GOVERNMENT OF THE VIRGIN ISLANDS

OF THE

UNITED STATES



Public Services Commission



IN RE:

INVESTIGATION OF THE VIRGIN ) Docket Nos. 626 & 628

ISLANDS TELEPHONE CORPORATION ) Order No. 54/2016

RATE INVESTIGATION )

Docket 626 )



)

And )



)

INVESTIGATION OF THE VIRGIN )

ISLANDS TELEPHONE CORPORATION )

DEPRECIATION SCHEDULE )

Docket 628 )



)

Consolidated )



_)

CONSENT ORDER



WHEREAS, on December 14, 2014, the Virgin Islands Public Services Commission

(hereinafter “PSC” or “Commission”) appointed Hearing Examiner, Ronald Belfon, Esq. in

these consolidated dockets, 626 and 628; and



WHEREAS, on November 9, 10 and 12, 2015, public hearings were conducted,

testimony was heard from representatives of the Virgin Islands Telephone Corporation

(hereinafter “VITELCO” or “company”) and its staff, the PSC Staff, and the public, and



WHEREAS, on February 22, 2016, the Commission received the Report and

Recommendations of the Hearing Examiner (“Hearing Examiner Report”), and



WHEREAS, a review of the record and the Hearing Examiner Report reveals significant

differences between the positions of VITELCO and PSC Staff in regard to numerous issues; and



WHEREAS, the record of this proceeding is extensive and is in full before the

Commission; and



WHEREAS, at the Commission’s meeting on March 15, 2016, the Commission heard

from the Hearing Examiner, VITELCO, and the PSC Staff, and

PSC Order No. 54/2016 - Docket 626 & 628 (Consent Order)

Page 2 of 5



WHEREAS, in Order No. 39/2016 (March 2016) the Commission ordered that this

matter be continued until the next meeting of the Commission, to permit sufficient time for the

Commissioners to review the record, including reports, filings and testimony in this matter prior

to making a final decisions; and



WHEREAS, at the Commission’s April 18, 2016 meeting VITELCO and PSC Staff

reported that, while substantial progress had been made, an agreement had not yet been reached,

and the Commission directed that negotiations continue for 72 hours; and



WHEREAS, VITELCO and the PSC Staff have mutually agreed to recommend a

resolution of these proceedings as set forth in this Consent Order; and



WHEREAS, VITLECO and the PSC Staff consent to the following findings and

conclusions:



1. The depreciation parameters in the depreciation study submitted by VITELCO

dated March 30, 2015 entitled “Virgin Islands Telephone Corporation Study as of

December 31, 2013” are reasonable, and VITELCO shall utilize the specific

service lives, net salvage, and depreciation rates from that study on a going

forward basis.



2. VITELCO presented evidence in the record that would support an increase in

regulated local telephone revenues by a total of $8.9 million, which could have

resulted in an increase of 40% in local rates. If applied on a proportional basis,

the local residential rate would have increased from $21.65 a on 31, and the

local business rate would have increased from $58.55 to $81. 97 based on such

evidence.



3. VITELCO and the PSC Staff disagree about the proposed findings of fact and

conclusions of law in the Hearing Examiner Report.



4. Under 30 V.LC. § 2, VITELCO is required to furnish telephone service at rates

that are just, reasonable, and nondiscriminatory.



5. The rates set forth in Appendix 1 to this Consent Order would increase regulated

local telephone rates by approximately $2 million and would result in an average

increase in local rates of approximately 9.3%, if adopted by the Commission.



6. The rates set forth in Appendix 1, which include an increase in'the local

residential rate from $21.65 to $23.00 and an increase in the local business rate

from $58.55 to $64.00, are just, reasonable, and nondiscriminatory as required by

30 V.LC. § 2.



7. The rates set forth in Appendix 1 shall take effect on July 1, 2016, provided that

VITELCO has demonstrated satisfactory customer service quality for telephone

service the four-month period from March 1, 2016 through June 30, 2016. For

PSC Order No. 54/2016 - Docket 626 & 628 (Consent Order)



Page 3 of 5



10.



11.



12.



purposes of this Consent Order only, “satisfactory customer service quality”

means that VITLECO has met 90 percent of the company service objectives for

the territory as a whole on an aggregate basis the following telephone service

metrics: (1) Percent Customer Service Calls Answered in less han 20 seconds

(90%); (2) Percent Repair Calls Answered in less than 20 seconds (90%); (3)

Percent Repair Troubles Cleared within 24 Hours (85%); (4) Percent Repair

Commitments Met (90%); (5) Repair Reports per 100 Lines (9,5); (6) Installations

Completed with 5 Days (90%); and (7) Initial Service Order Commitments Met

(90%). If VITELCO has not demonstrated satisfactory customer service quality

for telephone service for the period from March 1, 2016 through June 30, 2016,

the rates set forth in Appendix 1 shall not take effect until such'time as VITELCO

has demonstrated satisfactory customer service quality over any consecutive four-

month period.



VITELCO shali engage an independent consultant to conduct a review of the

company’s customer service quality data collection and reporting procedures and

shall provide a report to the Commission no later than November 1, 2016. Prior

to engagement of the independent consultant, VITLECO shall Consult with PSC

staff about the appropriate scope of the independent consultant's review as shall

be included in the request for proposal.



Consistent with 30 V.LC. § 16 and 30 V.I. R. & Regs. § 13-31, the Commission

reserves the right to inspect VITELCO’s books, accounts, papers, records, and

memoranda to ensure the accuracy of VITELCO’s service performance data,



VITELCO states that it has completed the buildout of its hybrid coaxial-fiber

(“HFC”) network. VITELCO shall use its best efforts to complete the migration

of customers to its HFC network by July 2016 on St. John and|by November 2016

on St. Croix. No later than December 31, 2016, VITELCO shall file a report with

the Commission that: (i) identifies any customers who have not been migrated to

the HFC network; (ii) explains the reason why the migration has not been

completed for those customers; and (iii) provides a reasonable |plan to remediate

the situation that shall be reviewed by the PSC at a PSC Meeting providing the

opportunity for those affected to be heard.



VITELCO shall maintain and present its books for local regulatory purposes on

an original cost basis and will not make any adjustments for Fair Value or

Goodwill for local ratemaking purposes.



VITELCO shall confer in good faith with Commission staff to develop a cost

allocation methodology and procedures in compliance with Part 32 and Part 64 of

the rules of the Federal Communications Commission, which VITELCO and

Commission staff shall present to the Commission for approval no later than

September 1, 2016.

PSC Order No. 54/2016 - Docket 626 & 628 (Consent Order)

Page 4 of 5



13. | VITELCO shall flow through to ratepayers all current and future tax benefits,

whether from the Economic Development Authority or the Research and

Technology Park or any other source.



14. __ The findings of fact and conclusions of law in this Consent Order are supported

by the record and comply with the law of the United States Virgin Islands.

NOW THEREFORE, the Commission hereby ORDERS that;



1. This Consent Order, and the findings and conclusions contained therein, are

adopted and approved by the Commission;



2. The Hearing Examiner Report is not adopted or approved by the Commission,

and the Hearing Examiner Report shall have no binding effect or precedential

value in any future earnings investigation of VITELCO; and



3, Consistent with 30 V.LC. § 9, VITELCO is directed to file tariffs within fourteen

(14) days that comply with the requirements of this Consent Order.



So Ordered.



For the Commission



Ss



Andrew Rutnik, Vice-Chair



Dated: June | , 2016



Respectfully submitted,



By: /s/ Boyd L. Sprehn

Boyd L. Sprehn



Law Office of John H. Benham, P.C.

P.O. Box 9260



1001 Frederiksberg Gade



St. Thomas, VI 00801



(340) 774-0673



Attorney for the Public Services Commission

PSC Order No. 54/2016 - Docket 626 & 628 (Consent Order)

Page 5 of 5



By: /s/ Nathania Bates

Nathania Bates



Vice President — Legal Affairs

Innovative Companies



4006 Estate Diamond

Christiansted, VI 00820



(340) 712-5046



Bennett L. Ross



Daniel Brooks



Wiley Rein LLP



1776 K Street, N.W.

Washington, DC 20006

(202) 719-7524



Attorneys for Virgin Islands Telephone Corp.

d/b/a Innovative Telephone