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Chapter 3 Meeting the New Challenges of the Telecommunications Market

Gearing up to the 5G era

Making available additional spectrum for 5G development

To better prepare Hong Kong for the timely launch of the 5G services, there is a need for additional spectrum for public mobile services towards 2020 and beyond.

To implement the work plan issued by the CA in March 2017 for making available additional spectrum for public mobile services, OFCA served notice in April 2017 to spectrum assignees of the 26 GHz band, notifying them that their frequency assignments in the 26 GHz band will be withdrawn on 1 April 2019 with a view to re-allocating the 26 GHz band for 5G services. In December 2017, OFCA assisted the CA in issuing an invitation for expression of interest (“EOI”) in using the 4 100 MHz of spectrum in the 26 GHz and 28 GHz bands for the provision of 5G services. The EOI aimed to gauge the demand of the local industry for such spectrum and to solicit information from the industry and interested parties on relevant matters to facilitate the CA’s consideration of the appropriate arrangements for spectrum assignments. After reviewing the information received in the EOI, OFCA supported the CA in preparing a joint public consultation with the Secretary for Commerce and Economic Development (“SCED”) on the proposed allocation of the 26/28 GHz bands to mobile service and the associated arrangements for spectrum assignment, as well as the related Spectrum Utilization Fees (“SUF”). The joint public consultation was launched on 26 July 2018.

From July to September 2017, OFCA assisted the CA to conduct a public consultation on the proposal to change the frequency allocation of the 3.4 – 3.7 GHz band from fixed satellite service (space-to-Earth) to mobile service, to assign 200 MHz of spectrum in the 3.4 – 3.6 GHz band for the provision of public mobile services, and to reserve 100 MHz of spectrum in the 3.6 – 3.7 GHz band as a guard band. In addition, OFCA commissioned a consultancy study to examine radio interference mitigating measures to enable the co-existence of satellite master antenna television systems and systems of mobile services within the 3.4 – 4.2 GHz band. Having duly considered the views and comments received during the consultation, findings of the consultancy study and feedback from the industry, the CA decided on 28 March 2018 to effect the aforesaid re-allocation from 1 April 2020, thereby giving an advance notice period of two years to the affected licensees and parties.

As the next step, OFCA also assisted the CA during the year to make preparations for launching a joint public consultation with SCED on the proposed arrangements for assignment of the spectrum in the 3.4 – 3.6 GHz band for the provision of public mobile services and the related SUF. The joint consultation was launched in May 2018.

OFCA has been closely monitoring the global development on spectrum planning for 5G services. It will continue its efforts in identifying more spectrum to support the development of 5G services in Hong Kong.

Facilitating the industry to conduct trials for 5G technologies and applications

OFCA has been encouraging and facilitating the industry to conduct trials of 5G technologies and applications to better prepare for the launch of 5G mobile services. As of 31 March 2018, the CA issued a total of seven trial permits, with temporary, free-of-charge spectrum assignment for test purposes, to equipment vendors and mobile network operators. OFCA welcomes applications from other interested parties for conducting further 5G trials.

Facilitating Development of Wireless Internet of Things Services

IoT is an emerging technology which enables the provision of communications platforms and services for interconnected devices to generate, exchange and consume data with minimal human intervention. OFCA provided support to the CA to conduct an industry consultation in August 2017 on the proposal to create a new Wireless Internet of Things (“WIoT”) Licence. The proposal received general support from the industry.

Having carefully considered the views and comments received, the CA announced on 1 December 2017 the creation of a new licensing regime for the provision of WIoT platforms and services using the shared frequency band of 920 – 925 MHz. So far, two WIoT licenses have been issued.

Re-assignment of Frequency Spectrum in the 900 MHz and 1 800 MHz Bands

Frequency spectrum in the 900 MHz and 1 800 MHz bands is being deployed for the provision of second generation (“2G”), third generation (“3G”) and fourth generation (“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 1 800 MHz band will expire during 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 available for assignment / re-assignment. The CA and SCED jointly conducted two rounds of public consultation in 2016 and 2017 respectively to solicit views and comments of the industry and other affected parties on the proposed arrangements for spectrum re-assignment and the related SUF.

Having carefully considered the views and comments received in the two rounds 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 and SCED jointly promulgated their decisions in December 2017 to adopt a hybrid administratively-assigned cum market-based approach for spectrum re-assignment upon expiry of the existing assignments and on arrangements for the related SUF. The hybrid approach will 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.

Under the hybrid approach, each of the four incumbent spectrum assignees will be offered a right of first refusal for re-assignment of 20 MHz of spectrum in the 1 800 MHz band (i.e. a total of 80 MHz of the re-assignment 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 70 MHz of spectrum in the 1 800 MHz band and all the 50 MHz of spectrum in the 900 MHz band, together with any spectrum in respect of which the incumbent spectrum assignees do not exercise their right of first refusal to take up the spectrum offered, will be assigned by way of auction in around the end of 2018.

To ensure a seamless transition when the spectrum is handed over in 2021, OFCA is minded to convene a technical working group comprising representatives of all the incumbent and new spectrum assignees, to coordinate the relevant technical arrangements.

Making Available the 5 GHz Shared Band for the Provision of Public Mobile Services

Recent advances in mobile technologies enable the use of the shared spectrum in the 5 GHz band (“5 GHz Shared Band”) for the provision of 4G mobile services based on the Long Term Evolution standard in an unprotected and uncoordinated manner. With a total 580 MHz of spectrum in the 5 GHz Shared Band made available for use on a sharing basis, this represents a significant addition to the existing total capacity of the 552 MHz of spectrum in the sub-3 GHz bands assigned to mobile network operators (“MNOs”) for the provision of public mobile services. Mobile users will benefit from the increased service quality and capacity to be provided by MNOs through the use of the 5 GHz Shared Band.

OFCA supported the CA in conducting a public consultation in February 2018 on the proposals to make available the 5 GHz Shared Band for the provision of public mobile services, and the associated regulatory and licensing regime. The proposals received general support from the industry.

Having carefully considered the views and comments received, the CA announced in June 2018 its decision to make available the 5 GHz Shared Band for the provision of public mobile services on a shared basis among the MNOs and the related arrangements. The decision would enable Hong Kong to become one of the first few economies in the world to adopt advanced mobile technologies in the 5 GHz Shared Band for the provision of higher speed public mobile services.

Strengthening the Licensing and Regulation of Mobile Virtual Network Operators

To ensure satisfactory provision of service by Mobile Virtual Network Operators (“MVNOs”) for the protection of consumer welfare, OFCA provided support to the CA to introduce measures to strengthen the licensing and regulation of the MVNOs. In September 2017, after taking into account views and comments received from the industry and relevant stakeholders, the CA issued a Code of Practice on the Cessation Arrangements for MVNO Services to provide practical guidance to the licensees in the event of cessation of MVNO services in order to better protect consumer interest. The Code of Practice sets out the requirements to ensure that MVNOs and their hosting mobile network operators would manage the service cessation arrangements in a better coordinated manner and that a reasonable advance notice would be given to the affected service subscribers and the general public before any service cessation of an MVNO. This would enable affected service subscribers to make timely arrangements to reduce adverse impacts caused.

Reduction of Telecommunications Licence Fees

In November 2012, the CA and SCED issued a joint statement to promulgate their decisions (“the Decisions”) to reduce the customer connection fee level of Unified Carrier Licences 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 relevant 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 Decisions. The JR proceedings ultimately reached the Court of Final Appeal (“CFA”), which handed down its judgement on 27 December 2017, allowing the appeal of PCCW and HKT and declaring that the Decisions were made upon error of laws. To give effect to the CFA judgement, SCED and the CA have reviewed the licence fee levels in accordance with the revised financial arrangements as advised by the Financial Services and the Treasury Bureau, and launched a public consultation on 8 June 2018 on the proposed reduction of licence fees for five types of licences issued under the Telecommunications Ordinance (“TO”), and the proposed introduction of a new fee component under unified carrier licence.

Implementation of Measures for More Efficient Use of the 8-digit Numbering Plan

OFCA assisted the CA in conducting a consultation on five proposed measures to make available additional number resources for mobile services through more efficient use of the existing 8-digit telecommunications numbering plan in October 2015. To ensure the smooth and timely implementation of the five measures in three phases, 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, Phase 1 of the measure was successfully implemented on 1 January 2017.

With the implementation of Phase 2 on 1 July 2017, allocation of mobile numbers with new prefixes ‘4’, ‘7’ and ‘8’ has commenced from August 2017. To raise public awareness of mobile numbers with these new prefixes, OFCA delivered the message to the public through press release, social media platform and OFCA’s Community Talks in February and March 2018. OFCA also wrote to a number of trade organisations in Hong Kong soliciting their help in disseminating the message to their members and reminding them to make the necessary changes to their systems in order to support the mobile numbers with the new prefixes.

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 for telephone numbers to at least 2029.

Review of the Number of Public Payphones under the Universal Service Obligation

Public payphone is a form of basic telephone service which the universal service provider is required under its USO to provide. There were about 2 800 public payphones covered by USO as at 31 March 2018. The cost of providing public payphone service subject to the USO is shared by the fixed and mobile services operators. In view of the diminishing demand for public payphone service in recent years, the CA announced on 29 June 2017 to embark on a review to determine the reasonable number of public payphones that should be subject to the USO.

Whilst public payphones with an extremely low usage rate (i.e. with an average revenue not more than $1 per day) would be the subject of the review, OFCA would engage the relevant stakeholders, including site owners for in-building type public payphones and District Councils for kiosk type public payphones, throughout the process such that any needs and considerations specific to the locations or districts will be well catered for before a decision to exclude specific public payphones from the USO is made.

For in-building type public payphones, consultations with the site owners were completed in February 2018. Altogether, OFCA decided to exclude about 35% of the in-building type public payphones from the USO. For kiosk type public payphones, consultations with District Councils have started since March 2018. It is expected that the entire review will be completed by end 2019.

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 2018 there were around 2.66 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 83% of fixed broadband subscribers use broadband services with a speed of 10 Mbps or above.

According to a report issued by the Fibre to the Home Council Europe in February 2018, Hong Kong ranked the fifth worldwide in fibre to home/building household penetration among the 65 economies under comparison. According to the World Competitiveness Yearbook 2018 published by the International Institute for Management Development in May 2018, Hong Kong was ranked the fourth out of 63 economies in terms of average Internet bandwidth speed.

Landing of New Submarine Cable Systems in Hong Kong

With the support of OFCA’s single-point-of-contact service, a new transcontinental submarine cable system (namely, Asia Africa Europe-1) and a new domestic submarine cable system (namely, Tseung Kwan O Express) have been brought into service in Hong Kong from December and June 2017 respectively. In addition, four regional and transcontinental systems (namely, Pacific Light Cable Network, Hong Kong-Guam Cable System, Hong Kong-Americas Cable System and South East Asia-Japan 2 Cable System), as well as two domestic systems, (namely, Ultra Express Link and TKO Connect) are being constructed and planned for putting into service between 2018 and 2020. OFCA will continue to assist operators in applying for the necessary statutory approvals for construction of new submarine cable systems in Hong Kong.

Development of the Hong Kong Satellite Networks

Satellite spectrum and orbital positions are scarce natural resources. Use of these resources by communications satellites registered in Hong Kong should also comply with the coordination and notification requirements of the International Telecommunications Union (“ITU”). In this regard, OFCA supports the licensed satellite operators of Hong Kong to attend satellite network coordination meetings with foreign administrations from time to time and assists in the processing of licences for the launching and operation of satellites in space orbits. In 2017/18, OFCA participated in three satellite network coordination meetings with the administrations of Russia, the United Kingdom and France respectively. Following the launch of two new satellites, AsiaSat 9 in September 2017 and APSTAR 6C in May 2018 recently, there are now twelve satellites in orbit operated by two Hong Kong companies licensed to provide satellite communications services.

Setting and Enforcing Telecommunications Standards

OFCA closely monitors international developments in telecommunications standardisation, and updates local technical standards in order to meet the needs of the industry and the public. In 2017/18, one new and one revised technical standards were approved and issued by the CA after consulting the Radio Spectrum and Technical Standards Advisory Committee.

Qualified local and overseas testing laboratories are now providing testing and certification services for telecommunications equipment against technical standards prescribed by the CA. In particular, local laboratories accredited by the CA as local certification bodies (“LCBs”) can offer a full range of telecommunications equipment testing and certification services. In 2017/18, LCBs and foreign certification bodies issued 495 equipment certificates to meet the needs of the telecommunications equipment market.

To ensure that all LCBs providing telecommunications equipment testing and certification services meet the service quality and performance standards required by OFCA, OFCA will continue to closely monitor their performance by conducting documentary checks, plant visits and reviews on a regular basis. So far, all LCBs have been performing up to the requirements set by OFCA.

Facilitating the Use of In-building Co-axial Cable Distribution Systems Channels

IBCCDS are used for carrying terrestrial television, closed circuit television, satellite television and telecommunications signals, etc. in multi-storey buildings that enable occupants in buildings to get access to and enjoy various broadcasting and telecommunications services. The CA is mindful of regulating the efficient use of IBCCDS channels which are scarce telecommunications resources. In 2017/18, OFCA assisted the CA in processing applications for the use of IBCCDS channels submitted by HKCTV for conveyance of its domestic pay TV services and the domestic free TV services provided by Fantastic TV.

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, consumer complaints relating to mobile broadband billing disputes is 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 MVNOs as well as our on-going consumer education efforts, the number of complaints in relation to “mobile bill shock” decreased from 156 cases in 2016 to 143 cases in 2017, representing a year-on-year decrease of 8%.

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 2017/18, OFCA assisted the CA in handling nine 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 launched 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 600 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 2018, more than 79 million tests were performed under the system.

Continued Efforts 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 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 419 cases in 2017, representing a drop of 67% in six 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 updates the published information periodically, and when changes are introduced by service providers. OFCA will continue to encourage service providers to review their 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 light of past experiences and latest market situation, as well as the persistently low level of complaints 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 continued compliance with the code requirements by CSPs, and the Administrative Agency set up under CAHK for handling matters related to the code ceased operation 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.

In 2017/18, only two complaints about MCS were received, reflecting the general compliance of CSPs with the voluntary code and satisfaction of customers with the MCS.

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 2018, 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.

Customer Complaint Settlement Scheme

The voluntary Customer Complaint Settlement Scheme (“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 82 eligible applications in 2017/18, 42 of which were resolved before referral to the CCSS Centre, 36 were satisfactorily settled upon referral to the CCSS Centre, and four cases were not settled after mediation.

To raise public awareness of the CCSS, a series of publicity activities were conducted, including publication of comic strips on newspapers, featured posts on social media platform and website banner advertisements, as well as roving exhibitions and public seminars. OFCA will continue to support the CCSS and monitor its effectiveness.