The deal with Time Warner
From staff and wire reports
will directly compete with
GTE Hawaiian TelAT&T Corp. has struck a deal to offer telephone service over Time Warner Inc.'s cable systems in 33 states, including Hawaii, greatly escalating the long-distance phone company's move into local service.
In addition to local and long-distance phone service for residential and small-business customers, the joint venture will offer interactive digital television and high-speed Internet service.
Hawaii is a logical place for this to happen because it is one of Time Warner's biggest cable markets and a place where AT&T has a major presence, said Ken Sandefur, vice president of AT&T Hawaii. Hawaii "definitely will be included," Sandefur said.
Mike Luftman, a Time Warner spokesman in New York, said Honolulu is the 12th-largest city with Time Warner cable operations, with about 300,000 subscribers, and that makes it a definite target for the new telephone service.
Neither AT&T nor Time Warner is disclosing any timetable, however. The companies today would say only that by the end of this year they will pick one or two cities to try out the system and after that it will be extended to the rest of the 33 states where Time Warner has cable.
In Hawaii, Time Warner has Oceanic Cable, which now reaches virtually every street on Oahu with fiber-optic cable, and a separate operation called Oceanic Communications. Since mid-1998, Oceanic Communications has been offering telephone service to mid- and large-sized businesses in direct competition with GTE Hawaiian Tel.
The state Public Utilities Commission last month finalized rules that will allow companies such as AT&T and other competitors enter the local telephone business in the islands.
The deal announced today comes as AT&T is close to completing its purchase of Time Warner's biggest rival in the cable TV industry, Tele-Communications Inc., which also has cable operations in Hawaii. That purchase is expected to be completed this spring.
AT&T said today's deal, plus its acquisition of TCI and arrangements with other cable TV companies will give it the potential to supply local phone service to 40 percent of U.S. households, or 35 million homes, over the next four to five years.
The company hopes consumers will be enticed by the convenience of receiving phone service channeled through the same cable TV circuits that deliver hundreds of channels, Internet access and online banking.
AT&T will own slightly more than three-quarters of the joint venture and Time Warner the rest. AT&T estimates it will spend $600 million on costs resulting from the venture in the first two years. In addition, it will spend between $300 and $500 to equip each home to handle telephone services over cable lines. Time Warner will get monthly fees ranging from $1.50 to $6 per home over six years.
The arrangement is expected to have annual sales of $4 billion after three years.
The Associated Press and
Star-Bulletin reporter Russ Lynch
contributed to this report.
