Option 2) Full immediate deregulation of domestic and international franchised services
5.8 This option advocates the introduction of additional carriers, without universal service obligation, into the basic domestic and international services currently covered by the franchise agreement (see Exhibits 12 and 13). We considered, but rejected, the option of additional carriers with mandatory universal service coverage because such a condition would prove onerous to potential new carriers and result in uneconomic duplication of facilities in the outlying areas of the territory. New carriers should, however, contribute to the provision of universal service by the dominant carrier according to a formula that needs to be developed and negotiated. There are very strong economic benefits supporting this case. The benefits resulting from this full market liberalisation amount to a net present value of HK$17bn over the next 15 years, equivalent to HK$1.2bn per year in real terms, for a cost of just HK$0.4bn.
Exhibit 12: Full Liberalisation of Facilities-Based and Non-Facilities-Based Telecommunications 1
Switched
TODAY
Leased-
Circuit
Switched
FULLY-
LIBERALISED
Leased-
Circuit
DOMESTIC
INTERNATIONAL
Voice
Non-Voice
Voice
Non-Voice
DOMESTIC
INTERNATIONAL
Voice
Non-Voice
Voice
Non-Voice
FULL COMPETITION-
1) Telex and telegram are excluded from this analysis
Franchised services only
to be provided by HKT
Disputed services based on one's interpretation of 'Public Telephony'
Available for competition
5.9 The benefits resulting from domestic liberalisation alone are limited. Residential users would enjoy benefits of HK$200m and business users HK$600m. The real benefit is derived from savings in the costs of international services. Benefits to residential users from international competition would total HK$2.9bn, and business users would benefit by HK$13.3bn.