BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 3
Author: Padilla (D)
Amended: 6/20/11
Vote: 27 - Urgency
SENATE ENERGY, UTILITIES & COMM. COMMITTEE : 11-0, 4/5/11
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Pavley, Rubio, Simitian, Strickland, Wright
SENATE APPROPRIATIONS COMMITTEE : 8-0, 5/26/11
AYES: Kehoe, Walters, Alquist, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Emmerson
SENATE FLOOR : 39-0, 6/2/11
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De Le�n, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Strickland, Vargas, Walters, Wolk,
Wright, Wyland, Yee
NO VOTE RECORDED: Runner
SUBJECT : Telecommunications: universal service
SOURCE : Author
DIGEST : This bill extends the sunset date for the
California High Cost Fund A (CHCF-A) and California High
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Cost Fund B (CHCF-B) collections, and requires voice over
Internet protocol service providers to collect and remit
surcharges to state universal service programs.
Assembly Amendments (1) extend the sunset date for CHCF-A
from January 1, 2013 to January 1, 2015, (2) extend the
sunset date for CHCF-B from January 1, 2012 to January 1,
2015, and (3) determine that, under this bill, be operative
if AB 841 (Buchanan), which contains identical language.
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 CHCF-B program, which sunsets on January
1, 2012.
2. Requires that all providers of telecommunications
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).
4. Existing law, until January 1, 2013, 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).
This bill
1. Extends the sunset date for CHCF-A from January 1, 2013,
to January 1, 2015.
2. Extends the sunset date for CHCF-B from January 1, 2012,
to January 1, 2015.
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3. Requires the CPUC to require interconnected voice over
Internet protocol (VoIP) service providers to collect
and remit surcharges on their California intrastate
revenues in support of the universal service funds.
4. Makes finding on the FCC proposal to reform the federal
universal service program to support voice and broadband
and on the requirement in federal law that state
universal service programs not be inconsistent with the
federal program.
5. Contains an urgency clause, allowing this bill to take
effect immediately upon enactment.
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
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
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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) CHCF-A, which provides direct
support to the 14 small rural telephone companies that are
under rate-of-return regulation; and (2) CHCF-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 CHCF-B
surcharge currently is 0.45 percent of intrastate services,
and the CHCF-A surcharge is 0.0 percent 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
would make changes as to how the recipient of federal
universal service support for serving high cost areas is
determined.
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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 CHCF- 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
authority under state law to require this.
Related Legislation
SB 379 (Fuller), 2011-12 Session, amends statement of
telecommunications policy to express support for
continuation of universal service support for the small
telephone companies that draw from the CHCF-A.
AB 841 (Buchanan), 2011-12 Session, is a spot bill the
author intends to amend to require the CPUC to require VoIP
contribution to state universal service programs. The bill
passed the Senate (37-0) on August 29, 2011.
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
Revenues from extending the ($25,000)
($51,000) ($25,000) Special *
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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 : (Verified 8/29/11)
AT&T
California Communications Association
California Independent Telecommunications Companies
California State Association of Counties
Frontier Communications
Regional Council of Rural Counties
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 telephone access in these
communities.
"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
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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
(VoIP)."
RM:kc 8/29/2011 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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