Congress committee hears testimony on bill to transfer FSMTC assets

By Bill Jaynes
The Kaselehlie Press
May 18, 2017
Palikir, Pohnpei—Chairman Senator Victor Gouland of Chuuk called a public hearing of the Committee on Transportation and Communication for 8:30 this morning. The purpose of the hearing was to discuss proposed amendments that if passed would transfer certain assets of FSM Telecommunications Corporation (FSMTC) to the newly established “Open Access Entity”.
Witnesses at the hearing included representatives of the Department of Transportation, Communication and Infrastructure including the Department’s Secretary. The Secretary for the Department of Justice was there. FSMTC had representatives there including one board member. No one from the new “Open Access Entity” was there, leaving an attorney who has worked on the project to be the spokesperson, even though he told the committee that he didn’t work for the new government corporation.

OAE Board Chairman John Sohl resigned on May 16, 2017 over the proposed bill and because of the “fact that WB (World Bank) wants to create their own untouchable monopoly after having convinced congress in 2014 to liberalize the telecom market.”
In 2014, a law was established liberalizing the telecommunications in the FSM in order to allow for competition within the industry. The industry was to be regulated by an “open access entity” that would ensure that government owned fiber optic resources would be available to any potential competing telecom companies. That entity was set up after Congress recently authorized the expenditure of over $300,000 to set up the FSM Telecommunications Cable Corporation (FSMT Cable Corp.). Both FSMTC and FSMT Cable Co. are FSM entities and any of their assets are government owned.
The bill being discussed this morning proposes to transfer ownership of several of FSMTC’s assets including the HANTRU1 fiber optic spur to Pohnpei over to FSMT Cable Co. FSMTC and any other telecom provider would then pay FSMT Cable Corp. for access to the line. Essentially FSMT Cable Corp. would be a wholesaler of telecommunications services and FSMTC would be a retailer of those services but the asset would no longer be theirs.
The person who ended up having to speak for FSMT Cable Corp. said that the only way that a truly competitive telecommunications industry could be set up would be to strictly divide wholesale and retail operations.
He also said that there are really only two options if the FSM is to receive the largest grant in its history for a single project provided by the World Bank. One would be to transfer the assets and the other would be for FSMTC to provide open access to FSMT Cable Corp. for free. He said that the transfer was a World Bank requirement in order to ensure that access to the HANTRU1 line would be guaranteed since Chuuk would be tying into that line. Kiribati and Nauru would also be tying into that line.
He postulated that transfer of the HANTRU1 line to FSMT Cable Corp. would also guarantee to the World Bank that the lines they are proposing to pay for would be put into use. Without asset transfer, FSMTC, as a de facto monopoly could decide that market conditions are better suited to satellite provision of those services and simply not use the new line.
The bill would also ensure that there are proper landing facilities in the States.
Senator Esmond Moses said that he and the committee had been over and over the World Bank grant agreement but could not find any World Bank requirement that assets would need to be transferred to the new Open Access Entity. He wanted to know if TC&I had any documentation in writing saying that would be a requirement.
The TC&I representative said that he did have documentation. In a small dig against FSMTC he said that he had tried to print it that morning but that the Internet was not working at the time. He said he would provide the document right after the committee meeting.
Chairman Gouland said that the committee had to move very carefully in regard to FSMTC because “that’s our baby”.
The TC&I spokesperson said that they had spoken with several telecommunications experts who told them that FSMTC would not be damaged by the transfer of assets and could possibly, in fact do better. He said that the FSMT Cable Corp. would require $500,000 a year for overhead, an amount that he called relatively small. He said that if a new operator comes in, that cost would be divided between FSMTC and another operator so FSMTC’s costs would go down. Additionally, with the addition of new fiber optic lines in each of the other states, FSMTC would be able to provide a better and more attractive package of services to potential customers in states that do not currently have the service. That could potentially attract more customers and boost revenue and profits.
Chairman Gouland said that the committee was also concerned that there had been no consultation with FSMTC before the bill was submitted. During the meeting he several times mentioned that the plan appeared to be in someone’s self-interest.
Senator Ferny Perman asked who would be paying for the outstanding loan that FSMTC is currently paying for the HANTRU1 fiber line. The spokesperson said that FSMT Cable Corp. would be paying the loan. Perman asked if RUS (US Rural Utilities Service), which holds the loan, had been asked if transferring the loan would be possible, and if not, why not. The spokesperson said that RUS had not been consulted because the government had not yet made a decision. He added that if RUS did not give its approval, the bill, if passed would require FSMTC to hold the asset on behalf of FSMT Cable Corp. and the loan would still be paid by the Open Access Entity.
FSMTC’s new CEO and President, Fredy Perman began his statement claiming that if some people in the room were Pinocchio, their noses would be getting longer and longer. “I understand why there is the push. Everyone wants the grant. Everyone wants fiber,” he said. But he claimed that all the bill really does is hurt FSM Telecom customers and disrupt FSMTC and its contracts. He said that it would also be almost impossible to implement due to the complexity of the agreements that FSMTC has with its providers.
Perman said that he doesn’t want FSMTC to be in the position to file wrongful action suits against their shareholder, the National Government. State governments are also shareholders and FSMTC has agreements with those governments for land use for facilities. He wondered what would happen if satellite providers didn’t want to work with the open access entity? Would FSMTC’s contracts with them just go away?
He called the bill a “bad bill” and the move, “a hostile takeover”.
FSM TC&I and the Secretary for Finance told the committee that if Congress didn’t act to approve the bill during this session, FSM would be in default of its contract with the companies with which it signed a contract and may not proceed at all. Additional liabilities also would likely incur. Further, the board of the World Bank has before it a $16 million dollar grant for a cable to Kosrae.
Chuuk and Kosrae’s cable would both need access to the HANTRU1 cable.
Senator Joseph Urusemal said that FSM TC&I should go back and work together with FSMTC to come up with a plan that would be mutually beneficially for all of the stakeholders and the people of the FSM.
“Talk to each other, and don’t be a child,” Chairman Gouland said. “Really, these are government entities and it’s too important.” He concluded that the committee could not currently recommend passage of the bill.
The first full session of the FSM Congress has several days before it adjourns. It is still possible that an agreement could be reached.
Senator Perman said that it felt as if Congress had a gun in its face.