BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1299
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          Date of Hearing:   April 29, 2013

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
                               Steven Bradford, Chair
                   AB 1299 (Bradford) - As Amended:  April 25, 2013
           
          SUBJECT  :   Telecommunications: universal service programs:  
          California Advanced Services Fund

           SUMMARY  :   Requires the PUC to fund grants for the deployment  
          and adoption of broadband services in publicly supported housing  
          communities using the California Advanced Services Program  
          (CASF).  Specifically,  this bill  :  

          1)Authorizes the PUC to appropriate $20 million from the  
            Broadband Infrastructure Grant Account to award grants to  
            connect broadband networks to publicly supported multitenant  
            affordable housing dwellings.

          2)Authorizes the PUC to appropriate $5 million from the  
            Broadband Infrastructure Grant Account to award grants to fund  
            broadband adoption programs, as specified.

          3)Defines publicly supported housing community and non-profit  
            affordable housing.

          4)Specifies if such funds are not awarded by December 31, 2016  
            that they may be used for another purpose within CASF.

          5)Requires the PUC to award grants for this program in a manner  
            that reflects the statewide distribution of those publicly  
            supported housing communities.

          6)States the PUC shall prepare a report beginning January 1,  
            2015 on the implementation status of the publicly supported  
            housing communities' broadband deployment and adoption  
            efforts.

           EXISTING LAW  : 

          1)Establishes the CASF in the State Treasury and requires that  
            moneys in those funds are the proceeds of rates and are held  
            in trust for the benefit of ratepayers and to compensate  
            telephone corporations for their costs of providing universal  
            service and may be expended only to accomplish specified  








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            telecommunications universal service programs, upon  
            appropriation in the annual Budget Act or upon supplemental  
            appropriation. (Public Utilities Code 270)

          2)Requires the PUC to develop, implement and administer the CASF  
            to encourage deployment of high-quality advanced  
            communications services to all Californians that will promote  
            economic growth, job creation, and substantial social benefits  
            of advanced information and communications technologies, as  
            provided in specific decisions of the PUC and in the CASF  
            statute. (Public Utilities Code 281)

          3)Requires that $100 million, collected by a surcharge  
            authorized by the PUC, after January 1, 2011, is to be  
            deposited into the Broadband Infrastructure Account. (Public  
            Utilities Code 281)

          4)Authorizes the PUC to collect an additional sum not to exceed  
            $125 million after January 1, 2011, for a sum of total moneys  
            collected through the surcharge not to exceed $225 million.  
            (Public Utilities Code 281)

          5)Authorizes the PUC to collect the additional sum through the  
            2015 calendar year. (Public Utilities Code 281)


           FISCAL EFFECT  :   Unknown.

           COMMENTS  :   According to the author, "the term Digital Divide  
          refers to the gap that prevents access to the Internet by  
          individuals, households, businesses and geographic areas at  
          different socio-economic levels. Closing the Digital Divide is  
          essential to economic prosperity and quality of life for all  
          Californians.  Access to broadband internet technology affords  
          citizens with the opportunity to communicate with family and  
          friends, conduct personal and business activities, achieve  
          academic success, research employment offerings, and access  
          community resources. Many students in California's schools are  
          not learning the skills necessary for tomorrow's world. These  
          students are at greater risk of falling behind in academic  
          achievement. While few suggest the Digital Divide is the primary  
          cause of the educational achievement gap, a growing body of  
          evidence suggests that digital inequalities can evolve into  
          future disparities in academic achievement and career success.  
          Thus, it is imperative that statewide broadband policies are  








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          realized in all California communities so that benefits of  
          broadband can be made available to everyone, regardless of their  
          location or income.

          AB 1299 recognizes that bridging the Digital Divide will require  
          new public policy that encourages investment in deployment and  
          adoption of broadband technology in publicly subsidized  
          affordable housing developments."

           1)The CASF  :  In 2007, as part of a High-Cost Fund-B rulemaking,  
            the PUC created the CASF
          to help promote the deployment of broadband infrastructure in  
          unserved areas of the state.  As part of the decision, the PUC  
          reduced the annual allocation of money to the High-Cost Fund-B  
          by $315.4 million and implemented a phased-in reduction in the  
          ratepayer surcharge from 1.3% on all intrastate calls to .25%. 

          The PUC created the program and assessed a surcharge on  
          telephone ratepayers to fund the program, however, the PUC did  
          not have clear legislative authority to assess the surcharge or  
          to expend the funds.  SB 1193 (Padilla) Chapter 393, Statutes of  
          2008, provided that authority by statutorily establishing the  
          CASF; however, SB 1193 prohibited the PUC from collecting more  
          than $100 million.  

          The PUC prioritized CASF expenditures to areas where no  
          facilities-based provider offered broadband service.  A  
          secondary priority was for funding in underserved areas where no  
          facilities-based provider offered broadband service at benchmark  
          download transmission speeds of at least 3 megabits per second  
          and upload speeds of at least 1 megabit per second.  By  
          Resolution T-17143, dated June 12, 2008, the PUC adopted filing  
          requirements and scoring criteria for the award of CASF funds  
          and a timeline for further filings and for final approval of  
          awards.

          After the enactment of the American Reinvestment and Recovery  
          Act of 2009 (Recovery Act), the PUC revised the CASF program to  
          allow California companies to use CASF grants as a match for  
          Recovery Act broadband grants.  AB 1555 (Perez Chapter 24,  
          Statues of 2009) expanded CASF eligibility to any entity  
          applying for CASF funding in conjunction with a Recovery Act  
          funding request.

          Subsequently Governor Schwarzenegger signed into law SB 1040  








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          (Padilla, Chapter 317, Statutes of 2010) which provided an  
          additional $125 million, and expanded the program into three  
          accounts:

                 $100 million to the Broadband Infrastructure Grant  
               Account (for a total of $200 million), 
                 $10 million to the Rural and Regional Urban Consortia  
               Account, and 
                 $15 million to the Broadband Infrastructure Loan  
               Account.

          The Broadband Infrastructure Grant Account funds the capital  
          costs of broadband infrastructure projects in unserved and  
          underserved areas in California. Carriers eligible to apply for  
          a grant award must hold a certificate of public convenience and  
          necessity (CPCN) or Wireless Identification Registration (WIR)  
          from the PUC.

          The Rural and Urban Regional Broadband Consortia Grant Account  
          provides funding for the cost of broadband deployment and  
          adoption activities other than the capital cost of facilities.  
          Eligible recipients include, but is not limited to local and  
          regional governments, public safety, K-12 education, health care  
          and community based organizations.

          The Revolving Loan Account supplements financing for projects  
          also receiving CASF grant funding. Up to twenty percent of total  
          project cost is eligible for financing. Applicant and project  
          eligibility is the same as the Infrastructure Grant Account.



           1)CASF awards and expenditures  : As of December 31, 2012, the  
            cumulative total CASF award funding is as follows:

                     The Broadband Infrastructure Grant Account: The PUC  
                 authorized $41.08 million for 34 projects that will  
                 benefit 255,246 households when completed.

                    o           Unserved areas $2.31 million for 15  
                      projects benefitting 16,530 households
                    o           Underserved areas: $38.77 million for 19  
                      projects benefitting 238,716 households
                    o           At total of 1,777 new subscribers since  
                      program initiation (45% subscription rate).








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                     The Rural and Urban Regional Broadband Consortia  
                 Grant Account: The PUC authorized $2.85 million for 14  
                 consortia grantees in 2012, and has provided grantees  
                 with a three-year budget allowance of $8.55 million.
                     The Broadband Infrastructure Revolving Loan Account:  
                 As of year-end the PUC had not received any loan  
                 applications. Currently, there are 7 loan applications  
                 pending.

           1)Have we closed the digital divide  :  This question was the  
            topic of an informational
          hearing in March 2013. The hearing examined efforts to close the  
          Digital Divide in California, examined the status of broadband  
          deployment by communications providers, and discussed barriers  
          and possible remedies to deploying broadband infrastructure in  
          unserved and underserved areas of the state, specifically urban  
          communities. Much of the testimony provided by several of the  
          panelists confirmed that California has made notable strides  
          over the last decade to close the Digital Divide thus a gap  
          remains in many of the rural and urban areas of the state.   
          According to the PUC's California Broadband Report, statewide as  
          of June 2011, an estimated 72.9% of all households subscribe to  
          fixed broadband services. It found that of households which have  
          been determined to have geographic access to fixed broadband  
          services, an estimated 74.6% subscribe.

           2)Broadband in affordable housing communities  : Barriers exist in  
            certain publicly supported 
          and non-profit affordable housing developments in California.   
          AB 1299 authorizes the PUC to appropriate $20 million from the  
          Broadband Infrastructure Grant Account to fund grants for  
          deployment of broadband services and adoption programs in  
          publicly-supported housing communities.  Representatives from  
          publicly-supported and non-profit housing communities, situated  
          primarily in urban areas, testified at the hearing that a  
          majority of their properties lack reliable broadband  
          connectivity. The housing panelists claimed the costs associated  
          with building or upgrading the infrastructure and maintaining  
          the network is the primary barrier to receiving broadband  
          services for the many disadvantaged residents that reside in  
          these affordable housing developments. California Emerging  
          Technology Fund (CETF) conservatively estimates there are  
          200,000-250,000 such publicly-supported housing units in  
          California - the exact number is being determined by further  
          investigation by CETF staff.  Obtaining an approximate figure on  








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          the number of unserved or underserved Californians who reside in  
          affordable housing dwellings is practically impossible.   
          However, the bill allows the PUC to develop the appropriate  
          policies and criteria to awards grants that would effectively  
          achieve the goal of closing the digital gap in public housing  
          communities while also ensuring grants are distributed in a  
          manner that reflects the statewide distribution of the publicly  
          supported housing communities.  

           3)If you build it will they come?  Provisions in this bill  
            authorize the PUC to appropriate $5
          million to fund grants for broadband adoption programs in  
          publicly supported housing communities. Deploying broadband  
          services in a publicly supported housing community would ensure  
          the standard cables, and infrastructure required for power,  
          television and telephone service is installed - which is a first  
          step. On the other hand it does not offer a guarantee that  
          disadvantaged residents will see the value in subscribing to the  
          broadband service. Factors contributing to a disadvantaged  
          residents' lack of enthusiasm to subscribe to voice, cable or  
          internet service is notably the costs associated with the  
          subscription. In addition, a housing resident may have limited  
          knowledge in understanding the benefits of digital literacy and  
          the societal benefits of adopting broadband services.   
          Representatives from the housing panel testified at the hearing  
          that some of their properties have free computer learning  
          centers which provide their residents with opportunity to access  
          the internet.  Children who reside at these properties can also  
          utilize the computer learning center to complete homework or  
          conduct research for other activities. With this bill, a  
          publicly supported housing community would be eligible to apply  
          for a grant provided that the units in the housing community to  
          be served have existing broadband services or will have  
          broadband services at the time the grant for adoption is  
          implement.  Eligible housing communities will also have the  
          ability to collaborate with a non-profit or public agency to  
          assist in implementation of a broadband adoption program.  

           4)Accountability and transparency  : CASF is a public purpose  
            program funded by surcharges assessed on end user's telephone  
            bills throughout the state.  It is therefore important that  
            the program achieve its objective and be transparent  
            throughout the process.  AB 1299 recognizes this need and does  
            so by requiring the PUC to prepare a report due January 1,  
            2015 on the implementation status of the publicly supported  








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            housing broadband deployment and adoption efforts.   
            Furthermore, provisions in this bill authorize the PUC to use  
            any funds not awarded by December 31, 2016 for any other  
            purpose permitted under CASF. 

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          AT&T (if amended)
          Boys & Girls Clubs of Santa Monica
          California Cable & Telecommunications Association (CCTA)
          California Center for Rural Policy (CCRP)
          City and County of San Francisco
          Division of Ratepayer Advocates (DRA)
          Housing Authority of the City of Los Angeles
          Humboldt State University 
          International Institute of Los Angeles
          Kids Progress, Inc.
          Laura Baca, Pupil Services and Attendance Counselor, UCLA  
          YouthSource Center
          LINC Housing
          Los Angeles Regional Broadband Consortia
          Mutual Housing California
          Non-Profit Housing Association of Northern California (NPH)
          Shields for Families
          UCLA Community Based Learning Program
          Verizon

           Opposition 
           
          None on file.
           
          Analysis Prepared by  :    DaVina Flemings / U. & C. / (916)  
          319-2083