[24 FSM R. 184]

CIVIL ACTION NO. 2021-010

Trial: May 16-19, 2023
Decided: July 24, 2023

APPEARANCES:

For the Plaintiff:            Aaron L. Warren, Esq.
                                     Mooney Wieland Warren PLLC
                                     P.O. Box 3501
                                     Pago Pago, American Samoa AS 96799

For the Defendant:       Stephen V. Finnen, Esq.
                                     P.O. Box 1450
                                     Kolonia, Pohnpei FM 96941

HEADNOTES

Civil Procedure – Injunctions; Evidence

Evidence received upon an application for a preliminary injunction which would be admissible at the trial on the merits becomes part of the record on the trial and need not be repeated at the trial. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 189 n.2 (Pon. 2023).

Telecommunications

In 2011, the national government adopted an explicit policy goal of providing fiber optic undersea cable connections to all four FSM states. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 189 (Pon. 2023).

Telecommunications

The FSM Telecommunications Act of 2014 created a regulatory framework for the telecommunications sector and a regulatory body called the Office of the Telecommunication Regulation Authority. It also provided for the creation of a not-for-profit, shareholding corporation with the FSM Secretary of Finance and the FSM Secretary of Transportation, Communication and Infrastructure as the only shareholders, and who held the shares for and on behalf of the government, to implement the FSM's declared policy of providing fiber optic undersea cable connections to all four states. And, it abolished Telecom's monopoly status. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 189 (Pon. 2023).

Telecommunications

The Open Access Entity is the national government's vehicle to implement its declared policy of providing fiber optic undersea cable connections to all four FSM states. It is a bottleneck facility created to provide as a wholesaler, but not at retail, international and domestic connectivity for the transmission of data via undersea fiber optic cables and must provide that connectivity on non-discriminatory and cost-based terms. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 190 (Pon. 2023).

Telecommunications

A "bottleneck facility" is a communications facility declared by the Telecommunications Regulatory Authority to be essential for the production of communications services which, for technical reasons or due to economies of scope and scale and the presence of sunk costs, cannot practically be duplicated by a potential competitor in a communications market. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 190 n.3 (Pon. 2023).

Contracts – Unconscionable

When both contracting parties are FSM government-owned corporations subject to Congressional policy-making, and none of the non-parties affected by an alleged unconscionable contract provision objected to it, and the non-party to be paid, in particular, agreed to it, and when the alleged unconscionable contract provision was negotiated to avoid a less favorable result legislated by Congress, the court must conclude that, under the unique circumstances of the parties' relationship, the contract provision is not unconscionable, and that the party-proponent of unconscionability has failed to prove that the provision is unconscionable. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 191 (Pon. 2023).

Banks and Banking; Debtors' and Creditors' Rights

A line of credit is the maximum amount of borrowing power extended to a borrower by a given creditor to be drawn upon by the borrower as needed. A drawdown from a line if credit is a loan of money to be repaid later. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 192 (Pon. 2023).

Banks and Banking; Debtors' and Creditors' Rights

A concessional loan is a loan made at below market rates or with no interest at all – a loan is considered "concessional" if its terms (interest rate, other charges, as well as the grace and repayment periods) are more lenient than typical commercial loans, in this sense, a concessional loan includes a grant element. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 193 & n.9 (Pon. 2023).

Banks and Banking; Debtors' and Creditors' Rights

A concessional loan can be made with no interest at all. Nevertheless, it is a loan, and lenders expect loans to be repaId. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 193 (Pon. 2023).

Debtors' and Creditors' Rights; Statutes – Construction

A Congressional appropriation of funds as either a concessional loan or a subsidy to a national-government-owned corporation does not constitute payment of another government-owned corporation's contractual debts to the first corporation unless the public law says it does. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 193 (Pon. 2023).

Administrative Law – Judicial Review; Telecommunications

While the telecommunications retail service provider is contractually bound to pay the telecommunication wholesale service provider's invoiced expenses, those invoiced expenses are subject to the Telecommunications Regulatory Authority's oversight, and when the retail service provider has never sought TRA oversight on the size or amount of the invoiced expenses, whether those costs are inflated and should be lower is a matter not properly before the court because the service provider should first seek this relief from the TRA. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 194 (Pon. 2023).

Insurance – Coverage; Telecommunications

Marine maintenance coverage is a type of insurance whereby the policyholder is guaranteed that a repair ship will be available to fix a broken or disabled submarine cable whenever needed. It does not cover the actual cost of chartering that ship to do the repair, or supply the funds to pay for the ship charter and cable repair, or even set the ship's charter price. It only gives the policyholder priority to charter the repair ship. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 194 (Pon. 2023).

Insurance – Coverage; Telecommunications

Marine maintenance coverage is the industry standard among submarine cable owners and service providers in the Pacific, who sometimes form a consortium to share the cost. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 195 (Pon. 2023).

Contracts

Contractual parties are each responsible for their own business mistakes. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 195 (Pon. 2023).

Contracts – Breach – Waiver

A contracting party may waive the other party's breach of a contract term by its conduct. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 196 (Pon. 2023).

Contracts – Interpretation

A contract that provides for full recovery of all fixed and variable costs provides for recovery of office overhead expenses. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 196 (Pon. 2023).

Interest and Usury

The London Interbank Offered Rate (LIBOR) for U.S. dollars ceased to exist on June 30, 2023. It has been replaced by the Secured Overnight Financing Rate for U.S. dollars (SOFR-US). FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 197 n.16 (Pon. 2023).

Interest and Usury; Judgments – Interest on

Interest ceases to accrue on a judgment when the money is paid into a court of competent jurisdiction per the court's order, with those payments accruing interest for the benefit of the ultimate recipient only as earned in the court's depository institution. The same is true of interest-bearing prejudgment payments into court. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 197 (Pon. 2023).

Attorney's Fees – Court-Awarded

Generally, the court will award attorney's fees to the prevailing party only if authorized by contract or by statute. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 198 (Pon. 2023).

Attorney's Fees – Court-Awarded

A redacted bill showing amounts and totals of unpaid attorney's fees is not sufficient for the court to make an attorney's fee award because a party seeking an attorney's fee award must submit supporting documentation showing the attorney's hourly rate, the date, the work done, and the amount of time spent on each service for which a claim for compensation is made. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 198 (Pon. 2023).

Attorney's Fees – Court-Awarded

Whether a defendant is liable to the plaintiff for an attorney's fee award is properly part of the matters that must be heard at trial and decided before judgment, but the actual amount of the attorney's fees award will, however, be determined in response to a post-judgment request or motion. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 198 (Pon. 2023).

Civil Procedure – Injunctions – Mandatory

A mandatory injunction either: 1) commands the defendant to do some positive act or particular thing; 2) prohibits it from refusing (or persisting in a refusal) to do or permit some act to which the plaintiff has a legal right; or 3) restrains the defendant from permitting its previous wrongful act to continue to be operative, thus virtually compelling it to undo it. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 198 (Pon. 2023).

Civil Procedure – Injunctions – Mandatory

Generally, courts do not issue mandatory injunctions because courts are ill-equipped to involve themselves in day-to-day administration and because of the difficulty of enforcing them, particularly when money payments are involved because if money damages or other relief will fully compensate for the threatened interim action, irreparable harm usually does not exist and an injunction should be denied, but an exception is when an award of damages at the end of trial will be inadequate because the damage award comes too late to save the plaintiff's business since the plaintiff may go broke while waiting or may have to shut the business down but without declaring bankruptcy. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 198 (Pon. 2023).

Attachment and Execution; Civil Procedure – Injunctions – Mandatory; Judgments

No mandatory injunction to pay money should be needed for a judgment because once the judgment is entered by the clerk, the judgment creditor has a statutory right to immediate execution upon the judgment, which execution is, by rule, automatically stayed for ten days. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 199 (Pon. 2023).

Appellate Review – Stay – Civil Cases – Money Judgment; Attachment and Execution

Without a stay, a pending appeal will not affect a judgment creditor's execution rights because an appeal from a final judgment does not affect the judgment holder's right to execute upon the judgment. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 199 (Pon. 2023).

Civil Procedure – Injunctions – Irreparable Harm; Civil Procedure – Injunctions – Mandatory

When the only remedy sought at trial is damages, the two requirements–irreparable harm, and no adequate remedy at law–merge. A mandatory injunction is appropriate if the movant partially or wholly relies on income from the non–movant to continue its operations and thus maintain the status quo, but not the immediate payment of a judgment means that the damages award does not come too late to save the movant's business. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 199 (Pon. 2023).

Civil Procedure – Injunctions – Irreparable Harm; Civil Procedure – Injunctions – Mandatory

When the imminent payment of a substantial judgment should give the movant some breathing room and when there is no reason to believe that once judgment is entered that the judgment debtor would not resume its invoice payments, the court cannot presently find the irreparable harm for a mandatory injunction. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 199-200 (Pon. 2023).

Civil Procedure – Injunctions – Permanent

Permanent injunctions are only issued as a result of or as part of a final judgment. A preliminary injunction is either dissolved or made permanent when the final judgment is entered. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 200 (Pon. 2023).

Telecommunications

Telecommunications service providers have 30 days to reach an interconnection and access agreement, and if they do not, then the Telecommunications Regulatory Authority may set the terms, and it may also, determine interim interconnection and access prices. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 201 n.21 (Pon. 2023).

Telecommunications

The Telecommunications Regulatory Authority has the power to determine interim interconnection and access prices, so the TRA's initial price allocation may not be the final price set. FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 24 FSM R. 184, 201 (Pon. 2023).

COURT'S OPINION

LARRY WENTWORTH, Associate Justice:

This is a contract dispute between the FSM's wholesale provider of submarine cable telecommunications services and the FSM's predominant retail telecommunications services provider. The judgment entered herewith resolves this dispute mostly in the wholesaler's favor. The court's explanation follows.

I. PARTIES' POSITIONS

The plaintiff, the FSM Telecommunications Cable Corporation, usually called the Open Access Entity ("the OAE"),¹ not only seeks a money judgment in its favor for all unpaid past due invoices sent to the defendant, the FSM Telecommunications Corporation ("Telecom"), but also seeks a mandatory permanent injunction requiring Telecom to pay its current and future invoices as well as the past due invoices. The OAE contends that a mandatory injunction is necessary to maintain the status quo and to carry out the public interest in keeping the OAE functioning because payment at some later, uncertain date would be inadequate for the OAE to be able to maintain its services.

Telecom, which has already appealed the court's February 27, 2023 Order Directing Entry of Partial Final Judgment, FSM Telcomm. Cable Corp. v. FSM Telcomm. Corp., 24 FSM R. 55 (Pon. 2023), first contended that the OAE's mandatory injunction request sought relief that should be determined by a trial. That concern was alleviated when the injunction hearing was consolidated with the trial on the merits. Telecom next contends that it should not be liable for the fees that the OAE has been paying its vendors, and then invoicing Telecom for, because those fees are higher than comparable fees that Telecom pays for its Hantru-1 cable spectrum, or because those fees have been paid for from other sources so Telecom should not have to pay the OAE for them, or because the fees are for an unnecessary service, marine maintenance coverage. Telecom also contends that mandatory injunctions are disfavored and should not be granted lightly because an injunction commanding future payments would require monitoring by the court.

II. FINDINGS AND CONCLUSIONS

A. Trial

Based on the court's February 27, 2023 Order Directing Entry of Partial Final Judgment, FSM Telcomm. Cable Corp. v. FSM Telcomm. Corp., 24 FSM R. 55 (Pon. 2023), and its October 25, 2022 Order Granting Partial Summary Judgment, FSM Telcomm. Cable Corp. v. FSM Telcomm. Corp., 23 FSM R. 667 (Pon. 2022), the court, in its March 3, 2023 Order Concerning Trial, suggested that the issues remaining for trial were:

1) whether the contract provision permitting the Open Access Entity ("OAE") to charge the FSM Telecommunications Corporation ("Telecom") for the 50% of the Rural Utility Service Hantru loan that the OAE had agreed to pay is unconscionable;

2) whether the OAE's office personnel charge improperly includes costs that would attributed to either:

a) capital costs (planning, funding and constructing) the East Micronesia Cable project, or

b) for projects (such as fiber-to-the-home projects) not covered by the parties' Deed Granting Indefeasible Rights of Use; and

3) whether Telecom can overcome estoppel to challenge any of the OAE's $45,228 monthly operations charges it has incurred since July 2018.

The court added that if any of this was inaccurate, either party could request that this list be altered. Neither suggested changes. And, in its May 9, 2023 Final Pretrial Order, the court, with the parties' agreement, consolidated the hearing on the Plaintiff's Motion for TRO, Modification of Injunctive Orders and Order to Show Cause, filed on April 25, 2023, and on Telecom's opposition, filed May 3, 2023, with the May 16, 2023 trial on the merits. FSM Civ. R. 65(a)(2).

This case was tried on May 16-19, 2023. The court heard testimony from Gordon Segal (the OAE's chief executive officer), Pieter Bakker (the OAE's former chief executive officer), Eugene Amor (former FSM Secretary of Finance), Chris Chingyan (a technical supervisor employed in Telecom's Yap office), Rodelio Pulmano (Telecom's senior vice president and chief financial officer), and Fredy Perman (Telecom's president and chief executive officer). Based on their testimony; the admitted exhibits; and on the testimony heard and exhibits admitted during the preliminary injunction motion hearing² on May 6-7, 11-14, 17-19, and 24, 2021, the court makes the following findings of fact and conclusions of law.

B. Background Facts

In 2011, the national government adopted an explicit policy goal of providing fiber optic undersea cable connections to all four FSM states. Congress then enacted the FSM Telecommunications Act of 2014. Pub. L. No. 18-52, §§ 5-94, 18th Cong., 3d Spec. Sess. (2014) (to be codified at 21 F.S.M.C. 301-391). This Act created a regulatory framework for the telecommunications sector and a regulatory body called the Office of the Telecommunication Regulation Authority ("TRA"). Id. §§ 8-9 (to be codified at 21 F.S.M.C. 304-305). The Act also provided for the OAE's creation. Id. §§ 91-92 (to be codified at 21 F.S.M.C. 389-390). The OAE is a not-for-profit, Id. § 91(2) (to be codified at 21 F.S.M.C. 389(2)), "shareholding corporation" with the FSM Secretary of Finance and the FSM Secretary of Transportation, Communication and Infrastructure as the only shareholders, and who held "the shares for and on behalf of the government," Id. § 92(1) (to be codified at 21 F.S.M.C. 390(1)). The Act also abolished Telecom's monopoly status. Id. § 1(1) (to be codified at 21 F.S.M.C. 203(1)).

The OAE is the national government's vehicle to implement its declared policy of providing fiber optic undersea cable connections to all four FSM states. It is a bottleneck facility³ created to "provide international and domestic connectivity for the transmission of data for communications services as a wholesaler but not at retail" via undersea fiber optic cables and must provide that connectivity "on non-discriminatory and cost-based terms." Pub. L. No. 20-101, § 2(2), 20th Cong., 4th Spec. Sess. (2018) (to be codified at 21 F.S.M.C. 389(2)). Thus, the sums that the OAE charges Telecom (or any other OAE customer) must be based on the OAE's costs. The OAE is expected to be self-funding. From the start, Telecom has been the OAE's only customer, so it was invoiced for all,⁴ or substantially all, of the OAE's costs. It is Telecom's liability for (and possible setoffs against) these invoices, unpaid since April 2020, that was contested in trial.

C. Whether the Hantru-1 Repayment Provision is Unconscionable

1. Previous Consideration

The court has already extensively considered whether the Deed Granting Indefeasible Rights of Use ("IRU Deed") provisions were unconscionable when it considered the OAE's summary judgment motion. The court, in its analysis, concluded that the IRU Deed was not, as a whole, unconscionable, but noted one possible exception – the provision whereby the OAE assumes liability for 50% of Telecom's Hantru-1 loan repayments to the Rural Utilities Service ("RUS") after obtaining 50% of the Hantru-1 spectrum from Telecom, but then charges all of those repayment costs back to Telecom, its sole customer. FSM Telcomm. Cable Corp. v. FSM Telcomm. Corp., 23 FSM R. 667, 686-89 (Pon. 2022). That issue was thus left for trial.

If that one provision were unconscionable, and thus unenforceable, that would make the OAE liable, on a setoff basis, to Telecom for 50% of the loan repayments on the Hantru-1 cable from when the OAE started operating until when RUS forgave the remaining loan balance. Starting February, 2018, and ending December, 2020, that 50% totaled $1,016,692.

2. Not Unconscionable Because of Unique Circumstances

After careful consideration, the court concludes that, under the unique circumstances of this case, it cannot hold this IRU Deed provision to be unconscionable and unenforceable.

The World Bank financing agreement for the OAE required that the OAE have access to the Hantru-1 cable system free of charge before the World Bank would disburse any funds. Telecom, then the sole owner of the Pohnpei spur and onward transmission rights to Guam on the Hantru-1 cable system, would not agree to this. Congress, in response, enacted legislation, which Telecom had lobbied against, to require Telecom to give the OAE access to its Hantru-1 cable rights free of charge, Pub. L. No. 20-13, § 1(10), 20th Cong., 1st Reg. Sess. (2017) (to have been codified at 21 F.S.M.C. 201(10)).⁵ This legislation did not alter Telecom's contractual obligation to fully repay the RUS loan for the Hantru-1 system.

Congress had the power to give the OAE access to the Telecom's Hantru-1 cable system rights free of charge because the national government not only was the sole owner of the OAE, but also owned Telecom, except for a small minority stake held by a state government. Public Law No. 20-13 thus transferred what were ultimately government-owned Hantru-1 property rights from one national-government-owned corporation, Telecom, to another national-government-owned corporation, the OAE, in the furtherance of the government's declared national policy of providing fiber optic undersea cable connections to all four FSM states.⁶

Faced with the imminent loss of its Hantru-1 cable spur and spectrum while still being responsible to repay the RUS loan for building it, Telecom negotiated with the OAE and eventually agreed to the IRU Deed. Under the IRU Deed, Telecom granted the OAE a "25-year indefeasible exclusive rights of use of 50% of the total available capacity on one fiber pair in the main HANTRU-1 cable . . . ." IRU Deed § D.(1). The World Bank issued its non-objection to the IRU Deed conditioned on the FSM Department of Justice deeming the IRU Deed to be binding and legally enforceable. Both the Telecom and the OAE boards of directors approved and executed the IRU Deed, subject to RUS's approval since RUS held a lien on Telecom's Hantru-1 Pohnpei spur cable ownership. RUS consented to the IRU Deed, and the FSM Department of Justice issued a legal opinion that the IRU Deed was a valid binding agreement. Congress then (July 20, 2018) repealed Public Laws No. 20-13 and No. 20-20, thereby transferring the Hantru-1 rights and property back to Telecom from the OAE, and reinstating the previous statutory language with the express purpose that the IRU Deed and its provisions, instead of Public Laws No. 20-13 and No. 20-20, would govern the relationship between the OAE and Telecom.⁷ Pub. L. No. 20-101, § 1, 20th Cong., 4th Spec. Sess. (2018).

The OAE and Telecom are both FSM government-owned corporations subject to Congressional policy-making, and none of the non-parties affected by the IRU Deed § 5.1(a)(1) objected to it, and RUS, in particular, agreed to it. The court therefore concludes that, under the unique circumstances of the OAE-Telecom relationship, IRU Deed § 5.1(a)(1) is not unconscionable. Thus, Telecom failed to prove that the IRU Deed provision is unconscionable.⁸

The intended effect of the combined operation of IRU Deed § 5.1(a)(1) with § 7.2 (allocation of charges when Telecom is the OAE's sole customer) and § 7.3 (allocation of charges when the OAE has multiple customers) was that if the OAE had customers other than Telecom using the Hantru-1 spectrum, then the OAE would charge back to Telecom only the part of the OAE's 50% not charged to its other customers. But the OAE did not have other customers.

D. $45,228 Monthly Operations Invoices

From July 2019 through January 2020, the OAE invoiced Telecom $45,873.25 each month. Telecom paid each of those invoices without objection. Starting February 2020, the OAE's monthly invoices to Telecom each totaled $45,228, although the February 2020 invoice total was reduced by a one-time $637 credit due to downward adjustments to charges on the earlier invoices. Starting January 2020, the OAE also invoiced an $20,000 monthly internal operation (office overhead) cost, separately at first, but, starting with the January 2021 invoice, the two monthly invoices were combined into one. The internal operation charge will be considered separately, infra part II.E. The rest are considered next.

1. Telecom's Objections to Invoice Charges

Telecom does not dispute that the OAE's invoices accurately reflect the amounts that the OAE has been paying it vendors (with the exception of the cable joint kits, see infra part II.D.6). Telecom generally objects that the OAE invoice fees are higher than comparable fees that Telecom pays for its Hantru-1 cable and that the OAE paid its vendors' fees from other sources so Telecom should not have to pay the OAE for those fees.

2. Basis of the OAE's Invoices

This $45,228 monthly invoice charges are itemized as follows: 1) Yap cable storage, $2,090; 2) Yap marine maintenance, $4,575; 3) GTA XC Connect, $3,350; 4) Telin IRU O&M, $19,417; 5) Chuuk cable storage, $870; 6) Chuuk marine maintenance, $12,570; 7) Credit facility-FSMDB (cable repair emergency), $1,667; and 8) Cable joint kits, $689.

The Yap and Chuuk cable storage charges (#1 and #5) are for the storage of cables that would be used to repair or replace those respective undersea cables. The Yap and Chuuk marine maintenance charges (#2 and #6) are for insurance coverages that are discussed below in part II.D.5. The GTA XC Connect charge (#3) is for the OAE's cable connection to the Guam Telephone Authority and onward access to the rest of the world. The Telin IRU O&M charge (#4) is for operation and maintenance charges for the OAE's Yap spur connection to Telin's main Guam-Palau cable. The credit facility-FSMDB charge (#7) is for a specific line of credit at the FSM Development Bank that can only be drawn on for funds if there is a cable repair emergency. The cable joint kits charge (#8) is for the purchase of cable joint kits that would be used to effect repairs when cable repair is needed. The cable joint kits are discussed below in part II.D.6.

3. Alleged Payment from Other Sources

Although Telecom has not paid the OAE's invoices since March, 2020, the OAE had, until late 2022, managed to pay its vendors' bills, which are the basis for the OAE's invoices, but since then has missed payments and, as of May 2023, was in arrears to its vendors for about $396,000, including accrued interest. Telecom argues that, because the OAE has paid those bills (at least to late 2022) with funds from sources other than Telecom, Telecom cannot be expected to pay them. The court concludes that this is not so.

a. FSM Development Bank Line of Credit

One source that the OAE used was a line of credit at the FSM Development Bank (not the credit facility-FSMDB line of credit). A line of credit is "[t]he maximum amount of borrowing power extended to a borrower by a given creditor to be drawn upon by the borrower as needed." BLACK'S LAW DICTIONARY 1014 (9th ed. 2009). This OAE line of credit is now exhausted. This bank debt, with accrued interest, is now about $400,000.

The OAE drawdowns from the FSM Development Bank are loans. The FSM Development Bank definitely did not pay the OAE's vendors or the OAE's invoices to Telecom for Telecom's benefit or relieve Telecom of its contractual liability to pay the OAE's invoices. The bank only loaned the OAE money to be repaid later.

b. Congress Appropriations

Telecom also contends that since the OAE used some Congress appropriations to pay its vendors once Telecom ceased paying its invoices, it is not liable for those invoices because Congress paid them. In July 2017, Congress appropriated $500,000 as a "[c]oncessional loan to support OAE initial operations and emergency fund in case of fiber optic [cable] cutting." Pub. L. No. 20-23, § 5(4)(k), 20th Cong., 1st Spec. Sess. (2017). A concessional loan is a loan made at below market rates or with no interest at all.⁹ The public law does not mention interest. Nevertheless, it is a loan. Lenders expect loans to be repaId. Like the FSM Development Bank line of credit drawdowns, this concessional loan is not a payment of Telecom's contractual obligations by another source.

Congress also appropriated other funds for the OAE. On June 16, 2017, Congress appropriated $500,000 for the "ICT/World Bank Program Open Access Entity," Pub. L. No. 20-14, § 5(4)(h), 20th Cong., 1st Reg. Sess. (2017), which was reenacted without change on July 21, 2017, Pub. L. No. 20-23, § 5(4)(h), 20th Cong., 1st Spec. Sess. (2017), when Congress amended the earlier public law. On March 28, 2019, Congress appropriated $500,000 for "FSMTCC (OAE – IRU)." Pub. L. No. 20-172, § 5(4)(g), 20th Cong., 7th Spec. Sess. (2019). And on September 30, 2022, Congress appropriated $250,000 for "FSMTCC – Open Access Entity (OAE)." Pub. L. No. 22-154, § 1(2), 22nd Cong., 5th Reg. Sess. (2022). The OAE considers these to also be concessional loans to be repaid once subsidies are no longer required, although the public laws do not specifically state that.¹⁰

These public laws also do not state that the appropriations were to pay Telecom's invoices or the vendors' charges included in those invoices. The 2017 and 2019 appropriations predate Telecom's unpaid invoices and so could not have been intended to pay Telecom invoices or to relieve Telecom of its contractual obligations to pay. The court concludes that, if these are not concessional loans to the OAE, then they must be subsidies meant to keep the OAE functioning or to assist with its East Micronesia Cable ("EMC") project startup expenses.¹¹ Either way, these appropriations did not relieve Telecom of its contractual obligation to pay the OAE. If Congress had intended any of these appropriations to pay the OAE's invoices to Telecom, Congress would have either appropriated the money to Telecom with the proviso that Telecom use it to pay the OAE invoices or Congress would have appropriated the money to the OAE specifically for it to retire Telecom's debt. Congress did neither. Congress did not pay the Telecom invoices. Only the 2022 appropriation comes after Telecom unilaterally stopped paying its invoices. But that appropriation must also be a general subsidy for the OAE because there is no indication that it is anything else.

Public Law No. 20-172, enacted March 28, 2019, also included an appropriation for "Telin Invoices . . . $340,000." Pub. L. No. 20-172, § 5(4)(h), 20th Cong., 7th Spec. Sess. (2019). These Telin invoices preceded and were earlier than the Telin vendor charges that the OAE invoiced Telecom for and which Telecom has not yet paId. Thus, this appropriation could not have paid any of the charges that the OAE invoiced Telecom for from April 2020 to date.

Accordingly, Telecom's defense that it is not liable to the OAE because the OAE's invoices, or the vendor charges therein, were paid from other sources fails.

4. Higher than Comparable Fees

Telecom also contends that these charges are higher than those Telecom pays for comparable services for its Hantru-1 cable and spectrum. Telecom, however, did not direct the court's attention to any documentary evidence to support this contention or to show what its expenses were or to show how much lower the OAE's expenses ought to be if the OAE were to pay the lower rates that Telecom claims it pays. Telecom CEO Perman testified that Telecom's charges were lower without providing any exact figures. Accordingly, this Telecom "defense" is not a basis to alter the amounts of any of the charges in the OAE invoices.

Telecom is contractually bound to pay the OAE's invoiced expenses. IRU Deed §§ 5.3 and 7.6. Those invoiced expenses are subject to TRA oversight. Id. § 7.1; Pub. L. No. 18-52, §§ 44-45, 18th Cong., 3d Spec. Sess. (2014) (to be codified at 21 F.S.M.C. 340-341). Telecom has never sought TRA oversight on the size or amount of the OAE's listed expenses. Telecom contends that the OAE's costs are inflated and should be lower, and that it has no control over the OAE increasing its costs. Telecom should first seek this relief from the TRA. IRU Deed § 12.2 ("Any regulatory matters in dispute and within the competence of the TRA under the Telecommunications Act will be decided by the TRA."). Since the Telecom did not, this "defense" is not properly before the court. Furthermore, this defense lacks a factual basis as to what those lower amounts should be. Telecom has also waived challenging the size of these amounts because it did not those amounts earlier.

Furthermore, the IRU Deed encourages or requires that the OAE and Telecom operate on the principle of economic efficiency, IRU Deed § 6.1, and notes that the interdependency of the parties requires cooperation when it comes to "operations support costs," IRU Deed § 8.1(b). Telecom has not offered to assist the OAE in negotiating lower fees from the OAE's service providers. To further economic efficiency, it should. For all these reasons, Telecom's "defense" that the OAE's expenses were too high also fails.

5. Marine Maintenance Coverage

Telecom contends that it should not be liable for the marine maintenance coverage fees because, in its view, marine maintenance coverage is not a worthwhile expense. Marine maintenance coverage is a type of insurance whereby the policyholder is guaranteed that a repair ship will be available to fix a broken or disabled submarine cable whenever needed. It does not cover the actual cost of chartering that ship to do the repair, or supply the funds to pay for the ship charter and cable repair, or even set the ship's charter price. It only gives the policyholder priority to charter the repair ship. Telecom considers this a bad bargain, especially since the FSM cables are deadend cables. Telecom states that it does not contract for such coverage on its Hantru-1 cable, with no ill results so far.

The court can sympathize with these concerns. These marine maintenance coverage fees – $4,575, monthly; $54,900, annually for the Yap spur cable and $12,570, monthly, $150,840, annually for the Chuuk to Pohnpei cable (for a total of $17,145, monthly or $205,740 annually) – seem a hefty sum to pay solely for a guarantee that, if cable repair is needed, a repair ship will be available for the cable owner to charter. Then, only if the insured has the financial means¹² and negotiates suitable terms, will that ship set sail for the damaged cable to repair it.

Nevertheless, marine maintenance coverage is the industry standard among the other submarine cable owners and service providers in the Pacific, who sometimes form a consortium to share the cost.¹³ As such, the court must conclude that marine maintenance coverage is a valid expense. Moreover, the OAE's cable spectrums are its sole means of connecting its customers to the outside world, while presently Telecom is not solely reliant on cable connectivity since it has current ability to use satellites to supply Kosrae (and other) connections, although Telecom is required to use the OAE's cables where available, IRU Deed § 6.4.¹⁴

Therefore, because marine maintenance insurance coverage is the Pacific cable industry standard and because its undersea cables are the OAE's only connectivity tools, the court must conclude that the marine maintenance coverage fee is a valid business expense for which the OAE may charge its customer(s).

6. Cable Joint Kits

To recoup the cable joint kits' purchase price, the OAE amortized the cost over the kits' 25-year useful lifetime and charged the OAE's wholesale customer(s) (Telecom) the monthly depreciation amount. The OAE concluded that this would be the best and fairest way to pass this expense on to its customer(s). The court agrees that, if the OAE can pass this expense on to its customer(s), this would be the fairest way to do it.

However, the court must first determine whether the OAE's customer(s) should bear this cost. The court concludes that they should not. Although generally, the OAE may invoice its "[t]otal expenses . . . including . . . depreciation, amortization and interest expenses," IRU Deed § 7.1, this particular charge is different. In the court's view, the OAE and Telecom are each responsible for their own business mistakes. See IRU Deed § 11.1 (neither party liable to the other for "special, incidental, indirect, punitive or consequential costs, liabilities or damages"). The OAE made a mistake in not getting the proper paperwork done and submitted on time. The OAE acknowledges that if it had timely submitted the proper paperwork, the cable joint kits' cost would have been a sunk capital cost. If the OAE can pass on to its customers what, but for the OAE's own mistake, would have been a sunk capital cost, the cooperation and economic efficiency the parties must contractually strive for under IRU Deed § 8.1 and § 6.1 would be discouraged or circumvented. That is contrary to letter and the spirit of the IRU Deed.

This indirect or consequential cost or damage is therefore disallowed. The OAE's customer(s) will henceforth not be liable for the cable joint kits' cost. Therefore that $689 charge will be deducted from the unpaid invoices. Since Telecom did not object to this cost until after it had unilaterally stopped paying the OAE's invoices ostensibly for unrelated reasons, the court holds that Telecom has either waived any challenge to the cable joint kit charges on the invoices it paid or that Telecom is estopped from now challenging the invoices it paid without objection. A party may waive the other contracting party's breach of a contract term by its conduct. Harden v. Inek, 19 FSM R. 244, 251 (Pon. 2014); see FSM v. GMP Hawaii, Inc., 17 FSM R. 555, 577 (Pon. 2011); cf. Uehara v. Chuuk, 14 FSM R. 221, 227 (Chk. 2006).

E. $20,000 Internal Operations (Office Overhead) Monthly Charge

In late 2019, the OAE notified Telecom that it would start charging for its office overhead (internal operations) expenses as permitted by IRU Deed § 7.1 ("full recovery by OAE of all fixed and variable costs"). The OAE indicated that this would amount to $30,000 a month. Telecom negotiated this proposal down to $20,000. Starting in January 2020, the OAE invoiced Telecom $20,000 a month for office overhead. Telecom paid these invoices for January. February, and March 2020. Like the regular OAE monthly invoices, Telecom did not pay these invoices after March 2020. Starting January 2021, the OAE combined its two monthly invoices into one for $65,228.

The evidence at trial was that the OAE's overhead office expenses usually exceed, and have exceeded, $30,000 a month. Overhead expenses incurred through time spent on planning for the EMC project may be included in those expenses so long as they are not sunk capital costs. The OAE may charge its wholesale customers its total expenses (including its payments to Telecom under IRU Deed section 5, and depreciation, amortization, and interest expenses) plus up to a 5% reserve,¹⁵ but cannot charge for its sunk costs in its submarine fiber optic cable capital assets. IRU Deed § 7.1.

It is theoretically possible that once the EMC project is fully funded and its construction is underway, some in-office planning expenses might later be covered by donor funding as part of a capital expenditure and thus become a sunk capital cost. If, at any time, any of these "office expenses" becomes a sunk capital cost (a capital cost specifically paid for by an outside source, such as the World Bank or other international development agencies or donors, for a capital project), then the OAE will have to credit those sunk costs against its invoices to Telecom and other wholesale customers. But none are currently apparent.

Accordingly, Telecom is liable for the invoiced $20,000 overhead charge on all past due, current, and future invoices. Future invoices are, of course, subject to change under IRU Deed § 7.1 ("amounts chargeable" will be adjusted "from time to time"), and to TRA oversight, IRU Deed § 7.1 and § 12.2.

F. Principal, Interest, and Attorney's Fees

1. Principal Amount

Deducting the disallowed $689 for cable joint kits from each month's unpaid invoice(s), leaves Telecom liable to the OAE for $64,539 each month, April 2020 through July 2023, a total of 40 months. This total equals $2,581,560. These are the actual contract damages. The OAE has to repay its loans, including interest, that it used to pay its vendors. It is also in arrears to its vendors, and those arrears include interest.

2. Interest on Unpaid Invoices

The OAE also seeks interest on the unpaid invoices. Under the IRU Deed, "[i]f either Party fails to make timely payment to the other Party of any sum due hereunder, then the payee may charge interest on the late payment at the . . . London Interbank Offered Rate (LIBOR) plus 9 percentage points per annum between the date due and the actual payment date." IRU Deed § 11.2.¹⁶

a. Telecom's "Booking" of Invoice Amounts

Although Telecom has not paid the OAE's invoices after March 2020, it has "booked" those amounts, first, at its own volition, and since, July 19, 2021, under court order "to keep those funds in its retained reserves (or retained earnings) so that those funds, or whatever part of them the court orders, are readily available for payment to the OAE, upon the resolution of this case." FSM Telecomm. Cable Corp. v. FSM Telecomm. Corp., 23 FSM R. 360, 363 (Pon. 2021). The court could have ordered that Telecom pay those sums into court instead of merely booking them. It did not. (Nor was it asked to.) That may have been an oversight on the court's part.

If the court had, in July 2021, ordered the funds paid into court, then the contractual IRU Deed interest on them would have ceased. As a general rule, interest ceases to accrue on a judgment when the money is paid into a court of competent jurisdiction pursuant to the court's order, and the payments into court accrue interest for the benefit of the ultimate recipient only as earned in the court's depository institution. Senda v. Creditors of Mid-Pacific Constr. Co., 7 FSM R. 664, 670-71 (App. 1996). The same is true of interest-bearing prejudgment payments into court. See People of Eauripik ex rel. Sarongelfeg v. F/V Teraka No. 168, 19 FSM R. 88, 94 (Yap 2013); People of Rull ex rel. Ruepong v. M/V Kyowa Violet, 14 FSM R. 501, 504 (Yap 2006); Aggregate Sys., Inc. v. FSM Dev. Bank, 11 FSM R. 514, 517 (Chk. 2003). If the court had ordered Telecom to pay into court the money that Telecom had "booked" and continued to book, then the OAE would only get the interest paid by the court's depository institution after July 2021.

b. Interest Calculation

The court will therefore first determine the interest amount Telecom owes the OAE on unpaid invoices up through July 2021. From April 2020 through July 2021, $46,772 in interest accrued on the OAE's unpaid invoices. Pl.'s Ex. Q. Deducting $712.52 for the interest that accrued during that time period on the now disallowed $689 cable joint kits charge, leaves $46,059.48.

Since the court does not wish to penalize either side for its own omission in not ordering Telecom to pay the sums it was booking into the court's registry, the court will only allow interest after July 2021 based on what the court's depository institution may have paId. There is no evidence before the court of exactly what that might be. The court therefore concludes that the accrued LIBOR interest for that time frame should be a fair approximation. Total LIBOR interest from August 2021 through April 2023 is $51,360.¹⁷ Subtracting the $782.41 in LIBOR interest that accrued on the now disallowed $689 for cable joint kits charge, leaves $50,577.59. Adding these two interest amounts together equals $96,637.07. This amount will be added to the $2,581,560 invoice judgment amount for a judgment amount of $2,678,197.07.

3. The OAE's Attorney's Fees

The OAE further asks the court to award it the attorney's fees it incurred in pursuing this litigation and obtaining the judgment entered herewith. Generally, the court will award attorney's fees to the prevailing party only if authorized by contract or by statute. FSM Dev. Bank v. Adams, 14 FSM R. 234, 256 (App. 2006). The IRU Deed is a contract. It authorizes an attorney's fee award when "either Party engages counsel or initiates proceedings to collect any past due amount from the other Party, then the payee will be entitled to recover reasonable and necessary legal fees and expenses incurred in collecting the past due sum." IRU Deed § 11.2.

The OAE, the payee, initiated this litigation to collect past due amounts from Telecom since Telecom did not pay the OAE after it paid the March 2020 invoice. The OAE has submitted as a trial exhibit a redacted bill showing amounts and totals as evidence of its unpaid attorney's fees, but that is evidence which tends to support its mandatory injunction motion (by showing the OAE's inability to pay its bills) rather than an actual attorney's fees request. It is not sufficient for the court to make an attorney's fee award because a party seeking an attorney's fee award must submit supporting documentation showing the attorney's hourly rate, the date, the work done, and the amount of time spent on each service for which a claim for compensation is made. George v. Sigrah, 19 FSM R. 210, 218 (App. 2013).

Whether a defendant is liable to the plaintiff for an attorney's fee award is properly part of the matters that must be heard at trial and decided before judgment, but the actual amount of the attorney's fees award will, however, be determined in response to a post-judgment request or motion. George v. Albert, 17 FSM R. 25, 34 (App. 2010). The IRU Deed authorizes an attorney's fee award in a successful collection action by either of the IRU Deed's parties against the other. The issue was heard at trial. The OAE, having prevailed in its collection action, the OAE is entitled to an award for its reasonable and necessary attorney's fees and expenses. The OAE has until August 10, 2023, to file and serve its fee award request in conformity with George v. Sigrah, 19 FSM R. 210, 218 (App. 2013). Telecom may file and serve a response by August 31, 2023. The court will then determine the attorney's fee award amount.

G. Injunctive Relief

The OAE seeks not only to make the current preliminary injunction permanent, but to also modify it to add a mandatory component requiring Telecom to pay its current and future invoices as well as the past due invoices.

1. Mandatory Injunction

a. Generally

A mandatory injunction either: 1) commands the defendant to do some positive act or particular thing; 2) prohibits it from refusing (or persisting in a refusal) to do or permit some act to which the plaintiff has a legal right; or 3) restrains the defendant from permitting its previous wrongful act to continue to be operative, thus virtually compelling it to undo it. FSM Dev. Bank v. Ligohr, 22 FSM R. 321, 333 (Pon. 2019). In this case, the OAE wants the court to command Telecom to timely pay the OAE's monthly invoices once judgment is entered, even though Telecom has an appeal from the partial final judgment pending.

Generally, courts do not issue mandatory injunctions because courts are ill-equipped to involve themselves in day-to-day administration and because of the difficulty of enforcing them. Ligohr, 22 FSM R. at 333. This is particularly true when money payments are involved because when money damages or other relief will fully compensate for the threatened interim action, irreparable harm usually does not exist and an injunction should be denied. FSM Petroleum Corp. v. Etomara, 21 FSM R. 123, 126 (Chk. 2017). An exception is when an award of damages at the end of trial will be inadequate because "[t]he damage award may come too late to save the plaintiff's business. He may go broke while waiting, or he may have to shut down his business but without declaring bankruptcy." Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386 (7th Cir. 1984). The OAE contends that its current situation is analogous to this exception because it has spent its subsidies, exhausted its line of credit, and is substantially in arrears to its vendors, who are threatening to terminate their services, and even if a favorable judgment is quickly issued, the OAE cannot wait for payment until Telecom exhausts its appeal(s). It would likely come to late to save its business.

b. Application to Judgment Amount

Telecom met its financial obligations under the IRU Deed and made its monthly payments up through March 2020, after which Telecom stopped paying. Telecom's ostensible reason for stopping was that it anticipated substantial lost revenue due to the covid-19 pandemic that necessitated the emergency closure of the FSM's borders since Telecom would not then receive any "roaming charges" from overseas visitors' use of their mobile phones while here. Those charges were a significant part of Telecom's overall revenue stream. Although the "roaming charges" revenue, as expected, evaporated, Telecom's overall revenue from other sources unexpectedly increased substantially. Telecom has booked the OAE invoice amounts and is liable to pay the past due invoices when ordered to. Telecom therefore has the present ability to pay the judgment that issues herewith. Telecom's CEO testified that it had the funds available and could make payment if the court ordered it to.

No mandatory injunction should be needed for the $2,678,197.07 judgment amount. Once the judgment is entered by the clerk, the OAE will be a judgment creditor with a statutory right to immediate execution upon the judgment, 6 F.S.M.C. 1407, which execution is, by rule, automatically stayed for ten days, FSM Civ. R. 62(a). FSM Social Sec. Admin. v. Reyes, 20 FSM R. 276, 277 (Pon. 2015); People of Rull ex rel. Ruepong v. M/V Kyowa Violet, 14 FSM R. 501, 503 (Yap 2006): See also FSM Dev. Bank v. Carl, 23 FSM R. 191, 194 (Pon. 2021); FSM Dev. Bank v. Salomon, 23 FSM R. 112, 115 (Pon. 2020); FSM Dev. Bank v. Talley, 23 FSM R. 100, 102 (Kos. 2020). The pending appeal will not affect the OAE's execution rights because an appeal from a final judgment does not affect the judgment holder's right to execute upon the judgment. FSM Dev. Bank v. Ehsa, 19 FSM R. 128, 130 (Pon. 2013). The court has every reason to expect that, without a stay, the judgment amount will be paid within 30 days of entry of judgment without the need for a mandatory injunction, either by Telecom tendering payment or the OAE executing on the judgment. The OAE's arguments in support of a mandatory injunction may be good grounds to deny a stay if one is sought.

Since the immediate infusion of the $2,678,197.07 judgment into the OAE's coffers should pull it back from the brink of insolvency, at least temporarily, the court is unable to find the irreparable harm necessary to issue a mandatory injunction. While it is true that "[w]here the only remedy sought at trial is damages, the two requirements—irreparable harm, and no adequate remedy at law—merge," Roland Mach., 749 F.2d at 386, the prospect of the immediate infusion of a $2,678,197.07 payment means that this damages award does not come too late to save the OAE's business. That exception is no longer operable. The court is aware that under Columbia Broad. Sys., Inc. v. American Soc'y of Composers, Authors & Publishers, 320 F. Supp. 389, 391-92 (S.D.N.Y. 1970), a mandatory injunction is appropriate when the movant partially or wholly relies on income from the non-movant to continue its operations and thus maintain the status quo. But that is not this case once judgment is entered in the OAE's favor, and either Telecom tenders payment or the OAE executes on the judgment.

c. Application to Future Invoices

The imminent payment of $2,678,197.07 should give the OAE some breathing room. The court has no reason to believe that once this judgment is entered that Telecom would not resume its invoice payments,¹⁸ while awaiting the outcome of its appeal(s). The court therefore cannot presently find irreparable harm. If, however, Telecom does not resume payment of the OAE's monthly invoices and the OAE is again threatened with its business operations approaching the brink, the OAE may again request a mandatory permanent inunction. The current request for a mandatory injunction is therefore denied without prejudice to its necessity under future circumstances.

2. Preliminary Injunction Made Permanent

Permanent injunctions are only issued as a result of or as part of a final judgment. Andrew v. Heirs of Seymour, 19 FSM R. 331, 337 (App. 2014). A preliminary injunction is either dissolved or made permanent when the final judgment is entered. Accordingly, the following parts of the preliminary injunction that are still relevant are hereby made permanent and the rest are dissolved.

NOW THEREFORE IT IS HEREBY ORDERED that the defendant, FSM Telecommunications Corporation, its officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with it who receive actual notice of this order by personal service or otherwise shall permit the plaintiff, the FSM Telecommunications Cable Corporation (the Open Access Entity), through whichever officer, agent, servant, or employee it designates, access to, on seven (7) days' notice, the Pohnpei cable landing station for the purpose of inspecting, maintaining, or repairing its equipment that is installed there.

IT IS FURTHER ORDERED that the defendant shall provide a qualified person to accompany the plaintiff's personnel while present in the Pohnpei cable landing station, and, at the defendant's convenience and availability of qualified personnel, it may allow and arrange for that access at an earlier time within the seven-day notice period.

AND IT IS FURTHER ORDERED that Telecom must consult with the FSM Telecommunications Cable Corporation (OAE) and cooperate in good faith and with all due diligence in respect of the OAE's efforts to seek and obtain all of the required designs, surveys, testing, approvals and consents from Telecom to permit OAE's own Hantru-1 Cable System capacity upgrade, and Telecom must supply the OAE with all records in its possession or control, give all required notices and consents so that, from the start, neither party's spectrum upgrade interferes with or damages the other party's spectrum, thus allowing each to pursue and execute its own upgrade.¹⁹

H. Adjustments for Other Retail Operator(s) and Miscellaneous Matters

At some point, Telecom stopped invoicing the OAE under IRU Deed sections 5.1 and 5.3 because the OAE just charged all of those costs back to Telecom and netted them out or the OAE failed to include those sums in its monthly invoices because those sums would be netted out to zero. That will no longer be true once the OAE starts invoicing customers other than Telecom. Telecom asks, and the OAE concurs, that the Telecom invoices to the OAE be included in all future invoices to the OAE's customers. (Telecom's charges to the OAE will, of course, be netted out on the OAE's invoices to Telecom.)

Telecom also complains that, since the OAE has now had a second retail customer for some time, iBoom in Yap,²⁰ not only should the OAE charge that new customer for the wholesale services the OAE is providing it, but that the OAE should also adjust what it is charging Telecom accordingly, as provided for in the IRU Deed. The IRU Deed provides that:

when OAE acquires multiple customers in addition to [Telecom], the allocation of OAE's total revenue requirements between [Telecom] and OAE's other customers will be based criteria established by OAE's board of directors as set forth in the articles of incorporation, subject to oversight by the TRA and consistent with the principles of (a) ensuring OAE meets its needs for total revenue requirements and (b) OAE's charges are fairly and equitably allocated among its wholesale customers.

IRU Deed § 7.3. Telecom contends that the OAE has breached this contract provision because, although a competitor, iBoom, is now using OAE's services in Yap, the OAE has not concluded a service agreement with iBoom or started charging iBoom for its use of the OAE's Yap cable. IBoom has not yet paid the OAE anything because the OAE has not yet invoiced iBoom. The OAE has submitted a proposed allocation scheme or billing formula to the TRA and is awaiting that agency's approval or other response before concluding a service provider agreement with iBoom and billing it. This proposed formula is not before the court.

Nevertheless, it is high time for the OAE to start charging iBoom (or any other new customers) for the undersea cable connectivity provided.²¹ The OAE is therefore ordered to begin charging iBoom for its use of the OAE's undersea Yap cable with a suitable adjustment in Telecom's invoices. If the allocation the OAE uses in this invoicing is different from the one eventually approved by the TRA, the the OAE will then be responsible for assigning its customers credits and debts as needed to conform to the TRA's approved allocation formula. The court notes that the TRA has the power to "determine interim interconnection and access prices," Pub. L. No. 18-52, § 45(4), 18th Cong., 3d Spec. Sess. (2014) (to be codified at 21 F.S.M.C. 341(4)), so the TRA's initial price allocation may not be the final price set.

Therefore, the OAE shall, within 30 days, start invoicing all of its current customers, and its invoices shall contain all charges including those that will be netted out on the OAE's invoices to Telecom.

III. CONCLUSION

Accordingly, the clerk will enter a judgment herewith in the OAE's favor for $2,678,197.07. The OAE is also entitled to an award of attorney's fees. The OAE has until August 10, 2023, to file and serve its fee award request in conformity with George v. Sigrah, 19 FSM R. 210, 218 (App. 2013), and Telecom may file and serve a response by August 31, 2023.

The OAE shall start invoicing iBoom for the service it provides iBoom and adjust its invoicing to Telecom accordingly. The OAE shall issue, starting in 30 days, invoices that conform to this judgment to all its customers, including iBoom.

The OAE's request for a mandatory injunction ordering payment of its invoices is denied without prejudice. Telecom is permanently enjoined to permit, on seven days' notice, the OAE's personnel, accompanied by Telecom personnel, access to the Pohnpei cable landing station to, inspect, maintain, or repair its equipment installed there, and Telecom is permanently enjoined to cooperate with the OAE so that the OAE's upgrade of its Hantru-1 spectrum does not interfere with Telecom's Hantru-1 spectrum.

Footnotes:

¹ The plaintiff, although called the Open Access Entity in the enabling statute, Pub. L. No. 18-52, §§ 91-92, 18th Cong., 3d Spec. Sess. (2014) (to be codified at 21 F.S.M.C. 389-390), is now somewhat confusingly named the FSM Telecommunications Cable Corporation. To avoid any confusion that the parties' similar names and virtually identical acronyms (FSMTCC and FSMTC) might cause, the court will refer to the plaintiff as the Open Access Entity or the OAE, and the defendant as Telecom.

² "[A]ny evidence received upon an application for a preliminary injunction which would be admissible upon the trial on the merits becomes part of the record on the trial and need not be repeated upon the trial." FSM Civ. R. 65(a)(2).

³ A "bottleneck facility" is "a communications facility declared by the [TRA] to be essential for the production of communications services which, for technical reasons or due to economies of scope and scale and the presence of sunk costs, cannot practically be duplicated by a potential competitor in a communications market." Pub. L. No. 18-52, § 6(f), 18th Cong., 3d Spec. Sess. (2014) (to be codified at 21 F.S.M.C. 302(f)). No potential competitor can practically duplicate the OAE's cable system in the FSM market.

⁴ The OAE has recently acquired another customer, iBoom in Yap, but has not yet invoiced that customer. See infra part II.H.

⁵ Congress also enacted companion legislation to give Telecom the same access to the OAE's Chuuk undersea cable. Pub. L. No. 20-20, § 1(2), 20th Cong., 1st Reg. Sess. (2017) (to have been codified at 21 F.S.M.C. 389(2)).

⁶ Telecom feels that if it owned, operated, and developed the FSM's submarine cable assets, they would be better-run (and cheaper because some costs would not be duplicated), and that the OAE is an unnecessary intermediary. Telecom also feels that, in the future, the Starlink satellite system will prove superior to cable and should replace it. These are policy matters, and policy decisions are made by the other branches of government, not the judicial branch. The court will confine itself to the contract dispute before it and decide the matters it presents.

⁷ See FSM Telcomm. Cable Corp. v. FSM Telcomm. Corp., 23 FSM R. 667, 686 (Pon. 2022) for a an explanation of why the IRU Deed is valid and governs Hantru-1 cable rights although it was contrary to Public Laws No. 20-13 and No. 20-20 when negotiated and executed.

⁸ But if Telecom had been a privately-owned enterprise, the result likely would have been different.

⁹ "A loan is considered 'concessional' if its terms (interest rate, other charges, as well as the grace and repayment periods) are more lenient than typical commercial loans, in this sense, a concessional loan includes a grant element." Ibrahim F.J. Shihata, Implementation, Enforcement, and Compliance with International Environmental Agreements – Practical Suggestions in Light of the World Bank Experience, 9 GEO. INT'L ENVTL. L. REV. 37, 48 n.41 (1996).

¹⁰ The former Secretary of Finance also seemed to be under the impression that these may be concessional loans.

¹¹ Congress also accepted by resolution donor grants from the United States and Australia to finance the EMC project to connect Kiribati, Nauru, and Kosrae to the Hantru-1 Pohnpei spur terminus on Pohnpei and from there on to the internet. These grants are to fund the construction and implementation of the EMC project and related activities. See Res. 22-211, 22nd Cong., 7th Spec. Sess. (2023) ($10,084,604 from Commonwealth of Australia); Res. 22-215, 22nd Cong., 7th Spec. Sess. (2023) ($14,285,714 from United States); Res. 22-216, 22nd Cong., 7th Spec. Sess. (2023) ($5,850,000 from United States). These funds should be sunk capital costs once the EMC project is completed, and they are not funds that can be used to support or subsidize the OAE's day-to-day operations.

¹² The OAE addresses this contingency with the $1,667 monthly payment ($20,004 annually) to the FSM Development Bank for a second, separate line of credit that can be drawn on solely for cable repair expenses. This line of credit is the Credit facility-FSMDB (cable repair emergency) charge on the monthly invoice.

¹³ Telecom's abstinence is an outlier in this regard. Telecom's CEO testified that Telecom has been trying to persuade other Pacific area cable providers to not purchase marine maintenance coverage, without success. Telecom suggests that a redundant cable from Chuuk to Guam would be a more cost effective alternative.

¹⁴ Telecom, if it has satellite services contracted, must provide the OAE, at its request, with backup interstate and international transit services on a non-discriminatory, cost-based basis, "whenever its submarine cables experience any outage or downtime." IRU Deed.§ 6.5. But Telecom "is not obligated to maintain satellite backup services." Id.

¹⁵ The OAE has not yet invoiced any of this 5% reserve.

¹⁶ The London Interbank Offered Rate (LIBOR) for U.S. dollars ceased to exist on June 30, 2023. It has been replaced by the Secured Overnight Financing Rate for U.S. dollars (SOFR-US).

¹⁷ The LIBOR intentest rate was under was under 0.2% until March 2022, and remained under 1% until June 2022. Pl.'s Ex. Q. But by April 2023, it had risen to almost 5% – 4.95907%. Id.

¹⁸ The interest rate on unpaid invoices would now be well into double figures – 9% plus SOFR-US would be well over 10%. Recently the IRU Deed interest rate has been near 15%. See supra note 17.

¹⁹ Telecom has already completed its Hantru-1 upgrade. The OAE has not.

²⁰ Reportedly Docomo Pacific and Guam Telephone Authority have both considered and rejected entering the FSM market because they consider the market to be too small.

²¹ The statutory time period for this may have passed. The OAE and iBoom had 30 days to reach an interconnection and access agreement. Pub. L. No. 18-52, §§ 44(1), 18th Cong., 3d Spec. Sess. (2014) (to be codified at 21 F.S.M.C. 340(1)). If they do not, then the TRA may set the terms. Id. § 44(1)(a) (to be codified at 21 F.S.M.C. 340(1)(a). Also, the TRA "may determine interim interconnection and access prices." Id. § 45(4) (to be codified at 21 F.S.M.C. 341(4)).