What happens when telcos practically give it away ($13 for 100 megs!)?

    By Jeffrey M. O'Brien

    NiQ Lai, chief financial officer of Hong Kong's City Telecom (CTEL), stopped by FORTUNE's San Francisco offices this week while on an investor tour. I had one question for him: Short of moving to Hong Kong, how can I get some of what he's selling?

    I pay $25 to AT&T (T) every month for DSL that tops out at 1.5 megabits per second downstream, and 384Kbps for uploads. It's not always as fast as advertised. Sometimes it doesn't work at all. Cable offers faster speeds in my neighborhood, but the service also costs more, so I just try to remember the days of dial-up modems and convince myself that DSL is good enough.

    But if we had a US version of City Telecom, I'd switch in a heartbeat – which is precisely what the residents of Hong Kong have been doing lately.

    City Telecom's 400,000 customers pay $13 a month for 100 megabit synchronous broadband. And they get a money-back guarantee: If they don't clock 80% of the promised speed, the company pays them twice their monthly fee.

    "We have a big hairy audacious goal," says Lai, referring to the term popularized by "Good to Great" author Jim Collins. "We want to be the largest IP service provider in Hong Kong by 2016. And three years into our strategy, we're well on our way to doing it."

    If you live within coverage area of Verizon's FiOS service (VZ), you pay as much as $150 a month for up to 50 megs downstream and 20 upstream.

    How can City Telecom possibly offer service that's more than twice as fast at less than 10% of the price?