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FCC and Innovative Sign Decree to End Investigation

Oct. 23, 2004 — A consent decree entered into by Innovative Telephone and the Federal Communications Commission has terminated an FCC investigation into the phone company's failure to meet certain requirements relative to federal communications funds.
In the order terminating the investigation the FCC said, "We adopt a Consent Decree terminating an investigation into possible violations by Virgin Islands Telephone Corporation d/b/a Innovative Telephone … of the Commission's rules in connection with the Universal Service Fund, Telecommunications Relay Services Fund and the North American Numbering Plan Administration Fund contribution requirements."
Innovative collected a hefty $33 million last year from the USF and other federal funds set up to make sure telephone service is available and affordable to customers in rural areas.
But even though Innovative is a recipient of the funds, the company is also required to pay into the funds, as are all companies who provide telephone service.
Innovative Telephone collects the Universal Service Charge from its customers, billing them 58 cents per phone line, per month. Innovative claims to have about 60,000 phone lines. At 58 cents per phone line that works out to $34,800 per month or $417,600 per year collected from ratepayers, for the Universal Service Fund contribution alone. The phone company is not required to collect the fee from customers, though most companies do. But it is required to pay it based on revenues and other financial factors.
The consent decree does not say, nor would anyone at the FCC, how much in arrears Innovative was alleged to be in payment to the mandatory funds, or even if that was the issue, though the documents do suggest that the FCC claimed there was a debt owed to the Universal Service Fund.
One communications expert told the Source that investigations or enforcement actions of this nature are brought in only one of two scenarios: the utility is late in paying its assessments, or the FCC feels the utility may have underreported the finances upon which the assessments are made.
Officials keep a tight lid, however, on details leading up to consent decrees. "They are not public documents," one knowledgeable source said.
A legal analyst characterized consent decrees as agreements that read, "I never did it and I promise I won't do it again."
Promising not to do it again was part of the agreement between Innovative and the FCC, along with a "voluntary" $45,000 payment from Innovative into the U.S. Treasury.
Within 30 days of the order being released, the document says, Innovative agrees to implement "an internal compliance program to ensure Innovative's future compliance with the Commission's USF, TRS and NANPA Fund contribution requirement." Innovative also agrees to develop a compliance manual and to make certain employees have "ready access to the compliance manual and are to follow the procedures contained in it."
Innovative must also establish an FCC compliance-training program for employees who are involved in the payment of USF, TRS and NANPA funds contributions.
Furthermore, the decree says, "The compliance manual will encourage personnel to contact the company's legal department, the company's chief executive and/or the company's chief financial officer with any questions or concerns that arise."
The order and decree were released less than two weeks after Greg Mann, a consultant hired by the Public Services Commission to review the phone company's application for USF monies, gave his stamp of approval to the telephone company's re-certification for benefits.
The FCC requires the local PSC to review and approve the phone company's application for funds from the Universal Service Fund. The application is essentially an audit, Mann said, "except you don't go as deep, like back to the original invoices."
The PSC gave its blessing to the telephone company's re-certification on Sept. 10. It agreed at that time to write a letter to the FCC saying it had done so.
Mann said he was not aware of the consent decree when he was reviewing Innovative's certification: "It would have caused us some concern to have known that."
Valencio Jackson, PSC chairman, has contacted Fred Watts, the commission's legal counsel, "to open new interrogatories," since becoming aware of the decree.
Jackson said the matter was "very, very important to the PSC."
When asked who would pay for the $45,000 Innovative volunteered to pay to Treasury – the ratepayers or Innovative's directors out of their own pockets – Jackson said the commission would "do our utmost to protect the ratepayers."
Holland L. Redfield, II, vice president for corporate affairs of Innovative Communication Corp., said in a written response to questions posed by the Source, "Ratepayers are not affected by the voluntary payment."
The consent decree says ICC was informed of the investigation on Feb. 4. Innovative Communications Corp., the parent of all the companies named in the order, responded on March 2, the decree says. The FCC requested more information on May 5, to which ICC responded again on May 12. This correspondence is not public information and therefore was unavailable for review.
The decree goes on to say, "Prior to and during the investigation, the ICC Entities have made efforts to pay their USF debt by sending additional payments in certain months. Since the investigation began, ICC timely provided responses to our inquiries and coordinated with Bureau [FCC enforcement bureau] staff in providing the information requested. ICC is currently up to date on all of its universal service, TRS and NANPA contribution obligations."
Redfield, in his written response to questions posed about the nature and amount of the dispute between ICC and the FCC, said, "The FCC consent decree is a settlement between the agency and ICC that resolves a dispute about the timing of payments by a number of ICC business units into federal telecommunications funds."
He went on to write, "There was no dispute about the amount of payments. There was a resolution of the dispute by the company entering into the consent decree without admitting liability solely for the purpose of reducing the costs of investigation and resolving the dispute."

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