As of July 1, the federal subsidies for local phone service declined again for reasons related to the accounting rules of the Federal Communications Commission.
The richly complex, highly technical FCC decision that brings that news also says, in effect, that Vitelco’s current set of wires and utility poles is so old that FCC accounting rules define the system as less than worthless. In the FCC’s words, Vitelco’s cable and wire facilities now constitute a "negative plant balance."
Vitelco is thus one of only eight of the hundreds of phone companies in the United States with the dubious distinction of having systems so old, and with so little recent investment, that they have a "negative plant balance." The FCC document offered a footnote to that effect.
But just as bumblebees fly despite a design that dismays engineers, Vitelco phone lines continue to carry conversations, if sometimes with limited grace.
How do you define matters in such a way that a system of poles and wires has a negative dollar value?
This is how it works: First, using a standard aging procedure, you depreciate the investment in the system to zero; then you throw in an allowance for removing the old poles and wires. The combination gives you a negative number. Thus, in this system, no actual human being actually looks at poles and wires.
The principal thrust of the FCC report, however, deals with the level of federal subsidies to the phone company. Stan Springel, the court-appointed trustee for what had been Jeffrey Prosser’s corporate interests, earlier this year sought to head off a reduction in the federal subsidies that he saw on the horizon. He and his lawyers complained that the FCC accounting system was not giving Vitelco a fair shake.
He did secure a delay for the planned subsidy reduction, one that stayed in place for six months. However, the FCC ruled in a May 29 decision that went into effect July 1 that its accounting rules were correct, and that Vitelco owed about a million dollars for "over-disbursements" made in the six-month period when the FCC was reviewing the matter.
Apparently given the problems with Hurricane Omar and what the FCC termed "general past mismanagement," the FCC opted to give Vitelco 12 months to repay the missing million, rather than the usual six months. When the FCC seeks to recoup over-disbursements from a local phone company it does not send a bill, it just deducts money from future subsidies, and it does so over time.
The FCC decision says that the basic reason for the fall in phone subsidies in recent years is the long-term lack of investment in Vitelco. These subsidies, generally, tend to reflect the depreciation of investments in the system, and as investments decline, years later, the subsidies decline as well.
As the Source has reported for years, Vitelco and its owners had, years ago, received a remarkably high level of federal subsidies. During the time when Prosser was in control, and the V.I. Public Service Commission routinely approved his subsidy submissions, the monthly level was about $2 million a month.
By the first five months of this year, the subsidies had fallen to about $1.4 million. Now, because of the FCC decision, they are slated to drop another $85,000 a month for the coming 12 months. According to the Universal Service Administrative Company, the FCC affiliate that handles this work, that level will be, in the coming year, about $1.3 million a month.
When one divides the subsidy by the 65,000 phone lines in the islands (that is an FCC number) one sees that in the first months of this year the average subsidy per V.I. phone line was about $21 per month. That will fall in the year to come to about $19.80 per month. By mainland standards, even the current local subsidies are very substantial ones, and are some of the highest in the nation.
The mainland phone users who fund the local subsidies are almost totally unaware of the largess flowing to the islands. Some rural and other insular phone users benefit from the subsidies, but most mainland phone users see none of them. One of the reasons, some cynics say, that these subsidies have never become a mainland controversy is that the phone bills are too complicated for most people to notice the Universal Service charges, the source of the subsidies.
The total amount of money raised by the Universal Service fees, nationwide, has been declining in recent years, and that is still another reason why the V.I. receipts are falling.
