Customer bonus in Verizon deal
By Sean Hao
Advertiser Staff Writer
Verizon Hawaii customers will get a $20.70 credit on their bills when the state's main telephone company is sold to The Carlyle Group, according to a plan announced yesterday by the state's Division of Consumer Advocacy.
Carlyle, a global equity firm, proposed in May to buy Verizon Hawaii for $1.65 billion and is waiting for regulatory approval. To win support, Carlyle promised not to seek a general rate increase before 2009.
In addition, Verizon Hawaii agreed to pay customers a $20.70 credit on their bills if the company is sold to Carlyle.
The one-time "customer appreciation credit," which must be approved by the state Public Utilities Commission, would be available five months after the purchase by Carlyle.
"Seeing as how that's half our phone bill, that would be good," said Francine Ahinga of Wahiawa. "But not if they're going to raise rates right away. I think in a few years it will probably go up, but not right off the bat."
Carlyle, which plans to change Verizon Hawaii's name to Hawaiian Telcom, said in August that it didn't expect to increase rates in the first 10 years of service. Carlyle also said the sale will benefit consumers by making Hawai'i's main phone service provider a locally run company, which would improve customer service.
"That seemed intangible and not certain to happen," said John Cole, executive director of the state consumer advocacy office. Cole asked Carlyle to provide the $20 credit on phone bills as "a way to ensure that consumers benefit from the deal."
To prevent rates from rising, Cole proposed that the PUC not allow Carlyle to raise rates except under certain conditions.
"We didn't think the ratepayer should bear the risk," Cole said.
Mike Ruley, the CEO of the proposed Hawaiian Telcom, disagreed with some of Cole's analysis of the deal, but said the company agreed with his terms.
"The Division of Consumer Advocacy raised important issues for us to address and although we do not fully agree with the analysis, we will continue in the regulatory process and continue to take into account the interests of Hawai'i's consumers," he said in a written statement. "We are enthusiastic about our plans to become Hawai'i's local telephone company and look forward to the next step in the state regulatory process."
The Federal Communications Commission already has approved of the sale of Verizon Hawaii, which employs about 1,700 people. Carlyle still needs approval from the U.S. Justice Department and the state PUC to proceed with the purchase. Carlyle also is seeking federal approval to raise the allowable foreign investment in the deal to a maximum of 47.2 percent, up from a 25 percent cap.
Cole said he supported the sale only if the PUC adopts his recommendations as conditions.
Kris Nakagawa, chief legal counsel for the PUC, said the consumer advocate's terms will be considered by the commission.
"They (PUC commissioners) basically have to decide on their own the company's position or the consumer advocate's position (and) how much weight to give the arguments," he said. "There's no real trend" in terms of adopting the consumer advocate's recommendations.
"They're treated like any other party," Nakagawa said.
The proposed sale includes Verizon Hawaii's local telephone operations and print directory, long-distance and Internet service provider businesses, but excludes Verizon Wireless.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
Correction: A previous version of this story said The Carlyle Group would pay customers a credit on their bills if Verizon Hawaii is sold to Carlyle.
