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The Office of the Telecommunications Authority (OFTA) today (December 28) issued a consultation paper to seek industry and public views on its proposal to review the universal service obligation (USO) arrangements.
The purpose of the USO is to ensure that basic service, which consists essentially of telephone line service and public payphone service, is available and affordable to all people in Hong Kong on a non-discriminatory basis irrespective of where they live or do business. PCCW-HKT Telephone Ltd. (PCCW-HKTC) is currently the only service provider being charged with the obligation to provide universal service in the territory.
Under the USO scheme, PCCW-HKTC is compensated for the net cost it incurs in providing services to unprofitable customers and public payphones. The net cost is shared by all licensees who provide external telecommunications service (ETS), commonly known as IDD service, based on the traffic volume which the individual licensee handles.
"The present USO regulatory framework has been in place since 1998. Although it was updated in 2000, the telecommunications market has since then experienced rapid changes, such as more households being served by alternative network operators, declining profits in the IDD service and emergence of new technologies such as voice over Internet protocol (VoIP). In view of the fast-changing telecommunications landscape, the existing USO regulatory framework may not be sustainable in its present form," an OFTA spokesman said.
"There is therefore a need to review the regulatory framework to ensure that it may keep pace with the market and technological developments.
"At present, 76% of households have already had alternative local fixed network operators serving their buildings. All local fixed network operators also provide ETS and therefore need to bear the costs of PCCW-HKTC serving unprofitable customers. We have to examine whether alternative fixed network operators should continue to subsidise the costs incurred by PCCW-HKTC in serving unprofitable customers when the operators themselves are able and willing to serve these customers without subsidisation. As such, we would like to seek the views of the public and the industry on the proposed exclusion from the USO scheme of areas or buildings with alternative fixed network coverage," the spokesman said.
"The profit margin of ETS operators has been significantly driven down by the intensive competition since the liberalisation of the ETS market in 1999. The advent of VoIP technology and broadband network access has also made possible the provision of international voice service outside the traditional public switched telephone network. We therefore see also the need to review the current sharing mechanism and explore other alternatives in order that we may put in place a fair, sustainable and effective arrangement."
Other issues identified in the consultation paper include the scope of the universal service, how the cost for the USO should be assessed and whether competition should be introduced for the provision of the universal service.
Interested parties are invited to submit their comments on the consultation paper on or before February 28, 2007. The paper can be downloaded from OFTA's website at www.ofta.gov.hk.
Background:
The present universal service obligation regulatory framework was established by the Telecommunications Authority in 1998 and subsequently updated in 2000. Its policy objectives are:
a. To ensure access to affordable basic telephone services for all people in Hong Kong on a non-discriminatory basis irrespective of where they reside or carry on business;
b. To ensure that the costs of providing universal basic services are fairly borne by the users of network services.
PCCW-HKTC is compensated under the USO scheme for the net cost that it has to incur for serving unprofitable customers under the USO. The amount of universal service contribution for 2004 was $103.3 million.
Ends/Thursday, December 28, 2006
Issued at HKT 16:52
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