BEFORE THE CORPORATION COMMISSION OF OKLAHOMA

APPLICATION OF BRANDY L. WREATH, ji.Y' DIRECTOR OF THE PUBLIC UTILITY DIVISION,,J' OF THE OKLAHOMA CORPORATION

COMMISSION, FOR A SHOW CAUSE HEARING AGAINST TERRACOM, INC. D/B/A/ TERRACOM WIRELESS

)

)

)

)

)

)

CAUSE NO. PUD 201300020

ORDER NO. 617960

HEARING: November 1, 2013, in Courtroom B 2101 North Lincoln Boulevard, Oklahoma City, Oklahoma 73105 Before James Myles, Administrative law Judge

APPEARANCES: Kimberly Prigmore, Deputy General Counsel representing Public Utility Division of the Oklahoma Corporation Commission

Marc Edwards, Attorney representing TerraCom, Inc. William L. Humes and Nicole A. King, Assistant Attorneys

General, Office of Attorney General, State of Oklahoma

FINAL ORDER CLOSING CAUSE

The Corporation Commission of the State of Oklahoma ("Commission") being regularly in session and the undersigned Commissioners being present and participating, there comes on for consideration and action the Application of Brandy L. Wreath, Director of the Public Utility Division, for a Show Cause against TerraCom, Inc. ("TerraCom"), filed on February 4, 2013. On October 16, 2013, Teena May submitted Pre-filed Direct Testimony on behalf of the Public Utility Division Staff ("Staff') detailing the Commission's review of TerraCom Inc. and in support of closing this cause. On October 25, 2013, the Staff and TerraCom submitted a Joint Motion to Close Cause, attaching thereto an executed Joint Stipulation and Settlement Agreement among the parties. On November 1, 2013, the Motion to Close Cause was heard and recommended for approval by the undersigned Administrative Law Judge ("AU").

SUMMARY OF EVIDENCE

Mark Argenbright on behalf of the Public Utility Division Staff

Mr. Mark Argenbright testified on behalf of the Staff. The purpose of his testimony was to support the request by Staff and TerraCom to close the Cause and to explain and answer questions regarding the Joint Stipulation and Settlement Agreement. Mr. Argenbright testified that the stipulation provided for a refund to the Oklahoma Universal Service Fund ("OUSF") by TerraCom of $11,132.55 for over-collections during the period May 2011 to October 2012. Further, Mr. Argenbright testified that TerraCom will provide reporting of additional revisions to USF reports after the October 2012 time period as soon as possible. Mr. Argenbright also stated that the Joint Stipulation contains a determination that TerraCom is operating in compliance with the applicable Lifeline rules and regulations and has, and will maintain, adequate procedures to guard against errors. In the event such errors are identified, TerraCom has agreed to take appropriate corrective action. Mr. Argenbright further stated that if the Joint Stipulation and

Cause No. PUD 201300020 - TerraCom, Inc. Page 2 of 5 Final Order Closing Cause

Settlement Agreement is approved by the Commission, TerraCom will continue to work with Staff to monitor TerraCom's compliance activities.

Mr. Argenbright also testified it is Staffs opinion that the Joint Stipulation and Settlement Agreement is fair, just, and reasonable and in the public interest, and that Staff recommends the Commission accept the Joint Stipulation and Settlement Agreement as presented.

Teena May on behalf of the Public Utility Division Staff

Ms. Teena May submitted pre-filed direct testimony on behalf of the Staff and was called to the witness stand by the AU. The purpose of her testimony was to explain the process used by the Staff to review the information provided by TerraCom, describe how the Staff identified issues and worked with TerraCom to resolve the same, and support the request by Staff and TerraCom to close this proceeding.

Ms. May testified that TerraCom was given a wireless eligible telecommunications carrier ("ETC") designation in Oklahoma pursuant to Order No. 588940, on August 18, 2011, for the purpose of providing Lifeline service in Oklahoma. Ms. May also explained that on November 1, 2012, in Cause No. PUD 201200200, TerraCom's ETC designation was amended to allow TerraCom to provide Lifeline service on a resale and facilities based basis.

In explaining the circumstances that led to the filing of this cause, Ms. May explained that the Staff originally opened Cause No. PUD 201200186 on August 10, 2012, to review Oklahoma's ETCs' records to verify and review the eligibility of their subscribers for Lifeline services. Specifically, Ms. May testified that the Staff wanted to verify that there were not duplicate, or multiple Lifeline credits from Oklahoma ETCs, in accordance with Commission and Federal Communication's Commission ("FCC") rules. In that cause, several providers, including TerraCom, provided information of active Lifeline subscribers to Staff. Ms. May explained that based on that information, and other information obtained from the Universal Service Administrative Company ("USAC"), Staff identified five companies, among which was TerraCom, to perform a more detailed investigation. These more detailed investigations, Ms. May explained, were done through Show Cause Applications. For TerraCom, that Show Cause Application is this Cause No. PUD 201300020.

Ms. May testified that the Staff focused its investigation and review of TerraCom on its billing practices, processes for identification, and associated corrective in order to identify TerraCom's internal controls and the procedures by which TerraCom remedies any identified problems. Ms. May explained that although TerraCom had a few issues, it had generally already self-reported these issues and made a robust effort to develop business practices that protect the public interest and the Federal Lifeline program funds.

Ms. May explained that TerraCom provided a list of its active subscribers for the months of November 2012 and February 2013. The Staff then created a database that allowed the provided information to analyzed. This information was sorted to identify identical addresses, the same or similar names, duplicate social security numbers, and other redundant geographical criteria that could be easily duplicated. After this analysis was conducted, Ms. May stated that

Cause No. PUI) 201300020— TerraCom, Inc. Page 3 of 5 Final Order Closing Cause

Staff identified 258 subscriber records of TerraCom that merited further review. Staff was then able to easily audit those subscribers at the offices of TerraCom because of TerraCom's cooperation. As a result of the review of the identified 258 subscribers, Ms. May testified that Staff discovered 54 sets of possible duplicates, of which, 30 had already been identified by TerraCom through its own internal audit process. Of those 30, 10 were demonstrated to be eligible subscribers. Ultimately, Ms. May stated that Staff only identified 14 sets of duplicates that TerraCom had not already identified.

Ms. May also described TerraCom's internal audit process which is comprised of a dedicated set of employees in their internal audit department that ensure reporting for fund reimbursements is appropriate and that internal control systems and processes are effective. Before TerraCom submits their subscriber data to process for State and Federal funding, three tiers of team reviews are conducted that review and audit subscriber information. This process produces a report of data that has successfully passed review, and a report of data that failed to pass review. Then, Ms. May stated, that all of this information is reviewed again by TerraCom's Internal Audit team. Because TerraCom had previously identified the majority of the possible duplicates that Staff identified, Ms. May testified that TerraCom's process achieves the goal of actively finding and correcting duplicate or otherwise ineligible subscribers.

It was also discussed by Ms. May that TerraCom quickly de-enrolls subscribers that are ineligible, and then places them on an internal list for true-up both with the Federal Universal Service Fund and the OUSE. Ultimately, this process results in TerraCom returning the support payments received for a subscriber that is later found to be ineligible. Ms. May stated that this is an acceptable process to the Staff. Ms. May also testified that TerraCom brought its sales force back in-house, which has allowed for greater internal controls, training, and education over its sales force that helps prevent duplications or the creation of ineligible subscriptions.

Ms. May also testified Staff concluded that TerraCom has responded in a transparent and thorough manner, to multiple requests for information. TerraCom has provided all the information that Staff has sought, and the level of cooperation by TerraCom has helped facilitate the review process in an efficient and effective manner. TerraCom was proactive in identifying issues both to the Commission and to the FCC. Ms. May stated that the Staff found TerraCom had implemented process and controls that have improved the company's ability to identify duplicates as well as prohibit future subscriber issues. Based on this review, Ms. May further testified that Staff 1) ensured that the Oklahoma Lifeline Fund was made whole for prior errors; 2) thoroughly reviewed the internal control procedures of TerraCom and; 3) therefore supports closure of this cause.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. THE COMMISSION FINDS that on February 14, 2013, Brandy L. Wreath, Director of the Public Utilities Division of the Oklahoma Corporation Commission filed this Show Cause action, Cause No. PUD 201300020, to investigate the marketing practices of TerraCom and to also formally review, audit, and analyze the subscription data of TerraCom to ensure compliance with State and related Federal regulations.

Cause No. PUD 201300020— TerraCom, Inc. Page 4 of 6 Final Order Closing Cause

2. THE COMMISSION FURTHER FINDS that in 2012, TerraCom learned of a glitch to its internal control systems which resulted in some undetected duplications, that were self-reported to USAC and then in turn, the FCC. Accordingly, the FCC initiated an enforcement action, which resulted in a reimbursement and contribution by TerraCom to the United States Treasury. TerraCom also initiated robust revisions of its internal procedures to prevent further duplications and to ensure compliance with FCC regulations.

3. THE COMMISSION FURTHER FINDS that pursuant to this cause, Staff audited and thoroughly reviewed the subscriber data of TerraCom for the months of November 2012 and February of 2013. Staff identified 54 sets of possible duplicates and 30 of those possible duplicates had previously been discovered and remedied by TerraCom.

4. THE COMMISSION FURTHER FINDS that TerraCom has unintentionally over- collected OUSF Lifeline Funds in the amount of $11,132.55 for the period of May 2011 through October 2012, which TerraCom has agreed to and will reimburse to the Commission at the close of this cause.

5. THE COMMISSION FURTHER FINDS that TerraCom's internal controls are adequate and help ensure compliance with State and Federal regulations, and especially guard against duplications.

6. THE COMMISSION FURTHER FINDS that revisions to TerraCom's marketing practices, such as bringing its sales force back into the company, provide greater training, control, and management by TerraCom of its operations, helping ensure compliance with State and related Federal regulations.

7. THE COMMISSION FURTHER FINDS that TerraCom and Staff entered into a Joint Stipulation and Settlement Agreement, under which TerraCom has agreed to reimburse the Oklahoma Lifeline Fund for duplications and to provide Staff with further updates of its further internal review and revisions to internal controls. The terms of the Joint Stipulation and Settlement Agreement are incorporated herein and have been attached as Attachment 1, hereto.

8. THE COMMISSION FURTHER FINDS that the Joint Stipulation and Settlement Agreement should be adopted by the Commission as being in the public interest and the Joint Motion to Close Cause should be approved by the Commission.

JURISDICTION

The Commission has jurisdiction over this Cause pursuant to Article IX, Section 18 of the Oklahoma Constitution, 47 U.S.C. § 151 et seq., and 17 O.S. § 139.105.

ORDER

IT IS THEREFORE, THE ORDER OF THE CORPORATION COMMISSION of the State of Oklahoma that the Joint Motion To Close Cause filed by Brandy L. Wreath,, Director of the Public Utility Division and TerraCom, Inc. be granted, consistent with the findings herein.

Cause No. PUI) 201300020— TerraCom, Inc. Page 5 of 5 Final Order Closing Cause

IT IS FURTHER THE ORDER OF THE COMMISSION that the Application filed herein by Brandy L. Wreath, Director of the Public Utility Division of the Oklahoma Corporation Commission, Cause No. PUD 201300020, be closed.

IT IS FURTHER THE ORDER OF THE COMMISSION that all findings of fact and conclusion of law set forth above are hereby adopted by the Commission.

THIS ORDER SHALL BE EFFECTIVE immediately.

CORPORATION COMMISSION OF OKLAHOMA

PATRICE DOUGW, Clfirman

M BOB ANTHONY, Vice Chafrman

DANA L. MURPHY, Commission

CERTIFICATION

DONE.AND. PERFORMED by the Commissirners participting in he making of this Order a shownbS' flicir signatures above, this k'- day of 'jiiou4Cr , 2013

[Seal]

qPEEY LL, Secretary

REPORT OF THE ADMINISTRATIVE LAW JUDGE

The foregoing findings, conclusions and order are the report and recommendations of the undersigned administrative law judge.

ZQJ—~~ 6>1--7f I ~~ ,)o-v --i 1 2013 L. MYLES Date

Administrative Law Judge

!ILE I flCT

BEFORE THE CORPORATION COMMISSION OF IUiRIOLK'S OFFICE - OKC CORPORATION COMMISSION

APPLICATION OF BRANDY L. WREATH, ) OF OKLAHOMA DIRECTOR OF THE PUBLIC UTILITY DIVISION, ) CAUSE NO. PUD 201300020 OF THE OKLAHOMA CORPORATION ) COMMISSION, FOR A SHOW CAUSE HEARING ) AGAINST TERRACOM, INC. D/B/A/ TERRACOM ) WIRELESS )

JOINT MOTION TO CLOSE CAUSE

Brandy L. Wreath, Director of the Public Utility Division of the Oklahoma Corporation

Commission and TerraCom, Inc. ("TerraCom") hereby submit this Joint Motion To Close Cause,

requesting that the Oklahoma Corporation Commission issue an order closing Cause No. PUD

201300020. In support, Brandy L. Wreath and TerraCom state:

1. On February 14, 2013, Brandy L. Wreath, Director of the Public Utility Division of the

Commission filed this instant case, Cause No. PUD 201300020, to perform a detailed

investigation of TerraCom's compliance with Lifeline rules and regulations.

2. The Public Utility Division Staff ("PUD Staff) conducted a thorough investigation into

TerraCom's Lifeline Services including a review of TerraCom's internal processes and

assessment of TerraCom's compliance with state and federal Lifeline regulations. PUD Staff has

further established a plan to continually monitor and ensure future compliance of TerraCom with

Commission regulations. The results of PUD Staff's investigation are set forth in the testimony

of Teena May, that was filed in this Cause on October 16, 2013.

3. PUD Staff and TerraCom have entered into a Joint Settlement Agreement ("Agreement")

related to the issues in Cause No. PUD 201300020, which is attached hereto as Exhibit A.

4. TerraCom has further agreed to pay the OUSF Lifeline Fund for the amounts set forth in

the Affidavit of Dale Schmick, and agreed to provide the PUD Staff with any findings, reports,

and results of revisions TerraCom is making to its internal processes and procedures that it is

t.4JT "1"

PUD 201300020

Page 2 of 4 Joint Motion to Close Cause

making to ensure the integrity of the OUSF and Lifeline services. See Exhibit B.

5. Based upon the PUD Staff's investigation and the attached exhibits, the parties

respectfully request an Order of the Commission closing Cause No. PUD 201300020.

Respectfully submitted,

k-,rc 1CmoQ4.. Kimberly Pngmore, OBA # 21781 Deputy General Counsel Oklahoma Corporation Commission P. 0. Box 52000-2000 Oklahoma City, Oklahoma 73152-2000 Telephone: (405) 521-2308 Facsimile: (405) 521-4150

MARC— €b\JA4LP" Marc Edwards, OBA #10281 PHILLIPS MURRAH, P.C. Corporate Tower, 13th Floor 101 North Robinson Oklahoma City, Oklahoma 73102 Telephone: (405)235-4100 Facsimile: (405) 235-4133 ATTORNEYS FOR COX OKLAHOMA TELCOM, L.L.C.

CERTIFICATE OF SERVICE

On this A of October, 2013, a true and correct copy of the foregoing was mailed, postage prepaid. to:

PUD 201300020

Page 3 of 4 Joint Motion to Close Cause

William L. Humes, OBA #15264 Nicole A. King, OBA #18246 Office of Attorney General 313 NE 21 4 Street Oklahoma City, Oklahoma 73105 Bil1.humes(oag.ok.gov NicoIe.King,oag.ok.gov

P\Aw- EA qt

BEFORE THE CORPORATION COMMISSION OF OKLAHOMA

APPLICATION OF BRANDY L. WREATH, DIRECTOR OF THE PUBLIC UTILITY DIVISION, OF THE OKLAHOMA CORPORATION COMMISSION, FOR A SHOW CAUSE HEARING AGAINST TERRACOM, INC. D/B/A/ TERRACOM WIRELESS

)

)

)

)

)

)

CAUSE NO. PUD 201300020

JOINT STIPULATION AND SETTLEMENT AGREEMENT

COME NOW the undersigned parties to this proceeding ("the Stipulating Parties"): the Public Utilities Division Staff ("PUD Staff") and TerraCom, Inc., ("TerraCom") and present the following Joint Stipulation and Settlement Agreement ("Agreement") for review and approval by the Oklahoma Corporation Commission ("Commission") for the resolution of the issues presented in this proceeding, Cause No. PUD 201300020 (the "Show Cause"). The Stipulating Parties represent to the Commission that this Agreement represents a fair, just and reasonable settlement of the issues contained herein, and that the terms and conditions are in the public interest. The Stipulating Parties urge this Commission to issue an order dismissing the Show Cause and approving this Agreement in its entirety. It is hereby stipulated and agreed by and among the Stipulating Parties as follows:

Neither this Stipulation nor any of the provisions hereof shall become effective unless and until the Commission shall have entered an order approving, without modification, the terms and provisions here, without supplemental or additional terms, conditions and provisions, and thereby dismissing the Show Cause. The provisions of this Stipulation are intended to relate only to the specific matters referred to herein, and by and through this Agreement, no party waives any claim or right which it might otherwise have with respect to any matters not expressly provided for herein. Furthermore, no party hereto admits to the correctness or appropriateness of any of the contentions of another. The Stipulating Parties state and recognize that the Agreement represents a negotiated settlement with respect to the issues presented herein. The Agreement is a balance and compromise of the positions of each party hereto in consideration for the agreements and commitments made of the positions of each party hereto and other parties in connection herewith. Accordingly, the Commission shall explicitly recognize that the execution of this Agreement by each party hereto shall not be constructed as agreement or acquiescence by any one, or all parties to any particular calculation, adjustment, theory or issue.

Additionally, as a part of the internal review conducted by PUD Staff in this matter, a thorough and complete analysis was performed for TerraCom. TerraCom was founded to help low-income consumers get access to communications services. Accordingly, TerraCom's customers benefit from the federal Lifeline and the low-income portion of the Oklahoma Universal Service Fund ("OUSF"). The federal Lifeline rules explicitly require that TerraCom

PUD 201300020 Joint Stipulation

only provide supported services to one subscriber per household monitored by internal systems and controls that prevent duplications and over collections from the federal Lifeline fund.

In 2012, TerraCom discovered an error in its internal control system that revealed undetected duplications among a few of its subscribers. Then, through a collaborative Federal Communications Commission ("FCC") enforcement action, TerraCom reimbursed the FCC's Lifeline program in the amount of Four Hundred Two Thousand Seven Hundred Sixty dollars ($402,760.00) with interest for the duplicate payments it had received. Additionally, there was a voluntary contribution of an additional Four Hundred Forty Thousand dollars ($440,000.00) to the United States Treasury. Further, TerraCom, throughout its operations, has instituted robust compliance plans to govern the receipt of its Lifeline funds by establishing stronger internal procedures that ensure accurate reporting while also providing training to employees regarding Lifeline supported services.

During the course of the FCC review, and as analyzed by the PUD Staff in this Show Cause, it was and has been determined that TerraCom over collected OUSF Lifeline funds in the amount of $11,132.55 for the timeframe of May 2011 through October 2012 Thus, the undersigned parties stipulate and agree to the following:

1. The PUD Staff fully reviewed TerraCom's records and determined that TerraCom over collected OUSF Lifeline Funds in the amount of $11,132.55.

2. TerraCom has agreed to fully refund the OUSF Lifeline Funds in the amount of $11,132.55.

3. The PUD Staff has conducted extensive discovery of TerraCom's books and records and has concluded that TerraCom is operating in full compliance with the rules and regulations governing the OUSF Lifeline Fund and has adequate policies and procedures in place to guard against errors as well as to make appropriate corrections in the event errors occur.

4. TerraCom has agreed that post FCC review and revisions, consistent with the new internal procedures, will be completed as soon as possible. The Stipulating Parties recognize that these revisions and amendments to the necessary federal Universal Service Fund reports is a tedious and labor intensive process of identifying the months involved and actually preparing the revised reports for submission to USAC in order to accomplish adjustments that cover the entire period identified. The Stipulating Parties agree that TerraCom will provide the PUD Staff with the findings, reports, and results of the revisions TerraCom is making to the necessary Universal Service Fund reports consistent with TerraCom's new audit revisions and internal procedures that TerraCom is implementing, along with any corresponding adjustments to the OUSF.

PUD 201300020 Joint Stipulation

5. The Stipulating Parties agree that the provisions of this Agreement are the result of extensive consultation and collaboration, and that the terms and conditions of the Agreement are interdependent. The Stipulating Parties agree that this Agreement is in the public interest and, for that reason they have entered into this Agreement to settle among themselves the issues in this Agreement. This Agreement shall not constitute nor be cited as precedent, nor deemed an admission by any Stipulating Party in any other proceeding, including but not limited to any future OUSF Lifeline requests or show cause applications, except as necessary to enforce its terms before the Commission or any court of competent jurisdiction. The Commission's decision, if it enters an order consistent with this Agreement and ultimately dismisses this Show Cause, will be binding as to the matters decided regarding the issues described in this Agreement, but the decision will not be binding with respect to similar issues that might arise in other proceedings. A Stipulating Party's support of this Agreement may differ from its position of testimony in other causes. To the extent there is a difference, the Stipulating Parties are not waiving their positions in other causes. Because this is a stipulated agreement, the Stipulated Parties are under no obligation to take the same position as set out in this Stipulation in other dockets.

Non-Severability

The Stipulating Parties stipulate and agree that the agreements contained in this Agreement have resulted from negotiations among the Stipulating Parties and are interrelated and interdependent. The Stipulating Parties hereto specifically state and recognize that this Agreement represents a balancing of positions of each of the Stipulating Parties in connection therewith. Therefore, in the event that the Commission does not approve and adopt the terms of this Agreement in total and without modification or condition (provided, however, that the affected party or parties may consent to such modification or conditions), this Agreement shall be void and of no force and effect, and no Stipulating Party shall be bound by the agreements or provisions contained herein. The Stipulating Parties agree that neither this Agreement, nor any of the provisions hereof shall become effective unless and until the Commission shall have entered an Order approving all of the terms and provisions as agreed by the parties to this Agreement and such Order becomes final and this Show Cause likewise dismissed.

WHEREFORE the undersigned Stipulating Parties submit this Joint Stipulation and Settlement Agreement as their negotiated settlement of the issues in the above styled cause, and respectfully request the Commission to approve this Joint Stipulation and Settlement Agreement without change and issue an Order dismissing this Show Cause.

3

PUD 201300020 Joint Stipulation

Maribeth D. Snapp, Telecom Policy Director Public Utility Divisions, Oklahoma Corporation Commission

Offe Scluniclç Chief Operating Officer TerraCom, Inc.

BEFORE THE CORPORATION COMMISSION OF OKLAHOMA

APPLICATION OF BRANDY L WREATH, DIRECTOR OF THE PUBLIC UTILITY DIVISION, OF THE OKLAHOMA CORPORATION COMMISSION, FOR A SHOW CAUSE HEARING AGAINST TERRACOM, INC. 1)/B/Al TERRACOM WMELESS

)

)

)

)

)

)

CAUSE NO. PUD 201300020

w:i 41i i } ITh Vj #- 'A0 I' STATE OF OKLAHOMA

)

) SS. COUNTY OF OKLAHOMA

)

I, Dale R. Schniick, being of lawful age and having first been duly sworn upon oath,

state:

1. I am the Chief Operating Officer of TerraCoin, Inc. ("TetzaCom") and YourTel

America, Inc., ("YourTel") (collectively "the Companies') and my principal office is located at

4011. Memorial Rd., Suite 400, Oklahoma City, Oklahoma 73114.

2. On December 19, 2004, the Oklahoma Corporation Commission rCommission")

designated YourTel, as an eligible telecommunications carrier ("ETC") to provide wireline

Lifeline and Link Up Service. On August 18, 2011, the Commission authorized YourTel to

provide wireless Lifeline and Link Up Service.

3. On August 26, 2004, the Commission designated TerraCom as an FIt to provide

Special Universal Services in Oklahoma through wireline Lifeline and Link Up Service. On

August 28, 2011, the Commission authorized TerraCom to provide wireless Lifeline and Link

Up Service in Oklahoma.

4. The Companies were founded to help low-income consumers get the

communications services they need and deserve. In fact, the Companies were one of the first to

1 EXHIBIT

B

use the federal Universal Service Fund to provide consumers with telecommunication services

at affordable rates. Both TerraCom and YourTel strive to provide high-quality low-cost services

through an experienced and efficient operation that always has the customer in mind

5. The Companies' customers benefit from the federal Lifeline and the low-income

portion of the Oklahoma Universal Service Fund ("OUSF") and, in the past, from the federal

Link Up, all of which are programs that were designed to ensure the availability of

telecommunications

for eligible low-income households by providing discounts on basic

telephone services. federal Lifeline rules establish explicit requirements that ETCs like

TerraCom and

only provide supported services to one subscriber per household. To

ensure that restriction, are required to have internal systems and controls that prevent

duplicate customers and resulting over collection from federal Lifeline fund.

7. In 2012 TerraCom learned of a glitch in its internal control systems that revealed

undetected duplicalions among a relatively small number of subscribers. At about the same time

USAC identified the same issue during an In-Depth Validation (IDV). USAC reported to the

FCC that it had idtified the duplications and as a consequence the Companies had

imintvrilionally over collected federal funds for its supported services.

S. Through an FCC enforcement action, the Companies without hesitation

reimbursed the FCC's Lifeline program in the amount of $416,000.00 with interest for the

duplicate payments it had received. Additionally, the Companies voluntarily contributed an

additional $600,000 to the United States Treasury.

9. In working with the FCC, the Companies have initiated robust compliance plans

that will govern the receipt of its Lifeline funds by establishing internal procedures that ensure

accurate reporting while also providing annual training to our employees regarding Lifeline

supported services and have strengthened an Internal Audit Department that assures funds

2

received from the federal Universal Service Fund, and relevantly, also received from the OUSF

are used and reported appropriately. Subscriber data is analyzed and reviewed at a minimum of

three times before fihingc are made for reimbursement for supported services. Duplicate

infcinnation automatically fails our auditing process and even data that successfully passes our

initial review is still manually analyzed for concerning patterns and possible duplication issues.

10. The Oklahoma Lifeline Fund is "designed to advance the goals of universal

service and ensure that low-income residential customers within the State of Oklahoma.. . are

provided financial assistance in maintaining basic local exchange telecommunications service."

OAC 165:59-9-1. During the course of the FCC review and audit it was determined that the

Companies over collected OUSF Lifeline funds in the amount of $11,132.55 for TerraCom, and

$1,082.25 for YouTel, as set forth in the matrix attached to this Affidavit as Exhibit 1.

11. The Companies have been engaged in extensive discussion and collaborative

meetings with the Commission Public Utilities Division Staff to assist them in maintaining the

integrity of the OUSF Lifeline fund and the services it provides to low-income Oklahoma

citizens. M such, the Companies are prepared to refund the amount of its over collection upon

direction and Order of the Commission.

12. Post FCC review and audit revisions, consistent with the new internal procedures,

will be completed as soon as possible. These revisions and amendments to the necessary federal

Universal Service Fund reports is a tedious and labor intensive process of identifying the months

involved and actually preparing the revised reports for submission to USAC. This is an ongoing

process and, once complete, a copy of the results will be provided to P1)1) along with any

corresponding adjustments to the OUSF. -~ Z-5- Ar6~schmick~

3

STATE OF OKLAHOMA ) ) SS.

COUNTY OF OKLAHOMA )

Subscribed and sworn to before me this J_L day of September, 2013.

1U(C

D12014,-) Notary Public

[S E A L] I-I -----

-

II PAMELA D. RONEY 1 JJ

Notary Public. Silts of Oklahoma II Commission a 10003362 {!CommIsuion bpk.s April 31.2014

4