MTA could buy Ketchikan telecom utility

PALMER — Matanuska Telephone Association has entered into exclusive negotiations with the city of Ketchikan to explore purchasing its telecommunication’s utility.

The agreement was announced by Ketchikan City Manager Karl Amylon during Thursday’s Ketchikan City Council meeting. Ketchikan is one of the few municipalities left in the country that owns and runs all three divisions of its public utilities — electric, water and telecommunications.

At the direction of Ketchikan’s city council, Amylon, who also serves as general manager of Ketchikan Public Utilities, had notified MTA in writing Dec. 28 of the city’s willingness to work with MTA exclusively during a 90-day negotiations period, according to Amylon’s Jan. 6 statement to his city council.

The agreement was first reported by Ketchikan Daily News after that council meeting.

“In addition to being Alaska-based companies, MTA and KPU share a common interest in the deployment of fiber networks and other advanced telecommunications technology,” Amylon said in his statement to council. “If a transaction can be successfully negotiated, we believe that Matanuska Telephone Association is a good fit for the Ketchikan community. Both parties are optimistic that satisfactory terms to such an agreement can be reached and both parties are moving forward to that end.”

Asst. City Manager/Asst. KPU General Manager David Martin said Friday that although Ketchikan’s public utilities are not considered a cooperative like MTA, city residents — through the council — are given a say in how it is run and managed. He said he believes that if Ketchikan and MTA reach an agreement for the telecommunications division, it would become part of MTA’s cooperative.

“The city and KPU would still retain ownership of the electric and water components,” Martin said, adding that it is still too early to know how such an agreement would affect telecommunications rates for Ketchikan residents.

Although MTA officials said Saturday they are bound under a confidentiality agreement with Ketchikan during the 90-day negotiation period, MTA CEO Greg Berberich said he believes MTA and KPU are of like minds when it comes to values and commitment to the community.

“We’re excited about the opportunity, and with due diligence we’ll be able to tell whether it will be of value to our membership,” Berberich said. “We’ll go through the process and hopefully be embraced by the city of Ketchikan and the people of Ketchikan.”

Berberich came under public scrutiny lately when word go out that he rewarded all 350 MTA employees with a $1,000 holiday bonus and reportedly is paid more than $350,000 per year for his services. He argued then that the cooperative dispensed $2.7 million in capital credits to members over the last year and contributes millions more to the community as a whole on a consistent basis in an extremely competitive telecommunications environment.

He said Saturday MTA’s first criteria in considering purchasing Ketchikan’s utility will be to “make sure it will add value for our own members.”

Martin said the city’s ownership of its public utilities goes back to the early 1920s and that it was working well over the years until the telecommunications industry began expanding rapidly in the last decade and it became difficult for the city to keep up and still remain competitive and offer low rates to residents.

“For 80 years, we were a plain old telephone company. Then we were forced to get into Internet and television and the full array of services,” Martin said. “For a small city like us, we just couldn’t afford it anymore and started to see the handwriting on the wall in 2006 when GCI entered the market. We lost a percentage of our customer base and got thrust into what the rest of America was dealing with for years.”

Having to make upgrades to the city’s water and electric services also made it difficult to continue to put money into the telecommunications division, he said. Those improvements include $10 million for a new water filtration system using UV light to disinfect the water and $16 million for the future construction of a small hydroelectric plant.

Martin said the city first wanted to put the telecommunications division on the market in 1996, but when residents were asked to vote on the idea, it failed by six votes.

“So everything was just business as usual until two years ago when we had to make significant expenditures on the other divisions and the council decided to engage a broker to see if there was interest out there to purchase the telecommunications division,” Martin said.

MTA was one of several companies that expressed an interest over the past year, but Martin wouldn’t disclose the names of the other companies. He suggested that one or more of them were outside the state.

Although Martin wouldn’t disclose the amount of money being discussed in the possible sale to MTA, he said it is less than the approximately $30 million PTI Alaska was offering in 1996.

Contact K.T. McKee at kate.McKee@frontiersman.com or 352-2252.