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Hawaiian Telcom

Hawaiian Telcom just lost $30.5 mil. Why are these guys smiling? They believe local leadership can save the struggling company.

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Perhaps the phone company’s largest asset is its decidedly old-fashioned network of thousands of miles of copper wire. According to LaClair, as Hawaiian Telcom rolls out service to new developments, its strategy is “putting fiber-optic to the home.” To be competitive in the near term, though, they’ll have to find ways to leverage that copper asset. “We’ve made a large investment over the last year in a new system called the MPLS network,” says LaClair. Part of the advantage of this new technology, which the company expects to be fully operational by the end of the year, is that it allows Hawaiian Telcom to deliver all its services over a single network, ultimately saving costs and providing better service. They believe MPLS will also allow them to offer average connection speeds substantially faster than those of Oceanic’s node-based cable system. “We call it the ‘better, faster, cheaper network,’” LaClair says.

Still, many observers believe that the independent, local telcom is a dinosaur. “I have to admit, I used to think the same thing,” says Yeaman. The more he thought about it, though, the more he began to see opportunities. “Yeah, the land line may not be as relevant as it used to be,” he says. “But today, everybody has Internet access, and there’s no reason why it should not be with Hawaiian Telcom. We’ve already got 93,000 Internet customers; but we have 550,000 customers overall. There’s no reason why we shouldn’t have 550,000 high speed Internet customers.” Similarly, he sees the opportunity on the wireless side. “Everybody needs a cell phone. And, while we all agree we don’t have the best wireless solution today, there’s no reason why we couldn’t.”

Nevertheless, as its landline customer base declines at about 8 percent a year, it’s clear that the future of the phone company lies in new products and services. Yeaman has made it a point to tell employees, “You know, we were a phone company. But we’re not a phone company anymore. If we want to be successful going forward, we really have to be a communications and technology company.” And, as a communications and technology company, Hawaiian Telcom is busy scrutinizing the kinds of services it can offer. Yeaman notes that the board has already approved four new services that the company will announce soon, “products and services that I would call ‘low-hanging fruit,’” he says. Beyond that, Yeaman and Dods are holding their cards close to their vests. Like the previous management, Yeaman acknowledges the importance of IPTV, a television service that would leverage the new MPLS system and allow the company to compete more directly with Oceanic. In a conference call with industry analysts, he said, “I think a video solution in this marketplace is an important part.” He is also quick to note his dissatisfaction with the company’s resale arrangement with Sprint, which may suggest that wireless is also a major component in the company’s strategy. Still, Yeaman emphasizes that he and the rest of the new management team are still in the assessment and planning stages, and that everything is on the table.

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Hawaii Business,October