Agenda item 1: Confirmation of the notes of the last meetings

The notes of the meetings held on 12 and 17 October 1995 were confirmed subject to the following amendments:

1. regarding the notes of the meeting held on 12 October, delete the names of Mrs Donna Shum and Miss S Y Yue from the list of representation as they were only in attendance and not representing the LegCo Secretariat at the meeting; and

2. in the same notes, replace all references to "CUHK" with "CUHK/JUCC" in paras 17-19.

Agenda item 2: Matters arising

Occupancy Minute Dispute

3. The Chairman referred to the Workshop on Occupancy Minute Dispute held with the computer and information industry on 6.12.96 and asked whether the industry had further comments on the subject. The meeting agreed that the improvements made by HKTC following the workshop were satisfactory and that the item could be discharged.

   Developments in the Internet

4. Mr K M Fung representing CUHK/JUCC reported on recent developments of the Hong Kong Internet Exchange (HKIX), which included the acceptance of applications from secondary Internet Access Providers (IAPs) as well as primary IAPs provided that they must have a valid PNETS licence and their own rout to the Internet. He said that about 30 IAPs had now been connected to the HKIX and 5-6 applications were being processed. He observed that most of the connections were on T1 lines and expected that a larger band-width would be available for use in 6 months' time.

5. In response to a question raised by the participants, Mr Fung confirmed that it was possible for an IAP to have more than one connection to the HKIX.

   Internet voice

6. Some participating Internet Service Providers (ISPs) said the industry was keen to facilitate voice communications between the users. The Chairman referred to the TA Statement entitled "The interpretation of the exclusivities of HKTI Ltd" published on 23 April 1996 and said that the TA would allow services to be offered by licensees other than HKTI provided that such services were value-added services and not telephonic communications in real time. He further clarified that the provision of video-phone services using the PSTN were within the exclusivities of HKTI although video-conferencing was not. He said guidelines would be issued shortly to assist the industry in understanding the TA Statement.

   Telecommunication (Amendment) Bill

7. The Chairman informed the meeting that a Legislative Council slot in June 1996 had been reserved for the introduction of the Telecommunication (Amendment) Bill, and that very soon the industry would be invited to comment on the draft Bill which would be put on OFTA's Home Page. The industry would receive notice in due course and comments could be made to OFTA through e-mail or by post.

   Control of obscene and indecent materials on the Internet

8. Ms Young informed the meeting that the Recreation and Culture Branch (RCB) was seeking legal advice on whether materials on the Internet were subject to the regulation under the Control of Obscene and Indecent Articles Ordinance (COIAO).

9. Some ISPs were concerned that they might be prosecuted for publishing offensive materials through the Internet despite the fact that they could not possibly have vetted all information on the Internet before allowing the users to have access to it. Ms Young clarified that the RCB did not expect the ISPs to vet all information in advance, and certainly would not ask them to intercept e-mails. She said RCB's intention was to establish a mechanism whereby obscene and indecent materials on the Internet could be reasonably and effectively regulated, taking into account the special nature of the Internet as a publishing medium. She said the RCB was also contemplating the establishment of a self-regulatory mechanism within the industry to complement the legislative control.

10. Mr Ho from the Television and Entertainment Licensing Authority supplemented that under the existing legislation, a person could put up a defence by proving that he had no reasonable chance to inspect and withhold the offensive articles before their publication. He said it would however be impossible for one to state definitively whether an ISP would be found guilty under such circumstances because the COIAO had not been so tested and each case would be judged by its own merits.

11. Ms Young said that the RCB intended to discuss the issue in greater detail with the industry and would notify them in due course.

    Internet domain name

12. Mr K M Fung reported on the discussion with the Intellectual Property Department (IPD) following the last meeting. He understood that the IPD was concerned about possible conflict of interest if it were to control both trade mark registration and the registration of Internet domain names. In view of this JUCC undertook to maintain the Internet domain name register but disputes on the right to use particular names would have to find their ultimate resolution in court.

13. In response to a question from a participant, the Chairman said he expected no change to the ".hk" ending code after 1997, and that this would certainly be OFTA's recommendation to the administration. He said in so far as telecommunications codes were concerned, Hong Kong would have its own identity and the code "852" would remain as the prefix dialing code for all incoming international calls after 1997.

14. With no further comments this item was considered discharged.

    Asia Pacific Information Infrastructure (APII)

15. The Chairman invited the industry to join the Hong Kong delegation at the International Forum for APII Testbed in Seoul between 18 and 20 June 1996. He said the delegation would have two presentation slots and the Forum would consider proposals for joint projects to develop a prototype information superhighway. He said that some FTNS operators had applied to join the delegation and that members of the computer and information industry were welcomed to register their interest with OFTA.

16. The Chairman said that the APII was also working on a pilot project to link up the home pages of all small and medium size enterprises (SMEs) in G7 countries to facilitate the sourcing and selling of products. A participant enquired whether this project would be using the APEC network instead of the Australian based APNet. The Chairman said the two networks might actually be merged for the purpose of this project and that the administrations were exchanging information on this account.

17. In response to a question as to whether interested parties were supposed to contribute to or tender for the G7 project, the Chairman said that the G7 project was looking for a co-ordinator in Hong Kong to collate the home pages of local SMEs. He said the Government was to identify a suitable co-ordinator and promulgate the necessary procedures. If the industry was prepared to support the project, OFTA could organise a separate meeting on technical and other relevant issues.

18. The Chairman noted that HKIE's IT & Environmental Divisions had led a delegation to China to join the 1st International Conference on Information Infrastructure (ICII) in Beijing between 25 and 28 April 1996. He invited Mr Anthony Kwan to report on the conference. Mr Kwan said that the delegation had obtained a fair understanding of the developments in China. Mr Alfred Ho supplemented that while in January 1995 no one in China was interested in providing Internet service, nowadays there were already 4 well established networks.

19. Mr Kwan said a Hong Kong EcoNet presentation had also been given to 15 countries under the Federation of Engineers in Southeast Asia and South Pacific, and that both this presentation and the HKIE's report on ICII were available on the Home Page of EcoNet.

20. The Chairman said in view of the industry's interest the industry might consider setting up a newsgroup for discussing II issues, but he suggested that the newsgroup should be properly moderated and should have a restricted mailing list.

    Agenda item 3: Local Telephone Pricing Structure and PNETS charges review

21. The Chairman reported on the Government's presentation to the Legislative Council's Economic Services Panel on 1 April 1996 in relation to the review of pricing structure for local fixed telephone services including the review of PNETS charges. He said a full scale public consultation would be launched later in May 1996.

22. Regarding the PNETS charges, the Chairman said that OFTA had come to a view that a monthly rental of HK$75 plus a usage charge of 6 cents per minute would be closer to the actual cost than the existing level of charges. He made it clear that the PNETS charges were reflecting actual cost and would not be used to subsidise other users. He said the HKTC had been given 2 months to respond and file a tariff revision to OFTA, failing which the TA would consider determining the PNETS charge under s.36A of the Telecommunication Ordinance.

23. Some participants believed that pending the implementation of the new charges HKTC should refund the "excess charges" so far collected to the PNETS licensees. The Chairman explained that it would be impossible to ascertain whether the existing charges had been higher than the actual cost in the past, and it was not reasonable to seek refund on an approved tariffed service. In response to another question, the Chairman clarifed that HKTC's costs were calculated in terms of average costs, as was appropriate for tariffed service, and not LRAIC which was for fixed network interconnection. As regards the assumption on cost of capital, he considered that the 15% adopted in the calculation was reasonable, taking into account the normal return on investment in the industry and the risk factors.

24. Some participants wished to verify the calculation and requested OFTA to release details of HKTC's accounts, in particular the actual cost figures on the basis of which the 6 cents had been arrived at. The Chairman declined to release HKTC's detailed accounts as they were commercially sensitive. He explained that the calculating method had been very transparent and would be explained once again in the consultation paper to come. Moreover, the ISP would have access to further information on the breakdown of HKTC's accounts in due course when OFTA passed the information to the Legislative Council.

25. The Chairman also suggested that interested parties might examine the Accounting Manual produced by OFTA which would give them a better understanding of the level of details required by OFTA when the FTNS licensees submitted their quarterly accounts. He emphasised that there was no room for HKTC to manovure the accounts, and that this had been verified by the independent accounting consultant employed by OFTA. He also assured the meeting that the level of PNETS charge would be subject to annual review.

26. Some participants queried the reasonableness of HKTC's expenditures. The Chairman said that OFTA was not in a position to specify for individual licensees the levels of their expenditures, but had by introducing full competition in the FTNS market and by establishing a price control of CPI-4% provided enough incentive for HKTC to improve efficiency and save costs.

27. A participant opined that the Government should also take into account whether the PNETS charge constituted a reasonable proportion of an ISP's costs. The Chairman said the Government's responsibility was to ensure that HKTC would not reap an unreasonable profit from the ISPs. As regards individual ISPs' business plans, he said the ISPs had entered into the market with full knowledge of the need to pay PNETS charges and must have taken this into account when planning their business. He said in a fully competitive market the Government should not be expected to plan for the participants' business on their behalf.

28. Some participants believed that the PNETS licensees were not responsible for the worst case loading of the PSTN, and therefore it would not be fair to impose upon them a special tariff. The Chairman said that OFTA had taken great care to ascertain the network traffic, namely employing an independent consultant to study traffic measurements at HKTC's exchanges and to confirm the findings. He believed that the results thus obtained were reliable.

29. A participant queried the need for a fixed monthly rental if there was already a time-based usage charge. The Chairman said that there were fixed costs incurred in a line even if it was not used. He noted this view and welcomed further comments when the public consultation took place.

    Agenda item 4: Any other business

30. The Chairman invited the industry to submit comments on the Consumer Council's report on the telecommunications market as well as the Law Reform Commission's proposals to enhance the protection of privacy.

31. A participant enquired about the allegations that HKTIMS had been adopting anti-competitive marketing tactics. The Chairman said that OFTA was investigating into the matter, but believed the meeting was not an appropriate forum for discussing individual complaints. The complainants would be informed of the results of the investigation once they were available.

    Agenda item 5: Date of next meeting

32. The date of the next meeting would be announced in due course.

Office of the Telecommunications Authority
May 1996