Thursday, October 07, 2010


The High Cost of Cheap Phones

By Henry Curtis

Sandwich Isles Communications Inc. was created in 1995 to provide rural telephone service for Native Hawaiians living on Department of Hawaiian Home Lands (DHHL) property.

Honolulu Advertiser staff writer Rick Daysog wrote on June 16, 2009 that the federal government pays Sandwich Isles about $13,000 per customer for providing phone service and that Sandwich Isles made an offer of $400 million to purchase the bankrupt Hawaiian Telcom Inc.

The cost of phone via inter-island cable is far greater than offering each lessee two cell phones for free each with unlimited minutes.

Sandwich Isles filed an application with the FCC to tap a money fund to finance lease payments for an inter-island phone cable owned by Paniolo Cable Company.

As reported by the Kona Blog, the National Exchange Carrier Association commented on the application:

“Paniolo Cable Company (owner of the leased cable) is now owned in its entirety by Blue Ivory, LLC. Blue Ivory, which is held by the children of Albert S.N. Hee, President of Sandwich Isles, in three private trusts ...In addition, NECA is concerned that the Paniolo cable was constructed by Sandwich Isles’ sister company ClearCom.

While NECA fully supports the provision of advanced services in rural areas, it could not support Sandwich Isles’ decision to lease, in its entirety, a cable transportation network to serve its regulated customer base. This decision was based on the fact that the lease was made at an extraordinarily high cost relative to the number of subscribers, which appears inconsistent with the Commission’s longstanding “Used and Useful” standard, especially given the availability of more reasonable alternatives.”

Last week the Federal Communications Commission ruled that Sandwich Isles can tap the fund for half of the lease costs.

Henry Curtis


I suppose it is relevant for your readers to know Al Hee is brother to Senator Clayton Hee and that the CEO of Sandwich Isle is retired Admiral Robert Kihune, a trustee for Kamehameha Schools-Bishop Estate.

Clearly, the beneficiaries of this sweetheart deal are well-connected political insiders. Which helps make sense of the outrageous price tag, as well as the assistance they have received from Senator Inouye's office in helping the proposal work through the federal system.

Where are the Watchdogs? I am so glad Democrats believe in government regulation. How else will we ensure public dollars are spent wisely?

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