Presentation by the Hong Kong Coalition of Service Industries to the Provisional Legislative Council Subcommittee on Telecommunications (Amendment) Regulation 1998 and Telephone (Repeal) Regulation 1998

6 March 1998

1. The combined effect of the removal of the monopoly license in international telecommunications, the opening up of Hong Kong Telecomˇ¦s domestic residential lines to other FTNS operators and the relaxation of price control arrangements will together bring about a more open market in both international and domestic telecommunications. In a nutshell, this arrangement will bring about a liberalisation of the telecommunications industry and will improve both market access and market contestability.
2. We urge the Provisional Legislative Council to consider the positive aspects of such a liberalisation. In terms of employment telecommunications has been a significant job creator for the economy even in the constrained environment over the past years. Between 1990 and 1996, employment in this sector has risen from 27,000 to 38,000. This represents an increase of 40% over six years, which is much bigger than the increase in the overall labour force which is 12.5% for the same period (from 2.75 million in 1990 to 3.09 million in 1996). A more liberalised environment will certainly mean more employment opportunities in this fast growing sector.
3. We believe consumers will benefit from greater diversity of products and services with higher quality and at lower prices, as a result of greater efficiency and productivity brought about by better market access and market contestability. Consumers will benefit from cheaper and higher quality IDD services. For small businesses the benefits could be substantial, as it is not uncommon for them to have an IDD bill that runs into thousands or even tens of thousands of dollars a month. But other than cheaper rates, the higher quality of international services is also increasingly important for the business user.
4. There is also an opportunity to redress the current imbalance between local and international services by gradually removing the cross-subsidisation. We realise that this may mean prices would rise for local services, which would be a matter of concern to the community. The business sector especially the SMEs are also very concerned about the possibility of major price rises. However, we believe that in the long term the best guarantee for high quality and lower prices is through competition rather than through cross subsidisation, which is economically inefficient, stifles competition and distorts the market. This is especially so with the expansion of applications using broadband telecommunications, as Hong Kong moves into the information technology age.

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