TNAG-1779-FCO40-2539-Hong-Kong-international-telecommunications-1988 — Page 287

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CONFIDENTIAL #

HCV's Comments on the BAH

Telecommunication Consultancy Report

Annex V

A. Vertically Integrated Management

HCV : BAH underestimates the value of vertically integrated management of the cable television project. Unless it had full control over the cable television network, HCV would

consider the risk of the venture too great to warrant its participation.

Administration's Reponse: That vertically integrated management of the cable television venture would reduce the risk of failure is given due regard by BAH. Set against this is the extra cost incurred in building a non-HKT cable television network (5% of total project costs). BAH

concludes that these two factors can be taken as more or

less cancelling each other out. Whether more weight should be given to vertically integrated management is a matter of judgement. While international experience indicates that cable television networks provided by telephone companies can be relatively expensive and subject to construction delays, there appears to be no grounds for concluding that the resulting network would necessarily be unsatisfactory.

:

HCV As HKT would have other more important priorities, an HCV cable television network would be constructed quicker.

Administration's Response : In view of the competing priorities of its telephone network, a telephone company would inevitably not have the same single minded commitment

to building a cable television network as a vertically integrated cable television company. However, against this must be offset the advantage accruing to the telephone company as a result of its ownership of a duct network.

G.F. 326

CONFIDENTIAL #2