BILL ANALYSIS Ó SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS Senator Ben Hueso, Chair 2015 - 2016 Regular Bill No: AB 1262 Hearing Date: 6/16/2015 ----------------------------------------------------------------- |Author: |Wood | |-----------+-----------------------------------------------------| |Version: |2/27/2015 As Introduced | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |Yes |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Nidia Bautista | | | | ----------------------------------------------------------------- SUBJECT: Telecommunications: universal service: California Advanced Services Fund DIGEST: This bill would reallocate funding among two accounts within the California Advanced Services Fund (CASF) for purposes of encouraging broadband deployment in the state. Specifically, the bill would result in a reduction of $5 million from the Broadband Infrastructure Revolving Loan Account and a corresponding increase to the Rural and Urban Regional Broadband Consortia Grant Account. ANALYSIS: Existing law: 1)Establishes the CASF as one of several California universal service program funds established in the State Treasury. (Public Utilities Code §270) 2)Requires the California Public Utilities Commission (CPUC) to develop, implement, and administer the CASF program 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. (Public Utilities Code §281) 3)Establishes the goal of the CASF program to approve funding for infrastructure projects that will provide broadband access to no less than 98% of Californians by December 31, 2015. (Public Utilities Code §281) AB 1262 (Wood) Page 2 of ? 4)Requires the CPUC to establish four accounts within CASF program, including the Broadband Infrastructure Grant Account, The Rural and Urban Regional Broadband Consortia Grant, The Broadband Infrastructure Revolving Loan Account, and The Broadband Public Housing Account. (Public Utilities Code §281) 5)Requires that of the monies collected for CASF on and after January 1, 2011, $190,000,000 is deposited into the Broadband Infrastructure Grant Account, $10,000,000 is deposited in the Rural and Urban Regional Broadband Consortia Grant Account, and $15,000,000 is deposited into the Broadband Infrastructure Revolving Loan Account. (Public Utilities Code §281) 6)Requires that of the monies deposited into the CASF program $20 million shall be transferred from the Broadband Infrastructure Account and another $5 million shall be transferred from the Broadband Revolving Loan Account for a total of $25 million to the Broadband Public Housing Account. Requires any funds not awarded as of December 31, 2016 shall be transferred back in proportion to the amount transferred. (Public Utilities Code §281) This bill: 1)Requires moneys collected for CASF on and after January 1, 2011, $15,000,000 is to be deposited into the Rural and Urban Regional Broadband Consortia Grant Account and used for specified purposes, and $10,000,000 is to be deposited into the Broadband Infrastructure Revolving Loan Account and used for specified purposes. 2)Declares to take effect immediately as an urgency statute. Background In 2007, the CPUC established the CASF which was subsequently codified in law by SB 1193 (Padilla, Chapter 393, Statutes of 2008) as a new universal service program to encourage deployment of broadband services to all Californians that will promote economic growth, job creation, and substantial social benefits of advanced information and communications technologies. The CASF provides grants to bridge the "digital divide" in unserved and underserved areas in the state. AB 1262 (Wood) Page 3 of ? CASF is funded by a surcharge rate on revenues collected by telecommunications carriers from end-users of intrastate services. With initial authorized funding of $100 million, the CASF supports projects that will a) provide broadband services to "unserved" areas that are currently without broadband access and b) build out facilities in "underserved" areas. An "unserved" area is an area that is not served by any form of wireline or wireless facilities-based broadband, such that internet connectivity is available only through dial up service. An "underserved" area is an area where broadband is available, but no wireline or wireless facilities-based provider offers service at advertised data transfer speeds of at least 6 megabits per second download and 1.5 megabits per second upload. Statute requires the CPUC to prioritize CASF investments to unserved areas, followed by underserved areas. SB 1040 (Padilla, Chapter 317, Statutes of 2010) extended CASF indefinitely, established subaccounts within CASF, and increased CASF funding to $225 million. SB 740 (Padilla, Chapter 522, Statutes of 2013) authorized an additional $90 million funding for a CASF grant subaccount. Currently, the CASF program has a total authorized funding of $315 million to be collected in surcharges through the year 2020. The current authorized funding limits for each CASF subaccount is as follows: Broadband Infrastructure Grant Account $270 million Broadband Infrastructure Revolving Loan Account $10 million Rural and Urban Regional Broadband Consortia Grant Account$10 million Broadband Public Housing Account $25 million The Broadband Infrastructure Grant Account provides grants to cover the capital costs of expanding broadband infrastructure. The CASF grant awards 70% of project costs for unserved areas and 60% for underserved areas. Eligible entities include both telephone corporations and non-telephone corporations with certain conditions, such as conditioning funding for local governments to projects that only serve unserved households or businesses. AB 1262 (Wood) Page 4 of ? The Broadband Infrastructure Revolving Loan Account is intended to provide supplemental financing for projects also applying for CASF grant funding. The loan program would cover 20% of projects costs, with a maximum of $500,000. The Rural and Urban Regional Broadband Consortia Grant Account provides grants to eligible voluntary regional consortia to fund the cost of broadband deployment activities other than capital costs of facilities. Eligible consortia include diverse stakeholders from their respective communities, and work to inform the public about broadband, gather data about Internet availability and speeds for CPUC broadband maps, mobilize local governments and employers to aggregate demand to assist the private sector, ensure local broadband providers know about CASF. There are currently over a dozen regional consortia representing every area of the state. While the members of each regional consortia vary, many consortia include representatives from local businesses, community colleges, school districts, community-based organizations and local governments. The Broadband Public Housing Account supports deployment of broadband infrastructure and adoption programs in eligible publicly supported housing communities. The program was established by AB 1299 (Bradford, Chapter 507, Statutes of 2013) and transfers a total of $25 million from CASF accounts, specifically $20 million from the grant account and $5 million from the loan account. Per the statute, any remaining funds as of December 31, 2016 will be transferred back in proportion to the two accounts. On December 18, 2014, the CPUC approved the rules implementing the new Broadband Public Housing Account (D. 14-12-039). Consortia Grant Account vs. Revolving Loan Account. The funds within the Regional Consortia Account have been well-subscribed. The CPUC has awarded a total of $9.26 million in grant funding for 16 consortia groups, leaving only $250,000 remaining in the account. Furthermore, most regional consortia (13 of 16) will have exhausted their funding this year, with the remaining scheduled to exhaust their funding next year. On the other hand, according to the CPUC, "the CASF Revolving Loan program is either undersubscribed or of little necessity, given the number of grant applications vs. loan applications received on the February 1, 2013 deadline." The CPUC has approved only three loans to date totaling $126,654 to two applicants, for three AB 1262 (Wood) Page 5 of ? separate infrastructure projects. The CPUC in its budget documents had already flagged the need to evaluate whether the loan program is worth continuing to pursue. Prior/Related Legislation SB 1193 (Padilla, Chapters 393, Statutes of 2008) codified CASF as a new universal service program in the Public Utilities Code to encourage the deployment of broadband. SB 1040 (Padilla, Chapter 317, Statutes of 2010) extended CASF indefinitely and expanded it to include three accounts: 1) Broadband Infrastructure Grant Account, 2) Broadband Infrastructure Revolving Loan Account, and 3) Rural and Urban Regional Broadband Consortia Grant Account. The bill also increased CASF funding to $225 million ($100 million additional for the Infrastructure Grant Account, $15 million to the Revolving Loan Account, and $10 million to the Consortia Grant Accounts). SB 740 (Padilla, Chapter 522, Statutes of 2013) Expanded eligibility in the CASF, established a program goal, and increased the program funding. AB 1299 (Bradford, Chapter 507, Statutes of 2013) Required the CPUC to transfer a total of $25 million from the Broadband Infrastructure Grant Account and the Broadband Revolving Loan Account in order to fund the Broadband Public Housing Account. Required that any funds not awarded by December 31, 2016 are transferred back. AB 238 (Stone, 2015) would define "broadband" services based on specified speeds for purposes of CASF. The bill is in Assembly Utilities & Commerce Committee. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No ASSEMBLY VOTES: Assembly Floor (77-0) Assembly Appropriations Committee (17-0) Assembly Utilities and Commerce Committee(14-0) AB 1262 (Wood) Page 6 of ? SUPPORT: California Center for Rural Policy (Source) 211 San Bernardino County Access Humboldt Anza Electric Cooperative, Inc. Broadband Consortium of the Pacific Coast California Emerging Technology Fund California Primary Care Association California Public Utilities Commission California State Association of Counties California State University San Bernardino Central Coast Broadband Consortium Central Sierra Connect Broadband Consortia City of Bishop City of California City City of Ridgecrest City of Riverside City of Tehachapi Connected Capital Area Broadband Consortium Contra Costa Economic Partnership Corporation for Education Network Initiatives in California County of Alpine County of Amador County of Del Norte County of El Dorado County of Humboldt County of Kern County of Mariposa County of Modoc County of Mono County of Nevada County of Riverside County of Sacramento County of San Bernardino County of San Diego County of Shasta County of Sierra County of Sutter County of Tehama County of Trinity County of Tuolumne County of Ventura County of Yolo East Bay Broadband Consortium AB 1262 (Wood) Page 7 of ? Eastern Sierra Connect Regional Broadband Consortium Economic Vitality Corporation Edgewood Companies Feldman McLaughlin Thiel LLP Gold Country Broadband Consortium High Desert Community Foundation Inland Empire Economic Partnership Inland Empire Regional Broadband Consortium Inyo Networks, Inc. Kern Community College District Lake Tahoe South Shore Chamber of Commerce Los Angeles County Regional Broadband Consortia North Bay/North Coast Broadband Consortium North Lake Tahoe Chamber/CVB/Resort Association Northeastern California Connect Consortium Plumas-Sierra Rural Electric Cooperative Plumas-Sierra Telecommunications Praxis Associates, Inc. Redwood Coast Connect Rural County Representatives of California San Bernardino Community College District San Diego Imperial Regional Broadband Consortium San Joaquin Valley Regional Broadband Consortium Sierra Economic Development Corporation Sierra Ecosystems Associates SmartRiverside Tahoe Prosperity Center The Utility Reform Network Town of Mammoth Lakes Tuolumne County Economic Development Authority Upstate California Connect Consortium Volcano Communications Group West Kern Community College District Yuba Community College District OPPOSITION: None received ARGUMENTS IN SUPPORT: The author's office expresses concern that the CASF Rural and Urban Regional Broadband Consortia Grant Account is about to be exhausted and that if further funds are not available, many rural consortia will no longer be able to provide the appropriate broadband educational service nor assist in preparing applications for grants. AB 1262 (Wood) Page 8 of ? The members of the Broadband Regional Consortia state: "AB 1262 would allow consortia to continue working with telecommunication providers and key community stakeholders to promote CASF for years to come. We believe AB 1262 is essential to achieving the state's broadband goal of reaching 98% broadband deployment and 80% adoption for California by 2015, goals acknowledged by the California Broadband Council; CPUC; and California Emerging Technology Fund." -- END --