Casf Eligibility Proposed Decision 6jan2014

8/13/2019 Casf Eligibility Proposed Decision 6jan2014

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STATE OF CALIFORNIA EDMUND G. BROWN JR.,Governo

PUBLIC UTILITIES COMMISSION505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

January 6, 2014 Agenda ID #12692

Quasi-Legislative

TO PARTIES OF RECORD IN RULEMAKING 12-10-012

This is the proposed decision of Commissioner Michael R. Peevey. Until and unless theCommission hears the item and votes to approve it, the proposed decision has no legaleffect. This item may be heard, at the earliest, at the Commissions February 5, 2014Business Meeting. To confirm when the item will be heard, please see the BusinessMeeting agenda, which is posted on the Commissions website 10 days before eachBusiness Meeting.

Parties of record may file comments on the proposed decision as provided in Rule 14.3of the Commissions Rules of Practice and Procedure.

/s/ DOROTHY J. DUDA, forKaren V. Clopton, ChiefAdministrative Law Judge

KVC:dc3

Attachment

FILED1-06-14

12:12 PM


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83511580 -1-

COM/MP1/sbf/dc3 PROPOSED DECISION Agenda ID #12692Quasi-Legislative

Decision PROPOSED DECISION OF COMMISSIONER PEEVEY(Mailed 1/6/2014)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to ConsiderModifications to the California AdvancedServices Fund.

Rulemaking 12-10-012(Filed October 25, 2012)

DECISION IMPLEMENTING REVISED ELIGIBILITY CRITERIA FOR THE

CALIFORNIA ADVANCED SERVICES FUND PROGRAM


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statute.4 The passage of SB 740 makes the discussion of whether or not we

should change the applicant eligibility rules moot.

In the OIR, the Commission discussed what possible safeguards it should

implement since non-telephone corporations are not subject to the Commissions

regulatory authority.5 In the past, the Commission had permitted non-telephone

corporations to participate in the CASF program, subject to a variety of

safeguards, if they had obtained American Recovery and Reinvestment Act

funds.6 On March 18, 2013, the Administrative Law Judge (ALJ) assigned to the

proceeding issued a Ruling to supplement the record on safeguards.7

A numberof parties provided comments on this issue. However, Communications

Division (CD) Staff still found that additional research was necessary to make a

determination on the issue of safeguards, particularly on whether it was feasible

for entities to obtain a post-construction phase compliance bond from a surety

company. The results of Staffs research can be found in Appendix 3.

Based on the record and CD Staffs independent research, we conclude

that non-telephone corporations will be required to obtain a performance bond

for the construction phase of the project in order to ensure completion of the

CASF grant funded project. In order to ensure that non-telephone corporations

4 OIR to Consider Modifications to the California Advanced Services FundR.12-10-012, November 11, 2012 at 4.

5

Id.at 20-22.6 Decision Establishing New Filing Plan for CASF Projects D.09-07-020,July 7, 2009 at 18-19.

7 ALJs Ruling Soliciting Additional Comment on Issues Identified in OIR 12-10-012,March 18, 2013.


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administration of the program.11 In Resolution T-17143 the Commission

adopted specific application requirements, timelines and scoring criteria for

parties seeking CASF project grants. The resolution confirmed that eligibility for

CASF grants was limited to entities holding either a CPCN or WIR but did not

rule out reconsidering the issue in the future if the CASF had surplus funds or if

other circumstances justified reconsideration of the issue.12

The restriction on eligibility for CASF funding to telephone corporations

was subsequently reflected in statute when the Legislature codified the CASF.13

With the passage of the American Recovery and Reinvestment Act (ARRA) inFebruary of 2009, which provided grants to both telephone corporations and

other entities for the construction of broadband facilities, the Commission saw

the opportunity to leverage existing CASF funds by providing CASF matching

grants to ARRA grantees for the unfunded portion of ARRA grants.

In D.09-07-020, the Commission determined that it would consider

modifying the CASF eligibility requirements to provide CASF support to ARRA

grantees which were not telephone corporations, contingent upon the

Legislatures passage of an existing bill that would give the Commission the

required authority to modify eligibility.14 The Commission noted that expanding

the range of entities eligible to receive CASF funds beyond certificated or

registered telecommunications carriers would raise issues about the fitness and

11

D.07-12-054 at 35.12 Resolution T-17143 at 19.13 Senate Bill (SB) 1193 (Padilla) Stats. 2008 Ch. 393, amending Cal. Pub. Util. Code 270 and 281.

14 D.09-07-020 at 13-14.


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technical capabilities of entities the Commission does not regulate. Therefore, it

stated that the Commission would need to implement appropriate safeguards to

ensure than any non-certificated entities were financially and technically

qualified to meet CASF program requirements as a condition of receiving

CASF money.15

In July of 2009, the Legislature enacted Assembly Bill (AB) 1555, which

gave the Commission authority to provide CASF matching grants to ARRA

grantees that are not telephone corporations if those entities met the

requirements of the Commissions CASF program.16

Subsequently, theCommission issued Resolution T-17233, which adopted specific rules governing

the participation of non-certificated or registered entities in the CASF program,

taking into account the concerns the Commission expressed in D.09-07-020. In

order to ensure the financial, technical and managerial competence of those

CASF applicants which the Commission did not regulate, the Commission

imposed additional requirements on them, including: the submission of

information sufficient to conduct a thorough background check; an affidavit

agreeing to comply with specific Commission rules; an agreement to allow the

Commission to inspect the applicants accounts, books, papers, and documents

related to the application and award of CASF funds; and a mandatory

performance bond.17

15 Id.16 Cal. Pub. Util. Code 281(c)(2). In fact, AB 1555 required that such entities beallowed to apply for CASF support.

17 Resolution T-17233 at 4-6. See alsoAppendix 2 and 3.


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In D.12-02-015, the Commission concluded that since broadband funding

under ARRA had been fully allocated, the opportunity for non-certificated or

non-registered entities to participate in the CASF program had expired.

Therefore, if the Commission wished to allow these entities to be eligible for

CASF funds prospectively, the Commission reasoned that it would need further

legislative authority.

However, the Commission decided not to pursue this authority for the

following reasons. First, it cited reports by Communications Division (CD) Staff

that non-certificated or registered entities that had applied for CASF funds inconjunction with ARRA grants had required significant assistance from the Staff

to negotiate the application and grant processes.18 Moreover, the Commission

noted that few grants had been issued to these entities because they had failed to

obtain ARRA grants.19 Finally, the Commission recognized that it might not

have a regulatory mechanism to enforce its resolutions awarding grants to

non-certificated entities, and that the Commission does not have the same

capabilities to oversee and ensure the proper use of ratepayer funds by

unregistered entities as it does with entities holding a CPCN or WIR.20 Based

on these facts and continued concerns about the ability to properly oversee CASF

program participants the Commission does not regulate, the Commission

18 D.12-02-015 at 21-22

19 Id.

20 Id.at 22.


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concluded that retaining the program eligibility restrictions adopted in

D.07-12-054 was appropriate.21

In an OIR issued on October 25, 2012, we asked whether, based on a

review of the CASF, we should expand eligibility for the program.22Our review

of the program found that there is a need for more last mile projects in unserved

and underserved areas of the State, which are often located in rural areas where

the cost to deploy broadband is high because of low population density and

rough terrain.23 We were also alerted to the proliferation of entities using new

technologies that may be uniquely suited to provide cost effective broadbandservice in high cost rural areas of the State, but are not considered telephone

corporations.24 Since the Commission does not traditionally regulate

non-telephone corporations, this rulemaking also considers safeguards to

prevent the waste, fraud and abuse of ratepayer monies. Parties filed opening

comments on issues identified in the OIR on December 3, 2012, and filed reply

comments on December 18, 2012.

After reviewing the comments, the ALJ issued a Ruling on March 18, 2013,

seeking additional comments from interested parties in order to supplement the

record on the issue of safeguards.25 Parties filed opening comments on April 9,

2013, and filed reply comments on April 23, 2013.

21 Id.

22

R.12-10-012 at 21-22.23 Id.at 15.

24 Id.at 16-17.

25 ALJs Ruling Soliciting Additional Comment on Issues Identified in OIR 12-10-012,March 18, 2013.


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The OIR acknowledged that any change in applicant eligibility

requirements was contingent upon legislative action because the CASF

requirements are defined in statute. Thus, the Commission sought a legislative

amendment to expand eligibility through SB 740. Through the legislative

process, this bill was amended several times and ultimately its passage resulted

in several changes to the CASF program, including applicant eligibility. Such

changes include the following:

1. A program goal to approve funding for infrastructureprojects that will provide broadband access to no less than

98% of California households by no later thanDecember 31, 2015.

2. Authorization for the Commission to collect an additional$90 million which will be deposited into the BroadbandInfrastructure Grant Account, supplementing the original$200 million authorized for CASF broadband infrastructuregrants.

3. Eligibility of entities that are not telephone corporations toapply for a CASF program grant to provide broadbandaccess to unserved or underserved households. Suchentities shall meet the CASF eligibility requirements andcomply with program requirements. These requirementsshall include all of the following:

a. Entities must provide last-mile broadband access tohouseholds that are unserved by an existingfacilities-based broadband provider and only receivefunding to provide broadband access to households thatare unserved or underserved, as defined in CommissionD.12-02-015

b. Funding for a CASF project proposing to providebroadband access to an underserved household shall notbe approved until after any existingfacilities-based provider has had an opportunity todemonstrate to the Commission that it will, within a


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reasonable timeframe, upgrade existing service. Anexisting facilities-based provider may, but is not requiredto, apply for funding to make that upgrade.

c. A local governmental agency may be eligible for aninfrastructure grant only if the infrastructure project is foran unserved household or business, the Commission hasconducted an open application process, and no othereligible entity applied.26

Additionally, during the 2013-2014 legislative session, the Legislature

passed AB 1299.27 AB 1299 created an additional account under the CASF

program called the Broadband Public Housing Account to support the

deployment of broadband infrastructure and adoption programs in eligible

publicly supported communities.28 These efforts will be funded through

$20 million from the CASF Broadband Infrastructure Grant Account and

$5 million from the Broadband Revolving Loan Account, respectively.29

This decision implements the applicant eligibility provisions and the

safeguard provisions proposed through the initial OIR and the ALJs Ruling,

taking into account the comments previously filed by parties in this proceeding

on the OIR and the ALJs Ruling and CD Staffs independent research on

performance bonds.

A revised scoping memo will be issued after this decision in order to

implement the additional issues raised by SB 740 and AB 1299 and to revise the

26 SB 740 (Padilla) Stats. 2013 Ch. 522, amending Cal. Pub. Util. Code 281.

27 SB 1299 (Bradford) Stats. 2013 Ch. 507, amending Cal. Pub. Util. Code 281.

28 Id.

29 Id.


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requested comments on this issue31and parties expressed both support and

opposition to changing the applicant eligibility requirement.

Parallel to this Rulemaking, the Commission sought legislation to amend

Cal. Pub. Util. Code 281 which statutorily defines the eligibility requirements of

the CASF. SB 740, which went into effect October 3, 2013, achieved that result.

Cal. Pub. Util. Code 281 now permits an entity that is not a telephone

corporation to apply to participate in the program administered by the

Commission to provide access to broadband to an unserved or underserved

household, as defined by the commission in D.12-02-015, if the entity otherwisemeets the eligibility requirements and complies with program requirements

established by the commission.32 Based on this language, the statute permits the

Commission to adopt the NTIA definition of a broadband service provider to

determine applicant eligibility. The Legislatures passage of SB 740 means that

we do not need further comment on this issue.

However, we note that some categories of eligible entities will have greater

restrictions on how they may participate because of additional provisions in

SB 740. For example, existing facilities-based providers in underserved areas will

have a right of first refusal against an entity proposing to serve that area using

CASF program funds.33 These issues will be discussed in greater detail in the

revised scoping memo.

31 R. 12-10-012 at 19.

32 740 (Padilla) Stats. 2013 Ch. 522, amending Cal. Pub. Util. Code 281.

33 Id.


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3.2. Performance Bonds

In the OIR, we asked parties to comment on the safeguards that would be

necessary if the applicant eligibility requirements were modified to permit

non-telephone corporations to participate since the Commission does not have

the same tools at its disposal to secure compliance from unregulated entities as it

does with regulated entities. In doing so, we asked commenters to take into

account the need to strike a balance between the Commissions and Legislatures

policy goals with respect to the CASF program and protecting ratepayer money

from waste, fraud, and abuse.34

Any safeguards the Commission imposesinvolve costs and constraints which, if not properly considered, may preclude

the ability to bring broadband to some parts of California.35 Thus, in making

these comments, we asked parties to discuss how each of the safeguards

proposed balances these competing objectives.36 Specifically, we asked whether

the specific rules adopted in Resolution T-17233 which were applied to

non-certificated ARRA grantees, are adequate for this purpose.37 One of the rules

adopted in Resolution T-17233 as a safeguard required non-telephone

corporation grantees to obtain a performance bond.38

34 R.12-10-012 at 22.

35 Id.

36

Id.37 Id.

38 Resolution T-17233 can be found on the Commissions website at:http://docs.cpuc.ca.gov/PublishedDocs/WORD_PDF/FINAL_RESOLUTION/109345.PDF.


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bifurcated bond requirement but only if the grantee could not obtain a

performance bond covering post project construction obligations43 Additionally,

the Small LECs suggested that if the Commission elects to use a bifurcated bond,

they would support reducing the amount of the post-construction bond to the

minimum performance bond level currently imposed on Non-Dominant

Interexchange Carriers, which is $25,000 or 10% of intrastate revenues,

whichever is greater.44 Because CASF-funded projects may include revenues

from interstate or unregulated services, the Small LECs support the use of

$25,000 rather than a percentage of intrastate revenues.45

TURN makes a similar comment, suggesting that we should first require

applicants to attempt to obtain a bond for the full project amount for five years to

cover both the construction period and the post-construction period, but if the

applicants could not obtain one, then the Commission should permit them to

obtain a bifurcated bond with a lesser bond required after construction.46 TURN

also suggests that the Commission consider a different requirement for local

governments.47 In its reply comments, TURN attempts to strike a balance

between the amount proposed by CCTA and the Office of Ratepayer Advocates

43 CCTA Opening Comments on ALJ Ruling at 2-3; Small LECs Opening Comments onALJ Ruling at 2-3.

44 Small LECs Opening Comments on ALJ Ruling at 2-3.

45 Id.

46 TURN Opening Comments on ALJ Ruling at 2-3.

47 Id.at 3-4.


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(ORA)48by suggesting a bifurcated bond with a post-construction bond that is

25% of the total grant amount.49

ORA opposes the idea of reducing the bond amount in the

post-construction phase.50 Rather, it suggests that grantees should obtain a bond

in the full amount for the entirety of the three years after construction, during

which time the Commission would be able to audit the awardees books and

records.51 However, ORA states that if the Commission were to require a bond of

a lesser amount during the post-construction phase, it should be at least 50% of

the total grant amount in order to enforce the post-construction requirements ofthe program.52 ORA also suggests that other scenarios, such as bankruptcy and

transfer of company ownership or attendant assets, should be considered before

the bond amount is reduced in the post-construction phase.53 In its reply

comments, ORA elaborates that the bond should be variable depending on the

value of the project rather than a flat rate and thus a percentage, such as

50%, should be used rather than a flat rate.54

Unfortunately, no parties commented on how a bifurcated bond

requirement should be structured since it would be necessary to ensure that an

48Formerly Division of Ratepayer Advocates (DRA)

49 Id. at 2-3.

50 ORA Opening Comments on ALJ Ruling at 3-4.

51 Id.

52 Id.

53 Id.

54 ORA Reply Comments on ALJs Ruling at 4.


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awardee has obtained or absolutely could obtain both bonds before any funds

are dispersed.

3.2.2. Discussion - Construction Phase Bond/Performance Bond

We shall implement a performance bond requirement for non-telephone

corporations to ensure complete construction of the project. Many commenters

agree with continuing to use this safeguard. We disagree with TURN and ILSR

and implement this requirement for all participants, including government

entities.

We reiterate that this bond is meant to ensure that the project is completed

in accordance with the approved grant. Although previous bonds included

some language regarding compliance with CASF program requirements, based

on Staffs research, we will remove this language to ensure that the bond we seek

is more aligned with a standard performance bond. We believe that this will

alleviate some of the difficulties non-telephone corporations previously

encountered when attempting to obtain a bond. Instead, we will enforcecompliance measures using the Commissions authority to reduce or withhold

payment during this phase of the project. We will also reserve the authority to

enforce compliance measures using the Commissions enforcement authority

pursuant to Public Utilities Code Section 2111, as discussed in Section 3.4 below.

All grantees must currently comply with a number of requirements during

the construction phase. We plan to enforce all existing requirements on newly

eligible non-telephone corporations. However, in response to ORAs concern

about sales and transfers of assets, we also add the following obligation, which

will be enforced outside of the bond requirement as mentioned above.


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Grantees must notify the Commission within five days ofdetermining that the grantee is planning to sale or transfer itsassets. The grantee shall notify the Director of the

Commissions Communications Division in writing of theirintent to sale or transfer company assets within five days ofbecoming aware of these plans. The grantee shall also providedocumentation, including an affidavit, stating that the newentity will take full responsibility and ownership to meet therequirements and compliance of the CASF award. The newentity shall agree in writing to such. The grantee shallprovide the Commission with any necessary documentsrequested in its review of the transfer. This will include all

documents that are generally required of all entities applyingfor the CASF grants and loans. The grantee shall not transferCASF funds or the built out portion of the project to the newentity prior to Commission approval via a Resolution. If theCommission does not provide approval, it will rescind thegrant or loan.

3.2.3. Discussion - Post-Construction Phase

Bond/ Compliance Bond

The Commission will not require a compliance bond during the

post-construction phase of the project from newly eligible non-telephone

corporations.

Some commenters seemed to question whether unregulated entities would

actually have trouble obtaining a bond for the post-construction phase.

However, we asked these questions in light of our past experiences where two

unregulated providers, which had obtained CASF grants after receiving ARRAfunds, subsequently decided to obtain a CPCN because of their difficulties in

obtaining a bond. In one case, the provider acquired the CPCN of one of its

affiliates because it found it was unable to obtain a performance bond that

covered both the construction and post-construction requirements of the


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is necessary for a surety to determine the level of risk it is exposing itself to,

grantees may not be able to obtain a compliance bond.

Based on the comments we received from parties and Staffs independent

research, we will not require grantees to obtain a compliance bond in the post-

construction phase. Rather, the Commission will rely on its ability to impose

penalties against non-telephone corporations in order to enforce non-compliance

with Commission rules in the post-construction phase, as discussed in

Section 3.3.

The compliance measures that the Commission will seek to enforce againstnon-telephone corporations during the post-construction phase are listed below.

We note that current participants in the CASF program are already required to

meet some of these compliance measures.

1. The grantee must carry out the adoption plan submitted aspart of its application to encourage adoption of broadbandservice in the proposed project area(s). The plan includesthe total number of households the applicant estimates will

sign up for the service (the take rate) and the marketing oroutreach plans the applicant will employ to attracthouseholds to sign up for the service.

2. The grantee must commit to a price plan to providebroadband service to all households within the project areafor at least two years. If the grantee commits to a pricecommitment plan for a longer period of time in itsapplication, it must provide the price commitment for theperiod it specifies.

3. The Commission has the right to conduct any necessaryaudit, verification, and discovery for up to three years afterthe completion of project construction to ensure thatgrantees spent CASF funds were in accordance withCommission rules and requirements. To this end, the


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Commission will have access to the grantees invoices forup to three years after completion of project construction.

4.

If a grantee provides voice services in the project area, itmust meet the FCC standards for E-911 service and batterybackup.

5. A grantee must agree to respond to all CD Staff datarequests. This may include how many households withinthe proposed project area have subscribed to the projectsdeployed broadband service.

6. A grantee must submit a copy of its Federal Form 477 datadirectly to the Commission, under General Order

66-C, when it submits its data to the FederalCommunications Commission (FCC) for a five year periodafter project completion.

7. For three years from after the date of project completion,grantees must notify the Commission within five days ofdetermining that the grantee is planning to sell or transferits assets. The grantee shall notify the Director of the CD inwriting of its intent to sell or transfer company assetswithin five days of becoming aware of these plans. The

grantee shall also provide documentation, including anaffidavit, stating that the new entity will take fullresponsibility and ownership of meeting the requirementsof and compliance with the CASF award and rules of theprogram. The new entity shall agree in writing to such.

3.3. Liquidity Requirements

As noted previously, the OIR asked parties to comment on the safeguards

that would be necessary if the eligibility requirements are modified to permit

non-telephone corporations to participate since the Commission does not have

the same tools at its disposal to secure compliance from unregulated entities as it

does with regulated entities. In addition to safeguards we had used previously

for ARRA-funded projects, we asked specifically whether there were additional


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safeguards that the Commission should consider adopting that would

appropriately strike a balance between protecting ratepayer monies and

encouraging a greater pool of applicants to apply and potentially participate in

the CASF program.

Unfortunately, parties comments provided little in the way of concrete

examples of safeguards. Thus, in the ALJs Ruling we sought comment on

whether to use a liquidity requirement to ensure that unregulated broadband

service providers receiving CASF support are capable of meeting start-up

expenses over and above those covered by a CASF grant or loan or any externalsource of funding.55 We noted that currently, CASF applicants are required to

submit information that enables the Commission to assess the applicants

financial fitness, but they are not required to meet any specific financial

requirement.56 We proposed the liquidity requirement because a similar

requirement is asked of CPCN holders at the time they apply for a CPCN and

previously, the safeguards applied to ARRA grantees attempted to create parity

between CPCN holders and unregulated entities.57 The proposed level of

liquidity was the greater of $25,000 or 10% of the total project cost in cash or cash

equivalents, capped at a total of $100,000. We asked parties to comment on

whether this amount is sufficient or excessive.58 We asked whether, for example,

this level of liquidity would be appropriate for an applicant seeking funds for a

55 ALJs Ruling Soliciting Additional Comment on Issues Identified in R.12-10-012,March 18, 2013 at 8-9.

56 Id.at 7-8.

57 Id.

58 Id.at 8-9.


25/103

R.12-10

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26/103


- 24 -

requirement is necessary for local governments and if so, whether the

Commission should require same amount of liquidity.65

ORA asks the Commission to require non-certificated entities to agree in

writing to Commission inspection of accounts, books, papers and documents

related to the application and award of CASF funds as an additional safeguard.66

Specifically, in response to the proposed liquidity requirement, ORA argues that

whether a liquidity requirement is necessary should not be tied to whether a

performance bond is required and advocates for a liquidity requirement of at

least $100,000 for two years following project construction.67

It notes that thiswould be reasonable in light of the Commissions limited jurisdiction over

unlicensed entities.68 ORA suggests that parity between telephone corporations

and non-telephone corporations is not required because of the uncertainty

surrounding the Commissions enforcement authority over non-telephone

corporations during the post-construction phase.69

Winters Broadband, a wireless internet service provider, comments that a

method to ensure ratepayer funds are not subject to waste, fraud, or abuse would

be to only grant funds to those companies who are financially viable and have a

65 Id.

66 ORA Opening Comments at 8.

67 ORA Opening Comments on ALJs Ruling at 2-3.

68 Id.

69 Id.at 5.


27/103


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29/103

R.12-10

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30/103


- 28 -

that one way to ensure that the Commission has complete authority over all

participants in the program is to condition the grant award on the recipients

agreement to abide by all the terms of the grant and submit to the Commissions

authority for purposes of compliance.77

In response to the ALJs Ruling, published March 18, 2013, which sought

comments on the use of penalties as an additional safeguard, CCTA comments

that non-telephone corporations should not be required to agree to be treated as

telephone corporations as a condition of accepting grant funds by having to

contractually agree to comply with all Commission rules and regulations.78

CCTA argues that having all rules and regulations apply would contradict the

purpose of the OIR, which is to expand eligibility.79 However, CCTA specifies

that all entities should have to comply with the rules specifically governing the

CASF program.80

ORA argued in its comments in response to the ALJ Ruling that the

Commission would need specific statutory language to ensure that the

Commission can impose penalties and can enforce the terms and conditions of

the grant post-construction.81 Thus, according to ORA, in order for the

Commission to rely on 2108 and 2111, it would need additional legislative

77 TURN Reply Comments at 5.

78 CCTA Opening Comments on ALJs Ruling at 2.

79 Id.

80 Id.

81 ORA Opening Comments on ALJs Rulingat6-8.


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authority.82 ORA also expressed concerns regarding other risks, such as the case

of a transfer of assets, where the Commission would not be able to enforce CASF

conditions.83 ORA made these comments before the Legislature passed SB 740.

Small LECs ask the Commission to clarify that its enforcement authority

applies to applicants and not just grantees.84 They assert that this will ensure that

applicants provide truthful information on applications to the Commission.85

ORA agrees with this suggestion in its reply comments and recommends that an

applicant's fiscal agent should sign an affidavit, under penalty of perjury and

subject to Rule 1.1., that to the best of their knowledge all of the statements andrepresentations made in the application are true and correct.86 As ORA notes,

this is already a requirement under the current CASF program.87

TURN argues that the Commission is able to use both contractual

obligations and regulatory authority to ensure compliance with the obligations of

its grant program.88

3.5. DiscussionThe Public Utilities Code gives the Commission the authority to penalize

non-public utilities, sets for the range of fines the Commission may impose per

82 Id.

83 Id.at 6.

84 Small LECs Opening Comments on ALJs Ruling at 4.

85 Id.

86 ORA Reply Commentson ALJs Ruling at 6-7.

87 Id.

88 TURN Reply Comments on ALJs Ruling at 4.


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offense, and defines what constitutes an offense. Pub. Util. Code 2108

provides:

Every violation of the provisions of this part or of any part ofany order, decision, decree, rule, direction, demand, orrequirement of the commission, by any corporation or personis a separate and distinct offense, and in case of a continuingviolation each day's continuance thereof shall be a separateand distinct offense.89

Pub. Util. Code 2111 states:

Every corporation or person, other than a public utility and itsofficers, agents, or employees, which or who knowinglyviolates or fails to comply with, or procures, aids or abets anyviolation of any provision of the California Constitutionrelating to public utilities or of this part, or fails to complywith any part of any order, decision, rule, direction, demand,or requirement of the commission, or who procures, aids, orabets any public utility in the violation or noncompliance, in acase in which a penalty has not otherwise been provided forthe corporation or person, is subject to a penalty of not lessthan five hundred dollars ($500), nor more than fifty thousand

dollars ($50,000) for each offense.90We conclude that 2111 permits the Commission to enforce the CASF

requirements in both the construction and the post-construction phases against

non-telephone corporations, i.e., entities which do not hold CPCNs or WIRs,

through the use of penalties. Furthermore, we conclude that 2108 permits

penalties up to $50,000 for each offense.

The Commission should not seek to treat as telephone corporations

providers that the Commission has not deemed to be telephone corporations as a

89 Cal. Pub. Util. Code 2108.

90 Cal. Pub. Util. Code 2111.


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condition of accepting grant funds. Rather, we should enforce the requirements

of the CASF program on non-telephone corporations and ensure that non-

telephone corporations follow the same rules and regulations as telephone

corporations with regard to the CASF program.

ORA comments that we would need specific statutory language to impose

penalties and enforce the terms and conditions of the grant during the

construction phase and post-construction. While we do not agree with ORAs

statement, we note that the Legislature did, indeed, grant the Commission

authority to penalize non-telephone corporation CASF applicants and grantrecipients that violate the rules of the CASF program.91 The Commission has

ancillary jurisdiction over its own public purpose programs, including the CASF

program, pursuant to SB 740, which amended Public Utilities Code 281. Thus,

we have the authority to give grants and to require applicants and grantees to

meet[s] the eligibility requirements and compl[y] with program requirements

established by the Commission to non-CPCN/WIR holders, which are not

telephone corporations.92 Because of our authority over this program and our

responsibility to ensure that ratepayer money is protected from waste, fraud and

abuse, the Commission may rely on 2111 for purposes of enforcing all the

requirements of the CASF program.

91 Section 281(e)(3) provides, in relevant part: Notwithstanding subdivision (b) ofSection 270, an entity that is not a telephone corporation shall be eligible to apply to

participate in the program administered by the commission pursuant to this section toprovide access to broadband to an unserved or underserved household, as defined incommission D.12-02-015, if the entity otherwise meets the eligibility requirements andcomplies with program requirements established by the commission.

92 Id.


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ORA also expresses concern that other risks exist, such as the transfer of

assets, where the Commission would not be able to enforce CASF conditions. We

agree that the transfer of assets may cause complications with the CASF

program. Therefore we propose that the following language be added as a

condition of accepting CASF grant funds:

For three years from project completion, grantees must notifythe Commission within five days of determining that thegrantee is planning to sell or transfer its assets. The granteeshall notify the Director of the Commissions CommunicationsDivision in writing of their intent to sale or transfer company

assets within five days of becoming aware of these plans. Thegrantee shall also provide documentation, including anaffidavit, stating that the new entity will take fullresponsibility and ownership to meet the requirements andcompliance of the CASF award. The new entity shall agree inwriting to such.

Failure to comply with this requirement, as well as all other compliance

and program requirements, may result in the Commission choosing invoke the

penalty provisions of 2111.

We agree with the Small LECs and DRA that Rule 1.1 should apply to

applicants and grantees to ensure that applicants provide truthful information on

their CASF applications and grantees provide accurate information to the

Commission. However as ORA notes, applicants are already required to sign an

affidavit, under penalty of perjury, and subject to Rule 1.1 that, to the best of

their knowledge, all of the statements and representations made in theapplication are true and correct. This requirement will continue to be in effect

for both telephone corporations and non-telephone corporations.

Additionally, in order to accurately monitor compliance with CASF

program requirements, the Commission requires grantees to timely respond to


35/103

R.12-10

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36/103


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2. The Commission issued an OIR on October 25, 2012 proposing to expand

applicant eligibility to non-CPCN/ WIR holders for the CASF program and

examining what safeguards shall be applied to these newly eligible entities.

3. The ALJs Ruling, issued March 18, 2013 sought additional comments on

the issue of safeguards.

4. CD Staffs research on bond requirements determined that a

post-construction bond requirement would be infeasible to implement.

5. Parallel to the instant rulemaking, the Legislature passed SB 740, which

expanded CASF applicant eligibility to non-telephone corporations.6. SB 740 includes additional requirements on how newly eligible entities

may participate in the CASF program.

Conclusions of Law

1. The Commission is authorized to implement measures necessary to enable

qualifying applicants to seek funding for grants and loans under the CASF

program in accordance with the provisions of SB 740.

2. Consistent with the Commissions authority under SB 740, the Commission

may award grants and loans to both telephone corporations and non-telephone

corporations.

3. The Commission has the authority to enforce the terms and conditions of

the grant awards and to impose penalties under 2111 and 2108.


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4. Rules applicable to non-telephone corporations should be adopted for

purposes of implementing the revisions to the CASF program addressed in this

decision.

O R D E R

IT IS ORDEREDthat:

1. The rules permitting non-telephone corporations to participate in the

California Advanced Services Fund (CASF) program and the rules to ensure that

funds granted to non-telephone corporations are not subject to waste, fraud and

abuse are adopted as set forth in Appendix 1 and are shown as revisions to the

current rules.

2. The remaining issues raised by Senate Bill 740 and Assembly Bill 1299 are

to be resolved in a subsequent phase of this rulemaking.

3. Rulemaking 12-10-012 remains open.

This order is effective today.

Dated , at San Francisco, California.


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APPENDIX 1

Rules permitting non-telephone corporations to participate in theCASF Program and to ensure that funds granted to non-telephone

corporations are not subject to waste, fraud and abuse

The following rules are adopted to implement the eligibility rules of Senate Bill 740 and

ensure that adequate safeguards are available to the Commission.

a. Non-telephone corporations, which are facilities-basedbroadband service providers, are eligible to apply to participatein the California Advanced Services Fund (CASF) program. TheCommission shall use the National Telecommunications andInformation Administrations (NTIA) definition of a facilities-based broadband service provider, which is generally definedas any entity providing internet access service or middle miletransport, over its own fixed or wireless facilities to residences,businesses, or other institutions.93

b. A performance bond is required during the construction phaseof the project to ensure timely completion of the project in

accordance with the existing rules of the CASF program.c. Nontelephone corporations must comply with all existing

CASF program rules.

d. In addition, nontelephone corporations must comply with thefollowing conditions:

For three years from project completion, grantees must notify the Commission withinfive days of determining that the grantee is planning to sale or transfer its assets. Thegrantee shall notify the Director of the Commissions Communications Division in

93 The NTIAs detailed definition can be found on pages 1 and 2 of the technicalappendix of the NTIAs Notice of Availability of Funds for the State Broadband Dataand Development Grant Program athttp://www.dhses.ny.gov/ocs/broadband/documents/nofa-with-technical-appendix-and-clarifications.pdf.


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APPENDIX 2

Broadband Infrastructure Grant Account

Revised Application Requirements and Guidelines


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CASF TheBroadbandInfrastructureGrantAccount

RevisedApplicationRequirementsandGuidelinesDate:November2013

Version1.0

- i -

Table of Contents

I. Background - 1 -II. Amount Available for Grants ................................................................... - 1 -III. Definitions .................................................................................................. - 3 -IV. Who May Apply ...................................................................................... - 4 -V. Information Required From Applicants ................................................ - 5 -VI. Submission and Timelines .................................................................... - 15 -VII. Proposal Checklist ................................................................................ - 18 -VIII. Scoring Criteria .................................................................................... - 18 -

IX. Selection ................................................................................................ - 23 -X. Reporting ................................................................................................ - 24 -XI. Payment ................................................................................................ - 24 -XII. Execution and Performance ................................................................. - 25 -AttachmentsAttachment A Information SheetAttachment B Application ChecklistAttachment C Notarized AffidavitAttachment D Sample Scoring Scenario Analysis


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1.

The CalCommideployto qualiservicesor satellavailablapplicainternal

On SeptcodifieincreasemillionmillionRegionaRevolvion revecalenda

On Octissued aapplicaand loawouldConseqcodifietelepho

1While rGrantthe Co

The gra

C

ackgrou

fornia Adsion on Dent of bro

ying applito areas cite; and the. Matchits with thy generate

ember 25,at Califor

d the CASo be colleco the Broal Urban Cg Loan Aues collecyear 2011

ber 25, 201n Order Int eligibilits. The Coe neededently, onat P.U. Coe corpora

.1. Am

venues ofccount, thmission

t funding

SF The

RevisedA

d

anced Sercember 20,adband infants. Therrently win second,g funds ofapplicant

d funds or

010, Goveia Publicappropri

ted after Jadband Infrnsortia Account. Thed from e.

2, the Califstituting Rrules to amission

ecause thectober 3,

de 281),ions, amo

unt Avail

$20 millioactual amust deduct

limits are a

roadban

plication

ices Fund2007, undastructure

funding ishout broauild out f

40% of totprovidingfrom exter

nor Schwtilities (P.tion fromnuary 1, 2structureount, and$125 mill

d-users an

ornia Publlemaking

low non-tcknowled

rules gove013, Govehich expag other pr

ble for

per yearunt availa

costs for a

s follows:

Infrastr

Requirem

- 1 -

(CASF), ar D.07-12

in unservused for pband accecilities inl project c60% of the

al source

rzenegger.) Code 100 millio

11 is allocrant Acc

$15 millioon will bed collected

c Utilities(OIR) R.12lephone ced in that

rning eliginor Browded the Cgram cha

rants

ill be allocble for infrministeri

ctureGr

entsand

wo year p054, provid and unojects thats or withnderservests are av

projects co.

signed SB281), whicn to $225ted to theunt, $10to the Bro

funded byat $25 mil

ommissi10-012 prrporationsOIR that aility for thsigned SBSF applic

ges.

ated to theastructureg the pro

ntAccou

uidelinesD

ogram estes matchi

erserved awill first pccess only

d areas if filable to ssts either f

1040 (Stats.expandeillion. Thollowing aillion to thadband In

a surchargion a year

n (Commiposing toto apply f

legislativee CASF ar740 (Stats.ant eligibil

Broadbangrants willram from t

t

ate:Janua

Ver

blished bg fundingeas of Cal

rovide broto dial-upnds are stccessful Com their

2010, c.31the CASFincrease

ccounts: $Rural anrastructure to be ass

eginning

sion or Change ther CASF gr

amendmein statute.

2013, ch. 5ty to inclu

Infrastrube $19 milhis accoun

y2012

ion6.0

thefor theforniadband

servicellSF

,andf $125100

ssed

UC)CASFantst

22,e non-

turelion ast.


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CASF TheBroadbandInfrastructureGrantAccount

RevisedApplicationRequirementsandGuidelinesDate:January2012

Version6.0

- 2 -

InfrastructureGrant

(% of total

project cost)

Broadband InfrastructureRevolving Loan Account

(% of total project cost

Applicant(s) Funds(% of total project

cost

A. With LoanUnserved Areas 70% 20% 10%Underserved areas 60% 20% 20%

B. Without LoanUnserved Areas 70% 0% 30%Underserved areas 60% 0% 40%

Unserved areas are eligible for a 70% CASF matching grant amount as the Commissionconsiders unserved areas as having the highest priority. Typically, these areas are totally

devoid of broadband service, are sparsely populated, and are characterized by difficultterrain and geography -- with correspondingly high broadband infrastructuredevelopment costs and thus are not financially attractive to private investors. TheCommission hopes that the higher CASF matching funds will attract private investmentsto these areas as the funds required from the private investor will only be 10-30%,(depending on whether the applicant also applies for and receives a loan from theBroadband Infrastructure revolving Loan Account).

Underserved areas are eligible for 60% CASF grants, 10% less than that allocated tounserved areas, as these areas already have broadband service and the funding from

CASF will be used to construct broadband infrastructure projects geared towardsincreasing the broadband speed to at least 6 Megabits per second (mbps) download and1.5 mbps upload.

An applicant who applies for both a grant and a loan, but who is deemed ineligible for theloan, will have to submit a new application if it intends to pursue the project and showhow it will fund 30 40 % of the total project cost.

In areas where the Commission has already awarded a CASF grant, new CASF grantfunding for broadband projects in the same area will be available only after 3 years fromthe start of broadband service of the first CASF- funded project in order to ensure thatexisting grantee(s) are able to realize returns on their investment.


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2.

An unfacilitiedial-up

An unwirelessdownloThe Coand unA Califapplicabased oinventopursuaadvertisstreet seundersebroadbpopulat

Wherefacilitieunderseprojectson theirunservebackbounderseinclude

explanafunding

94 Wireprovideprogra

C

efinition

erved are-based broservice.

erserved94facilitiesd and 1.5

missionerserved a

rnia Interat(s) in idethe mosty mappint to a Recoed speedsgment (forrved, existnd technoon in the s

broadbanin alreadrved area,are requir compliand and unde construcrved comfacilities in

tion of thephase of t

ess broadbd to houseguideline

SF The

RevisedA

a is an areadband, s

area is anbased pro

bps uplo

ill considereas, irresp

ctive Broatifying are

current infeffort. D

very Act Bre shownlarger blocng providogy offereerved and

infrastruserved, uthe projectd to subme with therserved p

tion is an iunities Th

unserved,

allocatione project.

and meansolds, busi

s set forth

roadban

plication

that is noch that Int

rea whereider offerd.

r all CASFective of t

band Mapas that arermation cta used inoadbandy census

ks). Thers in areasin servednderserv

ture mayserved ormay be cot all docu

guidelinesojects, incldispensab

e applicanunderserv

f costs an

a wirelessesses and

n this deci

Infrastr

Requirem

- 3 -

served byrnet conn

broadbanservice at

funded pre CASF fu

is postedstill unserllected as

this mapapping g

lock (for bap will sh

where broareas, currd areas.

ave to pasnderservesidered foentary re

and the evding sub

le part of twill alsod, and se

a full acc

high-speeor anchorion. Wire

ctureGr

entsand

any formctivity is a

is availabadvertised

jects in thnded proje

n the CASed and unpart of theere collectant. Availlocks 2 sqw the are

adband seent speeds

s or upgrad areas tor funding.uirementsaluation crission ofeir plan tave to prorved ar

unting of t

internet ainstitutioness broad

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f wirelinevailable on

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determincts techno

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ability andare miless served,vice is avain the serv

e existingeach a re

Applicantand will biteria applroof that treach unsrate costsas, includ

hat allocat

ccess or cos that meeand can b

t

ate:Janua

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or wirelessly through

ireline ort least 6

tion of unogy.

to assist tThis mapadbandlifornia prmaximur smaller),nserved olable, theed areas, a

broadbanote unserfor middlevaluatecable to lae backharved andhen proje

ng a detail

on at each

nnectionthe speedmobile or

y2012

ion6.0

94

bps

erved

eis

viders

and by

d

ed ore-milebasedt milel oror

ctsed

andfixed.


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For exagrant oimprov

rate theby unseonly incshouldarea, anfully exfigures

3.

CASF fNecessisectionWirelesalso avaprovideAdminiis gener

95 a) TUnserv

b) Equ$250,00

c) Com$250,00

d) Proj

e) CAS($2,000,

f) Thus$175,00

C

ple, if a ply) will coments tha

amounts rved areas

lude $250,hus ask fod $175,000lain the tosed in the

ho May

nding is ay (CPCN)34 or wirecarriers nilable to ns. The Cotrations (

ally define

tal Projectd and Ser

l proration,

on cost fx 0.70 = $

ct cost excl

funding00 x 0.70),

the applic).

SF The

RevisedA

oject (fort $2.5 millwill benef

lated to eaand by co00 in the a$1,575,00in commotal cost of tapplicatio

pply

ailable tothat qualifless carriered not obtn-telephomission sTIA) defias any en

Cost x 20%ed areas: (

of facility

nded by C75,000,

usiveof fac

f project c

ants Total

roadban

plication

n unserveon and 20it both uns

ch area. Tmunitiesplicationin CASF fcosts allohe project. 95

ntities witas a tele

s who areain a CPCe corporatall use thition of a

tity provid

equals a$2,500,000

mprovem

ASF for fa

ility impro

sts exclusi

CASF fun

Infrastr

Requirem

- 4 -

area andof those

erved and

us, if the cith broad

or facilitynds ($1,4

ated to thnd the all

h a Certifichone corp

egisteredto qualif

ons, whicNationalacilities-bing interne

ount of facx 0.20 = $5

nts: Unser

ility impr

ements e

e of faciliti

ing reques

ctureGr

entsand

the applicaosts are reserved are

ommon faand toda

improvem0,000 for cunservedcation tha

ate of Puboration aith the Cofor CASFare facilitelecommsed broadt access se

ility impro00,000),

ved area =

vements:

uals $2,00

es improv

t would b

ntAccou

uidelinesD

nt is requeated to facs, applica

ilities will, then thent costs. T

onstructioarea). Thet was mad

ic Convendefined ummissionfunding.es based bnicationsand servicvice or mi

vements b

$250,000 a

nserved a

,000 ($2,50

ments equ

$1,575,000

t

ate:Janua

Ver

sting a CAilityts should

be used epplicant she applicain the un

applicantto arrive

ence andder P.U.

i.e., hold aASF fundoadbandnd Informe providerdle mile

nefiting b

d Served

rea equals

0,000 - $50

als $1,400,

($1,400,00

y2012

ion6.0

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uallyouldt

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odeWIR).ng iserviceation, which

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00

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47/103

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submit themmary m

tion (Coiddle-Mi

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er / CPU

d/orficate of P

instructiolemakingas soon as

ctureGr

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munity /e)f Grant /

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mount of

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unities/a

ether it is

ved or un

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to sign up(R.10-12-0.

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he CASFng inform

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ion6.0

tion:

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48/103

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mes of eac

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of of CPCber

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submit thocuments

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CASF.

rst Name

st Nameddress Linddress LintyatePail

one

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one Num

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izational

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ompany

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any and

Infrastr

Requirem

- 7 -

n pending

er

et

n sheet at

Chart an

zational ch

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tached as

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ttachment

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Desc

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99This f

C

3.1.

ription of

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Casf Eligibility Proposed Decision 6jan2014

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