9
most of its own telephone requirements free, with the remainder at reduced rates; and, in addition, received a fixed annual royalty for each line in use, plus half the net profits above 12.... The system of a flat rate of royalty independent of profits and a variable royalty depending on profits, ensures to the
public revenues a stable minimum return and a share
in any high profits made. This seems to be
preferable to reliance solely (a) on a flat rate of royalty (which, if heavy, might prove a serious handicap to the Company in a period of financial difficulty) or (b) on a share of profits (which, on
the one hand, might result in long periods of no return to government, and at the other extreme, night lead to undue reliance on a precarious source of
revenue).
8.
Conclusions. There appear to be no reasons of
general principle why the British Quiana telephone system should not be successfully operated by a commercial company on an agency basis as in Hong Kong.
If, as a result of the expert report, such a course seemed desirable and practicable the following propositions might be considered:
(1) The term of the agreement should, if
possible, be less than 35 years.
(2) There should be a minimum return on capital, if possible less than 8% per annum, but no maximum limit should be imposed.
(3) The position of subscribers should be
safeguarded against heavy charges at a time when high
net profits are being made and distributed.
(4)
Government should exercise a measure of
direct control over policy through e.g. appointment of
a government director.
/(5).