Report — March 28

CALIFORNIA STATE LEGISLATURE

Flexibility in Utilizing PEG Funding. Assembly Joint Resolution 39 (Hernandez) requests that Congress allow states and local municipalities to determine the best use of funding for Public, Education and Government Programming (PEG) for “any legitimate PEG channel expense.”

Pursuant to both federal and state law, in most cases, cable operators provide one percent of their gross revenues in a franchise area to support the capital costs associated with providing PEG programming. Cable operators are also required to provide, at no cost, dedicated PEG channels for PEG programming. Local municipalities argue that they currently do not have sufficient funds to operate their PEG channels and propose that the use of PEG capital funds for other PEG operational costs would help preserve the use of these PEG channels. The measure is supported by over 40 cities, counties, the League of Cities, PEG program advocates and businesses providing services to PEG operators.

The California Cable and Telecommunications Association (CCTA) is opposed to the measure for three reasons. First, PEG programming has historically been a partnership between local governments and cable operators, with each partner contributing to create and provide a service that is supposed to benefit the public at large. Cable operators also pay local governments five percent of their gross revenues as a franchise fee that can be used without restriction to cover any general government expenses, including non-capital PEG costs. And many local governments have also added a Utility Users Tax to multi-channel video services that could also be used to support PEG programming. There is simply no reason for local governments not to be able to support PEG programming.

Second, while cable and video companies support PEG programming with the provision of channels and funding, direct broadcast companies (satellite) are not required, nor do they provide any support for PEG programming, meaning one-third of the state’s video customers have no access to such programming.

Finally, there are newer technologies today that can provide cheaper and more efficient access to PEG programming. These newer technologies allow citizens, whether they are a cable customer or not, to become better connected to their communities, making exclusive access to the tools of production that PEG uses less essential. If the true vision of PEG is to provide greater access to government and local origination programming, then Congress and states cannot continue to ignore the use of newer, cheaper and more efficient technologies.

AJR 39 was heard and approved (12-0) in the Assembly Utilities and Commerce Committee this week. The measure now moves to the Assembly Floor.

Extension of California Film Tax Credit Program. Assembly Bill 1839 (Gatto) would extend through state budget fiscal year 2021-22 the income tax credit for the production of qualified motion pictures filmed in California. In addition to extending the sunset date of the program, a number of significant changes were also made to broaden the availability of the funds to other types of productions.

Currently, eligible applicants can receive a 20% tax credit on qualified expenditures for feature films with budget between $1 million and $75 million; for movies-of-the-week and mini-series with a minimum budget of $500,000; and for one-hour television series that air on basic cable channels. The current program also provides a 25% tax credit for any TV series that relocates to California. The program annually allocates $100 million to qualified production, of which $10 million is set-aside for productions made by independent companies. Finally, the current program has two more $100 million annual allocations left before those allocations sunset on July 1, 2014 and July 1, 2015.

AB 1839 was heard and approved (7-0) this week in the Assembly Committee on Arts, Entertainment, Sports, Tourism, and Internet Media Committee and was referred to the Assembly Revenue and Taxation Committee for review.

Prohibit Marketing to K-12 Students. Senate Bill 1177 (Steinberg) would prohibit K-12 online educational sites, services, and applications from compiling, sharing, or disclosing student personal information and from facilitating, marketing, or advertising to K-12 students.

According to the Author, many companies provide online services to aide classroom teaching but they require students to create accounts that capture contact data and personal academic information. In some cases, these companies are mining data from students beyond the needs of classroom for marketing purposes. Current federal and state law places the onus on schools and school districts to protect student personal information. SB 1177 would place safeguards student personal information while allowing tech industry to continue innovating educational applications.

Although not opposed, the tech industry has raised some concerns with the measure. The State Privacy and Security Coalition noted that as drafted, the bill discriminates against online services by completely exempting offline services; establishes a “one-size fits all” ban on commercially-supported education services; and includes an overly broad definition of personal information. The coalition has offered to “collaborate” with the Author to balance his interest in data protection and the industry’s interest in educational innovation.

SB 1177 was heard and approved (9-0) in the Senate Education Committee this week and was referred to the Senate Judiciary Committee.

Next Gen 911 Transition. Senate Bill 1211 (Padilla) would require the Office of Emergency Services (OES) to develop a plan and timeline of target dates for testing, implementing, and operating a Next Generation 911 emergency communication system, including text to 911 service, throughout California. The bill would also require OES, in determining the appropriate 911 surcharge rate, to additionally include costs it expects to incur, consistent with the plan and timeline to plan, test, implement, and operate Next Generation 911 technology and services. OES would also be required to annually prepare a summary of the calculation of the proposed surcharge and make it available to the Legislature and the 911 Advisory Board, and on the office’s Internet website. This bill does not increase the 911 surcharge.

California’s existing 911 system includes 458 existing 911 call centers that receive about 25 million 911 voice calls per year, with about 75 percent of all calls coming from wireless devices. The 911 program costs are paid from 911 surcharge on telephone customer bills, including landlines, wireless, and Voice over Internet Protocol (VoIP) services. Next Gen 911 refers to an Internet Protocol (IP)-based, two-way communications system that will enable real-time transmission of emergency-related voice, text, data, photos, and video between the public and public safety agencies. The federal government and states are currently preparing for this transition.

According to the Author, this bill will increase transparency and accountability for establishing the state 911 surcharge, and ensure that the fee is sufficient to fund the Next Gen upgrades necessary for 911 system, including text messages. The bill also requires coordinated planning of Next Gen 911 infrastructure with existing public safety communications systems. The bill is supported by Frontier Communications and The Utility Reform Network (TURN), There is no opposition to the measure.

SB 1211 will be heard next week in the Senate Utilities and Communications Committee on Tuesday, April 1, 2014.

Extension of California High Cost Fund A and B Programs. Senate Bill 1364 (Fuller) would extend the sunset date of the California High Cost Fund A (CHCF-A) and B (CHCF-B) programs for four years to January 1, 2019.

Current law requires the California Public Utilities Commission (CPUC) to establish and maintain several universal service programs to ensure statewide affordable telephone services and access to broadband and advanced communications services, funded by customer surcharges on landline, wireless, and Voice over Internet Protocol (VoIP) services.

The CHCF-A program supports small independent telephone companies’ provision of basic service in rural, high-cost areas of the state. The program will sunset on January 1, 2015. The CHCF-B program supports large communications providers that are Carriers of Last Resort for the provision of basic services in the high-cost portions of their service areas. This program will also sunset on January 1, 2015. According to the Author, this bill will “help maintain lower rates for rural customers” where there is no business case for providing affordable communications services.

SB 1364 will be heard next week in the Senate Utilities and Communications Committee on Tuesday, April 1, 2014.

FEDERAL UPDATE

First STELA Legislation Approved. On Tuesday, March 25, 2014, the House Subcommittee on Telecommunications approved a bi-partisan STELA reauthorization bill by voice vote. While several issues remain to be resolved the spirit of the mark-up was one of bi-partisan ship where members committed to working out their remaining differences prior to action in the full Commerce Committee which has not yet been scheduled. The primary focus of STELA is to ensure that 1.5 million satellite customers in hard-to- reach areas can receive broadcast programming from their satellite provider.

During the mark-up various amendments were offered and withdrawn so that members could express their concern about issues without holding up the process. .Representative Anna Eshoo (D-Palo Alto) the Ranking Democrat on the subcommittee offered an amendment asking the FCC to study whether blocking online access to broadcast content during a retransmission consent dispute qualified as not negotiating in good faith. She pointed to CBS’s actions of blocking online access to Time Warner Cable broadband subscribers during the companies retransmission dispute. She called retransmission payments an unsustainable business model.

The committee adopted compromise language on the set-top box integration ban which eliminates the FCC ban on integrate security on leased boxes while preserving the Commissions ability to act in this area if the Commission finds problems in the future.

NCTA President and CEO Michael Powell released a statement stating “We applaud Chairmen Upton and Walden, Ranking Members Waxman and Eshoo and the entire subcommittee for the bipartisan efforts to advance the STELA on to the full committee We are especially pleased that the committee members worked collaboratively to eliminate the FCC’s Integration Ban… We look forward to working with the full committee on this important legislation .”

On Thursday, March 27, 2014, the Senate Commerce Committee held a hearing on STELA as it gets ready to mark-up legislation. The Committee which has not yet released a draft of its legislation heard witnesses from NAB, Public Knowledge, Dish Network and the Writers Guild of America West.

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