Chapter 3 Meeting the New Challenges of the Telecommunications Market
Re-assignment of Frequency Spectrum in the 1.9 – 2.2 GHz Band
The previous term of assignment of 118.4 MHz of spectrum in the 1.9 – 2.2 GHz band expired on 21 October 2016. According to the re-assignment arrangement arrived at by the CA after two rounds of public consultation, 29.6 MHz out of the 118.4 MHz of spectrum re-assigned was to change hands with effect from 22 October 2016. In order to facilitate a smooth spectrum handover among the mobile network operators and to minimise service impact, if any, on users, OFCA set up a Technical Working Group in March 2015 with the participation of all relevant mobile network operators for the purpose of coordinating the technical issues and arrangements in relation to the spectrum re-assignment. Through the efforts of the Technical Working Group and the collaboration of all relevant operators, the spectrum handover arising from the spectrum re-assignment was successfully and seamlessly completed at 00 hours on 22 October 2016, and members of the public continue to enjoy smooth and uninterrupted mobile services.
Re-assignment of Frequency Spectrum in the 900 MHz and 1800 MHz Bands
Frequency spectrum in the 900 MHz and 1800 MHz bands is being deployed for the provision of 2G, 3G and 4G mobile services. The existing assignments for 49.8 MHz of spectrum in the 900 MHz band and 148.8 MHz of spectrum in the 1800 MHz band will expire within the period between November 2020 and September 2021. Together with 1.4 MHz of currently unassigned spectrum in the two frequency bands, a total of 200 MHz of spectrum is under consideration for assignment / re-assignment.
The CA and the SCED jointly conducted the first round of public consultation from February to May 2016 to solicit views and comments of the industry and other affected parties on the proposed arrangements for spectrum re-assignment and the related spectrum utilisation fee (“SUF”). Three options were proposed for spectrum re-assignment, namely (a) a full-fledged administratively-assigned approach; (b) a full-fledged market-based approach; and (c) a hybrid administratively-assigned cum market-based approach. Upon the close of the three-and-a-half-month consultation, 325 submissions were received from the industry, business organisations and members of the public. There was support from different industry players for each of the three proposed re-assignment options.
Having carefully considered the views and comments received in the first round of public consultation and the findings of a technical study undertaken by an external consultant on the possible service impact arising from different spectrum re-assignment options, the CA considered that there were justifications for adopting the hybrid administratively-assigned cum market-based approach for further consultation. Under this approach, 80 MHz of the spectrum in the 1800 MHz band (or 40% of all spectrum under consideration) was proposed to be re-assigned to the four incumbent spectrum assignees through the offer of a right of first refusal to each of them for the acquisition of 20 MHz of spectrum, so as to safeguard the provision of 4G services in the Mass Transit Railway premises and the provision of territory-wide 2G services. The remaining 120 MHz of spectrum (or 60% of all spectrum under consideration) in the 900 MHz and 1800 MHz bands was proposed to be re-assigned by way of auction. The CA and the SCED jointly launched the second round of public consultation on 14 February 2017. Upon the close of the three-and-a-half-month consultation on 24 May 2017, 22 submissions were received. OFCA will continue to support the CA in reviewing the submissions received in the second consultation in detail, with a view to adopting an arrangement that would best meet the four objectives in spectrum re-assignment, namely, ensuring customer service continuity, efficient spectrum utilisation, promotion of effective competition, and encouragement of investment and promotion of innovative services.
The CA and the SCED plan to promulgate their decisions on the arrangements for the re-assignment of the 200 MHz of spectrum in the 900 MHz and 1800 MHz bands and the related SUF by around the end of 2017. This will allow a lead time of about three years for the industry to prepare for any change in spectrum assignments.
Reduction of Telecommunications Licence Fees
In November 2012, the CA and the SCED issued a joint statement to promulgate their decisions to reduce the customer connection fee level of Unified Carrier Licences (“UCLs”) from $800 to $700 for each set of 100 customer connections; and to reduce the mobile station fee level of Public Radiocommunications Service Licences (Paging) and Services-Based Operator Licences (Class 3) from $800 to $700 for each set of 100 mobile stations. Following the completion of the legislative procedure, the new licence fees took effect on 1 March 2013. In February 2013, PCCW-HKT Telephone Limited and Hong Kong Telecommunications (HKT) Limited (“PCCW and HKT”) applied for leave to lodge a judicial review (“JR”) against the CA and the SCED on their decisions on licence fees reduction. The Court of First Instance and the Court of Appeal ruled in favour of the CA and the SCED, and dismissed the JR application in August 2015 and May 2016 respectively. PCCW and HKT subsequently appealed to the Court of Final and the process is ongoing.
Implementation of Measures for More Efficient Use of the 8-digit Numbering Plan
Since 1995, Hong Kong has adopted an 8-digit telecommunications numbering plan. In light of the persistently high demand for mobile service numbers and the finite amount of numbers in the 8-digit telecommunications numbering plan, it was forecast that the 8-digit numbers available for allocation to mobile services would be used up by as early as 2018 if no mitigation measures were taken. Against this background, OFCA assisted the CA in conducting a consultation to solicit public views on five proposed measures with a view to making available additional number resources for mobile services through more efficient use of the existing 8-digit telecommunications numbering plan. Having carefully considered views and comments from the industry and interested parties, OFCA supported the CA in finalising the measures to be adopted and the arrangements to implement the respective measures in three phases, with promulgation of the CA’s decision on 24 June 2016. To ensure the smooth and timely implementation of the measures, OFCA has been closely working with the industry and following up with the operators concerned in respect of the implementation of the necessary changes to their networks and systems. With the collaboration and efforts of all parties involved, Phases 1 and 2 of the measures were successfully implemented on 1 January 2017 and 1 July 2017 respectively. Phase 3 of the measures will be launched on 1 July 2021. Following full implementation of the five measures in three phases, a total of 15.72 million additional numbers will become available for allocation to mobile services. They are expected to be able to cope with the demand growth up to at least 2029.
Review of the Number of Public Payphones under the Universal Service Obligation (“USO”)
There were around 3 100 public payphones covered by the USO as at 31 December 2016. Public payphones under the USO are funded by fixed and mobile service providers under the universal service contribution (“USC”) scheme set up pursuant to section 35B of the TO. The telecommunications industry contributed HK$21.6 million for the cost of providing public payphones in 2014.
With the high level of mobile phone penetration in Hong Kong, the general public relies almost entirely on mobile phones for making calls or sending instant messages, and the demand for public payphones has waned over recent years with almost all of them unprofitable under the USO. Based on the data of 2014 and 2015, about 56% of the public payphones had an average revenue of not more than HK$1 per day.
Against the above background, OFCA had been in consultation with the telecommunications industry since the second half of 2016 on conducting a review, with a view to reducing the number of public payphones eligible for USC to a reasonable level, thereby reducing the level of USC borne by the industry and accordingly the pressure for operators to pass on the USC to subscribers of fixed and mobile services through adjustments to service charges. On 29 June 2017, after finalising the guiding principles and other details, the CA announced its decision to embark on the payphone review. OFCA will approach relevant stakeholders by groups to solicit their views on the exclusion of public payphones with an average revenue of not more than HK$1 per day from the USO. It is expected that the entire review will be completed by end 2019.
Regulation of Broadcast-type Mobile TV Services
In January 2014, Hong Kong Mobile Television Network Limited (“HKMTV”), the licensee holding the UCL (“Mobile TV Licence”) which authorised it to provide broadcast type mobile TV services (“Mobile TV Services”), indicated to OFCA its proposal to switch from the original China Mobile Multimedia Broadcasting (“CMMB”) standard to the Digital Terrestrial Multimedia Broadcast (“DTMB”) standard. As the executive arm of the CA, OFCA expressed its views to HKTV and HKMTV that Mobile TV Services using the DTMB standard without effective technical measures to prevent fixed reception by specified premises would render the Mobile TV Services available for reception by an audience of more than 5 000 specified premises in Hong Kong and hence should be subject to regulation by the BO. HKTV and HKMTV applied to the court for leave to apply for a JR of OFCA’s position. The Court of First Instance handed down its judgment (“Court Judgement”) on 29 September 2015 in favour of OFCA and dismissed all the grounds of JR brought by HKTV and HKMTV.
Subsequently, HKTV requested OFCA to process HKMTV’s alternative proposal of using the Digital Video Broadcasting – Terrestrial 2 (“DVB-T2”) transmission standard for the provision of its Mobile TV Services (“Application”). After rounds of correspondence and discussion with OFCA, HKTV submitted a finalized technical proposal in June 2017, setting out the detailed technical arrangements to ensure that the Mobile TV Services provided by HKMTV would be in strict compliance with the Court Judgment and the relevant statutory requirements under the BO and the TO.
Having carefully reviewed the technical proposal, the CA approved the Application and issued on 13 July 2017 to HKMTV an amended Mobile TV Licence, authorising HKMTV to change its transmission standard to the T2 Lite profile under DVB-T2 standard using the 8 MHz of spectrum assigned and in accordance with the new/amended conditions and technical parameters stipulated in the amended Mobile TV Licence.
The CA and OFCA will continue to facilitate HKMTV to provide its Mobile TV Services in strict compliance with the Court Judgment and the relevant statutory requirements under the BO and the TO.
Continued Efforts to Strengthen Consumer Protection in the Use of Telecommunications Services
Ongoing Implementation of “Mobile Bill Shock” Preventive Measures
The growing popularity of smartphones and advanced mobile devices has driven the growth of and demand for mobile data services in recent years. At the same time, the increase in the number of consumer complaints relating to mobile broadband billing disputes has become a common concern among consumers. Many of these complaints involve “mobile bill shock”, which refers to the shock consumers experience upon receiving unexpectedly high mobile bill charges. “Mobile bill shock” is mainly caused by unintentional or inadvertent usage of mobile data services, locally or while roaming outside Hong Kong.
To address this problem, OFCA has promulgated a series of preventive measures for the industry since May 2010. These measures include allowing customers to opt out of individual services; setting a charge ceiling; setting a usage cap for all kinds of usage-based mobile services; and alerting customers through short messages when their pre-determined usage threshold is reached, or when their roaming data usage is triggered.
To increase the transparency of the relevant service information, OFCA has published measures implemented by individual operators on its website and provided regular updates. On top of these measures, OFCA has organised a series of consumer education programmes to enhance consumers’ awareness and knowledge of mobile data services. OFCA has also posted a data usage calculator on its website, which serves as a tool for consumers to estimate their data usage consumption. With the implementation of the abovementioned preventive measures by mobile network operators and mobile virtual network operators as well as our on-going consumer education efforts, the number of complaints in relation to “mobile bill shock” decreased from 289 cases in 2015 to 156 cases in 2016, representing a year-on-year decrease of 46%.
Progress of the Implementation of Fair Usage Policy Guidelines
Fixed and mobile broadband service providers offer a variety of service plans to consumers, including plans with “unlimited usage”. However, certain “unlimited usage” service plans are in fact subject to usage restrictions imposed by service providers in the name of Fair Usage Policy (“FUP”). The FUP is intended to prevent excessive usage of network resources by individual customers, which may adversely affect the network performance and hamper other customers’ use of the service. For example, service providers may impose restrictions by lowering the network service priority or reducing the access speed for customers whose data usage has exceeded certain threshold. Nevertheless, consumers may not be aware of the existence of the FUP or understand the relevant terms and conditions. Customers of “unlimited service” plans in particular feel aggrieved when their data usage is subject to restriction because of the FUP.
In order to protect consumer interests and enhance the transparency of service information, the CA issued a set of FUP guidelines in November 2011, governing the way service providers should implement their FUP. The mandatory guidelines have been in effect since February 2012.
In 2016, OFCA assisted the CA in handling six FUP-related complaint cases. None of them was found to be in contravention of the FUP guidelines.
Enhancement of the Broadband Performance Test System
Since December 2010, OFCA has posted on its website a broadband performance test system to enable broadband service users to measure the performance of their broadband connections, including download and upload speeds, network latency, packet loss and jitter. Apart from users of desktop and notebook computers, users of smart phones and tablets running iOS and Android operating systems may also make use of the test system.
From time to time, we review and upgrade the test system to further enhance its capability and performance. Currently, it offers desktop users and users of iOS- and Android-based mobile devices speed tests of up to 1 000 Mbps and 450 Mbps respectively.
The broadband performance test system was accredited with a Certificate of Merit under the category of “Best Public Service Application (Web/Mobile Application) Award” in the “Hong Kong ICT Awards 2013”. From service launch to March 2017, more than 72 million tests were performed under the system.
Continuing to Facilitate the Implementation of Self-regulatory Measures
Enhancement of the Industry Code of Practice for Telecommunications Service Contracts
In order to provide guidelines for the industry in drawing up telecommunications service contracts with a view to improving transparency in the contracting process and increasing customer satisfaction, the Communications Association of Hong Kong (“CAHK”), an industry association, promulgated a self-regulatory Industry Code in December 2010, which was implemented by all major fixed and mobile network operators starting from July 2011.
Having regard to the implementation experience and consumers’ feedback, OFCA made a number of suggestions to CAHK to further enhance the Industry Code. CAHK revised the Industry Code in October 2014 following discussions with participating operators. The revised Industry Code took effect on 1 May 2015.
Since the implementation of the Industry Code in July 2011, the number of complaints related to service contract disputes has been decreasing continuously, from 1 277 cases in 2011 to 425 cases in 2016, representing a drop of 67% in five years.
Publications of the Service Termination Arrangements of Residential Broadband Service Providers
To enhance service information transparency and to better inform consumers, OFCA has since November 2016 published on its website details of the arrangements adopted by major residential broadband service providers to handle service termination requests from consumers. Information published covers the advance notice requirement, channels for accepting service termination requests and their relevant formats, arrangements to acknowledge and to confirm receipt of service termination requests, and channels for the return of customer equipment to service providers. The information will enable consumers to better understand existing practices of different service providers, which should help reduce disputes over service termination matters. The information would also go some way towards facilitating consumers in making informed decisions on service plans that best suit their needs, by comparing the existing termination arrangements of different service providers, thereby encouraging operators to introduce improvements on an on-going basis. OFCA will update the published information periodically and as and when changes are introduced by service providers. OFCA will continue to encourage the service providers to review the service termination arrangements with a view to making further improvements.
Code for the Provision of Chargeable Mobile Content Services
To safeguard consumer interests and to increase the transparency of the pricing information related to Mobile Content Services (“MCS”), OFCA has worked closely with the industry to draw up the voluntary “Code for the Provision of Chargeable Mobile Content Services”. Promulgated and put into effect by CAHK in January 2010, the code governs the practices of third-party Content Service Providers (“CSPs”) in providing MCS and the establishment of an industry self-regulatory scheme. Under the code, all third-party CSPs are required to indicate clearly to their customers the chargeable nature of the services and to obtain their clear consent before initiating the delivery and provision of MCS. They are also required to set out clearly the unsubscribing mechanism, which should be simple and convenient.
Since the adoption of the code in January 2010, OFCA has been closely monitoring its effectiveness, and noted a continued decrease in the number of related complaints, which has remained at a low level. In 2016/17, only one complaint case was received, reflecting the general compliance of CSPs with the voluntary code and satisfaction of customers with the MCS.
In light of past experiences and latest market situation, as well as the persistently low level of complaints about MCS in recent years, CAHK, in consultation with the industry and OFCA, streamlined the self-regulatory arrangements under the code from 1 April 2017 such that mobile network operators would take up a more prominent role to ensure continual compliance with the requirements set out in the code by CSPs. Following the implementation of the streamlined arrangements, the Administrative Agency set up under CAHK to handle matters related to the code ceased operation starting from 1 April 2017.
Despite the adoption of the streamlined arrangements under the revised code, all the measures in respect of safeguarding consumer interests and provision of transparent pricing information related to MCS by CSPs remain the same in the revised code.
Code of Practice in Relation to Billing Information and Payment Collection for Telecommunications Services
In October 2011, the CA issued a voluntary code of practice entitled “Code of Practice in Relation to Billing and Payment Collection for Telecommunications Services”, with a view to reducing billing disputes and enhancing the transparency of billing information. This code of practice provides guidance to telecommunications operators on chargeable items to be included in their bills, and arrangements for payment collection. As at March 2017, seven local fixed network operators and four mobile network operators had pledged compliance with the code. We have published on our website a consumer alert as well as a summary of the compliance status of all operators for the information of consumers. We will continue to closely monitor the implementation and effectiveness of this code of practice.
Industry Code of Practice for Provision of Mobile TV Services
According to the Framework for Development of Broadcast-type Mobile TV Services in Hong Kong promulgated by the Government in December 2008 and revised in February 2010, the industry is required to develop a code of practice on the provision of Mobile TV Services, both local broadcast-type and streaming-type, for the purpose of self-regulation. In August 2012, CAHK issued a code of practice for Mobile TV Services. With a view to protecting children and public morals, the code requires Mobile TV Service providers to implement access controls for pornographic and obscene content. Mobile TV Service providers should also have regard to the prevailing standards of morality generally accepted by society, and in particular be vigilant about the likely effects of their television content on children.
Long-term Implementation of the Customer Complaint Settlement Scheme
The voluntary Customer Complaint Settlement Scheme (“CCSS”) has been implemented on a long term basis since 1 May 2015. The CCSS helps resolve billing disputes in deadlock between telecommunications service providers and their residential / personal customers by means of mediation. The mediation service is provided by an independent mediation service centre (“CCSS Centre”) set up under CAHK with voluntary participation of all major telecommunications service providers in Hong Kong. OFCA supports the CCSS by contributing the necessary funding, vetting the CCSS applications against the acceptance criteria, and monitoring the performance and the governance of the scheme.
There were 71 eligible applications in 2016/17, 41 of which were resolved before referral to the CCSS Centre, 26 were satisfactorily settled through mediation by the CCSS Centre, and only one case was not settled. The remaining three cases were being processed by the CCSS Centre.
To raise public awareness of the CCSS, a series of publicity activities were conducted, including publication of comic strips and advertorials, as well as roving exhibitions and public seminars. OFCA will continue to support the CCSS and monitor its effectiveness.
Facilitation of the Landing of New Submarine Cable Systems in Hong Kong
With the support of OFCA’s single-point-of-contact service, a new regional submarine cable system, namely, the Asia Pacific Gateway, has been brought into service in Hong Kong since October 2016. In addition, three regional and transcontinental systems (namely, the Asia Africa Europe-1, Pacific Light Cable Network and Hong Kong-Guam Cable System), as well as two domestic systems, (namely, Tseung Kwan O Express and Ultra Express Link) are being constructed and planned for putting into service between mid-2017 and 2020. OFCA will continue to provide the single-point-of-contact service to assist operators in applying for the necessary statutory approvals to construct new submarine cable systems in Hong Kong.
Development of Fixed Broadband Services
Broadband access to various applications and content services has become an integral part of people’s lives in Hong Kong. With the continuous network rollout of fixed network operators, the Hong Kong community is able to enjoy nearly ubiquitous coverage of broadband networks deploying various technologies. As at March 2017, there were around 2.63 million residential and commercial fixed-broadband subscribers, with a household penetration rate of 93%. Broadband services are now available at speeds of up to 10 Gbps. Around 82% of fixed broadband subscribers use broadband services with a speed of 10 Mbps or above. With a view to enhancing the provision of fixed broadband services in rural and remote areas through increased competition in the market, the CA amended the network rollout requirement under the UCL of the 21 ViaNet Group Limited for the provision of wireless fixed broadband service using radio spectrum in the 2.3 GHz band to at least 4 000 village houses. In addition, the CA granted a new UCL in January 2017 to Village Telephone Limited which focused on the construction and operation of fibre-based broadband infrastructures in rural and remote areas of Hong Kong. It is expected that the choice and quality of fixed broadband services in rural and remote areas will improve progressively through continuous rollout of the network infrastructure to those areas by various fixed network operators.
According to a press release issued by the FTTH Council Europe in February 2017, Hong Kong ranked the fifth worldwide in fibre to home/building household penetration among the 61 economies under comparison. According to the “State of the Internet 1st Quarter, 2017 Report” published by Internet content delivery provider Akamai in May 2017, Hong Kong has an average peak connection speed of 129.5 Mbps, which is the fourth highest in the world.