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 a mixture of regulated and non-regulated entities, the Commission should allow the market to operate to deliver broadband services. SureWest further states that if, after a sufficient period of time, the Commission determines that the market has failed to deliver on the promise of broadband services, the Commission can begin the complex analysis of determining which people are not receiving broadband services, why they are not receiving broadband services, and a solution within the Commission's jurisdiction to help alleviate any such problem.⁸² Citizens also states that the B-Fund balance could be used for statewide broadband deployment initiatives and/or service to underserved areas in the state.⁸³

Promoting deployment of additional broadband services within areas of California that are underserved or not served at all is consistent with our universal service policies aimed at bridging the "digital divide" as articulated in Pub. Util. Code § 709(c) and (d). We have previously taken steps to promote the ubiquitous availability of broadband and advanced services in California, and to enhance broadband connectivity, by establishing the California Emerging Technology Fund (CETF) in conjunction with approval of the mergers of SBC/AT&T and Verizon/MCI. Pub. Util. Code § 709(c) identified as one of the policies for telecommunications in California, the following: "To encourage the development and deployment of new technologies and the equitable provision of services in a way that efficiently meets consumer need and encourages the ubiquitous availability of a wide choice of state-of-the-art services." Pub. Util. Code § 709 (d) further identifies as a goal: "To assist in bridging the "digital divide" by encouraging expanded access to state-of-the-art technologies for rural, inner-city, low-income, and disabled Californians." This rulemaking provides an opportunity to take a further important step toward realizing this goal of access to state-of-the-art technologies through the creation of a California Advanced Services Fund (CASF).⁸⁴

We believe broadband deployment will be a key measure of success in our information economy and is crucial to the future growth of productivity. The ubiquitous deployment of broadband is widely regarded as holding tremendous opportunities for consumers, technology providers, and content providers. Deployment and management of broadband is important to economic development in California. Applications enabled by broadband development generate productivity and growth in numerous Internet industries in California including e-learning, telemedicine, and entertainment among others. These productivity benefits spill over to economies at large as well, and will result in significant expansion of employment in California. For the most recent year of reported data, California's broadband connections in 2005 grew faster than the national average, however, that was the only year in this decade where California outpaced the rest of the nation.⁸⁵ A recent study by the Brookings Institution has quantified just how important broadband deployment is to the people of California, "for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year."⁸⁶

California, like many other states, has realized the importance of a robust broadband infrastructure to the continued health and development of the state and its residents. It has taken steps to collect broadband deployment and subscription data in addition to using the data heretofore available from the FCC. While we believe that solutions to the digital divide is best driven by market forces within the telecommunication and internet industry, the public sector has a role to play as well. The first and most important is to identify and remove any unnecessary regulations or barriers that it has placed in the way of broadband deployment and adoption. The second role is to identify appropriate public polices that will provide significant assistance in overcoming obstacles to broadband deployment, while increasing the rate of use of advanced telecommunication services.

Governor Schwarzenegger has recognized the need for California to play a leading role in the development of broadband. Executive Order S-23-06 issued in November, 2006, established a California Broadband Task Force to "identify opportunities for increased broadband adoption, and enable the creation and deployment of new advanced communication technologies."⁸⁷ The Executive Order further found:

WHEREAS deploying broadband networks and advanced communication services throughout California will enable continued improvements in healthcare, public safety, education, and the economy; and

WHEREAS a technology-neutral approach to removing barriers to broadband deployment will encourage lower prices and creation of more consumer choices; and

WHEREAS advanced communication services have become central to the financial health of our State, as these services have increased individual worker productivity and connected California businesses to international markets; and

WHEREAS California is ahead of all other states in dollar value of high-tech exports (approximately $50 billion last year alone); and

WHEREAS California boasts more than twice as many high-tech jobs than any other state, and its average high-tech employee wage ($90,600 in 2004) leads the nation; and

WHEREAS California's Web content, e-commerce, networking, telecommunications, entertainment, broadcasting, and computer software and hardware businesses have placed the State at the forefront of the Internet revolution, but to continue to be a world-class leader, California must adopt next-generation policies and practices that spur on further broadband innovation; and

WHEREAS State action is needed to continue investment in, stimulate adoption of, and remove further barriers to the development of world-class broadband networks; and

WHEREAS it is an executive priority to promote widespread access to, adoption of, and new applications for broadband networks and advanced communication services; and

WHEREAS section 709 of the California Public Utilities Code establishes that it is the State's policy to encourage expanded access to state-of-the-art technologies for rural, inner-city, low-income, and disabled Californians; and

WHEREAS the California Public Utilities Commission (CPUC) issued a report on Broadband Deployment in California that, among other items, (1) specifies how the State can be a leader in promoting the availability and use of broadband services, (2) calls for the creation of a California Broadband Task Force, (3) endorses increased use of advanced communication services for government operations and public access, and (4) recommends limiting rights-of way (ROW) fees assessed upon broadband providers; and

WHEREAS the Governor's Cabinet - led by the Business, Transportation and Housing Agency (BTH) - convened seventeen meetings on regional economic vitality, and civic leaders in all of these meetings called for increased broadband deployment; and

WHEREAS in accordance with Executive Order S-5-05, the California Partnership for the San Joaquin Valley has made accelerating the deployment of broadband networks and advanced communication services part of its Work Plan; and

WHEREAS ninety-two percent of California's land contains only fifteen percent of the State's population, and some of the communities in these rural areas lack the multiple telecommunication connections necessary for linking to outside resources during states of emergency, such as catastrophic fires, floods, and earthquakes; and

WHEREAS in accordance with Executive Order S-12-06, broadband networks are needed to create a sustainable eHealth network that connects rural health clinics to other State medical centers; and

WHEREAS the increased State use of broadband networks and advanced communication services will enhance government operations through telemedicine for healthcare, distance learning for education, and better coordination in the areas of public safety....⁸⁸

In addition, California is beginning to develop the mechanisms for identifying and gathering certain useful broadband data as the technology and industry continue to evolve. In particular, the California Legislature last year enacted the DIVCA requiring that certain broadband providers - those that obtain a state-issued video franchise from the CPUC - submit to the CPUC broadband subscribership information and data about homes passed at the census tract level. In this context, the Legislature ordered build-out requirements to ensure service was made available to all Californians, particularly low income and rural citizens.⁸⁹ This Legislative direction recognizes that broadband services are and will be used to deliver universal telephone service now and in the future.⁹⁰

We emphasize that basic telephone service is service that is being provided on an ever increasing basis via broadband technologies, in addition to wireless and satellite technologies. Telecommunication services are migrating to broadband because of the greater flexibility, efficiency and redundancy that can be achieved. In other words, in a broadband environment, telephone service is simply one of many data streams flowing over the broadband connection.⁹¹ In URF, we noted the historic practice of finding that each telecommunications service constitutes a separate "market" is no longer a relevant factor for analyzing or explaining the dynamics of today's technologically diverse voice communications environment.⁹² Instead, we found that the voice market today consists of a rich mix of wireline telephony, wireless telephony, voice over Internet protocol (VoIP), and satellite voice offerings.

Accordingly, it would be imprudent to continue to only support legacy copper networks of incumbent local exchange carriers through the universal service programs due to the fact that basic voice telephone service is being provided on an increasing basis using advanced technologies such as VOIP and wireless technologies including broadband systems.⁹³ Limiting universal service support to particular technologies skews competitive forces, and in some cases, may even prevent consumers in high cost areas from ever receiving advanced communication services and the economic and social benefits that flow from such services. This Commission must recognize and incorporate new technologies as it administers CHCF-B so that we can continue to meet the goals of the Legislature for telecommunications in California as enunciated in Pub. Util. Code § 709:

The Legislature hereby finds and declares that the policies for telecommunications in California are as follows:

(a) To continue our universal service commitment by assuring the continued affordability and widespread availability of high-quality telecommunications services to all Californians.

(b) To focus efforts on providing educational institutions, health care institutions, community-based organizations, and governmental institutions with access to advanced telecommunications services in recognition of their economic and societal impact.

(c) To encourage the development and deployment of new technologies and the equitable provision of services in a way that efficiently meets consumer need and encourages the ubiquitous availability of a wide choice of state-of-the-art services.

(d) To assist in bridging the "digital divide" by encouraging expanded access to state-of-the-art technologies for rural, inner-city, low-income, and disabled Californians.

(e) To promote economic growth, job creation, and the substantial social benefits that will result from the rapid implementation of advanced information and communications technologies by adequate long-term investment in the necessary infrastructure.

(f) To promote lower prices, broader consumer choice, and avoidance of anticompetitive conduct.

(g) To remove the barriers to open and competitive markets and promote fair product and price competition in a way that encourages greater efficiency, lower prices, and more consumer choice.

(h) To encourage fair treatment of consumers through provision of sufficient information for making informed choices, establishment of reasonable service quality standards, and establishment of processes for equitable resolution of billing and service problems.⁹⁴

Additionally, in order to effectuate requirements of Pub. Util. Code § 739.3, we find it necessary to consider providing incentives for broadband infrastructure in unserved and underserved high cost areas of the state on a going forward basis. Telecommunications service and usage patterns have been shifting for some time as consumers switch voice calls to wireless and VoIP networks. The number of wired telephone lines has been dropping between three and five percent for the past several years,⁹⁵ while the number of wireless and VoIP lines have increased. Nearly 77% of Americans, or 233 million people, were wireless phone subscribers by the close of 2006,⁹⁶ and more than one out of every eight American homes (12.8%) had only wireless telephones in 2006,⁹⁷ and millions of businesses, schools, banks and government offices are projected to migrate from legacy services to broadband services over the next five years. In California, this has meant that the number of landlines decreased by 2.39 million from end-of-year 2001 to June 2006, while during the same period, the number of wireless subscribers in California increased by 13.34 million to 27.52 million,⁹⁸ and the number of advanced service subscribers increased by 7.76 million.⁹⁹

The shift in communication volumes from fixed wireline phone service to wireless and VoIP services has been rapid and dynamic as users became used to the convenience and mobility advantages of wireless, bundled long distance and local calling plans, and the very low domestic and international calling rates (sometimes offered free) of VoIP. The average U.S. wireline toll minutes of use (MOUs) have dropped almost 30% since 2000,¹⁰⁰ while U.S. wireless interstate MOUs per user grew more than 25% during the same period. The percentage of interstate minutes has increased from 16 percent to 28 percent of all wireless minutes.¹⁰¹ These changes in calling patterns are reflected in ILEC line losses.

In addition to the specific direction enunciated by the California Legislature in Public Utilities Code,¹⁰² the Telecommunications Act requires:

The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans.¹⁰³

The slow historic deployment of broadband services in California during this decade,¹⁰⁴ and the importance of broadband services to the "financial health" of the state,¹⁰⁵ and the direction of the Legislature "to encourage the development of new technologies"¹⁰⁶ prompt us to consider providing funding under Pub. Util. Code § 739.3 for deployment of broadband facilities in unserved and underserved high cost areas of California. We believe this will provide important incentives to help advance - from a timing point of view - rural areas in California obtaining advanced telecommunications services than if we left market forces to deliver such services.

Universal service is defined as an "evolving level of telecommunications services ... taking into account advances in telecommunications and information technologies and services."¹⁰⁷ Providing funding under Pub. Util. Code § 739.3 for deployment of broadband facilities in unserved and underserved high cost areas of California is necessary to meet the objectives of universal service. The funding of broadband infrastructure under Pub. Util. Code § 739.3 may be the best way to take into account advances in telecommunications and information technologies and services and ensure the continued effectiveness of the universal service policies set forth by the Legislature.

An important goal of universal service policy is to ensure that all citizens have access to critical communications technologies. We believe that a suitable, competitively neutral, and broad-based program targeted toward broadband infrastructure is critical to ensuring "a fair and equitable local rate support structure" in high cost areas.¹⁰⁸ As a component of the CHCF-B, the CASF may "promote the goals of universal telephone service and ... reduce any disparity in the rates charged by those companies."¹⁰⁹

In legislation enacted subsequent to Pub. Util. Code § 739.3, the Legislature did provide guidance regarding the implementation, development, and administration of the universal service programs.¹¹⁰

To specify the purposes of the various universal service funds, the Legislature references the relevant section of the Public Utilities Code, enacted legislation, or Commission decision that governs the respective program.¹¹¹ To determine the Legislative intent of Public Utilities Code Sections 275, 276, 277, 278, 279, and 280 we review them together.

In reviewing the Chapter as a whole it is clear, that the descriptive language in 276 regarding CHCF-B does not alter or more narrowly define how other infrastructure used to deliver telecommunication services may be funded through the B-Fund when read in conjunction with Pub. Util. Code § 739.3.

Further, there is nothing in the legislative intent indicating they sought to alter, limit, or change any of the underlying programs. "Chapter 1.5 Advisory Committees" was enacted in 1999 pursuant to SB 699 for two reasons. The first was to "create 6 advisory boards to advise the commission regarding the implementation, development, and administration of specified programs, and to carry out the programs pursuant to the commission's direction, control, and approval."¹¹² The second sought to institute more formal financial controls over the funds:

[C]reate a fund in the State Treasury for each advisory board, and would require the commission, on or before July 1, 2000, to report to the Governor and the Legislature regarding a transition plan for programs associated with those funds. The bill would limit the expenditure of moneys appropriated from the specified funds, as prescribed. The bill would require telephone corporations to submit to the commission approved rate revenues for transfer by the commission to the Controller for deposit in the appropriate fund as created by the bill. The bill would require any unexpended revenues collected prior to the operative date of the bill to be deposited in the appropriate fund, as specified. The bill would require the commission to conduct financial audits of the revenues for each of the funds, and to conduct compliance audits with regard to each program, as specified.¹¹³

The intent is clearly to move control of the deposit and expenditure of these funds from the Commission to the state's chief fiscal officer. The intent of the legislation clearly is to limit expenditures to appropriated funds that fall under the purpose of the funds as set forth in their authorizing statute or Commission decision. Further evidence of such intent can be found in the subsequent enactment of Section 276.5 in 2004 where the Legislature established a renewing grant program utilizing either the A-Fund or the B-Fund at the discretion of the Commission.¹¹⁴ Legislative intent in expanding the uses of the California high cost funds shows that the basic descriptive language in Section 276 recognizes the evolving nature of universal service, and that grants similar in structure to the CASF may be allowable under Sections 276 and 739.3. As discussed infra, the proposed limited funding under Pub. Util. Code § 739.3 for deployment of broadband facilities in unserved and underserved high cost areas of California is necessary to meet the objectives of universal service and is within the prescribed purpose of Pub. Util. Code § 739.3. Further, the funds that will be used by the CASF component of the CHCF-B have already been collected and appropriated in compliance with Pub. Util. Code § 270.¹¹⁵

Based on the determinations above, we propose that a limited allocation consisting of B-Fund money should be used to pay for some of the infrastructure costs of broadband facilities in California's unserved or underserved high cost areas, with the express goal of minimizing any disparity in rates for basic telephone service between high cost areas and urban areas which will ensure that the goals of universal telephone service are met. Such fund may be administered on a technology neutral basis by the Commission, and shall have as a goal providing infrastructure subsidies to unserved and underserved high cost areas for basic telephone service provided through broadband speeds as defined by the CPUC. Accordingly, we intend to establish a CASF under the CHCF-B to promote this goal. In order to provide an initial funding source for the CASF, we are soliciting comments as to whether and how to direct a portion of the already collected and appropriated B-Fund contributions for this purpose on a limited basis.

We direct that the B-Fund surcharge on January 1, 2008 be lowered to reflect the reduced level of subsidy draw that will result from raising the high cost threshold. We believe that maintaining an increased B-Fund contribution surcharge until January 1, 2008 is necessary as the phase-in of the new benchmark does not begin until that date. Therefore, we will refrain from lowering the B-Fund surcharge until that time, and will instead consider whether and to what extent existing B-Fund contributions should be used by the CASF component of the CHCF-B. We shall solicit comments on the merits of such an approach and the size of the fund in the next phase of this proceeding.

Finally, we have noted the concerns some parties have had to creating the CASF component of the CHCF-B.¹¹⁶ We believe we have authority under existing statutes to use the CHCF-B as long as basic telephone service is one of the components of any broadband service. Assuming arguendo, that parties' concerns would unduly delay implementation of the CASF component of the CHCF-B, we also are soliciting comments on the merits of establishing a brand new program pursuant to our general statutory authority under Pub. Util. Code § 701.¹¹⁷ As explained infra, broadband infrastructure is critical to the economic health and welfare of the state and its citizens.¹¹⁸ California is home to the leading centers for entertainment and high technology; we cannot and should not wait for a national solution to alter the downward trend of the United States' ranking for broadband availability.¹¹⁹ The Legislature and Governor have both clearly proclaimed the importance of high-quality telecommunications and advanced information and communication technologies. Accordingly, we will move expeditiously to implement a program to fund broadband infrastructure.

In Phase II of this proceeding, we also shall consider establishing requirements whereby applicants may qualify for funding under the CASF component of the CHCF-B for purposes of deploying broadband in high cost areas that are not currently being served or that are underserved. As to the CASF, we tentatively envision the following process, which we intend to solicit public comment on in Phase II. The Commission would issue a Phase II decision

putting in place an application process that would be used to qualify for funding of broadband deployment based on a showing that a proposed area is either not being served or is underserved by broadband services at less than speeds of 3 MBPS downstream. Under such a process, applicants would be required to: (1) voluntarily submit data to the Commission, under appropriate confidentiality provisions, of its current broadband infrastructure by census block group, (2) set forth the boundaries of the specific high cost area to be served by census block group along with a verifiable showing that it is unserved or underserved; and (3) commit to complete build out within 18-24 months of the grant of the application. The Commission would provide matching funds to funds provided by the applicant. A bond may be required for applicants. We envision a process whereby priority would be directed first to areas not served by facilities capable of providing 3 MBPS download and 1 MBPS upload speeds, and second, to underserved areas (e.g. areas with only one facilities-based provider capable of providing those speeds to all customers).

We tentatively propose to begin receiving applications for the CASF component of CHCF-B in early 2008. Applications will be considered on a first come, first considered basis, subject to window periods where all applications received within the timeframe specified will be treated as if received on the same date. Applications must include project plans, maps of the proposed service area, and specific milestones which must be verifiable by Staff. Staff will make funding determinations based at least on the price per MBPS offered to customers, overall size of the request, matching funds, and time for implementation. A reasonable amount of funding may be distributed prior to construction and at the completion of specific milestones. We may delegate to Commission staff the authority to establish the application process and forms in Phase II of this proceeding.

As the CASF would be a limited, one-time-only source of matching funds to build advanced infrastructure in California and would work in conjunction with the California Emerging Technology Fund, we will seek comment on the overall size and funding of the CASF. We also shall also seek input as to whether an application should open a 60-day window for other applications for substantially the same geographic area. CASF applicants would have to meet specific audit, verification, and other requirements with respect to the use of the funds. At this time, funding is limited to a "telephone corporation" as defined under Pub. Util. Code § 234 and required under §§ 276 and 739.3.¹²⁰ To the extent other entities believe they may qualify for funding, we will consider other requests for funding. Funding not directed for use by January 1, 2010, will be used to reduce the B-Fund surcharge in the 2010-2011 funding year. The CASF program will serve as a precursor to a reverse auction process which we believe to be a promising method for meeting our universal service goals on a prospective basis. We shall pursue further development of these issues in the next phase of this proceeding.

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.

⁸² Surewest Reply Comments of 10/16/06 at 10.

⁸³ Citizens Telecommunications Company of California Comments on the Assigned Commissioner's Ruling at 6.

⁸⁴ See e.g., Broadband for All? Gaps in California's Broadband Adoption and Availability, Public Policy Institute of California, rel. July 10, 2007.

⁸⁵ Connecting California, California Public Utilities Commission Telecommunication Division Broadband Report Update, September 20, 2006.

⁸⁶ The Effects of Broadband Deployment on Output and Employment: A Cross-sectional Analysis of U.S. Data, by Robert Crandall, William Lehr and Robert Litan, The Brookings Institution, Issues in Economic Policy, July 2007.

⁸⁷ Executive Order S-23-06 of Governor Arnold Schwarzenegger.

⁸⁸ Executive Order S-23-06 of Governor Arnold Schwarzenegger.

⁸⁹ Pub. Util. Code § 5890.

⁹⁰ Pub. Util. Code § 709.6(c) ("Encourages the provision of advanced, high-speed digital telecommunications services to the public."), Pub. Util. Code § 709.7 (California High Speed Internet Access Act of 1999), Pub. Util. Code § 5810(a)(2)(E) ("DIVCA legislation should [c]omplement efforts to increase investment in broadband infrastructure and close the digital divide."), see also, Pub. Util. Code §5810(a)(1) ("increasing competition for video and broadband services is a matter of statewide concern").

⁹¹ See, e.g., New Zealand Telecommunications Service Obligations Regulatory Framework - Ministry of Economic Development Discussion Document at §5.4 (August 2007) (Requesting comment on the obligations of Telecom New Zealand will be after it converts to an all broadband network within the next five years.).

⁹² D.06-08-030, mimeo. at 264, COL 15.

⁹³ National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U.S. 967 (2005) (Upholding FCC determination that high-speed transmission used to provide cable modem service is a functionally integrated component of that service, and "changed market conditions warrant different [regulatory] treatment.").

⁹⁴ Pub. Util. Code § 709.

⁹⁵ Federal Communications Commission Trends in Telephone Service at Table 7.4, rel. Feb. 9, 2007.

⁹⁶ CTIA's Wireless Industry Indices: 1985 - 2006.

⁹⁷ Center for Disease Control, Wireless Substitution: Early Release of Estimates Based on Data From the National Health Interview Survey, rel. May 2007.

⁹⁸ Local Telephone Competition: Status as of June 30, 2006, Federal Communications Commission, Industry Analysis and Technology Division, Wireline Competition Bureau, January 2007, downloaded from http://fjallfoss.fcc.gov/edocs_public/attachmatch/DOC-270133A1.pdf, Tables 9 (CLEC Lines), 10 (ILEC lines), and 14 (wireless).

⁹⁹ High-Speed Services for Internet Access: Status as of June 30, 2006, Federal Communications Commission, Industry Analysis and Technology Division, Wireline Competition Bureau, January 2007, downloaded from http://fjallfoss.fcc.gov/edocs_public/attachmatch/DOC-270128A1.pdf, Table 10

¹⁰⁰ Federal Communications Commission Trends in Telephone Service at Table 10.2, rel. Feb. 9, 2007.

¹⁰¹ Federal Communications Commission Trends in Telephone Service at Table 11.4, rel. Feb. 9, 2007.

¹⁰² Pub. Util. Code §§ 709(c) ("encourage the development and deployment of new technologies and ... the ubiquitous availability of a wide choice of state-of-the-art services."), 709(e) ("rapid implementation of advanced information and communications technologies by adequate long-term investment in the necessary infrastructure."), 709.6(c) ("Encourage the provision of advanced, high-speed digital telecommunications services to the public.").

¹⁰³ Telecommunications Act of 1996, Pub. L. 104-104, Feb. 8, 1996, 110 Stat. 56, at § 706. See also 47 U.S.C. § 157 ("It shall be the policy of the United States to encourage the provision of new technologies and services to the public.").

¹⁰⁴ Connecting California, California Public Utilities Commission Telecommunication Division Broadband Report Update, September 20, 2006.

¹⁰⁵ Executive Order S-23-06 of Governor Arnold Schwarzenegger.

¹⁰⁶ Pub. Util. Code § 709(c).

¹⁰⁷ 47 U.S.C. § 254(c)(1).

¹⁰⁸ Pub. Util. Code § 739.3(c).

¹⁰⁹ Pub. Util. Code § 739.3(c).

¹¹⁰ Pub. Util. Code §§ 270-281 (Chapter 1.5. Advisory Boards, Added by Stats. 1999, Ch. 677, Sec. 2, Effective January 1, 2000).

¹¹¹ Pub. Util. Code §§ 275(a), 276(a), 277(a), 278(a), 279(a), and 280(b).

¹¹² Cal. Stats. 1999, Ch.677, Legislative Counsel's Digest (2).

¹¹³ Id.

114

¹¹⁵ AT&T and Verizon argue that Pub. Util. Code §§ 270(b) and 270(c) prohibit the expansion of existing programs. AT&T Comments on the Proposed Decision at 23, Verizon Comments on the Proposed Decision at 18. Such a reading of the statute would lead to absurd results. The programs covered by Section 270 cover a myriad of topics and issues. Advances in technology and other factors have led to changes, including expansions of the programs since they were created. The Commission has taken both formal and informal actions to adapt the programs to changed circumstances. See, e.g., D.05-04-26 (expanding Lifeline eligibility criteria), CPUC Report to the Legislature on the California Teleconnect Fund, May 2005 (outlining numerous improvements to Teleconnect implemented by the Commission); see also Pub. Util. Code § 276.5. AT&T and Verizon would have the Commission institute no improvements or changes to the existing programs. As the CASF is not a transfer or diversion of funds to another fund or entity but is an expansion of an existing program, the limitations of section 270 do not apply.

¹¹⁶ AT&T Comments on the Proposed Decision at 23, Sprint Nextel Comments on the Proposed Decision at 9, SureWest Comments on the Proposed Decision at 6-7, TWTC Comments on the Proposed Decision at 4, Verizon Comments on the Proposed Decision at 18.

¹¹⁷ Pub. Util. Code § 701 ("The commission may supervise and regulate every public utility in the State and may do all things, whether specifically designated in this part or in addition thereto, which are necessary and convenient in the exercise of such power and jurisidiction."). While some view Assembly of the State of California v. Public Utilities Commission, 12 Cal. 4th 87, 48 Cal. Rptr.2d 54 (1995) to limit Commission's ability to create such a fund, we believe the California Supreme Court did not reach that issue in finding that refunds to ratepayers should be refunded to ratepayers and not used to create new funds. A new fund with a new surcharge would fall outside the parameters of that decision.

¹¹⁸ Pub. Util. Code § 709, Executive Order S-23-06 of Governor Arnold Schwarzenegger, Telecommunications Act of 1996, Pub. L. 104-104, Feb. 8, 1996, 110 Stat. 56, at § 706, 47 U.S.C. § 157, Connecting California, California Public Utilities Commission Telecommunication Division Broadband Report Update, September 20, 2006, The Effects of Broadband Deployment on Output and Employment: A Cross-sectional Analysis of U.S. Data, by Robert Crandall, William Lehr and Robert Litan, The Brookings Institution, Issues in Economic Policy, July 2007, Broadband for All? Gaps in California's Broadband Adoption and Availability, Public Policy Institute of California, rel. July 10, 2007.

¹¹⁹ The United States is ranked 15^th in broadband subscribers per 100 inhabitants, Organisation for Economic Co-operation and Development (OECD) Broadband Statistics to December 2006, rel. April 2007, available at http://www.oecd.org/sti/ict/broadband.

¹²⁰ See, Pub. Util. Code §§ 233 and 234.