Should the international monopoly of Hongkong Telecom (HKT) be terminated, and if so, how much should HKT be compensated? Rick Tang of HKT (South China Morning Post, August 1) responded to my letter (Post, July 19) by insisting that contractual pledges must be honoured, because HKT's long-term planning is based on the continuation of the monopoly. Unfortunately, the long-term planning described involves services that should not be subsidised by a government-trusted monopoly. According to Mr Tang, HKT has invested $17.7 billion in the past five years, nearly 50 per cent of operating profit, in the development of network capacity, value added services, interactive multimedia services, and the GSM mobile network. As a consumer, I do not subscribe to HKT's multimedia and mobile services, because I am not interested or I have subscribed to another service provider. However, I am forced to pay HKT for every international call I place. This payment reaches a grievous level for calls placed to countries also with monopolised telephony. The new services I am forced to pay for indirectly were non-existent in 1981 when HKT was granted the IDD monopoly for 25 years. Since then these services have been declared competitive, for which the Government has granted licences to firms other than HKT. If it is government policy to use IDD revenue to subsidise new services and the local phone service, such a subsidy should be divided among the service providers. By allowing HKT an exclusive IDD licence and internal cross subsidy, the Government is being unfair both to consumers and other service providers. If the monopoly right is not terminated, the Government must exercise vigilant efforts to limit the current excessive return and curb unfair cross subsidy. Unfortunately, the Government relies almost entirely on licensing as a mechanism for regulating the industry, and post-licensing corrective action is rare. It is not surprising that HKT interprets the 1981 contract as a licence for cross subsidy and unfettered profit. Several corrective measures could be considered by the Government. A rate of return cap on local and international phone services could be applied. HKTI, the international arm of HKT, could be divested from HKT. A divestiture is not as drastic as it seems, as HKT and HKTI were separate and profitable companies before 1988. HKTI could pay a per-minute access fee to the local fixed network chosen by a consumer to complete an international call. These measures were successfully employed to liberalise the US telecom market. I share the confidence of Mr Tang that HKT and other telecom concerns have a bright future. This is achievable without an IDD subsidy, as the competitors of HKT have demonstrated in the areas of paging, mobile services, and the Internet. By having an IDD monopoly in the otherwise liberalised telecom market, the Government faces a virtually impossible regulatory task. The monopoly has also denied consumers the cost and volume benefits which are rightfully theirs. JOSEPH Y. HUI Professor Department of Information Engineering Chinese University of Hong Kong
