Public Notice PUBLIC NOTICE ITC-T/C-20150612-00146 Pleading Cycle PN DA

Attachment Pleading Cycle PN DA

Pleading Cycle PN DA

PUBLIC NOTICE

Public Notice

2015-06-26

This document pretains to ITC-T/C-20150612-00146 for Transfer of Control on a International Telecommunications filing.

IBFS_ITCTC2015061200146_1093751

TeleGuam in excess of the 25-percent foreign ownership benchmark identified in Section

310(b)(4) of the Communications Act.1

II. INTRODUCTION AND SUMMARY

TeleGuam holds certain Commission-issued common carrier wireless radio station li-

censes as described in more detail below. As explained herein, AP TG and Telkom USA have

entered into a merger agreement by which Telkom USA will acquire direct control of AP TG

and, thus, indirect control of TeleGuam (the “Proposed Transaction”). 2 As an additional conse-

quence of the Proposed Transaction, PT Telkom Indonesia and Telin, parent companies of

Telkom USA and both organized under the laws of Indonesia, will indirectly own and vote all of

the equity in TeleGuam.3 In addition, PT Telkom Indonesia is a semi-privatized, majority state-

owned telecommunications and network service provider in Indonesia; the Government of the

Republic of Indonesia holds a 52.56 percent direct ownership interest in PT Telkom Indonesia,

and thus would also hold a controlling indirect interest in TeleGuam.4

1
See 47 U.S.C. § 310(b)(4); 47 C.F.R. § 1.990(a).
2
As detailed below in Section II.B, in addition to AP TG and Telkom USA, PacHub
Acquisition Co., a direct wholly-owned subsidiary of Telkom USA, and Cayman Orchid
Capital Management, Ltd., as the representative of the owners of AP TG are also parties
to the merger agreement.
3
Contemporaneously with the filing of this Petition, Petitioners have submitted applica-
tions pursuant to Section 310(d) (on FCC Form 603 and FCC Form 608) and Section 214
of the Communications Act, seeking the FCC’s approval for the transfer of control of
TeleGuam to Telkom USA. (“214 Transfer Application”)
4
See Review of Foreign Ownership Policies for Common Carrier and Aeronautical Radio
Licensees under Section 310(b)(4) of the Communications Act of 1934, as Amended, Sec-
ond Report and Order, 28 FCC Rcd 05741, 05765 (2013)(“Foreign Ownership Second
Report and Order”) (“we adopt a new framework that requires licensees seeking approval
of aggregate foreign ownership in excess of the statutory limits to identify and seek fur-
ther specific approval in their petitions only of those individual foreign interests that
would exceed five percent of the controlling U.S. parent of a common carrier or aeronau-
tical radio station licensee, under section 310(b)(4), and/or exceed five percent of a com-
mon carrier licensee, under our section 310(b)(3) forbearance approach, with an
exception for certain interests in excess of five percent and up to ten percent.”)

2

Under the applicable standard of Section 310(b)(4), the Commission may only refuse or re-

voke a license, and by extension deny a transfer of control application involving indirect foreign

ownership – whether by a foreign government, a foreign corporation, or a foreign citizen – in the

licensee in excess of 25 percent where it affirmatively finds that the public interest would be served

by doing so. The Commission has long recognized the benefits of indirect foreign investment in U.S.

carriers and, indeed, in 1997, adopted a rebuttable presumption that the competitive concerns under

Sections 214 and 310(b)(4) of the Act are not raised by applications that propose indirect ownership

by citizens of, entities from, or governments of Word Trade Organization (“WTO”) Members of

common carrier (and aeronautical) radio licensees.5 In 2013, the Commission went a step further and

eliminated the distinction between ownership of common carrier (and aeronautical) radio licensees

by sources from WTO Member and non-WTO Member countries, providing that the same “open

entry” standard that had been adopted sixteen years earlier for WTO Members would apply to non-

WTO Members.6 On numerous occasions, the Commission has approved up to 100 percent indirect

foreign investment in common carrier licensees under Section 310(b)(4).7

As explained in detail below, the proposed indirect foreign investment in TeleGuam by

Telin, PT Telkom Indonesia, and the Republic of Indonesia (collectively, the proposed “Foreign

Owners”) would not be contrary to the public interest. Of principal significance, under the

Commission’s “open entry” policies, PT Telkom Indonesia is entitled to a presumption of a

favorable Section 310(b)(4) ruling except in “exceptional” cases where the foreign investment is

5
See Rules and Policies on Foreign Participation in the U.S. Telecommunications Market,
Report and Order and Order on Recon., 12 FCC Rcd 23891, 23896. 23913, 23940 (1997)
(“Foreign Participation Order”).
6
See Foreign Ownership Second Report and Order, 28 FC C Rcd at 05755 (2013).
7
See Applications of Softbank Corp., Starburst II, Inc., Sprint Nextel Corporation, and
Clearwire Corporation For Consent to Transfer Control of Licenses and Authorizations
Petitions for Reconsideration of Applications of Clearwire Corporation for Pro Forma
Transfer of Control, Memorandum Opinion and Order, Declaratory Ruling, and Order on
Reconsideration, 28 FCC Rcd 9642, ¶ 124 (2013).

3

shown to pose a “very high risk” to competition.8 No such risk can be shown in this case. Com-

petition in the Guam wireless market would not be adversely affected by the proposed transac-

tion. To the contrary, the Foreign Owners’ proposed indirect interest in TeleGuam would

substantially benefit Guam and U.S. consumers and serve the public interest generally by provid-

ing beneficial financial resources and enhancing TeleGuam’s competitive capabilities. Addition-

ally, although PT Telkom Indonesia is the largest provider within Indonesia,9 there is no basis for

believing it will favor TeleGuam on the U.S. / Indonesia route or that U.S. providers seeking

access to the markets of Indonesia to complete U.S.-originated traffic would be disadvantaged. 10

8
Foreign Participation Order, at 23913-914.
9
Note that Petitioners accept that TeleGuam, through the proposed affiliation with PT
Telkom Indonesia and Telkomsel, would become dominant on the U.S. Indonesia route
in their 214 Transfer Application and that protections in place under the Commission’s
Rules and policies to monitor and protect competition on that route would apply.
10
PT Telkom Indonesia faces growing competition and operates in an increasingly rigorous
regulatory environment at home. Reformation in Indonesian telecommunications regula-
tion initiated by the Government over fifteen years ago have promoted liberalization in
the Indonesian telecommunications industry, removing barriers to entry and supporting
increased competition. Specifically, Law No. 36/1999 on the Elimination of Telecom-
munications Monopoly (“Telecommunications Law”), which became effective in Sep-
tember 2000, set guidelines for reforms in the Indonesian telecommunications industry,
the facilitation of new entrants, and enhanced transparency and competition. Under the
Telecommunications Law, network providers must allow users to access other providers
or obtain services from other networks by paying interconnection fees agreed upon by
each network operator. Government Regulation No. 52/2000 dated July 11, 2000 regard-
ing Telecommunications Operations provides that interconnection charges between two
or more network operators must be transparent, mutually agreed upon and fair. The Tel-
ecommunications Law prohibits monopolistic practices and unfair competition among
telecommunications operators and has been implemented through numerous government
regulations, ministerial regulations and ministerial decrees. In March 2004, for example,
the Ministry of Communications (“MoC”) issued Decree No.33/2004, which prescribes
measures to prohibit abuse by dominant network and service providers through, to name
just several examples, predatory pricing, cross subsidies, mandatory use of a provider’s
services (to the exclusion of competitors) and hampering mandatory interconnection (in-
cluding discrimination against specific providers). Further, on February 8, 2006, the
Ministry of Communication and Information (which replaced the MoC) issued Regula-
tion No.8/PER/M.KOMINFO/02/2006 on Interconnection (“Regulation No.8/2006”)
which mandated an interconnection tariff scheme based on a long-run incremental cost
formula for all network and services operators determined by the network on which a call
terminates and which requires that network interconnection be implemented transparently
and without discrimination. Competition in the Indonesian telecommunications sector is

4

Further, this transaction will undergo a national security and law enforcement review by Federal

Executive Branch agencies – the Departments of Justice, Homeland Security, and Defense – who

will determine whether TeleGuam’s existing National Security Agreement will address their

concerns, if any, raised by the Proposed Transaction, or whether certain modifications to the

agreement will be required.

For these reasons, the Commission should promptly grant the Petitioners’ request and is-

sue a declaratory ruling that it would not serve the public interest to deny consent to the Foreign

Owners from holding indirect foreign ownership and voting rights in TeleGuam in excess of the

Section 310(b)(4) benchmark up to 100 percent in the case of PT Telkom Indonesia and Telin

and 52.56 percent in the case of the Republic of Indonesia.11

The information requested under Section 1.991 of the Commission’s Rules in connection

with this Petition filed under Section 310(b)(4) of the Act is supplied in Exhibit A hereto.12

II. THE PROPOSED TRANSACTION AND FOREIGN OWNERSHIP

A. DESCRIPTION OF THE PETITIONERS

1. TeleGuam Holdings, LLC (“TeleGuam”) & AP TeleGuam Holdings, Inc.
(“AP TG”)

TeleGuam is a limited liability company formed under the laws of Delaware. Its principal

place of business is 624 North Marine Corps Dr., Tamuning, GU 96913.

also governed more generally by Law No. 5/1999 dated March 5, 1999 regarding Prohi-
bition of Monopolistic Practice and Unfair Business which bans agreements and activities
tending toward unfair business competition, as well as the abuse of a dominant market
position. In combination, the regulations summarized herein preclude PT Telkom Indo-
nesia from affording an affiliate a favored position regarding access to its network facili-
ties in Indonesia to the detriment of competitors.
11
PT Telkom Indonesia does not anticipate an increase in the Government’s ownership of
PT Telkom Indonesia.
12
See 47 C.F.R. § 1.991.

5

Document Created: 2015-06-26 10:06:12
Document Modified: 2015-06-26 10:06:12

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