TNAG-1779-FCO40-2539-Hong-Kong-international-telecommunications-1988 — Page 6

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The present network operated by Telco is almost entirely low capacity copper pair wiring, although in recent years some degree of upgrading using optical fibres has taken place between telephone exchanges to improve transmission capability. PMG confirms that even in the absence of competition by virtue of its monopoly,

its monopoly, Telco's standard and the cost of the public telephone services compare favourably with those provided elsewhere. However, leased data circuits* are expensive, for example twice as expensive as those in the USA. Moreover, Hong Kong's relatively small area and high density living conditions yield substantial cost savings for network installation and maintenance compared with other countries, although it is difficult to determine the exact extent to which Telco's low telephone tariffs and apparent high productivity are attributable to these advantages.

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In principle, competition should lead to greater responsiveness to changing market needs. In the fast changing and expanding field of telecommunications, there is a need to ensure that new technology is introduced at an appropriate pace to satisfy market demands at reasonable prices. Figures available to the Administration show clearly that growth in telecommunications services has been consistently at a very high rate, generally in excess of 15% per annum. These figures are consistent with recent estimates made by Telco for the present and forecast local telecommunications market in Hong Kong. Telco's figures indicate that the competitive market is currently valued at $2.12 billion/annum and is expected to rise to $6.3 billion in the year 1990/91#. While there are no major complaints position as the sole network indicate that there should be from the competitive market alone to support the development of a second network.

regarding Telco's de facto provider, the above figures sufficient available revenue

Note These are circuits which are used for carrying data and

are for the exclusive use of the leasee.

Note #The proportion of the competitive market revenue that is estimated by Telco to have derived from non-franchised telecommunication services in 1985/86 is about $370 million and

and it

it estimates that this will increase to over $2,500 million in 1990/91 including revenue from cable television. However, Telco has commented that these estimates should probably be much larger for both years and that view is endorsed by the PMG, at least for 1985/86, as it is known that of the current 20 competitive services, radio paging and public mobile radiotelephone alone produced revenue of at least $350 m in 1985/86.

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