Amended in Assembly June 26, 2013

Amended in Senate May 7, 2013

Senate Bill No. 740

Introduced by Senator Padilla

February 22, 2013

An act to amend Section 281 of the Public Utilities Code, relating to telecommunications, and declaring the urgency thereof, to take effect immediately.

LEGISLATIVE COUNSEL’S DIGEST

SB 740, as amended, Padilla. Telecommunications: universal service programs: California Advanced Services Fund.

Existing law, the federal Telecommunications Act of 1996, establishes a program of cooperative federalism for the regulation of telecommunications to attain the goal of local competition, while implementing specific, predictable, and sufficient federal and state mechanisms to preserve and advance universal service, consistent with certain universal service principles. The universal service principles include the principle that consumers in all regions of the nation, including low-income consumers and those in rural, insular, and high-cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas. The act authorizes each state to adopt regulations to provide for additional definitions and standards to preserve and advance universal service within the state, only to the extent that they adopt additional specific, predictable, and sufficient mechanisms that do not rely on or burden federal universal service support mechanisms.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including telephone corporations, as defined. Existing law establishes the California High-Cost Fund-A Administrative Committee Fund, the California High-Cost Fund-B Administrative Committee Fund, the Universal Lifeline Telephone Service Trust Administrative Committee Fund, the Deaf and Disabled Telecommunications Program Administrative Committee Fund, the Payphone Service Providers Committee Fund, the California Teleconnect Fund Administrative Committee Fund, and the California Advanced Services Fund, referred to as the CASF, in the State Treasury and requires that moneys in the 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 telecommunications universal service programs, upon appropriation in the annual Budget Act or upon supplemental appropriation. Existing law requires the commission 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 specified decisions of the commission and in the CASF statute.

Existing law requires that moneys, collected by the surcharge, authorized by the commission, after January 1, 2011, are to be deposited into 3 separate accounts within the CASF. Existing law authorizes the commission to collect begin delete an additional end delete begin insert a end insert sum not to exceed $125,000,000, after January 1, 2011, begin delete for a sum total of moneys collected through the surcharge not to exceed $225,000,000 end delete begin insert and requires that $100,000,000 of that amount be deposited into the Broadband Infrastructure Grant Account end insert . Existing law authorizes the commission to collect the begin delete additional end delete sum through the 2015 calendar year.

begin insert This bill would increase the amount the commission is authorized to collect to a sum not to exceed $215,000,000, after January 1, 2011, and instead would require that $190,000,000 be deposited into the Broadband Infrastructure Grant Account. end insert The bill would authorize the commission to collect begin delete the additional money end delete begin insert that amount end insert until 2020.

begin delete

This

end delete

begin insert The end insert bill would provide that the goal of the CASF program is, no later than December 31, 2015, to approve funding for infrastructure projects that will provide broadband access to no less than 98% of California begin delete households and would provide that it is the intent of the Legislature to authorize collection of additional surcharge amounts necessary to achieve this program goal end delete begin insert households end insert . In begin delete awarding end delete begin insert approving end insert infrastructure begin delete grants end delete begin insert projects end insert , begin delete this end delete begin insert the end insert bill would require begin delete that end delete begin insert the commission to give end insert priority begin delete be given end delete to projects that provide last-mile broadband begin delete connection end delete begin insert access end insert to households that are unserved by an existing facilities-based broadband provider. begin delete This bill would provide that a middle-mile broadband project is eligible for an infrastructure grant even if it passes through an area served by an existing facilities-based broadband provider, as long as the project applicant can demonstrate that the project provides last-mile broadband connection to households that are unserved by any existing facilities-based broadband provider. end delete begin insert The bill would require the commission to provide each applicant, and any party challenging an application, the opportunity to demonstrate actual levels of broadband service in the project area, as prescribed. end insert

begin delete

This

end delete

begin insert The end insert bill would provide that, notwithstanding the requirement that moneys in the funds are to be used to compensate telephone corporations for their costs of providing universal service, an entity that is not a telephone corporation is eligible to apply to participate in the CASF program if the entity otherwise meets the eligibility requirements and complies with program requirements established by the commission. begin delete This bill would provide that a local governmental agency may be eligible for an infrastructure grant only if the infrastructure project is for an unserved area, the commission has conducted an open application process and no other eligible entity applied, and the commission determines that within the region of the local agency’s jurisdiction there is less than 98% broadband deployment. end delete

begin insert

Existing law requires the commission to conduct an interim and final financial audit and an interim and final performance audit of the implementation and effectiveness of the CASF and to report its interim findings to the Legislature by April 1, 2011, and its final findings to the Legislature by April 1, 2017.

end insert begin insert

This bill would require the commission to conduct an additional interim financial audit and interim performance audit and to report these findings to the Legislature by April 1, 2017. The bill would instead require the commission to report its final findings to the Legislature by April 1, 2021.

end insert begin insert

Existing law requires the commission, until January 1, 2016, to provide an annual report to the Legislature that includes specified information.

end insert begin insert

This bill would extend this reporting requirement until January 1, 2021, and would require the report to include information regarding the status of the CASF balance and the projected amount to be collected in each year through 2020 in order to fund approved projects.

end insert

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 281 of the Public Utilities Code is
amended to read:

281.  

(a) The commission shall develop, implement, and
administer the California Advanced Services Fund program to
encourage deployment of high-quality advanced communications
services to all Californians that will promote economic growth,
job creation, and the substantial social benefits of advanced
information and communications technologies, as provided in
Decision 07-12-054 and begin delete Decision 09-07-020 end delete begin insert subsequent decisions end insert
and this section.

(b)  begin insert (1) end insert begin insert   end insert The goal of the program is, no later than December 31,
2015, to approve funding for infrastructure projects that will
provide broadband access to no less than 98 percent of California
households. begin delete In awarding end delete

begin insert (2) end insert begin insert   end insert begin insert In approving end insert infrastructure begin delete grants end delete begin insert projects end insert , begin insert the commission
shall give end insert priority begin delete shall be given end delete to projects that provide last-mile
broadband begin delete connection end delete begin insert access end insert to households that are unserved by
an existing facilities-based broadband provider. begin delete However, a
middle-mile broadband project is eligible for an infrastructure
grant even if it passes through an area served by an existing
facilities-based broadband provider, as long as the project applicant
can demonstrate that the project provides last-mile broadband
connection to households that are unserved by any existing
facilities-based broadband provider. end delete begin insert The commission shall provide
each applicant, and any party challenging an application, the
opportunity to demonstrate actual levels of broadband service in
the project area, which the commission shall consider in reviewing
the application. end insert

(c) The commission shall establish the following accounts within
the fund:

(1) The Broadband Infrastructure Grant Account.

(2) The Rural and Urban Regional Broadband Consortia Grant
Account.

(3) The Broadband Infrastructure Revolving Loan Account.

(d) (1) All moneys collected by the surcharge authorized by
the commission pursuant to Decision begin delete 07-12-054, whether collected
before or after January 1, 2009, end delete begin insert 07-12-054 end insert shall be transmitted to
the commission pursuant to a schedule established by the
commission. The commission shall transfer the moneys received
to the Controller for deposit in the California Advanced Services
Fund. Moneys collected after January 1, 2011, shall be deposited
in the following amounts in the following accounts:

(A) One hundred begin insert ninety end insert million dollars begin delete ($100,000,000) end delete
begin insert ($190,000,000) end insert into the Broadband Infrastructure Grant Account.

(B) Ten million dollars ($10,000,000) into the Rural and Urban
Regional Broadband Consortia Grant Account.

(C) Fifteen million dollars ($15,000,000) into the Broadband
Infrastructure Revolving Loan Account.

(2) All interest earned on moneys in the fund shall be deposited
in the fund.

(3) The commission shall not collect moneys, by imposing the
surcharge described in paragraph (1) for deposit in the fund, in an
amount that exceeds one hundred million dollars ($100,000,000)
before January 1, 2011. After January 1, 2011, the commission
may collect an additional sum not to exceed begin delete one end delete begin insert two end insert hundred
begin delete twenty-five end delete begin insert fifteen end insert million dollars begin delete ($125,000,000) end delete begin insert ($215,000,000) end insert ,
for a sum total of moneys collected by imposing the surcharge
described in paragraph (1) not to exceed begin delete two end delete begin insert three end insert hundred
begin delete twenty-five end delete begin insert fifteen end insert million dollars begin delete ($225,000,000) end delete begin insert ($315,000,000) end insert .
The commission may collect the additional sum beginning with
the calendar year starting on January 1, 2011, and continuing
through the 2020 calendar year, in an amount not to exceed
twenty-five million dollars ($25,000,000) per year, unless the
commission determines that collecting a higher amount in any year
will not result in an increase in the total amount of all surcharges
collected from telephone customers that year.

begin delete

(4) It is the intent of the Legislature to authorize collection of
additional surcharge amounts necessary to achieve the program
goal described in subdivision (b).

end delete

(e) (1) All moneys in the California Advanced Services Fund
shall be available, upon appropriation by the Legislature, to the
commission for the program administered by the commission
pursuant to this section, including the costs incurred by the
commission in developing, implementing, and administering the
program and the fund.

(2) Notwithstanding any other law and for the sole purpose of
providing matching funds pursuant to the federal American
Recovery and Reinvestment Act of 2009 (Public Law 111-5), any
entity eligible for funding pursuant to that act shall be eligible to
apply to participate in the program administered by the commission
pursuant to this section, if that entity otherwise satisfies the
eligibility requirements under that program. Nothing in this section
shall impede the ability of an incumbent local exchange carrier,
as defined by subsection (h) of Section 251 of Title 47 of the
United States Code, that is regulated under a rate of return
regulatory structure, to recover, in rate base, California
infrastructure investment not provided through federal or state
grant funds for facilities that provide broadband service and
California intrastate voice service.

(3) Notwithstanding subdivision (b) of Section 270, an entity
that is not a telephone corporation shall be eligible to apply to
participate in the program administered by the commission pursuant
to this section if the entity otherwise meets the eligibility
requirements and complies with program requirements established
by the commission. begin delete A local governmental agency may be eligible
for an infrastructure grant only if the infrastructure project is for
an unserved area, the commission has conducted an open
application process and no other eligible entity applied, and the
commission determines that within the region of the local agency’s
jurisdiction there is less than 98 percent broadband deployment. end delete begin insert end insert
begin insert These requirements shall include that projects under this
paragraph primarily provide last-mile broadband access to
households that are unserved by an existing facilities-based
broadband provider. The commission shall provide each applicant,
and any party challenging an application, the opportunity to
demonstrate actual levels of broadband service in the project area,
which the commission shall consider in reviewing the application. end insert

(f) Moneys in the Rural and Urban Regional Broadband
Consortia Grant Account shall be available for grants to eligible
consortia to fund the cost of broadband deployment activities other
than the capital cost of facilities, as specified by the commission.
An eligible consortium may include, as specified by the
commission, representatives of organizations, including, but not
limited to, local and regional government, public safety, K-12
education, health care, libraries, higher education,
community-based organizations, tourism, parks and recreation,
agricultural, and business, and is not required to have as its lead
fiscal agent an entity with a certificate of public convenience and
necessity.

(g) Moneys in the Broadband Infrastructure Revolving Loan
Account shall be available to finance capital costs of broadband
facilities not funded by a grant from the Broadband Infrastructure
Grant Account. The commission shall periodically set interest rates
on the loans based on surveys of existing financial markets.

(h) (1) The commission shall conduct begin delete an end delete begin insert two end insert interim begin insert financial
audits end insert and begin insert a end insert final financial audit and begin delete an end delete begin insert two end insert interim begin insert performance
audits end insert and begin insert a end insert final performance audit of the implementation and
effectiveness of the California Advanced Services Fund to ensure
that funds have been expended in accordance with the approved
terms of the grant awards and loan agreements and this section.
The commission shall report its interim findings to the Legislature
by April 1, 2011 begin insert , and April 1, 2017 end insert . The commission shall report
its final findings to the Legislature by April 1, begin delete 2017 end delete begin insert 2021 end insert . The
reports shall also include an update to the maps in the final report
of the California Broadband Task Force and data on the types and
numbers of jobs created as a result of the program administered
by the commission pursuant to this section.

(2) (A) The requirement for submitting a report imposed under
paragraph (1) is inoperative on January 1, begin delete 2018 end delete begin insert 2022 end insert , pursuant to
Section 10231.5 of the Government Code.

(B) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government
Code.

(i) (1) Beginning on January 1, 2012, and annually thereafter,
the commission shall provide a report to the Legislature that
includes all of the following information:

(A) The amount of funds expended from the California
Advanced Services Fund in the prior year.

(B) The recipients of funds expended from the California
Advanced Services Fund in the prior year.

(C) The geographic regions of the state affected by funds
expended from the California Advanced Services Fund in the prior
year.

(D) The expected benefits to be derived from the funds expended
from the California Advanced Services Fund in the prior year.

(E) Actual broadband adoption levels from the funds expended
from the California Advanced Services Fund in the prior year.

(F) The amount of funds expended from the California
Advanced Services Fund used to match federal funds.

(G) An update on the expenditures from California Advanced
Services Fund and broadband adoption levels, and an accounting
of remaining unserved and underserved areas of the state.

begin insert

(H) The status of the California Advanced Service Fund balance
and the projected amount to be collected in each year through
2020 in order to fund approved projects.

end insert

(2) (A) The requirement for submitting a report imposed under
paragraph (1) is inoperative on January 1, begin delete 2016 end delete begin insert 2021 end insert , pursuant to
Section 10231.5 of the Government Code.

(B) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government
Code.

SEC. 2.  

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

In order to authorize the award of funds for the expansion of
broadband deployment to unserved and underserved areas of
California, to stimulate investments in infrastructure critical to
increasing the state’s productivity, and to improve the quality of
information available to all of the state’s citizens, as needed for
the health and safety of those citizens, it is necessary that this act
take effect immediately.