The leader of the state Department of Commerce and Consumer Affairs Division of Consumer Advocacy recently advised members of the state Public Utilities Commission that he supports the proposed sale of Verizon Hawaii to The Carlyle Group. John Cole, state
The leader of the state Department of Commerce and Consumer Affairs Division of Consumer Advocacy recently advised members of the state Public Utilities Commission that he supports the proposed sale of Verizon Hawaii to The Carlyle Group.
John Cole, state consumer advocate, said lengthy negotiations led to concessions by Carlyle and Verizon that will protect and benefit consumers across Hawai‘i.
“We had some serious reservations about the plan that Carlyle initially presented, but after a series of discussions we were able to agree on conditions that will address the concerns,” Cole said.
Specifically, Cole was concerned with the high amount of debt that Carlyle leaders plan to take on in order to acquire the phone company, the challenges associated with the transition of Verizon’s existing Mainland back-office systems and support functions to Hawai‘i, and the possible loss of directory advertising profits to the regulated side of the business.
To address Cole’s concerns, Carlyle and Verizon leaders agreed:
Verizon Hawaii officials will provide $12 million to fund a “customer appreciation bill credit” equal to roughly one month’s basic phone service to subscribers;
Any transaction and transition costs incurred by Carlyle leaders in connection with the acquisition cannot be passed onto ratepayers;
Carlyle officials will not file for a general rate increase before 2009 unless the PUC members find a compelling reason for such a request. If Carlyle is able to demonstrate a compelling reason to ask for a rate increase before 2009, it must make an additional equity investment in the telephone company equal to the amount of the annual increase that it is seeking from ratepayers.
In addition, 67 percent of Carlyle’s revenues from local directory operations would be counted against its revenue requirements for the purposes of calculating any such rate increase;
Additional conditions deal with access to information, reporting requirements, creditor access to privileged assets only upon PUC approval, and the treatment of income-tax expenses in future rate proceedings.
Cole recommended that members of the PUC approve the transaction only if each of the 10 conditions set out in his statement of position are adopted as conditions of the commission’s approval. “Commitment to these terms and conditions provides a good starting point for Carlyle and Hawaiian Telcom in Hawai‘i, and will ensure that ratepayers will not bear the risks associated with this transaction,” Cole said.
