HAWAII'S TELECOM TUSSLE

By Dennis Oda, Star-Bulletin
Gail Au stands in front of his Niu Valley Union 76 service station
by an empty Starnet telephone booth, which replaces a GTE booth.
His station has been without pay-phone service since a GTE worker
cut an underground phone line that wasn't supposed to be cut.
GTE competitors point to such occurrences as evidence
that Hawaiian Tel is blocking them.

---

Phone Fight!

So many problems have arisen
in the conversion from a telecom monopoly
that some competitors believe GTE
is deliberately hindering competition.

Not so, says Hawaiian Tel

By Rob Perez
Star-Bulletin

Gas station owner Gail Au has seen first-hand what can happen when competition goes haywire in Hawaii's telecom market.

His Niu Valley business has been without pay-phone service for the past several weeks because a GTE Hawaiian Tel worker cut an underground phone line that wasn't supposed to be cut. Just last week the sidewalk near Au's station was torn up so repair crews could work on the line.

The cut, for which GTE later apologized to Au, has thus far prevented GTE's competitor, StarNet Hawaii Inc., from connecting its pay phones at the station. StarNet says Hawaiian Tel is guilty of sabotage -- a charge the utility disputes.

"There was absolutely no reason to cut that line," said Richard Kelly, StarNet's general manager.

The incident illustrates what GTE competitors have become painfully aware of in recent months: the road to competition against Hawaii's local phone monopoly is filled with potholes, some created by GTE.

And the bumpy transition from a monopolistic to a competitive market has inconvenienced hundreds of Hawaii residents and businesses like Au's.

So many problems have emerged -- at least from the competitors' perspective -- that the companies are questioning whether Hawaiian Tel is deliberately hindering competition or is just ill-prepared for the massive changes transforming the industry.

"It's either a tremendous coincidence or something else is at work here," said Rob Volker, regional vice president of GST Telecommunications Inc., which is building a competing phone network and recently entered the long-distance market here.

GTE acknowledges that there have been problems, but not nearly to the extent its competitors are suggesting. The company says problems result because GTE, after having the Hawaii market to itself for decades, is going through a tremendously complex deregulation process that is new to everyone.

"There are going to be some rough spots on the road to competition simply because it's never happened before," said Hawaiian Tel spokesman Dan Smith.

He said the Niu Valley situation was an isolated one in which a GTE technician mistakenly cut the line while trying to replace old splices. GTE is paying for the repairs.

Smith also said GTE in the long run will benefit if Hawaii's high-

tech industry and the economy grow, so engaging in anti-competitive behavior would be counter-

productive.

"It would be like shooting yourself in the kneecap to save your big toe," he said. "That's not smart."

By Dennis Oda, Star-Bulletin
Richard Kelly, general manager of Starnet Hawaii Inc.,
supervises the installation of a new phone at a Kahala service station.
Kelly points to an underground phone line in Niu Valley that was
cut by a GTE worker as evidence that Hawaiian Tel is blocking
competitors. "There was absolutely no reason to cut that line,"
says Kelly. GTE denies engaging in anti-competitive acts
and is paying for repairs to the line.

---

To be sure, the coming of competition to parts of Hawaii's multimillion-dollar telecom market has brought more than inconveniences to residents and businesses. Phone users, for instance, saw interisland toll rates drop by double-digit percentages once competitors were allowed into that market.

But even in areas where the benefits have been obvious, snafus have sullied the picture.

In the long-distance arena, GTE, which offers long-distance service but as the local phone company handles all customer requests to change carriers, has had problems making such changes, though to what extent is disputable. And carriers say the problem seems more prevalent when a customer wants to drop GTE and use a competing long-distance company.

GTE says its error rate is currently about 1 percent, around the industry norm. GTE counts it as an error when a customer makes a long-distance call but is billed by the wrong carrier because GTE's selection process didn't work properly.

Sprint and GST, however, say GTE's error rate is much higher, and even AT&T, which wouldn't discuss numbers, says Hawaiian Tel has had problems with switching long-distance customers since July, when the interisland market opened to full competition.

Sprint and GST count it as an error when the switch-over isn't done correctly, a much broader definition than GTE's.Nonie Toledo, a Sprint executive, last week said GTE's error rate from earlier in the year was as high as 30 percent for customers requesting Sprint service.

GST's Volker said a random check of more than 400 GST orders in March revealed an error rate of about 40 percent, though that percentage has come down since.

All the carriers say they have been pressing GTE to fix the problem for months, but none are happy with the utility's progress.

"We want to give them the benefit of the doubt to make it right," Toledo said. "But our patience is wearing thin."

When customers have discovered they haven't been switched correctly, sometimes resulting in higher-than-expected long-

distance charges, they often complain to their new carrier -- not knowing GTE usually is to blame, the carriers said.

And GTE, the carriers said, have little incentive to fix the problem quickly, particularly because the company is aggressively marketing its own long-distance service.

Smith said that's not the case. Business from competitors is a big and growing part of GTE's business, and keeping those customers happy is important, he said.

Prompted in part by the carriers' concerns, Smith said GTE has improved its switching process and has been able to cut the error rate by more than half since March. Now 99 percent of long-

distance switches are made accurately within three days of getting the orders, he said.

But GTE's work has been so unreliable that GST double-checks all switch-overs involving its customers, even though that means extra work for GST, Volker said.

In the pay-phone business, StarNet executive vice president Rob Hail said the Niu Valley case was typical of the way GTE has tried to snuff out competition.

"They do whatever it takes," Hail said. "It's tough to compete with your supplier."

GTE's Smith, however, said the utility has provided lines to about 350 sites for competitors' pay phones since March and the Niu Valley case was the only one in which a problem cropped up.

"One out of 350 is regrettable, but that's still a pretty good rate," Smith said of the 349 successful jobs.

GTE's competitors admit that the deregulation process is so complex that snafus have developed even within their own systems. And the potential for problems will be magnified when the far more massive and complex local phone market opens to competition.

"There are a lot of areas where something can go awry," said AT&T Hawaii executive George Irion.

But competitors say so many GTE-caused problems have cropped up in so many different arenas -- long distance, pay phones, Internet service -- that they wonder whether GTE workers are acting on their own to hinder competition. Such practices are not unheard of in the phone industry, especially when employees of the monopoly carrier perceive competition as a threat to their job security.

George Waialeale, head of the union that represents most Hawaiian Tel workers, said that's not happening here. He attributes the bumpy transition to "growing pains."

"If you're guiding a boat through uncharted waters," Waialeale said, "you're going to hit a lot of reefs."