|Asia-Pacific II 2002
|The Next Steps – Regulatory Contributions to Growth
|Anthony S. K. Wong
|Director-General of Telecommunications
|Office of the Telecommunications Authority, Hong Kong
Anthony S. K. Wong is the Director-General of Telecommunications at the Office of the Telecommunications Authority of Hong Kong. After graduating from the University of Hong Kong, he joined the Telecommunications Branch of the Post Office in 1974 and was responsible for a range of activities of the then telecom regulator. In 1988, he was appointed Assistant Postmaster General (Telecommunications), head of the Telecommunications Branch. With the establishment of the Office of the Telecommunications Authority (OFTA) in July 1993 as an independent government agency, Anthony Wong was appointed Senior Assistant Director of Telecommunications in charge of the Regulatory Affairs Branch. In March 1997, he became Director-General of Telecommunications. Mr Wong was the Chairman of the Information Infrastructure Advisory Committee from 1997 to 1998. He is also a member of the Broadcasting Authority in Hong Kong. In the international arena, Mr Wong continues to represent Hong Kong in various international and regional telecoms conferences and events. Anthony Wong holds a Bachelor of Science Honours degree in Electrical Engineering, a Master of Philosophy and a Master of Social Science.
Hong Kong’s regulatory authorities have aggressively opened local telecom markets to competition and levelled the playing field for incumbents and newcomers alike. As a result, Hong Kong now has ten operators offering local services and six mobile operators. Innovative regulations and licensing are being used to create business opportunities. 3G licensees, for example, must cede at least 30% of their capacity to mobile virtual network operators and/or content providers and innovative Class Licences lower the barriers for small business entrants.
The recent years have not been an easy time for the telecommunications industry. The ICT companies are hit particularly hard in the stock market. In Europe, companies who made huge bids for 3G licences face difficulties to finance their projects. Major handset companies have recorded a downward trend in sales. Generally, the optimistic prediction of growth of the industry just two years ago has turned out to be an over-confident forecast. The predicament is worldwide. Hong Kong, being an open economy, can hardly stay blissfully away from it. In the midst of this difficult climate, regulators certainly have a part to play in bringing the telecommunications market back on track. Our task is to create a regulatory environment that will gain the confidence of operators, investors and consumers alike, and encourage investment in telecommunications infrastructure and all kinds of innovative services. Hong Kong has, for long, adopted a pro-competition policy for the telecommunications market. We welcome anyone who has a business case to test to come and test it in Hong Kong. As recently as in 2000, we introduced a sector-specific competitive law for the telecommunications sector to ensure that operators, big and small, would able to compete on a level playing field. We are technology-neutral, yet we are also quick to provide guidance to the industry on new or emerging technologies, for we know that the market changes fast, and no one can stand to lose time and see opportunities gone. A good case in point is that, as early as 2000, the Telecommunications Authority (TA) of Hong Kong had issued a statement providing the industry with the basic ground rules for the regulation of broadband interconnection. It has always been our firm belief that a regulatory regime should be pro-competition, market – driven and technology-neutral. The telecommunications policy in Hong Kong has been framed along this line. We already have ten local fixed telecommunications network services (FTNS) operators offering local telecommunications services to the public using wireline or wireless technologies. In the external telecommunications market, there is no limit on the number of licences issued for either network-based or service-based operations. For mobile services, Hong Kong has always been reputed to be one of the most keenly competitive markets in the world. Before October 2001, we already had six 2G operators operating 11 networks. Between September and October 2001, we awarded four 3G licences by a hybrid method of pre-qualification and spectrum auctioning based on royalty percentage bidding. This licensing system was itself an innovative design. It is ‘pro-entry’ by lowering the financial burden of successful 3G licensees, whilst it also allows the Government to share the upside of the future 3G services market. The licensing regime has also introduced a new concept to the mobile services, namely the requirement that the 3G licensees should open up at least 30% of their network capacity to non-affiliated mobile virtual network operators (MVNO) and/or content providers. This requirement, aimed at creating a competitive and vibrant content and e-commerce market over the 3G platform, and catered to the situation in Hong Kong where there are six 2G operators but only four 3G licences. We believe that this arrangement will help not only maintain but also promote effective competition in the mobile market. The number of 3G licences is necessarily limited by spectrum availability. There is however no such restriction for MVNOs. Licences may already be applied for by any parties who wish to employ either the 2G or 3G platforms to provide MVNO services. We believe that for 3G services to take off, the innovation in content is as important as (if not more important than) the innovation in the telecommunications technology. After all, what the consumers care about is what services will be provided to them, rather than how they are being provided. The building up of a mobile infrastructure involves huge investment, but MVNO licences will create opportunities for smaller business to try their ideas at much lower costs. In this respect, we are thinking of organizing training workshops, jointly with the industry, to assist those who are interested in exploring their career prospects in the mobile content / software business. Our policies, combined with the efforts of the operators, have made Hong Kong one of the best connected cities in the world. We are not content to stop there. We have to work even harder to maintain our competitive edge. We should constantly seek to improve the regulatory framework and telecommunications infrastructure in order to create business opportunities in hard times, and to get ourselves well equipped to reap the benefits when the good times arrive. In January 2003, we shall fully liberalize the local FTNS market. From then on, barring any physical restraints (such as spectrum availability), any last bit of market entry restrictions in all aspects of the telecommunications markets will be truly and finally removed. There will be no limit on the number of licences to be issued for FTNS or any other telecommunications services, and there will be no performance commitments imposed on the licensees as to the scale of the rollout and investment, which should best be determined by the market. Whilst the fixed and mobile network operators take care to improve the telecommunications infrastructure, it is of equal importance that the general public is able to benefit from such improvement and enjoys as much variety of services as is available, directly from their own flats. Hong Kong is a unique place where the majority of the population lives in high-rise buildings. No matter how advanced is the telecommunication infrastructure, consumers will not be able to benefit at all if the blockwiring systems in which they live lack the necessary capacity or features to accommodate new forms of services. The blockwiring systems that are currently installed within most of the buildings in Hong Kong belong to the incumbent local FTNS operator. All the other nine local FTNS operators are also granted to right to enter the buildings to build their own systems. Competition therefore already takes place even for this last mile of connection. Nonetheless, in order to further promote the establishment of advanced in-building telecommunications systems, or what we refer to as ‘intelligent buildings’, we have recently released a consultation paper proposing to allow property owners to install their own in-building telecommunications systems in their own buildings. The idea is to give them a say on the type of in-building telecomm– unications systems that can best suit their needs. To ensure that residents and tenants in the buildings will have unrestricted choice of different networks/services, one important licence condition under our proposal is that the in-building telecommunications systems must be made available for interconnection with telecommunications networks or operators on a non-discriminatory basis. To foster competition, the right of the local FTNS operators to enter the buildings will not be affected. The property owners will be licensed by way of class licence, which is a new form of licensing introduced to our regulatory regime. A person will be qualified as a class licensee so long as he meets the criteria set out in the class licence. Registration with the TA may or may not be necessary, depending on the kind of class licence to be introduced. It is anticipated that in future, more and more forms of telecommunications services, especially services at the retail level, will be class – licensed. The regulatory control on class licensees will be more relaxed than that on those who are individually licensed. With a lower entry threshold, and less regulatory scrutiny, small businesses can join in to take part in this exciting telecommunications market. We believe that the regulatory changes outlined above will help establish an even more vibrant business environment for investors. Our policy of liberalization supported by a level playing field for the incumbent and new entrants alike will no doubt gain confidence from those who are contemplating investments in the basic infrastructure. Thus, the telecommunications industry is not a playing field that only the conglomerates can take part in. The MVNO licences and all other forms of service licences, as well as the class licences, will all encourage the small businesses to come along and use their imagination and creativity to boost the service/application and content side of the market, making the Hong Kong telecommunications market a truly enviable one in terms of its innovation, variety, choice availablity and quality. As to the general public, they will certainly benefit from the publicity of these large and small businesses and gain a deeper understanding of what telecommunications are capable of. Ultimately, it is only with the existence of an informed class of consumers who are driven with a desire for more and better services that demands can be generated and business opportunities created in the telecommunications market.