HOUSE OF REPRESENTATIVES	H.C.R. NO.	84
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII

HOUSE CONCURRENT

RESOLUTION

Requesting the senate COMMITTEE on commerce and consumer protection and the house committee on consumer protection and commerce to convene joint informational briefings to determine whether the sale of the incumbent local exchange carrier by verizon hawaii, inc. was in the public interest and the feasibility of the Public Utilities Commission acquiring the INCUMBENT local exchange carrier and operating it as a cooperative venture.

     WHEREAS, Verizon Hawaii, Inc., formerly GTE Hawaiian Telephone Company Inc., was the largest telecommunications service provider in the State, providing telephone, cellular phone, broadband internet, facsimile, and digital as well as broadband-related services to Hawaii's owners and businesses on a daily basis; and

     WHEREAS, Verizon Hawaii, Inc. was also one of the largest employers in the State, employing over two thousand employees and generating millions of dollars in revenue annually; and

     WHEREAS, in 2005, Verizon Hawaii, Inc. sold the incumbent local exchange carrier to the private-equity Carlyle Group for $1,650,000,000, in turn naming the new company Hawaiian Telcom, Inc.; and

     WHEREAS, as a regulated industry, the sale of the incumbent local exchange carrier required oversight and approval from the Hawaii Public Utilities Commission and the Division of Consumer Advocacy of the Department of Commerce and Consumer Affaiars, agencies mandated to protect the public's interests; and

     WHEREAS, in 2005, the Public Utilities Commission issued a decision and order approving the sale, however, even though mitigation provisions were structured into the approval of the sale, there were concerns such as:

(1)  The transaction was highly leveraged to the detriment of Hawaiian Telcom, Inc. with a debt to equity ratio of 82.5% to 17.5%;

(2)  The high debt load leveraged on the new company would limit its ability to secure additional loans and funding; and

(3)  The possibility of transition glitches or system errors from switching Verizon's back-office systems over to Hawaiian Telcom's new back-office systems; and  

     WHEREAS, in 2006, Hawaiian Telcom, Inc.'s back-office conversion suffered  problems after transitioning from Verizon's systems, causing customer service issues, billing errors, and provisioning backlogs for both retail and wholesale services  resulting in customers disconnecting service; and

     WHEREAS, in 2008, already saddled with high debt, Hawaiian Telcom, Inc. was denied approval from the Public Utilities Commission to increase its line of credit to fund company operations and upgrades; and

     WHEREAS, as a result of the back-office problems, customers disconnecting service, and the inability to increase its debt, Hawaiian Telcom, Inc. filed for Chapter Eleven bankruptcy on December 1, 2008; now, therefore,

     BE IT RESOLVED by the House of Representatives of the Twenty-fifth Legislature of the State of Hawaii, Regular Session of 2009, the Senate concurring, that the Senate Committee on Commerce and Consumer Protection and the House Committee on Consumer Protection and Commerce are requested to convene joint informational briefings within fifteen days after the adoption of this Concurrent Resolution to determine whether the 2005 sale of Hawaii's incumbent local exchange carrier was in the public interest and to discuss the feasibility of the Public Utilities Commission acquiring Hawaiian Telcom, Inc. and operating it as a cooperative venture in a manner similar to Kauai Electric; and

     BE IT FURTHER RESOLVED that both Senate and House committees are strongly encouraged to invite representatives from Hawaiian Telcom, Inc., other members of Hawaii's telecommunications industry, representatives from the Public Utilities Commission and Division of Consumer Advocacy, as well as members of the public; and

     BE IT FURTHER RESOLVED that both Senate and House Committees are requested to report any findings or recommendations to the Legislature no later than twenty days before the convening of the 2010 Regular Session concerning whether the sale was in the public interest and the feasibility of the Public Utilities Commission acquiring and operating the incumbent local exchange carrier; and

     BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to provide all necessary assistance to these Committees in coordinating and conducting these informational briefings and in formulating the findings and recommendations of the Senate and House Committees; and

     BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the members of Hawaii's congressional delegation, the President of the Senate, the Speaker of the House of Representatives, the Chairperson of the Senate Committee on Commerce and Consumer Protection, the Chairperson of the House Committee on Consumer Protection and Commerce, the Chief Executive Officer of Hawaiian Telcom, Inc., the Chairperson of the Public Utilities Commission, the Director of the Legislative Reference Bureau, and the Chairs of each County Council.

OFFERED BY:

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Report Title: 

Hawaiian Telcom; Joint House and Senate Briefing