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Following is a question by the Hon Sin Chung-kai and a reply by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, in the Legislative Council today (Wednesday):

Question:

Regarding the competitive environment of the broadband conveyance services ("BCS") market in Hong Kong, will the Government inform this Council:

(a) of the current number of BCS providers; whether it has assessed if there is any anti-competitive behaviour such as predatory pricing in the market; and the measures it will take to ensure fair competition in the market;

(b) whether it will re-examine its policy of non-intervention towards Type II BCS interconnection, and consider introducing legislative measures to require Fixed Telecommunication Network Services licensees to permit, on a non-discriminatory basis, Internet Service Providers ("ISPs") to share their voice lines in providing BCS; and

(c) of the measures it will take to ensure equal access to the cable TV network of the Hong Kong Cable Television Limited by ISPs affiliated to the company and other ISPs in providing BCS?

Reply:

Madam President,

(a) There are at present four broadband conveyance services providers. These are the four Fixed Telecommunication Network Services (FTNS) licensees, namely Hong Kong Telephone Company Limited (HKTC), Hutchison Communications Limited, New T & T Hong Kong Limited and New World Telephone Limited.

There is no evidence of anti-competitive practices by the four FTNS licensees in the broadband conveyance services market. However, the Telecommunications Authority (TA) has recently received a complaint from the Hong Kong Internet Service Providers Association about anti-competitive pricing of the broadband Internet access service provided by Hong Kong Telecom IMS Limited (HKTIMS) using HKTC's broadband conveyance service. The TA is investigating this complaint and will publish his findings when the investigation is completed within the next couple of months.

The FTNS licences issued under the Telecommunication Ordinance include conditions safeguarding fair competition in the market. If a licensee is found to be in breach of the licence conditions, the TA may issue a direction to the licensee requiring it to stop the breach. If the licensee continues to breach the licence conditions, the TA may impose a financial penalty, or suspend or revoke the licence.

In the Telecommunication (Amendment) Bill 1999, which I introduced into this Council on 12 May 1999, we propose to incorporate the competition safeguards currently included in the licences into the primary legislation and seek to increase substantially the maximum level of penalty which may be imposed for breaches of a licence condition, a direction made by the TA or a provision of the Telecommunication Ordinance.

(b) It is the TA's policy to encourage commercial negotiations for interconnection terms, both for narrowband and broadband services. Should such negotiations fail, the TA has powers under the Telecommunication Ordinance to intervene. However, in a policy statement issued in July 1997, the TA has clarified that he will not consider making a determination on Type II interconnection (i.e. interconnection to the customer access network of another network operator) for certain types of infrastructure for broadband conveyance services within three years of introduction of the services. The infrastructure concerned includes optical fibres and copper cables newly installed for broadband services. The reason for making that statement is that the TA recognises that investment in a broadband network is a risky investment because of the uncertainty in future demand. To entertain requests for Type II interconnection from its competitors immediately after an operator has decided to invest substantial sums in the new broadband infrastructure would mean that the operator which installs the infrastructure is bearing the full risks, with its competitors seeking interconnection only when customer demand exists. This does not appear to the TA to be an equitable arrangement and would seriously undermine the commercial incentive for the operator to take the commercial risk of making an investment in the infrastructure for the broadband services.

To take account of recent developments in the broadband conveyance services market, the TA intends to review his policy regarding interconnection of broadband networks. He is aiming to issue a consultation paper within the next couple of months to invite comments from the industry and interested parties in the community on the issues relating to the interconnection of broadband networks, including Type II interconnection.

(c) Government has recently announced its policy that, subject to satisfactory commitments from Hong Kong Cable Television Limited (HKCTV) on network rollout and the return of the frequencies temporarily allocated for use by the company's Microwave Multipoint Distribution System, Government will issue a FTNS licence to HKCTV for the provision of telecommunication services using cable modem technology. This licence, like other FTNS licences, will include interconnection requirements to enable other network operators and service providers to access their customers through the broadband network of HKCTV. The principles for such broadband interconnection will be covered in the consultation exercise to which I refer in part (b) of my reply.

END/Wednesday, May 19, 1999

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