BILL ANALYSIS Ó
SB 740
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Date of Hearing: July 1, 2013
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 740 (Padilla) - As Amended: June 27, 2013
SENATE VOTE : 36-1
SUBJECT : Telecommunications: universal service programs:
California Advanced Services Fund.
SUMMARY : Expands eligibility in the California Advanced
Services Fund (CASF), establishes a program goal, and increases
the program funding. Specifically, this bill :
1)Specifies the goal of the CASF program is to approve funding
for infrastructure projects that will provide broadband access
to no less than 98% of California households no later than
December 31, 2015.
2)Requires the California Public Utilities Commission (PUC) to
give priority to projects that provide last-mile broadband
access to households that are unserved by an existing
facilities-based broadband provider.
3)Requires the PUC 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.
4)Allows an entity that is not a telephone corporation to apply
to participate in the CASF program if the entity meets the
program requirements.
5)Requires the PUC to conduct an additional interim financial
audit and interim performance audit and to report findings to
the Legislature by April 1, 2017. Final findings are due to
the Legislature by April 1, 2021.
6)Extends the CASF annual reporting requirement until January 1,
2021 and requires additional program information.
7)Increases the amount the PUC is authorized to collect to an
amount not to exceed $215 million, and requires that $190
million be deposited into the Broadband Infrastructure Grant
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Account.
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
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 :
1)Author's Statement. According to the author, "SB 740 would
modify the CASF to support broadband infrastructure in the
most remote areas of the state that still lack the high-speed
Internet access that is essential to function in modern life.
It would give the CPUC flexibility to award CASF grants to
entities that are uniquely suited to provide broadband access
in the last remaining unserved areas and authorize additional
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funding for this purpose, thereby advancing state policy to
ensure that all Californians are connected."
2)Background . 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
(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),
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$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 grants awarded to date. As of December 31, 2012, the PUC
reports the followings CASF grant awards:
The Broadband Infrastructure Grant Account: The PUC
authorized $41.08 million for 34 projects that will benefit
255,246 households when completed, including $2.31 million
for 15 projects benefitting 16, 530 households in unserved
areas, and $38.77 million for 19 projects benefitting
238,716 households in underserved areas. There are a total
of 1,777 new subscribers since program initiation (45%
subscription rate).
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.
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On February 1, 2013, 28 applications were submitted to the PUC
for projects in underserved areas of the state seeking total
CASF funding of $240.6 million.
1)Alas, a goal for CASF : There is agreement among state
policymakers, key community organizations, and industry
stakeholders that achieving ubiquitous broadband deployment in
order to bring the social and economic benefits of high-speed
internet throughout the state. In fact, the state has made
notable strides to close the "digital divide" but no statewide
goal has been established. Since the CASF statute does not
specify a goal, this bill establishes a state goal of
achieving deployment to 98% of California households no later
than December 31, 2015.
The California Emerging Technology Fund (CETF), established in
2005 with funds derived from conditions on mergers of
telecommunications companies, was created as a nonprofit
organization dedicated to making grants to community based
organizations for projects to help close the digital divide.
CETF has established a statewide broadband goal of achieving
98% deployment by 2017, with projects approved and funded by
2015.
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)Expanding CASF eligibility : Current CASF rules limits program
participation to telephone corporations. This bill proposes to
expand eligibility to for infrastructure grants to entities
that are not telephone corporations, similar to the expanded
eligibility authorized in connection with the Recovery Act.
In October 2012, the PUC proposed this very issue, subject to
legislative authorization, because it found that commercial
and nonprofit entities that are not telephone corporations,
such as tribal entities and Wireless Internet Service
Providers (WISPs) have expressed interest in providing
broadband. These broadband services provide wireless
solutions that are viable for "last mile" connection of end
users in rural areas that are challenging to serve. To
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protect against waste, fraud, and abuse of ratepayer funds
being awarded to entities it otherwise does not regulate, the
PUC proposed imposing requirements similar to those it applied
to Recovery Act applicants that did not hold a CPCN or WIR,
including a requirement to comply with applicable PUC rules.
Regional Consortia leaders across the state opine that this
bill "provides the needed flexibility in eligible applicants
to CASF. Previous experience with applications submitted to
CASF has shown that the large broadband providers are not
likely to apply to deploy infrastructure into unserved areas
of California based on their business model."
The California Cable and Telecommunications Association
"opposes the expansion of eligibility for CASF grants to any
entity that is not a telephone corporation, particularly with
regard to grants that may be awarded to public entities that
regulate access to rights of way, and which may seek to
provide a competitive broadband service in areas of California
that are currently served by an existing broadband provider."
Industry stakeholders state no objection to expanding
eligibility to entities that are not telephone corporations;
however they do have concerns about these entities submitting
applications for CASF projects that propose to "overbuild"
existing broadband infrastructure of commercial providers
funded with private investment.
The author has attempted to address these concerns by
requiring an entity that is not a telephone corporation to be
eligible for a CASF grant or loan if the project primarily
provides last-mile broadband access to households that are
unserved by an existing facilities-based broadband provider.
Additionally, the PUC is required to provide each applicant
and any party challenging an application, the opportunity to
demonstrate actual levels of broadband services in the project
area and take that under consideration during the application
review process.
3)Unserved vs. underserved. The PUC's rules administering the
CASF authorize grants for projects to both unserved and
underserved areas, with a priority for funding unserved areas.
An unserved area is where no broadband service is available
(except through dial-up or satellite service). The PUC
defines an underserved area as where broadband service is
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slower than 6 megabits per second (mbps) down or 1.5 mbps up.
The Federal Communications Commission defines underserved as
slower than 4 mbps down or 1 mbps up.
However, the majority of CASF grants awarded so far are for
underserved areas. This has caused some confusion as to how
the PUC determines a project as unserved or underserved,
depending if it passes through an underserved or unserved
area. Inconsistencies also exist between mapping data as to
speed of available services. Many of these factors contribute
to industry claims regarding overbuild.
4)Additional CASF funding . This bill authorizes the PUC to
collect an additional $90 million in increments of no more
than $25 million per year through 2020 for CASF infrastructure
grants. According to the author, additional funding is needed
for the following reasons: expanded eligibility authorized by
this bill will generate more applications for funding than
under current rules - especially for last-mile projects to
unserved households, pending CASF applications at the PUC seek
substantially more funding than currently authorized for CASF,
and the average cost per household required so far to connect
remaining unserved households exceeds authorized collections.
5)Related legislation : AB 1299 (Bradford, 2013) which authorizes
the PUC to award CASF grants for the deployment and adoption
of broadband services in publicly supported housing
communities. This bill is scheduled to be heard, Tuesday, July
2, 2013 in Senate Energy, Utilities and Communications
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
AT&T
California Broadband Cooperative (CBC)
California Center for Rural Policy (CCRP)
California Emerging Technology Fund (CETF)
California Public Utilities Commission (CPUC)
Central Coast Broadband Consortium (CCBC)
Central Sierra Connect Broadband Consortium (CSC)
Connect Joy Road
Connected Capital Area Broadband Consortium (CCABC)
Contra Costa Council
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Corporation for Education Network Initiatives in California
(CENIC)
County of Humboldt
County of Trinity
Del Norte County Board of Supervisors
East Bay Broadband Consortium (EBBC)
Eastern Sierra Connect Regional Broadband Consortium (ESC)
Edwin Lee, Mayor, City of San Francisco
Fred Stump, Mono County Supervisor, District 2
Fresno State Office of Community and Economic Development
Frontier Communications
Gold Country Broadband Consortium (GOLD COUNTRY)
Golden Bear Broadband, LLC (GBB)
Inland Empire Regional Broadband Consortium (IERB)
Interbahn
Jared Huffman, Member of Congress
Lake County Board of Supervisors
Los Angeles County Regional Broadband Consortium (LACRBC)
Mendocino Coast Broadband Alliance
Mendocino County Board of Supervisors (if amended)
Mendocino County Office of Education
Modoc County Office of Education
Mono County Board of Supervisors
Northeastern California Connect Consortium (NECCC)
Redwood Coast Connect (RCC)
Russian River Fire Protection District
Russian River Rotary Club
San Diego Imperial Regional Broadband Consortium (SDIRBC)
San Joaquin Valley Regional Broadband Consortium (SJVBC)
Shasta County Health and Human Services Agency (HHSA)
Sierra Economic Development Corporation (SEDCorp)
Sonoma Connect
Sonoma County Sheriff's Office
Spiral Internet
Tehama County Board of Supervisors
Tuolumne County Economic Development Authority
Upstate California Connect Consortium (UCCC)
West Sonoma County Union High School District
Youth Policy Institute (YPI)
Opposition
California Cable & Telecommunications Association (CCTA)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
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319-2083