Existing law requires the Public Utilities Commission to develop, implement, and administer a program to advance universal service by providing discounted rates to qualifying schools, community colleges, libraries, hospitals, health clinics, and community organizations.

This bill would would, beginning January 1, 2021, require entities that receive discounted rates for broadband services pursuant to the program to provide those services at a speed sufficient to support the delivery of high-speed broadband service.

Existing law establishes the California Teleconnect Fund Administrative Committee Fund in the State Treasury, requires that moneys from the fund only be expended upon appropriation in the annual Budget Act or upon supplemental appropriation, and requires that the moneys appropriated be utilized exclusively by the commission for authorized teleconnect programs. Existing law authorizes the commission to expend up to $2,000,000 of specified unencumbered funds for the nonrecurring installation costs for high-speed broadband services for community organizations that are eligible for discounted rates, as specified. Existing law also states that it is the intent of the Legislature that any program administered by the commission that addresses the inequality of access to high-speed broadband services by providing those services to schools and libraries at a discounted price, provide comparable discounts to a nonprofit community technology program. Existing law defines high-speed broadband services for these purposes to mean a system for the digital transmission of information over the Internet at a speed of at least 384 kilobits per second.

This bill would instead define high-speed broadband services for those purposes to mean a system for the wireless or wireline digital transmission of information over the Internet at a speed of at least 6 megabits per second.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 514 (Bradford) - California Teleconnect Fund Administrative Committee Fund

This bill may meet the criteria for referral to the Suspense File.

Bill Summary: SB 514 provides that an entity may only receive discounted rates for broadband services under the California Teleconnect Fund (CTF) if those services are provided at a speed sufficient to support the delivery of high-speed broadband, defined as at least six megabits per second.

Fiscal Impact:

• Up to $75,000 (Utilities Reimbursement Account) to the California Public Utilities Commission (CPUC) to confirm compliance.
• Unknown, potentially significant, cost pressures to other state programs to provide funding for infrastructure or services necessary to maintain communications services in schools that become ineligible as a result of this bill.

Background:

California Teleconnect Fund.  The CTF provides qualified anchor institutions (schools maintaining kindergarten or any of grades 1 to 12, community colleges, libraries, hospitals, health clinics, and community organizations) a discount on communications services (generally 25 percent on voice and 50 percent on broadband). The program is funded by a $1.080 surcharge assessed on revenues collected from end-users for intrastate telecommunications services subject to surcharge.

Over the past several budget years the CTF budget grew significantly due to new rules expanding the types of eligible participants, services and service providers, outreach to community based organizations and a lack of price or quantity limitation on services. In Fiscal Year (FY) 2009-2010, the CTF budget was $60 million; the current year’s budget is $148 million. Program administration accounts for less than 10 percent of the program budget.

CPUC Reforms of CTF. In January 2013, the CPUC opened rulemaking R.13-01-010 to examine the program. The CPUC has issued two decisions in the rulemaking, with other phases pending. Decisions 15-07-007 and 16-04-01 require a reduction in the CTF discount for voice services from 50 percent to 25 percent, community-based organizations to renew their CTF eligibility every three years based on revised eligibility criteria, and the CPUC to develop a methodology for carriers to disclose detailed pricing information for every CTF-eligible service to facilitate customer decision-making.

Broadband Speeds. Broadband speed, the speed with which information packets are downloaded from, or uploaded to, the internet, is measure in megabits per second (mbps). Per the Federal Communications Commission (FCC) Broadband Speed Guide, common activities require between .5 mbps (email or web surfing) to 4 mbps (HD videoconferencing).

Proposed Law: This bill:

Requires

an entity that receives discounted rates for broadband services under the CTF to provide those services at a speed sufficient to support the delivery of high-speed broadband services.

1. Defines “high-speed broadband services” as a system for the digital transmission of information over the Internet at a speed of at least six megabits per second.
2. Implements the prohibition on January 1, 2021.

Staff Comments:

Cost pressures to provide funding to schools that become ineligible. CTF provides a privately funded mechanism through which schools and entities serving student, such as libraries, can access critical communications services at a discounted rate. Staff notes policy committee’s comments about institutions in areas unable to meet the requirements imposed in this bill becoming ineligible to receive the CTF discount. Schools in rural and disadvantaged areas will likely be disproportionately impacted.

Given the state’s responsibility to provide funding for K-12 education, including increased support to schools that serve disadvantaged students, increased costs to impacted schools may result in cost pressures to provide additional state funding or pressure on other state-funded programs serving these schools. It is unclear how many schools would be impacted or how significant the cost pressure; however, costs could exceed the suspense threshold.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2017 - 2018 Regular

Bill No: SB 514 Hearing Date: 4/18/2017

SUBJECT: California Teleconnect Fund Administrative Committee Fund

DIGEST: This bill would require broadband services provided at discounted rates from the California Teleconnect Fund (CTF) program to be at a high speed, defined as at least six megabits per second.

ANALYSIS:

Existing law:

1. Establishes several universal service program funds, including the CTF Administrative Committee Fund, and requires monies in the funds are held in trust and may only be expended per statutory requirements and the annual Budget Act or upon supplemental appropriation. (Public Utilities Code §270)
2. Requires the California Public Utilities Commission (CPUC) to develop, implement, and administer a program to advance universal service by providing discounted rates to qualifying schools maintaining kindergarten or any of grades 1 to 12, community colleges, libraries, hospitals, health clinics, and community organizations. (Public Utilities Code §280)
3. Requires a Teleconnect Fund discount to be applied after applying an E-rate discount, except in the case of specified schools, and requires the CPUC to give priority to bridging the digital divide by encouraging expanded access to state-of-the-art technologies for rural, inner city, low-income, and disabled Californians. (Public Utilities Code §884.5)

This bill requires the CPUC when providing discounted rates for broadband services in administering the CTF program, to require high speed broadband service, defined as at least six megabits per second, to qualifying

schools, community colleges, libraries, hospitals, health clinics, and community organizations.

Background

California Teleconnect Fund Administrative Committee.  The CTF is a program to advance universal service by providing discounted rates to qualified anchor institutions: schools maintaining kindergarten or any of grades 1 to 12, community colleges, libraries, hospitals, health clinics, and community organizations.  CTF discounts are generally 50 percent for communications services. The program is funded by a surcharge assessed on revenues collected from end-users for intrastate telecommunications services subject to surcharge.  The current surcharge rate is 1.080 percent.  The CTF Administrative Committee is required to submit a proposed budget to the CPUC on or before June 1 of each year.  The CTF budget grew from $60 million in FY 2009-10 to approximately $108 million in FY 2014-15. The FY 2015-16 budget increased to $148 million, 37 percent above the previous year, and at the same level in the current fiscal year, 2016-17. Budget drivers have included new rules expanding the types of eligible participants, services and service providers, outreach to community based organizations and a lack of price or quantity limitation on services. Program administration accounts for less than 10 percent of the program budget.

CPUC Reforms of CTF. In January 2013, the CPUC opened rulemaking R.13-01-010 to undertake a comprehensive examination of the CTF program. The CPUC has issued two decisions in the rulemaking, with other phases pending. Decisions 15-07-007 and 16-04-01 require a reduction in the CTF discount for voice services from 50 percent to 25 percent, community-based organizations to renew their CTF eligibility every three years based on revised eligibility criteria, and the CPUC to develop a methodology for carriers to disclose detailed pricing information for every CTF-eligible service to facilitate customer decision-making.

Broadband Speeds. Mbps (Megabits per second) is the standard measure of broadband speed. It refers to the speed with which information packets are downloaded from, or uploaded to, the internet. As a reference, below are common activities and their corresponding minimum broadband speeds, per the Federal Communications Commission (FCC) Broadband Speed Guide.

FCC Broadband Speed Guide

https://www.fcc.gov/reports-research/guides/broadband-speed-guide

Need for Transition Period. Instituting a new definition for high-speed broadband service could result in disruption of the program, where there are applications by entities currently in process for CTF monies. As an example, the Corporation for Education Network Initiatives in California (CENIC), a nonprofit that operates the California Research and Education Network (CalREN), “a high-capacity network designed to meet the unique requirements of over 20 million users, including the vast majority of K-20 students together with educators, researchers and other vital public-serving institutions.” CENIC has requested the author move the date of implementation for the new minimum speed, as proposed in this bill, by a few years, in order to allow for a transitional period and minimize financial hardship on schools and libraries that are either unable to access high-speed broadband services at the speed defined in this bill or are in the process of upgrading their internet connection which may not take effect by the January 1, 2018 implementation date in this bill. This seems like a reasonable suggestion should the committee approve the minimum speed requirement. As such, the author and committee may wish to amend this bill to allow the new high-speed proposed by this bill to take effect beginning January 1, 2021.

Is a Bill Necessary?  Once speeds are codified in statute it becomes more difficult to adjust the program appropriately at the pace of changing technology. Additionally, there may be some areas of the state which lack broadband service at the six mbps. It seems unfair that anchor institutions, such as schools and libraries, in areas lacking the minimum broadband speeds, many of which are rural communities, would be prevented from receiving CTF discounts due to lack of available qualified service.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

California Cable & Telecommunications Association (Source)

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author, “SB 514 will provide a needed update to the minimum broadband speeds used in the California Teleconnect Fund Program. Updating the statute to six megabits can make sure that CTF funds are not used for slow, out-of-date broadband service.”

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