TNAG-1779-FCO40-2539-Hong-Kong-international-telecommunications-1988 — Page 191

3.5.3

unit given in the HKT and CWHK submissions. There is no Scheme of Control return assumed. Historically real installation rates have barely changed over the past decade. Residential line rentals however have fallen in real terms by 4.3% p.a. between 1976 and 1986 and business line rentals by the same amount. For the base line forecasts it is assumed that tariffs for basic local services remain constant in real terms, while obligatory and non franchise service tariffs fall by 4% p.a.

Incremental revenues

BAH has assumed a new pricing structure for business telephony, with a 15% price discount offered by the new entrant in 1995. The following year it is assumed that HKT would react with volume discounts to premium business clients which translates into a 5% discount in 1996 on business lines and 5.2% in 1997. This results in a slight fall in total local telecommunications revenues from HK$6,257 million in scenario 1 to HK$6,109 million in scenario 4 due to lower real tariffs (excluding cable and wideband rental charges).

The total revenues of the second carrier would rise from HK$34 million in 1995, or 0.6% of the total local telecommunications revenues to HK$269 million by 2000 which is 4% of the total. This includes an amount of HK$169 million passed to the second carrier from CWHK for international calls.

3.6

SCENARIO 5: TWO NETWORKS OFFERING FULL COMPETITION IN TELECOMMUNICATIONS AND CABLE TELEVISION

3.6.1 Definition of scenario 5

3.6.2

In this last scenario a second network provides a wide range of local and international telecommunications services. These services include international telephony IDD '800' international freephone and "home direct" services, private services (such as leased circuits and customer networks) and switched message services. ISDN will also be available and visual services including video conferencing, broadcast services, and eventually video telephony. While the licence for international services runs until 2006, the quantitative analysis has been brought forward to consider the implications of two networks from 1995.

Forecast revenues for international services

International services

BAH estimates the 1987 international telephony market size to be 200 million paid minutes (outgoing) with growth assumed at 20% rather than at the 27% of recent years. While strong growth will be maintained in volume terms, the percentage growth rate declines steadily throughout the late 1980s and early 1990s to 6% by 1996 and thereafter assuming no competition.

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