California Bills Propose Expanding State Broadband Fund

The California Public Utilities Commission adopted the broadband-focused California Advanced Services Fund in 2008. The fund relies on a surcharge and now faces big changes in current pending bills -- particularly in SB 740, which would reauthorize the fund. Both bills faced key votes this week, and passed. SB 740 passed the Senate 34-1 Tuesday and will now move to the California Assembly. AB 1299 passed Wednesday in a 55-14 vote. Sen. Alex Padilla (D), the author of SB 740, described the needs of changing the funds to address the digital divide.

"While the initial funds, now having reached a total of about $225 million, have gone a long way in filling that gap, filling that void to the unserved and underserved parts of the state, there are still some areas of the state that by virtue of being hard to get to, an economic case or otherwise, providers aren’t offering high-speed Internet access,” Padilla told senators Tuesday. He said there’s also “more and more being done online.” Residents rely on the Internet for government communication, e-commerce, education and healthcare, and it’s important to connect as many Californians as feasibly possible, he said. “This bill would do just that by providing the PUC a little bit more flexibility on who can apply for and receive the advanced services fund grant to try to get to those final pockets of the state that aren’t ideally connected."

Some stakeholders worry about how SB 740 has evolved since Padilla introduced it in February. “You're all but killing CASF [California Advanced Services Fund],” Tellus Venture Associates President Steve Blum told us of the latest version. His consulting firm focuses on community broadband and has many municipal customers. The original version of the bill fit with what the California Emerging Technology Fund had lobbied for last year, he said. “That was the proposal on the table as of last February.” Amendments to the bill, added after industry aired its concerns, dropped the maximum size of the fund from $325 million as originally proposed back to $225 million, $25 million of which would be shifted to public housing deployment and adoption spending if AB 1299 passes.

"The current version will not get us there at all,” Sunne Wright McPeak, president of the California Emerging Technology Fund, told us of SB 740. Her nonprofit told legislators of the need for the additional $100 million, which informed the first version of the bill, and she stressed the need to restore the $100 million to the bill if California wants to reach its stated goal of 98 percent broadband access. The bill’s latest text (http://bit.ly/17tdz16) proposed that CASF strive to offer broadband to “no less than 98 percent of California households and would provide that it is the intent of the Legislature to authorize collection of additional surcharge amounts necessary to achieve this program goal.” Padilla has said he plans to restore additional funding once the CPUC provides more information, McPeak said, expressing optimism, especially after the recent votes: “Both authors are working diligently to address concerns from stakeholders.” A Senate Appropriations Committee analysis from earlier this month confirmed Padilla’s intention “to amend the bill at a later date to allow the collection of additional funding” (http://bit.ly/11zrG1y).

The amended bill text “tightened the focus” on connecting unserved rather than underserved homes and specified that middle-mile providers “can only build out to unserved areas,” Blum said, citing these as priorities of cable companies and telcos. “That throws a big monkey wrench in the ability of independent ISPs to propose projects.” The bill also creates restrictions on cities and counties applying for funds, making it a “practical impossibility,” Blum said. The bill allows municipalities to apply for funds “only if the infrastructure project is for an unserved area, the commission has conducted an open application process and no other eligible entity applied, and the commission determines that within the region of the local agency’s jurisdiction there is less than 98 percent broadband deployment,” it said. Most remaining opportunities belong to the cable companies and telcos, Blum said. Tellus’s municipal clients are not especially worried about SB 740 because they often don’t work with the CPUC as is, but independent ISPs have expressed concern, he said. “This puts a big hole in some of their business plans.” SB 740 “started off looking a lot better” before committee amendments, Access Humboldt Executive Director Sean McLaughlin said, saying the latest version left him “a little disappointed.” The version that exists now has a “really significant” drop in funds and changed the eligibility language to include “a strong bias” against community-owned networks, he said.

McPeak, however, said she believes the bill text preserves flexibility on who can apply for the funds. The text doesn’t preclude the “woefully underserved,” she said. There is a need for hard numbers and goals, said McPeak. “It is imperative to focus on last mile to make sure we reach the 98 percent.” The fund can’t “just be an expenditure pot,” she said. According to the text, “an entity that is not a telephone corporation shall be eligible” to apply. The bill outlined instances where applicants will no longer need a certificate of public convenience and necessity, which McPeak said was important.

AT&T likes the direction of the bill. “We support the effort to focus the CASF on unserved consumers,” a spokesman told us. The telco supports the idea of using the CASF for deploying broadband to unserved areas “where private investment has not been forthcoming,” he said. AT&T is “working with the author,” Padilla, to make sure the funds go to those providing service to unserved communities and that “funding is used for applicants that demonstrate the intention and ability to provide service only to hard-to-reach, unserved consumers,” the spokesman added.

AB 1299 proposes shifting $25 million in CASF money to focus on broadband access and adoption in public housing. It “seeks to close the digital divide in those communities that need it the most,” bill author Assembly member Steve Bradford (D) said on the Assembly floor Wednesday. McPeak called the bill “groundbreaking in the nation” and said it’s critical if California wants to reach its 80 percent adoption goal. As the federal stimulus grant projects of NTIA’s Broadband Technology Opportunities Program end, these new fund purposes could help achieve the same ends, McLaughlin said. “That’s exactly the opportunity if we do it right.”

"Any funding from the program should be technology-neutral to allow for a variety of solutions, including wireless,” the AT&T spokesman said of AB 1299. “CASF resources for this purpose should be available to public housing agencies and established non-profit entities that operate affordable housing communities in California.” The telco supports using the grant money in cases of “existing limitations such as the age of the buildings and condition of current wiring,” he said. The bill also contains items “making the cable industry in particular very happy,” Blum said. He was referring to their potential role providing the broadband and bill text that requires cities and counties to give providers right of entry into the public housing.

Both bills have garnered a lot of support and attention and each is sponsored by the head of its respective committee, which “gives us certain indications of their chances of moving forward,” McLaughlin said. Blum also described a “lot of support” for both bills in the Legislature. “Right now the only meaningful obstacle to either of those becoming law is Gov. [Jerry] Brown,” Blum said. He called the California Democrat “an independent thinker” who “makes up his own mind” before signing bills. The bills’ wide passage margins this week are “a reflection of the commitment and the credibility of the two authors,” McPeak said. “I'm hopeful that the money will get added back in.”