When Pasha Hawaii Transport Lines LLC announced plans to enter the interisland shipping business and challenge Young Brothers Ltd.'s decades-old regulated monopoly, it received a warm reception from Gov. Linda Lingle.

Local car dealers, equipment leasing companies and construction companies also testified that Pasha's proposed new service would benefit local businesses and consumers.

"I was pleased to learn of your intention to seek expansion of the Pasha Hawaii operations through the addition of interisland cargo transfer as part of your scheduled service," Lingle wrote in a March 10, 2009, letter. "As an island state, we recognize the importance of increased surface transportation alternatives and the benefit that increased competition can offer in the movement of cargo and commodities between our islands."

Barry Fukunaga, Lingle's chief of staff, said the governor's letter is "a statement of her belief that competition in the market place and the expansion of service is desirable."

He added that the determination of whether to grant or deny Pasha's application is the responsibility of the state Public Utilities Commission.

But as the PUC mulls Pasha's application and considers opening up the interisland shipping business to competition for the first time since statehood, a more complicated picture of the economic impact of Pasha's proposed entry is emerging.

In PUC testimony submitted by Young Brothers, trade groups such as the Hawaii Farm Bureau Federation, the Hawaii Cattlemen's Council and the Hawaii Foodservice Alliance LLC said that Pasha's new service will only serve a limited segment of the interisland market, won't reduce shipping rates and could lead to reduced services to smaller ports such as Kaua'i, Läna'i and Moloka'i.

Economists Sumner La Croix and Paul Brewbaker, who are serving as consultants to Young Brothers, said that allowing Pasha to "cherry pick" the most lucrative routes could have disasterous results for consumers and many businesses.

State Senate President Colleen Hanabusa, Senate Vice President Russell Kokubun and Dwight Takamine, chairman of the Senate Labor Committee, said they have "serious concerns" about requiring one carrier to provide universal shipping service while at the same time allowing a new entrant "to pick and choose routes and lines of service."

"What studies or expert testimony, if any, demonstrate that we now, or will in the future, lack adequate facilities to serve the public and that what Pasha is proposing will fill that need," the senators wrote in a Nov. 12 letter to the PUC. "If there is no such unmet need and Pasha service is not required by any such necessity, then the law is clear. The Pasha application should be denied."

Pasha spokeswoman Joelle Vossbrink declined comment when asked to respond to questions raised by farmers, economists and state Senate leaders.

She said the company plans to file a position paper with the PUC tomorrow and noted that Pasha received letters of support from Lingle as well as from House Speaker Calvin Say, former Speaker Joe Souki and the state Department of Transportation.

Since statehood, the interisland shipping market has operated as a regulated monopoly by Young Brothers.

The 109-year-old company, a division of Seattle-based Saltchuk Resources Inc., operates 12 weekly shipments to all Neighbor Island ports and handles between 6 million and 7 million tons of cargo each year.

California-based Pasha has provided West Coast to Hawai'i shipping service since 2005 using its 579-foot ship the Jean Anne.

In March, Pasha filed an application with the PUC to use its Jean Anne to make interisland trips every two weeks.

Under rates approved by the PUC, Young Brothers subsidized rates to smaller ports such as Moloka'i and Läna'i with more profitable rates it charges for shipments to larger ports such as Honolulu.

The company also provides 30 percent to 35 percent discounts to Hawai'i's livestock and agriculture industry by subsidizing those rates by other lines of services.

La Croix, a University of Hawai'i-Mänoa economist, said allowing a new entrant to operate in only the most lucrative markets would be similar to allowing the start-up of a new electric company that only serves a highly profitable neighborhood like Makiki.

Hawaiian Electric Co. would have to raise its rates for all non-Makiki residents to make up for losses from a competitor that only serves a highly profitable market, he said.

"PUC approval of Pasha's application to enter the intra-state shipping market has the potential to lead to a reduction in the frequency of service to Hawai'i's ports, higher rates on routes and product lines not served by Pasha, and reduction or elimination of existing discounts," La Croix said.

Alan Gottlieb, president of the 130-member Hawaii Cattlemen's Council, said Pasha's new service represents "a serious threat" to the livestock industry.

Pasha's roll-on, roll-off ship doesn't provide a transportation alternative for his members and threatens the 30 percent to 35 percent agricultural discounts provided by Young Brothers.

Dean Okimoto, president of the 2,200-member Hawai'i Farm Bureau Federation, said most farmers won't be able to use Pasha service since most require refrigeration, which will not be provided in the new ships.

"Pasha's proposed services do nothing to replace or supplement Young Brothers services to farmers," Okimoto said. "Unless Pasha is able to directly and satisfactorily address and resolve the agricultural industry's concerns, we request that the commission deny Pasha's application," Okimoto said.