CONFIDENTIAL
XCC(91)127
by over 40% and improved quality and flexibility of service provision. BAH's conclusion is that unless Hong Kong promotes an environment that ensures competitive pricing of key services, its attractiveness as a hubbing centre and more generally as an international business centre will be increasingly eroded relative to its competitors.
(b) The state of Hong Kong's telecommunications
10
As in 1988, the recent BAH study confirms that both the franchised companies (Telco and HKTI) provide a high quality of service at charges that are not significantly out of line with those levied elsewhere in the region. Local telephone service charges are particularly low. The local network is well developed with exchange line penetration at a level comparable to major industrialised nations and digitalisation well advanced. International service quality has improved since 1988 with HKTI's investment in optical fibre cable systems.
11
However, the actual growth in Hong Kong's telecommunications market, and demand for international services in particular, has outstripped the forecasts made by BAH in 1988 (which were based in good measure on data provided by Telco and HKTI). Between 1986 and 1990, outgoing international telephone traffic exhibited an actual compound annual growth rate of 34%, compared with the 1988 forecast for the same period of about 16%. Also worth noting is BAH's finding that Hong Kong currently has the highest per capita rate of usage of international telecommunications of all countries surveyed, including the U.K., U.S., Singapore and Japan.
12
This growth in international traffic has been stimulated in part by the 7% decline per annum in real terms since 1981 of HKTI's charges for international telephone calls. On the other hand, the rate of decrease of the underlying costs of providing such calls has been far greater (for example, the latest BAH report points out that between 1956 and 1988, the cost per voice channel of a trans-Atlantic telecommunications cable has decreased by over 98%, from around US$550,000 to US$9,000). In common with other long-distance carriers, HKTI has as a result experienced increasingly large profit margins and revenue surpluses.
Executive Council
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