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.