TNAG-1987-FCO40-2820-Presentation-of-UK-policy-on-Hong-Kong-to-the-media-1989 — Page 10

data and facsimile services, HC V proposes in addition to lease private lines for voice transmission, not just for local transmission but also to bypass the local portion of IDD traffic current ly

currently carried

carried by Telco. While HCV argues that such services are in a grey area, the Attorney General's Chambers have advised that for a third party to lease private lines for local voice transmission would be an infringement of Telco's exclusive franchise. Given this advice, HCV would not be allowed to proceed with its proposals in this regard. The likely outcome therefore is that HCV in practice would provide a similar range of services to HKCC.

30

At

first glance, Government's objective of encouraging competition in non-franchised telecommunications services might seem to be better served, at least in the pre-1995 period, by selecting HCV. However, HCV's apparent aggressiveness is mainly focused

mainly focused on providing private lines for voice transmission prior to the expiry of Telco's exclusive franchise, which it would not be allowed to do. Our conclusion is that, in practice, both HKCC and HCV would seek to maximise the market opportunities provided by this project and that neither has a clear advantage over the other. On the other hand, one of the key objectives behind the second network decision was to increase diversity of supply of telecommunications so as to enhance competition in this important service sector. In the overall assessment of the bids therefore, account should be taken of the fact that granting the second network licence to HKCC would bring additional new players and hence greater

greater diversity into the

local telecommunications market.

31

The telecommunications proposals of HKCC and HCV should both meet Government's policy objectives of encouraging competition in non-franchised services. While each has its own positive aspects, we do not

do not consider that either has any significant advantage that would clearly justify a decision in its favour purely on telecommunications grounds. This being the case, we think the prudent and desirable course of action would be to enter into negotiations concurrently with both parties, with a view to securing further improvement s to the respective proposals along the lines outlined in paragraph 35 So that a final decision may be made.

Financial Aspects

Financial Viability

32

(a)

(i)

to

the

According evaluation, both bidders'

consultant s'

proposals

are financially robust. They have advised that the return on investment,