Verizon questions CTC fee rate

Micronesia Telecommunications Corp. has asked the Commonwealth Telecommunications Commission to reduce the regulatory fee rate imposed on the company, allow it to pass on the fee’s cost to consumers, and assess other telecommunications providers the same fee imposed on Verizon Micronesia.

MTC, Verizon’s owner, asked the CTC to reconsider its final order with respect to the regulatory fee, saying that the commission’s imposition of the fee on a new rate equivalent to 2.5 percent of gross receipts was procedurally defective and constitutionally non-compliant for unfairly imposing it on Verizon alone—not on all telecom providers in the CNMI.

MTC attorney Steven Carrara said the imposition of the 2.5-percent fee was not properly promulgated by the CTC without complying with the requirements of the Administrative Procedures Act.

Verizon has been disputing the fee being assessed by the CTC in the amount of $107,526.03 representing 2.5-percent of the company’s declared gross revenue of over $4.3 million for the first quarter of 2005 and has expressed its desire to pass the cost on to consumers. Earlier, it sent the CTC a $21,505-check representing 0.5-percent of the gross revenue.

Public Law 14-53, which was enacted on Jan. 6, 2005, removed the 0.5-percent cap on the fee, which had been effective since 2001. For about two decades, the historic rate had always been 2.5 percent before the 0.5-percent cap took effect.

“Without the benefit of following the procedural requirements set forth in the APA and the CTA [Commonwealth Telecommunications Act], the CTC may not raise the applicable rate without providing notice, the opportunity to comment or public review of the proposed actions,” Carrara said. “As the Legislature vested the CTC with the discretionary regulatory authority to determine the applicable fee, its determination must be made in accordance with proper regulatory procedures.”

In a request for reconsideration of order filed with the CTC last week, Carrara said the commission has not promulgated regulation authorizing the increased assessment and has not satisfied the APA’s 30-day notice and publication requirement.

“Without the benefit of any administrative regulatory process, or ability to comment, the CTC has improperly assessed over $300,000 in additional yearly charges against MTC,” Carrara said.

He said the CTC could not also impose the increased fee retroactively. CTC executive director Adam Turner assessed MTC with an increased fee for the first quarter of the year, applying the 2.5-percent rate retroactive to Jan. 17, 2005, the date when PL 14-53 became law.

Carrara also questioned the authority of Turner to assess the fee, saying that the executive director could not do so without a commission vote. He said no evidence appears on the record to show that the commission delegated its authority to the executive director.

‘CTC discriminates vs. Verizon’

Carrara said the CTC has only imposed the fee on Verizon and no other telecommunications provider in the CNMI. He said the CTC should also impose the fee on wireless and cable television providers in the CNMI.

“The CTC should consider the Commonwealth gross revenues of all telecommunication providers in determining the applicable percentage to be imposed on all telecommunication providers as their gross revenues fall within the CTA statutory definition,” he said.

Carrara said discriminatory assessment of the fee on Verizon alone violates not only the CTA but also the U.S. and CNMI constitutions.

Verizon also asked the CTC to allow it pass on the cost of the fee to consumers, citing the “consumer pass through” provision in a 2004 settlement agreement, which the company and prospective purchaser Pacific Telecom, Inc. agreed to with Gov. Juan N. Babauta and CNMI consumer counsel Brian Caldwell, who have intervened in the companies’ joint application for CTC approval for the transfer of all common stock.

“The settlement agreement, as adopted by the CTC, provided that both parties would seek legislation increasing CTC funding in the form of a consumer pass through. The fact that the Legislature has made it discretionary upon CTC to allow the collection of this fee as a consumer pass through does not relieve the parties of their obligations to continue to support this instant pass through request,” Carrara said.

The lawyer said passing on the cost of increased fees to consumers does not equate to a prohibited service rate increase, saying that the company had no control over the increased franchise costs.

Carrara filed the request for reconsideration after the CTC recently came out with a final order that green-lighted the proposed multi-million-dollar sale of Verizon from MTC to PTI. The order also affirmed the 2.5-percent regulatory fee imposed by the CTC on Verizon for the first quarter of the year.

MTC and PTI, as well as the governor and the consumer counsel, have also filed with the CTC separate reconsideration requests on various other grounds. The companies have asked the CTC to consider comments by CoBank, one of PTI’s financiers. Carrara said that CoBank is experienced in providing telecommunications acquisition financing and was involved in the acquisition of the Guam telephone system.

MTC-PTI lawyer Carrara also requested the CTC to relax its requirement for the companies to join the National Exchange Carrier Association, subject to their demonstration of good cause within 119 days of closing the telecom deal.

PTI has agreed to join the NECA as part of the 27-point agreement, which the companies reached with the intervenors before settlement hearing officer Sean Emory Frink. The parties expected PTI’s membership to NECA to provide assistance to rate and tariff development, industry database management, compliance auditing, economic forecasting, trend analysis and regulatory policy analysis.

“As NECA membership may prove to be financial liability rather than a benefit to MTC, PTI proposes modification of the final order,” Carrara said. The companies also want an extension to the deadline for closing the telecom deal from Aug. 11 to Aug. 30.

The CTC released its final order last June 16, over one year and nine months after MTC and PTI jointly applied for the approval of transfer of all common stock.

But the commission also ordered the conduct of a contested case proceeding on competitive issues related to Verizon’s sole ownership of the CNMI’s only inter-island cable, asserting its jurisdiction over the matter.