Sept. 14, 2005 – Despite some question marks, the Public Services Commission will most likely sign off on the phone company's application for millions of dollars in Universal Service Funds administered by the Federal Communications Commission.
Public Services Commissioners were vocal about their displeasure with the fact that Vitelco had not provided them with the company's audited financial statements, though they are required to do so every year, while at the same time asking the commission to sign off on the USF application.
"This utility has failed to comply with this regulation," Valencio Jackson, commission chairman, said Tuesday at the PSC's monthly meeting, referring to the April 1 deadline for submitting an audited annual financial report.
Commissioner Verne C. David agreed, saying he was tired of the utility expecting to get a "rubber stamp" every time it came before the commission asking for approval in order to receive the funds. But David also later capitulated because without the $14 million or so in funds, Vitelco officials say they would be right back at the PSC asking for an emergency rate increase.
The Universal Service Fund was established to ensure that local telephone service was affordable and available for everyone in America, especially people living in high-cost service areas.
The FCC requires the application to be submitted by Oct. 1. All phone companies, including the recipients, are required to pay into the fund. Usually they pass the costs on to the ratepayers, which is the case with Vitelco.
Attorney Jada Finch Sheen, Vitelco counsel, said the financials were not made available because, "We are in the throes of litigation with RTFC (Rural Telephone Finance Cooperative). Every piece of paper we give to the PSC … ends up in the hands of RTFC."
RTFC sued Vitelco's parent company, Innovative Communications Corp., last year when it issued preferred stock without the knowledge or permission of RTFC – ICC's major lender.
The issue of how the USF money was spent in a prior year also fueled the flames of the commissioners' dissatisfaction. The consultant hired by the PSC to review the application and Vitelco's financials to determine if everything was in order said that, of the $14 million received in USF funds last year, $8 million was accounted for in capital projects.
Consultant Greg Mann, managing vice president of Gorham, Gold, Greenwich & Associates, did not provide details about how the remaining $6 million had been spent, leaving some of the commissioners believing it was not properly used under the USF's guidelines. Mann was definitive in his advice, however. "At this time, we commend the submission made by Innovative (Vitelco) to the VIPSC for consideration and recommend that the commission reaffirm its designation as an eligible telecommunications carrier and certify that it has satisfied all the requirements set forth" in the regulations governing the use of funds.
Mann does not audit the company in making his recommendations. He reviews the application along with supporting documents provided by Vitelco.
He did have some other advice for the commission. In the end of his report, Mann mentions, as he has on other occasions, that federal entities are reviewing the viability of the USF, and Mann believes the funding will begin to diminish.
He also says rather cryptically that although he recommends the PSC sign off so Vitelco can receive the USF funds, the commission also has the right to implement "additional measures" which "may be deemed appropriate to ensure the use of support from the high-cost fund is consistent with the public's interest," he writes. "If the VIPSC determines that such actions would be appropriate, we believe those actions will not be inconsistent with the intent" of the statute. Mann could not be reached for further clarifications on his remarks.
The law governing the use of the funds says "a carrier that receives federal universal support shall use that support only for the provision, maintenance, and upgrading of facilities and services for which the support is intended."
In his report, Mann states that the uses of the fund monies are broad and suggests that Congress, in enacting the legislation governing the allowable uses of the fund, "appeared to be confident that the beneficiaries of these funds would use them in a manner that is consistent with their intended purpose" to provide affordable telephone service to high-cost areas.
Part of the problem in identifying how the utility has used the funds seems to be Vitelco's co-mingling of the USF money with the rest of its revenues.
David Sharp, president of Vitelco, was clear Tuesday that the FCC did not require the funds to be accounted for separately, as was Mann in his report.
But the matter so moved Commissioner Jerris T. Browne that he made a motion, which passed unanimously, calling for Vitelco to produce quarterly reports on the use of USF money beginning Jan. 1, 2006.
Still, that didn't completely satisfy Jackson, who said, "Unless I receive a report that tells me that I can verify that all the $14 million in USF funds have been used within the guidelines, my pen doesn't work."
As chairman, Jackson is charged with signing off on the application.
But despite the commissioners' dissatisfaction with Vitelco's failure to account in detail for the $6 million and to provide audited financials as required by law and agreement, David summed up the situation saying, "I don't see the sense in prolonging the unavoidable."
He said, "Whether or not they do it [provide the requested information] the consequences of not allowing them the funds will affect more than us sitting here. We have to do it anyway," David said.
Desmond Maynard, who served as commission chairman prior to Jackson, had a different concern about the commission's responsibility. "Commissioner David seems to be suggesting it's a fait accompli that the commission will sign off on the application," Maynard said. But with the "long-standing problem" of annual reports not being filed on time despite repeated requests and threats, Maynard asked, "To give consent without having any inkling about the use of these funds, how do you account to the public for that?"
Though he said he agreed with Maynard, and was furthermore dissatisfied with Vitelco's service, Commissioner Alric Simmonds asked: "How do you report to the public if you withhold the funds?"
In the end, a motion was passed and approved that the commission would sign off on the application, provided that the requested audited financial report and accounting for the additional $6 million be provided by Sept. 20.
In attendance at Tuesday morning's meeting were commissioners, Browne, David, Jackson, Maynard, Simmonds and Alecia Wells. Sen. Roosevelt David, a non-voting member also showed up for awhile.

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