BILL ANALYSIS
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THIRD READING
Bill No: SB 834
Author: Bowen (D)
Amended: 4/10/03
Vote: 21
SENATE ENERGY, U.&C. COMMITTEE : 6-0, 4/22/03
AYES: Bowen, Alarcon, Dunn, McClintock, Murray, Sher
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Public utilities: high speed communications
services
SOURCE : Author
DIGEST : This bill requires the Public Utilities
Commission to convene a proceeding to consider how to
encourage more competition in the high speed communications
services business.
ANALYSIS : Current law declares it is the policy of the
state of California to: (a) Encourage the ubiquitous
availability of a wide choice of state-of-the-art services;
and (b) Promote economic growth by encouraging the rapid
implementation of advanced communications technologies.
This bill requires the Public Utilities Commission (PUC) to
consider how to encourage more competition in the
high-speed communications services industry and make
appropriate recommendations to the Legislature by July 1,
2004.
CONTINUED
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Background
The late 1990's saw a burst of competitive activity in the
telecommunications industry as the federal
Telecommunications Act of 1996 opened the door to new
competitors. From about a dozen competitors in 1996 to
over 150 in 1998 to nearly 500 in 1999, new competitors
installed thousands of miles of fiber optic line and
created many new services, such as digital subscriber line
(DSL).
At the turn of the century, the "dot com" boom went bust,
triggering a swift and drastic reduction in the need for
telecommunications capacity. Once promising
telecommunications companies perished as their markets
vanished, as did their access to capital. Making matters
worse were the high profile examples of corporate
misconduct, where some telecommunications competitors
participated in questionable, and some times fraudulent,
accounting practices. By 2001, the 500 telecommunications
competitors had dwindled to less than 100.
In some areas of the state, such as parts of San Diego and
Orange counties, there is relatively vigorous competition
on the high speed communications service front. However,
it's just as common for customers to either have no choice
between DSL and cable broadband or no broadband service
available at all. The PUC noted in its 2002 Competition
Report that 24 percent of cities have no broadband service,
34 percent have only DSL service, 18 percent have only
cable broadband service, and just 24 percent have a choice
between DSL and cable service. Looking more closely within
those two services, there is little competition among DSL
providers and among cable providers. The vast majority of
residential DSL service is provided by the incumbent local
telephone company (i.e., SBC and Verizon) and its
affiliates, with 97 percent of residential broadband
revenue going to the incumbent and its affiliate. Business
DSL service is much more competitive, with 59 percent of
business DSL revenue going to the incumbent and its
affiliate.
The availability of a widespread broadband infrastructure
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has long been seen as a key to the next stage of growth of
the California economy. In Connecting to Compete in the
New Economy, a report prepared for the Great Valley Center,
the authors note technology has the potential to transform
the Central Valley. They see advanced an communications
infrastructure as the key technology to the area being able
to exploit its natural strengths in agriculture,
specialized manufacturing, warehousing, and distribution.
TechNet, the lobbying arm for the high tech industry, has
issued a call for a national broadband policy as a means of
staying competitive, educating the workforce, and
increasing productivity.
Comments
Getting The Services. Current law is designed to encourage
a wide choice of state-of-the-art telecommunications
services, but as noted in the "Background" section and
during an informational hearing the Senate Energy,
Utilities and Communications Committee held last year,
competition is more of a theory than a reality in most
parts of the state.
This isn't to say there are no innovations on the horizon.
Wireless broadband service has started to become
commercially available and improved network technology may
improve data transmission capacity over existing
telecommunications networks. The notion of delivering
broadband services over electric power lines looks
promising, though it's in the very early stages of
development.
This bill requires the PUC to look at and develop ways it
can encourage more competition in the high speed
communications services business.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
NC:nl 5/5/03 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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