*
Cable Irrevocable Right of Use (IRUS). An international carrier may also choose to route international traffic via the submarine cables which pass through Hong Kong. By purchasing cable IRUS, an operator has the right to use a certain amount of cable capacity at a fixed cost. The use of submarine cables to carry international traffic will in the future become increasingly attractive for two reasons:
1. Due to the use of high capacity submarine fibre optic cable, the
Asiatic region will experience a rapid increase in available cable capacity. This will place a downward pressure on price as supply will initially be greater than demand.
2. Due to the decrease in the propagation delay (the time it takes
for a signal to travel the complete path of the route) over that of satellite transmission, there will be an increase in the amount of traffic routed over cable as new applications which take advantage of cable's strengths are developed. As an example, a decrease in the propagation delay for international traffic would increase the number of interactive data services. Additionally, the higher reliability of digital cable transmission makes cable a more attractive medium for data transmission.
A switch and billing system capable of handling the international traffic. Furthermore, the existing billing system would need to be supplemented to provide call charges and records of the international calls. As part of the cost of the international switch, there is a cost component for the equipment needed to interface to the existing international switch.
Additional maintenance required to serve the increased capital investment; technical support and operation of the earth station; operation of the billing system; and additional marketing staff.
To analyze the amount of cost duplication of a second international operator, BAH examined the extent to which each of the above costs would be incurred if there was no second international carrier and demand continued as projected in scenario 1.
In the long term, the cost of the switch and the cable IRU's would be necessary for the existing carrier. Therefore, neither of these two costs are considered to be duplicated. BAH considers that the maintenance cost would be duplicated by approximately 10%. This represents the cost to maintain part of the earth station equipment. The technical staff and operations cost have a slightly higher (15%) cost of duplication.
Those costs which are entirely duplicated include the billing and earth station equipment and site, as well as the recurrent cost of marketing.
The implications of these findings for the cost of operating competitive international telecommunications facilities are summarized in chapter 5 (Exhibit 5.4).
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