Office of the Communications Authority
Trading Fund Report 2019/20

I am delighted to present the 2019/20 annual report of the Office of the Communications Authority (OFCA) Trading Fund.

Market Overview

Telecommunications Market

Hong Kong faced social and economic challenges during the year. Yet, the development of the telecommunications market continued to stay strong, resilient and healthy. Local mobile and fixed broadband penetration rates remained one of the highest in the world.

The number of mobile service subscriptions increased to over 23 million in 2019/20, and the subscriber penetration rate reached 275%. Mobile data usage by customers continued to register remarkable growth: the total volume of mobile data usage surged to 75 664 Terabytes per month, representing an average monthly per capita mobile data consumption of 10 Gigabytes.

The commercial launch of the fifth generation (5G) services from 1 April 2020 has taken the Hong Kong telecommunications market to a new era, opening up tremendous new business opportunities to the industry and bringing to the general public new possibilities of innovative telecommunications services and applications.

In addition, Hong Kong is home to some of the most advanced optical-fibre networks in the world, giving local consumers choices of a full range of affordable high-speed broadband services. As of March 2020, there were more than 2.8 million broadband subscriptions with the household broadband penetration rate exceeding 94%, and over 80% of the subscriptions were served by optical fibre to the buildings/premises.

Broadcasting Market

Hong Kong has a vibrant broadcasting sector offering a wide range of services to the community. We have access to over 800 local and overseas television channels in various languages through free-to-air terrestrial and satellite reception or pay television services and 13 local radio channels. With its geographical location, excellent infrastructure and other favourable factors, Hong Kong is a prime location for uplinking satellite television services. At present, there are 12 non-domestic television programme service licensees providing over 180 satellite television channels for audiences in the Asia-Pacific region. With the “open sky” policy of the Government, residents are able to receive unencrypted satellite television programme channels uplinked from Hong Kong and elsewhere in the world for free. There are now over 400 such free satellite television channels available for reception in Hong Kong.

Highlights of Our Work in 2019/20

2019/20 has been a year of significant progress for OFCA. I would like to highlight some of our major accomplishments during the year below.

Telecommunications Services

Facilitating the launch of 5G services was a major focus of our work in 2019/20. We assisted the Communications Authority (CA) in making available a total of about 4 500 MHz of spectrum in multiple frequency bands for the deployment of 5G, laying the foundation for an exciting new chapter for Hong Kong's communications industry and telecommunications service users.

With an ample supply of high frequency spectrum in the 26 GHz and 28 GHz bands, the CA decided to assign the spectrum administratively. Three incumbent mobile network operators (MNOs) applying for assignment were each assigned 400 MHz of spectrum in the two bands in April 2019 for the provision of large scale public mobile services including 5G services. In addition, application was opened in July 2019 for the assignment of up to 400 MHz of spectrum in the 26 GHz and 28 GHz bands for use on a geographically shared basis to provide localised wireless broadband services (LWBS), and the first assignment of the shared spectrum was made in October 2019.

As for the 5G spectrum in the low to mid frequency bands, we assisted the CA in auctioning off a total of 380 MHz of spectrum to the industry in October and November 2019. It includes 100 MHz of spectrum in the 3.3 GHz band, 200 MHz of spectrum in the 3.5 GHz band and 80 MHz of spectrum in the 4.9 GHz band for the provision of 5G services in Hong Kong.

Following the outcome of a consultancy study commissioned by OFCA, it was determined that the existing Satellite Master Antenna Television (SMATV) systems in buildings for receiving and distributing satellite TV signals to occupants would need to be upgraded in order to co-exist with 5G systems operating in the adjacent 3.5 GHz band starting from 1 April 2020. OFCA launched a subsidy scheme in November 2019 with funding provided by the four 5G MNOs using the 3.5 GHz band to support the upgrading of existing SMATV systems. The scheme would run for one year with OFCA serving as the administrator as jointly elected by the MNOs.

As a long term solution to lift the restriction zone in Tai Po so that the 3.5 GHz spectrum could be used there for provision of 5G services, OFCA has been discussing with the concerned satellite operators the relocation of their satellite earth station facilities operating at the 3.5 GHz band from Tai Po to the Chung Hom Kok Teleport. OFCA is working closely with the satellite operators and the relevant bureaux and departments with a view to resolving the land and technical issues.

After the completion of the review of the Class Licence for Offer of Telecommunications Services (CLOTS) in April 2019, OFCA assisted the CA to implement the revised licensing regime of the CLOTS and issued guidelines in August 2019 to assist licensees with a customer base of 10 000 subscriptions or more to register their business information with the CA. As of September 2020, 20 CLOTS licensees had been registered.

In support of the Government’s policy initiative to promote the extension of fibre-based networks to remote villages, OFCA has implemented a subsidy scheme with a funding of HK$770 million to provide financial incentives for telecommunications operators to extend their fibre-based networks to villages in remote areas. During the year, OFCA completed the tender exercises and awarded all six projects to the selected fixed network operators. OFCA will closely monitor the implementation progress of these projects. The new fibre-based networks are expected to be extended to the villages concerned in phases from 2021 onwards.

In order to reinforce Hong Kong’s role as a regional telecommunications hub, the Chief Executive proposed in the 2019 Policy Address Supplement to provide suitable land lots in the Chung Hom Kok Teleport for the establishment of additional external telecommunications infrastructures. OFCA is working closely with the relevant bureaux and departments to make the relevant land lots available in the coming few years.

The work of OFCA goes beyond promoting a conducive business environment and protecting consumers’ interests. Consumer education is also an important part of our work. In order to increase consumers’ awareness and help them to make informed choices on different types of telecommunications services, we continued our public education programmes during the past year, including a series of TV and radio announcements in the public interest, roving exhibitions, public seminars and consumer education programmes tailor-made for schools.

Broadcasting Services

OFCA assisted the CA in implementing relaxation measures in response to the increasingly challenging business environment for the broadcasting industry so as to ease their regulatory burdens. In consideration of a request from a licensee and the policy views of relevant government bureaux, the CA decided to lift the requirements for free TV licensees to broadcast programmes of Radio Television Hong Kong (RTHK) and Educational Television (ETV) programmes for schools with effect from 4 March 2020 and 6 June 2020 respectively.

With the switching off of analogue television services (ASO) planned to proceed on 30 November 2020 (23:59 hours), Hong Kong will enter an era of full digital terrestrial television (DTT) broadcasting from 1 December 2020 onwards. A total of 140 MHz of spectrum in the 614 – 806 MHz band will be made available for the provision of mobile telecommunications services subsequent to the ASO. We are working closely with the broadcasters and stakeholders to coordinate the implementation arrangements for ASO and the vacation of the relevant spectrum.

Major Challenges Ahead

Since the commercial launch of 5G services on 1 April 2020, we have entered the exciting 5G era, which will undoubtedly accelerate growth and drive innovation in the communications industry. In the year ahead, OFCA will continue to support the development of 5G services in Hong Kong and assist the CA to make available more spectrum in different frequency bands, including new spectrum in the 600 MHz and 700 MHz bands and additional spectrum in the 4.9 GHz band, for the provision of 5G or other innovative mobile services.

In light of the expiry of the existing assignments of spectrum in the 850 MHz band and 2.5/2.6 GHz band in November 2023 and March 2024 respectively, OFCA will assist the CA to conduct the re-assignment exercise for spectrum in these two bands with the launch of public consultations.

OFCA will also continue to work with relevant government departments to facilitate the effective rollout of 5G networks and services across Hong Kong, including opening up suitable government premises, sheltered bus stops and public payphone kiosks for installation of radio base stations to extend 5G network coverage.

On the broadcasting front, OFCA will assist the CA in conducting a mid-term review of the free TV licences of HK Television Entertainment Company Limited (HKTVE), Television Broadcasts Limited (TVB) and Fantastic Television Limited (Fantastic TV) and the sound broadcasting licences of Hong Kong Commercial Broadcasting Company Limited (CRHK) and Metro Broadcast Corporation Limited (Metro). The CA will assess the performance of these licensees during the first six years of their respective licences, and collect views of the general public on service needs and regulatory requirements through a consultation process. The outcome of the review, including the recommendations to improve the services provided by the licensees in the remaining years of their licences, will be submitted for consideration by the Chief Executive in Council.

Despite all the challenges ahead, I am confident that with the dedication and hard work of the professional team of colleagues in OFCA, as well as the guidance from the Chairman and Members of the CA, we will continue to foster the development of the broadcasting and telecommunications market in the years to come.