Licensing of Telecommunication Services in Hong Kong
Licensing of Telecommunication Services in Hong Kong

Statement by
Telecommunications Authority of Hong Kong

"The Statement is intended to clarify the licensing requirements for telecommunication services offered over the public telecommunications networks in Hong Kong, in particular, Internet access and bulletin board services."
Legislation

  1. All telecommunication services in Hong Kong are regulated under the Telecommunication Ordinance (Cap. 106) (the "Ordinance") and its subsidiary legislation. Under section 8 of the Ordinance, no person shall establish or maintain any means of telecommunication unless an appropriate licence from the Governor in Council or the Telecommunications Authority ("TA") is first obtained. Thus the provision of a telecommunication service involving the establishment or maintenance of a means of telecommunication is subject to licensing under the Ordinance. "Telecommunication service" means any provision of facilities for use by members of the public or by any person for the transmission or reception of messages or the provision on loan, lease or hire to members of the public or to any person of apparatus for telecommunication either within Hong Kong or with any place outside Hong Kong. "Message" means any communication sent or received or made by telecommunication or given to a telecommunications officer to be sent by telecommunication or to be delivered.

  2. Section 39 of the Ordinance allows the Governor in Council to exempt any person or any class of persons from licensing. In fact through a series of Exemption Orders the licensing requirement has been removed for persons possessing or using apparatus connected to the public telephone system for the use of services offered by the Hong Kong Telephone Company Limited or for persons possessing or using apparatus for telecommunication as a customer of a public telecommunications service provider licensed under the Telecommunication Ordinance. Importantly, the Exemption Orders do not exempt any person from the obligation to hold a licence where the apparatus is used by him for the purpose of providing a service to the public by any means of telecommunication. The test for licensing a service connected to public networks is therefore whether a provision of a service to the public is involved.
What Constitutes The Provision Of A Service To The Public By Any Means Of Telecommunication

  1. To be classified as the provision of a service to the public, the TA examines if the following "elements" are present:

    1. whether there are physical telecommunication installations in Hong Kong operated by the service providers for the conveyance of messages for customers of the service - if the service provider is simply a sales agent or a reseller with no physical equipment or apparatus in Hong Kong, no licence is required.

    2. if in fact the service is generally available to any member of the public and there are no special requirements or qualifications for being a customer other than the payment of a fee which may either be in the form of monthly subscription, usage or membership fee - a telecommunication service using the public telecommunications networks as the mode of conveyance will not need a licence if the service is restricted for private use or for use by a closed user group with specific qualifications to be members, for example, all members have to belong to the same business sector, or the same profession (e.g. medical practitioners registered in Hong Kong), or members of a trade association. Where the service being offered is clearly for own use or use by a closed user group, the TA does not consider that as a service to the public and no licence is required. In this particular case of a closed user group, all the users should be engaged in a common business or activity and the service provider should be an organisation formed by this group of users for the specific purpose of furthering such common business or activity that is the main business or activity.

    3. whether the service involves the conveyance of "third party" traffic or messages - that is, whether a customer of the service can make use of the service to communicate or exchange messages with another customer of the service, for example, through electronic mail. If "third party" traffic is not exchanged a licence is not required. This "third party" traffic requirement makes it clear that, for example, telecommunication systems established by a bank specifically for customer enquiry or banking transactions between the bank and its customers do not require a licence.
Services Not Subject To Licensing

  1. Based on the criteria above, telecommunications services such as electronic data interchange (EDI), electronic mail (voice, data or fax), store-and-forward data and fax, teleconference etc. which are provided to the public generally will need a licence. On the other hand, no telecommunication licence is required for a service which only sells information (e.g. financial information, computer data bases, computer software etc.) accessed via the public telecommunication networks. Such services are generally not regarded as telecommunication services because the providers of these services are merely users of the public telecommunication networks to operate some other lines of business.
The Internet And BBS Services

  1. Generally, Internet access service providers in Hong Kong offer a wide range of information and messaging services including information retrieval, electronic mail and access to the Internet network in the United States. All of them own or operate a telecommunication system for customer access via the public telecommunication networks and a route for access to Internet. Clearly, the Internet service providers are providing a service to the public and are subject to licensing.

  2. BBS, the bulletin board service, is commonly used for dissemination of information or computer programmes. As explained in paragraph 4 above, no licence is required for the operation of such an information service. However, if the scope of the service is expanded to include messaging or electronic mail capability so that customers or subscribers to the service can communicate with one another and the service is offered generally to the public, then a licence is required.
The Public Non-exclusive Telecommunications Service (PNETS) Licence

  1. The appropriate licence for the provision of telecommunication services to the public over the public telecommunications networks is the Public Non-exclusive Telecommunications Service (PNETS) licence provided for under the Telecommunication Regulations.

  2. PNETS licences are granted readily by the Telecommunications Authority on application and a large number of such licences have been granted. There are good reasons for requiring telecommunication services offered to the public to be licensed. These are:

    • Customer protection - There is a need to protect the confidentiality of customer data and the messages sent by customers through the service. Customers are also protected from discriminatory or unfair treatment.

    • Compliance with international obligations.

    • Ensuring network connectivity.

    • Compliance with local regulatory framework (e.g. no breach of exclusive rights already granted).

  3. PNETS licences contain conditions to allow the TA to ensure licences conform to the appropriate standards of behaviour and a breach of licence conditions can result in pecuniary penalties and withdrawal of licence.

  4. The annual licence fee for a PNETS licence is HK$750. The normal OFTA processing time for a PNETS licence is within 14 working days on receipt of an application complete with all the required information. A Guidance Note on PNETS licence application is available on application to OFTA.
Interconnection Charge

  1. For ordinary telephone lines used for either business or residential purpose, the Hong Kong Telephone Company ("HKTC") charges a flat monthly rental. However, for an interconnection line between the public switched telephone network and a service licensed under the PNETS licence, another tariff will apply. Currently this tariff is composed of a monthly charge of HK$69 per line per month and a usage charge of 9 cents per minute. The tariff is set on the principle of recovering the actual costs incurred by HKTC in delivering the PNETS messages plus a reasonable margin of return and it is regulated by the TA. No such interconnect charge will apply to dedicated leased circuits if such are used for PNETS connections to customers. The normal flat rate tariffs for leased circuits will apply. From 30 June 1995, HKTC loses its monopoly and three competitors are being licensed. In time it may be expected that interconnection lines will become competitively supplied and tariffed.
Licensing - Future Considerations

  1. The Hong Kong Government has announced its intention to amend the Telecommunication Ordinance to bring it more up-to-date with technological innovations and the emerging competitive situation in Hong Kong. The TA is looking to ways to improve the administration of the Ordinance and streamline the regulatory requirements. In this regard, the TA is minded to adopt a "class licensing" approach which, simply stated, would automatically provide blanket authorization for particular services. In effect whole classes of services are licensed without the need to issue individual licences to each service provider. Because there would be a "class licence" in force and publicly available, service providers would be expected to abide by the conditions of that licence - as long as they abided by those conditions no further regulatory, approval or action would be necessary. "Class licensing" is a well-tested regulatory instrument in other countries e.g. UK and Australia and has worked quite satisfactorily in practice. Legislative proposals to implement a "class licence" approach are being drafted for inclusion in a Telecommunication Amendment Bill proposed to be put to the Legislative Council later in 1995.

  2. For enquiries, please contact:

    Controller of Telecommunications (Competitive Services)
    Office of the Telecommunications Authority,
    29/F., Wu Chung House,
    213 Queen's Road East,
    Wanchai,
    Hong Kong.

    Tel: 2961 6654
    Fax: 2803 5112

    22 March 1995