The Hong Kong government has agreed a broad strategy for introducing a second domestic telephone carrier, when Hong Kong Telecommunications Ltd’s monopoly runs out in 1995. It also decided that the share of international revenue Cable & Wireless Plc, the parent company, pays to Hong Kong Telecom should be converted into an access charge calculated on current operating costs plus cost of capital. In order to liberalise the domestic market further, cellular companies are also now to be allowed to connect to the international network direct, rather than going through Hong Kong Telecom. Also as part of the package, Hong Kong Telecom is to reduce international rates by 12% over the next three years, and increase domestic rates by a maximum four percentage points below the rate of inflation; the international rate reductions will come in three stages: 8% this financial year, followed by a further two reductions of 2% each in the years 1993-94 and 1994-95; meanwhile the legislature has agreed that both local and international phone networks should be opened up to competition; also, it voted that there should be a price-capping approach for local telephony services to keep annual increases below the inflation rate; the legislators will now press their case to the government.
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