XN000022-1995-03-30 — Page 15

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HKTI's functions and rights as an external carrier only start at the point of interconnection between the local network and the international gateway. HKTI bas no function and no rights on the local side of the points of interconnection for telephony. HKTI does not participate in and has no exclusive rights over any part of the local telephone network. A similar situation exists on the other side of the circuit where HKTI must hand-off a call to other carriers which provide the relevant telecommunications services in that regime. Therefore, for telephony, HKTI's domain lies between the interconnection point with the local network in Hong Kong and the interconnection points (notionally half-way along the international circuits) with its correspondent international carriers. This contrasts with the provision of internal Public Telegram Service and internal Public Telex Service as specifically listed in the First Schedule (items c and d) of the HKTI licence.

It is also important to note that HKTI has no right to dictate which direction it carries the signals and messages beyond the international gateway; it must carry them as presented - either to the Hong Kong gateway or from that gateway.

History of HKTI's exclusivities. HKTI and its predecessor (Cable and Wireless) have been issued a series of licences stretching back before the Second World War. More recently a licence was issued in 1963 and the current licence was issued in 1981. The circuits and services exclusively reserved to HKTI are specified in the First Schedule to HKTT's licence - a copy is provided at Attachment 2.

The development of the First Schedule shows a deliberate policy of successive Hong Kong Government Administrations that only particular circuits and services be exclusive to HKTI. It is undeniable that the list of circuits and services has grown over time in concert with the development of technologies and the increased breadth of services enabled by new technologies. But HKTI's rights as an external carrier were never all embracing. History shows attempts by HKTI to obtain from the Hong Kong Government an all-encompassing monopoly. While the First Schedule extended rights over a period of time, attempts to achieve a complete monopoly were resisted and did not succeed. Moreover nothing granted to HKTI trenched upon the local public switched telephone network (the PSTN in Hong Kong).

As a matter of policy the Hong Kong Government has maintained its position that HKTI does not have an all-encompassing monopoly. This point was made by the Secretary for Economic Services in a speech to the Legislative Council on 3 June 1992 where it was reaffirmed in the following terms:

"Further liberalization in international services is of course constrained by the terms of Hong Kong Telecom International's licence which does not expire until 2006. There is, however, in our view still some room for further liberalization in international services without infringing the exclusive rights granted under that licence."