CTC issues ultimatum vs Verizon on franchise fee

The Commonwealth Telecommunications Commission has given Verizon an ultimatum to settle the full amount of its franchise or regulatory fee until today.

A breach of the Commonwealth Telecommunications Act and CTC regulations allows the commission to impose sanctions.

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 on the cost to consumers.

It has refused to pay the invoiced amount, sending 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.

CTC’s board members unanimously affirmed the invoice the commission had earlier sent Verizon regarding the 2.5 percent regulatory fee.

“The company shall pay by the close of businesses on May 6, 2005, as the first quarterly regulatory/franchise fee payment the total amount of $107,526.03, or such higher amount reflecting first quarter gross revenues at a rate of 0.5 percent for Jan. 1-5, 2005, and 2.5 percent for Jan. 6, 2005 and following,” the CTC board said in an order Wednesday.

“The company’s failure to pay the assessed and invoiced fee by May 6, 2005, shall constitute a violation of…CTA [Commonwealth Telecommunications Act] sections and CTC regulations,” it added.

The CTC concluded that Verizon has indicated its intention to breach its franchise by paying less than the invoiced 2.5 percent of the first quarter gross revenue.

CTC executive director Adam Turner sent Verizon the invoice last April 13. On the same day, Verizon general manager Tony Mosley said the new public law leaves the CTC free to establish the fee level and implementation date.

In that letter, Mosley claimed that the CTC has advised the company of increasing the fee to 2.5 percent “with retroactive effect to Jan. 17, 2005.”

“We are unaware of any formal action that the CTC has taken to implement this increase, and request that you provide us with formal notification both of the increase and of authorization to pass the increased fee through to our customers,” Mosley said.

“Once we receive such notification, we will remit the incremental fee for the retroactive period, and will adjust our billing to include a levy for the retroactive fee as well as the pass-through of the fee for future periods,” he said.

Mosley suggested that the CTC implement a rate lower than the 2.5 percent maximum as allowed by law. “MTC [Micronesian Telecommunications Corp.] suggests that in order to lessen impact on consumers, the retroactive fee be collected over the course of the next six months.”

CNMI consumer counsel Brian Caldwell strongly opposed the passing on of the increased fee to consumers.

“Any telecommunications company seeking a modification to existing rates must go through a hearing process before the commission. The purpose is to allow the public a chance to participate. MTC cannot circumvent these legal requirements as it is now trying to do,” Caldwell said.