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5. OUR INITIAL REACTION IS THAT THIS REQUEST FOR A COMMITMENT
BY US NOW ON THE FUTURE OF THE TELCO AND CWHK FRANCHISES SHOULD NOT BE ENTERTAINED. WE CANNOT, IN THE LIGHT OF RAPIDLY DEVELOPING TECHNOLOGY PREDICT WHAT THE APPROPRIATE ARRANGEMENTS FOR HONG
KONG'S TELECOMMUNICATIONS FACILITIES MIGHT BE IN 1995 AND 2006.
IN ANY CASE WE THINK THAT THE EXISTING COMPETITIVE TELECOMMUNICATIONS
SECTOR SHOULD PROVIDE MORE THAN SUFFICIENT INCENTIVE FOR THE
ESTABLISHMENT OF A SECOND NETWORK.
5. PEMBERTON (CW PLC), NOT SURPRISINGLY, ARGUED VERY STRONGLY THAT
COMPETITION IN TELECOMMUNICATIONS IN HONG KONG'S CIRCUMSTANCES
IS NOT APPROPRIATE. HONG KONG IS TOO SMALL FOR TWO NETWORKS AND
THERE MIGHT BE TARIFF REBALANCING PROBLEMS WHICH WOULD ADVERSELY
AFFECT DOMESTIC CONSUMERS. MOREVOER FRANCHISE INFRINGEMENT WAS
UNAVOIDABEL. HE TOOK STRONG OBJECTION TO BT'S CLAIM THAT TELCO/
CWHK IS NOT PROVIDING AS GOOD A SERVICE TO THE BUSINESS CONSUMER
AS THEY SHOULD. CWPLC WERE CONSIDERABLY IRRITATED WITH BT'S
EFFORTS TO DISLODGE THEM NOT ONLY IN HONG KONG BUT IN A NUMBER OF
OTHER PLACES AROUND THE WORLD.
7. THE REQUEST FROM BT FOR COMMITMENTS ON THE FUTURE OF THE TELCO
AND CWHK FRANCHISES IS ONE ELEMENT IN A GENERAL HARDENING OF BT'S
POSITION WITH RESPECT TO THE RESTRICTIONS THAT IT WOULD BE PREPARED
TO ACCEPT ON THE USE OF A SECOND NETWORK. THIS TOGETHER WITH THE
STRONG OPPOSITION BY CWPLC TO ANY EROSION OF THEIR MONOPOLY POSITION BY BT IS CAUSING US TO BE LESS CONFIDENT ABOUT OUR CASE
FOR THE PROPOSED RECOMMENDATION TO EXCO OUTLINED IN
PARAGRAPH 3 ABOVE. AN INCREASING VOLUME OF CONFLICTING EVIDENCE
IN ALL THE BASIC AREAS FOR CONSIDERATION - THE BENEFITS OF
INCREASED COMPETITION, DEMAND FOR A SECOND NETWORK, THE IMPACT ON TARIFFS, PROTECTING THE TELCO TRANCHISE AND PUBLIC DISRUPTION IS STRETCHING GOVERNMENT'S INTERNAL RESOURCES OF EXPERTISE TO THE
LIMIT. WE ARE NOW INCLINED TO THE VIEW THAT WE NEED OUTSIDE
ASSISTANCE IN THE FORM OF CONSULTANTS TO HELP US TACKLE THE
WHOLE ISSUE. IN THIS CONNECTION WE HAVE RECENTLY BEEN APPROACHED
BY IAN ELLISON OF ROBERT FLEMING CO LTD WHO WE UNDERSTAND WAS
UNTIL 1985 THE ASSISTANT SECRETARY AT DTI RESPONSIBLE FOR THE
DEREGULATION OF THE UK TELECOMMUNICATIONS INDUSTRY.
9. AS REGARDS REFERENCE TO EXCO WE ARE CONTINUING TO REFINE OUR
SUBMISSION. IN PARTICULAR WE HAVE ASKED TELCO/CWPLC TO LET US HAVE
DETAILED ARGUMENTS PROVING WHY COMPETITION WOULD BE POSITIVELY
DISADVANTAGEOUS TO HONG KONG. IT NOW SEEMS LIKELY THAT THE EXCO
PAPER WILL OUTLINE THE ISSUES, HIGHLIGHTING THOSE QUESTIONS WHICH
WE CANNOT YET ANSWER AND RECOMMEND THE APPOINTMENT OF CONSULTANTS
RATHER THAN MAKE ANY SPECIFIC RECOMMENDATION REGARDING THE
IMMEDIATE ESTABLISHMENT OF A SECOND NETWORK OR THE FUTURE OF THE
TWO FRANCHISES. ONE RESULT OF THIS OF COURSE IS THAT THE CALLING
OF TENDERS FOR CABLE TELEVISION WILL HAVE TO BE DEFERRED UNTIL WE
HAVE RESOLVED THE BASIC TELECOMMUNICATIONS POLICY ISSUE.
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