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The Honolulu Advertiser
Posted on: Saturday, April 1, 2006

HawTel lost 6% of land-line clients

By Sean Hao
Advertiser Staff Writer

Hawaiian Telcom's customer service center in Honolulu. The company, which severs ties with New York-based Verizon today, has mounted a campaign to persuade customers to keep their land lines. The rate of customers giving up their wires is said to be declining.

DEBORAH BOOKER | The Honolulu Advertiser

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Hawaiian Telcom, the state's largest telephone company, lost 6.3 percent, or more than 43,000, of its phone-line accounts last year amid stiff competition from wireless, cable and Internet companies.

Hawaiian Telcom expected to lose land-line phone customers, just not that rapidly.

The company, which today cuts all ties with its former owner, New York-based Verizon Communications Inc., said yesterday its phone-line accounts fell to 645,727 last year from 689,052 the year before.

The company's new owner, The Carlyle Group of Washington D.C., had expected the number of residential access lines to decline by just 1.3 percent annually through 2009, according to a 2005 regulatory filing.

"We are paying close attention to line loss," said Hawaiian Telcom spokeswoman Ann Nishida. "We have an internal 'Save the Line' campaign to educate consumers about the benefits of the land line and hope to see further improvements once our systems transition is complete and we are able to bundle products and services more effectively and more specifically for the Hawai'i market."

Nishida said the rate of line loss has declined each quarter since the business was acquired from Verizon Communications in May. The Carlyle Group bought Verizon Hawaii for $1.6 billion and changed the name to Hawaiian Telcom.

The erosion of the company's phone business is a likely factor behind plans by Hawaiian Telcom to start offering video services to high-speed Internet Digital Subscriber Lines , or DSL, this fall.

Last year's slowdown in demand for phone lines was partially offset by a 6.6 percent, or 4,888-line, increase in high-speed Internet lines. Hawaiian Telcom had 645,727 traditional phone, or switched-access-line, accounts and 78,973 DSL accounts at the end of last year.

Increased DSL use generated $11.1 million in added revenues last year, while revenues from local phone services fell by $30.3 million.

Overall, Hawaiian Telcom lost nearly $176 million last year mainly because of one-time charges relating to moving office functions from the Mainland to Hawai'i. That was down from a profit of $36.9 million posted by Verizon Hawaii in 2004.

Hawaiian Telcom is preparing to launch a television service via high-speed phone lines this year.

With its entry into television, Hawaiian Telcom would be the first local company to offer Internet, television, telephone and wireless telephone services in Hawai'i, which could help the company stem customer losses.

Companies such as Hawaiian Telcom and competitor Time Warner Oceanic Cable seek to package, or bundle, several services as a means of building loyalty among customers. The new technology that Hawaiian Telcom would use for its televison product is known as Internet Protocol Television, or IPTV, and uses the Internet to send video to customers.

Oceanic already competes for Hawaiian Telcom customers with its Digital Phone service. Still, Oceanic at its core remains a television service provider, not a phone company, said Alan Pollock, vice president of marketing for Oceanic.

"We are adding more people with Digital Phone, but we got into the telephone service so we could provide our customers one product, one bill," he said. "It's more of a defensive position, not to find an area for new growth at least that's the way it is now."

Reach Sean Hao at shao@honoluluadvertiser.com.