BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 745


                                                                    Page  1





          Date of Hearing:  June 29, 2016


                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE


                                  Mike Gatto, Chair


          SB  
          745 (Hueso) - As Amended June 20, 2016


          SENATE VOTE:  36-1


          SUBJECT:  Telecommunications:  universal service:  California  
          Advanced Services Fund


          SUMMARY:  Makes various changes to the California Advanced  
          Services Fund (CASF). Specifically, this bill:  


          1)Requires the California Public Utilities Commission (CPUC), in  
            its review of applications for funds from the CASF Broadband  
            Public Housing Account (Public Housing Account), to prioritize  
            unwired housing developments.


          2)Expands eligibility to wired housing developments for Public  
            Housing Account funds, if the CPUC determines that the  
            projects would provide broadband Internet service at no  
            greater cost for comparable speed and quality than is  
            commercially available before the project.


          3)Specifies that a housing development is wired when it is  
            possible to subscribe to a commercially available broadband  








                                                                     SB 745


                                                                    Page  2





            Internet service, such as Digital Subscriber Line, cable  
            modem, or another protocol, utilizing existing wired  
            facilities.


          4)Specifies that a housing development is unwired when at least  
            one housing unit within the housing development is not wired.


          5)Extends the date remaining funds from the Public Housing  
            Account are transferred back to other CASF Accounts from  
            December 31, 2016 to December 31, 2020.


          6)Extends the due date on the CPUC annual report to the  
            Legislature from January 1 of each year to April 1 of each  
            year.


          7)Requires the CPUC to provide additional information in its  
            annual report, including county information and specified  
            details on the status of each CASF funded project.


          8)Authorizes representatives of workforce organizations and air  
            pollution control or air quality management districts to be  
            included as an eligible consortium for funds in the CASF Rural  
            and Urban Regional Broadband Consortia Grant Account  
            (Consortia Account). 


          EXISTING LAW:   


          1)Establishes the CASF in the State Treasury, and requires that  
            monies in those funds are the proceeds of rates and held in  
            trust for the benefit of ratepayers, and to compensate  
            telephone corporations for their costs of providing universal  
            service, and expended only to accomplish specified  








                                                                     SB 745


                                                                    Page  3





            telecommunications universal service programs, upon  
            appropriation in the annual Budget Act or upon supplemental  
            appropriation.  (Public Utilities Code Section 270) 


          2)Requires the CPUC 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 substantial social benefits  
            of advanced information and communications technologies, as  
            provided in specific decisions of the CPUC and in the CASF  
            statute.  (Public Utilities Code Section 281) 


          3)Requires that $190 million, collected by a surcharge  
            authorized by the CPUC, after January 1, 2011, to be deposited  
            into the Broadband Infrastructure Grant Account  
            (Infrastructure Account).  (Public Utilities Code Section 281)  



          4)Requires that $15 million, collected by a surcharge authorized  
            by the CPUC, after January 1, 2011, is to be deposited into  
            the Consortia Account.  (Public Utilities Code Section 281) 


          5)Require that $10 million, collected by a surcharge authorized  
            by the CPUC, after January 1, 2011, to be deposited into the  
            Broadband Infrastructure Revolving Loan Account (Revolving  
            Loan Account).  (Public Utilities Code Section 281) 


          6)Requires the CPUC to transfer to the Public Housing Account  
            $20 million from the Infrastructure Account and $5 million  
            from the Revolving Loan Account.  Any moneys in the Public  
            Housing Account that have not been awarded by December 31,  
            2016, shall be transferred back to the Infrastructure Account  
            and the Revolving Loan Account in proportion to the amount  
            transferred from the respective accounts.  (Public Utilities  








                                                                     SB 745


                                                                    Page  4





            Code Section 281) 


          7)Authorizes the CPUC to collect an additional sum not to exceed  
            $315 million through the 2020 calendar year, but not to exceed  
            $25 million per year, unless the CPUC 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.  (Public Utilities Code Section  
            281) 


          8)Requires the CPUC to give priority to projects that provide  
            last-mile broadband access to households that are unserved by  
            an existing facilities based broadband provider.  (Public  
            Utilities Code Section 281) 


          FISCAL EFFECT:  Unknown.


          COMMENTS:  


          1)Author's Statement:  "Addressing the digital divide is  
            imperative to ensuring all Californians have full and equal  
            access to the economic, educational, social, and health  
            opportunities available on the internet, now a primary  
            mechanism for many of society's activities.  Improved  
            broadband access and availability is an important strategy in  
            the state's efforts to bridge the divide, and the CASF program  
            is a key component of the strategy.  Improving the information  
            available to policymakers about the efforts and activities of  
            the CASF program will help to further our efforts to improve  
            access for more Californians. More detailed information at the  
            county-level and information about efforts to leverage  
            non-CASF resources will be beneficial to inform policymakers  
            as to the existing challenges and opportunities.  The funds in  
            the Public Housing program are beneficial to low-income  








                                                                     SB 745


                                                                    Page  5





            residents who would otherwise be without broadband service -  
            and therefore, opportunities for employment, economic  
            development, health improvements, services, etc."


          2)Background:  The CASF was created by the CPUC and statutorily  
            established by the Legislature through SB 1193 (Padilla),  
            Chapter 393, Statutes of 2008, to help promote the deployment  
            of broadband infrastructure in unserved and underserved areas  
            of the state.


            The goal of the program was to reach areas of the state that  
            had dial-up internet connectivity.  Recognizing that  
            consumers, including schools, libraries, health and medical  
            facilities, etc. have a range of broadband access needs, the  
            CPUC adopted a 6Mbps/1.5Mbps speed standard as a benchmark for  
            evaluating proposals.  The CPUC believed that such benchmark  
            speeds provided a minimum necessary to effectively work from  
            home.  According to the Federal Communications Commission, for  
            most activities, including HD-quality streaming, a download  
            speed of 4Mbps is adequate.


            In 2010, SB 1040 (Padilla), Chapter 317, Statutes of 2010,  
            expanded the program by authorizing telecommunications  
            carriers to collect an additional $125 million from its  
            initial $100 million allocation.  Furthermore, SB 740  
            (Padilla), Chapter 522, Statutes of 2013, further expanded  
            CASF eligibility to any commercial provider of broadband  
            access, or any nonprofit entity, including government entities  
            or community anchor institutions that elect to provide  
            facilities based broadband service, prioritized projects that  
            provide last-mile broadband access to households that are  
            unserved by an existing facilities based broadband provider,  
            and specified a goal for the CASF to approve funding for  
            infrastructure projects that will provide broadband access to  
            no less than 98% of California households by December 31,  
            2015. The CASF is funded through a surcharge collected on all  








                                                                     SB 745


                                                                    Page  6





            telecommunications end-users.  As of June 2016, the CASF  
            surcharge rate is at 0.464%.


          3)CASF Accounts:  CASF funding is allocated into four accounts,  
            the Infrastructure Account, the Consortia Account, the  
            Revolving Loan Account, and the Public Housing Account. The  
            Infrastructure Account funds the capital costs of broadband  
            infrastructure projects in unserved and underserved areas in  
            California.  The Consortia Account provides funding for the  
            cost of broadband deployment activities, other than the  
            capital cost of facilities.  The Revolving Loan Account  
            supplements financing for projects also receiving CASF grant  
            funding.  The Public Housing Account supports projects to  
            deploy local area networks and to increase adoption rates in  
            publicly supported housing communities. 


          4)Unserved vs. Underserved:  The CPUC authorizes CASF grants for  
            projects in both unserved and underserved areas, with priority  
            going to unserved areas.  An unserved area is an area where no  
            broadband service is available, (except through dial-up or  
            satellite service).  The CPUC defines an underserved area as  
            an area where broadband service is slower than 6 megabits per  
            second (Mbps)/1.5Mbps. The CPUC prioritized CASF expenditures  
            to unserved areas where no facilities based provider offered  
            broadband service, followed by underserved areas where no  
            facilities based providers offered broadband service at  
            specific speeds. 


          5)Current Status of the CASF:  Currently, the CPUC is authorized  
            to collect $315 million for the CASF through 2020, but not to  
            exceed $25 million per year, unless the CPUC 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.  As of December 2015 the status  
            of each CASF account is as follows:









                                                                     SB 745


                                                                    Page  7






            Infrastructure Account:  Authorized to collect $270 million  
            for funding for the capital costs of broadband infrastructure  
            projects. Fifty-two projects have been approved and 20  
            projects are still pending/under review.  Approximately  
            $121,293,776 has been awarded from the account.  


            Revolving Loan Account:  Authorized to collect $5 million to  
            provide supplemental financing for projects that are also  
            applying for funds from the Infrastructure Grant Account.   
            Approximately $626,654 has been awarded from the account.


            Consortia Account:  Authorizes $15 million to fund the cost of  
            broadband deployment activities other than the capital cost of  
            facilities.  Approximately $9,263,476 has been awarded from  
            the account.


            Public Housing Account:  Authorizes $25 million to provide  
            grants and loans dedicated to broadband access and adoption in  
            publicly supported housing communities. Ninety-nine projects  
            have been approved and 271 projects are still pending/under  
            review.  Approximately $2,506,628 awarded. 


          6)CASF Broadband Public Housing Account: In 2013, the  
            Legislature passed AB 1299 (Bradford), Chapter 507, Statutes  
            of 2013, which established the Public Housing Account within  
            the CASF.  The Public Housing Account was created to award  
            grants and loans to finance projects to connect broadband  
            networks to publicly support communities.  The Public Housing  
            Account grew out of the need to fund publicly subsided housing  
            units in California that lacked broadband connections. The  
            Legislature held hearings in which representatives citied the  
            lack of reliable broadband connectivity due to the cost of  
            building or upgrading the infrastructure and maintaining the  
            network and inside wiring, along with cable providers being  








                                                                     SB 745


                                                                    Page  8





            denied access to public housing to install services, as  
            primary causes for the lack of broadband connection in  
            publicly subsided housing units. 


            AB 1299 transferred $20 million from the Infrastructure  
            Account and $5 million from the Revolving Loan Account to the  
            Public Housing Account. Twenty million dollars from the Public  
            Housing Account is to be used to finance projects to connect  
            broadband networks to publicly supported communities, and $5  
            million is to be awarded to support programs designed to  
            increase adoption rates for broadband services.  As of  
            December 2015, there remains approximately $22 million  
            remaining in the Public Housing Account.  Any remaining funds  
            in the Public Housing Account that hasn't been awarded by  
            December 31, 2016, is to be transferred back to Infrastructure  
            Account and Revolving Loan Account.


          7)Resolution T-17515:  In 2015, the Housing Authority of the  
            County of San Bernardino (HACSB), Community Housing Works  
            (CHW), and Eden Housing, Inc. (Eden), submitted applications  
            for CASF funding. The 12 project application was to provide  
            broadband services for 548 living units in the publicly  
            supported communities.  The 12 projects were challenged by two  
            Internet Service Providers (ISP), Charter and Comcast, on the  
            grounds that an ISP was already providing service to those  
            publically supported communities.  The subsequent review of  
            the challenge concluded that nearly all of the public housing  
            application locations were wired.  HACSB, CHW, and Eden  
            responded to the challengers by asserting that "although the  
            units may have wiring to support broadband Internet service,  
            residents do not subscribe to that service because they cannot  
            afford the service."  In June 2016, the CPUC approved $239,793  
            for the HACSB, CHW, and Eden projects.


            This bill requires the CPUC to prioritize unwired housing  
            developments for funds from the Public Housing Account. This  








                                                                     SB 745


                                                                    Page  9





            bill also authorizes wired housing developments to be eligible  
            for Public Housing Account funds, if the CPUC determines that  
            the projects would provide broadband Internet service at no  
            greater cost for comparable speed and quality than is  
            commercially available before the project. Furthermore, this  
            bill extends the date in which money is transferred from the  
            Public Housing Account back to the Infrastructure Account and  
            Revolving Loan Account from December 31, 2016, to December 31,  
            2020. 


            By authorizing wired housing developments to be eligible for  
            Public Housing Account funds, this bill would potentially  
            greatly expand the number of eligible projects for CASF grant  
            monies. Such expansion could promote overbuilding and reduce  
            funds available to support unserved communities and unwired  
            housing development. 


             The author may wish to consider an amendment to ensure that  
            CASF funds from the Public Housing Account are prioritized for  
            unserved housing development, to be consistent with current  
            CPUC priorities and to ensure that funds are not used to  
            overbuilt existing housing developments with broadband  
            services. 


           8)CASF Annual Report:  Under current law, the CPUC is required  
            to provide an annual report to the Legislature on January 1 of  
            each year on the status of the CASF, including information on  
            the amount of funds expended, the recipients of the funds, the  
            geographic regions affected by the funds, the expected  
            benefits of the funds, actual broadband adoption levels from  
            the funds, and the amount of funds expended used to match  
            federal funds.  


            This bill extends the due date on the CPUC annual report to  
            the Legislature from January 1 of each year to April 1 of each  








                                                                     SB 745


                                                                    Page  10





            year. In addition, this bill requires the CPUC to include more  
            information in its annual report, including the geographic  
            regions of the state affected by funds including, information  
            by county, details on the status of each project, whether the  
            project has been completed, and/or the expected the completion  
            date, and additional details on efforts to leverage non-CASF  
            funds.


          9)Regional Consortia:  Under current law, moneys from the  
            Consortia Account are available only to eligible consortia's  
            to fund the cost of broadband deployment activities other than  
            the capital cost of facilities.  An eligible consortium may  
            include, as specified by the CPUC, representatives of  
            organizations, including, local and regional government,  
            public safety, elementary and secondary education, health  
            care, libraries, post-secondary education, community-based  
            organizations, tourism, parks and recreation, agricultural and  
            business.


            This bill would add representatives of workforce organizations  
            and air pollution control or air quality management districts  
            as eligible consortia that may apply for Consortia Account  
            funds.  According to the author, workforce organizations  
            include one-stop career centers that provide opportunities and  
            access to employment and training.  In addition, air quality  
            agencies are developing new information resources via  
            broadband connections which provide residents with improved  
            access to air quality, including real time air monitoring.   
            These agencies can contribute to the efforts of local  
            consortium to help bridge the digital divide.


          10)Suggested Amendment:  


            281 (h) (3) (B) (i) In its review of applications received  
            pursuant to subparagraph (A), the commission shall prioritize  








                                                                     SB 745


                                                                    Page  11





             unwired   unserved  housing developments.  A wired housing  
            development shall be an eligible applicant only if the  
            commission determines that the project would provide broadband  
            Internet service at no greater cost for comparable speed and  
            quality than is commercially available before the project.


             (ii) For purposes of this subparagraph,  a housing development  
            is wired when it is possible to subscribe to a commercially  
            available broadband Internet service, such as Digital  
            Subscriber Line (DSL), cable modem, or another protocol,  
            utilizing existing wired facilities.  A housing development is  
             unwired   unserved  when at least one housing unit within the  
            housing development is not  wired   offered broadband Internet  
            service  .


          11)Prior Legislation:


            AB 1299 (Bradford), Chapter 507, Statutes of 2013: Establishes  
            the Public Housing Account within the CASF to fund grants for  
            the deployment and adoption of broadband services in publicly  
            supported communities.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          None on file.












                                                                     SB 745


                                                                    Page  12





          Opposition


          None on file.




          Analysis Prepared by:Edmond Cheung / U. & C. / (916)  
          319-2083