Existing law requires all contracts for the acquisition of information technology goods and services related to information technology projects, as defined, to be made by or under the supervision of the Department of Technology, which also has the final authority in the determination of information technology procurement policy.

This bill, the Affordable Internet and Net Equality Act of 2023, 2024, would require the Department of Technology, in coordination with the Public Utilities Commission and the Department of General Services, to develop and establish the Net Equality Program. The bill would require the state and state agencies to only enter into a procurement contract with an internet service provider offering affordable home internet service, which costs no more than $40 per month and meets specified minimum speed requirements, to households participating in certain public assistance programs, or with an internet service provider participating in the federal Affordable Connectivity Program, or any other state or federal program that offers broadband affordability assistance for qualifying households, and meeting the bills price and minimum speed requirements, as specified. households that qualify for that program, and that offers to households that qualify for those programs internet service that costs no more than $40 per month and meets specified minimum speed requirements.

This bill would require the Department of Technology to annually post on its internet website a list of internet service providers that meet the requirements of the bill, as provided. The bill would not apply to the Department of Forestry and Fire Protection, the Office of Emergency Services, political subdivisions of the state, including, but not limited to, cities and counties, a contract entered into before January 1, 2025, 2026, or an internet service provider with fewer than 100,000 California residential subscribers. The bill would also make its provisions severable.

Existing law requires all contracts for the acquisition of information technology goods and services related to information technology projects, as defined, to be made by or under the supervision of the Department of Technology, which also has the final authority in the determination of information technology procurement policy.

This bill, the Affordable Internet and Net Equality Act of 2023, would require the Department of Technology, in coordination with the Public Utilities Commission and the Department of General Services, to develop and establish the Net Equality Program. The bill would require the state and state agencies to only enter into a procurement contract with an internet service provider offering affordable home internet service service, which costs no more than $40 per month and meets specified minimum speed requirements, to households participating in certain public assistance programs, as specified. The bill would define affordable home internet service to mean internet service costing no more than $40 per month and that meets specified minimum speed requirements. The bill would require these internet service providers to establish a telephone number to sign up eligible households and would require these providers to advertise the availability of affordable home internet service, among other requirements placed on these providers. or with an internet service provider participating in the federal Affordable Connectivity Program, or any other state or federal program that offers broadband affordability assistance for qualifying households, and meeting the bills price and minimum speed requirements, as specified.

This bill would require the Department of Technology to annually post on its internet website a list of internet service providers that meet the requirements of the bill, as provided. The bill would not apply to the Department of Forestry and Fire Protection, the Office of Emergency Services, political subdivisions of the state, including, but not limited to, cities and counties, a contract entered into before January 1, 2025, or an internet service provider with fewer than 100,000 California residential subscribers. The bill would also make its provisions severable.

Existing law requires all contracts for the acquisition of information technology goods and services related to information technology projects, as defined, to be made by or under the supervision of the Department of Technology, which also has the final authority in the determination of information technology procurement policy.

This bill, the Affordable Internet and Net Equality Act of 2023, would require the Department of Technology, in coordination with the Public Utilities Commission and the Department of General Services, to develop and establish the Net Equality Program. The bill would require the state and state agencies, except as provided, agencies to only do business enter into a procurement contract with an internet service provider offering affordable home internet service to households participating in certain public assistance programs, as specified. The bill would define affordable home internet service to mean internet service costing no more than $40 per month and that meets specified minimum speed requirements. The bill would require these internet service providers to establish a telephone number to sign up eligible households and would require these providers to advertise the availability of affordable home internet service, among other requirements placed on these providers. The

This bill would require the Department of Technology to annually post on its internet website a list of internet service providers that meet the requirements of the bill, as provided. The bill would not apply to the Department of Forestry and Fire Protection, the Office of Emergency Services, political subdivisions of the state, including, but not limited to, cities and counties, a contract entered into before January 1, 2025, or an internet service provider with fewer than 100,000 California residential subscribers. The bill would also make its provisions severable.

Existing law requires all contracts for the acquisition of information technology goods and services related to information technology projects, as defined, to be made by or under the supervision of the Department of Technology, which also has the final authority in the determination of information technology procurement policy.

This bill, the Affordable Internet and Net Equality Act of 2023, would require the Department of Technology, in coordination with the Public Utilities Commission and the Department of General Services, to develop and establish the Net Equality Program. The bill would require the state and state agencies, except as provided, to only do business with an internet service provider offering affordable home internet service to households participating in certain public assistance programs, as specified. The bill would define affordable home internet service to mean internet service costing no more than $40 per month and that meets specified minimum speed requirements. The bill would require these internet service providers to establish a telephone number to sign up eligible households and would require these providers to advertise the availability of affordable home internet service, among other requirements placed on these providers. The bill would also make its provisions severable.

SENATE COMMITTEE ON

Senator Anna Caballero, Chair

2023 - 2024 Regular Session

AB 1588 (Wilson) - State and federal lifeline programs: eligible telecommunications carrier designations: expedited process

Bill Summary:

This bill would require the California Public Utilities Commission (CPUC) to establish an expedited process by which an existing regulated telephone service provider that offers broadband services or has an affiliate that offers broadband services can become an eligible telecommunications carrier (ETC) for the purposes of providing Lifeline services.

Fiscal Impact:

• The CPUC estimates ongoing costs of about $420,000 annually (Universal Lifeline Telephone Services Trust Fund) to implement and review the expedited process and specified ETC designation.

Background:

Lifeline is one of several universal service programs addressing the affordability of communications services. California Lifeline subscribers can participate in both the federal Lifeline program and a California Lifeline program. The federal Lifeline program is regulated by the FCC, and the state Lifeline program is regulated by the CPUC. Both programs are funded through surcharges on telephone bills.

Prior to the 1984 break-up of the Bell telephone system, long-distance services helped subsidize local telephone costs. Following AT&T’s divestment of the Bell Operating Companies, long-distance and local telephone services were separated. The Reagan FCC established the Lifeline program to address concerns about the affordability of local telephone service for after this separation. The Lifeline program provides households at or below 135 percent of the federal poverty level with a monthly subsidy to obtain one fixed or wireless line with a participating communications provider, which may include a data package. California Lifeline subscribers may receive $19 per month from the state program in addition to the $9.25 from the federal program. As a result, California participants can receive a total of $28 per month towards their Lifeline service if they can stack both the federal and state programs.

Federal universal service rules require every Lifeline provider to obtain certification as an ETC before the provider can participate in Lifeline. Federal rules specify that a provider cannot become an ETC unless it provides a regulated voice service, subject to certain conditions. Federal rules also specify that state utility commissions are responsible for assigning ETCs in their respective jurisdictions. In alignment with federal rules, California’s Lifeline program also requires each provider to become an ETC to provide Lifeline services.

In many cases, obtaining ETC designation in California can take more than a year even when a provider already offers regulated telephone service. Large ISPs may not offer any telephone services that match ETC requirements; as a result, many large ISPs have no pathway to participate in Lifeline – even if standalone broadband is an eligible service. If no mechanism enabling large ISPs to participate in the Lifeline program is established pursuant to this bill, the majority of eligible subscribers may not be able to apply Lifeline subsidies to their internet plans because there may not be an ISP in their communities that can participate in the Lifeline program.

While California can modify ETC requirements for the state Lifeline program, it cannot modify federal ETC requirements for the federal Lifeline subsidy. To the extent that non-ETCs become Lifeline providers, they can only draw the state subsidy of $19 and they are ineligible for the $9.25 federal subsidy. Those providers who are ETCs will be eligible to stack both subsidies. As a result, Lifeline subscribers that obtain broadband service from an ISP that is also an ETC may receive a larger discount on their monthly plan than those subscribers that are only served by non-ETC companies.

Proposed Law:

This bill would require the CPUC to establish an expedited process by which an existing regulated telephone service provider that offers broadband services or has an affiliate that offers broadband services can become an ETC for the purposes of providing Lifeline services. It would:

1. Require the CPUC, as part of a new or existing proceeding, to establish an expedited process by which a telephone corporation that offers broadband service may become an ETC for the purposes of providing stand-alone broadband service as part of the state and/or federal Lifeline program.
2. Require that a telephone corporation be eligible for the expedited process regardless of whether broadband service is provided by the telephone corporation or by an affiliate of the telephone corporation.

Related Legislation:

SB 4 (Gonzalez, Chapter 671, Statutes of 2021) and AB 14 (Aguiar-Curry, Chapter 658, Statutes of 2021) made various changes to update and extend the operation of the CASF to 2032, including updating the mechanism for collecting surcharges funding universal service programs to include VoIP lines.

SB 156 (Committee on Budget, Chapter 112, Statutes of 2021) implemented broadband infrastructure spending approved in the 2021 Budget Act. The bill established the Federal Funding Account within the CASF to fund broadband infrastructure projects using one-time funds. The bill made a number of changes to the CASF. The bill also required the CDT to oversee the construction of a state-owned, open access middle mile broadband network.

SB 394 (Hueso, Chapter 765, Statutes of 2021) modified the definition of a “household” for the purposes of the Lifeline program to conform California’s definition to the definition adopted by the FCC for the federal Lifeline program.

SB 704 (Bradford, 2019) would have, among other changes to Lifeline enrollment, modified the definition of a “household” for the purposes of the Lifeline program. The bill also would have allowed the following persons to obtain a lifeline subscription without regard to the restriction on one subscription per household: (1) foster youth, (2) formerly incarcerated individuals, (3) members of a Native American tribe, (4) veterans, (5) individuals with limited hearing, (6) individuals with disabilities, or (7) a member of another vulnerable or disadvantaged group commonly presenting complex guardianship or household compositions that would benefit from inclusion in the lifeline program, as determined by the commission. The bill was vetoed.

AB 2570 (Quirk, Chapter 577, Statutes of 2016) required the CPUC to adopt a portability freeze rule for the Lifeline program by January 15, 2017. The bill required the CPUC to consider a 60-day freeze as part of its proceeding.

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SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Steven Bradford, Chair

2023 - 2024 Regular

Bill No: AB 1588 Hearing Date: 7/2/2024

SUBJECT: Communications: fees: lifeline service: broadband

DIGEST: This bill makes various changes to law to allow the California Public Utilities Commission (CPUC) to use funds from the California Lifeline program to fund subsidies for broadband service. This bill also expands the CPUC’s authority to assess various surcharges by expanding the number of telecommunications lines subject to a surcharge, deleting existing law that sets the basis for applying these surcharges, and authorizes the CPUC to set its own methodology for calculating and collecting these surcharges.

ANALYSIS:

Existing law:

1. Establishes the following universal service programs at the CPUC to support the state’s universal telecommunications service goals:
   1. California High Cost Fund – A (Public Utilities Code §275)
   2. California High Cost Fund – B (Public Utilities Code §276)
   3. Moore Universal Telephone Service program/ California Lifeline (Public Utilities Code §871)
   4. Deaf and Disabled Telecommunications Program (Public Utilities Code §278)
   5. California Teleconnect Fund (Public Utilities Code §280)
   6. California Advanced Services Fund (Public Utilities Code §281)
2. Establishes the basis for which the CPUC must assess telecommunication surcharges that fund universal service programs. Under existing law, these surcharges apply to both traditional telephone lines and Voice over Internet Protocol (VoIP) counted as 9-1-1 access lines, as specified. (Public Utilities Code §285)
3. Requires the CPUC to designate a class of Lifeline service necessary to meet minimum communications needs and set rates and eligibility criteria for that service. Existing law establishes requirements for setting Lifeline telephone rates. (Public Utilities Code §§873, 874, 877, 879)
4. Existing law permits only one Lifeline subscription per household and defines a household as any group of individuals, including the subscriber, who are living together at the same address and as one economic unit. A household may include related and unrelated persons. If an adult has no, or minimal, income and lives with someone who provides financial support to that adult, both persons shall be part of the same household. A child under 18 years of age and living with a parent or guardian shall be part of the same household as the parent or guardian. Existing law allows multiple Lifeline subscriptions at the same address if those subscribers are not part of the same household. (Public Utilities Code §878)
5. Requires the CPUC to adopt a portability freeze rule for the Lifeline program, limiting a subscriber’s ability to change providers until the freeze period expires. (Public Utilities Code §878.5)
6. Establishes the Public Utilities Commission Utilities Reimbursement Account (PUCURA), which funds the CPUC’s administrative costs. Existing law authorizes the CPUC to assess the PUCURA over specified public utilities, which includes telephone and telegraph corporations. Existing law specifies that the annual fee must be established to produce revenue equal to the amount needed for the CPUC’s authorized budget for that year. Existing law specifies that the PUCURA surcharge applied to telephone and telegraph corporations must be based on each corporation’s gross intrastate revenues. Under existing law, the CPUC must establish uniform PUCURA fees for public utilities with gross intrastate revenues at or below $750,000. Existing law also establishes a schedule for utilities to pay their PUCURA fees. (Public Utilities Code §§401-410 and §§431-435)

This bill:

1. Makes various changes to law to enable the CPUC to expand and increase surcharges for the PUCURA, including the following:
   1. Expands PUCURA collection to VoIP lines based on the federal definition of these lines.
   2. Authorizes the CPUC to set its own methodology for determining the PUCURA surcharge assessed on telecommunications providers.
   3. Deletes existing law requiring the CPUC to set uniform annual PUCURA fees for utilities with annual gross intrastate revenue at or below $750,000, and instead authorizes the CPUC to set PUCURA fees for these utilities at their discretion.
   4. Allows the CPUC to schedule utilities’ PUCURA payments as it determines appropriate.
2. Deletes existing law that establishes the basis for how the CPUC may collect surcharges to fund the universal service programs, including the California Lifeline program.
3. Expands the scope of communications lines subject to the Lifeline surcharge and allows the CPUC to use Lifeline surcharge revenues to subsidize broadband plans.
4. Renames the California Lifeline program as the Moore Universal Communications Service Act.
5. Requires the CPUC to provide broadband subsidies using Lifeline funds.
6. Grants the CPUC to take any action it deems appropriate in order to do the following:
   1. Offer standalone subsidies for broadband internet service.
   2. Where appropriate, combine the state lifeline and federal lifeline subsidies and any other federal funds.
   3. Consider whether companies that do not qualify as eligible telecommunications carriers (ETCs) can participate in the California Lifeline program.
   4. Ensure that broadband plans receiving a subsidy pursuant to this bill meet or exceed 100/20 Megabits per second (Mbps), or the highest speed offered by the service provider at the customer’s location if no other plan is available.
7. Removes technological neutrality from factors the CPUC must consider when conducting a proceeding to modify universal service to include broadband services.
8. Requires the CPUC to do the following to the Lifeline program, as it deems appropriate:
   1. Establish minimum service standards for Lifeline services, including any broadband service offered through Lifeline.
   2. Set a maximum out-of-pocket cost for customer for different tiers of lifeline service.
   3. Set rates and charges for Lifeline service.
   4. Set eligibility criteria for Lifeline service.
   5. Assess progress towards broadband adoption by income, ethnicity and geography.
9. Deletes existing law that sets requirements for establishing rates for Lifeline services.
10. Modifies eligibility criteria for the Lifeline program to authorize the CPUC to provide Lifeline subsidies to certain individuals, regardless of law limiting Lifeline subscriptions to one subscription per household. This bill requires the CPUC to determine whether the following groups are eligible:
    1. Individuals using domestic violence shelters.
    2. Formerly incarcerated persons.
    3. Unhoused individuals.
    4. Persons at least 60 years of age or older.
    5. Farm workers.
    6. Tribal members.
    7. Disabled veterans.
    8. Students eligible under the federal National School Lunch Program.
    9. Any other person who is a member of a vulnerable or disadvantaged group commonly presenting complex guardianship or household compositions that could benefit from Lifeline, as determined by the CPUC.
11. Specifies that foster youth are eligible for Lifeline service and authorizes the CPUC to set requirements necessary to provide subsidies to foster youth for both the Lifeline service and any devices needed to access broadband.
12. Prohibits any surcharges on Lifeline service.
13. Deletes existing law requiring the CPUC to establish a portability freeze on Lifeline enrollments.
14. Modifies the definition of VoIP service for the purposes of assessing local pre-paid telephone taxes.

Background

The end of the ACP. According to the author, this bill is aimed at addressing affordability issues facing lower income Californians in the wake of the end of the federally-funded Affordable Connectivity Program. The Covid-19 pandemic underscored the extent to which the lack of broadband access impacts Californians’ ability to access services. Multiple factors can limit consumers’ ability to access broadband; however, multiple studies indicate that access to broadband infrastructure and the cost of internet service plans or data subscriptions are major drivers of access gaps. In 2021, Congress appropriated funding to the FCC to help low-income consumers access broadband services and devices during the ongoing pandemic. The Federal Communication Commission (FCC) established the Emergency Broadband Benefit (EBB), which provided a $50 discount for broadband services for eligible consumers. The passage of the Infrastructure, Investment and Jobs Act (IIJA) provided additional funds for the EBB and required the FCC to modify the program’s rules. These changes resulted in the EBB’s transition to the Affordable Connectivity Program (ACP) in December 2021. The ACP provided a $30 discount on monthly broadband service and a one-time $100 discount for a broadband device for most eligible subscribers. Since the passage of the IIJA, Congress has not appropriated any additional funding for the ACP. As a result, the ACP ceased accepting applications on February 7, 2024, and the program ceased operation on June 1, 2024. As of February 2024, California had the greatest number of households enrolled in the ACP of any state; Over 2.9 million California households enrolled in the ACP.

While the ACP has stopped providing subsidies for internet service, multiple providers have committed to retaining a $30 plan with no fees or data caps until the end of the year. On May 31, 2024, the White House announced it had received commitments to continue offering these plans from many large internet service providers (ISPs), including AT&T, Cox, Comcast, Charter Communications, and Verizon.

The Lifeline programs: federal and state. Lifeline is one of several universal service programs addressing the affordability of communications services. California Lifeline subscribers can participate in both the federal Lifeline program and a California Lifeline program. The federal Lifeline program is regulated by the FCC, and the state Lifeline program is regulated by the CPUC. Both programs are funded through surcharges on telephone bills.

Prior to the 1984 break-up of the Bell telephone system, long-distance services helped subsidize local telephone costs. Following AT&T’s divestment of the Bell Operating Companies, long-distance and local telephone services were separated. The Reagan FCC established the Lifeline program to address concerns about the affordability of local telephone service for after this separation. The Lifeline program provides households at or below 135 percent of the federal poverty level with a monthly subsidy to obtain one fixed or wireless line with a participating communications provider, which may include a data package. California Lifeline subscribers may receive $19 per month from the state program in addition to the $9.25 from the federal program. As a result, California participants can receive a total of $28 per month towards their Lifeline service if they can stack both the federal and state programs.

The Eligible Telecommunications Carrier (ETC) issue. While this bill requires the CPUC to take all steps necessary to include broadband in the California Lifeline program, this bill does not clearly require a mechanism by which an ISP that does not offer a regulated voice service can become a Lifeline provider. Federal universal service rules require every Lifeline provider to obtain certification as an ETC before the provider can participate in Lifeline. Federal rules specify that a provider cannot become an ETC unless it provides a regulated voice service, subject to certain conditions. Federal rules also specify that state utility commissions are responsible for assigning ETCs in their respective jurisdictions. In alignment with federal rules, California’s Lifeline program also requires each provider to become an ETC to provide Lifeline services. In many cases, obtaining ETC designation in California can take more than a year even when a provider already offers regulated telephone service. Large ISPs may not offer any telephone services that match ETC requirements; as a result, many large ISPs have no pathway to participate in Lifeline – even if standalone broadband is an eligible service. If no mechanism enabling large ISPs to participate in the Lifeline program is established pursuant to this bill, the majority of eligible subscribers may not be able to apply Lifeline subsidies to their internet plans because there may not be an ISP in their communities that can participate in the Lifeline program.

While California can modify ETC requirements for the state Lifeline program, it cannot modify federal ETC requirements for the federal Lifeline subsidy. To the extent that non-ETCs become Lifeline providers, they can only draw the state subsidy of $19 and they are ineligible for the $9.25 federal subsidy. Those providers who are ETCs will be eligible to stack both subsidies. As a result, Lifeline subscribers that obtain broadband service from an ISP that is also an ETC may receive a larger discount on their monthly plan than those subscribers that are only served by non-ETC companies.

Bill grants the CPUC broad authority, but may not ensure necessary changes are made. This bill addresses the different regulatory frameworks between voice and internet services by granting the CPUC broad authority to apply certain requirements in the bill as it deems appropriate. As a result, this bill does not establish a clear framework for how broadband companies would become Lifeline providers, how enrollment processes may change, or what rules would apply to each type of Lifeline service. This bill also implies that the CPUC may establish different tiers of Lifeline service; however, it is unclear what those tiers would provide. For example, the CPUC could establish different cost tiers, different tiers of data plans, or different internet speed tiers. All these tiers may not be available through all providers and in all geographic locations of the state. A lack of clarity about program rules may disincentivize participation from providers, and a lack of guarantees about services and costs may discourage eligible households from subscribing.

Bill modifies multiple surcharges, enabling the CPUC to collect substantial new funds from telecommunications consumers. This bill modifies the basis for applying surcharges for all universal service programs, including the California Lifeline program. This bill also expands the basis for assessing PUCURA fees for both telecommunications providers and small utilities, regardless of sector. While the universal service funds are funded by a surcharge on telecommunications lines to support programs that help close gaps in universal service, PUCURA funds the CPUC’s administrative costs. Historically, both the universal service funds and PUCURA have collected surcharges on telephone services based on in-state revenues; however, the ongoing rise in internet-based communications has resulted in lower consistent surcharge revenues and increasing surcharge rates for those customers who retain traditional telephone service. To reduce ongoing cost shifts and ensure lasting support for the universal service funds, the Legislature passed bills that updated the basis for assessing universal service funds in 2021. The CPUC updated its surcharges for the universal service funds pursuant to this legislation in April 2023. While the Legislature passed legislation adjusting surcharges for universal service programmatic needs, these bill did not adjust the PUCURA. This bill would delete existing law establishing the surcharge basis for telecommunications companies’ PUCURA fees, expand the PUCURA surcharge to VoIP lines, and authorize the CPUC to establish its own method for calculating the amount of revenue it receives from PUCURA telecommunications charges. This bill would also delete existing law establishing this surcharge mechanism for the universal service funds and instead allow the CPUC to assess universal service fund surcharges based on CPUC discretion. While some universal service fund program have statutory caps on the amount of surcharge revenue that can be collected to fund the programs, other universal service funds do not have such caps.

The modification and expansion of these surcharges may have substantial impacts for telecommunications consumers since the potential costs of providing all the subsidies potentially authorized under this bill are unclear. The Governor’s 2024-25 May Revise included approximately $377 million for Lifeline, which includes $30 million in state operations funding. If the nearly 3 million California households enrolled in the ACP became subscribers in the California Lifeline program, the CPUC would likely need at least $700 million annually to maintain existing state operations and provide sufficient subsidies. This amount would not include any reserve for unexpected costs and does not include any other surcharge increases related to other universal service programs or the PUCURA.

Need for amendments. As currently drafted, this bill contains numerous provisions that are unrelated and unnecessary to permit the use of the state Lifeline subsidy for broadband service. Additionally, while this bill seeks to add standalone broadband service to the Lifeline program, the bill removes existing statutory requirements for existing Lifeline services and rates and instead gives the CPUC to set program requirements at its discretion. Despite providing the CPUC with broad authority to establish broadband subsidies within Lifeline, the bill does not fully address those policy issues needed to ensure that broadband providers can or will participate in the program. As a result, the author and committee may wish to amend this bill to delete the current text of the bill and instead require the CPUC to establish an expedited process by which an existing regulated telephone service provider that offers broadband services or has an affiliate that offers broadband services can become an ETC for the purposes of providing Lifeline services.

Prior/Related Legislation

SB 4 (Gonzalez, Chapter 671, Statutes of 2021) and AB 14 (Aguiar-Curry, Chapter 658, Statutes of 2021) made various changes to update and extend the operation of the CASF to 2032, including updating the mechanism for collecting surcharges funding universal service programs to include VoIP lines.

SB 156 (Committee on Budget, Chapter 112, Statutes of 2021) implemented broadband infrastructure spending approved in the 2021 Budget Act. The bill established the Federal Funding Account within the CASF to fund broadband infrastructure projects using one-time funds. The bill made a number of changes to the CASF. The bill also required the CDT to oversee the construction of a state-owned, open access middle mile broadband network.

SB 394 (Hueso, Chapter 765, Statutes of 2021) modified the definition of a “household” for the purposes of the Lifeline program to conform California’s definition to the definition adopted by the FCC for the federal Lifeline program.

SB 704 (Bradford, 2019) among other changes to Lifeline enrollment, the bill would have modified the definition of a “household” for the purposes of the Lifeline program. The bill also would have allowed the following persons to obtain a lifeline subscription without regard to the restriction on one subscription per household: (1) foster youth, (2) formerly incarcerated individuals, (3) members of a Native American tribe, (4) veterans, (5) individuals with limited hearing, (6) individuals with disabilities, or (7) a member of another vulnerable or disadvantaged group commonly presenting complex guardianship or household compositions that would benefit from inclusion in the lifeline program, as determined by the commission. The bill was vetoed.

AB 2570 (Quirk, Chapter 577, Statutes of 2016) required the CPUC to adopt a portability freeze rule for the Lifeline program by January 15, 2017. The bill required the CPUC to consider a 60-day freeze as part of its proceeding.

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

SUPPORT:

California Association of Public Authorities for IHSS
California Emerging Technology Fund
California Human Development
Center for Employment Training
CFT- A Union of Educators & Classified Professionals, AFT, AFL-CIO
First Day Foundation
Inland Coalition for Immigrant Justice
La Cooperativa Campesina de California
Los Amigos de la Comunidad, Inc.
Proteus, Inc.
Saban Community Clinic

OPPOSITION:

California Broadband & Video Association
California Communications Association, unless amended

US Telecom-The Broadband Association

ARGUMENTS IN SUPPORT: According to the Author:

Millions of Californians lack access to affordable, high-speed internet all across the state, with a particular impact to our disadvantaged communities. The digital divide exacerbates existing inequities for low-income Californians who increasingly need internet access for everything from education, school, banking, work, entertainment, social lives, and health & safety. As the ACP expired this year and with no additional funding in sight, millions more are at risk – or have already – lost access. AB 1588 would help reduce the digital divide by expanding the CA lifeline program to include subsidies for standalone or bundled broadband. California must act to address the inequities that pervade through the digital divide.

ARGUMENTS IN OPPOSITION: The California Broadband and Video Association (CalBroadband) and US Telecom oppose this bill, stating that it will unnecessarily increase consumer costs while providing insufficient direction to the CPUC to create an effective broadband subsidy. In opposition, CalBroadband and US Telecom state:

Expanding LifeLine to include broadband services could significantly increase the number of LifeLine customers and the Program’s required budget, driving up surcharges needed to address those seeking a broadband benefit. It is not just raising the surcharge to incorporate any new potential participants that is concerning; AB 1588 also unfairly includes an open-ended proposition to allow the CPUC to increase the surcharges and fees on telephone customer bills to fund administrative costs that have no relation to the LifeLine program. Californians should not be forced to pay higher telephone bills to fund the CPUC.

The California Communications Association (CalCom) is opposed to this bill unless it is amended to more closely mirror federal broadband subsidy programs, address state requirements for ETC designations, and establish a pilot program to facilitate Lifeline support for broadband and telephone service for low-income customers of the small independent local exchange carriers (ILECs). CalCom states:

AB 1588 should take a page from the ACP’s playbook by minimizing barriers to ISP participation and allowing participation to be voluntary. The bill should not allow the CPUC to set rates for broadband service, i.e., it should not set an out-of-pocket maximum cost for LifeLine subscribers. Rather, AB 1588 should promote consumer choice and competitive neutrality by directing to the CPUC to allow LifeLine subscribers to choose to apply their state support amount to either wireline phone service, wireless phone service, or broadband service from the provider of their choice.

Finally, we respectfully request that AB 1588 include a pilot program to establish an enhanced LifeLine support amount for the low-income customers of the small telephone companies that are rate-of-return regulated by the CPUC and their ISP affiliates. LifeLine discounts are particularly important in rural areas, where costs of service are higher, the customer base is smaller, and the service alternatives fewer.

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ASSEMBLY THIRD READING

ATR Bill Id:AB 1588

Author:(Wilson)

As Amended Ver:January 22, 2024

Majority vote

SUMMARY

This bill establishes the Net Equality Program, which allows a state agency to enter into a procurement contract with a California internet service provider (ISP) only if the ISP offers affordable home internet service, as defined, or participates in any other state or federal program that offers broadband affordability assistance to qualified households.

Major Provisions

1. Directs the Department of Technology (CDT), in coordination with the California Public Utilities Commission (CPUC) and the Department of General Services (DGS), to establish the Net Equality Program, by which state agencies may enter into a procurement contract with an ISP only if the ISP offers "affordable home internet service" to all "eligible households."
2. Provides that an ISP that participates in the Affordable Connectivity Program (ACP) or any other state or federal program that provides broadband affordability assistance for qualifying households, and that meets the price and minimum speed requirements set forth in the bill, may enter into a procurement contract with the state and state agencies.
3. Directs CDT, on or before December 31, 2024, and annually thereafter, to post online a list of ISPs with which state agencies are authorized to enter into procurement contracts.
4. Exempts from the preceding service requirement an ISP that is the only ISP to offer service in a given geographical area and from the preceding contracting restriction the Department of Forestry and Fire Protection, the Office of Emergency Services, political subdivisions of the state, including cities and counties, a contract entered into before January 1, 2025, and an ISP with fewer than 100,000 California residential subscribers.
5. Defines affordable home internet service as service costing no more than $40 per month and that has speed requirements of at least 100 megabits per second downstream and 20 megabits per second upstream (100/20) and sufficient to support distance learning and telehealth services, though the bill authorizes CDT to revise the definition speeds upwards.
6. Defines an eligible household as a resident in a group home or congregate care facility within the qualified ISP's California service territory participating in a qualified public assistance program, or a household within the qualified ISP's California service territory with at least one resident of the household participating in a qualified public assistance program.

COMMENTS

1. Broadband service costs are a known barrier to adoption. According to the Broadband for All Action Plan completed by the California Broadband Council in December of 2020, broadband affordability and adoption remains a large challenge to achieving broadband for all in the state. Other research backs up this claim. According to CETF-USC Statewide Broadband Adoption Survey over two-thirds of respondents cited affordability as the reason they chose not to subscribe to broadband, with the lack of an appropriate computing device also being relevant factors. In summary, where broadband service is available but not purchased, the price of the service is one of the leading reasons potential subscribers remain without access.
2. This bill would complement existing efforts to achieve broadband affordability. Recently, under the Infrastructure Investment and Jobs Act (IIJA) Congress established the Affordable Connectivity Program, or ACP. The ACP is a subsidy program that helps ensure that households can afford the broadband they need for work, school, healthcare and more. The generous subsidy provides a discount of up to $30 per month toward internet service for eligible households and up to $75 per month for households on qualifying Tribal lands. A household is eligible for the ACP if the household income is at or below 200% of the Federal Poverty Guidelines or if a member of the household participates in various other federal assistance programs such as Lifeline, Medicaid, or housing assistance. This bill's definition of an eligible household for purposes of the Net Equity Program are very similar to the ACP, except the Net Equity Programs ties eligibility to state public assistance programs such as CalFresh and Covered California.

As of January 2024 roughly 3 million California households are taking advantage of the ACP program, which represents only about half of the eligible population. Awareness of the program remains an issue with some of the remaining households, however the creation of an additional program with a distinct name could create further complication about services available to low-income Californians. In response to this concern, amendments adopted in the Communication & Conveyance committee would expand qualification for the Net Equality Program to ISPs that participate in any other state or federal program that offers broadband affordability assistance for qualifying households. This amendment to this bill ensures it would complement instead of compete with existing program offerings.

1. Establishing a definition of affordable home internet. This bill defines affordable home internet, for purposes of the program, to mean broadband service costing no more than $40 per month and that meets the minimum speed requirements of 100/20 mbps. To put those numbers into context, the $40 threshold in this bill is actually more expensive than the low-cost plans currently available from major internet service providers. For example, in 2022 the Biden-Harris Administration secured commitments from 20 leading internet service providers to offer ACP-eligible households a high speed internet plan for no more than $30 per month. Nonetheless, the larger dollar amount established by this bill is a price cap, not a floor, and therefore providers would be permitted to offer existing lower-cost plans.

Regarding the minimum speed thresholds established by this bill, recent amendments increased the speed requirement from 25/3mbps to 100/20mbps in response to concerns that the previous version set too low of a threshold. The increased minimum speed requirement is more appropriate to meet the basic needs of users, and arguably better aligns the bill with the author's intent.

1. Fact Check: Will consumers be kicked off existing affordable plans if Congress fails to authorize additional funds for the Affordable Connectivity Program? Some stakeholders have argued that if Congress fails to authorize additional funding for the Affordable Connectivity Program that roughly 3 million California households be left without affordable internet service. This is a mostly false claim, although there is reason to be concerned about the effect of the possible expiration of the Affordable Connectivity Program. Most importantly to understand, there is no requirement that if the ACP indeed runs out of funding ISPs would be required to cease offering the existing affordable plans. Prior to the ACP some ISPs had already offered affordable plans to some households, so there is reason to believe they would continue to do the same. However, consumers would lose access to the $30 subsidy that helps enrolled households afford their home internet service. As a result, some households may choose to discontinue their subscription because even the lowest-cost plan offerings would be outside their budget without a subsidy. In that sense, consumer advocates are appropriately concerned that some low-income households would lose access to broadband service if ACP runs out of funds, although it would not be an automatic process.
2. This bill takes an unconventional approach to achieve affordability. California's contracting and procurement policies generally have created a well-regulated public procurement process that reflects principles of transparency, equality and open competition to ensure that public funds are not misspent and that contracts are fair. This bill aims to go one step further and to address the social impacts beyond a particular contract when procurement decisions are made by the state, particularly to encourage broadband affordability benefits to the general public. Maximizing public benefit from government procurement, by setting minimum standards for potential vendors, is not an uncommon approach. For example, labor standards such as prevailing wage requirements are required of government contracts for public works.

However, under typical contracting agreements, the qualifying terms and conditions placed on a potential vendor are project specific. For example, while a construction contractor is required to pay state prevailing wage when constructing a public works project, that same contractor is not necessarily required by law to pay the same prevailing wage on non-public works projects. By requiring a potential vendor to offer particular services at a specified price to some members of the general public, particularly services that are outside the scope of the specific public contract, this bill would seem to propose a novel approach that ties general public benefits to specific state contracts for services. In other words, there is not a nexus between the public benefit, in this case affordable plans, and the service being rendered, which could be any service procured by the state from an internet service provider.

According to the Author

"The Affordable Internet and Net Equality Act of 2023 is a landmark piece of legislation to ensure California continues to be a national leader in broadband affordability. Internet access should be correctly recognized and treated as a necessity and not as a luxury. It is a basic necessity to access education, health care, economic opportunity, and other necessary services. This bill will ensure vulnerable communities across the state are not left behind in the 21st century and have an affordable option before them."

Arguments in Support

The California Emerging Technology Fund argues that this bill is the last major missing piece of state policy required to close the digital divide and achieve digital equity in California. They view this bill as a vital backstop and back-up plan should existing programs cease operations.

Arguments in Opposition

This bill is opposed by some broadband internet service provider industry associations including USTelecom and CalBroadband who argue that it would inappropriately complicate state procurement contracts.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, there are potential fiscal impacts to the state, including:

1. Onetime costs in the mid hundreds of thousands of dollars to low millions of dollars (General Fund) for CDT to develop the Net Equality Program, conduct meetings, conduct analytical work and monitor compliance.
2. CPUC costs of approximately $500,000 annually (special fund) for two analyst positions and one data specialist, as well related information technology hardware, software and licensing.
3. Ongoing DGS costs to coordinate on development of the Net Equality Program are unknown, but likely in the low hundreds of thousands of dollars.
4. The bill's more significant fiscal effect is also more speculative. To the extent a state agency must, consistent with this bill, contract with an ISP that is not the lowest-cost service provider, the state would incur costs, which might be substantial.

VOTES

ASM COMMUNICATIONS AND CONVEYANCE: 7-3-1

YES: Boerner, Bonta, Garcia, Holden, Maienschein, Luz Rivas, Rodriguez

NO: Jim Patterson, Dixon, Hoover

ABS, ABST OR NV: Stephanie Nguyen

ASM APPROPRIATIONS: 12-3-1

YES: Holden, Arambula, Wood, Calderon, Connolly, Mike Fong, Grayson, Haney, Hart, Lowenthal, Pellerin, Villapudua

NO: Sanchez, Dixon, Ta

ABS, ABST OR NV: Megan Dahle

UPDATED

VERSION: January 22, 2024

CONSULTANT: Emilio Perez / C. & C. / (916) 319-2637 FN: 0002614

Date of Hearing: January 18, 2024

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1588

Author:(Wilson) – As Amended Ver:January 12, 2024

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes the Net Equality Program, which allows a state agency to enter into a procurement contract with a California internet service provider (ISP) only if the ISP offers “affordable home internet service.”

Specifically, this bill:

1. Directs the Department of Technology (CDT), in coordination with the California Public Utilities Commission (CPUC) and the Department of General Services (DGS), to establish the Net Equality Program, by which state agencies may enter into a procurement contract with an ISP only if the ISP offers “affordable home internet service” to all “eligible households.”
2. Directs CDT, on or before December 31, 2024, and annually thereafter, to post online a list of ISPs with which state agencies are authorized to enter into procurement contracts.
3. Exempts from the preceding service requirement an ISP that is the only ISP to offer service in a given geographical area and from the preceding contracting restriction the Department of Forestry and Fire Protection, the Office of Emergency Services, political subdivisions of the state, including cities and counties, a contract entered into before January 1, 2025, and an ISP with fewer than 100,000 California residential subscribers.
4. Defines affordable home internet service as service costing no more than $40 per month and that has speed requirements of at least 25 megabits per second downstream and three megabits per second upstream (25/3) and sufficient to support distance learning and telehealth services, though the bill authorizes CDT to revise the definition speeds upwards.
5. Defines an eligible household as a resident in a group home or congregate care facility within the qualified ISP’s California service territory participating in a qualified public assistance program, or a household within the qualified ISP’s California service territory with at least one resident of the household participating in a qualified public assistance program.

FISCAL EFFECT:

1. Onetime costs in the mid hundreds of thousands of dollars to low millions of dollars (General Fund) for CDT to develop the Net Equality Program, conduct meetings, conduct analytical work and monitor compliance.
2. CPUC costs of approximately $500,000 annually (special fund) for two analyst positions and one data specialist, as well related information technology hardware, software and licensing.
3. Ongoing DGS costs to coordinate on development of the Net Equality Program are unknown, but likely in the low hundreds of thousands of dollars.

The bill’s more significant fiscal effect is also more speculative. To the extent a state agency must, consistent with this bill, contract with an ISP that is not the lowest-cost service provider, the state would incur costs, which might be substantial.

COMMENTS:

1. Purpose. The author intends this bill to ensure every Californian has access to internet service. According to the author:

Internet access should be correctly recognized and treated as a necessity and not as a luxury. It is a basic necessity to access education, health care, economic opportunity, and other necessary services. This bill will ensure vulnerable communities across the state are not left behind in the 21st century and have an affordable option before them.

1. Background. The California Broadband Council was created by statute to promote broadband deployment in unserved and underserved areas of the state as defined by the CPUC, and broadband adoption throughout the state for the benefit of all Californians. In 2020, the Broadband Council released a report titled the “Broadband for All Action Plan.” In the plan, the Broadband Council, like the author of this bill, declares broadband internet access “a critical service, not a luxury.”

The action plan estimates that 23% of California housing units do not have broadband subscriptions. The plan identifies five challenges that prevent Californians from adopting or accessing broadband high-speed internet: availability (speed and reliability), affordability, access to devices, digital skills and data.

The Affordable Connectivity Program (ACP), administered by the Federal Communication Commission, offers low-income households a discount on internet service of up to $30 a month, and a discount of up to $75 a month on qualifying Tribal lands. However, as the action plan notes, many eligible Californians do not participate in, or even know of such subsidy programs. In any case, existing funding for ACP is likely to be exhausted this year, and Congress has not authorized additional funding for the program.

In 2022, President Biden’s administration secured the commitment of 20 ISPs to provide eligible households high-speed internet service plans for no more than $30 a month. Many ISPs continue to offer these affordable service plans in California. There is fear, among some, that some ISPs will not continue to offer these affordable internet service plans if Congress does not authorize more ACP funding.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: January 10, 2024

ASSEMBLY COMMITTEE ON COMMUNICATIONS AND CONVEYANCE

Tasha Boerner, Chair

ABPCA Bill Id:AB 1588 (

Author:Wilson) – As Amended Ver:April 11, 2023

SUBJECT: Affordable Internet and Net Equality Act of 2023

SUMMARY: This bill requires the California Department of Technology (CDT) to develop and establish the Net Equality Program to ensure the state and state agencies shall only enter into a procurement contract with a qualified internet service provider (ISP) that offers affordable home internet service, as specified. Specifically, this bill:

1. Requires CDT to establish the Net Equity Program in consultation with the California Public Utilities Commission (CPUC) and the Department of General Services (DGS).
2. Defines “eligible household” to mean a resident in a group home or congregate care facility within the qualified internet service provider’s California service territory participating in a qualified public assistance program, or a household within the qualified internet service provider’s California service territory with at least one resident of the household participating in a qualified public assistance program.
3. Defines “affordable home internet service” to mean internet service costing no more than forty dollars ($40) per month and that meets the minimum speed requirements.
   1. “Internet service” exempts commercial mobile service and private mobile service.
4. Defines “minimum speed requirements” to mean at 25 megabits per second downstream and 3 megabits per second upstream (25/3 mbps) with sufficient speed and latency to support distance learning and telehealth services
   1. Authorizes CDT to increase the minimum speed requirements for purposes of aligning the minimum service requirements with updated state or federal policies.
5. Defines a “qualified internet service provider” to mean an ISP doing with the state or state agency.
6. Requires CDT to ensure that the “overall goals for adoption” are met.
   1. Defines “overall goals for adoption” to mean that at least 90 percent of eligible households receive affordable home internet service by January 1, 2025, and at least 95 percent of eligible households receive affordable home internet service by January 1, 2028.
7. Provides that all eligible households shall be allowed to convert to affordable home internet service within the month they are eligible, and requires an internet service provider to sign up an eligible household in no more than 30 minutes by phone with trained personnel.
8. Requires qualified internet service providers to advertise the availability of affordable home internet and the federal Affordable Connectivity Program (ACP), including by placing various print and online advertisements in multiple languages.
   1. Provides that advertising may stop when there is documented awareness of the availability of affordable home internet service by at least 80 percent of all eligible households according to a reputable statewide survey.
9. Provides that the program does not apply to the Department of Forestry and Fire Protection, to the Office of Emergency Services or political subdivisions of the state, including, but not limited to, cities and counties
10. Requires that a qualified internet service provider shall meet annually with CDT and the California Broadband Council in an open workshop with key stakeholders to confer on how to achieve the overall goals for adoption and other specified topics.
11. Provides an exceptions for procurements contracts entered into before January 1, 2025 and in geographic areas where there is only one internet service provider.
12. Provides that provisions of the bill are severable.

EXISTING LAW:

State Law

1. Establishes, within the Government Operations Agency, the Department of Technology (CDT), and generally tasks the department with the approval and oversight of information technology (IT) projects, and with improving the governance and implementation of IT by standardizing reporting relationships, roles, and responsibilities for setting IT priorities. (Gov. Code § 11545, et seq.)
2. Finds that the unique aspects of IT goods and services and their importance to state programs warrant a separate body of governing statutes that should enable the timely acquisition of IT goods and services to meet the state’s needs in the most value effective manner. (Pub. Con. Code § 12100(a).)
3. Provides that all contracts for the acquisition of IT goods and services related to IT projects, as defined, shall be made by or under the supervision of CDT as provided, and endows CDT with the final authority for all of the following: the acquisition of IT goods and services related to IT projects; the determination of IT procurement policy; the determination of IT procurement procedures applicable to IT acquisitions and telecommunications procurements; and the determination of procurement policy in telecommunications procurements. (Pub. Con. Code § 12100(b)-(e).)

Federal Law

1. Establishes the Affordable Connectivity Program, under the administration of the Federal Communications, which provides a $30 broadband subsidy to eligible households and a $75 broadband subsidy to eligible tribal households. (Infrastructure Investment and Jobs Act. Public Law 117–58)
2. Provides that no state or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service. (Section 332 of Title 47 of the United States Code)

FISCAL EFFECT: Unknown. This bill has been keyed fiscal by the Legislative Counsel.

COMMENTS:

1. Purpose of the bill. This bill seeks to maintain the availability of low-cost broadband options for Californians by leveraging the state’s business and procurements contracts with internet service providers, specifically by requiring those ISPs to offer affordable plans as specified.
2. Author’s statement. According to the author:

“The Affordable Internet and Net Equality Act of 2023 is a landmark piece of legislation to ensure California continues to be a national leader in broadband affordability. Internet access should be correctly recognized and treated as a necessity and not as a luxury. It is a basic necessity to access education, health care, economic opportunity, and other necessary services. This bill will ensure vulnerable communities across the state are not left behind in the 21st century and have an affordable option before them.”

1. The digital divide is an infrastructure problem and an adoption problem, and this bill is targeted at broadband adoption. In broadband terminology, when we speak of unserved households, it generally means a household for which no facility-based broadband provider offers broadband service at minimum speeds. In other words, there is no infrastructure. However, there are also households for which broadband infrastructure is available but it is not accessible – this is a broadband adoption problem. According to the Broadband for All Action Plan^[1] completed by the California Broadband Council in December of 2020, broadband affordability and adoption remains a large challenge to achieving broadband for all in the state. According to the report, 23 percent of California housing units—home to 8.4 million residents—do not have broadband subscriptions. To put that in context, broadband infrastructure is available to an upwards 95 percent of California households. According to CETF-USC Statewide Broadband Adoption Survey^[2] over two-thirds of respondents cited affordability as the reason they chose not to subscribe to broadband, with the lack of an appropriate computing device also being relevant factors. In summary, where broadband service is available but not purchased, the price of the service is one of the leading reasons potential subscribers remain without access.
2. Federal and state policies have favored subsidies to achieve affordability. To overcome the affordability challenges for low-income households, there are primarily two ways to achieve affordability: price controls or subsidies. This is true not just for broadband, but also housing, healthcare, and electricity. For example, the Housing Choice Voucher Program (“Section 8”) offers subsidies for low-income households to afford housing costs, and the Affordable Care Act provides subsidies to afford the cost of healthcare. While price controls and subsidies are not strictly mutually exclusive, policymakers have tended to favor subsidies over price control to achieve affordability for telecommunications services. For example, both the federal Lifeline and California Lifeline programs provide a flat-rate subsidy for eligible households to afford the cost of basic telephone and/or broadband service. Notably, to be eligible for reimbursement for California Lifeline participating providers must agree to the program’s minimum service standards, which include price controls on the plans that are offered. In that way, subsidies and price controls can sometimes work together.

Recently, under the Infrastructure Investment and Jobs Act (IIJA) Congress established the Affordable Connectivity Program, or ACP. The ACP is an FCC subsidy program that helps ensure that households can afford the broadband they need for work, school, healthcare and more. The generous subsidy provides a discount of up to $30 per month toward internet service for eligible households and up to $75 per month for households on qualifying Tribal lands. Similar to the Lifeline programs, ACP is limited to one monthly service discount per household. A household is eligible for the ACP if the household income is at or below 200% of the Federal Poverty Guidelines or if a member of the household participates in various other federal assistance programs such as Lifeline, Medicaid, or housing assistance. The bill’s definition of an eligible household for purposes of the Net Equity Program are very similar to the ACP, except the Net Equity Programs ties eligibility to state public assistance programs such as CalFresh and Covered California.

Notably, the ACP does not currently have an ongoing appropriation from the federal government to continue to program past its initial allocation. While reports vary on when the fund will be exhausted, there is agreement among different sources that it will happen sometime in 2024 unless Congress appropriates more funding. If the program were to run out of funds the subsidies would stop, and low-income households would be responsible for their entire bills. While there is no indication that internet service providers would pull their existing low-cost plans from the market if ACP ended, the author of this bill purports that the affordable plans established under this bill would be a backstop to that potential action.

1. This bill would utilize price caps and establish minimum speed requirements for internet services providers that wish to contract with the state. This bill proposes to establish a program that would require an internet service provider to offer affordable home internet, as defined, in order to be eligible to enter into a procurement contract with the state. This bill defines affordable home internet, for purposes of the program, to mean broadband service costing no more than $40 per month and that meets the minimum speed requirements of 25/3 mbps. To put those numbers into context, the $40 threshold in the bill is actually more expensive than the low-cost plans currently available from major internet service providers. For example, in 2022 the Biden-Harris Administration secured commitments from 20 leading internet service providers to offer ACP-eligible households a high speed internet plan for now more than $30 month.

Regarding the minimum speed thresholds for the affordable plan established by this bill, the speeds are significantly lower than the low-cost options already offered on the market. For example, most leading providers are offering speeds of at least 100mpbs for their lowest cost plans. Additionally, a 25/3 threshold is the slowest qualifying speed a household may receive under existing law to be considered served, and in fact a household receiving speeds below 100/20mbps would be considered to be underserved. Therefore, compared to existing offers on the market, this bill establishes a thresholds for affordable home internet that are potentially more expensive and provide lower speeds. While the intent of the author is clearly not to make broadband internet service more expensive, it is true that if internet service providers updated their existing lowest-cost offerings to match the thresholds set in this bill then low-income consumers would likely be paying more money for much lower speeds. To avoid that unintended consequence, the author may wish in the future to consider updating the thresholds established by this bill to at least match the quality of plans already existing in the market for low-income consumers.

1. While there is precedent for utilizing state procurement to extract public benefits from vendor, this bill pushes the envelope. Public agencies use public funds when procuring goods, works and services. Therefore, California’s contracting and procurement policies generally have created a well-regulated public procurement process that reflects principles of transparency, equality and open competition to ensure that public funds are not misspent and that contracts are fair. This bill aims to go one step further and to address the social impacts beyond a particular contract when procurement decisions are made by the state, particularly to encourage broadband affordability benefits to the general public. Maximizing public benefit from government procurement, by setting minimum standards for potential vendors, is not an uncommon approach. For example, labor standards such as prevailing wage requirements are typical of government contracts. In the healthcare space, regulators also regularly utilize price caps to determine eligibility for certain programs. In this regard, the state is acting as a market participant that sets minimum standards for where the public’s dollars should go.

However, under typical contracting agreements, the qualifying terms and conditions placed on a potential vendor are project specific. For example, while a construction contractor is required to pay state prevailing wage when constructing a public works project, that same contractor is not necessarily required by law to pay the same prevailing wage on non-public works projects. By requiring a potential vendor to offer particular services at a specified price to some members of the general public, particularly services that are outside the scope of the specific public contract, this bill would seem to propose a novel approach that ties general public benefits to specific state contracts for services. In other words, there is not a nexus between the public benefit, in this case affordable plans, and the service being rendered, which could be any service procured by the state from an internet service provider. The approach of this bill would be akin to the state withholding a public works contract to build a road from a construction firm that did not agree to build a certain number of affordable housing units; or the Department of General Services disqualifying potential vendors to fulfill an order for landscaping plants if those nurseries also did not commit to planting a certain number of trees in low-income neighborhoods.

While the approach could work to the state’s and public’s benefit if the potential vendors agree to the terms, there is no guarantee of that outcome. Service providers and vendors are not required to enter into contracts with the state, but rather they make an economic assessment on the value of the potential income to their business. According to the California Department of Technology, there are about $29.5 million dollars’ worth of internet contracts that would likely be covered by this program. This is likely a lower-end estimate, as CDT’s estimates only covers internet expenditures, but the state also enters into contracts with internet service providers for other educations and information technology needs. Opponents of the bill argue that bargaining with the state’s procurement process puts the state’s operations at risk, particularly when no other service provider is available or there is an emergency situation. However, this bill provides specific exemptions for the Office of Emergency Services and the Department of Forestry and Fire. Additionally, it allows procurement contracts to be entered into when only one internet service provider is available.

1. Greater enrollment in existing broadband affordability programs could also help affordability. This bill establishes specific enrollment goals of up to 95% of eligible households in affordable home internet, as defined. Despite broadband affordability being such a pressing need for so many California households, many have not taken advantage of existing programs like the ACP or other affordability programs like California Lifeline. For example, the California Department of Technology estimates that about 5.8 million California households are eligible for federally funded digital access assistance. However, recent numbers show that as of January 2024, only 48% of eligible households in California participated in the ACP. According to analysis from the Public Policy Institute of California^[3], several factors have contributed to the low take-up rates. First, awareness is very low: nationwide, only 23 percent of adults have heard “a lot” or “some” about the Emergency Broadband Benefit (the ACP Predecessor) Second, many households may be discouraged by the multi-step application process, which requires them to first apply for funding and then arrange for a participating internet service provider to apply the subsidy. Third, some internet service providers initially required enrollees to upgrade their existing data plans to more expensive plans, so some households may have decided not to apply for fear of higher bills if they lose eligibility or the program ends. Given the low-enrollment in the ACP program, which is the result of various factors, it’s likely the Net Equality Program would face similar challenges and fall short of the proposed goal.

To encourage enrollment in existing programs, ISPs participating in ACP are already required to promote that program to eligible households through various means. Non-profits and other organizations are also stepping in with strategies to increase participation. For example, the California Emergency Technology Fund partnered with Los Angeles County to invest money in a culturally and linguistically competent advertising pilot campaign and 24/7 call center that resulted in outstanding growth in enrollments in those areas. According to CETF’s reporting of their efforts, prior to the pilot the call center had received an average of 1,400 calls/month and by the end it had received 5,013. Examples like this point to the opportunity ACP presents for low-income California households, and the benefit of a focused response to enrolling more households.

This bill borrows some of the tactics of the California Emerging Technology Fund’s outreach, such as requiring ISPs to advertise the availability of affordable home internet by placing various print and online advertisements in multiple languages and requirements for expeditious phone sign-ups. However, the bill ties that outreach to a threshold that would require awareness by 80% of eligible households before a participating ISP could cease advertising. Instead of directly leveraging existing efforts to programs by expanding on promising strategies to increase enrollment, the bill instead proposes to establish a state contracting process that may not result in more California households accessing affordable home internet. To avoid confusion with existing programs, duplication of existing efforts, and to fully leverage existing state and federal programs the committee may wish to amend the specific outreach and advertising requirements.

1. Two-Year Bill. This bill was first introduced about one year ago in February 2023. Since that time, the date referenced in the title of the bill and other specific timelines in the bill have not been updated. For example, the overall goals for adoption set out a first date of January 1, 2025 by which 95% of eligible households should be enrolled in an affordable plan. Given the impracticality of that goal, the committee may wish to remove the overall goals for adoption from the bill. Further, the author may wish to reconsider some of the other dates in the bill moving forward.
2. Related/prior legislation.
   1. AB 2751 (E. Garcia) of the 2022 legislative session was functionally identical to this bill. That bill failed passage in the Senate Governmental Organization Committee.
3. Committee Amendments. The Chair recommends the following amendments:
   1. Clarify that an internet service provider that participates in the federal Affordable Connectivity Program or any other state or federal program that offers broadband affordability assistance for qualifying households, and that meets the price and minimum speed requirements established by the bill, shall be considered a qualified internet provider and shall be authorized to enter into a procurement contract with the state.
   2. Strike the “overall goal for adoption” and provisions requiring the CDT to monitor the progress towards achieving the overall goal for adoption.
   3. Strike clauses (e) through (h) inclusive, pertaining to specific outreach and advertisement procedures.

REGISTERED SUPPORT / OPPOSITION:

Support

#oaklandundivided
#oaklandundivided Coalition
Active San Gabriel Valley
Alliance for A Better Community
Altamed Health Services
Arts for La
Ayuda Al Nino, INC
California Community Foundation Digital Equity Initiative
California Emerging Technology Fund
California Family Resource Association
California Human Development
California Reinvestment Coalition
California Rural Legal Assistance Foundation, INC.
Casa Del Diabetico Gualan
Center for Powerful Public Schools
Central Valley Opportunity Center (CVOC)
Child Abuse Prevention Center
Coalicion De LA Buena Salud Y Bienestar
Coalition for Humane Immigrant Rights (CHIRLA)
Common Sense Media
Communities in Schools of Los Angeles (CISLA)
Community Clinic Association of Los Angeles County (CCALAC)
Community Tech Network
County Welfare Directors Association of California (CWDA)
Destination Crenshaw
Everyoneon
Farmworkers Institute of Education & Leadership Development
First Day Foundation
Fresno State Connect Initiative
Greater Sacramento Urban League
Healing and Justice Center
Inland Coalition for Immigrant Justice
LA Cooperativa Campesina De California
Leadingage California
Los Amigos De LA Comunidad, Imperial Valley
Lynwood Unified School District
National Association of Social Workers, California Chapter
Nextgen California
Para Los Ninos
Proteus, INC.
San Joaquin Valley Regional Broadband Consortium
Southern Border Broadband Consortium
The Children's Partnership
Union De Guatemaltecos Emigrantes
Unite-la
United Parents and Students
Valley Vision

Opposition

Calchamber
California Broadband & Video Association
California Chamber of Commerce
CTIA
United States Telecom Association Dba Ustelecom - the Broadband Association
Wireless Infrastructure Association

Analysis Prepared by: Emilio Perez / C. & C. / (916) 319-2637

1. Broadband for All Action Plan. California Broadband Council. https://broadbandcouncil.ca.gov/wp-content/uploads/sites/68/2020/12/BB4All-Action-Plan-Final.pdf ↑

2. CETF-USC Statewide Broadband Adoption Survey. California Emerging Technology Fund. https://www.cetfund.org/wp-content/uploads/2021/03/Statewide-Survey-on-Broadband-Adoption-CETF-Report.pdf ↑

3. Commentary: Narrowing the Digital Divide with Pandemic Benefits. Public Policy Institute of California. https://calmatters.org/commentary/2022/01/narrowing-the-digital-divide-with-pandemic-benefits/ ↑