37.
In the very long run, the aim is to introduce a sufficient degree of competition into the telecommunications network industry so as to make regulation of tariffs largely or completely unnecessary. For this purpose it is necessary that competition exists in both the international and domestic portions of the network, so that in due course the regulation of revenue allocations between these two sectors become unnecessary.
From the legal standpoint, the early introduction of international service competition is more difficult than the early introduction of domestic competition.
Overseas experience suggests that there would be no advantage to the gradual phasing in of competitive service, as would be implied by a delay of some years between scenario 3 and scenario 4, and a further delay to scenario 5. A competitor's market share builds up gradually in any event; it takes several years to establish a firm position in the industry, and to win over the confidence of the general business user community. The incumbent service provider (HKT) would have time to adjust to the competitive environment without massive disruption to its organization or practices, as AT&T had time to adjust to the presence of MCI (and other newcomers) and British Telecom to adjust to the presence of Mercury. An artificial constraint on the range of services which the newcomer in Hong Kong can offer such as a limitation to non-franchised services initially - would slow down further the pace of development of an activity which is of its nature gradual in its growth.
38.
The study has reviewed a number of miscellaneous costs and benefits arising from the construction of second network facilities. Most important among these costs are the effects of disruption to the Hong Kong community arising from duct construction, and most important among the benefits are improvements in the competitiveness of user sectors
(especially finance-related industries) in the international arena. concluded that the costs of disruption are not of sufficient magnitude to merit prohibition of network development, while the benefits of improved international competitiveness strengthen the case for telecommunications competition.
BENEFITS AND COSTS OF A SEPARATE NETWORK FOR CABLE TELEVISION
It is
39.
Consumer demand for cable television service appears from the evidence available to be strong enough to justify the construction of a cable network. It was shown in Exhibit 1 that construction of a cable television network separately from the main telecommunications network would impose a cost penalty of some 18% on the network operator. The major countervailing benefit (setting aside any implications for telecommunications competition) is that of vertical integration of the cable television business. By combining management of the physical development of the network with management of the required investment in programming and marketing, the risk of failure of the enterprise is minimized.
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