CONFIDENTIAL
A - Establish a common understanding of the key characteristics of Hong
Kong's local telephone services, and the worldwide trends and experience in local telephony
B
Clarify the type of service a second network would provide and the fundamental policy issues that introduction of a second network will raise
C - Outline a regulatory vision for Hong Kong's local telecommunications
services, that will sustain the territory's leadership in this
telecommunications sector, and ensure the widest possible range of
products and services at low prices for the people of Hong Kong.
A
LOCAL TELEPHONY IN
HONG KONG AND ELSEWHERE
Hong Kong is considering potentially fundamental changes in its
telecommunications industry. To foster a meaningful and practical debate about the appropriateness of a second network for Hong Kong, we believe it is important to set out basic facts on the state of local telephony in Hong Kong, as well as on regulatory and technology trends that are reshaping local telephony elsewhere. Specifically:
1. Hong Kong has one of the most advanced telecommunications
industries in the world. It offers modern international and local voice and data
services. Moreover, the territory is a world leader in network digitalization: by 1993, Hong Kong will have a totally digital network, ahead of all other countries. Hong Kong also has Asia's first fiber-optic submarine cable, linking it with Japan and South Korea and giving it access to the trans-Pacific digital link between Japan and the U.S.
Beyond the franchised local and international telephony, Hong Kong also has well- developed and competitive data and value-added services, as well as radio-based local
telephone service (see Exhibit 1). Data and value-added services have seen increasing competition, with a number of major players offering fixed-link and mobile products (see Exhibit 2). The recent alliance between Hutchison and AT&T speaks to the vibrancy of the competitive marketplace. Three strong cellular telephone companies offer consumers a world-class, competitive service - with relatively low connection and usage rates, and a
McKinsey & Company, Inc.
CONFIDENTIAL
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