3. Total Funds Allocated to the CASF Program
In D.07-09-020, we directed that effective January 1, 2008, the B-Fund surcharge be lowered to reflect the reduced level of subsidy draw resulting from raising the high cost threshold eligible for B-Fund support. We stated that maintaining an increased B-Fund contribution surcharge until January 1, 2008 was necessary as the phase-in of the new benchmark does not begin until that date. Therefore, we refrained from lowering the B-Fund surcharge until that time. In this interim order, we likewise determine whether, or to what extent, the existing B-Fund surcharge should be changed, and how we can collect and allocate funds toward the CASF. We have reviewed the comments filed in this phase of the proceeding concerning the merits of such an approach and the size of the CASF.
C. Parties' Positions
AT&T argues that the determination of the appropriate overall amount of funding that should be provided through the CASF depends upon the program parameters (e.g., broadband transmission speeds, lead time for construction deployment, and topographies and populations of proposed service areas).and the demand for funds based upon those parameters. AT&T suggests that the Commission collect funds as needed based upon applications received and expenditures paid over time.
Verizon argues that the size of the CASF should be limited to excess funds beyond those needed to support basic services in high cost areas, consistent with the principle in D.07-09-020 that consumers are entitled to relief from excessive burdens of B-Fund subsidies without delay. Verizon believes that the reduction of the B-Fund surcharge from 1.3% to 0.5%, as ordered in D.07-09-020, however, may leave no surplus to fund the CASF. Based on the premise that any surplus in the B-Fund is likely to be limited, Verizon argues that funding criteria should narrowly target support to unserved areas so as to benefit the most potential customers.
Verizon provides a "rough estimate" of between $50-$80 million for the potential range of CASF subsidies that may be requested, based on 2006 census estimates of 12.2 million California housing units multiplied by an 8% factor for unserved housing units, using FCC statistics.
Sprint states that if any surplus remains in the B-Fund after taking into account the reduced surcharge collections and subsidy support levels as ordered in D.07-09-020, the California State Assembly appears to point toward the need for refunds to be paid to ratepayers who supplied the funds in the first place.40 Sprint argues that the Commission should in any event, first conduct the research necessary to determine the appropriate design of a successful program and determine the appropriate total pool of funds to be designated for CASF subsidies prior to soliciting any applications.
D. Discussion
We shall allocate to the CASF $100 million. Beginning January 1, 2008, the CASF shall be collected using the same surcharge mechanism as the CHCF-B, with collected funds allocated half to the CASF and half to the CHCF-B.41 The CASF allocation represents our estimate of the amount of funds collected by half of the 0.5% surcharge over a two-year period. Consequently, the surcharge applicable to the CHCF-B will be 0.25% and the surcharge applicable to the CASF will be likewise be 0.25%. Such an allocation will begin with the surcharge revenues collected after January 1, 2008.42 We consider $100 million to provide an appropriate amount of initial funding for the CASF, given its purpose as a limited funding source to augment the deployment of broadband in unserved and underserved areas. We believe that a specific amount of funding is superior option to an "as needed" amount as it limits the overall collection and allows for better oversight by the Commission of the proposed projects. We also believe that Verizon's "rough estimate" is a reasonable basis upon which to base the initial funding component for unserved areas and include an additional support amount to ensure that underserved areas also receive funding.
As soon as practical, carriers shall rename the surcharge description on the bill to reflect both the California High Cost Fund-B and the California Advanced Services Fund. Where these line items are explained by the carriers, they shall describe that a portion of the line item is being directed toward the CHCF-B and a portion toward the CASF. As the CASF collection will be in place for a limited time and to avoid unnecessary costs, we do not direct carriers to create a new line item for CASF, but carriers may do so if they choose.43
Carriers, however, shall each be required to establish a memorandum account tracking system for recording receipts of the 0.25% surcharge revenues applicable to the CASF. The CASF memorandum account shall accrue monthly interest on the accumulated balance at the applicable short-term commercial paper rate. Carriers shall retain custody of all surcharge revenues collected and tracked in the CASF memorandum account until the Commission provides further direction concerning the disposition of CASF funds.
To the extent that the total amount of claims for CASF support exceed the total pool of funds that we have allocated, we shall first rank Applicants' proposed projects in terms of how well they satisfy the selection criteria and award funds to the most qualified applicants in accordance with those rankings. We shall first award CASF funds to qualifying projects for unserved areas only. If any CASF funds remain after unserved areas have been funded, we shall consider awarding funding proposals for underserved areas, as well. If unserved and underserved areas remain after the initial two-year period of the surcharge, the Commission may choose to continue the CASF surcharge for another limited fund amount to ensure the benefits of advanced services are made available to all of California.
In comments on the Proposed Decision, AT&T states that redirecting half of the funds collected through the 0.5% B-Fund surcharge to the CASF will result in a deficit to meet B-Fund obligations over two years.44 The 0.5% surcharge adopted in D.07-09-020 was based on having a CHCF-B balance of approximately 2.5 to 3 times the monthly payment rate at the end of 2008. The 0.25% allocation to the CHCF-B for 2008 continues to meet this goal.45 More than $30 million is projected to be available at the end of 2008 for CHCF-B purposes.46 Additional changes in the CHCF-B program may occur before January 2009 that may lead to a change in its associated surcharge rate. As all of the surcharge amounts are continuously evaluated and adjusted at least annually, a revision to the surcharge attributable to the CHCF-B may occur in 2009 to ensure continued sufficiency of CHCF-B funds.
Likewise, the 0.25% surcharge allocated to the CASF will continue in effect until the $100 million appropriation has been collected. We estimate that a two-year period will be required to collect this sum. Once the $100 million in CASF funding has been collected, however, we shall make the appropriate adjustment in the surcharge.
40 Sprint Reply Comments at 14, citing Assembly of the State of California v. Public Utilities Commission (1995) 12 Cal. 4th 87 (State Assembly).
41 Carriers are hereby granted discretion to either use the same surcharge line on customer bills for both the CHCF-B and the CASF, or may establish a new surcharge line for CASF separate from the CHCF-B. If the same surcharge line is used for both CHCF-B and CASF, the carrier should clearly explain that it is collecting for both funds via that line item in an appropriate place on the bill.
42 This $100 million takes into account the revisions to the originally forecasted CHCF-B claim amount as adopted in our Resolution T-17103 due to the CHCF-B modifications we adopted in D.07-09-020. Those modifications include reductions in surcharge revenues collected after January 1, 2008 and reduced draws on the B-fund as a result of raising the high-cost threshold to $36 per line, to be phased in by July 1, 2009.
43 Should the CASF surcharge be extended by the Commission a separate surcharge line item will be required consistent with past Commission practice. See, D.96-10-066 at OP 10, which required that the California Teleconnect Fund surcharge be given separate line item treatment separate from the B-Fund.
44 AT&T Comments on the PD at 12-14.
45 Prudent management of the CHCF-B would not have the Commission retain the large balance currently available, but would seek to reduce the fund to a manageable and sufficient level as quickly as possible.
46 January 2009 payments project to be approximately $10 million.
