Before the FEDERAL COMMUNICATIONS COMMISSION Washington,DC 20554

) In the Matter of ) ) . INC. ) WCB/Pricing File No. 0B-01 ) Petitionfor PhaseI Pricing Flexibility ) Pursuantto Sectton69.709of the ) Commission'sRules ) ) )

COMMENTS OF PACIFIC LIGHTNET. INC.

Pacific LightNet, Inc. ("PLNI") submitsthese brief commentsin responseto Hawaiian

Telcom,Inc.'s ("HawaiianTelcom" or "HT") Petitionfor PhaseI Pricing Flexibility ("Petition") filed November 16,2007.' PLNI, a competitivelocal exchangecarrier serving customers on

Oahu,, , the Big Island, and through its own submarinecable and land-basedfiber network, offers a full rangeof integratedtelecommunications products and services,including local dial tone,high-speed Internet access, dedicated and switchedlong distance,special access and enhanceddata services. As a competitor,collocator and customerof

HT's since2001, PLNI has experiencedfirst-hand the issuesplaguing HT's back-officesystem sinceHT's cutoverfrom Verizon's systemsin 2006-not the leastof which was a significant upturn in billing effors.

With thesecomments, PLNI doesnot take issuewith the adequacyof the Commission's establishedtriggers to effectivelygauge the level of competitionin a market;rather, PLNI's sole concernlies with the validity of the revenuecalculations supporting HT's Petition. Hawaiian

t nA 0B-19,Released January 3, 2008. Telcom's Petition-which, if granted,would be irrevocable-hinges on a calculationthat allows no margin for effor.

To receivepricing flexibility for dedicatedtransport and specialaccess services (other than channelterminations to end users),a price-capLEC must demonstratethat unaffiliated competitors(i) havecollocated in at least15 percentof the LEC's wire centerswithin an MSA, or (ii) havecollocated in wire centersaccounting for 30 percentof the LEC's revenuesfrom theseservices within an MSA. In addition,the price-capLEC must show that,with respectto eachwire center,at leastone collocatoris relying on transportfacilities provided by a transport provider other than the incumbent LEC.2

In HawaiianTelcom's case,the first triggerclearly fails: competitorshave collocated in only 4 of the47 wire centersin the Non-MSA Area. Thus,HT relieson the lattertrigger, alleging,specific ally, that 32.62 percentof total 2006Qualifyng DT/SA Servicesin the Hawaii

Non-MSA Area is attributableto QualifyrngWire Centers.

As describedin AttachmentD to HawaiianTelcom's Petition.the revenuedata was derivedfrom Verizon's recordsfor the period commencingJanuary 1,2006 and endingMarch

31,2006,and Hawaiian Telcom's vendor, Communications Data Group ("CDG"), for the period commencingApril 1,2006through December 31,2006. This disclosurereflects the April 1,

2006cutover from Verizon's back office to HawaiianTelcom's back office.

Simply stated,Hawaiian Telcom's April 1,2006 back office conversionwas a failure.

As HawaiianTelcom's SeniorVice Presidentand GeneralCounsel put it, "we were shocked when we actuallysaw what was being delivered"3and "fo]bviously,by the end of April, we were

'47 c.F.R.$ 69.709(b) - Transcriptof HearingsHeld September25-26,2007 in Docket 2006-0400, In the Matter of the Public Utilities CommissionInstituting a ProceedingRegarding Hawaiian Telcom,Inc.'s ServiceQuali4t and PerformanceLevels and Standardsin Relation To lts Retail and LVholesaleCustomers ("Transcript"), p. 53, lines 12-13. seeingmassive problems...."* Although the CABS revenueat issuein HT's Petitionwas billed

by CDG, a third-partyvendor, and not HT itsell the bills could only be as accurateas the data

providedto CDG by HT's back-officesystems. HT acknowledgedthis fact in its Statementof

Positionfiled with the Hawaii Public Utilities Commission,in a proceedinginitiated to

investigateHT's servicequality:

Followingthe systemconversions, the Compaay identified that generally the NeuStarsystem was functioning as expected. However, within the Wholesale Disptachersystem, certain functionalitieswere not performing asexpected. Thosefunctionalities were validation of the engineeringcodes, the correct way to assigncircuit identificationnumbers, and accuratelyapply the USOC codes.The result of the WholesaleDispatcher and CABS gapsin functionality from what was expectedand the other gapsidentified for the other systemssuch asCRM whichwere used for bothretail and wholesale customers resulted in wholesalecustomers experiencing diffrculties in conductingcertain transactions. (emphasisadded). Hawaiian Telcom's Statement of Position,Docket 2006-0400, filed Feb.15,2007 , In theMatter of thePublic UtilitiesCommission Instituting a ProceedingRegarding Hawaiian Telcom, Inc.'s ServiceQuality and PerformanceLevels and Standardsin RelationTo ItsRetail and l4'holesale Customers,at p. 62.

PLNI's first-handexperience supports the foregoingassessment by HT. For example,PLNI has

anoutstanding, unresolved dispute with HawaiianTelcom regarding misapplication ofUSOC codes.

This andother still unresolveddisputes resulted in overbillingby HT for DT/SA Servicesin Qualifying

Wire Centersby approximately18%. With respectto theQualifyiirg Wire Centers,from April 1, 2006

throughDecember 31,2006, over two{hirds ofnew circuitsinstalled by HT for PLNI experienced billing errors.Across all services,billing errorsby HT rosesignificantly following the cutover,s which trendis only beginningto subsidein recentmonths. The following graph shows the number of disputes ofHT invoicesfiled by PLNI for theperiod beginning January 2005 and ending April 2007:

* Transcript,p. 83, lines 5-7. ' From a billing perspective,there was somethingof a calm before the storm immediately following the April 1, 2006 cutover: owing to the large percentageof order fall-out, billing relating to new orderswas delayedfor the initial months after cutover. TotalDisputes Per Month

600

500

400

300 +Total

200

100

0 €88S€ES88q8qFD 589= fi9 Es9= EE 5s

HT's troubledback-office conversion also led to an ongoingdisclosure to the SEC and

HT's noteholdersthat the deficienciesin HT's billing and revenueassurance systems, among others,result in a materialweakness in HT's internalcontrol over financialreporting.6

For the bright-linetest of 47 C.F.R. $ 69.709(b)to haveany validity, the datasupporting the triggersmust be accurateand reliable. As a primafaciematter, HT's Petitiondoes not contain sufficient information or disclosureto reasonablvdemonstrate that the 32.620/oreventrc u SnnHawaiian Telcom Communications,Inc. SEC Form 10-Q for the period endingSeptember 30,2001, filed November14, 2007,Item 4, pp. 30-3I : A material weaknessin internal control over financial reporting existsbecause there is more than a remote likelihood that a material misstatementof the annualor interim financial statementswill not be prevented and detected.The material weaknessresults from significant weaknessesin severalinformation technology systemsand changemanagement controls, as well as operatingprocesses and controls neededto fully record,process, summarize and reportfinancial data after our March 31,2006 transition.These deficienciesrelate to (but are not limited to) the following:

' Billing and revenueassurance, . Fixed assetsand project costing, ' Order accuracyand systemprocessing, ' Procurementand inventory valuation, and . Tax and surchargeaccuracy.

To help remediatedeficiencies in theseareas we engagedthe servicesof Accenture as a strategicpartner with specific expertisein information technologyprocesses and systemremediation efforts. In addition, we formed a stablhzationproject team to perform an assessmentof our control environmentafter the March 31,2006 transition.These continuing activities are intendedto facilitate improvementin the design and operationof our internal controls. calculationis accurateand reliable. The Commissionshould require Hawaiian Telcom to producecircuit level revenuedata that canbe reviewedand verified by the customerswho are the sourceof the revenue,or, alternatively,the samecircuit level revenuedata should be subject to review and verification by an independentthird -partyor auditor. As part of this verification,

HT shouldbe requiredto disclosewhether its revenuesinclude or excludepending disputes. If

HT'sreVenueSinc1udependingdisputes,thenit'squitepossiblethatHT's32.62o/ocalculati alreadybarely making it over the threshold-is artificially inflated and not indicativeof bona fide revenues.

If, in the end,Hawaiian Telcom legitimatelymeets the trigger,then by all means,pricing flexibility shouldbe granted;however, in light of HawaiianTelcom's unprecedentedfailed back- office conversion,the summaryrevenue data put forth in the Petitiondoes not serveto satisfy

HT's burden. Basedon HawaiianTelcom's extraordinarydisclosures in otherforums that its billing systemswere materiallydeficient during2006, the accuracyand reliability of the revenue calculationspresented in the Petitionarc at issue,and, therefore, the Commission-whether through an audit or otherwise-should requireHawaiian Telcom to provide additional informationto reasonablvdemonstrate the accuracvand reliabilitv of its outcome-determinative revenuecalculation of 32.62%.

Isignaturepage follows] I Respectfullysubmitt ,! n'/ .l

rti {/ / Z --'*tl -Y ,' \A* J. JeffreyMayhook LauraA. Mayhook MAYHOOKLAW, PLLC 34808NE 14thAvenue La Center,WA 98629 Tel:(360) 263-4340 Fax:(360) 263-4343

Attorneysfor PacificLightNet, lnc.

February4, 2008

VERIFICATION

STATE OF'HAWAII ) ) ss. LdLu Countyof iionld )

I, PatrickBustamante, being first duly sworn,deposes and says: That I am a duly authorizedofficer of Pacific LightNet, Inc., that I haveread the foregoingcofiunents, and knolv the contentsthereof; and that the contentsof thereofare tru

PatrickBustamante President PACIFICLIGHTNET. INC.

Subscnbedand sworn to beforeme this 4'hday of Februarv.2008. f \ '1o,,tZ,t'^rt- NotaryPublic Stateof Hawaii

My cornmissionexpires: huT.a-?, & ooI