COMPETITION in the fixed telecommunications network has yet to have an obvious impact in Hong Kong and it is fairly easy to see why. Even though the Government allowed three new service providers into the fixed local network market in 1993, the Sino-British Joint Liaison Group only gave its approval in March this year. And the new entrants did not begin introducing their services until recently. It would be unrealistic to expect the newcomers to make a big impact on the industry, including the market share of the dominant service provider, given the few months these companies have been in operation. There are no signs yet that these companies have been able to attract large numbers of consumers, despite their advertised cost advantages of some of their international direct-dial (IDD) services. Some services have also been offered at rates below cost. The new licensed fixed network operators - Hutchison Communications, New T&T Hong Kong (controlled by the Wharf group) and New World Telephone - have concentrated their early marketing efforts at the IDD and corporate high-value-added sectors. There are several reasons for consumer resistance to new operators at the retail level. One reason is number portability. Few customers want to give up their existing Telecom numbers and, although the Office of the Telecommunications Authority (OFTA) has made portability between operators mandatory, it is currently accomplished via call forwarding. Other factors could range from convenience and trust; consumers need a strong incentive to switch from a well-established service provider and, even when there are compelling reasons, it requires a big leap of faith to trust an untried company. These factors are magnified when a customer's business relies, to a large degree, on telecommunications services. It is convenient to receive one bill from one operator. And with free local calls and low monthly rents, the battle for the consumer can only be fought on IDD rates, or the level of service offered. Hongkong Telecom will retain its international monopoly licence until 2006. But the industry regulator has allowed other companies to offer call-back services, which turn an outgoing call into an incoming one and which help to exploit anomalies in international accounting rates. These services, although having an effect on Hongkong Telecom's revenues in varying degrees, brought more pressure for lower IDD rates. When it set about opening the fixed-network market, the Government deliberately avoided policies which would hamper Hongkong Telecom's efforts to compete with the new service providers. As Director of Telecommunications Alex Arena explained, the regulator's view was that the way to develop the local telecommunications industry was 'not to saw a leg off the dominant player'. Mr Arena said change was best accomplished by letting market forces work naturally, not by trying to 'tilt the playing field' in favour of new entrants. 'Hong Kong companies must become world-class operations precisely because they learn to succeed in competing against a strong player in a competitive market. Success resulting from the regulator tilting the field can only be illusory as, eventually, competition on a more level field must be encountered,' he said. While he acknowledged OFTA's role in creating the liberalised environment, he said its role in settling disputes over such issues as interconnection would decrease as the new players established themselves. 'Regulation will persist for many years to come, but OFTA's role will need to evolve in concert with the industry. It would be odd, indeed, if, in this most dynamic of industries, a static view was to be taken of regulation. Clearly, regulation will, and must, change,' he said. Like all monopoly telecommunications providers, Hongkong Telecom fought the opening up of the market, while it also thought it could influence government policy. Now that the direction has been set, the company is adapting to the changing market conditions by cutting staff numbers and branching out into new technologies such as multimedia. Chief executive Linus Cheung said liberalisation inevitably caused some upheaval in companies which faced competition. 'We firmly believe that competition will make Hongkong Telecom a stronger company,' he said.