Moves to free PCCW-HKT from pricing conditions

A proposal to remove certain pricing restrictions on Hong Kong's main fixed line operator, PCCW-HKT Telephone Limited, was released today (October 8) by the Office of the Telecommunications Authority for public comment.

The consultation paper seeks to lift the prior approval requirement by OFTA on PCCW-HKT prices under its licence to operate residential and business fixed line telephone services.

Under the proposal, the company would not have to get its prices approved by the authority, including moves to offer discounts and other benefits in response to price competition from the 10 other active fixed line providers. The authority is confident this will improve competition on fixed telephony services.

"When Hong Kong's telecommunications markets were deregulated nine 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 networks could establish a foothold," an OFTA spokesman said.

However, since 1995 fixed telephony competition has become more firmly established, not only from the new fixed line operators, but also from other sources, such as mobile phone services and new broadband facilities that incorporate phone services.

The spokesman said the prior approval requirement had 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 therefore seek industry views on the best way to implement a change in the supervision of PCCW-HKT's prices," the spokesman said.

The specific proposal is to lift the prior approval requirement on the company's prices, by issuing a new fixed carrier licence without the price approval conditions.

Under this approach, it would not be necessary for the Telecommunications Authority to make a determination on two applications received from PCCW-HKT for it to be declared non-dominant.

The authority has identified legal concerns with making a finding on the applications now, under the present licence conditions, as it could be a barrier to the application of the 'abuse of dominance provisions' of the Telecommunications Ordinance.

Those rules, which can penalise 'predatory pricing' must continue to apply to PCCW-HKT, especially if there is no prior approval of its prices.

The authority also proposes to maintain some publication and prior notification requirements on PCCW-HKT's prices. In particular, the authority may publish the company's prices on residential services to enhance transparency, which in turn will better protect consumer interests.

The paper includes the form of a new fixed carrier licence to give effect to the alternative method. Affected parties, such as the other fixed network operators, have six weeks to respond to the terms of the new form of licence and the related issues identified in the paper.

The consultation paper can be downloaded from OFTA's website at http://www.ofta.gov.hk.

Ends/Friday, October 8, 2004