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The Honolulu Advertiser
Posted on: Thursday, November 16, 2006

HawTel service issues will take months to fix

By Greg Wiles
Advertiser Staff Writer

It will be well into next year before Hawaiian Telcom, the state's biggest telephone company, straightens out service problems that have given it a black-eye with many customers and hindered some of its operations.

"There still remains a significant amount of work to be done," Michael Ruley, Hawaiian Telcom chief executive officer, said yesterday in a conference call with investors.

"It will be several quarters before we think we can return to a more normal operating mode than the one we're in today."

Hawaiian Telcom was formed last year after the Washington, D.C.-based Carlyle Group bought the company from Verizon Communications Inc. for $1.6 billion. Hawaiian Telcom has been having trouble with customer service since it took over all operations in April.

"They're good people, but they are working with a broken system," said Hawaiian Telcom customer Marilyn Vrana. The McCully resident said she tried to get Hawaiian Telcom's staff to answer a question she had about her bill but gave up after no one could give her an explanation.


Hawaiian Telcom said yesterday its customer care, order management, billing and financial reporting systems are still not working properly because a management consultant hired to build its information technology systems, BearingPoint Inc. of MacLean, Va., hadn't delivered systems that were operating properly. Hawaiian Telcom relied on the systems when it took over from Verizon.

Since then, customers have complained about billing errors, long waits to reach service representatives and other problems. Ruley said Hawaiian Telcom has hired other contractors and had employees work overtime to help resolve problems.

While it will take months before all of the systems are functioning properly, customers should see progress, company spokesman Dan Smith said. The average customer service call hold time is down from 28 minutes in May to under 4 minutes now, he said. The state requires the company to answer 85 percent of customer calls with a live voice within 20 seconds.

"There have been improvements, but certainly not enough," said Smith.

Said Ruley, "Our performance remains at an unacceptable level today."

A quarterly filing with the U.S. Securities and Exchange Commission shows the company has spent $11.3 million on outside consultants and services to resolve its back-office and information technology system problems.

Ruley said the company is in talks with BearingPoint about recovering some of what it's spent resolving the situation. BearingPoint has acknowledged there were delays in meeting deadlines at Hawaiian Telcom and that it was in discussions with the company.


Under the terms of the sale to Carlyle, Hawaiian Telcom was to take over operations from Verizon in February. In its SEC filing, Hawaiian Telcom disclosed it spent $22.3 million on a two-month extension with Verizon as it waited for BearingPoint to get the systems built.

The Honolulu-based utility hasn't disclosed how much it is seeking in damages from BearingPoint. But Smith said the company's contract states that it can recover costs incurred because systems don't function properly.

Hawaiian Telcom also said yesterday it won't start offering an Internet-based television service until the second half of next year. The company earlier had thought it might begin offering the service by the end of December.

The company said the rollout is being delayed in part to make sure it lines up the right features and functions as technology evolves.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.