Introduction

1. This paper informs Members' of MTR Corporation's position and views on the Telecommunication (Amendment) Bill 1999.

Background

2. Over the past six years the MTR Corporation (hereafter called "the Corporation") has signed a number of agreements with paging and mobile telephone operators providing coverage to public areas of the MTR.

3. The agreements have been negotiated and implemented successfully without the need for intervention by the Office of Telecommunications Authority (OFTA).

4. The Corporation understands from the Telecommunication (Amendment) Bill that the Telecommunications Authority (TA) has proposed legislative amendments to ensure that mobile telephone operators are not prevented from gaining access and providing services to the public in underground stations, tunnels and shopping malls.

5. The Corporation has always ensured that access has been available to mobile, fixed network and radio paging operators on a fair and equitable basis. In reviewing the Bill the Corporation has concerns with respect to how the proposed amendments may adversely impact on telecommunications coverage at the Corporation's tunnels, stations, shopping centres etc. These concerns are set out in the following paragraphs.

Concerns
Impact to the Existing Agreements

6. The Amendments may provide the TA with the power of determination to override terms of concluded agreements which the Corporation has already entered into.

7. It is the Corporation's fundamental position that the Amendments should not include power to override existing concluded agreements, otherwise the principle of Government non-interference in private agreements which have been entered into voluntarily by both parties would be violated and the commercial viability of investments made by the Corporation in good faith, with the expectation of reasonable returns for the risk and investments undertaken, would be jeopardized. This non-retrospective principle was cited in the "1998 Preview of Fixed Telecommunications - A Considered View" paragraph 6.25 where it states "the Government does not intend that the amended section 14 should affect the existing commercial agreements because as a general rule, it is contrary to legal policy to use legislation to upset contracts voluntarily entered into."

Right of Access and Installation of Equipment

8. The clause 7 Amendment to Section 14 gives mobile telephone operators the right to access the Corporation's premises to build their own individual systems. The Corporation's concern is that due to the space constraints and complexity of coordination it is not practical nor is it efficient for operators to build their own systems in a piecemeal fashion. It is a fact that there is very limited space in ceilings, equipment rooms and cable ducts and also for aesthetic reasons it is essential that a single shared network requirement for all mobile telephone networks be installed in MTR premises.

9. The proposed amendments of the Bill may reduce the incentive for mobile telephone operators to work together and develop such a shared network, as they may individually have the right to build systems to suit their own particular needs but without regard to other telecommunication operators nor the MTR's needs. If this scenario were to be adopted for a new extension to the MTR network it is possible that several operators may propose their own solutions and they may not be prepared to agree to the joint development of a shared network, thus leading to insufficient space to accommodate all requirements or unacceptable antennae forests and cabling in tunnels and ceilings.

10. The Corporation therefore must retain the power and authority to assure access to its facilities is undertaken in a safe and coordinated manner, and that the capital costs be equally shared fairly between telecommunication operators. Equally important, the Bill should also ensure that the Corporation has the right to determine the type of equipment to be installed, as well as the method of installation to avoid interference to the operations of the railway.

The Right of TA to determine Commercial Terms

11. It is proposed in the Telecommunication (Amendment) Bill that the TA will have the power to intervene and determine commercial terms between property owners and telecommunication operators. It is the Corporation's opinion that Government, or Government policy-making bodies, should not be involved in any commercial contract discussions as a matter of principle. Otherwise the free market economic policy of Hong Kong will be undermined.

12. It will always be arguable whether any such determination made by the TA is really based on public interest rather than primarily on the commercial interests of the telecommunications operators. In any case, Government should not be seen as helping one industry at the expense of another.

13. The Corporation is operated under commercial principles and therefore should make a reasonable return on any commercial venture. If the TA were to make a determination which resulted in the Corporation effectively subsidizing telecommunication operators, the fare-paying passengers in turn would indirectly be subsidizing the telecommunication operators and users.

14. In addition, it may not be cost effective for the TA to equip itself with expertise to make professional assessments of the complex situation of telecommunications systems in the MTR involving construction / maintenance / operation / opportunity costs, risks and reasonable returns in any commercial deal between the Corporation and telecommunications operators.

15. The proposed amendments of the Telecommunication (Amendment) Bill will encourage operators to ask for determinations from time to time rather than committing to longer term contracts using commercial judgement. This will inevitably require the TA to commit extra cost and manpower to deal with such matters.

16. The previous arrangement whereby telecommunication operators negotiated and voluntarily entered into contracts with the Corporation has worked well for both MTR passengers and telecommunications operators' subscribers. Thus there is no need to change the system, and to do so, as per the Bill, would lead to all the disadvantages outlined above.

Conclusion

17. In a free market, the telecommunication operators should be given the freedom of choice in selecting their marketing strategy and this should include which areas they should provide coverage and at what prices. Similarly the public is given a choice of network operators and corresponding fees payable based on their needs i.e. possibly additional fees for use of mobile phones in railways, tunnels or some indoor malls.

18. It is of the utmost importance that the free economy of Hong Kong should be protected and that one industry should not be made to subsidize another industry. It is important to protect the rights and authority of property owners such as the Corporation to ensure the smooth and efficient operations of the railway will not be affected by any uncoordinated activities by telecommunication operators installing their equipment at railway premises.

19. The commercial interest of the property owners should also be respected by allowing a reasonable return on investments made in telecommunication systems and/or for the use of the owners' property by telecommunications operators.


MTR Corporation
August 1999