Contents
Vision, Mission and Values
Message from the Director-General
Highlights of the Year 2006/07
Eye on the Future
Having Faith in the Market
Consumer Interest – Our Main Concern
Managing the Radio Spectrum and Ensuring Technical Excellence
Close Communications with the Industry and the Community
Committed to Service Excellence
Vision, Mission and Values
Vision
OFTA's VISION is clear and focused - to enable Hong Kong to have an advanced telecommunications infrastructure and the best telecommunications services to meet the challenges of the Information Age. We work to enhance the competitiveness of Hong Kong as the telecommunications, broadcasting and Internet hub in the Asia-Pacific region. Our regulatory regime is pro-liberalisation, pro-competition and pro-consumer, providing a regulatory framework which ensures that the widest range of quality telecommunications services is available to consumers at reasonable prices.
Mission
OFTA's dedicated team is guided by a shared MISSION to improve the quality of life of our community. As the industry regulator, our focus is on cultivating a favourable environment where consumer interests are protected, while commercial incentives to invest in the telecommunications infrastructure are preserved through measures to ensure fair competition, thereby maintaining our competitive edge as a pre-eminent telecommunications centre conducive to business development.
Values
None of the above is possible without a cohesive and versatile team. Our staff is our greatest asset. To achieve our mission, we uphold the VALUES of integrity, professionalism and respect for our clients, our staff and the community. We adopt a proactive attitude and react promptly and effectively to the rapidly changing market and the new demands on the regulatory framework.
Message from the Director-General
In my final message as Director-General of Telecommunications, it gives me great pleasure to report that, in addition to the continuing growth of the telecommunications market, we have been able to see the completion of a number of policy and regulatory reviews in 2006/07. These achievements, a major focus of our activities in the past year, will help remove market uncertainties and make sure that our regulatory environment keeps up with the rapid developments both in technology and the market. At the same time, I am pleased to note that operators are increasingly focusing on the introduction of innovative and sophisticated products and services that will bring even higher value to customers.
Growing Apace – Hong Kong's Telecommunications Industry
On the local scene, fixed network operators continue to roll out customer access networks in the local fixed network market. The annual surveys showed that in October 2006, 76% of Hong Kong's households were connected to at least one alternative customer access network compared to 71% in October 2005. Hong Kong also continues to maintain its position as one of the world's leading markets with broadband access into the home. At the end of March 2007, the household broadband penetration rate had risen to 73.3% compared to the figure of 68.7% a year earlier.
As a result of the high broadband penetration rate into Hong Kong's homes, triple-play services over these broadband connections – IP telephony, IPTV services and broadband Internet access – are commonplace. The situation is set to improve yet further as higher access speeds, above 10 Mbps and up to 100Mbps, are increasingly introduced into the market. This has been brought about by the competing infrastructure reaching into consumers' premises – Hong Kong is one of the few cities in the world where facilities-based competition has been successfully developed in the domestic fixed network sector.
In the world of mobile communications, Hong Kong continues to set the pace on a global basis. With the territory's competitive pricing and diverse range of services, the penetration rate for mobile telephones rose to 136% at the end of March 2007, up from 125% in March 2006 and translating into a usage rate of some four mobile telephones, or SIM cards, for every three people in the territory. Usage is set to grow yet further as Hong Kong's four 3G network operators continue to develop content and applications to take advantage of the speed and capacity of their networks. In March 2007, 3G customers accounted for 16.1% of Hong Kong's 9,356,396 mobile users, a sharp increase from 9.7% of 8,693,368 mobile customers in March 2006.
Addressing the growing need for wireless access to the Internet as well as more demanding bandwidth applications such as video and other multimedia services, operators are introducing more affordable packages for wireless data transmission over their 3G networks while also improving service speeds with the upgrading of their networks to the HSDPA – High Speed Downlink Packet Access – technology. These initiatives, together with recent plans by industry members to launch a municipal WiFi infrastructure in public areas, will furnish our city with ubiquitous wireless Internet access.
As increasing on-line applications fuel demand for high-speed data communications, Hong Kong's external links with the rest of the world continue to grow. Equipped capacity for Hong Kong's external communications rose from 1,153 Gbps in March 2006 to 1,421 Gbps in March 2007 while activated capacity grew from 461 Gbps to 763 Gbps during the same period.
A major hiccup experienced during the year was the severe damage caused to six of the seven major submarine cable systems linking Asia with North America, by the earthquake which rocked the Luzon Strait on Boxing Day in December 2006. I am pleased to report that despite the initial massive disruption of services, service providers responded immediately, taking a number of measures and working around the clock to remedy the situation. Services were restored within days of the problem first arising with everything returning to normal in February 2007, when the affected cable systems were fully repaired.
Despite Hong Kong's competitive and leading-edge telecommunications services – in addition to the territory's highly competitive prices, Hong Kong's penetration rates, from fixed-line to mobile telephones, broadband and IP-based TV services, are amongst the highest in the world – there is no room for complacency. Looking ahead, Hong Kong must continue to keep its eye on the future and invest in the new and developing technologies such as the IP-based Next Generation Networks and new wireless access infrastructure.
Eye on the Future – Our Role and Responsibilities
Making sure that we help to facilitate these developments within the industry in Hong Kong, our aim is to apply regulatory principles and practices that provide a clear direction for the future. Having established effective market competition with the formation of the Office of the Telecommunications Authority (OFTA) in 1993, the industry has been characterised by progressive deregulation in the past three years, as market forces have been allowed to play a more dominant role in the industry. Rather than remaining in an ex-ante rule-setting environment, we have made the transition to regulation on an ex-post basis with a focus on safeguarding effective and fair competition. Only when the market cannot deliver the required policy objectives or where players fail to comply with fair competition rules will we step in with regulatory intervention.
Aware of the importance of a clear and predictable regulatory environment to managing risk and promoting investment within the industry, we expended considerable effort during the year to ensure the completion of a series of regulatory and policy reviews. A major step forward was the establishment of a regulatory framework to facilitate Fixed-Mobile Convergence (FMC). Under this new framework, which aims to remove the differentials between fixed and mobile networks, we are recommending, among other things, the introduction of a Unified Carrier Licence (UCL) for Hong Kong. This move will open the way for the provision of fixed and mobile services under the same licence.
The efficient and effective management of the radio spectrum is essential for the future development of the industry, particularly as demand for this resource continues to escalate with the rapid proliferation of wireless data and video services. As such, we rendered full support to the Commerce, Industry and Technology Bureau (CITB) for a policy review on the management of radio spectrum in Hong Kong. The review was concluded in April 2007. OFTA also announced a Spectrum Release Plan in the same month. The release plan provides advance information on the radio spectrum to be released over the next three years, providing a clear road map for investment decisions into the future.
We also completed a regulatory review and issued a Telecommunications Authority (TA) Statement on the release of radio spectrum for CDMA2000. A major international mobile communications standard, CDMA2000 provides high-speed data services on par with existing 3G services in Hong Kong. Compatible with a major mobile service in Mainland China, CDMA2000 will strengthen Hong Kong's position as a world city and its strategic role as the gateway between Mainland China and the rest of the world. Rounding out our activities on the wireless front during the year, we also issued a consultation paper in May 2007, resuming public consultation on the proposed allocation of spectrum for Broadband Wireless Access (BWA) services. BWA, expected to become commonly available in the next few years, not only supports high-speed wireless access for mobile and portable terminals, it also provides an alternative to wireline access at fixed locations.
At the same time, in view of the fast-changing telecommunications landscape in Hong Kong, it was felt that the existing regulatory requirements for universal service arrangements would not be sustainable into the future. Accordingly, OFTA completed a review of the situation, issuing a TA Statement in June 2007. Among other changes, the methodology for the calculation for universal service costs has been revisited, providing a more equitable direction into the future. During the year, we also worked closely with CITB on the proposed merger of the Telecommunications Authority and the Broadcasting Authority into a unified Communications Authority, to better deal with the increasing convergence in telecommunications and broadcasting services.
These reviews, together with the IP-based services review completed in early 2006, ensure that the principal elements of the future regulatory environment are in place. With an emphasis on fair competition and the protection of consumer interests, we are keen to see industry players competing freely without regulatory intervention. Aware however that as competition intensifies, the need to cut costs may lead to sacrifices and short cuts in the services offered – in quality or sales conduct, for example – we remain ever vigilant in the effective protection of consumer interests. As such, we will not hesitate to step in with necessary regulation and the appropriate disciplinary measures if we feel such action is warranted.
In Conclusion – A Vote of Thanks
This will be my last message for the OFTA Trading Fund Report as Director-General of Telecommunications, as I will be retiring at the end of June 2007. I am proud to have witnessed and participated in the phenomenal growth and progress made in the telecommunications industry in Hong Kong in the past 14 years since OFTA was first established and honoured to have served as the territory's Telecommunications Authority for the past three years. As this latter period has been characterised by enormous change within the industry – from the increasing demand for broadband wireless networks, to the rapid migration to the Next Generation Networks and the new IP-based technologies, to convergence of the fixed and mobile networks; telecommunication and broadcasting services; and of voice, data and video services – I am particularly pleased that we have been able to pave the way forward for further development with the completion of the regulatory and policy reviews during the year.
Needless to say, none of these activities would have been possible without the support of our stakeholders – the many operators and industry members, the Consumer Council, our Advisory Committees, as well as OFTA's staff. I would therefore like to thank each and every one of them for their commitment and advice, encouragement and support, loyalty and hard work, not only in the past year but over the years. Their contribution has made the industry what it is today.
In conclusion, let me take this opportunity to wish my successor, Mrs Marion Lai, every success. As she takes over as Director-General, I have every confidence that OFTA will continue to make rapid progress and that the industry will flourish under her ongoing guidance.
M H Au
Director-General of Telecommunications and
General Manager, OFTA Trading Fund
25 June 2007
Highlights of the Year 2006/07
06/2006
In collaboration with the telecommunications industry, OFTA took the initiative to tackle the problem of unsolicited promotional calls generated by machines (usually referred to as "junk calls"), and issued a Code of Practice for voluntary compliance by operators on the handling of customer complaints about such calls. The Code is proving its efficacy as the volume of junk calls has fallen considerably since its introduction.
07/2006
Paving the way for the advent of Fixed-Mobile Convergence, OFTA published a second consultation paper to solicit public views on the proposed regulatory changes. The TA issued a statement in April 2007 announcing his conclusions of the consultations.
09/2006
With the ongoing collaboration of the Government and mobile network operators, mobile network coverage in Hong Kong's country parks continued to improve. On 3 September 2006, a ceremony was held at Fung Yuen Village, Tai Po, to mark the improvements in mobile network coverage in the country areas of Tai Po.
On the same day, 99 digital maps showing useful information on mobile network coverage over 99 popular hiking trails in Hong Kong's country parks were published on OFTA's web site. By March 2006, these numbers had increased to 147 digital maps.
10/2006
OFTA issued a consultation paper to solicit public views on the proposal to release spectrum in the 850 MHz frequency band for the provision of mobile services on the CDMA2000 standard. In April 2007, the TA announced his decision to auction the relevant spectrum and to issue a licence for the deployment of a CDMA2000 mobile service in the 4th quarter of 2007.
12/2006
OFTA conducted a consultation on the proposal to review universal service obligation (USO) arrangements introduced in 1998. The TA issued a statement with the conclusion of the review in June 2007.
02/2007
To protect consumer interests, OFTA created a new Class Licence to regulate telecommunications services offered by telecommunications service resellers. Typical examples of telecommunications services offered by resellers are international calling cards and pre-paid SIM cards for mobile phone services.
In view of the submarine cable disruption caused by the earthquakes in the Luzon Strait in December 2006, OFTA implemented new guidelines on the reporting of network and service outages of submarine cable systems and Internet services, after consultation with the industry. We also reviewed the contingency plans of major Internet service providers and began exploring the timely exchange of information with Mainland China and other administrations.
03/2007
Supporting the Government's initiative to strengthen Hong Kong's WiFi networks, OFTA revised the "Guidance Note for Submission of Application for Installing Micro-cell Base Station on Highway Facilities or on Unleased and Unallocated Government Land" with a view to facilitating network operators' use of public lamp-posts to install public WiFi access points.
Eye on the Future
Facilitating the Development of Future Service Platforms
Next Generation Networks (NGNs) will integrate conventional fixed, mobile and data networks into an intelligent and unified IP-based backbone network infrastructure to deliver universal access and act as host to a range of new technologies, applications and service opportunities.
The realisation of NGNs will hinge on the migration to new networks and services. More and more operators, including local network operators, are formulating plans to introduce new network technology for the provision of enhanced services to their customers. Further work will however be necessary to ensure that both the regulator and the industry will better understand the new technologies, learn how they will interrelate and interconnect. With NGNs, services currently provided by networks under distinctly different regulatory frameworks will share the same service platform. The possible shift of competition from the present lower layers of transport and networks to the higher layers of services and applications will lead to intensified competition between independent service providers and NGN operators. As such, broader regulatory issues will need to be addressed.
In 2006/07, OFTA continued to put considerable effort into consulting and working with the industry to ensure that the appropriate regulatory frameworks will be put into place to pave the way for the introduction of Fixed-Mobile Convergence and the Broadband Wireless Access technologies. Progress and results were promising.
Multimedia Services over Internet Protocol
In June 2005, TA promulgated the regulatory framework for IP Telephony services. Under the two-class licensing regime, Class 1 services are required to meet relevant licensing conditions applicable to fixed network operators providing conventional telephone services under Fixed Telecommunications Networks Services (FTNS) or Fixed Carrier Licences. Class 2 services are required to meet only minimal licensing conditions to ensure that innovative development will not be inhibited while at the same time protecting consumer interests. Existing FTNS or fixed carrier licensees are allowed to provide IP Telephony services under their existing licences. To pave the way for a wider choice of innovative telecommunications services, a Services-Based Operator (SBO) Licence was introduced in January 2006 for the provision of IP Telephony services. At the end of March 2007, six SBO licences had been issued.
Fixed-Mobile Convergence
The demarcation between fixed and mobile services will become less and less distinct in the NGN era. With convergence, service providers will be able to provide services on a fixed network, a mobile network or a combination of the two to the same customer. At the same time, end-users will be able to enjoy access to mobile and fixed services without the need to switch between service providers.
In Hong Kong, different regulatory systems apply to the fixed and mobile networks. To ensure that we will stay fully abreast with developments in these converged services, we initiated a consultation on the necessary review of the situation in September 2005. A consultancy study was commissioned to identify the changes necessary to the existing regulatory framework and the ensuing costs and benefits to stakeholders. Taking the recommendations of the consultant and the views of the industry into account, we launched a further round of consultation in July 2006 with regard to the new regulatory regime and the implementation arrangements required for the necessary changes. The responses received at the second consultation were further taken into account when the TA issued a statement in April 2007 setting out his conclusions.
One of the TA's conclusions is that the current regulatory guidance on the interconnection charges between a fixed and a mobile network, the Fixed-Mobile Interconnection Charge (FMIC), should be withdrawn. The current guidance adopts a "Mobile Party's Network Pays" approach. In other words, regardless of whether a call is made by a mobile user to a fixed user or vice versa, the interconnection charge is always borne by the mobile operator. A two-year transitional period, from April 2007, was promulgated to enable operators concerned to adapt to the change in FMIC. This new deregulation means that the interconnection charge and payment arrangements will be a matter of commercial negotiations among the operators. However, the TA will retain his statutory power to make a determination on interconnection terms under section 36A of the Telecommunications Ordinance if an agreement between operators cannot be reached.
The current Local Access Charge (LAC) arrangement for interconnection between external service providers and fixed/mobile network operators will be maintained. We will be monitoring the situation to see if the removal of regulatory guidance on FMIC is likely to make the origination or termination of external calls more competitive, before proposing any further deregulatory measures in relation to LAC.
With regard to Fixed-Mobile Number Portability, OFTA will conduct a market survey to assess consumer demand for this facility, before making any proposals on its introduction in Hong Kong.
Broadband Wireless Access
Broadband Wireless Access (BWA) is a technology that supports high-speed wireless access to mobile user devices for voice, video, Internet access and other applications. It also provides an alternative to wireline technologies for access to buildings and individual customers at fixed locations. User devices employing BWA technologies meeting open standards are expected to be commonly available in the market in the next couple of years. These technologies have the potential to support innovative services and offer more customer choices.
In Hong Kong, some local fixed network operators have expressed interest in deploying BWA technologies in their customer access networks. We conducted two rounds of public consultation in 2004 and 2005 on the regulatory framework, spectrum planning and licensing arrangements to facilitate the introduction of BWA in Hong Kong. The proposal then was to allocate spectrum in the 3.4 GHz band for these services.
In response, the industry raised concerns that BWA deployment in the 3.4 GHz band would cause harmful interference to downlinking satellite transmissions operating in the 3.5 GHz band and adjacent bands. To address these concerns, the Radio Spectrum Advisory Committee, under OFTA's auspices, established a working group in February 2006 to assess the impact of the proposed frequency plan. The group conducted a series of technical assessments and concluded that the deployment of BWA services in the 3.4 GHz band would indeed cause interference to existing satellite transmissions. Furthermore, the measures required to protect the earth stations would make it difficult for widespread and cost-effective deployment of the service in the 3.4 GHz band in Hong Kong. As a result, the proposed allocation of the 3.4 GHz band for BWA was held in abeyance.
In May 2007, we launched a third consultation on BWA putting forward specific proposals for the allocation of the 2.3 GHz band for the deployment of this technology. In line with the Government's guiding principles under its new Spectrum Policy Framework announced in April 2007, the proposal was to assign the BWA spectrum using a market-based auction approach. The auction is expected to take place in 2008.
The Local Fixed Telecommunications Network Services Market
Full liberalisation of the local Fixed Telecommunications Network Services (FTNS) market since 2003 and the policy to withdraw mandatory Type II interconnection at telephone exchanges have hastened the rollout of competitive fixed networks using advanced technologies. In this regard, we have taken an active role in facilitating operators' network rollout, helping them to gain access to buildings, coordinating road-openings and facilitating access to in-building wiring systems. This has resulted in an increase in the choice of services for consumers as well as the emergence of a variety of innovative telecommunications and multimedia services supported by high-speed and high-capacity telecommunications networks. As at October 2006, 76% of Hong Kong's households were connected to at least two self-built customer access networks.
The Broadband Services Market
Market liberalisation and vigorous facilities-based competition have brought about significant growth in the local broadband service market. At the end of March 2007, there were over 1.79 million broadband customers in Hong Kong, representing a growth of 8.3% year-on-year, while the household penetration rate rose to 73.3%.
Rapid advances in the broadband technologies and the increasing convergence between telecommunications and broadcasting have created opportunities for telecommunications operators to offer IP Television (IPTV) services. In fact, a number of fixed operators have been offering "triple-play" services – telephony, broadband access and TV – for a couple of years, with "quadruple-play" – telephony, broadband access, TV and mobile, emerging in 2007. By the end of 2006, there were more than 800,000 IPTV subscribers in Hong Kong, placing us well ahead of all developed economies around the world, in terms of IPTV household penetration.
The Mobile Market
By 2005 all four 3G operators had launched their services. At the end of 2006, they had also fulfilled all coverage and data transmission requirements under their 3G carrier licences. This means that each 3G operator is now providing network coverage and services over an area where at least 50% of the population of Hong Kong live. All base stations have been configured to be capable of supporting services operating at a minimum of 144 kbits per second for an individual customer. Additionally, during the year under review, three operators upgraded their networks with 'High Speed Downlink Packet Access' (HSDPA) technology, allowing data transmission speeds of up to 3.6 Mbps. Consumers can thus enjoy innovative and high-speed multimedia services with their 3G devices.
Competition in the mobile market continues to be intense, with five operators operating ten 2G networks and four 3G networks. The number of mobile customers exceeded 9.35 million at the end of March 2007, out of which around 1.5 million were 3G customers. The penetration rate was 136%, one of the highest in the world.
Renewals of 2G licences, expiring between July 2005 and September 2006, were successfully completed, in line with the relevant licensing framework set out in November 2004. Holders of the nine incumbent GSM and PCS licences providing 2G mobile services were offered the right of first refusal, entitling them to new mobile carrier licences for a further period of 15 years and allowing them to continue providing mobile telecommunications services. No new licences were granted to licensees operating CDMA and TDMA networks as the assigned spectrum had not been used efficiently. However, the CDMA licensee was allowed to continue operating CDMA services until November 2008, using a third of the originally assigned spectrum to facilitate smooth customer migration.
To ensure the continued availability of CDMA mobile services after 2008 to local consumers as well as roaming service users from Mainland China and other parts of the world, OFTA launched a consultation in October 2006 to solicit the views of interested parties on the proposal to release frequency spectrum in the 850 MHz band through a public auction exercise for the provision of mobile services using the latest CDMA technology.
In April 2007, having considered all the views received, the TA announced his plan to release spectrum in the 850 MHz band to enable the provision of CDMA2000 services. The auction of this spectrum is expected to be held in the last quarter of 2007.
Having Faith in the Market
Competition Advocacy and Regulatory Impact Assessment
Hong Kong is amongst the few places in the world where a free market in the telecommunications industry genuinely exists. In 2004, having been satisfied with the extent of competitive last-mile network rollout, the Government deregulated the mandatory Type II interconnection policy (i.e. local-loop unbundling). In 2005, the ex-ante price regulation against the fixed-line incumbent was lifted. In April 2007, OFTA announced its plan to deregulate fixed-mobile interconnection charges. Competition has been working effectively at both the infrastructure and the service levels.
Complementary to the withdrawing of ex-ante regulatory rules and prescriptive guidelines in recent years, OFTA has been counting on the ex-post provisions against anti-competitive practices in the Telecommunications Ordinance to protect competition. During the year 2006/07, there have been a handful of preliminary investigations on merger cases and alleged anti-competitive conducts, but none of them had resulted in any action taken by the TA.
At this stage of market development, and given the pace of innovation in the telecommunications industry, OFTA realises that it is not enough to preserve existing competition via the enforcement of regulation. The regulator must also promote competition by reshaping or withdrawing existing regulations that are unnecessary, inappropriate or disproportionate. Since 2005, OFTA has been taking an active role of competition advocacy through regulatory impact assessments, conducted where new regulation is contemplated or an existing regulatory regime is reviewed, to ensure that major regulatory decisions by the TA are taken in an informed, reasoned and coherent manner.
OFTA's initiative in competitive advocacy is echoed in the "Be the Smart Regulator" campaign run by the Efficiency Unit and the Economic Analysis and Business Facilitation Unit of the Government, where regulatory impact assessment becomes a specific action point for all Government departments. The objective of this campaign is to encourage investment and innovation in the private sector by cutting government red-tape, so as to maintain the competitiveness of the Hong Kong economy.
In carrying out regulatory impact assessments, OFTA puts faith in the market in serving community interest. Over the years, this market-driven philosophy has delivered positive results for the telecommunications industry in Hong Kong.
Market Surveillance
With the deregulation of the tariffs of the incumbent PCCW-HKT Telephone Limited (PCCW-HKTC) under its fixed carrier licence in 2005, PCCW-HKTC no longer needs OFTA's approval for its prices, including any discounted tariffs or other customer benefits that may be offered in response to pricing and market competition.
After the implementation of the ex-post regulatory regime, consumers enjoy a wide range of promotion programmes offered by the operators in the fixed-line market. In order to compete for customers, operators also offer a wide variety of bundled-service packages, including "triple-play" or "quadruple-play" packaged services. OFTA will continue monitoring the competitive environment in different telecommunications markets, having regard to the development of fixed-mobile convergence and new technologies (such as VoIP).
Assessment and Review of Mergers and Acquisitions
During the year, the TA conducted a preliminary ex-post review on two merger transactions in relation to carrier licensees under section 7P of the Telecommunications Ordinance. After the completion of the reviews, the TA concluded that no further investigations into potential competition issues were necessary.
The first transaction concerned change of ownership of Asia Netcom Hong Kong Limited and its potential consolidation with C2C (Hong Kong) Limited. The TA's competition impact report, published on 8 September 2006, focused on the areas of overlap in the external telecommunications facilities between the two parties, the likelihood of reduced rivalry between competitors and the increased risk of collusive behaviour. The TA concluded that there was unlikely to be any material competitive detriment in any of these areas and decided not to proceed with an investigation under section 7P(1)(a) of the Telecommunications Ordinance.
The second transaction involved the acquisition of interest in Pacific Internet (Hong Kong) Limited by the parent company of Asia Netcom Hong Kong Limited. This transaction raised issues of market overlap in the provision of external bandwidth services, the increased risk of collusive behaviour and concerns about vertical integration in the service-based Internet services market and facilities-based external bandwidth market. In the competition impact report published on 16 February 2007, the TA concluded that the transaction would not be likely to substantially lessen competition in any of the above areas and on this basis decided not to proceed with a section 7P(1)(a) investigation.
Deregulating Interconnection at Telephone Exchanges
During the early phases of telecommunications market liberalisation, regulatory intervention was required to safeguard seamless and reliable communications between networks. As facilities-based competition has continued to develop over the years, the incentives for network interconnection and service access have become increasingly market-driven. In July 2004, the TA announced the decision to phase out the mandatory arrangements for Type II interconnection at telephone exchanges (i.e. local loop unbundling), with full withdrawal to take place by June 2008. The arrangements have been withdrawn gradually on a building-by-building basis in the run-up to this date, applying to buildings already connected to at least two self-built customer access networks. Mandatory Type II interconnection in these buildings was subject to a two-year transitional period followed by a one-year "grandfather" period to protect consumer interests.
After the "grandfather" period, interconnection terms including charges will be subject to commercial negotiations between the operators concerned. However, to protect consumer choice after the full withdrawal of the policy in 2008, mandatory Type II interconnection will be maintained as a safety net in buildings where it is technically unfeasible or economically unviable for operators to roll out customer access networks.
In September 2004, OFTA first published a list of buildings, which are connected by at least two self-built customer access networks provided by local fixed network operators. The list was subsequently updated in 2005 and 2006. As at October 2006, 76% of Hong Kong's households were connected by at least two self-built customer access networks and 51% of households by at least three such networks. The corresponding figures in October 2005 were 71% and 43% respectively. The increased coverage showed continual investment in telecommunications infrastructure by fixed network operators.
Building Up Territory-Wide WiFi Networks
Unlike other economies where the deployment of public WiFi networks relies mainly on backing from the Government, Hong Kong continues to adhere steadfastly to a market-led approach. During the year under review, both PCCW-HKTC Telephone Ltd and Hong Kong Broadband Network Ltd publicly announced their plans to roll out territory-wide WiFi networks. Upon receipt of their applications, OFTA amended their fixed carrier licences to include a provision for public WiFi services.
To facilitate operators' roll-out of WiFi networks and to support the Government's initiative to provide free WiFi services in Government premises, OFTA revised the "Guidance Note for Submission of Application for Installing Micro-cell Base Station on Highway Facilities or on Unleased and Unallocated Government Land" in March 2007 so that network operators can use lamp posts and other highway facilities to install WiFi access points. We have also been actively processing operator applications in relation to the establishment of WiFi networks as well as coordinating activities with the relevant Government departments.
Coordinating the Sharing of Facilities
We are keen to ensure that the development of market competition will not be hindered by any bottlenecks. Therefore, we have been coordinating the sharing of facilities, including radiocommunication sites on hilltops, rooftops, tunnels and in rural areas, between telecommunications and broadcasting operators. This sharing of facilities also serves to minimise environmental disruption and avoid the unnecessary proliferation of sites.
Gearing up for the broadcast of Digital Terrestrial Television (DTT), which is to be launched before the end of 2007, we have been liaising with existing users of selected hilltop sites to facilitate installation of DTT transmission equipment by television broadcasters. We have also been working with the Civil Aviation Department to ensure that the new DTT infrastructure and its transmissions will not affect aviation safety.
Pioneering Number Portability
Number portability allows consumers to retain their telephone numbers when they change telephone service providers. This ensures freedom of choice and fair competition in the market.
Hong Kong is one of the first economies in the world to implement both Operator Number Portability (ONP) and Mobile Number Portability (MNP). ONP, introduced in 1995, handles the porting of numbers between fixed network operators while MNP, launched in 1999, handles this activity between mobile network operators. In 2006/07, some 0.20 million ONP applications and 1.40 million MNP applications were successfully processed, representing porting rates of 5% and 15% against 3.85 million fixed-line subscribers and over 9.35 million mobile service subscribers respectively. Since the launch of MNP in 1999, more than 10 million successful MNP applications have been processed, testifying to the success of the arrangement, the importance of the service to consumers, as well as its significant contribution to competition in the market.
Consumer Interest – Our Main Concern
Sufficient Information for Making Choices
The market cannot properly function without a sufficient flow of information to enable consumers to make informed purchasing decisions. In this respect, it is important that the information provided by operators is accurate. Under the Telecommunications Ordinance, operators are prohibited from engaging in misleading or deceptive conduct in promoting their services and products. OFTA will take enforcement action against operators in breach of the law.
In addition to law enforcement, we conduct consumer surveys to get a grasp of the general public's understanding of and satisfaction for the telecommunications services they use. The survey results also indicate what, and how, customer information should be made available to the public. With the survey results in hand, we, together with the industry and related organisations, engage in dialogue to establish ways in which the market can improve the flow and availability of information to consumers, as well as develop best practice indicators for the advertising and marketing of telecommunications services.
Customer Information concerning Broadband Internet Services
In May 2007, the TA issued a statement on "Survey on Residential Broadband Internet Access Services". The survey, which was conducted by the Social Science Research Centre of the University of Hong Kong in the second half of 2006, was the first of its kind commissioned by OFTA to study the level of consumer awareness of broadband Internet access services and to identify any deficiency in the availability of information to consumers in the market.
The background to this survey was the historically high level of consumer complaints, which had accompanied the wider availability and uptake of broadband Internet access, together with earlier proposals for publishing certain technical performance indicators.
The survey showed that some 87% of the respondents were satisfied with the broadband services they were using. It also showed that service reliability is the most significant factor that consumers take into account while making their purchasing decisions. This factor was followed by download speed, quality of customer service, price and customer service hotline, in descending order of importance.
Helping consumers to make informed choices with regard to broadband services, adequate and relevant service information must be made available to consumers in a meaningful manner.
While around 62% of the respondents considered that there was sufficient information available for them to make an informed choice with regard to a broadband service provider, others wanted unambiguous information on the price, transmission speed and quality of service of individual service providers.
Addressing the need for information among consumers, we have been working with the industry and the Consumer Council on how best to make necessary information available to consumers. OFTA will also develop a number of best practice indicators concerning advertising and the provision of pricing information to potential customers.
The survey results also showed that many problems encountered by residential broadband users were not connected to the service quality delivered by Internet service providers. Rather, many residential Internet users do not yet have an adequate grasp of the technical issues facing them in the home. To improve benefits to consumers using broadband services, we are seeking the cooperation of the industry, the Consumer Council and other relevant Government organisations, on the feasibility of launching an education programme to the broader Hong Kong community on how to become smart information technology users.
Investigating Misleading or Deceptive Conduct
Between 1 April 2006 and 31 March 2007, we looked into 47 complaints concerning alleged breaches under section 7M of the Telecommunications Ordinance, which prohibits misleading or deceptive conduct by telecommunications licensees. After investigation, two of these allegations were confirmed during the year as established breaches. The TA imposed financial penalties of $80,000 and $100,000 respectively on the two telecommunications operators found in breach of the Ordinance.
As a general observation, following the issuance of the TA's report on "Mis-selling of Fixed-line Telecommunications Services to Consumers in Hong Kong" on 29 March 2005 (the Mis-selling Report), complaints in relation to misleading or deceptive sales practices have dropped on a year-on-year basis. Nonetheless, OFTA has continued to monitor direct sales practices in the market and has, through regular contacts with operators, encouraged them to adopt the best practice indicators set out in the Mis-selling Report with a view to raising the standard of sales for the benefit of consumers, as well as minimising the risk of an offence under section 7M of the Telecommunications Ordinance.
New Reporting Mechanism for Internet Service Outage
In the light of the earthquakes which occurred in the Luzon Strait on 26 December 2006, there was an urgent need to review the outage reporting mechanisms for cable-based External Fixed Telecommunications Network Services (EFTNS) providers and Internet Service Providers (ISPs). OFTA worked closely with the industry and formulated new guidelines for reporting submarine cable system outages, external telecommunications service outages and Internet service outages, with a view to strengthening communication and coordination among concerned parties. The new guidelines came into effect on 28 February 2007. In general, in the event of a major submarine cable system outage or disruption in external telecommunications or Internet services, the operators concerned are required to make a report to OFTA within 2 hours of confirmation of the incident or within 4 hours after the incident occurs. We will then assess the significance of the impact of the reported incident on the territory and determine whether a public alert is warranted.
Improved Mobile Network Coverage in Country Parks
To improve the coverage of mobile networks in country parks and other remote areas, we coordinate the setting up of mobile base stations with mobile network operators in these areas. These stations are normally shared by participating mobile network operators, unless there are physical constraints.
To provide further incentives to operators to extend their service coverage into country parks, we decided in early 2006 to allow the use of Government hilltop sites for the setting up of new base stations at a nominal annual rental of HK$1 for each site. Use of the frequency spectrum for these purposes will also not incur any spectrum usage fees. These measures have proven to be effective as five new base stations were built in 2006. They were at Cloudy Hill in Tai Po, Shek Uk Shan in Sai Kung, Woodside near the Tai Tam Country Park, Tsuen Kam Au near Tai Mo Shan and Robin's Nest near Sha Tau Kok. With these new base stations, the total number of base stations covering country parks increased to 12. Several other new base stations are being planned and they will serve to improve mobile network coverage in southern Lantau, Tai Lam Chung and eastern Sai Kung.
During the year 2006/07, OFTA completed a comprehensive survey on the coverage of mobile phone networks along popular hiking trails, totaling over 600 km in length. Based on the survey's results, a total of 147 digital maps (as at the end of March 2007) covering the same number of popular hiking trails were produced and published on our web site for public information. Covering most of the popular hiking trails in Hong Kong, these digital maps provide useful information to hikers on whether emergency calls made with a mobile phone at a particular hiking trail may be connected to at least one of the local mobile networks.
Unimpeded Access to Fixed Network Services
To enable the public to have unimpeded access to fixed network services offered by local operators in an efficient and orderly manner, the TA has granted local fixed network service operators the legal right to access the "common parts" of private buildings to lay cables and install equipment, under section 14(1) of the Telecommunications Ordinance.
Since 2000, OFTA has been coordinating fixed network operators' access to buildings and liaising closely with property management offices, Incorporated Owners and property owners on matters related to operators' right of access. In 2006/07, we attended 70 liaison meetings with property owners and management companies and conducted seminars and workshops for interested parties on this subject. At the same time, our hotline 8102 4100 answers enquiries on network facilities inside buildings while providing advice and assistance to property owners and management companies.
We have issued a Code of Practice providing guidance on the installation and maintenance of in-building telecommunications systems and in-building access by telecommunications network operators. The Code also ensures that in-building telecommunications systems are installed properly and disturbance to residents kept to a minimum. In 2006/07, we conducted sample checks on 278 buildings to ensure that operators' installations comply with the Code.
Regulating Resale of Telecommunications Services
In view of the rapid development of the telecommunications market and the various thriving resale activities, we see the merit of bringing resellers of telecommunications services under regulation for better protection of consumer interests. After two rounds of public consultation conducted in 2004 and 2006, the TA decided to create a Class Licence for services falling within the scope of section 8(1)(aa) of the Telecommunications Ordinance in September 2006. Under the new regulation, resellers will automatically become class licensees without any requirements for individual licence applications or registrations.
The new Class Licence covers the resale of any public telecommunications service, including local and international voice services, fixed and mobile, as well as prepaid and post-paid services. The regulation is light-handed and class licensees are only subject to licence conditions which aim at consumer protection, such as the provision of basic information to customers, maintenance of billing or charging accuracy and obligations to not to engage in misleading or deceptive practices. The Class Licence commenced operation in February 2007.
Backup Power Supplies for Local Fixed-line Telephone Services
In April 2006, the TA revised the Code of Practice for the Provision of Backup Power Supplies for Local Fixed-line Telephone Services. According to the revised Code, all the network equipment of fixed network operators and service-based operators involved in the provision of basic telephone-line services must be supported by backup power supply systems. In particular, network equipment installed in customer buildings must be backed up by power systems with at least one hour's capacity, unless constraints in the physical environment render the provision hazardous or technically unfeasible. These backup systems allow emergency calls and other "lifeline" services to be maintained even when the public electricity supply is disrupted. Operators are obliged to inform their customers and to provide regular reports to the TA if backup power supplies are not available due to physical constraints or other reasons.
Universal Service Obligation under Review
PCCW-HKTC, the incumbent operator in the local fixed-line telephone service market, is obliged under its Fixed Carrier Licence to provide universal basic telephone services at a reasonable cost and on a non-discriminatory basis to everyone in Hong Kong. In turn, the company is entitled to receive a Universal Service Contribution (USC) to meet this obligation. Currently, USC is paid by External Telecommunications Service (ETS) providers (including service providers licensed under the FTNS/Fixed Carrier Licence and the Public Non-exclusive Telecommunications Service (PNETS) Licence) to cover PCCW-HKTC's costs in the provision of basic telephone services to uneconomical customers. The USC level is updated on an annual basis using the methodology developed in 1998 and 2000. The last update was conducted in November 2006.
In the light of developments in the telephony service market, such as the introduction of VoIP services, the wider availability of alternative fixed networks to the public and the declining profit margins of ETS, we conducted a consultation in December 2006 to solicit views from the public and the industry on a proposal to review the current universal service arrangement.
Meeting the Demand for New Numbers
While the demand for fixed telephone numbers remains steady, the demand for mobile telephone numbers is still high. In order to make avaliable sufficient numbers to meet the need, a working group was established under the Telecommunications Numbering Advisory Committee (NAC) in late 2006. The working group consists of representatives of network operators and other industry members. It explored different options to expand the number supply for mobile services in the near term and for other services in the longer term. Recommendations made by the group will be presented to the NAC for further consideration and endorsement.
Monitoring Accounting Practices
Under section 7H of the Telecommunications Ordinance, a licensee shall adopt the accounting practices that the TA specifies.
Major FTNS and fixed carrier licensees, including PCCW-HKTC are directed by the TA to comply with the accounting practices and reporting requirements specified in the Accounting Manual for FTNS Licensees revised in January 2006. While other fixed carrier licensees are exempted from the full reporting requirements, the Authority reviews the situation regularly and may impose the full reporting requirements if the need arises.
3G mobile carrier licensees are directed by the TA to comply with the accounting practices and reporting requirements specified in the Accounting Manual for Third Generation Mobile Carrier Licensees and Other Reporting Parties issued in August 2005. OFTA has started reviewing 3G licensees' procedures manuals and regulatory reports to ensure proper accounting separation and reporting of network turnover for the purposes of, inter alia, the calculation of 3G spectrum utilisation fees.
Broader Measures to Deal with Unsolicited Electronic Messages
Unsolicited electronic messages are distributed through various electronic means to consumers. They include unsolicited messages sent by e-mail, fax, phone, Short Messaging Services (SMS) and Multi-media Messaging Services (MMS).
On 12 July 2006, the Government introduced the Unsolicited Electronic Messages (UEM) Bill to the Legislative Council with a view to containing the problems caused by unsolicited electronic messages. The Bill's proposed regulatory measures cover all electronic communications of a commercial nature but exclude person-to-person video or telephone calls with no pre-recorded elements. The UEM Bill was passed on 23 May 2007. OFTA acts as the enforcement agency for the majority of the provisions of the Unsolicited Electronic Messages Ordinance with provisions involving fraudulent acts being enforced by the Police.
In the meantime, non-statutory measures were strengthened to combat junk fax messages and promotional telephone calls generated by machines. With regard to junk fax, on 4 July 2005, we revised the voluntary Code of Practice "Procedures for Handling Complaints against Senders of Unsolicited Fax Advertisements" for fixed-line service providers. The revision has proven to be effective in combating junk fax. Under the revised procedure, the threshold to terminate service to a junk fax sender, by fixed-line service providers, has been lowered. As a result, the number of service termination cases by fixed-line service providers against junk fax senders recorded a significant increase, from 237 in 2005/06 to 318 in 2006/07. In the same year, the number of junk fax complaints received by fixed-line service providers also dropped from 41,966 in 2005/06 to 19,012.
Another Code of Practice, "Handling Complaints about Inter-operator Unsolicited Promotional Telephone Calls Generated by Machines", was issued on 5 June 2006 for voluntary compliance by fixed-line and mobile telephone service providers. According to the Code, service providers will take action to suspend or terminate the telephone services of a sender if two or more complaints, within five days, have been established against him/her for sending unsolicited promotional telephone calls generated by a machine (junk calls). All service providers offering telephone services to consumers have pledged to comply with the Code to handle customer complaints about junk calls. Since the launch of the Code, service providers have handled more than 380 valid complaints and terminated 49 phone numbers, as at the end of March 2007. The Code has proven to be an effective tool in tackling the problem of junk calls and helped to reduce the number of junk calls in the market by more than 80%, compared to before the implementation of the Code.
Handling Consumer Complaints
In 2006/07, we handled 203 consumer complaints against Hong Kong's telecommunications operators. Under our existing complaint handling procedures implemented in August 2006, complainants are required to lodge complaints in writing to help us accurately and efficiently assess whether the complaints involve possible breaches of the Telecommunications Ordinance or licence conditions. If a consumer complaint falls outside our remit, we refer it to the operator concerned for review and ask the operator to reply to the complainant directly. Where complaints warrant our investigations, we pledge to issue interim replies to complainants within three working days, and to provide full replies or advise on progress within 27 working days.
The decrease in the number of complaints over the year, as compared to the 282 complaints handled in 2005/06, is possibly due to enhanced public awareness of OFTA's role and powers in resolving disputes between operators and customers as well as operators' improved customer services. Of the 203 consumer complaints handled in 2006/07, only one case was found to be in breach of the Telecommunications Ordinance. A financial penalty was imposed and a report was published on our web site.
Consumer Education
A publicity campaign was launched in October 2006 advising the public to "Be Prepared for Your Outing; Know more about Communications in Country Areas". Through announcements on TV and the radio, members of the public were encouraged to obtain information about mobile network coverage along individual hiking trails from the digital maps at OFTA's web site before going hiking. Other tips for communications in country areas included "dialling 112 with a mobile phone in an emergency". Apart from TV and radio announcements, posters, note cards and bookmarks carrying these messages were distributed to country parks, schools, universities and community centres to reach hiking groups and potential country park visitors.
A series of 11 print advertisements offering "Smart Tips for Consumers by Red Tone and Blue Tone" was kicked off in February 2007. The print advertisements were published in two local newspapers and on our web site. The advertisements provided useful advice to consumers on a weekly basis, covering various topics such as the proper use of communication equipment, tips for buying calling cards, points to note before switching telecom operators, etc. Concluding the programme, an on-line quiz, tying in with the advertisements, was launched on our web site.
A number of publicity materials, including leaflets and posters, covering the following themes were produced in the past year, keeping the public updated on the latest telecommunications information in a timely manner:
Managing the Radio Spectrum and Ensuring Technical Excellence
Satisfying Growing Demand for Radio Spectrum
To meet the industry's demand for radio spectrum in the launch of innovative applications and services, one of OFTA's priorities is to make these scarce, yet necessary, resources available in a timely manner.
In 2006/07, a total of 898 frequency assignments were made for the provision of various radiocommunications services. Additionally, we processed almost 5,000 applications – 4,309 for base stations for Hong Kong's 2G and 3G mobile networks, 49 for paging services and 265 for private radiocommunications services.
In October 2006, the Commerce, Industry and Technology Bureau (CITB) initiated a comprehensive review of Hong Kong's policies guiding radio spectrum management. We provided CITB with the necessary support and technical assistance for the review.
In April 2007, CITB concluded this spectrum policy review and promulgated its Spectrum Policy Framework. Under the Framework, the Government will employ a market-based approach as far as possible, in the management of the radio spectrum.
Coordination with Neighbouring Cities
We represent the Hong Kong Special Administrative Region Government in liaison meetings held with authorities in Mainland China and Macau to ensure that Hong Kong's radio and broadcasting stations operate without radio interference. In addition, we coordinated the use of frequencies within the 174 to 230 MHz band for digital audio broadcasting in Hong Kong with Mainland authorities.
Before the Hong Kong-Shenzhen Western Corridor was opened in July 2007 and during the initial operation of the Corridor and the Hong Kong Port Area at the Shenzhen Bay Port, to ensure the smooth operation of the pubic mobile radiocommunications services and the radiocommunications systems of Government departments providing essential services, we coordinated extensively with Mainland authorities on the use of radio frequencies in these areas.
We will continue to liaise with Mainland authorities on frequency planning and other compatibility issues related to both broadcasting and radiocommunications services. The latest major frequency coordination meeting between OFTA and Mainland authorities was held in December 2006. During the year 2006/07, several task group meetings on the coordination of frequencies between Hong Kong and Guangdong were also convened.
Facilitating the Growth of New Technology
Exploring the performance of ultra-wideband (UWB) devices operating in the 3.1 – 10.6 GHz band, we issued trial permits to interested parties to conduct tests on UWB devices. Following the licence-exemption of passive RFID equipment operating in the 800 MHz and the 900 MHz band, we are considering the possibility of making radio frequencies available in the 400 MHz band for active RFID operation.
At the same time, we are closely monitoring the development of new telecommunications services, technologies and devices in the market to make sure that suitable frequency bands are allocated to meet new demands in an efficient and timely manner.
Implementation of Digital Terrestrial Television
OFTA advises the Government on telecommunications matters and provides technical support to the Broadcasting Authority in their regulation of broadcasting services. We have been tasked to facilitate the deployment of Digital Terrestrial Television (DTT) services which are to be simulcast with analogue services by the two incumbent terrestrial television broadcasters by or before the end of 2007. We have set up two working groups to assist the broadcasters in solving technical issues and coordinating with other Government departments in relation to the implementation of DTT services.
As to the selection of a technical standard for DTT services in Hong Kong, the Government has adopted a market-led approach, ie, leaving the incumbent broadcasters to choose a standard. They have proposed adopting the national DTT standard. After evaluating the proposals and in view of the satisfactory outcome of laboratory tests and field trials of the proposed standard, in June 2007, the TA announced the adoption of the national standard as the transmission standard for DTT services in Hong Kong. Technical specifications for DTT receivers were published in the same month.
Satellite Services in Hong Kong
In preparation for the World Radiocommunication Conference 2007 (WRC-07), OFTA and local satellite operators attended meetings with the Ministry of Information Industry (MII) of China to discuss and resolve issues related to the conference's agenda with regard to satellite matters. We also participated in coordination meetings with operators in Mainland China to resolve potential interference issues between satellite networks of Hong Kong and Mainland China to ensure the coordinated use of satellite orbital positions and frequency assignments.
We studied more than 2,526 satellite network filings issued by the International Telecommunication Union (ITU) to assess any potential interference that could affect Hong Kong's satellite networks.
In 2006, OFTA and MII jointly revised the full set of domestic satellite coordination procedures effecting the coordination of satellite networks between Hong Kong and Mainland China to ensure their efficient and consistent operation. The two parties signed the document, formally adopting the procedures in December 2006.
Telecommunications Standards
In 2006/07, we issued 55 consultation papers to seek the industry's views on standardisation. Subsequently the TA approved five revised telecommunications standards, covering:
Certification and Type Approval of Telecommunications Equipment
In 2006/07, OFTA completed 560 type approval applications for radiocommunications equipment and 62 certification applications for wireline equipment. During the same period, OFTA appointed a testing laboratory as a recognised testing agency (RTA). This means that we accept its test reports for equipment certification.
Since our participation in the APEC Telecommunications Mutual Recognition Arrangement (APEC Tel MRA) in 1999, we have recognised nine testing laboratories within APEC economies as Conformity Assessment Bodies (CABs). Consisting of three designated by Chinese Taipei, four by the US, one by Singapore and one by Canada, these CABs are able to competently perform equipment tests according to our technical regulations. At the same time, three locally designated testing laboratories have been recognised as CABs, including one by Singapore, one by Canada and one by the US.
Ensuring Marine Radiocommunications Standards
OFTA provides the Marine Department with the technical support required to fulfill its obligations with regard to maritime radio installations under the International Convention for the Safety of Life at Sea. In 2006/07, we conducted 81 local surveys on maritime radio and radar installations to ensure that radiocommunications at sea continues to meet the highest international standards.
Professional Training for Maritime Personnel
To improve the professional qualifications of maritime radio operators, OFTA conducted 23 maritime examinations, which were attended by 144 candidates, in 2006/07. The examinations covered certificate categories in radiotelephony for river-trade vessels, local craft, pleasure boats and fishing vessels.
During the year, a total of 54 qualified seafarers holding relevant certificates issued by foreign administrations received their Certificate of Equivalent Competency with Endorsement according to the 1995 Amendments to the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978 (STCW 95), enabling them to operate radio stations on Hong Kong-registered ships.
We continue to recognise and monitor Global Maritime Distress and Safety System (GMDSS) courses at the Maritime Services Training Institute of the Vocational Training Council, the Training Centre of the Marine Department and the Hong Kong Institute of Vocational Education (Tsing Yi). In 2006/07, OFTA issued 42 GMDSS certificates to local seafarers, qualifying them for the operation of GMDSS radio equipment on both Hong Kong-registered and foreign vessels.
During the same period, OFTA continued to recognise and monitor radio amateurs' examinations (in Chinese and English) conducted by the Hong Kong Institute of Vocational Education (Tsing Yi) for the issuing of Amateur Station Licences. Two written examinations were conducted. Of the 382 candidates who attended the examinations, 212 passed.
Crackdowns on Unauthorised Subscription TV
Since the Broadcasting (Amendment) Ordinance came into operation in 2004, we have taken enforcement action, including regular patrols, the issuing of warnings to suspected offenders, as well as raids against pirated viewing of subscription TV programmes in commercial premises. In 2006/07, OFTA patrolled over 600 commercial establishments and mounted 20 raids against suspected offenders.
The sale of unauthorised subscription TV decoders is an offence under the Broadcasting Ordinance. OFTA conducts regular patrols and mounts raids in conjunction with the Police at premises selling such illegal devices. During the year, about 1,100 decoders and component parts were seized in 4 raids, with 7 people being arrested for selling unauthorised TV decoders. In addition, 20 offenders were convicted during the year. Penalties for these offences ranged from fines of $1,000 to $7,000.
Regulating the Sale of Radiocommunications Equipment
The use of radiocommunications equipment not complying with specifications prescribed by the TA can cause severe interference to legitimate radiocommunications services. In regulating the sale of radiocommunications equipment, we conduct inspections on licensed radio dealers and random patrols to shops selling radio equipment. In 2006/07, OFTA mounted 10 raids and seized about 1,000 pieces of radio equipment. Sixteen people were arrested for illegal possession and/or selling of radio equipment.
Enforcement against Unauthorised External Telecommunications Services
OFTA fully understands the impact of unauthorised operations of External Telecommunications Services (ETS) on the industry. We have therefore stepped up enforcement action to combat these illegal activities since 2004. In 2006/07, investigations were conducted in response to 155 complaints and 56 items of telecommunications equipment were seized with an estimated value of over $560,000 in 16 raids. The total amount in fines imposed by the courts and the TA on 11 cases also added up to over $350,000. Looking forward, we will continue to take enforcement action to ensure that Hong Kong's ETS operations are properly regulated.
Rapid Action on Radio Interference Complaints
In 2006/07, our Radio Monitoring Unit (RMU) investigated 3,253 complaints on radio interference filed by operators, users of radiocommunications services and the general public. Investigations were carried out, often on-site, and appropriate action taken to eliminate interference problems. Our RMU will continue to monitor traffic loading on radio channels for effective management of the spectrum.
Improving Broadcast Reception
We continue to play an active role in the handling of complaints and the offering of technical advice with regard to broadcasting reception problems. In 2005/06, we investigated 421 complaints concerning poor television reception and sound broadcasting services.
We also coordinate the construction of new television transposers across the territory to improve reception of domestic free television programme services. During the year under review, a TV transposer came into service in Cha Kwo Ling while a further transposer is being constructed to improve reception in the Ap Lei Chau/Aberdeen area.
OFTA regularly monitors the technical performance of domestic free and pay television programme services, sound broadcasting services and Satellite Master Antenna Television (SMATV) systems, to ensure their compliance with the relevant technical standards and Codes of Practice issued by the Broadcasting Authority and the TA.
Close Communications with the Industry and the Community
In Touch with the World
OFTA participates actively in the global telecommunications arena. We keep in close touch with international organisations such as the International Telecommunication Union (ITU), while also participating in conferences and forums around the world. We maintain close links with the international community, exchanging views and sharing our experiences in the regulation of telecommunications services.
In 2006/2007, we attended, participated or provided support in almost 30 regional and international conferences including:
ITU TELECOM WORLD 2006
The ITU TELECOM WORLD Conference and Exhibition, often described as the "Olympics of the telecommunications industry" and seen as the premier event of its kind in the world, was held from 4 to 8 December 2006 at AsiaWorld-Expo in Hong Kong. This is the first time that this mega event has ever been held outside ITU's home base in Geneva.
A Hong Kong, China Secretariat (HKCS) for the event was set up within CITB to assist the ITU in marketing the event globally, organising official and social functions and providing a wide range of protocol services, hospitality and support programmes for event participants. Assisting in these operations, OFTA provided both manpower and technical support to the Secretariat.
OFTA also co-organised the Hong Kong, China Pavilion with the HKCS and the Office of the Government Chief Information Officer. The Pavilion provided a platform for both Hong Kong's activities and international exchanges, enhancing overseas understanding of the Information and Communications Technology (ICT) market in Mainland China. It also created networking opportunities for industry members from Mainland China, Hong Kong and overseas and facilitated the sharing of experience and knowledge. During the event week, seminars and meetings covering a wide range of topics related to ICT development in Mainland China were held at the Pavilion. A first-ever ‘China Day' event, held at the ITU TELECOM WORLD, provided the climax to the series of activities which took place at the Pavilion.
In conjunction with the world-class exhibition on ICT, a high-level forum was held at ITU TELECOM WORLD 2006 to explore emerging policies, trends and technologies under the theme "Living the Digital World". The Chairman of the Standing Committee of the National People's Congress, Mr Wu Bangguo; the Founder of Grameen Bank, Bangladesh and Nobel Peace Prize Laureate 2006, Prof Muhammad Yunus; the Chief Executive of the Hong Kong Special Administrative Region, Mr Donald Tsang; and the Secretary-General of the ITU, Mr Yoshio Utsumi officiated at the opening ceremony. Some 695 exhibitors from 37 countries took part in this mega event and it was visited by more than 62,000 ICT industry members from 141 countries, including 608 ministers and CEOs. The direct economic benefit generated by this event for Hong Kong is estimated to be in the region of HK$900 million.
Executive-Level Training for Regulators and Policy-Makers
The "Executive-Level Training for Regulators and Policy-Makers" workshop, co-organised by the ITU and Information for Development Program, was held in Hong Kong on 2 and 3 December 2006. OFTA assisted in the pre-event logistics arrangements for the workshop.
Participating in this event, Mr M H Au, Director-General, gave an opening speech to about 100 workshop attendants, consisting of senior executives from telecommunications regulatory agencies from around the world. Mr T Y Chan, Assistant Director (Regulatory Affairs), also joined other regulators at a panel discussion to share his views and experiences on the regulation of interconnection for the new technologies.
Our Partnerships around the World
We maintain strong ties with our counterparts around the world, working in partnership and sharing knowledge and experience with neighbouring territories as well as telecommunications administrations overseas. In 2006/07, we welcomed more than 20 visiting delegations. These included visits from the Botswana Telecommunications Authority, the Australian Communications and Media Authority and the Infocomm Development Authority of Singapore. Discussions and exchanges were both insightful and fruitful.
In March 2007, we made arrangements for a visit for a delegation from the Ministry of Energy, Water and Communications of Malaysia, the Malaysian Communications and Multimedia Commission and top executives of the Malaysian telecommunications sector. In addition to briefings and discussions on the development of Hong Kong's telecommunications market and other regulatory issues, the programme also covered visits to the various operators.
Riding on the ITU TELECOM WORLD event in December 2006, we arranged various bi-lateral meetings with visiting regulators and our telecommunication counterparts from around the world. These meetings provided an ideal opportunity to share information while paving the way for further exchanges into the future.
CEPA and WTO Initiatives
In September 2003, the telecommunications services sector was included in the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA). "Hong Kong Service Suppliers" (HKSS) fulfilling various prescribed requirements enjoy preferential treatment in respect of five value-added telecommunications services in Mainland China. OFTA supports the Trade and Industry Department in the processing of telecommunications operator applications for HKSS certification. CEPA, an open and developing platform, provides an ongoing mechanism for further discussion with the Mainland authorities on more co-operative and market access opportunities. The Government thus maintains close contacts with the industry, seeking further co-operation and market access opportunities under CEPA.
We also provide technical advice and support to the Trade and Industry Department in respect of Hong Kong's participation in World Trade Organization (WTO) negotiations on telecommunications services.
Sharing Insights with the Industry
Two major industry seminars were held in 2006/07. With the emergence of Fixed-Mobile Convergence in the telecommunications industry, we appointed an independent consultant to review the regulatory framework in 2006. A seminar on the Consultancy Report "Review of the Regulatory Framework for Fixed-Mobile Convergence in Hong Kong" was subsequently held in May 2006 to exchange views among industry members, the consultant and OFTA.
In March 2007, we organised a 4-day seminar on competition law for the industry. At our invitation, Professor Richard Whish of King's College, the University of London and non-executive director of the Office of Fair Trading in the United Kingdom, presented a series of talks covering basic principles as well as the latest developments in competition law in Hong Kong and Europe. The professor attracted keen interest and a large audience from the local industry.
Communicating with the Local Community
We take an active role in keeping the public informed of our activities. In the year under review, we organised five media briefings and issued 37 press releases on subjects related to major OFTA initiatives, events and important decisions from the TA.
Articles by our Director-General detailing OFTA's policies and views on various telecommunications issues were published in major local newspapers. At the same time, speeches and presentations made by senior OFTA staff at public seminars and industry conferences were also published on our web site, keeping the public informed and helping to spread our message to stakeholders and the industry.
Working with our Advisory Committees
We work closely with a number of advisory committees to ensure our efficient and effective operations. These committees, consisting of members of the public, industry professionals and representatives of other Government departments, give us specialist advice and a broader view of the industry while also representing the interests of the community. In place since 1994, they include the:
Additionally, they provide a structured and formal channel of communications for interested and relevant parties to offer advice to the TA. Ensuring total transparency, the minutes and discussion papers from all committee meetings are posted on our web site for public information.
Committed to Service Excellence
During the year, we continued to review our manpower requirements and organisational structure to meet changing regulatory needs and the community's rising expectations for quality telecommunications services. Manpower support for our Information and Communications Technologies Division was strengthened, through both staff redeployment as well as the injection of new talent, to provide support services for the enactment of the Unsolicited Electronic Messages Ordinance and associated regulatory requirements. Our Regulatory Affairs Branch also underwent major redistribution of work and redeployment of staff to meet new service demands under the current market environment and policy framework.
On the office management and administrative support front, we made every effort to minimise operating costs while optimising the use of resources. We continue to outsource various services, such as fitting-out works, building services maintenance, office cleaning, vehicle maintenance and security services, with a view to delivering services in the most cost-effective and efficient manner possible. The use of office equipment and energy consumption are also kept under constant review to save costs and improve efficiencies.
A Versatile and Quality Workforce
As at 31 March 2007, OFTA had a total staff complement of 313, consisting of 214 civil servants and 99 staff employed on non-civil service contract terms. This professional workforce is made up of staff members drawn from various fields of expertise.
We maintain a flexible manpower policy, employing contract staff where and when appropriate. Staffing levels and the staff mix are also kept under regular review to ensure the best possible services to the community.
Fostering Staff Relations and Promoting Staff Communications
Our Departmental Consultative Committee (DCC) continues to serve as an effective communications channel between management and staff members. Chaired personally by the Director-General and attended by staff representatives from various offices, the Committee holds regular meetings which provide a useful forum for senior management and staff to exchange views on areas of concern and common interest.
Our quarterly departmental newsletter, OFTA EXPRESS, also serves to improve communications and understanding among staff members. In addition to keeping staff informed of recent events and activities, it also provides a platform for staff to share their views, interests and personal experiences with their colleagues.
To promote a better balance between work and life and to cultivate stronger ties among colleagues, we organise diverse recreational activities for our staff on a regular basis. Activities organised during the year include a lunchtime health talk, an autumn outing to the Hong Kong Wetland Park, a barbecue day, a photo competition as well as an annual dinner-cum-Christmas party. The OFTA team also took part in various charity events – ranging from the Community Chest Corporate Challenge to various marathon walks and other races – to show our care and concern for the less fortunate.
Awards and Commendations
Making sure that we show our appreciation to our staff for their hard work and particularly when they have shown exemplary conduct, a high degree of achievement or service excellence, we present a number of awards, acknowledgements and commendations. During the year, 15 staff members and one work team received the Director-General's Commendation for Meritorious Service, 25 officers received the Long and Meritorious/Valuable Service Award, two officers received the Long and Meritorious Service Travel Award and four of our Drivers received 2006 Safe Driving Awards.
Pursuing Excellence
We are committed to building a dynamic and responsive staff team capable of meeting new challenges and service demands as they arise in the regulation of Hong Kong's dynamic and ever-evolving telecommunications market. To this end, we place a high priority on staff training at all levels, providing training opportunities to update skills and allow our people to keep pace with the advent of new technologies and to enhance their versatility and management capabilities. In 2006/07, we invested $2 million in staff training.
Our staff enjoy a wide spectrum of training opportunities ranging from vocational and technical training, management and leadership enhancement programmes to language and communication courses as well as national studies programmes.
Apart from enrolling staff in training courses offered locally, we continue to sponsor staff attendance at regulatory and management training programmes outside Hong Kong, notably in the USA, Australia and the UK. In 2006/07, staff attended overseas training programmes run by the Australian Communications and Media Authority; an Executive Development Course on Negotiation and Competitive Decision Making at Harvard University; international training courses on utility regulation and strategy run by the University of Florida; as well as the postgraduate diploma course on EC Competition Law run by King's College, University of London. A number of in-house workshops and seminars also keep staff updated on specific topics such as competition and telecommunication laws, new telecommunications technologies, computer forensic training, presentation and public speaking skills and media handling.
During the year, 764 staff members enrolled in our training programmes receiving a total of some 1,500 man-days of training.
Outperforming Our Targets
In the year under review, we either achieved or surpassed our performance targets in 25 out of 26 service areas. In 2007/08, we are aiming to maintain these high standards of service. In addition, we have enhanced the performance target for the handling of consumer complaints and made a new pledge with regard to the handling of industry complaints. Further details of our performance in 2006/07 and our pledge for 2007/08 appear in Appendix D of this report.
We will continue to review our performance indicators and targets to ensure the effective measuring and monitoring of our services.
Caring for the Environment
We are committed to conducting our daily operations and activities in an environmentally friendly and responsible manner.
Speeding up the process and saving paper at the same time, we launched a number of on-line services. This new development makes it easier for members of the public and telecommunications operators to submit licence applications, conduct other business or obtain various items of information through the Internet.
Electronic processes such as e-mail, e-fax and e-filing systems, are widely used within OFTA to facilitate the sharing and flow of information. We also upload electronic versions of our reports, consultation papers and publications on our web site, significantly reducing the need for printed copies. These activities have all contributed positively to the promotion of a "paperless" office.
We continue our procurement of green supplies and environmentally friendly products such as recycled wood-free paper and rechargeable batteries. We also participate in recycling programmes such as the recycling of paper, toner cartridges, compact discs and batteries.
With the support of our staff, we were able to make the following achievements during the year: