Hong Kong 2006 - Communications, the Media and Information Technology

The Government's telecommunications policy facilitates the development of the telecommunications industry and enhances Hong Kong's position as an international telecommunications hub.

The Office of the Telecommunications Authority (OFTA) is the executive arm of the Telecommunications Authority. It oversees the regulation of the telecommunications industry in Hong Kong and administers the legislation governing the establishment and operation of telecommunications equipment and services.

Hong Kong's telecommunications market is fully liberalised and highly competitive. There are sector-specific pro-competition provisions in the Telecommunications Ordinance to ensure fair and effective competition in the telecommunications market.

Convergence of telecommunications services is taking place at a number of levels. At the core level, traditional stand-alone voice networks, data networks and broadcasting networks are progressively migrating to the Next Generation Networks (NGNs), which support all forms of communications on a single platform. At the access level, the boundary between fixed and mobile networks is also blurring. This converged mode of transmission enhances the efficiency of network operation, lowers costs and facilitates the quick introduction of innovative services to the market. Such a development requires OFTA to review and update the regulatory regime in a timely manner.

The promulgation of the regulatory framework for Internet Protocol (IP) telephony in June 2005 and the creation of the service-based operator (SBO) licence for the provision of IP telephony services in January 2006 were good examples of the Government's effort to keep pace with market and technology developments. Under the new regulatory framework for IP telephony, both local fixed network operators and SBO licensees are allowed to provide voice telephony services over IP networks. At year-end, there were five SBO licensees.

The current regulatory framework which demarcates fixed and mobile carrier services with differential regulatory arrangements may also need to be revamped in order to cater for the convergence trend. A consultation paper proposing a unified licensing framework was first issued in September 2005. In December 2005, a consultancy study was initiated to analyse the costs and benefits to stakeholders and the community arising from possible changes to the existing regulatory arrangements, such as fixed-mobile interconnection charging arrangement and fixed-mobile number portability. Taking into account the findings and recommendations of the consultancy study and the feedback from stakeholders, a second consultation paper was issued in July 2006 setting out the preliminary proposals for the regulatory changes. The Government will take into consideration the responses to the two consultation exercises before making a decision on the way forward.

The Government is considering allocating spectrum for the provision of broadband wireless access (BWA) services. Apart from its ability to provide a broadband wireless connection to subscribers, thereby offering an alternative to conventional wireline connection, BWA technologies are expected to eventually embrace full mobility capabilities, enabling consumers to gain access to a wider choice of innovative services under the fixed-mobile convergence environment. Two public consultations on the licensing framework for deployment of BWA in the 3.5 GHz band were conducted in December 2004 and August 2005. Responses from the telecommunications industry indicated there would be interference between BWA services and satellite services that operate in the adjacent frequency bands. The Government is therefore exploring other suitable frequency bands for BWA applications.

Rapid advances in broadband technologies and the increasing convergence between telecommunications and broadcasting have created opportunities for telecommunications operators to offer IP television (IPTV) services. A number of fixed telecommunications network operators have entered the IPTV market and are now offering triple-play products, or telephony, broadband internet access and IPTV to their customers. With over 700 000 IPTV subscribers, Hong Kong is the most advanced IPTV market in the world.

Businesses and consumers in Hong Kong enjoy an excellent telecommunications infrastructure. In 2006, the telephone density was 95.5 exchange lines per 100 households, one of the highest in the world.

The local fixed-line market has been fully liberalised since January 2003. Under the full liberalisation policy, there is no pre-set limit on the number of licences issued, or the timing for submission of applications for licences. By year-end, there were 10 local wireline-based fixed network licensees and one local wireless-based fixed network licensee. Under the technology-neutral regime, a licensee may use any technology for service provisioning provided the technology conforms to open and non-proprietary standards and for which there is a reasonable choice of consumer equipment in the market.

After two public consultations, the Government concluded in July 2004 that mandatory Type II interconnection at telephone exchange level — which helped other fixed-line operators enter the market by allowing them access to PCCW's customer access network — would be fully withdrawn by June 30, 2008. This revised policy aims to encourage investment in building new infrastructure and upgrading existing infrastructure. In the long run, consumers will benefit from a greater choice of telecommunications services delivered through an advanced telecommunications infrastructure capable of supporting different forms of innovative services.

Since the introduction of competition in the local fixed network services market in 1995, operators have been actively rolling out their self-built customer access networks to provide choices and services to end-customers. By December 2006, 76 per cent of households in Hong Kong were able to enjoy a choice of at least two self-built fixed networks.

The number of broadband accounts increased significantly during the year to 1 744 420, or 25.3 broadband accounts per 100 inhabitants, representing an annual increase of 11 per cent. In terms of household penetration, this translated into 71.4 per cent of households. Currently, broadband internet access services with access speed of up to 1 000 megabits per second in both the upstream and downstream directions are available in the market. According to reports issued by the International Telecommunication Union (ITU) in 2005, Hong Kong ranks second in Asia in terms of broadband penetration.

The market for mobile communications services is highly competitive. At year-end, five mobile carrier licensees were operating a total of 14 digital systems providing second generation (2G) and third generation (3G) mobile services, serving a customer base of over 9 million. This represented an annual growth rate of 9.5 per cent. The penetration rate of mobile communications services was about 137 per cent, one of the highest in the world. At year-end, the four 3G operators had acquired a customer base of 1 331 651. New services based on the high-speed downlink packet access (HSDPA) technology offering service to mobile customers as fast as 3.6 megabits per second are also available.

OFTA consulted the public and the industry in October 2006 on the issue of a mobile carrier licence for services in the 850 MHz spectrum band to enable the provision of mobile services based on the CDMA2000 standard, one of the popular mobile standards in the world, including Mainland China. By facilitating the provision in Hong Kong of a key service which is used widely around the world, Hong Kong's strategic position as a world city and the gateway between the Mainland and the world can be strengthened. Bidding is expected to take place during the fourth quarter of 2007 upon the completion of the consultation process and the enactment of the necessary legislation.

The external telecommunications service market had been fully liberalised since 1999. At year-end, there were 21 external fixed carrier licensees providing cable-based external telecommunications facilities and six providing non-cable-based external telecommunications facilities. Competition in the external telecommunications facilities and services markets have led to a significant drop in International Direct Dialing (IDD) call rates.

Two Hong Kong companies, APT Satellite Company Limited and Asia Satellite Telecommunications Company Limited (AsiaSat), hold licences to operate and provide satellite communication services. At year-end, the two satellite companies were operating eight satellites.

To tackle the problem of Unsolicited Electronic Messages (UEMs), the Government announced in February 2005 a package of measures under the so-called 'STEPS' campaign¹. New anti-spam legislation is one of the proposed measures. Taking into account the views submitted to a public consultation on the legislative proposal, the Government introduced the Unsolicited Electronic Messages Bill into the Legislative Council in July 2006.

Hong Kong has been an active player in international telecommunications forums. It is part of the China delegation to conferences and meetings convened by the ITU and participates as an independent member at the meetings of the Asia-Pacific Telecommunity and the Telecommunications and Information Working Group of the Asia-Pacific Economic Cooperation (APEC). Hong Kong also plays an active part in the initiative to implement the APEC Mutual Recognition Arrangement for Conformity Assessment of Telecommunications Equipment.

The ITU TELECOM WORLD 2006, a mega exhibition-cum-forum event organised by the ITU, also known as the 'Olympics' of the telecommunications industry, was held in Hong Kong from December 4 to 8, 2006. It was the first time that this prestigious international event was held outside Geneva, home base of ITU. Mr Wu Bangguo, chairman of the Standing Committee of the National People's Congress, and Professor Muhammad Yunus, founder of Grameen Bank, Bangladesh and Nobel Peace Prize Laureate, officiated at the opening ceremony.

Under the theme 'Living the Digital World', the ITU TELECOM WORLD 2006 showcased the latest innovation and development in information and communications technology around the world and provided an invaluable platform for exchanging views on the regulatory policies and for opportunities for business networking. By hosting the event, Hong Kong's role as the gateway to the Mainland market and Hong Kong's image as the world's events capital and telecommunications hub were further enhanced. The event attracted almost 62 000 visitors from 141 countries, including more than 950 ministers, Chief Executive Officers and other VIPs. It generated about $900 million of direct economic benefit to Hong Kong.