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The Office of the Telecommunications Authority (OFTA) today (December 31) issued a consultation paper to seek public views on the review of the Local Access Charge (LAC) regime, which governs the payment of interconnection charge by providers of External Telecommunications Services (ETS) to the local network operators for the conveyance of external telecommunications traffic.
"LAC was introduced when the ETS market was liberalised in January 1999. The market conditions and regulatory environment then were very different from those of today. After more than a decade, the telecommunications market has undergone fundamental changes due to technological advancements, market developments and regulatory changes. There is a need to review the LAC regime so that it may continue to be relevant, proportionate and conducive to further development of the telecommunications market for the benefit of both the industry and the consumers," a spokesman for OFTA said.
In the consultation paper, OFTA has identified four possible options that the future regime may adopt - maintaining the status quo, aligning regulation of the regime for both the fixed network operators and mobile network operators, deregulating the level of LAC, and fully deregulating the whole regime.
"The Telecommunications Authority (TA) is open to any one of these options, or other options that may be proposed by the industry. The TA will take into account the views and opinions of all the respondents to this consultation exercise before making a decision on the way-forward. If necessary, the TA may conduct further consultations on issues that have been identified in this consultation exercise," the spokesman said.
Interested parties are invited to submit views or comments on this consultation paper. All submissions should reach OFTA on or before March 6, 2010. The consultation paper can be downloaded from the following hyperlink at OFTA's website:
Consultation Paper:
http://www.ofta.gov.hk/en/report-paper-guide/paper/consultation/20091231.pdf
Executive Summary:
http://www.ofta.gov.hk/en/report-paper-guide/paper/consultation/20091231_ex.pdf
Background:
LAC is the interconnection charge payable to the local network operators by ETS providers for the conveyance of ETS traffic to and from the end customers of the local network operators. The TA first introduced the LAC regime when the ETS market was liberalised in 1999.
At present, the ETS providers are obliged to pay LAC to all local fixed network operators (FNOs) depending on the amount of ETS traffic conveyed. The existing level of LAC payable to the incumbent FNO, i.e. PCCW-HKT Telephone Limited and Hong Kong Telecommunications (HKT) Limited, was prescribed by a determination made by the TA in December 1998 and was subsequently adjusted downward in June 2001, with the current level of LAC ranging from 10.6 cents to 12.6 cents per minutes depending on the route and direction of the ETS call. The LAC level for other FNOs is subject to commercial negotiation between the concerned parties. For the ETS traffic originating from or terminating at mobile network operators (MNOs), whether the ETS operators are obliged to pay LAC to the MNOs and the level of such charge are not regulated and are decided solely by commercial agreements.
The LAC regime has been reviewed several times over the past decade but the payment arrangement and costing methodology have stayed largely unchanged over the years. However, the local and external telecommunications markets have undergone significant changes in the past decade due to technological advancements, market developments as well as changes in the regulatory environment. These changes include the full liberalisation of the local fixed market in 2003; the steady and substantial drop in prices of the ETS and mobile services; the broadband, multimedia and data services having become major revenue streams for the FNOs other than traditional voice telephony services; the advent of Voice over Internet Protocol and mobile broadband services; the commencement of the unified carrier licensing regime in August 2008; and the de-regulation of fixed mobile interconnection charge on April 27, 2009. It is therefore timely to conduct a comprehensive review of the LAC regime in order that it may keep abreast of the latest technological and market developments.
Ends/Thursday, December 31, 2009
Issued at HKT 18:03
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