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Phone Company Questioned on EDC, FCC, DS-3

Nov. 11, 2004 – "We have exceeded our capital expenditures by millions of dollars," David Sharp, president of Innovative Telephone, told Public Services commissioners Wednesday. Sharp was responding to questions about the company's compliance with its requirements as a former Economic Development Commission program beneficiary.
The phone company, which had received benefits from Oct. 1, 1998, through Sept. 30, 2003, was fined nearly $500,000 recently for being out of compliance with some of the terms of its certificate. (See below terms of EDC benefits).
Sharp said the problems had only to do with some "advertising" issues and the number of people the company employs. Sharp said the employees matter had been an ongoing issue that had yet to be resolved. He also said Innovative was halfway through paying the fine.
Fred Watts, attorney for the PSC, asked Sharp if the fine was going to show up as "a revenue requirement" and thus be passed on to ratepayers. Sharp said, "No."
Sharp answered the same question in the same way about a recent $45,000 "voluntary payment" the phone company made to the Federal Communications Commission, after the FCC dropped an investigation into possible violations of the Commission's rules in connection with several funds Innovative is required to pay into. (See "FCC and Innovative Sign Decree to End Investigation").
The phone company was less clear about the cost for providing DS-3 service to a competing telecommunications company, that Valencio Jackson, PSC chairman, had asked for in August.
Both Jackson and Maria Tankenson Hodge, attorney for Choice Communications, felt the two-page document submitted Wednesday morning by Innovative in response to Jackson's request, was less an analysis than it was a price list," Hodge said.
Quoting from the transcript of August's meeting, Hodge read Jackson's request for a breakdown and cost analysis.
She said her client had been waiting for a long time for an answer on cost, "while they [Innovative] disregard your order."
Jackson said, "I agree with you 100 percent."
Hodge asked the commission to issue an order that Innovative provide the DS-3 trunk line which the document states, "enables a business to make 678 simultaneous calls," using Hawaii, Guam and Puerto Rico as benchmarks for setting the cost.
Hodge also said the language used in the document titled "Hypothetical DS-3 Pricing" suggesting that — instead of operating through the PSC — Innovative would like to use "normal regulatory practices" by meeting face to face with Choice, flew in the face of Choice's experience over the last two years.
Hodge said Innovative, after two years of attempts to negotiate directly, had never provided Choice with a price.
Sharpe said he had held meetings with Choice and continued "to be willing to sit down" with them.
Jackson told Sharp he wanted the underlying analysis used in determining the "hypothetical" rates to be presented to the PSC by Monday close of business.
Terms of EDC benefits:
The certificate it received, effective Oct. 1, 1998, through Sept. 30, 2003, allowed the company to receive the following tax breaks and other privileges in exchange for certain obligations:
– 100 percent exemption from gross receipts taxes.
– 100 percent exemption from excise taxes on the importation of raw materials and component parts used in its production process and of building equipment and machinery.
– 100 percent exemption on real property taxes.
– 90 percent exemption from V.I. income taxes.
– Exemptions on withholding tax on dividends and interest.
Under the terms of the certificate, Innovative was obligated to:
– Invest no less than $100 million locally.
– Employ no fewer than 421 full-time employees, of which at least 80 percent were required to be V.I. residents.
– Provide its employees with health, dental, life and accident insurance; 401(k) retirement-savings plans; and an employee stock ownership plan.
– Provide 10 college scholarships a year of $1,000 apiece for the duration of the benefit period.
– Assist schools in the territory to gain access to the Internet.
– Contribute $40,000 yearly to the Boys and Girls Club.
– Continue its sponsorship of the St. Thomas Vitelco Youth Strikers Program and establish a similar program on St. Croix.
– Contributing $5,000 yearly to both St. Thomas and St. Croix Little League Baseball.
Schulterbrandt said on Tuesday that he could not specify which of the obligations the company had not met because the matter remains under review.
Last April, officials from Innovative told the Public Services Commission that they would not seek an extension of their benefits after the certificate then in effect expired.
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