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Consultants Paint Grim Picture of Vitelco's Infrastructure

Nov. 6, 2008 – As the Public Services Commission's investigation moved into its second day, consultants painted a grim picture of Vitelco's infrastructure.
"Vitelco's network is in a serious state of disrepair," Atlanta-based telecommunications consultant W. Keith Milner said Thursday.
Although hearing examiner David Nissman invited the public to attend the hearing, held at the Legislature building on St. John, only consultants, the phone company and the PSC attended.
The PSC hearing began Wednesday on St. Croix. It will conclude Friday on St. Thomas. The hearing begins at 10 a.m. at the PSC conference room at Barbel Plaza.
Milner inspected 25 of Vitelco's 29 facilities on all three islands. He said that two-thirds were in poor condition and one-third were in fair condition.
"And those that are fair need some replacement," he said.
Vitelco's switching system has software that's "woefully" out of date to the point the manufacturer no longer provides support, Milner said.
Instead of using the correct wiring, the company used what it had on hand when expanding service to new customers.
"Instead of doing it the right way, they used baling wire and chewing gum," Milner said.
Milner said Vitelco even failed to do routine maintenance like clearing brush from around telephone poles.
"Cabinets are rusted and wire trimmings lying around causing shortages," Milner said.
Additionally, Vitelco can't test equipment remotely. Instead, Milner said it must send a technician out for each repair issue.
"The repair process takes quite a while," Milner said.
Nissman agreed with Milner's assessment on the state of affairs at Vitelco.
"Consumers were not treated very well by the old company," Nissman said.
Vitelco's failure to upgrade its system means it can offer only the most basic services to customers.
Another consultant, Jeffrey Eisenach of the Washington, D.C.-based Empiris LLC, later added that the inability to offer more advanced services like broadband to all its customers has a big economic impact. He said that only 36 percent of people in the Virgin Islands have broadband accessibility compared to 62 percent on the mainland.
"If you closed the gap by 14 percent, you'd get 1,700 new jobs," Eisenach.
Milner suggested that while whoever buys Vitelco won't have to throw out the entire infrastructure, most of it needs replacing.
"But upgrading the network will not be easy or quick given the degradation and age," Milner said.
He said that if significant repairs are made, customers will have to pay twice. They'll pay the first time for the repairs and the second time for the sorely needed replacement.
The new owners should make the most critical repairs, but quickly develop a plan for upgrading the system, Milner said.
Adam Dunayer of the Dallas-based Houlihan Lokey, a financial restructuring group, said the bankruptcy trustees hired his firm to finalize the sale process.
"We're getting buyers comfortable with the vast amount of information that makes up these companies. We're the intermediary between the buyer and the seller," he said.
Dunayer said that several people are doing their "due diligence" in regards to buying Vitelco.
Several people, including Nissman, said the price will hit $185 million "or better."
"And every one of the bidders is considering making significant improvements," Dunayer said.
Vitelco's parent company, Innovative Communications, is in Chapter 11 bankruptcy proceedings. Vitelco is for sale in order to pay some of Innovative's debts, but efforts to sell the company are complicated by the global credit crunch and lack of clarity of the Vitelco rate structure.
The sale was put off until late December and the PSC, working with the court-appointed Chapter 11 trustee handling Innovative's properties, expects to have a new rate schedule by Dec. 3 in order to provide potential buyers with a clearer picture of the company's financial prospects and value over the next few years.

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