Last update at : Thu Apr 27 22:41:27 1995

Hawaii's Information Industry

Surf's Up! Hawaii Attempts to Develop an Information Industry and Statewide Internetwork But Doesn't Always Catch the Right Wave

Stephen B. Harkness


This paper examines past and present developments in the State of Hawaii's telecommunications infrastructure, fledgling information industry and proposed statewide internetwork. It briefly summarizes the history of telecommunications within the state over a 100 year period. The author cites recent examples of local successes and failures in providing public access networks. Specifically, a mini-case study reviews the state government's efforts to provide a public access network via its network development agency, Hawaii Information Network Corporation (Hawaii INC). A summary suggests lessons to be learned from this project and what the key drivers may be for Hawaii's successful development of an information industry in the future.

1. An Information Industry for Hawaii?

Hawaii state politicians, academicians and business executives have long questioned Hawaii's ability to develop an information industry. Indeed, many states have been so overwhelmed by the impressive growth of electronic commerce in general, that their governments have formed policies for the development of local internetworks, eg. Utah 2000, Texas, North Carolina, etc.

Economists suggest that with Hawaii's poorly diversified economy, overly dependent upon tourism for the majority of its exports, Hawaii must look to growth industries to bolster its revenues.

Aspirations to develop telecommunications and information services industries appeal to Hawaii's sense of international role in the Pacific. The availability of high speed fiber optic connections to Asia and the US mainland, along with the promise of VSAT teleports, would allow Hawaii to compete with cities more favorably situated. Some believe that Hawaii's future international competitiveness hinges upon its ability to attract and develop high technology industries.

To understand why Hawaii should be concerned about the development of a diversified economy, let us look at the major components of Hawaii's economy.

2. Hawaii Economic Factors

Hawaii's gross state product (GSP) is the broadest measure of output of final goods and services we can use to take Hawaii's economic pulse. Hawaii's GSP for 1992 was $29.3B (the most recent confirmed figures) and the state's economy is expected to show a modest growth of 0.5 of 1% in 1993 slowing to almost flat in late 1993 and early 1994 [1]. Indications are that Hawaii experienced modest growth in 1994 overall and that growth will probably not exceed 2% in 1995.

Hawaii's GSP comprises three major sectors weighted heavily in favor of tourism. They are: tourism (35% of GSP), federal military spending(12%) and agriculture (4%). Recently, military spending and agriculture have experienced significant downturns and tourism has faltered as shown in Figure 1.

Figure 1. Source: First Hawaiian Bank.

These downturns in Hawaii's major export industries and their depressing effect on the local economy should cause concern over the dangers of a poorly diversified economy. Let's examine these three sectors more closely and attempt to forecast the short-term prospects of each.

2.1 Tourism

Tourism, the catalyst for Hawaii's modern economic growth, has experienced a slump in recent years. Since its 1990 peak of 7.0M visitor arrivals, the market softened through 1993 to 6.1M arrivals - a 12% decline. The market recovered somewhat in 1994 growing 5%, and is expected to grow between 5% and 6% in 1995.

Although visitor arrivals appear to be recovering to near 1990 levels, since then there has been a 10% increase in hotel inventory (rooms, jobs, etc.). This oversupply of hotel inventory is likely to lead to comparatively slow growth in the industry in the short term due to reduced occupancy rates and reduced operating profits.

Advances in aviation technology mean that Hawaii is more frequently "over flown" by travelers crossing the Pacific. United Airlines and Continental now fly non-stop to Auckland and Sydney from the west coast USA, over-flying Honolulu altogether. Singapore Airlines and All Nippon Airways have stopped direct flights to Hawaii.

Overcrowding in Waikiki, commercialism and a general ebb in the fabled "aloha spirit" have also conspired to make Hawaii an increasingly unattractive destination for holiday makers. Hawaii is loosing its comparative advantage over other neophyte tourist destinations such as Bali, Cairns and Pattaya.

2.2 Military Spending

In 1993, the US military controlled 239,000 acres of Hawaiian lands, of which 10% were owned freehold, 38% were leased from private land owners, and 52% were leased on special terms from the state [2]. These military expenditures amount to about 12% of GSP, making the defense sector Hawaii's second largest export after tourism.

Military cost cutting has lead to scrutiny of the rationale of maintaining expensive military bases in an increasingly costly Hawaii. Restrictive land use zoning, the heightened profile of environmental agencies and sovereignty groups, and the high cost of living for military personnel stationed here are all concerns for the Pentagon. Hawaii's exposure to base closures is high as it ranks top of the league of states dependent upon military revenues. Most recently, Barbers Point naval base, Oahu, has been closed and the bombing practice island, Kahoolawe, signed over to Hawaiian rights groups.

2.3 Agriculture

More than half, 177,000 acres, of the land used for sugar and pineapple production 25 years ago has now been released. Hawaii can no longer compete with producers from Thailand or the Philippines were daily wages are often less than hourly wages in Hawaii.

The future of the agricultural industry looks bleak for Hawaii. To avoid further plantation closures, the federal government would have to support sugar prices in the absence of a favorable change in world sugar markets; congress already has a long history of supporting US sugar prices. Technological breakthroughs would also have to make possible substantial reductions in production costs and substantial increases in yield [3]. The 1994 total value of unprocessed farm produce was $500M, or 1.5% of Hawaii's GSP, down from 4% in 1990 [1].

3. Regional Economic Influences

Hawaii's economic outlook is strongly influenced by the performance of various national economies of the Pacific Rim, in particular the US and Japan. Hawaii must react to changes in the economic fortunes of these two superpowers and be prepared to monitor market opportunities and take advantage of favorable trends.

The Asia-Pacific regional economy experienced a significant increase in trade and output in 1993 and 1994 and seems to be at its most buoyant since the global recession of 1991. Growth in the Japanese economy is expected to be 0.6% in 1994, 1.0% in 1995, and 2.0% in 1996, effects of the Kobe earthquake notwithstanding [4]. Growth in Asian economies as a whole is expected to be excellent in 1995, at over 7.0%.

4. Technological Influences

Economists point to studies showing that there was approximately a 40 year lag between the widespread deployment of the national electricity grid in the US, and a marked increase in industrial output. Likewise, computers have been in business use for roughly 25 years and the next 15 years are anticipated to bring significant gains in industrial efficiency, productivity and output as a result of their widespread deployment.

The US has steadily matured from a manufacturing economy to a service economy over the past several decades. Within service related industries alone, studies show that 50% of the labor force now works in technology related jobs. Similar research shows that Hawaii has only 10% to 15% of its labor force in technology related jobs [4]. This disparity between Hawaii and the 48 contiguous states leads us to the worrying conclusion that Hawaii is failing to attract high technology industries, which consequently generate high technology jobs.

Figure 2 illustrates how US spending on high technology capital equipment, including computers, has increased significantly in 1993 and 1994. This, combined with the expected 3.1% growth in the US economy in 1995, is forecast to raise the median family income substantially over the next few years.

Figure 2. Source: Barron's.

Central to the theme of developing technology related jobs is the need for local businesses and government to realize that we stand at the threshold of a digital revolution of unparalleled proportions. This revolution is based upon the widespread conversion of information from "atoms" to "bits" [5]. Physical goods and services - atoms - are being converted to digital matter - bits - at breakneck speed, eg. from VHS video cassette to digital video delivered over fiber. This mass conversion gives us the ability to move, manage, convert, and use the bits to reach new audiences in a multitude of ways.

Consider the digital revolution in the context of the video rental market. Cable companies have commissioned the development of powerful video-on-demand (VOD) servers to supply individual homes with digital versions of entire movies on request. Viewers select a movie from the company's digital library, retrieve it at will, watch it when it suits them, and are able to view the movie any way they please, eg. freeze, play in slow motion, etc. All this without setting foot in their local Blockbuster store!

With this escalation in the delivery of bits, comes the need for increased bandwidth. Local telephone companies (telcos) are replacing existing copper-based networks with fiber optic cable at the rate of 5% per annum. Optical fiber is readily available, cost efficient and there are abundant raw materials available for its manufacture. Over 10 million miles of optical fiber were deployed in the US in 1993 alone. At this rate, we will be nationally "fiber ready" within 20 years.

With the development of advanced transmission technologies and error correction algorithms, our ability to push more bits along this medium becomes seemingly limitless. MCI is already offering its corporate customers fiber connections at 2.4 gigabits per second. They expect to be able to offer 40 gigabit per second connections in two years, at the same price! British Telecom's Martlesham research laboratory has succeeded in sending some 700 separate wavelength streams, in parallel, down a single fiber thread.

Accepting the digitization of information and the availability of infinite bandwidth, we can make two significant postulations [5]. Firstly, that bits can effortlessly commingle to form a rich array of multimedia information. Secondly, that we can develop new bits or "headers" to accompany existing information. These headers will describe the core information in ways never previously done. To understand the uses of headers, let us extend our earlier VOD example.

Consider digital television delivered to your home over high bandwidth fiber optic cable. If the digital content were accompanied by additional bits describing a variety of aspects of the content, you would no longer be constrained to necessarily watching or recording the content at a certain time. You could elect to have your VCR record it because it contained information matching a selection mask you had previously created. You might instruct your VCR to record only sports programs showing final rounds of golf tournaments, or feature films starring the actor Steve Martin. You would no longer be constrained to making recording decisions based upon date, time and program title. You may even be able to enhance content by adding information from another source and medium, eg. overlay the final PGA Masters scores as clipped by your Dow Jones News Retrieval service.

As companies realize the power of being able to supply their goods and services in multimedia formats to every home in the nation, eg. via the World Wide Web, opportunities for new businesses, products and services will be boundless. Industries at the forefront of this revolution realize that competitiveness in the digital era is contingent upon their ability to convert atoms to bits and deliver them in hitherto unforeseen ways. The only bounds to their use of infinite bandwidth, will be those delimited by their creativity.

5. Hawaii's Opportunities

Hawaii can turn the digital revolution to its advantage by identifying its core competencies and leveraging them in the area of high technology business. Hawaii has proven expertise in inter-cultural communication and international business. Institutions such as University of Hawaii, East-West Center, Japan-American Institute for Management Science, can act as advisors to technology partnerships between Eastern and Western organizations. It's residents, by virtue of their multi-ethnic background, are already culturally sensitized and possess highly developed inter-cultural communication skills. Combining Hawaii's international agencies and multi-ethnic work force with high technology businesses should produce a new brand of international technology literacy. Within this context, an advanced telecommunications infrastructure would attract firms wishing to pursue technology projects in the Pacific region. Verifone Corp. is such an example: locally founded, the company eventually moved to Texas citing the parochial Hawaiian business climate among its reasons for relocating.

Opportunities also abound for Hawaii to position itself as a preeminent provider of education and learning in the Pacific. Local institutions such as PeaceSat and Honolulu Community College are working on the delivery of Internet and digital radio services to remote island communities via satellite. Such telecommunication facilities will enable educators to develop Pacific-wide distance learning projects for island residents. The state has the opportunity to become the "hub" for such an educational network. Students could join Hawaii's virtual classroom to participate in learning, research projects and demonstrations delivered via this digital education network.

There is an increased awareness in local government of the need to provide low cost access to public information. Also on the legislators' list of priorities is the need to streamline local government. Methods for doing so include making government forms available in digital format, introducing electronic processing of government applications, and improving ease of access to public information. Such steps would likely lead to a reduction in the cost of local government.

Another concern in the local community is the reduction of the so-called "brain drain" - the loss of young, educated people to out-of-state careers. Developing a technology industry may serve to retain more of Hawaii's graduates and perhaps attract some of those who have already left.

6. Historical Telecommunications Infrastructure Development

To understand more about Hawaii's telecommunications background, the foundation upon which it is attempting to build an information industry, let us review the history of telecommunications infrastructure growth in the state during the hundred year period 1878 to 1978 [6].

1878 Telephone service begins in Hawaii under a special charter from King Kamehameha. Two telephones are in service on a three mile route in Maui.
1920 The Transportation Act: Hawaii public utilities rates are controlled by the US Interstate Commerce Commission. Hawaii has no control over local rates.
1922 The Mutual Telephone Company protests a bill proposing local control of utilities rates. Commercial AM broadcast radio begins service in Hawaii.
1934 The Communications Act: the Federal Communications Commission (FCC) is established. Control of local utilities rates is returned to the Hawaii Public Utilities Commission (PUC).
1940 A total of 40,000 telephones are in service in Hawaii.
1948 PUC commissioner Jack Field is dismissed for "aggressively protecting the public interest."
1953 The first FM radio station begins broadcasting in Hawaii.
1955 Broadcast television service begins in Hawaii
1967 General Telephone & Electronics (GTE) is given permission by the state legislature to acquire Mutual Telephone, despite advice from mainland telecommunications analysts to the contrary.
1972 Hawaii hosts the Governor's Conference on the Future of Telecommunications for Hawaii aiming to "further cooperation and to initiate dialogue among all parties who have interest in telecommunications."
1975 Governor Burns convenes a Task Force on Telecommunications User Requirements to survey state usage of telecommunications. The task force reports that the state's annual telecommunications bill is $6.7M. The top three state departments using telecommunications, by expenditures, are: University of Hawaii, Department of Education (DOE) and Department of Health. The Budget & Finance Department spends only 0.34% of its budget on telecommunications (this is the department which will later control the state's information industry development agency).
1976 Electronic MailGram service is introduced in the islands by the US Postal Service and Western Union Telegraph on an interim basis. Electronic mail traffic averages 4,000 messages per month. 600,000 telephones are in service in the islands. An average of 2,574 calls are made per annum per telephone.
1977 Citizen Band Radio - CB - has 15,000 registered users in Hawaii.
1978 Hawaii has six subsea telephone cables linking it to the US mainland and Australasia. Total cable capacity equals 2,335 simultaneous conversations.

Satellites provide additional domestic long distance capacity. Local telephone service costs are increasing while long distance service costs are decreasing. Usage of cable and satellite bandwidth now includes computer data transmission; radio and television transmission (from the mainland). Business applications are introduced on wide-band telephone networks (ie. 12 to 24 voice channels) including airlines reservations; credit card booking systems; and hotel reservations.

Hawaiian Telephone Company (Hawaiian Tel.) introduces "Dasnet II", an inter-island data switched network for high quality, high speed data communication. Dasnet I is already in service connecting the islands to the mainland based data network "Telenet."

Broadcast radio now comprises six FM stations and 26 AM stations. Hawaii's broadcast stations operate largely at a loss and are believed to provide tax write-offs for mainland operators. Hawaii and Idaho are the only states in the union not to have a public broadcast radio station.

Hawaii has five broadcast television stations and seven satellite stations. Of Hawaii's homes, 97% have television sets. Hawaii receives broadcast television one week later than mainland states. Important events are broadcast live via satellite to Hawaii at "greater expense" than other states.

Hawaiian Telephone Company is given permission by the FCC to use television designated frequencies for point-to-point microwave services. Hawaiian Tel. charges international carriers twice the domestic rate for time on its COMSTAR transponder under an FCC ruling which treats Hawaii as an international point for telecommunications services.

Nine companies provide cable television service on Hawaii. Of Hawaii's households, 30% have cable service. The FCC requires that three cable channels be reserved for public, government and educational purposes.

Television Entertainment Co. uses a multi-point distribution service to broadcast television to approximately 500 subscribers in Waikiki via a single transmission tower, multiple external receiving antennae and line of sight transmission.

Maritime telephone and telex services are provided to shipping by Marisat satellite services. Hawaii pays a 21% premium as an international point of service.

Mobile radio telephone service ("cellular" service) is offered in the islands by two carriers: Hawaiian Telephone Company and Radiocall Inc. Oahu has 450 subscribers.

Four firms offer local paging services: Radiocall Inc., Hawaiian Telephone Co., Marshall Communications and Oahu Communication Inc.

Telegraph service is offered by three firms: International Telephone and Telegraph, RCA Globecom and Western Union International. Traffic is 350,000 messages per annum and falling.

7. Mini-case study: Hawaii INC

Hawaii INC, or Hawaii Information Network Corporation, is a state of Hawaii chartered corporation charged with generating private investment in telecommunications and developing an information industry in Hawaii. It was formed as a result of House Bill 2032, the 1988 Statute relating to Telecommunications and Information. This bill was signed into law by Governor John Waihee on June 6, 1988, with the intent that it would "create the mechanism for the State of Hawaii to become a leader in the field of telecommunications and information technology in the Pacific Basin and throughout the world." [7]. Hawaii was the first state of the union to sign such an act into law.

The act foresaw the partnering of public and private sectors to provide Hawaii with an information infrastructure. The state would provide bandwidth on its statewide data network and create an information agency, Hawaii INC, to manage a public access gateway to the network. In return, the private sector would provide information of value to the public through the creation of searchable on-line databases and service bureaus. Private information providers would supposedly prosper by adding value to information through data repackaging, enhanced search and retrieval interfaces, etc. [8].

Hawaii INC was incorporated and began operations in 1989. For the purposes of administration, it reports to the director of the state Budget & Finance Department.

7.1 Strategy

In April 1989 the governor appointed a nine member board of directors to Hawaii INC. Three board members were from the governor's cabinet and six from private industry. Hawaii INC publicly announced its mission to promote the development of an information industry in Hawaii and increase revenues for the state through the attraction of high technology businesses to Hawaii. It intended to fulfill this mission through the following strategy: It was to accomplish this through use of the state's existing, HAWAIIAN, network which could be tapped to provide residents with easy access via home computers and modems. It was also intended that the state would provide dumb terminals to schools and libraries. HAWAIIAN - HAwaii Wide Area Integrated Information Access Network - is the state's wide area network. Established in 1988 by the Budget and Finance Department and managed by their Information and Communication Services Division (ICSD), HAWAIIAN is used for voice, data and video communication between the various state departments and agencies. Hawaii INC believed it had a great strategic advantage in being able to make use of the HAWAIIAN network.

From the outset, Hawaii INC was revered as a test case for other states of the union. Industry experts waited in anticipation to see the short range results of this daring industrial experiment in the aggressive development of an information industry.

Gene Kimmelman, legislative director of the Consumer Federation of America described the state's initiative as, "light years ahead of others," and, "a test bed for the nation." [9]

Early in its life, Hawaii INC became burdened with problems relating to cronyism. It's mandate called for the board of directors to appoint an agency executive director. Of nine candidates for the directorship, the appointment went to one of the least professionally experienced, Art Koga. Koga was former campaign manager for Senator Norman Mizuguchi and had strong connections with the democratic party. Koga had previously been an executive of the DOE and had little experience of telecommunications and technology in general [10]. The Budget & Finance Department had ensured that Koga qualified for the position by altering the job description originally approved by the board [11].

So great were the waves of dissent that Koga's appointment created among board members, that the fallout caused two ex-officio members to request replacement and two elected members to resign: Pacific Telecommunications Council executive director, Richard Barber, and former PUC commissioner, Hideto Kono.

7.2 Operations

Despite the early hiatus, Hawaii INC opened its doors for business as planned. Consulting firms were engaged, at expense, to conduct marketing research studies to identify potential information providers, market trends, opportunities, and create a model to track and predict the economic demand for information services.

In 1990, republicans in the legislature demanded an investigation of Hawaii INC's spending practices and an inquiry into the operations of the agency. The democrats declined to oblige.

Hawaii INC linked up with the DOE to promote a terminal "take-home" project. This program encouraged school children to develop computer, reading, writing, research and communication skills through the use of telecommunications and information technologies.

The agency developed an on-line Polynesian cultural and education program based on the voyages of the ancient navigational outrigger Hokule'a. The program's aim was to educate the public on the traditions of navigation in the islands and the history of past Hawaiian voyages.

Hawaii INC conducted educational and training seminars for users and potential information service providers (ISP's). Terminals were distributed to schools and libraries throughout the state.

Field tests were conducted with the deaf community in conjunction with the standard for telecommunications devices for the deaf (TDD) to test the effectiveness of videotext services as a communication tool.

Hawaii INC launched an annual HINTS - Hawaii Information Networks and Technology Symposium - conference on information technologies and related issues. HINTS-7 held in March this year, attracted over 500 attendees and 45 exhibitors and generated lively debate about the determinants of a successful local civic net.

Hawaii INC also published an information community newsletter addressing local industry issues.

7.3 Reevaluation

In spite of this series of projects conducted under the leadership of Koga, Hawaii INC's activities appeared to be deviating from the originally mandated mission. Little private investment had been attracted to the telecommunications and information industries, and Hawaii INC had begun to concentrate its effort on the development of a state-managed gateway to the HAWAIIAN network: this gateway was called Hawaii FYI. Hawaii FYI was ostensibly a videotext service providing free public access to many of the information sources Hawaii INC had created [9].

In doing this, Hawaii INC switched strategies from a demand side model to a supply side model. It focused on generating large numbers of end users in the hope that the sheer size of the market would attract electronic purveyors of goods and services. To achieve this, Hawaii INC targeted one of the most technology literate of all market segments: teenage children with access to home computers and modems. It made available free "chat" or "rap" lines, electronic games, e-mail and bulletin board discussions on a variety of teenage topics. With a budget of $1.2M, Hawaii INC was able to successfully market these chat lines to schools and libraries and attract significant volume on its "free" information network. Indeed, the metric by which Hawaii INC measured network usage shows impressive growth: Hawaii INC boasted 2M+ minutes of customer usage per month at its peak. However, most of these usage minutes were for the 65 in-house information services Hawaii INC was hosting on Hawaii FYI itself. Unfortunately this misleading metric did not reveal the fact that Hawaii INC had only succeeded in attracting four commercial ISP's. Its business plan had projected 158 ISP's by the end of 1993 and, in an interview with local press, Koga had predicted that the number might go as high as 300.

By this stage, Hawaii FYI was looking unattractive to potential investors. Its bulletin board services contained a litany of adolescent obscenities, the text-only interface was looking moribund and content was poorly organized. Hawaii INC had squandered its budget on consultants' marketing surveys and advertising, and still could not attract new investors.

By mid-1994, Hawaii INC realized it was in trouble and changed strategic tack drastically. The agency attempted to terminate its contract with Hawaii FYI's three remaining ISP's and pass the gateway off on ICSD. At least one ISP threatened legal action.

Its budget was reduced to $590,000 (half of which was accounted for by staff salaries) and its management team began desperately trying to devise a new strategic plan to ensure survival under the forthcoming administration: gubernatorial elections were slated for Fall 1994.

A round of closed-session meetings ensued, to which industry stakeholders and technology professionals were invited. Opinion was solicited as to what role Hawaii INC could play under the new administration. The board of directors, perhaps anticipating the need to show prudence in the face of the new administration, declined to endorse any significant change in strategic direction. Some participants commented that the round of strategic planning meetings was too little, too late, and that the resulting plan was lacking the creativity necessary to salvage the agency.

The strategic planning process served no more than to reveal what critics had said all along, ie. that the agency should not be in the business of managing information themselves, but rather, in the business of encouraging others to manage information and promoting an information industry in general.

The central tenets of the revised strategy were:

The agency was caught in a state of limbo for several months awaiting a firm indication from the new administration as to its policy regarding telecommunications.

7.4 Dissolution

Bill 1913 currently before the house, repeals statute 2032 which originally formed Hawaii INC. At the behest of Governor Cayetano, state budget director, Earl Anzai implemented harsh budget cuts: Hawaii INC was at the top of the list and was allocated a zero budget. In an interview with the Honolulu Star-Bulletin, Anzai stated that the program hadn't lived up to its objectives: "Just look at their track record," he said [12]. At the time of writing, bill 1913 has passed the house unamended, but has not yet been heard in the senate. The allocation of zero budget means it is not necessary for the senate to pass the bill, as the agency will close its doors regardless on June 30, 1995, the end of the current fiscal year.

In an eleventh hour bid for reprieve, the Hawaii INC advisory board suggested approaching the governor with an information policy plan that the state democratic party could embrace. The advisory board also suggested approaching private investors for their support in an attempt to continue the work of Hawaii INC through private contracts. Such a rescue package would at least have allowed the staff to continue their participation in the local information industry.

At the HINTS-7 conference, March 1995, a petition was passed around delegates affirming "that the HAWAII INC and its programs are important to the State of Hawaii and require continued financial support," and resolving that, "The Legislature and Governor continue to support the efforts of the Hawaii Information Network Corporation." [13]. An impassioned plea from former City Information Services Agency director, Robert Graham, called for delegates to do everything in their power to ensure that Hawaii did not fall behind the other 49 states in its development of an information industry. Graham praised Hawaii INC for its past work, describing the program as "an asset for all of Hawaii," and, "a spark plug for development." [12]

It is expected that Hawaii INC will cease to exist on July 1, 1995.

8. Lessons Learned

Reviewing the above mini-case study, we can highlight a few key determinants of success required in a statewide policy aimed at encouraging investment in an information industry: In fairness to the out-of-state reader, there are other factors at large in Hawaii's business environment that conspire to limit the potential of an information industry. These are mentioned for the reader's information, and include:

9. Current Initiatives

Governor Cayetano announced in his 1995 state-of-the-state address that one of his major priorities is developing the state's telecommunications infrastructure. He stated that deregulation of the local telecommunications industry was tantamount to the successful growth of the industry. He also held an inter-agency meeting on telecommunications infrastructure to evaluate the current state of the industry and hear suggestions on how to accelerate growth in this area.

The Department of Business, Economic Development & Tourism (DBEDT) has also been conducting surveys of private businesses in an attempt to estimate needs and measure their perception of how a strong telecommunications infrastructure can help make them more competitive in the global marketplace [15].

On February 15, 1995, the state senate held initial hearings to determine the measures necessary to expand telecommunications competition within Hawaii's market and invited ideas and testimonies from the public [16]. The PUC conducted a series of facilitated meetings with industry stakeholders to determine the highest level of consensus on the present infrastructure docket.

House Bill 471 now before the House of Representatives goes a long way towards recognizing how far Hawaii's government and regulatory practices have fallen behind the current pace of technological change [17]. It states:

"Changes in technology are outpacing changes in regulations at the state level and a national policy is evolving to advance competition in the provision of all telecommunications services."
It alerts the legislature to the dangers of maintaining a tightly regulated telecommunications environment:
"The development of these capabilities should be constrained and not by regulation whenever possible to reflect the dramatic changes in technology and new methods of accessing networks, such as wireless communications, that have increased consumer choice and broken down the monopoly structure that evolved under current telecommunications regulation."
The bill requires that all carriers provide connectivity to their networks for the provision of intrastate telecommunications services by any competing provider. This includes the local exchange carrier and is the first step towards breaking the statewide monopoly GTE Hawaiian Tel. has held on intrastate telephone service for decades.

Arising from the failure of Hawaii INC to sustain a statewide public access network, is a move on the part of one of its former information service providers, Hawaii Online, to form a local Internet association and use this as a vehicle for developing a local internetwork.

Calling itself the Hawaii Internet Access Providers Association (HIAPA), this loose coalition of Internet access providers and information resellers is seeking to implement a private switch which would allow Hawaii to develop its own local Internet. This would eliminate the current need to send Internet packets to the US mainland and back whenever the transmitting and receiving parties are both Hawaii-based. This would lead to reductions in network latency, increased access speeds for World Wide Web queries, cost savings to local Internet access providers, and cost savings to Hawaii-based Internet users. The result would be a more efficient and competitive Internet infrastructure for Hawaii.

HIAPA intends to recruit the University of Hawaii as its main provider of network bandwidth, although it is unclear what additional network capacity and network management staff the already busy state university can afford, especially in the face of state budget cuts.

One effort to streamline local government is being carried out by the state Office of Information Practices (OIP). OIP director Kathleen Callaghan describes their objective as making hundreds of state and city forms available to users via their home computer and modem, or, state-provided terminals in libraries and satellite city halls. Achieving this will bring huge time and money savings to many citizens. This project makes OIP a central clearing house for state forms and records. OIP has so far scanned and stored in a searchable database over 18,000 public records. Unfortunately, the intended vehicle for providing public access to these records no longer exists. This was to have been Hawaii FYI which has now been withdrawn from public use following the collapse of Hawaii INC. The OIP project has also been hindered by the non-compliance of the University of Hawaii and DBEDT. Both agencies have so far failed to file their forms electronically as required by state law.

Another state initiative took place this January in the form of the Hawaii Information Congress '95. This half-day forum brought together academics, government officials, businessmen, industry commentators and end users of information technology. They participated in moderated sessions in which participants were asked to identify key applications that would evolve in the next 5 years by industry sector. Participants voted on the relative importance of each application identifying the most significant emerging applications. This led to discussion on how Hawaii can position itself to take advantage of these developments. The findings may not have uncovered any new high technology applications, but did serve to provide government an indication of priorities in infrastructure development and initiated valuable brainstorming processes among participants [18].


Hawaii has an important opportunity to take advantage of the current revolution in global information management for the mutual benefit of the state and its residents. It can apply its tremendous expertise in cross-cultural communication and international business in the area of Asia-Pacific digital commerce. Hawaii can draw upon professional resources to provide the guidance and skills necessary to position itself as an international player in the developing information economy. This paper has identified some of the factors that contribute to establishing a statewide industrial policy for the promotion and development of an information industry.

Only when these steps have been taken, will Hawaii truly be able to participate in the digital revolution.


[1] "Hawaii 1994," Annual Economic Report, Bank of Hawaii, vol. 44, 1994.
[2] Leroy Laney, "Military & Economy," in Randall W. Roth, ed., The Price of Paradise, Volume II, Mutual Publishing, 1993.
[3] Peter Garrod, Bruce S. Plasch, "Agricultural Lands," in Randall W. Roth, ed., The Price of Paradise, Volume II, Mutual Publishing, 1993.
[4] David McClain, University of Hawaii, panel session of the Hawaii Economic Association, Apr. 13, 1995.
[5] Nicholas Negroponte, Being Digital, Alfred A. Knopf, 1995.
[6] Richard J. Barber, "Communication Planning and Policy in Hawaii," University of Hawaii, 1978.
[7] "Hawaii INC to Link Public, Private Sectors," Information Times, vol. 1, no. 1, Jul. 1988, pp.18-19.
[8] George E. Darby, "Hawaii, The Information Industry, and Economic Development," in Proc. PTC'89, Honolulu, Jan. 1989, pp.585-587.
[9] "Hawaii INC Overview," Hawaii INC.
[10] Robert M. Rees, "A Comment on Cronyism," Pacific Business News, Nov. 1, 1993.
[11] Richard J. Barber, Pacific Telecommunications Council, private communication, 1995.
[12] Richard Borreca, "Cayetano team pulling plug on Hawaii INC," Honolulu Star-Bulletin, Mar. 30, 1995, p. A-4.
[13] "Resolution Related to the Hawaii Information Network Corporation," presented to HINTS-7, Honolulu, Mar. 1995.
[14] George E. Darby, Meheroo Jussawalla, "Telecommunications," in Randall W. Roth, ed., The Price of Paradise, Volume II, Mutual Publishing, 1993.
[15] "DBEDT helps to explore two of governor's key initiatives," Newsline, DBEDT, Jan-Mar. 1995, p. 3.
[16] "Status Update/Communications Legislation," Hawaii State Legislature, Feb. 21, 1995. [17] "House Bill No. 471," State of Hawaii, Jan. 19, 1995.
[18] "Final Report, Information Congress '95," Hawaii Chapter AIIM, Jan. 15, 1995.

Author Information

Stephen Harkness is Information Systems Manager for Pacific Telecommunications Council (PTC), an international, non-profit, non-governmental, telecommunications membership organization. He is a member of the advisory council of Hawaii Information Network Corporation - Hawaii INC - and a member of the steering committee for the Pacific Distance Learning Consortium, a group of educators and technologists promoting the use of technology in distance learning projects in the Pacific. He was instrumental in project managing the installation of Oceanic Communication's first fiber-based private Internet access circuit in Hawaii: this circuit, implemented in conjunction with Internet access provider Hawaii Online, allowed PTC to achieve full Internet connectivity. He has a B.Sc.(Hons) in computer science from The Queen's University of Belfast. and an MBA with specialization in international business from the University of Hawaii.

Pacific Telecommunications Council
2454 South Beretania Street, Suite 302
Honolulu, HI 96826, USA
Phone: +1-808-941-3789
Fax: +1-808-944-4874
World Wide Web: