Partnerships should be no longer viewed as exclusive but could apply wherever a business advantage made them work, he said.

The liberalisation on January 1 allows providers to rent bulk capacity from Hongkong Telecom and resell this to customers, a process known as international simple resale (ISR).

For companies such as New T&T there are two ways to do this and renting capacity directly from Hongkong Telecom is not always the best option.

Global One too has a licence to carry out ISR but its focus is not residential service but providing global end-to-end voice and data services for large multi-nationals.

As a result of that, it has extra capacity, especially in the evenings. It could also potentially resell capacity.

New T&T plans to rent capacity from Telecom on probably five of its main routes.

The company's director of commercial operations Peter Heavyside said in these circumstances it was cheaper for New T&T to rent directly from Telecom.

But renting the capacity from Telecom only gets you half the 'pipe'.

Undersea cables are owned in halves. So in order to terminate a call at a country it is necessary to rent the second half of the circuit from the operator which controls the second half of the cable.

This is why New T&T, for example, recently signed a deal with British Telecom for Hong Kong-Britain traffic.

It has also signed with Teleglobe International for Canada. A US partner has not yet been disclosed.

In addition, New T&T will do these sort bilateral deals with operators for two other countries.

Typically, the size of capacity will be that known as an E1 (about two megabits per second), which will allow a maximum of two million minutes of voice traffic a month with eight times compression.

The agreement with Global One covers other destinations and helps out when it needs top-up capacity.

But under the new 'least cost' routing environment, nothing will be stable for long.

Special offers and new prices will inevitably change the attraction of sending certain traffic in certain ways.

The costs involved in international capacity are now so low that the real economic cost of a minute of voice traffic is a fraction of a US cent.

Compare that to actual call costs, sometimes several hundred times higher, and the possibility of arbitrage between routes remains large.

The ability of companies to actually own capacity going out of Hong Kong rather than renting from Hongkong Telecom should bring costs down much further for operators.

The extent to which this so-called international facilities market is to be opened has not yet been determined.

But the attraction for the likes of Global One is the ability to own both ends of the pipe, giving them a big pricing advantage over the local operators here who will only own one half at best.

In the meantime, Global One's deal with New T&T is not exclusive and it will resell extra capacity to anyone who wants to buy.

That cannot be said of the deal with New World Telephone. Mr Grezaud said that would be exclusive to New World and Hongkong Telecom, through which it already offers its global services.

Rather than simple voice, New World wants to use Global One's high-speed global backbone and hundreds of points of presence to offer integrated voice, data and video services.

Hutchison Telecom already has a similar agreement with British Telecom's Concert global network.

New World commercial director Frankie Lai said the difference was that New World already had a high-speed data backbone in Hong Kong.

The service, known as frame relay, is primarily designed to link computer networks between offices.

One of New World's main customers is the Jockey Club, which uses its frame relay service to send data between its branches around Hong Kong and its central computers.

The Jockey Club does some back-office software development in Australia. Should it choose to take New World's international frame relay service, these offices could all be linked, allowing speedy downloading of data and video-conferencing services.

Frame relay also offers the opportunity of international voice traffic as well.

In the situation where a company needs the service for large-scale data transfer, tagging voice traffic on the network could potentially mean that the marginal cost of voice to a company is virtually nil.

Of course, Global One can offer all this on its own. Why does it need New World? Mr Grezaud said it was about tackling new sectors of the market. New partners had a better ability to market to particular parts of business than Global One itself, he said.