BILL ANALYSIS � 1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 740 - Padilla Hearing Date:
April 30, 2013 S
As Introduced: February 22, 2013 FISCAL B
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DESCRIPTION
Existing law establishes the California Advanced Services Fund
(CASF), administered by the California Public Utilities
Commission (CPUC), to help fund deployment of broadband
infrastructure and bring high-speed Internet access to all areas
of the state (Public Utilities Code Section 281).
Existing law authorizes the CPUC to use ratepayer funds
collected for universal service programs, including the CASF, to
compensate regulated telephone corporations for their costs of
providing universal service (Public Utilities Code Section 270).
This bill authorizes an entity that is not a telephone
corporation otherwise subject to CPUC regulation to be eligible
for a CASF grant if that entity meets eligibility and program
requirements established by the CPUC
Existing law authorizes collection of a customer surcharge on
intrastate communications services of up to $225 million for the
CASF through 2015 with no more than $25 million per year (Public
Utilities Code Section 281).
This bill authorizes collection of an additional $100 million
for the CASF through 2020 with no more than $25 million per
year.
BACKGROUND
CASF Supports Universal Service Goals - The CPUC established the
CASF in 2007 in order to promote broadband deployment statewide
and to comply with state law declaring that California's
telecommunications policies include closing the Digital Divide
and assuring that all Californians have universal access to
high-quality, state-of-the-art, advanced telecommunications
services (D.07-12-054). The program is a continuation of
long-held state and federal universal service programs that
provide support to cover the cost of providing service in
high-cost areas so that all Californians can be connected to the
telecommunications network at affordable rates. Historically
these programs have supported landline voice service. But more
recently, recognizing that high-speed Internet access is
essential to modern life, universal service goals require
support for broadband where private investment has not been
viable. As stated by the CPUC, "the areas that are being funded
and will be funded by CASF are areas that have no broadband
precisely because these are high cost areas that are
characterized by rugged terrain and low population density,
which would not otherwise be economically viable or make
business sense for private entities to invest in without CASF
funding assistance" (Resolution T-17233).
CASF Program Has Evolved -- SB 1193 (Padilla, 2008) codified the
CASF program established by the CPUC and authorized collection
of up to $100 million through a ratepayer surcharge on
intrastate telephone service to be used for CASF grants to help
pay the capital cost of broadband infrastructure projects.
Eligibility originally was limited to "telephone corporations"
that are regulated by the CPUC that hold either a Certificate of
Convenience and Necessity (CPCN) or a Wireless Identification
Registration (WIR). After enactment of the American Reinvestment
and Recovery Act of 2009 (ARRA), AB 1555 (Perez, 2009) expanded
CASF eligibility to other entities so CASF grants could be used
as matching funds for applicants seeking ARRA broadband grants.
SB 1040 (Padilla, 2010) authorized collection of an additional
$125 million through 2015 (for a total of $225 million) and
created three accounts:
$100 million to the Broadband Infrastructure Grant Account
(for a total of $200 million).
$15 million to the Broadband Infrastructure Loan Account to
help pay for project costs not covered by a grant.
$10 million to the Rural and Urban Regional Consortia Account
to help pay for broadband deployment activities other than
capital costs.
CPUC Proposes Expanded Eligibility - In In October 2012, the
CPUC proposed, subject to legislative authorization, expanding
eligibility for infrastructure grants to entities that are not
telephone corporations, similar to the expanded eligibility
authorized in connection with ARRA. The CPUC found that
commercial and nonprofit entities that are not telephone
corporations, such as tribal entities and Wireless Internet
Service Providers (WISPs) have expressed interest in providing
broadband with unique plans and wireless technologies that are
viable for "last mile" connection of end users in hard-to-serve
remote and rural areas. To protect against waste, fraud, and
abuse of ratepayer funds being awarded to entities it otherwise
does not regulate, the CPUC proposed imposing requirements
similar to those it applied to ARRA applicants that did not hold
a CPCN or WIR, including a requirement to comply with applicable
CPUC rules
CASF Grants Awarded to Date -- The CPUC reports the following
CASF grant awards:
Infrastructure Grant Account : The PUC has authorized $41.08
million for 34 projects that will benefit 255,246
households when completed, including $2.31 million for 15
projects benefitting 16,530 households in unserved areas,
and $38.77 million for 19 projects benefitting 238,716
households in underserved areas. Currently, there are 29
applications are pending that seek a total of $240.8
million in infrastructure grants.
Broadband Infrastructure Revolving Loan Account : As of
year-end the CPUC had not received any loan applications.
Currently, there are 7 loan applications pending.
Rural and Urban Regional Broadband Consortia Grant Account :
The CPUC authorized $2.85 million for 14 consortia grantees
in 2012, and has provided grantees with a three-year budget
allowance of $8.55 million.
CASF Part of Overall Broadband Strategy - The CASF has been a
critical element of California's comprehensive strategy to
achieve ubiquitous broadband deployment in order to bring the
social and economic benefits of high-speed Internet access to
all corners of the state. In 2005, with funds derived from
conditions on mergers of telecommunications companies, the
California Emerging Technology Fund (CETF) was created as a
nonprofit organization dedicated to making grants to community
based organizations for projects to help bridge the Digital
Divide. (CETF has established a statewide broadband goal of
achieving 98 percent deployment by 2017, with projects approved
and funded by 2015.) The following year, the Legislature
enacted AB 2987 (Nunez, 2006), the Digital Video and
Telecommunications Act of 2006 to authorize statewide video
franchises and promote increased deployment of broadband
facilities. The same year, Governor Schwarzenegger's Executive
Order S-23-06 established the California Broadband Task Force,
which brought together business leaders, academics, engineers
and public policy experts that developed state goals and made
recommendations in a 208 report, which found that about 1.4
million (4 percent) of Californians lacked broadband and nearly
50 percent had only low-speed Internet access. All of these
efforts helped California obtain more than $400 million in
federal broadband grants under ARRA. Moreover, policymakers
have tried to foster an environment to spur private investment
in broadband.
COMMENTS
1. Author's Purpose . According to the author: "SB 740
would modify the CASF to support broadband infrastructure
in the most remote areas of the state that still lack the
high-speed Internet access that is essential to function in
modern life. It would give the CPUC flexibility to award
CASF grants to entities that are uniquely suited to provide
broadband access in the last remaining unserved areas and
authorize additional funding for this purpose, thereby
advancing state policy to ensure that all Californians are
connected."
2. "Overbuild" or Service Too Slow ? Industry stakeholders
have stated concerns that pending CASF applications propose
projects that "overbuild" existing broadband infrastructure
of commercial providers funded with private investment.
Some object to CASF grants for a project if any broadband
service currently exists, calling that an "overbuild."
However, characterizing any such project as an improper
"overbuild" oversimplifies the CASF program and does not
fully acknowledge the state goal of ensuring that
Californians have Internet service at speeds essential to
function in modern society. The range of essential
services and activities that require Internet access is
expanding each day, as illustrated by multiple bills
currently before the Legislature, from online voter
registration to online education to telehealth. Internet
service at any old speed is not good enough if all
Californians are to effectively participate in life in the
21st century.
3. Priority for Unserved Areas . The CPUC's rules
administering the CASF authorize grants for projects to
both unserved and underserved areas, with a priority for
funding unserved areas. An unserved area is where no
broadband service is available (except through dial-up
service or satellite). An underserved area is defined by
the CPUC as where broadband service is slower than 6
megabits per second (mbps) down or 1.5 mbps up. (The FCC
defines underserved as slower than 4 mbps down or 1 mbps
up.). As stakeholders point out, however, the majority of
CASF grants awarded so far are for underserved areas.
There is some confusion as to how the CPUC characterizes a
project as unserved or underserved, depending if it passes
through an underserved or served area. Discrepancies also
exist between mapping data as to speed of available
services. All of these factors contribute to the industry
claim regarding "overbuilds."
There does seem to be universal agreement that connecting
unserved households is a priority, although the CASF
governing statute does not specify this. Moreover, CETF,
which has adopted a state goal of achieving deployment to
98 percent of households by 2017, with funding approval by
2015, points out that the statute does not state an overall
goal of the program against which progress can be measured.
Thus, the author and committee may wish to consider
amending the bill to include the following:
a) Establish a CASF broadband deployment goal of,
no later than December 2015, approving infrastructure
projects that will provide broadband access to no less
than 98 percent of California households.
b) Establish a priority for award of CASF grants
to infrastructure projects that provide last-mile
broadband connection to households that are unserved
by any existing provider.
c) Recognize that a cost-effective backhaul
middle-mile broadband project is eligible for a CASF
infrastructure grant, even if it passes through an
area served by an existing provider, as long as the
applicant can demonstrate how the project enables
last-mile broadband connection to households that are
unserved by any existing provider.
1. Additional Funding . This bill as introduced February
22 authorizes collection of an additional $100 million in
increments of no more than $25 million per year through
2020 for CASF infrastructure grants. The author states
that additional funding is needed for several reasons:
expanded eligibility authorized by this bill will generate
more applications for funding than under current rules -
especially for last-mile projects to unserved households,
pending applications filed February 1 seek substantially
more funding than currently authorized for CASF, and the
average cost per household required so far to connect
remaining unserved households exceeds authorized
collections.
Some industry stakeholders state concerns about increasing
authorized collections for CASF, based primarily on a
belief that pending applications will not deplete the fund
because proposed "overbuild" projects will be deemed
ineligible. The CPUC currently is reviewing all pending
applications and industry protests to determine which
projects are eligible for funding, with decisions expected
in the next few months, possibly as early as June. That
outcome will help determine whether an additional $100
million, or some other amount, is enough to meet state
broadband goals. In order to not pre-judge the outcome of
CPUC review of applications and protests, the author
indicates that, although additional funding will be needed
to connect remaining unserved areas of California, it may
be appropriate to not specify an exact amount of additional
funding until later in the legislative process. Thus, the
author and committee may wish to amend the bill to strike
the additional $100 million and insert legislative findings
on the state's goal to achieve no less than 98 percent
deployment by 2015 and the intent to authorize collections
for CASF to meet that goal.
2. Expanding Program Eligibility . This bill lifts the
restriction on only telephone corporations being eligible
for CASF grants, in recognition of the CPUC proposal to
extend 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." Several
stakeholders have raised concerns about government agencies
being eligible for CASF grants, noting the potential for
anticompetitive behavior given that government agencies
control access to rights of way and that they may not have
adequate funding to sustain service. Thus, the author and
committee may wish to consider amending the bill to provide
that a local government agency may be eligible for a CASF
infrastructure grant only if (a) the project is for an
unserved area,(b) the CPUC has conducted an open
application process and no other eligible provider has
applied; and (c ) the CPUC determines that within the
region of the local government jurisdiction there is less
than 98 percent deployment.
3. Related Legislation. AB 1299 (Bradford) authorizes use
of CASF funds to support broadband in publicly supported
multitenant affordable housing.
4. Ratepayer Impact . Current law authorizes a customer
surcharge to fund CASF through 2015. The surcharge
currently is set at 0.164 percent of charges for intrastate
service. This bill would authorize collection of that
surcharge through 2020.
POSITIONS
Sponsor:
Author
Support:
Bishop Paiute Development Corporation
California Broadband Cooperative
California Public Utilities Commission
Corporation for Education Network Initiatives in California
Del Norte County Board of Supervisors
Desert Mountain Resource Conservation and Development Council
Frontier, if amended
Greg Newbry, Mono County School Board Member
Mono County Board of Supervisors
Northeastern California Connect Consortium
Praxis Associates
Sonoma County Board of Supervisors
Upstate California Connect Consortium
Valley Vision
Concerns:
AT&T
California Cable & Telecommunications Association
Verizon
Oppose:
None on file.
Jacqueline Kinney
SB 740 Analysis
Hearing Date: April 30, 2013