Hawaiian Telcom facing increased heat
By Sean Hao
Advertiser Staff Writer
Hawaiian Telcom should not face penalties if it can resolve outstanding customer service problems by the end of August, the state consumer advocate is recommending.
Hawaiian Telcom is in the midst of a state Public Utilities Commission investigation into the company's deteriorated customer service since a $1.6 billion sale in May 2005. After the sale, Hawaiian Telcom spent $100 million moving human resource, finance, marketing, information technology and other Mainland-based jobs to Hawai'i and integrating systems to speed up customer service.
The switch to a locally run telephone company was supposed to improve service, produce new products and bring a net increase of about 150 jobs to the state. But the transition in ownership from Verizon Communications Inc. to Hawaiian Telcom was fraught with difficulty.
The PUC investigation is focused on Hawaiian Telcom's decision to switch to its new in-house "back office" support systems in April 2006, even though those systems weren't yet fully functional. That resulted in erroneous bills, recurring billing problems, missed installation and repair appointments, and long waits for customer service. Those systems problems also have prevented Hawaiian Telcom from filing complete reports on customer service levels to the PUC for more than a year.
The company doesn't expect to resolve most outstanding issues until September — 17 months after they began. However, Hawaiian Telcom should not face any state-ordered remedies because it did not deliberately cause the problems, according to the state Division of Consumer Advocacy. The company should be given an opportunity to resolve these problems before the PUC considers imposing regulatory sanctions, according to document filed by the Consumer Advocate last week.
"However, should future negative impacts arise once again due to back-office cut over problems after August 2007, the Consumer Advocate would support the imposition of remedies including the requirement that an independent audit ... be conducted on Hawaiian Telcom since the company would have already been allowed what one would believe to be sufficient developmental time, cut over experience, and forbearance by customers," wrote Catherine Awakuni, executive director of the consumer advocacy agency.
Two Hawaiian Telcom wholesale customers that also are parties to the PUC proceeding — Time Warner Telecom and Pacific LightNet — are calling for an independent audit to determine the capability of Hawaiian Telcom's systems.
Hawaiian Telcom has acknowledged that its systems were not fully functional when it attempted to switch them on in April 2006. However, the company maintains that it put in place contingency plans that were supposed to address known and unexpected problems that could occur following the switchover.
Last week, Time Warner Telecom said Hawaiian Telcom should have not have attempted the switchover without ensuring its in-house systems worked.
"Such a blatant disregard for the commission's decision and order, and the conditions to its approval of this merger transaction, cannot be overemphasized, and indicate that additional regulatory oversight of HT's managerial conduct is essential if the state of Hawai'i and HT's retail and wholesale customers are to have any chance benefiting from the merger transaction rather than continuing to be harmed by it," Time Warner Telecom wrote in a filing with the PUC.
The consumer advocate also had harsh words for Hawaiian Telcom.
"In view of the large magnitude of the resulting system related problems that occurred after April 2006 cut over, however, one may question whether Hawaiian Telcom's initial efforts involved the right people and systems-integrating venders, whether the company's financial interest may have had a higher priority than the immediate impact to consumers in decisions made, and whether the company actually knew or knows how to fix the resulting problems," Awakuni wrote.
Hawaiian Telcom has yet to resolve all billing and other problems, but customer service levels are returning to normal. Hawaiian Telcom also claims to be making better progress in resolving its systems problems since it hired Accenture Ltd. in February to complete the development and deployment of customer service and business-support systems.
Pacific LightNet is recommending the PUC set specific deadlines for Hawaiian Telcom to resolve outstanding problems or face stiff penalties.
"The bottom line is we're two years into this situation, and I think the community has done a great job of being patient, but I think the patience is up," said Pat Bustamante, president of Pacific LightNet. "Representations were made by the company (about how well the transition would work), and representations haven't been fulfilled."
Joel Matsunaga, Hawaiian Telcom's vice president for external affairs, said the company has yet to take a position for or against the various recommendations made thus far.
"This is the first time we've had a chance to see what their positions are," he said.
Hawaiian Telcom is working with various parties to resolve its remaining systems problems, Matsunaga said.
"So far to date, from what we've seen, all of the parties are working as hard as possible to resolve it," he said.
The PUC isn't expected to complete its investigation until mid-September at the earliest.
Correction: In a previous version of this story, a quote attributed to Cheryl Kikuta should have been attributed to Catherine Awakuni, the state's consumer advocate. Kikuta is the utilities administrator for the Division of Consumer Advocacy.
Reach Sean Hao at shao@honoluluadvertiser.com.
