BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 3|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: SB 3
Author: Padilla (D)
Amended: 5/31/11
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SUBJECT : Telecommunications: universal service
SOURCE : Author
DIGEST : This bill extends the sunset date of the
California High Cost Fund B program to January 1, 2014, and
requires the commission to require contributions from
intrastate revenues of interconnected Voice over Internet
Protocol service to support the universal services programs
as specified.
ANALYSIS :
Existing law:
1.Requires the California Public Utilities Commission
(CPUC) to establish and maintain universal service
programs to ensure that affordable telephone service is
available in rural, high-cost areas of the state,
including the California High Cost Fund B program, which
sunsets on January 1, 2012.
2.Requires that all providers of telecommunications
CONTINUED
SB 3
Page
2
services contribute to universal service programs.
3.Requires that state universal service programs not be
inconsistent with federal universal service law and
regulations of the Federal Communications Commission
(FCC).
This bill
1.Extends the sunset date of the California High Cost Fund
B program to January 1, 2014.
2.Requires the CPUC to require providers of
telecommunications service using Voice over Internet
Protocol (VoIP) service to contribute to state universal
service programs and would add an urgency clause so that
statutory authority is in effect prior to CPUC action in
a pending VoIP proceeding.
Comments
According to the author's office, this bill ensures that
California continues programs that help every Californian
get connected to the telecommunications network at
affordable rates in order to increase the value of the
network for all subscribers and to ensure that these
programs are appropriately modified to reflect changes in
technology and the telecommunications marketplace.
Universal service is a long-standing state and federal
policy
Universal service ensures the availability of high quality,
affordable telephone service for all Americans -- has been
a bedrock principle of telecommunications policy nationwide
since enactment of the Communications Act of 1934. But
methods of achieving universal service have evolved over
time with changes in the marketplace and technology. The
challenge is how to keep rates affordable in rural,
sparsely populated areas with rough terrain where the cost
of providing service is high. Historically, when the old
AT&T ("Ma Bell") provided both local and long distance
service, rates for customers in high-cost areas were kept
SB 3
Page
3
affordable in part with revenue from above-cost long
distance charges. In addition, telephone companies
traditionally have set local service rates based on the
average cost of providing service across their service
areas, effectively a subsidy from densely populated urban
areas to enable lower rates in high-cost rural areas.
Competition in long distance markets and the breakup of
AT&T in 1984, followed by local service competition with
the Telecommunications Act of 1996, led to federal and
state universal service programs funded by explicit
customer charges rather than embedded subsidies.
California has two programs to promote universal service in
rural, high-cost areas: (1) California High Cost Fund A,
which provides direct support to the 14 small rural
telephone companies that are under rate-of-return
regulation; and (2) California High Cost Fund B, which
provides support for large local exchange carriers (AT&T,
Verizon, Frontier, and SureWest) for the high-cost areas of
their service territories where the cost of providing basic
service exceeds $36 per month. The CPUC establishes the
surcharge rate for each fund in an annual resolution based
on carrier claims and balance in the funds. The B Fund
surcharge currently is 0.45% of intrastate services, and
the A Fund surcharge is 0.0% of intrastate services.
Universal service support evolving with technologies
State and federal universal service programs are structured
to support landline voice telephone service. However, the
FCC has several pending proceedings that propose
significant transformation of federal universal service
programs to provide efficient, targeted support for
broadband and voice service, rather than just voice
service, as outlined in the FCC's National Broadband Plan
released in March 2010. According to the FCC, broadband
has transformed virtually every aspect of modern life - the
workplace, commerce, education, health care, government
services, and public safety, making universal access to
broadband a necessity in today's 21st century digital
economy. Therefore, the FCC's proposals would modify
universal service policies to promote investment in
broadband facilities capable of providing video, data and
high-speed Internet access, as well as voice service and
SB 3
Page
4
would make changes as to how the recipient of federal
universal service support for serving high cost areas is
determined.
At the state level, the CPUC has taken initial steps to
update California's universal service programs. In
November 2010, the CPUC opened the door for wireless, VoIP,
and other non-traditional carriers to offer service to
customers eligible for the low-income program. The CPUC
also is considering how to expand the definition of "basic
service" to include more than landline voice service for
purposes of the B Fund program. In January 2011, the CPUC
opened a proceeding that responds to a recent FCC ruling
that interconnected VoIP providers must contribute to the
federal programs and that states may require VoIP
contribution to state universal service programs. The FCC
recognized that as an ever-growing number of customers get
voice service from VoIP rather than landline providers, the
funding for universal service programs diminishes. The
CPUC has proposed requiring interconnected VoIP providers
to contribute to state universal service programs, although
there is a significant question whether the CPUC has
sufficient authority under state law to require this.
Prior legislation
SB 379 (Fuller) amends statement of telecommunications
policy to express support for continuation of universal
service support for the small telephone companies that draw
from the California High Cost Fund A.
AB 841 (Buchanan) is a spot bill the author intends to
amend to require the CPUC to require VoIP contribution to
state universal service programs.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in
thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
SB 3
Page
5
Revenues from extending the ($25,000)
($51,000) ($25,000) Special *
High Cost Fund B program
Expenditures from the High $25,000 $51,000
$25,000Special *
Cost Fund B program
New revenues from VoIP Unknown additional
revenuesVarious **
providers
Participations in FCC $175 Special
***
proceedings
* California High-Cost Fund-B Administrative Committee
Fund
** Several universal service funds administered by the CPUC
***Public Utilities Commission Utilities Reimbursement
Account
SUPPORT : (5/26/11)
AT&T
California Communications Association
California Independent Telecommunications Companies
California State Association of Counties
Frontier Communications
Regional Council of Rural Counties
OPPOSITION : (5/26/11)
The Utility Reform Network (unless amended)
ARGUMENTS IN SUPPORT : AT&T states: "The California High
Cost Fund-B program, which is funded by a surcharge on
customer's bills, allows phone subscribers in high-cost and
hard to serve rural areas to obtain phone service at
reasonable rates. The program is scheduled to sunset
January 1, 2012. We support continuation of the program,
which has been an effective means for ensuring universal
SB 3
Page
6
telephone access in these communities." AT&T also states,
"SB 3 will not result in any new costs to the state. The
bill simply extends an existing program - the California
High Cost Fund-B program, and it will not require a new
rulemaking by the CPUC to extend the universal surcharges
to VoIP. The CPUC already has a rulemaking in progress,
commenced in January of this year. The California State
Association of Counties (CSAC) states: "On behalf of CSAC,
I write in support of your SB 3, which would extend to
2014, authority for the CPUC to use the California
High-Cost Fund-B to support telephone and broadband
services in high-cost service areas, primary rural. It
would also explicitly require contributions to the fund
from users of Voice over Internet Protocol.
ARGUMENTS IN OPPOSITION : The Utility Reform Network
states it "opposes SB 3 unless amended to accomplish the
stated goal in a more consumer friendly manner. This bill
will unduly limit the commission's jurisdiction over
alternative providers of voice communication services. As
consumers increasingly rely on these alternative providers
such as Voice Over Internet Protocol ("VoIP") and
broadband, for "basic" voice services, it is imperative
that the California Public Utilities Commission have clear
authority to protect California consumers through means of
reasonable service quality standards, registration
requirements, and consumer protection rules among other
regulatory mechanisms. While this bill attempts to
accomplish laudable goals, it does so in such a way as to
potentially and unnecessarily restrict the Commission's
authority in this area."
RM:rm 5/31/2011 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****