TNAG-2247-FCO40-3230-Business-interests-in-Hong-Kong-Cable-&-Wireless-1991 — Page 109

Exhibit 13: Increased Choice of a Fully Liberalised Market

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Office

Home

MONOPOLY MARKET

H K Telephone

HKTI

Today

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Choice of domestic carrier

FULLY LIBERALISED MARKET

HK Telephone

Choice of international carrier

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Office

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Alternative domestic carrier(s)

Future

Alternative International carrier(s)

HKT

Alternative carrier

5.10 The principal concern about the effects of this option is that competition would lead to an end of the cross-subsidisation scheme and thus adversely affect residential customers. Our findings, however, point to significant net savings for most residential, as well as business, users (6).

5.11 With an average annual residential bill of HK$2,500 removing the cross-subsidy would add an extra HK$184 to the bill before deducting IDD savings. However, as the average residential customer makes 278 minutes of IDD calls a year, a price decrease of only 11% offsets the rise in line rental charges. Evidence from the US, the UK and Japan show that price decreases are typically much higher in the years following competition. It is therefore estimated that the majority of residential customers will in

fact be better-off.

5.12 The benefits to the business community have to be seen in the light of Hong Kong's position as a hubbing centre for multinational companies in the Asia-Pacific region. The move of competing countries such as Australia in introducing telecommunications competition increases the pressure on Hong Kong to maintain its attractiveness. Lower tariffs reflecting a 15 year saving of HK$13.3bn for the business community would present a strong argument for retaining Hong Kong as a regional hub.

5.13 The HK$0.4bn costs that will be incurred to generate this incremental benefit are clearly negligible when compared to the HK$17bn end-user savings they generate and outweigh any infrastructure duplication arguments.