Introduction

This paper sets out the purposes of the Telecommunication (Amendment) Bill 1999 (the Bill) and provides a summary of the major provisions of the Bill.

Background

2. On 3 September 1998, the Administration published a Consultation Paper entitled "1998 Review of Fixed Telecommunications - A Considered View" (the Review) for public consultation. Chapter 6 of the Review set out proposals to update the Telecommunication Ordinance, which reflected also the results of the previous two consultations in 1996. On 8 February 1999, we briefed the Legislative Council Panel on Information Technology and Broadcasting on the principles of proposed legislative amendments to improve the regulatory environment for the telecommunications industry. We introduced the Bill into the Legislative Council on 12 May 1999.

Overview of the Legislative Proposals

3. The purposes of the proposed amendments to the Telecommunication Ordinance are -

1. to consolidate the provisions for the promotion of fair competition in the market for public telecommunications services, particularly to incorporate into the Telecommunication Ordinance such conditions already written in the Fixed Telecommunications Network Service (FTNS) licence;
   
   
2. to update, consolidate and clarify certain provisions concerning access to land and interconnection which are already in existence in the Telecommunication Ordinance. In particular, there is a proposal to extend to mobile telecommunications operators rights of access to land on a cost-plus basis;
   
   
3. to streamline licensing procedures to cope with the rapid developments in the telecommunications industry; and
   
   
4. to provide the Telecommunications Authority (TA) as the statutory regulator with explicit legal powers in areas like radio spectrum management and technical standards.

Functions and Powers of the Telecommunications Authority

4. To enhance the status of the TA as an independent regulator who oversees the telecommunications industry with due regard to the needs of the industry, we consider it important that the TA exercises his decision-making powers in a transparent and timely manner, after conducting appropriate consultation with relevant parties. We propose in new section 6A that the TA, in exercising his powers under the Telecommunication Ordinance, should be required to give his reasons in writing when making a determination, direction or decision. We do not propose a general obligation of consultation as there are many decisions which need to be taken by the TA on a routine basis. It is already the practice of the TA to consult relevant parties prior to making significant decisions. We are merely formalising this by including in the Telecommunication Ordinance provisions on consultation and the requirement to issue guidelines for the exercise of TA's various powers.

5. One new provision is for the Policy Secretary responsible for telecommunications, i.e. the Secretary for Information Technology and Broadcasting, to issue directions in writing (which will be published in the Gazette) on how the TA is to exercise his functions and powers under the Telecommunication Ordinance. We expect that this power of policy direction would be exercised only rarely, as it is important for the TA to be, and to be perceived to be, independent.

Licensing

6. To enable the TA to act quickly and responsively to new technology and service offering, we have proposed a tiered licensing framework under clause 4, new sections 7-7E, whereby -

• the Chief Executive in Council will continue to prescribe the conditions in, and issue, exclusive licences;
  
  
• the Secretary for Information Technology and Broadcasting will prescribe, after consultation, the general conditions of carrier licences (for example, FTNS licences and Public Radiocommunication Services (PRS) licences) which the TA may issue; and
  
  
• the TA will issue the carrier licences prescribed by the Secretary for Information Technology and Broadcasting and will prescribe the conditions in, and issue, all other licences provided under the Telecommunication Ordinance.

7. In addition, there will be a new system of class licences to cover the supply of certain telecommunications services and to operate certain networks. Taking account of the representations received from the industry, we propose that the scope of the intended class licences and their terms and conditions should be determined by the TA after consultation with the industry. This proposed means of licensing will be responsive to technological and economic changes, business-friendly and easy to administer.

8. The present licensing system is a facilities-based licensing system. Under clause 5 of the Bill, we propose to extend the requirement for licensing to persons who provide non-facilities-based services, such as international calling cards marketed in Hong Kong, in order to protect consumers.

Competition Safeguards

9. Our principal concerns are to consolidate the powers for the promotion of fair competition and to extend these across the whole telecommunications market through incorporating powers now provided in the General Conditions of the FTNS licences into the Telecommunication Ordinance. New sections 7K-N are intended to achieve this aim. New section 7F requires telecommunications licensees to publish tariffs for the information of consumers.

10. We propose in clause 22 an increase in the maximum penalty which may be levied by the TA for breaches of licence conditions or directions of the TA by ten-fold to $1 million per breach. For cases where the TA considers such a penalty insufficient, we propose that he should be allowed to pass the case to the Court of First Instance for it to determine the case, if appropriate, and impose fines of up to 10% of the turnover of the company in the relevant market segment in the relevant period or $10 million per breach, whichever is the higher. We also propose that the TA should be empowered to require the concerned licensee to take remedial publicity action and to suspend the licence, or parts thereof, relating to the services that are the subject of the breach.

11. In clause 25 (new section 39A), we propose that there should be an additional civil remedy available to persons who suffer damage arising from the breaches of the provisions prohibiting anti-competitive practices and misleading or deceptive conduct, or licence conditions or directions relating to matters in these provisions. Action must commence within three years after the commencement of the breach or the imposition of penalty by the TA or the court as the case may be, whichever is the later.

12. Operational experience has shown that it is necessary to obtain information from customers to determine whether a breach has or has not occurred. Sometimes, this information is provided voluntarily. But where this is not the case, we propose in clause 23, new section 36D, that the TA should be able to apply to a magistrate for an order to require the non-licensee concerned to provide the information relevant to the alleged breach. This seeks to ensure that there is independent assessment of the TA's requirement for the requested information and is intended as a safeguard for the non-licensee. The information obtained would be treated in confidence and would not be released without the consent of the non-licensees.

Interconnection

13. In clause 19, we propose to clarify the powers of the TA on interconnection. The TA will be given unequivocally the powers to make a Determination on interconnection at any technically feasible point, (i.e. including the local loop,) and on such terms (including those which are cost-based) as appear to the TA to be fair compensation for access to and use of the appropriate part of the network or line. The clarity thus provided will facilitate interconnection agreements and thus improve competition, particularly in the local fixed telecommunications market.

Access to Buildings and Land

14. The objectives of our proposals on access to buildings and land are to clarify the existing access right at no charge for persons authorised by the TA - primarily FTNS licensees and the subscription television broadcasting licensee (Hong Kong Cable Television Limited) - and to extend these rights, on payment of a reasonable fee, to public radiocommunication services licensees. To improve the right of access to telecommunications services, we propose in clause 13 to void any terms in an agreement, deal or contract that restrict the rights of residents to access telecommunications services of their choice. This provision is intended to have only prospective effect. We also propose to reinstate the right previously contained in a repealed section of the Telephone Ordinance for FTNS licensees to lay telecommunications lines on the seabed within the waters of Hong Kong and to manage such lines in a similar manner to the way in which telecommunications lines on land are managed.

15. Our policy intention is that there should be ubiquitous coverage for mobile telecommunication services. With eleven mobile phone networks operated by six operators, competition in our mobile radiocommunications market is intense and air-time charges have dropped substantially in recent years. The number of mobile phone users reached 3.26 million as at April 1999, representing a penetration rate of 48%. The introduction in the next few years of the next generation of mobile phones, with their ability to convey large amounts of data, voice and video signals at high speed, will further spur the demand for mobile telecommunications services. Improved access for the installation of base stations and antennae is therefore important for ensuring the availability of quality mobile telecommunications services in Hong Kong.

16. Mobile telecommunications operators have encountered problems in gaining access to shielded areas of public places (e.g. shopping malls and tunnels) where equipment has to be placed at specific locations in order to provide network coverage. This makes it difficult to achieve our policy objective that there should be ubiquitous coverage for mobile telecommunication services. Clause 7 proposes that there should be a right, subject to a public interest test and on payment of a reasonable fee (based on costs and a reasonable profit element), for the mobile network operators to gain access to such shielded areas in order to place their telecommunications facilities therein to provide services. It remains our intention that the mobile network operators should, in the first instance, seek a commercial agreement with the landlords/tunnel operators on access. Only if this failed and the public interest test was met would the TA be empowered to step in and determine terms. We believe this strikes the right balance between the various interests involved.

17. The tunnel operators do not favour this approach and have made representations that the proposal may affect their property rights and for which they may seek compensation. We have since obtained legal advice which confirms that our proposals are reasonable and that the grounds on which they seek compensation are not founded. Given the increasing importance of mobile radiocommunications services for businesses and domestic use, we consider that the Government should take this further step to enable the mobile network operators to provide ubiquitous coverage for mobile networks throughout Hong Kong.

Technical Regulation

18. Following deregulation of the local fixed network market, the Hong Kong Telephone Company no longer certifies telecommunications equipment against the applicable technical standards and specifications. This work is now overseen by the TA, who needs explicit powers, which we have provided for in new Part VA, to set such technical standards for telecommunications equipment and to conduct type approval and certification of telecommunications equipment.

Telecommunications Numbering Plan

19. In new section 32F, we are re-enacting section 3 of the Telephone Ordinance, under which the TA manages the telecommunications numbering plan for Hong Kong. There is a new provision, which is an enabling one ,for the Secretary for Information Technology and Broadcasting to make regulations to allow the TA to auction off "special numbers" (that is numbers valued by the consumers for their "lucky" properties) and apply the proceeds (less administrative costs) to charitable institutions or to institutions for education and research and development activities connected with telecommunications.

Radio Frequency Spectrum Management

20. The TA has been managing the radio spectrum, but there is no explicit provision in the Telecommunication Ordinance for the powers to plan and manage the radio frequency spectrum and to allocate and re-allocate radio frequency channels for use. Given the growing importance of radiocommunications, new Part VB has been inserted to specify the powers of the TA in the planning and allocation of radio spectrum, including his obligations to consult before exercising such powers. Important provisions regarding the prevention of interference are to empower the TA to give directions to persons causing direct or harmful interference and to require relevant apparatus to be submitted for testing of compliance within specified limits. As radio frequency spectrum is a limited community resource, we have also included an enabling provision for the Secretary for Information Technology and Broadcasting to prescribe a spectrum utilisation fee or a method of calculating such fees in excess of costs to promote a more economically efficient utilisation of spectrum.

Conclusion

21. The Telecommunication (Amendment) Bill 1999 is an important, although technical, Bill to improve the regulation of the telecommunications industry. It will promote competition and economic efficiency in the telecommunications industry, thereby providing benefits to that industry, the industries which it supports and consumers. The ability of the TA to respond quickly to emerging trends and technologies through a more responsive system of licensing will similarly benefit the industry and consumers. Improvements to access for telecommunications will benefit all telecommunications users, who will then be in a better position to choose from competitive suppliers. In the mobile telecommunications field, better access is essential to enable ubiquitous coverage by telecommunications networks. The proposal for regulation on determining charges for access to shielded areas only if this is in the public interest will benefit the telecommunications industry and users, while providing a reasonable return for the owners of such shielded areas. In drawing up the proposals, we have taken into account results of an extensive consultation exercise. We believe the proposed legislative amendments will benefit the industry, consumers and the community as a whole.


July 1999
Information Technology and Broadcasting Bureau