CONFIDENTIAL
XCC(91)127
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Members will be asked to advise whether the above recommendations should be approved.
BACKGROUND
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In memorandum XCC(90)151 considered on 30 October 1990, we recommended that, following its expiry in 1995, the Hong Kong Telephone Company (Telco's) exclusive franchise over the local voice telephone service by wire should be replaced by a non-exclusive licence. Following consideration of the memorandum, the Council ADVISED and the Governor ORDERED that a further submission should be made which, among other things, referred to the 1988 Booz, Allen and Hamilton (BAH) consultancy study and outlined the proposed future regulatory framework.
The 1988 BAH Study
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The 1988 BAH consultancy study suggested that introducing a second network carrier for local business traffic in Hong Kong (including local voice telephony after the expiry of Telco's franchise in 1995) would result in net direct economic benefits of the order of $1.35 billion (in 1988 prices; from 1988 to 2006). Also, BAH concluded with confidence that the financial position of Telco would not be jeopardised by such a development. The economic case for competition in international services was even more compelling with forecast additional net economic benefits of about $4 billion, yielding total net economic benefits for both local and international network competition of $5.3 billion. This assumed that full competition would begin in 1995, although Hong Kong Telecom International Limited (HKTI)'s exclusive licence for most international services is not due to expire until 2006.
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In referring to the 1988 study, as directed by this Council, it was clear to us that it was no longer fully up to date. In particular, the forecasts of demand for telecommunications services and the survey of international trends in telecommunications regulation and the state of telecommunications development in Hong Kong were no longer current. Accordingly, we decided to re-engage BAH to update their previous study, as well as to provide information on recent technological developments in telecommunications of relevance to regulatory policy.
Executive Council
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