Ref : CB1/BC/18/98/1

Members present :

Hon SIN Chung-kai (Chairman)
Hon David CHU Yu-lin
Hon HO Sai-chu, SBS, JP
Hon Fred LI Wah-ming, JP
Hon MA Fung-kwok
Dr Hon Philip WONG Yu-hong
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon Mrs Miriam LAU Kin-yee, JP

Members attending :

Hon Martin LEE Chu-ming, SC, JP
Hon Christine LOH

Members absent :

Hon Eric LI Ka-cheung, JP
Hon CHOY So-yuk

Public officers attending :

Ms Eva CHENG, JP
Acting Secretary for Information Technology and Broadcasting

Mr M H AU
Acting Director-General of Telecommunications

Ms Gracie FOO
Principal Assistant Secretary for Information
Technology and Broadcasting

Miss Priscilla TO
Assistant Secretary for Information Technology and Broadcasting

Attendance by invitation :

Cable & Wireless HKT CSL Limited

Mr SHUEN Shiu-man
Group Manager, Radio Planning

Mr Adam WONG
Director, Mobile Networks

Cable & Wireless HKT Limited

Mr Norman YUEN
Deputy Chief Executive

Mr Fred TIPSON
Director of Regulatory Affairs

Hong Kong Cable Television Ltd

Mr Vince LAM
Strategic Planning Director

Ms Kou Li CROWTER
Legal Manager, Commercial Affairs

Hutchison Telecommunications (Hong Kong) Ltd

Mr Peter WONG
Fixed Network Director

Mr Tony MA
Senior Manager - Commercial

New T&T Hong Kong Limited

Ms Agnes TAN
General Counsel

Mr Malcolm LEUNG
Legal & Regulatory Counsel

New World Telephone Limited

Mr Pedro CHING
Consultant

Mr Thomas YAU
Senior Manager, Regulatory & Carrier Affairs

Peoples Telephone Company Limited

Mr Ali BAIREKTAR
General Manager, Technical Division

Miss Sze Yuk Ying
Regulatory Manager

SmarTone Mobile Communications Limited

Mr Hubert NG
Chief Executive Officer

Sunday (Mandarin Communications Ltd)

Mr Craig EHRLICH
Group Managing Director

Ms Emilia HOASJOE
Group Director

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Miss Connie FUNG
Assistant Legal Adviser 3

Ms Anita SIT
Senior Assistant Secretary (1)8

I Meeting with mobile phone operators, Fixed Telecommunication Network Services operators and the Administration

The Chairman welcomed representatives of mobile phone operators (MPOs) and Fixed Telecommunication Network Services (FTNS) operators to the meeting. He said that the purpose of this meeting was for the Bills Committee to exchange views with operators in the telecommunications industry on the Telecommunication (Amendment) Bill 1999 (the Bill), and for the Administration to take note of the deputations' views and to provide supplementary information where necessary. He then reminded the deputations that when addressing the Bills Committee, they were not covered by the protection and immunity provided under the Legislative Council (Powers and Privileges) Ordinance (Cap. 382). Their written submissions were also not covered by the said Ordinance. He then invited the representatives to present their views.

Presentation of views by representatives of mobile phone operators and Fixed Telecommunication Network Services operators

Cable & Wireless HKT CSL Limited (CWHKT/CSL)
(CB(1)1842/98-99(03))

2. Mr Adam WONG highlighted the views of the company as follows :

1. In view of its phenomenal growth, mobile telecommunication would likely become an equally important platform as fixed telecommunication for E-commerce and Internet applications in the foreseeable future. However, MPOs had experienced difficulties in gaining access to tunnels and buildings, including unfair treatment, denial of access and exorbitant rentals. The access fees charged by tunnel operators and landlords of shopping malls were about 20 times and seven times respectively the rental for general roof-top sites.

2. The level of access fees was not the outcome of market forces, since licensed MPOs had the obligation to provide service coverage in tunnels and other shielded areas of public places while tunnel operators and railway corporations enjoyed monopolistic rights to the respective infrastructure facilities.

3. If Hong Kong was to develop into a leading telecommunication centre and Internet service hub in Asia, legislation should be enacted to provide MPOs with an unconditional right to install and maintain network facilities on land and buildings just as FTNS operators had the same right to install their cable networks.

4. Legislation to provide for unconditional access by MPOs should apply to future buildings and facilities and the necessary space and sites should be reserved at the planning stage for future installation of mobile network facilities. As regards access to existing buildings and facilities, the criteria for determining access fees charged on MPOs should be drawn up by an independent body in consultation with the industry and other relevant parties.

5. The company supported the enactment of general competition legislation, as the proposed provisions on competition safeguards in the Bill applied only to licensees under the Telecommunication Ordinance but not to other affiliated commercial entities.

Cable & Wireless HKT (CWHKT)
(CB(1)1831/98-99(01))

3. Mr Norman YUEN highlighted the following points delineated in the company's written submission -

1. The company had all along supported amendments to the Telecommunication Ordinance in order to meet present day needs and to provide an appropriate regulatory framework for the telecommunication industry. However, the proposed amendments were not comprehensive enough to reflect and facilitate the phenomenal development of the industry.

2. The company supported proposed amendments seeking to provide clear standards and guidelines for the industry, such as the proposal to increase the maximum penalty which might be levied by the Telecommunications Authority (TA) for breaches of licence conditions or directions of TA, and the proposal to empower TA to make determination in the case of unreasonable obstruction to installation of telecommunications facilities.

3. The Bill conferred on TA wide-ranging powers, but did not spell out the principles and objective criteria that TA should follow in exercising its powers. For example, the Bill did not specify how and on what basis TA should form his opinion that a licensee was in breach of the competition protection provisions. The proposed provisions might also lead to a flood of frivolous lawsuits, and a licensee being sued for such breaches could hardly raise a defense against or challenge TA's opinions as the basis for his opinions was not known.
   

4. While decisions of most regulatory bodies in Hong Kong were subject to some sort of appeal on merits, (whether to the Court, or to specifically constituted appeal bodies or the Chief Executive in Council), the Bill did not provide an appeal mechanism against TA's opinions, determinations, directions and decisions. The general remedy of judicial review was only a limited remedy as the Court would mainly consider the process of reaching a decision, rather than whether the decision per se was lawful and reasonable.

5. The Bill provided TA with almost unfettered discretion to mandate facilities sharing and interconnection, and absolute discretion as to the calculation of compensation including whether compensation was payable at all. The company considered that these proposed provisions were an infringement on private property rights, and would stifle innovation and investment. As pointed out in the joint legal advice by Michael Thomas Q.C.S.C., Johannes CHAN of the Hong Kong Bar and Tim Eicke of the English Bar (CB(1)1842/98-99(02)), those provisions conferring wide ranging powers on TA without the limits of these powers being clearly spelt out were not concordant with the human rights provisions of the Basic Law, the Bill of Rights Ordinance and the International Covenant on Civil and Political Rights.

6. General competition legislation should be enacted but this should not delay enactment of the present Bill.

Hong Kong Cable Television Ltd
(CB(1)1860/98-99(02))

4. Mr Vince LAM highlighted the following points raised in the company's written submission-

1. The proposed Section 6A in the Bill conferred on TA wide-ranging powers. In exercising his powers, TA was subject to certain requirements, including policy directions of the Secretary for Information Technology and Broadcasting etc. However, in view of the absence of anti-trust or competition laws in Hong Kong, it was doubtful whether the proposed requirements were adequate in checking the broad and loosely-defined powers proposed for TA.

2. An appeal procedure should be drawn up and an independent appeal body should be set up with the powers to quash the orders, determinations or decisions of TA which had led to the appeal. The appeal body might be chaired by a LegCo Member and augmented by industry experts, representatives from relevant licensees and consumer interest bodies.

3. The Bill was timely and necessary. With proper checks and balance in place, it would facilitate the development of Hong Kong into a telecommunication hub in the region.

Hutchison Telecommunications (Hong Kong) Limited (Hutchison)
(CB(1)1845/98-99(03))

5. Mr Peter WONG stated that the company was in support of the Bill in general, and in particular, the proposed provisions which purported to-

1. grant access right to MPOs to install radiocommunication facilities in public places;

2. clarify the powers of TA on interconnection; and

3. consolidate the powers of TA to promote fair competition in the telecommunications market.

6. Mr WONG also highlighted the growing importance of mobile telecommunication as a utility and the difficulties being faced by MPOs, as detailed in the company's written submission. The company also supported the provisions on competition safeguards and considered that the proposed provisions on interconnection would facilitate the early completion of cabling by the three new FTNS licensees.

New T&T Hong Kong Limited
(CB(1)1853/98-99(01))

7. Ms Agnes TAN informed members that the company welcomed the Bill in general, though it considered that refinements were needed for some proposed provisions. She further submitted the following views on behalf of the company -

1. Before and after the liberalization of the fixed telecommunication market in 1995, new FTNS operators had been frustrated by the lack of clarity in the functions and powers of TA and had to engage in protracted and difficult "commercial negotiations" for interconnection access with the dominant FTNS operator. The company considered that in the absence of a clear legal basis for the definition and management of competition in the telecommunications market, TA had grave difficulty in rectifying inappropriate operating relationships.

2. The functions of TA should be clearly spelt out in legislation to avoid uncertainties. Whilst TA should be vested with the necessary powers to fully discharge his functions, there should be adequate checks on his powers. The company considered that an independent appeal board with the responsibility to review the decisions of TA, and where appropriate, to quash the decisions, should be established. However, this appeal board should not have the authority to substitute the decisions of TA. Appropriate guidelines should be formulated to safeguard against abuse of the appeal mechanism.

New World Telephone Limited (New World)
(CB(1)1842/98-99(04))

8. In presenting New World's submission, Mr Pedro CHING confirmed that the company supported proposals to enhance competition safeguards, including the proposed increase in penalty for breach of licence conditions, allowing TA to obtain information from other parties on alleged breaches of licence conditions by a licensee, and availing civil remedy to parties who suffered losses as a result of anti-competitive practices engaged by a licensee. On the subject of interconnection, the company supported the proposed measures to consolidate TA's power in determining the terms and conditions of interconnection.

9. On access to land and buildings, Mr Petro CHING said that the proposed provisions were not satisfactory as the current problem of landlords/tunnel operators charging exorbitant rentals for access had not been adequately addressed. The proposed provisions would place a heavy burden on MPOs to satisfy TA that there were grounds for TA's intervention. Moreover, he said that TA's intervention would be a lengthy process which might delay network roll-out. Mr CHING further proposed that MPOs be granted the right similar to that of fixed network licensees to install their network equipment in shielded areas pending the conclusion of a commercial agreement on access. This would enable timely provision of mobile services and a more equitable bargaining relationship between MPOs and landlords. Either party could apply to TA for arbitration if an access agreement could not be reached after protracted negotiation.

People Telephone Company Limited (People)
(CB(1)1842/98-99(01))

10. Mr Ali BAIREKTAR said that in general, the company welcomed the amendments proposed in the Bill. He stressed the importance of providing fair and equitable access as that currently available to FTNS operators so as to enable MPOs to provide quality mobile telecommunication services. As MPOs had the licence obligation to provide service coverage in tunnels and other shielded areas of public places, they were put in a disadvantaged position when bargaining with landlords/tunnel operators on access rentals. The company considered that the proposed provisions on access to lands and buildings could balance the needs and interests of MPOs, landlords/tunnel operators and the public.

SmarTone Mobile Communications Limited (SmarTone)
(CB(1)1845/98-99(01))

11. In presenting the views of the company, Mr Hubert NG said that SmarTone in principle supported the Bill which aimed to enhance the development of a dynamic information infrastructure for Hong Kong. He also made the following points-

1. With the very high penetration of mobile telecommunication services and the prospective convergence of fixed and mobile services, the company considered that it would only be fair and equitable for MPOs and FTNS operators to receive equal treatment.

2. The company supported the Government's policy of providing ubiquitous coverage for mobile telecommunication services. Currently, MPOs were often refused entry or required to pay exorbitant rentals to gain access. This situation was incongruent with the prevailing practices in other countries where tunnels and shopping malls only charged MPOs at cost or a minimal fee for access.

3. The company therefore supported any proposed amendments in the Bill which would enhance MPOs' position in gaining access and which would help to reduce the difference in treatment between MPOs and FTNS operators.

Sunday (Mandarin Communications Limited) (Sunday)
(CB(1)1877/98-99(02))

12. Mr Craig EHRLICH requested members to give due consideration to the policy objectives for telecommunications services and consumers' interest. He commented that past Government policies on telecommunications had facilitated substantial accomplishments of the industry but it should be recognized that telecommunications technologies were on the edge of a revolution in wireless applications. New mobile technologies in future would be the convergence of mobile and fixed services with the handset becoming the fastest means for data delivery. He stressed that mobile telecommunication services would have a much more important role to play in future.
13. Mr Craig EHRLICH further commented that whilst the intention was to adopt a technology-neutral approach in policies, in practice, policy decisions were in favour of fixed telecommunication services. The company considered the Bill a step in the right direction but did not go far enough to achieve the policy objectives.

14. To conclude, Mr Craig EHRLICH urged members to view mobile telecommunication services from a forward looking perspective and put mobile network services on par with fixed network services in examining Government policies on telecommunications and the present Bill.

Discussion with representatives of MPOs and FTNS operators

15. In response to members' enquiry about reasonable criteria for determining access fees, Mr Adam WONG of CWHKT/CSL opined that the criteria should be drawn up through a consultation process involving all relevant parties. The opportunity cost of providing access by landlords/tunnel operators was a reasonable basis for calculating the access fees. He stressed that in the long run, MPOs should be given the right of access to land and buildings as were FTNS operators at present. The access right of MPOs should thus be taken into account when planning for buildings and other structures, thus obviating the need to negotiate for access by MPOs. If this policy direction was adopted in future, determination of access fees would be a transitional issue only.

16. Regarding the feasibility of installing common network facilities to be shared by different MPOs in order to save space and costs, Mr Adam WONG of CWHKT/CSL said that each radiocommunications installation consisted of two elements, an antenna and a broadcasting machine. At present, common antennas had already been installed in many shielded areas, but it was technically not feasible to share the use of broadcasting machines among different operators. However, the size of new models of broadcasting machines were as small as refrigerators.

17. As to whether the licensed MPOs had ever sought to negotiate collectively with tunnel operators for access, Mr Craig EHRLICH of Sunday and Mr Adam WONG of CWHKT/CSL confirmed that MNOs had sought to negotiate collectively with tunnel operators for placement of common facilities, but tunnel operators insisted on negotiating separately with individual MPOs and required MPOs to install separate facilities.

18. On some members' concern about discriminatory charges and denial of access by landlords/tunnel operators affiliated with a particular MPO, Mr Hubert NG of SmarTone said that although Sun Hung Kai Properties Limited was a shareholder of SmarTone and Tai Lam Tunnel, SmarTone was charged on the same basis as other MPOs for access to Tai Lam Tunnel. He understood that the operator of Tai Lam Tunnel had not rejected the access of any MPO. Mr Peter WONG of Hutchison said that the company was charged for access to properties owned by Hutchison Whampao Limited on the same basis as other MPOs.

19. Mr Craig EHRLICH of Sunday said that there had been discriminatory treatment to different MPOs by some property owners in the past, but the situation had changed over the past year and Sunday found it easier to obtain access at present. He considered that the issue at stake was the level of charges. Mr Adam WONG of CWHKT/CSL said that the company had negotiated for access to some properties owned by companies affiliated with certain MPOs for many years but could only obtain access at exorbitant fees.

20. As to whether there had been incidents whereby tunnel operators had agreed with affiliated MPOs on very high access fees and then quoted these fees as benchmark reference for subsequent negotiations with other MPOs, Mr Tony MA of Hutchison and Mr Craig EHRLICH of Sunday confirmed that their companies had encountered such incidents.

21. On the difference between the access fees charged by Government tunnels and those charged by private tunnels, Mr Tony MA of Hutchison said that the access fees charged on the company by private tunnels were about eight times those charged by Government tunnels. Mr Hubert NG of SmarTone pointed out that generally speaking, private tunnels charged higher access fees than Government tunnels, partly due to the fact that the access agreements with Government tunnels were concluded at earlier times. Mr Adam WONG of CWHKT/CSL said that the access fees charged by Government tunnels and private tunnels were about six times and 20 times respectively that of the rentals for installations at general rooftop sites. In reply to Mr Howard YOUNG's request for further information on the level of fees payable, Mr Pedro CHING of New World said that the revenue generated from the usage of the mobile phone services of the company in tunnels only accounted for about 30% of the total access fees payable by New World to tunnel operators.

22. On some deputations' suggestion of using the rental value of the premises used for installation of network facilities as the basis for determining access fees, Mrs Miriam LAU considered the potential benefits that could be derived from the placement of network facilities could not be fully reflected in the market rental value of the premises concerned. On another suggestion of using the cost-plus (i.e. costs plus a reasonable profit element) basis for fees determination, Mrs LAU also pointed out that there could be considerable cost differences between different properties and infrastructure facilities and the concept of a reasonable profit element was also ambiguous. Finally, she queried that using costs as the basis for fees determination might be unfair to tunnel operators, bearing in mind that MPOs could determine their charges on commercial considerations whereas BOT tunnel operators could not determine the level of tolls entirely on their own accord.

23. Mr Petro CHING of New World said that whilst it was acceptable for MPOs to pay a reasonable access fee for obtaining access to private properties, he considered that currently, the fees being charged were unreasonable as they could be as high as HK$600,000 a month for BOT tunnels. Mr Hubert NG of SmarTone and Mr Craig EHRLICH of Sunday shared the view that as MPOs were required by their licence to provide service coverage in tunnels, they could not negotiate with tunnel operators on an equal footing. Given the licence obligation, they considered that it would only be fair to provide MPOs with a statutory right of access to tunnels.

24. On whether MPOs had encountered difficulties in gaining access to Government tunnels, Mr Pedro CHING of New World said that the company operated a PCS network. Unlike GSM network operators, the company had not been able to obtain access to Government tunnels so far. He added that in this regard, the Government had acknowledged that the delay in providing access was not due to any fault of the company and therefore the company would not be penalized for the delay.

25. Mrs Miriam LAU asked whether the licence requirements, including the one relating to network coverage in tunnels, had been made known to MPOs at the time when they applied for their licence. She also enquired whether the Government had made any indication to MPOs on the possible enactment of legislation to regulate access fees charged on them by landlords/tunnel operators.

26. In response, Mr Hubert NG of SmarTone confirmed that the licence conditions were made known to bidders in the licence tendering exercises. He also informed members that compliance with the licence conditions was assured through a performance bonds system. Mr Craig EHRLICH of Sunday said that the company was aware of the licence requirement on coverage and the performance bonds system when applying for a MPO licence, but had not envisaged that tunnel operators would take advantage of their monopolistic position and demand exorbitant fees. He added that when most of the existing tunnels were built, the tunnel operators might not have foreseen the rapid growth of mobile telecommunication.

27. On some members' concern that the access provisions in the Bill would affect the existing agreements on access entered into by the landlord/tunnel operators and MPOs, Mr Pedro CHING of New World said that this was a legal issue to be resolved though the company would prefer that the access provisions would apply upon enactment. Mr Adam WONG of CWHKT/CSL said that the company fully respected the spirit of contract but was also concerned whether MPOs would be treated equally with FTNS operators in the near future.

28. Mr Howard YOUNG enquired about the feasibility of appointing a private independent arbitrator instead of applying to TA for arbitration in the case of both parties failing to reach an agreement on access. Mr Ali BAIREKTAR of People and Mr Pedro CHING of New World indicated that the companies would accept either the TA or an independent body as the arbitrator.

29. Mr Martin LEE requested the attending representatives to note that the views expressed and questions raised by individual members at this meeting did not represent any collective views of this Bills Committee. However, the Bills Committee and other non-Committee Members would take into consideration their views when examining the provisions of the Bill. He also suggested that the attending MPOs and FTNS operators liaise among themselves and if possible, reach some form of consensus on issues related to the Bill. He added that it would be most helpful if the Bills Committee could be advised of any such consensus.

II Any other business

30. The Chairman thanked the representatives for attending the meeting and said that if the deputations had further views to submit, they would be welcome to do so in writing.

31. The meeting ended at 10:25 am.

Legislative Council Secretariat
30 September 1999