6. California Advanced Services Fund Component of CHCF-B

In the identification of issues for comment in the OIR, we raised the issue of whether the Commission should reconsider the definition of basic residential service and include an enhanced service such as broadband, which may be used to provide not only basic residential service but other telecommunications or information services.80 As part of this proceeding, we also sought additional comments on the need for reporting on broadband services.81 In its comments, SureWest states that because the deployment of broadband services encompasses . . .

D.07-09-020 - Page 128 (Revised)

COLR submitting any subsequent claims for B-Fund support shall clearly identify, for each of the revisions to the threshold amount, as shown in Appendix Table 1, the specific Census Block Groups, and associated proxy costs, that have been eliminated and are no longer eligible for B-Fund support due to revisions in the threshold benchmark.

3. During the transition period as the benchmark is increased from $20.30 up to $36, the existing formula for B-Fund support shall apply, whereby lines with costs above the high-cost benchmark receive support for the difference between the basic rate plus EUCL and the benchmark. This additional subsidy component shall be discontinued, however, once the $36 benchmark is fully phased in. At that point, the per-line support shall be limited only to the applicable costs that exceed the $36 benchmark.

4. The Commission hereby authorizes an inquiry in Phase II as to the establishment of a California Advance Services Fund (either under the B-Fund or as a new fund program) to be implemented for the purpose of promoting the deployment of broadband services in areas that are not served or that are underserved within the service territories of the Incumbent LECs that are currently subject to the B-Fund. The specific measures to fund and implement the California Advanced Services Fund, and to develop rules for eligibility to draw from the CASF shall be addressed in the next phase of this proceeding.

5. Effective January 1, 2008, the B-Fund retail surcharge shall be reduced to 0.5% to reflect the anticipated reduced level of B-Fund support claims resulting from the revised threshold benchmark adopted in this order. AT&T is directed to file an advice letter under Tier 1 to implement the revised 0.5% surcharge, to become effective by January 1, 2008. Furthermore, all telephone corporations subject to the B-Fund surcharge are directed to assess the revised CHCF-B surcharge of 0.5% on their end-users' bills rendered for intrastate telecommunications services on January 1, 2008 and thereafter, until further revised by the Commission."

6. The basic rate freeze shall be lifted for AT&T and Verizon on January 1, 2008, and for SureWest and Frontier on January 1, 2009. AT&T and Verizon are authorized to increase their respective basic monthly residential rate by up to 2.36% on January 1, 2008.

7. On those dates, respectively, the basic rate freeze shall be lifted on all remaining basic residential lines, but subsequent increases in ILEC basic rates shall be phased in under a process to be determined in Phase II of this proceeding in order to bring basic rate caps up to the level as necessary for a transition to full pricing flexibility to avoid sudden large increases in basic service rates.

8. Upon the conclusion of the phase-in period, COLRs shall be granted full flexibility to adjust basic rates.

9. As a basis to receive B-Fund support after full pricing flexibility takes effect, however, a COLR must certify annually that it is not charging rates for basic service in excess of the benchmark levels that we establish herein. A COLR that does not make the required annual certification must provide detailed a detailed showing as to why they are unable to comply with the Commission's Orders. The Commission will evaluate the evidence and determine what, if any, action is required.

10. As a basis for considering the implementation of the CASF, comments shall be solicited in Phase II on the overall size and funding of the CASF, considering its function as a limited source of matching funds to build advanced infrastructure in California in conjunction with the California Emerging Technology Fund. We shall specifically solicit comments as to the merits of funding and administering the CASF under the CHCF-B versus establishing an entirely independent new funding program. Funding not otherwise directed for use by January 1, 2010, will be used to reduce the B-Fund surcharge in the 2010-2011 funding year.

11. Comments are also solicited as to whether an application should open a sixty day window for other applications for substantially the same geographic

area. CASF applicants must meet specific audit, verification, and other requirements with respect to the use of the funds, subject to procedures adopted in the next phase of the proceeding. We will specifically look at whether the use of "telephone corporation" in Pub. Util. Code § 739.3(c) may limit recipients to those entities qualifying under Pub. Util. Code § 234.188

12. In the next phase of this rulemaking, comments shall also be solicited on the merits of the process for candidates to apply for funding the California Advanced Services Fund set forth in Appendix 3.

13. The Commission shall undertake a second phase of this proceeding to resolve the remaining issues in this proceeding. Specifically, the second phase of the proceeding shall address the following issues:

(END OF ATTACHMENT)

80 See OIR at 48 (Sec. V.G. 6).

81 Assigned Commissioner's and Administrative Law Judge's Ruling Soliciting Further Comments regarding reform of the California High Cost Fund-B Program, February 23, 2007.

188 See, Pub. Util. Code §§ 233 and 234.

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