May 28, 2004 – The Public Services Commission and the territory's telecommunications industry got a thorough grilling Thursday night before the Senate Economic Development, Agriculture and Consumer Protection Committee. Giving consumers a fair break and the lack of competition in the territory were the main thrusts of the meeting.
Senators and commission members agreed that telephone service in the Virgin Islands is woefully inadequate, with both citing numerous complaints. Valencio Jackson, PSC chair, said the commission is "concerned with the alarmingly increased rate of complaints pouring into our offices by telephone subscribers, as well as employees of Innovative Telephone."
One ex-employee who had 20 years with the telephone company, questioned Innovative procedures. Randolph Allen is now a union representative of the U.S. Steelworkers of America which represents Innovative employees. "They have just said they are making $100 million in improvements," he said. "Where is it being spent? This is what happens with a monopoly. You still wait in their new offices from 8 a.m. to 1 p.m. for service."
The PSC was represented at the hearing by Jackson; Fred Watts, commission attorney; Keithley Joseph, executive director; and Sandra Setorie, assistant executive director.
Jackson said he had read news reports of the $100 million expansion. But he said the PSC has received "no details of Innovative's plan, and we cannot predict how that expansion will affect consumers."
The commission is aware that Innovative is once again applying for Economic Development Commission tax benefits, Jackson added. (See the March 10 Source report "Phone Company Seeking Renewal of Tax Breaks".) He said the PSC requested details "several weeks ago" but has received no answer.
Joseph said on Friday morning that the commission first wrote to David Sharp, Innovative president, on April 27 requesting the information, giving a May 15 date by which to respond. After receiving no answer to that letter, Joseph said, the PSC wrote again on May 25, stating that if a "prompt" response was not received, the commission would have no choice but to subpoena the information.
An Innovative rate increase granted last August was "expressly conditioned on Innovative's assurances that its current benefits were expiring, and that Innovative did not intend to seek additional benefits," Jackson told the senators on Thursday.
An Alternate Approach to Regulation
Because of dissatisfaction with telecommunications services, Jackson said, the commission wants the Senate to adopt legislation giving the PSC the power to demand improvement in those services.
Jackson proposed a "price cap" approach, as opposed to regulation of the rate of return. Most jurisdictions in the States have abandoned rate-of-return regulation and gone to the "price-cap" process, he said, which makes the regulatory role of the commission "more sensible and less expensive." The price-cap system sets service performance targets with financial rewards and penalties linked to the quality of service, he said.
Maria Tankenson Hodge, formerly counsel to the PSC for 10 years, spoke against the "price-cap" proposal. She also disagreed with statements by Watts and Jackson that the PSC has its hands tied in terms of fining Innovative, or any utility, for poor service.
Sen. Luther Renee, the committee chair, asked Watts: "Can we institute and mandate better service right now without any new legislation?"
"Yes, we can," Watts replied, "but the phone company just makes promises and never carries them out. There is no way now to punish them. There should be financial penalties."
Current law doesn't allow for the imposing of such sanctions without lengthy and expensive court procedures, Watts said.
Hodge, in a prepared statement, said it was her opinion that "the state of telecommunications service in the V.I. is presently insufficient and, in particular, that the service provided by the monopoly land-line telephone company … Innovative, is largely to blame."
Further, she said, it is her opinion that "the blame for this situation must be shared with the PSC, which is charged by law with regulating the public utilities and the service they provide."
Hodge claimed that, contrary to remarks by PSC representatives, the commission does have the authority under Title 30 of the V.I. Code to require that public utilities obey the lawful orders of the commission. Innovative is a private utility.
The "price-cap" mechanism does not permit review of whether a utility is "over-earning a reasonable return," Hodge said, and would "simply fix a cap with an automatic increase for cost-of-living increases."
This would mean that, "although their costs may go down because they fire workers, save money on operations by shortchanging consumers on quality, or for any other reason, they would simply keep that savings," she said, "and the consumer would continue to pay the already excessive rates they have been given — and more."
The High-Speed Internet Access Issue
Hodge illustrated another problem — the lack of competition in the telecommunications field. She was joined in her objections by almost all senators. Hodge cited the recent case where the PSC denied Choice Communications' request that the commission order Innovative to allow Choice access to Innovative's DS3 lines to provide high-speed Internet service. (See "PSC Denies Choice Request for Bandwidth Access".)
Sen. Emmett Hansen II was irate at the PSC's refusal to grant the Choice request. "It's absurd," he said. "New information demands new analyses. We seem to have to be dragged crying and screaming into the 21st century. I don't think it's up to a senator or anyone else to call the PSC and demand high-speed service. It is incumbent on the PSC to find out what the community demands."
Sen. Louis Hill said he has received numerous complaints about local telecommunications service from individuals, the University of the Virgin Islands and EDC beneficiaries.
He asked Watts if the PSC had done a needs-assessment survey on the high-speed access issue. Watts replied that "DS3 is for high-information users like the university or Choice. It was dependent on Choice to bring us the proof."
Echoing Hansen, Hill responded: "The PSC has the responsibility to make sure our community stays abreast of modern technologies. You should be the ones looking for the need."
Hodge, who is representing Choice in legal matters, has filed a petition for reconsideration of the PSC decision in the DS3 access matter. She said that request was "two big companies fighting, and they apparently didn't want to do anything to upset Innovative." Renee, early in the meeting, denied Hodge's request to read into the record a document titled "Exceptions to the Report of the Hearing Examiner in the Choice Matter."
Jackson said that since high-speed access has become such an issue, Internet access will be on the agenda of the PSC's June meeting.
New Regulations and the Need for More
Andrew Rutnik, Licensing and Consumer Affairs commissioner and a former long-time PSC member and chair, took issue with changes in Federal Trade Commission regulations addressing the expanding telecommunications industry. The new regulations, he said, set certain guidelines for service standards and regulations but "left big gaps in the regulation of cell phones and cable TV, and left Internet service completely unregulated."
The PSC, Rutnik said, "was given little authority to regulates the service issues
and no authority, except basic service, over rates."
He said the intent of the new FTC regulations was to "free up the marketplace," but "hindsight has proved the big fish have eaten all the small ones."
Rutnik also said he constantly receives complaints regarding several cellular phone issues and suggested that a consumer advocate agency be formed to deal with them.
Hill said he is drafting legislation to create just such an agency. He said the "Consumer Utilities Public Advocate" bill is in the legislative legal counsel's office. "The government has to do something," he said, "Are we all helpless?" He declined to give specifics of the bill.
Hill continued to quiz the PSC contingent about Innovative' Telephone's new EDC application and other financial matters of the company. He referred to an article published in the V.I. Source last August stating that Innovative Telephone collects $25 million a year from a Washington-based not-for-profit entity that administers what is called the Universal Service Fund.
The V.I. company's subsidies work out to be much more per line than is received by any other phone company of its size, or by any other phone company serving the U.S. insular territories.
The article stated: "Innovative Telephone, formerly the V.I. Telephone Corp. (or Vitelco), receives subsidies totaling $31.20 per line per month through the subsidy system … Through the same system, the local telephone service provider for American Samoa gets a subsidy of $4.01 per line per month and that of Guam gets $2.12 per line per month."
Hill said he will check these figures, although "I think the Source is credible." He added: "I think the feds should investigate this. If these figures are correct, as compared to other jurisdictions, we pay 90 percent to 92 percent more than anywhere else."
Hill also said he is opposed to Innovative getting any more tax benefits in the territory. "We've given them benefits for several years," he said. "The union chief [Allen)]laid out a great case on how they've reduced their work force, and now they are applying again. I want to go on record tonight. I hope people in high places supporting that hope [for more benefits] have the interest of the people at heart."
He continued, "I am going to pay very close attention to that application and how it is processed."
"We have to be able to institute severe penalties" for poor service, Hill said. "Why are we unable to?"
Watts said: "Because the statute doesn't provide for it."
"The only way to do that is the price-cap and performance standards?" Hill asked.
Watts replied: "Yes, absolutely."
"So what can you say about these people complaining?" Hill asked. "I want to know what's going on with all those complaints."
Watts responded, "You tell me what you're going to do with the legislation, and I'll tell you what we're going to do with the complaint reports."
The meeting ended on a more or less convivial note with the suggestion that there may be more meetings on the matter in the near future. "This is getting to be really good," Hill said of the discussions. "I think we need another hearing very soon."
Committee members present were Sens. Lorraine Berry, Roosevelt David, Hansen and Renee. Sens. Douglas Canton Jr., Almando "Rocky" Liburd and Celestino A. White Jr. were not present. Also attended the meeting were Sens. Hill, Shawn-Michael Malone and Usie Richards, who are not members of the committee.
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