Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1758

Introduced by Assembly Member Mark Stone

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(Coauthors: Assembly Members Eduardo Garcia and Levine)

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(Coauthor: Senator McGuire)

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February 2, 2016

An act to amend Section 281 of, and to add Section 281.1 to, the Public Utilities Code, relating to telecommunications.

LEGISLATIVE COUNSEL’S DIGEST

AB 1758, as amended, Mark Stone. Telecommunications: California Advanced Services Fund.

Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including telephone corporations. Existing law establishes, among other funds related to telecommunications, the California Advanced Services Fund (CASF) in the State Treasury. Existing law requires the commission 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 the substantial social benefits of advanced information and communications technologies, as provided in specified decisions of the commission and in the CASF statute. Existing law requires the commission to give priority to projects that provide last-mile broadband access to households that are unserved by an existing facilities-based broadband provider. Existing law establishes that the goal of the program is, no later than December 31, 2015, to approve funding for infrastructure projects that will provide broadband access to no less than 98% of California households. Existing law authorizes the commission to collect a surcharge for deposit into the CASF not to exceed $315,000,000 in total and authorizes the surcharge until 2020.

This bill would extend to December 31, 2023, the time period for meeting the program goal and would specify the threshold speeds to be met in achieving the goal. The bill would also specify as a program goal the achievement of a statewide 90% adoption rate of high-speed Internet access by December 31, 2023. The bill would require the commission to give priority to projects that provide advanced communication services at those threshold speeds to unserved and underserved households until the goal is achieved. The bill would authorize the commission, once that goal is achieved, to prioritize funding for other specified projects. The bill would require the commission and the California Broadband Council, in consultation with relevant state agencies, to develop a plan to implement these provisions in a manner that fosters public-private collaboration. The bill would authorize the commission to allocate up to $10 million from the Broadband Infrastructure Grant Account in the CASF to a specified nonprofit organization for specified purposes. The bill would make various legislative findings, including findings regarding deployment of broadband speeds of at least 25 megabits per second (Mbps) downstream and 3 Mbps upstream. The bill would establish the High-Speed Internet Access Adoption Account within the CASF and would authorize the commission to award grants to eligible community-based organizations for education and outreach to low-income households to facilitate the adoption of high-speed Internet access by these households. The bill would authorize the commission to collect an additional $350,000,000, would specify the distribution of the additional moneys among the accounts in the CASF, and would authorize the collection through 2026. By increasing the collection for deposit in the CASF, the bill would constitute a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.

Existing law requires a certain amount of moneys from the Broadband Infrastructure Grant Account and the Broadband Revolving Loan Account to be transferred to the Broadband Public Housing Account and requires the commission to award grants and loans from the Broadband Public Housing Account to eligible publicly supported communities. Existing law requires any moneys in the Broadband Public Housing Account not awarded by December 31, 2016, to be transferred back to the other 2 accounts.

This bill would repeal the requirement to transfer back the moneys in the Broadband Public Housing Account that are not awarded.

Because the provisions of this bill are within the Public Utilities Act, a violation of which is a crime, this bill would impose a state-mandated local program by extending 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.

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.  

This act shall be known, and may be cited, as the
Internet For All Now Act of 2016.

SEC. 2.  

(a) The Legislature finds and declares all of the
following:

(1) The availability of high-speed Internet access, referred to
generically as “broadband” and including both wired and wireless
technologies, is essential 21st century infrastructure for economic
competitiveness and quality of life. Economic studies confirm that
the use of broadband technologies increases economic productivity
as a foundation for increased efficiency in organizational operations
and enhanced profitability in business.

(2) Broadband infrastructure is also vital to the operation and
management of other critical infrastructure, such as energy
generation systems and the power grid, water supply systems, and
public safety and emergency response networks. There is a need
for world-class broadband infrastructure throughout California to
support these major infrastructure investments to protect lives,
property, and the environment.

(3) The California Advanced Services Fund (CASF) is a vital
resource for California to be a national leader and globally
competitive in broadband infrastructure.

(b) It is the intent of the Legislature that the Public Utilities
Commission, after ensuring the development of last-mile
infrastructure to provide at least 6 megabits per second (Mbps)
downstream and 1.5 Mbps upstream service for 98 percent of
unserved or underserved households in each region of the state,
do all of the following:

(1) Establish the goal for threshold broadband speeds in future
plans and programs of not less than 25 Mbps downstream and 3
Mbps upstream. In establishing the threshold broadband speeds,
the commission should ensure California remains a national leader
and globally competitive on broadband infrastructure while taking
into account all cost-effective strategies.

(2) Analyze and publish public data regarding the availability
of broadband service at speeds specified in paragraph (1)
throughout the state.

(3) Prepare and submit to the Legislature a plan for achieving
broadband service at speeds specified in paragraph (1) that includes
the following:

(A) An analysis of the availability of those threshold speeds for
all consumers.

(B) An assessment of the implications of the implementation
of paragraph (1) for the CASF and the required funding needed to
achieve that goal in unserved and underserved areas.

(C) A delineation of the strategies and policies that would
achieve that goal in the most cost-effective manner possible,
including whether or not it should be the policy of the state to
encourage fiber deployment for middle-mile projects.

SEC. 3.  

Section 281 of the Public Utilities Code is amended
to read:

281.  

(a) (1) The commission shall develop, implement, and
administer the California Advanced Services Fund program to
encourage deployment of high-quality advanced communications
services to all Californians that will promote economic growth,
job creation, and the substantial social benefits of advanced
information and communications technologies, consistent with
this section and Section 281.1.

(2) Recognizing that, in addition to residential households, there
are other types of consumers, including anchor institutions, such
as schools, libraries, community centers, and health and medical
facilities, small businesses and large employers, and research
organizations, all with a range of needs for broadband access
threshold speeds in excess of those specified in Section 281.1, the
commission, in administering the program, shall consider
approving funding for last-mile infrastructure projects begin delete to reach
unserved and underserved households that exceed those threshold
speeds, that also provide improvements to those other types of
consumers, and that the commission deems end delete begin insert deemed by the
commission end insert to be in the public interest and a cost-effective use of
the moneys in the California Advanced Services begin delete Fund. end delete begin insert Fund that
will reach unserved and underserved households and that will do
both of the following: end insert

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(A) Provide broadband access at speeds that exceed those
thresholds.

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(B) Provide improvements to those other types of consumers.

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(b) (1) The goals of the program are both of the following:

(A) No later than December 31, 2023, to approve funding for
infrastructure projects that will provide broadband access at
advertised speeds of 6 megabits per second (Mbps) downstream
and 1.5 Mbps upstream to no less than 98 percent of California
households.

(B) No later than December 31, 2023, to approve funding for
education and outreach projects that would facilitate the
achievement of a statewide 90 percent household adoption rate of
high-speed Internet access with no significant population segment
with less than 80 percent adoption. For purposes of this
subparagraph, high-speed Internet access means access to the
Internet at speeds faster than dialup.

(2) In approving infrastructure projects, the commission shall
give priority to projects pursuant to Section 281.1. The commission
shall provide each applicant, and any party challenging an
application, the opportunity to demonstrate actual levels of
broadband service in the project area, which the commission shall
consider in reviewing the application.

(c) The commission shall establish the following accounts within
the fund:

(1) The Broadband Infrastructure Grant Account.

(2) The Rural and Urban Regional Broadband Consortia Grant
Account.

(3) The Broadband Infrastructure Revolving Loan Account.

(4) The Broadband Public Housing Account.

(5) The High-Speed Internet Access Adoption Account.

(d) (1) All moneys collected by the surcharge authorized by
the commission pursuant to Decision 07-12-054 shall be
transmitted 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 Advanced
Services Fund. Moneys collected on and after January 1, 2011,
shall be deposited in the following amounts in the following
accounts:

(A) Three hundred fifty million dollars ($350,000,000) into the
Broadband Infrastructure Grant Account.

(B) Thirty million dollars ($30,000,000) into the Rural and
Urban Regional Broadband Consortia Grant Account.

(C) Ten million dollars ($10,000,000) into the Broadband
Infrastructure Revolving Loan Account.

(D) In addition to the amount transferred pursuant to
subparagraph (A) of paragraph (7) of subdivision (h), seventy-five
million dollars ($75,000,000) into the Broadband Public Housing
Account.

(E) One hundred million dollars ($100,000,000) into the
High-Speed Internet Access Adoption Account.

(2) All interest earned on moneys in the fund shall be deposited
in the fund.

(3) The commission shall not collect moneys, by imposing the
surcharge described in paragraph (1) for deposit in the fund, in an
amount that exceeds one hundred million dollars ($100,000,000)
before January 1, 2011. On and after January 1, 2011, the
commission may collect an additional sum not to exceed five
hundred sixty-five million dollars ($565,000,000), for a sum total
of moneys collected by imposing the surcharge described in
paragraph (1) not to exceed six hundred sixty-five million dollars
($665,000,000). The commission may collect the remaining balance
of the additional sum beginning with the calendar year starting on
January 1, 2017, and continuing through the 2026 calendar year,
in an amount not to exceed fifty million dollars ($50,000,000) per
year, unless the commission determines that collecting a higher
amount in any year will not result in an increase in the total amount
of all surcharges collected from telephone customers that year.

(e) (1) (A) All moneys in the California Advanced Services
Fund shall be available, upon appropriation by the Legislature, to
the commission for the program administered by the commission
pursuant to this section and Section 281.1, including the costs
incurred by the commission in developing, implementing, and
administering the program and the fund.

(B) To ensure the most cost effective and timely achievement
of the goals specified in paragraph (1) of subdivision (b), the
commission may award contracts through an open and competitive
process for any of the following services:

(i) Project oversight and management of grants awarded from
the Broadband Infrastructure Grant Account to accelerate the
completion of projects without cost increase or overruns.

(ii) Engineering review of proposals for grants from the
Broadband Infrastructure Grant Account.

(iii) Overall management, distribution of funds from the
Broadband Infrastructure Grant Account to sub-awardees, and
verification of performance by the sub-awardees receiving funds.

(C) To avoid delays in begin delete cash flow, end delete begin insert cashflow, end insert contracts entered
into pursuant to subparagraph (B) shall include terms for reasonable
and prudent advance payment schedules reconciled to actual
expenditures by contractors, as verified by independent audits.

(2) Notwithstanding any other law and for the sole purpose of
providing matching funds pursuant to the federal American
Recovery and Reinvestment Act of 2009 (Public Law 111-5), any
entity eligible for funding pursuant to that act shall be eligible to
apply to participate in the program administered by the commission
pursuant to this section and Section 281.1, if that entity otherwise
satisfies the eligibility requirements under that program. Nothing
in this section shall impede the ability of an incumbent local
exchange carrier, as defined by subsection (h) of Section 251 of
Title 47 of the United States Code, that is regulated under a rate
of return regulatory structure, to recover, in rate base, California
infrastructure investment not provided through federal or state
grant funds for facilities that provide broadband service and
California intrastate voice service.

(3) Notwithstanding subdivision (b) of Section 270, an entity
that is not a telephone corporation shall be eligible to apply to
participate in the program administered by the commission pursuant
to this section and Section 281.1 to provide access to broadband
to an unserved or underserved household, as defined in commission
Decision 12-02-015, if the entity otherwise meets the eligibility
requirements and complies with program requirements established
by the commission. These requirements shall include all of the
following:

(A) That projects under this paragraph provide last-mile
broadband access to households that are unserved by an existing
facilities-based broadband provider and only receive funding to
provide broadband access to households that are unserved or
underserved, as defined in commission Decision 12-02-015.

(B) That funding for a project providing broadband access to
an underserved household shall not be approved until after any
existing facilities-based provider has an opportunity to demonstrate
to the commission that it will, within a reasonable timeframe,
upgrade existing service. An existing facilities-based provider
may, but is not required to, apply for funding under this section to
make that upgrade.

(C) That the commission shall provide each applicant, and any
party challenging an application, the opportunity to demonstrate
actual levels of broadband service in the project area, which the
commission shall consider in reviewing the application.

(D) That a local governmental agency may be eligible for an
infrastructure grant only if the infrastructure project is for an
unserved household or business, the commission has conducted
an open application process, and no other eligible entity applied.

(E) That the commission shall establish a service list of
interested parties to be notified of California Advanced Services
Fund applications.

(4) Notwithstanding subdivision (b) of Section 270, up to ten
million dollars ($10,000,000) from the Broadband Infrastructure
Grant Account shall be available for allocation to the California
Telehealth Network, a 501(c)(3) nonprofit organization, for
purposes of leveraging that organization’s utilization of the Federal
Communications Commission’s Healthcare Connect Fund for
California’s medically underserved communities.

(f) Moneys in the Rural and Urban Regional Broadband
Consortia Grant Account shall be available for grants to eligible
consortia to fund the cost of broadband deployment activities other
than the capital cost of facilities, as specified by the commission.
An eligible consortium may include, as specified by the
commission, representatives of organizations, including, but not
limited to, local and regional government, public safety, elementary
and secondary education, health care, libraries, postsecondary
education, community-based organizations, tourism, parks and
recreation, agricultural, and business, and is not required to have
as its lead fiscal agent an entity with a certificate of public
convenience and necessity.

(g) Moneys in the Broadband Infrastructure Revolving Loan
Account shall be available to finance capital costs of broadband
facilities not funded by a grant from the Broadband Infrastructure
Grant Account. The commission shall periodically set interest rates
on the loans based on surveys of existing financial markets.

(h) (1) For purposes of this subdivision, the following terms
have the following meanings:

(A) “Publicly subsidized” means either that the housing
development receives financial assistance from the United States
Department of Housing and Urban Development pursuant to an
annual contribution contract or is financed with low-income
housing tax credits, tax-exempt mortgage revenue bonds, general
obligation bonds, or local, state, or federal loans or grants and the
rents of the occupants, who are lower income households, do not
exceed those prescribed by deed restrictions or regulatory
agreements pursuant to the terms of the financing or financial
assistance.

(B) “Publicly supported community” means a publicly
subsidized multifamily housing development that is wholly owned
by either of the following:

(i) A public housing agency that has been chartered by the state,
or by any city or county in the state, and has been determined to
be an eligible public housing agency by the United States
Department of Housing and Urban Development.

(ii) An incorporated nonprofit organization as described in
Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. Sec.
501(c)(3)) that is exempt from taxation under Section 501(a) of
that code (16 U.S.C. Sec. 501(a)), and that has received public
funding to subsidize the construction or maintenance of housing
occupied by residents whose annual income qualifies as “low” or
“very low” income according to federal poverty guidelines.

(2) Notwithstanding subdivision (b) of Section 270, moneys in
the Broadband Public Housing Account shall be available for the
commission to award grants and loans pursuant to this subdivision
to an eligible publicly supported community if that entity otherwise
meets eligibility requirements and complies with program
requirements established by the commission.

(3) Not more than twenty million dollars ($20,000,000) shall
be available for grants and loans to a publicly supported community
to finance a project to connect a broadband network to that publicly
supported community. A publicly supported community may be
an eligible applicant only if the publicly supported community can
verify to the commission that the publicly supported community
has not denied a right of access to any broadband provider that is
willing to connect a broadband network to the facility for which
the grant or loan is sought.

(4) (A) Not more than five million dollars ($5,000,000) shall
be available for grants and loans to a publicly supported community
to support programs designed to increase adoption rates for
broadband services for residents of that publicly supported
community. A publicly supported community may be eligible for
funding for a broadband adoption program only if the residential
units in the facility to be served have access to broadband services
or will have access to broadband services at the time the funding
for adoption is implemented.

(B) A publicly supported community may contract with other
nonprofit or public agencies to assist in implementation of a
high-speed Internet access adoption program.

(5) To the extent feasible, the commission shall approve projects
for funding from the Broadband Public Housing Account in a
manner that reflects the statewide distribution of publicly supported
communities.

(6) In reviewing a project application under this subdivision,
the commission shall consider the availability of other funding
sources for that project, any financial contribution from the
broadband service provider to the project, the availability of any
other public or private broadband adoption or deployment program,
including tax credits and other incentives, and whether the applicant
has sought funding from, or participated in, any reasonably
available program. The commission may require an applicant to
provide match funding, and shall not deny funding for a project
solely because the applicant is receiving funding from another
source.

(7) To provide funding for the purposes of this subdivision, the
commission shall transfer to the Broadband Public Housing
Account twenty million dollars ($20,000,000) from the Broadband
Infrastructure Grant Account and five million dollars ($5,000,000)
from the Broadband Revolving Loan Account.

(i) (1) (A) Notwithstanding subdivision (b) of Section 270,
moneys in the High-Speed Internet Access Adoption Account shall
be available for the commission to award performance-based grants
to eligible not-for-profit, community-based organizations, schools,
and libraries to increase high-speed Internet adoption by
low-income households by providing public education and outreach
programs that are culturally appropriate and in relevant languages
on digital literacy training, assistance with selecting a high-speed
Internet provider, and subscription to high-speed Internet access.

(B) The commission shall develop criteria for awarding grants
and determine the process and methodology for verifying
high-speed Internet access based on new subscriptions by
low-income households.

(C) The commission may award one or more contracts for the
overall management of grants to eligible not-for-profit
community-based organizations, schools, and libraries to increase
high-speed Internet adoption among low-income households at a
cost not to exceed 10 percent of the amount of grants awarded.

(2) To avoid delays in begin delete cash flow, end delete begin insert cashflow, end insert contracts entered
into pursuant to paragraph (1) shall include terms for reasonable
and prudent advance payment schedules reconciled to actual
expenditures by contractors, as verified by independent audits.

(j) (1) The commission shall conduct two interim financial
audits and a final financial audit and two interim performance
audits and a final performance audit of the implementation and
effectiveness of the California Advanced Services Fund to ensure
that funds have been expended in accordance with the approved
terms of the grant awards and loan agreements, this section, and
Section 281.1. The commission shall report its interim findings to
the Legislature by April 1, 2020, and April 1, 2022. The
commission shall report its final findings to the Legislature by
April 1, 2024. The reports shall also include an update to the maps
in the final report of the California Broadband Task Force and data
on the types and numbers of jobs created as a result of the program
administered by the commission pursuant to this section and
Section 281.1.

(2) (A) The requirement for submitting a report imposed under
paragraph (1) is inoperative on January 1, 2022, pursuant to Section
10231.5 of the Government Code.

(B) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government
Code.

(k) (1)   Beginning on January 1, 2018, and annually thereafter,
until January 1, 2027, the commission shall provide a report to the
Legislature that includes all of the following information:

(A) The amount of funds expended from the California
Advanced Services Fund in the prior year.

(B) The recipients of funds expended from the California
Advanced Services Fund in the prior year.

(C) The geographic regions of the state affected by funds
expended from the California Advanced Services Fund in the prior
year.

(D) The expected benefits to be derived from the funds expended
from the California Advanced Services Fund in the prior year.

(E) The amount of actual high-speed Internet access adoption
due to the funds expended from the California Advanced Services
Fund in the prior year.

(F) The amount of funds expended from the California
Advanced Services Fund used to match federal funds.

(G) An update on the expenditures from California Advanced
Services Fund and broadband adoption levels, and an accounting
of remaining unserved and underserved households and areas of
the state.

(H) The status of the California Advanced Services Fund balance
and the projected amount to be collected in each year to fund
approved projects.

(2) A report to be submitted pursuant to paragraph (1) shall be
submitted in compliance with Section 9795 of the Government
Code.

SEC. 4.  

Section 281.1 is added to the Public Utilities Code, to
read:

281.1.  

(a) For the purposes of this section, the following terms
mean the following:

(1) “Last-mile infrastructure” means the segment of the Internet
infrastructure that provides Internet connectivity to end users, such
as residential households, anchor institutions, and local businesses.

(2) “Middle-mile backhaul infrastructure” means the segment
of the Internet infrastructure that connects the last-mile
infrastructure to the backbone infrastructure of the Internet.

(3) “Program” means the California Advanced Services Fund
program.

(4) “Unserved households” and “underserved households” have
the same meanings as in commission Decision 12-02-015.

(b) (1) Until the goal specified in subparagraph (A) of paragraph
(1) of subdivision (b) of Section 281 is achieved, the commission,
in administering the program, shall give priority to last-mile
infrastructure projects that provide advanced communication
services at or above the advertised speeds required under the goal
to unserved or underserved households. Recognizing that
cost-effective, last-mile infrastructure projects are dependent upon
affordable middle-mile backhaul infrastructure that may be
deployed through underserved or unserved areas either by
incumbents providing access to existing middle-mile backhaul
infrastructure at reasonable prices as determined by the commission
or by the project applicant constructing essential middle-mile
infrastructure as part of the project, the commission shall consider
applications for projects that provide for the development of
last-mile infrastructure serving unserved and underserved
households that include the development of middle-mile backhaul
infrastructure to which the last-mile infrastructure connects.

(2) (A) The commission shall give additional priority to
applicants that are incumbents with existing middle-mile backhaul
infrastructure proposing to deploy last-mile infrastructure to
provide services to unserved and underserved households, if the
incumbent submits an application no later than March 31, 2017,
and the proposal is deemed cost effective by the commission

(B) The commission shall require the incumbent to complete,
no later than December 31, 2018, the construction of the project
given priority pursuant to this paragraph.

(3) In applying for funding for the program, an applicant shall
demonstrate the cost-effectiveness of the last-mile infrastructure
at the threshold speeds specified in subparagraph (A) of paragraph
(1) of subdivision (b) of Section 281.

(c) Once the goal specified in subparagraph (A) of paragraph
(1) of subdivision (b) of Section 281 is reached, the commission
may prioritize funding pursuant to the program for any of the
following:

(1) Last-mile infrastructure projects providing advanced
communication services at advertised speeds of at least 25 Mbps
downstream and 3 Mbps upstream to unserved and underserved
households and at appropriate speeds to anchor institutions and
other customers in the vicinity of those households.

(2) Upgrades to broadband connectivity for other critical
infrastructure systems not in the vicinity of residences.

(3) Last-mile infrastructure projects of statewide public
significance, including projects related to public safety and
emergency response, such as providing broadband connectivity to
and among county fairgrounds as staging areas for emergency
responses, wildfire fighting, and disaster evacuations.

(d) It is the intent of the Legislature to enact legislation to
establish a transparent public process to analyze and designate a
project as having statewide significance for purposes of paragraph
(3) of subdivision (c).

(e) The commission and the California Broadband Council shall,
in consultation with relevant state agencies, develop a plan to
implement this section in a manner that fosters public-private
partnership collaboration in an open and transparent process.

SEC. 5.  

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.