14.
SCENARIO 5
Two networks offering a full range of local and international telecommunications and one offering cable television services i.e. full telecommunications competition.
During the course of the study it became clear that consideration should also be given to development of a second telecommunications network independent of a future cable television
service.
15.
This study addresses the extension of existing policies towards telecommunications competition (notably in customer premises equipment and value added services) to the network construction and operation of basic networks. It is often argued that competition in the provision of services over telecommunications networks (rather than construction and operation of the networks themselves) will generate the necessary competitive benefits to users in the long run. It is true that telecommunications networks are being used increasingly to support the provision of information and related services; this is precisely what is meant by the term "value added service". There is little doubt that such value added activities should be open to the widest possible competition, and few advanced countries are contemplating the retention of monopoly arrangements in this area. Despite the importance of these ancillary activities, it must be remembered that the largest cost component in the telecommunications networks service industry (i.e. the source of greatest "value added") is due to provision of basic switching and transmission the temporary or permanent interconnection of one terminal to another for the purpose of transmitting information. Unless this activity is opened up to competition, the majority of the telecommunications service business will remain monopolized. It is for this reason that the study focuses on competitive scenarios which involve the construction of duplicate telecommunications networks.
COST AND TECHNOLOGY ANALYSIS
16.
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Generally, the greater the degree of telecommunications network competition desired, the greater the need to spend resources on facilities which might have been more economically integrated into the existing main network. Exhibit 1 summarizes our findings with regard to the costs of alternative network configurations.
17.
The largest box represents the operation of the main existing telecommunications network. The two smaller boxes represent the costs of a cable television network and second telecommunications network (all expressed as the net present value in 1988 of all expenditure to 2007). In each of these two cases, the overall size of the box represents the cost of building that network in isolation, while the extent of its overlap with any other box represents the extent to which costs can be saved by integrating it with that other network. Thus the overlap between the cable television and main telecommunications network boxes indicates the amount which can be saved by building the cable television network in accordance with the HKT plans, sharing ducts with the existing telephone system. The overlap between the second telecommunications network and main telecommunications network boxes indicates the amount which is saved
iv