BILL ANALYSIS Ó
SB 740
Page 1
SENATE THIRD READING
SB 740 (Padilla)
As Amended September 6, 2013
Majority vote
SENATE VOTE : 36-1
UTILITIES & COMMERCE 11-4
APPROPRIATIONS 12-4
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|Ayes:|Bradford, Bonilla, |Ayes:|Gatto, Bocanegra, |
| |Buchanan, Fong, Garcia, | |Bradford, |
| |Gorell, Roger Hernández, | |Ian Calderon, Campos, |
| |Quirk, Rendon, Skinner, | |Eggman, Gomez, Hall, |
| |Brown | |Holden, Pan, Quirk, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Patterson, Chávez, Beth |Nays:|Harkey, Donnelly, Linder, |
| |Gaines, Jones | |Wagner |
| | | | |
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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 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 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 CASF program to provide access to broadband
to an unserved or underserved household, as defined, if the
entity meets the eligibility requirements and complies with
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program requirements established by PUC.
5)Requires 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 CASF annual reporting requirement until January 1,
2021, and requires additional program information.
7)Increases the amount 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 Account.
8)Contains an urgency clause allowing the bill to take effect
immediately upon enactment.
9)Provides language that double joints the bill with AB 1299
(Bradford) of the current legislative session.
FISCAL EFFECT : According to Assembly Appropriations Committee,
unknown cost pressures, possibly in the hundreds of thousands of
dollars from CASF (special fund) for expanded grantee
eligibility.
COMMENTS :
1)Author's Statement : According to the author, "SB 740 would
modify 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 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
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, PUC created CASF to help promote the deployment of
broadband infrastructure in unserved areas of the state. As
part of the decision, 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%.
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PUC created the program and assessed a surcharge on telephone
ratepayers to fund the program however 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 CASF;
however, SB 1193 prohibited PUC from collecting more than $100
million.
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 three
megabits per second (mbps) and upload speeds of at least one
mbps. By Resolution T-17143, dated June 12, 2008, 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), PUC revised CASF program to allow
California companies to use CASF grants as a match for
Recovery Act broadband grants. AB 1555 (V. Manuel Pérez),
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:
a) $100 million to the Broadband Infrastructure Grant
Account (for a total of $200 million);
b) $10 million to the Rural and Regional Urban Consortia
Account; and
c) $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
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Registration (WIR) from 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 20% of total project
cost is eligible for financing. Applicant and project
eligibility is the same as the Infrastructure Grant Account.
3)CASF grants awarded to date : As of December 31, 2012, PUC
reports the followings CASF grant awards:
a) The Broadband Infrastructure Grant Account: 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).
b) The Rural and Urban Regional Broadband Consortia Grant
Account: 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.
c) The Broadband Infrastructure Revolving Loan Account: As
of year-end PUC had not received any loan applications.
Currently, there are seven loan applications pending.
On February 1, 2013, 28 applications were submitted to PUC for
projects in underserved areas of the state seeking total CASF
funding of $240.6 million.
4)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
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goal has been established. Since 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 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.
5)Expanding CASF eligibility : Current CASF rules limit 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, 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
protect against waste, fraud, and abuse of ratepayer funds
being awarded to entities it otherwise does not regulate, 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.
6)Unserved vs. underserved : PUC's rules administering 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). PUC defines an
underserved area as where broadband service is slower than six
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mbps down or 1.5 mbps up. The Federal Communications
Commission defines underserved as slower than four mbps down
or one mbps up.
7)Additional CASF funding : This bill authorizes 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 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.
8)Related legislation : AB 1299 (Bradford) of 2013, which
authorizes PUC to award $25 million in CASF grants and loans
for the deployment and adoption of broadband services in
publicly supported housing communities.
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083
FN: 0002569