CTC clears way for Verizon deal

The Commonwealth Telecommunications Commission rejected early last night Gov. Juan N. Babauta’s proposal for the establishment of special enforcement provisions and the imposition of a $10-million performance bond on Pacific Telecoms Inc. once it acquires control over Verizon’s local operations from Micronesian Telecommunications Corp.

This development narrows down the dispute arising from the governor’s intervention in the approval of the sale to two issues: the financial audit to be completed by Deloitte and Touche to determine PTI’s financial capability and Verizon’s monopoly of the CNMI’s fiber optic cable.

In a meeting at the governor’s conference room, CTC chair Norman Tenorio, commissioners Mike Fitzgerald and Josephine Mesta unanimously voted to reject Babauta’s and CNMI consumer counsel Brian Caldwell’s joint proposal on the enforcement provisions and bond requirement, inching the Verizon transaction a step closer to possible approval by the CTC.

“It is close to impossible to impose a bond on PTI,” the chairman said. “[The bond] is just an additional cost of doing business. And let’s face it—this [cost] will be passed on to consumers.”

Tenorio said more faith should be placed on the CTC in its task to oversee PTI’s operations, once its acquisition of the telecom company is consummated. He said PTI should be allowed to operate its affairs in a free enterprise setting.

Fitzgerald said that, while he recognizes the interest of the governor and the CNMI consumer counsel to protect the interest of the public, the imposition of a $10-million performance bond is not the right way to ensure PTI’s compliance with an approved settlement agreement. He said there could be better ways that could be crafted to ensure such compliance.

PTI had opposed the proposal, describing it as anti-business. The company’s reaction to the CTC decision was not immediately available last night.

Babauta’s lawyer, Assistant Attorney General James Livingstone, and Caldwell welcomed the CTC’s decision, saying they would not contest it pursuant to the Final Negotiation Settlement Report released by CTC settlement officer Sean Frink.

“The decision on [the] enforcement [provisions issue] doesn’t in any way limit the power of the consumer counsel under the Commonwealth Telecommunications Act,” Caldwell said.

Livingstone also supported the CTC’s clamor for funding, saying that its current financial problem might eventually affect the commission’s enforcement capability.

CTC executive director Adam Turner said the Legislature has not acted on proposed legislation addressing the commission’s funding problem.

“Included in the settlement was a finding that the CTC needs resources to enforce the settlement and agreement between the parties to support legislation addressing this,” Turner said. “In terms of enforcement, both parties [companies and intervenors] agree that the CTC needs these resources.”

“The other issue involving competitive use of the fiber optic cable was not agreed to in this settlement and we have treated it as a contested case. Our regulations clearly address and contemplate competitive issues such as this,” Turner also said.

He said that, while Verizon’s use of the fiber optic cable is clearly a monopoly, there are cases when natural monopolies are allowed to operate without any special regulation, such as cable television. He stressed, however, that the commission has yet to arrive at a decision, saying that there are also numerous cases of monopolies being regulated.

The junked proposal for enforcement provisions provided for up to $500,000 of penalty should PTI eventually violate the settlement agreement.

Under the proposal, anyone who believes that PTI is violating the settlement can provide the company a written notice of violation, which will give the company 30 days to remedy the situation. After 30 days, the complaining entity may then file with the CTC a complaint that attaches the written notice.

Once it takes over MTC’s Verizon operations, PTI has committed to end inter-island toll charges, protect local workers, increase local competition, guarantee certain technological offerings and no-rate increases for years.

The governor and consumer counsel had proposed the bond requirement to ensure that PTI has the financial capability to pay a fine and correct possible violations.