HONG KONG 2004 - Communications, the Media and Information Technology

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

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

Since 2003, the Government has fully opened competition to all sectors of the telecommunications market — local and external, services-based and facilities-based. Following an industry consultation, the TA issued the relevant guidelines on merger and acquisition activities in July 2004. The Government then brought the Telecommunications (Amendment) Ordinance 2003, enacted in July 2003, into effect to promote fair and effective competition in the telecommunications market and facilitate informed decision-making by businesses on mergers and acquisitions.

Businesses and consumers in Hong Kong enjoy an excellent telecommunications infrastructure. In 2004, the telephone density was 55 exchange lines per 100 population — one of the highest in the world. Also serving Hong Kong's needs in data communications were more than 456 081 dedicated facsimile lines.

The local fixed network market has been fully liberalised since January 2003. Under the full liberalisation policy, there is no pre-set limit on the number of licences to be issued, nor on timing for submission of applications for licences. By year-end, there were altogether 13 local fixed telecommunications network services (FTNS) operators. They included nine local wireline-based FTNS operators, one local wireless-based FTNS operator, one cable television operator which provides telecommunications services over its hybrid fibre coaxial network and two FTNS operators for distribution of domestic free TV programme services.

In 2004, the Government completed a review of the policy and regulatory regime for Type II interconnection, which refers to interconnection between two fixed telecommunications networks at the customer access network level to enable operators without a customer access network to provide services to customers through the networks of other operators. After two rounds of consultation in 2003, the Government concluded in July 2004 that mandatory Type II interconnection at telephone exchange level would be fully withdrawn by June 30, 2008, except for buildings meeting the 'essential facilities' criteria. In the run-up to June 30, 2008, Type II interconnection will be withdrawn on a building-by-building basis in buildings connected by at least two self-built customer access networks.

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. This converged mode of transmission simplifies network structure and lowers costs. The Government will review the regulation of FTNS, which is based on the traditional Public Switched Telecommunications Networks, in the light of the different forms of network and service operation of NGNs. As a first step of an overall review, OFTA launched a consultation on the regulation of Internet Protocol (IP) telephony in October 2004.

At year-end, virtually all households and commercial buildings were covered by the broadband network. The number of broadband accounts increased significantly during the year to 1 484 486, or 22 broadband accounts per 100 inhabitants, representing an annual increase of 21 per cent. In addition, 61 per cent of households had broadband Internet access. Internet Service Providers (ISPs) numbered 188 at year-end.

According to reports issued by the International Telecommunication Union (ITU) in 2003 and 2004, Hong Kong ranks second in the world in terms of broadband penetration. According to the ITU's Digital Access Index published in November 2003, Hong Kong ranks No. 1 in the world in terms of affordability of Internet access.

With a view to further promoting the use of broadband technologies, the Government will consider allocating spectrum for the provision of services based on broadband wireless access technologies (including technologies based on the IEEE 802.16 series of standards). A public consultation on the licensing arrangement of such services was launched in December 2004.

The market for public mobile phone services is highly competitive in Hong Kong. At year-end, six firms were operating a total of 14 digital systems, serving a customer base of over 8 million. This represented an annual growth rate of 13 per cent. The penetration rate of public mobile phone services was about 118 per cent, one of the highest in the world.

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 their network capacity for interconnection to, or access by, non-affiliated Mobile Virtual Network Operators and/or content providers on a non-discriminatory basis. This will facilitate the development of innovative applications and services through effective competition. 3G services were launched in Hong Kong in January 2004. By the end of the year, there were three operators offering 3G services.

The existing licences for 2G mobile services will expire in 2005 and 2006. To facilitate long-term investment and business planning (including planning for any necessary transitional or migration arrangements) by industry participants before their existing licences expire, the Government conducted two rounds of consultation in August 2003 and March 2004 to collect views on the regulatory framework for mobile services after expiry of the existing 2G licences. Taking into account the views received, the Government announced its decisions in November 2004: In essence, the Government would offer new 15-year licences to nine existing 2G mobile networks and allow a three-year period for the operators of the remaining two mobile networks to migrate their customers to other networks.

Competition in the external telecommunications services market was introduced on January 1, 1999. On January 1, 2000, the external facilities market was also liberalised. An operator that brings in new submarine or overland cables, or uses 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 19 licensees providing cable-based external telecommunications facilities and six providing non-cable based external telecommunications facilities. Competition in the external telecommunications services and facilities market has led to a significant drop in International Direct Dialling (IDD) call rates.

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 seven satellites.

Hong Kong continued to participate in the activities of international and regional telecommunications organisations. As a member of China's delegation, Hong Kong was represented in conferences and meetings convened by the International Telecommunication Union (ITU). Hong Kong participated in its own right in 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.

In March 2004, Hong Kong hosted the 29th APEC Telecommunications and Information Working Group meeting, attended by about 300 delegates from APEC economies.

In June 2004, the ITU announced that ITU Telecom World 2006 would be held in Hong Kong in December 2006. ITU Telecom World consists of a mega-exhibition and an international forum and takes place every three to four years. The event will strengthen further Hong Kong's position as a telecommunications hub and a first-class world city.