‘Address Verizon monopoly first before sale’s OK’

Gov. Juan N. Babauta and CNMI consumer counsel Brian Caldwell want the Commonwealth Telecommunications Commission to first resolve the controversy arising from Verizon’s monopoly of the islands’ only fiber optic cable before it grants prospective buyer Pacific Telecoms Inc. a license to operate the telecommunications firm.

“The sale should not be allowed to go through until this matter [monopoly] is addressed,” Caldwell said.

This came after CTC executive director Adam Turner said that CTC could approve the Verizon deal after the completion of the required audit on PTI, even if the monopoly issue has yet to be resolved.

As this developed, the CTC appointed a Majuro-based accountant to perform a portion of the audit work in addition to the task that would be done by Deloitte and Touche, denying the request of Babauta and Caldwell to appoint an auditing firm based in Boston, Massachusetts.

Caldwell said the CTC should set the threshold conditions to allow the consummation of the sale from Micronesian Telecommunications Corp. to PTI without resolving first the monopoly controversy.

Turner said last week that the CTC could grant PTI the license once two remaining issues are resolved. What remains to be done is the completion of an audit by Deloitte and Touche to determine PTI’s financial capability. Turner also said it is important for the Legislature to act on a proposed legislation for CTC’s future funding.

With the audit’s completion possible by August, Turner said a decision on the application for approval of the deal might be possible by September.

Turner added, however, that the CTC would look into the monopoly issue even if PTI is granted a license to operate Verizon.

He earlier 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. In contrast, Turner had also said that there are also numerous cases of monopolies being regulated.

Meanwhile, the CTC appointed Greg Tarasar, an accountant based in Majuro in the Republic of the Marshall Islands, to perform a portion of the audit work that Deloitte and Touche could not do.

Initially, Deloitte and Touche indicated that it could not perform running projections on Verizon’s post-sale future revenues and doing a sensitivity analysis on how PTI could respond to possible scenarios, citing company policy and recent changes to accounting practices.

Tarasar’s appointment sailed through despite the objection raised by Caldwell and Babauta’s lawyer, Assistant Attorney General James Livingstone, who both said that the accountant has yet to submit a formal proposal to them.

“We’ll agree to use the [accountant’s services] because that’s what CTC ordered, but we maintain our objection to his appointment,” Caldwell said.

Caldwell said the CTC rejected the proposal of Massachusetts-based Economics and Technology Inc., which has been engaged in the telecommunications policy field for nearly 30 years. He said ETI’s clients included numerous public utility commissions throughout the U.S.

Besides determining PTI’s financial capability, Deloitte and Touche and the newly appointed accountant would also look into how PTI could respond to baseline-, worst- and best-case scenarios by running projections of future revenues once the MTC-PTI deal is consummated.

Caldwell noted that, as part of the settlement agreement reached with the MTC and PTI, the latter company’s capital investment would reach $20 million in five years. PTI also agreed not to raise service rates in the next two years, and that increases in the following three years, which would be subject to CTC approval, should not be higher than the inflation rate level.