BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 379|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 379
Author: Fuller (R)
Amended: 8/20/12
Vote: 21
SENATE ENERGY, UTIL. & COMM. COMMITTEE : 11-0, 4/5/11
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Pavley,
Rubio, Simitian, Strickland, Wright
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 40-0, 5/9/11
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,
Runner, Simitian, Steinberg, Strickland, Vargas, Walters,
Wolk, Wright, Wyland, Yee
SENATE ENERGY, UTIL. & COMM. COMMITTEE : 8-0, 8/29/12
(pursuant to Senate Rule 29.10)
AYES: Padilla, Fuller, Corbett, Emmerson, Kehoe, Rubio,
Strickland, Wright
NO VOTE RECORDED: Berryhill, De Le�n, DeSaulnier, Pavley,
Simitian
ASSEMBLY FLOOR : 78-0, 8/23/12 - See last page for vote
SUBJECT : Telecommunications policies
CONTINUED
SB 379
Page
2
SOURCE : Californias Independent Telecommunications
Companies
DIGEST : This bill modifies the California High Cost Fund
- A (CHCF-A) program to align the Federal Communications
Commissions (FCC) modification of the federal universal
service program to allow high-cost support for the
California Independent Telecommunications Companies
broadband-capable facilities in rural areas.
Assembly Amendments add language that states the bill
requires a small independent telephone corporation that
receives support from the CHCF-A program to provide
information regarding revenues derived from the provision
of unregulated internet access service upon request from
the Public Utilities Commission (PUC) and requires the PUC
to treat this information as confidential, add coauthors,
and make clarifying and technical changes.
ANALYSIS : Existing law:
1. Requires the PUC 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.
2. Declares the policies for telecommunications in
California which include continuing our universal
service commitment by ensuring the continued
affordability and widespread availability of
high-quality telecommunications services to all
Californians.
Background
Universal service has been an important public policy
objective on both the federal and state level. The United
States Congress first made universal service a basic goal
of telecommunications policy with the passage of the
Communications Act of 1934. In 1983, the California
Legislature enacted the Moore Universal Telephone Service
CONTINUED
SB 379
Page
3
Act to ensure that consumers have access to basic voice
service that is both affordable and ubiquitously available.
In 1987, the California Legislature directed the PUC to
establish a rate structure for small independent telephone
companies serving rural and small metropolitan areas to
mitigate increases in service. To achieve this legislative
goal, PUC created various public programs such as CHCF to
provide a source of supplement revenues to telephone
companies serving rural or geographically hard-to serve
areas of California. In 1996, PUC divided CHCF into two
separate programs labeled A and B: the CHCF-A, to provide
high cost support for the small companies, and CHCF-B, to
provide high cost support for large companies.
Support from both the federal and state programs is often
necessary to cover service providers' costs and keep
customer rates affordable. CHCF-A is scheduled to sunset
on January 1, 2015.
FCC activities and orders: Recognizing the need for all
Americans to have universal access to broadband, FCC in
March 2010 released the National Broadband Plan, which
included a proposal for transforming the federal universal
service program and intercarrier compensation systems to
support the provision of affordable broadband in high-cost
areas rather than just voice telephone service.
In November 2011, FCC issued a decision adopting this
proposal and redirecting the $4.5 billion in Universal
Service Fund into a new "Connect America Fund" to support
providers in high-cost areas that accept obligations to
build out high-speed broadband networks. FCC designated
funding for a "Mobility Fund" to accelerate mobile
broadband networks, and a "Remote Areas Fund" for the most
difficult to serve areas. While stakeholders continue to
evaluate the implications of the Order, states are taking
initial steps to implement decisions and determine how
state universal service programs align with the federal
reforms.
PUC looking at CHCF-A : Also in November 2011, the PUC
opened Rulemaking 11-11-007 to review CHCF-A program.
CONTINUED
SB 379
Page
4
According to the PUC's Order, "a detailed review of the
program is warranted in response to market, regulatory, and
technological changes since CHCF program was first
established in 1987." In its June 1, 2012, analysis of
this bill, the PUC states that the "aim of the proceeding
is to develop a more efficient, prudent, and
forward-looking plan for rural consumers that will reflect
realities of the market place and technological
advancements to safeguard California ratepayers."
Comments
According to the author, "SB 379 will help preserve federal
funding coming into rural California and enhance the
availability of advanced broadband services in rural areas
of the state. The modern communications network is a
broadband network, and California's rural communities need
to be connected to the digital superhighway in order to
access the economic development, tele-medicine and
educational opportunities available through advanced
broadband services. At a minimum, state policy should
support the efforts of our small rural telephone companies
to upgrade their networks with broadband-capable facilities
in order to meet the requirements of the federal high-cost
support program. SB 379 ensures this outcome by including
the goal of rural access to advanced services in CHCF-A
program."
Prior Legislation
SB 3 (Padilla) Chapter 695, Statutes of 2011, extends the
sunset date of the California High Cost Fund B.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee,
significant savings, potentially in the millions of
dollars, to the CHCF-A fund due assuming preservation of
federal funding. The PUC calculates the annual amount of
CHCF-A support based on anticipated revenues from the
federal High Cost Loop Support (HCLS). Federal and state
funding works in concert and no double recovery occurs;
i.e., decreases in federal HCLS funding increase CHCF- A
CONTINUED
SB 379
Page
5
funding and vice versa. Presently, the small independent
telephone companies receive about $25 million annually in
federal HCLS and $33.7 million in CHCF-A support.
Hypothetically, if these companies lost the $25 million in
federal funding because they could not meet the FCC's
broadband speed, capacity, and other reliability
requirements, the CHCF-A program could increase
significantly.
Cost pressure, in the hundreds of thousands, to CHCF-A due
to incorporation of broadband as an allowable cost. The
sponsor indicates that its member (13 small, rural)
telephone companies already provide both telephone and
broadband services, and that these multi-use networks just
need incremental upgrades to meet new federal broadband
speed, latency, and service quality requirements. These
cost pressures are unknown, but at current CHCF-A funding
levels, each 1% of additional cost would be $337,000.
Increased administrative costs in the $200,000 range. PUC
indicates that allowing the incorporation of broadband
infrastructure will add complexity to these companies' rate
cases, requiring additional review and analysis, and a
determination whether the broadband facilities are
appropriate for rate-making purposes. For at least the
initial rate cases following enactment of this legislation,
PUC may need two additional regulatory analysts at a cost
of $200,000 for one to two years. Aside from rate cases,
any other general regulatory issues should be able to be
incorporated into PUC's opened rulemaking on CHCF-A
program.
SUPPORT : (Verified 8/23/12)
California Independent Telecommunications Companies
(source)
Calaveras Telephone Company
California Communications Association
California State Association of Counties
Ducor Telephone Company
Ponderosa Telephone
Regional Council of Rural Counties
Sebastian
Siskiyou Telephone
CONTINUED
SB 379
Page
6
Small School Districts' Association
Volcano Communications Group
ASSEMBLY FLOOR : 78-0, 8/23/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell,
Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Hill,
Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara,
Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller,
Mitchell, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, Perea, V. Manuel P�rez, Portantino, Silva,
Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Yamada, John A. P�rez
NO VOTE RECORDED: Roger Hern�ndez, Williams
RM:n 8/30/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED