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 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 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 $30 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.

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, a contract entered into before January 1, 2026, or an internet service provider with fewer than 100,000 California residential subscribers. The bill would also make its provisions severable.

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2023 - 2024 Regular

Bill No: 1179 Hearing Date: 4/9/2024

SUBJECT: Affordable Internet and Net Equality Act of 2024

DIGEST: This bill requires the California Department of Technology (CDT), in coordination with the Public Utilities Commission (CPUC) and the Department of General Services (DGS), to develop and establish the Net Equality Program. The bill requires the state and state agencies to only enter into a procurement contract with an internet service provider (ISP) doing business in California that offers affordable home internet service to all eligible households, as specified.

ANALYSIS:

Existing law:

1. Establishes, within the Government Operations Agency, 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 relationship, roles and responsibilities for setting IT priorities.
2. Requires the CPUC to develop and administer the California Advanced Services Fund with the goal of funding infrastructure projects to provide broadband access to no less than 98% of California households in each broadband consortia region in the state, as specified.
3. Provides that all contracts for the acquisition of IT goods and services related to IT projects 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.
4. Establishes the Broadband Council in state government for the purpose of promoting broadband deployment in unserved and underserved areas of the state and broadband adoption throughout the state for the benefit of all Californians.

This bill:

1. Requires CDT, in coordination with the CPUC, and DGS, to develop and establish the Net Equality Program.
2. Requires the state and state agencies to only enter into a procurement contract with an ISP doing business in California that offers affordable home internet service to all eligible households.
3. Provides that the provisions of this bill apply to the State Compensation Insurance Fund, the Legislature, and the Legislative Data Center in the Legislative Counsel Bureau.
4. Requires CDT to monitor the progress toward achieving the overall goals for adoption.
5. Requires CDT, on or before December 31, 2025, and each year thereafter, to annually post on its website a list of ISPs that meet the requirements of this bill. The state and state agencies shall use this list to identify the ISPs that are eligible to enter into a procurement contract with the state or state agencies.
6. Provides that all eligible households shall be allowed to immediately convert to affordable home internet service during the month that the household qualifies as an eligible household.
7. Requires a qualified ISP to establish a telephone number with trained, and preferably dedicated, personnel to sign up eligible households for affordable home internet service in no more than 30 minutes.
8. Requires a qualified ISP to advertise the availability of affordable home internet service and the Federal Affordable Connectivity Program (ACP) or an equivalent program offered by the Federal Communications Commission, including by providing a telephone for interested persons to call. The advertisements shall include placing advertisements with public and nongovernmental organizations and in media in multiple languages, in print and online, until 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, or 95 percent of all eligible households are connected to the internet at home according to the same reputable statewide survey.
9. Requires a qualified ISP to meet annually with CDT and the California Broadband Council in an open workshop with key stakeholders, including, but not limited to, the California Emerging Technology Fund, the Regional Broadband Consortia, and California Advanced Services Fund Adoption Account grantees, to confer on how to achieve the overall goals for adoption and explore options for establishing and advancing strategic and effective public-private partnerships.
10. Requires a qualified ISP to report annually to CDT, beginning the year after the provider first becomes a qualified ISP, the number of newly eligible households that signed up for affordable home internet service since the previous report and the total number of eligible households subscribing to affordable home internet service.
11. Provides that the provisions of this bill do not apply to any of the following:
    1. The Department of Forestry and Fire Protection
    2. The Office of Emergency Services.
    3. A contract entered into before January 1, 2026.
    4. An ISP with fewer than 100,000 California residential subscribers.
12. Specifies that if within a given geographic area, only one ISP is available and that the ISP does not meet the requirements of this bill, the state and state agencies may enter into a procurement contract in that geographic area with the ISP even though the ISP does not meet the requirements of this bill.
13. Defines “affordable home internet service” to mean internet service costing no more than $30 per month and that meets the minimum speed requirements.
14. Defines “eligible household” to mean a resident in a group home or congregate care facility within the qualified ISP California service territory participating in a qualified public assistance program, or a household within the qualified ISPs California service territory with at least one resident of the household participating in a qualified public assistance program.
15. Defines “minimum speed requirements” to mean at least 100 megabits per second downstream and 20 megabits per second upstream and sufficient speed and latency to support distance learning and telehealth services. CDT, may subsequently increase the “minimum speed requirements for the purpose of aligning the minimum service requirements with updated state or federal policies but CDT shall not redefine “minimum speed requirements” to mean speeds lower those established by this bill.
16. Defines “overall goals for adoption” to mean that at least 90 percent of eligible households received affordable home internet service by January 1, 2026, and at least 95% of eligible households receive affordable home internet service by January 1, 2029.
17. Defines “qualified public assistance programs” to mean the California Alternate Rates for Energy program, the National School Lunch Program, the State Supplementary Payment Program, the Temporary Assistance for Needy Families program, CalFresh, Covered California, Medi-Cal, and Supplemental Security Income, and person’s receiving financial aid for postsecondary education.
18. Defines a “qualified ISP” to mean an ISP doing business in California that enters into a procurement contract with the state of state agencies.

Background

Author Statement. According to the author’s office, “addressing the digital divide has been a focal point of federal and state policy and resource allocation. Although affordability plans like the ACP exist, not all eligible households were aware and participating. A major challenge to increasing enrollment is the lack of awareness, with a 2023 Statewide Digital Equity Survey finding 65% of eligible households received needed assistance. Unfortunately, ACP is no longer accepting applications as of February 7, and its future is in limbo.”

Additionally, the author’s office states that, “SB 1179 will align the interest of public and private stakeholders to ensure an affordable Internet service is available for low-income California households with the unknown [status] of the ACP. Specifically, this bill directs CDT to only enter into a procurement contract with an internet provider offering affordable home internet service costing no more than $30 per month and meets specified minimum speed requirements to low-income eligible households; set target goals for covering and require ISPs to advertise their affordable internet offers.”

California’s Digital Divide. It has been well documented that millions of Californians lack access to high speed, reliable internet. While some don’t have internet speeds that are fast enough for their needs, some have no connection at all. Put simply, people and communities that lack access to broadband and those without the means to use it are falling behind.

Residents in less populated areas have much less access to broadband services. However, lack of broadband is not just a matter of where people live, but also income, education, age, race, ethnicity, and disability status. In other words, the poor, the less-educated, and the differently abled, seniors, and people of color also feel the costs of the digital divide.

The COVID-19 pandemic not only made the digital divide worse, but also reinforced our reliance on broadband. Access to reliable Internet access became a must in order to attend school, work, access healthcare, and stay connected with family and friends. Californian’s ability to access and use broadband became the difference between being able to fully engage in life, or being completely cut off. In light of these challenges, the Governor issued Executive Order N-73-20 to improve connectivity throughout the state.

Infrastructure Investment and Jobs Act (IIJA). Recently, under the IIJA, Congress established the ACP. The ACP is a subsidy program that helps ensure that households can afford the broadband they need for work, school, healthcare and other needs. The benefit 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.

Notably, the ACP benefit can be combined with the California Lifeline benefit of up to $9.25 per month. Similar to California Lifeline, the ACP is limited to one monthly service discount and one device discount per household. Under the ACP, eligible households can also receive a one-time discount of up to $100 to purchase a laptop, desktop computer, or tablet from participating providers if they contribute more than $10 and less than $50 toward the purchase price. The bill’s definition of an eligible household for purposes of the Net Equality Program are very similar to the ACP, except the Net Equiality Program ties eligibility to state public assistance programs such as CalFresh and Covered California.

As of January 2024, roughly three million California households are taking advantage of the ACP program, which represents only about half of the eligible population. According to the Public Policy Institute of California, several factors have contributed to this. First, awareness is very low; nationwide, only 23% of adults were aware of the program. 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.

To encourage participation, under the IIJA law, ISPs participating in the ACP are required to promote the 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.

As of February 7, 2024, the ACP has stopped accepting new applications and enrollments. While a bipartisan bill has been introduced in Congress, it remains unclear whether the program will be extended. Without an extension, the ACP is expected to exhaust its current source of funds by the end of April.

Impact on the State. The bill prohibits the state from entering into a procurement contract with any ISP that does not offer affordable home internet service to all eligible households. While it appears that many ISPs are currently offering such a service, there could be a number of ISPs, especially those in rural areas, that don’t currently offer such a service and thus would not be allowed to do business with the state. In addition, some ISPs might decide that the requirements in this bill are too cumbersome or lead to uncertainty in future contracts and decide to stop doing business with the state altogether. By reducing the number of businesses eligible to do business, this bill could lead to less competition, which could result in the state having to pay more for these types of services.

In addition, the bill makes it clear that in order for an ISP to be eligible for state contracts, the ISP is required to provide affordable internet service to all eligible households. The definition of “eligible households” includes 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. This definition, combined with the requirement that the ISP must provide affordable internet service to all eligible households presents a number of questions. For example, how is an ISP or CDT supposed to know whether the household has “at least one resident of the household participating in a qualified public assistance program?” What happens if an ISP suddenly does not offer an affordable internet service to all eligible households, but the state has signed a multi-year contract with that ISP? Would the state have to terminate such a contract?

Flawed Assumptions. At its core, the bill assumes that the value of state contracts and the profit from those contracts are enough of an incentive that would force ISPs to invest in the necessary high-speed internet infrastructure that would make them eligible for state contracts. According to CDT, last year, there were 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 cover internet expenditures, but the state also enters into contracts with internet service providers for other education and information technology needs. In addition, the bill covers all state agencies, including the Legislature, so it’s likely that there are other state contracts that would fall under the purview of the bill.

However the $29.5 million, even if it’s a lower-end estimate, would not appear to be significant enough to force ISPs to invest in the necessary infrastructure to satisfy the conditions of the bill. If this bill were to become law, ISPs might decide that the value of those contracts are not substantial enough to warrant the necessary investment that would be required in order to provide affordable internet service to all eligible households and thus become an eligible provider.

For example, it has been well documented that the building out of high-speed internet cable infrastructure can be extremely costly, especially in rural areas where the lack of possible customers likely does not warrant an investment in that infrastructure. It should be noted that 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. If this bill becomes law would ISPs really invest, possibly hundreds of millions of dollars, in new high-speed cable infrastructure simply for the opportunity to bid on state contracts valued in the tens of millions or would they simply decide to stop entering into contracts with the state?

A New Precedent. 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 new 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 similar to a state agency withholding a public works contract to build a road from a construction firm that did not build a certain number of affordable housing units. Or another example, DGS 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.

Prior/Related Legislation

SB 1460 (Durazo, 2024) requires any state agency that constructs a broadband project, as defined, to collaboratively develop and establish specified contract terms and requirements, including contract provisions on training and certifications under penalty of perjury regarding compliance with certain labor laws, to be included in their public contracts or subcontracts and procurement processes relating to the construction of those projects. (Pending in the Senate Energy, Utilities, and Communications Committeee)

AB 1588 (Wilson, 2024) would require CDT to establish the Net Equality Program and require the state and state agencies to only enter into a procurement contract with an ISP 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 ISP participating in the ACP, or any other federal program that offers broadband affordability assistance, as specified. (Pending Referral in Senate Rules Committee)

SB 387 (Dodd, Chapter 485, Statutes of 2023) authorizes DGS to enter into a lease, at an amount less than fair market value, in support of broadband development if specified conditions are met.

AB 1176 (E.Garcia, 2022) requires the CPUC to administer the California Connect Program to ensure high-speed broadband service is available to every household in the state at affordable rates. (Held in the Assembly Appropriations Suspense File)

AB 2750 (Bonta, Chapter 597, Statutes of 2022) requires CDT to develop a state digital equity plan, as specified.

AB 2751 (E. Garcia, 2022) would have required CDT to develop and establish the Net Equality Program to ensure the state only do business with an ISP that offers affordable home internet service to eligible households, as specified. (Failed Passage in the Senate Governmental Organization Committee).

AB 2753 (Reyes, 2022) establishes the Digital Equity Bill of Rights, which, among other things, declares it is the policy of the state to ensure digital equity for all residents of the state. (Held in the Assembly Appropriations Suspense File)

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT:

California Emerging Technology Fund (Source)
California Human Development
California State Parent Teacher Association

California Telehealth Policy Coalition
Center for Employment Training
Central Valley Opportunity Center
County of Monterey
Farmworkers Institute of Education & Leadership Development
First Day Foundation
Inland Coalition for Immigrant Justice
LA Cooperativa Campesina De California
LeadingAge California

Los Amigos De La Comunidad, INC.

Mixteco/indigena Community Organizing Project
Proteus INC.
UNITE-LA

OPPOSITION:

Cal Broadband

California Chamber of Commerce

CTIA

USTelecom – The Broadband Association

Wireless Infrastructure Association

ARGUMENTS IN SUPPORT: According to the California Emerging Technology Fund, “SB 1179 requires no State General Funds or Special Funds or other government subsidies. It relies on the ISPs continuing to offer quality affordable offers as all of the major companies have previously committed to do as a condition of corporate consolidations or social responsibility. ISPs have demonstrated their ability to offer affordable internet subscriptions efficiently without increasing costs for other customers. The challenge is to ensure that ISPs continue to offer affordable Internet subscriptions for low-income households and join with government in increasing awareness. The bedrock question is: Shouldn’t ISPs who are receiving taxpayer or ratepayer funds be required to assist the State in getting all low-income households online so that everyone can participate in daily file as we know it?”

ARGUMENTS IN OPPOSITION: According to opponents of the bill, “SB 1179 would make it unlawful for any state agency to contract with an ISP unless that service provider ‘offers affordable home internet service to all eligible’ households’ for no more than $30 per month and under other specific terms prescribed by this bill, including advertising and call center staffing obligations. This definition of affordability by setting a specific rate in statute is an attempt at rate regulation which is preempted by federal law.”

Additionally, opponents argue that, “this bill does not resolve the larger problem of continued ACP funding by the federal government. Service providers took part in the predecessor program and have been leading in affordable plans for qualified individuals since before the pandemic. The problem is not with the service providers maintaining low-income plans, it is with a federal subsidy possibly not being provided in the future in conjunction with those plans.”

Finally, opponents state that, “SB 1179 interruptions to critical state internet services by potentially making an existing contractor ineligible from the moment the bill takes effect. Even if an existing contractor’s current offering qualifies, the CDT can redefine the speed requirement at any time, disqualifying that contractor. The state cannot issue a fair Request for Qualification prior to procurement when providers cannot predict what the key qualifier will be. This will shrink competitive pool of vendors, which will raise costs.”

DUAL REFERRAL: Senate Governmental Organization Committee & Senate Energy, Utilities, and Communications Committee