Commission Document

Federal Communications Commission

DA 12-211

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
) File No.: EB-11-IH-0442
)
Hawaiian Telcom, Inc.
) NAL/Acct. No.: 201232080016
)
) FRN: 0001520980

NOTICE OF APPARENT LIABILITY FOR FORFEITURE

Adopted: February 14, 2012

Released: February 14, 2012

By the Chief, Enforcement Bureau:

I.

INTRODUCTION

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),1 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,2 we conclude that HTI is
apparently liable for a total forfeiture of $16,000 for the two unauthorized transfers of control.

II.

BACKGROUND

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.”3
Additionally, the submarine cable landing license for the Cable System may not be assigned or transferred
without prior authorization from the Commission.4


1 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).
2 See 47 U.S.C. § 503(b).
3 47 U.S.C. § 34. The Commission has been delegated the President’s authority under the Cable Landing License
Act. See Exec. Ord. No. 10530 § 5(a) (May 10, 1954), reprinted as amended in 3 U.S.C. § 301.
4 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).

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Federal Communications Commission

DA 12-211

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).5 This transaction was approved on August 17,
2004,6 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 System.7
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.8 Soon thereafter, the Companies
applied to the Commission for approval of several bankruptcy-related transfers. The Commission
authorized these license transfers.9 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.


5 HTCI was formerly named Paradise MergerSub, Inc., which was ultimately owned and controlled by the Carlyle
Group. See ITC-ASG-20040630-00255 and ITC-ASG-20040630-00256.
6 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, 2004).
7 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).
8 In re Hawaiian Telecom Communications, Inc., et al., Ch. 11, Case No. 08-02005 (Bankr. D. Haw. Dec. 30, 2009).
9 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).
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Federal Communications Commission

DA 12-211

6.
On January 12, 2011, the Companies filed applications seeking Commission consent to
transfer control of the submarine cable landing license held by HTI.10 The Companies filed these
applications to correct the earlier omissions.11 The International Bureau granted these applications on
March 28, 2011,12 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.13 The Companies responded to the LOI on September 8,
2011.14 That response makes clear that control of HTI, holder of the submarine cable landing license, was
twice transferred without prior Commission authorization.15

III.

DISCUSSION

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.16
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.”17 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,18 and the Commission has
so interpreted the term in the Section 503(b) context.19 “Repeated” means that the act was committed or
omitted more than once, or lasts more than one day.20 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.21 The


10 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).
11 See id.
12 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).
13 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).
14 See LOI Response, supra n.7.
15 Id. at 3-8.
16 47 U.S.C. § 503(b)(1); see also 47 C.F.R. § 1.80(a)(1).
17 47 U.S.C. § 312(f)(1).
18 H.R. Rep. No. 97-765, 97th Cong. 2d Sess. 51 (1982).
19 See, e.g., Southern California Broadcasting Co., Memorandum Opinion and Order, 6 FCC Rcd 4387, 4388, para.
5 (1991).
20 Id. at 4388, para. 5; Callais Cablevision, Inc., 16 FCC Rcd 1359, 1362, para. 9 (2001).
21 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(f).
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Federal Communications Commission

DA 12-211

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.22

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.23 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.24
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.25
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.”26 The Commission’s Forfeiture Policy Statement
and implementing rules prescribe a forfeiture of $8,000 for each separate unauthorized substantial transfer
of control.27 In this case, there were two separate unauthorized transfers of control. Based on the facts


22 47 C.F.R. § 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).
23 See Cable Landing License Order, 8 FCC Rcd at 7606, para. 6(4).
24 See LOI Response, Answers to Inquiries 4 and 5.
25 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).
26 47 U.S.C. § 503(b)(2)(E); 47 C.F.R. § 1.80(b)(6).
27 See 47 C.F.R. § 1.80(b)(6); Forfeiture Policy Statement, 12 FCC Rcd 17087, 17113 (1997).
4

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Federal Communications Commission

DA 12-211

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.28

IV.

ORDERING CLAUSES

11.

ACCORDINGLY, IT IS ORDERED

that, pursuant to Section 503(b) of the Act29 and
Sections 0.111, 0.311, 0.314 and 1.80 of the Rules,30 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.31
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 forfeiture.
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 Mindy.Littell@fcc.gov.
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.32 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-


28 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.
29 47 U.S.C. § 503(b).
30 47 C.F.R. §§ 0.111, 0.311, 0.314, 1.80.
31 47 U.S.C. § 1; Cable Landing License Order, 8 FCC Rcd at 7606, para. 6(4).
32 See 47 C.F.R. §§ 1.80(f)(3), 1.16.
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DA 12-211

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 documentation submitted.
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. 20554.33
For answers to questions regarding payment procedures, contact the Financial Operations Group Help
Desk at 1-877-480-3201 or email: ARINQUIRIES@fcc.gov.
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


33 See 47 C.F.R. § 1.1914.
6

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