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Entries in ICC (3)


Atlantic Tele-Network Announces Acquisition of Innovative Group of Companies

On Thursday, October 1st, Atlantic Tele-Network, Inc. (NASDAQ: ATNI) announced that it had acquired Caribbean Assets Holdings, LLC, the holding company for Innovative Communications Corporation (ICC) that provides cable TV, Internet and landline services primarily in the U.S. Virgin Islands.  ATN acquired the assets from the National Rural Utilities Cooperative Finance Corporation (CFC). 

Transaction Facts

  • ATN will pay approximately $145.0 million for the transaction.
  • The deal will be financed primarily with $85.0 million payable in cash and the option to finance the remaining $60.0 million of the purchase through a loan from an affiliate of CFC, the Rural Telephone Finance Cooperative (RTFC).
  • Deal is expected to close in mid-2016.

Deal History

  • In 2006, ICC was forced into involuntary bankruptcy after defaulting on RTFC loans; RTFC had loaned more than $500m to ICC between 1987 and 2001.
  • CFC purchased ICC’s assets through bankruptcy in 2010.
  • ICC majority shareholder Jeffrey Prosser appealed the sale to CFC to the Virgin Island Supreme Court, which upheld the sale to CFC in 2012.
  • Prosser co-founded of ATN in 1987 with Cornelius Prior Jr., current chairman of the board for ATN.
  • Prosser and Prior led ATN’s acquisition Virgin Island Telephone Company (Vitelco).
  • Management differences at ATN led to a split of the company’s assets with Prosser retaining Vitelco (dba Innovative).

Financial and Strategic Considerations

  • ATN is a provider of telecommunication services to rural, niche and other under-served markets and geographies in the United States, Bermuda and the Caribbean and owns and operates solar power systems in select locations across the United States. 
  • Enables ATN to offer quad play--wireless, broadband, cable and wireline telephone—in U.S. Virgin Islands. 
  • ICC’s company-wide operations revenue was approximately $100.0 million for its most recently completed fiscal year that ended May 31, 2015.

JSICA’s Take

  • The EV/TTM Rev in this transaction represents an implied multiple of 1.5x, a discount to recently observed ILEC deals in the U.S.    
  • Deal signals ATN’s desire to expand its operations in Caribbean after winding down is U.S. based wireless operations in recent years
  • ATN subsequently announced that it had agreed to acquire 51% of Bermuda based KeyTech Limited providing entry into the Cayman Islands market

NARUC Plays a Numbers Game with VoIP Providers

State Regulators Want a Rulemaking Proceeding on VoIP Access to Numbering Resources

A struggle over VoIP providers’ desire for direct access to numbering resources has quietly brewed in the FCC comment database over the last few months, but NARUC and other commenters hope the FCC will escalate the issue to a formal rulemaking proceeding. This proceeding goes back seven years, when Vonage and a handful of other VoIP providers filed petitions for waivers of the FCC’s rules regarding access to numbering resources (Section 52.15(g)(2)(i)). These waiver petitions lingered in regulatory limbo until December 27, 2011, when the FCC released a Public Notice to refresh the very stale record on VoIP provider access to numbering resources.

Vonage and its fellow petitioners essentially want direct access to numbering resources to “promote the deployment of new and innovative services, lead to lower consumer prices for VoIP service, improve the quality of Vonage’s services, and promote the Commission’s goal of moving toward an all IP network,” according to the Public Notice. Unfortunately for Vonage, opponents are urging the FCC to initiate a rulemaking proceeding rather than just rubber-stamp approval of the petitions. On March 30, NARUC filed a request for a rulemaking based on resolutions adopted at its February 2012 winter meeting.

NARUC explains that it has “historically agreed with the FCC that numbers are a limited resource which must be utilized in the most efficient way to accommodate new entrants and new technologies into the telecommunications marketplace. Poor management can lead to unnecessary exhaust of area codes requiring relief proceedings and development of implementation plans which are costly and can have a negative impact on both consumers and commerce.” Furthermore, numbering resources are only for carriers who have obtained the appropriate FCC licenses, State certification or FCC waivers (which the VoIP providers hope to obtain, but haven’t yet). In exchange for access to numbering resources, certified and licensed carriers have to meet various obligations. NARUC argues that numbering administrators NANPA and PA have no mechanism to monitor numbers given to unlicensed and non-certificated VoIP providers, and the VoIP providers “are not likely to have an incentive to efficiently utilize numbering resources.”

Among their concerns about granting VoIP providers direct access to numbering resources, NARUC and several state commissions worry that “Granting these petitions raises complex routing, number exhaust/utilization, interconnection, and intercarrier compensation issues.” A rulemaking proceeding should be initiated to establish a formal record on all of these important issues—issues that NARUC argues the VoIP petitioners have not adequately addressed. “For example, there is almost no detail in the record before the agency on how they will interact with existing carriers on crucial intercarrier issues like routing, interconnection (including reciprocal interconnection obligations), and compensation,” NARUC explains. NARUC urges the FCC to consider two minimum prerequisites in the public interest: let states determine which rate centers are available to VoIP providers; and make sure that unlicensed and non-certificated VoIP providers comply with Part 52 numbering rules in the same manner as the FCC has imposed on previous VoIP waiver recipients (namely SBC Internet Services, Inc., an affiliate of AT&T, who was granted a similar waiver in 2005).

Looking back through the docket on this issue (CC 99-200), other commenters encourage the FCC to initiate a formal rulemaking proceeding as well. NTCA filed comments on January 25, in which it argues that “a grant of the petitions would permit entities that hold no authority to offer telecommunications services to obtain telephone numbers directly from the North American Numbering Plan Administrator…The requested relief would have far-reaching implications and the Bureau should deny the petitions.” NTCA recommends a rulemaking proceeding given the complexity and confusion over interconnection agreements and the added uncertainty surrounding intercarrier compensation issues in the USF/ICC Order and FNPRM. NTCA definitely does not recommend that the FCC grant the waivers, which would “reverse decades of precedent by holding that [Enhanced Service Providers] can effectively self-provide access to the PSTN as if they were carriers without bearing many of the regulatory obligations that otherwise apply to carriers.”

Vonage’s most recent defense of its waiver request came on March 19 in an ex parte meeting with FCC staff.  Vonage discussed various technical, interconnection, routing, and numbering inventory concerns. Of note, Vonage argued that it will use “a standard technical framework, subject to commercially acceptable variations” for IP interconnection, and “its approach to IP interconnection permits backwards-compatibility to accommodate traffic to the PSTN going forward.” Vonage also expressed its commitment to work with states to preserve numbering resources, including a “voluntary offer to maintain a high number utilization rate, combined with its practice of taking smaller number blocks.”

Do you think Vonage and the VoIP providers will “promote even more disregard for number conservation and the rules which promote number conservation” if their waiver requests are granted, or will they help facilitate the deployment of new IP-based services? Should the FCC initiate a formal rulemaking proceeding to untangle the complex web of technical issues, or have the waiver requests sat idle long enough for interested parties to speak their peace? Although the core issues are number conservation and fair treatment of different classifications of carriers, the purported implications of the VoIP providers' waiver petitions appear to go much deeper into the murky worlds of interconnection and intercarrier compensation.


Rural Telecom Associations Advocate Responsible USF/ICC Reform

Source: NTCA Press Release

The National Exchange Carrier Association, the National Telecommunications Cooperative Association, the Organization for the Promotion and Advancement of Small Telecommunications Companies and the Western Telecommunications Alliance, together with 30 concurring state and regional associations, filed comments in the Federal Communications Commission's notice of proposed rulemaking regarding Universal Service Fund and intercarrier compensation reform.

In their comments, the associations acknowledged the need to orient the USF toward broadband-capable networks and to modify certain of the existing mechanisms to enhance performance and improve sustainability. At the same time, however, the associations emphasized the importance of a measured approach to reform that would not undermine or eradicate approaches and mechanisms that have already achieved substantial success in promoting and maintaining broadband-capable networks in rural carriers' service areas.

To strike this balance, the associations have offered a plan for USF and ICC reform that would avoid dramatically damaging universal service in rural areas served by rural rate-of-return carriers, while still accomplishing the fundamental principles of reform identified in the NPRM.

As key parts of their reform roadmap, the associations recommend that the FCC should:

  • Immediately address long-standing disputes involving application of ICC rules to all traffic originating from or terminating to switched networks (regardless of technology), call signaling requirements, access stimulation, and non-payment issues.
  • Adopt several carefully-targeted measures reasonably designed to constrain the recovery of capital investments and operational expenditures from federal universal service mechanisms on a prospective basis, without harming rural consumers, hampering broadband deployment efforts, hindering the ability to recover costs associated with prior investment under existing rules, or undermining the continuing availability and affordability of services in rural America.
  • Set up a process to unify intrastate switched access rates with interstate rates by company. A critical component of this transition is that any such ICC rate reductions be coupled with an appropriately-designed restructure mechanism that enables rural local exchange carriers to recover the lost access revenues.
  • Avoid arbitrary and artificially designed long-term rate-setting goals like "bill and keep" or a uniform rate applicable to all carriers. Instead, the FCC should pursue ICC reform in sensible, well-defined stages, starting with unification of access charges, followed by subsequent evaluation of market developments, technological advances, and regulatory needs that will inform how further reforms should be structured and implemented.
    • Develop a cost-based, "evolved" Rate of Return-based broadband funding mechanism that:
    • phases out legacy USF support mechanisms over a reasonable transition period,
    • ensures the opportunity to recover existing investment,
    • promotes responsible new investment,
    • supports reasonably comparable rates and services, and recognizes the importance of carriers of last resort in rural America, and
    • operates as a separate but complementary component of a more far-reaching Connect America Fund aimed at supporting broadband-capable networks throughout rural America.

The rural associations' plan satisfies the commission's near- and long-term reform principles by encouraging fiscal responsibility, demanding accountability, reasonably constraining growth in USF, and modernizing the existing mechanisms – all without the disruptive impacts that would arise under other reform proposals currently under consideration. The rural associations' plan further serves the statutory objectives of ensuring predictability, sufficiency, and specificity in universal service support, and it will promote both the availability and sustainability of services throughout rural America at rates and levels of quality that are reasonably comparable to those in urban areas.

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