BILL NUMBER: SB 1364	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MAY 27, 2014

INTRODUCED BY   Senator Fuller
   (Coauthors: Senators Berryhill, Evans, Gaines, Nielsen, Padilla,
 and Vidak   Vidak,   and Wolk  )
   (Coauthors: Assembly Members Conway, Dahle, Beth Gaines, Gray,
Grove, Logue, Olsen, Pan, Perea,  V. Manuel Pérez,  and
Yamada)

                        FEBRUARY 21, 2014

   An act to amend Sections  247.1, 270, 275,  275.6  ,
 and  739.3 of   276 of, and to amend and
renumber Section 739.3 of,  the Public Utilities Code, relating
to telecommunications, and declaring the urgency thereof, to take
effect immediately.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1364, as amended, Fuller. Telecommunications universal service
 programs: California High-Cost Fund-A program. 
 programs. 
   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   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.
   Existing law authorizes the Public Utilities Commission to
supervise and regulate every public utility in the state, including
telephone corporations, and to fix just and reasonable rates and
charges for the public utility. Existing law establishes the state's
 6  universal service funds in the State Treasury, including
the California High-Cost Fund-A Administrative Committee Fund and
the California High-Cost Fund-B Administrative Committee Fund, and
provides that moneys in each of the state's universal service 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. Moneys in the funds may only be
expended to accomplish specified telecommunications universal service
programs, upon appropriation in the annual Budget Act or upon
supplemental appropriation. Existing law, until January 1, 2015,
requires the commission to develop, implement, and maintain a
suitable program to establish a fair and equitable local rate
structure aided by universal service rate support to small
independent telephone corporations that serve rural areas and are
subject to rate-of-return regulation by the commission (the CHCF-A
program). Existing law, until January 1, 2015, requires the
commission to develop, implement, and maintain a suitable,
competitively neutral, and broadbased program to establish a fair and
equitable local rate support structure aided by universal service
rate support to telephone corporations serving areas where the cost
of providing services exceeds rates charged by providers, as
determined by the commission (the CHCF-B program).
   This bill would  delete the provision stating that moneys in
each of the state's universal service funds are the proceeds of rates
and are held in trust for the benefit of ratepayers and to
compensate telephone corporations for their cost of providing
universal service. The bill would require the commission, in
administering the universal service program funds, and in
administering state participation in federal universal service
programs, to make it a priority, and to take all reasonable steps
consistent with the state's universal service policies and goals, to
maximize the amount of federal funding to California and to
California participants in the federal programs. The bill would 
extend the repeal date of the CHCF-A program and CHCF-B program
requirements until January 1, 2019.  The bill would renumber the
statute establishing the programmatic requirements for the CHCF-B
program so that it is located in the code adjacent to the statute
establishing the California High-Cost Fund-B Administrative Committee
Fund, would delete outdated language, and would make other
conforming changes. 
   Under existing law, a violation of the Public Utilities Act or an
order or direction of the commission is a crime.
   Because the CHCF-A program and CHCF-B program, that are extended
under the provisions of this bill, are within the act and a decision
or order of the commission implements the programs' requirements, the
bill would impose a state-mandated local program by expanding the
definition of a crime.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   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: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 247.1 of the   Public
Utilities Code   is amended to read: 
   247.1.  (a) The Mobile Telecommunications Sourcing Act 
(P.L.   (Public Law  106-252) was enacted for the
purpose of establishing nationwide uniform sourcing rules for the
imposition of state and local taxes, fees, and surcharges on mobile
telecommunications services. In order to establish a single, uniform
sourcing rule, the federal act partially preempted state and local
law imposing taxes, fees, and surcharges on a mobile
telecommunications services customer whose place of primary use is
outside of the state in which the state and local taxes, fees, or
surcharges are imposed.
   (b) In accordance with the Mobile Telecommunications Sourcing Act,
which is incorporated herein by reference, and notwithstanding
Sections  275.6, 276.5,  280, 431,  739.3, 
879, and 2881, the surcharges or fees under these sections do not
apply to any charges for mobile telecommunications services billed to
a customer where those services are provided, or deemed provided, to
a customer whose place of primary use is outside this state. Mobile
telecommunications services shall be deemed provided by a customer's
home service provider to the customer if those services are provided
in a taxing jurisdiction to the customer, and the charges for those
services are billed by or for the customer's home service provider.
   (c) For purposes of this section:
   (1) "Charges for mobile telecommunications services" means any
charge for, or associated with, the provision of commercial mobile
radio service, as defined in Section 216.8, or any charge for, or
associated with, a service provided as an adjunct to a commercial
mobile radio service, that is billed to the customer by or for the
customer's home service provider, regardless of whether individual
transmissions originate or terminate within the licensed service area
of a home service provider.
   (2) "Customer" means either (A) the person or entity that
contracts with the home service provider for mobile
telecommunications services, or (B) if the end user of mobile
telecommunications services is not the contracting party, the end
user of the mobile telecommunications service. This paragraph applies
only for the purpose of determining the place of primary use. The
term "customer" does not include either (A) a reseller of mobile
telecommunications service, or (B) a serving carrier under an
arrangement to serve the customer outside the home service provider's
licensed service area.
   (3) "Home service provider" means the facilities-based carrier or
reseller with which the customer contracts for the provision of
mobile telecommunications services.
   (4) "Licensed service area" means the geographic area in which the
home service provider is authorized by law or contract to provide
commercial mobile radio service to the customer.
   (5) "Mobile telecommunications service" means commercial mobile
radio service, as defined in Section 216.8.
   (6) "Place of primary use" means the street address representative
of where the customer's use of the mobile telecommunications service
primarily occurs, that must be:
   (A) The residential street address or the primary business street
address of the customer.
   (B) Within the licensed area of the home service provider.
   (7) (A) "Reseller" means a provider who purchases
telecommunications services from another telecommunications service
provider and then resells the services, or uses the services as a
component part of, or integrates the purchased services into a mobile
telecommunications service.
   (B) "Reseller" does not include a serving carrier with which a
home service provider arranges for the services to its customers
outside the home service provider's licensed service area.
   (8) "Serving carrier" means a facilities-based carrier providing
mobile telecommunications service to a customer outside a home
service provider's or reseller's licensed area.
   (9) "Taxing jurisdiction" means any of the several states, the
District of Columbia, or any territory or possession of the United
States, any municipality, city, county, township, parish,
transportation district, or assessment jurisdiction, or any other
political subdivision within the territorial limits of the United
States with the authority to impose a tax, charge, or fee.
   SEC  .   2.    Section 270 of the
  Public Utilities Code   is amended to  
read: 
   270.  (a) The following funds are hereby created in the State
Treasury:
   (1) The California High-Cost Fund-A Administrative Committee Fund.

   (2) The California High-Cost Fund-B Administrative Committee Fund.

   (3) The Universal Lifeline Telephone Service Trust Administrative
Committee Fund.
   (4) The Deaf and Disabled Telecommunications Program
Administrative Committee Fund.
   (5) The Payphone Service Providers Committee Fund.
   (6) The California Teleconnect Fund Administrative Committee Fund.

   (7) The California Advanced Services Fund.
   (b)  Moneys in the funds are the proceeds of rates and are
held in trust for the benefit of and to compensate telephone
corporations for their costs of providing universal service.
 Moneys in the funds may only be expended pursuant to this
chapter and upon appropriation in the annual Budget Act or upon
supplemental appropriation. 
   (c) The commission, in administering the universal service program
funds listed in subdivision (a), and in administering state
participation in federal universal service programs, shall make it a
priority, and take all reasonable steps consistent with the state's
universal service policies and goals, to maximize the amount of
federal funding to California and to California participants in the
federal programs.  
   (c) 
    (d)  Moneys in each fund  may  
shall  not be appropriated, or in any other manner transferred
or otherwise diverted, to any other fund or entity, except as
provided in Sections 19325 and 19325.1 of the Education Code.
   SEC. 3.    Section 275 of the   Public
Utilities Code   is amended to read: 
   275.  (a) There is hereby created the California High-Cost Fund-A
Administrative Committee, which is an advisory board to advise the
commission regarding the development, implementation, and
administration of a program to provide for transfer payments to small
independent telephone corporations providing local exchange services
in high-cost rural and small metropolitan areas in the state to
create fair and equitable local rate structures, as provided for in
Section  739.3, the development of a grant program for the
construction of telecommunications infrastructure as set forth in
Section 276.5   275.6  , and to carry out the
program pursuant to the commission's direction, control, and
approval.
   (b) All revenues collected  by telephone corporations in
rates   through surcharges  authorized by the
commission to fund the program specified in subdivision (a) shall be
submitted 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 High-Cost Fund-A
Administrative Committee Fund. All interest earned by moneys in the
fund shall be deposited in the fund.  Any unexpended revenues
collected prior to the operative date of this section shall be
submitted to the commission, and the commission shall transfer those
moneys to the Controller for deposit in the California High-Cost
Fund-A Administrative Committee Fund. 
   (c) Moneys appropriated from the California High-Cost Fund-A
Administrative Committee Fund to the commission shall be utilized
exclusively by the commission for the program specified in
subdivision (a), including all costs of the board and the commission
associated with the administration and oversight of the program and
the fund.
   (d) The Legislature finds and declares that, because maintenance
of universal public switched telephone network service throughout the
state and maintenance of public safety answering points in high-cost
areas of the state rely on appropriations from the California
High-Cost Fund-A Administrative Committee Fund, maintaining adequate
funding levels for the fund is critical to public health and safety.
   SECTION 1.   SEC. 4.   Section 275.6 of
the Public Utilities Code is amended to read:
   275.6.  (a) The commission shall exercise its regulatory authority
to maintain the California High-Cost Fund-A Program to provide
universal service rate support to small independent telephone
corporations in amounts sufficient to meet the revenue requirements
established by the commission through rate-of-return regulation in
furtherance of the state's universal service commitment to the
continued affordability and widespread availability of safe,
reliable, high-quality communications services in rural areas of the
state.
   (b) For purposes of this section, the following terms have the
following meanings:
   (1) "Carrier of last resort" means a telephone corporation that is
required to fulfill all reasonable requests for service within its
service territory.
   (2) "Rate base" means the value of a telephone corporation's plant
and equipment that is reasonably necessary to provide regulated
voice services and access to advanced services, and upon which the
telephone corporation is entitled to a fair opportunity to earn a
reasonable rate of return.
   (3) "Rate design" means the mix of end user rates, high-cost
support, and other revenue sources that are targeted to provide a
fair opportunity to meet the revenue requirement of the telephone
corporation.
   (4) "Rate-of-return regulation" means a regulatory structure
whereby the commission establishes a telephone corporation's revenue
requirements, and then fashions a rate design to provide the company
a fair opportunity to meet the revenue requirement.
   (5) "Revenue requirement" means the amount that is necessary for a
telephone corporation to recover its reasonable expenses and tax
liabilities and earn a reasonable rate of return on its rate base.
   (6) "Small independent telephone corporations" are rural incumbent
local exchange carriers subject to commission regulation.
   (c) In administering the California High-Cost Fund-A Program, the
commission shall do all of the following:
   (1) Continue to set rates to be charged by the small independent
telephone corporations in accordance with Sections 451, 454, 455, and
728.
   (2) Employ rate-of-return regulation to determine a small
independent telephone corporation's revenue requirement in a manner
that provides revenues and earnings sufficient to allow the telephone
corporation to deliver safe, reliable, high-quality voice
communication service and fulfill its obligations as a carrier of
last resort in its service territory, and to afford the telephone
corporation a fair opportunity to earn a reasonable return on its
investments, attract capital for investment on reasonable terms, and
ensure the financial integrity of the telephone corporation.
   (3) Ensure that rates charged to customers of small independent
telephone corporations are just and reasonable and are reasonably
comparable to rates charged to customers of urban telephone
corporations.
   (4) Provide universal service rate support from the California
High-Cost Fund-A Administrative Committee Fund to small independent
telephone corporations in an amount sufficient to supply the portion
of the revenue requirement that cannot reasonably be provided by the
customers of each small independent telephone corporation after
receipt of federal universal service rate support.
   (5) Promote customer access to advanced services and deployment of
broadband-capable facilities in rural areas that is reasonably
comparable to that in urban areas, consistent with national
communications policy.
   (6) Include all reasonable investments necessary to provide for
the delivery of high-quality voice communication services and the
deployment of broadband-capable facilities in the rate base of small
independent telephone corporations.
   (7) Ensure that support is not excessive so that the burden on all
contributors to the California High-Cost Fund-A Program is limited.
   (d) In order to participate in the California High-Cost Fund-A
Program, a small independent telephone corporation shall meet all of
the following requirements:
   (1) Be subject to rate-of-return regulation.
   (2) Be subject to the commission's regulation of telephone
corporations pursuant to this division.
   (3) Be a carrier of last resort in their service territory.
   (4) Qualify as a rural telephone company under federal law (47
U.S.C.  Section   Sec.  153(44)).
   (e) Upon request from the commission, a small independent
telephone corporation that receives support from the California
High-Cost Fund-A Program shall provide information regarding revenues
derived from the provision of unregulated internet access service by
that corporation or its affiliate within that corporation's
telephone service territory. The commission shall treat as
confidential any information provided pursuant to this subdivision.
   (f) The commission shall structure the programs required by this
section so that any charge imposed to promote the goals of universal
service reasonably equals the value of the benefits of universal
service to contributing entities and their subscribers.
   (g) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date. 
  SEC. 2.    Section 739.3 of the Public Utilities
Code is amended to read:
   739.3.  (a) The commission shall develop, implement, and maintain
a suitable program to establish a fair and equitable local rate
structure aided by universal service rate support to small
independent telephone corporations serving rural and small
metropolitan areas. The purpose of the program shall be to promote
the goals of universal telephone service and to reduce any disparity
in the rates charged by those companies.
   (b) For purposes of this section, small independent telephone
corporations means those independent telephone corporations serving
rural areas, as determined by the commission.
   (c) The commission shall develop, implement, and maintain a
suitable, competitively neutral, and broadbased program to establish
a fair and equitable local rate support structure aided by universal
service rate support to telephone corporations serving areas where
the cost of providing services exceeds rates charged by providers, as
determined by the commission. The commission shall develop and
implement the program on or before October 1, 1996. The purpose of
the program shall be to promote the goals of universal telephone
service and to reduce any disparity in the rates charged by those
companies. Except as otherwise explicitly provided, this subdivision
does not limit the manner in which the commission collects and
disburses funds, and does not limit the manner in which it may
include or exclude the revenue of contributing entities in
structuring the program.
   (d) The commission shall structure the programs required by this
section so that any charge imposed to promote the goals of universal
service reasonably equals the value of the benefits of universal
service to contributing entities and their subscribers.
   (e) The commission shall investigate reducing the level of
universal service rate support, or elimination of universal service
rate support in service areas with demonstrated competition.
   (f) By July 1, 2010, the commission shall prepare and submit to
the Legislature a report on the affordability of basic telephone
service in areas funded by the California High-Cost Fund-B
Administrative Committee Fund. The report, among other things, shall
provide information on prices and costs of basic telephone service,
and penetration and utilization rates of basic telephone service by
income, ethnicity, age, and other demographic characteristics, using
surveys and other methods of identifying the factors affecting
affordability of basic telephone service for customers and
noncustomers. The report shall describe the characteristics of
noncustomers and their reasons for not having telephone service. The
report shall identify those persons most at risk of losing basic
telephone service. The report shall be funded out of the California
High-Cost Fund-B Administrative Committee Fund.
   (g) This section shall only apply to the California High-Cost
Fund-B Administrative Committee Fund program.
   (h) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date. 
  SEC. 5.    Section 276 of the   Public
Utilities Code   is amended to read: 
   276.  (a) There is hereby created the California High-Cost Fund-B
Administrative Committee, which is an advisory board to advise the
commission regarding the development, implementation, and
administration of a program to provide for transfer payments to
telephone corporations providing local exchange services in high-cost
areas in the state to create fair and equitable local rate
structures, as provided for in  Section 739.3, the
development of a grant program for the construction of
telecommunications infrastructure as set forth in  Section
276.5, and to carry out the program pursuant to the commission's
direction, control, and approval.
   (b) All revenues collected  by telephone corporations in
rates   through surcharges  authorized by the
commission to fund the program specified in subdivision (a) shall be
submitted 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 High-Cost Fund-B
Administrative Committee Fund. All interest earned by moneys in the
fund shall be deposited in the fund.  Any unexpended revenues
collected prior to the operative date of this section shall be
submitted to the commission, and the commission shall transfer those
moneys to the Controller for deposit in the California High-Cost
Fund-B Administrative Committee Fund. 
   (c) Moneys appropriated from the California High-Cost Fund-B
Administrative Committee Fund to the commission shall be utilized
exclusively by the commission for the program specified in
subdivision (a), including all costs of the board and the commission
associated with the administration and oversight of the program and
the fund. 
   (d) This section shall become operative on January 1, 2006.

   SEC. 6.    Section 739.3 of the   Public
Utilities Code   is amended and renumbered to read: 
    739.3.   276.5.   (a) The commission
shall develop, implement, and maintain a  suitable program to
establish a fair and equitable local rate structure aided by
universal service rate support to small independent telephone
corporations serving rural and small metropolitan areas. The purpose
of the program shall be to promote the goals of universal telephone
service and to reduce any disparity in the rates charged by those
companies.  suitable, competitively neutral, and
broadbased program to establish a fair and equitable local rate
support structure aided by universal service rate support to
telephone corporations serving areas where the cost of providing
services exceeds rates charged by providers, as determined by the
commission.   The purpose of the program shall be to promote
the goals of universal telephone service and to reduce any disparity
in the rates charged by those companies. Except as otherwise
explicitly provided, this subdivision does not limit the  
manner in which the commission collects and disburses funds, an 
 d does not limit the manner in which it may include or exclude
the revenue of   contributing entities in structuring the
program.  
   (b) For purposes of this section, small independent telephone
corporations means those independent telephone corporations serving
rural areas, as determined by the commission.  
   (c) The commission shall develop, implement, and maintain a
suitable, competitively neutral, and broadbased program to establish
a fair and equitable local rate support structure aided by universal
service rate support to telephone corporations serving areas where
the cost of providing services exceeds rates charged by providers, as
determined by the commission. The commission shall develop and
implement the program on or before October 1, 1996. The purpose of
the program shall be to promote the goals of universal telephone
service and to reduce any disparity in the rates charged by those
companies. Except as otherwise explicitly provided, this subdivision
does not limit the manner in which the commission collects and
disburses funds, and does not limit the manner in which it may
include or exclude the revenue of contributing entities in
structuring the program.  
   (d) 
    (b)  The commission shall structure the programs
required by this section so that any charge imposed to promote the
goals of universal service reasonably equals the value of the
benefits of universal service to contributing entities and their
subscribers. 
   (e) 
    (c)  The commission shall investigate reducing the level
of universal service rate support, or elimination of universal
service rate support in service areas with demonstrated competition.

   (f) By July 1, 2010, the commission shall prepare and submit to
the Legislature a report on the affordability of basic telephone
service in areas funded by the California High-Cost Fund-B
Administrative Committee Fund. The report, among other things, shall
provide information on prices and costs of basic telephone service,
and penetration and utilization rates of basic telephone service by
income, ethnicity, age, and other demographic characteristics, using
surveys and other methods of identifying the factors affecting
affordability of basic telephone service for customers and
noncustomers. The report shall describe the characteristics of
noncustomers and their reasons for not having telephone service. The
report shall identify those persons most at risk of losing basic
telephone service. The report shall be funded out of the California
High-Cost Fund-B Administrative Committee Fund.  
   (g) 
    (d)  This section shall only apply to the California
High-Cost Fund-B Administrative Committee Fund program. 
   (h) 
    (e)  This section shall remain in effect only until
January 1  , 2015   2019  , and as of that
date is repealed, unless a later enacted statute, that is enacted
before January 1,  2015   2019  , deletes
or extends that date.
   SEC. 3.   SEC. 7.   No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.
   SEC. 4.   SEC. 8.   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 ensure that the Public Utilities Commission has the
necessary statutory direction to fund the state's universal service
programs at the earliest possible time, it is necessary for this act
to take effect immediately.