BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 740 (Padilla) - Telecommunications: universal service  
          programs
          
          Amended: May 7, 2013            Policy Vote: EU&C 10-0
          Urgency: Yes                    Mandate: No
          Hearing Date: May 23, 2013      Consultant: Marie Liu
          
          SUSPENSE FILE.
          
          
          Bill Summary: SB 740 would extend the California Public  
          Utilities Commission's (CPUC) authority to collect a surcharge  
          on intrastate communication services from 2015 to 2020 to fund  
          the California Advanced Services Fund (CASF) and would allow  
          entities that are not telephone corporations to receive funds  
          from the CASF. 

          Fiscal Impact: Unknown cost pressures, possibly in the hundreds  
          of thousands of dollars from the CASF (special fund) for  
          expanded grantee eligibility.

          Background: The CASF, administered by the CPUC, was established  
          to help fund deployment of broadband infrastructure and bring  
          high-speed Internet access to all areas of the state. The CPUC  
          is authorized until 2015 to collect a surcharge on intrastate  
          communication services, not to exceed $25 million a year or a  
          total of $225 million over the life of the program.

          Proposed Law: This bill would extend the period of time that the  
          commission may charge a surcharge to fund the CASF, not to  
          exceed $25 million in on year or $225 million collectively from  
          January 1, 2015 to January 1, 2020 and express Legislative  
          intent to authorize collection of additional surcharge to  
          achieve broadband access to at least 98% of California  
          households.

          This bill would allow entities that are not a telephone  
          corporation to be eligible for receiving CASF funding.

          Related Legislation: AB 1555 (Perez) Chapter 24/2009 expanded  
          CASF eligibility to other entities only for the purpose of  
          providing matching funds made available through the American  








          SB 740 (Padilla)
          Page 1


          Reinvestment and Recovery Act of 2009. 

          SB 1040 (Padilla) Chapter 317/2010 authorized collection of an  
          additional $125 million through 2015 (for a total of $225  
          million).

          Staff Comments: In November 2012, the CPUC opened a rulemaking  
          to allow entities which are not telephone corporations to be  
          eligible for CASF funding, contingent on Legislative action to  
          statutorily allow such an expansion. In this rulemaking  
          (R.12-10-012), the CPUC notes that it has received numerous  
          comments that broadband services will not be made available  
          throughout the state without changes to the CASF's eligibility  
          requirements and that there are a number of commercial and  
          non-commercial entities that would seek CASF support if  
          eligibility for funds was expanded. The CPUC further notes in  
          its rulemaking, "?to the extent that some of these entities use  
          technologies that may be more cost effective than technologies  
          generally used by certified providers to provide service in high  
          cost rural areas, changing the CASF eligibility requirements may  
          also promote the deployment of more cost effective broadband  
          infrastructure in unserved and underserved areas." Staff  
          believes that widening the eligibility for funds will create a  
          cost pressure on the CASF, likely in the hundreds of thousands  
          of dollars. However, this cost pressure will at least partially  
          be offset by more cost-efficient projects being funded to  
          achieve the state's goal of establishing broadband access  
          throughout the state.

          A previous version of the bill would have authorized the CPUC to  
          raise additional collections for CASF. The author has removed  
          those provisions while the CPUC is reviewing the current  
          estimated costs of reaching the state broadband goals. While the  
          author believes that additional funding will be needed, the  
          author does not intend to influence the outcome of the CPUC  
          review. Staff notes that it is the author's intention to amend  
          the bill at a later date to allow the collection of additional  
          funding. Authorizing additional funding will help offset any  
          cost pressures created by expanding eligibility for the program.