Facing potential financing difficulties on its massive undersea cable project, executives with Sandwich Isles Communications Inc. met with Federal Communications Commission officials earlier this month.

Sandwich Isle is seeking to tap into a special fund paid for by consumers around the country to finance the lease of a 358-mile cable connecting Oahu and the Neighbor Islands.

But the fund's administrator, the National Exchange Carrier Association, recently rejected Sandwich Isle's request as too costly.

In a Nov. 13 letter to FCC Secretary Marlene Dortsch, company attorney David Cosson said he and Sandwich Isles President Albert Hee met earlier this month with the chief of the FCC's Wireline Competition Bureau, Sharon Gillett, and Albert Lewis, the chief of FCC wireline bureau's pricing policy division, in an effort to overturn NECA's decision

It appears that the FCC officials asked a lot of questions and Sandwich Isles agreed to provide further financial data about the lease.

Cosson's letter did not say whether the FCC officials support or oppose the funding but he did say the financing is crucial to Sandwich Isles' survival.

"However, without Commission action to require NECA to accept the network costs, Sandwich Isles cannot survive financially while the network evolves to full utilization," Cosson wrote.

Sandwich Isles provides heavily subsidized phone lines to about 2,000 Hawaiian homesteaders.

The federal government pays Sandwich Isles about $13,000 per customer for providing the service, which is 100 times higher than the average subsidy for rural telephone service on the Mainland.

Under a 20-year lease, Sandwich Isles has exclusive rights to use the fiber-optic cable network, dubbed the Paniolo Cable.

The company recently proposed buying bankrupt Hawaiian Telcom Inc. for $400 million but Hawaiian Telcom opted instead to pursue $460 million, stand-alone reorganization plan, which recently received bankruptcy court approval.

To be sure, Cosson's doom and gloom tone belies Sandwich Isles' shrewdness.

The company earlier this year applied for more than $236 million in federal grant money and $67.3 million in low-interest loans as part of the Obama administration's broadband stimulus funding.

If anything, the company has proven that it's pretty persuasive when seeking federal money.

Local media watchers hoping to get more information about the operational merger between KHNL, K5 and KGMB9 said they recently were denied access to KHNL’s public inspection files.

Federal Communications Commissions rules require that all broadcast stations maintain some of its business records available for the public during normal business hours.

A station's public inspection file typically contains a copy of the broadcast license, records of ownership changes, letters and e-mails from consumers, records of FCC complaints and investigations and copies of any agreements with other stations to sell or lease blocks of airtime.

Failure to make available the public inspection files could lead to fines by the FCC.

“It’s one of the ways that the public can see what’s going on in their local broadcast stations,” said Chris Conybeare, president of the Media Council of Hawaii, which plans to challenge the newsroom merger.

In a complaint filed with the FCC last week, local blogger Larry Geller and two members of the media council -- former Lt. Gov. Jean King and former Hawaii Newspaper Guild President Lucy Witeck -- said they visited KHNL’s Kalihi offices on Sept. 3 to review its files but were kept waiting for several hours.

Geller said when they arrived at the station that morning they were told by the station manager John Fink that he didn’t know where the public file was.

Geller said Fink later informed his group that “the public file is locked and he was looking for the key.”

After two hours, Geller said is group still weren't given access to KHNL’s public file so they left the station.

Geller said he and King were headed to  KGMB’s office to see that station's public inspection file when he received a call from a KHNL manager who said that the file was now available for review.

“I ... felt that we gave KHNL more than enough accommodation to provide access,” Geller said.

"Unfortunately, we were denied access to the public file."

Fink could not be reached for comment.

The KGMB visit was a little more fruitful.

KGMB President Rick Blangiardi made the station’s public inspection files available and Blangiardi and a staffer helped them locate documents, Geller said.

But Geller also said that KGMB’s public files were in “disarray” making it difficult to find certain records.

“They could not locate the station’s current FCC license at all,” Geller said.

It’s easy to see the KHNL public file episode as a big mix-up.

For its part, Raycom Media, which owns KHNL and K5, says the shared services agreement between the local stations does not require FCC approval since there’s no ownership change involved.

But restricting access to the station’s records will likely invite the FCC attention, which is probably what groups like the media council would like to see.

Owners of KGMB9, KHNL and K5 say the merger of the station's news and business operations doesn't require regulatory approval since there's no sale of assets or broadcast licenses involved.

But the deal may face another hurdle: an antitrust review either by the Department of Justice, the state Attorney General's office or a local plaintiff who feels the deal is detrimental to the public.

Big mergers or joint ventures between competitors routinely attract the attention of the Justice Department's antitrust division, especially if such a deal raises questions about barriers to entry or restraint of trade.

Consumer advocates and media watchdogs say the KHNL-KGMB-K5 deal will create a tri-opoly in a five-station market and that in itself warrants Justice Department review.

But it's more complicated than that.

An antitrust review requires complex analysis of the market concentration to see if the merger gives the companies too much market power, said Todd Miller, a Washington, D.C. attorney who specializes in antitrust law.

The DOJ website lists guidelines on the levels of market concentration that's allowed as a result of a merger. (See:)

To do this kind of analysis in the KGMB-KHNL-K5 deal requires specific sales and marketshare figures for the three stations in Hawaii's $48 million a year television market.

But the owners of the stations -- Raycom Media of Alabama and MCG Capital Corp. of Virginia -- have disclosed that kind of data publicly.

It would take a subpoena or very good source at one of the station's to pry those numbers loose.

One local media observer said that the deal wouldn't raise antitrust concerns because all three stations have separate sales teams that set separate ad rates and compete against one another.

For their part, Raycom and MCG say the deal doesn't raise antitrust concerns. Such deals have been tested in at least 20 markets nationally and have not been significantly challenged.

Media watchdogs and public interest groups counter that a three-station share service agreement has only been tried in one place -- Syracuse, N.Y.

That deal was completed just this March so it's too early to tell if the Syracuse deal is legal from antitrust and regulatory standpoints, they say.

The local media council says it's looking into potential legal challenges to the KGMB-KHNL-K5 deal so don't be surprised if the antitrust question gets raised in such litigation.