Verizon Hawaii
co-op floated

Two state lawmakers seek a
special hearing as the parent of
the local phone company looks
for a potential buyer

Concerns over the economic and consumer fallout of a proposed sale of Verizon Hawaii have prompted two state lawmakers to call for a special hearing into whether the local phone company can be converted into a customer-owned business cooperative.

In a draft of a Senate resolution, state senators Carol Fukunaga (D, Ala Moana) and David Ige (D, Waimalu) are asking for a joint information session on the proposed Verizon Hawaii deal by the Senate Commerce, Consumer Protection and Housing Committee and the House Consumer Protection and Commerce Committee.

The senators said they want the committees to study whether Verizon Hawaii can be acquired by the state Public Utilities Commission and be operated as a cooperative venture modeled after Kauai Electric Co., which is partly owned by its customers.

"I think our number one concern is service to consumers and accountability to Hawaii's rate payers," Fukunaga said.

Verizon Hawaii spokeswoman Ann Nishida said the company has no immediate comment on the Senate resolution.

Kauai Electric, which serves about 30,000 customers on the Garden Isle, is the only utility in the state that operates as a business cooperative. Customers who have elected to be cooperative members own a share of the company and receive a portion of its revenues.

The Kauai coop was set up in 2002 when Citizens Communications Corp. sold the local company to Kauai Island Utility Co-op for $215 million.

Verizon Communications Inc. confirmed last month that it has had discussions with several parties about the sale of its local phone units in Hawaii and New York. Verizon stressed that no sale is imminent and that no decision has been made to sell off its Hawaii operations.

Several news reports have identified the Carlyle Group, a Washington D.C.-based private equity firm, as one of several potential suitors for Verizon Hawaii, which could fetch up to $1.5 billion. The resolution referred to offers by Carlyle and a New York-based asset management company, as well as other telecommunications service providers.

Fukunaga said she introduced the resolution after several Verizon Hawaii employees approached her with their concerns about a potential sale to an investment company.

"Utilities should not really be an investment acquisition," said Fukunaga. "They are really here for the public good and we want to make sure we preserve and maintain their quality of service."

The Carlyle Group -- whose executive ranks and advisory boards include former President George Bush, former Secretary of Defense Frank Carlucci and ex-British Prime Minister John Major -- is one of the world's largest private equity firms with more than $18 billion under management.

In 2002, the investment firm paid $300 million to acquire CSX Lines, which operates West Coast to Hawaii ocean freight service.


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