•
Provides that an incumbent cable service provider is not required to provide video service outside the area in which it provided cable television service when it first received a state franchise.
Wis. Act 42, as passed by the Legislature, gave DATCP very limited authority to adopt rules interpreting the access and anti-discrimination provisions of the new video services law. The Governor's partial veto effectively expanded DATCP's rulemaking authority to interpret those provisions. In his veto message, the Governor stated: “It is imperative that the state agencies responsible for …enforcing the anti-discrimination provisions have the ability to interpret these statutes through administrative rule."
Rule content
This rule incorporates and clarifies certain video service access and anti-discrimination provisions contained in Act 42. This rule does all of the following:
•
Clarifies that a “group" means 2 or more households. A video service provider denies access to a “group" if it denies access to all of the households comprising that “group."
•
Defines “household" consistent with current statutes.
•
Defines “low-income household" as a household with a combined annual income equal to less than 200% of the federal poverty level for a family of 3.
•
Clarifies that a video service provider provides video service “access" to a household if the provider is able to provide video service to that household using the provider's normal service network or an equivalent alternative technology, regardless of whether any customer has ordered the service.
•
Spells out the procedure by which a video service provider may ask DATCP to waive or extend the deadline for complying with a minimum access requirement:
• A provider must submit a request in writing, in hard-copy and electronic form. The request must justify the proposed waiver or extension, based on statutory criteria, and must include facts and evidence supporting the justification. DATCP may request relevant supplementary information.
• Within 30 business days after DATCP receives a written request, it must issue a proposed order granting the request, denying the request, or granting the request in modified form. DATCP must issue a press release announcing the proposed order and inviting public comment. DATCP may hold one or more public hearings on the proposed order.
• Within 60 business days after DATCP issues a proposed order, DATCP must issue a final order. If the final order differs from the proposed order, DATCP must explain the reasons for difference.
•
Clarifies that a “large telecommunications service provider" must file its required annual progress report with DATCP by January 31 of each calendar year, beginning with the first calendar year after the provider first provides video service under a state franchise. The provider must provide annual progress reports for at least 5 years, unless DATCP makes an earlier written determination that the provider has met applicable minimum access requirements.
In a separate rule-making proceeding (
Clearinghouse Rule No. 08-027), DATCP has proposed a definition of “video service" that would also apply to this rule. That definition is identical to the definition in s.
66.0420 (1) (y), Stats.
Comparison with federal regulations
Federal law regulates cable television service, including cable ownership, use of cable channels, and cable franchising. Federal law also regulates video services provided by telephone companies.
State and local governments may regulate video services, as long as the regulations do not conflict with federal law. Federal law imposes consumer protection and customer service obligations on cable television service providers, but does not prevent states from imposing more stringent requirements.
Federal law does not establish minimum access requirements. Federal law does prohibit discrimination against a “group" of customers based the income of residents of the “local area" in which the “group" resides. Federal law does not define “group" or “local area."
Comparison with rules in adjacent states
During 2007, Illinois, Michigan and Iowa enacted laws that create a new state system for franchising and regulating video service providers. Minnesota has yet to adopt such a law. The laws adopted by Illinois, Michigan and Iowa are similar in relevant respects to the Wisconsin law, but are not identical to the Wisconsin law.
Illinois. The Illinois law does the following:
•
Prohibits a video service provider from denying access to any potential residential providers because of race or income of the residents in the local area in which the potential subscribers reside; and does not provide the video service provider with an affirmative defense to an allegation of discrimination.
•
Requires a large video service provider to provide access to 25% of the households in its telecommunication service area within 3 years after it began providing video service, and 35% within 5 years after it began providing video service. The provider is not required to meet the 35% requirement until 2 years after at least 15% of the households with access to the provider's video service subscribe to the service for at least 6 months.
•
Requires, within 3 years after the video service provider is granted a franchise, that 30% of the households with access to the video service shall be low-income.
•
Requires the video service provider to file with the state an annual report describing factors related to the access requirements.
•
Allows the video service provider to assert as a defense to a violation of the access requirements a need for an extension of the time requirements based on stated factors.
•
Defines “low-income household" as those residential households within the video service provider's existing local exchange area where the average annual household income is less than $35,000 based on United States Census Bureau estimates adjusted annually.
•
Defines “access" to mean that the video service provider is capable of providing broadband Internet capability and video programming at the household address using any technology except satellite television regardless of whether any customer has ordered the service.
Michigan. The Michigan law does the following:
•
Prohibits a video service provider from denying access to service to any group of potential residential subscribers because of the race or income of the residents in the local area in which the group resides.
•
Provides the video service provider with a defense to an allegation of discrimination where it can show either of the following:
• Within 3 years after it began providing video service at least 25% of the households with access to the provider's video service are low-income households.
• Within 5 years after it began providing video service and from that point forward at least 30% of the households with access to the provider's video service are low-income households.
•
Requires a large video service provider to provide access to 25% of households in its telecommunication service area within 3 years after it began providing video service, and 50% within 6 years after it began providing video service. The provider is not required to meet the 50% requirement until 2 years after at least 30% of the households with access to the provider's video service subscribe to the service for at least 6 months.
•
Allows the video service provider to apply for a waiver or extension of time of the access requirements based on stated factors.
•
Requires the video service provider to submit to the Michigan pubic service commission any information necessary for the commission to prepare an annual report.
•
Defines “low-income household" as a household with an average annual household income of less than $35,000.00 as determined by the most recent decennial census.
•
Does not define “access."
Iowa. The Iowa law does the following:
•
Prohibits a video service provider from denying access to any group of potential residential providers because of the income of the residents in the local area in which the potential subscribers reside. This law does not prohibit denying access based on race, and does not provide the video service provider with an affirmative defense to an allegation that it violated this law.
•
Requires a large video service provider to extend its system to a potential subscriber located within its authorized service area if all of the following occur:
• At least 250 dwelling units are located within 2,500 feet of a remote terminal.
• The dwelling units do not have cable service or video service available from another provider.
• The video service provider is providing cable service and video service to over 50% of all cable service or video service subscribers in the potential subscribers franchise area.
•
Does not specify any reporting requirements for the video service providers.
Summary of factual data and analytical methodologies
This rule does not depend on any complex analysis of data. The definition of “low-income household" is based on the official poverty line defined by the federal Office of Management and Budget based on the most recent data available from the United States Bureau of the Census. The definition of “access" is based on industry practices and consumer experience.
Initial Regulatory Flexibility Analysis
2007 Act 42 will have a major impact on video service providers in Wisconsin.
This rule interprets and clarifies portions of Act 42 related to customer access to video services, and discrimination in providing access. This rule does not add any substantive requirements or prohibitions, beyond what is already contained in Act 42.
None of the video service providers affected by Act 42 or this rule are small businesses, so this rule will have no impact on small business. For the most part, this rule will have a positive impact on video service providers, because it will clarify requirements and procedures under Act 42.
Fiscal Estimate
This rule will have no significant fiscal impact on DATCP or local units of government.
Notice of Hearing
Financial Institutions—Securities
NOTICE IS HEREBY GIVEN that pursuant to the general rule-making authority provided in sections 551.63 (1) and (2) of the current Wisconsin Securities Law, as well as the statutory authority sections listed below for the Securities Law-related changes based on
2007 Wisconsin Act 196, together with the statutory rule-making authority under current ss.
553.58 (1) and
553.27 (4) of the Wisconsin Franchise Law, the Division of Securities of the Department of Financial Institutions will hold a public hearing to consider a comprehensive adoption, amendment and repeal of administrative rules of the Division of Securities relating to the operation of Chapter 551, Wis. Stats., the Wisconsin Uniform Securities Law as repealed and recreated based on
2007 Wisconsin Act 196, together with revisions to several rules under the Wisconsin Franchise Investment Law, Chapter
553, Wis. Stats.
Hearing Information
August 20, 2008 345 West Washington Avenue
Wednesday 4th Floor Conference Room
at 10:00 a.m. Madison
Submission of Written Comments
Written comments in lieu of public hearing testimony may be submitted which must be received no later than the hearing date and should be addressed to the Administrator of the Division of Securities, 345 West Washington Avenue, PO Box 1768, Madison Wisconsin, 53701.
Copies of Proposed Rule and Contact Person
A copy of the full text of the proposed rule revisions and fiscal estimate may be obtained from:
Randall E. Schumann (608) 266-3414
Legal Counsel for the Division of Securities
Department of Financial Institutions
345 West Washington Avenue, 4th Floor
P. O. Box 1768
Madison, WI 53701
Additionally, the full text of the proposed rule revisions is available on-line at the DFI Website:
www.wdfi.org/ securities&franchising.
Analysis Prepared by Dept. of Financial Institutions— Securities
Statutory authority
Sections
551.605 (1) (a),
(b) and
(c),
(2),
(3) and
(4),
551.102 (2),
(4) (e),
(11) (p),
(15) (h),
(16) (d) and
(28) (h),
551.105,
551.201(1) (b),
(3) (c),
(6), and
(7) (intro.),
(a), and
(b),
551.202 (6),
(13) (c),
(14) (b) and
(23),
551.203,
551.302 (intro.),
(1) (a),
(b) and
(c),
(3) and
(5),
551.304 (2) (intro.) and
(r),
(3) and
(5),
551.305 (2),
(7),
(9),
(10) and
(11),
551.306 (1) (b),
551.401 (2) (h), and
(4) (intro.),
551.402 (2) (i) and
(5),
551.403 (2) (c),
551.404 (2) (b) and
(4),
551.405 (2) (a) 4. and
(c),
(3),
(4) (b) and
(c),
551.406 (1),
(3) (b),
(4) and
(5),
551.407 (4),
551.408 (5),
551.409,
551.411(1),
(2),
(3) (a) and
(c),
(5),
(6),
(7) and
(8),
551.411 (4) (b) and
(5),
551.502 (2) and
(3),
551.504 (1),
551.606 (3),
551.608 (2) (intro.),
551.611 (1),
551.614 (1) (b) 1. and
2., and
(4), Wis. Stats.
For the Franchise Law-related changes under Chapter
553, Wis. Stats:
Statutes interpreted
Securities Law-related:
Sections
551.605 (1) (a),
(b) and
(c),
(2),
(3) and
(4),
551.102 (2),
(4) (e),
(11) (p),
(15) (h),
(16) (d) and
(28) (h),
551.105,
551.201 (1) (b),
(3) (c),
(6), and
(7) (intro.),
(a), and
(b),
551.202 (6),
(13) (c),
(14) (b) and
(23),
551.203,
551.302 (intro.),
(1) (a),
(b) and
(c),
(3) and
(5),
551.304 (2) (intro.) and
(r),
(3) and
(5),
551.305 (2),
(7),
(9),
(10) and
(11),
551.306 (1) (b),
551.401 (2) (h), and
(4) (intro.),
551.402 (2) (i) and
(5),
551.403 (2) (c),
551.404 (2) (b) and
(4),
551.405 (2) (a) 4. and
(c),
(3),
(4) (b) and
(c),
551.406 (1),
(3) (b),
(4) and
(5),
551.407 (4),
551.408 (5),
551.409,
551.411 (1),
(2),
(3) (a) and
(c),
(5),
(6),
(7) and
(8),
551.411 (4) (b) and
(5),
551.502 (2) and
(3),
551.504 (1),
551.606 (3),
551.608 (2) (intro.),
551.611 (1),
551.614 (1) (b) 1. and
2., and
(4), Wis. Stats.
Franchise Law-related:
Summary of rule
Because the repeal and recreation of the Wisconsin Securities Law in
2007 Wisconsin Act 196 (signed by the Governor on March 27, 2008) -- which involved the adoption of the 2002 Uniform Securities Act (“2002 USAct") as developed by the National Conference of Commissioners on Uniform State Laws -- resulted in changes to all aspects of Wisconsin securities regulation (definitions, securities registration procedures and registration exemptions, securities licensing, enforcement powers and procedures, as well as general administrative powers), the corresponding administrative rule chapters and provisions relating to those aspects/categories of law changes need to be updated and made consistent. Such rule revisions are necessary to facilitate compliance by securities issuers and securities professionals of the Securities Law changes for the benefit of Wisconsin public investors. Also, because the effectiveness date for
2007 Wisconsin Act 196 is January 1, 2009, the proposed rule-making process is being conducted now to enable the rules to be finalized concurrent with the effectiveness of the legislation.
Separately, because the adoption by the Federal Trade Commission of its FTC Franchise Rule (“the FTC Franchise Rule," which became effective for use on a voluntary basis for franchisors on July 1, 2007, and becomes effective on a mandatory basis July 1, 2008) supersedes and preempts several existing Wisconsin franchise rules establishing requirements for disclosure documents used in connection with the offer and sale of franchises to persons in Wisconsin, the Wisconsin franchise rules so impacted need to be revised to be consistent with the FTC Rule. As a related matter, remedial franchise-related legislation was enacted in
2007 Wisconsin Act 150 (effective April 5, 2008) which made a necessary statutory change to make Wisconsin's timing deadline within which franchisors must provide a franchise disclosure document to a prospective purchaser, consistent with the recent FTC Franchise Rule change on that subject.
Additionally, the Wisconsin Franchise Law disclosure document-related rules impacted by the changes to the FTC Franchise Rule need to be revised and updated as necessary to be made consistent and thereby facilitate compliance by franchisors seeking to offer and sell franchises to persons in Wisconsin. For purposes of providing regulatory consistency among the 15 state jurisdictions (including Wisconsin) that regulate offers/sales of franchises, the Franchise and Business Opportunity Project Group of the North American Securities Administrators Association (“NASAA") developed revised 2008 Franchise Registration and Disclosure Guidelines (“Franchise Guidelines") that were adopted by the NASAA membership in April 2008, that state jurisdictions which register franchise offerings can adopt as the required format for franchise disclosure documents. Those Franchise Guidelines were developed to be, and are, consistent with the FTC Franchise Rule which allows franchise law states to impose additional disclosure requirements that are consistent with the FTC Franchise Rule. In that regard, the Franchise Guidelines adopt the FTC form of franchise disclosure document with the addition of a state cover page, and include new instructions for franchisors to file registrations with state administrators, as well as revised application forms. The proposed Wisconsin Franchise Rule revisions will include, via incorporation by reference, the above-described NASAA Franchise Guidelines and forms.
A summary of the subject matter and nature of the more significant of the rule revisions follows:
1. In the definitional Chapter of the Securities rules, rules DFI-Sec 1.02 (6) (a) and (b), which define the term “investment contract" to include both the “modified
Howey" and “risk capital" tests, are being repealed because both are expressly included [as subsections (d) 1 and 2] in the statutory definition of “security" in new s.
551.102 (28), Wis. Stats.
2. The additional categories of “institutional investor" contained in the registration exemption rule of DFI-Sec 2.02 (4) under current s.
551.23 (8), Wis. Stats., are moved to the Definitions Chapter of the rules because under the new statute, “institutional investor" is now a defined term contained in definitional section s.
551.102 (11), Wis. Stats., par. (b) of which provides separate authority to, by rule, further specify other persons as “institutional investors."
3. The registration exemption treatment for both domestic (Wisconsin) as well as non-Wisconsin not-for-profit-issuers that is currently scattered in several different places in both the statutes and rules, is consolidated in 4 distinct subsections of a single exempt security rule adopted under the statutory authority of new s.
551.201 (7), Wis. Stats.
4. Because the federal Regulation D, Rule 505 securities registration exemption contained in current s.
551.23 (19), Wis. Stats., was not retained in the new law, but rather was to be adopted by rule, that federal Rule 505 exemption is made an exempt transaction rule under the discretionary exemption rule-making authority of s.
551.203, Wis. Stats.
