4) Competition could lead to the end of the cross-subsidy for residential users, with the benefits generated from liberalisation being restricted to the business community.
5.3 We do not believe that these arguments are sustainable.
5.4 Hong Kong is a City: The fact that Hong Kong is a city, not a country, actually increases the rationale for multiple carrier(s), because installing alternative domestic networks would be more cost-effective than in countries with large suburban and rural communities. Experience in other countries with a competitive market structure such as the US, UK and Japan indicates that competition is most successful and effective in the larger cities like New York, Chicago, London and Tokyo. Hong Kong's size and economy is similar to these cities. Hong Kong has one of the world's highest levels of international traffic and generates very high returns which can effectively support more than one operator.
5.5 HKT's High Level of Service: It is accepted that HKT provides a high level of service, but it could be and would be even better under a competitive environment and as stated by the Corporate Strategy Group at Cable and Wireless "monopoly gains are at the expense of the consumer" (5). In the early eighties AT&T were looked upon as being one of the most efficient and state-of-the art telecommunications companies in the world, and many could not see the rationale for breaking it up. The result, however, was an increase in choice for customers, a drop in prices of nearly 50% over a four year period, a dramatic increase in the range of services offered, and the transforma- tion of AT&T into a market-driven service provider.
5.6 The Duplication of Resources: The costs of duplication of telecommunications infrastructure that would result from the introduction of alternative carriers should be judged in the context of the total benefits that would accrue to the community if a market liberalisation option was implemented. If development such as price de- creases and service innovation produce substantial benefits which greatly outweigh the incremental costs of infrastructure duplication then the policy should be pursued.
5.7 Competition Resulting in the End of Cross-Subsidisation: A policy of liberalisa- tion would eventually lead to the re-balancing of tariffs, which would have numerous advantages while bringing Hong Kong into line with global trends in other competitive markets. The majority of Hong Kong's residential consumers would actually benefit significantly more from a reduction in IDD prices than any cost due to the loss of the cross-subsidy.