‘Verizon sale to benefit NMI’

Verizon owner Micronesian Telecommunications Corp. and prospective purchaser Pacific Telecom Inc. are insisting that the sale would result in tangible benefits to local consumers, reiterating its strong opposition to Gov. Juan N. Babauta’s request to divest the telecom firm of the only fiber optic cable facility in the Commonwealth.

MTC and PTI highlighted an earlier ruling by the Federal Communications Commission, which determined that the proposed sale would have no adverse impact on telecommunication competition in the CNMI. They insisted that the sale would benefit the public interest, contrary to the claim of the governor and CNMI consumer counsel Brian Caldwell.

PTI executive vice president for business development Jose Ricardo Delgado also urged the CTC to approve its proposed purchase of Verizon, saying that practically all of Verizon’s products have competition in the local market.

“This is not Cuba. This is not North Korea. This is not Burma, and therefore, I am confident that, having been presented with the same facts, the CTC will approve the application as the FCC did,” Delgado said in a telephone interview.

The companies said that the FCC also considered PTI’s technical and financial qualifications and that the latter is capable to assume MTC’s operations.

“PTI also made additional numerous financial and technical concessions which will provide direct immediate tangible benefit to consumers, increase the quality of services and maintain the continued successful operations of MTC,” said the companies’ lawyer, Marcia K. Schultz, in a submission to the Commonwealth Telecommunications Commission Tuesday.

The lawyer cited PTI’s commitment to eliminate inter-island toll between the islands of Saipan, Tinian and Rota; maintain current residential and business rates for two years; invest $20 million in capital improvements over the five-year period following the sale; join the National Exchange Carrier Association; and retain employees and promote the hiring of local resident employees.

She also said that CTC has no jurisdiction over Verizon’s fiber optic cable, saying that the facility, being an instrument of interstate commerce, is subject to FCC regulatory licensing requirements.

“Intervenors’ [Babauta and Caldwell] regulatory divestiture request to the CTC infringes upon federal authority over interstate commerce and therefore the CTC is without jurisdiction to consider the request,” Schultz said.

The companies cited that there are over 100 competitors offering long-distance service in the form of direct dialing and call card services. She said the MTC’s share of the total long distance market is actually less than 18 percent, as noted in an earlier ruling by the FCC.

“In the wireless communications market, there are currently three providers in addition to MTC offering competitive service: SaipanCell, Choice Communications and Radio.com. With respect to Internet and data services, there are currently five service providers in addition to MTC: Saipan DataCom, Marianas Cable Vision, IT&E and EC Communications and PDS,” their lawyer said.

“The number of providers and diversity in pricing plans indicates that these markets are highly competitive,” the lawyer added.

The governor and Caldwell had asserted that the CTC has jurisdiction to divest MTC of at least 33 percent of its ownership of the cable facility, insisting that public interest necessitates such action by the commission.

They accused the MTC of abusing its ownership of the only cable facility on the islands to limit competition.

“It abuses this monopoly by using it as a bottleneck to limit competition among carriers offering retail services. It does so by increasing the prices to unreasonable levels and severely restricting the capacity offered to competitors. This results in fewer choices and higher prices for consumers—the end users—in the Commonwealth,” they said.

“[MTC and PTI] are incorrect to assert that the commission should use the building of a second cable as a litmus test to determine whether the prices for capacity leases are reasonable. The CTC cannot assume that construction of a second cable is imminent, or that the absence thereof somehow proves that Verizon’s prices are justified by cost,” they also said.

Verizon general manager Tony Mosley pointed out, though, that, in the first place, the CTC has only jurisdiction over intra-state commerce and not inter-state commerce, which is the purview of the FCC.

“Secondly, if this [cable] is such a great business for us and is giving us good returns, we would have more competitors. You don’t need a license to put up a cable. Any company that wants to build one can do so,” Mosley said. “The fact that no one else is doing it is because they realize that it’s not a moneymaking machine. It is a significant risk. The CNMI doesn’t have any competitive constraints to anyone building their own cable here. There is no barrier here, none. If they want to, they can build that too.”

Thirdly, Mosley said there is no precedent for divestiture anywhere where free market enterprise rules.

Mosley insisted that when the governor wrote about the competitive issues to the FCC, their arguments were all summarily rejected—“all those things were rejected and the CTC should do the same with these frivolous arguments.”

Delgado cited page 15 of the FCC order, which says: “Based on our review of the record, we conclude that the proposed transfer is not likely to reduce the number of potential competitors in any of the relevant product or geographical market being served by MTC or GTE Pacifica. We find that acquisition of MTC by PTI does not pose any risk to competitors in the CNMI.”

“What the governor is doing is just another way of interference,” he said. “This is an open market, any company can come in and participate in any form they choose. There’s only monopoly if I stop you from building something the same.”