BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 140
                                                                  Page  1

          Date of Hearing:   May 9, 2001

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                              Carole Migden, Chairwoman

                 AB 140 (Strom-Martin) - As Amended:  April 26, 2001 

          Policy Committee:                               
          UtilitiesVote:15-0 (Consent)

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill: 

          1)Requires the Public Utilities Commission (PUC) to establish a  
            grant program to fund telecommunications infrastructure in  
            areas currently without such service.  

          2)Limits the grant funding to $10 million per year from  
            California High Cost Fund-A (CHCF-A) or the California High  
            Cost Fund-B (CHCF-B), or both, and sunsets the program after  
            four years.  

          3)Requires the PUC to establish a government-industry work group  
            to develop technical criteria for evaluating grant proposals,  
            which would be submitted by community-based groups.

           FISCAL EFFECT  

          Up to $10 million special fund costs for four years.

           COMMENTS  

           1)Background  . There are two High Cost Funds which operate to  
            provide subsidy for high cost local telephone service in  
            California.  CHCF-A provides for transfer payments to the  
            small, independent telephone companies in California providing  
            telephone service in high-cost areas.  The fund allows for  
            fair and equitable rate structures throughout the state by  
            providing payment as subsidy to the telephone companies whose  
            basic exchange access line rates may be set below their  
            average cost to serve these mostly rural areas.  CHCF-B  








                                                                  AB 140
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            established in 1996 through CPUC Decision (D.) 96-10-066,  
            provides for the same sort of equitable statewide rate  
            structure for the larger carriers. 

           2)Purpose  .  AB 140 would allow money in the CHCF-A and CHCF-B to  
            be diverted to the specified grant program until January 1,  
            2006.  The purpose of this bill is to try to bridge the divide  
            between communities which have no basic telephone service and  
            those with access to a broad array of wired and wireless  
            services.  The cost of infrastructure to many of these areas  
            and their remoteness from other communities have been the  
            obstacles to many communities in getting basic telephone  
            service.  

           3)Prior Legislation  .  Last year, AB 1825 (Strom-Martin), which  
            was substantially similar to this bill, was vetoed.  The  
            governor, while acknowledging the good intent of the bill, was  
            concerned that by diverting up to $10 million a year from the  
            California High Cost Funds could cause other rural ratepayers  
            to see increases in their telephone bills.  To address the  
            governor's concern, language is included in AB 140 stipulating  
            that the high cost funds are only available for the grant  
            program if the PUC is current in paying claims from telephone  
            carriers for providing service in high cost areas.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916)319-2081