functions. However, the cost savings would only last be for the first several years. Eventually the size of the new cable television operation coupled with the lack of integration between the cable television service and the telecommunications service would require an entirely new organization to emerge.
As in the case of scenario 1, the maintenance cost is approximated as 2% of the capital investment per annum. The absolute cost for the new entrant is greater than that of HKT only because of the greater level of investment required for the building of the duct network.
4.2.5 Summary
In summary, the key differences in costs between scenarios 1 and 2 are:
the 25% shorter underground build requirement for the horizontal network (this reduces the overall material and electronic equipment costs),
the higher cost/kilometre to build the horizontal network
higher maintenance costs due to the single service obligation for the cable operator.
These cost differences are detailed in chapter 5 and Appendix A (see also Exhibit 4.2).
In sections 4.4 and 4.5 we assess the costs incurred by a competitive telecommunications supplier in providing varying degrees of competition to the existing telecommunications services of HKT and CWHK. For reasons which will be discussed in Chapter 5, we require an analysis of the incremental costs of providing telecommunications services in this way, by comparison with the costs which would be incurred by the main telecommunications operators (HKT and CWHK) if the traffic which the competitor would have carried were alternatively carried by an expansion of main network facilities. Thus the analysis which follows considers the incremental cost of scenarios 3, 4 and 5 by comparison with a "base line" of scenario 1.
The cost analysis proceeds by assessing the total costs of setting up a competitive telecommunications network, and then assessing the extent to which those costs duplicate expenditure already incurred in the main network. Throughout sections 4.4 and 4.5, the actual cost estimates we have developed are provided in full in Appendix A and summarized in chapter 5.
The case of scenario 3 is very straightforward. There are no significant incremental costs over and above those described in scenario 2, since the supertrunk fibre network required for distribution of the cable television service already has the necessary capacity to provide such non-franchised telecommunications services as it would be economic to offer under this scenario.
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