- This Statement confirms the position under the law as it currently stands. It does not deal with the issues from the perspective of how charging policy may develop - this is subject to the conduct of the reviews mentioned in paragraphs 28 to 33 inclusive.
Background
- On 22 March 1995, the TA issued a Statement clarifying the licensing requirement for telecommunications services offered over the public telecommunications networks in Hong Kong, in particular, Internet access and bulletin board services. The Statement identified a series of "elements" to be examined in classifying whether a service is a public telecommunication service (paragraph 3).
- On 29 September 1995, OFTA issued a circular letter to all ISPs confirming that the lines between the system of an ISP and the network of HKTC used for the retrieval of information and files not originating from the ISP (e.g. information and files retrieved over the World Wide Web (WWW) from databases located throughout the world) are subject to the "interconnection charge" approved by the TA under the tariffs of HKTC. The circular letter was also intended to clarify that the "service which only sells information" referred to in paragraph 4 of the March 1995 Statement would not include a service offered by an ISP which acts as a carrier of information from information providers to the customers of the ISP.
- Subsequent to the issue of the September 1995 circular letter, the TA has held meetings with the ISPs and received nine written submissions from ISPs and Fixed Telecommunications Network Services (FTNS) operators. A summary of the written submissions is given in the Annex. As can be seen from the Annex, the views are divided : most ISPs wishing to avoid the charge; most FTNS operators (particularly HKTC) wishing the current charges to be enforced and the charge paid by ISPs. The TA has considered the views expressed in these submissions and has taken legal advice.
- As all network operators, service providers and users are required to comply with the law at all times, it is the factual position under the current law that the TA must enforce when it comes to payment of interconnection charges. Looking to the future, the TA is reviewing the policies on the interconnection charges. This includes whether the interconnection charge is equitable and whether the level of the charge is appropriate. If any change is warranted as a result of the review, the appropriate revisions will be made to the law at a future time and all parties will be, of course, expected to comply with the revised law at that time. The time table of the review is discussed further in paragraphs 31and 32 below.
TA's Considerations
- Under the tariffs approved by the TA in accordance with the FTNS Licence granted to HKTC, HKTC is entitled to levy the "interconnection charge" on customers using lines connected to the PSTN for the provision of services licensed as "Public Non-Exclusive Telecommunications Services (PNETS)". Thus an ISP needs to pay the "interconnection charge" if the service the ISP provides needs to be licensed as a PNETS under the law.
- The "interconnection charge" of the lines connected to HKTC's network is referred to in this Statement only because at present, only one FTNS operator, i.e. HKTC, is offering such a service. When, in future, other FTNS operators also offer the service, then ISPs will have a choice of operators. The charges of non-dominant FTNS operators (i.e. currently Hutchison Communications, New T&T Hong Kong and New World Telephone) are not subject to approval by the TA.
What Constitutes the Operation of
a Public Telecommunication Service - Under section 8(1)(a) of the Telecommunication Ordinance, a licence is required for the establishment or maintenance of any means of telecommunication. However, the Telecommunication (Fixed Telecommunication Network Services)(Exemption from Licensing) Order (the "Exemption Order") (LN 293 of 1995) exempts a customer of an FTNS licensee from the licensing requirement for the operation of telecommunications equipment (not being a radiocommunication equipment) connected to the FTNS if the customer does not use telecommunication equipment to operate a public telecommunication service. Thus anyone, including an ISP, is not required to pay the "interconnection charge" for lines connected to the system not used for the operation of a public telecommunication service.
- Although the term "public telecommunication service" is not defined, the words "telecommunication service", in so far as relevant, are defined in the Telecommunication Ordinance as the provision of facilities for use by members of the public or any person for the transmission or reception of messages. It follows that whether an ISP is operating a public telecommunication service depends on whether the system of the ISP can be said to be provided for use by members of the public for the transmission or reception of messages.
- What constitutes the "provision of facilities for use by members of the public for the transmission or reception of messages" can best be illustrated by a few examples.
Figure 1
- Figure 1 shows a telephone of a business connected to the PSTN for the provision of an enquiry service providing information concerning the business to any member of the public. It is clearly the intention of the Exemption Order to exempt the business from any licensing for the operation of such a telephone. To argue that the members of the public communicating with the business over the PSTN have used the business' telephone for the reception or transmission of messages and therefore the business has somehow provided this telephone for public use would lead to the absurd conclusion that the business would need a telecommunication licence to operate that telephone. It therefore follows that in the situation shown in figure 1, the business operating that telephone cannot be said to be providing that telephone for the use by the members of the public for the transmission or reception of messages. The business is merely providing that telephone for use by itself for the transmission or reception of its own messages.
Figure 2
- Figure 2 shows a computer connected to the PSTN for the operation of an electronic bulletin board service for the dissemination of information of the operator of that service. There is not much logical difference between such a computer and the business telephone in figure 1 except that the human manning the telephone has been replaced by a computer. Accordingly, the operator of the computer cannot be said to be providing a facility for use by the members of the public for the transmission or reception of messages. Rather the operator of the computer is providing a facility for use by itself for the transmission or reception of its own messages.
- If the business telephone in figure 1 is open to use by any member of the public to make telephone calls or if the bulletin board service in figure 2 is used for the display and posting of messages from any member of the public, then clearly the telephone or the bulletin board service is providing a facility for the use of members of the public for the transmission or reception of messages. Licensing would be required under the Telecommunication Ordinance.
- It is the common characteristic of all services licensed under the PNETS licence that the services all convey messages of customers or "third parties". For example, a value-added facsimile service stores and forwards facsimile messages accepted from customers to the service. An electronic-mail service conveys messages between users of the service. An electronic bulletin board service used for the exchange of information between users effectively conveys messages between the users.
- Thus a consistent interpretation that has been applied in the past is that the provision of facilities for use by members of the public for transmission or reception of messages should be taken to mean the provision of facilities for the conveyance of messages of the members of the public.
The Above Principles as Applied to
the World Wide Web Service - The World Wide Web (WWW) is one of the services for the dissemination of information over the Internet. WWW documents are stored in computers known as "servers". There is a huge number of servers scattered throughout the world. The servers are identified by Uniform Resource Locators (URL) which contain the domain names of the servers on the Internet network and the path and file names of the documents in the servers.
- A user can retrieve information from a WWW server through the service of an ISP. The user's computer is connected to the ISP's system either through a dedicated circuit (for large corporate users) or a dialled-up connection over the Public Switched Telephone Network (for the typical small or home users). To enable dialled-up access, the ISP's system is connected to the PSTN through dedicated telephone lines. The ISP's system is also interconnected with overseas ISPs through international private leased circuits (IPLCs) or other ISPs with IPLC connections. The ISP's system may be interconnected with other local ISPs through direct links or an ISP exchange system.
Figure 3
- The Internet user's computer is typically equipped with a "browser" programme. To reach the required WWW server identified by the URL, the browser queries the ISP's system for the address of the server. The ISP's system obtains the address either from its own database on domain names or makes enquiries to other databases. Once the address of the required server is obtained, the browser sends the file request in the form of packets to the remote WWW server through the Internet. The packets may be routed by many intermediate nodes of different networks before they reach the destination. On receiving the packets, the server validates the request and returns the required document file, also in packet form, to the user via the IPS's system.
- It is apparent that the primary function of the ISP's system is the conveyance of messages between the Internet users and the WWW servers. Such a conveyance function includes the translation of addresses and the routing of data messages in data packet form. The ISP is not responsible for the content of the messages or the information from the WWW databases. The ISP is basically operating as a node to convey messages between WWW servers and the ISP's customers. Performing functions in this mode, ISPs are therefore operating a public telecommunication service.
- The above describes the case where the WWW servers are remote from the system of the ISP. It is possible that some local servers may be connected to the ISP's system or that the WWW documents actually reside in the memory of the ISP's system (figure 4). Unless the ISP has assumed responsibility for the content of the documents attached to, or residing in, its system, the function of the ISP system is still to convey the messages from the "authors" originating the documents and the Internet users. The Internet users are connected to the ISP and so are the "authors" or information providers. This also indicates that the ISP is merely providing a service for the conveyance of messages between users and information providers connected to its system.
Figure 4
- The only situation when an ISP can be treated as disseminating its own information is where the ISP has assumed responsibility for the content of the documents residing in its system, or the servers connected to it. This is where the ISP has actually incorporated the information into a service operated by the ISP and exercised editorial control and bears the associated responsibilities and possible liabilities over the content of the documents. The process is not unlike the incorporation of materials from various reporting agencies into a newspaper or from various producers into a broadcasting service. The information has been repackaged into another service with a separate identity.
- In the very unusual situation where an ISP repackages information from WWW into its own information, the TA agrees that under the current law, lines for the access to such a database operated by the ISP are not subject to the interconnection charge, but the use of these lines would be restricted to the access of this database only. The lines could not be used for the customers to access other Web sites. The ISP would, however, also have to bear all the responsibilities and liabilities associated with the contents of the information it disseminates under such a system.
- One submitter has argued that "the WWW is a huge computer database based on multiple networks of Web Servers on the Internet, cooperating together to form a world wide database of information. A Content Provider who owns and maintains a Web Server on the Internet allows repackaging of its content by other providers, thus forming a larger pool of information". Such an argument is not supported by facts. There is a huge number of independent providers of information on the WWW and there is no evidence of any cooperative agreement among them. An ISP cannot therefore simply claim that it has assumed the responsibility or ownership of all the content available on the myriads of databases connected to the WWW without documentary proof.
- Some submitters have argued that the ISP may "mirror" the databases, i.e. the local ISP will download "hot information" from overseas Web sites and store information in the local computer for access by local Internet customers. Unless the ISP can supply documentary evidence that it has assumed ownership or responsibility for the information so downloaded, this operation is merely a store-and-forward process which is again a common method of conveyance in telecommunication services.
- The TA concludes that, under the current law, the lines between the ISP's systems and the network of Hong Kong Telephone Company Limited (HKTC) used for the retrieval of information and files not originating from the ISP (e.g. information and files retrieved over the World Wide Web (WWW) from servers located throughout the world) are subject to the "interconnection charge" approved by the TA under the tariffs of HKTC.
Next Steps
- The TA will follow the following steps to implement his decision above :
- A circular letter will be sent to all ISPs informing them of the decision on WWW in this Statement.
- All ISPs will have to use '300' prefix interconnect lines for normal Internet access services with immediate effect.
- HKTC will be informed of the TA's decision. HKTC will directly deal with ISPs to make the necessary arrangements to ensure that only '300' prefix lines are to be used. HKTC will be required to conduct the transition of an ISP's lines to '300' lines in a quick and fair manner.
- HKTC is permitted, subject to its conditions of service, to disconnect ISPs who have not paid their bills. However, before disconnection, HKTC will have to give 14 days' notice to the ISP concerned and to inform OFTA at the same time. OFTA will publish the pending disconnection so that the customers of the ISP concerned could prepare for the disconnection and have sufficient time to change their subscription to another ISP.
Investigation on HKTC's Charging Methodology
and Metering of the Interconnect Charge - The TA has also received a number of complaints from ISPs alleging that HKTC's charging methodology and metering of the interconnect charge is unfair and possibly inaccurate. The TA has conducted a preliminary investigation into HKTC's existing charging system for PNETS. While the results of the investigation show that there are no gross errors in the current metering system, the TA has identified a number of improvements that should be implemented. Accordingly, the TA will organize a workshop for all interested ISP's on this matter. The workshop is scheduled on Wednesday, 6th December 1995 at 3:00 p.m. in OFTA's Conference Room. Separate invitations will be sent to all ISPs. The TA intends to issue his report on the technical investigations before the date of the workshop.
Review of the Interconnection Charge
and the Associated Legislative Framework - The TA accepts that the current legislative framework on interconnection charges imposed on Public Non-Exclusive Telecommunications Service providers may not be the most appropriate arrangement given that many new technologies, e.g. Internet services, have emerged, and there are likely to be many more new services coming up in the near future.
- The TA has already started work on the review of the level of the interconnection charge (i.e. whether it should be 9 cents a minute) and the regulatory framework on who should pay, if at all, this charge.
- Work carried out by the TA so far includes :
- an OFTA project team has been formed to consider the conceptual principles of the interconnection of PNETS to the PSTN.
- OFTA has engaged a consultant (Deloitte Touche Tohmatsu) to study the costs of using the HKTC network, including the methodology used for measuring traffic in the HKTC network. (Started in October 1995; estimated completion date end January 1996).
- OFTA is in the final stages of appointing another technical consultant to audit the accuracy of HKTC and HKTI's metering equipment. (Project start date January 1996; completion date end March 1996).
- The TA expects to complete OFTA's internal study by February 1996. Based on the results of the internal study, a consultation paper will be issued around end February 1996 for industry consultation. The TA intends to complete the entire review process by end April 1996 and implement the decisions as soon as possible thereafter.
- On a related matter, the current price control arrangements which apply to HKTC are due to expire in mid-1996. The TA has already started his review of these price control arrangements and relevant background papers may be found on OFTA's BBS service or OFTA's Internet Home-page. Clearly the PNETS interconnection charge will also be a relevant factor in the review of price control arrangements.