03 May Legislative Report – May 3, 2019

Volume 20 Number 6 – May 3, 2019

14th & 15th legislative days

Legislation to Allow Electric Utilities to Provide Broadband Approved by House of Representatives

After extended debate on Thursday, the House approved HB400 by Rep. Randall Shedd (R – Cullman), which will allow electric co-ops, municipal electric companies, and Alabama Power Company to offer broadband service. The final vote count for approval was 92 – 2.

The bill was first on the Special Order calendar, chosen by the Speaker of the House. When the bill came up, the House voted to pass the Budget Isolation Resolution (BIR), which is a procedural motion, and immediately carried it over to allow for further negotiations.

The Rules Chairman, Rep. Mike Jones (R – Andalusia), expressed concerns with the bill and gathered a group of legislators together following the carry over motion. The group included the sponsor, Minority Leader, and members of the Broadband subcommittee of the Ways and Means – Education Committee. They met together for two or more hours and then called in the co-ops’ and Alabama Power Company’s lobbyists and lawyers to hammer out an amendment to address Rep. Jones’ concerns.

The amendment included three provisions:

1. It inserted the word “unserved” into the legislative findings to address the concern that the bill does not guarantee that people without broadband service today will be served under this legislation. The legislative findings have no rule of law; therefore, there is still no assurance that unserved areas of the state will be addressed.

2. It addressed concerns from ALDOT and the counties regarding permitting and regulation in their rights-of-way. ALDOT has said that the amendment does not address all of their concerns.

3. It included language to prohibit cross subsidization, which is the practice of charging higher prices for one group of consumers (electric) to artificially lower prices for another group (broadband). Christie Strategy Group client, The Alabama Cable and Broadband Association (ACBA), does not believe that this section fully addresses the threat of cross-subsidization.

The amendment did not address pole attachment rates. Currently, electric co-ops’ and municipal electric providers’ pole rates are not regulated, so they can charge whatever price they choose to allow another provider to connect to their poles. Cable providers connect to their poles, and the pole rates are often the biggest expense in rural areas, which hinders rural broadband deployment.

Christie Strategy Group and ACBA pursued language to include a cap on pole rates, but it was not accepted.

When the bill was brought back to the floor, several legislators expressed concern with the bill. Four more carry over motions were made, but all failed and the bill was eventually approved with the Shedd amendment.

Another amendment was added by Rep. Jones. It said that no Education Trust Fund money can be appropriated under this Act.

ACBA thanks Reps. Kyle South (R – Fayette), Chris Blackshear (R – Phoenix City), Alan Baker (R – Brewton), Joe Lovvorn (R – Auburn), Reed Ingram (R – Montgomery), and Rod Scott (D – Fairfield) for their attempts to address our concerns on the floor.

The bill has not yet been assigned to a committee in the Senate, but they will likely address the legislation quickly.

Bill to Change Broadband Grant Program Approved by Senate Committee

SB 90 by Sen. Clay Scofield (R – Guntersville) would make changes to the Alabama Broadband Accessibility Act by expanding the definition of an “unserved area,” increasing the percentage of project costs eligible for grant funding, and allowing for “middle mile” projects.

The bill was approved by the Senate Fiscal Responsibility and Economic Development Committee on Wednesday.

Changes to the program include

• Changing the “minimum service threshold” from 10/1 download/upload speed to 25/3

• Adding two tiers of funding – 1) $2.5 million grants for projects that will be capable of transmitting broadband signals at the minimum service threshold; 2) $5 million grants for projects that will be capable of transmitting broadband signals with an average speed per customer of at least 50/50

• Increasing the percentage of grant money available from 20 percent of project costs to 50 percent

• Including “middle mile” projects, which are broadband projects that do not serve a customer, and projects that serve a hospital, public school, public safety, or economic development site in a rural area. Forty percent of the total grant program can be used on these projects.

The Senate included $30 million for the grant program in the Education Trust Fund budget.

The bill could be on the Senate floor as early as next week.

Senate Approves Largest Ever Education Trust Fund Budget

On Thursday, the Senate approved a $7.1 billion Education Trust Fund (ETF) budget by a vote of 28 – 2. This is the largest ETF budget in state history.

The budget includes a four percent pay raise for teachers, a $26.8 million increase for the state’s pre-kindergarten program, a $73.9 million increase for four-year universities, a $39 million increase for the community college system, a $22 million increase for the rural broadband grant program, a $960,000 increase for residential habilitation programs, and many other increases.

The budget now goes to the House where more changes are expected.

Bill to Allow Direct Shipment of Wine Approved by House Committee

HB 350 by Rep. Terri Collins (R – Decatur) would allow a licensed wine manufacturer to obtain a wine direct shipper permit from the Alcoholic Beverage Control Board to allow the permittee to ship 18 cases of wine per year directly to Alabama residents for their personal use. The bill was approved by the House Commerce and Small Business Committee on Wednesday.

Several Alabama wine wholesalers, including Christie Strategy Group client, International Wines and Craft Beer, attempted to work with the sponsor and committee members to amend the bill, but the amendments were not accepted.

The bill that was approved by the committee includes a $200 filing fee and annual $50 renewal fee. Alabama wholesalers pay $550 for their licenses in addition to the multiple municipal business licenses they must purchase in order to deliver in the city. The wholesalers suggested a $350 annual direct shipper license fee.

Under the legislation, direct shippers can ship up to 18 cases per year, per consumer. Alabama wholesalers suggested 12 cases per year, per household.

Finally, the bill allows for a Class C misdemeanor for manufacturers who ship without a license. It also allows the ABC Board to make the final decision on penalties for those with a permit that violate the law. Alabama wholesalers suggested a penalty schedule that begins with a Class B misdemeanor and ends with a Class C felony and loss of license after multiple violations.

International Wines and Craft Beer supports the ability for consumers to receive wine shipped directly to their home, but there must be parameters that aid in leveling the playing field and acknowledge the impact of local Alabama companies on the state.

The bill must now be approved by the full House.

Upcoming Legislative Schedule

The House and Senate will reconvene on Tuesday, May 7, 2019, at 1:00 p.m. and 3:30 p.m., respectively.