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From the New York Times and Om Malik: Google and five telecom companies will build a trans-Pacific cable between Tokyo and Los Angeles, to increase bandwidth and reduce costs. The Times reported on the Unity consortium last September, but this new announcement confirms the US$300 million project. GearLog has more information on this topic. I haven’t determined if this new cable will connect with Honolulu.

It’s an important announcement because, as Om notes, this is the first time that Google has publicly confirmed its corporate strategy of building its own international telecom infrastructure through acquisition and investment. Google claims it wants to provide more reliable service to its users, so the company is entering the undersea cable industry not as a competitor but as a customer and complementor of Bharti Airtel, Global Transit, KDDI Corporation, Pacnet and SingTel.

As I mentioned on 7 February 2008 and 31 January 2008, the oceanic cable business can be risky. Google will have priority on the 7.68 terabit connection when it is completed. Adding more bandwidth is an essential part of providing scalable, reliable web services in North America and the Pacific Rim. If Google controls its own network as a source of competitive advantage, will competitors like Yahoo and Microsoft face higher costs to stay in business?

One strategy that telecommunications companies have adopted is bundling, or selling a combination of services at a reduced price. The goal is customer lock-in, a situation in which the buyer is more or less trapped in their purchase. In many cases, lock-in happens when the customer satisfices or compromises to gain value or convenience. Customers might grow dissatisfied over time, but they are unlikely to leave because alternative services are not available, or their perceived switching costs are too high.

A variety of US cable television and telecommunication companies have offered bundling programs. The usual items include television service and broadband Internet.

Companies that offer cable modems usually offer these services through the same “pipe” or connection – the coaxial cable drop found in many homes.

Local exchange carriers (LECs) offer POTS (traditional or “plain old telephone service”), and the final connection to the home is the familiar RJ-11 modular phone jack found in most US homes. Some LECs also offer mobile phone plans in their bundles.

Landline connections may be offered through VoIP or POTS, depending upon the carrier’s technology.

Agonizing over savings

Alina Tugend of the New York Times provided a great example of this decision-making process in her article last week. Customers sometimes obsess over lock-in when their friends brag about how much they saved by switching. Yes, lock-in also works well for insurance companies, too!

In Honolulu, Oceanic Time Warner, Clearwire and Hawaiian Telcom each offer bundles. Oceanic has a standard cable television package that includes cable modem service, long distance calling and VoIP calling plans. Oceanic staff can connect the customer’s RJ-11 telephone jacks to the company’s network, so customers can continue to use their existing landline handsets and equipment.

Clearwire offers broadband Internet service, long distance calling and VoIP telephone numbers through its WiMax network. Customers can hook their landline phone into Clearwire’s modem. The Clearwire service does not require an installation visit, but the coverage areas are somewhat limited. This article at DailyWireless.org has several interesting diagrams of business telephone systems.

Hawaiian Telcom keeps struggling

The HawTel package includes a POTS landline, long distance calling and DSL. HawTel is still working on its IPTV offering, which has been delayed by implementation problems. IPTV would let HawTel offer television service through the same RJ-11 telephone drop used by its landline and DSL offerings.

As a side note, I hated HawTel’s obnoxious “Savers Unite” advertising campaign, and am glad that it has been replaced. Was the tagline a call to action or an insult? It was hard for me to tell. The radio and television ads reinforced a stereotype of the “thrifty local” who clips coupons, hoards travel-size toiletries and wears old clothes to pay the “price of paradise”. Then again, telecom marketing campaigns usually strive for the “common touch”, in an effort to hold the average customer.

Telecom bundles are subject to a host of Federal, state and local regulations. Pricing is often controlled by government agencies and franchise agreements. On 18 August 2007, I discussed HawTel’s naked DSL option, which let consumers order DSL service without a voice landline. HawTel was late to act, as thousands of subscribers adopted mobile phones and dropped their landlines. These customers switched to Oceanic, Clearwire, or other broadband Internet services.

Customer lock-in is difficult to achieve when companies fail to implement their industries’ key success factors well. On 16 November 2006, I discussed HawTel’s billing problems after the company was purchased from Verizon. Mike Ruley never overcame these earlier issues and lost his post as HawTel’s CEO earlier this month, as I mentioned on 5 February 2008.

Hawaiian Telcom CEO Mike Ruley was dismissed yesterday. His replacement is Stephen Cooper, co-founder or Kroll Zolfo Cooper, a New York City-based interim management firm. Cooper is best known as the Enron’s CEO during the company’s bankruptcy. Today’s Star-Bulletin article has a brief biography of Cooper. Kevin Nystrom, a senior director at KZC, will join HawTel as COO.

While Cooper stated in today’s Honolulu Advertiser that HawTel is not a “distressed company”, it’s now clear that the Carlyle Group is unhappy with their acquisition’s performance. HawTel has lost thousands of subscribers to mobile carriers and Time Warner Oceanic’s VoIP services, leading to US$137 million in financial losses since 2006. I mentioned some of the operational issues on my old blog on 16 November 2006, and last week BusinessWeek discussed how market forces have affected the US telecom industry overall.

The Advertiser noted that Ruley put his Kahala home on the market in early January, which is a possible indication that changes were coming at HawTel. The company has eliminated over 100 management positions since October 2007.

Last Saturday we took a tour of the Superferry, and I took a few pictures for this blog. The Alakai arrived in Honolulu in early July and remains docked at Pier 19 while the Coast Guard does its final inspections of the vessel. About 4000 people participated in the event, according to this article in the Honolulu Star-Bulletin.

The main cabin is spacious and well-lit. The cafe section has plenty of tables. Voyages can range from 4 to 6 hours, and that’s plenty of time to grab a snack and talk story.

Most of the interior seating in the main cabin is located away from the windows. There are flat-screen displays mounted throughout the cabin. During the tour, the monitors showed a video that must have been shot while the Alakai sailed to Honolulu. On a regular voyage, the monitors will display interesting ocean sights captured by the ship’s video cameras.

There is a spacious first-class cabin on the bow. It costs an extra US$20 a seat. I wonder if the Superferry’s staff will be diligent about keeping the main cabin customers out of the premium areas. I’ve rarely seen flight attendants tell people to return to the main cabin, although that warning is a standard part of the safety briefing these days.

Plenty of amenities, but there’s something missing

First class is the only place where I saw accessible AC outlets, and these were few and far between. We saw perhaps 4 or 5 work carrels in this cabin. At least the few outlets that we found didn’t have a meter attached to them, as they now do at Dallas-Fort Worth International Airport. Anyone who wants to watch a movie on their laptop needs to board the Superferry early or make sure they charged their battery.

There’s no evidence that the Superferry will offer Internet access during voyages, either.

According to an article in yesterday’s Honolulu Advertiser, two court cases regarding the ferry’s environmental impact are due to be heard soon.

While I’m glad we got a chance to see the Alakai, it seems that the Superferry’s management had planned for a smaller event:

1. There were no souvenirs available. No free pens. No t-shirts. No hats. Even the boat’s gift shop was closed! This seems like a missed opportunity to get the brand and logo out to the most interested members of the public.
2. The boat seemed short-staffed. Most of the employees were leading very quick tours of the vessel. It was hard to find anyone who could answer a question or two.
3. While the Superferry is taking reservations online and by telephone, I couldn’t find anyone who was taking Superferry reservations during the event. All those willing customers right on board the boat, and no money changing hands?
4. There is no passenger parking at Pier 19. If you want to ride the Superferry without taking your car on board, then take a cab or have a friend drop you at the pier. I hope that the Superferry adds those tips to their walk-on passengers page soon. Most of the tour groups were shuttled in from downtown Honolulu courtesy of the Superferry, and a shuttle service from a remote parking lot might be a good side business.
5. I didn’t see any rental car counters at Pier 19. Perhaps riders should call Enterprise if they need a rental car to pick them up!

USA: The Los Angeles city council, in a unanimous vote, has taken a bold step. They have banned silly string on Halloween in Hollywood. The silly string fights got out of control during the last few years. Tree-huggers also claim that silly string washes into the ocean and kills marine life. Violaters face fines of $200 to $1000. Detention is a more appropriate option.