Internet service providers who accept government funding in exchange for providing Internet access in rural areas were "reminded" this week that they're not allowed to use the money for food, alcohol, entertainment, personal travel, and other expenses unrelated to providing Internet access.

The Federal Communications Commission issued a public notice with a "non-exhaustive list of expenditures" that cannot be reimbursed. The list includes all of the above as well as political contributions, charitable donations, scholarships, payment of penalties and fines, club membership fees, sponsorships of conferences and community events, gifts to employees, and personal expenses of employees and family members "including but not limited to personal expenses for housing, such as rent or mortgages."

The ban on using subsidies for food includes but is "not limited to meals to celebrate personal events, such as weddings, births, or retirements," the FCC said.

This money comes from the Universal Service Fund (USF), which is paid for by Americans through fees imposed on phone bills.

Commissioners Mignon Clyburn and Michael O'Rielly wrote that while "the vast number of providers" would not take advantage of the system, "there are unfortunate examples to the contrary and spending on outrageous items has occurred."

Commissioner Ajit Pai detailed one example in a statement attached to the public notice:

Since 2002, Sandwich Isles Communications [in Hawaii] has collected $242,489,940 from the federal Universal Service Fund to serve no more than 3,659 customers. During that same time, Albert Hee, the owner of Sandwich Isles’s parent company Waimana Enterprises and affiliate ClearCom, apparently used the company as his family’s personal piggy bank. For example, the companies apparently paid $96,000 so that Hee could receive two-hour massages twice a week; $119,909 for personal expenses, including family trips to Disney World, Tahiti, France, and Switzerland and a four-day family vacation at the Mauna Lani resort; $736,900 for college tuition and housing expenses for Hee’s three children; $1,300,000 for a home in Santa Clara, California for his children’s use as college housing; and $1,676,685 in wages and fringe benefits for his wife and three children.

Hee was convicted of federal tax crimes not specifically tied to the FCC funding, and he hasn't been sentenced yet. Pai criticized the FCC for "turn[ing] a blind eye to such conduct for so long" and urged his colleagues to launch a full investigation of Sandwich Isles and "recover whatever funds we can for the American taxpayer."

Pai said this week's public notice and the recent suspension of USF payments to Sandwich Isles appear to be a reaction to Hee's conviction. Sandwich Isles was spending $5.5 million more "on corporate operations each year than similarly sized companies," and seven years ago dropped a $1.9-million-per-year lease with an undersea cable network to go with a $15-million-a-year lease with a company affiliated with Hee's three children, Pai said.

The FCC-issued public notice said ISPs that use USF money for anything other than providing communications services to rural areas could have to give money back, face enforcement actions from the FCC, and be prosecuted under the False Claims Act.

Clyburn and O'Reilly said the rules still need changing. "We remain concerned that certain expenses not related to the provision of service, such as for artwork and cafeterias, may oddly be permitted under certain readings of our rules," they said. "These decades-old precedents, created under very different circumstances, must be realigned to reflect the Commission’s more recent reforms. We believe it is appropriate for the Commission to initiate a proceeding to address these issues in the coming months."

In August, the FCC used the USF Connect America Fund to award $1.5 billion in annual support to Internet service providers who pledged to serve 3.6 million homes and businesses. The carriers are required to provide 10Mbps Internet service at rates "reasonably comparable to those in urban areas." They include AT&T, CenturyLink, Cincinnati Bell, Consolidated Telecom, Fairpoint, Frontier, Hawaiian Telcom, Micronesian Telecom, and Windstream. Frontier will also get money in Texas and California territories that it is purchasing from Verizon.