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Hongkong Telecom Gets VOD OK

Hong Kong -- Hongkong Telecom received final approval to
operate a video-on-demand service, but would-be rival Star Interactive Television (Star
iTV) only earned provisional approval because of a legal challenge against the company.

The Broadcasting, Culture and Sport Bureau (BCSB) said the
government had formally approved a 12-year license for Hongkong Telecom VoD Ltd.'s
(HKTVOD) service effective last Friday.

HKTVOD plans to launch commercially within a month, and it
is already available on a trial basis in 7,000 homes. HKTVOD has lodged a $HK210 million
($US30 million) performance bond with the government to make it meet specified targets,
including carrying 16 to 18 hours of programming daily and ensuring that it takes no more
than four-and-one-half minutes between ordering a service and receiving it. Some HKTVOD
test households have reported that it has taken up to 15 minutes to order programming.

Hongkong Telecom chief executive Linus Cheung said the
Special Administrative Region of China would be the first major city in the world where
VOD is available commercially, 'affirming Hong Kong's status as a leader in the
information age.'

Star iTV, however, was only granted approval in principal
because of its continuing legal battle with failed VOD bidder Future TV, which claims that
Star iTV pirated some of its technology when it bid for a license last year. In addition,
Star iTV and its parent, Star Telecom, have been obliged to give the government an
indemnity against any claim arising out of its dispute with Future TV.

Star iTV managing director Daniel Ng said he welcomed the
government's decision to give his company a license in principle, but he said HKTVOD
was gaining 'a de facto monopoly' because the two services were not being
launched simultaneously.

BCSB deputy secretary Rita Lau said officials needed time
to assess the legal implications of the civil case. She would not offer a timetable for
when Star iTV would be granted a license, although the company said it was gearing up for
a midyear launch. 'I personally pledge to give my team's full support to make it
happen as soon as possible,' Lau said when asked when the license would be granted.