BILL ANALYSIS
AB 1825
Page 1
GOVERNOR'S VETO
AB 1825 (Strom Martin)
As Amended August 8, 2000
2/3 vote
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|ASSEMBLY: |60-18|( May 30, 2000 |SENATE: |30-4 |( August 28, |
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|ASSEMBLY: |66-11|( August 29, | | | |
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Original Committee Reference: U. & C.
SUMMARY : Establishes a grant program within the California
Public Utilities Commission (CPUC) for the construction of
telecommunications infrastructure in areas not already served.
The Senate amendments:
1)Change the source of the funding for the grant program from
the California Teleconnect Fund Administrative Committee (CTF)
to either the California High Cost Fund-A Administrative
Committee (High Cost Fund-A), the California High Cost Fund-B
Administrative Committee (High Cost Fund-B), or both, as
determined by CPUC.
2)Delete provisions for the Rural Telecommunications
Infrastructure Task Force (Task Force) within CPUC to
administer the grant program and instead specify that CPUC
evaluate and award grant proposals.
3)Provide that telephone corporations receiving funding for
providing service in high cost areas will continue to be fully
reimbursed for entitled costs.
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4)Delete the provision requiring proof of formation of a locally
controlled entity able to insure delivery of
telecommunications services from the initial grant proposal.
5)Require applicants to seek federal funds if available for
construction of infrastructure.
6)Allow groups to apply alternatively for grants subsidizing
telecommunications service instead of building of new
infrastructure if it would be more cost effective.
7)Require applicants to provide evidence that competing
providers and technologies have been considered and evaluated.
8)Delete the restriction that no more than five grants are
awarded per year.
9)Require CPUC to consider the cost-effectiveness of the
application, number of people served, level of local support,
the ability of the community served to pay for the services
delivered, and effect on public health and safety before
awarding grants.
EXISTING LAW:
1)Establishes the High Cost Fund-A to advise CPUC regarding
programs providing transfer payments to telephone corporations
serving high cost rural and small metropolitan areas.
2)Establishes the High Cost Fund-B to advise CPUC regarding
programs providing transfer payments to telephone corporations
serving high cost areas.
3)Requires the program to be paid for in utility rates
authorized by CPUC.
4)Limits the expenditure of money in the funds to specified
programs and upon appropriation in the annual Budget Act.
AS PASSED BY THE ASSEMBLY, this bill:
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1)Established the Task Force as part of CPUC to be composed of
one member from CTF, the Rural Development Council, and the
telecommunications industry. The executive director of CPUC
will appoint members.
2)Authorized the Task Force to administer a needs-based grant
program allowing 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.
3)Specified 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).
4)Stipulated that grant proposals must include preliminary
engineering feasibility studies conducted in cooperation with
the local exchange providers, cost projections,
recommendations and letters of support from local government
bodies, letters of commitment from 75% of the unserved
population, a plan assuring proper use of the funds, documents
showing the formation of a locally controlled entity that can
insure delivery of telecommunications services, and a project
schedule that includes timeline and budget. Grants were to be
approved and awarded by CPUC based on recommendation of the
Task Force and will be advanced directly to the grant
recipient. This bill stipulated that grant applicants who are
rejected by the Task Force be reimbursed for the cost of their
preliminary engineering feasibility studies by the grant
program.
5)Limited the number of grants awarded per year to no more than
five and limits the total amount appropriated per year for the
program to $10 million. This bill also limited the amount
awarded per applicant to no more than 25% of the total money
appropriated per year, and specified that only one grant be
awarded per community under this program. Capped the
surcharge for money appropriated for use by the grant program
from CTF at 0.06%. Required the CTF Administrative Committee
to provide support for the Task Force and the grant program.
6)Established a working group to develop technical criteria used
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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. This bill sunset the program on January 1,
2006.
FISCAL EFFECT : According to Assembly Appropriations analysis,
annual $10 million special fund cost for five years.
COMMENTS : 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
areas must either go without telephone service entirely, or use
wireless technologies such as radio, cellular, or satellite
telephones. 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
offers limited access to the Internet.
The primary 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. Because persons living in these communities
must bear the cost of installation, the associated costs impose
a barrier for poor and rural communities to overcome to
establish telephone service.
The Senate amendments change the funding source for the grant
program from CTF to High Cost Funds A & B. High Cost Fund-A
provides subsidies to 17 small telephone companies to permit
rural local exchange carriers to provide services comparable to
services in urban areas. CPUC does not currently assess a
surcharge since subsidy payments of $6.9 million for 2000 are
funded through reserves of $19 million. The Universal Service
Order (Decision 96-10-066) established High Cost Fund-B in 1996
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to provide subsidy support in high cost areas of the five
largest Incumbent Local Exchange Carriers. A user surcharge of
2.6% on intrastate billing funds High Cost Fund-B, providing a
budget of $444.5 million for 2000. The projected fund balance
at the end of 2000 is $160.6 million.
Further, Senate amendments make various technical changes. They
expand the scope of what applicants include in their grant
proposals and what CPUC considers in its evaluation of the
proposals, and provide that grant money may pay for
telecommunications service in lieu of infrastructure if it is
found to more cost effective. The amendments also delete the
provision requiring communities to form an entity that can
insure delivery of telecommunications services. This provision
could have resulted in added regulatory and cost burdens to
communities that are already unable to afford telephone service
due to the costs involved in constructing infrastructure.
GOVERNOR'S VETO MESSAGE :
This bill expands the California High-Cost fund
program to fund a grant program within the California
Public Utilities Commission for rural
telecommunications infrastructure. It provides
grants to community-based organizations to construct
telecommunications infrastructure in rural areas that
are currently not served by a telecommunications
carrier. The bill sunsets the grant program on
January 1, 2006.
For public safety, health, and convenience reasons,
all Californians should have access to reliable local
telephone service. Regrettably, topography and
fiscal concerns prohibit providing telephone service
to every Californian.
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
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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.
Analysis Prepared by : Jonathan Buttle / U. & C. / (916)
319-2083
FN: 0007547