TNAG-2247-FCO40-3230-Business-interests-in-Hong-Kong-Cable-&-Wireless-1991 — Page 108

Option 2) Full immediate deregulation of domestic and international franchised services

5.8 This option advocates the introduction of additional carriers, without universal service obligation, into the basic domestic and international services currently covered by the franchise agreement (see Exhibits 12 and 13). We considered, but rejected, the option of additional carriers with mandatory universal service coverage because such a condition would prove onerous to potential new carriers and result in uneconomic duplication of facilities in the outlying areas of the territory. New carriers should, however, contribute to the provision of universal service by the dominant carrier according to a formula that needs to be developed and negotiated. There are very strong economic benefits supporting this case. The benefits resulting from this full market liberalisation amount to a net present value of HK$17bn over the next 15 years, equivalent to HK$1.2bn per year in real terms, for a cost of just HK$0.4bn.

Exhibit 12: Full Liberalisation of Facilities-Based and Non-Facilities-Based Telecommunications 1

Switched

TODAY

Leased-

Circuit

Switched

FULLY-

LIBERALISED

Leased-

Circuit

DOMESTIC

INTERNATIONAL

Voice

Non-Voice

Voice

Non-Voice

DOMESTIC

INTERNATIONAL

Voice

Non-Voice

Voice

Non-Voice

FULL COMPETITION-

1) Telex and telegram are excluded from this analysis

Franchised services only

to be provided by HKT

Disputed services based on one's interpretation of 'Public Telephony'

Available for competition

5.9 The benefits resulting from domestic liberalisation alone are limited. Residential users would enjoy benefits of HK$200m and business users HK$600m. The real benefit is derived from savings in the costs of international services. Benefits to residential users from international competition would total HK$2.9bn, and business users would benefit by HK$13.3bn.