Information Technology Development
This submission presented by Wharf Cable comments on the Paper on Information Technology Development for the Information Policy Panel of the Provisional Legislative Council.
Wharf Cable supports the framework for the development of information technology (IT) proposed by the Chief Executive in his Policy Address of 8 October l997, and believes that, if introduced and administered thoughtfully, it will be of great value to Hong Kong.
A Bureau Secretary for IT Development
Wharf Cable supports the concept of one Bureau Secretary to lead and co-ordinate IT work, including Broadcasting and Telecommunications. However, we consider it appropriate to assign the responsibility to a Secretary with involvement across the full range of economic and industry development, rather than one who is directly involved day- to-day in IT issues.
We are not suggesting that any one (or any particular) Secretary cannot be impartial, but successful IT development will need to combine a judicious blend of regulation from both telecommunications and broadcasting in order to create an innovative policy synthesis recognising Hong Kong's leading regional position.
Broadcasting and telecommunications regulations have significantly different backgrounds. Broadcasting is especially concerned with supervision and development of programme content, whereas telecommunications is concerned with distribution, interconnectivity and universality. It is largely indifferent to content.
Positive economic benefits for Hong Kong will occur if IT policy and regulation are formed from the best or most appropriate from each sector, rather than using any one existing regulatory model as a paradigm.
Wharf Cable supports the general responsibilities for the IT initiative noted at point 4 in the paper. However, there are notable omissions which we recommend be included.
First, no mention is made of the essential feature of economic and industry viability essential to meet the wider objectives.
Second, there is no scope for the review of the philosophy, role and function of the regulatory system itself (as opposed to specific regulations.)
Third, the need for the enhancement of local cultural and social values and the development of programme and system content deserves more explicit treatment.
We comment later on the timing suggested by the responsibilities and tasks of the IT Secretary.
Wharf Cable submits that the first and most important task of this IT initiative is to consider the total regulatory landscape. The telecommunication and broadcasting industries have long been negative about the prevailing segmented approach. There is now a positive opportunity to review and overhaul the nature of the regulatory regime itself.
Such a review need not prevent the IT initiative from immediately coordinating some of the existing projects within Government agencies or taking some short-term and key development decisions.
Thinking through the regulatory system, in a methodical and systematic manner, could be undertaken by the IT Secretary without disrupting the existing regulatory environment, which would still be administered within the existing organisation. Complex and hasty administrative and departmental change is, in our view, unnecessary and counter-productive. It is surely axiomatic in public administration that form follows function.
The understandable pressure, once the coordinating Bureau Secretary has been determined, will be to set up new structures and procedures. This may seem pragmatic and administratively "tidy," but it is less likely to result in the outcomes clearly described in the Chief Executive's Policy Address. It does not put "first things first." The first issue is: "What is the regulator there to do, why, and how can it best be done?"
Convergence, technical issues, and (especially) experience in regulating for sustained competition, have encouraged Government leadership in other countries to review the philosophy of industry-specific regulation and its impact on the industry and consumers. It should not be forgotten that consumers and industry are clients of the regulator. The IT initiative provides a leadership opportunity to deal with the nature of regulation independently of previous history and preconceptions about the level and nature of regulation needed.
The IT initiative can accelerate co-operation (especially within Government) in the short term, but we urge that this be done against the background of a review of the philosophy, process, social objectives, and function of regulations specific to the IT sector. This in turn will suggest the most appropriate administrative arrangements. Form will thus follow function.
Wharf Cable suggests this process could benefit from independent consultancy support from those with expertise in current thinking of public administration and those with an appreciation of the economics of the IT sector. Confidence, and the clarity and speed of such a review in Hong Kong, would be assisted by industry consultation, the setting of specific terms of reference, transparent procedures for making submissions, a continuing interactive process with industry, and a "report-back" process measuring recommendations against the terms of reference
The Development of High Capacity Communications Systems
The Policy Address emphasised the network (hardware) necessary for Hong Kong to show sustained leadership in IT. Wharf Cable believes, however, that existing telecommunications regulatory policy is inadequate to promote competition for the provision of networks suitable for advanced IT services We recommend the promotion of competitive networks at economic prices and within commercial and marketplace realities be included as a specific responsibility of the IT Secretary.
Wharf Cable believes this is a serious omission in the Policy Paper. Although OFTA have issued four FTNS licences, Hong Kong Telecom still dominate the telecommunications market. Wharf Cable is the only company with a network capable of challenging HKT dominance in the provision of both narrowband and broadband services--advanced IT services--yet is not allowed to compete and provide such services.
We suggest industry consensus has developed that there is continuing abuse of dominant position by HKT, and that the current philosophy and approach to regulation has not been timely or focused enough to prevent it.
Development of Local Content and Values
The Internet is a (narrowband) forerunner of information (broadband) services. The Internet has already challenged many preconceptions about control by regulators.
In this environment, services delivered from overseas can over-ride local controls and local services. If, as many people believe, new transactional services increase while traditional broadcasting services decline, overseas services could challenge and undermine the unique SAR culture that local services and local cultural values would reflect.
Wharf Cable believe the IT Secretary deserves a specific mandate to establish policies and regulation that enhance rather than undermine local services and local cultural values and support the educational, employment and economic benefits they bring.
The Paper confirms that the Broadcasting, Culture and Sport Bureau intend to study the issue of convergence of telecommunications and broadcasting as part of the 1998 Review on Television Environment, and that digital broadcasting issues will be managed outside of (and after) this review.
We submit that the IT initiative should be used, first, and as already proposed in this submission, to examine the whole regulatory process for both sectors so that the right environment can be determined, and new regulatory and process management systems
introduced by Government.
The introduction of two VOD licences further complicates the picture. An integrated Review, inclusive of broadcasting and telecommunications sectors, could therefore usefully begin (after industry consultation on terms of reference and review procedures) say nine to twelve months after both VOD licences are operating.
We therefore recommend that the first and separate part of the Review process be an examination by the IT Secretary of the role and scope of the Regulators, and the philosophy and approach to licensing and regulation. Government's decision to establish an IT initiative provides a unique opportunity to do this without the pressure of history, the impending introduction of two new services that will have significant technology and market effect, while avoiding a fragmented single-sector, single-agency review of broadcasting.
This approach would also allow the Government to investigate and take account of the unique situation developing elsewhere in the world, particularly in the United Kingdom, on the issues surrounding the introduction of digital broadcasting and role, philosophy and administration of regulation in television and telecommunications. Convergence is occurring because of technological developments, including the digitalisation of television services. The provision of digital television is one of the central ingredients to convergence and the provision of IT services.
Wharf Cable's position is that it is inappropriate for BCSB to consider digital television after the intended 1998 Broadcasting Review--digital television should be central to it. We further believe that the intended 1998 Review be conducted as part of a coordinated IT strategy for the SAR. It seems counter-productive to adopt, as Government policy, the co-ordination of approach and strategy at the IT Secretary level, while retaining the existing cluttered and non-integrated timetable for reviews by existing regulatory agencies.
As things new stand, we have a new IT Secretary and Government initiative, an uncertain philosophy at a time of considerable international change, the need for administrative and structural change within the executive structure to meet the needs of the IT initiative, a current Telecommunications Review (without, as far as we know, a clear remit), and an intended Broadcasting Review that plans to exclude the most compelling forces i.e. VOD services and digital broadcasting, affecting the industry being reviewed.
This clutter could be converted into coherent change through the intervention of the IT Secretary, after industry consultation. The outcome would be a systematic and methodical approach that we believe all sectors would confidently support.
Wharf Cable therefore recommend that Government ask the IT Secretary to review the brief and timing of all current and proposed reviews; that integrated telecommunications and broadcasting reviews be considered, and that these reviews be deferred until after decisions have been taken on the long-term philosophy and approach to IT regulation in Hong Kong.