BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 994
                                                                  Page  1

          Date of Hearing:   January 10, 2000

                    ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE 
                               Roderick Wright, Chair
                    AB 994 (Wright) - As Amended:  January 5, 2000
          
          SUBJECT  :  Rural telephone cooperatives.

           SUMMARY  :  Requires the California Public Utilities Commission  
          (CPUC) to study the feasibility of establishing telephone  
          cooperatives in California.  Specifically,  this bill  :  

          1)Requires CPUC by January 1, 2002 to prepare and submit a  
            report to the Governor and the Legislature on the feasibility  
            of establishing rural telephone cooperatives in California.

          1)Requires CPUC to include recommendations concerning  
            appropriate legislation.

           EXISTING LAW  authorizes CPUC to supervise and regulate public  
          utilities in California.  

           FISCAL EFFECT  :  Unknown.

           COMMENTS  :  

          1)A recent report by the California State Auditor estimated that  
            112,000 people in California (three percent of the state's  
            rural population) live in areas where traditional telephone  
            service is not available.  

          1)The main obstacle to hard-line telephone service in these  
            areas is the cost of installing telephone lines and poles.   
            Pursuant to CPUC tariffs, the incumbent telephone company  
            constructs the first 700 to 1000 feet of line extension  
            without charge.  The household then pays a per-foot charge for  
            the remainder of the line extension.  In some cases, these  
            costs run into the many thousands of dollars.  This creates a  
            financial hardship for households that cannot afford these  
            costs.

          1)Rural cooperatives are consumer-owned businesses that provide  
            services similar to investor-owned utilities.  Members  
            purchase shares in the business in order to provide capital  
            for the purchase of facilities such as telephone lines and  








                                                                  AB 994
                                                                  Page  2

            poles.  In other states, telephone cooperatives provide their  
            subscribers with telephone service along with Internet and  
            advanced telecommunications capabilities.  Cooperatives are  
            eligible for low-interest loans from federal programs such as  
            the Rural Utilities Service Telecommunications Program.

          1)Key issues that the report should address include the ability  
            of telephone cooperatives to access telecommunications  
            networks and equipment, sources of capital available to  
            cooperatives, including loans and grants, the regulatory  
            environment governing the establishment and operation of  
            cooperatives, and possible economic benefits to communities  
            that would result from the establishment of telephone  
            cooperatives.


           REGISTERED SUPPORT / OPPOSITION  :   

           Support  

          None on file.

           Opposition  

          None on file.

           
          Analysis Prepared by  :    Jonathan Buttle / U. & C. / (916)  
          319-2083