August 22, 2011

By Bill Jaynes

The Kaselehlie Press

August 9, 2011 Koror, Palau-The telecommunications providers from the Federated States of Micronesia and Palau have joined forces to bid on a retired fiber optic cable that currently stretches between Guam and the Philippines. Success in their joint purchase bid would be the first step toward the end goal of broadband connectivity for Palau and for Yap, FSM.

Palau and Yap have always utilized relatively slow satellite capacity for their communications capacity.

The Memorandum of Understanding (MOU) between FSMTC (FSM Telecommunications Corporation) and PNCC (Palau National Communications Corporation) sets up guidelines for the establishment of a "Caroline Cable Consortium."

Guam-Philippines Cable Limited Partnership owns the cable that Palau and the FSM are jointly trying to purchase and later to re-route to Palau and Yap.

According to Fredy Perman, FSMTC Chief Operating Officer, the owners of the retired cable have laid a new fiber optic cable with three terabytes of capacity and are selling the smaller capacity cable they previously used. "When a cable is 'retired' it doesn't mean that the cable is bad," Perman explained. He said that the cable could be picked up and re-routed and that is the first step in what the Caroline Cable Consortium is trying to do.

Perman said that last year Samoa and American Samoa teamed up to purchase and re-route another fiber optic cable which saved a substantial amount of money to provide broadband communications capacity for the two countries. The cost savings realized by purchasing that existing cable instead having to buy brand new cable helped to make that project financially possible.

The Caroline Cable Consortium has submitted a maximum bid of $5 million for the purchase of the cable between Guam and the Philippines. "That would only be the first step (toward Palau-Yap broadband connectivity)," Perman reiterated. If the consortium wins the purchase bid it will then need to find funding to pay for the cost of picking up the cable and re-routing it. Perman estimates that job would carry an additional price tag of as much as $30 million.

"The specific purpose of the Partnership will be to acquire, deploy, manage, operate and maintain a new or existing underwater fiber optic cable to the State of Yap, Federated States of Micronesia and to the Republic of Palau; however, the Parties intend to immediately pursue the acquisition of an existing cable owned by the Guam-Philippines Cable Limited Partnership (the "GP Cable"), for which GP Cable PNCC has tendered and is negotiating a proposal to purchase," the MOU said.

PNCC and FSMTC would provide cash and property in the ratio of 2/3 provided by PNCC and 1/3 provided by FSMTC. If the purchase bid is successful the initial contributions by the partners would be sufficient to purchase the GP cable.

The two partners will share profits and losses on the same 2:1 ratio.

The Parties intend to finalize the instruments forming the Partnership by no later than August 29, 2011, and will meet in Guam on August 26, 2011, to formally execute those instruments.

The August 9, 2011 MOU was signed by Richard Misech, General Manager, PNCC, John D. Sohl, President/CEO, FSMTC, Mariana Espangel, Chair, PNCC Board, and Esmond Moses, Chair, FSMTC Board.