Regulatory costs
A second network would create the need to provide significant resources to manage complex arrangements for interconnection and to ensure the rights conferred under HKT's existing franchise are protected. would therefore involve more not less regulation.
1.2.2 The arguments for a second network
Lower tariffs
HCV argues that competition will result in greater efficiency, lower costs and lower tariffs for users. These benefits will be passed on to improve the national productivity and competitiveness of Hong Kong and to improve the performance of all businesses in the Territory. At the same time the economic viability of the traditional carrier can be preserved and the provision of universal customer service maintained.
Increased innovation
If a second network were introduced to Hong Kong, the pace of service and equipment innovation would be accelerated. Additionally there would be a proliferation of new value added services.
Improved network and service quality
HCV argues that a new entrant has the advantage of bringing the most up to date technology and the optimal efficiency configuration to the construction of the new network. This would also have the effect of stimulating the pace of modernization of the existing carrier. In order to gain customer support the new entrant must offer attractive service and maintenance contracts. In London one of the attractions of deregulation to the financial institutions was the ability to use specialist maintenance contractors.
Security in diversity
The financial institutions handle growing volumes of data, reflecting real time prices in markets for foreign exchange, securities, government bonds, commodities and gold. With 24 hour trading, automated dealing and the emergence of global markets these institutions cannot risk losing a line under any circumstances. Their preference is therefore to have the security of a second and totally separate network as an insurance against all possible failures. Even access to HKT's alternative routing and switching facilities is less than optimal for the dealer who handles tens of millions of dollars every day.
Vertical integration of the cable television business
A further argument put forward by HCV, not strictly related to the second telecommunications network issue, was that the cable network should be constructed by the cable television service operator in order to obtain the benefits of managing a vertically integrated business. We consider this point later in this chapter.
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