The PUC award, announced yesterday, is in response to complaints that Hawaiian Tel doesn't adequately service rural areas such as Kau, where many customers are still on party lines.
It also underscores the increasing competition in Hawaii's telecommunications industry, which for decades has been dominated by Hawaiian Tel.
"Our history has been to provide the type of service that the customer needs in the rural areas," said Michael Burke, TelHawaii's vice president of finance.
"We have a track record in those areas."
Burke said that his company plans to employ about 15 workers locally and hopes to invest $5 million to $6 million to upgrade the current telephone system at Kau.
Besides TelHawaii, the PUC said that Hawaiian Tel, cable operator Oceanic Cable, Voicestream Wireless and a local unit of GST Telecommunications Inc. bid for the Kau market.
Hawaiian Tel said it was disappointed with the PUC's decision. Kevin Payne, Hawaiian Tel's vice president for external affairs, said the company is studying the PUC decision but will continue to provide services to Kau in the interim period.
It's been 50 years since a company other than Hawaiian Tel provided local phone service. That company, which operated on Lanai, was acquired by the predecessor of Hawaiian Tel in 1946, said Calvin Tadaki, company spokesman.
Under the PUC order, TelHawaii also will have 30 days to file a waiver with the Federal Communications Commission for federal subsidies. Such subsidies often make it possible for small phone carriers to make money in rural markets.
The PUC said it could put TelHawaii's award back to bid if the company doesn't qualify for the subsidies.
Founded in 1968, TelHawaii's parent, TelAlaska, specializes in phone service in remote areas of Alaska. The company provides service for 5,500 customers in Alaska and employs about 50 workers, Burke said.