Federal regulators have dramatically reduced a subsidy Sandwich Isles Communications receives for providing telephone service to customers living on Hawaiian Home Lands, saying the Honolulu-based company was not able to justify “significant and wasteful expenses totalling many millions of dollars.”

The Federal Communication’s Wireline Competition Bureau on May 10 denied a request by Sandwich Isles for a waiver that would have exempted the telecommunications company from new federal regulations that cap the amount firms can draw from a ratepayer-funded account to cover the expense of running phone lines to rural and remote areas.

Sandwich Isles, which had been receiving about $830 per customer when it filed the waiver request in 2011, will see that fall to $250 per customer by June 2014 at the end of a phase-in period.

“We conclude that Sandwich Isles has failed to show good cause for a waiver at this time. In particular, Sandwich Isles seeks a waiver that would allow it to retain a number of significant and wasteful expenses, totaling many millions of dollars, including significant payments to a number of affiliated and closely-related companies,” FCC Wireline Competition Bureau Chief Julie Veach wrote in the agency’s decision.

She said Sandwich Isles may file a new waiver petition in the future “once it is able to restructure its operations in an appropriate manner that allows it to reduce unreasonable expenses.”

Sandwich Isles President Albert Hee is the brother of State Sen. Clayton Hee (D, Kahuku-Kaneohe).

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