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PSC Hears Apologies from Phone Company President

Aug. 25, 2004 – Innovative Telephone President David Sharp apologized to Public Services Commission members on two occasions Wednesday, commenting that "hindsight" is "20/20 vision."
His first apology came after Valencio Jackson, PSC chair, pointed out to Sharp that he was duty bound to notify the commission of the phone company's intention to reapply for Economic Development Commission tax benefits. He hadn't done so.
Sharp used the "hindsight is 20/20 vision" line again when commission member Desmond Maynard suggested it might have been a good idea to keep the PSC informed of all of the phone company's activities, including plans for capital projects that Sharp had cited as the reason the company decided to reapply for EDC benefits three months after its initial benefits expired.
Sharp said that between his excitement at beginning several new capital projects and the torrential downpours and resulting telephone equipment problems last November, he forgot.
The company reapplied for benefits in December, after having told the PSC during rate increase hearings in spring of 2003 that it would not seek extension of the tax breaks of up to 100 percent the privately owned utility had enjoyed for five years.
On Wednesday Sharp said that in its current application the phone company is seeking tax breaks of only "about 40 percent" worth $2.5 million a year. He said company officials realized they were going to need the benefits in order to put in place all of the hoped-for infrastructure improvement.
Maria Tankenson Hodge, a private attorney, asked how Innovative Telephone could claim to need money for capital projects, and therefore EDC benefits, while at the same time spending $28 million to buy another phone company in Belize.
Innovative Communication Corp., parent company of Innovative Telephone, took $28 million from the phone company to invest in the purchase of Belize Telecommunications Ltd., according to a lawsuit brought recently by ICC's prime lender, Rural Telephone Finance Corp.
Jackson assured Hodge her question would be answered at a special PSC meeting scheduled for Sept. 10 to address Innovative Telephone's financial state.
Wednesday's PSC agenda called for addressing several phone company-related issues. By the end of that portion of the meeting, it was clear that neither Sharp nor the commission members recalled that Vitelco had in the mid-80s agreed to certain performance standards that included monthly and quarterly reporting on varying issues, among them the number of and responses to trouble calls and the number of and responses to requests for installations.
The agenda had included a docket opened to develop performance standards. Prior to the meeting it was revealed that those standards had long since been set.
When asked if Innovative Telephone was meeting the reporting requirements as established by agreement, Sandra Setorie, PSC assistant executive director, said, "No."
The chastising Sharp took from the commission did not seem to dampen his enthusiasm for the $75 million worth of capital projects he said the phone company has on the drawing boards.
Jackson asked Sharp for a detailed report on the projects. Sharp said he would rather offer a "presentation" that would, he said, better explain what the company is planning. He said he could make such a presentation in October.
Sharp also said several times that the reapplication for benefits is still under consideration by the EDC.
Frank Schulterbrandt, chief executive officer of the Economic Development Authority, told the Source in March that there were compliance issues from the last benefit period that would have to be addressed before the phone company's new application would be considered.
He did not say what the issues were.
Around the same time, Innovative Telephone announced plans to spend $100 million on capital projects in the U.S. Virgin Islands. (See "Phone Company Seeking Renewal of Tax Breaks".)
Sharp told the Source on Wednesday that the phone company has already spent more than $100 million on capital improvements — as was required by its EDC certificate during the five years it received benefits.
Sharp, however, could not tell commission whether Innovative Telephone has paid its taxes since the benefits ran out last September. He promised to provide that information to the PSC by "next week."
Sen. Luther Renee, a non-voting member of the PSC, asked how many of the capital projects have been completed with the "significant dollars" that Sharp said the company is spending on them.
None, Sharp replied, citing problems with obtaining equipment and materials. He said the first project the company hopes to complete is on St. John and involves system redundancy and a fiber-optic cable that would run from "the sea to Pastory."
"We have committed we will spend $75 million over five years," Sharp said.
He also said the company is laying underground cable where feasible to ensure that telephone service will continue despite storms and other weather-related problems.
Sharp also said on Wednesday that only 60 percent of Innovative Telephone's current infrastructure can support high-speed DSL service. He said the company is working on resolving that problem, but that it means replacing equipment.
PSC Survey on DS-3 Demand
As for high-speed access and the need for more bandwidth in the territory, no conclusions were drawn and no decisions were made on Wednesday. Choice Communications had asked that the PSC order Innovative Telephone to lease DS-3 lines to Choice at retail rates. The PSC denied the request. After that, the PSC conducted a survey to determine the level of demand for DS-3 service in the territory.
Sandra Setorie, PSC assistant executive director, reported on the survey findings. Despite confusion in the minds of the public, she said, there is clearly a demand for more bandwidth and for high-speed Internet access. Setorie said she received 35 responses to the survey, one of them from a company wanting to purchase the expensive DS-3 lines. The company was not Choice Communications, Setorie said.
Further discussion of the matter was postponed to allow commission members a chance to review the report, which they had received early Wednesday morning.
Universal Service Fund Certification
For the first time, the PSC has hired a consultant to review the phone company's application for funding from the Federal Communications Commission through its Universal Service Fund. In years past, Jackson said during a break in the meeting, the commission had pretty much rubber-stamped the application, which must be reviewed yearly.
Greg Mann of Gorham, Gold, Greenwich and Associates reported that he has not finished his review of the application but that so far it seems to be in order. He said he expects to complete the review by Sept. 2.
Mann did say he expects the money Innovative can anticipate receiving from the Universal Service High Cost Loop Fund to drop to about $12 million from the current $16 million in the new funding cycle. And he said that is only the beginning. He said a number of factors, including the growth in wireless service, are contributing to the shrinking of the fund, which was established to support rural phone companies with small customer bases and above-average costs.
There are two other FCC subsidy programs that Innovative taps into for supplemental funding: the Long Term Support program and the Interstate Common Line monthly support fund.
As of 2003, Innovative was getting an additional $7.6 million in Long Term Support program funding and another $11.6 million in Interstate Common Line monthly support.
Mann said he could not comment on the status of those funds, as he was hired only to consult on the High Cost Loop application.
Several PSC members asked if the funding
can be earmarked to improve the phone system. "I am tired of hearing 'all circuits are busy,'" Maynard said.
Mann said the money is intertwined with the company's other funds and can be used at the company's discretion.
Commission members present Wednesday were Jerris T. Browne, Yvette Canegata-Jones, Jackson, Maynard, Alric Simmonds and Renee, who is one of two non-voting Senate representatives. Verne David, Alecia Wells and the other non-voting member, Sen. Shawn-Michael Malone, were not present.

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