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Chapter 1 Message from the Director-General

Agnes Wong, Director-General of Communications Agnes Wong, Director-General of Communications
Quotation markIn 2018/19, we made available radio spectrum in various frequency bands and strengthened facilitating measures to support the development of 5G services. We also assisted in planning the switching off of analogue television services with a view to realising full digitisation of free television services and reaping the digital dividend for the society.Quotation mark
Agnes Wong
Director-General of Communications

It is my pleasure to present the 2018/19 annual report of the Office of the Communications Authority (OFCA).

Market Overview

Driven by steady increases in mobile service subscriptions and high popularity of smartphones and communications devices, the mobile data service market continues to thrive. The number of mobile service subscriptions increased to over 22 million in 2018/19, and the subscriber penetration rate was 276%1, one of the highest in the world. In terms of mobile data volume, Hong Kong is one of the world's most dynamic and exciting markets: the total volume of mobile data usage surged to 54 860 Terabytes per month, representing an average monthly mobile data consumption of about 7.3 Gigabytes per capita.

1 Calculation of subscriber penetration rate does not include machine type connections.

Hong Kong is home to some of the most advanced optical-fibre networks in the world, giving local consumers a choice of affordable high-speed broadband services. The maturity and sophistication of this market is reflected in both the household broadband penetration rate, which as of March 2019 exceeded 93% with almost 2.71 million subscriptions, and that over 77% of the subscriptions are served by optical fibre to the buildings/premises.

Highlights of Our Work in 2018/19

Significant progress has been made by OFCA in 2018/19. Some of our major accomplishments in the year are highlighted below.

Telecommunications Services

Preparation for the rollout of the fifth generation (5G) mobile services in 2020 continued to be a major focus of our work in 2018/19. We assisted the Communications Authority (CA) in making available spectrum in various frequency bands for the rollout of 5G services, laying the foundation for an exciting new chapter for Hong Kong's communications industry and telecommunications service users.

Pursuant to decisions made respectively by the CA and the Secretary for Commerce and Economic Development (SCED), a total of about 4 500 MHz of spectrum in various frequency bands has been designated for the development of 5G services. In December 2018, OFCA invited applications for the administrative assignment of 3 700 MHz of spectrum in the 26 GHz and 28 GHz bands, taking into account the ample supply of spectrum in these bands. Three incumbent mobile network operators were each assigned 400 MHz of spectrum to enable them to commence network deployment of large scale 5G services starting from April 2019. As there are likely to be competing demands for spectrum in the 3.3 GHz, 3.5 GHz and 4.9 GHz bands, the CA decided that such spectrum should be assigned by way of auctions. OFCA is now working towards conducting these auctions in the second half of 2019.

To facilitate timely and cost-effective rollout of 5G networks, OFCA has worked closely with other government departments on a pilot scheme to streamline the application and approval arrangements for installation of radio base stations in government premises. Since the launch of the pilot scheme in March 2019, over 1 000 government venues have been made available for application by mobile network operators.

During the year, we completed another major task by assisting the CA to re-assign 200 MHz of spectrum in the 900 MHz and 1800 MHz bands. This was accomplished through the adoption of a hybrid administratively-assigned cum market-based approach. The existing assignments of spectrum in the 900 MHz and 1800 MHz bands to the four incumbent spectrum assignees will expire in January and September 2021. While 80 MHz of the spectrum was re-assigned administratively to incumbents through the rights of first refusal, the remaining 120 MHz of the spectrum was re-assigned through an auction for use in the new assignment term.

An important aspect of our work is to ensure the smooth handover of spectrum when re-assignment occurs. We have set up a working group with all four incumbent spectrum assignees to coordinate the required technical work.

Separately, OFCA provided assistance to the CA to complete a review on the Class Licence for Offer of Telecommunications Services (CLOTS) in 2018/19. The CLOTS authorises any person meeting certain criteria or conditions to offer any telecommunications services to the general public without the establishment, operation or maintenance of any means of telecommunications. To ensure that the CLOTS licensing regime is up-to-date and that consumers are well protected, we assisted the CA in conducting a public consultation in the year. Taking into consideration the views collected, the licence conditions in CLOTS will be amended, including the introduction of a registration requirement for licensees having a customer base of 10 000 subscriptions or more. The revised CLOTS will take effect from 26 October 2019.

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During the year, we also assisted the CA in completing a review of Hong Kong's public payphone service. In Hong Kong, the majority of public payphones are provided by a universal service provider under its Universal Service Obligation (USO) as prescribed in the Telecommunications Ordinance (TO). Hong Kong's exceptionally high rate of mobile service users resulted in a decline in demand for public payphone services. In June 2017, OFCA assisted the CA in conducting a review to determine the reasonable number of public payphones that should remain under the USO. After consulting all relevant stakeholders, about 35% of in-building-type public payphones and about 50% of kiosk-type public payphones were decided to be excluded from the USO.

In addition, we provided support to the Commerce and Economic Development Bureau (CEDB) in the review of the telecommunications regulatory framework under the TO. The review aims to ensure the telecommunications regulatory framework in Hong Kong will be 5G-ready and conducive to future technology evolutions. We will continue to support the CA in providing advice to the Government in relation to any future legislative amendments to the TO having regard to the submissions received in the consultation.

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Improving access to telecommunications for everyone in Hong Kong remains a key aspect of our work. Following the Chief Executive's announcement in the 2017 Policy Address that the Government would provide subsidies to telecommunications operators to extend their fibre-based networks to villages in remote areas, we are conducting a tender exercise for the selection of operators to participate in the subsidy scheme.

OFCA's work involves much more than facilitating market competition and investment. Consumer education is equally important. To this end, we continued to implement a series of publicity programmes and activities, such as a new series of TV & Radio Announcements in the Public Interest, roving exhibitions, public seminars and consumer education programmes tailor-made for schools, in the past year to enhance public awareness of smart use of communications services and assist consumers in making informed service choices.

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Broadcasting Services

One of the major tasks of OFCA in 2018/19 was to support CEDB in its review of the television and sound broadcasting regulatory regimes, with the aim of modernising the regulatory framework in response to market needs and technological developments. After the review, CEDB proposed to relax certain restrictions and introduced legislative amendments to give effect to such proposals. In addition to the legislative amendments pursued by CEDB, we also assisted the CA in formulating and implementing measures to streamline certain administrative requirements.

The switching off of analogue television services (ASO) will be a major milestone for Hong Kong's broadcasting industry. In 2018/19, OFCA continued to provide advisory services to CEDB on the planning for the ASO and the subsequent release of spectrum for mobile telecommunications services. Our efforts also involved liaising with Mainland authorities on the ASO target date and post-ASO frequency coordination for use of the 470 – 806 MHz band. On 11 February 2019, the Government announced the decision as approved by the Chief Executive in Council that the ASO would proceed on 30 November 2020 (23:59 hours). A total of 160 MHz of spectrum in the 614 – 806 MHz band would be made available for the provision of mobile telecommunications services subsequent to the ASO.

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Major Challenges Ahead

We are fast entering the exciting 5G era, which will undoubtedly accelerate growth and drive innovation in the communications industry. In the year ahead, OFCA will continue to assist the CA in assigning spectrum in the 3.3 GHz, 3.5 GHz, 4.9 GHz and 26/28 GHz bands, and strive to identify more spectrum in various frequency bands for the provision of 5G services. OFCA will also implement relevant facilitating measures to promote the effective rollout of 5G networks and services across Hong Kong. We are committed to assisting the CA in performing its regulatory functions on the broadcasting front – working hard as always to strike a balance between providing a more conducive business environment to broadcasting licensees while protecting the interests of viewers. To ensure that we fulfil this role to the best of our ability, we will remain vigilant to the latest developments in global technology and industry best practices, and provide our full support to the CA in updating the regulatory and licensing regimes to ensure that they always encourage further business investment. For the community, we will uphold our commitment to meeting their needs and aspirations for quality and state-of-the-art communications services.

In closing, I wish to extend my heartiest thanks to the Chairman and all members of the CA for their guidance, as well as members of the advisory committees of OFCA and all other stakeholders for their invaluable advice and thoughtful inputs throughout the year. I would also like to thank all my colleagues in OFCA for their full and professional support throughout my tenure as the Director-General of Communications. Their expertise and dedication have enabled OFCA to fully accomplish its goals set for the last year, while tirelessly drawing up new targets for future years. We are all determined to uphold Hong Kong's position as the leading communications hub in the Asia-Pacific region.

This is my last report as the Director-General of Communications. I would like to take this opportunity to wish my successor, Mr Chaucer Leung, every success. I am confident that under his leadership, OFCA will rise to the challenges ahead. Working hand in hand with all stakeholders, OFCA is poised to scale new heights and will continue to empower Hong Kong as the frontrunner in communications services on the world stage.