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SCMP Reporter

While the focus of interest in Hong Kong's telecommunications industry is very much on Hongkong Telecom's international monopoly negotiations with the Government, another small liberalisation of the sector has slipped through with little fanfare.

 The Telecommunications Authority on Friday opened the way for companies other than Telecom to sell international services for fax and data traffic.

 This should translate into lower prices for the customer, with rival operators looking to get into the business.

 Earlier this year, Hong Kong was one of about 60 countries that signed up to a World Trade Organisation agreement on opening up telecom markets.

 Hong Kong's commitment was to open by January 1 the market in virtual private network services and international simple resale (ISR) of data traffic.

  Last week's ISR liberalisation gives rival operators the right to buy international line capacity and resell this to domestic customers.

 The big advantage of ISR is that it gets round the international accounting rate system, under which national operators pay each other for completing calls. In theory it should mean call charges fall to a level much closer to their economic cost.

 Jardine Fleming recently reported that the United States telecom authorities had calculated that the true cost of a call routed under the Pacific was in the 60 to 70 cents per minute range.

 Telecom charges $6.80 per minute to the US.

  While many of Hong Kong's rival operators already offer discounted international services, they do this largely by using the callback technique, which inevitably means a lower quality of line.

  With ISR on offer, there is little reason to use callback.

 Industry analysts see the ISR data licences as attractive, particularly for Hong Kong's new operators trying to extend their portfolio of products.

 For example, New T&T director of commercial operations Peter Heavyside confirmed that the firm would be keen to offer the service.

 While the international data sector is certainly growing, it is still dwarfed by the amount of international voice traffic.

 In the year to the end of March, Telecom's out-going traffic reached 3.7 billion minutes, of which about 5 per cent was fax and data traffic.

 Bear Stearns telecom analyst Daniel Widdicombe estimated that data and leased line traffic would amount to about 5 to 8 per cent of Telecom's revenues.

 He said the impact on Telecom of competition in this sector would not be that marked, although there certainly was viable market for others to go for.

 'It is a large and dynamic enough market for more than one operator. However, it will be a low-margin, high-volume business,' he said.

 The government has imposed no limit on the numbers of companies it will award ISR data licences to, nor on their nationality.

 In many ways, this small-scale liberalisation heralds a new age in the telecommunications industry.

 With leased-line capacity increasingly seen and priced as a commodity, the battle for customers will become one of who prices and markets the best.

 The decision to open ISR for data in this way has not necessarily been welcomed with open arms by Telecom's rivals.

 The three competing new fixed-line operators would no doubt have preferred a more restrictive licence.

 The argument goes thus: why should companies that are not spending cash on building local telecoms infrastructure be allowed to make money out of the Hong Kong market?  While New T&T, Hutchison Telecom and New World Telephone spend billions on building their local network, they appear to get no reward from the Government for doing so in terms of privileged access to offer international data and fax services.

 This is a dress rehearsal for bigger decisions to come involving much higher stakes.

 Both the Government and Hongkong Telecom have hinted they will soon announce an early end to Telecom's monopoly over international voice traffic.

 One possible outcome is that the Government could well take a step-by-step approach to this, and, as a first move, allow ISR on voice traffic.



Data licences add to telecoms mixture