O'ahu a battleground for phone-TV-Net providers
By Sean Hao
Advertiser Staff Writer
If good things come in threes, then Honolulu residents could soon be in for a treat.
That's because by year's end, many residents will likely have their choice of at least three different TV services, three different high-speed Internet services and three different home telephone services. That's more choices than most Mainland communities, as Hawai'i becomes an early battleground between traditional phone, cable, satellite and wireless companies.
The competition will heat up with this summer's launch of residential wireless broadband Internet service by Clearwire Corp., followed later this year by the launch of an Internet-based TV service by Hawaiian Telcom.
For consumers, that means more options and lower prices.
"It's absolutely good for the consumer because the monopoly is gone," said Norm Bogen, director of networking research for In-Stat, a market research company. "There's real competition."
What's happening in Hawai'i "is the future of what's coming around the world," Bogen said.
Hawaiian Telcom's application for a cable franchise license is still under review by state officials. The company has not disclosed a price for the service, though it is expected to be competitive with cable TV.
Downtown resident Dan Poole said he would switch from satellite TV to Hawaiian Telcom, if the phone company were allowed to offer TV.
"Today there is a monopoly in video services," he said. "I believe we need competition since that means much lower prices."
The newest entrant to Honolulu is Kirkland, Wash.-based Clearwire, a company founded by mobile phone pioneer Craig McCaw. The company, which already offers broadband Internet service on Maui, is now rolling out a similar service on O'ahu. That high-speed connection also can be used to access Internet-based phone services offered by Clearwire and others.
Following on the heels of Clearwire is Hawaiian Telcom, which plans to launch an Internet-based TV service by year's end. That means:
That's a far cry from the era when consumers only had one choice for phone service and one choice for cable TV. Now consumers can get all those services from one company. In Hawai'i, Oceanic was the first company to offer customers the so-called "triple play," which is television, Internet and phone service bundled together on one bill. Hawaiian Telcom plans to top that by bundling those three services and a fourth — wireless phones — on one bill later this year.
"The ability to offer voice, data, wireless and video goes beyond a home run," said Mike Ruley, Hawaiian Telcom CEO. "That's the grand slam."
BENEFITS OF BUNDLING
Bundling is a key part of Hawaiian Telcom and Oceanic's strategies. The idea is to sell customers several services, making them less likely to switch to a competitor or "churn." Last year Hawaiian Telcom lost 6.3 percent, or more than 43,000, of its phone-line accounts. While that was higher than the company originally estimated, the rate of line loss has declined each quarter since the sale of Verizon Hawaii closed in May of last year, according to Hawaiian Telcom.
Hawaiian Telcom officials said they know they're in a fight, not only with Oceanic, but with newcomers such as Clearwire. Phone companies have long sought to offer TV services but have been slow to do so because of high costs and technical challenges.
Hawaiian Telcom said it has spent $100 million in Hawai'i since taking over Hawai'i's phone company from Verizon Communications. That includes money spent upgrading its network to offer new services, such as Internet Protocol TV in Hawai'i.
Jim Goodrich, an attorney who lives in Makiki, said he'll consider switching to Hawaiian Telcom's TV service, but only if the phone company's high-definition TV offering is better than his current satellite service.
"Anybody that offers me significant HD content without a loss of resolution or drop out of signal is going to get my business," he said. "The competition is serious and it's only going to get better" for consumers. "I think consumers only win as a result."
Currently in Hawai'i and nationwide, the cable companies seem to have the early advantage over their phone company counterparts.
"The cable companies are confident because it is harder (for phone companies) to get in the video business than it is (for cable companies) to get into the phone business," said Alan Pollock, vice president of marketing for Oceanic. "We're confident that we'll be around for the long-term."
If Hawaiian Telcom's TV service could fundamentally change the competitive landscape away from a cable monopoly, Clearwire's Internet service promises to be a legitimate third major competitor to both Oceanic and Hawaiian Telcom's high-speed DSL Internet services. Currently DSL is the faster-growing service, though Oceanic's RoadRunner remains the largest broadband Internet service.
COMPETITIVE RATES
For consumers, more Internet competition will mean lower prices. For example, Clearwire's lowest regular price for high-speed Internet access is about $30 a month, excluding a $5 a month modem charge. That's slightly more than Hawaiian Telcom's regular rate for digital subscriber line Internet service, which costs $29.99 a month. However Hawaiian Telcom customers also must spend $25 to $30 a month for residential phone service to subscribe to DSL service. Both Clearwire and Hawaiian Telcom require a minimum one-year contract.
Oceanic's RoadRunner Internet service costs about $10 a month more than both Clearwire and Hawaiian Telcom's services, though that price falls about $10 when bundled with TV and phone services.
Clearwire customers access the Internet via a modem that plugs into an electrical outlet and a computer. Download speeds range from 768 kilobits per second to 1.5 megabits per second — or 1.5 million bits of information per second. That's slower than Oceanic Road Runner's maximum speed of 5 megabits per second, and Hawaiian Telcom's digital subscriber line speed of 3 megabits per second, but remains far faster than traditional dial-up Internet connections.
Both Oceanic and Hawaiian Telcom appear to take the pending threat from Clearwire seriously.
"We definitely look at them as a competitor," said Oceanic's Pollock. "Will they affect us? I don't honestly know."
In-Stat's Bogen said the convergence of telephone, TV and Internet is inevitable and ultimately may result in Clearwire partnering with a satellite TV company to offer a suite of Internet, phone and TV services. Clearwire officials would not provide comments for this story.
"It's a collision of a lot of different industries and there are going to be losers and there are going to be winners," Pollock said. "But I think consumers win in the end."
Reach Sean Hao at shao@honoluluadvertiser.com.
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