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Following is a question by the Hon Sin Chung-kai and a written reply by the Secretary for Commerce, Industry and Technology, Mr Joseph W P Wong, in the Legislative Council today (November 1):
Question:
The level of local access charge (LAC) has not been revised since 2001. Some industry players have relayed that the current level of LAC renders effective competition difficult. The Office of the Telecommunications Authority (OFTA) has advised that regular reviews will be conducted on the level of LAC. It also indicated in its statement on February 27, 2004 that the calculation of LAC should not include local loop costs. In this connection, will the Government inform this Council:
(a) whether it has any plan to revise the costing methodology of LAC by deducting local loop costs pursuant to the conclusion in the statement in 2004; if it has, of the relevant details; if not, the reasons for that; and whether it has any plan to review afresh the said costing methodology;
(b) whether it has conducted any internal study on the costing methodology and level of LAC since 2004;
(c) whether it has any plan to review the level of LAC and make corresponding revisions based on the review outcome, so as to ensure fair and effective competition in the external telecommunications services market; if it has, of the relevant details and schedule; if not, the reasons for that; and
(d) whether it has reviewed OFTA's performance in fulfilling its above pledge to review regularly the level of LAC; if it has, of the outcome; if not, the reasons for that?
Reply:
Madam President,
The regulatory regime for local access charge (LAC) that applies to fixed networks, which includes the costing methodology, level of charge and commitment for periodic review, was introduced by the Telecommunications Authority (TA) in 1998 when the external telecommunications service market was liberalised. In 2001, the TA revised the level of LAC according to the 1998 mechanism. In May 2004, the TA decided to exclude the local loop cost after a review of the costing methodology for LAC, and determined the level of LAC according to the revised methodology. Subsequently, PCCW sought a judicial review, which was accepted by Court, thus overturning the determination made by the TA.
(a) and (b) The level of LAC set by the TA in 2004 could not be implemented because it was overturned by the Court. Since 2004, the TA has not conducted any internal study on the costing methodology and level of LAC. (See paragraph (c) below for the reasons)
(c) In view of the substantial change in the telecommunications market in Hong Kong, the TA is of the view that the review of LAC that applies to fixed network should not focus on costing methodology and level of charge only but should be a more comprehensive one about the necessity and reasonableness of the regulatory intervention in respect of LAC in order to protect fair and effective competition. OFTA therefore, consulted the industry concerning the regulatory regime of LAC for fixed networks in May 2005. After considering the views of the industry, the TA concluded that LAC for fixed networks was closely related to the market trend in fixed-mobile convergence (FMC). Accordingly, the issue of LAC was included under the ongoing review of FMC. In view of this, the TA currently has no plan to conduct any review of the costing methodology and level of LAC.
(d) The TA has followed the established mechanism to review the costing methodology and level of LAC in 2001 and 2004 respectively. After 2004, as mentioned in paragraph (c) above, OFTA has proactively decided to undertake a fundamental review of the regulatory regime of LAC in the light of the actual situation and market development. Since this fundamental review is still in progress, it is not appropriate for OFTA to review the level of LAC at this juncture. OFTA will implement the necessary arrangements in accordance with the outcome of the fundamental review. If the review concludes that LAC should be subject to regulation, OFTA will review the level of LAC periodically.
Ends/Wednesday, November 1, 2006
Issued at HKT 12:50
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