The Administration's Response to
Submission by the Hong Kong Society of Accountants

Clause 4 - New Section 7H

The new section 7H is modelled on the existing licence conditions (e.g. General Condition 17 of the Fixed Telecommunication Network Services (FTNS) Licence 1 ) and the term "accounting practices" is used therein. The term is therefore well understood and accepted by the telecommunications industry. The Telecommunications Authority (TA) has issued an Accounting Manual specifying in detail the accounting practices to be adopted, including the items in the licensee's Chart of Accounts, the separation of accounts for different service segments and the cost allocation methods. The "accounting practices" as prescribed in the Bill therefore has a very clear meaning and has been adopted by licensees in the telecommunications industry as part of the current operation.

Clause 18 - New Section 35A

The new section 35A is modelled on an existing licence condition (e.g. general condition 19 of FTNS licence 2 ). The new section is intended to codify the TA's existing power to inspect records, documents and accounts of the licensee for the purpose of enabling the TA to perform his statutory functions (e.g. whether the licensee is in compliance with its licence obligations). This power has to be exercised from time to time on a routine basis as part of the operational functions of the TA to monitor the status of compliance of the licensees.

The TA is bound by administrative law to act lawfully and not to exercise the power arbitrarily. In addition, the TA is guided by the administrative rules of natural justice to exercise the power reasonably for the purpose of performing his statutory functions.

Similar powers are granted to overseas regulators. For example, under the Competition Act 1998 in the UK, any officer authorized by the Director of Fair Trading may enter any premises in connection with an investigation and require the production of documents, take copies of or extracts from such documents, without the need to apply for a warrant from the court. There are also similar powers granted to the regulators in other countries including Canada and Switzerland.

It is not our intention for the TA to override any legal privilege. In the past, the TA had not required any licensee to produce document that would override any legal privilege.

Clause 23 - New Section 36D

Operational experience has shown that it is necessary to obtain information from customers to determine whether a breach has or has not occurred. Sometimes, such information is provided voluntarily. But sometimes, this may not be the case. We therefore propose to add the new section 35A to empower the TA to apply to a magistrate for warrants to seek information about anti-competitive practices from non-licensees. The information obtained would be treated in confidence and would not be released without the consent of the non-licensees.

The TA is bound by duties under the administrative law to act lawfully and not to exercise his powers arbitrarily. If the magistrate considers that the TA has abused this provision, the application for a warrant will not be granted.

Telecommunications operators have expressed support to the proposal. They consider that the proposal would facilitate the TA to conduct investigations on complaints of anti-competitive conduct.

Information Technology and Broadcasting Bureau
4 October 1999

1. Where directed by the Authority in writing, the licensee shall implement such accounting practices as specified by the Authority. Such accounting practices are to be consistent with generally accepted accounting practices, where applicable, and may include (but are not limited to) accounting practices which allow for the identification of the costs and charges for different services or types or kinds of services.

2. The licensee shall permit the Authority or any person authorized by him in writing for the Authority's own purpose to inspect and if required to make copies of records, documents and accounts relating to the licensee's business for the purpose of enabling the Authority to perform his functions under the Ordinance and this licence.