![[Top]](/images/nav-top.gif)
![[Back]](/images/nav-back.gif)
![[Home]](/images/nav-home.gif)
April 24 & 25, 2006
Room 302, Capitol Building
Cheyenne, Wyoming
Senator Cut Meier, Co-Chairman
Representative Pete Illoway, Co-Chairman
Senator John Hanes
Senator Wayne Johnson
Senator Jayne Mockler
Senator Charlie Scott
Representative Bruce Barnard
Representative Ross Diercks
Representative Keith Gingery
Representative Del McOmie
Representative Erin Mercer
Representative David Miller
Representative Monte Olsen
Representative Marty Martin
Lynda Cook, Staff Attorney
Please refer to
Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.
Co-Chairman Curt Meier called the meeting to order at 8:35 am. The following sections summarize the Committee proceedings by topic. Please see the Agenda for details. (Appendix 2).
The committee approved the minutes of the December 2005 meeting.
The presentation (Appendix 3) began with an overview of the Telecom Act of 1995. Mr. Schmidt discussed the legislative intent. He outlined how the act regulates essential telecommunications services through price controls, universal service fund and access to emergency services. The act allows for no price regulation if effective competition exists.
Mr. Schmidt explained the difference between local exchange services and interexchange companies that provide long distance services.
Mr. Schmidt explained TSLRIC. Chairman Meier asked if the PSC has had any internal discussion as to what to replace TSLRIC with. Mike Korber stated that they have looked at many alternatives in terms of how they would implement them but they did not have a recommendation. He also noted that Qwest is not treated as a rural carrier with respect to federal Universal Service Fund and is therefore not receiving the same federal support as other local carriers.
Sen. Scott stated that the statutory notion of cost does not correspond with reality. He noted that the initial cost is the high amount and the incremental costs after the service is in place are minimal. Any method that arbitrarily assigns costs equally across the board or is dependant on estimates is fundamentally flawed. Chairman Meier suggested that the committee needs to look at a method that recognizes the federal support that is already received. Mr. Korber noted that state USF recognizes whether federal support is received.
Mr. Schmidt outlined the substantial increases in base rates for residential and business services throughout the state between 1995 (when TSLRIC was implemented) and 2006. He also showed how switched access rates went down during that time period. Representative Gingery asked about how zones are determined. Mr. Schmidt explained how zones were determined several years ago based on the requirements of cables and electronics to serve the area based on distance and density. The zones are adjusted over time to reflect the increased density. Senator Mockler noted that on the chart they do not reflect the amount of universal service fund being received. It also does not reflect what additionally was upgraded in that time period. Senator Scott noted that switched access rates fell. He stated that the so-called cost based rates are a shell game. Companies raised base rates in order to lower switched access and thereby receive increased USF. Mr. Korber stated that under the PSC rules the costs assigned to TSLRIC are for those basic services only. The base rates used to be subsidized by the switched access rates. Chairman Meier asked for another chart adding USF, both state and federal. He also wanted retail rates included in the chart showing changes in switched access rates.
Steve Ellenbecker pointed out that the documentation of those numbers is available in the annual telecommunication report (Appendix 4). The report also shows the increased services that have become available over the last ten years. He also informed the committee of the Wyoming Telecom Council’s meeting in June that will offer an overview of what has happened in the state in the last ten years.
Rep. Gingery pointed out that in Dubois they have low local rates because they have high switched access rates. Mike Korber stated that would be against the law because it would be cross subsidization. He noted that in Dubois they have low base rates because they receive a great deal of federal support. Senator Scott argued that somehow they are able to manipulate the system through this cross subsidization because the TSLRIC costs are truly a fiction. Chairman Meier asked whether the allocation of costs to basic services or switched access is a constant – whether it can be predicted. Steve Furtney, PSC commissioner, stated that each of these sets of prices is set in front of a hearing of the PSC. Anybody could challenge the filings of the companies. The PSC makes the price determinations based on those filings and the facts before them. Therefore they are not arbitrary. Senator Scott pointed out that he does not find flaws with the PSC determinations, but rather the statutory framework. Chairman Meier noted that whatever they replace TSLRIC with, the committee will need to know the intricacies of what goes into a cost determination.
Mr. Schmidt discussed some issues that are before Congress. They expect some issues there to drive down switched access charges but drive up local rates. The Congress is also looking at providing USF based on every telephone number and at changing intercarrier compensation.
Mr. Schmidt discussed the decline in the number of wireline access lines in the state since 2001. He attributed it to wireless customers as well as other factors including the use of private branch exchanges.
Mr. Schmidt compared the base rates in surrounding states. They also noted that Wyoming is above the national average in terms of competitors certificated in the state, but there are many that are not active. Chairman Meier asked for a chart comparing switched access rates in surrounding states too.
Sen. Mockler asked what are the advantages of having zones and allowing the “shell game” as opposed to other states that just set a base rate. Mr. Korber stated that it increases competition. Chairman Meier asked why it is better to have competition at $40 per month rather than have lower rates with no competition. Mike Ceballos, Qwest, stated that competition forces elimination of cross subsidization and therefore lowers rates other than local residential rates such as business rates and long distance. He noted that Idaho legislature just deregulated and it will affect those rates.
Senator Scott stated that the competition isn’t available throughout the state. Therefore there will be a tricky balancing required to fix this law.
Rep. Gingery asked what the negatives are with the Idaho deregulation. Mr. Korber stated that it is too early to tell. They will need to see what the effects on competition will be.
The presentation turned to the universal service fund. Senator Mockler asked about the requirement to provide essential telecommunications to all Americans at an affordable price. She argued that at some point legislatures have to set the minimum requirements and should require people who want to get more advanced services to pay for them themselves. Liz Zerga, representing Alltel and McCloud, noted that TSLRIC allows the companies to base their rates on a modern network so the capability of an advanced network is captured in the basic local exchange rate.
It was noted that wireless carriers do pay into the USF but none have been determined eligible to receive state USF funds. They are receiving funds through the federal fund. Rep. McOmie asked why they are not using the state fund. Liz Zerga stated that the reason they do not use it is because the PSC held that the cell company would have to charge exactly the same as an incumbent and that removed their competitive advantage.
Mr. Korber stated that the federal USF is based on interstate revenues and the state USF is based on intrastate revenues. This distinction is impossible to apply to purchase of prepaid phone cards.
Chairman Meier asked for a chart that compares the number of lines supported by the USF, both federal and state, for landlines and wireless.
There was a great deal of discussion of the amount of federal subsidies received by Wyoming companies. Most of these funds are coming from out of state. The state fund only disperses funds to companies charging 130% or more of the statewide average. The total support projected for fiscal year 2006 is $2,752,000. The federal program is cost based while the state is a price based program.
Senator Scott asked what would happen with the state expenditures if the federal program went away. Mr. Korber said that the state fund would have to make up the $25 million dollars.
Competitive Trends in Wyoming. Mr. Schmidt outlined the number of competitors in the state as independent local exchanges (ILECs), Competitive local exchanges (CLECs) and cellular. There was a great deal of discussion whether cable and cellular have emergency services capabilities. There was also much discussion on the costs that are not being carried by the competitors. Cellular and cable callers still need to be connected to land phones when their customers call them. Mr. Schmidt stated that those costs are getting paid by the cellular or cable companies through negotiated interexchange agreements. Those costs are built into the basic monthly service charges that the companies charge their customers.
Competitive Trends. Mr. Schmidt outlined the trends they see in the telecom industry including mergers, convergence, congestion on the land line network, technology improvements and bundling.
Larry Biggio updated the committee on the Wyoming Telecom Council’s efforts to provide broadband accessibility throughout the state. There is another Telecom forum scheduled for the end of June. LSO staff will forward information on the meeting as soon as it is available.
Edie Ortega, CenturyTel, gave a presentation: Federal Update: Telecommunications. (Appendix 5).
She also provided a summary of Telecom Legislation (Appendix 6) and Telecom Regulatory Proceedings (Appendix 7).
There are many telecom bills in front of Congress right now. There has been little movement beyond introduction and some markup because the debate is intense. 2006 is an election year so they expect to see some more work done on the bills but they don’t expect to see many passed this year. They are currently in the mode of framing the issues and determining the industry stand on them.
Universal Service Reform. The base for the contributions is eroding. There are an increasing number of providers drawing from the fund. Congress is considering redefining supported services and requiring similar obligations on contributors and providers.
The debate on supported services is about what is an essential telecommunications service – does it include broadband. Senator Stevens is the chairman of the committee and he is going to be introducing a bill in the near future.
S.2256 is looking to expand the contribution base to include intrastate as well as interstate revenues. The bill would move away from the forward looking hypothetical costs. Ms. Ortega offered to provide the detail of what will be used to replace those costs. Chairman Meier asked if the trend in Congress is to use actual costs instead of hypothetical. Ms. Ortega stated that there is an interest there but actual costs can look different to different people.
It was noted that providers may come into any market but they cannot collect from the USF unless they receive competitive ETC status.
There is a House Bill by Representatives Terry and Boucher which would allow the FCC to reform the contribution methodology, require payment from any telephone number provider. The bill would make broadband a new supported service.
S.2113 would limit state regulation of rates for services to basic stand alone service. This bill would also require contributions from all phone number providers. The bill would cap the USF and distribute it as block grants to the states. It would sunset all FCC rules in five years unless there was proof it helped the public.
S.1504 would cap basic service rates until 2010 and would preempt state and local regulation of telecom and cable.
S.1349 provides that no franchise would be required for competitive video services provider.
Net neutrality is an emerging issue. It’s the principal that the internet remains an open platform for innovation while ensuring that certain consumer protection norms are upheld. S.2360 would prohibit network operators from blocking any content, application or service transmitted over the network. Operators would not be able to discriminate in favor of themselves or their affiliates. There was discussion among the committee regarding the liability of those providers if the content would cause harm. Steve Mossbrook, Contact Communications, stated that the network congestion problem is not the real issue but rather the content issue.
Regulatory Update. There are several dockets open regarding USF contribution methodology, non-rural high cost support, rural high cost support and administration. Some key issues that will be determined by the FCC are whether an embedded cost, forward-looking cost or some other alternative is the most efficient and effective means to satisfy Section 254 of the federal telecommunication law. They will also decide the appropriateness of basing rural support on statewide average costs and whether there should be distinctions in the high-cost program between carriers of different sizes and characteristics.
The FCC is seeking to change the present method carriers use today to reimburse each other by migrating the industry toward a system of lower, uniform rates (intercarrier compensation).
Steve Furtney offered to inform the committee about the details of the NARUC conference. LSO staff will check into whether the legislators could get reimbursed or if the price could be reduced.
Phantom Traffic is an emerging topic. It is the intentional or inadvertent stripping of carrier and location information that is essential to accurate routing and billing. The FCC should establish regulations that require carriers to identify all traffic.
Ms. Ortega discussed the Brand X decision – the Supreme court upheld an FCC ruling treating cable modem services as information services and allowing cable modem service providers to close off their networks to competing internet service providers.
Chairman Meier asked about the concept of using a flat rate for the subscriber line charge. The FCC used the SLC to replace subsidies but over time things like USF created new subsidies. SLC is an optional charge that a carrier is allowed to add to the bill and which the carrier keeps to increase their bottom line. It is not a tax per se because the carrier keeps it and it is optional.
The committee broke until 1:30pm.
Chairman Meier asked the committee for their thoughts on whether to go back to the bill from last year or start with a blank slate.
Senator Mockler wanted to review the goals of the 1995 act, determine what the current goals are given the current market, and then tweak the current statute.
Rep. Gingery agreed with the ideas in Bruce Egan’s letter (Appendix 8). He believes the committee should scrap as much of the current statute as possible then eliminate retail price regulation, tapping the basic telephone and regulating wholesale prices.
Senator Scott didn’t want to go back to last years bill. He doesn’t like the 1995 act either. He definitely wanted to start with a blank slate.
Rep. Dierks agreed with Senator Mockler.
Sen. Hanes agreed with starting with a blank slate, coming up with principals, then following Dr. Egan’s advice to get experts with no axe to grind to craft something.
Rep. McOmie expressed regret that there was so much work done but suggested that the committee ought to start by looking at the goals and crafting something from those goals. The committee members can’t turn their backs on all the providers though. He thought a clean slate is the way to go.
Chairman Illoway agreed with Chris Robish who said “it is our sincere hope that comprehensive legislative reform and deregulation of retail services is possible in the upcoming session. A Wyoming Telecom Act that adheres to consumer driven economic principal, creates and closely monitors effective and legitimate cost based intercarrier interconnection and allows for downward retail pricing from all carriers must be our state's goal with any new legislation. Lower prices to consumers, a level playing field for all carriers and significant advancements technically and economically are all very possible for Wyoming. I implore you to form an independent panel to create a new Wyoming Telecom Act.”.
Sen. Johnson stated that he personally thinks deregulation has been a disaster for all industries. But he wants a clean slate with help from people who don’t have a vested interest. The industry members tried that last year and it didn’t work.
Rep. Mercer stated that she missed out on everything from last year so would like a clean slate. She wants much more information about the topic.
Rep. Miller stated that he wants a clean slate as well. This committee can’t imagine what is going to be out there in ten years and the legislation should reward innovation.
Rep. Barnard stated that he likes the idea of a clean slate. The committee shouldn’t make a silk purse out of a sow’s ear. The legislation should be driven by people outside of the industry but the committee should run it across industry members for their expertise.
Rep. Olsen did not disagree with a clean slate. With respect to an independent panel, he felt that is too expensive and will take too long. He reiterated that whatever happens, the legislation should be technically and competitively neutral.
Chairman Meier stated that he liked the idea of looking at each of the goals and crafting something new. He would like to bring in any free experts to guide them. The committee would need clearly defined benchmarks before they would allow deregulation. He thinks setting prices for both local base rates and wholesale prices is good.
Liz Zerga, representing Alltel Wireless and McCloud USA, provided a synopsis of her presentation (Appendix 9). She was going to initially request that they start anew rather than going back to last years bill. First, the committee needs much more information about the state of the market today. Much of that information is available from the FCC. The committee should use the PSC to find out what level of competition is really out there and what are the markets.
The FCC has put out information that Ms. Zerga used to create a pie chart showing the number of access lines owned by incumbent carriers, competitive carriers who purchase unbundled network elements from incumbents, competitive carriers who resell portions of the line from incumbents and resell it, and competitive carriers who own their own facilities. She stated that this kind of information leads to the following questions and conclusions: What does it look like with respect to each independent incumbent? How much of the pie does Qwest own? This information will help show what the state of competition really is. The FCC breaks information down by zip code and in 45% of the zip codes in Wyoming there is no competition.
Ms. Zerga advised the committee to start afresh and get help from independent experts. The committee should get answers to the questions she lists in her presentation. If there is no competition then the wholesale market needs protection. The committee should have the carriers report the number of voice grade equivalent lines are there and find out what types of voice grade equivalents are available, and whether they are regulated.
Ms. Zerga stated that the committee should determine if wireless is truly competitive. She testified that nationally only 5.6% of customers have been willing to substitute wireless for land lines. The committee should determine what the demographic of those people is and whether Wyoming fits the demographic. The committee should consider what the average number of minutes used on land lines is and whether wireless plans are the same. She testified that 1200-1300 minutes per month is the average used by land lines.
Ms. Zerga explained how cellular prices are set in response to a question from Chairman Meier.
Ms Zerga asked the committee to consider what the financial picture for independent carriers is and whether that is a good basis for deregulating. If the committee had the real answers it might find that there isn’t a financial basis for deregulation.
Her presentation included a briefing paper that sets forth the areas that are traditionally regulated and their importance in the market. Important areas are wholesale competition and market monitoring.
Chairman Meier asked about how to determine a true cost based formula. Ms. Zerga said the question is being looked at by the FCC, but it is an overstatement to say that the feds are moving toward imbedded cost basis. If the committee wants to go there they need info from the FCC about what those imbedded costs are. If the committee does decide to use imbedded costs, in most instances the price would be higher than forward looking costs.
Chris Robish and Steve Mossbrook, Contact Communications testified. (Appendix 10). They believe the 1995 act is outdated. It has resulted in higher costs and squelches innovation. Wireless is not a competitor since wireless is not as versatile and has lower quality. Competition is not available in 45% of Wyoming zip codes. When asked whose fault is that, they stated that competitors forego trying to serve rural areas because incumbent carriers price interexchange out of the market. Independent carriers have a rural exemption. They state that they would use that rural exemption to fight any market penetration and that would price the competitor out of the market.
Mr. Robish testified that broadband deployment in Wyoming lags far behind the rest of the US. High prices for interconnection and other barriers to market entry are holding Wyoming back. He would like to see retail price deregulation that would allow all competitors to compete. Wholesale prices should be regulated, and laws should reward incumbent carriers for tearing down barriers to entry. Price caps should be used to force downward pressure on prices.
Chairman Meier asked how can you have deregulation and price caps. Mr. Robish stated that price caps keep the largest market competitor from taking advantage of that position while the market forces down prices. Wholesale regulation should ensure that it reflects retail price trends.
Senator Scott asked if there was any savings to a wholesaler over selling retail. Mr. Robish testified that there is, they are relieved of the administration and customer service costs. There are some additional expenses too. If you don’t provide for a reasonable wholesale market then you allow incumbents to hold the infrastructure captive.
Mr. Robish testified that competition exists but is not thriving. The differing perception of reality is what hurt the working group. He recommends the committee gather 4-5 independent experts including professors, retired telecom executives, all with no financial interests in the outcome. The panel could provide the committee with the principals, then work with the committee and LSO in crafting language. Funding for a panel should not be a problem. Dr. Egan is willing to donate his time and he may convince others to volunteer.
Chairman Meier stated that it would be hard to find anyone who is not somehow tied to a telephone company and they did not ask for a budget for this.
Senator Johnson asked why the state can not build off what some other states have done. Mr. Mossbrook is not aware of any state that has taken to time and effort to truly draft something new, looking ten years in the future.
Steve Mossbrook testified that the architecture of the public switched telephone network is very different than VoIP. They are exactly opposite. The PSTN is centralized smart machines attached at the house to dumb devices. With the net, the intelligence is at the edges (home computers) with a dumb centralized network (the line just transfers data). He stated that the committee needs to write a law that allows the network be a dumb network and let the outside edges get smarter and smarter. Protecting an architecture and a mindset that is from the 1950’s is not the way to go.
Mr. Robish testified that currently every community with over 300 people has at least one broadband provider.
He argued that subsidies should follow the subscriber and lamented that millions of dollars were spent to extend fiber optics to Jeffery city for only 26 phone lines.
Rep. Gingery asked if the state could set the wholesale access charges. Mr. Robish testified that interstate access charges are not really a factor. Interconnection charges are what need to be controlled. Arbitration at the local level needs to be provided too. The arbitration authority should not be taken away from the PSC but the standards in the statutes should be very clear and succinct.
Senator Scott agreed that writing clear concise language is a very great goal with legislation but it is never as simple as it sounds. Because of the nature of competition, there will always be disputes. The committee needs to make the process of dispute resolution easier and less expensive.
Mr. Robish testified that the committee needs to be careful to ensure that the federal state partnership remains – that the state should accept primacy over issues that effect the small competitor. Chairman Meier asked for a list of areas where the state can take primacy so the committee can make a decision on what is important to take over.
Mr. Mossbrook testified that right now competitors can ask for arbitration from the PSC. The PSC can also approve uncontested agreements. But the contract has to be for interconnection otherwise the PSC has no authority.
Erik Cecil, Level 3 Communications, testified regarding the enormous expense of litigating. Level 3 is a new network that runs 24,000 miles. They put in fiber themselves. They are the largest network provider in the US and Europe. He stated that Level 3 is the stupid network in the middle. He asked the committee to not try to shoehorn technologies like this into the regulatory scheme that controls telephony. Mr. Cecil asked the committee to consider where communications are today and where they want it to be. He advised them to be sure to understand how each network works. Mr. Cecil provided a copy of his presentation (Appendix 11).
Bruce Asay, representing several small independent carriers, testified. A question was asked regarding whether cellular companies are collecting state USF. Some local carriers who carry wireless products do collect from the state USF.
With respect to the legislation, Mr. Asay prefers using the legislation that is already there but he understands that the committee is going a different way. They need to start with a set of principals. He doesn’t think they have the time to use a panel and he doesn’t think they would be able to find anyone who is truly neutral. The closest thing they should draw on is the Public Service Commission.
Mr. Asay suggested the committee could use the framework from other states and the federal legislation and hang the committee’s principals on that. Rep. McOmie asked what would happen if they don’t do anything for three more years. Mr. Asay thinks we are going to get some guidance from the FCC this year with respect to intercarrier compensation. Life will go on, telecom will go on, but it is forestalling what they will need to do in the future.
Mr. Asay argued that competition does exist in this state. With respect to interconnection, the agreements are just contracts between two companies. He stated that there are small incumbents having to negotiate with larger competitive carriers. It’s not just a monolith controlling the negotiations.
Mr. Asay explained the rural exemption. The federal law has certain requirements for all telecommunications companies. Then it makes levels of regulation that get tighter for different levels of telecom companies. Then it provides an exemption for little companies with respect to some of the regulatory requirements for negotiating interconnection agreements. Rep. Gingery stated that he thinks the market should decide whether the company stays in business. Sen. Mockler stated that the difference is this is essential phone service and we can’t have them all go under. Rep. Barnard compared it to forcing a store to give up half its property to a competitor even though they built the store.
Sen. Scott suggested one of the things the committee should try to do is put in incentives so that rural companies will want to enter into those agreements. Jerry Lambert, Bresnan Communications, also pointed out that rural companies that negotiate these agreements run the risk of losing their exemption.
Mr. Asay testified that hearings in front of the commission are not always expensive. The PSC is very good at taking into consideration the need for little companies to avoid costs. But some issues are going to be expensive because they affect millions of dollars.
Chris Robish stated that their concern with interconnection agreements is that the small incumbents charge retail prices for the interconnection. Competitors are unable to compete at that level.
Jerry Lambert, Bresnan Communications, testified. He supported the notion of starting anew. He noted that Bresnan applied for certification from the PSC even though they are offering a product that is a little bit different. They ask that whatever the committee does it should make sustainable competition a priority. To do that they have to make the economic climate something that companies want to enter. Incumbents should be free to compete but not free to dominate.
Bresnan is concerned about municipalities being able to fund infrastructure that will compete with the investments already made by incumbents. Mr. Lambert brought the situation in Powell to the attention of the committee. Their concern is that the municipality will be able to use public funds to bring in competition to the local companies. Such a move compromises the investment based risk capital. He would like to see Wyoming pass a law like Texas that makes it illegal for municipalities to do something like this. The concern is that local governments can bond out at cheaper rates and have the protection of sovereign immunity.
Bresnan would also want to see it easier for cable and wireless carriers to receive funds from the USF.
Larry Wolfe representing Bresnan, provided additional comments on the difficulty of the Powell situation.
Mr. Lambert elaborated on the Brand X decision which held that cable services are information services and are not subject to the regulation as a common carrier.
Mike Ceballos and Jodi Levin, Qwest Communications, testified. Mr. Ceballos asked that whatever the committee does, they do not exclude the industry members. He agreed with technological neutrality. He doesn’t see how a company can be deregulated with a price cap. He pointed out that if the committee is only talking about wirelines then they haven’t fully discussed competition. He also asked the committee to consider the nature of regulation when they consider the nature of competition. His company is required to negotiate. He encouraged the committee to make sure that when they pass something they ensure that the big company gets to stay in the competition. Qwest is the only company that is regularly required to file TSLRIC reports. They would rather see no one regulated than everyone regulated. They don’t understand the argument that it is too expensive to challenge the rural exemption. It does take major resources but competitors are always using those resources against Qwest.
Mr. Ceballos testified that the current laws do provide dispute resolution processes. Finally he asked that they don’t end up creating regulation to replace current regulation. Qwest wants to provide the best service possible at the best possible price.
Steve Mossbrook testified that the nature of the disputes is not services out of the catalog but the ways you are allowed to do things. Qwest sets internal rules in which they have to interact with them. Qwest changes their minds periodically so then competitors have to renegotiate and fight about it. It not about pricing but the order of the catalog keeps changing and that is what the battles are about. It is not simple to adjust to these constant changes, it costs money. These things do not sit well with them.
Senator Hanes stated that the committee needs to refocus on the issue.
Rep. Gingery questioned whether the Commission should be given more authority. He lamented that no one is getting along. He stated that the law may need to give the PSC more power to be the referee because it looks like the fights are going to continue.
Qwest suggested that there is more than sufficient authority for the commission to resolve these fights. There is a process and that should not be expanded. They don’t see the need to add more regulation to a process that is already overburdened.
Brett Glass, lariat.net, provided written testimony (Appendix 12).
Chairman Meier stated that the committee needs to get its goals and priorities down. He wants to get everyone on the same page.
Rep. Gingery suggested the committee start with the briefing paper provided by Ms. Zerga. (Appendix 13). Page four sets forth some very good goals. The committee should then go through every type of regulatory function and decide a priority of high or low. Then the LSO could go through which ones we are doing and which ones we are not, then decide as a committee what they want to tackle. He stated that interconnection agreements are a main goal.
Senator Scott stated his six goals: 1. Ensuring constituents have the full range of telecommunication services. 2. Provide a resolution process for disputes. 3. Keep costs for phone service and 911 services as low as possible. 4. Determine if the competitors are getting enough revenues for the system to keep access available at all time and avoid congestion problems. 5. First do no harm. 6. Subcommittee meetings to better understand these issues. Chairman Meier stated that there would be no subcommittee.
Senator Hanes stated that is main principal to establish and maintain a competitive environment. Good things flow from this. Stated that the committee received a lot of material today and need to absorb it all. He is not yet locked into anything particular.
Rep. McOmie asked for someone to show what other statues would keep unfair competitions from happening. He thinks TSLRIC is the problem but removing it could create unfair competition. He wants to know if there is some protection in statue or does the committee need to add more safeguards.
Chairman Illoway referred to the materials handed out by Chris Robish. His fifteen bullet points are right on. Maybe a number of those we don’t want to do but they are very good points. It is a good list for where the committee should be heading.
Rep. Miller agreed that first the committee should do no harm. He stated that Wyoming is moving in the right direction and doing some things right.
Rep. Barnard stated that he wants to completely deregulate.
Rep. Olsen agreed with what was already said. He wants to ensure that services are universally available.
Chairman Meier stated that he wants the committee to look to the future. The committee should set a bench mark for access rates and lower the price of basic services. He believes that a USF that supports broadband might not happen. He stated that he was not sure they would be able to have draft legislation for the next meeting.
The committee discussed the details of the next meeting. The meeting will be two days of which possibly more than one day will be spent on telecom.
Chairman Meier offered to get together with LSO staff on what the committee wants. They may look at drafting legislation for consideration by the full committee.
The committee adjourned for the day.
Jan Livingston, Teton County Director of Administrative Services testified about a developer who bought a large ranch in Teton County then used the family exemption to subdivide the land outside the subdivision law. Teton County believes that the family exemption should require the grantor to hold it for 5 years as well as the grantee to hold it for another five years. This is to prevent abuse. The county would also like to see language clarifying that zoning and use regulations apply also and brought proposed language for the committee's consideration. (Appendix 14).
Written testimony from the Jackson Hole Conservation Alliance was also received supporting the extension of time on the family exemption. (Appendix 15).
Rep. Gingery stated that what they are trying to do is prohibit using the family exemption to speculate on land and avoid the subdivision regulations. Rep. Gingery pointed out that the subdivision laws really apply mostly to counties that have no zoning regulations.
Senator Scott questioned whether a person could get around the five year requirement by doing a contract for deed.
Rep. Olsen was concerned whether this is an isolated incident with one family or if it is a real problem throughout the state that needs to be addressed. Ms. Livingston stated that land values are not going down. This is recognition of a weakness in the law that could be strengthened. Rep. Olsen stated that he does not have a problem with speculation. If a person wants to give land to their kids and the kids want to do what they want with it as part of their individual private property rights, why shouldn’t they be able to.
Chairman Meier stated that all it does is force the landowners to follow the planning and zoning subdivision laws. Sen. Mockler doesn’t see it as taking a property right, but rather strengthening a privilege granted in statute.
Rep. Gingery pointed out that the clause stating that zoning provisions still apply, including minimum lot sizes. The Pedro Aspen decision says that regulation of “use” by counties, there is still argument that minimum lot sizes are not a regulation of use.
Joe Evans, Wyoming County Commissioners Association, testified. When the family exemption passed it was to solve the problem at that time that the subdivision law only applied when land was split into more than two lots. They changed it to any division of land but they wanted to allow ranchers to split off a piece for the children to build on the ranch.
Mr. Evans was mostly interested in 35+ acres of land. In 1995 the legislature required DEQ to review subdivision applications. Later the legislature made those requirements less onerous. When the task force looked at this, there was a great deal of discussion of whether to address the lots larger than 35 acres. They chose not to deal with it so there was no discussion of whether that 35 acre distinction should be larger or whether it should be a county option. Unless a county has zoning, there is nothing that has to be provided to the lots of 35 acres or more.
Mr. Evans stated that the County Commissioners Association will be discussing subdivisions at their next meeting. There are a lot of different issues being talked about by many different groups. County planners are really the experts and they would like to bring to the committee options that would help counties better control planning. Right now the only tool is zoning.
Rep. McOmie asked about zoning and whether counties can zone just parts of the county. The answer is yes, you can zone all or part of a county.
Chairman Meier asked how many counties have zoning at the local level. In 1996 there were only 6 but 7 or 8 have been added. Therefore, approximately half the counties have it. Chairman Meier wondered whether they should just give the counties the full authority regarding subdivisions. If they don’t adopt something then subdivisions can’t occur. That makes it all or nothing. The problem right now is that the counties have good control for less than 35 acres. If it is over 35, there is nothing other than a 30 foot easement to the land required.
Whether the committee wants to raise the 35 acres, to make a county option or whatever, Mr. Evans testified that he hopes that the committee will work with the county planners in making that decision.
Rep. Gingery suggested using the very small lot exemption in W.S. 18-5-306 could also be made to apply to 35+ acre lots.
Doug Cooper, rancher from Casper, testified regarding his unfortunate experience with 35+ acre subdivisions. (Appendix 16). 40,000 acres were subdivided near his ranch. They have been sold with absolutely no amenities.
Senator Scott asked whether the property is actually getting developed. Mr. Cooper stated that some has been fenced and one lot has a travel trailer sitting on it. Sen. Scott has a little development like this going in near his home and the people have no idea how difficult it is going to be to get water. Mr. Cooper’s neighboring lots are near an old uranium mine. Sen. Scott asked about the tax problem – how do you distinguish from smaller hay fields and such. Mr. Cooper suggested that the law currently requires the landowner to prove the agricultural productivity of the land.
Mr. Cooper also expressed concern about the wildlife populations that are being affected by the fragmentation of the land.
Mark Reed, Planning director for Laramie County, testified about the history of 35 acre developments in Laramie County. (Appendix 17). Platted lands in Laramie County really exploded in the 1970's and again in the 1990’s and 2000’s. It is currently about 6% of land in the county. Factors driving rural development are economic prosperity, easy commutes, technology, market approach to control, desire for rural lifestyle, cheap cows, lack of environmental constraints and affordable housing choices with modular homes.
The rate of lands being platted is far in excess of the population growth. He provided a graph showing the explosion of development in the county, with over 12,000 acres being platted into 35 to 45 acre lots in 2005. He is also aware of a single development to come in 2006 that will include approximately 20,000 acres.
Mr. Reed addressed the concerns they have with this type of development. The positives are that it does allow people the rugged individualistic lifestyle. In Laramie County it is a minimal impact on water quality. It does present an affordable housing alternative and it offers ranchers a reasonable method to stay afloat.
The problems are that it compromises the values Wyoming associates with open spaces. The revenues received by county governments and school districts are less than what is necessary to provide services to these areas. The demands on rural roads and sheriff departments are difficult. Nuisances increase. These subdivisions do not follow the methods of land management and planning or range stewardship.
Mr. Reed addressed what can be done. Carbon County has chosen to use their zoning power to require one residential unit per 640 acres in some parts of the county. He encouraged statutory change to a larger lot size or to allow counties to set the exemption. He provided a bill that would require conservation design be built into these lot sizes. (Appendix 18). He also provided a map that shows how the conservation design system would work. (Appendix 19).
Chairman Meier asked how much open space is needed. Rep. Olsen understood the idea of a need to deal with the unique qualities of each county. He is surprised to hear the same issues here in Laramie County that they see in Teton and Sublette Counties. Rep. Barnard asked whether there were any land use controls with these properties. The counties can do zoning but half the counties have not done so.
Rep. Miller asked why the counties can not do the conservation design system now through incentives. He does not see a need for more legislation. Mr. Reed did not believe the counties can’t do it right now. Rep. McOmie stated that he has heard these same issues over and over and over. The committee thought they had given the counties the right to do their own thing. The Supreme Court got their intent wrong. Additionally, when a town is surrounded by these 35 acre ranchettes there is no place to build affordable housing.
Sen. Hanes agreed that this causes girdling of the city and restrains the city’s ability to grown in any direction.
Sen. Scott described an example in Natrona County that flourished during the boom, then during the bust the trailers were abandoned and the place was a mess. With respect to the tax issue, everybody in the state pays less than they receive since the mineral industry really pays the most in taxes. Also, there is a developer in Buffalo that has done the conservation design plans under our current laws. He would like to hear from that developer if the committee decides to move forward with this legislation. He also asked how the open space is protected after the initial design. Mr. Reed stated that conditions can be placed on the land at the time of platting that could be enforced by the county. Sen. Scott hoped the committee chooses to pursue this issue and he would join Sen. Johnson if they don’t, because he believes it has significant merit.
Rep. Gingery reiterated that a simple change could be made in W.S. 18-5-306 that gives the county authority to regulate just like the small lot subdivisions.
George Parks, Wyoming Association of Municipalities testified that they are watching with great interest because what happens with rural subdivisions affects the nearby cities. Cities need room to grow. These subdivisions create the expectation of extension of municipal amenities. He offered to help with anything the committee needs.
Mike Besson, Director of WWDC, testified about some of the things that they are looking into. There is a provision in law that says that if a landowner does not get prior approval from DEQ they are not allowed to apply for WWDC monies. The WWDC is still dealing with bailing out old subdivisions made before this requirement. When the WWDC starts building pipelines they try to estimate the population 30-40 years out.
Sen. Scott asked about the development Mr. Cooper complained about. There is a pipeline to Midwest right next to the development and Scott wondered if they can tap into it. Mr. Besson was unsure. It would be a good idea to build in a preclusion from asking for WWDC funds for lots that are exempted from the subdivision laws because of size unless they get prior approval.
Bobby Frank, Wyoming Association of Conservation Districts, presented a proposal from Representative Childers. Rep. Childers wrote "For small acreage owners, the subdivision laws do not provide an avenue for the owners to easily resolve differences. First, the law should force the formation of landowner associations for handling issues with the subdivisions, i.e., conveyances, road maintenance, and irrigation issues. Second, the County Commissioners should be the main authority to mitigate differences with the technical help of other agencies when necessary. Section 18-5-301 provides the authority of the County Commissioners but, generally, does not make it clear that that governing body should mitigate conflicts for the landowners. The County Commissioners usually handle the permitting of the subdivisions but the courts have normally handled the differences. There should be a method for the landowners to resolve differences through the local governing body prior to going to court. The subdivision laws should make it quite clear for conveyances, road maintenance, and irrigation issues that the associations have to be active and utilized or the governance of those issues are not valid. For instance, if an active covenants committee is not maintained and the covenants enforced, the rules and restrictions are not worth the paper they are written on according to attorneys advising clients in subdivisions.
My comments at this time are concerning the small irrigation issues with suggestions to establish a new section for “Water Irrigation Supply and Distribution System” along with several changes to the subdivision laws to address the irrigation issues. I believe that if you talk to the irrigation districts and the State Engineer’s office, you will find that there are real problems with irrigation in subdivisions and with an excessive use of water. I am not trying to make the system to complicated for landowners. If we do not establish some formality to the subdivision laws, the diversity of the retired people living on small acres will continue to create havoc in those subdivisions. I believe that my approach may help resolve some of those problems. I have been living in this type of subdivision for over 25 years.". (Appendix 20).
As a landowner, Bobbi Frank testified that development has affects on children. They spend much more time on school buses. She is not opposed to development but would rather see the county have authority to make decisions. She does not agree with forcing developers to do cluster developments.
Lori Urbigkit, Wyoming Association of Realtors, testified that the 35 acre exemption was meant to protect agricultural properties. She agreed that counties should be regulating. The problem is that counties that do regulate are so onerous that it is easier to just do the 35 acre splits. She liked Rep. Gingery’s suggestion to allow counties to pick and choose which regulations they will put on 35+ acres the way they do with the small number lots. The main thing is the restrictions need to be such that they do not prohibit growth.
Sen. Scott asked how we distinguish between the legitimate division of agricultural land and the potential development divisions if you just increase the number of acres. He also asked what kind of problems she sees as realtor. She agreed to provide the committee with further information.
Chairman Meier described how he spent more than $1000 per acre in surveying and other costs just to split off a five acre parcel.
Sen. Scott asked for specifics as to what counties are doing that is onerous. He stated that they need to be specific as to what needs to be fixed if the committee is going to do anything. Sen. Johnson pointed out that his bill is only an alternative, not an onerous requirement. Rep. Gingery pointed out that W.S. 18-5-306 provides the extent of regulation that counties can do. Those requirements are not onerous requirements for subdivisions. On the other hand, the zoning requirements may be harder, but that is not what the committee is talking about.
Rep. McOmie stated that what is considered onerous in some counties is what other counties desire.
Sen. Scott believes they still need to keep an upper acreage exemption, but give counties authority to choose to regulate up to 100 acre divisions. The committee needs to think about whether the survey plat requirement is necessary. They should also be allowed to apply this to part of the county if the county chooses. The committee should look at the types of disclosures that required – they may be heading the way of Florida in the 1920’s if they don’t. The committee needs to think about the tax implications when the land becomes residential as opposed to agricultural. Finally, he supports the Sen. Johnson bill as long as it is an option with incentives from the county for the developer to choose that method. The key is making it optional. But he wants to hear from developers as to whether that type of development isn’t already allowed under law.
Chairman Meier argued that 100 acres shouldn’t be the limit. He suggested the 35 should be taken down to 32.5. Then he would like to give the county the option to regulate if the land is going to be used for residence.
Chairman Illoway asked about how zoning is different than subdivisions. Zoning deals with lot sizes, uses of land, etc. Subdivision law sets the requirements for amenities, roads, easements etc. Current law requires easements for road and electric to 35+ acre subdivisions, but not that they be built. Rep. McOmie asked the difference between land use planning and zoning. Land use planning sets the foundation for the regulations the county adopts. Zoning is the regulations that put the planning into effect.
There was discussion of the Attorney General opinion regarding the Pedro Aspen case. (Appendix 21).
Rep. Gingery asked that LSO draft a bill and bring it to the next meeting for discussion. The restrictions in 306(a) and (c) could be adopted by the county, but the restriction in 306(b) should always apply. The committee agreed.
There was discussion about allowing property to be taxed as agricultural until it is developed. The committee was not interested in addressing that issue.
Rep. Gingery also asked that LSO draft a bill as requested by Teton County for committee approval. Sen. Scott wanted to add to it that small family corporations could take advantage of the family exemption. The committee concurred.
Sen. Scott asked that first bill include the requirement of a disclosure about who owns the mineral estate and any known mineral exploration. Chairman Illoway suggested that the disclosure should also include availability of water, but Rep. Gingery pointed out that 306(a) does have those requirements.
The committee chose not to address Representative Childers' recommendation.
The committee broke for lunch and reconvened at 1:00pm
Secretary of State Joe Meyer testified regarding the issues that have become a concern for the Secretary of State’s office. (Appendix 22). Jeanne Sawyer brought up the concern that corporations, statutory trusts and LLC’s lapse but can be reinstated within two years. The office is not resistant to allowing longer periods with certain requirements. Limited partnerships and registered limited liability partnerships do not have any ability to reinstate.
Sen. Mockler suggested that the committee allow a reinstatement for dissolution of assets. Secretary Meyer is concerned about the entities that have been administratively dissolved, then come back and reinstate, but no one knows what they have been doing in that period of time.
Another concern is that facsimile signatures are not allowed on paper filings. The Secretary of State provided language from the Model Business Corporations Act that could allow those types of signatures.
Andrea Byrne gave an update on the computer program development. Completion is scheduled for December 11, 2006. The program will provide for filings via computer which will reduce a great deal of paperwork. This will allow for computer filing of annual reports.
Tom Cowan testified that in the late 1980’s and 90’s there was a push to make
incorporation easier. The goal was to
attract business to Wyoming. Secretary
Meyer testified regarding a man who came in and opened 1000 corporations. Tom Cowan testified that weekly they get
visits from the FBI for certified documents from corporations organized by
persons from outside of the country.
The state does not collect any information on these corporations other
than registered agent for service. The
Department of Treasury put out a report on money laundering which cited
Wyoming, Delaware and Nevada as states with the least restrictive laws. Wyoming allows too much anonymity and it is
being used for nefarious conduct. What
the state gets out of this anonymity is $100 filing fee and the embarrassment
of being tied to these companies. The
policy question is whether the state actually wants to know more.
Sen. Mockler asked if the state has some fiduciary responsibility to collect this information. Secretary Meyer said the state's current level of scrutiny is probably constitutional but he is deeply concerned about what these people are doing in the state. There may be benefits but he is not real sure what it does for the state.
There was discussion on the corporate annual fee. Right now it is $50 plus a percentage of assets in the state. Charging a flat fee would increase rates for small corporations but would greatly decrease the fees paid by large corporations who already do not have to pay a state corporate tax. (Appendix 23).
Sen. Hanes brought up legitimate business reasons for maintaining privacy, but there is a sinister side growing. It is unclear what types of information would be needed. The committee could make the filings confidential unless requested by a law enforcement agency.
Sen. Scott pointed out that there were two objectives to the lax filing requirements. First was to assist mom and pop companies to protect themselves. The legislature also thought that it could attract business to Wyoming, even if the only business in Wyoming was hiring an attorney to do the filing. He thinks the committee should be cautious before they reverse what they did because there may be unintended consequences. Even in restrictive states it is easy enough to create straw corporations.
Secretary Meyer said he really has no recommendations, just that his office wanted to bring the complaints of the FBI and Interpol to the committee's attention.
Carol Ganella, an attorney in Jackson, testified regarding issues that she finds important. (Appendix 24). The state had the foresight to create the first LLC laws. Now every state in the country has them. LLC’s have now become the entity of choice. Her biggest suggestion is to modify the annual fee. Setting it as a flat fee would encourage companies to keep business and property in Wyoming. Additionally it would remove the argument over whether property is located and employed in Wyoming.
Sen. Hanes asked for a comprehensive list of the fees that are charged to corporations and LLCs and the Secretary of State agreed to provide that. He agreed that it is very cumbersome the way it is right now. Sen. Scott suggested a complicated manner of increasing the fees but allowing them to offset by the amount of property tax paid in Wyoming.
Ms. Ganella's second suggestion is to create Series LLC legislation – currently available in Delaware, Illinois, Tennessee, Iowa and Okalahoma. A Series LLC allows for an umbrella LLC with subsidiaries under that umbrella. This would allow for compartmentalization of the business, but would lower the filing and reporting requirements.
Sen. Hanes stated that this has the possibility of filling a need and is very interesting. Chairman Meier was interested in the transparency of transferring money between LLCs. Sen. Hanes compared them to a holding company with subsidiaries. Sen. Scott suggested they would want to structure it that way. A company might want to have one entity that was riskier but would not affect the borrowing ability of the other. It would also help compartmentalize liability.
Ms. Ganella asked that there be clarification of rights of creditors against a member of an LLC in W.S. 17-15-145.
She requested that the state enact a statute that establishes that Wyoming law governs and controls Wyoming LLCs. This would help clarify choice of law in court cases. She believes either Iowa or Illinois has that language.
Finally, Ms. Ganella would like to see the number of members of board of directors lowered to just one for non profit corporations. W.S. 17-19-803 currently requires 3. It would give more flexibility to private individuals. Sen. Mockler expressed concern that that would take away the interpersonal checks and balances. Ms. Ganella suggested that the filings with the federal government provide checks and balances.
The Secretary of State offered to write a memo outlining the concerns with creating series LLC’s.
Senator Scott suggested that the SOS convene a task force with Ms. Ganella and other attorneys who have worked in the area and come back with specific proposals. The Secretary of State agreed.
Scott Meier, Cheyenne attorney and CPA testified regarding Wyoming’s business corporations act. The act was premised on the 1984 model business corporation act. He reiterated what Sen. Scott pointed out - that the legislature followed Delaware because it was business friendly and had substantial case law. The model act was updated in 1999. Dissenter's rights under the old act is not keeping up with case law. He suggested a task force of practicing attorneys and the Secretary of State to provide recommended changes.
Senator Hanes suggested having LSO staff work with a task force of attorneys and the SOS so that a bill can be drafted for the next meeting. The same will be the process for updating the Uniform LLC act. Scott Meier will mock up the corporations act and Carol Ganella will mock up the limited liability company act.
Larry Christensen, representing land title companies, testified regarding dissolution problems. (Appendix 25). Wyoming law recognizes the continuation of a corporation for the purpose of dissolution and transfer of assets. However, that does not apply to limited partnerships. This causes problems in transferring title to properties.
Mr. Christensen also expressed concern about recognition of entities created under differing state laws. For instance, Colorado has an entity called a Limited Liability Limited Partnership which Wyoming does not recognize. This has caused problems with transferring title. Sen. Mockler suggested the committee statutorily state that an LLLP is equivalent to LLP for purposes of title transfers. The committee asked LSO staff to draft a bill that handles the concerns raised with respect to dissolution.
The issue of LLLP transfer of title will be looked at by the SOS and he will report back to LSO to suggest a way of fixing the title transfer problem.
The committee went into executive session with the Secretary of State.
The committee chose July 13 and 14 in Casper as the dates for the next meeting.
There being no further business, Co-Chairman Pete Illoway adjourned the meeting at 3:45pm.
Respectfully submitted,
Representative Pete Illoway, Co-Chairman Senator Curt Meier, Co-Chairman