The Government's telecommunications policy aims to facilitate the development of the telecommunications industry and enhance Hong Kong's position as a regional telecommunications hub.

    Supported by the Office of the Telecommunications Authority (OFTA), the Telecommunications Authority (TA) oversees the regulation of the telecommunications industry in Hong Kong and administers the ordinances governing the establishment and operation of telecommunications services.

    Since 2000, the Government has opened to competition all sectors of the telecommunications market — local and external, services-based and facilities-based.

    To provide a comprehensive and clear legislative framework for the regulation of merger and acquisition activities in the telecommunications market, the Telecommunications (Amendment) Bill 2002 was introduced into the Legislative Council in May 2002. The bill would promote fair and effective competition in the market and facilitate businesses to make informed decisions on mergers and acquisitions.

Local Fixed Telecommunications Network Services

Businesses and consumers in Hong Kong enjoy an excellent telecommunications infrastructure. Hong Kong had 4.8 million telephones served by more than 3.8 million exchange lines at year-end. The telephone density was 70 telephones or 56 exchange lines per 100 population — one of the highest in the world. Also serving Hong Kong's needs in data communications were more than 546 330 dedicated facsimile lines.

    To implement the Government's policy to fully liberalise the local fixed network market as from January 2003, the TA announced in January 2002 the implementation details and issued guidelines on inviting applications for licences. Under the full liberalisation policy, there would not be any pre-set limit on the number of licences to be issued, nor on timing for submission of applications. By year-end, there were altogether nine local fixed telecommunications network services (FTNS) operators, all of which were capable of providing broadband networks and services. They included four local wireline-based FTNS operators, four local wireless-based FTNS operators, and the cable television operator which provides telecommunications services over its hybrid fibre coaxial network. One new FTNS licence had become effective, as of January 1, 2003. Two incumbent local FTNS operators also had their licences modified to provide local service through the wireline-based FTNS network.

Broadband and Internet Access Services

By the end of the year, virtually all households and commercial buildings were covered by the broadband network. The number of broadband accounts increased significantly during the year to 989 115 or 14 broadband accounts per 100 inhabitants, representing an annual increase of 59 per cent. In addition, 42 per cent of households had broadband Internet access. The number of registered customer accounts with dial-up access was 1 371 705, or 20 dial-up access accounts per 100 inhabitants. Internet Service Providers (ISPs) numbered 236 at year-end.

    After two rounds of consultation, the Government issued in November 2000 a statement stipulating the regulatory framework for broadband interconnection. The regulatory framework promotes effective competition and consumer choice at affordable prices, maintains a fair and competitive market environment, and promotes investment in broadband infrastructure underpinning the service sector. The TA is in the process of determining the terms and conditions for Type II broadband interconnection in Hong Kong.

Public Mobile Phone Service

The market for public mobile phone services is highly competitive in Hong Kong. At year-end, six firms were operating a total of 11 digital systems, serving a customer base of over 6.2 million. This represented an annual growth rate of 10 per cent. The penetration rate of public mobile phone services was about 91 per cent, one of the highest in the world. The International Telecommunication Union report entitled 'Internet in a Mobile Generation' released in September 2002 ranked Hong Kong as the No. 1 economy in the world in terms of performance in mobile and Internet technologies.

    In October 2001, the Government issued four 3G licences under an innovative royalty scheme. The Government also spearheaded the introduction of an open network access requirement whereby 3G network operators are required to make available 30 per cent of network capacity for interconnection to, or access by, non-affiliated Mobile Virtual Network Operators and/or content providers on a non-discriminatory basis. This would ensure competition at both the network and service application levels.

External Telecommunications Services

Competition in the external telecommunications services market was introduced from January 1, 1999. Competition in the market has led to a significant drop in International Direct Dialling (IDD) call rates. Consumer savings for the three years from 1999 to 2001 amounted to an estimated $17.5 billion.

    Competition in the external facilities market was introduced from January 1, 2000. Operators who bring in new submarine or overland cables, or use non-cable based means of transmission (primarily satellite) to provide external telecommunications facilities-based service may apply for a licence. At year-end, there were 18 licensees providing cable-based external telecommunications facilities and five providing non-cable based external telecommunications facilities.

    The Government has liberalised the external facilities market from early 2000. As from January 1, 2003, operators may obtain external facilities licences by means of acquiring capacity through the purchase of Indefeasible Rights of Use (IRUs) of submarine or overland cables. In addition, existing operators of external facilities may apply for modifications of their licences to extend their scope of services to operate backhaul facilities from January 1, 2003 onward. The TA invited applications for licences in January 2002, and a new licence was issued in January 2003.

Satellite Communications

Two Hong Kong companies, APT Satellite Company Limited and Asia Satellite Telecommunications Company Limited (AsiaSat), hold licences under the Telecommunications Ordinance and the Outer Space Ordinance to operate and provide satellite communication services. At year-end, the two satellite companies were operating a total of six satellites.

International Activities

Hong Kong continued to participate in the activities of international and regional telecommunications organisations. As a member of the China delegation, Hong Kong was represented in conferences and meetings convened by the International Telecommunication Union (ITU). Hong Kong participated in its own right in the meetings of the Asia-Pacific Telecommunity and the Telecommunications and Information Working Group of the Asia-Pacific Economic Cooperation (APEC). Hong Kong also took part in the initiative to implement the APEC Mutual Recognition Arrangement for Conformity Assessment of Telecommunications Equipment.

    The work of the OFTA in the regulation of the development and operation of the telecommunications industry of Hong Kong is well recognised at the international level. The OFTA was voted the 'Best Asian Regulator' of 2002 by readers of a leading telecommunications journal in Asia, for the fourth time since 1998.

    The highlight of the year was the ITU TELECOM ASIA 2002 held from December 2 to 7 at the Hong Kong Convention and Exhibition Centre. Hong Kong had hosted this prestigious event in 2000. Encompassing an international telecom exhibition and a special session of the World Telecom Forum, the event in 2002 attracted over 21 000 visitors and 319 exhibitors from 127 countries. Officiating with the Chief Executive at the opening ceremony were Minister of Information Industry, Mr Wu Jichuan, and the Secretary-General of the ITU, Mr Yoshio Utsumi. A first-ever Youth Forum for talented university students from the Asia-Pacific region was held in conjunction with the event. Immediately following the event, Hong Kong hosted the ITU Global Symposium for Regulators, for telecommunications policy-makers and regulators from all over the world to exchange views and experience on regulatory issues. Attended by more than 150 representatives from 50 national regulatory authorities, the symposium was held outside the ITU headquarters in Geneva for the first time.