BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 379 - Fuller/Cannella Hearing
Date: April 5, 2011 S
As Amended: March 25, 2011 FISCAL B
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DESCRIPTION
Current law 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 A program, which sunsets on January 1, 2013.
Current law declares the policies for telecommunications in
California which include continuing our universal service
commitment by assuring the continued affordability and
widespread availability of high-quality telecommunications
services to all Californians.
This bill would declare that the state's telecommunications
policies include continuing universal service rate support for
telephone corporations subject to rate of return regulation by
the CPUC for the purpose of providing rural areas of the state
with access to telecommunications service.
BACKGROUND
Universal Service - ensuring the availability of high quality,
affordable telephone service for all Americans has long been a
bedrock principle of telecommunications policy nationwide and in
California. The goal is to keep rates affordable in rural,
sparsely populated areas with rough terrain where the cost of
providing service is high. Keeping as many people as possible
connected to the telecommunications network increases the value
of the network for all subscribers. California has two programs
to promote universal service in rural, high-cost areas, one for
each of the two major groups of providers of traditional
landline telephone service.
The first group includes the four large local exchange carriers
(AT&T, Verizon, Frontier and SureWest). These four companies
operate under the Uniform Regulatory Framework (URF), also known
as incentive regulation, which allows them to set their own
rates, including the rates for local service since January 1,
2011. The URF companies are eligible for support from the
California High Cost Fund B to offset the cost of providing
service in the high-cost portions of their service areas where
the cost of service exceeds $36 per month. The CPUC establishes
the surcharge rate in an annual resolution based on carrier
claims and balance in the fund. The current 2010-11 budget is
set at $50.9 million, with a current surcharge of 0.45% of
intrastate services, scheduled to be reduced to 0.30% effective
May 1, 2011.
The second group of providers includes the 14 small independent
telephone companies that serve mostly rural areas: Calaveras
Telephone Company, California-Oregon Telephone Company, Ducor
Telephone Company, Foresthill Telephone Company, Frontier
Communications West Coast Inc., Happy Valley Telephone Company,
Hornitos Telephone Company, Kerman Telephone Company, Pinnacles
Telephone Company, The Ponderosa Telephone Company, Sierra
Telephone Company, Siskiyou Telephone Company, The Volcano
Telephone Company, and Winterhaven Telephone Company. These
companies operate under traditional rate of return regulation
where the CPUC sets their rates to cover expenses, a return on
capital investment, and a profit. Because the cost of providing
service in these rural areas is so high, the revenue from rates
is supplemented with support from the California High Cost Fund
A. This support minimizes rate disparity between customers in
these rural areas and in urban areas. The surcharge currently is
set at 0.0% because of a balance expected to cover the current
year claims. Happy Valley, Hornitos, and Winterhaven currently
do not draw from the A Fund.
COMMENTS
1. Author's Purpose . The author states that this bill is
intended to affirm the state's commitment to supporting
rural Californians' access to affordable, up-to-date
telecommunications services.
2. Universal Service for all Californians . This bill adds
a new provision about universal service to an existing list
of declared policies for telecommunications in California.
This list already includes the policy "to continue our
universal service commitment by assuring the continued
affordability and widespread availability of high-quality
telecommunications services to all Californians." The
policy added by this bill is "to continue universal service
rate support for telephone corporations subject to rate of
return regulation by the commission for the purpose of
providing rural areas of the state with access to
telecommunications service." Thus, the new provision
essentially restates the existing policy of commitment to
universal service but with a focus on rural areas of the
state served by the companies subject to rate of return
regulation that currently receive universal service support
from the California High Cost Fund A. As described above,
the state's universal service programs also provide support
from the California High Cost Fund B to URF companies for
the high-cost portions of their service areas. According
to the author, it is not the intent of this bill to
diminish the state's commitment to providing universal
service support for high-cost areas served by URF
companies.
3. Statutory Authority for A Fund . While this bill would
express a policy of commitment to universal service support
in rural areas served by rate of regulation companies, the
statutory authority for the California High Cost Fund A
sunsets on January 1, 2013. Thus, this policy will need to
be manifested in a bill extending the sunset if the program
is to continue after December 31, 2013.
4. Related Legislation . SB 3 (Padilla), which extends the
sunset date of the California High Cost Fund B.
POSITIONS
Sponsor:
California's Independent Telecommunications Companies
Support:
Division of Ratepayer Advocates (if amended)
Oppose:
None on file
Jacqueline Kinney
SB 379 Analysis
Hearing Date: April 5, 2011