Introduction

After prolonged negotiation between Hong Kong Telephone Company ("HKTC") and New T & T Hong Kong Limited ("New T & T"), the two companies have not been able to agree commercially on the interconnection charges and have agreed that the Telecommunications Authority ("TA") should make a determination.

2. The TA, in exercise of his power under section 36A of the Telecommunication Ordinance, publishes today the determination related to the interconnection charges applicable to the "Type I" interconnection between the networks of HKTC and New T & T (hereafter referred to as the "Determination"). The Determination and its Annex is attached to this Statement and is also available at OFTA's homepage at www.ofta.gov.hk.

The Determination Process

3. The scope of the Determination, charging principles, cost model methodology and important issues are covered in the Final Analysis annexed to the Determination.

4. The TA has conducted the review on the "Carrier-to-Carrier Charging Principles" which was issued in 1995. After considering the views from the industry, the TA published the TA's Statement No.7 (Revised) in November 1997 which forms the basis of this Determination.

5. In accordance with the charging principles stated in the TA's Statement No. 7 (Revised), the TA has adopted the interconnection charges based on the historical cost standard.

6. The TA also determines that the two-tiered charging structure between the two parties should be effective from 1 July 1998 as it would reflect the behaviour of the underlying costs.

Validity Period

7. The Determination covers the interconnection charges between HKTC and New T & T for the period 1 July 1995 to 30 June 1999. The two parties are encouraged to reach commercial agreement on the charges after June 1999.

Industry Interconnection Charges

8. The interconnection charges determined were based on the costs of HKTC and the overall interconnection traffic pattern between HKTC and all Fixed Telecommunication Network Services ("FTNS") operators.

9. The TA has also calculated the interconnection costs on the basis of only the interconnection traffic between HKTC and New T & T. They only differ marginally from the ones calculated based on all FTNS networks. In 1997/98, the average costs per occupancy minute and per call attempt for all call types, based on New T & T's interconnection traffic, were 0.1 cent lower and 0.2 cent higher than the average costs per occupancy minute and per call attempt respectively for all call types based on overall interconnection traffic. The costs were different because of the differences in routing, call types and profiles of call types of individual operators.

10. Given the similarity of the interconnection and the relatively small differences in the costs, the TA decides that the interconnection charges in this Determination should be based on the interconnection traffic pattern of all FTNS operators. The methodology and financial model for this Determination would provide useful reference for any determination which needs to be made for periods after June 1999. The other two FTNS operators, in their negotiations with HKTC on interconnection charges, are also encouraged to make reference to the level of charges in this Determination.

Office of the Telecommunications Authority
21 August 1998