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To keep pace with the market developments, the Telecommunications Authority today (June 8) announced his decisions to update the existing universal service arrangements.
After considering the submissions in response to the consultation paper "Review of the Regulatory Framework for Universal Service Arrangement" issued on December 28, 2006, the authority issued a statement today to conclude the review. The existing universal service arrangements were put in place in 1998. PCCW-HKT Telephone Ltd. (PCCW), the only universal service provider, has been compensated under the Universal Service Contribution (USC) scheme for the net cost of providing universal service to unprofitable customers. At present, the compensation is shared by telecommunications service providers who provide external telecommunications services, commonly known as International Direct Dialling (IDD) services, on the basis of the traffic volume handled.
A spokesman for the Office of the Telecommunications Authority (OFTA) said the authority agrees with the majority of the respondents to the consultation that the universal service arrangements should be maintained so affordable basic telephone service would continue to be available to all members of the public.
"However, the market landscape has undergone massive changes since 1998. Competitors of PCCW have rolled out customer access networks to connect directly their customers. More than 76% of households are accommodated in buildings connected by at least one alternative access network constructed by PCCW's competitors. PCCW's competitors are competing with PCCW in these buildings. To be fair to the competitors of PCCW, PCCW should no longer receive subsidy in the form of USC in those buildings connected by alternative access networks," the spokesman said.
"The authority also updated the methodology for the calculation of the universal service cost. For example, the net cost of providing universal service should not be calculated on an individual customer basis. The net cost of serving all customers connected by the same distribution point should be considered instead."
The above changes to the existing universal service arrangements will take effect from July 1.
"Regarding the funding arrangement, the existing mechanism of sharing the cost of providing universal service on the basis of IDD traffic volume will gradually become unsustainable as more and more traffic will be routed through IP-based networks. The authority decides that the status quo will remain until the end of April, 2009, when the fixed-mobile interconnection charge is deregulated and the new funding arrangement will be based on the quantity of telephone numbers allocated," the spokesman said.
The Telecommunications Authority statement, which is entitled "Review of the Regulatory Framework for Universal Service Arrangements", can be downloaded from OFTA's website at www.ofta.gov.hk.
The present regulatory framework for universal service arrangements was established by the authority in 1998 to ensure affordable basic telephone service would be available to all people in Hong Kong on a non-discriminatory basis, irrespective of where they reside or carry on business.
Under the existing universal service arrangements, PCCW as the sole universal service provider is compensated for the net cost that it has to incur for providing universal service to unprofitable customers. The net cost is shared by all licensees who provide external telecommunications service, commonly known as IDD service, based on the traffic volume which the individual licensees handle.
In view of the fast-changing telecommunications landscape, such as the availability of alternative fixed network operators, declining profits in IDD service and bypass by IP telephony services, the existing regulatory framework for universal service arrangements is no longer sustainable in the longer term. The authority sees a need to review the regulatory framework and he consequently issued a consultation paper entitled "Review of the Regulatory Framework for Universal Service Arrangements" on December 28, 2006 to seek public views on the subject matter. A total of 17 submissions were received during the consultation. After considering the submissions received, the authority concluded his views today through the publication of a statement.
Ends/Friday, June 8, 2007
Issued at HKT 17:45
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