BILL ANALYSIS
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THIRD READING
Bill No: AB 140
Author: Strom-Martin (D)
Amended: 8/20/01 in Senate
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 9-0, 6/26/01
AYES: Bowen, Morrow, Alarcon, Battin, Murray, Sher,
Speier, Vasconcellos, Vincent
SENATE APPROPRIATIONS COMMITTEE : 7-1, 9/10/01
ASSEMBLY FLOOR : 74-0, 6/5/01 - See last page for vote
SUBJECT : Rural telecommunications infrastructure
SOURCE : Author
DIGEST : This bill requires the California Public
Utilities Commission to establish a grant program to extend
telecommunication services to low-income communities.
ANALYSIS : Current law requires the California Public
Utilities Commission (CPUC) to develop, implement, and
maintain a suitable program to establish a fair and
equitable local rate structure for small independent
telephone corporations serving rural and small metropolitan
areas to promote universal telephone service and reduce any
disparity in the rates charged by companies. Existing law
also creates the California High-Cost Fund-A Administrative
Committee and the California High-Cost Fund-B
Administrative Committee to advise CPUC on programs
CONTINUED
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providing telephone services to high-cost areas of
California.
This bill creates a grant program of up to $10 million
annually administered by CPUC, funded out of an existing
surcharge on telephone services, to extend
telecommunication services to low-income communities.
This bill establishes the Rural Telecommunications
Infrastructure Task Force to evaluate those grant
proposals.
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 percent 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
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has been installed, and the effect on public health and
safety.
This bill sunsets on January 1, 2006.
Background
This bill is similar 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
The revenues in the CHCF-A and CHCF-B are derived from
surcharges on telephone bills. The CHCF-A funds provide
subsidies to small, independent telephone companies
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providing telephone service in mostly rural, high-cost
areas where rates may be set below their average cost to
serve these customers. The surcharge, which is currently
zero because the program has been using up a substantial
reserve, will be reactivated this summer.
The surcharge for the CHCF-B is currently 2.5 percent. L
The surcharge revenues provide about $480 million annually
in universal service subsidies to ratepayers (roughly four
million customers at an average of $125 per customer per
year) in the high cost areas of the service territories of
Pacific Bell and other large telephone companies. The fund
has reserves of $953 million (about $500 million represents
prior year liabilities).
SUPPORT : (Verified 9/10/01)
Citizens Communications
County of Del Norte Board of Supervisors
Pacific Bell
Regional Council of Rural Counties
Sierra County Board of Supervisors
3 Individuals
ASSEMBLY FLOOR
AYES: Aanestad, Alquist, Aroner, Ashburn, Bates, Bogh,
Briggs, Calderon, John Campbell, Canciamilla, Cardenas,
Cardoza, Chan, Chavez, Chu, Cogdill, Cohn, Corbett,
Correa, Cox, Daucher, Diaz, Dickerson, Dutra, Firebaugh,
Florez, Frommer, Goldberg, Harman, Havice, Horton,
Jackson, Keeley, Kehoe, Kelley, Koretz, La Suer, Leach,
Leslie, Liu, Longville, Lowenthal, Maddox, Maldonado,
Matthews, Migden, Mountjoy, Nakano, Nation, Negrete
McLeod, Oropeza, Robert Pacheco, Rod Pacheco, Papan,
Pavley, Pescetti, Reyes, Richman, Runner, Salinas,
Shelley, Simitian, Steinberg, Strickland, Strom-Martin,
Thomson, Vargas, Wayne, Wesson, Wiggins, Wright, Wyland,
Wyman, Hertzberg
NC:kb 9/11/01 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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