Chapter 1 Message from the Director-General
I am pleased to present the third annual report of the Office of the Communications Authority (“OFCA”). In 2014/15, OFCA continued to provide the Communications Authority (“CA”) with full support in discharging its statutory responsibilities as the regulator of the communications sector in Hong Kong.
The communications market in Hong Kong continued to be vibrant and dynamic in 2014/15. The mobile telecommunications market remained very competitive and continued to expand, with a penetration rate exceeding 233% as at March 2015. This vibrancy has driven network operators to continually upgrade their networks. I am pleased to report that the World Economic Forum’s Global Information Technology Report 2015 ranked Hong Kong the first among 143 economies in mobile network coverage, and the second in international Internet bandwidth per user.
The fixed telecommunications market also fared very well internationally. Our fibre to the home/building household penetration was ranked the third globally by the Fibre to the Home (“FTTH”) Council Europe. Hong Kong has among the fastest broadband in the world according to the Internet content-delivery provider Akamai. Facilities-based competition further encouraged network rollout by the fixed-network operators, providing 87% of residential households with a choice of at least two self-built fixed networks and 79% a choice of at least three networks.
The landscape of the broadcasting sector has also been undergoing changes. There will be a new player entering the free television market following the decision of the Chief Executive in Council (“CE in C”) to grant a domestic free television programme service (“free TV”) licence to HK Television Entertainment Company Limited (“HKTVE”) on 1 April 2015. Meanwhile, a number of free TV licence applications are being processed. The latest developments will have significant impact on the broadcasting landscape and the coming on stream of new licensed services will enhance programme variety and widen the viewers’ choices.
There are continuous new developments for television and sound broadcasting services. Following the approval in principle of the CE in C for the free TV licence applications of Fantastic Television Limited (“Fantastic TV”) and HKTVE in October 2013, OFCA assisted the CA in taking follow-up actions on the licence applications and the CA’s recommendations on the applications were submitted to the CE in C in January 2015. On 1 April 2015, the CE in C decided to formally grant a 12-year free TV licence to HKTVE. In parallel, we assisted the CA in processing the application of Asia Television Limited (“ATV”) and Television Broadcasts Limited (“TVB”), the two incumbent free TV licensees, for renewal of their licences. The CA’s assessment of the two licensees’ performance and recommendations on the renewal applications were submitted to the CE in C in early November 2014. Having regard to, inter alia, the recommendations of the CA, the CE in C decided on 1 April 2015 not to renew ATV’s licence, and on 12 May 2015, to renew TVB’s licence for a new term of 12 years.
During the period under review, we also assisted the CA in conducting a renewal exercise in respect of the domestic pay television programme services (“pay TV”) licence of PCCW Media Limited (“PCCW Media”). The recommendations of the CA on this application were submitted to the CE in C in September 2014. On 9 December 2014, having regard to the recommendations of the CA, the CE in C decided to renew PCCW Media’s licence for a term of 12 years. During the year, we further assisted the CA in processing two applications for renewal of other licensable television programme service licences.
Hong Kong Commercial Broadcasting Company Limited (“CRHK”) and Metro Broadcast Corporation Limited (“Metro”), the two incumbent analogue sound broadcasting licensees, submitted in July and August 2014 respectively applications for renewal of their licences, which are due to expire on 25 August 2016. We assisted the CA in conducting comprehensive assessments of their performance and the CA submitted its recommendations on the licence renewal applications to the CE in C in May 2015.
The CA received new applications for free TV licences from Hong Kong Television Network Limited (“HKTV”) in April 2014 and Forever Top (Asia) Limited (“Forever Top”) in April 2015. We will continue to support the CA in processing the applications in accordance with the Broadcasting Ordinance (Cap. 562) (“BO”) and established procedures.
OFCA continued to receive a large number of complaints about broadcast materials. In 2014/15, OFCA handled nearly 40 000 complaints relating to some 2 600 cases. Using powers delegated by the CA, OFCA handled most of those cases, which involved breaches of a minor nature, or allegations which did not constitute any breach, or fell outside the remit of the ordinances. The CA dealt with 23 cases in accordance with the established practices.
Fixed broadband networks continued to develop in 2014/15. During the year, the household penetration rate for fixed broadband services stood at 83%, with over 88% of subscribers choosing services with a speed of at least 10 Mbps. We also actively facilitated new submarine cable systems to be landed in Hong Kong, so as to increase our external connection capacity and resilience. Two new systems are scheduled to land in Hong Kong in 2016.
We assisted the CA in reviewing whether certain telecommunications regulatory measures were still necessary, taking into account market and technology developments. After public consultation, the CA decided that the regulatory guidance for narrowband interconnection between fixed carriers, first promulgated in 1995, should be phased out after an 18-month transitional period. Starting from 16 October 2014, all types of carrier-to-carrier local interconnection charges are no longer subject to any regulatory guidance, and are solely determined through commercial negotiations between the carriers.
In terms of mobile telecommunications services, with the 3G spectrum assignments in the 1.9 – 2.2 GHz band due to expire in October 2016, we assisted the CA in mapping out the way forward on the spectrum re-assignments following two rounds of public consultation. The CA decided in November 2013 to adopt a hybrid administratively-assigned cum market-based approach to re-assign the spectrum upon expiry of their existing term of assignments, with part of the spectrum to be re-assigned to the incumbent 3G operators through right of refusal and the remaining part by way of auction. The auction was completed in December 2014. Two incumbent 3G operators and a non-incumbent 3G spectrum assignee successfully bid for the spectrum, generating a total spectrum utilisation fee of $2.42 billion. This, together with the $4.57 billion fetched from the spectrum assigned through right of first refusal, is payable in August 2016 before the spectrum handover in October 2016.
Competition and Consumer Protection
Ensuring effective competition in the communications market is an important means of facilitating consumers’ access to advanced services at reasonable prices. To this end, OFCA continued to assist the CA in enforcing the competition provisions in the Telecommunications Ordinance (Cap. 106) (“TO”) and the BO. From April 2014 to March 2015, we assisted the CA in considering 15 complaints cases and two merger and acquisition cases involving telecommunications carrier licensees.
The newly enacted Competition Ordinance (Cap. 619) (“CO”) will come into operation by end of 2015. With the CA conferred concurrent jurisdiction with the Competition Commission (“CC”) to enforce the CO, OFCA has been supporting the CA in working closely with the CC to prepare the guidelines on the enforcement of the CO. A memorandum of understanding between the CA and the CC will also be prepared to coordinate the performance of their respective functions under the CO.
The amended Trade Descriptions Ordinance (Cap. 362) (“TDO”) came into effect on 19 July 2013, under which the CA is conferred concurrent jurisdiction with the Customs & Excise Department (“C&ED”) to enforce the new fair-trading provisions in the broadcasting and telecommunications sectors. OFCA received 1 486 complaints under the jurisdiction of the criminal regime of the amended TDO from July 2013 to March 2015. 1 155 were closed due to insufficient evidence to suggest and/or establish a contravention, or for falling outside the scope of the TDO. 105 complaints were closed with the issue of advisory letters to the concerned licensees to draw their attention to the need to observe more closely the requirements in the TDO, and 226 complaints were under process at various stages. Misleading and deceptive conduct by telecommunications licensees prior to the implementation of the amended TDO are still regulated under the TO. In this regard, OFCA handled 81 complaint cases from April 2014 to March 2015, with the CA confirming one case as infringement of the TO and imposing a financial penalty on the licensee as sanction.
Service contract disputes are a major area of consumer complaints. While the CA has no statutory power to investigate such disputes, after active discussions between OFCA and the Communications Association of Hong Kong (“CAHK”), an industry association, CAHK drew up a self-regulatory Code of Practice for Telecommunications Service Contracts (“Industry Code”) in December 2010. The industry started implementing the Industry Code in July 2011. Having reviewed and analysed the consumer complaints on contractual disputes received since the implementation of the Industry Code, OFCA made a number of suggestions to CAHK for improvement of the Industry Code. CAHK, after discussion with the participating operators, revised the Industry Code in October 2014. The revised Industry Code has taken effect from 1 May 2015.
During the year, OFCA also continued to sponsor the operation of the trial Consumer Complaint Settlement Scheme (“CCSS”), which was set up in November 2012 to help resolve, through mediation, billing disputes in deadlock between telecommunications service providers and their customers. The trial ended in October 2014 and OFCA has conducted an assessment of the effectiveness of the trial. Having regard to the encouraging outcome of the CCSS trial, the proven demand from customers and positive feedback from the industry, OFCA has supported the long-term implementation of the scheme since 1 May 2015.
OFCA has been assisting the CA in the enforcement of the Unsolicited Electronic Messages Ordinance (Cap. 593) (“UEMO”). The number of reports in relation to suspected contraventions of the UEMO remained stable last year. In 2014/15, there were 2 068 reports, broadly comparable to the 1 998 reports in the previous year. During the period, the Legislative Council passed amendments to the UEMO to permit specified notices to be served by ordinary post or by hand in addition to registered post, so as to provide greater flexibility in the service of the notices and to enhance the effectiveness of the enforcement mechanism under the UEMO. In 2014/15, OFCA issued a total of 270 advisory letters, 49 warning letters and one enforcement notice to the senders of commercial electronic messages after investigation. We will continue to monitor the compliance situation and streamline the procedures for more effective enforcement.
In 2014/15, OFCA continued to run an annual consumer education campaign under the theme “Smart Use of Communications Services”, which provided useful consumer tips on how to use smartphones wisely and protect personal data stored on the phones. I am pleased to report that the response to the various activities under the campaign was encouraging, and we will expand our consumer education efforts in 2015/16 to reach out to more segments of the community.
OFCA also gave 11 talks to students and participants in a community project on radio programme production in 2014/15, specifically on how the public could make informed viewing choices regarding television programme services, how television and sound broadcasting services were regulated, and the programme standards governing radio services.
OFCA participated actively in conferences organised by international and regional organisations to keep track of the latest global regulatory developments and to share our regulatory experience. During the year, OFCA also met with its counterparts from Austria, Brunei Darussalam, Singapore and Guangdong among others, to exchange views and share its experience.
Major Challenges Ahead
2015/16 will be another busy year for OFCA. On the broadcasting front, we will continue to assist the CA in handling three free TV licence applications, monitoring a new licensee in rolling out its free TV service and assigning radio spectrum to support licensed broadcasting services. On the telecommunications front, following the 3G spectrum auction, we will continue to coordinate with the mobile network operators to prepare for the spectrum handover in October 2016. We will also prepare for the re-assignment of about 200 MHz of spectrum in the 900/1800 MHz bands upon expiry of the existing assignments between 2020 and 2021. With the continuous growth in the number of mobile subscribers, it is estimated that all the number blocks currently available for mobile services will be allocated by 2018. OFCA has been discussing with the industry on a number of measures to extend the lifespan of the existing 8-digit numbering plan, such as re-allocating the unused number blocks to mobile services, raising the threshold of utilisation rate before an operator is entitled to apply for additional number blocks, etc. OFCA will assist the CA in soliciting views from the industry and the general public on various proposed measures through a public consultation in the fourth quarter of 2015.
In respect of the implementation of the CO, the Government has gazetted a commencement notice appointing 14 December 2015 as the full commencement date of the ordinance. OFCA is working in full steam to complete the remaining preparation work in close collaboration with the CC to bring the new cross-sector competition regime into operation.Despite the heavy workloads during the year, I am most grateful to have a very professional and dedicated team of colleagues at OFCA who have worked professionally and tirelessly to meet the challenges. I look forward to their continued support in tackling the various regulatory challenges in 2015/16 and providing full support to the CA in discharging its statutory regulatory responsibilities.