The revenue flows in net present value terms and the sensitivity analyses are discussed in Chapter 4.
3.3
SCENARIO 2: TWO NETWORKS, ONE FOR CABLE AND ONE FOR TELECOMMUNICATIONS
3.3.1 Definition of scenario 2
In this scenario HKT retains an exclusive franchise over the local telephone service and CWHK the international service. There is a separate cable network which is constructed and used exclusively for cable television only. The cable network would not carry any other telecommunication services.
3.3.2 Incremental revenues
We noted in section 1.3.5 that these vertical integration of the cable television business under scenario 2 may result in improved efficiency of operation (by comparison with scenario 1). We have not taken account at this stage of differences in revenues which may follow from this; instead we have assumed that the revenues achieved under the two scenarios are the same. The increased revenues which may be obtained as a result of vertical integration are however analyzed in Chapter 5.
3.4
SCENARIO 3: TWO NETWORKS, ONE FOR CABLE AND NON FRANCHISED SERVICES AND THE OTHER FOR TELECOMMUNICATIONS
3.4.1 Definition of scenario 3
3.4.2
The main features of scenario 3 are that HKT and CWHK retain their existing franchise and licence over the local and international network and another network carrier is allowed to establish a second cable network to carry:
-
a franchised cable television service
- and, non voice telecommunication services.
Network construction would proceed as described in the following chapter and in parallel with the development of the television production facility. These key dates are summarized in Exhibit 3.6. Non franchised services such as videotex, alarm systems, interactive home banking, home shopping and other value added services can be made available by early 1991. There are some other non franchised services such as point-to-point private services, that require enhancements to the network that can only be justified by the opportunity to provide franchised as well as non franchised services. These however would only come into operation under scenario 4, but could be provided for within the network by 1994.
Incremental revenues
BAH makes no distinction between the quality of programming packages, prices or connection rates achieved by CTHK and HCV. Consequently the total revenues generated in scenario 3 are the same as in scenario 1. As in scenario 2 the IRR however is slightly lower in scenario 3 at 12.6% compared with 14.3% in scenario 1 due to the higher cost penalty.
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