9. They have seen the future, and they aren't very interested

Lucky Hong Kong. Its citizens have access to the Internet “in a more powerful form than 99% of users in the world”, marvels Microsoft's Bill Gates. Last year Hong-Kong Telecom launched the first commercial interactive television (ITV) service in the world, offering video and music on demand, along with high-speed Internet access, to 70% of the city's homes. Mr Gates was impressed enough to fly in and announce that this network would become the chief testbed of Microsoft's efforts to merge the television and the PC, allowing users to gain access to broadcast-quality movies, PC games and pay-per-use software from the network nearly as quickly as from their own hard drives.

Mr Gate's presence threw Hong Kong into a technotizzy as the government announced a lot of Singapore-rivalling projects, from a $1.6 billion “cyberport” to efforts to make Hong Kong the region's e-commerce hub. But the city's planners do not seem to have noticed that the Microsoft deal is better evidence of the service's problems than of its potential.

Ever since ITV was first put together in the early 1990s, virtually every trial has shown that viewers are not keen enough on video-on-demand to pay the cost of receiving it. Hong Kong reckoned it was different: its 6m relatively affluent and gadget-mad people are packed tightly into easy-to-wire apartment buildings, most within a few miles of Hong Kong Telecom's video servers. When the company launched the service last March, it predicted that it would have 250,000 subscribers by the end of March this year, paying an average of around $50 a month. Instead, it has only 80.000 subscribers, paying an average of $35 each, less than half of what it costs to provide the service.

It seems that although Hong Kong may be a uniquely cheap place to roll out a commercial broadband network to the home, its people are all too typical of guinea pigs everywhere: unimpressed.

Like others who have dipped their toes in the ITV waters only to have them bitten off, the firm now acknowledges that movies, music, even interactive karaoke and horse racing are not enough: it still needs the elusive “killer application”. This is where Microsoft comes in.

Today, Hong Kong Telecom's broad-band service offers two options, each inadequate in its own way. The service on television does not offer e-mail or PC-quality games, while the high-speed Internet service provided to PCs does not offer movies. Microsoft hopes to solve the problem by fixing the limitation in the PC service.

This would be more exciting were it not for an uncomfortable parallel in Singapore, Hong Kong's smaller wired-island rival. Around the same time Hong Kong telecoms was launching its television-based service, Singapore was rolling out its own broadband network, called Singapore ONE, based on PCs. It has been even less successful, with just 14.000 subscribers, and its video-on-demand part, Magix, has struggled. “Most people just don't want to watch movies on their PC,” explains a spokesman. So Singapore Telecom is now thinking about taking the service over to television, just as Hong Kong Telecom appears to be moving in the opposite direction.

Hong Kong Telecom has compounded its problems with a big strategic mistake. It chose to make the service available to lower-income apartment complexes first, because they are more tightly packed and thus cheaper to reach, and because lower social classes tend to watch more television. Since those households were also targeted by the city's cable-TV provider, they already have as much television as they want. Worse, many higher-income consumers, who tend to be more spread out, cannot get the service yet.

Of course, any new technology takes time to establish itself, and telephone companies are not the obvious choice to package and market entertainment and information. But Asians are normally enthusiastic early-adopters of the latest gizmo. Western executives thrilled by the vision of an interactive future should note the apathy in Hong Kong, and beware.