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The Honolulu Advertiser
Posted on: Thursday, March 30, 2006

Verizon Hawaii era coming to an end

By Sean Hao
Advertiser Staff Writer

Chris Tuitele is an affiliate service support representative for Hawaiian Telcom and provides DSL support over the phone to online customers, who must change their e-mail address.

DEBORAH BOOKER | The Honolulu Advertiser

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Two years after the sale was announced, Hawaiian Telcom will break all ties with its former parent, New York-based Verizon Communications Inc., on Saturday and begin a new chapter as a Hawai'i-run phone company.

All human resource, finance, marketing, information technology and other so called "back office" jobs that previously were on the Mainland will shift to Hawai'i on that day. The switch will mark the final step in the $1.6 billion sale of Verizon Hawaii to the Washington, D.C.-based global equity firm The Carlyle Group and a small group of local investors.

Carlyle promised when it bought the company and changed the name to Hawaiian Telcom that it would move all operations and jobs back to Hawai'i from the Mainland.

Hawaiian Telcom says the switch to a locally run telephone company will improve customer service, lead to new products and bring a net increase of about 150 jobs to the state.

Despite more than a year of planning and preparation, customers should be prepared for a slight slowdown in customer service next week as functions are passed from Verizon to Hawaiian Telcom.

"That'll probably be the most painful week of the transition," said Mike Ruley, Hawaiian Telcom's chief executive officer. "Undoubtedly we'll have some bumps in the road."

The problems should be limited to special customer needs such as getting a new phone line or getting a question about a bill answered not the quality or reliability of basic phone service.

Hawaiian Telcom is spending $100 million to bring Verizon's back-office operations to Hawai'i and to integrate systems to speed up customer service. This includes opening a local customer-service center that employs about 35 people and will be open at all hours. Such services were provided from the Mainland under Verizon.

Hawaiian Telcom customer Rick Korngut, a handyman in Kapahulu, said the changes at Hawaiian Telcom should be good for customers.

"I do think it's better," he said. "I'm all for it."

Among the more immediate changes that customers will notice is a new billing system allowing online payments. Verizon Hawaii had an online bill-paying system but that service hasn't been available during the transition. In addition, Hawaiian Telcom customers that subscribed to Verizon long-distance service will automatically become Hawaiian Telcom long-distance customers.

Consumers who get their Internet access via Hawaiian Telcom's digital subscriber line, or DSL, will have to switch their e-mail address from verizon.net addresses to hawaiiantel.net starting Saturday.

The larger question for consumers may be who will own Hawai'i's largest phone company in the future and what will happen to customer rates and the company's 1,800 employees if Carlyle's heavily leveraged buyout doesn't pan out.

Those were among a host of concerns raised during a yearlong vetting by the state Public Utilities Commission when it looked into the sale. Carlyle has said it will only be an interim owner of the phone company. Ultimately Hawaiian Telcom could be taken public or privately sold.

"I'm not sure how that will play out," said Scot Long, business manager for the International Brotherhood of Electrical Workers Local 1357, which has 1,150 members working at Hawaiian Telcom. "I'm not opposed to anybody making money as long as they take care of my members."

The changes at Hawaiian Telcom come at a time when traditional wired phone companies are fighting to keep customers from migrating to competitors, including cell phone companies and, more recently, cable companies that offer phone service and voice over Internet phone companies.

Phone companies can only partially offset the loss of phone business by growth in nontraditional services, such as high-speed Internet access, according to a report released this week by technology research firm In-Stat. As a result, wireline service sales in the U.S. will decline by 3.3 percent annually on average until 2009.

Hawaiian Telcom's Ruley said the company recognizes the need to adapt to the changing environment.

"It's a very competitive industry," he said. "It's kind of a collision of industries right now with cable and telecommunications coming together and wireless in there as well.

Hawaiian Telcom plans to eventually offer faster Internet service and a new video service that will compete with cable TV.

"Ultimately that benefits consumers," Ruley said.

"We think competition is good and we'll let the customer decide which way they want to go (and) who they want to stay with."

Reach Sean Hao at shao@honoluluadvertiser.com.