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The Honolulu Advertiser
Posted on: Saturday, May 13, 2006

Television via phone on O'ahu a step closer

By Sean Hao
Advertiser Staff Writer

Hawaiian Telcom has taken a step closer to offering television service on O'ahu.

This month Hawai'i's major phone company applied for a cable franchise license from the state, which would give Hawaiian Telcom the right to offer video service over its phone lines in competition with Time Warner Oceanic Cable.

"There will be some trials first," said Hawaiian Telcom chief executive Mike Ruley. "Our hope initially is to launch the service this year."

Ruley stressed that the company's immediate concern is fixing lingering customer service problems and other glitches resulting from a recent change in ownership. Longer term, the company plans to position itself as a major alternative to cable television.

For Hawaiian Telcom, which has 1,800 employees, the drive to offer video comes amid increasing competition from wireless and cable companies. Last year Oceanic began offering telephone service.

To get into the video business Hawaiian Telcom not only needs state permission. The company also needs to upgrade its Digital Subscriber Line network to second-generation speeds, which are about three times faster than current DSL speeds.

The new technology uses the Internet to send video to customers, who would receive TV service via a special set-top box. The service will be available only to Hawaiian Telcom's DSL customers.

If Hawaiian Telcom succeeds in offering television services, the dividend for consumers could be lower prices. Competition from telephone companies has helped push the cost of TV services down 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.

Hawaiian Telcom is not yet discussing details such as channel line-ups and rates.

"Because we still have important details to address and for competitive reasons, we're not providing extensive details at this time," said company spokeswoman Ann Nishida. "We are excited about the possibilities for IPTV (Internet Protocol Television) in Hawai'i and will provide more details when we are closer to a launch."

In its filing with the state Department of Commerce & Consumer Affairs, Hawaiian Telcom said the new service will be comparable with those offered by telephone company SureWest in Sacramento, Calif. The department has about 120 days to act on Hawaiian Telcom's application.

SureWest offers a bundled package of local phone, television and broadband Internet service for $100 a month, according to company spokesman Ron Rogers. The service has more than 17,000 subscribers, out of a potential total base of 89,000, he said.

SureWest's IPTV service offers more than 260 channels including HBO, Showtime and Starz and high-definition TV, which are provided over a fiber-optic network that extends to the home.

Hawaiian Telcom's network also uses fiber, but will connect to homes using traditional copper wire.

The key challenges for IPTV providers is competition from companies such as cable TV providers and overcoming the public's lack of awareness of the new service, said Jimmy Schaeffler, a senior analyst at telecommunications consultant with The Carmel Group, in Carmel-by-the-Sea, Calif.

Phone companies have long sought to offer TV services but have been slow to do so because of high costs and technical challenges.

Oceanic said it isn't too concerned about a potential new competitor.

"It was easy for cable to get into the phone business," said Alan Pollock, vice president of marketing for Oceanic.

"Fortunately for us, it's not easy for phone companies to get into the cable business. They (Mainland phone companies that have gone into the television business) really have been having a lot of problems and for the most part they haven't been successful."

Reach Sean Hao at shao@honoluluadvertiser.com.

Correction: The use of traditional copper wire in Hawaiian Telcom's phone network will not result in a more limited channel lineup in the company's planned television service. A earlier version of this story contained incorrect information.