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New FCC ruling could cost local telecom Hawaiian Lands project
Pacific Business News (Honolulu) - by Terrence Sing Pacific Business News
After working for years and spending about $160 million to deliver telephone and broadband services to rural homesteads on Hawaiian Home Lands, a Native Hawaiian-owned telecom could lose access to the federal funds that underwrite the project.
The $400 million project by Honolulu-based Sandwich Isles Communications Inc. seeks to link 69 noncontiguous parcels of Hawaiian Home Lands on Oahu, Kauai, Molokai, Lanai, Maui and the Big Island via high-speed fiber-optic cable.
But a surprise ruling from the Federal Communications Commission last October has put the project in jeopardy, based on an appeal originally filed by GTE Hawaiian Tel in 1998, which is now Verizon Hawaii.
GTE argued the areas Sandwich Isles proposed to serve were not unserved because they were within GTE's territory.
At the time, Sandwich Isles applied for and received a waiver from the FCC as an incumbent local exchange carrier, which allowed it access to the Universal Service Fund to pay back money it borrows from the U.S. Department of Agriculture's Rural Utilities Service fund.
The Universal Service Fund comes from fees charged to telephone customers to ensure quality service at affordable rates nationwide, particularly in rural areas.
In its October ruling, the FCC said it made a mistake in 1998 when it granted Sandwich Isles' petition and ordered Sandwich Isles to reapply for a waiver in order to continue receiving universal fund support.
"Incomprehensibly, this dispute has sat in front of the commission for six years," FCC Commissioner Michael J. Copps said in a statement issued with the order. "I limit my support to concurring because fairness requires that we resolve issues involving support for unserved areas and disputed territory with greater speed than we attempt to do here."
Sandwich Isles serves 1,300 customers on Oahu, Maui, Kauai and the Big Island.
"We always knew the appeal was there, but because we were granted local exchange carrier status and relied on it, as did the Rural Utilities Service, we were moving along," said Sandwich Isles Vice President Gil Tam. "In the meantime, we've been out there and getting to people that haven't been served. They will not only have telephones, but affordable access to broadband services."
Tam said Sandwich Isles is the only Hawaii company to ever draw upon the Universal Service Fund that Hawaii residents have been paying into since the late 1940s.
"Everybody pays into it and it's been going to the Mainland to fund other local exchange carriers building out rural America," said Tam, who stressed that Sandwich Isles' project helps all Hawaii. "It's creating high-tech jobs. We have areas out there that don't have telephone service."
Representatives of The Carlyle Group, which is in the process of buying Verizon Hawaii, declined comment.
Reach Terrence Sing at 955-8001 or tsing@bizjournals.com.
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