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The Honolulu Advertiser
Posted on: Wednesday, February 22, 2006

Phone company will offer new TV service

By Sean Hao
Advertiser Staff Writer

Time Warner Oceanic Cable, the dominant television provider in Hawai'i, soon will face a major new competitor, which could result in lower prices for all viewers.

Hawaiian Telcom, the state's largest telephone provider, is preparing to launch a television service via high-speed phone lines as soon as August.

Hawaiian Telcom would not say yesterday what it will charge, but a similar service on the Mainland charges $35 a month for 180 channels. Oceanic's standard service with 77 channels costs $41.70 per month, and its digital service with 198 channels costs $52.70, according to the company's Web site.

The lines among providers of telephone, television and Internet services has blurred in recent years. Hawaiian Telcom was first to move into Oceanic's territory when it launched high-speed Internet service several years ago, competing with Oceanic's RoadRunner service. Oceanic answered back last year when it began offering telephone service.

The competition often leads to lower prices for consumers.

"If they (Hawaiian Telcom) were to offer local channels at a price that's the same or lower than the cable company, I'd be happy," said Stan Tomyl in Kailua, Kona, who subscribes to DirecTV satellite television but buys local channels from Oceanic Cable. "They (Oceanic) have an attitude, and their attitude is they know they're the only business in town."

An Oceanic employee in Ho-nolulu said yesterday no one was available to comment for this story.

Ann Nishida, Hawaiian Telcom spokeswoman, said the ability to deliver television programming over high-speed phone lines is "one of the hottest technologies in telecommunications today, and it has the potential to really shake up the video market."

"We're excited about bringing this innovation to Hawai'i," Nishida said.

Competition from telephone companies has helped push the cost of TV services down by 28 percent to 48 percent in markets where both are available, according to a study by the Phoenix Center for Advanced Legal & Economic Public Policy in Washington, D.C.

With it's entry into television, Hawaiian Telcom would be the first local company to offer Internet, television, telephone and wireless telephone services in Hawai'i. Companies such as Hawaiian Telcom and Oceanic seek to bundle several services as a means of building loyalty among customers.

Offering TV service could help Hawaiian Telcom win back customers from Oceanic while keeping others from migrating to the cable company. Already cable's grip on the multichannel video market has slipped because of competition from satellite providers, including Dish Network and DirecTV.

Cable's share fell from 71.6 percent last year to 69.4 percent this year, according to a Federal Communications Commission report issued this month.

Phone companies have long sought to offer TV services. But that was delayed by high costs and technical challenges. Now high-speed digital subscriber lines (DSL) have made TV over phone lines a reality.

Hawaiian Telcom's planned TV service will be available only to the company's DSL customers.

On the Mainland, Verizon Communications offers television service to DSL customers for $34.95 a month. That includes 180 channels, including local channels and 20 high-definition channels. That excludes a separate $39.95 a month fee for high-speed Internet access. Premium cable channels such as HBO and sports programming packages also cost extra.

The new technology that Hawaiian Telcom would use is known as Internet Protocol Television, or IPTV, and uses the Internet to send video to customers. Customers must have a special set-top box to receive the TV service. Such services are available to only a small number of Mainland homes. At the end of 2004, there were 1.6 million telcom TV subscribers nationwide, according to tech research firm In-Stat. That number is forecast to reach 32 million by the end of 2009.

Hawaiian Telcom's plan to launch IPTV was mentioned earlier this month in comments submitted to the Federal Communications Commission. Hawaiian Telcom and other phone companies were asking the federal government to make it easier for them to obtain state and local government permission needed to offer video over telephone lines.

"We believe consumers will find our entertainment offerings very attractive," Hawaiian Telcom's Nishida said yesterday. "Consumers benefit from more choices, and we're excited to be entering this market sooner than IPTV may have been introduced to our state under our previous owner."

Hawaiian Telcom was created when Verizon Communications sold Verizon Hawaii to The Carlyle Group last year for $1.7 billion.

Reach Sean Hao at shao@honoluluadvertiser.com.