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GCI, Alaska Communications get FCC approval for network

Posted: July 31, 2013 - 12:16pm

Alaska’s two major in-state telecoms have joined forces.

Alaska Communications Systems Group Inc. and General Communication Inc. announced July 23 that they had combined their wireless infrastructure into the Alaska Wireless Network, or AWN.

The AWN transaction closed shortly after the Federal Communications Commission, or FCC, on July 12 approved a request from Alaska Communications and GCI to transfer their licenses to the new company.

The decision means that the telecoms can combine their infrastructure, but must continue to sell separate retail products. Work to integrate the two networks will begin immediately, wrote ACS’ Heather Cavanaugh in a July 23 email.

The FCC’s memorandum opinion, order and declaratory ruling were released July 16.

In approving the transaction, the FCC wrote that any potential competitive harms were outweighed by the public benefit of having wireless carriers better able to provide coverage throughout the state.

According to the approval: “Such benefits include network efficiencies from infrastructure consolidation, expanded coverage and improved service throughout Alaska, and increased competitiveness from a timely transition to LTE. We therefore conclude that, on balance, the assignment applications, as conditioned, would serve the public interest, and, accordingly, grant those applications.”

GCI owns two-thirds of the new entity, while Alaska Communications owns the remaining third. GCI paid $100 million to Alaska Communications as part of the deal to acquire the majority ownership, which provided ACS with capital to pay down its long-term debt.

“The wireless business is capital intensive, requires scale to compete successfully against national carriers, and demands more spectrum than either of our two companies individually owns,” wrote Alaska Communications President and CEO Anand Vadapalli and GCI President and CEO Ron Duncan in a statement announcing the network. 

“By combining our respective wireless assets, we can provide a state-of-the-art Alaska wireless network owned and operated by Alaskans for Alaskans. We believe that The Alaska Wireless Network will provide the fastest, most geographically extensive, and most reasonably priced wireless services for Alaska subscribers, allowing us each to compete more effectively in the retail market.”

Cavanaugh wrote that consumers will not see a change in service or operations in the short term.

“In the long term, service will become even better,” Cavanaugh wrote. “…Our customers will experience improved service quality, an expanded range of wireless services, greater variety of service, and enhanced service plans.”

Under the AWN transaction, the companies will continue to market and sell their plans separately, and the order requires that they maintain confidentiality about some information to preserve competition.

GCI’s current executive vice president, Wilson Hughes, will be the CEO of AWN.

Under the terms of the approved transaction, Alaska Communications and GCI will each contribute wireless assets to the new network. ACS will receive certain preferential cash flow initially, as long as it maintains certain subscriber levels, with GCI receiving the remainder. GCI will receive a consulting fee from the new network for its management work.

The approval document also dictates that AWN will build out its LTE and 3G networks in rural Alaska by the end of 2014, and also maintain its 2G network. The telecoms had voluntarily committed to that work in a letter to the commission earlier this year. 

The two telecoms have said that the merger will allow them operational efficiencies to better compete with the national players in Alaska.

The commission’s approval analyzes some of those, noting that the AWN should be able to operate on fewer cell towers than when the companies have overlapping, but separately-run, networks, which will save money while maintaining current coverage. This could also enable a further build out than either company would otherwise be able to afford on its own.

In its approval, the commission also denied the late-filed petition from a competitor questioning the infrastructure merger. Jeremy Lansman, part of another broadcast operation, had filed his objection after GCI announced that it expand its broadcast presence, arguing that such a move raised concerns over the company’s expanding footprint overall.

The commission rejected those arguments and denied Lansman and Fireweed Communication’s petition.

The telecoms had announced in June 2012 that they were pursuing the merger, and intended to complete the deal within a year. The July 23 announcement marked the completion of that effort about 13 months after the process began.

Under the transaction, the companies had said they would like to build out their combined network this summer, and had asked several times for approval in time to do so.

FCC Commissioner Ajit Pai wrote in a statement that the decision took longer than the commission’s target timeframe of 180 days, which could show a need to codify the timeline for decisions in the future.

“Time is of the essence,” Pai wrote. “It’s true of the communications marketplace given the rapid evolution of technology and insatiable consumer demand. And it’s especially true in Alaska, where the building season is short and the winters are long. Hence, when the two carriers plan on consolidating their operations in order to reinvest in their communities, we owe it to them to move quickly.” 

FCC Acting Chairwoman Mignon Clyburn wrote that while decisions must be timely, major wireless changes also deserve a thorough review.

“In this case, I am pleased that the Commission was able to approve the underlying transaction within two weeks of the parties’ providing final amended language to protect against the inappropriate use of competitively sensitive information.”

The order calls for certain confidentiality requirements, in part to prevent any questions of anti-competitiveness that could arise from the shared network.

Much of the approved agreement is marked as highly confidential information, and not available. That includes part of the Facilities and Network Use agreement, including information on work to be done to remain competitive, and things that GCI and ACS will do. Market share information and other data about the two companies’ current operations is also left out as confidential.

GCI and Alaska Communications will still be eligible for universal service fund, or USF, programs, as long as they continue to meet certain conditions, according to the order.

The USF provides federal funding for certain telecommunications projects that meet criteria intended to ensure that basic coverage is available nationwide.

In the order, the FCC wrote: “We find compelling the Applicants’ assertion that the combined network operated by AWN would, among other things, facilitate better network coverage in Alaska, greater consumer choice of services, and greater resources for public safety.”

Molly Dischner can be reached at molly.dischner@alaskajournal.com. 

 

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