The SAR will experience major benefits from the agreement to end Hongkong Telecom's monopoly on international phone calls over the next two years. The introduction of full-scale competition will slash most people's telephone bills and may make the price cuts of the past few years - which have been limited by the need to use call-back services - seem small-scale by comparison.
In all probability, the total savings to the consumer will far exceed the $17 billion predicted by the Government. The new system will also allow the benefits of competition to be distributed more evenly and so reduce some of the distortions caused by the call-back system, which currently makes it cheaper to phone New York than Shenzhen.
According to official projections, the cost of calls to most parts of the mainland, which now cost up to four times as much as those to the US, will fall substantially in a liberalised market. That will reduce the burden on Hong Kong's poorest residents, many of whom have relatives on the mainland, and so are disproportionately penalised by the present high charges.
There are also benefits for Hong Kong as a whole. At a time when the SAR is facing an economic slowdown, increased competition in the phone market will give a badly needed fillip to growth. It should also strengthen Hong Kong's role as a telecommunications hub, and so boost ambitions to develop into a regional services centre.
But there is a price to be paid and one which is possibly higher than was necessary. No justification has been offered for how the figure of $6.7 billion compensation for Hongkong Telecom - $1,100 for every man, woman and child in the SAR - was arrived at. Objectively this may be a small sum compared with the benefits liberalisation will bring. But that is not how it will seem to many provisional legislators when they are asked to approve paying this amount out of public funds to a predominantly British-owned company.
Preferred options It would have been far preferable if Hongkong Telecom could have been persuaded to surrender its monopoly in return for the right to develop some of the telephone exchanges and other land it currently holds, as was apparently the original intention. But that evidently proved impossible in such a depressed property market.
