TNAG-1779-FCO40-2539-Hong-Kong-international-telecommunications-1988 — Page 201

The duct

The second point is that this methodology attempts to capture the opportunity cost of using an existing asset with the underlying assumption that each of the ducts in the network has a true opportunity cost. Clearly, in the more congested routes, this is the case. capacity has been planned for growth in telecommunication demand. Any additional requirement for duct capacity by cable operations will place a strain, and hence a cost, on the ability to meet telecommunications growth in the future. For these routes, a cost must be apportioned to the cable operation. However for those duct routes which have excess capacity even taking into account future telecommunication requirements (as described earlier this can occur primarily due to technological innovation), there is no inherent opportunity cost of using duct space which has no value in the future; that is, without cable television, the duct would not be fully utilized during its depreciable life. In this case, the true apportioned cost should be only that of the maintenance of the duct.

For the 5% of the duct network which needs to be upgraded for the provision of cable television, the full replacement cost, ($153,137 per kilometre) is apportioned to the cable operation due to the need to build the duct for the sole requirements of cable television. It should be noted that in the future this additional duct capacity could still be used by telecommunication services, thus lowering the effective cost apportionment to cable operations.

As the final step BAH has calculated the cost of the trunk network and the supertrunk network on a per kilometre basis using data supplied by the Highway Department, HKT, and HCV. In addition, BAH have used information on the costs incurred in other countries as a basis of comparison.

The construction cost for the trunk network is HK$26,000 per kilometre of build. This cost does not include the cost of the cable and the labour of pulling in the cable; it covers only the building of the ducts. That cost is covered in the horizontal portion of the network, of which the duct cost is a subset.

The cost for the supertrunk network, without any apportionment of the existing duct cost, is HK$70,000 per kilometre of build. This higher cost is due to the fact that the cost of the fibre optic cable and installation is included as part of the higher apportioned cost of using the existing duct network.

4.1.3 Horizontal network

The costs of the horizontal network consist of the cost of the installation and the material costs of putting in the coaxial cabling and the electronics which are needed to support the horizontal network. These costs have been calculated as HK$26,760 and HK$35,340 per kilometre, respectively.

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