• Background
• Revised Interconnection Charges
• Reasons for Different Charges for PMRS and VAS
• Future Review

Background

The Office of the Telecommunications Authority (OFTA) has completed a review on the interconnect charges between PMRS and VAS with the PSTN of Hong Kong Telephone Co. Ltd. (HKTC). The findings of the review indicated that due to increases in HKTC productivity since these charges were last set in 1989 and the rapid growth of PMRS and VAS traffic, the costs of HKTC to provide the interconnect services have reduced. The Telecommunications Authority (TA) has therefore requested HKTC to review its current interconnection charges with respect to the two services.

Revised Interconnection Charges

2. HKTC has submitted a proposal to the TA proposing to revise the charges of interconnect lines to PMRS and VAS as follows:

   For an interconnect line between PMRS and PSTN

   • HK$78 per line per month plus a usage charge of 6.7 cents per minute of line occupancy

     For an interconnect line between VAS and PSTN

   • HK$78 per line per month plus a usage charge of 4.2 cents per minute of line occupancy

3. The TA considers the proposed charges to be acceptable as they are in line with the TA's analysis of the costs of HKTC in the provision of such services and the TA has given approval to the revised charges with effect from 1 June 1996.

4. HKTC has submitted that it needs about two to three months to make changes to its metering and billing system so that new bills would not be immediately available after 1 June 1996. However, the new charges will start to apply from 1 June 1996 and a retrospective adjustment will be made when changes to the billing system have been completed. The TA considers this arrangement acceptable.

5. The revised charges only apply to HKTC's published interconnect services. The other three fixed telecommunication network services (FTNS) operators are free to offer their own interconnection arrangements and charges to PMRS and VAS operators. The charging principles stated in Statement No. 7, "Carrier-to-Carrier Charging Principles" issued on 10 June 1995, will apply if the TA is requested to make a determination on interconnection between FTNS operators in relation to such interconnection services. In such an eventuality the TA would expect the charges applying between FTNS operators to be no greater than HKTC's published interconnection tariffs. The TA will continue to allow the FTNS operators to negotiate commercially the charges between them but he is prepared to intervene if resolution of these charges is not forthcoming in a timely manner.

   Reasons for Different Charges for PMRS and VAS

6. In the past, although the interconnect lines for PMRS and VAS are listed under different items in HKTC's tariff table, the charges have been the same for both services. This is because an averaging of the costs of the provision of these two types of interconnection services has been applied, mainly due to the lack of sufficiently accurate breakdown of cost data on HKTC's network and the consideration that much the same technology has been used for both services anyway when the traffic was small.

7. In the detailed analysis of HKTC's costs conducted by the TA, sufficiently reliable data was obtained to distinguish between the actual costs of provision of the two different interconnection services. It was found that the traffic of PMRS consisted mainly of calls of very short duration compared with traffic in other VAS messages. PMRS calls tend to be short voice calls whereas many VAS calls tend to be relatively lengthy data transmissions. PMRS traffic incurs a higher cost on the network because of the significantly higher number of call attempts generated. The TA has engaged a consultant to study this issue in detail and concludes that it is desirable to impose different levels of charges to PMRS and VAS interconnection which reflect the actual costs incurred in the HKTC network.

   Future Review

8. As the markets on PMRS and VAS are both developing at a very rapid pace and technology is also advancing quickly, the TA will monitor the interconnect charges closely and conduct reviews annually to ensure that the charges are kept in line with costs.

9. The TA is not entirely satisfied with the current arrangement of charging on a line occupancy basis and intends to conduct a review within the next 12 months with a view to examining whether the charging arrangement would be better if it was more related to the actual time that customer messages are being passed through the circuits, possibly with a separate charge per call attempt. The TA will consult the industry fully before introducing any changes to the structure of the charge.

1 June 1996
Office of the Telecommunications Authority