Response to the Consultation on Telecommunications
Review
Hong Kong Coalition of Service Industries
April 1997
General comments
- Since the opening up of domestic telephone services, Hong Kong has seen great advances
in telecommunications services with tangible improvements both in the variety and quality
of services. An increasingly liberalising global environment for telecommunications has
also opened the possibility for an exciting range of new services for telecommunications.
This review is, therefore, very timely in the development of Hong Kong's
telecommunications.
- In light of this review, it is important for government to take stock of existing
progress, such as evaluating how far the intended level of competition has been achieved
by current policies. We are slightly disappointed, therefore, with the 5-page, 15-point
consultation paper which is couched in very general language. The recent consultation
paper on proposed amendments to the Telecommunications Ordinance, by comparison, contained
50 pages. The consultation paper on review of pricing structure of local fixed telephone
services carried 15 pages of main text. Even that of the limited subject of calling number
display contained 8 pages. A consultation paper should not be judged by its length.
However, for such a key subject one would have expected a much more elaborate document
which seeks to gather views as well as encourage discussion in more specific areas.
Moreover, such an important review should not be conducted in such a short timeframe. As
it stands the current document reads much more like a preface to a consultation paper
rather than a consultation paper itself.
- This is not, however, to devalue the current consultation exercise. On the contrary, we
believe the current exercise is of great value as a call for brainstorming of ideas. It
should be the first stage of a more protracted consultation process which offers the
opportunity for different points of view to be discussed and debated on the full range of
telecommunications-related subjects. This process of debate and discussion should also be
made as transparent as possible, such as including public enquiries in a similar manner to
the public hearing conducted recently by the Legislative Council Information Panel on the
subject of information infrastructure.
- The following are our views on the more specific aspects of telecommunications which we
believe should be tackled fully in the consultation process.
Pricing, cross-subsidisation and international service
- A key issue to be addressed is the cross subsidisation between domestic and
international telecom services. The present cross subsidisation is economically
inefficient, market distorting, and unsustainable in the long run. Leaving the matter as
it is will only lead to underinvestment in domestic services, eventually resulting in much
higher costs to the consumer. A priority of the telecommunications review should be to
explore effective means of rebalancing the pricing structure, with a view to moving
towards a user-pay system.
- The subject is closely related to the monopoly license over international services which
is held by Hong Kong Telecom International. International services should be liberalised
as soon as possible to allow consumers to benefit from full competition in such services.
We support, however, the principle that contracts and franchises must be honoured and that
government should not unilaterally revoke the licence. Having said that, we wish also to
emphasise that businesses and government should always be open to opportunities for
improving regulatory and commercial arrangements. We believe Hong Kong is now presented
with such an opportunity in view of the rapid development of telecommunications and the
global trend of liberalisation. Recently there have been reports of government and Hong
Kong Telecom beginning a dialogue on the issue. Although legally this is a matter between
Hong Kong Telecom and government, other parties should also be allowed an opportunity to
air their views. In line with the Hong Kong spirit, a win-win solution should be found
between government and Hong Kong Telecom which is mutually agreeable to both and which
benefits all parties.
Effective competition
- The government should ensure that its policies are consistent with achieving a
level playing field in the local telecommunications industry. In particular, the
relationship between the dominant operator and new entrants has become an issue of
considerable public interest which should be adequately addressed, with a view to allowing
all parties to compete effectively.
- Issues such as cross-subsidisation and possible use of unlicensed entities to undermine
the anti-competitive provisions in the FTNS licences should also be addressed in any
review of the telecommunications industry.
National information infrastructure
- The "information superhighway" has given rise to a mushrooming of
Internet and related services. As a premier service economy Hong Kong should seek to
establish itself as the communications hub in Asia for Internet traffic. This calls for an
advanced telecommunications and business infrastructure, as telecommunications is an
important - perhaps the most important - part of the "national information
infrastructure" (NII).
- The development of NII would require an adequate legal framework, a set of clearly
defined and internationally recognised common standards upon which applications can be
developed and implemented. As telecommunications and the use of NII are so closely
intertwined, the interfacing in the legal and regulatory framework between
telecommunications and information technology should be evaluated carefully. The aim
should be to encourage as wide a variety of applications as possible while at the same
time remove ambiguity over the regulation of overlapping services such as the
"Internet phone".
Integrated multimedia services
- Integrated multimedia services (IMS) such as video-on-demand, teleshopping,
telebanking, etc. is a major development ahead of other applications in telecommunications
and NII. In anticipation of the great variety of IMS-related services to be offered by the
market, the time has come for a comprehensive examination of the regulatory framework for
IMS.
- Such a regulatory framework should be market-oriented rather than intervention- prone.
It should be capable of addressing the needs of industry in the face of rapidly changing
technology, and should hence be technology-neutral rather than technology-oriented.
International liberalisation
- With the WTO agreement on telecommunications, great advances have been made
in liberalisation of global trade in telecommunications. Concurrently, major progress is
being achieved in specific areas such as reform in accounting rates and liberalisation of
trade in information technology products, the latter enshrined in the WTO Information
Technology Agreement. These have far-reaching implications not only for services provided
for Hong Kong, but in opening up possible future markets for Hong Kong operators. The
telecommunications regime should enable this potential to be exploited. The
telecommunications review should be conducted with this in mind.
- In the course of the WTO negotiations a set of regulatory principles have been
developed. The extent to which these principles are complied with by Hong Kong's trading
partners should be examined in detail. At the same time, Hong Kong should aim to surpass
the requirement of these regulatory principles, so as to set a benchmark for a regulatory
regime which supports and advances effective competition within the telecommunications
industry.
(ends)
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