This convicted felon gets $1 million a year to sell outdated internet service. You pay for it.

Early in his three-year federal prison sentence for tax evasion, Roger Shoffstall lost his phone privileges when a guard caught him running his small Alaska phone company behind bars.

He has lost many privileges over the years. Shoffstall, 75, cannot serve on a federal jury. Unlike most Alaskans, he does not receive an annual dividend check from the Permanent Fund. And he is not allowed to own a gun.

One thing never changes, however: Each year, the federal government sends more than a million dollars to his company, Summit Telephone.

The money comes from a special government grant program created by Congress to provide fast, affordable phone and Internet service in hard-to-reach places. You help pay for it.

View your latest phone bill and look for a line labeled “Universal Service Fund.” Some phone companies list them as “universal connectivity fees” or include them in “regulatory programs and telecommunications recovery fees.” It’s the same thing: an extra charge added to the monthly bill of telephone customers anywhere in the United States.

The federal government and the phone companies don’t call it a tax, but it acts like one. Carriers must currently contribute 37 cents on the dollar of their interstate and international telephone revenues to the fund.

In Alaska, where many communities are only accessible by plane or boat, the Federal Communications Commission has awarded telecommunications companies $4.6 billion in grants since 2016. That’s more than $600 per Alaskan per year. More per capita than any other state.

Yet after all this spending, Alaska still ranks near the bottom for access to the terrestrial high-speed Internet service the money was supposed to provide.

Some communities are not yet wired. In others, fiber optic cables or microwave towers provide Internet access at recently recorded speeds across the state, as the system predicts. slowest in the country. Even with subsidies, the service is expensive for customers: often hundreds of dollars a month for Internet, a tenth what the FCC considers broadband quality.

The federal program has allowed money to flow to businesses like Shoffstall’s, whose operators have troubled pasts. It also gives money to companies like Shoffstall’s, regardless of how many people use their services. And fewer Alaskans have done so since Starlink’s ground satellites entered the market at better prices. (Satellite Internet is not eligible for the subsidy, but costs between $90 and $130 per month for download speeds of up to 280 megabits per second in the same service area as Summit Telephone. According to The Summit websiteits fastest Internet plan in the same region maxes out at 25 Mbps and costs $135 per month.)

All of these excesses appear to be within the program’s rules or the FCC’s discretion.

A telecommunications company on the Aleutian island of Adak receives more than $350,000 a year to provide low-speed phone and Internet service to 306 buildings, according to FCC records, even though the state Department of Labor says the island is home to fewer than 80 people. One business owner said everyone he knew on the island had switched to Starlink anyway.

GCI, the state’s largest telecommunications provider and largest grant recipient, received $466 million just two years after its deal with the federal government. for alleged fraud linked to the same subsidy program. (THE regulation said this was neither an admission of guilt by GCI nor a concession by the Justice Department that the allegations were unfounded.)

Shoffstall and his attorney did not respond to repeated interview requests or detailed emailed questions. On Thursday, Shoffstall sent two documents to the Anchorage Daily News and ProPublica claiming he is a sovereign citizen of the United States, an ideology the FBI described as “those who believe that even though they physically reside in this country, they are separate or ‘sovereign’ from the United States.” The FBI has categorized the extremist version of this movement as “domestic terrorism”.

Larry Mayes, owner of Adak Eagle Enterprises, the company receiving the grant to provide internet on Adak, declined to answer questions about the funding. “You’ll have to talk to the FCC about this,” he said, hanging up the phone.

In a written response to questions, GCI said it and other Alaska telecommunications companies rely heavily on grants to provide service throughout the state.

“Before and after the settlement, GCI continued to work with the FCC and its customers to provide high-quality communications services in compliance with all applicable laws and regulations,” the GCI statement said. “The settlement has not changed Alaskans’ growing demand for these services, GCI’s willingness to provide them, or the critical importance of USF funding to the sustainability of these services. »

The FCC did not respond to requests for comment. The agency is considering the future of the program and recently circulated a proposal to revise or potentially remove elements of the grant that funds companies like Summit.

Alaska lobbyists and telecommunications executives said the state offers one of the hardest-to-serve geographic areas in the United States and they have made great strides in Internet access in Alaska.

Christine O’Connor, executive director of the Alaska Telecom Association, said the grants have improved access and reduced costs for people in rural Alaska.

“There is simply no way for rural Alaska communities to be connected to Anchorage or the rest of the United States and the world” if consumers living in rural Alaska communities had to pay the full cost, she wrote in a statement to the Daily News and ProPublica.

But Daniel Lyons, a former lawyer whose firm represented Verizon and AT&T and who now teaches Internet law at Boston College Law School, said the grant program is broken. The fundamental problem: no one has ever rigorously tested whether it works.

“It’s not proven to be a success,” said Lyons, who specializes in telecommunications and Internet law, “because the FCC is not very good at auditing its program.”

In Shoffstall’s case, the FCC pays his company the equivalent of about $800 per month per customer. Lyons advocated abandoning that approach and sending the subsidy directly to consumers, letting them choose which provider gets their money. In Alaska, that could mean Starlink, although some new users say they’re being charged a $1,500 “high demand” fee to sign up, or its future satellite competitors like Amazon Leo.

“If the goal is to ensure that everyone has access to the Internet,” Lyons said, “you try to find the families who can’t afford the service at market rates and give them subsidies directly.”

Money for homes without Internet

Alaska’s outsized share of the subsidy can be traced back to a man memorialized by a life-size bronze statue at the Anchorage airport.

Senator Ted Stevens – “Uncle Ted” – spent 40 years doling out federal money to Alaska and was nearing the height of his power in 1996 when Congress passed the Telecommunications Act, creating the modern Universal Service Fund.

This was before smartphones or Netflix. Most American homes didn’t have Internet, and in the late 1990s, “high-speed” service meant 200 kilobits per second — faster than dial-up modems but too slow to play high-definition video. Today, the FCC defines broadband, which is just another way of saying high-speed Internet, as 100 Mbps. This is 500 times faster than in the 90s.

As chairman of the committee that controlled the FCC budget, Stevens ensured that Alaska telecommunications received special treatment, according to Carol Mattey, a former FCC official who oversaw subsidy reform efforts.

“It would be suicidal to do something that would make the chairman of the Appropriations Committee angry with you,” said Mattey, who served as deputy head of the commission’s Bureau of Wireline Competition.

Stevens lost re-election in 2008 while facing a corruption charge that was later dropped. He died two years later in a plane crash while leaving a private lodge owned by GCI, the Alaska telecommunications giant. GCI’s current president and chief operating officer, Gregory Chapados, is Stevens’ former chief of staff.

A GCI spokesperson wrote that although Stevens chaired the Appropriations Committee, he did not at the time chair the Senate Commerce Committee, which wrote the telecommunications law and oversees the grant program. Chapados, who served as Stevens’ chief of staff from 1986 to 1992, was not involved in the development of the telecommunications law, the company said.

The company said it “maintains a constructive working relationship with all members of our delegation to advance the interests of our customers and all other Alaskans.”

Nationally, the grant program allows payments to any company that the FCC or state regulators have designated as an “eligible telecommunications carrier.” The amount they will receive depends on whether they want to provide internet to village schools, health clinics or just isolated communities.

In its statement to ProPublica and the Anchorage Daily News, GCI said: “There is no provision in the law regarding telecommunication communications granting special treatment to Alaska. » But the state is treated differently in practice. In 2016, the FCC created a program called Alaska map specifically for carriers here, allowing them to negotiate their own performance targets rather than being subject to the same cost models applied elsewhere.

Alaska’s geography made it particularly difficult for the agency to estimate the cost of serving customers in the state, Mattey said. The FCC assumed that companies would only set goals that they could achieve.

They tried to adjust the national formula for distributing the money to account for that factor, Mattey said, but Alaska Telecommunications continued to slide backwards and FCC officials gave up.

“We tried very hard not to treat Alaska differently because our goal was to create defined deployment obligations for all companies, and we failed,” she said of the 2016 reforms. “The political pressure was too much.”

Summit received $12 million over the past decade by promising to provide internet to 337 locations in a collection of wooded roadside neighborhoods just north of Fairbanks. Summit filings show dozens of new connections in some years, for a combined total of 271 in 2025.

But according to the FCC interactive map of all the locations that U.S. telecommunications companies report serving over the Internet, the number of customers using Shoffstall’s service is much lower. In a telephone interview, the company’s interim chief executive, James Perry, said Summit has about 120 Internet customers and 160 total.

Mattey said the program’s rules say nothing about ensuring that lines built by a grant recipient are actually used — only that they are built.

Companies that fall behind in building their network may see their reduced subsidies. But they are allowed to continue collecting money long after the technology they use has become obsolete as customers have moved to cheaper solutions. They find faster alternatives or their community has become a ghost town.

“They play by the rules, so to speak,” Mattey said. “It’s a fixed amount that the government has decided they are entitled to.”

Off-grid

Shoffstall’s penchant for making his own rules first got him into trouble in 1996. State prosecutors charged him with a misdemeanor for mailing documents that mimicked court rulings in tone and language to an Alaska bank, demanding money.

The trial ended without a verdict when Shoffstall agreed to change his plea from not guilty to no contest. He received a suspended sentencea judgment pronouncing a conviction without prison time, subject to the end of probation. Over the decades, he continued to file documents in state courts, federal courts and the Alaska Department of Natural Resources, claiming to be a sovereign citizen not bound by the same legal systems as other Alaskans.

An electrical technician by training, Shoffstall purchased the business for about $675,000 in 2000.

Shoffstall’s clients live primarily in the hills north of Fairbanks. Some just off the highway. Some at the end of snowy roads littered with warning signs like: “You are no longer an intruder. You are a target.”

People moved here when the famously independent and wild town of Fairbanks seemed too urban. They moved here to escape the grid. Not on it.

Among Shoffstall’s clients was a Sunday school teacher who arrived in Alaska in 1981, answering phones for a small insurance company.

In the late 1990s and early 2000s, still in the days of landlines and dial tones, Lois Sannes found herself frustrated by a surcharge added to calls in the Summit service area. She began complaining to the Alaska Regulatory Commission.

She wrote so many letters to the governor that someone wrote back to her. Sannes met with an attorney who she said told her the IRS had opened a criminal investigation into Shoffstall.

Moreover, Shoffstall’s company was under the control of the regulatory commission itself.

When Summit sought approval of the rates it charged other telecommunications companies to use its phone lines, the commission allowed them to review Summit’s unredacted financial reports. A consultant hired by rival telecommunications companies testified before the commission that Summit expenses appeared unusually high, poorly documented, and in some cases linked to transactions between the company and Shoffstall himself.

About 95% of the company’s revenue during that period came not from phone customers, but from the federal subsidy program and payments redistributed through the telecommunications industry itself, according to Summit audited financial statements filed with state regulators.

The dispute before the regulatory commission ended when Summit and its competitors agreed to a settlement. The commission issued no conclusions as to whether there were indeed problems with Summit’s books, as the consultant’s report had outlined.

But a new legal problem arose for Shoffstall – this time from the IRS, whose investigation Sannes had heard about. On September 15, 2009, a federal grand jury indicted Shoffstall on allegations of criminal tax evasion. The charges say he “deliberately evaded paying his income taxes” for at least eight years starting in 1996.

Shoffstall’s former accountants testified against him.

“I told him he was going to get caught, that’s not a question,” accountant Garry Hutchison told the jury. “The only question is whether or not it would lead to the downfall of the company.”

A Fairbanks jury found Shoffstall guilty on Feb. 5, 2010, after a five-day trial.

The FCC has the authority to terminate grants to recipients found guilty of fraud and other financial crimes related to the grant program. The agency must interpret the extent to which the crime should be related to the payment of grants.

On the one hand, Shoffstall’s indictment says he used his position as head of a federally subsidized company to obstruct the IRS investigation. On the other hand, the conviction involved tax evasion related to money he personally owed to the IRS.

There is precedent for the FCC to closely examine a grant recipient who has been convicted of individual income tax evasion.

The FCC’s Wireline Competition Bureau has asked the Universal Service Fund administrator to investigate whether Hawaii-based Sandwich Isles Communications abused its subsidies. This action follows owner Albert Hee’s conviction for federal tax crimes in 2015.

The FCC fined Sandwich Isles and Hee $49.6 million and ordered the company to repay $27 million in subsidies it described as improperly received. Hee’s lawyers disputed the charges, arguing that he hid nothing and that the government mistook the accounting errors for criminal intent. A jury disagreed.

It is unclear whether the FCC investigated Shoffstall after his conviction; the agency did not respond to questions about the case.

But records show that Shoffstall’s company continued to receive grants from the Universal Service Fund, even while Shoffstall was in prison. Two months after his release in January 2013, Summit declared having collected $1.1 million in annual grants.

When Shoffstall’s probation officer told a federal judge that Shoffstall was ignoring his probation requirements, he was arrested on December 9, 2013, and returned to prison for several months. His company received $859,393 in Universal Service Fund grants during that time.

In the years that followed, Summit’s grants increased. FCC Data shows that Summit received one of the highest levels of federal grants per customer in the country in 2016.

Beginning that year, Shoffstall’s company paid him an annual salary of up to $121,000 and paid an annual dividend of up to $155,000 to a holding company in which he was the sole shareholder. His company stopped publicly disclosing this information after 2016 as the Alaska Regulatory Commission stopped requiring detailed annual reports, leaving far less financial information publicly available.

Sannes, the former Summit client who once lobbied state regulators to take a closer look at the company, now lives in Wisconsin. Asked if she was surprised to learn that the company’s subsidies not only continue today, but have increased to $1.5 million a year, Sannes said she had assumed her criminal conviction alone would have been enough to wipe out the money.

“I’m horrified,” she said.

Unplugged

Summit Telephone is named after a mountaintop, Cleary Summit, outside of Fairbanks. Sled dogs can be heard howling from their plywood homes, and every now and then a tractor-trailer barrels down the highway, swirling with snow while hauling gold ore from strip mines.

In winter, you can watch a rocket launch from a valley a few miles north, at the world’s only university-operated rocket launch site. The hills are known for their world-famous Northern Lights and a collection of Airbnbs and lodges lining winding roads.

As grants flowed into Summit, Shoffstall continued to create and distribute documents intended to resemble court orders. He filed papers in federal court arguing he didn’t have to pay taxes — in one filing in 2017 accusing the federal government of “serious crimes” against him, in another issuing what he called “summary judgment” against President Donald Trump for “fraud, collusion and conspiracy.”

None of that stopped the state’s telecommunications industry from holding him up as a model. O’Connor, executive director of the Alaska Telecom Association, cited the summit before state lawmakers in 2018 as an example of a company being forced to “making do with outdated technology” rather than modern ser its network due to the burden of excessive state regulation. Raising rates to allow for upgrades would have required Summit to argue to regulators that the fee increases were necessary.

When asked whether having a company like Summit receive about $10,000 per customer per year in federal grants was an appropriate use of public funds, O’Connor did not answer directly. In a written response, the Alaska Telecom Association said the program “is specifically designed to support the construction and operation of telecommunications networks in high-cost areas” and that participating providers “are subject to FCC program requirements, reporting obligations, and oversight.” When asked if she stood by her characterization of the Summit in 2018, O’Connor said her testimony focused on the challenges facing small providers in general.

Shoffstall has never upgraded to expand its service. According to the FCC’s broadband map, Summit equipment today remains incapable of providing an Internet connection at speeds faster than 25 Mbps, a quarter of the FCC’s current definition of broadband.

In the meantime, the Internet market has changed. Some Alaskans no longer need or want the slower, subsidized service.

On a recent Saturday, Philip Marshall, 74, dug a waist-high tunnel through the snow to a cabin near the mountain’s summit. A wood sculptor, he wore a red ski cap decorated with the Danish flag. Asked about his Internet access, he invited a reporter inside and made him a pot of black tea.

Marshall said his wife, Janet, moved into this cabin before he met her. The construction boom for the 800-mile trans-Alaska pipeline had driven rents so high within Fairbanks city limits in the mid-1970s that she moved here outside the city. Like many cabins outside of Fairbanks, the house is “dry,” meaning there is no running water. The ancients carried the building itself up the mountainside on sleds.

In interviews, several Marshall neighbors said they had no complaints about the internet speeds Summit provides. One said she paid Summit $95 a month and the Internet suited her needs just fine. Another, who retired after a career at remote radar sites in Alaska, said he also used the service. But it recently added satellite Internet.

Others who opted for low-orbit satellite dishes, which offer speeds up to 10 times faster than Summit for about the same price, abandoned their Summit plans altogether. Recently, on a particularly clear evening, Marshall stood in the snow and counted 18 satellites passing overhead in nine minutes. “Starlink,” he said.

The company and parent SpaceX did not respond to questions or release the number of users in Alaska. But Ookla, a company that offers tools people can use to test their Internet speed, offered an indirect measure: About 1 in 10 Alaskans tested their home Internet speed through Ookla connected via Starlink, compared to about 1 in 67 in California.

The Marshalls did not feel the need to pay for any of these services. Their cell phones offer five-bar 5G service from a nearby tower. Finishing his tea, Marshall put on his jacket to go back outside. A path to the latrines still needs to be dug, he said.

In one corner of the room, a plastic box the size and color of a concrete brick sat near the floor. It is for the Summit Internet line that the company receives public subsidies for the provision of about $10,000 per year. Unplugged and unused.