II. Background

We issued this order instituting rulemaking (OIR) into the implementation of California Assembly Bill (AB) 140 (Stats. 2001, Ch. 903), enacted on October 14, 2001, which created the Rural Telecommunications Infrastructure Grant Program. AB 140, codified at Pub. Util. Code § 276.5,¹ with a funding level capped at $10 million per year, enables unserved communities to apply for grants of up to $2.5 million for the construction of telecommunications infrastructure. AB 140 requires that grant proposals be submitted in accordance with procedures prescribed by the Commission and evaluated and awarded by the Commission using technology criteria developed by a government-industry working group.

The OIR requested comments on six issues:

1. Given the $2.5 million annual cap on individual grant awards, how should the Commission deal with applications from communities whose estimated infrastructure construction costs exceed the $2.5 million cap?

2. Should there be an annual funding allocation between large and small projects, i.e., 50% to projects under $1 million and 50% to projects over $1 million? If a funding allocation is adopted, should any unused funds be made available for projects of any size?

3. Should there be fixed application filing deadlines each year or should applications be considered on a first-come, first-served basis until each year's grant funds are exhausted? Would considering applications on a first-come, first-served basis provide an unfair advantage to applicants whose projects are less complex and therefore take less time to prepare?

4. How should the Commission provide for unserved communities in unfiled territory if no carrier is willing to serve?

5. Should unserved communities with infrastructure construction costs exceeding the $2.5 million annual cap be allowed to apply in successive years? To address this problem and ensure that infrastructure is completed, should the Commission earmark a portion of the annual funding for multiple-year grants?

6. How should the Commission resolve a situation where an unserved community falls within the filed territory of more than one telecommunications carrier?

The OIR also attached an application for the rural telecommunications infrastructure grant program (grant program) that included application information, instructions, and a checklist. (Rulemaking (R.) 03-02-034, Attachment A.) There is an initial qualifying phase, and the Director of the Telecommunications Division, or its successor division, will notify applicants if the application has passed that phase. Applicants must submit more detailed information on the project in the construction costs and feasibility study phase.

On April 14, 2003, six parties filed comments-the joint comments of Citizens Telecommunications Co. of California, Inc., Citizens Telecommunications Co. of the Golden State, and Citizens Telecommunications Co. of Tuolumne (Citizens); the Governor's Office of Planning and Research ; SBC California; the Small LECS (Calaveras Telephone Company, Cal-Ore Telephone Co., Ducor Telephone Co., Evans Telephone Co., Happy Valley Telephone Co., Hornitos Telephone Co., Kerman Telephone Co., Pinnacles Telephone Co., The Ponderosa Telephone Co., Sierra Telephone Co., Inc., The Siskiyou Telephone Co., The Volcano Telephone Co., and Winterhaven Telephone Co.); The Utility Reform Network (TURN); and Verizon California Inc. (Verizon). All of the parties except the Governor's Office of Planning and Research filed reply comments on April 28, 2003.²