DA 03-3563 ORDER & AUTHORIZATION ISP-PDR-20030418-00012 DA 03-3563

Attachment DA 03-3563

DA 03-3563

ORDER & AUTHORIZATION

DA 03-3563

2003-11-06

This document pretains to ISP-PDR-20030418-00012 for Petition for Declaratory Ruling on a International Special Project filing.

IBFS_ISPPDR2003041800012_643658

Federal Communications Commission DA 03-3563

Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of )
)
)
Bell Atlantic New Zealand Holdings, Inc., )
Transferor, ) IB Docket No. 03-115
)
and )
)
Pacific Telecom Inc., Transferee, )
)
Applications for Consent to Transfer Control of a )
Submarine Cable Landing License, International )
and Domestic Section 214 Authorizations, a )
Cellular Radiotelephone License, Common Carrier )
and Non-Common Carrier Satellite Earth Station )
Licenses, and a Petition for Declaratory Ruling )
Pursuant to Section 310(b)(4) of the )
Communications Act )

ORDER AND AUTHORIZATION

Adopted: November 6, 2003 Released: November 6, 2003

By the Chiefs, International Bureau, Wireline Competition Bureau, and Wireless Telecommunications
Bureau:

TABLE OF CONTENTS

Paragraph
I. INTRODUCTION ........................................................................................................................... 1

II. BACKGROUND ............................................................................................................................. 3

A. The Applicants.................................................................................................................... 3
1. The Transferor ....................................................................................................... 3
2. The Transferee ....................................................................................................... 4
B. The Transaction .................................................................................................................. 5
III. PUBLIC INTEREST ANALYSIS................................................................................................... 8

A. Framework for Analysis ..................................................................................................... 8
B. Qualifications of Applicants ............................................................................................. 10
1. Financial Qualifications....................................................................................... 12
2. Technical Qualifications ...................................................................................... 15
3. Character Qualifications ...................................................................................... 17

Federal Communications Commission DA 03-3563

C. Foreign Ownership Review .............................................................................................. 21
1. Legal Standard for Foreign Ownership of Radio Licensees ................................ 22
2. Attribution of Foreign Ownership Interests......................................................... 25
D. Competitive Effects .......................................................................................................... 29
1. Competition in the Relevant Product Markets in the CNMI ............................... 30
2. Rate Integration.................................................................................................... 33
E. Dominant Carrier Safeguards ........................................................................................... 36
F. National Security, Law Enforcement, Foreign Policy, and Trade Policy Concerns......... 38
G. Public Interest Benefits ..................................................................................................... 44
IV. REQUEST FOR HEARING.......................................................................................................... 45

V. CONCLUSION ............................................................................................................................. 49

VI. ORDERING CLAUSES ................................................................................................................ 51

APPENDIX A Licenses and Authorizations
APPENDIX B Pacific Telecom/Executive Branch Agreement

I. INTRODUCTION

1. In this Order, we grant, subject to the conditions identified below, the applications
(“Transfer Applications”) filed by Bell Atlantic New Zealand Holdings, Inc. (“BANZHI” or the
“Transferor”) and Pacific Telecom Inc. (“Pacific Telecom” or the “Transferee,” and together with the
Transferor, the “Applicants”) for approval to transfer control from BANZHI to Pacific Telecom of
licenses and authorizations held by The Micronesian Telecommunications Corporation (“MTC”) and
GTE Pacifica Inc. (“GTE Pacifica”). These licenses and authorizations include a cellular radiotelephone
license, common carrier and non-common carrier earth station licenses, a submarine cable landing
license, and various domestic and international section 214 authorizations which MTC and GTE Pacifica
use in their provision of telecommunications services in the Commonwealth of the Northern Mariana
Islands (“CNMI”),1 a U.S. territory.2

1
See Pacific Telecom Inc. and Bell Atlantic New Zealand Holdings, Inc., Application for Consent to
Transfer License Pursuant to Section 310(d) of the Communications Act, File No. SES-T/C-20030418-00502 (filed
April 18, 2003) (Common Carrier Earth Station Application); Pacific Telecom Inc. and Bell Atlantic New Zealand
Holdings, Inc., Application for Consent to Transfer License Pursuant to Section 310(d) of the Communications Act,
File No. SES-T/C-20030418-00501 (filed April 18, 2003) (Non-Common Carrier Earth Station Application);
Pacific Telecom Inc. and Bell Atlantic New Zealand Holdings, Inc., Application for Consent to Transfer License
Pursuant to Section 310(d) of the Communications Act, File No. 0001236852 (filed April 18, 2003) (Cellular
Radiotelephone Service Application); Pacific Telecom Inc. and Bell Atlantic New Zealand Holdings, Inc., Joint
Application for Transfer of Control of Cable Landing License, File No. SCL-T/C-20030418-00008 (filed April 18,
2003) (Submarine Cable Application); Pacific Telecom Inc. and Bell Atlantic New Zealand, Inc., Joint Application
for Transfer of Control of Holder of International Section 214 Authorizations, File No. ITC-T/C-20030418-00204
(filed April 18, 2003) (International Section 214 Application); Pacific Telecom Inc. and Bell Atlantic New Zealand
Holdings Inc., Joint Application for Transfer of Control of Domestic 214 Authority (filed April 18, 2003) (Domestic
214 Application). See also Petition of Pacific Telecom Inc. for Declaratory Ruling Under Section 310(b)(4) of the
Communications Act of 1934, as Amended (filed April 18, 2003) (Petition for Declaratory Ruling). Each of these
applications includes identical exhibits describing the transaction and providing related information.
2
The Applicants note that the CNMI is under the sovereignty of the United States and that, with few
exceptions, CNMI citizens are U.S. citizens. Petition for Declaratory Ruling at 2 n.2 (citing Presidential
(continued....)

2

Federal Communications Commission DA 03-3563

2. As discussed below, we conclude, pursuant to our review under sections 214(a) and
310(d) of the Communications Act of 1934, as amended (“Act”),3 and under section 2 of the Cable
Landing License Act4 that approval of the Transfer Applications will serve the public interest,
convenience, and necessity. In addition, subject to the limitations specified herein, we grant Pacific
Telecom’s Petition for Declaratory Ruling that the public interest would not be served by prohibiting the
proposed indirect foreign ownership of GTE Pacifica in excess of the 25 percent benchmark set by section
310(b)(4) of the Act.5 We also grant the Petition to Adopt Conditions to Authorizations and Licenses
filed by the Department of Justice and Federal Bureau of Investigation, with the concurrence of the
Department of Defense and the Department of Homeland Security.6 Finally, we deny the petition to
deny, or in the alternative, to designate for hearing filed by the Governor of the CNMI (“Governor”) and
the petitions to deny filed by Mr. Herman Guerrero and the House of Representatives of the
Commonwealth of the Northern Mariana Islands.7

II. BACKGROUND

A. The Applicants

1. The Transferor

3. BANZHI is a wholly-owned, indirect subsidiary of Verizon Communications Inc.
(“Verizon”), a publicly-held corporation that is organized under the laws of the State of Delaware.8
BANZHI wholly owns MTC, which in turn wholly owns GTE Pacifica. MTC is the incumbent carrier
providing local exchange and exchange access service in the CNMI with approximately 25,000 access
lines.9 MTC is incorporated in the CNMI and holds a blanket, domestic section 214 authorization.10
GTE Pacifica, also a CNMI corporation, provides commercial mobile radio service as well as domestic
long distance and international telecommunications services in the CNMI through the use of cellular
radiotelephone, terrestrial fiber optic, satellite and submarine cable facilities.11 GTE Pacifica connects the
CNMI’s three primary islands, Saipan, Tinian and Rota, to Guam by an undersea fiber optic cable and

(...continued from previous page)
Proclamation No. 5564, 51 Fed. Reg. 40399 (November 7, 1986)). See also 47 U.S.C. § 3(51) (defining “United
States” to include states, territories, the District of Columbia, and possessions of the United States); Policy and
Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section 254(g) of the
Communications Act of 1934, as amended, CC Docket No. 96-61, Report and Order, 11 FCC Rcd 9564, 9589, n.118
(1996) (Rate Integration Order) (stating that “the 1996 Act extends rate integration to U.S. territories and
possessions, including Guam and the [CNMI] . . . .”).
3
The Communications Act of 1934, as amended, 47 U.S.C. §§ 151 et seq. Hereinafter, all citations to the
Communications Act will be to the relevant section of the United States Code unless otherwise noted. 47 U.S.C. §§
214(a), 310(d).
4
See An Act Relating to the Landing and Operation of Submarine Cables in the United States, 47 U.S.C. §§
34-39 (“Cable Landing License Act”), at § 35.
5
47 U.S.C. § 310(b)(4).
6
See infra note 112.
7
See infra note 28.
8
Petition for Declaratory Ruling at 2.
9
Petition for Declaratory Ruling at 2.
10
Domestic 214 Application at 5.
11
Petition for Declaratory Ruling at 2.

3

Federal Communications Commission DA 03-3563

provides cellular service pursuant to the B-Block cellular radiotelephone license for the CNMI Rural
Service Area. In addition to the cellular radiotelephone license, 12 GTE Pacifica holds one common
carrier satellite earth station license,13 a non-common carrier satellite earth station license,14 a submarine
cable landing license to land and operate the common carrier MTC Interisland Cable System,15 a blanket,
domestic section 214 authorization,16 an international, limited global facilities-based and global resale
section 214 authorization, and an international section 214 authorization to construct and operate the
MTC Interisland Cable System.17

2. The Transferee

4. Pacific Telecom is a privately-held corporation organized under the laws of the CNMI.18
Pacific Telecom was formed as the vehicle to purchase the entire outstanding capital stock and voting
interests of MTC.19 Pacific Telecom is a direct, wholly-owned subsidiary of Prospector Investment
Holdings Inc. (“Prospector”), a privately-held corporation incorporated in the Cayman Islands, British
West Indies.20 Prospector’s principal business is to hold the investment in Pacific Telecom.21 Prospector
is owned by two, related individuals: (1) Ricardo C. Delgado, a citizen of the Philippines, holds a 60
percent equity and voting interest in Prospector; and (2) Jose Ricardo Delgado, also a citizen of the
Philippines, holds a 40 percent equity and voting interest in Prospector.22

B. The Transaction

5. On April 18, 2003, BANZHI and Pacific Telecom filed the Transfer Applications and the
Petition for Declaratory Ruling seeking Commission approval of the proposed transfer of control of
licenses and authorizations held by MTC and its wholly-owned subsidiary GTE Pacifica.23 After
consummation of the proposed transaction, Pacific Telecom will wholly own MTC, which, in turn,
wholly owns GTE Pacifica, and both will continue to offer the services they currently offer under existing
service arrangements.24 According to the Applicants, Pacific Telecom’s guiding principles for the

12
Cellular Radiotelephone Service Application. Call Sign “KNKN616.”
13
Common Carrier Earth Station Application. Call Sign “E000164.”
14
See Non-Common Carrier Earth Station Application. Call Sign “KA-34.”
15
See Submarine Cable Application. File No. SCL-92-003-AL.
16
See Domestic 214 Application.
17
See International Section 214 Application at 5. File Nos. ITC-214-19970502-00247, ITC-ASG-10071211-
00776, ITC-ASG-19971211-00778.
18
See Petition for Declaratory Ruling at 7.
19
Id. at 3.
20
Id.
21
Id.
22
See Letter from Kenneth D. Patrich and Timothy J. Cooney, Attorneys for Pacific Telecom, to Marlene H.
Dortch, Secretary, Federal Communications Commission (dated September 9, 2003).
23
Previously, Pacific Telecom had filed an application to acquire MTC and GTE Pacifica, but subsequently
withdrew that application. See Letter from Peter Shields, Jennifer Hindin, Kenneth Patrich, and Timothy Cooney,
Attorneys for Applicants, to Marlene H. Dortch, Secretary, Federal Communications Commission (dated March 19,
2003) (withdrawing the transfer of control applications filed in IB Docket No. 02-111) (Applicants’ Letter to
Withdraw).
24
See International Section 214 Application at 3.

4

Federal Communications Commission DA 03-3563

III. PUBLIC INTEREST ANALYSIS

A. Framework for Analysis

8. In considering the Transfer Applications, the Commission must determine, pursuant to
sections 214(a) and 310(d) of the Act, whether the proposed transfers of control will serve the public
interest.31 In addition, because Pacific Telecom seeks to transfer control of a cable landing license, we
review the proposed transaction under the Cable Landing License Act.32 Finally, because of the foreign
ownership interests presented in this case, we also must determine whether the proposed transfer of
control of GTE Pacifica is permissible under the foreign ownership provisions of section 310(b) of the
Act.33

9. The legal standards that govern our public interest analysis for transfer of control of
licenses and authorizations under sections 214(a) and 310(d) require that we weigh the potential public
interest harms against the potential public interest benefits to ensure that, on balance, the proposed
transaction will serve the public interest, convenience, and necessity.34 Our analysis considers the likely
competitive effects of the proposed transfers and whether such transfers raise significant anti-competitive
issues.35 In addition, we consider the efficiencies and other public interest benefits that are likely to result
from the proposed transfers of control of the licenses and authorizations.36 Further, we consider whether
the proposed transaction presents national security, law enforcement, foreign policy or trade policy
concerns.37 If the Executive Branch raises national security, law enforcement, foreign policy or trade
policy concerns, we accord deference to its expertise on these matters.38 Similarly, our review pursuant to

31
47 U.S.C. §§ 214(a), 310(d).
32
47 U.S.C. §§ 34-39. See also Executive Order No. 10530, Exec. Ord. No. 10530, § 5(a), reprinted as
amended in 3 U.S.C. §301 (“Executive Order 10530”); Review of Commission Consideration of Applications under
the Cable Landing License Act, Report and Order, IB Docket No. 00-106, FCC 01-332, 16 FCC Rcd 22167, 22169-
70, ¶ 5 (2001) (Submarine Cable Report and Order); 47 C.F.R. § 1.767(b) (2003); Streamlined Procedures for
Executive Branch Review of Submarine Cable Landing License Requests, Media Note (Revised) (Dec. 20, 2001),
available at www.state.gov/r/pa/prs/ps/2001 (visited March 28, 2003). Pursuant to section 1.767(b) of the
Commission’s rules, the Cable Landing License Act, and Executive Order 10530, we informed the Department of
State of the Submarine Cable Application.
33
47 U.S.C. § 310(b).
34
See, e.g., Application of VoiceStream Wireless Corporation, Powertel, Inc., Transferors, and Deutsche
Telekom AG, Transferee, for Consent to Transfer Control of Licenses and Authorizations Pursuant to Sections 214
and 310(d) of the Communications Act and for Declaratory Ruling Pursuant to Section 310 of the Communications
Act, Memorandum Opinion and Order, FCC 01-142, 16 FCC Rcd 9779, 9789, ¶ 17 (2001) (VoiceStream/Deutsche
Telekom Order). See also AT&T Corp., British Telecommunications, PLC, VLT Co. LLC, Violet License Co. LLC,
and TNV (Bahamas) Limited, Applications For Grant of Section 214 Authority, Modification of Authorizations and
Assignment of Licenses in Connection with the Proposed Joint Venture Between AT&T Corp. and British
Telecommunications, PLC, Memorandum Opinion and Order, FCC 99-313, 14 FCC Rcd 19140, 19147, ¶ 15 (1999)
(AT&T/BT Order); Motient Services Inc. and TMI Communications and Company, LP, Assignors, and Mobile
Satellite Ventures Subsidiary LLC, Assignee, Order and Authorization, DA 01-2732, 16 FCC Rcd 20469, 20473,
¶ 11 (Int’l Bur. 2001).
35
See, e.g., AT&T/BT Order, 14 FCC Rcd at 19148, ¶ 15.
36
See, e.g., VoiceStream/Deutsche Telekom Order, 16 FCC Rcd at 9789, ¶ 17.
37
See Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, Report and Order
and Order on Reconsideration, FCC 97-398, 12 FCC Rcd 23891, 23919-21, ¶¶ 61-66 (1997) (Foreign Participation
Order), Order on Reconsideration, FCC 00-339, 15 FCC Rcd 18158 (2000).
38
Id.

6

Federal Communications Commission DA 03-3563

the Cable Landing License Act considers the competitive effects and public interest benefits of the
proposed transaction, as well as any national security, law enforcement, foreign policy, or trade policy
concerns.39

B. Qualifications of Applicants

10. As a threshold matter, we must determine whether the Applicants have the requisite
qualifications to hold and transfer control of licenses under section 310(d) of the Act and Commission
rules.40 We do not, as a general rule, re-evaluate the qualifications of the transferors unless issues related
to basic qualifications have been designated for hearing by the Commission or have been sufficiently
raised in petitions to warrant the designation of a hearing.41 We conclude that no such issues have been
raised with regard to the Transferor that would require us to designate a hearing to re-evaluate BANZHI’s
basic qualifications.

11. Conversely, the analysis of the Transfer Applications requires that we determine whether
the Transferee is qualified to hold Commission licenses. Under section 310(d), we consider the
qualifications of the Transferee as if the Transferee were applying for the license directly under section
308 of the Act.42 In this case, two parties have challenged the qualifications of Pacific Telecom to acquire
control of the Commission licenses held by GTE Pacifica.43 Based on our review of the record, we
conclude that Pacific Telecom is legally and otherwise qualified to acquire control of the licenses at issue
in this proceeding.44

1. Financial Qualifications

12. The Commission does not have specific financial requirements for applicants seeking
approval to transfer control of the licenses and authorizations that are the subject of the Transfer
Applications. However, we consider Pacific Telecom’s financial qualifications as part of our public
interest analysis under section 310(d) of the Act.

13. The Governor alleges that Pacific Telecom failed to make available sufficient financial
information to demonstrate that it possesses the requisite financial qualifications to operate the
telecommunications network in the CNMI.45 According to the Governor, reliance on the individual assets

39
See Foreign Participation Order, 12 FCC Rcd at 23933-35, ¶¶ 93-96, 23919-21, ¶¶ 61-66.
40
47 C.F.R. § 310(d), 47 C.F.R. § 1.948 (transfer of control of wireless licenses).
41
See, e.g., VoiceStream/Deutsche Telekom Order, 16 FCC Rcd at 9790, ¶ 19.
42
47 U.S.C. § 308.
43
See generally, Governor of CNMI’s Opposition; Herman Guerrero’s Letter.
44
See 47 C.F.R. § 1.945(c)(2) (2003); see also 47 C.F.R. § 1.903(b) (2003); VoiceStream/Deutsche Telekom
Order, 16 FCC Rcd at 9798, ¶ 30.
45
See Governor of CNMI’s Opposition at 12. The Governor also finds problematic Pacific Telecom’s
reliance on the financial condition of Citadel Holdings, Inc. (Citadel), another Delgado company, as a basis for
showing that Pacific Telecom is financially qualified. Id. at 13; see also Governor’s Reply to August 15 Letter at 4
The Governor claims that the Commission should not rely on Citadel’s financial condition because it has no
apparent ownership interest in Pacific Telecom and because the Transfer Applications provide little financial
information about Citadel. Governor of CNMI’s Opposition at 13; see also Governor’s Reply to August 15 Letter at
4. We do not address this issue because, as Applicants note, given the other financial information provided, they do
not need to rely on Citadel to demonstrate Pacific Telecom’s financial qualifications. See Joint Opposition at 5. We
also reject the Governor's argument that the record warrants further inquiry into whether Citadel and Prospector are
in fact the same company. The Governor presents no persuasive evidence that these two companies are not legally
(continued....)

7

Federal Communications Commission DA 03-3563

of the Delgados is not useful because the Commission is unable to determine which of those assets are
readily available for operating MTC’s telecommunications network.46 In addition, the Governor argues
that the only true basis for Pacific Telecom’s financial qualifications is a pro forma balance sheet that is
insufficient because it only reflects projected funding and not the financial condition of the underlying
shareholders.47

14. We find that the information provided in the record is sufficient to demonstrate that
Pacific Telecom and its principals have the ability to finance the acquisition of MTC’s facilities and,
therefore, we reject the Governor’s arguments. Based on the representations made to us by Pacific
Telecom in the form of a pro forma balance sheet, we find that the Delgados will contribute a substantial
amount of capital to make an equity investment in Pacific Telecom.48 In addition, Pacific Telecom
provided a letter from a financial institution that states that the Delgados have the funds to purchase MTC
and that the Delgados qualify for a loan, if needed, to acquire MTC.49 Pacific Telecom further provided a
second letter from a financial institution that offers to partially fund the acquisition.50 Accordingly, we
find that the information in the record demonstrates that Pacific Telecom and its principals, the Delgados,
have the financial resources needed to fund Pacific Telecom’s acquisition of MTC.

2. Technical Qualifications

15. Second, the Governor argues that Pacific Telecom does not have the requisite technical
qualifications or expertise to operate the CNMI’s telecommunications network. Specifically, the
Governor argues that Pacific Telecom cannot claim it is technically qualified based on: (1) reliance on
MTC’s existing managerial staff; (2) intentions to hire a particular person experienced in
telecommunications; (3) an executed technical services agreement with the Transferor, BANZHI, because
it demonstrates that Pacific Telecom lacks the requisite technical knowledge; and (4) the Delgado
family’s experience operating telecommunications carrier Isla Communications, Inc. (“ISLACOM”) in
the Philippines because any knowledge gained would be insufficient to cover MTC’s (and GTE

(...continued from previous page)
separate entities or that Prospector, through Pacific Telecom, will not maintain control of MTC. See Governor’s
October 31 Letter at 3-4, Exhibit C, Report of Independent Public Accountants, J.B. Santos & Associates, at Section
13, and at Exhibit D, General Information Sheet, Stock Corporation, at 4.
46
Governor of CNMI’s Opposition at 14. We note, however, that the Governor subsequently obtained access
to the pro forma balance sheet and other confidential documents pursuant to a Protective Order. See Application of
Bell Atlantic New Zealand Holdings, Inc. and Pacific Telecom Inc., Disclosure Order, DA 03-3010 (rel. October 1,
2003) (Pacific Telecom Protective Order).
47
Governor’s Reply to August 15 Letter at 4-5. The Governor also argues that Pacific Telecom cannot rely
on confidential letters from financial institutions confirming the value of the Delgados’ accounts because interested
parties are unable to review those letters and provide comments. Governor of CNMI’s Opposition at 13-14. This
argument is moot because the Governor has access to all confidential documents filed in this proceeding. See
generally Pacific Telecom Protective Order.
48
See Letter from James Ball, Chief, Policy Division, International Bureau, to Kenneth D. Patrich and
Timothy J. Cooney, Attorneys for Pacific Telecom (dated August 18, 2003). See also Letter from Kenneth D.
Patrich and Timothy J. Cooney, Attorneys for Pacific Telecom, to Marlene H. Dortch, Secretary, Federal
Communications Commission, dated August 27, 2003 (requesting that the attached materials be withheld from
public inspection) (August 27 Response).
49
See Joint Opposition at 5, Exhibit B, Letter from Lorenzo V. Tan, President and Chief Executive Officer,
Philippine National Bank, to Adam Turner, Executive Director, Commonwealth Telecommunications Commission
(dated June 23, 2003).
50
See August 27 Response.

8

Federal Communications Commission DA 03-3563

will assist with technical issues.58 Pacific Telecom’s plan demonstrates that it has made the necessary
preparations to transition and implement operations in the CNMI.

3. Character Qualifications

17. The Governor claims that Pacific Telecom failed to disclose in its initial transfer
applications in the prior proceeding (IB Docket No. 02-111)59 a nolo contendere plea to felony charges
entered by a company affiliated with Tan Holdings Corp. ("Tan Holdings"), a former investor in Pacific
Telecom in the prior proceeding.60 The Governor also cites to an investigation by the Department of
Labor (“DOL") and claims that Pacific Telecom withheld information about this investigation in the prior
proceeding.61 The Governor asserts that, although the nolo contendere plea and DOL investigation
involved companies affiliated with Tan Holdings, it was Pacific Telecom and not Tan Holdings that was
before the Commission as an applicant and the misstatements were made to serve Pacific Telecom’s
interests.62 The Governor therefore would have us find in this case a violation of section 1.17 based on
Pacific Telecom's alleged failure in the prior proceeding to respond fully and accurately to questions
raised in that proceeding.

18. We find that the Governor’s allegations, which are based on conduct in the prior
proceeding, do not provide a sufficient basis to conclude that Pacific Telecom violated section 1.17 of the
Commission’s rules or otherwise lacks the character qualifications required to become a Commission
licensee. We accept Applicants’ unrefuted explanation that, prior to the proceeding in IB Docket No. 02-
111, the Applicants had no knowledge that a Tan affiliate in an unrelated business had entered a nolo
contendere plea more than ten years before the filing of the initial application.63 Applicants further state
that, in the prior proceeding, Pacific Telecom clarified its certifications and fully disclosed all relevant
facts to the Commission.64 While Pacific Telecom, as a distinct legal entity, properly is viewed as the
applicant in the prior proceeding, we will not in these circumstances impute to the current 100 percent
owners of Pacific Telecom, as a basis for denial of this application, alleged intentional misrepresentations
or omissions about conduct engaged in by affiliates of their former investment partner, which no longer
has any ownership or management interest in the transferee.65 We therefore reject the Governor's
argument that the Transferee here violated section 1.17 of the rules and therefore lacks the requisite
character qualifications to be a Commission licensee.

19. Finally, Herman Guerrero argues that Pacific Telecom made contradictory statements
about the nature of a proposed trust arrangement to be established for employees after the proposed
transfer of control. Mr. Guerrero states that in the Marianas Variety newspaper, Jose Ricardo Delgado
stated on behalf of Pacific Telecom that MTC employees would have a 10 percent interest in Pacific
Telecom. According to Mr. Guerrero, Pacific Telecom contradicted itself because, in the Petition for
58
Joint Opposition at 3-4.
59
See supra note 23.
60
Governor of CNMI's Opposition at 6-7. Questions 37 and 75 of FCC Forms 312 and 603, respectively, ask:
"Has the applicant, or any party to this application or amendment, or any party directly or indirectly controlling the
applicant ever been convicted of a felony by any state or federal court?"
61
Governor of CNMI’s Opposition at 6. See also Governor’s Reply to Joint Opposition at 4.
62
Governor of CNMI’s Opposition at 6-7. See also Governor’s Reply to Joint Opposition at 2-3.
63
See Joint Opposition at 12.
64
Id. There is no evidence in the record demonstrating that the Delgados intended to mislead the
Commission.
65
See id. at 12.

10

Federal Communications Commission DA 03-3563

Declaratory Ruling filed in this proceeding, Applicants indicated that they would reserve only a 2 percent
interest for MTC employees.66 Similarly, Mr. Guerrero alleges that Jose Ricardo Delgado stated that no
MTC employees has ever owned shares in MTC when, in fact, Mr. Guerrero owned shares in MTC while
he was employed as a vice president of MTC.67 According to Mr. Guerrero, each of these statements
provides evidence of bad character.

20. We disagree. Pacific Telecom has not made contradictory statements to the Commission
with regard to its request that we approve, pursuant to section 310(b)(4), an additional two percent
indirect foreign ownership in Pacific Telecom for MTC employees. It appears that Mr. Guerrero
misunderstood Pacific Telecom’s request in the Petition for Declaratory Ruling. As Applicants note, their
request is intended to cover ownership interests that would be attributable to current MTC employees who
are non-U.S. citizens, and not to all MTC employees.68 In other words, the trust would allow MTC
employees to have a 10 percent beneficial ownership stake in Pacific Telecom.69 A portion of those MTC
employees accounting for a 2 percent ownership stake in Pacific Telecom are foreign nationals.
Similarly, it appears that Mr. Guerrero misunderstood Mr. Delgado’s statements about employee
ownership of MTC. While Mr. Guerrero, as an MTC employee, may have held shares in the company as
an individual, we find Mr. Delgado’s statement addressed Pacific Telecom’s desire to establish a trust on
behalf of MTC employees as a group. We therefore find that Pacific Telecom has not made contradictory
statements to the Commission, and reject Mr. Guerrero’s argument that Pacific Telecom lacks the
requisite character qualifications to be a Commission licensee.

C. Foreign Ownership Review

21. In this section, we address issues relevant to our public interest inquiry under the foreign
ownership provisions of section 310 of the Act. Pacific Telecom requests a declaratory ruling, pursuant
to section 310(b)(4) of the Act, that the public interest would be served by allowing 100 percent indirect
foreign ownership of GTE Pacifica, a common carrier radio licensee, by Ricardo C. Delgado and Jose
Ricardo Delgado, each of whom is a citizen of the Philippines. Pacific Telecom also seeks advance
authorization for an additional 2 percent indirect ownership by unidentified foreign individuals, to take
into account potential future foreign ownership interests attributable to a proposed trust arrangement to be
established for company employees after the proposed transfer of control is consummated. Based on the
record before us, we conclude that it would not serve the public interest to deny the application to transfer
control of the common carrier radio licenses held by GTE Pacifica because of indirect foreign ownership
interests that would be held by the Delgados through their foreign subsidiary holding company,
Prospector. We therefore grant the Petition for Declaratory Ruling under section 310(b)(4) of the Act to
the extent specified below.70

66
Herman Guerrero’s Letter at 1-2.
67
Herman Guerrero’s Letter at 1. Specifically, according to Mr. Guerrero, the April 17, 2003 issue of the
Marianas Variety quotes Mr. Delgado as saying, ‘“127 employees of Verizon will become owners of the company
under the purchase deal. . . . This has never happened before in the CNMI, where employees would also own the
companies they work for.”’ Id.
68
See Joint Opposition at ii.
69
See Petition for Declaratory Ruling at 3 n.6 (stating that, once the transfer of control is completed,
Prospector intends to create a trust fund for MTC employees and to assign 10% of Pacific Telecom’s stock to that
trust).
70
The proposed transaction does not raise foreign ownership issues under section 310(a) or (b)(1)-(3) of the
Act. Section 310(a) prohibits any radio license from being “granted to or held by” a foreign government or its
representative. See 47 U.S.C. § 310(a). No foreign government or its representative would hold any of the subject
radio licenses. Section 310(b)(1)-(2) of the Act prohibits common carrier, broadcast, aeronautical fixed or
(continued....)

11

Federal Communications Commission DA 03-3563

1. Legal Standard for Foreign Ownership of Radio Licensees

22. Section 310(b)(4) of the Act establishes a 25 percent benchmark for indirect, attributable
investment by foreign individuals, corporations, and governments in U.S. common carrier radio licensees,
but grants the Commission discretion to allow higher levels of foreign ownership if it determines that
such ownership is not inconsistent with the public interest.71 The calculation of foreign ownership
interests under section 310(b)(4) is a two-pronged analysis in which the Commission examines separately
the equity interests and the voting interests in the licensee’s parent.72 The Commission calculates the
equity interest of each foreign investor in the parent and then aggregates these interests to determine
whether the sum of the foreign equity interests exceeds the statutory benchmark. Similarly, the
Commission calculates the voting interest of each foreign investor in the parent and aggregates these
voting interests.73 The presence of aggregated alien equity or voting interests in a common carrier radio
licensee’s parent in excess of 25 percent triggers the applicability of section 310(b)(4)’s statutory
benchmark.74 Once the benchmark is exceeded, section 310(b)(4) directs the Commission to determine
whether the “‘public interest will be served by the refusal or revocation of such license.’”75

23. In the Foreign Participation Order, the Commission concluded that the public interest
would be served by permitting greater investment by individuals or entities from World Trade
Organization (“WTO”) Member countries in U.S. common carrier and aeronautical fixed and en route
licensees.76 Therefore, with respect to indirect foreign investment from WTO Members, the Commission
replaced its “effective competitive opportunities,” or “ECO,” test with a rebuttable presumption that such

(...continued from previous page)
aeronautical en route radio licenses from being “granted to or held by” aliens, or their representatives, or foreign
corporations. See 47 U.S.C. § 310(b)(1), (b)(2). According to the Transfer Applications, no alien, representative, or
foreign corporation will hold any of the common carrier licenses. Additionally, because the proposed transaction
does not involve direct foreign investment in GTE Pacifica, it does not trigger section 310(b)(3) of the Act, which
places a 20% limit on direct alien, foreign corporate or foreign government ownership of entities that hold common
carrier, broadcast and aeronautical fixed or en route Title III licenses. See 47 U.S.C. § 310(b)(3). See
VoiceStream/Deutsche Telekom Order, 16 FCC Rcd at 9804-9809, ¶¶ 38-48 (issues related to indirect foreign
ownership of common carrier licensees are addressed under section 3l0(b)(4)). Accordingly, we find that the
proposed transaction is not inconsistent with the foreign ownership provisions of section 310(a) or 310(b)(1)-(3) of
the Act.
71
See 47 U.S.C. § 310(b)(4) (providing that “No broadcast or common carrier or aeronautical en route or
aeronautical fixed radio station license shall be granted to or held by . . . any corporation directly or indirectly
controlled by any other corporation of which more than one-fourth of the capital stock is owned of record or voted
by aliens, their representatives, or by a foreign government, or representative thereof, or by any corporation
organized under the laws of a foreign country, if the Commission finds that the public interest would be served by
the refusal or revocation of such license.”).
72
See BBC License Subsidiary L.P., Memorandum Opinion and Order, FCC 95-364, 10 FCC Rcd 10968,
10973, ¶ 22 (1995) (BBC License Subsidiary).
73
See id. at 10972, ¶ 20, 10973-74, ¶¶ 22-25.
74
See, e.g., Sprint Corporation, Petition for Declaratory Ruling Concerning Section 310(b)(4) and (d) and
the Public Interest Requirements of the Communications Act of 1934, as amended, Declaratory Ruling and Order,
FCC 95-498, 11 FCC Rcd 1850, 1857, ¶ 47 (1995) (Sprint Ruling). See also BBC License Subsidiary, 10 FCC Rcd
at 10972-73, ¶ 25.
75
See Sprint Ruling, 11 FCC Rcd at 1857, ¶ 47 (quoting section 310(b)(4)). It is the licensee’s obligation to
inform the Commission before its indirect foreign ownership exceeds the 25% benchmark set forth in section
310(b)(4). See Fox Television Stations, Inc., Order, FCC 95-188, 10 FCC Rcd 8452, 8474, ¶ 52 (1995).
76
See Foreign Participation Order, 12 FCC Rcd at 23896, ¶ 9, 23913, ¶ 50, and 23940, ¶¶ 111-12.

12

Federal Communications Commission DA 03-3563

investment generally raises no competitive concerns.77 In evaluating an applicant’s request for approval
of foreign ownership interests under section 310(b)(4), the Commission uses a “principal place of
business” test to determine the nationality or “home market” of foreign investors.78

24. In light of the policies adopted in the Foreign Participation Order, we begin our
evaluation of the proposed transaction under section 310(b)(4) by calculating the proposed attributable
foreign equity and voting interests in Pacific Telecom, the U.S. parent of GTE Pacifica. We then
determine whether these foreign interests properly are ascribed to individuals or entities that are citizens
of, or have their principal places of business in, WTO Member countries. The Commission has stated, in
the Foreign Participation Order, that it will deny an application if it finds that more than 25 percent of
the ownership of an entity that controls a common carrier radio licensee is attributable to parties whose
principal place(s) of business are in non-WTO Member countries that do not offer effective competitive
opportunities to U.S. investors in the particular service sector in which the applicant seeks to compete in
the U.S. market, unless other public interest considerations outweigh that finding.79

2. Attribution of Foreign Ownership Interests

25. In this case, 100 percent of the equity and voting interests in Pacific Telecom would be
held by and through Prospector, a holding company incorporated in the Cayman Islands, a territory of the
United Kingdom, which, in turn, is a WTO Member country.80 However, the investment principals,
77
See id. at 23896, ¶ 9, 23913, ¶ 50, 23940, ¶ 111-12.
78
To determine a foreign entity’s home market for purposes of the public interest determination under section
310(b)(4), the Commission will identify and balance the following factors: (1) the country of a foreign entity’s
incorporation, organization or charter; (2) the nationality of all investment principals, officers, and directors; (3) the
country in which the world headquarters is located; (4) the country in which the majority of the tangible property,
including production, transmission, billing, information, and control facilities, is located; and (5) the country from
which the foreign entity derives the greatest sales and revenues from its operations. See Foreign Participation
Order, 12 FCC Rcd at 23941, ¶ 116 (citing Market Entry and Regulation of Foreign-Affiliated Entities, Report and
Order, FCC 95-475, 11 FCC Rcd 3873, 3951, ¶ 207 (1995)). For examples of cases applying the five-factor
“principal place of business” test, see Lockheed Martin Global Telecommunications, Comsat Corporation, and
Comsat General Corporation, Assignor, and Telenor Satellite Mobile Services, Inc., and Telenor Satellite, Inc.,
Assignee, Applications for Assignment of Section 214 Authorizations, Private Land Mobile Radio Licenses,
Experimental Licenses, and Earth Station Licenses and Petition for Declaratory Ruling Pursuant to Section
310(b)(4) of the Communications Act, Order and Authorization, FCC 01-369, 16 FCC Rcd 22897 (2001), erratum,
DA 02-266, 17 FCC Rcd 2147 (Int’l Bur. 2002), recon. denied, FCC 02-207, 17 FCC Rcd 14030 (2002) (Telenor
Order); Space Station System Licensee, Inc., Assignor, and Iridium Constellation LLC, Assignee, et al.,
Memorandum Opinion, Order and Authorization, DA 02-307, 17 FCC Rcd 2271 (Int’l Bur. 2002).
79
See Foreign Participation Order, 12 FCC Rcd at 23946, ¶ 131. In addition to holding common carrier
cellular radiotelephone and common carrier satellite earth station licenses, GTE Pacifica holds a non-common
carrier satellite earth station license. We note that section 310(b)(4) governs only common carrier, broadcast, and
aeronautical en route or fixed radio licenses. Therefore, we do not consider here the proposed foreign ownership as
it relates to the non-common carrier earth station license. Our findings in this Order and Authorization with respect
to competitive effects, our public interest determination for the common carrier licenses, and the Executive Branch’s
resolution of any national security and law enforcement concerns, collectively suffice to resolve any public interest
implications, outside of our review under section 310(b)(4), to the extent there are any, for the non-common carrier
license.
80
See Petition for Declaratory Ruling at 7-8 (citing Cable & Wireless USA, Inc., Application for Authority to
Operate as a Facilities-Based Carrier in Accordance with the Provisions of Section 63.18(e)(4) of the Rules
Between the United States and Bermuda, Order, Authorization and Certificate, DA 00-311, 15 FCC Rcd 3050, 3052,
¶ 7 (Int’l Bur. 2000) (relying on an opinion provided by the U.S. Department of State to conclude that the 1994
Marrakesh Agreement Establishing the World Trade Organization applies to the United Kingdom’s overseas
territories).

13

Federal Communications Commission DA 03-3563

directors and officers of Prospector are from the Philippines; the world headquarters of its owners is
located in the Philippines; a majority of the owners’ tangible property is in the Philippines; and the
owners derive a majority of their sales and revenues from operations in the Philippines.81 Therefore, we
find that, on balance, Prospector principally conducts its business in the Philippines, also a WTO Member
country.

26. Because Prospector’s principal place of business is in a WTO Member country,
Prospector is entitled to a rebuttable presumption that its proposed foreign ownership of Pacific Telecom,
the U.S. parent of the Title III licensee, does not pose a risk to competition in the United States that would
justify denial of the Transfer Applications.82 As explained more fully in Section III.D, we find no
evidence in the record of any competitive concerns that would rebut this presumption.

27. The Governor opposes the proposed indirect foreign ownership and control of MTC and
GTE Pacifica “given the national security and public safety issues raised by [the CNMI’s] distant and
strategic geographic location.”83 In particular, the Governor argues that prior orders cited by the
Applicants in support of the proposed indirect foreign ownership fail to justify a grant of the Petition for
Declaratory Ruling.84 The Governor claims that, although the Commission approved 100 percent indirect
foreign ownership in those orders, most involved the competitive continental United States where
“compelling national security and public safety concerns did not exist.”85 We reject the Governor’s
contentions and deal with this aspect of the transaction in Section III.F below.

28. We conclude that it will not serve the public interest to prohibit the proposed indirect
foreign ownership of GTE Pacifica in excess of the 25 percent statutory benchmark set by section
310(b)(4) of the Act. Specifically, this ruling permits GTE Pacifica to be owned indirectly by Prospector
(up to and including 100 percent of the equity and voting interests) and by Prospector’s shareholders
Ricardo C. Delgado (up to and including 60 percent of the equity and voting interests) and Jose R.
Delgaldo (up to and including 40 percent of the equity and voting interests). In addition, Pacific Telecom
seeks advanced authorization for two percent indirect foreign ownership by foreign individuals in relation
to a trust arrangement being established for MTC and GTE Pacifica employees.86 In accordance with our
usual policy, we will permit Pacific Telecom to accept up to and including an aggregate 25 percent
indirect equity and/or voting interest from other foreign investors without obtaining prior Commission
approval under section 310(b)(4) of the Act.87

81
See Petition for Declaratory Ruling at 8.
82
See Foreign Participation Order, 12 FCC Rcd at 23913-14, ¶ 51.
83
Governor of CNMI’s Opposition at 29. The Governor argues that there is little competition in the CNMI
and, therefore, without such competitive alternatives, foreign ownership of MTC and GTE Pacifica poses significant
national security and public safety risks. See id. at 21-29. Additionally, Herman Guerrero opposes the proposed
indirect foreign ownership because CNMI/U.S. citizens will hold no significant ownership interests in Pacific
Telecom. See Herman Guerrero’s Letter at 2. See also CNMI House of Representatives’ Letter at 2 (generally
opposing foreign ownership of the CNMI’s telecommunications network).
84
Governor of CNMI’s Opposition at 30-31.
85
Id.
86
See Petition for Declaratory Ruling at 15-16.
87
See XO Communications Inc. for Consent to Transfer Control of Licenses and Authorizations Pursuant to
Sections 214 and 310(d) of the Communications Act and Petition for Declaratory Ruling Pursuant to Section
310(b)(4) of the Communications Act, Memorandum Opinion, Order and Authorization, DA 02-2512, 17 FCC Rcd
19212, 19223 n.77 (Int’l Bur., WTB and WCB 2002). In doing so, we reject the Governor’s argument that we need
more information about the trust arrangement before making a decision. See Governor of CNMI’s Opposition at 11-
(continued....)

14

Federal Communications Commission DA 03-3563

D. Competitive Effects

29. Our public interest analysis includes an evaluation of the competitive effects of the
proposed transaction in both the relevant product and geographic markets. For telecommunications
service providers, the Commission has determined that the relevant product and geographic markets can
include both U.S. domestic telecommunications services markets and telecommunications services
between the United States and foreign points.88 We determine that the proposed transfer will not likely
result in harm to competition in any relevant market and will likely yield tangible public interest benefits.

1. Competition in the Relevant Product Markets in the CNMI

30. 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 relevant product or geographic market served by MTC
or GTE Pacifica. MTC serves the local exchange market and GTE Pacifica serves the domestic and
international telecommunications services market in the CNMI through the use of cellular radiotelephone,
terrestrial fiber optic, satellite, and submarine cable facilities.

31. We find that acquisition of MTC by Pacific Telecom does not pose any risk to
competition in the local services market in the CNMI. In particular, the proposed transaction involves a
transfer of control of one local exchange carrier with a relatively small number of lines in a very limited
geographic area, the CNMI, to an entity that does not currently compete or, based on our review of the
record, intend to enter into the relevant local market on its own.89 There is no evidence in the record that
the proposed transaction would diminish local competition, or reduce the possibility that competitive
local exchange carriers will enter the local services market in the future.90 In fact, Pacific Telecom’s
entrance into the market should result in continued service without interruption.91 Thus, given the present

(...continued from previous page)
12. Based on our review of the record, we can make a determination regarding this transaction without further
information about the trust arrangement.
88
See, e.g., VoiceStream/Deutsche Telekom Order, 16 FCC Rcd at 9823, ¶ 78, 9825, ¶ 81, 9833, ¶ 97. See
also Application of WorldCom, Inc., and MCI Communications Corporation for Transfer of Control of MCI
Communications Corporation to WorldCom, Inc., Memorandum Opinion and Order, FCC 98-225, 13 FCC Rcd
18025 (1998) (WorldCom/MCI Order); Lockheed Martin Corporation, Comsat Governmental Systems, LLC, and
Comsat Corporation, Applications for Transfer of Control of Comsat Corporation and Its Subsidiaries, Licensees of
Various Satellite, Earth Station, Private Land Mobile Radio and Experimental Licenses, and Holders of
International Section 214 Authorizations, Order and Authorization, File Nos. SAT-T/C-20000323-00078 and SAT-
STA-20000323-00078, FCC 00-277, 15 FCC Rcd 22910, 22915, ¶ 16 (2000) (Comsat/Lockheed Order), erratum,
DA 00-1789, 15 FCC Rcd 23506 (Int’l Bur. 2000), recon. denied, FCC 02-197, 17 FCC Rcd 13160 (2002); and
Application of General Electric Capital Corporation and SES Global S.A. for Consent to Transfer Control of
Licenses and Authorizations Pursuant to Section 214(a) and 310(d) of the Communications Act and Petition for
Declaratory Ruling Pursuant to Section 310(b)(4) of the Communications Act, Order and Authorization, DA 01-
2100, 16 FCC Rcd 17575 (Int’l Bur. & WTB 2001), Supplemental Order, DA 01-2482, 16 FCC Rcd 18878 (Int’l
Bur. & WTB 2001).
89
Indeed, neither Prospector, Citadel, nor the Delgados hold any equity interests in any U.S.
telecommunications common carrier. See Petition for Declaratory Ruling at 3-4, n.8; see also Cellular
Radiotelephone Service Application Attach. C, FCC Ownership Disclosure Information for the Wireless
Telecommunications Services.
90
In particular, Pacific Telecom states that the local market is, and post-transaction will continue to be, open
to competition. See Joint Opposition at 7.
91
See generally Petition for Declaratory Ruling Attach. B, Pacific Telecommunications, Inc., a Pacific
Powerhouse (Pacific Telecom Presentation) (indicating that the transfer of telecommunications operations in the
CNMI from BANZHI to Pacific Telecom will be seamless).

15

Federal Communications Commission DA 03-3563

whether, upon consummation of the proposed transfers of control, the international section 214
authorization holder, in this case, GTE Pacifica, will become affiliated with a foreign carrier that has
market power on the foreign end of a U.S. international route to be served by the international section 214
authorization holder.104 In addition, under sections 1.767(a)(8) and (a)(11) of the Commission’s rules, a
submarine cable licensee that proposes to transfer control of an interest in a submarine cable landing
license granted pursuant to the Cable Landing License Act and Executive Order 10530 is required to
disclose if it will become affiliated with a foreign carrier as a result of the transfer of control.105 Under
rules adopted in the Foreign Participation Order, the Commission classifies a U.S. carrier as “dominant”
on a particular route if it is, or is affiliated with, a foreign carrier that has market power on the foreign end
of that route.106 With respect to submarine cable licensees, the Commission similarly applies competitive
safeguards to a licensee that is, or is affiliated with, a carrier with market power in foreign input markets
that could result in harm to competition in the U.S. market.107

37. GTE Pacifica will continue to qualify for non-dominant classification on all authorized
U.S. international routes because Pacific Telecom certifies that it is not a foreign carrier and is not
affiliated with any foreign carrier.108 Accordingly, and taking into account our findings below with
respect to national security, law enforcement, foreign policy and trade policy concerns, we conclude that
the proposed transfers of control of the international section 214 authorizations and submarine cable
landing license from BANZHI to Pacific Telecom are consistent with our foreign affiliation rules.
104
47 U.S.C. § 214(a).
105
47 C.F.R. §§ 1.767(a)(8), (a)(11); see also 47 U.S.C. §§ 34-39; Exec. Order No. 10530, § 5(a), reprinted as
amended in 3 U.S.C. § 301.
106
See Foreign Participation Order, 12 FCC Rcd at 23987, ¶ 215, 23991-99, ¶¶ 221-39. A carrier classified
as dominant on a particular U.S. international route due to an affiliation with a foreign carrier that has market power
on the foreign end of the route is subject to specific international dominant carrier safeguards set forth in section
63.10 of the rules. See 47 C.F.R. § 63.10(c), (e). These safeguards are designed to address the possibility that a
foreign carrier with control over facilities or services that are essential inputs for the provision of U.S. international
services could discriminate against rivals of its U.S. affiliates (i.e., vertical harms). In the Foreign Participation
Order, the Commission concluded that these safeguards, in conjunction with generally applicable international
safeguards, are sufficient to protect against vertical harms by carriers from WTO Member countries in virtually all
circumstances. In the exceptional case where an application poses a very high risk to competition in the U.S.
market, and where the standard safeguards and additional conditions would be ineffective, the Commission reserves
the right to deny the application. See Foreign Participation Order, 12 FCC Rcd at 23913-14, ¶ 51. In
circumstances where an affiliated foreign carrier possesses market power in a non-WTO Member country, the
Commission applies the ECO test as part of its public interest inquiry under section 214(a). See Foreign
Participation Order, 12 FCC Rcd at 23944, ¶ 124.
107
See Submarine Cable Report and Order, 16 FCC Rcd at 22180, ¶ 25. Relevant foreign carrier input
markets include those facilities or services necessary for the landing, connection, or operation of submarine cables.
See id. at 22180, ¶ 23. In the Submarine Cable Report and Order, the Commission found that these competitive
safeguards should be sufficient in all but the most exceptional of circumstances to detect and deter any anti-
competitive behavior associated with market power in WTO Member markets where U.S.-licensed cable systems
land and operate. See id.; see also id. at 22174, ¶ 12, n. 32 (noting that pursuant to the Foreign Participation Order,
12 FCC Rcd at 23944-46, ¶¶ 124-130, an applicant proposing to acquire an interest in a U.S. cable landing license
that is affiliated with a foreign carrier that possesses market power in a non-WTO destination market of the cable is
required to meet the ECO test as a prerequisite to grant of the cable landing license application). See also 47 C.F.R.
§ 1.767 Note (“The terms ‘affiliated’ and ‘foreign carrier,’ as used in this section, are defined as in § 63.09 of this
chapter except that the term ‘foreign carrier’ also shall include any entity that owns or controls a cable landing
station in a foreign market.”).
108
International Section 214 Application at 7-8. A U.S. carrier is presumptively classified as non-dominant if
it has no affiliations with, and itself is not, a foreign carrier in a particular country to which it provides service. See
47 C.F.R. § 63.10(a)(1).

18

Federal Communications Commission DA 03-3563

F. National Security, Law Enforcement, Foreign Policy, and Trade Policy Concerns

38. When analyzing a transfer of control or assignment application in which foreign
investment is an issue, we also consider national security, law enforcement, foreign policy or trade policy
concerns presented. If the Executive Branch raises national security, law enforcement, foreign policy or
trade policy concerns, we accord deference to its expertise on such matters.109 As noted above, these
concerns are addressed as part of our public interest analysis.

39. In their Petition for Declaratory Ruling, the Applicants state that, prior to the filing of the
Transfer Applications, Pacific Telecom and its representatives approached certain Executive Branch
agencies regarding the transaction.110 The Applicants also request, with the concurrence of the Executive
Branch agencies, that the Commission defer action on the Transfer Applications until issues identified by
the Executive Branch agencies “have or have not been resolved” and appropriate action is requested.111
The Department of Justice and the Federal Bureau of Investigation (collectively referred to as
“DOJ/FBI”) now advise that the Executive Branch agencies involved here have no objection to a grant of
the Transfer Applications or the Petition for Declaratory Ruling provided that the Commission conditions
the grant on compliance with the terms of a network security agreement between the Department of
Justice, Federal Bureau of Investigation, Department of Defense and Department of Homeland Security,
and Pacific Telecom and MTC (“Pacific Telecom/Executive Branch Agreement” or “Agreement”).
Specifically, on October 10, 2003, the DOJ/FBI filed, with the concurrence of the Department of Defense
and Department of Homeland Security, a Petition to Adopt Conditions to Authorizations and Licenses
(“Petition to Adopt Conditions”) that attaches the Pacific Telecom/Executive Branch Agreement.112

40. The Petition to Adopt Conditions states that the Pacific Telecom/Executive Branch
Agreement “is intended to ensure that the Department of Justice, Federal Bureau of Investigation,
Department of Defense, the Department of Homeland Security, and other entities with responsibility for
enforcing the law, protecting the national security and preserving public safety can proceed in a legal,
secure and confidential manner to satisfy these responsibilities.”113 The Pacific Telecom/Executive
Branch Agreement includes provisions regarding access to and protection of facilities, visitation,
information storage and security, disputes, audits, reports, notice, and treatment of information submitted
by Pacific Telecom to the Executive Branch agencies. In particular, the Agreement requires, inter alia,
(1) the domestic communications companies to comply with the U.S. legal process, Executive Orders and
National Security and Emergency Preparedness rules, regulations and orders;114 (2) the domestic
communications companies to take reasonable measures to prevent improper use of or access to the

109
See Foreign Participation Order, 12 FCC Rcd at 23918-21, ¶¶ 59-66.
110
Petition for Declaratory Ruling at 14.
111
See id. at 14-15.
112
See generally, Petition to Adopt Conditions, IB Docket No. 03-115 (filed October 10, 2003). Appendix B
to this Order and Authorization attaches the Pacific Telecom/Executive Branch Agreement. We have received no
comments or oppositions to the Petition to Adopt Conditions or the Pacific Telecom/Executive Branch Agreement.
113
See id. at 5. As stated in the Petition to Adopt Conditions, “[d]uring the course of discussions between the
DOJ, FBI and DOD and the Applicants, the U.S. Department of Homeland Security was established and became a
member of the Committee on Foreign Investment in the United States.” Id.
114
See Pacific Telecom/Executive Branch Agreement at Art. 2.3. See also id. at Art. 1.11 (which defines
“domestic communications company” to mean all subsidiaries, branches, departments, divisions and other
components of MTC, and any other entity over which MTC exercises de facto or de jure control) and at Art. 1.6
(defining de facto and de jure control).

19

Federal Communications Commission DA 03-3563

“domestic communications infrastructure” or to “data centers;”115 and (3) MTC to promptly notify the
Department of Justice, Federal Bureau of Investigation, Department of Defense and Department of
Homeland Security of any foreign entity or individual, other than Pacific Telecom, that obtains or likely
will obtain a direct or indirect ownership interest above 10 percent in MTC or a domestic communications
company, or gains or likely will gain “control” of MTC or a domestic communications company.116

41. In assessing the public interest, we consider the record and accord the appropriate level of
deference to Executive Branch expertise on national security and law enforcement issues. 117 As the
Commission stated in the Foreign Participation Order, foreign participation in the U.S.
telecommunications market may implicate significant national security or law enforcement issues
uniquely within the expertise of the Executive Branch.118 Although the Commission presumes that an
application from a WTO Member applicant does not pose a risk of anti-competitive harm that would
justify denial of the application, the Commission does not presume that an application poses no national
security, law enforcement, foreign policy, or trade concerns.119 In the context of this particular
proceeding, we considered these concerns independent of our competition analysis, and, at the request of
the Applicants, with the concurrence of the Executive Branch agencies, we deferred action on the
Transfer Applications until resolution of the Executive Branch agencies’ concerns. As indicated in the
Petition to Adopt Conditions, the Executive Branch agencies have addressed their concerns with respect
to national security or law enforcement concerns through the negotiation of the Pacific
Telecom/Executive Branch Agreement. We recognize that, separate from our licensing process, Pacific
Telecom has entered into the Pacific Telecom/Executive Branch Agreement, and expressly states that the
Department of Justice, Federal Bureau of Investigation, Department of Defense, and Department of
Homeland Security will not object to grant of the pending Transfer Applications, provided that the
Commission conditions grant of the Transfer Applications and the Petition for Declaratory Ruling on
compliance with the Pacific Telecom/Executive Branch Agreement.120 The Executive Branch has not
otherwise commented in this proceeding.

42. In addition, the Governor and the CNMI House of Representatives raise public safety
and/or national security concerns in this proceeding.121 The Governor argues that 100 percent foreign
ownership of the CNMI’s telecommunications network would pose national security and public safety
115
See id. at Art. 3.1. The Agreement requires, inter alia, MTC’s board of directors (“MTC Board”) to
establish a security committee to oversee security matters. See id. at Art. 3.15. Half (50%) of the MTC Board’s
members nominated by Pacific Telecom must be security directors, that is, directors who are U.S. citizens, have or
acquire U.S. security clearances, and satisfy the independent director requirements of the New York Stock
Exchange. See id. at Art. 3.15-3.16. Within 30 days of receiving notice of the proposed appointment of an
individual as a security director, the Department of Justice, Federal Bureau of Investigation, Department of Defense,
or Department of Homeland Security may object to the appointment, requiring rescission of the appointment and
appointment of another candidate. See id. at Art. 3.16. See also id. at Art. 1.5 (defining “data centers”) and at Art.
1.12 (defining “domestic communications infrastructure”).
116
See id. at Art. 5.2. See also id. at Art. 1.3 (which defines “control” to include the power to reach certain
decisions as well as de facto and de jure control).
117
See Foreign Participation Order, 12 FCC Rcd at 23919-21, ¶¶ 61-66.
118
See id. at 23919, ¶ 62.
119
See id. at 23920-21, ¶ 65.
120
See Petition to Adopt Conditions at 5.
121
See CNMI House of Representatives’ Letter at 2 (stating that “foreign ownership of the [CNMI]
telecommunications infrastructure is antithetical to the efforts by the United States to ensure the security of our
borders and our communications systems . . . in terms of defense security . . . .”); Governor of CNMI’s Opposition at
17-31; Governor’s Reply to August 15 Letter at 3.

20

Federal Communications Commission DA 03-3563

find that grant of the Transfer Applications will serve the public interest, convenience and necessity.

IV. REQUEST FOR HEARING

45. We deny the Governor’s request to designate the Transfer Applications for an evidentiary
hearing pursuant to sections 309(d) and 214(b) of the Act to determine whether approval of the transfer of
control request would serve the public interest.129 Parties challenging an application to transfer control by
means of a petition to deny and seeking a hearing on the matter must satisfy a two-step test established in
section 309(d).130 A protesting party seeking to compel an evidentiary hearing must: (1) allege specific
facts demonstrating that “a grant of the application would be prima facie inconsistent with [the public
interest];”131 and (2) present “a substantial and material question of fact.”132 If the Commission concludes
that the protesting party has met both prongs of the test, or if it cannot, for any reason, find that grant of
the application would serve the public interest, the Commission must designate the application for a
hearing in accordance with section 309(e) of the Act.133

46. In evaluating whether a petitioner has satisfied the two-part test established in section
309(d), the D.C. Circuit has indicated that where petitioners assert only “legal and economic conclusions
concerning market structure, competitive effect, and the public interest,” such assertions “manifestly do
not” require a live hearing.134 Moreover, in determining whether the specific claims of a petitioner raise
substantial and material questions of fact, “the Commission may consider the entire record, weighing the
petitioner’s evidence against facts offered in rebuttal.”135 The determination as to the adequacy of the
record is, in the first instance, a decision that must be made by the Commission in light of its public
interest responsibility.136

47. The Governor alleges that he has set forth a prima facie case pursuant to section
309(d)(1) because Pacific Telecom has failed to demonstrate that it possesses the requisite financial and
technical qualifications; Pacific Telecom’s foreign ownership of the telecommunications facilities in the
CNMI poses significant national security and public safety concerns; rate integration may be
compromised in the CNMI; and Pacific Telecom made intentional misrepresentations and omissions with

129
See Governor of CNMI’s Opposition at iii; Governor’s Reply to Joint Opposition at 1-2; Governor’s Reply
to July 18 Letter at 1-3; Governor’s Reply to August 15 Letter at 5. On October 20, 2003, the Governor also
requested a 14-day extension of time (until November 3, 2003) to potentially submit information from the Philippine
government regarding, inter alia, the operating record of ISLACOM and the Delgados in the Philippines. See
Governor’s October 20 Letter. Because this Order and Authorization has been released after the 14-day time period,
we consider this request moot.
130
47 U.S.C. § 309(d).
131
47 U.S.C. § 309(d)(1); Gencom Inc. v. FCC, 832 F.2d 171, 181 (D.C. Cir. 1987); see Astroline
Communications Co. v. FCC, 857 F.2d 1556, 1562 (D.C. Cir. 1988) (Astroline).
132
47 U.S.C. § 309(d)(2); Gencom, 832 F.2d at 181; see Astroline, 857 F.2d at 1562.
133
47 U.S.C. § 309(e). See also WorldCom/MCI Order, 13 FCC Rcd at 18139-40, ¶ 202.
134
SBC Communications, Inc. v. FCC, 56 F.3d 1484, 1496-97 (D.C. Cir. 1995) (quoting United States v. FCC,
652 F.2d at 89-90) (affirming the Commission’s decision in the AT&T/McCaw Order not to hold a full evidentiary
hearing before approving the merger). See AT&T/McCaw Order, 9 FCC Rcd 5836 at 5927-28, ¶¶ 172-74.
135
Astroline, 857 F.2d at 1561. Ultimately the Applicants bear the burden of proof to demonstrate, by a
preponderance of the evidence, that the proposed transaction, on balance, serves the public interest. See, e.g.,
WorldCom/MCI Order, 13 FCC Rcd at 18031-32, ¶ 10, 18144-45, ¶ 209.
136
United States v. FCC, 652 F.2d at 90-91.

22

Federal Communications Commission DA 03-3563

regard to the activities of its former partner from the prior proceeding.137 The Governor also argues that,
if the Transfer Applications are not denied, a hearing should be granted as a matter of right pursuant to
section 1.763(b) of the Commission’s rules and section 214(b) of the Act. 138

48. We conclude that the Governor has failed to raise a substantial and material question of
fact that would require an evidentiary hearing under section 309(d). The issues raised by the Governor
involve primarily legal and economic conclusions concerning market structure, competitive effect, and
the public interest, including the potential impact of the proposed transfers of control on national security
and law enforcement. Where the Governor has drawn into dispute facts relevant to Pacific Telecom’s
basic qualifications, we find his assertions speculative and not substantially supported by the evidence.139
Our review of the entire record, including the multiple filings by the Governor and the confidential
material we have inspected, convinces us that we have sufficient evidence to determine, without
conducting an evidentiary hearing, that the grant of the Transfer Applications serves the public interest,
convenience and necessity. We also agree with Pacific Telecom that the Governor does not have a
“right” to a hearing under section 214(b) of the Act and section 1.763(b) of the Commission’s rules.140
As the Commission noted in the AT&T Order, the term “heard” is not defined in section 214 or in the
relevant legislative history, and a trial-type hearing is not required by the Administrative Procedures
Act.141 Accordingly, we deny the Governor’s request for a hearing.

V. CONCLUSION

49. Based on the foregoing findings, we conclude, pursuant to sections 214(a) and 310(d) of
the Act, and section 2 of the Cable Landing License Act, that the proposed transfers of control are not
likely to result in harm to competition in any relevant market and likely will result in public interest
benefits. We also conclude, pursuant to section 310(b)(4) of the Act and the Commission’s “open entry”
standard for indirect investment from WTO Member countries in U.S. common carrier licensees, that it
would not serve the public interest to prohibit the proposed indirect foreign ownership of GTE Pacifica,
the Title III licensee. We also grant the Petition to Adopt Conditions filed by the Department of Justice
and Federal Bureau of Investigation, with the concurrence of the Department of Defense and the
Department of Homeland Security. This foreign ownership ruling permits GTE Pacifica to be owned
indirectly by: Prospector (up to and including 100 percent of the equity and voting interests); Prospector’s
shareholders Ricardo C. Delgado (up to and including 60 percent equity and voting interests) and Jose R.
Delgado (up to and including 40 percent equity and voting interests). In addition to these approved
interests, GTE Pacifica may accept up to and including an aggregate 25 percent indirect equity and/or
voting interest from other foreign investors, without seeking prior Commission approval under section

137
See supra Section III.B.3.
138
See Governor’s Reply to Joint Opposition at 2; Governor’s Reply to July 18 Letter at 1-2; Governor’s Reply
to August 15 Letter at 5. Section 214(b) requires a copy of the section 214 application to acquire common carrier
lines to be sent to the “Governor of each State” in which the lines will be located and that those parties notified have
a right to be heard. 47 U.S.C. § 214(b). Section 1.763(b) requires that a copy of the section 214 application be
forwarded to the Secretary of Defense, Secretary of State and the Governor of each State that is affected and allows
a hearing to be held if any of these parties “desires to be heard or if the Commission determines that a hearing
should be held . . . .” 47 C.F.R. § 1.763(b).
139
See supra Section III.B.
140
See Response to Governor’s August 1 Letter at 1-3.
141
See American Telephone and Telegraph Company Acquisition of ITT Communications Services, Inc.
Subsidiaries et. al., Memorandum Opinion and Order, DA 87-825, 2 FCC Rcd 3948, 3952, ¶¶ 22, 23 (1987) (AT&T
Order). The Commission has allowed a hearing in “circumstances involving a conflict over material questions of
fact where witness credibility is critical to resolving the controversy.” Id. at 3952-53, ¶ 24.

23

Federal Communications Commission DA 03-3563

310(b)(4). We emphasize that, as a Commission licensee, GTE Pacifica has an affirmative duty to
monitor attributable foreign equity and voting interests and to calculate attributable interests consistent
with the attribution principles enunciated by the Commission.

50. Accordingly, we approve the requested transfer of the international section 214
authorizations, the domestic section 214 authority, the cellular radiotelephone license, common carrier
and non-common carrier satellite earth station licenses, and the submarine cable landing license listed in
Appendix A, subject to the requirements and conditions specified in this Order and Authorization.

VI. ORDERING CLAUSES

51. ACCORDINGLY, IT IS ORDERED that, pursuant to sections 4(i) and (j), 214(a) and
(c), 309, and 310(b) and (d) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154 (i) and
(j), 214(a) and (c), 309, 310(b) and (d), and section 2 of the Cable Landing License Act, 47 U.S.C. § 35,
and Executive Order 10530, the applications filed by Pacific Telecom and BANZHI in the above-
captioned proceeding ARE GRANTED to the extent specified in this Order and Authorization.

52. IT IS FURTHER ORDERED that, pursuant to section 310(b)(4) of the Communications
Act of 1934, as amended, 47 U.S.C. § 310 (b)(4), the Petition for Declaratory Ruling filed by Pacific
Telecom IS GRANTED to the extent specified in this Order and Authorization.

53. IT IS FURTHER ORDERED, that, pursuant to sections 4(i) and (j), 214(a) and (c), 309,
and 310(b) and (d) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154 (i) and (j), 214(a)
and (c), 309, 310(b) and (d), and section 2 of the Cable Landing License Act, 47 U.S.C. § 35, and
Executive Order 10530, the Petition to Adopt Conditions to Authorizations and Licenses filed by the
Department of Justice and the Federal Bureau of Investigation on October 10, 2003 IS GRANTED, and
that consent to the transfer of control of the authorizations and licenses listed in Appendix A and grant of
the referenced Petition for Declaratory Ruling are subject to compliance with the provisions of the
Agreement between Pacific Telecom and MTC, and the Department of Justice, Federal Bureau of
Investigation, Department of Defense and Department of Homeland Security dated October 6, 2003 and
attached hereto as Appendix B, which Agreement is designed to address the national security, law
enforcement, and public safety issues of the Department of Justice, Federal Bureau of Investigation,
Department of Defense and Department of Homeland Security regarding the licenses and authority
granted herein. Nothing in this Agreement is intended to limit any obligation imposed by Federal law or
regulation, including, but not limited to, 47 U.S.C. § 222(a) and (c)(1) and the Commission’s
implementing regulations.

54. IT IS FURTHER ORDERED that, pursuant to sections 4(i) and (j), 214(a) and (c), 309,
and 310(b) and (d) of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154 (i) and (j), 214(a)
and (c), 309, 310(b) and (d), and section 2 of the Cable Landing License Act, 47 U.S.C. § 35, and
Executive Order 10530, the petitions to deny filed by the Governor of the Commonwealth of the Northern
Mariana Islands, Herman Guerrero, and the House of Representatives of the Commonwealth of the
Northern Mariana Islands and the hearing requested by the Governor of the Commonwealth of the
Northern Mariana Islands ARE DENIED.

55. This Order and Authorization is issued pursuant to the authority delegated by sections
0.261, 0.291, and 0.331, 47 C.F.R. §§ 0.261, 0.291, 0.331, and is effective upon release. Petitions for
reconsideration under section 1.106 or applications for review under section 1.115 of the Commission’s
rules, 47 C.F.R. §§ 1.106, 1.115, may be filed within 30 days of the date of the release of this Order and
Authorization. See 47 C.F.R. § 1.4(b)(2).

24

Federal Communications Commission DA 03-3563

FEDERAL COMMUNICATIONS COMMISSION

Donald Abelson, Chief
International Bureau

John Muleta, Chief
Wireless Telecommunications Bureau

William F. Maher, Jr., Chief
Wireline Competition Bureau

25

Federal Communications Commission DA 03-3563

APPENDIX A

FILE NOS., LICENSES AND AUTHORIZATIONS

Petition for Declaratory Ruling
ISP-PDR-20030418-00012 Pacific Telecom Inc.

Transfer of Control of International Section 214 Authorizations
File No. Authorization Holder Authorization
ITC-T/C-20030418-00204 GTE Pacifica Inc. ITC-214-19970502-00247
(formerly ITC-97-288)
ITC-ASG-19971211-00776
(formerly ITC-97-779-AL)
ITC-ASG-19971211-00778
(formerly ITC-97-778-AL)

Transfer of Control of Domestic Section 214 Authorizations
Micronesian Telecommunications Corporation (for local exchange carrier operations)
GTE Pacifica Inc. (for domestic interstate, interexchange operations)

Transfer of Control of the Submarine Cable Landing License
File No. Licensee License
SCL-T/C-20030418-00008 GTE Pacifica Inc. SCL-92-003-AL

Transfer of Control of Common Carrier and Non-Common Carrier Earth Station Licenses Held by
GTE Pacifica Inc.
File No. Call Sign/License Number
SES-T/C-20030418-00502 E000164 (common carrier)
SES-LIC-20000414-00563
SES-T/C-20030418-00501 KA-34 (non-common carrier)
SES-RWL-20001006-01900

Transfer of Control of the Cellular Radiotelephone License Held by GTE Pacifica Inc.
File No. Call Sign
0001236852 KNKN616

26

Federal Communications Commission DA 03-3563

APPENDIX B

PACIFIC TELECOM/EXECUTIVE BRANCH AGREEMENT

27

Document Created: 2003-11-06 16:55:22
Document Modified: 2003-11-06 16:55:22

© 2025 FCC.report
This site is not affiliated with or endorsed by the FCC