Cell-phone competition rises

By Sean Hao
Advertiser Staff Writer

Honolulu cell-phone users will soon benefit from growing competition as Hawaiian Telcom launches a local wireless phone service next month, followed by local startup Coral Wireless early next year.

Coral Wireless president Bill Jarvis says the new entry in the Honolulu market will offer unlimited local and long-distance wireless calling for a flat fee of $49.95 a month when it launches next year. Another service, from Hawaiian Telcom, will debut next month. Gregory Yamamoto • The Honolulu Advertiser

"It will be unlimited local and long-distance with no contracts and no overage penalties," said Bill Jarvis, president and chief executive of Coral. "We want to make it simple for the customer."

Coral customers will have to pay in advance and initially won't be able to use their phones on the Mainland or have high-speed Internet access.

Unlike Coral, Hawaiian Telcom won't be building its own wireless network. Instead, the company will partner with an unidentified existing provider, and offer the service under the Hawaiian Telcom brand name.

Hawaiian Telcom is the company formed by Washington, D.C.-based Carlyle Group to take over Verizon Hawaii, the state's largest phone company. Carlyle's purchase of Verizon Hawaii for $1.6 billion is expected to close in early May.

Hawaiian Telcom said it will offer a wireless service that competes on convenience and cost savings created by buying bundled residential and wireless phone services. The company wouldn't disclose further details of its plans or prices.

"We are interested in meeting all of the telecommunications needs of our customers and they will be rewarded as they choose to make more product or service purchases from Hawaiian Telcom," said Jon Gelman, Hawaiian Telcom's vice president and general manager for wireless services, in an e-mail reply. "This will be a key point of differentiation from our competitors."

Market growing

While convenient, discounts provided by buying both wired and wireless services from one company typically aren't compelling enough to draw large amounts of new customers, said Toll Hart, a senior analyst at Gartner Research.

"It's starting to happen more," Hart said. But "you usually don't get a really deep discount."

Coral and Hawaiian Telcom are entering the wireless phone market as consumers slowly shift away from traditional wired dial-tone service. Last year, 14.4 percent of U.S. consumers used a wireless phone as their primary phone — a figure forecast to rise to 29.8 percent by 2008, according to industry research firm In-Stat.

The two newcomers will enter a field dominated by larger, nationwide competitors. But despite their small size, the pending arrival of Hawaiian Telcom and Coral promises to bring increased competition, lower prices, possibly better service and new jobs.

Coral, which now has 17 employees, plans to add 65 more workers this year. Hawaiian Telcom wouldn't provide employment figures, though the company already has advertised for nine open management positions in its wireless business.

The shift away from wired phones should help a company such as Coral, said telecom analyst Hart.

"There is a market for that kind of service," Hart said, referring to Coral's plan to offer unlimited calls for $50 a month. "It's a niche that you can make some money on. The advantage is it's as much as you want — all you can eat."

Clinton Abe, a salesman in Kailua and T-Mobile customer, said he'd consider switching services, if the price were right.

"I'd find that attractive, if it's unlimited calling anywhere in the U.S.," he said. "But if it's a company without ties to a major company I'd be a little worried about them going out of business."

More ahead?

Increased competition isn't expected to end with Coral and Hawaiian Telcom.

"We've discussed wireless," said Alan Pollock, vice president of marketing for Oceanic Time Warner Cable. "It's certainly the future. But not in the near future."

While Hawai'i consumers are getting two new wireless options, some familiar names in wireless are disappearing or changing because of consolidation. This year, Sprint PCS and Nextel Communications will merge to become Sprint Nextel. Last year, Cingular and AT&T Wireless merged to become Cingular Wireless. Those two plus Verizon Wireless and T-Mobile are Hawai'i's major wireless companies.

Verizon spokeswoman Georgia Taylor acknowledged the company doesn't offer a comparably priced service to the one planned by Coral. Verizon Wireless will compete based on the quality and reliability of its service, she said.

"The main thing that we have is the quality of our network," she said. "It's easy to say you're launching a network. It's another thing to launch a reliable service. We would put our network up against anyone coming into the Hawai'i market."

Coral Getting started

Coral won't disclose how much it's spending to build its phone network and retail store system. However, the company has received at least $8 million from Boston-based M/C Venture Partners and Alexandria, Va.-based Columbia Capital, which also was an investor in former Honolulu tech startup Pihana Pacific.

To be successful, Coral will have to overcome numerous challenges — including the massive marketing budgets of larger competitors, said Kirk Parsons, senior director for wireless services at J.D. Power and Associates. Additionally, the startup will have to manage its network construction costs.

"The idea of having unlimited calls for a fixed amount is appealing," Parsons said. " ... Something they'll have to pay attention to is cash as well as how fast they are going to be building out their network.

"At the same time, the competition is not going to be sitting still."

Coral had planned to launch its service several years ago, but its wireless spectrum license was tied up in a lengthy battle with former license holder American Wireless License Group LLC. Under an extension granted by the Federal Communications Commission last year, Coral Wireless LLC has until late June to finish construction of its communications network and offer service to at least one-third of O'ahu's population or face losing its license.

That deadline will be met but Coral won't commercially launch its service until next year as it spends the rest of this year fine-tuning its offerings, Jarvis said.

"We're not over here with our feet up," Jarvis said. "We've got a lot of work to do before we're ready to hit the gas."

Reach Sean Hao at 525-8093 or shao@honoluluadvertiser.com.