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Charlotte Amalie
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HomeNewsArchivesFCC: Vitelco Over-earnings Entitle AT&T to Refund

FCC: Vitelco Over-earnings Entitle AT&T to Refund

Aug. 18, 2004 – The Federal Communications Commission has ruled that AT&T is entitled to a refund on fees it was charged by Vitelco — V.I. Telephone Corp., now doing business as Innovative Telephone — for access to the local phone company's switches and lines.
In a complaint AT&T filed informally against Vitelco in 2001, the communications giant alleged that it should receive unspecified refunds because Vitelco earned more than its maximum allowable rate of return during several periods in the late 1990s.
AT&T claimed, and the commission agreed — in a memorandum released Aug. 11 — that during a time in 1997-98 referred to in the memorandum as "the monitoring period," Vitelco, with an allowable rate of return of 11.65 percent on its investment, actually earned almost 13 percent. The ruling in the FCC Memorandum Opinion and Order notes that in subsequent years Vitelco earned as much as a 14.79 percent rate of return.
In its complaint AT&T did not ask for a specific monetary amount, but the FCC opinion clearly states the company is entitled to a settlement. "We conclude that Vitelco has violated section 201 (b) of the Act and that Vitelco is liable to AT&T for AT&T's share of Vitelco's over-earnings accrued during 1997," the opinion reads. In the complaint AT&T asked only that liability be established.
According to one legal expert, the FCC has the power to order refunds and award damages which would be the difference between the amount paid under Vitelco's over-earnings rates and the rate the customer would have paid, had the carrier been within its allowable rate of return. However, in order to collect any money AT&T will have to file a supplemental complaint seeking damages.
Innovative's attorney Gregory J. Vogt stated in writing to the Source on Wednesday: "The FCC’s decision concluding that Innovative overcharged AT&T in 1997 is clearly erroneous."
Further, Vogt stated, "The rates in question were Innovative tariffed charges that were legal under the federal statute, which requires the FCC to adjust rates when first filed, rather than years after rates are in effect."
Vogt also said that "the court of appeals has already reversed the FCC once on an earlier interpretation of this statutory provision."
Innovative also claims the FCC’s action was barred by the statute of limitations, since AT&T's formal complaint was not filed until 2004.
However, the FCC memorandum states that on Sept. 10, 2001, AT&T and Vitelco "moved jointly that the enforcement bureau instruct Vitelco not to respond to AT&T's informal complaint until 90 days after a certain court decision became final." The request was granted, the memorandum states, and "Thereafter, the relevant court decision became final, our informal complaint process ran its course and AT&T timely filed its formal complaint," in January 2004.
"Thus pursuant to our informal complaint rules and orders, the instant formal complaint relates back to AT&T's September 10, 2002, informal complaint for purposes of tolling the applicable two-year statute of limitations," the FCC memorandum states.
Innovative spokesman Holland L. Redfield II stated Wednesday in writing that the company is "evaluating its legal options and will decide whether to appeal the decision in the next few weeks."
Redfield was asked by the Source in writing on Tuesday "what dollar amount was realized as a result of the over-earnings during the monitoring period of Jan. 1, 1997, to Dec. 31, 1998."
In apparent response to that query, Redfield wrote: "The FCC issued a decision on a complaint filed by AT&T that sought money from Innovative for FCC regulated interstate access rates charged during 1997. The FCC did not make any finding as to the amount owed, which will be determined in a subsequent proceeding at the FCC."
It remains to be seen, therefore, what kind of refund AT&T might get if the FCC were to make a monetary award.
The FCC has jurisdiction over issues relating to access to long-distance lines.
The local Public Services Commission is charged with oversight of local access.
Last year the PSC's hearing examiner for Innovative Telephone, Frederick Watts, recommended that Innovative's maximum allowable rate of return on local access be reduced to 10.6 percent from 11.5 percent. Innovative had requested that it be increased to 13.84 percent.
The PSC left the company's allowable rate of return at 11.5 percent but granted a tariff increase of its various rates that was estimated to increase consumers' phone bills by more than 17 percent.

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