June 19, 2005
The federal government is on pace to pay Honolulu-based Sandwich Isles Communications Inc. $13,743 per customer this year for providing high-speed fiber-optic phone lines to families living on Hawaiian Home Lands. The Hawai'i subsidy funded by a $2 fee attached to all phone bills is 100 times higher than the average for rural telephone service on the Mainland.
Nextel Partners Inc. of Reston, Va. using the same program that gives wireless phone companies a payout similar to the land-line subsidy should get $13,389 this year for each wireless customer on Hawaiian Home Lands.
"It's definitely a lot of money," said John Cole, executive director of the state consumer advocacy office. "I would think there's other (cheaper) ways to do it. When you look at the amount, it does seem out of line with what it should be."
The money comes from the Universal Service Fund, a federal program designed to ensure that customers in high-cost rural areas have affordable phone service. In Hawai'i, the fund is financed by an 11.1 percent fee on interstate phone bills paid by Hawaiian Telcom, the state's main land-line phone provider, and a higher rate for local wireless customers. Hawai'i customers paid an average $2.04 per phone per month last year.
Sandwich Isles and Nextel Partners are on track to receive a combined $24.9 million in federal subsidies this year for providing service to a total of 1,823 customers on Hawaiian Home Lands.
The Hawaiian Home Lands are approximately 200,000 acres of property formerly owned by the Hawaiian monarchs and government that were ceded to the United States when Hawai'i was annexed as a territory in 1898. In 1921, the land was set aside for use by eligible Hawaiians. There are about 6,000 parcels of land leased to Hawaiians for residential use and about 18,000 Hawaiians on a waiting list for property.
The subsidies given Sandwich Isle and Nextel equate to an average of $13,642 per customer, or more than 100 times the $130-per-line average annual subsidy provided for rural communications projects nationwide, according to Federal Communications Commission records.
The cost might have been less if Sandwich Isles had opted for cheaper technologies such as satellite.