Young Bros and Pasha Hawaii Transport Lines continue to battle one another over the future of interisland shipping services in the state.

Pasha, based in Corte Madera, Calif., seeks entry into the state's interisland shipping trade, which Young Bros. of Honolulu has served for the last 110 years.

But Young Bros. continues to claim that the newcomer's debut would be on unfair terms.

Young Bros. says that Pasha is only seeking to serve the most profitable lines, between the ports of Honolulu, Kahului, Hilo and Nawiliwili, Kauai.

In December, Hawaii's consumer advocate issued a statement recommending that the state reject Pasha's application due to insufficient information.

The state Public Utilities Commission, meanwhile, is expected to make a decision on Pasha's application sometime after this month.

At stake is whether the Hawaii market has room for two players.

Young Bros. says Pasha is “;cherry-picking”; by only providing select, profitable markets on a service that fits its needs.

Whereas Young Bros. offers 12 consistent weekly trips at all ports, including Molokai and Lanai, Pasha is proposing only one trip every two weeks between Honolulu and Kahului and Hilo, and, if there is enough demand, Nawiliwili.

While Young Bros. takes freight of all kinds, Pasha, as a roll-on, roll-off carrier, will target automobiles and construction companies with heavy equipment.

With the competition, Young Bros. estimates a revenue loss of about $1.4 million but says that figure is conservative.

Young Bros., which has invested $90 million on new barges and equipment since 2005, also says it may no longer be able to subsidize service to smaller isles such as Molokai and Lanai or maintain its 30 percent discount for farmers. It might also have to raise its rates.

Young Bros. is also questioning why no public hearing on the matter is being held.

Pasha, which filed its application with the PUC in March, says it has support from its existing clients for additional services that it could provide in Hawaii, as well as from lawmakers who say competition is good for the state.

With its Jean Anne, which is 570 feet long and 102 feet wide, Pasha says it can offer more than 140,000 square feet of enclosed cargo space.

Obtaining a certificate to operate interisland would give businesses in Hawaii another choice, says Pasha, and has the support of car dealers, car rental companies, the military and construction companies.

“;There is no reason to insulate Young Bros. from competition by Pasha Hawaii's proven enclosed roll on roll off service now, when the Commission previously allowed Superferry to compete with Young Bros.,”; said Pasha in its application.

The battle has pitted local economist versus local economist, with Paul Brewbaker of TZ Economics as well as Sumner La Croix, a professor at the University of Hawaii, testifying on behalf of Young Bros., against Leroy Laney, a professor at Hawaii Pacific University, testifying on behalf of Pasha Hawaii.

At the heart of the debate is whether Young Bros. should be protected from outside competition.

Both La Croix and Brewbaker conclude that the interisland shipping is a natural monopoly, meaning it provides service at a lower-than-average cost than it would if more than one carrier served the market.

Brewbaker says Pasha's proposal would present an uneven playing field.

Pasha would serve larger-market consumers paying higher average costs that it could invest into better technology and equipment, he said.

Young Bros., meanwhile, would serve both large and small markets, under restrictions by a “;referee”; (the PUC) that puts it at a clear disadvantage.

By the end of the game, the second player, Pasha, could score more points for the same number of shots and win, even without playing in the first half, Brewbaker said.

“;Over time ... partial or complete exit may well be the only option for the first player,”; he said.

While the airline industry, which is deregulated, responds to competition with pricing moves, interisland ocean freight still remains regulated, said Brewbaker. The question is whether there can be a new model with multiple, regulated franchisees.

But Pasha's economist, Laney, said there was no reason to believe that an interisland tug and barge service is a natural monopoly any more than several other industries in which competition is allowed in Hawaii.

Hawaii's interisland airlines allow for competition, and during its brief run, the Hawaii Superferry provided competition for Young Bros., he said.

Laney says Pasha's entry into the interisland market in Hawaii would bring a new, unique service offering consumers greater choice, with the benefits of competition.

Pasha has a much larger vessel with enclosed cargo space, and adjustable decks that can handle a wide variety of sizes.

He also says that Pasha is proposing to serve all Hawaii ports except for two—Molokai and Lanai—adding, “;If this is cherry picking, they are picking all the cherries in the orchard except two.”;

The two markets on the smaller isles also make up a very small share of the total economy.

Pasha would actually prefer the Honolulu-to-Kaunakakai route than the one from Honolulu to Hilo. The problem is that the Kaunakakai harbor in Molokai cannot accommodate the Jean Anne.

“;In cases of natural monopoly, it is the role of regulators to protect consumers from the monopolist, not to protect the monopolist from competition,”; said Laney in his report.

Two players should be able to serve the market, said Laney, with the vessels they wish, and “;may the best player win, to that player's benefit as well as the benefit of Hawaii shippers and consumers.”;

Young Bros. has letters of support from the Hawaii Cattleman's Council and Hawaii Farm Bureau Federation.

Alan Gottlieb, president of the cattlemen's council, said it relies on Young Bros. for the 30 to 35 percent agricultural discount, and that Pasha would not provide any alternatives because it is not offering to transport livestock.

Farmers would not be able to use Pasha's services, according to Dean Okimoto, farm bureau president, because of its limited frequency, which is necessary for produce shipments, and because it is not offering to transport refrigerated cargo.

Okimoto also fears that Young Bros.' costs will increase as a result of competition from Pasha and that those costs will be passed on to farmers.

Grocery distributors and farmers, particularly on neighbor isles, also expressed concerns over changes that might be caused by Pasha: higher prices, limited frequency and the economic impact on Young Bros.