Instead, Hawaii Direct Telephone is a couple of guys from Texas with a knack for vacuuming pennies. They make their money by buying phone service at a discount from Verizon, then reselling it to Hawai'i residents for a few dollars more. They outsource their customer service, and don't own much besides their company's name.

It's a risky venture, with profit margins thinner than rice paper. But Hawaii Direct Telephone, which opened last fall after getting Public Utilities Commission approval, does offer an alternative to Verizon, and the newcomer's rate packages have caused consumers and their huge local competitor to notice. A recent promotional blitz offers "bundled" services, including local service, long-distance minutes, caller ID and voicemail, at a rate far cheaper than buying the individual service from Verizon.

Verizon has responded with new rate packages of its own, though it says Direct Telephone has barely scratched its customer base.

"Price isn't the only consideration when shopping for telecom services," said Ann Nishida, Verizon's local spokeswoman.

Still, Hawai'i's dominant telecommunications carrier says it has lost some market share in the past year, either to land-line competitors such as Hawaii Direct Telephone or Time Warner Telecom, which offers telecommunications services to businesses, or to increasing wireless use.

Hawaii Direct Telephone is trying to be the first Verizon rival to survive as a provider of residential land-line telephone service. Until the mid-1990s, dominant local phone companies such as Verizon and its predecessor, GTE Hawaiian Tel, had a monopoly on land-line phone service, protected as utilities by the federal government.

New laws have since forced the main local carriers to open their networks to rivals, which can buy services for resale. Typically, a competitor will lease a batch of phone numbers or lines, getting a bulk discount from the main local carrier.

For example, say a phone company charges $20 per month, tax and fees included, for no-frills residential service. Along comes a rival, which purchases a few thousand lines for $17 a month — a 15 percent discount.

The rival can then make money by selling those lines for, say, $18 per month — meaning it's undercutting the phone company by $2 per month, meanwhile making $1 per line in operating profit.

That's what Hawaii Direct Telephone is doing. Verizon has given Hawaii Direct Telephone a 15 percent general discount, according to a contract approved last September by the Public Utilities Commission.

Pulling this off, however, is one of the most difficult feats in the cutthroat telecommunications industry.

Many line-leasing competitors have become victims of the industry crash of 2001, when dozens of huge, free-spending companies simultaneously ran out of money. Plus the economy has slowed, competition from wireless providers has increased and the huge financial hangover facing the telecom industry has caused many phone companies to raise rates.

All of this puts immense pressure on the bottom line of companies such as Hawaii Direct Telephone, which will see its profits rapidly vanish as costs increase.

"If you're dependent on reselling someone else's services and facilities, it's much more difficult to be successful," said Galen Haneda, general manager of Time Warner Telecom in Hawai'i.

Despite the risks, Hawaii Direct Telephone has taken steps indicating it wants to stick around. The company has hired Summit Communications, a bankrupt but still operational telecommunications firm in Honolulu, to provide local marketing and customer service. Radio ads and a Web site urge customers to sign up for service packages, which cost between $40 and $60 per month.

"We've tried to lay real low until now," said Jared Grugett, a Summit employee who oversees Hawaii Direct Telephone's customer service.

Hawaii Direct Telephone president Nik Thomas, a Texas resident, did not respond to requests for comment on his company's strategy. But the all-outsourced, shoestring-budget approach appears to be one that Thomas and two other Texan businessmen are using in many states.

Direct Telephone Co., based in Katy, Texas, near Houston, has line-leasing agreements in at least 10 states from Texas to Florida.

Along with Thomas, key officials include company founder E.B. "Tommy" Thomas, a former Meineke Muffler franchise executive and real estate owner who plunged into telecommunications in 1997, and chief operating officer Seth Block, an accounting professional who has served as controller for several Texas companies.