BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 140 - Strom-Martin Hearing Date:
June 26, 2001 A
As Amended: May 31, 2001 FISCAL B
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DESCRIPTION
This bill creates a grant program of up to $10 million annually
administered by the California Public Utilities Commission
(CPUC), funded out of an existing surcharge on telephone
services, to extend telecommunications services to low-income
communities.
This bill establishes the Rural Telecommunications
Infrastructure Task Force to evaluate those grant proposals.
This bill sunsets on January 1, 2006.
BACKGROUND
This bill is nearly identical to AB 1825 (Strom-Martin) of 2000
which was approved by the committee on a 7-1 vote and the full
Senate by a 30-4 vote. That bill was vetoed by Governor Davis,
who concluded in his veto message:
The intent of AB 1825 is good. It seeks to provide
telephone service to remote, low-income communities.
Unfortunately, it has the potential to hurt all
high-cost areas of the state. By diverting up to $10
million a year from the California High Cost Funds, it
could cause other rural ratepayers to see increases in
their telephone bills. The High Cost Funds provide
subsidies to small and mid-sized telephone companies
to keep telephone rates affordable for rural telephone
consumers. If funds are diverted to pay for a new
grant program, existing payments could be jeopardized.
California has long embraced a policy of universal telephone
service. That policy has resulted in rate subsidies for
low-income and rural consumers, as well as subsidies to extend
telephone wiring to people who aren't located adjacent to an
existing telephone plant. However, some communities are so far
away from existing telephone plants that the cost of extending
telephone service to them will never be recouped, even with the
existing subsidies.
This bill creates a grant program to pay for the facilities to
serve those remote, unserved communities. A recent report by
the State Auditor estimated that 112,000 people live in areas
where telephone service isn't offered.
To accomplish its goals, the bill authorizes annual expenditures
of up to $10 million with the money being take from either of
two state programs which subsidize the cost of telephone
service, the California High Cost Fund A and California High
Cost Fund B. These programs are funded by a combined 2.6%
surcharge on telephone bills. The combined annual budget for
these programs was $490 million in FY 2000-2001.
The grant program created by this bill is needs-based in that
the median income of the community to be served cannot exceed
the top level used in the Universal Lifeline Telephone Service
Index. Grant applicants must also seek federal resources.
Grant applications, which can be submitted after July 1, 2002,
must contain specific information about engineering feasibility
studies, cost projections, letters of support from local
government and law enforcement officials, letters of commitment
from at least 75 percent of the unserved population, and
evidence that competing providers and technologies have been
evaluated.
In evaluating the grants, the CPUC shall consider the cost
effectiveness of the application, the level of local support,
the ability of the community to pay for the operational cost of
the services once the infrastructure has been installed, and the
effect on public health and safety.
COMMENTS
1)Local Match . This program permits 100% of the cost of a
telecommunications network to be covered by the California
High Cost Fund A and B, which are funded by a combined 2.6%
surcharge on telephone bills. The author and committee may
wish to consider whether the bill should be amended to require
some level of local match or, alternatively, provide a
preference to those communities that provide some match.
2)Obligation to Serve . Once a utility agrees to provide
service, it has an obligation to continue to provide that
service in a reasonable manner. It doesn't have the option to
walk away and abandon service. However, it's not clear in the
bill that such an obligation would apply to a company that
opts to provide service pursuant to this program. The author
and committee may wish to consider amending the bill to make
it clear that the obligation to serve does apply. This can be
done on Page 8, Line 29, by inserting at the end of the
existing sentence: "The grant program shall establish the
rules and regulations under which service may be provided."
3)Technically Speaking . The reference to "the top level used in
the Universal Lifeline Telephone Service Index" (Page 9, Line
17) should be clarified because under current law, there is no
top level. A reasonable substitute would be "the income level
used in the Universal Lifeline Telephone Service Index for a
family of four."
The reference to competitive interconnection with the public
telephone network (Page 10, Lines 30-34) is confusing and
unnecessary because the requirement to evaluate competitors is
already contained in the grant application requirement. The
author and committee may wish to consider dropping this
reference.
ASSEMBLY VOTES
Assembly Floor (74-0)
Assembly Appropriations Committee (21-0)
Assembly Utilities and Commerce Committee
(15-0)
POSITIONS
Sponsor:
Author
Support:
Citizens Communications
County of Del Norte Board of Supervisors
Pacific Bell
Regional Council of Rural Counties
Sierra County Board of Supervisors
3 Individuals
Oppose:
None of file
Randy Chinn
AB 140 Analysis
Hearing Date: June 26, 2001