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Planning can be based on full picture

Chris Chapel

Now that Hongkong Telecom International (HKTI) has agreed to an early end to its monopoly over the international gateway, the Government can at last treat fixed and international services as parts of the same market.

It probably made sense at the time, but the grant of a 25-year monopoly licence to HKTI in 1981 had an extraordinary effect on telecommunications policy.

In its consultation paper on the 1998 Review of Fixed Telecommunications, the Information Technology and Broadcasting Bureau (ITBB) spells out the Government's dilemma.

'The fact that the local fixed telecommunications market could be opened in 1995 and the external market could not be opened until 2006 had forced the Government into treating the two markets as distinct. From a policy perspective this has been sub-optimal as it is now widely accepted in most jurisdictions that licensing based on definitions of local fixed services, long distance and international is not sustainable and not in the interests of competition nor consumer benefit.' With the termination of the licence, the Government is now free to take an integrated approach to the telecommunications market.

While the ink was still drying on the Framework Agreement which ended the monopoly, it licensed all four existing fixed network operators for both 'external services' - the handling of international traffic. And 'external facilities-based services' which cover operations using physical gateways.

External services are due to be opened to competition on January 1 next year and facilities-based services on January 1, 2000.

The big question now is: should the Government open the external market right up by allowing in operators other than the four existing fixed network operators? The existing fixed players argue that they have made big investments and new competitors would upset their business plans. This argument does carry some weight with the Government, which is keen to see the privately-funded physical infrastructure develop.

But it is also similar to the argument Hongkong Telecom made in the early days of telecommunications liberalisation: 'We have invested heavily in infrastructure, so please protect our market.' The Government has a number of options in licensing external services, including giving the existing fixed operators a head start in the form of a buffer period during which no other operators are allowed in.

Telecom received $6.7 billion in compensation for the early end of its licence. It is impossible to know if this is the 'right' amount because, once external markets are opened, there will be no way of estimating how much Telecom would have made had it retained its monopoly rights.

Clearly, there will be some impact on international traffic because of the Asian economic crisis, which has already led to a 50 per cent fall in regional trade.

The Hongkong Telecom Users' Group has argued that the Government erred in projecting Telecom's IDD traffic volumes without taking account of emerging technologies such as Internet telephony.

The compensation gives Telecom an enormous war chest which it could use to beat off its competitors . . . if only it were allowed to.

As the dominant carrier, the company needs to seek approval from OFTA whenever it wants to offer services at other than its published tariffs.

FUTURE SHOCK System might have made sense when it was set up But splitting home and IDD services stymied planning

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