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Straight talk on competition

THE conference held last week on Hong Kong Telecommunications and Network Competition was an extraordinary event.

For one thing, the 'real' issues too commercially sensitive to discuss above a whisper before were talked about openly - even loudly - in public for the first time.

It was not only the usual roll-out of industry observers, consultants, academics and other assorted analysts doing the talking.

Also those at the conference were served a rare treat - astonishingly candid and open discussion about the challenges and opportunities presented by the introduction of fixed-network competition in Hong Kong in 10 months by all the main players in the game.

The referee indulged too, if you include the Hong Kong Government, which sent along its heavyweight, Acting Secretary for Economic Services Elizabeth Bosher.

It may be an exaggeration to suggest there was blood on the conference-room floor by the end of the proceedings - but not by much.


As amicable as the discussions were, there was a directness about the presentations rarely seen at such events.

The overall impression was simply that time is running short. These people were all in a hurry.

Introducing competition in Hong Kong is hellishly complicated, involving many 'absolutely critical' issues. In addressing each of these, 'the players' cut straight to the heart of the matter.

The fact is, with 10 months before the expiry of the Hongkong Telephone's exclusive franchise to provide basic fixed-line services, time is running short.


And the three new market entrants - New World Telephone, New T&T and Hutchison Communications - which until last week had been button-lipped about their network plans, have opened up in a most un-Hong Kong-like manner.

If there was one issue on which the three appeared most united (there were a few), it was in a call for greater Government involvement in the competitive process - more strange behaviour for Hong Kong companies.


Senior representatives from each company spelt out the need for Government to intervene on several fronts, saying the old laissez-faire regulatory approach simply would not work in the run-up to competition.

On many issues - not least the complicated arrangements for network interconnection - the Office of the Telecommunications Authority's (OFTA) position has been to leave the companies to work out arrangements for themselves through commercial talks. OFTA would intervene and arbitrate only when a deal could not be reached.

Mrs Bosher reiterated this 'light-handed' approach in her address to the conference.


It seems the three would-be competitors are not convinced this approach will work. They argue that it is near impossible to negotiate a sensible arrangement - or to negotiate much at all - when all the market power and market leverage sits on one side of the table.

Not only does Hong Kong Telecom have all the market clout, it would seem to have little incentive to sit down at the negotiating table. The longer talks take, the longer it will take for the new players to get on the field, and the better it is for Hong Kong Telecom.

That Hutchison Communications, New T&T, and New World Telephone appeared so keen to put arguments into the public forum gives the impression that they are dissatisfied with the pace of progress.


Although it is clear the Government's move to establish OFTA last year was almost universally hailed by the industry, and that OFTA's director-general, Alex Arena, seems to enjoy the confidence and respect of his telecommunications industry constituents, it is by no means clear that Government has yet realised that its role in regulatory competition in Hong Kong is going to be far more 'hands-on' than it is used to.

The situation was perhaps best spelt out by Milton Mueller, the Rutgers University academic and long-time Hong Kong telecommunications industry watcher.

'The real irony is that increasing competition generally leads to more Government involvement in the industry, not less,' Mr Mueller said.

'Interconnection will not come about as a product of voluntary negotiation, because in most cases the incumbent has nothing to gain and a lot to lose from providing access to its competitors.