TNAG-1779-FCO40-2539-Hong-Kong-international-telecommunications-1988 — Page 3

The deregulation of these "competitive" services approved on the following conditions

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(a)

(b)

Telco not using its position as the provider of the main telephone service to influence choice in its favour by, for example, insisting on unnecessarily restrictive technical specifications;

the

Telco agreeing with

Government appropriate accounting procedures to ensure that the services bear their proper share of costs and overheads and are not subsidised in any way by the exclusive services;

(c) Telco providing any financial and other information that may be required by the Government to enable it to be satisfied in regard to (b) above;

(d)

(e)

the services being carried out by a subsidiary company of Telco; and

the Government reserving the right to bring any of the excluded services back into the scheme of control

at any time if it considers that it is in the interests of the public and users of Telco's exclusive services to do so.

These conditions were made to ensure that the competitive services were separately identified and accounted for and would not be supported financially by the exclusive services of Telco which would continue to be subject to control. They were also necessary to ensure that Telco's subsidiary companies were not placed at an advantage vis a vis other providers of competitive services because of their corporate relationship with Telco.

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The conditions were accepted and to give effect to the transfer of specified competitive services approval under Section 35 of the Telephone Ordinance was given on 31 May 1983 (XCC(83)58), 28 June 1983 (XCC(83)73) and 1 October 1985 (XCC(85)130).

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It is proposed that conditions (a), (b) and (c) be attached to the approval now being sought although the wording requires amendment to reflect the current situation.

CONFIDENTIAL