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The following is the speech (English only) by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the luncheon meeting of the Mobile Service Provider Group of the Telecommunication Association of Hong Kong today (Wednesday) :
Ladies and Gentlemen,
Thank you for inviting me to your luncheon meeting today. I am glad to have this opportunity to talk about the development of the mobile telecommunications industry in Hong Kong and to outline, in particular, what the Government is doing, or intends to do to facilitate the development of this industry.
Hong Kong has a booming mobile telecommunications industry. We now have over 2.6 million mobile phone users. This represents a penetration rate of around 40%, the highest in the world outside of the Scandinavia. The industry has displayed a strong growth despite the economic recession. According to the latest available statistics, the industry recorded a growth rate of nearly 40% in the 12-month period to October 1998. I attribute this buoyant growth to a number of factors, not the least of which is the efforts you, as service providers, have spent on marketing your services.
Government is committed to promoting fair and effective competition in the telecommunications markets. We believe that competition will bring innovation, quality, choice and competitive prices to consumers. Since cellular mobile phone services were introduced into Hong Kong in the early 80's, the mobile telecommunications market has always operated on a competitive basis. We have at present six independent operators operating eleven digital networks. Consumers have a choice of technical standards conforming to the GSM standard which originated from Europe and the Digital AMPS and CDMA standards from North America. The coverage of our mobile phone services is comprehensive. Customers can use mobile phone services in road tunnels and in the Mass Transit Railway tunnels. New and attractive offers appear on the market all the time and prices for the services are affordable to most people. The merits of our pro-competition and pro-consumer policy are for all to see.
The success of our mobile telecommunications industry today is the result of many years of hard work by both the service providers and the Government. On the part of the Government, we have over the years cultivated a fair and competitive operating environment. For example, we have rigorously enforced the licence condition which requires service providers to allow non-discriminatory access to their networks of handsets purchased by customers from other suppliers. This requirement has brought about large reductions in the prices of handsets in the market. The decision to licence six operators in the Personal Communications Services in 1996 has further enhanced the level of competition in the mobile telecommunications market and led to the wide range of offers which consumers currently enjoy.
Looking ahead, the Government will continue with its commitments to facilitate the development of the mobile telecommunications industry. Our major areas of work in the near future include -
* the implementation of mobile number portability;
* the access to land for the extension of mobile radio coverage; and
* the introduction of the third generation mobile services.
I shall now expand on each of these areas.
Mobile Number Portability
Although competition in the mobile phone market is intense in Hong Kong, there remains a barrier to the free choice of customers. This is the necessity for customers to change their mobile phone number upon change of mobile network operators.
For fixed network services, operator number portability has been implemented since the introduction of competition in the local fixed services market in July 1995. This was initially done on a call-forwarding basis. Since January 1997, number portability has been implemented using the intelligent network and database technique, the first of its kind in the world. This allows more efficient use of the networks and provides superior quality for the consumer as it takes less time to make the connection to the ported number.
Following a study on the technical feasibility and cost-benefits of implementing mobile number portability in Hong Kong, OFTA and the mobile telecommunications industry are now working earnestly towards the introduction of mobile number portability on 1 March 1999, again using the intelligent network and database technique.
This will allow customers to retain their phone numbers when they change network operators. Customers will therefore be free to choose the service and price that will best meet their needs without worrying about the inconvenience of changing their mobile phone numbers as a result of a switch to an alternative service provider. This will in turn lead to more effective competition among mobile service operators, and hence to improved service quality and lower prices to customers.
Access to Land for the Extension of Mobile Radio Coverage
I am aware of concerns within the industry about the difficulties operators may encounter in gaining access to confined areas, such as indoor shopping malls and tunnels, for placing base station for radio communications. In our consultation paper issued in September last year, we recommended that legislative amendments be made to grant to mobile services operators the right of access to such confined areas, where there are no alternative places for the base stations if network coverage is to be extended to these confined areas. Our proposal would place the operators in a fairer bargaining position with the landlords of such confined areas and the tunnel operators. The mobile services operators would have to pay reasonable rental for the use of the space taken up by the base stations and other equipment. According to our proposal, if no agreement could be reached, the Telecommunications Authority (TA) would be able to make a determination in the public interest on access and the terms of such access.
Many respondents to the consultation paper welcomed our legislative proposals in this respect. The tunnel companies expressed reservations about the TA becoming involved in the setting of access fees for telecommunications services in tunnels and interfering with what they considered to be a free market mechanism. In coming to our final view, we will strike an appropriate balance between the interests of consumers of public mobile services, the free market mechanism and property rights. We expect to announce our policy decision on the issue shortly.
Third-Generation Services
The existing mobile phone services are based on the so-called second generation technology - the digital technology. The International Telecommunication Union (ITU) is at present working on the technical standard of the third-generation systems, which the ITU calls the IMT-2000. Decisions on the technical standards for the IMT-2000 is expected to be made by the end of this year.
It has always been our practice to adopt international standards and regional standards for mobile services. Our policy of advocating technology neutrality and allowing market forces to decide the optimum technology and standards has worked well and we shall follow the same policy for the third generation systems. We intend to accept any international standard which is open and for which equipment is widely available on the market from different manufacturers.
Our present plan is to license the third generation systems once the technical standards are defined and consumer equipment, such as handsets, is widely available at reasonable prices. Most of the developed countries around the world are considering introducing the third generation mobile services around 2001 or 2002. We expect to follow suit. To prepare for the licensing of the third generation systems, we shall be working on two major tasks, namely, spectrum allocation and the establishment of a regulatory framework
(a) Spectrum Allocation
The ITU has allocated spectrum of width 230 MHz near 2,000 MHz for the operation of the third generation services. At present, part of that spectrum in Hong Kong is being used for fixed services including microwave point to multipoint transmission systems for the provision of external telecommunication services and cable television services. To facilitate the timely introduction of the third generation mobile services, OFTA has revised the frequency allocation plans for these bands and has given notification to the operators of the fixed services to vacate the spectrum by the middle of 2001.
(b) Establishment of a Regulatory Framework
We will also need to establish an appropriate framework for the regulation of the third generation mobile services. A host of regulatory issues will need to be considered, e.g., who should be eligible to apply for the licences? Should the existing operators have an automatic right to access the third generation systems? What are the selection criteria for operators? OFTA will consult the industry in drawing up this new regulatory framework. Our plan is to invite licence applications for the new services in the year 2000, with a view to issuing the licences in 2001 for operation from 2002.
Conclusion
There will be many opportunities and challenges in the mobile telecommunications industry in the years ahead. I am pleased that you are actively introducing innovative services to develop the market and I expect many more to come. On the part of Government, we will continue to provide a fair, transparent and effective regulatory framework in which the industry can develop. I am confident that the prospect of the mobile telecommunications industry will continue to be bright and promising.
Thank you.
END/Wednesday, January 27, 1999
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