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Following is a speech (English only)by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, in addressing the annual conference of the Cable and Satellite Broadcasting Association of Asia (CASBAA) today (Wednesday):

Mr Fung, distinguished guests, ladies and gentlemen,

It gives me great pleasure to welcome delegates to the annual conference of the Cable and Satellite Broadcasting Association of Asia (CASBAA) which, after a brief absence, has chosen Hong Kong again as the venue of this prestigious event.

Rapid advances and convergence in technologies are bringing about revolutionary changes to the broadcasting environment. These changes are posing big challenges to broadcasters everywhere. At the same time, they are opening up unprecedented opportunities. Never before have sound and visual images been brought to consumers with such variety, quality and speed. Equally, policy-makers and regulators are having to rethink fundamentally their policy and regulatory approach to broadcasting.

It was against this background that the Government of the Hong Kong Special Administrative Region conducted the comprehensive review of our television policy last year. We have since decided on a package of policy initiatives which are aimed at enabling Hong Kong to take full advantage of the advances in technologies in the broadcasting industry.

The twin objectives of our broadcasting policy are to encourage innovation and widen viewers' choice on the one hand, and to enhance Hong Kong's position as a pre-eminent broadcasting hub on the other. To meet these twin objectives, we have focused on the 3 Cs, namely Connectivity, Convergence and Competition. Let me explain what I mean by each.

Connectivity

The success of the broadcasting industry is predicated on an excellent telecommunications infrastructure. To enhance Hong Kong's external connectivity, we have decided to open up the external facilities market by inviting applications for external facilities licences based on satellites and new submarine or land cables. These licences will be for operations from 1 January 2000. I am pleased to say that the market response has been very positive, and we have received a total of 34 applications for such external facilities licences. Our aim is to complete the evaluation of these applications by early 2000. We expect that the new facilities will increase the total capacity of our external communications links by several fold in the next few years.

Meanwhile, to encourage the optimum utilisation of existing satellite capacity, we have also decided that existing satellite broadcasters who have invested in their facilities in Hong Kong should be allowed to transmit television programme services for other operators, and to offer telecommunications services. This is particularly significant for international broadcasters who uplink their programmes from Hong Kong. Given the wider choice of external facilities this policy will spur, we expect more competitive prices to result. Also, by allowing the broadcasting network operators to offer a full range of uplinking service for both television and telecommunications signals, we hope that even non-broadcasting multi-media content providers will be attracted to use Hong Kong for distributing their contents.

Separately, we have invited applications for launching and operating a satellite carrying the payload of four Broadcasting-Satellite Service (BSS) channels assigned to Hong Kong by the International Telecommunication Union. Three applications have been received and we aim to complete the evaluation exercise and issue the licence sometime next year.

Our agenda to expand and upgrade connectivity also includes improving the efficiency of existing broadband networks, further developing the broadband infrastructure and freeing up radio frequencies. We are now consulting the industry and the community on our policy proposals for broadband interconnection. Our target is to complete the consultation with a view to promulgating broadband interconnection principles in early 2000.

Convergence

Let me now turn to the second element of our policies, which are formulated in full recognition of the convergence of technologies. Digitisation, coupled with expansion in bandwidth and improved compression techniques, have made it feasible for all forms of media to be carried by formerly disparate means of transmission, such as copper wire, coaxial cable, optical fibre, or the radio spectrum. As a result, the telecommunications, broadcasting and information technology industries are fast converging and the boundaries between the three markets are rapidly dissolving. In recognition of the inevitable trend of convergence in both technologies and markets, we have decided to remove all restrictions on the services which different types of transmission networks may carry, so that the networks will not be artificially restrained in their capability to carry broadcasting, telecommunications and multimedia services. We have, for example, decided to allow fixed telecommunications networks to carry programme services and the cable television network to carry telecommunications services. The only caveat is that they will be subject to the appropriate licensing requirements under the respective regulatory regime. In response to this initiative, the cable TV operator in Hong Kong has applied for a licence for the provision of telecommunications services over its hybrid fibre coaxial cable network. Under the liberalised regulatory environment for external facilities, service providers may also combine satellite broadcasting with interactive multimedia services (including fast Internet services) once they have obtained the appropriate licences to do so.

Needless to say, the industry and consumers stand to benefit from the application of digital technology in broadcasting. For the industry, more spectrum capacity will be made available for the introduction of new, innovative services, thanks to advances in compression technology. For consumers, they can expect improved sound and picture quality and, above all, a greater choice of programming and services. In recognition of these benefits, countries around the world are at various stages of testing or launching digital broadcast and television services. Hong Kong is no exception. We have completed the technical trials on digital audio broadcast and are finalising the technical trials on digital terrestrial television broadcast. We are aiming to consult the industry and the community early next year on the introduction of these digital services in Hong Kong.

Competition

I have described the initiatives we have taken to enhance connectivity of our telecommunications network and how we have removed regulatory restrictions in recognition of the convergence of technologies. But the network is there to carry content. The third element of our policies is thus the opening up of the television market for competition by whatever means of transmission that is technically feasible. We believe that a vibrant television market will attract investment, encourage innovation and, most important of all, bring the widest choice of quality services to viewers in Hong Kong. All along, Hong Kong has adopted an "Open Sky" policy whereby there are no restrictions on the reception of free-to-air satellite television programmes. As for domestic television, with the introduction of subscription TV and regional satellite TV in early 90s', the number of channels has increased from four to over forty in the past decade. Hong Kong is also the first in the world to launch a full commercial-scale interactive television service on a video-on-demand platform.

To fully open up the television market for competition, we invited applications for the provision of new television services in August this year and have received 10 applications. We are now evaluating the applications and aim to complete the process and grant the new licences in the first half of next year. This exciting development will further our policy objective to bring a wider choice of quality programmes to consumers.

We recognise that technological advancement must be supported by a flexible and facilitating regulatory environment. While working to facilitate the introduction of new services, we have not lost sight of the importance to provide a fair and level-playing field for all players in an open, competitive market. We are now working on a new, technology-neutral Broadcasting Bill which seeks to provide a licensing and regulatory framework flexible enough to embrace new services made possible by the convergence in technologies. The Broadcasting Bill, which we intend to introduce into the Legislative Council early next year, will provide separate licensing and regulatory frameworks for "transmission" and "provision" of television programme services. Among other things, the Bill will do away with those restrictions which are no longer relevant or necessary in a liberalised market, e.g. investment restrictions and the charging of royalties. To strengthen the competition safeguards for the television market, we will also include in the Broadcasting Bill general provisions to prohibit anti-competitive conduct and specific provisions to prohibit the abuse of the dominant position of a player in the market. This new regulatory framework will provide a clear, yet flexible regulatory environment for the development of our broadcasting industry.

Ladies and gentlemen, the broadcasting industry is facing an unparallelled market revolution, with attendant challenges and opportunities, as we enter the new millennium. Only the fittest will survive. We in the Government of the Hong Kong Special Administrative Region will do our utmost to provide the most conducive environment for the broadcasting industry to flourish. And I firmly believe that Hong Kong is well positioned to capitalise on the opportunities ahead.

Of course, in the next three days, the CASBAA conference will provide an excellent forum for operators and regulators to exchange views on the latest developments in this exciting area. And I hope you will all find the discussions helpful in your strive to be the industry leader in the next millennium.

Thank you.

END/Wednesday, December 1, 1999

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