Bill Text: CA AB41 | 2023-2024 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Telecommunications: The Digital Equity in Video Franchising Act of 2023.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Vetoed) 2024-02-01 - Consideration of Governor's veto stricken from file. [AB41 Detail]

Download: California-2023-AB41-Amended.html

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Amended  IN  Senate  July 13, 2023

Amended  IN  Senate  June 29, 2023

Amended  IN  Senate  June 21, 2023

Amended  IN  Assembly  May 18, 2023

Amended  IN  Assembly  April 26, 2023

Amended  IN  Assembly  April 07, 2023

Amended  IN  Assembly  March 14, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 41

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Introduced by Assembly Member Holden
(Coauthors: Assembly Members Connolly and Wilson)

December 05, 2022

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An act to amend Sections 5800, 5810, 5820, 5830, 5840, 5850, 5860, 5890, 5895, and 5900 of, to amend the heading of Division 2.5 (commencing with Section 5800) of, and to add Sections Section 5841 and 5842 to, the Public Utilities Code, relating to telecommunications.

LEGISLATIVE COUNSEL'S DIGEST

AB 41, as amended, Holden. Telecommunications: The Digital Equity in Video Franchising Act of 2023.

The Digital Infrastructure and Video Competition Act of 2006 establishes a procedure for the Public Utilities Commission to issue state franchises for the provision of video service, defined as video programming services, cable service, or open-video system service, except any video programming provided by a commercial mobile service provider, as defined in federal law, or video programming provided as part of, and via, a service that enables users to access content, information, email, or other services offered over the public internet. The act provides that the holder of a state franchise is not a public utility as a result of providing video services and that the act does not authorize the commission to regulate the rates, terms, and conditions of video service, except as explicitly set forth in the act. The act establishes a state franchise fee to be remitted to a local entity based on the franchiseholder’s gross revenues, as defined, derived from the provision of cable or video service within that jurisdiction. The act prohibits a cable operator or video service provider that has been granted a state franchise from discriminating against, or denying access to service to, any group of potential residential subscribers because of the income of the residents in the local area in which the group resides. The act limits the maximum fine that could be assessed for a violation of the access requirement. resides, as specified.

This bill would revise and recast the Digital Infrastructure and Video Competition Act of 2006 to, among other things, rename the act as the Digital Equity in Video Franchising Act of 2023, provide that the act does not authorize the commission to regulate the rates of video services, and authorize the commission to exercise the authority, jurisdiction, and powers authorized to be exercised by a franchise authority pursuant to certain federal law, as specified. The bill would require the commission to hold a public hearing related to each application for renewal of a state franchise, require the commission to conduct any hearings and issue a state franchise or a reject each application for a state franchise not more than 90 120 days after the public hearing, if required, or after the commission has deemed the application is deemed complete, as specified, require a franchise applicant to submit a description of the households that are known to be unserved in the video service area footprint that the applicant proposes to serve, and extend deadlines related to the commission’s review of applications for state franchises.

This bill also would require the commission to require video service providers to make video service available to all residences in its service area within 5 years of the issuance of a state-issued franchise renewal, except as specified, and would revise the revenues excluded from the definition of “gross revenue” for purposes of calculating the franchise fee for a local jurisdiction. The bill would establish a policy of the state that subscribers and potential subscribers of a state video franchiseholder should benefit from equal access, as defined, to video service within the franchise service area, expand the prohibition on certain cable operators or video service providers from discriminating against, or denying access to service to, any group of potential residential subscribers to include discrimination or denial of equal access because of any rationale, rather than only because of the income of the residents in the local area in which the group resides, and increase the maximum amount of a fine that could be assessed for a violation of the equal access requirement, access, as specified. The bill would require the commission to enforce customer service requirements for a holder of a state franchise and would increase the maximum amount of a penalty that a local entity may assess against a holder of a state franchise that materially breaches specified video service customer service and consumer protection standards. franchise.

Under existing law, a violation of any order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because a violation of a commission action implementing this bill’s requirements would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 The heading of Division 2.5 (commencing with Section 5800) of the Public Utilities Code is amended to read:

DIVISION 2.5. THE DIGITAL EQUITY IN VIDEO FRANCHISING ACT OF 2023

SEC. 2.

 Section 5800 of the Public Utilities Code is amended to read:

5800.

 This act shall be known, and may be cited, as the Digital Equity in Video Franchising Act of 2023.

SEC. 3.

 Section 5810 of the Public Utilities Code is amended to read:

5810.

 (a) The Legislature finds and declares all of the following:

(1) The Digital Infrastructure and Video Competition Act of 2006 (DIVCA), as enacted by Chapter 700 of the Statutes of 2006, drastically changed the cable and video service market in California by, among other things, granting the commission sole video franchising authority in the state, a power previously held by local governments.

(2) The monumental changes to public policy in DIVCA were intended to increase competition in the cable and video service sector, speed the deployment of new communications and broadband technologies, and provide consumers with more choices and lower prices on cable video and broadband services.

(3) DIVCA has fallen short of its intended outcomes, as demonstrated by all of the following:

(A) Thousands of California households still lack access to video or broadband service, including households that are within the existing service territories of state video franchiseholders.

(B) About 87 percent of California households only have access to two or fewer choices of internet service providers, which indicates a concentrated and noncompetitive market, according to independent analysis of state broadband availability data published by Valley Vision.

(C) The lack of competition in the video and broadband service market contributes to exorbitant prices that prevent low-income households from subscribing to service from a state video franchiseholder.

(D) There is evidence to suggest that some state video franchiseholders discriminate against low-income communities in providing access to video and broadband services, according to research published in conjunction with the Annenberg School for Communication and Journalism at the University of Southern California.

(E) Despite the state and federal governments making monetary incentives available to construct broadband infrastructure for unserved households, some state video franchiseholders choose not to participate, leaving households in their service territories without access to video or broadband service.

(4) Updates to DIVCA are needed to ensure both of the following:

(A) The commission can exercise its full legal authority to regulate the video service market, as the sole franchising authority in the state.

(B) State video franchiseholders are held to the highest legal and customer service standards as a condition of being granted the privilege of a state video franchise.

(5) Legislation to accomplish the goals described in this subdivision should adhere to all of the following principles:

(A) Create a fair and level playing field for all market competitors that does not disadvantage or advantage one service provider over another.

(B) Promote widespread access to the most technologically advanced cable and video services to all California communities in a nondiscriminatory and equitable manner, regardless of socioeconomic status.

(C) Protect local government revenues and control of public rights-of-way.

(D) Require market participants to comply with all applicable consumer protection laws.

(E) Complement efforts to increase investment in broadband infrastructure and close the digital divide.

(F) Continue access to and maintenance of the public, education, and government (PEG) channels.

(G) Affirm the existing authority of the commission as established in state and federal law.

(b) It is the intent of the Legislature that a video service provider shall pay as rent a franchise fee to the local entity in whose jurisdiction service is being provided for the continued use of streets, public facilities, and other rights-of-way of the local entity to provide service. The Legislature recognizes that local entities should be compensated for the use of the public rights-of-way and that the franchise fee is intended to compensate them in the form of rent or a toll, similar to that which the court found to be appropriate in Santa Barbara County Taxpayers Association v. Board of Supervisors for the County of Santa Barbara (1989) 209 Cal.App.3d 940.

(c) It is the intent of the Legislature that collective bargaining agreements be respected.

(d) It is the intent of the Legislature that the definition of gross revenues in this division shall result in local entities maintaining their level of revenue from franchise fees existing as of January 1, 2007.

SEC. 4.

 Section 5820 of the Public Utilities Code is amended to read:

5820.

 (a) This division does not create a vested right in a state-issued franchise by the franchiseholder or its affiliates that precludes the state from amending the terms and conditions of a franchise.

(b) This division does not eliminate or reduce a telephone corporation’s or video service provider’s obligations under any applicable state or federal environmental protection laws. The local entity shall serve as the lead agency for any environmental review under this division and may impose conditions to mitigate environmental impacts of the applicant’s use of the public rights-of-way that may be required pursuant to the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code).

(c) As provided in federal law, the holder of a state franchise is not a public utility as a result of providing video service under this division. This division does not grant the commission authority to regulate the rates rates, terms, and conditions of video services. services, except as explicitly set forth in this division.

SEC. 5.

 Section 5830 of the Public Utilities Code is amended to read:

5830.

 For purposes of this division, the following definitions apply:

(a) “Broadband” means any service defined as broadband in the most recent Federal Communications Commission inquiry pursuant to Section 706 of the Telecommunications Act of 1996 (Public Law 104-104).

(b) “Cable operator” means any person or group of persons that does either of the following:

(1) Provides cable service over a cable system and directly, or through one or more affiliates, owns a significant interest in a cable system.

(2) Otherwise controls or is responsible for, through any arrangement, the management and operation of a cable system, as set forth in Section 522(5) of Title 47 of the United States Code.

(c) “Cable service” means both of the following:

(1) The one-way transmission to subscribers of either video programming or other programming service.

(2) Subscriber interaction, if any, that is required for the selection or use of video programming or other programming service, as set forth in Section 522(6) of Title 47 of the United States Code.

(d) “Cable system” is defined as set forth in Section 522(7) of Title 47 of the United States Code.

(e) “Franchise” means an initial authorization, or renewal of an authorization, issued by a franchising entity, regardless of whether the authorization is designated as a franchise, permit, license, resolution, contract, certificate, agreement, or otherwise, that authorizes the construction and operation of any network in the right-of-way capable of providing video service to subscribers.

(f) “Franchise fee” means the fee adopted pursuant to Section 5841.

(g) “Holder” or “holder of a state franchise” means a person or group of persons that has been issued a state franchise from the commission pursuant to this division.

(h) “Incumbent cable operator” means a cable operator or OVS operator serving subscribers under a franchise in a particular city, county, or city and county franchise area on January 1, 2007.

(i) “Local entity” means any city, county, city and county, or joint powers authority within the state within whose jurisdiction a holder of a state franchise under this division may provide cable service or video service.

(j) “Local franchising entity” means the city, county, city and county, or joint powers authority entitled to require franchises and impose fees on cable operators, as set forth in Section 53066 of the Government Code.

(k)  “Network” means a component of a facility that is wholly or partly physically located within a public right-of-way and that is used to provide video service, cable service, voice service, or data services.

(l) “Open-video system” or “OVS” means those services set forth in Section 573 of Title 47 of the United States Code.

(m) “OVS operator” means any person or group of persons that does either of the following:

(1) Provides cable service over an open-video system directly or, through one or more affiliates, owns a significant interest in an open-video system.

(2) Otherwise controls or is responsible for, through any arrangement, the management of an open-video system.

(n) “Public rights-of-way” means the area along and upon any public road or highway, or along or across any of the waters or lands within the state.

(o) “State franchise” means a franchise that is issued pursuant to this division.

(p) “Subscriber” means a person who lawfully receives video service from the holder of a state franchise for a fee.

(q) “Video programming” means programming provided by, or generally considered comparable to programming provided by, a television broadcast station, as set forth in Section 522(20) of Title 47 of the United States Code.

(r) “Video service” means video programming services, cable service, or OVS service provided through facilities located at least in part in public rights-of-way without regard to delivery technology, including internet protocol or other technology. This definition does not include any (1) video programming provided by a provider of commercial mobile service, as defined in Section 332(d) of Title 47 of the United States Code, or (2) video programming provided as part of, and via, a service that enables users to access content, information, email, or other services offered over the public internet.

(s) “Video service provider” means an entity providing video service.

SEC. 6.

 Section 5840 of the Public Utilities Code is amended to read:

5840.

 (a) (1) The commission is the sole franchising authority for a state franchise to provide video service under this division.

(2) A local franchising entity or other local entity of the state shall not require the holder of a state franchise to obtain a separate franchise or otherwise impose any requirement on any holder of a state franchise, except as expressly provided in this division.

(3) Sections 53066, 53066.01, 53066.2, and 53066.3 of the Government Code do not apply to a holder of a state franchise.

(b)The commission may exercise the authority, jurisdiction, and powers authorized to be exercised by a franchise authority pursuant to Subchapter V-A (commencing with Section 521) of Chapter 5 of Title 47 of the United States Code. The commission’s authorization to exercise that authority, jurisdiction, and powers pursuant to this subdivision shall not exceed the authority, jurisdiction, and powers necessary to enforce this division.

(b) The application process described in this section and the authority granted to the commission under this section shall not exceed the provisions set forth in this section.

(c) A person or corporation who seeks to provide video service in this state for which a franchise has not already been issued, after January 1, 2008, shall file an application for a state franchise with the commission. The commission may impose a fee on the applicant that shall not exceed the actual and reasonable costs of processing the application and shall not be levied for general revenue purposes.

(d) A person or corporation shall not be eligible for a state-issued franchise, including a franchise obtained from renewal or transfer of an existing franchise, if that person or corporation is violating any final nonappealable order relating to either the Cable Television and Video Provider Customer Service and Information Act (Article 3.5 (commencing with Section 53054) of Chapter 1 of Part 1 of Division 2 of Title 5 of the Government Code) or the Video Customer Service Act (Article 4.5 (commencing with Section 53088) of Chapter 1 of Part 1 of Division 2 of Title 5 of the Government Code).

(e) (1)A holder of a state franchise that is seeking a renewal of its state franchise shall submit an application to the commission requesting renewal of its state franchise.

(2)The commission shall review each submitted application consistent with Section 546 of Title 47 of the United States Code.

(f) The application for a state franchise shall be made on a form prescribed by the commission and shall include, at a minimum, all of the following:

(1) A sworn affidavit, signed under penalty of perjury by an officer or another person authorized to bind the applicant, that affirms all of the following:

(A) That the applicant has filed or will timely file with the Federal Communications Commission all forms required by the Federal Communications Commission before offering cable service or video service in this state.

(B) That the applicant or its affiliates agrees to comply with all federal and state statutes, rules, and regulations, including, but not limited to, all of the following:

(i) A statement that the applicant will not discriminate in the provision of video or cable services as provided in Section 5890.

(ii) A statement that the applicant will abide by all applicable consumer protection laws and rules.

(iii) A statement that the applicant will remit the fee required by subdivision (a) of Section 5860 to the local entity.

(iv) A statement that the applicant will provide PEG channels and the required funding as required by Section 5870.

(C) That the applicant agrees to comply with all lawful city, county, or city and county regulations regarding the time, place, and manner of using the public rights-of-way, including, but not limited to, payment of applicable encroachment, permit, and inspection fees.

(D) That the applicant will concurrently deliver a copy of the application to any local entity where the applicant will provide service.

(2) The applicant’s legal name, any name under which the applicant does or will do business in this state, and contact information for the individual responsible for ongoing communications between the commission and the applicant.

(3) The address and telephone number of the applicant’s principal place of business, and the contact information for the person responsible for ongoing communications with the commission.

(4) The names and titles of the applicant’s principal officers.

(5) The legal name, address, and telephone number of the applicant’s parent company, if any.

(6) A description of the video service area footprint that is proposed to be served, as identified by a collection of United States Census Bureau Block numbers (13 digit) or a geographic information system digital boundary meeting or exceeding national map accuracy standards. This description shall include the socioeconomic status information of all residents within the service area footprint.

(7)A description of the households that are known to be unserved in the video service area footprint that the applicant proposes to serve.

(8)

(7) If the applicant is a telephone corporation or an affiliate of a telephone corporation, as defined in Section 234, a description of the territory in which the company provides telephone service. The description shall include socioeconomic status information of all residents within the telephone corporation’s service territory.

(9)

(8) The expected date for the deployment of video service in each of the areas identified in paragraph (6).

(10)

(9) Adequate assurance that the applicant possesses the financial, legal, and technical qualifications necessary to construct and operate the proposed system and promptly repair any damage to the public right-of-way caused by the applicant. To accomplish these requirements, the commission may require a bond.

(g) The commission may require a corporation with wholly owned subsidiaries or affiliates to be eligible only for a single state-issued franchise and prohibit the holding of multiple franchises through separate subsidiaries or affiliates. The commission may establish procedures for a holder of a state-issued franchise to amend its franchise to reflect changes in its service area.

(h) (1) The commission shall notify an applicant for a state franchise and any affected local entities whether the applicant’s application is complete or incomplete before the 60th calendar day after the applicant submits the application.

(2) If the commission finds that the application is incomplete, it shall specify with particularity the items in the application that are incomplete and permit the applicant to amend the application to cure any deficiency. The commission shall have 30 calendar days from the date the application is amended to determine its completeness.

(3) The failure of the commission to notify the applicant of the completeness of the application before the 60th calendar day after receipt of an application shall be deemed to constitute issuance of the certificate applied for without further action on behalf of the applicant.

(4)(A)Not more than 120 days after an application for renewal of a state franchise is deemed complete, the commission shall hold a public hearing to identify unserved households in the service area proposed to be served, proposed upgrades to the cable system, and service quality and reliability information.

(B)A public hearing is not required for a new application for a state franchise.

(5)(A)

(4) For purposes of an application for renewal of a state franchise and issuance of a new state franchise, if the applicant has complied with subdivision (f), the commission shall conduct any hearings and issue a the state franchise or reject the application not more than 90 120 days after the public hearing required pursuant to paragraph (4). commission has deemed that application complete.

(B)For purposes of a new application for a state franchise, if the applicant has complied with subdivision (f), the commission shall issue a state franchise or reject the application not more than 90 days after the application is deemed complete.

(i) The state franchise issued by the commission shall contain all of the following:

(1) A grant of authority to provide video service in the service area footprint requested in the application.

(2) A grant of authority to use the public rights-of-way, in exchange for the franchise fee adopted under Section 5841, in the delivery of video service, subject to state law.

(3) A statement that the grant of authority is subject to lawful operation of the cable service or video service by the applicant or its successor in interest.

(4) Terms imposed on the franchiseholder as a condition of holding the state franchise, including required upgrades to the cable system.

(j) The state franchise issued by the commission may be terminated by the video service provider by submitting at least 90 days prior written notice to subscribers, local entities, and the commission.

(k) It is unlawful to provide video service without a state or locally issued franchise.

(l) Subject to the notice requirements of this division, a state franchise may be transferred to a successor in interest of the holder to which the certificate is originally granted if the transferee first submits all of the information required of the applicant by this section to the commission and complies with Section 5970.

(m) In connection with, or as a condition of, receiving a state franchise, the commission shall require a holder to notify the commission and any applicable local entity within 14 business days of any of the following changes involving the holder of the state franchise:

(1) Any transaction involving a change in the ownership, operation, control, or corporate organization of the holder, including a merger, an acquisition, or a reorganization.

(2) A change in the holder’s legal name or the adoption of, or change to, an assumed business name. The holder shall submit to the commission a certified copy of either of the following:

(A) The proposed amendment to the state franchise.

(B) The certificate of assumed business name.

(3) A change in the holder’s principal business address or in the name of the person authorized to receive notice on behalf of the holder.

(4) Any transfer of the state franchise to a successor in interest of the holder. The holder shall identify the successor in interest to which the transfer is made.

(5) The termination of any state franchise issued under this division. The holder shall identify both of the following:

(A) The number of subscribers in the service area covered by the state franchise being terminated.

(B) The method by which the holder’s subscribers were notified of the termination.

(6) A change in one or more of the service areas of the holder of a state franchise pursuant to this division. The holder shall describe the new boundaries of the affected service areas after the proposed change is made.

(n) Before offering video service in a local entity’s jurisdiction, the holder of a state franchise shall notify the local entity that the video service provider will provide video service in the local entity’s jurisdiction. The notice shall be given at least 10 days, but no more than 60 days, before the video service provider begins to offer service.

(o) A video service provider that holds a franchise with a local franchising entity as of January 1, 2007, may seek a state franchise in the service area designated in that franchise upon meeting either of the following conditions:

(1) The expiration, before any renewal or extension, of its local franchise.

(2) A mutually agreed upon date set by the local franchising entity and video service provider to terminate the franchise provided in writing by both parties to the commission.

(p) When a video service provider that holds a state franchise provides the notice required pursuant to subdivision (n) to a local entity that it intends to initiate providing video service in all or part of the local entity’s jurisdiction, a video service provider operating under a franchise issued by a local franchising entity may elect to obtain a state franchise to replace its locally issued franchise. The franchise issued by the local franchising entity shall terminate and be replaced by a state franchise when the commission issues a state franchise for the video service provider that includes the entire service area served by the video service provider and the video service provider notifies the local entity that it will begin providing video service in that service area under a state franchise.

(q) Notwithstanding any rights to the contrary, an incumbent cable operator opting into a state franchise under this section shall continue to serve all areas as required by its local franchise agreement existing on January 1, 2007, until that local franchise otherwise would have expired. However, an incumbent cable operator that is also a telephone corporation with less than 1,000,000 telephone customers in California and is providing video service in competition with another incumbent cable operator shall not be required to provide service beyond the area in which it is providing video service as of January 1, 2007.

SEC. 7.

 Section 5841 is added to the Public Utilities Code, to read:

5841.

 (a) There is hereby adopted a state franchise fee payable as rent or a toll for the use of the public rights-of-way by holders of a state franchise issued pursuant to this division. The amount of the state franchise fee shall be 5 percent of gross revenues, as defined in subdivision (d) of Section 5860, or the percentage applied by the local entity to the gross revenue of the incumbent cable operator, whichever is less. If there is no incumbent cable operator or upon the expiration of the incumbent cable operator’s franchise, the amount of the state franchise fee shall be 5 percent of gross revenues, as defined in subdivision (d) of Section 5860, unless the local entity adopts an ordinance setting the amount of the franchise fee at less than 5 percent.

(b) (1) The state franchise fee shall apply equally to all video service providers in the local entity’s jurisdiction.

(2) Notwithstanding paragraph (1), if the video service provider is leasing access to a network owned by a local entity, the local entity may set a franchise fee for access to the network different from the franchise fee charged to a video service provider for access to the rights-of-way to install its own network.

SEC. 8.Section 5842 is added to the Public Utilities Code, to read:

5842.

(a)Except as specified in subdivision (b) or (c), consistent with Section 543 of Title 47 of the United States Code, the commission shall require a video service provider, if its application for renewal is issued, to do both of the following:

(1)Within three years of the issuance of a state-issued franchise renewal, make service available to all residences in its service area where there is a minimum density of at least 25 residences per linear mile of cable as measured from the provider’s closest technologically feasible tie-in point that is actively delivering video service.

(2)Within five years of the issuance of a state-issued franchise renewal, make video service available to all residences in its service area.

(b)Notwithstanding subdivision (a), a franchiseholder shall not be required to provide service due to factors that are beyond its control as described in subdivision (d) of Section 5890.

(c)Notwithstanding subdivision (a), if the commission determines that it is unreasonable for a franchiseholder to provide service to a portion of its service area due to the number of residences that would be served, the franchiseholder shall not be required to provide service to that portion of its service area. The commission shall establish a process by which a franchiseholder may request the commission to make that determination and, upon receiving such a request, shall timely make that determination.

SEC. 9.SEC. 8.

 Section 5850 of the Public Utilities Code is amended to read:

5850.

 (a) A state-issued franchise shall only be valid for 10 years after the date of issuance. The holder may apply for a renewal of the state franchise for an additional 10-year period to continue to provide video services in the area covered by the franchise.

(b) Except as provided in this section, the criteria and process described in Section 5840 shall apply to a renewal registration.

(c) Renewal of a state franchise shall be consistent with federal law and regulations.

(d) The commission shall not renew the franchise if the video service provider is violating any final nonappealable court order issued pursuant to this division.

SEC. 10.SEC. 9.

 Section 5860 of the Public Utilities Code is amended to read:

5860.

 (a) The holder of a state franchise that offers video service within the jurisdiction of the local entity shall calculate and remit to the local entity a state franchise fee, adopted pursuant to Section 5841, as provided in this section. The obligation to remit the franchise fee to a local entity begins immediately upon provision of video service within that local entity’s jurisdiction. However, the remittance shall not be due until the time of the first quarterly payment required under subdivision (h) that is at least 180 days after the provision of video service began. The fee remitted to a city or city and county shall be based on gross revenues, as defined in subdivision (d), derived from the provision of video service within that jurisdiction. The fee remitted to a county shall be based on gross revenues earned within the unincorporated area of the county. A fee under this section shall not become due unless the local entity provides documentation to the holder of a state franchise supporting the percentage paid by the incumbent cable operator serving the area within the local entity’s jurisdiction. The fee remitted to the local entity pursuant to this section may be used by the local entity for any lawful purpose.

(b) The state franchise fee shall be a percentage of the holder’s gross revenues, as defined in subdivision (d).

(c) A local entity or any other political subdivision of this state shall not demand any additional fees or charges or other remuneration of any kind from the holder of a state franchise based solely on its status as a provider of video or cable services other than as set forth in this division and shall not demand the use of any other calculation method or definition of gross revenues. However, this section does not limit a local entity’s ability to impose utility user taxes and other generally applicable taxes, fees, and charges under other applicable state laws that are applied in a nondiscriminatory and competitively neutral manner.

(d) For purposes of this section, the term “gross revenues” means all revenue actually received by the holder of a state franchise, as determined in accordance with generally accepted accounting principles, that is derived from the operation of the holder’s network to provide cable or video service within the jurisdiction of the local entity, including all of the following:

(1) All charges billed to subscribers for any and all cable service or video service provided by the holder of a state franchise, including all revenue related to programming provided to the subscriber, equipment rentals, late fees, and insufficient fund fees.

(2) Franchise fees imposed on the holder of a state franchise by this section that are passed through to, and paid by, the subscribers.

(3) Compensation received by the holder of a state franchise that is derived from the operation of the holder’s network to provide cable service or video service with respect to commissions that are paid to the holder of a state franchise as compensation for promotion or exhibition of any products or services on the holder’s network, such as a “home shopping” or similar channel, subject to paragraph (4) of subdivision (e).

(4) A pro rata portion of all revenue derived by the holder of a state franchise or its affiliates pursuant to compensation arrangements for advertising derived from the operation of the holder’s network to provide video service within the jurisdiction of the local entity, subject to paragraph (1) of subdivision (e). The allocation shall be based on the number of subscribers in the local entity divided by the total number of subscribers in relation to the relevant regional or national compensation arrangement.

(e) For purposes of this section, the term “gross revenue” set forth in subdivision (d) does not include any of the following:

(1) Amounts not actually received, even if billed, such as bad debt, refunds, rebates, or discounts to subscribers or other third parties, except that forgone revenue chosen not to be received in exchange for trades, barters, services, or other items of value shall be included in gross revenue.

(2) Revenues received by any affiliate or any other person in exchange for supplying goods or services used by the holder of a state franchise to provide cable services or video services. However, revenue received by an affiliate of the holder from the affiliate’s provision of cable or video service shall be included in gross revenue as follows:

(A) To the extent that treating the revenue as revenue of the affiliate, instead of revenue of the holder, would have the effect of evading the payment of fees that would otherwise be paid to the local entity.

(B) The revenue is not otherwise subject to fees to be paid to the local entity.

(3) Revenue derived from services classified as noncable services or nonvideo services under federal law, including, but not limited to, revenue derived from telecommunications services and information services, other than cable services or video services, and any other revenues attributed by the holder of a state franchise to noncable services or nonvideo services in accordance with Federal Communications Commission rules, regulations, standards, or orders.

(4) Revenue paid by subscribers to “home shopping” or similar networks directly from the sale of merchandise through any home shopping channel offered as part of the cable services or video services. However, commissions or other compensation paid to the holder of a state franchise by “home shopping” or similar networks for the promotion or exhibition of products or services shall be included in gross revenue.

(5) Revenue from the sale of cable services or video services for resale in which the reseller is required to collect a fee similar to the franchise fee from the reseller’s subscribers.

(6) Amounts billed to, and collected from, subscribers to recover any tax, fee, or surcharge imposed by any governmental entity on the holder of a state franchise, including, but not limited to, sales and use taxes, gross receipts taxes, excise taxes, utility users taxes, public service taxes, communication taxes, and any other fee not imposed by this section.

(7) Revenue from the sale of capital assets or surplus equipment not used by the purchaser to receive cable services or video services from the seller of those assets or surplus equipment.

(8) Revenue from directory or internet advertising revenue, including, but not limited to, yellow pages, white pages, banner advertisement, and electronic publishing.

(9) Revenue received as reimbursement by programmers of specific, identifiable marketing costs incurred by the holder of a state franchise for the introduction of new programming.

(10) Security deposits received from subscribers, excluding security deposits applied to the outstanding balance of a subscriber’s account and thereby taken into revenue.

(f) For purposes of this section, in the case of a video service that may be bundled or integrated functionally with other services, capabilities, or applications, the state franchise fee shall be applied only to the gross revenue, as defined in subdivision (d), attributable to video service. Where the holder of a state franchise or any affiliate bundles, integrates, ties, or combines video services with nonvideo services creating a bundled package, so that subscribers pay a single fee for more than one class of service or receive a discount on video services, gross revenues shall be determined based on an equal allocation of the package discount, that is, the total price of the individual classes of service at advertised rates compared to the package price, among all classes of service comprising the package. The holder’s offering a bundled package shall not be deemed a promotional activity. If the holder of a state franchise does not offer any component of the bundled package separately, the holder of a state franchise shall declare a stated retail value for each component based on reasonable comparable prices for the product or service for the purpose of determining franchise fees based on the package discount.

(g) For purposes of determining gross revenue under this division, a video service provider shall use the same method of determining revenues under generally accepted accounting principles as that which the video service provider uses in determining revenues for the purpose of reporting to national and state regulatory agencies.

(h) The state franchise fee shall be remitted to the applicable local entity quarterly, within 45 days after the end of the quarter for that calendar quarter. Each payment shall be accompanied by a summary explaining the basis for the calculation of the state franchise fee. If the holder does not pay the franchise fee when due, the holder shall pay a late payment charge at a rate per year equal to the highest prime lending rate during the period of delinquency, plus 1 percent. If the holder has overpaid the franchise fee, it may deduct the overpayment from its next quarterly payment.

(i) Not more than once annually, a local entity may examine the business records of a holder of a state franchise to the extent reasonably necessary to ensure compensation in accordance with this section. The holder shall keep all business records reflecting any gross revenues, even if there is a change in ownership, for at least four years after those revenues are recognized by the holder on its books and records. If the examination discloses that the holder has underpaid franchise fees by more than 5 percent during the examination period, the holder shall pay all of the reasonable and actual costs of the examination. If the examination discloses that the holder has not underpaid franchise fees, the local entity shall pay all of the reasonable and actual costs of the examination. In every other instance, each party shall bear its own costs of the examination. Any claims by a local entity that compensation is not in accordance with subdivision (a), and any claims for refunds or other corrections to the remittance of the holder of a state franchise, shall be made within three years and 45 days of the end of the quarter for which compensation is remitted, or three years from the date of the remittance, whichever is later. Either a local entity or the holder may, in the event of a dispute concerning compensation under this section, bring an action in a court of competent jurisdiction.

(j) The holder of a state franchise may identify and collect the amount of the state franchise fee as a separate line item on the regular bill of each subscriber.

SEC. 11.SEC. 10.

 Section 5890 of the Public Utilities Code is amended to read:

5890.

 (a) It is the policy of the State of California that subscribers and potential subscribers of a state video franchiseholder should benefit from equal access to video service within the franchise service area, regardless of income level.

(b) A cable operator or video service provider that has been granted a state franchise under this division shall not discriminate against or deny equal access to service to any group of potential residential subscribers. subscribers based on the income of the area in which the group resides.

(c)(1)Holders or their affiliates satisfy subdivision (b) if both of the following conditions are met:

(A)Within three years after it begins providing video service under this division, at least 50 percent of households in low-income communities within its service territory have access to the holder’s video service.

(B)Within five years after it begins providing video service under this division and continuing thereafter, 100 percent of households in low-income communities within its service territory have access to the holder’s video service.

(2)Holders or their affiliates with fewer than 250,000 telephone customers in California satisfy the requirements of this section if they offer video service to all customers within their telephone service area within a reasonable time, as determined by the commission.

(3)After two years of providing service pursuant to this division, a holder may apply to the commission for an extension to meet the requirements of this subdivision. Notice of this application shall also be provided to the customers of the holder, the Secretary of the Senate, and the Chief Clerk of the Assembly.

(d)

(c) In reviewing an alleged violation of subdivision (b), the commission shall consider any factors that are beyond the control of the holder, including, but not limited to, all of the following:

(1) The ability of the holder to obtain access to rights-of-way under reasonable terms and conditions.

(2) The degree to which developments or buildings are not subject to competition because of exclusive arrangements.

(3) The degree to which developments or buildings are inaccessible using reasonable technical solutions.

(4) Natural disasters.

(5) The need to access private property for which access could not be obtained.

(6) Whether the holder owns or controls the facilities used to deliver video services.

(e)

(d) Local entities and customers may bring complaints to the commission that a holder is not offering video service as required by this section, or the commission may open an investigation on its own motion. The commission shall hold public hearings before issuing a decision. The commission may suspend or revoke the franchise if the holder fails to comply with this division.

(f)(1)

(e) If the commission finds that the holder is in violation of this section, it may, in addition to any other remedies provided by law, impose a fine of not more than one hundred thousand dollars ($100,000) per day that the violation occurred, not to exceed a total of 5 percent of the holder’s annual revenue derived from providing service within its franchise service area per violation. not to exceed 1 percent of the holder’s total monthly gross revenue received from provision of video service in the state each month from the date of the decision until the date that compliance is achieved.

(2)The commission may only impose a fine within one year of the violation occurring.

(g)

(f) If a court finds that the holder of the state franchise is in violation of this section, the court may immediately terminate the holder’s state franchise, and the court shall, in addition to any other remedies provided by law, impose a fine. fine not to exceed 1 percent of the holder’s total gross revenue of its entire cable and service footprint in the state in the full calendar month immediately before the decision.

(g) This section does not require a holder to provide video service outside its wireline footprint or to match the existing service area of any cable operator.

(h) For purposes of this section, the following definitions apply:

(1) “Access” means that the holder is capable of providing video service at the household address using any technology, other than direct-to-home satellite service, providing two-way broadband internet capability and video programming, content, and functionality, regardless of whether any customer has ordered service or whether the owner or landlord or other responsible person has granted access to the household. If more than one technology is used, the technologies shall provide similar two-way broadband internet accessibility, speeds, capacities, latency, and other quality-of-service metrics accessibility and similar video programming.

(2) “Equal” means the opportunity to subscribe to an offered service that provides comparable speeds, and other quality-of-service metrics in a given area for comparable terms and conditions.

(3)“Household” means, consistent with the United States Census Bureau, a house, an apartment, a mobilehome, a group of rooms, or a single room that is intended for occupancy as separate living quarters. Separate living quarters are those in which the occupants live and eat separately from any other persons in the building and that have direct access from the outside of the building or through a common hall.

(4)“Low-income community” means a census block group with a median household income at or below either 80 percent of the statewide median income or the income limit for lower income households described in Section 50079.5 of the Health and Safety Code.

SEC. 12.SEC. 11.

 Section 5895 of the Public Utilities Code is amended to read:

5895.

 (a) The commission shall collect granular data on the actual locations served by the holder of a state franchise.

(b) The commission shall adopt and enforce customer service requirements for a holder of a state franchise and adjudicate any customer complaints.

(c) The commission shall not publicly disclose any personally identifiable information collected pursuant to this section.

(d) All information submitted to the commission pursuant to this section shall be disclosed to the public only as provided for pursuant to Section 583.

(e) For purposes of this section, “actual locations” includes addresses.

SEC. 13.SEC. 12.

 Section 5900 of the Public Utilities Code is amended to read:

5900.

 (a) The holder of a state franchise shall comply with Sections 53055, 53055.1, 53055.2, and 53088.2 of the Government Code, and any other customer service standards pertaining to the provision of video service established by federal law or regulation or adopted by subsequent enactment of the Legislature. All customer service and consumer protection standards under this section shall be interpreted and applied to accommodate newer or different technologies while meeting or exceeding the goals of the standards.

(b) The holder of a state franchise shall comply with Section 637.5 of the Penal Code and the privacy standards contained in Section 551 and following of Title 47 of the United States Code.

(c) The local entity may enforce all of the customer service and protection standards of this section with respect to complaints received from residents within the local entity’s jurisdiction. jurisdiction, but it shall not adopt or seek to enforce any additional or different customer service or other performance standards under Section 53055.3 of, or subdivision (q), (r), or (s) of Section 53088.2 of, the Government Code, or any other authority or law.

(d) The local entity shall, by ordinance or resolution, provide a schedule of penalties for any material breach by a holder of a state franchise of this section. Monetary penalties shall not be assessed for a material breach if it is out of the reasonable control of the holder. Any schedule of monetary penalties adopted pursuant to this section shall not exceed one thousand five hundred dollars ($1,000) ($500) for each day of each material breach, not to exceed fifty one thousand five hundred dollars ($50,000) ($1,500) for each occurrence of a material breach. However, if a material breach of this section has occurred, and the local entity has provided notice and a fine or penalty has been assessed, and if a subsequent material breach of the same nature occurs within 12 months, the penalties may be increased by the local entity to a maximum of five one thousand dollars ($5,000) ($1,000) for each day of each material breach, not to exceed three hundred thousand dollars ($300,000) ($3,000) for each occurrence of the material breach. If a third or further material breach of the same nature occurs within those same 12 months, and the local entity has provided notice and a fine or penalty has been assessed, the penalties may be increased to a maximum of ten two thousand five hundred dollars ($10,000) ($2,500) for each day of each material breach, not to exceed seven hundred thousand five hundred dollars ($700,000) ($7,500) for each occurrence of the material breach. For video providers subject to a franchise or license, monetary penalties assessed under this section shall be reduced dollar-for-dollar to the extent any liquidated damage or penalty provision of a cable television ordinance, franchise contract, or license agreement in effect as of January 1, 2007, imposes a monetary obligation on a video provider for the same customer service failures, and other monetary damages shall not be assessed.

(e) The local entity shall give the video service provider written notice of any alleged material breach of the customer service standards of this division and allow the video provider at least 30 days from receipt of the notice to remedy the specified material breach.

(f) A material breach for purposes of assessing penalties shall be deemed to have occurred for each day within the jurisdiction of each local entity, following the expiration of the period specified in subdivision (e), that any material breach has not been remedied by the video service provider, irrespective of the number of customers or subscribers affected.

(g) Any penalty assessed pursuant to this section shall be remitted to the local entity. entity, which shall submit one-half of the penalty to the Digital Divide Account established in Section 280.5.

(h) Any interested person may seek judicial review of a decision of the local entity in a court of appropriate jurisdiction. For this purpose, a court of law shall conduct a de novo review of any issues presented.

(i) This section shall not preclude a party affected by this section from using any judicial remedy available to that party without regard to this section. Actions taken by a local legislative body, including a local franchising entity, pursuant to this section shall not be binding on a court of law. For this purpose, a court of law shall conduct de novo review of any issues presented.

(j) For purposes of this section, “material breach” means any substantial and repeated failure of a video service provider to comply with service quality and other standards specified in subdivision (a).

(k) The Public Advocate’s Office of the commission shall have the authority to advocate on behalf of video subscribers regarding renewal of a state-issued franchise and enforcement of this section and Sections 5890 and 5950. For this purpose, the office shall have access to any information in the possession of the commission subject to all restrictions on disclosure of that information that are applicable to the commission.

SEC. 14.SEC. 13.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.