TNAG-1779-FCO40-2539-Hong-Kong-international-telecommunications-1988 — Page 118

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EXHIBIT 1.3 SUMMARY OF QUANTITATIVE ANALYSIS APPLIED IN THIS STUDY

Note:

Pro-monopoly refers to argument for monopoly supply of networks (both telecommunication and cable television); pro-competition refers to

argument for separate operation of cable television and second telecommunications network by entity competing with HKT.

1 Argument

1. TELECOMMUNICATIONS SERVICES

1A Pro-monopoly

1B

Economies of scale due to provision

of telecommunications services to all customers on one network

Pro-competition

Stimulus to competition provided by presence of two network operators

2. CABLE TELEVISION SERVICES

2A Pro-monopoly

2B

Economies of integration (scope) due to joint provision of narrow -band and broadband networks

Pro-competition

Benefits of vertical integration of cable television business (improved coordination of network and service development

2

Data Collected and Analysed

Extent to which second network costs would be saved if whole market were served by existing network; (see Exhibit 1.4 for detail)

Size of markets shared between two carriers under competitive model (see Exhibit 1.5 for detail)

Extent to which separate cable television network cost would be saved if network were laid by HKT (see Exhibit 1.4 for detail)

Magnitude of investment at risk in (a) network (b) content; forecast profitability of cable television business, and its sensitivity to penetration levels

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3

Benefit Cost Comparison

Compare benefits due to competitive incentives with costs due to network duplication (see Exhibits 1.4, 1.5, } 1.6)

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Compare benefits due to integrated business operation with costs due to separate network construction (see } Exhibits 1.4, 1.7)

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