- 41 -
(c) The Government considers that reduction in international telephone charges through market competition is more effective than through regulatory action.
Under its licence condition, the Hong Kong Telecom International's (HKTI) exclusive right is restricted to the delivery of external telephone traffic from the Hong Kong international gateway to places outside Hong Kong, and places outside Hong Kong to the international gateway. The HKTI is not permitted to deliver telephone traffic directly to customers in Hong Kong and must rely on a local Fixed Telecommunication Network Service (FTNS) operator, such as its sister company, the HKTC, to deliver calls to the customers. The local FTNS operator charges the customer for the IDD call and retains a share of it (the delivery fee) for providing the connection between HKTI's gateway and the customer's home or office. From 1 August 1993, all the mobile telephone operators are also permitted to deliver telephone traffic directly from the HKTI international gateway to their own mobile phone customers. Following the introduction of FTNS competition on 1 July 1995, the three new FTNS operators are providing IDD service in competition with HKTC and are offering very competitive rates. Further, with effect from 1 October 1995, the Telecommunications Authority (TA) has revised the delivery fees. The new delivery fees are more favourable to the FTNS operators on outgoing calls and give them a higher margin which enables them to offer further IDD reductions to customers. Local mobile phone operators also receive the same delivery fee from HKTI on the delivery of international telephone calls and are also offering competitive IDD charges to their customers. In addition, in March 1995 the TA confirmed his ruling that call-back services are legal in Hong Kong. There are now a large number of companies providing IDD call-back services in competition with HKTC/HKTI and the three FTNS operators. The TA will continue to monitor the market situation and review the effects of competition.
(d) As explained in (c) above, the Government considers competition to be more effective than negotiations with HKTI to reduce international telephone charges. The revised delivery fees introduced in October 1995 will give local FTNS operators a significant margin over IDD rates to China and it is expected that they will pass some of this margin back to the consumers through competition. The effect of increased competition is expected to be seen in the next few months. For the time being, some call-back operators are already providing competitive charges on calls to China, e.g, a charge of $8.50 compared with $9.50 from HKTC for calls to Beijing, Shanghai and other cities outside Guangdong. As competitive market pressures are taking effect, it is premature to consider intervening in HKTI's rates through regulatory action.