Recurrent Costs:
* Technical staff
* Service centre
* Marketing
* Maintenance
4.3.2 Capital costs
For the analysis of the incremental cost of the fibre optic network, it was necessary to examine how much of the existing supertrunk network of scenario 2 could be used for the services proposed in scenario 4 and how much additional fibre optic cable would be necessary in order to serve the new business market. 100 km of extra fibre optic will be needed to serve the business areas, and an additional kilometre of fiber for each building served. Using the unit costs as derived in scenario 2, the net present value of the total cost of the additional 100 km of fiber optic network is HK$22 million.
For each of the buildings served there is a cost for the additional fibre optic cable needed to serve the building, and a cost for the equipment needed within the building to connect to the network (the most significant equipment cost is for a multiplexer in the building to "breakdown" the high capacity of the fibre optic cable into many smaller capacity lines for the customer). For each of the lines served within a building there is a cost incurred for the line cards of the multiplexer equipment. The final component of the cost per building is the vertical wiring required to bring service from the point of entry of the building to the end customer. BAH has assumed that the cost is comparable to the vertical unit cost derived for the cable television service.
The switching equipment is the largest component of the capital costs and is calculated as a fixed cost for the switch and a per line cost for each of the lines served by the switch. Included in the cost of the switching system are those technical costs which are needed to interface to the public switched telephone network (PSTN) of HKT and the international network of CWHK. There has been no calculation of the payments which the new operator would need to pay for this access.
The final two capital cost items are the billing system and the service centre. The relatively unique nature of the telecommunications environment of Hong Kong would undoubtedly require a customized computer billing system. The service centre is required to maintain customer information and to provide a mechanism to respond to a customer's service requests.
We summarize below our judgements concerning the extent to which costs incurred by the competitive telecommunications network operator under scenario 4 duplicate expenditure incurred by the main network provider (HKT). The results are summarized in chapter 5 (Exhibit 5.1).
- 101 -