First Regular Session Sixty-ninth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 13-0409.01 Jennifer Berman x3286SENATE BILL 13-287 SENATE SPONSORSHIP Nicholson and Brophy, Morse, Aguilar, Giron HOUSE SPONSORSHIP McLachlan and Sonnenberg, Coram Senate Committees House Committees State, Veterans, & Military Affairs A BILL FOR AN ACT Concerning telecommunications. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The high cost support mechanism reimburses some of the cost of providing telephone services to rural areas. The bill adds broadband internet service in unserved and underserved areas to the services that are reimbursable. The bill exempts voice-over-internet-protocol service and internet-protocol-enabled service from regulation by the public utilites commission (PUC) and exempts broadband service from state sales tax. It also exempts basic local exchange service from regulation in geographic areas in which the PUC has determined that effective competition exists. The bill clarifies that this exemption does not affect an entity's rights and obligations under federal law, nor does it affect the PUC's authority with respect to: Wholesale telecommunications rates; services; agreements; providers; tariffs; the resolution of disputes regarding intercarrier compensation; or oversight of the implementation of a next-generation 911 plan with regard to interoperability and performance, operational, and system standards. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 40-15-102, add (2.5), (3.2), (3.3), (3.4), (14.5), (32), (33), and (34) as follows: 40-15-102. Definitions. As used in this article, unless the context otherwise requires: (2.5) "Advanced service" means high-speed, wireline or wireless broadband capability that enables users to originate and receive high-quality voice, data, graphics, or video telecommunications using any technology. (3.2) "Broadband" or "broadband service" means broadband internet service provided over a broadband network. (3.3) "Broadband internet service" means a retail service that transmits and receives data from the customer's property to substantially all internet endpoints, including any capabilities that are incidental to and enable the operation of the broadband service. (3.4) "Broadband network" means plant, equipment, components, facilities, hardware, and software used to provide nonsatellite broadband internet service of at least four megabits per second downstream and one megabit per second upstream with: (a) Sufficiently low latency to enable the use of real-time communications, including voice-over-internet-protocol service; and (b) Either no usage limits or usage limits that are reasonably comparable to those in urban areas. (14.5) "Internet-protocol-enabled service" or "IP-enabled service" means a service, functionality, or application, other than a voice-over-internet protocol, that uses internet protocol or a successor protocol and enables an end user to send or receive a voice, data, or video communication in internet protocol format or a successor format, utilizing a broadband connection at the end user's location. (32) "Underserved area" means an area of the state that: (a) Lies outside of municipal boundaries or is a city with a population of fewer than five thousand inhabitants; and (b) Consists of two or more contiguous census blocks in which a substantial number, but not a majority, of the households lack access to a provider of a broadband network at measurable speeds of at least four megabits per second downstream and one megabit per second upstream. (33) (a) "Unserved area" means an area of the state that: (I) Lies outside of municipal boundaries or is a city with a population of fewer than five thousand inhabitants; and (II) Consists of three or more contiguous census blocks in which a majority of the households lack access to a provider of a broadband network at measurable speeds of at least four megabits per second downstream and one megabit per second upstream. (b) "Unserved area" also means any portion of a state or interstate highway corridor that lacks access to a provider of a broadband network at measurable speeds of at least four megabits per second downstream and one megabit per second upstream. (34) (a) "Voice-over-internet-protocol service" or "VoIP service" means a service that: (I) Enables real-time, two-way voice communications originating from or terminating at a user's location in internet protocol or a successor protocol; (II) Utilizes a broadband connection from the user's location; and (III) Permits a user to generally receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network. (b) A service is not a voice-over-internet-protocol service if it: (I) Uses ordinary customer premises equipment without enhanced functionality; (II) Originates and terminates on the public switched telephone network; (III) Does not undergo a net protocol conversion; and (IV) Does not provide end users with enhanced functionality based on the provider's use of internet protocol technology. SECTION 2. In Colorado Revised Statutes, 40-15-208, amend (2) (a) and (3) (a) as follows: 40-15-208. High cost support mechanism - Colorado high cost administration fund - creation - purpose - operation - rules - repeal. (2) (a) (I) The commission is hereby authorized to establish a mechanism for the support of universal service, also referred to in this section as the "high cost support mechanism", which shall operate in accordance with rules adopted by the commission. The primary purpose of the high cost support mechanism is to provide financial assistance as a support mechanism to: (A) Local exchange providers to help make basic local exchange service affordable and allow such providers to be fully reimbursed for the difference between the reasonable costs incurred in making basic service available to their customers within a rural, high cost geographic support area and the price charged for such service, after taking into account any amounts received by such providers under price support mechanisms established by the federal government and by this state; and (B) Provide access to advanced service to build broadband networks in unserved and underserved areas. (II) The high cost support mechanism may also be used, to the extent necessary, to supplement any gifts, grants, and donations received pursuant to section 24-37.5-106 (3) (f), C.R.S., in assisting the office of information technology in preparing the statewide inventory of available broadband services as provided in section 24-37.5-106 (3), C.R.S. (II) (III) The commission shall ensure that no local exchange provider is receiving funds from this or any other source that, together with local exchange service revenues, exceeds the cost of providing local exchange service to customers of such provider. The high cost support mechanism shall be supported and distributed equitably and on a nondiscriminatory, competitively neutral basis through a neutral assessment on all telecommunications service providers in Colorado. (3) (a) There is hereby created, in the state treasury, the Colorado high cost administration fund, referred to in this section as the "fund", which shall be used to reimburse the commission and its contractors for reasonable expenses incurred in the administration of the high cost support mechanism, including administrative costs incurred in association with advanced service, as determined by rules of the commission. The moneys in the fund that are to be used for the direct and indirect administrative costs incurred by the commission and its contractors shall be appropriated annually by the general assembly. At the end of any fiscal year, all unexpended and unencumbered moneys in the fund shall remain in the fund and shall not be credited or transferred to the general fund or any other fund. Based upon the high cost support mechanism, the balance remaining in the fund, and the amount appropriated annually by the general assembly for use by the commission, each year the commission shall determine the nondiscriminatory, competitively neutral assessment on all telecommunications service providers in Colorado that will be necessary to cover the cost of implementing and administering the high cost support mechanism. Only the moneys from such assessment for administering the high cost support mechanism shall be transmitted to the state treasurer, who shall credit the same to the fund. All interest derived from the deposit and investment of moneys in the fund shall remain in the fund and shall not revert to the general fund. SECTION 3. In Colorado Revised Statutes, 40-15-401, amend (1) introductory portion; and add (1) (q), (1) (r), (1) (s), and (2) as follows: 40-15-401. Services, products, and providers exempt from regulation. (1) The following products, services, and providers are exempt from regulation under this article or under the "Public Utilities Law" of the state of Colorado, except as set forth in subsection (2) of this section: (q) Voice-over-internet-protocol service; (r) Basic local exchange service in geographic areas in which the commission has determined, pursuant to section 40-15-207, that effective competition exists; and (s) IP-enabled service. (2) This section does not affect, modify, or expand: (a) The commission's authority with respect to, or an entity's rights or obligations under, sections 251 and 252 of the federal "Communications Act of 1934", as amended, 47 U.S.C. secs. 251 and 252; (b) The commission's authority over wholesale telecommunications rates, services, agreements, providers, or tariffs; (c) The commission's authority to address or resolve disputes regarding intercarrier compensation; or (d) The commission's authority to oversee the implementation of a next-generation 911 plan, coordinate system enhancements to maintain interoperability, and establish and enforce rules for performance, operational, and system standards for the operation of 911 services. SECTION 4. In Colorado Revised Statutes, 40-15-502, amend (5) (a) as follows: 40-15-502. Expressions of state policy. (5) Universal service support mechanisms. (a) In order to accomplish the goals of universal basic service, universal access to advanced service, including broadband internet service, and any revision of the definition of basic service under subsection (2) of this section, the commission shall create a system of support mechanisms to assist in the provision of such services in high-cost areas. These support mechanisms shall be funded equitably and on a nondiscriminatory, competitively neutral basis through assessments, which may include a rate element, on all telecommunications service providers in Colorado and shall be distributed equitably and on a nondiscriminatory, competitively neutral basis. For purposes of administering such support mechanisms, the commission shall divide the state into reasonably compact, competitively neutral geographic support areas. A provider's eligibility to receive support under the support mechanisms shall be conditioned upon the provider's offering basic service throughout an entire support area. The commission shall review the costs of basic service and shall administer such support mechanisms. SECTION 5. In Colorado Revised Statutes, add 40-15-509.5 as follows: 40-15-509.5. Advanced service - report - repeal. (1) The general assembly hereby finds, determines, and declares that, to promote the state policy of providing universal access to advanced service, as set forth in section 40-15-502 (4), it may be necessary to provide financial assistance through additional support mechanisms if competition for local exchange services fails to deliver advanced service in all areas of the state. (2) The commission may use the Colorado high cost support mechanism, established pursuant to section 40-15-208, for the deployment of advanced and broadband service in unserved and underserved areas of the state. The commission may fund the deployment of advanced service in unserved and underserved areas of the state through use of the high cost support mechanism surcharge and surcharge rate in effect on the date of enactment of this section. The commission may utilize only the moneys that it determines are no longer required by the high cost support mechanism to support universal basic service. Nothing in this section increases any surcharge rate charged to help fund the Colorado high cost support mechanism. (3) (a) Of the total amount of funding that the commission allocates for the deployment of advanced and broadband service pursuant to subsection (2) of this section, the commission shall deploy the funding in the following percentages of that total amount over a period of twelve years, so that: (I) In years one through six of the deployment, the commission shall make seventy-five percent of the total amount of funding deployed available for qualifying advanced service and broadband projects; and (II) In years seven through twelve of the deployment, the commission shall make fifty percent of the total amount of funding deployed available for qualifying advanced service and broadband projects. (b) The commission shall reduce the corresponding surcharge that is not utilized by advanced service and broadband projects by the appropriate amount. (4) The commission shall develop criteria for awarding moneys from the fund for projects expanding broadband internet service into unserved and underserved areas, including: (a) Developing a project application process that places the burden on the applicant to demonstrate that the applicant's proposed project meets the project eligibility criteria established pursuant to paragraph (f) of this subsection (4); (b) Developing a methodology for determining whether proposed projects will serve unserved or underserved areas; (c) Giving priority to proposed projects that will serve unserved areas; (d) Minimizing conflicts with, or duplication of, federal sources of high cost support or federal broadband grants so as to maximize the total available state and federal support for rural broadband development; (e) In underserved areas, with regard to an existing provider who has submitted a proposed project to the commission, affording the existing provider an opportunity to match any project proposed by another provider for the same underserved area; (f) Determining project eligibility criteria, including: (I) Establishing as a minimum requirement that an eligible project provide broadband internet service delivering at least four megabits per second downstream and one megabit per second upstream; (II) Requiring an eligible project to demonstrate that it will utilize a cost-effective method for expanding broadband internet service into unserved and underserved areas; and (III) Requiring an eligible project to utilize the funding for capital development purposes only; and (g) Establishing reporting requirements for projects receiving financial support from the fund. (5) The commission shall report annually to the transportation and energy committee in the house of representatives and the agriculture, natural resources, and energy committee in the senate, or their successor committees, on the projects supported by moneys from the fund in a given year, including information on: (a) The number of projects; (b) The location of each project; (c) The amount of funding received for each project; and (d) A description of each project. (6) This section does not subject any broadband provider or broadband service to regulation by the commission other than for the limited purposes provided in this section and only for broadband providers that apply for or receive support from the high cost support mechanism. (7) This section is repealed, effective July 1 of the twelfth year following the year in which the director of the commission files written certification with the revisor of statutes that the commission has allocated money from the Colorado high cost support mechanism for advanced service. SECTION 6. In Colorado Revised Statutes, add 39-26-709.5 as follows: 39-26-709.5. Telecommunications provider. Beginning July 1, 2015, the provision of broadband service, as defined in section 40-15-102 (3.2), C.R.S., into an unserved area, as defined in section 40-15-102 (33), C.R.S., is exempt from taxation under part 1 of this article. SECTION 7. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.