1. Hong Kong: Changes and Challenges The 8th Asian Telecommunications Industry Exchange (ATIE) Forum John Ure Associate Professor and Director of the Telecommunications Research Project University of Hong Kong www.tpr.hku.hk

2. Policy and Regulation Structure Policy Bureau of HKG = CITB Regulatory Department of HKG = Office of the Telecommunications Authority (OFTA) Telecommunications Ordinance - –Regulator = the Telecommunications Authority (TA) –Carrier Licences = fixed, cellular and satellite - general conditions + special conditions –Class Licences –Buildings access authorizations

3. Policy and Regulation Changes 1990s: liberalize the market –ended domestic and international PSTN monopolies –opened up the cellular market to intense competition –simplified the licensing process for all other services 1999: International Simple Resale (ISR - see next) 1 January 2003 = open market Future: Digital Terrestrial Transmission and multiplexing licences

4. International Simple Resale Hong Kong Actual Data 1995 (with callback) –Total Revenue from IDD = HK$10.6 billion Hong Kong Revised Data 1995 (without callback) –Total Revenue from IDD = HK$12 billion Hong Kong Revised Data 1995 (with ISR) –Total Revenue from IDD = HK$3.1billion Weighted average IDD price –1995 Actual = HK$6.7 per minute –1995 ISR = HK$3.19 per minute

5. FTNS Licences Fixed Telecommunications Network Services (FTNS) PCCW/HKTC; Hutchison Telecom (+ Global Crossing); New World Telephone (NWT); New T&T + others from 2003 FTNS over Hybrid Fibre Coaxial (HFC) Hong Kong Cable Television = Cable TV + iCable (broadband fast Internet) + licensed to transmit telecoms services Moratorium on new FTNS licences expires Dec. 2002

6. PMRS Licences Public Mobile Radio Services (PMRS) cellphones GSM (CSL, Smartone, Hutchison) + TDMA (CSL’s One2Free) + CDMA (Hutchison) 6 Personal Communications Networks (PCN) –CSL (combined with GSM 1010, One2Free) + 3G licence –Hutchison (now combined GSM Orange)+ 3G licence –New World Mobility –Peoples –Smartone Extra (ex-P-Plus)+ 3G licence –Sunday+ 3G licence = 6 operators and 11 networks!

7. Third Generation Mobile (3G) OFTA adopted a royalty auction to avoid upfront debt OFTA assigned 4 licences (for the allocated spectrum of 140 MHz) at the auction reserve price of $50m or 5% royalty payment (whichever is the higher) on turnover for 1st five years, rising thereafter Obligations: 50% pop. coverage by Dec.2005 30% of network capacity available to Mobile Virtual Network Operators (MVNOs) on commercial terms

8. Other FTNS Licences LMDS: 5 licences issued Feb/March 2000 = expensive method of market entry? ETS: 18 cable-based + 6 satellite-based licences; but open market from January 2003 –a teleport site is located in Chung Hom Kok for external telecommunications facilities and broadcasters. NB. Backhaul permitted from January 2003 From January 2003: anyone can apply for local access FTNS

9. Satellite Licences Satellite space segments licensed in Hong Kong under the Telecom Ordinance and the Outer Space Ordinance –APT Satellite Company Limited - 3 satellites –Asia Satellite Telecommunications Company Limited (AsiaSat) - 3 satellites

10. Broadcast Transmission Licences Digital TV and Radio (Digital Terrestrial Transmission) –Trials taking place - future of terrestrial broadcast model? –Multiplexing licences to separate transmission from content Broadcasting Transmission Licences –Commercial TV: ATV, TVB –Subscription TV: (i) Broadband cable - HKCTV (Wharf), HK DTV (Yes TV), HK Network TV (defunct); (ii) Satellite - Galaxy DTV (TVB), Pacific Digital (Taiwan) –Programme Service licence: HKT VOD/iTV (suspended) –Satellite TV Uplink & Downlink: Hutchvision, Galaxy/TVB, APT

11. Changes & Challenges: Technological OFTA = technology neutral Network interoperability for SMS (achieved) and MMS 802.11 (WiFi) - commercial use of unlicensed spectrum 3G technological uncertainties - nothing particular to HK Note: HK has been ‘testbed’ for cellular due to high-density, high-rise Network competition  use content for network differentiation  danger of market fragmentation? Problem of network specific standards, api’s, etc.

12. Changes & Challenges: Commercial ISR and Jan. 2003 = IDD revenues down Mobile competition = low profitability 2.5G and 3G = uncertain market (HK = 7 million population.) But ….. 40% homes taking broadband! (PSTN lines falling!) M&A and fixed-mobile convergence?

13. Changes & Challenges: Policy & Regulatory Future of dominance regulation for fixed? M&A and fixed-mobile convergence? HKG = industrial policy = no; economic policy = yes, promote HK’s role as leading regional hub:- –competitive prices –innovative services –quality assurance

14. Changes & Challenges Telecoms globally going through the same transition from –‘narrowband economics’ = IDD and cellular voice revenues based on service provision; to –‘broadband economics’ = data and Web-centric services based on access provision Is Hong Kong any different? - NO, but….Hong Kong could just get it right! - Who Knows? -