CONFIDENTIAL
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Does the Government wish to favour large users, who already enjoy good local service and options, over residential and small business users? Hong Kong has a longstanding policy of universal service at modest rates.
Are higher tariffs or other subsidies to a second network justified when few incremental customer benefits will be achieved?
¶ Would Telco's substantial commitment to invest in Hong Kong's
telecommunications infrastructure be put at risk if a second network were to severely erode its profitability? Inability to raise tariffs or inadequate
compensation for providing access to its customer base might lead to revisions of Telco's aggressive investment plans.
¶ Should the Government focus on encouraging competition and investments in
new, radio-based and broadband technologies, such as personal communications networks (PCNs), rather than narrowband, fixed-link technology? These non-franchised services can be further stimulated to provide even broader customer choice.
¶ Have other secondary, yet significant, issues been fully assessed?
Would construction of a second network - given the demand for skilled workers - add to Hong Kong's already high inflation level?
How large a nuisance would construction of a second network create? Up to 50 kilometers of congested roads would likely be affected.
How seriously would the second network exacerbate Hong Kong's already large balance-of-payments deficit in international calls? We estimate the deficit might increase by 50 percent.
How these issues are resolved will affect the quality, range, and cost of Hong. Kong's local telecommunications services and will influence the territory's future competitiveness as a vibrant business center. It is our sense that Government has the opportunity to take a different, more creative approach to regulation of the
McKinsey&Company, Inc.
CONFIDENTIAL
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