Option 3) An incremental liberalisation of domestic and international markets
5.14 We understand that there may be some barriers to the implementation of the optimal solution of full immediate liberalisation of the domestic and international franchise markets. In light of this we have also examined an incremental path to competition, the timing of which is dependent on the ending of the HKT and HKTI franchise agreements (see Exhibit 14). The net benefit of this option, however, is only HK$0.6bn. It is clearly not as attractive as Option 2.
Exhibit 14: Incremental Approach to Liberalisation (Facilities-Based and Non Facilities-Based)
C
Mobile Operators |(Cellular, CT2, PCN)
New Int'l Carrier
Direct Customers
Additional Domestic Networks (1995)
Indirect customers
Interconnection
Value-added Service and Simple Resale Providers
Open Network
HKTI Int'l Gateway
2006
To Foreign Administrations
2
HKT Domestic Network
Business
(1) II directed by the Govenor in Coundi under Item (L) to the First Schedule to the HKTI license
Residential
Potential Bypass of the International Gateway for Private
Circuit Telephony (")
5.15 The incremental approach consists of five steps, three of which could be implemented immediately, and the last two, adding additional telecommunications carriers in the domestic and international markets, would take place in 1995 and 2006 respectively.
Step 1:
Allowing mobile operators direct interconnect with HKTI
5.16 An anomaly of the Hong Kong marketplace is that mobile operators are not rewarded for bringing international traffic to HKTI. They have to route their calls through HKT at a cost of HK9¢ a minute and then pay HKTI the full IDD rate. As most mobile telephone calls are currently incremental to fixed telephone usage, mobile operators are thus providing HKTI with a source of business they may not have otherwise enjoyed. Other telecommun cations carriers around the world reward the cellular industry for doing so with an interconnect arrangement similar to the one they maintain with the fixed domestic network. HKTI does not do so.