Amended in Assembly August 7, 2013

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 a sum not to exceed $125,000,000, after January 1, 2011, and requires that $100,000,000 of that amount be deposited into the Broadband Infrastructure Grant Account. Existing law authorizes the commission to collect the sum through the 2015 calendar year.

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. The bill would authorize the commission to collect that amount until 2020.

The 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 households. In approving infrastructure projects, the bill would require the commission to give priority to projects that provide last-mile broadband access to households that are unserved by an existing facilities-based broadband provider. 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.

The 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 begin insert to provide access to broadband to an unserved or underserved household, as defined, end insert if the entity otherwise meets the eligibility requirements and complies with program requirements established by the commission.

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.

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.

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

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 begin delete in order end delete to fund approved projects.

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, begin delete as provided in
Decision 07-12-054 and subsequent decisions and end delete begin insert consistent with end insert
this section.

(b) (1) 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.

(2) In approving infrastructure projects, the commission shall
give priority to projects that 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.

(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 07-12-054 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 ninety million dollars ($190,000,000) 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 two hundred fifteen
million dollars ($215,000,000), for a sum total of moneys collected
by imposing the surcharge described in paragraph (1) not to exceed
three hundred fifteen million dollars ($315,000,000). 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.

(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 begin insert to provide access to broadband to an unserved or
underserved household, as defined in commission Decision
12-02-015, end insert if the entity otherwise meets the eligibility requirements
and complies with program requirements established by the
commission. These requirements shall include begin delete that end delete begin insert all of the
following: end insert

begin insert ( end insert begin insert A) end insert begin insert   end insert begin insert That end insert projects under this paragraph begin delete primarily end delete provide
last-mile broadband access to households that are unserved by an
existing facilities-based broadband begin delete provider. The end delete begin insert provider and
only receive funding to provide broadband access to households
that are unserved or underserved, as defined in commission
Decision 12-02-015. end insert

begin insert

(B) That funding for a project providing broadband access to
an underserved household shall not be approved until after any
existing facilities-based provider has an opportunity to demonstrate
to the commission that it will, within a reasonable timeframe,
upgrade existing service. An existing facilities-based provider
may, but is not required to, apply for funding under this section
to make that upgrade.

end insert

begin insert (C) end insert begin insert   end insert begin insert That end insert begin insert the end insert 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.

begin insert

(D) That a local governmental agency may be eligible for an
infrastructure grant only if the infrastructure project is for an
unserved household or business, the commission has conducted
an open application process, and no other eligible entity applied.

end insert begin insert

(E) That the commission shall establish a service list of
interested parties to be notified of California Advanced Services
Fund applications.

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 two interim financial
audits and a final financial audit and two interim performance
audits and a 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, and April 1, 2017. The commission shall report
its final findings to the Legislature by April 1, 2021. 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, 2022, 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 begin insert households and end insert areas of
the state.

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

(2) (A) The requirement for submitting a report imposed under
paragraph (1) is inoperative on January 1, 2021, 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 begin insert households
and end insert 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.