HKT aims for a strong grip on Greater China Internet traffic

PUBLISHED : Monday, 02 August, 1999, 12:00am
UPDATED : Monday, 02 August, 1999, 12:00am

Cable & Wireless HKT (HKT) is moving to control how Internet traffic moves within Greater China and beyond its borders, potentially tipping the Internet power balance in Asia away from Japan's favour.

HKT's critics charge that its recent high-profile forays into Internet-related businesses in Hong Kong and Taiwan are nothing more than marketing gimmicks.

But the company said its recent purchases of two Internet service providers (ISPs) in Taiwan and the unveiling of several electronic-commerce ventures and Web portals in Hong Kong were moves that would help it one day control a large slice of Greater China's Internet traffic.

George Chou, chief representative of HKT in Taiwan, said the point was 'to build a big fat pipe in Greater China' that would serve as the principal conduit for Internet traffic in Hong Kong, Taiwan and, eventually, the mainland.

While he would not commit to a time frame, Mr Chou said the pace of implementation would be rapid.

'We are moving at a pretty good pace. Five years ago we had nothing, and now look at us,' he said.

In March, HKT took an 85 per cent stake in Taiwanese ISP FIC Network Service for NT$157.25 million (about HK$37.7 million).

Anthony Wang, general manager of FIC Network Service, said most Internet traffic at present moved between Hong Kong and Taiwan, and the United States.

HKT expected an increasing amount of Internet traffic would be intra-regional, with most Internet traffic taking place between Hong Kong, Taiwan and the mainland.

If so, control over the long-distance infrastructure within the region would give HKT significant earnings enhancement from economies of scale.

HKT owns 10 T1 fibre-optic cables connecting Taiwan and Hong Kong. They connect to three international gateways in Taiwan, which are also owned by HKT - in Taipei, Taichung and Kaohsiung.

This conduit would also give HKT the ability to bypass Japan's Asia Internet Holdings (AIH) in directing Internet traffic between Asia and the US.

At present, Internet traffic originating in Hong Kong is routed to AIH in Japan and is then passed to the US through AIH's so-called A-bone, an undersea fibre-optic cable between Japan and California.

HKT has to lease this capacity, beginning from AIH's international gateway in Hong Kong.

However, Taiwan's HiNet - the Internet infrastructure arm of State-owned Chunghwa Telecom - owns three T3 lines, which are high-bandwidth fibre-optic cables, which connect directly to the US.

HKT could utilise HiNet's link to the US, saving, at the very least, the bandwidth leasing costs between Hong Kong and Japan. It could then also move eventually to capture some Southeast Asian traffic as a direct competitor of AIH.

Mr Chou, who is also chief executive of Taiwan Telecommunication Network Service, an ISP that became a 56 per cent-held HKT subsidiary in June, said it planned $600 million in new investments over the next four years.