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Following is a question by the Hon Choy So-yuk and a written reply by the Secretary for Commerce and Economic Development, Mr Frederick Ma, in the Legislative Council today (February 27):
Question:
According to the statistics of the Office of the Telecommunications Authority, less than 60% of the telephone numbers currently allocated to fixed and mobile network operators have been assigned for use by the public and the remaining ones are lying idle; and with the existing allocation rate, the eight-digit telephone numbers may be exhausted in seven years. The Authority has therefore proposed that the operators be charged an annual fee of $3 per telephone number allocated to them, regardless of whether or not the numbers have been assigned to customers, to encourage efficient use of telephone numbers and return of unused numbers to the authorities, thereby deferring the migration of the existing eight-digit telephone numbers to longer-digit numbers. Regarding the management of telephone numbers, will the Government inform this Council whether:
(a) it has assessed if the passing on the said annual fee by most operators to the consumers will render the proposed measure not achieving the expected result but adding to the burden of consumers instead; if the assessment result is in the affirmative, of the measures in place to deal with the situation;
(b) it has considered if it will be more effective, as compared to the proposed measure of charging annual fee on all telephone numbers, to impose punitive charges on operators only in respect of the numbers which have not been assigned to customers upon the expiry of a certain period of time; and
(c) it will, by making reference to the Personalised Vehicle Registration Marks Scheme, select the special telephone numbers which are more attractive to the public for sale by open auction and use the proceeds for alleviating poverty?
Reply:
Madam President,
To ensure that our regulatory framework for telecommunications services can pave the way for the development of fixed-mobile convergence (FMC), a consultation paper was published by the Government in December last year to consult the public on the proposal to create a single unified carrier licence (UCL) to regulate all types of fixed, mobile and converged telecommunications services, as well as on issues such as the general conditions, period of validity and licence fee for the UCL. The consultation period will end on March 4.
Regarding the licence fee for the UCL, we propose that a fee structure similar to the one applicable to the existing fixed and mobile carrier licences should be adopted to harmonise the licence fees for fixed and mobile telecommunications services with appropriate adjustment on a cost recovery basis. Telecommunications numbers are limited resources. To encourage an efficient use of such numbers by UCL licensees, we propose that an annual fee of $3 for each subscriber number should be charged, regardless of whether the number has been assigned to end customers or not. According to the proposal, the annual licence fee payable by a UCL licensee in respect of each subscriber is $11 in total ($8 charged per customer connection and $3 charged per subscriber number), which is slightly higher than the existing fee of $7 paid by fixed network operators, but $7 less than the $18 currently paid by mobile network operators.
We propose that the UCL should replace the existing fixed and mobile carrier licences only upon their expiry. Existing carrier licensees may apply to convert their licences to UCLs on a voluntary basis before the expiry date. In other words, unless they choose to convert their licences to UCL before expiry, existing fixed and mobile carrier licensees are not required to pay the proposed number fee. They would continue to pay the licence fee in accordance with the terms of their existing fixed or mobile carrier licences, until the licences become expired.
My reply to the question is as follows:
(a) In coming up with the proposed level of licence fee for UCL, the Office of the Telecommunications Authority (OFTA) has taken into account the implications of the licence fee, including the number fee, to operators and consumers, as well as the need to sustain a healthy financial position for the future operation of the OFTA Trading Fund.
We believe that under commercial principles, operators will seek to reduce unnecessary expenditures wherever possible. Hence, the number fee will provide an economic incentive to encourage efficient use of telephone numbers and return of unassigned numbers to the OFTA by the operators so that the annual amount of number fee payable could be reduced. In fact, the introduction of number fee may not necessarily increase operators' expenditure on licence fee. For example, according to the proposal put forward in the consultation paper and as mentioned above, the licence fee payable for provision of mobile services under the UCL will be lower than what it is now. Although the licence fee for fixed services will increase, the number fee will be only $3 per annum, or 25 cents per month, for each subscriber number. This will only have an insignificant impact on the overall operating costs for the fixed network operators. Moreover, they may reduce the amount of licence fee payable by returning the unassigned telephone numbers. The fixed carrier licences issued to the existing four major fixed network operators will not expire until June, 2010. Operators may choose to replace their existing licences with UCLs upon expiry and pay the new licence fee. As such, they will have sufficient time to make business arrangements as necessary, including the returning of the telephone numbers that are lying idle.
As to whether the introduction of number fee will actually result in an increase in fixed service rates or a decrease in mobile service rates, it should be determined by the market. At present, the telecommunications market of Hong Kong is fully liberalised. The competition between fixed and mobile services will intensify with the further development of FMC. We believe that operators will carefully assess possible market responses to their acts of passing on the rising costs to customers.
Consultation on the UCL and the relevant fee is still ongoing. The Administration will carefully consider all the submissions and comments received, and strike a balance between the interests of operators, the interests of users, and the efficient use of telephone numbers in finalising the level of licence fee.
(b) According to the proposal, the more telephone numbers an operator holds, the higher amount of number fee it will have to pay. If punitive charges are imposed on operators only in respect of the numbers which have not been used for a certain period of time, operators may unnecessarily assign additional telephone numbers to their subscribers (e.g. assigning more telephone numbers than necessary to Private-Automatic-Branch-Exchange users) in order to maintain a large pool of numbers and at the same time, avoid paying the number fee. Thus, our purpose of encouraging an efficient use of telephone numbers through charging number fee will be defeated. Moreover, as operators are responsible for assigning telephone numbers to end customers, both the OFTA and operators have to deploy huge resources in monitoring and verifying whether the tens of millions of telephone numbers in the territory are currently in use or have been lying idle for longer than the specified period. Such a measure is not cost-effective.
(c) We are open to the suggestion of assigning special telephone numbers by open auction. As the assignment of telephone numbers through auction involves legislation and a number of technical issues, a preliminary study is being conducted by the OFTA. Subject to the findings of the study and the views received during the UCL consultation period, the OFTA will consider further seeking public views on this suggestion.
Ends/Wednesday, February 27, 2008
Issued at HKT 15:03
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