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The Office of the Telecommunications Authority (OFTA) today (January 13) announced the lifting of the prior approval requirement on PCCW-HKT Telephone Limited's (PCCW-HKT) prices via the issue of a new fixed carrier (FC) licence.

Under the new FC licence, PCCW-HKT does not have to get its prices approved by the Telecommunications Authority (TA), including moves to offer discounts and other benefits in response to price competition. The TA is confident that the new regulatory approach will secure competition in fixed telephony services.

"When Hong Kong's telecommunications markets were deregulated 10 years ago, it was necessary to impose more stringent price regulation on PCCW-HKT because the company was then in a much stronger market position to thwart the development of competition before the new fixed line network entrants could establish a foothold," an OFTA spokesman said.

"Since 1995 however, fixed telephony competition has become more firmly established, not only from the new fixed line operators but potentially from other sources, such as mobile phone services and new Internet Protocol (IP) phone services which have been launched commercially.

"The prior approval requirement has therefore become disproportionate in the current market situation. It is a fundamental principle that the level of regulation should be adjusted to be commensurate with the effectiveness of market competition. We consulted the industry and concluded that the best way was to implement the change via issuing a new licence to PCCW-HKT," the spokesman said.

In response to a consultation paper issued on October 8, 2004, in relation to the subject, the industry in general concurred that the market had moved on since 1995; the level of regulation should stay proportionate, and ex post regulation reflects the international best practice. They also recognised that replacing PCCW-HKT's licence instead of declaring PCCW-HKT non-dominant allowed regulatory measures to be imposed on a proportionate rather than an 'all-or-nothing' basis. Some useful comments on the implementation details were duly considered by the TA. In particular, the TA decided to maintain ex ante regulation on the existing interconnection tariffs of PCCW-HKT so as not to disturb the status quo with respect to interconnection arrangements.

"Some respondents raised concerns over the effectiveness of ex post regulation against potential anti-competitive conducts, particularly in relation to bundling and price discrimination. In fact, sanction of anti-competitive conduct has long been in place under the Telecommunications Ordinance, and the criteria do not change after the implementation of ex post regulation. OFTA will continue to devote resources to detecting and acting against anti-competitive conduct in a timely manner."

"Under the new FC licence, the TA's access to information for investigation purposes has been enhanced. In addition, PCCW-HKT must notify its actual prices to the TA one day in advance, and the TA can publish those prices, if it is in the public interest," the OFTA spokesman said.

The new FC licence for PCCW-HKT will be effective as soon as the company accepts the new FC licence in exchange for its existing FTNS licence. The two applications made by PCCW-HKT for declaration of non-dominance in business and residential direct exchange line services will become redundant upon the surrender of the company's existing FTNS licence. Other FTNS/FC licensees will also be able to exchange their existing licences for the new FC licence with similar conditions as applicable.

"Market deregulation should be proportionate and timely. We believe that our decision today will be conducive to further development on the telecommunications industry led by market forces, and will benefit consumers," the spokesman emphasised.

Ends/Thursday, January 13, 2005

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