The Secretary for Information Technology and Broadcasting submits the following note for Members' information -

Title of Note	Date of ExCo
1998 Review of Fixed Telecommunications -Moratorium on the Issue of Further Local Fixed Telecommunications Network Services Licences and Licensing of Additional External Facilities-Based Operators	4 May 1999

5 May 1999

Information Technology and
Broadcasting Bureau

File Ref. ITBB CR 7/4/6 (99) XV

INTRODUCTION

At the meeting of the Executive Council on 4 May 1999, the Council ADVISED and the Chief Executive ORDERED that to enhance effective competition and encourage the roll-out of telecommunications facilities, we should -

1. extend to 31 December 2002 the moratorium on the issue of further local Fixed Telecommunications Network Services (FTNS) licences for the construction of new fixed wireline-based ¹ networks subject to satisfactory commitments from the three new FTNS licensees ² on further network roll-out during the moratorium (and as elaborated in paragraphs 12, 22 and 23 below); and
   
   
2. progressively liberalise the external facilities-based telecommunications market by adopting the following measures as set out in paragraphs 20 to 23 below -
   
   
   1. with effect from 1 January 2000, allowing the three new FTNS licensees to operate all forms of external telecommunications facilities as already reflected in their FTNS licences;
      
      
   2. issuing licences for the operation with effect from 1 January 2000 of non-cable-based external telecommunications facilities ³;
      
      
   3. issuing licences for the operation with effect from 1 January 2000 of external telecommunications facilities based on submarine or land cables only to those who invest directly in bringing physical cable(s) to Hong Kong; and
      
      
   4. issuing licences for the operation with effect from 1 January 2003 of external telecommunications facilities based on submarine or land cables to those who have acquired capacity through the purchase of Indefeasible Rights of Use (IRUs) ⁴ of cables.

BACKGROUND AND ARGUMENT

Background

2. When we licensed three new FTNS licensees (at the time for the operation of local fixed telecommunications services only) in June 1995, we agreed to a three-year moratorium on the issue of further local FTNS licences. This moratorium is up for review - a review also required as a result of our commitment under the World Trade Organisation (WTO) Agreement on Basic Telecommunications. Also, in the Policy Statement which we issued following the conclusion of the Framework Agreement on 20 January 1998 for the early surrender of the licence of Hong Kong Telecom International Limited (HKTI) to provide certain external circuits and services (the 1998 Policy Statement), we undertook to consult the public on the further opening up of the external telecommunications markets.

3. Following two rounds of public consultation held in 1998, we announced on 22 October 1998 that licences for the provision of external telecommunications services would be issued freely on the basis of market demand, for operation from 1 January 1999. On the moratorium on the issue of further local FTNS licences and the licensing of additional external facilities-based operators, we have conducted discussions with the three existing new FTNS licensees on their proposed investments and their vision of the telecommunications market against global competition. We have also held discussions with potential new entrants to the local and external facilities-based telecommunications market.

Key considerations in policy-making on telecommunications

4. Our policy objectives for telecommunications are that -

1. the widest range of quality telecommunications services should be available to the community at reasonable costs;
   
   
2. telecommunications services should be provided in the most economically efficient manner possible;
   
   
3. Hong Kong should serve as the pre-eminent communications hub for the region now and into the next century; and
   
   
4. the competitiveness of our telecommunications industry should be enhanced in order to strengthen our overall competitiveness.

5. In addition, we have over the years followed a set of tried and tested principles which have contributed to the development of a vibrant telecommunications industry in Hong Kong. These principles are -

1. we have a strong preference for market-driven solutions and would only restrict the operation of the market where the overwhelming public interest demands it;
   
   
2. following from (a), there should generally be no restriction on the number of licences unless there are certain physical constraints, e.g. scarcity of spectrum or land;
   
   
3. the licensing regime should be technologically neutral, allowing the market to determine the most appropriate technological means to deliver services; and
   
   
4. we have made binding commitments in the WTO on -
   
   
   1. no foreign ownership restrictions for telecommunications companies; and
      
      
   2. "national" treatment of foreign companies.

6. In making a decision on the two outstanding issues raised in the 1998 Review of Fixed Telecommunications, we have had regard not only to the objectives and principles set out in paragraphs 4 and 5 above, but also the following factors -

1. the rapid development of the Internet and other types of multimedia information services (including electronic commerce) has led to an exponential increase in the volume of data traffic over external circuits. We must ensure that the capacity of external circuits to and from Hong Kong can meet this fast-growing demand so that Hong Kong can continue to be a telecommunications, broadcasting and Internet centre for the region. There should thus be a premium on proposals which will result in additional capacity to and from Hong Kong (rather than merely a reallocation of existing capacity through the purchase of IRUs);
   
   
2. we face a critical time for decision-making on a number of new facilities and innovative services, e.g. the laying of new submarine optical fibre cables and launching of new satellite systems. These projects are typically high-risk and high-technology investments which local companies are generally unwilling or unable to participate in. The new satellite systems will require considerable external bandwidth to service the region if their gateways are located in Hong Kong. Many of these operators will not invest without ownership of the facilities. We cannot afford to delay the liberalisation of the external facilities market if we are serious about positioning ourselves as a telecommunications, broadcasting and Internet hub for the region; and
   
   
3. we have decided to open up the television market. To implement these decisions, we need a corresponding liberalisation of the telecommunications facilities market.

I. Moratorium on the issue of further local FTNS licences

7. Since the three existing new FTNS licensees obtained their licences at the end of June 1995, they have achieved in total less than 3% of the local fixed line market. This has been partly due to difficulty in interconnection with Hong Kong Telecom's (HKT) local loops and partly due to HKT's below-cost local tariffs which had been artificially maintained through subsidies from the external telecommunications market. A key consideration is how we can accelerate the emergence of effective competition in the local FTNS market.

8. At present, the three existing new FTNS licensees have completed their optical fibre backbone in the urban areas and out to Chek Lap Kok. They are constructing similar backbones in the New Territories. Following the recent conclusion of an agreement between HKT and the New World Telephone on arrangements for Type II interconnection ⁵, we expect that HKT will be signing similar agreements with Hutchison and New T & T shortly. In addition, through the mediation of the Telecommunications Authority (TA), the four local FTNS licensees have agreed a code of practice on practical arrangements for implementing Type II interconnection. With these developments, the three existing new FTNS licensees are poised to provide more effective competition to HKT across many parts of Hong Kong. Together with the progressive re-balancing of the local tariffs by 2002, the three existing new FTNS licensees will benefit from an extended moratorium whereby they could have a further period to generate sufficient revenue from basic and premium local services (and external services) to fund further investments in the roll-out of their local networks (including broadband networks) and to help recoup the infrastructure investments already made.

9. In view of the foregoing, we consider that an extension of the moratorium on the issue of additional licences for the construction of local fixed wireline-based networks would be the quickest way to provide effective competition to HKT in the local FTNS market. But the three new FTNS licensees must offer binding commitments on further network roll-out in exchange for such an extension to the moratorium. If we are to maintain our telecommunications advantages over regional competitors, the moratorium must not be extended for too long, nor should the moratorium stifle innovative services. In connection with the latter, we should note that there are developments in new technology based on wireless transmission to provide fixed services. These services can be provided under the existing FTNS licences, but none of the licensees has so far chosen to do this. There are no reasons to prevent other operators from providing mobile telephones or data terminals to be used at fixed locations. As the costs of wireless solutions are approaching those of wireline-based services and wireless solutions will shortly be able to provide broadband service, we consider it important to facilitate their adoption. The wireless approach also provides a faster means to provide competitive network coverage to areas which the three existing new FTNS licensees hitherto have not served (e.g. certain areas of the New Territories). A company which has indicated an interest in providing local FTNS services has put forward proposals based on this approach.

10. In addition, we have received representations from developers of intelligent buildings and of self-contained sites that any moratorium on the issue of local FTNS licences should not apply to such projects. We agree that we should not stifle such proposals to provide broadband coverage within buildings or self-contained developments. We shall, through an amendment to the Telecommunication Ordinance, ensure that end-users within these buildings and developments will continue to have the freedom and right to obtain telecommunications services from the providers of their choice.

11. In the 1998 Review of Television Policy, we have received considerable support for the proposal that subscription television network licensees should be able to provide telecommunications services and vice versa. To make more efficient use of the network of Wharf Communications Network Limited, we decided that the subscription television licensee, Hong Kong Cable Television Limited (HKCTV), should be permitted to offer telecommunications services using cable modem technology over its hybrid fibre coaxial cable network. In exchange for this, we would require HKCTV to enter into a binding agreement to extend its cable network to at least encompass the areas currently served by their Microwave Multipoint Distribution System (MMDS) and to return these MMDS frequencies (which are already overdue for return to the TA and are required for the development of third generation mobile services and other wireless services) on an agreed schedule.

12. Our decisions on the moratorium on the issue of further local FTNS licences are -

1. to extend the moratorium on the issue of further FTNS licences covering the construction and operation of new fixed wireline-based networks to 31 December 2002. We shall invite applications in advance for new licences for the construction of competitive networks for operation from 1 January 2003;
   
   
2. to permit, with immediate effect, Hong Kong Cable Television Limited (HKCTV) to offer telecommunications services using cable modem technology over its hybrid fibre coaxial cable network, subject to the company making binding commitments on the roll-out of its cable network and the return of its MMDS frequencies on an agreed schedule;
   
   
3. to issue licences on application for the wiring-up of individual buildings or clusters of buildings within a single property development; and
   
   
4. to issue licences for the provision of fixed telecommunications services using non-wireline-based networks. Invitations for such applications will be called periodically, the first of which will be within this year. These are subject to the three existing new FTNS licensees providing binding commitments to invest in the roll-out of their networks (see paragraph 24 below).

II. Licensing of external facilities-based operators

13. In the 1998 Policy Statement, we announced that the three existing new FTNS licensees would be able to provide all types of external circuits (including satellite, newly constructed submarine and land cables and IRUs in existing cables) from 1 January 2000. This is an expansion of the scope of their licences at no charge to the licensees and is intended to guarantee competition to HKTI as soon as the external telecommunications facilities market is opened up on 1 January 2000.

14. We understand that the investment plans of three existing new FTNS licensees are essentially to purchase existing cable and satellite capacity and to lay overland cables to the Mainland of China to meet their own projected International Direct Dailing (IDD) demand. But if Hong Kong is to meet the forecast demand for external capacity, particularly for data and multi-media applications which are expected to grow at an exponential rate, we will need to attract further investment in such capacity. Other places in the region are building new cable capacity to meet anticipated exponential growth in demand. For example, on the Japan/US route there will be a ten-fold increase in capacity. However, in Hong Kong the committed expansion in capacity, funded primarily by HKTI, is only about double the existing capacity. We must encourage investment in additional capacity to and from Hong Kong if we are to maintain Hong Kong as a telecommunications, broadcasting and Internet hub for the region.

15. Additional capacity could be provided by submarine/overland optical fibre cable or by wireless technologies (such as satellite). For submarine and overland cables, they only connect up to points for which they have landing rights. For cables to land in Hong Kong, either the cable operator or a member of the cable consortium has to obtain an external facilities licence from the HKSAR Government. There is at present little spare cable capacity to and from Hong Kong and only one new cable system has definite plans to land in Hong Kong (SEA-ME-WE3 with investment from HKTI). Thus, in the short-term, allowing too many operators to purchase IRUs in such cables could drive up the price of those IRUs, if nothing is done to encourage direct investment in bringing additional cable capacity to Hong Kong. Given the anticipated growth in demand for external capacity, we should structure our policy in such a way as to actively encourage the choice of Hong Kong as a landing point along the route of major new cables being placed/laid. If we could attract such cables to land in Hong Kong, they could meet the anticipated demand for external capacity to and from Hong Kong at reasonable prices.

16. As for satellites, they cover a wide area and the transponders on them are usually leased for the provision of capacity anywhere within the coverage area. Unlike cross-border cables, there is no need to launch a satellite specifically to cover Hong Kong. As we open up the satellite facilities market and allow them to provide both broadcasting and telecommunications services, we could achieve more effective use of the capacities of those satellites which have a foot print covering Hong Kong, including in particular the seven satellites licensed in Hong Kong. Also, we expect to see many wireless and satellite technologies coming on stream over the next few years. It is essential that we do not stifle these developments.

17. In view of the foregoing, we decided to progressively open up the external telecommunications facilities market from 1 January 2000. For wireless-based external services, primarily satellite but also including ground to aircraft services, we decided that the market should be completely opened from 1 January 2000. This will enable Hong Kong to take advantage of newly emergent technology and innovative services. It will also provide an alternative means for external telecommunications services licensees to provide direct service to a large number of destinations (particularly to places with small traffic volumes) at economic prices.

18. For cable-based facilities, in order to encourage the construction of new submarine and overland cables between Hong Kong and other places, we shall, up to 31 December 2002, issue external facilities licences only to those companies which will bring new cables to land in Hong Kong and not to those who merely purchase IRUs of existing cables.

19. When more external capacity is available in Hong Kong, we would see no justification for restricting operators from purchasing IRUs in submarine or overland cables. We thus decided that the external telecommunications market be fully opened up from 1 January 2003.

20. In summary, our decision for the external telecommunications facilities market is to open the market progressively from 1 January 2000 by -

1. allowing the three new FTNS licensees to operate all forms of external telecommunications facilities with effect from 1 January 2000, as already reflected in their FTNS licences;
   
   
2. issuing licences for the operation with effect from 1 January 2000 of non-cable-based external telecommunications facilities;
   
   
3. issuing licences for the operation with effect from 1 January 2000 of external telecommunications facilities based on submarine or overland cables only to those who invest directly in bringing physical cable(s) to Hong Kong. Invitations for applications for such licences and licences referred to in (ii) above will be called periodically, the first of which will be within this year.
   
   
4. issuing licences for the operation with effect from 1 January 2003 of external telecommunications facilities based on submarine or land cables to those who have acquired capacity through the purchase of IRUs of cables, We shall invite applications before 1 January 2003 for new licences for the provision of such services from 1 January 2003;
   
   
5. permitting Hong Kong-licensed broadcasters who invest in their own facilities to uplink or downlink programmes to satellites to make use of their spare capacity by carrying other companies' broadcast programmes and various telecommunications services.

21. To be consistent with our decision for the construction of fixed wireline-based facilities within Hong Kong, we will require until 31 December 2002 all external facilities licensees to use the circuits of local FTNS operators for their backhaul circuits linking their cable landing points or satellite earth stations to the international gateways. The three existing new FTNS licensees will be able to deploy such circuits from 1 January 2000.

Licensing Issues

22. For both local FTNS licences and external facilities licences, the form of licence to be used will be based on the current FTNS licence which has already been issued to the existing four FTNS operators for the provision of both local and external facilities-based services. The different licensing scenarios set out in paragraphs 12 and 20 above will be reflected in the FTNS licences to be issued by specifying the approved scope of services in the Service Description Schedule.

23. For both the local non-wireline FTNS licences and the external facilities licences, we will not impose a pre-set limit on the number of licences. However, this does not mean that we will issue an unlimited number of licences to whoever applies. In considering the grant of licences, the TA will, in line with his usual licensing practice, take into account relevant considerations, e.g. limitations on the available natural resources (such as frequency spectrum, satellite orbital positions, suitable sites for satellite and cable stations, rights of way, etc.), the technical soundness of the proposal from the applicant and the applicant's technical capability to implement the proposal, the financial soundness of the proposal, the applicant's commitment to investment in the proposed services, and the need to avoid undue disruptions to the environment. In general, the TA will give preference to applications which will bring notable benefits to the local telecommunications industry, consumers in Hong Kong and the Hong Kong economy as a whole in terms of offering technological innovation, new services or improvements to existing services, wide coverage for services intended for the general public or early introduction of services. The TA will set out the minimum requirements and the licensing criteria in detailed guidance notes when he invites applications for local non-wireline-based FTNS licences and the various types of external facilities licences.

NEXT STEPS

24. We will give the three existing new FTNS licensees about four weeks to consider our decisions set out in paragraphs 12 and 20 below. If they accept, we will then publish their commitments; if they do not accept we will end the moratorium on the issue of further local FTNS licences with immediate effect and invite applications for new local FTNS licences in June 1999. In such circumstances, we will also invite applications in June 1999 for external facilities licences covering all modes of transmission for operation from 1 January 2000.

FINANCIAL AND STAFFING IMPLICATIONS

25. The Office of the Telecommunications Authority Trading Fund will recover the cost of processing and monitoring the additional facilities-based licences from the annual fees for such licences.

ECONOMIC IMPLICATIONS

26. The decision will benefit telecommunications users and the commercial and business activities which are underpinned by telecommunications. The decisions are balanced and will bring about more effective competition in the telecommunications markets, both local and external. The approach of encouraging investment in the external facilities market will be welcomed in the international community. The fact that the local telecommunications market will not be fully liberalised immediately may reduce the opportunities for our local telecommunications operators to expand their investments overseas in markets in which reciprocity is expected.

ENVIRONMENTAL IMPLICATIONS

27. The decisions have few environmental implications. The decisions will make more effective use of the HKCTV network, but will give rise to an increase in the number of road openings to meet the commitments to roll-out local networks. On the other hand, the additional external telecommunications facilities licensees will not have rights to lay cables in the streets in Hong Kong. There may, however, be some increase in road openings to increase the capacity of these FTNS networks for connection with the external facilities. All road openings will continue to be co-ordinated by the TA to minimise any environmental disturbance.

PUBLIC CONSULTATION

28. There have been two rounds of public consultations. In this brief we have reflected the comments received and incorporated them where appropriate.

ENQUIRIES

29. For any enquiries relating to this Brief, please contact -

Mr G F Woodhead
Principal Assistant Secretary (Information Technology and Broadcasting)
Tel : 2189 2210
Fax : 2511 1458

5 May 1999
Information Technology and Broadcasting Bureau
Government Secretariat

Annex

A. EXECUTIVE SUMMARY

A.1	Survey Objectives
A.1.1	The aim of the opinion survey is to evaluate public opinions on the effectiveness of the operation of the Control of Obscene and Indecent Articles Ordinance (COIAO). It also intends to gauge public perception of the level of moral standards generally acceptable to the community; and to collect views on possible areas of improvement.
A.1.2	The scope of the survey focuses on areas of (1) the effectiveness of the existing regulatory system; (2) public perception of the classification framework; (3) the standards of morality, decency and propriety generally accepted by the community; (4) the effectiveness of self-regulation of obscene and indecent articles transmitted through the Internet; and (5) the effectiveness of civic education and publicity efforts in protecting young persons from being unduly exposed to, and consequently menaced by, obscene and indecent articles.
A.2	Method and Sampling Design
A.2.1	The opinion survey comprised of two parts: the general survey and focus group survey. All respondents of the general survey were to complete a quantitative questionnaire. The focus group survey consisted of two parts: a quantitative part and qualitative part. For the quantitative part, focus group respondents were to complete the same questionnaire as in the general survey. For the qualitative part, respondents were to complete a separate questionnaire.
A.2.2	Data were collected through face-to-face or group interview using structured questionnaires. The questionnaires covered a wide range of aspects under the following five broad categories: awareness of the classification system under the COIAO; understanding of the work of the Obscene Articles Tribunal (OAT); perception of the prevailing moral standards generally accepted by the community; effectiveness of the self-regulation of obscene and indecent articles transmitted through the Internet; and effectiveness of civic education and publicity efforts on the control of obscene and indecent articles.
A.2.3	For the general survey, a sample of 1,107 persons aged 18 or above was successfully interviewed. The sample was generated by 2-stage random sampling method. The response rate was 60.6%.
A.2.4	For the focus group survey, a sample of 200 persons from eight sectors of the community was chosen and invited for interview.
A.3	An Overview of Key Findings
A.3.1	Knowledge of classification system under the Control of Obscene and Indecent Articles Ordinance (COIAO) Although respondents are generally aware of the classification system for the articles under the COIAO, a small proportion of the general survey respondents could correctly identify the different classifications. As regards nomenclature, most respondents considered that there was confusion between the classification system under the COIAO and the film classification system under the Film Censorship Ordinance.
A.3.2	Understanding the work of the Obscene Articles Tribunal (OAT) There is general acceptance of the present system of classification of obscene and indecent articles by a judicial body consisting of a presiding magistrate and members of the public. There is general acceptance of the present arrangement of classifying obscene and indecent articles according to the moral standards generally accepted by the community. There is demand for more adjudicators to sit in the classification sessions to increase the representativeness of the OAT.
A.3.3	Perception of the prevailing standards of morality In respect of obscene articles, the existing classification standards of the OAT are generally in line with the expectation of the community. Standards for the classification of articles in newspapers, magazines and comic books with indecent elements do not appear to match with the more conservative standard of the respondents. There is general acceptance of the present arrangement for publication of Class II (indecent) articles in a sealed wrapper with warning notice although the majority of respondents do not find the arrangement effective in preventing youths from getting access to such articles. It is generally perceived that civic education and parental guidance are the most effective means to prevent youths from reading indecent articles.
A.3.4	Obscene and indecent articles transmitted through the Internet There is general misconception that there is no legislative provision regulating the transmission of obscene and indecent materials through the Internet. Therefore, not many respondents think it appropriate to rely solely on self-regulation by the Internet Service Providers (ISPs). Apart from regulation by the Government, civic education and parental guidance are perceived as effective measures in preventing youths from accessing obscene and indecent materials on the Internet. In terms of complaints made by Internet-user respondents against pornographic materials on the Internet, only a small number of respondents have ever lodged complaints. The problem of pornographic content on the Internet does not appear to be serious at the time of the survey period. However, the situation should be closely monitored in the long run.
A.3.5	Effectiveness of civic education and publicity Publicity on parental guidance and the provisions of the COIAO are generally considered inadequate.
A.4	Summary of Key Findings of Quantitative Surveys (Abbreviations: GS = general survey; and FG = focus group survey.)
A.4.1	Awareness of the classification system under the Control of Obscene and Indecent Articles Ordinance (COIAO). In the survey, respondents were asked their knowledge about the COIAO and the classification system of articles under the Ordinance. The results are detailed below:

GS(a)	76.4% of the respondents were aware of the existence of a classification system for film and obscene and indecent articles. Among them, 55% were aware of the fact that the classification of film and obscene and indecent articles was under two different classification systems, 34.1% thought that there was one single classification system and the remaining 10.9% had no idea.
FG(a)	In the focus group of 200 respondents, 93.5% were aware of the former, and of these 86.5% of them were aware of there being two classification systems.
GS(b)	73.8% had heard about the COIAO. Of these, a great majority (88%) heard of the Ordinance from television APIs, 38.9% from newspapers, 26.5% from radio, 11.2% from magazines, 6.3% from publicity leaflets and 3.5% from the Internet.
FG(b)	97% of the respondents had heard of the COIAO.
GS(c)	22.6% of the respondents was aware of the classification system of obscene and indecent articles under the COIAO. 38.5% confused the classification system with that for film. The remaining 38.9% was either unable to identify correctly any of the prevailing classification systems under the Film Censorship Ordinance (FCO) and COIAO or had no idea.
FG(c)	65.7% of the focus group respondents could rightly identify the classification system under the COIAO, 19.7% confused it with that of film, and the rest comprised only 14.6%.
GS(d)	Whilst 28.3% considered that there was no confusion between the two classification systems under the COIAO and the FCO, 67% considered that there was confusion.
FG(d)	Only 27.5% did not admit of confusion, 72.5% admitted of a confusion between the article and film classification systems.
GS(e)	When respondents were asked whether the existing classification system under the COIAO to classify obscene and indecent articles into three classes of Class I, II and III was appropriate, the majority (78.7%) answered in the affirmative.
FG(e)	50% of the focus group respondents deemed the classification system appropriate, 48.5% considered it not appropriate.

A.4.2	Understanding of the work of Obscene Articles Tribunal (OAT).This part of the survey aimed to find out respondents' understanding of the work of the OAT. The results are detailed below.

GS(a)	Of those who claimed to know the organisation responsible for article classification, 25.2% gave the correct answer of OAT. 26.5% thought that it was the TELA. A few thought that it was the Broadcasting Authority (5.8%), or the Police (2.5%) or the court (1.1%). The remaining 39.2% had no idea.
FG(a)	In the focus Group, 63.5% gave the correct answer, only 20.5% thought it was TELA.
GS(b)	A great majority of the respondents (87.8%) considered that the task of article classification under the COIAO should involve members of the public.
FG(b)	94% of the focus group supported public involvement.
GS(c)	75.9% considered that it was appropriate for the OAT which consisted of a presiding magistrate and members of the public to make classification. 21.1% held a different view.
FG(c)	66.5% of the focus group were supportive of the role and formation of OAT, 32% were not.
GS(d)	Of those who considered that it was not appropriate for the OAT to make classification, 31.8% thought that it should be done by a body comprising publishers, producers and members of the public, 18.5% suggested by TELA, 6% by Broadcasting Authority, 4.7% by courts, 3.9% by the Police and the remaining 32.6% by various minor alternatives.
FG(d)	Of the 32% in FG(c), 43.8% supported the body comprising publishers, producers and members of the public. 7.8% supported TELA, as many as 46.9% had other opinions.
GS(e)	The great majority (80.4%) agreed that classification of articles by the OAT should be based on standards of morality generally accepted by the community at large. Of these, 65.5% agreed that the present composition of the OAT consisting of a presiding magistrate and members of the public could reflect standards. The remaining either did not agree (32.3%), or had no idea (2.3%).
FG(e)	67.5% of the focus group accepted classification based on standards of morality generally accepted by the community. However, only 45.8% as opposed to 52.7% considered that the composition of OAT can reflect the public standards.
GS(f)	Of those (32.3%) who did not consider the present composition of the OAT could reflect the standards of morality generally accepted by the community, 59.4% favoured participation of more members of the public, followed by regular opinion surveys (46.6%), standards to be set by the Government (11.3%) and some other options (9.5%).
FG(f)	Of the 52.7% in FG(e), 88.4% desired more involvement of the public, and 78.3% desired regular surveys.

A.4.3

Perception of the prevailing standards of morality. With the aid of either written description of sexual acts or sample pictures, respondents' views were sought on whether articles likely to be classifiable as Class III could be published, whether articles likely to be classifiable as Class II/III should be published to persons over the age of 18, whether articles likely to be classifiable as Class II should be published in newspapers, and whether articles of violent or repulsive nature should be published with or without restrictions to persons aged 18 and above. The results are summarized below.

GS(a)	Respondents were generally against the publication of articles likely to be classified as Class III. For articles depicting sexual intercourse, 38.2% objected to their publication and 48.8% agreed to their publication for adults only. However, there were more respondents objecting the publication of articles depicting incest (58% disagreed and 29.2% agreed for adults), child pornography (62.7% disagreed and 25% agreed for adults), S/M sexual activities (59.5% disagreed and 29.5% agreed for adults), or close-up of sex organs (45.2% disagreed and 39.9% agreed for adults).
FG(a)	Strong opposition to the publication of materials about incest (59.6), child pornography (77.4) and S/M sexual activities (52.5%) was observed. A majority wanted to see sexual intercourse (64.8%) and close-up of sex-organs (68.3%) confined within Class II.
GS(b)	Those who did not object to the publication of one or more of the articles mentioned in GS(a) above, 35.2% were for the protection of freedom of publication, 48.4% for freedom of access to information and 29.3% for satisfying one's psychological needs. For those who were against, 51.7% were on the ground of social morality, 45.1% said that they might be conducive to sex crimes and 46.4% on the ground of repulsiveness.
FG(b)	Allowing publication of certain materials in FG(Q10a-e) was based on freedom of access to information 68.5%, and then freedom of publication. Objection to publication was based on their being conducive to sexual crimes (66.7%), against social morality (64.7%) and repulsive and irritating (64.0%).
GS(c)	About half of respondents (ranged from 51.6% to 59.2%) considered articles (likely to be classified as Class II) depicting male or female sex organs, nudity and sexual behaviour between man and female were acceptable to persons over the age of 18. They found it less acceptable in respect of articles depicting homosexual activity (ranged from 32.4% to 33.4%) and rape (31.4%). Conversely 58.2% and 59.1% considered that it was too lenient to allow publication of articles depicting homosexual activity and rape respectively to persons over the age of 18, and 38.3%-43.1% in respect of articles depicting male or female sex organs, nudity and sexual behaviour between male and female.
FG(c)	There were 49.7% of the focus group respondents who considered materials about rape in class II as too lenient. For male and female homosexuality, there were 37.2% (45.2% for acceptable) and 34.3% (48.0% for acceptable) respectively, who considered class II too lenient. For the rest, the majority considered class II appropriate (male sex organ 64.8%, female sex organ 64.3%, female breast 59.8%, and sexual act between men and women 62.8%).
GS(d)	28.9% of respondents who considered it too harsh to restrict materials described in GS(c) above to persons over the age of 18 was based on the ground of freedom of publication, 42.1% on freedom of access to information, and 42.1% on satisfying one's psychological needs. Of those who thought that it was too lenient to publish such articles for adults, 50.7% were on the ground of social morality, 47.4% thought that they were conducive to sex crimes and 45.6% on the ground of repulsiveness.
FG(d)	42.2% of respondents in the focus group who considered it too harsh to restrict materials described in FG(c) above to persons over the age of 18 was based on the ground of freedom of publication, 55.9% on freedom of access to information, and 32.2% on satisfying one's psychological needs. Of those who thought that it was too lenient to publish such articles for adults, 58.5% were on the ground of social morality, 67.8% thought that they were conducive to sex crimes and 61.0% on the ground of repulsiveness.
GS(e)	Respondents were generally against (ranged from 45.5% in respect of articles depicting female nipples without mask (Q.12b) to 68.3% (Q.12h) in respect of newspaper column depicting web sites of obscene material) the publication of articles (although likely to be classifiable as Class I) containing some degree of nudity, vulgar language, feature articles of indecency, violence or repulsiveness in nature in newspapers. Respondents seemed to be more tolerable in respect of articles of violence in nature (37.7% objected to their publication).
FG(e)	Respondents of the focus group were generally against (ranged from 39.7% in respect of articles depicting female nipples without mask (Q.12b) to 64.3% (also Q.12h) in respect of newspaper column depicting web sites of obscene material) the publication of articles (although likely to be classifiable as Class I) containing some degree of nudity, vulgar language, feature articles of indecency, violence or repulsiveness in nature in newspapers. Respondents seemed to be more tolerable in respect of articles of violence in nature (20.6% objected to their publication).
GS(f)	Those who accepted that articles described in GS(e) above could appear in newspapers, 40.9% were on the ground of freedom of publication, 48% on freedom of information and 18.7% on satisfying one's psychological needs. Those who against, 33.8% were on the ground of social morality, 31.6% on their conducive to sex crimes, 49.4% on violence or repulsiveness and 52.8% on the protection of youths.
FG(f)	Allowing publication of the materials in newspaper is based 57.1% on the ground of freedom of publication , 60.0% on freedom of information and 22.3% on satisfying one's psychological needs.
GS(g)	Of the eight specimen articles of violence or repulsiveness in nature shown to the respondents, there were less objections against articles depicting torture or decapitation (14.8% against, 37.0% accepted for persons over the age of 18 and 42.1% accepted without restriction). There were strong objections to repulsive articles depicting, such as, playing with human wastes (68.2% against, 25% acceptable to persons over the age of 18 and 2.9% accepted without restriction). More than half of the respondents considered that comic books depicting bloody fighting (57.5%) and horror/ghost (55.6%) should be published to persons aged 18 and above only. In other cases, respondents found them generally acceptable to persons over the age of 18.
FG(g)	Of the eight specimen articles of violence or repulsiveness in nature shown to the respondents, there were less objections in the focus group against articles depicting torture or decapitation (6.5% against, 37.7% accepted for persons over the age of 18 and 50.3% accepted without restriction). There were strong objections to repulsive articles depicting, such as, playing with human wastes (68.8% against, 26.6% acceptable to persons over the age of 18 and 4.0% accepted without restriction). More than half of the respondents considered that comic books depicting bloody fighting (65.3%) and horror/ghost (60.8%) should be published to persons aged 18 and above only. In other cases, respondents found them also generally acceptable to persons over the age of 18.
GS(h)	The majority of respondents (68.5%) considered the present penalty for breach of the COIAO relating to the publication of Class II articles appropriate. The penalty for Class III offences was also considered appropriate by the majority of respondents (67.1%).
FG(h)	From the focus group, 61.3% deemed the present penalty appropriate for Class II offences, and 66% for Class III offences.
GS(i)	85.2% of the respondents considered that it was appropriate to prohibit the publication of Class III articles in Hong Kong.
FG(i)	69.0% agreed to the prohibition of Class III materials in Hong Kong.
GS(j)	84.3% considered the present packaging conditions restricting the publication of Class II articles to persons over the age of 18 acceptable. However, when asked about the effectiveness, the majority did not consider that the conditions were effective in preventing retailers from selling or preventing young persons from buying such articles (70.1% and 79.3% respectively).
FG(j)	85.5% of the focus group respondents considered the present packaging conditions restricting the publication of Class II articles to persons over the age of 18 acceptable. However, when asked about the effectiveness, the majority did not consider that the conditions were effective in preventing retailers from selling or preventing young persons from buying such articles (70.0% and 87.0% respectively).
GS(k)	55.9% considered civic education to be the most effective means to prevent young persons from having accessing to Class II articles, followed by parental guidance (52.5%), heavy penalty against sellers (49.1%), self-regulation by publishers (36.7%), publicity (31.1%), and levying tax on sellers (19.5%).
FG(k)	72.5% of the focus group respondents considered civic education to be the most effective means to prevent young persons from having accessing to Class II articles, followed by heavy penalty against sellers (67%), parental guidance (58.5%), self-regulation by publishers (48.0%), publicity (45.0%), and levying tax on sellers (30.5%).

A.4.4	Use of the Internet and effectiveness of self-regulation.In the survey, respondents were asked about knowledge of self-regulation of the obscene and indecent articles transmitted on the Internet and its effectiveness.

GS(a)	47.2% of the respondents had computers at home. Of these, slightly less than half (46.7%) had subscribed to the Internet and about half of them (52.6%) had children under the age of 18 who were Internet users at home.
FG(a)	As high as 80.5% of the focus group respondents had computers at home. Of these, (75.8%) had subscribed to the Internet and (57.6%) of them had children under the age of 18 who were Internet users at home.
GS(b)	Of those who used the Internet at home, 40.6% had the experience of inadvertently coming across obscene or indecent web sites. 11.4% of the respondents indicated that their children had also come across such web sites.
FG(b)	Of those focus group respondents who used the Internet at home, 67.7% had the experience of inadvertently coming across obscene or indecent web sites. 12.1% of the respondents indicated that their children had also come across such web sites.
GS(c)	63.9% were aware of the filtering tools and their functions but only 6.2% had installed such software on their computers.
FG(c)	71.8% of the focus group respondents were aware of the filtering tools and their functions but only 1.6% had installed such software on their computers.
GS(d)	Only two complaints (0.8%) had been made by respondents. One was made to TELA and the other one to the ISP concerned.
FG(d)	Only three complaints (2.4%) had been made by respondents of the focus group. One was made to TELA and the other two to the ISPs concerned.
GS(e)	10.3% of parents interviewed were often surfing the Internet with their children. 21.3% sometimes, 19.9% seldom, 8.1% rarely and 40.4% had never done it before.
FG(e)	In the focus group, 5.9% of parents interviewed were often surfing the Internet with their children. 23.5% sometimes, 26.5% seldom, 11.8% rarely and 32.4% had never done it before.
GS(f)	29.4% had heard of the Practice Statement adopted by the HKISPA. The majority had never heard it before.
FG(f)	20.6% had heard of the Practice Statement adopted by the HKISPA. The majority had never heard it before.
GS(g)	When asked how obscene and indecent articles on the Internet were regulated, only 21.2% answered correctly that they were regulated by both the Government and ISPs through a self-regulatory system. 20.1% said they were regulated by the Government, 11.5% said by the ISPs, and 26.1% said there was no regulation.
FG(g)	In the focus group, 51% gave the right answer. 4.5% said they were regulated by the Government, 21.7% said by the ISPs, and 11.1% said there was no regulation.
GS(h)	However when asked whether it was appropriate to rely on self-regulation by ISPs, only 22.5% answered in the affirmative. The remaining 73.2% answered in the negative.
FG(h)	Only 23.6% thought that self-regulation by the ISPs was appropriate. 75.9% answered in the negative.
GS(i)	86.5% considered that government control was an effective measure to prevent youths from gaining access to obscene and indecent materials on the Internet, followed by civic education (85.7%), parental guidance (75%) and self-regulation of the ISPs (58.3%).
FS(i)	82.9% of the respondents of the focus group considered that government control was an effective measure to prevent youths from gaining access to obscene and indecent materials on the Internet, followed by civic education (75.3%), parental guidance (67.3%) and self-regulation of the ISPs (49.2%).

A.4.5	Effectiveness of education and publicity. In this part of the survey, respondents were asked their knowledge about the education and publicity activities undertaken by the Government in protecting youths from the obscene and indecent articles. Their views were also sought on the effectiveness of such activities.

GS(a)	The majority of respondents (79.2%) knew about the publicity activities from television APIs, 29.2% from radio announcements, 25.3% from advertisements in newspapers, 14.9% from posters, 11.1% from publicity leaflets and 6.9% from talks/seminars.
FG(a)	The majority of respondents in the focus group (92.5%) knew about the publicity activities from television APIs, 56.0% from radio announcements, 41.7% from posters, 31.5% from advertisements in newspapers, 28.1% from publicity leaflets and 19.0% from talks/seminars.
GS(b)	It was generally considered that the publicity activities undertaken by the Government were inadequate. (Ranged from 69.5% for publicity on the provisions of the COIAO to 70.3% on parental guidance and 69.9% on encouraging youth to choose suitable reading materials.)
FG(b)	Again, in the focus group, it was also generally considered that the publicity activities undertaken by the Government were inadequate. (Ranged from 77.5% for publicity on the provisions of the COIAO to 83.0% on parental guidance and 81.4% on encouraging youth to choose suitable reading materials.)
GS(c)	25.2% of respondents who had children said that they often chose suitable reading materials for their children, 33.2% did this sometimes, 15.5% seldom, 4.4% rarely and the remaining 21.7% had never done it.
FG(c)	56.9% of respondents of the focus group respondents who had children said that they often chose suitable reading materials for their children, 32.8% did this sometimes, 5.2% seldom, 0% rarely and the remaining 5.2% had never done it.
GS(d)	80.0% considered that parents played an important role in protecting youths from obscene and indecent articles, followed by media (76.6%), schools (74.6%), Government (71.0%) and publishers (67.5%).
FG(d)	Among the focus group respondents, 75.0% considered that media played an important role in protecting youths from obscene and indecent articles, followed by parents (74.4%), publishers (68.5%), schools (54.8%), and Government (54.5%).

A.5 Summary of Findings of Qualitative Focus Group Survey

Q.1
Still 58% of the focus group respondents considered the classification systems between article and film confusing, after briefing was made.

Q.2
Remedial measures for confusion included, among many, combination of the two systems and stepping up publicity.

Q.3
Ideal composition consisted of the inclusion of more professionals, general public and people of different background.

Q.4
Selection process of adjudicators included open recruitment, appointment by the Government or the Judiciary.

Q.5
56.8% of the focus group respondents at this stage still supported the standards of morality generally accepted by the community.

Q.6 and Q.7
The focus group supported enlargement of the OAT adjudication panel size for both interim and full hearing.

Q.8
Art objects with nudity were given high tolerance. A wide range of materials (likely to be classified as Class II materials) ranging from depiction sex act to violence and bloodshed in photos as well as in the form of comics was accepted as Class II. Intercourse between men met with 48.2% of prohibition, and only 46.7% as Class II.

Regarding the reasons for publication, articles of art took lead (88.3%), followed by freedom of access to information (61.9), freedom of publication 57.4%), freedom of press (51.8%) and satisfaction of psychological needs (33.0%).

Regarding the reasons for prohibition, being repulsive and irritating (81.2%) took lead, followed by protection of youth (69.2%), conducive to sex crimes (59.4%), against social morality (54.1%), and depraving the sexes (45.1).

Q.9
The effective ways to deal with obscene and indecent information on the Internet other than legislation were "parental guidance" (76.9%), "self-regulation by ISPs" (72.4%) and "civic education" (71.9%).

Q.10
For the promotion of awareness of the COAIO through publicity, respondents suggested "TV advertisement" (92%), followed by "more advertisements in the press" (67.8%).

Q.11
For the enhancement of public awareness of the COIAO through education, the respondents considered that all of the listed ways below are effective: to step up sex education in primary schools (81.0%), to step up sex education in secondary schools (91.5%), special TV programmes (74.0%) and to encourage parental guidance (80.0%).


1 Wireline-based networks mean networks based on optical fibre, copper wire or similar fixed line facilities for the operation of telecommunications services. They do not include networks based on wireless technology, such as mobile radio telephony or wireless local loop.

2 The three new FTNS licensees are Hutchison Communications (Hong Kong) Limited (Hutchison), New T & T Hong Kong Limited (New T&T) and New World Telephone Limited (New World Telephone).

3 Non-cable-based external telecommunications facilities means facilities which are not based on submarine or land cables for the provision of external telecommunications facilities-based services. They include such facilities as satellites and other wireless facilities.

4 These IRUs are "ownership" rights over a certain capacity of the half circuit cable from Hong Kong to a mid-point and would have to be matched with a similar IRU half-circuit from the distant end to the mid-point. IRUs can be obtained in the secondary market from existing carriers or in the primary market by investing in up-coming submarine cable projects.

5 Type II interconnection is where a carrier interconnects with the local loop to a customer to provide service to that customer over the local network of a second carrier.