March 25, 2009 — Embattled Vitelco got another financial break from Washington recently: The current level of subsidies it gets from a Federal Communications Commission entity will remain steady for another three months.
On March 17, the Source reported that the local phone company was helped by a remarkably low interest rate — one tenth of one percent — on a $50 million government loan. (See "Vitelco Benefits from Fall in Interest Rates.")
The latest good news — which has no connection to the interest rate — came in a Feb. 27 letter from the Wireline Competition Bureau of the FCC, telling its affiliate, the University Service Administrative Company, to continue to send subsidies to Vitelco at the current rate through May 31.
During the first two months of 2009, the FCC subsidies to Vitelco were running at the level of $16.5 million a year. A few years ago, when Jeffrey Prosser was in charge of the company, the subsidies had been at the rate of $25 million a year. There have been comments in the Prosser bankruptcy proceedings that a further downward adjustment in the subsidies may be in the works, to compensate for overly generous payments when the company was under different management.
The subsidies are funded by small monthly payments, the Universal Service Charge, laid on all land-line telephone users. The program, an outgrowth of FDR's New Deal, is designed to help rural and insular phone-company customers receive telephone services at reasonable costs.
The court-appointed trustee in the Jeffrey Prosser bankruptcy case, Stan Springel, had appealed to the FCC to postpone any reduction in the subsidy until at least Feb. 28. FCC said yes to that request, and, later, to a subsequent one to keep the subsidy going for another three months. The FCC decided to keep the subsidies at current levels while it ponders a Vitelco challenge to the accounting rules it uses in the program — rules the phone company says are fundamentally unfair to Vitelco.
While making the most recent decision, the FCC cited the company's "financial strain resulting from the devastation inflicted by Hurricane Omar on Vitelco's telecommunications network."
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