Isle firm’s rejection by FCC is a red flag

A Hawaii company that provides telephone and high-speed Internet services to Hawaiian Home Lands residents has been receiving exorbitant amounts of federal funds for years and the Federal Communication Commission at last has decided to put an end to what it describes as "wasteful expenses."

Further investigation is needed to determine how Sandwich Isles Communications Inc. pulled off such extravagance.

Sandwich Isles was founded in 1995 and began its swoop into a special FCC fund — the Universal Service Fund — for exclusive rights to wire Hawaiian Home Lands. The federal agency’s new monthly limit to pay for such service is $250 per customer, but Sandwich Isle has been able to pull off more than $830 a month per customer from the fund. That has totalled "many millions of dollars, including significant payments to a number of affiliated and closely-related companies," the FCC asserted in rejecting the company’s request for a waiver of the limit.

The FCC also said, "Sandwich Isle has certain expenses that appear grossly excessive and unreasonable. In particular, Sandwich Isles has spent millions of dollars with affiliated and related entities for services that appear unrelated to the provision of a broadband-capable network."

The company receives about $25 million a year from the fund.

Sandwich Isles, with customers mainly on Hawaii island, Maui and Molokai, reported expenses of $6.5 million for 2,439 subscriber lines as of the end of 2011, an average of $224 a month per line. That was nearly seven times the average monthly expense of $31 per line for the next five companies of similar size in its peer group.

Sandwich Isles is a subsidiary of Waimana Enterprises Inc., and Albert S.N. Hee, the brother of state Sen. Clayton Hee, is president of both companies. Sandwich Isles also has a contract with Paniolo Cable Network, a subsidiary of Blue Ivory Hawaii Corp., which is held equally by the three children of Albert Hee, according to the FCC.

OpenSecrets.org, which tracks money in politics, reports that Waimana Enterprises spent $360,000 in lobbying and more than $120,000 to the political campaigns of Hawaii’s congressional delegation in the past decade.

Hawaiian Telecom Inc., the state’s largest telephone company, contended to the FCC that Sandwich Isles "overstates its own importance as a service provider to Hawaiian Home Lands." Hawaiian Telecom maintains that it provided that service long before Sandwich Isles received permission to provide service, and continues to do so.

The phone company "further argues that Sandwich Isles is not the only service provider authorized in the Hawaiian Home Lands," according to the FCC. Hawaiian Telecom adds that it "can and will continue to serve all rural areas of Hawaii, including the Hawaiian Home Lands."

The FCC’s Wireline Competition Bureau provides access to the broadband services fund to rural and low-income consumers with revenue of $2.75 from the monthly telephone bill of every customer in the nation. The fund "is a finite resource paid for by customers and businesses across the county," the FCC asserts, "and should not be used to support unreasonable or excessive costs."

With millions of federal dollars involved, more investigation needs to be done on Sandwich Isles Communications. If, indeed, millions of dollars were diverted elsewhere instead of going into the contracted broadband-capable network, there should be consequences or penalties. Hawaii’s elected officials and state offices, including the Department of Hawaiian Home Lands, which is already troubled on so many other fronts, should not be a part of any such impropriety, as described by the FCC.