BILL ANALYSIS
AB 1825
Page 1
Date of Hearing: April 24, 2000
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Roderick Wright, Chair
AB 1825 (Strom-Martin) - As Amended: April 24, 2000
SUBJECT : Rural telecommunications infrastructure.
SUMMARY : Develops a grant program within the California
Teleconnect Fund (CTF) to provide community based groups with
resources to build telecommunications infrastructure.
Specifically, this bill :
1)Establishes the Rural Telecommunications Infrastructure Task
Force (the Task Force) as part of the California Teleconnect
Fund Administrative Committee (CTFAC), to be composed of
members appointed by the California Teleconnect Fund
Administrative Committee.
1)Authorizes the Task Force to administer a needs-based grant
program that allows qualifying community groups lacking basic
telecommunications services, as defined, to apply for grants
after July 1, 2001 to be utilized for building original
telecommunications infrastructure.
1)Specifies that in order to qualify for the program,
communities must have a median income no greater than the top
income level for Universal Lifeline Telephone Service (ULTS).
1)Defines that grant proposals must include preliminary
engineering feasibility studies conducted in cooperation with
the local exchange carrier, recommendations and letters of
support from local government bodies, letters of commitment
from 75% of the unserved population, and a project schedule
that includes timeline and budget. Grants will be approved
and awarded by California Public Utilities Commission (CPUC)
based on recommendation of the Task Force and will be advanced
directly to the local exchange carrier.
1)Stipulates that grant applicants who are rejected by the Task
Force will be reimbursed for the cost of their preliminary
engineering feasibility studies by the grant program.
1)Limits the number of grants awarded per year to no more than
five and limits the total amount appropriated per year for the
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program to $10 million. This bill also limits the amount
awarded per applicant to no more than 25% of the total money
appropriated per year, and specifies that only one grant will
be awarded to a community under this program.
1)Caps the surcharge for money appropriated for use by the grant
program from CTF at 0.06%.
1)Appropriates money from CTF for administration of the grant
program.
1)Establishes a working group to develop technical criteria used
in evaluating grant awards to consist of representatives of
CPUC, the incumbent local exchange carrier industry, the
competitive local exchange carrier industry, and the wireless
carrier industry.
1)Sunsets the program on January 1, 2006.
EXISTING LAW:
1)Establishes CTFAC to provide discounted rates for qualifying
schools, libraries, health clinics, and community
organizations and is paid for in the utility rates authorized
by CPUC.
1)Provides for an advisory board that advises CPUC regarding CTF
program and creates a fund for the advisory board in the State
Treasury in which funds generated by CTF program are
deposited.
1)Limits the expenditure of money in the fund to specified
programs and upon appropriation in the annual Budget Act.
FISCAL EFFECT : Unknown.
COMMENTS :
1)In California, a 1999 report by the California State Auditor
estimates that 112,000 people live in areas that do not offer
traditional wire line telephone service. Many of these people
reside in mountainous or isolated areas that do not have the
necessary infrastructure such as telephone poles and wire that
support access to advanced telecommunications services such as
high speed data and voice communications. People in these
AB 1825
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areas must either go without telephone service entirely, or
utilitize wireless technologies such as radio, cellular, or
satellite telephones.
1)While these technologies can provide adequate voice service to
many people throughout the state, people who reside in
mountainous terrain can experience "dead spots" with cellular
service when they are not within "line of sight" of cellular
towers, and inclement weather can reduce the effectiveness of
radiotelephones. In addition, current wireless technology
does not offer access to the Internet.
1)Satellite telephones can offer voice communication for
mountainous or otherwise isolated communities by routing the
signal through satellites in orbit and back to ground stations
and is often used as an addition to cellular telephone
services. Coverage includes the entire United States at this
time. However, satellite services include very minimal data
transmission and the cost can be high compared to cellular
services. One satellite company estimates that by the end of
2000 it will offer a transmission rate of 9600 bytes per
second, which is sufficient for faxes and Internet mail but
limits access to high-graphic content web sites.
1)The main obstacle to establishing wire line transmission
services is the cost of installing infrastructure such as
telephone line extensions to communities that live in rural
and isolated areas. For example, the community of Iowa Hill
in the Sierra foothills late last year requested a cost
estimate from GTE California to establish wire line telephone
services. GTE California has tariffs on file with CPUC that
provides for a 700-foot free footage allowance beyond existing
telephone wire lines and a charge of $1.75 per foot beyond the
free footage allowance. GTE California supplied a preliminary
estimate for Iowa Hill that ranged from a high of $106,410.31
or $6,259.43 each for 17 customers to a low of $26,313.30 or
$337.35 each for 78 customers. Because communities must bare
the cost of installation themselves, this level of cost
imposes a difficult barrier for poor and rural communities to
overcome to establish phone service.
1)CTF program is funded by a surcharge on intrastate billings.
The Universal Service Order (Decision 96-10-066) established a
0.41% surcharge, which was intended to raise $50 million per
year to fund CTF discounts. At present the surcharge is only
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0.05% with a surplus of $30.7 million. CTF program is
designed to provide discounted basic telecommunications
services to qualifying schools, libraries, hospitals, and
community based organizations. Basic telecommunications
services is defined as "a certain defined minimum level of
telecommunications service which each carrier of local
exchange service is required to provide to all of its
residential customers who request local exchange service." It
goes on to list 17 service elements that are included under
basic service.
1)This bill expands CTF's mandate to include the development of
a grant program for the construction of telecommunications
infrastructure and appropriates $10 million per year for the
program. This bill caps the amount that can be charged
against CTF's billing base at 0.06% that raises approximately
$9.6 million annually.
1)This bill establishes the Task Force within CTFAC, which
administers the grant program for low-income communities that
lack traditional telecommunications services to build needed
infrastructure to extend service to their residents. The
program will be administered as part of CTFAC, and requires
CPUC to establish a government-industry working group, which
will develop technical criteria for grant administration.
1)Questions have been raised regarding how CTF, and other funds
designed to reimburse service providers for discounted
services, have been managed by CPUC. Service providers have
voiced complaints that they are not being reimbursed by the
funds in a timely manner for the reduced-price services and
rates they offer eligible customers in the state. At present,
CTF has in reserve millions of dollars that needs to be
reimbursed. This could be a problem for the program if CTFAC
is either unable or unwilling to process grant requests in a
timely manner.
1)This bill restricts applicants to communities that have a
median income no greater than the top income level used to
qualify for ULTS. According to CPUC, the top income level
under ULTS is $25,090 per year collectively for a household
with four members. CPUC regulations require adjustment of
ULTS income brackets annually by May 1, which then become
effective June 1 each year. Thus, qualifying income brackets
under the bill will be adjusted on an annual basis to
AB 1825
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correspond to the rate of inflation for future grant
recipients.
1)This bill also calls for reimbursement of the cost of the
preliminary engineering study as required by this bill to
grant applicants if they are rejected. Because the program
requires communities to advance monies for the preliminary
engineering study, reimbursement ensures that poor communities
are able to apply for a grant without concerns about expending
money for the study.
1)Related legislation. AB 994 (Wright) directs CPUC to author a
study as to whether rural telephone cooperatives are a viable
alternative for communities who wish to establish
telecommunications service. As part of the study, AB 994
requires CPUC to determine the number of communities in
California with over 20 families not served by traditional
telephone service. Since the focus of AB 1825 is on poor
communities, AB 994 examines a possible mechanism for
communities and areas that do not qualify for the grant
program to establish telephone service.
REGISTERED SUPPORT / OPPOSITION :
Support
Associated Communications and Research Services, Inc.
Sierra Economic Development District
Opposition
None on file.
Analysis Prepared by : Jonathan Buttle / U. & C. / (916)
319-2083