1.2.1 The arguments against a second network
Natural monopoly
According to HKT "the total market size of Hong Kong is small compared to the United States, the United Kingdom and Japan and there is no trunk network nor local call charges"; thus the factors affecting network competition elsewhere are not relevant in the case of Hong Kong. HKT already passes on the benefits of the economies of scale of a single network operator to the consumer in a low priced, "highly efficient network". Furthermore it is felt that the established policy already provides for sufficient competition in the area of non franchised services.
Higher tariffs
The introduction of a second network would result in "cream skimming" and a rebalancing of tariffs to the detriment of the majority of customers, and particularly residential customers. HKT estimated that the general tariff index under full competition would be twice as high as it otherwise would have been.
Degradation of service standards
A second network would result in a divided responsibility for service provision. Lower priority would be given to some customers, particularly those in rural areas or remote locations; preference would be given to business users. The concept of service on demand would no longer apply to loss making sectors, resulting in the possible return of waiting lists and shared service for parts of the residential market.
Saving resources
HKT estimates that the cost of the second network would amount to at least HK$1.5 billion whereas the cost of additional ductwork for an enhancement to the HKT network is small. The fastest and most cost effective means of developing a telecommunications infrastructure to meet Hong Kong's future needs is to enhance the existing facilities. only has significant network capacity in place, but also expects to achieve a fully digital network by 1995; this will be capable of providing all modern telecommunications services.
Disruption
The construction of a second network would be unnecessarily disruptive. HKT estimates that HCV would have to have "3000 kilometres of trenchwork in the roads and streets of Hong Kong to provide the necessary ductwork for a second network." This contrasts with a small requirement for new ducts for an enhanced HKT network. This disruption would be at a significant economic cost to the community.
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