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Federal Communications Commission
Washington, D.C. 20554
) File No.: EB-11-IH-0442
In the Matter of
) NAL/Acct. No.: 201232080016
Hawaiian Telcom, Inc.
) FRN: 0001520980
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: February 14, 2012 Released: February 14, 2012
By the Chief, Enforcement Bureau:
1. In this Notice of Apparent Liability for Forfeiture (NAL), we find
that Hawaiian Telcom, Inc. (HTI) apparently willfully violated the
conditions of the submarine cable landing license for the Hawaii
Interisland Cable System (Cable System), by failing on two occasions
to obtain Commission approval prior to transferring substantial
control of the submarine cable landing license. Based on our review of
the facts and circumstances surrounding this matter, and for the
reasons discussed below, pursuant to Section 503(b) of the
Communications Act of 1934, as amended, we conclude that HTI is
apparently liable for a total forfeiture of $16,000 for the two
unauthorized transfers of control.
2. Section 1 of the Cable Landing License Act states that no person shall
land or operate in the United States "any submarine cable directly or
indirectly connecting the United States with any foreign country, or
connecting one portion of the United States with any other portion
thereof, unless a written license to land or operate such cable has
been issued by the President of the United States." Additionally, the
submarine cable landing license for the Cable System may not be
assigned or transferred without prior authorization from the
3. HTI, previously known as Verizon Hawaii, is the holder of the
submarine cable landing license for the Cable System. HTI is also the
incumbent local exchange carrier for the State of Hawaii and provides
service to all of Hawaii's major islands. Hawaiian Telcom
Communications, Inc. (HTCI) (previously named Paradise MergerSub,
Inc.) is the parent company of HTI, and Hawaiian Telecom Holdco, Inc.
(Holdco) is the parent company of HTCI. In addition to local exchange
service, Holdco and its affiliates (collectively, the Companies)
provide exchange access, broadband services, and resold wireless
services. The Companies use the Cable System to provide at least some
of these services.
4. In 2004, GTE Corporation (GTE) and Verizon Holdco LLC (Verizon) filed
several applications seeking Commission consent to transfer control of
various entities holding FCC authorizations, including Verizon Hawaii
(subsequently renamed HTI), the licensee of the Cable System, to
Paradise MergerSub (subsequently renamed HTCI). This transaction was
approved on August 17, 2004, and the transfer was consummated on May
2, 2005. Although the Commission reviewed and approved the license
transfers relating to the transfer of control of Verizon Hawaii to
HTCI, the parties to the transaction failed to file a transfer
application covering the submarine cable landing license for the Cable
5. Additionally, on December 1, 2008, Holdco and its subsidiaries filed
for voluntary bankruptcy protection pursuant to Chapter 11 of the
United States Bankruptcy Code. Under the court-approved reorganization
plan, ownership of Holdco was transferred to HTI's secured creditors
on December 30, 2009, resulting in a substantial ownership change in
HTI. Soon thereafter, the Companies applied to the Commission for
approval of several bankruptcy-related transfers. The Commission
authorized these license transfers. Once again, the transfer of
control applications omitted the submarine cable landing license for
the Cable System. Holdco and its subsidiaries emerged from bankruptcy
and the transfer was consummated on October 28, 2010.
6. On January 12, 2011, the Companies filed applications seeking
Commission consent to transfer control of the submarine cable landing
license held by HTI. The Companies filed these applications to correct
the earlier omissions. The International Bureau granted these
applications on March 28, 2011, but referred the matter to the
Enforcement Bureau for investigation. On August 9, 2011, the
Enforcement Bureau issued a Letter of Inquiry (LOI) to the Companies
requesting information concerning their compliance with the
requirement to obtain Commission approval before transferring control
of the submarine cable landing license. The Companies responded to the
LOI on September 8, 2011. That response makes clear that control of
HTI, holder of the submarine cable landing license, was twice
transferred without prior Commission authorization.
7. Under Section 503(b)(1) of the Communications Act of 1924, as amended,
"[a]ny person who is determined by the Commission . . . to have . . .
willfully or repeatedly failed to comply substantially with the terms
and conditions of any license, permit, certificate, or other
instrument or authorization issued by the Commission . . . shall be
liable to the United States for a forfeiture penalty. Section
312(f)(1) of the Act defines "willful" as the "conscious and
deliberate commission or omission of [any] act, irrespective of any
intent to violate any provision of this Act or any rule or regulation
by the Commission authorized by this Act." The legislative history to
Section 312(f)(1) of the Act clarifies that this definition of
"willful" applies to both Sections 312 and 503(b) of the Act, and the
Commission has so interpreted the term in the Section 503(b) context.
"Repeated" means that the act was committed or omitted more than once,
or lasts more than one day. To impose a forfeiture penalty, the
Commission must issue a notice of apparent liability, and the person
against whom the notice has been issued must have an opportunity to
show, in writing, why no such forfeiture penalty should be imposed.
The Commission will then assess a forfeiture if it finds, based on the
evidence, that the person has violated the Act, a rule, a Commission
order, or the terms of a Commission license.
A. Apparent Violations of the Terms of the Cable Landing License
8. The submarine cable landing license for the Cable System prohibits the
transfer of control of the license without prior Commission approval.
We conclude that it is apparent that the Companies willfully and
repeatedly violated that license term by failing to obtain Commission
authorization prior to consummating two substantial transfers of
control of HTI, the holder of the submarine cable landing license. The
first apparent violation occurred when Verizon and Paradise MergerSub
transferred control of the cable landing license to HTCI; the second
occurred when control of HTI was transferred from Holdco's prior
shareholders to the new shareholders, in conjunction with the Chapter
11 bankruptcy reorganization. The Companies concede that the license
was "inadvertently omitted" from the FCC applications that were filed
to effectuate these transfers.
9. The requirements to obtain prior approval for ownership changes
involving cable landing licenses serve important public policies,
notably the identification of any foreign ownership interests and the
prevention of anti-competitive behavior that could result in
competitive harms in the U.S. market. The Companies' failure to obtain
prior Commission approval of these ownership transfers prevented the
Commission from examining whether control of the license for the Cable
System should be transferred to the entities that, in fact, operated
that System for a five-year period. In light of these considerations
and the admission by the Companies that they failed to obtain prior
Commission approval of the license transfers, we conclude that the
Companies apparently willfully and repeatedly violated the express
terms of the license, and therefore a forfeiture is warranted.
B. Proposed Forfeiture
10. In determining the amount of a forfeiture penalty, Section
503(b)(2)(E) of the Act and Section 1.80(b)(6) of the rules direct the
Commission to take into account "the nature, circumstances, extent,
and gravity of the violations . . . and the degree of culpability, any
history of prior offenses, ability to pay, and such other matters as
justice may require." The Commission's Forfeiture Policy Statement
and implementing rules prescribe a forfeiture of $8,000 for each
separate unauthorized substantial transfer of control. In this case,
there were two separate unauthorized transfers of control. Based on
the facts and circumstances presented, HTI is therefore apparently
liable for a total forfeiture of $16,000 for willful violations of the
express terms of the cable landing license for the Cable System.
IV. ORDERING CLAUSES
11. ACCORDINGLY, IT IS ORDERED that, pursuant to Section 503(b) of the Act
and Sections 0.111, 0.311, 0.314 and 1.80 of the Rules, Hawaiian
Telcom, Inc. is hereby NOTIFIED of its APPARENT LIABILITY FOR A
FORFEITURE in the amount of $16,000 for apparently willfully or
repeatedly violating the conditions of the submarine cable landing
license for the Hawaii Interisland Cable System.
12. IT IS FURTHER ORDERED that, pursuant to Section 1.80 of the Rules,
within thirty (30) calendar days of the release date of this Notice of
Apparent Liability for Forfeiture, Hawaiian Telcom, Inc. SHALL PAY the
full amount of the proposed forfeiture or SHALL FILE a written
statement seeking reduction or cancellation of the proposed
13. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission. The
payment must include the NAL/Acct. No. and FRN referenced above.
Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 979088, St. Louis, MO 63197-0000.
Payment by overnight mail may be sent to U.S. Bank - Government
Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101. Payments by wire transfer may be made to ABA Number 021030004,
receiving bank Federal Reserve Bank of New York, and account number
2700001. FCC Form 159 (Remittance Advice) must accompany any payment.
When completing the FCC Form 159, enter the NAL/Account number in
block 23A (call sign/other ID), and enter the letters "FORF" in block
number 24A (payment type code). The Companies will also send
electronic notification within forty-eight (48) hours of the date said
payment is made to Theresa Cavanaugh at Terry.Cavanaugh@fcc.gov,
Pamela Kane at Pamela.Kane@fcc.gov, and Mindy Littell at
14. The written statement seeking reduction or cancellation of the
proposed forfeiture, if any, must include a detailed factual statement
supported by appropriate documentation and affidavits pursuant to
Sections 1.80(f)(3) and 1.16 of the Rules. The written statement must
be mailed to Theresa Z. Cavanaugh, Acting Chief, Investigations and
Hearings Division, Enforcement Bureau, Federal Communications
Commission, 445 12th Street, S.W., Room 4-C330, Washington, D.C. 20554
and must include the NAL/Acct. No. referenced above. The written
statement should also be emailed to Theresa Cavanaugh at
Terry.Cavanaugh@fcc.gov, Pamela Kane at Pamela.Kane@fcc.gov, and Mindy
Littell at Mindy.Littell@fcc.gov.
15. The Commission will not consider reducing or canceling a forfeiture in
response to a claim of inability to pay unless the petitioner submits:
(1) federal tax returns for the most recent three-year period; (2)
financial statements prepared according to generally accepted
accounting practices (GAAP); or (3) some other reliable and objective
documentation that accurately reflects the petitioner's current
financial status. Any claim of inability to pay must specifically
identify the basis for the claim by reference to the financial
16. Requests for payment of the full amount of this Notice of Apparent
Liability for Forfeiture under an installment plan should be sent to:
Chief Financial Officer - Financial Operations, Federal Communications
Commission, 445 12th Street, S.W., Room 1-A625, Washington, D.C.
20554. For answers to questions regarding payment procedures, contact
the Financial Operations Group Help Desk at 1-877-480-3201 or email:
17. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability
for Forfeiture shall be sent by certified mail, return receipt
requested, to Gregory J. Vogt, Counsel for Hawaiian Telecom, Inc.,
2121 Eisenhower Avenue, Suite 200, Alexandria, VA 22314.
FEDERAL COMMUNICATIONS COMMISSION
P. Michele Ellison
Chief, Enforcement Bureau
GTE Hawaiian Telephone Company Applications for a License to Land and
Operate a High Capacity Digital Submarine Cable System Wholly Within the
State of Hawaii, Linking the Islands of Kauai, Oahu, Maui and Hawaii,
Cable Landing License, DA 93-1274, 8 FCC Rcd 7065 (CCB 1993) (Cable
Landing License Order).
See 47 U.S.C. S: 503(b).
47 U.S.C. S: 34. The Commission has been delegated the President's
authority under the Cable Landing License Act. See Exec. Ord. No. 10530 S:
5(a) (May 10, 1954), reprinted as amended in 3 U.S.C. S: 301.
Cable Landing License Order, 8 FCC Rcd at 7606, para. 6(4) (CCB 1993)
(specifying that "[n]either this license, nor the rights granted herein,
shall be transferred, assigned, or in any manner either voluntarily or
involuntarily disposed of or disposed of indirectly by transfer of control
of the Licensee to any persons, unless the Federal Communications
Commission shall give prior consent in writing"). This condition, which
was included in all cable landing licenses prior to 2001, was codified as
a routine condition in Section 1.767(g)(6) of the Commission's rules in
2002. See Review of Commission Consideration of Applications Under the
Cable Landing License Act, IB Docket No. 00-106, Report and Order, 16 FCC
Rcd 22167, 22201-02, paras. 66-68 (2001).
HTCI was formerly named Paradise MergerSub, Inc., which was ultimately
owned and controlled by the Carlyle Group. See ITC-ASG-20040630-00255 and
See International Authorizations Granted, Public Notice, Report No.
TEL-00821, DA 04-2520, IBFS File Nos. ITC-ASG-20040630-00255 and
ITC-ASG-20040630-00256, 19 FCC Rcd 15469 (IB 2004); Streamlined Domestic
Section 214 Application Granted, Public Notice, DA 04-2451, WC Docket No.
04-234, 19FCC Rcd 14831 (WCB 2004); Wireless Telecommunications Bureau
Assignment of License Authorization Applications, Transfer of Control
Licensee Applications, De Facto Transfer Lease Applications and Spectrum
Manager Lease Notifications, Public Notice, Report No. 1924 (rel. Aug. 25,
See Letter from Gregory J. Vogt, Esq., Counsel to Hawaiian Telcom, Inc.,
to Kathy Berthot, Attorney Advisor, Investigations & Hearings Division,
Enforcement Bureau, Federal Communications Commission (dated Sept. 8,
2011) (LOI Response).
In re Hawaiian Telecom Communications, Inc., et al., Ch. 11, Case No.
08-02005 (Bankr. D. Haw. Dec. 30, 2009).
Domestic Section 214 Authorization Granted; Domestic Section 214
Application Filed for the Transfer of Control of Hawaiian Telecom, Inc.,
and Hawaiian Telecom Services Company, Inc., Debtors-in-Possession, WC
Docket No. 10-41, DA 10-1746, 25 FCC Rcd 13149 (WCB 2010); International
Authorizations Granted, Public Notice, Report No. TEL-01457, DA 10-1798,
IBFS File No. ITC-ASG-20100122-00038, 25 FCC Rcd 13369 (IB2010); Wireless
Telecommunications Bureau Assignment of License Authorization
Applications, Transfer of Control of Licensee Applications, De Facto
Transfer Lease Applications and Spectrum Manager Lease Notifications,
Designated Entity Reportable Eligibility Event Applications, and
Designated Entity Annual Reports Action, Public Notice, Report No. 6390
(rel. Nov. 17, 2010).
See Application for Authority to Transfer Control of Submarine Cable
Landing License, File No. SCL-LIC-19921015-0008 (filed Jan. 12, 2011);
Application for Authority to Transfer Control of Submarine Cable Landing
License, File No. SCL-LIC-19921015-0008 (filed Jan. 12, 2011). See also
Streamlined Submarine Cable Landing License Applications Accepted for
Filing, Public Notice, Report No. SCL-00114S (rel. Feb. 18, 2011).
Actions Taken Under Cable Landing License Act, Public Notice, Report No.
SCL-00115, IBFS File Nos. SCL-ASG-20110112-0002 and SCL-T/C-20110112-0003,
DA 11-565, 26 FCC Rcd 4923 (IB 2011).
See Letter from Theresa Z. Cavanaugh, Acting Chief, Investigation &
Hearings Division, Enforcement Bureau, Federal Communications Commission,
to John T. Komeiji, Senior Vice President and General Counsel, Hawaiian
Telcom, Inc. (dated Aug. 9, 2011) (LOI).
See LOI Response, supra n.7.
Id. at 3-8.
47 U.S.C. S: 503(b)(1); see also 47 C.F.R. S: 1.80(a)(1).
47 U.S.C. S: 312(f)(1).
H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51 (1982).
See, e.g., Southern California Broadcasting Co., Memorandum Opinion and
Order, 6 FCC Rcd 4387, 4388, para. 5 (1991).
Id. at 4388, para. 5; Callais Cablevision, Inc., 16 FCC Rcd 1359, 1362,
para. 9 (2001).
47 U.S.C. S: 503(b); 47 C.F.R. S: 1.80(f).
47 C.F.R. S: 1.80(a)(1) (stating that "[a] forfeiture penalty may be
assessed against any person found to have: (1) Willfully or repeatedly
failed to comply substantially with the terms and conditions of any
license, permit, certificate, or other instrument of authorization issued
by the Commission"). See also SBC Communications, Inc., Forfeiture Order,
17 FCC Rcd 7589, 7591, para. 4 (2002) (affirming forfeiture penalty issued
for violation of a Commission order).
See Cable Landing License Order, 8 FCC Rcd at 7606, para. 6(4).
See LOI Response, Answers to Inquiries 4 and 5.
See Review of Commission Consideration of Applications Under the Cable
Landing License Act, Report and Order, 16 FCC Rcd 22167, 22184 (2001)
(adopting streamlined procedures for cable landing licensing, while
ensuring careful Commission review of certain applications to guard
against anti-competitive behavior).
47 U.S.C. S: 503(b)(2)(E); 47 C.F.R. S: 1.80(b)(6).
See 47 C.F.R. S: 1.80(b)(6); Forfeiture Policy Statement, 12 FCC Rcd
17087, 17113 (1997).
We note that the Companies made good faith efforts to comply with the
obligation to seek prior Commission approval before consummating the
transactions that transferred control of the authorizations held by HTI.
Under these circumstances, we do not believe an upward adjustment of the
proposed forfeiture is warranted.
47 U.S.C. S: 503(b).
47 C.F.R. S:S: 0.111, 0.311, 0.314, 1.80.
47 U.S.C. S: 1; Cable Landing License Order, 8 FCC Rcd at 7606, para.
See 47 C.F.R. S:S: 1.80(f)(3), 1.16.
See 47 C.F.R. S: 1.1914.
Federal Communications Commission DA 12-211
Federal Communications Commission DA 12-211