BILL NUMBER: SB 1364 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 26, 2014
PASSED THE ASSEMBLY AUGUST 25, 2014
AMENDED IN ASSEMBLY JULY 1, 2014
AMENDED IN SENATE MAY 27, 2014
INTRODUCED BY Senator Fuller
(Coauthors: Senators Berryhill, Evans, Gaines, Nielsen, Padilla,
Vidak, and Wolk)
(Coauthors: Assembly Members Conway, Dahle, Beth Gaines, Gray,
Grove, Logue, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, and
Yamada)
FEBRUARY 21, 2014
An act to amend Sections 247.1, 270, 275, 275.6, and 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, Fuller. Telecommunications universal service 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 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 broad-based 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
and would instead provide that moneys in the funds are held in trust.
The bill would encourage the commission, in administering the
universal service program funds, and in administering state
participation in federal universal service programs, to maximize the
amount of federal funding 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.
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 (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, 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 held in trust and 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, is encouraged,
consistent with the state's universal service policies and goals, to
maximize the amount of federal funding to California participants in
the federal programs.
(d) Moneys in each fund 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 275.6, and to carry out the program pursuant to the
commission's direction, control, and approval.
(b) All revenues collected 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.
(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.
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 Administrative Committee
Fund program (CHCF-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 CHCF-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 CHCF-A program is limited.
(d) In order to participate in the CHCF-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. Sec. 153(44)).
(e) Upon request from the commission, a small independent
telephone corporation that receives support from the CHCF-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 CHCF-A program 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. 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 276.5, and to carry out the
program pursuant to the commission's direction, control, and
approval.
(b) All revenues collected 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.
(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.
SEC. 6. Section 739.3 of the Public Utilities Code is amended and
renumbered to read:
276.5. (a) The commission shall develop, implement, and maintain
a suitable, competitively neutral, and broad-based 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 program shall be
known, and may be cited, as the California High-Cost Fund-B
Administrative Committee Fund program or CHCF-B program. 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.
(b) The commission shall structure the CHCF-B program 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.
(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.
(d) 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. 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. 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.