LC Paper No. CB(1)1905/98-99
(These minutes have been
seen by the Administration)

Ref.: CB1/BC/18/98/1

Bills Committee on Telecommunication (Amendment) Bill 1999

Minutes of meeting
held on Wednesday, 21 July 1999, at 2:30 pm
in Conference Room A of the Legislative Council Building Members present :

Hon SIN Chung-kai (Chairman)
Hon HO Sai-chu, SBS, JP
Hon MA Fung-kwok
Dr Hon Philip WONG Yu-hong
Hon Howard YOUNG, JP
Hon Mrs Miriam LAU Kin-yee, JP
Hon CHOY So-yuk

Members absent :

Hon David CHU Yu-lin
Hon Eric LI Ka-cheung, JP
Hon Fred LI Wah-ming, JP
Hon YEUNG Yiu-chung

Public officers attending :

Mr Anthony S K WONG
Director-General of Telecommunications

Senior Assistant Director (Regulatory), Office of the Telecommunications Authority

Ms Gracie FOO
Principal Assistant Secretary for Information Technology and Broadcasting

Miss Priscilla TO
Assistant Secretary for Information Technology and Broadcasting

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Ms Anita SIT
Senior Assistant Secretary (1)8

I Election of Chairman

Mr HO Sai-chu, the member who had the highest precedence among members present at the meeting, presided over the election of Chairman. Mr SIN Chung-kai was nominated by Mr Howard YOUNG to be the Chairman of the Bills Committee. The nomination was seconded by Dr Philip WONG. Mr SIN accepted the nomination. There being no other nomination, Mr SIN was elected Chairman.

II Meeting with the Administration

2. The Director-General of Telecommunications (DG, OFTA) briefed members on the major proposals in the Telecommunication (Amendment) Bill 1999 (the Bill). (The speaking note used by DG, OFTA was circulated to members after the meeting vide CB(1)1777/98-99 on 5 August 1999.)

3. Regarding access by mobile network operators (MNOs) to buildings and land to provide network coverage, members expressed strong reservation on the proposal to empower the Telecommunications Authority (TA) to intervene and determine terms if MNOs and landlords of shielded area of public places failed to reach an agreement on access. Referring to the Administration's information paper, members sought information on the problems encountered by MNOs in obtaining access and the proposed mechanism for determining "a reasonable fee" (based on costs and a reasonable profit element) payable by MNOs to obtain access.

4. In reply, DG, OFTA advised that during the consultation exercise on the Bill, nearly all the licensed MNOs had expressed the view that the access fees charged by tunnel operators were on the high side, and they often had to engage in difficult and lengthy negotiations with tunnel operators in order to reach access agreements. The proposed provisions on access aimed at providing an arbitration mechanism whereby TA would be empowered to determine access fees and terms if the two parties failed to reach an agreement and if the public interest test was met. In exercising its powers, TA would be required to follow a set of guidelines, which would be drawn up in consultation with relevant parties after the enactment of the Bill, in determining the access fees in the case of arbitration.

5. As regards the present position of access by MNOs to privately operated tunnels, the Senior Assistant Director (Regulatory), Office of TA (SAD/OFTA) advised that all the six licensed MNOs had reached access agreements with the Eastern Harbour Crossing and the Western Harbour Crossing. As regards access to the Tate's Cairn Tunnel and the Cross-Harbour Tunnel (CHT), one MNO had not obtained access and was negotiating with the respective tunnel operators.

6. Dr Philip WONG expressed the view that the Government should uphold the principles of a free economy and should refrain from intervening in commercial activities without sufficient grounds. He was concerned that making access by MNOs to tunnels a statutory right would jeopardize the bargaining power of tunnel operators in their negotiations with MNOs. In response, DG, OFTA stressed that the proposed provisions applied not only to access of mobile telecommunication facilities to tunnels, but to all shielded areas of public places, including shopping malls. The policy intention was that mobile telecommunication was an important infrastructure and thus, on grounds of public interest, there should be ubiquitous coverage for mobile telecommunication services.

7. While concurring that the public interest should be an important consideration, Dr Philip WONG said that the proposed access provisions were not warranted as according to his understanding, no MNOs had so far been denied access by tunnel operators which also had an incentive to provide access to MNOs as they could charge a fee. Dr WONG suggested that tunnels be exempted from the access provisions in the Bill.

8. In response, DG, OFTA reiterated that problems associated with access to tunnels had been raised by the mobile telecommunication industry during the consultation exercise on the Bill. He remarked that although most MNOs had obtained access to existing privately operated tunnels, the negotiation for the access agreements might have been conducted on an unequal footing, given that tunnel operators could reject the access of MNOs while MNOs must be able to obtain access in order to comply with the MNO licence conditions. To illustrate the problem, he said that due to the lengthy negotiation between MNOs and the Western Harbour Crossing, mobile phone services had not been available in the tunnel for a long time after its commissioning. He added that this kind of unequal relationship might also exist between MNOs and landlords of other public places, particularly where the landlord concerned also engaged in mobile network business.

9. Mr MA Fung-kwok questioned that the proposed access provisions might reverse the "unequal relationship", as perceived by TA, between MNOs and tunnel operators by putting the latter in the disadvantaged position. Miss CHOY So-yuk and Mrs Miriam LAU considered DG, OFTA's remark that the existing agreements between MNOs and tunnel operators were not fair commercial agreements inappropriate. They cautioned that the Government would contravene the principles of a free and open economy if it relied on its presumption of unequal commercial relationships as an excuse to intervene in commercial activities.

10. Mrs Miriam LAU further stressed that government regulation of commercial activities should not be resorted to unless it had been ascertained that problems involving public interest could not be resolved by the parties concerned. She said that whether access problems of mobile telecommunication services existed were yet to be ascertained. If the proposed provisions on access were enacted, she cautioned that little room would remain for normal commercial negotiations between tunnel operators and MNOs. Mrs LAU also reminded the Administration that under the existing legislation governing build-operate-transfer (BOT) tunnels, the tunnel operators were entitled to charge a fee on utility companies for access to the tunnels. Tunnel operators had in fact taken this right into account when entering into the BOT contracts with the Government. On public interest, Mrs LAU considered that it might not be in the best interest of the public to regulate the access fees charged by tunnel operators on MNOs as this might reduce the revenue of tunnel companies and give rise to increased pressure to raise tunnel tolls.

11. Mr HO Sai-chu commented that for an open and free economy as Hong Kong, any proposed legislation which provided for government intervention in commercial activities must be critically examined. He considered it fair for tunnel operators and landlords of shielded public places to have the right to allow or reject access of the facilities of other commercial organizations to their own properties, since this right had been one of the investment considerations of these landlords/operators. Mr HO pointed out that tunnel operators were already under the pressure of competition and motivated by revenue considerations to provide access to MNOs. As the CHT would be transferred to the Government in September 1999, access fees agreements negotiated with MNOs after the transfer could serve as benchmark reference for other tunnels. For new tunnels to be built, he considered it acceptable for the Government to include conditions in the relevant agreements with tunnel operators to prescribe the mode and/or level of access fees which could be charged on MNOs.

12. Addressing members' concerns, DG, OFTA advised that the interest of various relevant parties including tunnel operators, MNOs, mobile phone users and tunnel users had been taken into account in drawing up the proposed provisions on access. The Administration would welcome views on the proposed provisions and the future guidelines on determining access fees. DG, OFTA reiterated that the proposed access provisions sought to provide a mechanism whereby MNOs and landlords of shielded places or tunnel operators could negotiate access agreements on an equal footing. DG, OFTA also confirmed that according to the Bill, TA would be obliged to follow the guidelines when determining access fees and terms.

13. Mrs Miriam LAU and Miss CHOY So-yuk expressed the view that in the event of providing MNOs with a statutory right of access, the determination of access fees should be based on an objective standard or formula rather than subject to the arbitrary determination of TA. In this connection, Mr MA Fung-kwok enquired about the feasibility of making known the guidelines before the enactment of the Bill so as to allay the worry about possible arbitrary determination by TA. In response, DG, OFTA said that one of the objectives of the Bill was to establish a legal framework under which the guidelines for determining access fees could be drawn up and given legal effect. However, in view of the grave concern of members, he agreed to consider revealing the Administration's proposed guidelines before the Bill was enacted. Admin.

14. On the methods used by existing tunnel operators for computing access fees, DG, OFTA and SAD/OFTA advised that according to the existing access agreements, individual tunnel operators were not using a standard formula for charging access fees on different MNOs. As each access agreement was negotiated separately, the same tunnel operator was not bound to charge the same level of access fees or use the same formula for different MNOs. SAD/OFTA informed members that currently, the monthly access fees charged by tunnel operators on MNOs ranged from $100,000 to $300,000. The modes of charging varied from a fixed monthly fee, scale fees based on traffic volume or the number of network subscribers, to a minimum monthly fee with an additional charge based on traffic volume.

15 On whether reference had been made to overseas systems in drawing up the proposed access provisions in the Bill, DG, OFTA pointed out that as Hong Kong was in a leading position globally in the development of mobile telecommunications services in terms of network coverage and the intensity of competition among network/service providers, it might not be very useful to draw on overseas experience on the issue of access.

16. In response to members' requests, the Administration agreed to provide the following information before the next meeting as far as possible - Admin.

  1. details on the level of access fees being charged by tunnel operators on various MNOs without identifying the specific individual companies/operators for the sake of confidentiality and subject to the consent of the tunnel companies concerned;

  2. information on cases, if any, in which MNOs could not gain access to tunnels due to failure to reach an agreement with the tunnel operators;

  3. information on how access to tunnels by MNOs was achieved and regulated in overseas countries and whether there was any statutory regulation similar to that proposed in the Bill;

  4. information on the functions and powers (and the checks on such powers) of the regulatory authority in overseas countries with an open economy as compared to the powers of TA in Hong Kong; and

  5. information on the proportion of tunnel operators' revenue attributable to the access fees received from MNOs, and the proportion of the latter's expenditure attributable to the payment of access fees to tunnel operators, subject to the availability of such information from tunnel operators and MNOs.

17. Miss CHOY So-yuk referred to a written submission from Cable & Wireless Hong Kong Telecom (C&W/HKT) and requested the Administration to provide a written response to the submission before the next meeting. In this connection, the Chairman directed that C&W/HKT should also be formally invited by the Bills Committee to provide its written submission. Admin.

III Any other business

18. The next two meetings were scheduled for 8:30 am and 10:45 am on Monday, 6 September 1999 to meet with deputations and the Administration. Members agreed that the following parties should be invited to forward their written views and attend the meetings -

Meeting at 8:30 am
mobile phone operators, Fixed Telecommunications Network Services operators, and Wharf Cable Limited

Meeting at 10:45 am
BOT tunnel operators, the Mass Transit Railway Corporation, Kowloon-Canton Railway Corporation, Real Estate Developers Association of Hong Kong, Telecom Association of Hong Kong, Hong Kong Internet Service Providers Association and Hong Kong Telecommunications Users Group

19. The meeting ended at 4:00 pm.

Legislative Council Secretariat
13 September 1999