4. Discussion

Our objective in opening this proceeding was to assess whether the five telecommunications Public Policy Programs are meeting their respective statutory purposes and requirements, whether any updates are necessary given the competitive telecommunications market, and to identify and remedy any deficiencies going forward. In our order initiating this rulemaking, we adopted the following inquiry plan for this proceeding:

· Determine whether the programs remain necessary to achieve the fundamental statutory goal of enhancing universal service and, if so, whether changes are necessary to further this goal in today's competitive and technologically varied telecommunications environment.

· Ensure that funds obtained from the surcharges are being wisely spent to provide the most advanced telecommunications services to all Californians, with efficient administration demonstrating progress toward defined goals.

· Maximize the benefits of similar federal programs.

Below, we apply these inquiries to the California Teleconnect Program, the Deaf and Disabled Telecommunications Program, and the Payphone Provider Enforcement and Public Policy Payphone Programs.

4.1. CTF

The Commission established the CTF in D.96-10-066 to provide discounted basic and advanced services to schools, libraries, qualifying hospitals and health facilities, community, and government organizations.⁹⁴ Subsequent resolutions and legislation have expanded and modified the program to increase benefits, expand the number of eligible hospitals, and create a one-time discount on installation cost for advanced services.⁹⁵ The Staff Report on Public Policy Programs explained the current program structure with this chart:

Qualifying Entity	Eligible Services	CTF Discount
School and/or Library, Municipal, County Government or Hospital District Owned and Operated Hospital and Health Clinic, Community Based Organization	All Measured Business Service lines, Switched 56 lines, ISDN, DSL, T-1, DS-3 and up to and including OC-192 services or their functional equivalents	50%

The CTF is capped at $55 million per year, but, if necessary, can be raised by staff recommendation via a Commission resolution at any time.⁹⁶ Effective June 1, 2008, the current program surcharge is 0.079%. The fiscal year 2007-2008 budget is $25.131 million⁹⁷ and the fiscal year 2008-2009 budget is $33.202 million.⁹⁸

We find that the CTF program is successfully enhancing our universal service goals by bringing discounted telecommunications services to California's educational institutions, libraries, medical clinics, and CBOs. No party challenged the overall success of this program. As discussed below, we consider proposed efficiency improvements and issues relating to the comparable federal E-rate program. We address each issue from the scoping ruling in order. The expansions we authorize in today's decision are projected to increase the overall CTF budget by $8.35 million and to increase the surcharge to 0.11% in FY 2008-2009.⁹⁹

Our review of the CTF program shows that the program is working well to advance our universal service goals. The users of this program particularly appreciate its simplicity. We are concerned by one aspect of this simplicity however, and will seek additional comment on what procedures should be adopted to ensure that entities deemed eligible remain functional, eligible entities. A regular periodic review at least every five years should be conducted to ensure the most current information about the eligibility of the entities is evaluated by the Commission.

1. Expanding the CTF to include the California Community Colleges

Currently, only educational institutions serving students in kindergarten through 12^th grade are eligible to participate in the CTF. This mirrors the federal E-rate program.¹⁰⁰ The California Community Colleges Chancellor's Office asked that California's community colleges be deemed eligible to participate in the CTF. The Chancellor stated that the community colleges offer technology centers with computers for Internet access and technology assistance, and provide residents with access to technology and Internet services in a similar fashion to that provided by 587 CBOs and 2,123 K-12 schools and libraries which are currently participating in the CTF.¹⁰¹ The Chancellor estimates the cost of including the community colleges in the CTF to be about $7.2 million a year. We find it important that the Chancellor's Office states that 30% of the community college students are low income. Both the Legislature and this Commission have found that an important state goal is to ensure that low income citizens benefit from advanced communications services.¹⁰² Further, in June 2007, Commission partnered with the Department of Insurance, CalPERS and the State Bar of California in the California Aspire Achieve Lead Pipeline Project (California AAL) to provide for educational opportunities for diversity students leading them to successful careers in the legal, investment/finance, technology and public policy arenas. We believe that expanding our CTF program to the community colleges-30% of whose students are low income-will provide many benefits: encourage universal service goals at community colleges, bridge the digital divide, and serve to enhance diversity goals relating to the California AAL project.¹⁰³

The parties opposing this expansion of CTF eligibility primarily focused on the budgetary impact, and concerns that there will be a reduction in funding for other CTF participants.

The California Community Technology Policy Group and Latino Issues Forum cite Pub. Util. Code § 884 as somehow limiting expansion of schools eligible for CTF funds to exclude community colleges.¹⁰⁴ We find their arguments unpersuasive. Numerous statutes and laws, including California Pub. Util. Code § 884(a), clearly indicate that discounts should be provided to schools and libraries.¹⁰⁵ We acknowledge that initial CTF rules mirrored the federal E-rate program and used the federal definition of school¹⁰⁶ for convenience. We believe, however, that revisiting such determinations is consistent with the goal of this proceeding to ensure CTF is meeting its statutory and regulatory goals.

Nowhere does the Public Utilities Code limit CTF to only K-12 schools. We have not found any such limitation in our consideration of any other state telecommunication policy.¹⁰⁷ In fact, the seemingly interchangeable use of schools and educational institutions throughout the code conveys the opposite meaning-that the Legislature has provided discretion to delineate the range of educational institutions eligible for the programs as the Commission deems appropriate. The Commission thus may expand the definition of eligible schools to include community colleges, and does so subject to the limitations herein.

We are persuaded that the role of community colleges in California is similar to that of schools, libraries, and community-based technology centers, that the goals of our Teleconnect program are completely consistent with extending program benefits to them.¹⁰⁸ Thus, we expand eligibility for the CTF program to include California's community colleges. The community colleges serve a large population of 2.5 million adults per year, 30 percent of which are of low income students. Allowing the community colleges to increase access to advanced communications technology will help the community colleges to better train and serve their students. We find that it will enhance this Commission's goals to help bridge the digital divide in the communities served by such colleges.¹⁰⁹

We share, however, the other parties' concerns for the integrity of the CTF program. The Chancellor estimates a cost of $7.2 million to include the community colleges as eligible participants in the CTF program.¹¹⁰ The CTF fund can accommodate this amount without exceeding its cap, based on current budgets and projections.¹¹¹ To ensure that this program expansion does not negatively impact the other CTF program participants, we will limit the participation of community colleges in the CTF program to $7.2 million¹¹² per year. Further, we note that should the entire CTF fund approach the Commission mandated cap, the Commission's staff may make a recommendation to the Commission to increase the program's cap, or make other recommendations as necessary.

2. For schools and libraries, expanding the list of CTF-eligible services to mirror the services included in the federal E-rate program

This proposal was aimed at addressing the concerns raised by CCTPG and LIF¹¹³ that service providers have refused to honor the CTF discount for DSL and other advanced communication services (Internet services), arguing that they are interstate information services not subject to this Commission's regulatory authority.¹¹⁴

AT&T opposed expanding the list of CTF-eligible services to mirror the federal E-rate program because the E-rate program funds many services not currently included in the CTF, including non-telecommunication services, internal connection, and Voice over Internet Protocol (VoIP) services.¹¹⁵ AT&T stated that administering services of this magnitude and complexity could require a 100 percent increase in the CTF budget.¹¹⁶ DRA recommended mirroring E-rate offerings only with respect to Internet service connection services.¹¹⁷ The BCOE offered qualified support for the proposition, conditioned on the availability of funds.

Cox succinctly summarized the issue by explaining that the federal E-Rate and Rural Health Care programs allow non-telecommunications service providers to participate in the programs to provide Internet access services. Cox further explained that to only provide CTF funds for DSL services (provided by incumbent LECs) and not for cable broadband and wireless Internet services unfairly skews the competitive marketplace for broadband access services. Cox believes that "[a]s with other services, the Commission could make clear that such participation is voluntary and that participation by an otherwise unregulated provider would not thereby make that provider subject to the Commission's jurisdiction, except to the extent necessary to administer the program."¹¹⁸

We agree with AT&T that expanding the list of CTF-eligible services to mirror the federal E-rate program would be administratively burdensome. Absent a compelling need and furtherance of our universal service goals, we will not expand the list of CTF-eligible services at this time.

However, we remain troubled that "that some telephone service providers did not properly facilitate application and eligibility for the CTF discount"¹¹⁹ We agree with Cox that voluntary participation by providers of cable broadband and wireless Internet access services is an acceptable alternative to getting CTF discounts to all qualifying entities who desire such services. We also agree that participation would not thereby make an otherwise unregulated provider subject to the Commission's jurisdiction.¹²⁰ The Commission's authority with respect to unregulated providers would be limited to the administration of the CTF program. This Commission will not adjudicate or be a forum for billing, quality of service, service, or other disputes relative to broadband Internet access services or interstate broadband services except to the extent necessary to administer the CTF program.

Accordingly, we adopt the mechanism used in the implementation of the California Advanced Services Fund¹²¹ to allow telephone corporations, including registered providers,¹²² to provide advanced services eligible for CTF discounts through affiliated entities or through partnerships.¹²³ In such situations, the certificated entity awarded CTF funding will be held responsible for compliance with all CTF requirements. Thus, even if the certificated entity relies on one or more affiliates to carry out its commitments for the deployment of broadband facilities and services, the certificated entity shall remain legally responsible for any failure of its affiliates to fully meet those commitments. With this change we seek to make CTF as competitively neutral as possible and encourage broadband providers that are affiliated with entities that have CPCNs, such as cable Internet providers, to provide discounted service to eligible CBOs and apply to CTF for funding.

We also recognize that a similarly narrow reading of the CTF rules have prevented non-profit CBOs providing 2-1-1 Information and Referral Services from receiving CTF discounts.¹²⁴ We believe that had such entities existed at the creation of CTF they would have explicitly been included in the types of CBOs that are eligible to receive CTF discounts and clarify here that those CBOs that are 2-1-1 Information and Referral Service providers should be included in the list of types of entities eligible for CTF discounts, and we order any necessary rule changes.

Currently Universal Service Rules 8.B.(3), 8.C.(1), and 8.D.(3)¹²⁵ require carriers offering CTF-eligible services to provide in their tariffs that the rates for those service for entities qualified to receive the CTF discount shall be 50 percent below the rates charged to other businesses for those services.¹²⁶ It is clear that the requirement that the CTF discount be reflected in tariffed rates is an impediment to CBOs receiving discounted advanced services and as DSL.

Further, for local exchange carriers not subject to rate of return regulation, the Commission recently removed tariffing requirements for retail services, with certain exceptions, including basic services,¹²⁷ and we find no reason to continue to require such a requirement for CTF.

Therefore, we will eliminate this CTF tariffing requirement for all carriers that provide CTF-eligible services on a detariffed basis or other providers not regulated by this Commission. We believe that this change will have no impact on the market for these services other than to make it easier for CBOs to receive CTF-eligible services. In addition, removing the tariff requirements related to CTF is consistent with the original goals of CTF.¹²⁸

However, in order to facilitate Commission oversight of the CTF program, all detariffed or non-regulated providers claiming reimbursement from the CTF program will be required to include with their claim submittals the rates of the services that were in effect at the time of the provisioning of the services for which the claim is submitted or an electronic link to a website with such information.

We instruct the Commission staff to update the CTF processes to reflect these changes.

3. Requiring telephone service providers that are certificated by the Commission to provide CTF discounts on E-rate eligible services (telecommunications and Internet access) to all qualifying CTF entities

This was another proposal aimed at addressing the concerns raised by CCTPG and LIF¹²⁹ that service providers have refused to honor the CTF discount for advanced communication services (Internet services), arguing that they are interstate information services not subject to this Commission's regulatory authority.¹³⁰

As we addressed the problem identified in response to another topic above in section 4.2, we decline to specifically require telephone service providers that are certificated by the Commission to provide CTF discounts on all E-rate eligible services (telecommunications and Internet access) to all qualifying CTF entities at this time.

We fully expect that all eligible providers will provide the appropriate CTF discount to qualified CTF entities and seek reimbursement from CTF for the discounted amount on a going forward basis. If the changes adopted in this proceeding do not result in CTF entities receiving discounted communications services, impacted parties may seek further action from this Commission.

4. Improving overall statewide E-rate application and participation rates by dedicating Commission staff or a third-party consultant to provide E-rate application assistance to nonparticipating potential applicants, particularly those in low performing schools, low income, or disadvantaged areas, and rural or remote settings

As stated above, one of our goals in this proceeding is to fully utilize all available federal programs for similar services. The federal E-rate program provides substantial need-based funding for telecommunications services in schools; the CTF discount is applied only to remaining amounts. Schools and libraries that do not participate in the federal E-rate program nevertheless have their CTF funding calculated as if they were participating in the E-rate program. We do believe that the E-rate application, however, is lengthy and complicated; some schools and libraries do not have the personnel or other resources to submit the annual application.¹³¹ Because the CTF discount is applied as if the schools or libraries had received E-rate funding, these schools are, in effect, penalized for not participating in the federal program.

When the Commission established CTF more than a decade ago, it sought to foster the development of advanced telecommunications infrastructure in California. "[B]y providing qualifying schools, libraries, hospitals, health clinics, and CBOs with discounts, we will foster innovation in the use of advanced telecommunications services."¹³² To the extent we are assuming the school or library has received E-rate funding, but not doing anything to ensure that these schools and libraries are receiving such funding, we are limiting innovation.

Further while CTF was created to "reduce[] the dichotomy between the information rich and the information poor,"¹³³ we believe that over the past decade that the "information rich" have availed themselves of consultants and other assistance to successfully complete the federal E-rate process.¹³⁴ This is the logical result of a complex federal process built largely around funding for many services not currently included in the CTF, including non-telecommunications services, internal connection, and VoIP services.¹³⁵ In order to ensure that CTF accomplishes its goals, we should do more to make sure there are no "information poor" in California.

Given our "presumption of participation" on schools and libraries, we find it in the public interest to actively encourage and assist non-participating schools and libraries to participate in the federal and state programs. We will, therefore, direct the Executive Director to establish a special CTF Outreach and Assistance Unit within the CPUC or other agency of state government. The Unit will be dedicated to outreach to non-participating California schools and libraries, and establishing instruction manuals and best practices for obtaining funding for California schools and libraries from the federal E-Rate and California Teleconnect programs. The CTF Outreach and Assistance Unit should have no fewer than two full-time equivalent professional-level positions.¹³⁶ This Unit should be fully functional no later than July 1, 2009, and should actively coordinate its efforts with the California Department of Education and other agencies.

The duties of the Unit should include, but not be limited to, one-on-one coaching on filling out the appropriate forms; setting up an easy to use website to assist applicants with the procedures and forms; regular outreach efforts to non-participating schools and libraries; presentations at school and library organization functions to encourage participation; and other creative solutions. The unit shall also provide outreach support to other CTF-eligible entities.

The Unit's goal is 100% participation of eligible schools and libraries in the federal E-rate and CTF programs. When this goal is achieved, or as close to it as reasonably practicable, the Executive Director may discontinue or redeploy the Unit staff.

5. Expanding the CTF to fund 50 percent of the remaining costs in California Telemedicine projects selected for funding by the FCC's Rural Telemedicine Pilot Program¹³⁷

On September 26, 2006, the FCC established a pilot program, pursuant to Section 254(h)(2)(A) of the Telecommunications Act of 1996 (Act),¹³⁸ to examine how the universal service rural health care funding mechanism can be used to enhance public and non-profit rural health care providers' access to advanced telecommunications and information services.¹³⁹ The FCC pilot program will provide funding to support up to 85 percent of the cost of the construction of state or regional broadband networks and advanced telecommunications and information services provided over those networks, including:

· Initial network design studies;

· Transmission facilities;

· Recurring and non-recurring costs of advanced telecommunications and information services, such as connection to the public Internet; and

· If requested, costs of connecting the regional or state networks to Internet2 or National LambdaRail, which are both dedicated nationwide backbones.¹⁴⁰

Applicants will be required to fund the remaining costs of 15% or more, depending on the amount of the funding awarded to the applicant under the pilot program.

In reviewing the applications, the FCC will consider whether an applicant has a plan for:

· Aggregating (pooling) the specific needs of health care providers, including providers that serve rural areas, within a state or region.

· Leveraging (utilizing) existing technology to adopt the most efficient and cost effective means of connecting those providers.

· How the applicant plans to fully utilize a newly-created dedicated broadband network to provide health care services.

· Whether the applicant has a successful track record in developing, coordinating, and implementing a successful telehealth/telemedicine program within their state or region.

· The number of health care providers that would be included in the proposed network. Considerable weight will be given to applications that propose to connect the rural health care providers in a given state or region.

In May 2007, the State of California submitted an application seeking funding for more than $7 million annually for three years to connect 319 health care sites to form a statewide California Telehealth Network (CTN). The California Emerging Technology Fund, created by this Commission in 2005, pledged $3.6 million in matching funds to the CTN.

In November 2007, the FCC approved $22.1 million over three years to help develop the CTN.¹⁴¹ Through this award, the CTN will begin to establish a statewide broadband telehealth network aimed at improving the rural health care infrastructure throughout California.¹⁴² In addition, the Commission is participating on the Advisory Committee that will oversee the CTN.

The CTN and other new resources will help California develop an effective, sustainable and forward-looking telehealth network, focusing first on rural and tribal land communities. Over the course of the three-year pilot, the CTN will connect more than 300 rural sites with each other, and with a network of specialty providers at academic medical centers and other nonprofit and for-profit health providers statewide.¹⁴³

AT&T and DRA argued that CTF funds could not be used for non-recurring construction costs in telemedicine projects.¹⁴⁴ We agree, as completely matching CTF support to the FCC Pilot Program is not necessary at this point in time. However, one of the purposes of the CTF is to provide discounted telecommunications services to qualifying hospitals and health clinics that are owned and operated by a municipal or county government or a hospital district. Connecting rural medical facilities to urban health care providers furthers the health care goals of the CTF.

The goal of the FCC's Rural Health Care Pilot program is to "stimulate deployment of the broadband infrastructure necessary to support innovative telehealth and, in particular, telemedicine services to those areas of the country where the need for those benefits is most acute."¹⁴⁵ This goal falls squarely within the scope of CTF's objectives.¹⁴⁶ Funding these FCC-selected projects is consistent with CTF purposes and we explicitly include them as eligible to receive CTF discounts.¹⁴⁷

CTF already can provide discounts on CTF-eligible monthly recurring telecommunications service charges for most CTN participants, so we do not expect a significant difference in CTF funding levels based on this change. Further, as we limit funding to the monthly recurring charges for telecommunications services not paid for by the FCC's Rural Health Care Pilot Program we know that the funding will be no more than $650,000 per year for the three-year pilot.¹⁴⁸ Thus, participants within the CTN are eligible to receive the 50 percent discount from CTF for the monthly recurring CTF-eligible telecommunications services integral to the CTN not paid for by the FCC's Rural Health Care Pilot Program. However, any CTN participant that does not meet the current CTF eligibility criteria will be qualified to receive the CTF discount only on CTF-eligible services related to the CTN.

The CTN participants may apply as a consortium to receive the CTF discount.

We direct the Commission staff to update expeditiously the CTF process to include the CTN projects in accordance with this decision.

4.2. Payphone Enforcement and Public Policy Payphone Programs

Since 1990, the Commission has had two public policy programs for payphones. In D.90-06-018, the Commission established a Public Policy Payphone Program with the purpose of providing payphones to the general public in the interest of public health, safety, and welfare at locations where there would otherwise not be a payphone. The Public Policy Payphone Program has been funded by a monthly surcharge assessed on each payphone access line.¹⁴⁹ However, by Resolution T-16590, the Commission reduced the Payphone Program surcharge from a rate of $0.08 per line per month to zero, effective December 1, 2001, where it remains today.

In 1990, the Commission established the Payphone Enforcement Program to enforce tariffs, rules and regulations such as signage requirements, access to 9-1-1, call re-routing and rate caps for local, long distance, and directory assistance calls by inspecting pay telephones. The program is funded by a monthly surcharge assessed on each payphone access line, which is currently set at $0.25. The fiscal year 2005-2006 budget was $786,000.¹⁵⁰

In today's decision, we must assess whether these payphone programs remain necessary to achieve our universal service goals and whether the funds are being wisely spent.

No party disputes that the Public Policy Payphone Program is nonfunctional. We further acknowledge that this Commission has not done an adequate job in ensuring the program's success. Parties also do not dispute that the declining number of payphones cannot continue to support a dedicated enforcement staff. However, we agree with DRA, Latino Issues Forum, TURN and the National Consumer Law Center¹⁵¹ that payphones continue to play an important role in meeting our universal service goals. The California 9-1-1 Emergency Communications office estimates that 5.1% (931,933) of the total 9-1-1 calls for 2007 come from payphones. We find it significant that nearly a million 9-1-1 calls came from payphones last year. This fact clearly shows a continuing need by our citizens for public payphones. Due to competition from technologies such as wireless phones, the payphone industry is under increasing economic pressure, which is exacerbated by the payphone enforcement surcharge. Retaining the maximum number of payphones, in furtherance of our universal service and access to emergency services goals, requires that the payphone enforcement surcharge be lifted immediately while retaining the monthly reporting of payphone location and owner information to aid in the Commission's enforcement efforts.¹⁵²

The Commission's CPSD carries out enforcement of our statutes, decisions, and rules, which apply to all types of public utilities. This enforcement effort is funded by the PUC fee which is imposed on all public utility end users (see Pub. Util. Code § 431). Payphone enforcement duties, as with the Commission's myriad other enforcement obligations, should be carried out by CPSD and funded through the general PUC fee. The Commission directs the Executive Director to make efforts to augment the Commission budget to include payphone enforcement duties as required by Pub. Util. Code § 742.

Although we eliminate the separate Payphone Enforcement Program, to aid in the Commission's enforcement efforts we will retain the current requirement that local exchange carriers report monthly on payphone location and owner information.

A payphone in an isolated, rural or remote location without wireless telephone service or areas where basic residential landline phone service is not present-yet where the public travels-has significant value in achieving our universal service and access to emergency service goals. Our history of administering the Public Policy Payphone Program has been disappointing, and we intend to establish a narrowly focused, simple process for a limited group of truly necessary public policy payphones.

As set forth by CPA, the plain facts are that this state does not now have a functioning Public Policy Payphone Program. Thus, we can conclusively determine that this program is not meeting our universal service goals. We do have concerns, however, that there is a genuine need for public policy payphones in some select locations. Our goals for this program are protection of public safety, health and welfare. The fact that nearly a million calls to 9-1-1 come from payphones convinces us that payphones still play an important role in summoning emergency services. As advocated by DRA and LIF, low income or economically disadvantaged communities may have special needs in order to summon help.¹⁵³ Other examples of areas where a public payphone may be warranted include remote or isolated areas where access to emergency services are necessary, such as a public park, campground or recreational area; an interstate rest area; isolated gas stations; or communities on tribal lands. Again, these are payphones whose revenues would not otherwise support them, but which serve a public purpose for our citizens.

As a result, we believe that a very limited Public Policy Payphone Program should be put in place for no more than 50 public payphones, funding up to 50% of the otherwise applicable monthly charges and supported by a surcharge levied on all intrastate telephone service ratepayers. We delegate to the Executive Director the task of setting up the most appropriate surcharge mechanism, including utilizing an existing program.¹⁵⁴ We order any funds leftover in the public payphone program be used first for this new program, which is consistent with the goals of the prior program.¹⁵⁵

The new program shall consider the following criteria in designating a public policy payphone: (1) enhance public safety; (2) rural or remote area that is nonetheless trafficked by the public, even if seasonally; (3) interstate or state highway rest stop; (4) low income or disadvantaged community setting with little or no landline phone availability; (5) demonstrated need for a public payphone, with the request supported by a governmental entity or local community group willing to pay at least half the costs, or (6) presentation of other facts justifying the need for a publicly funded payphone. We order this program begun by July 1, 2009, and that it be administered in a streamlined manner with an eye to controlling costs. Should the number of public payphones in the program fall below 10 public payphones, the staff may recommend to the Commission a permanent termination of this program.

4.3. Deaf and Disabled Telecommunications Program

On May 3, 2007, the Commission issued Resolution T-17089 which established a pilot program to offset the cost of wireless equipment for California Telephone Access Program-certified participants. Eligible participants will be issued a credit of up to $300 to be applied to the equipment component of a wireless communications device, once every three years. The pilot program is authorized for one year, with the possibility of an additional one-year extension upon written approval of the Executive Director. The pilot is expected to serve 100-200 customers, but may reach up to 500 total participants.

In addition to qualifying for the California Telephone Access Program, the wireless pilot program also requires that participants be certified to be eligible for the Lifeline Telephone Service, which is limited to low-income individuals.

The Commission adopted the second criterion to control costs and offer the pilot program where it would have the most economic and societal impact, noting that the Legislature also requires that the Commission assist in expanding access to newer technologies specifically to low-income and disabled Californians.

In the scoping ruling, the assigned Commissioner and ALJ favorably noted the adoption of the pilot project, and asked the Communications Division to monitor evaluation of the pilot program and bring forward any proposals for permanent implementation.

The Telecommunications Access for the Deaf and Disabled Administrative Committee filed comments opposing the income limitation in the pilot wireless program, and supporting administrative reform and the implementation of a voucher system. In reply comments, DRA agreed that administrative reforms are necessary and that the implementation of a voucher system should be studied. The California Council for the Blind supports the Lifeline program's payment of half the monthly wireless costs as an "elegant solution."

While we acknowledge the comments critical of the income limitation in the pilot program, the Commission approved that pilot program with income limitations and will continue to exercise oversight of it. The Legislature has directed the Commission to consider income limitations.¹⁵⁶

As we stated in opening this docket, our goal is to ensure that "funds obtained from the surcharges are being wisely spent." Limiting participation in the wireless pilot program to low-income individuals directs the available funds to those least likely to be able to otherwise afford to purchase the more costly wireless devices vis-à-vis landline phones for people with disabilities. We find that this objective is consistent with the direction received from the Legislature and our duties to ratepayers.

While some additional changes may be necessary to fully realize the goals of the DDTP programs, overall, the DDTP programs are working well to advance our universal service goals. At the outset of this proceeding we did not contemplate consideration of administrative reforms.¹⁵⁷ Thus, while we may consider changes in the operational process and procedures related to the DDTP programs in a subsequent phase of this proceeding, we will not consider other administrative reforms in this proceeding.

⁹⁴ D.96-10-066, 68 CPUC2d 524, 571, citing AB 3643, Stats. 1994, Ch. 278, Sec. 2(b)(6).

⁹⁵ CPUC Communications Division Administrative Letter No. 15 issued on December 1, 2006 pursuant to Pub. Util. Code § 884.

⁹⁶ See, e.g., CPUC Resolution T-16542, adopted July 12, 2001 (raising CTF cap to current $55 million level).

⁹⁷ CA Governor's Budget; http://www.ebudget.ca.gov//pdf/GovernorsBudget/8000/8660.pdf.

⁹⁸ CPUC Resolution T-17104, adopted August 23, 2007.

⁹⁹ We are unable to quantify the financial impact of allowing wireless carriers to provide CTF-eligible services due to a lack of historical information.

¹⁰⁰ D.96-10-066, Universal Service and Compliance with the Mandates of Assembly Bill 3643, 68 CPUC2d 524, 575 and Appendix B Rule 8.B.(1).

¹⁰¹ As of March 31, 2008, there are 807 CBOs and 2,204 K-12 school and library participants.

¹⁰² See, e.g., Pub. Util. Code § 709(d).

¹⁰³ California Aspire Achieve Lead Pipeline Project (adopted June 21, 2007).

¹⁰⁴ The California Community Technology Policy Group and Latino Issues Forum Comments at 7-8 (Aug. 24, 2007).

¹⁰⁵ See also, Pub. Util. Code § 280(a), cf., Pub. Util. Code § 709(b).

¹⁰⁶ 47 U.S.C. § 254(h)(1)(B).

¹⁰⁷ See e.g., AB 3643, Stats. 1994, Ch. 278, § 2(a)(1) ("Define the goals of universal service given the new technologies and increasingly competitive markets, with emphasis on the role of basic service in education, health care, and in the workplace.").

¹⁰⁸ AB 3643, Stats. 1994, Ch. 278, § 2(b)(6) ("Because of their economic and social impact, education, health care, community, and government institutions must be positioned to be early recipients of the benefits of the information age."); see also, Pub. Util. Code § 709(a)-(e).

¹⁰⁹ Id.

¹¹⁰ $7.2 Million is 50% of the sum of $4,780,581 (2006-2007 total CalREN network expense) and $9,694,245 (telephone and data circuit expenses other than CalREN expense).

¹¹¹ More than a quarter of the $55 million capped CTF amount (adopted in Resolution T-16542 on July 12, 2001) will not be used even after including the entire $7.2 million for community colleges and adopted $33.2 budget for FY 08-09 in Resolution T-17104, issued August 23, 2007.

¹¹² Based on 2007 dollars, adjusted annually based on the Western-CPI rate. Carriers shall promptly submit claims for reimbursement for services provided to community colleges. Payment will be made based on the date a valid claim was received.

¹¹³ The California Community Technology Policy Group and Latino Issues Forum Comments at 10 (Aug. 24, 2007). See also DRA Reply Comments at 38 (Sept. 15, 2006), and Order Instituting Rulemaking to Review the Telecommunications Public Policy Programs, R.06-05-028, at 22 (May 25, 2006).

¹¹⁴ California Cable and Telecommunications Association at 4 (May 25, 2006), AT&T Reply Comments at 7 (Sept. 14, 2007).

¹¹⁵ AT&T Opening Comments at 8.

¹¹⁶ See Id.

¹¹⁷ Division of Ratepayer Advocates Comments at 13-14 (Aug. 24, 2007).

¹¹⁸ Cox Comments at 10 (July 28, 2006).

¹¹⁹ The California Community Technology Policy Group and Latino Issues Forum Comments at 10 (Aug. 24, 2007). As explained by these groups, while qualified CBOs are "entitled to a discounted rate for switched 56, ISDN service, and T-1, or their functional equivalents," the telephone companies are not providing discounts on these services, and they are not applying for the CTF subsidy from the Commission. This fact is borne out by CTF projections submitted by carriers for 2009-2010 that show claims related to CBOs will be approximately $5.5 million, which is half of what it should be as CBOs make up 26% of all eligible entities.

¹²⁰ D.06-06-010, p. 5, mimeo. ("The FCC has determined that it, not the states, will prescribe what regulations apply to IP-enabled services"), See also, Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities, Declaratory Ruling and Notice of Proposed Rulemaking, 17 FCC Rcd 4798, 4801, para. 4 (2002) (Cable Modem Declaratory Ruling), aff'd, Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 125 S. Ct. 2688 (2005) (NCTA v. Brand X). Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, CC Docket No. 02-33, FCC 05-150, Report and Order and Notice of Proposed Rulemaking (August 5, 2005) (Wireline Broadband Internet Acccess Order and Broadband Consumer Protection Notice), In the Matter of Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, WT Docket No.07-53, FCC 07-30, 22 FCC Rcd 5901 (rel. Mar. 23, 2007)(Wireless Broadband Internet Acccess Order), Petition of AT&T Inc. for Forbearance Under 47 U.S. C. § 160(c) from Title II and Computer Inquiry Rules with Respect to Its Broadband Services; Petition of BellSouth Corporation for Forbearance Under Section 47 U.S.C. § 160(c) from Title II and Computer Inquiry Rules with Respect to Its Broadband Services, WC Docket No. 06-125, Memorandum Opinion and Order, FCC 07-180 (rel. Oct. 12, 2007) (AT&T Title II and Computer Inquiry Forbearance Order).

¹²¹ D.07-12-054, mimeo., p. 34.

¹²² "Wireless Identification Registration." (See D.94-10-032, Ordering Paragraphs 1 and 4.) Wireless carriers registered with the Commission are eligible to seek CTF funding for advanced services on the same basis as other telecommunications carriers.

¹²³ Our expectation is that wireless and cable providers will offer discounted broadband Internet access services to eligible CBOs and apply to the CTF for the discounted amount. We direct our staff to facilitate this new set of providers as CTF-eligible providers offering discounted services.

¹²⁴ See D.03-02-029, p. 38, Findings of Fact 4, mimeo. ("The use of the 2-1-1 dialing code has the potential to provide Californians with easy access to information concerning child care services, housing assistance, physical and mental health resources, aging and hospice services, educational and other programs.").

¹²⁵ D.96-10-066, Appendix B, 68 CPUC2d at 678-679.

¹²⁶ See AT&T OIR Comments at 23 (July 28, 2006).

¹²⁷ D.07-09-018, mimeo. at 50-51.

¹²⁸ D.96-10-066, 68 CPUC2d at 579 ("the establishment of a competitively neutral fund permits any telecommunications carrier serving an eligible institution or organization to draw from the fund").

¹²⁹ The California Community Technology Policy Group and Latino Issues Forum Comments at 10 (Aug. 24, 2007). See also DRA Reply Comments at 38 (Sept. 15, 2006), and Order Instituting Rulemaking to Review the Telecommunications Public Policy Programs, R.06-05-028, at 22 (May 25, 2006).

¹³⁰ California Cable and Telecommunications Association Comments at 4 (May 25, 2006), Verizon Comments at 17 (August 24, 2007), AT&T Reply Comments at 7 (September 14, 2007).

¹³¹ In contrast, the CTF application is one page long and does not require annual resubmission.

¹³² D.96-10-066, 68 CPUC2d at 579.

¹³³ Id.

¹³⁴ See, e.g., California Dep't of Education E-Rate/CTF Training Slides for 2004 available at http://www.cde.ca.gov/ls/et/ft/eraterefbinder.asp.

¹³⁵ See, AT&T Opening Comments at 8.

¹³⁶ While these need not be new positions, the costs associated with the Unit should be included in the annual CTF administrative budget as Unit staff will be dedicated to outreach and education about the E-Rate and CTF programs.

¹³⁷ Rural Health Care Support Mechanism, WC Docket No. 02-60, Order (rel. Sept. 29, 2006); Order on Reconsideration (rel. Feb. 6, 2007).

¹³⁸ 47 U.S.C. § 254(h)(2)(A).

¹³⁹ See generally Rural Health Care Support Mechanism, WC Docket No. 02-60, Order, 21 FCC Rcd 11111 (2006) (2006 Pilot Program Order).

¹⁴⁰ See 2006 Pilot Program Order at p. 11115, ¶ 14, Rural Health Care Support Mechanism, WC Docket No. 02-60, Order on Reconsideration, 22 FCC Rcd 2555 (2007) (Pilot Program Reconsideration Order) (reconsidering the 2006 Pilot Program Order to permit funding to connect a state or regional health care network to NLR or to the public Internet, in addition to Internet2).

¹⁴¹ Rural Heath Care Support Mechanism, WC Docket No. 02-60, Order, 22 FCC Rcd 20,360 (2007) (2007 RHC PP Selection Order).

¹⁴² The CTN is comprised of a large and diverse group of partners that will connect California's rural communities to a broad range of technology-enhanced services to improve the quality of health care services. Up to $8.6 million in additional financial commitments have been secured from the California Emerging Technology Fund (CETF) and UnitedHealth Group Inc. to help support the successful implementation of the new telehealth network. Rural health care gets a boost, The Eureka Reporter, Nov. 25, 2007, available at http://eurekareporter.com/node/94575.

¹⁴³ The CTN will also be used as a resource for emergency services and disaster preparedness, and ultimately link California providers to a nationwide broadband network dedicated to health care. Id.

¹⁴⁴ AT&T Opening Comments at 10, DRA Scoping Comments at 14-15.

¹⁴⁵ 2007 RHC PP Selection Order at ¶ 1.

¹⁴⁶ D.96-10-066, 68 CPUC2d at 578-579 ("The CTF is an important strategy in fostering the development of a state of the art telecommunications infrastructure for California").

¹⁴⁷ See also, AB 3643, Stats. 1994, Ch. 278, § 2(b)(6) ("Because of their economic and social impact, education, health care, community, and government institutions must be positioned to be early recipients of the benefits of the information age.").

¹⁴⁸ The total cost estimate of the CTN submitted to the FCC was in excess of $26 million over three years. The FCC Pilot pays 85% of those costs, leaving $1.3 million per year not funded by the federal program. At most CTF would pay half that annual cost, but as noted above, some of those costs are for ineligible services so the actual payments from CTF will be less than $650,000 per year.

¹⁴⁹ The number of payphone access lines statewide has decreased significantly:

	2002	2003	2004	2005	2006-April	2007
Total	231,106	205,477	187,105	170,614	136,003	91,000

¹⁵⁰ Currently the payphone enforcement effort consists of three payphone inspectors.

¹⁵¹ TURN/NCLC Comments at 26.

¹⁵² With this change we believe that Pub. Util. Code § 279 is no longer needed. We will seek comment on this and any other statutory changes needed in light of the new structure of the program in the next phase of this proceeding.

¹⁵³ DRA Comments on PPEP and PPP programs at 3, Latino Issues Forum Comments at 1-2 (Sept. 7, 2007).

¹⁵⁴ The Executive Director may bring the new program before the Commission for any necessary approval.

¹⁵⁵ We shall seek to obtain any necessary legislation to accomplish this transfer to the new program. See Pub. Util. Code § 270.

¹⁵⁶ See Pub. Util. Code § 2881(c) ("The Commission shall ... study the feasibility of, and implement if determined to be feasible, personal income criteria, in addition the medical certification of disability, for determining a subscriber's eligibility under this subdivision."), and Pub. Util. Code § 2881(g)(2) ("The establishment of a means test for persons to qualify...").

¹⁵⁷ R.06-05-028, mimeo. at 21-22.