LC Paper No. CB(1)925/98-99
(These minutes have been seen
by the Administration)

Ref : CB1/PL/ITB

Legislative Council
Panel on Information Technology and Broadcasting

Minutes of meeting
held on Monday, 11 January 1999, at 2:30 pm
in Conference Room A of the Legislative Council Building

Members present :

Hon SIN Chung-kai (Chairman)
Hon MA Fung-kwok (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Dr Hon Raymond HO Chung-tai, JP
Hon Fred LI Wah-ming
Hon James TO Kun-sun
Hon Howard YOUNG, JP
Hon CHOY So-yuk
Hon LAW Chi-kwong, JP

Member attending :

Hon NG Leung-sing

Members absent :

Hon David CHU Yu-lin
Hon Eric LI Ka-cheung, JP
Prof Hon NG Ching-fai
Hon YEUNG Yiu-chung
Hon Emily LAU Wai-hing, JP
Hon Timothy FOK Tsun-ting, JP

Public officers attending :

For Item III

Secretary for Information Technology and

Mr Alan SIU
Principal Assistant Secretary for Information
Technology and Broadcasting (C)

For Item IV

Mr Geoffrey WOODHEAD
Principal Assistant Secretary for Information
Technology and Broadcasting (E)

Director - General of Telecommunications

For Item V

Mrs Jessie TING
Deputy Secretary for Information Technology
and Broadcasting

Director of Information Technology Services

Chief Systems Manager of Information
Technology Services Department

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Miss Connie FUNG
Assistant Legal Advisor 3

Ms Sarah YUEN
Senior Assistant Secretary (1)4

I Confirmation of minutes of meeting and matters arising
(LC Paper No. CB(1)650/98-99)

The minutes of the meeting held on 9 November 1998 were confirmed.

II Date and items for discussion for next meeting

2 Members agreed to discuss the 1998 Review of Fixed Telecommunications at the next meeting to be held on Monday, 8 February 1999, at 2:30 p.m. It was also agreed that if the outcome of the Review was not ready for discussion in its entirety at the time of the meeting, the Administration should instead brief the Panel on legislative proposals to deal with anti-competitive practices in telecommunications market.

(Post-meeting note: The agenda was subsequently revised to include "the 1998 Public Opinion Survey on the Film Classification System" at the Administration's request.)

3 Members also agreed to discuss the Year 2000 compliance exercise at the Panel's March meeting.

III Legal framework for electronic transactions
(LC Paper No. CB(1)709/98-99(01))

4 The Secretary for Information Technology and Broadcasting (S/ITB) briefed members on the proposed legal framework for the conduct of electronic transactions.

The legislative timetable

5 S/ITB advised that drafting of the relevant bill was in progress. The Administration aimed to introduce the bill into the Legislative Council within the first half of 1999 for enactment in late 1999 to provide a legal basis for the Electronic Service Delivery (ESD) scheme to be launched in the latter half of 2000.

Electronic records and digital signatures

6 Mr James TO was concerned about the implications of the acceptance of electronic records for the purpose of providing "information required by the law" and enquired if the term "the law" in this context referred to the law in general, or to specific ordinance(s). In his view, adoption of the former interpretation would imply that electronic records would as a rule be accepted as carrying the same legal effect as that of their written counterparts whenever certain information was required by law, unless specified otherwise. The resultant implications could be very far-reaching having regard that most day-to-day transactions such as tenancy agreements and consumer contracts were drawn up in very broad terms and might not specify the form in which the required information should be provided. As such, in these otherwise simple everyday dealings, not only would extra costs be incurred for accessing or providing the required information electronically but the computer illiterate would be placed in a highly disadvantaged position. Mr TO therefore stressed that the scope within which legal recognition of electronic records would apply must be clearly defined, taking into account its implications on different walks of life. He also asked the Administration to make careful reference to overseas practices.

7 Addressing Mr TO's concerns, S/ITB reiterated the policy intention that the proposed legislative framework should facilitate, rather than impede, the conduct of electronic transactions by giving electronic records and digital signatures legal effect, so that where the law required information to be provided in writing, that requirement could also be met by electronic records. He confirmed that contracts signed before the relevant legislation took effect would not be affected and that where digital signatures were concerned, only those arising from digital certificates issued by recognised certification authorities (CAs) would be recognised by law. He further assured members that there would be detailed provisions in the bill to address Mr TO's concern, in particular on what constituted receipt of the required information. S/ITB pointed out that although the scope of electronic transactions could be quite wide, digital signatures would not be accepted for certain documents or transactions which had required hand-written signatures all along, such as wills, bills of exchange, declarations of trust, instruments creating power of attorney, contracts for the sale or other disposition of immovable property or any interests in such property, etc.

Certification authorities (CAs)

8 On the proposal to adopt a minimalist regulatory approach whereby CAs would be free to apply for recognition from Government as against mandatory licensing, S/ITB pointed out that as different CAs were under different obligations of secrecy with some serving only the specific needs of particular sectors and some being based outside Hong Kong, it was both inappropriate and difficult to subject all CAs to the same level of regulation by mandatory licensing. A voluntary regime was thus preferred to avoid undue constraints on the development of electronic commerce. Members noted that for CAs which had not obtained Government recognition and thus not covered by the proposed statutory provisions, they and their subscribers could rely on common law principles in providing and obtaining CA services respectively.

9 Addressing members' concern about the confidence of the local and international communities in a voluntary regime in Hong Kong, S/ITB advised that the proposed voluntary regime would require publication of recognised CAs' certification practices and in line with international practice, allow them to set a recommended reliance limit for the certificates they issued and to confine their liabilities to the specified limit. Users would therefore be able to assess the trust standard of individual CAs and make an informed choice. Moreover, they could also choose to make use of Government-run CA services to be operated by the Hongkong Post.

10 Commenting on the Chairman's proposal that all CAs serving the general public should be subject to greater regulation through licensing, S/ITB opined that the nature of the transactions handled should be a more important consideration for mandatory licensing than the size of the clientele. He also advised that to guard against malpractice, the legal framework would empower the Government to issue a code of practice for compliance by all CAs.

11 As to the recognition of certification in international trade involving overseas CAs not recognised in Hong Kong, S/ITB advised that in the absence of international agreements in this area, the matter was normally dealt with by mutual recognition of certification effected under commercial agreements. Meanwhile, as many countries' postal service agencies were also operating certification services, the Hongkong Post was also liaising with them on mutual recognition of certification. However, this would only be feasible when both parties concerned were satisfied with each other's certification practices and when inter-operability could be ensured by the adoption of common and open operation standards.

12 On what constituted "a trust standard acceptable to Government" to qualify for recognition, S/ITB advised that the major considerations would be the technical standard and the certification practices. For example, the number and types of supporting documents required for identification of the certificate applicant and the form in which such documents were submitted. In addition, a recognised CA would also have to engage an accredited computer security professional to conduct an annual audit on its provision of CA services.

Other concerns

13 Regarding concerns about possible abuse by CAs of the large volume of personal or corporate data in their possession, S/ITB assured members that the legal framework would contain provisions which would make such malpractice a criminal offence punishable by fines and/or imprisonment.

14 On the Hongkong Post's role, S/ITB clarified that it would only act as one of the recognised CAs. The Information Technology Services Department would be responsible for granting Government recognition to CAs.

IV The Administration's decision on the proposed acquisition of the Internet-related business of Hong Kong Star Internet Limited by Hong Kong Telecom IMS Limited
(LC Paper No. CB(1)679/98-99)

15 The Director-General of Telecommunications (DG Tel) briefed members on the Telecommunications Authority (TA)'s decision relating to the acquisition of the Internet services-related business of Hong Kong Star Internet Limited (Star Internet) by Hong Kong Telecom IMS Limited (HKTIMS) (the Transaction). Members noted that in deciding to approve the transaction, the TA had imposed two conditions on HKTIMS to prohibit anti-competitive behaviour and the receipt of unfair cross subsidies. Moreover, DG Tel confirmed that he had considered all relevant factors, including the effect of the Transaction on competition in the market, consumer interests, continuity and quality of service to existing customers as well as the views of the industry and members.

16 Elaborating on the reasons for granting the approval, DG Tel emphasised that although the combined market share of HKTIMS and Star Internet in the dial-up access Internet market as at 1 December 1998 was 50.8%, this might not necessarily constitute market dominance when considered in the light of two important factors, namely, the height of barrier to market entry and the status of the market. He pointed out that as market entry in the provision of dial-up access for Internet was easy involving only low start-up costs and simple licensing procedures and low licence fees, possible abuse of a dominant position was difficult. Moreover, due to rapid growth of the market which experienced a 40% growth since June 1998, the acquired 50.8% market share might not last long in the face of new entrants and free competition.

17 On the criteria for determining market dominance, DG Tel advised that as there were no such guidelines in the Internet service provider (ISP) licence then having regard to rapid changes in the market, reference would be made to the fixed telecommunication network services (FTNS) market where certain thresholds for dominance were presumed - a licensee with a greater than 75% market share would be presumed to be dominant unless he could prove otherwise. A licensee with a market share of less than 25% would be presumed to be non-dominant and those with a market share of between 25% and 75% would not be subject to any presumption. On whether the 75% threshold was appropriate as a market share as high as 75%, reinforced by promotional practices such as special price offers, might enable an operator to squeeze competitors out, DG Tel maintained the view that a lower threshold was considered inappropriate for fear of discouraging competitive behaviour. He reiterated that operators with a share of between 25% to 75% would be closely monitored and the Administration would actively investigate any allegation of unfair market conduct. If the conduct was proved to be anti-competitive, the TA would impose sanctions or penalties as appropriate. He further assured members that the Transaction in question would be monitored closely notwithstanding the imposition of the two conditions mentioned in para. 15.

18 The Chairman was concerned that with a clientele significantly enlarged by the Transaction, HKTIMS might be able to attract more advertisers and hence derive sufficient advertising revenues to enable it to offer services at below-cost subscription fees to price out competition. In response, DG Tel pointed out that the above presumption might not be valid because the electronic advertisements hosted by any one ISP could be accessed and viewed by all users. He nevertheless added that each case had to be considered on its own facts.

19 In response to concerns that subsidy to HKTIMS by its parent company Hong Kong Telecom (HKT) might go unheeded despite the condition prohibiting cross-subsidy, DG Tel assured members that two levels of safeguard were in place. Firstly, HKT was required to submit separate accounts for its different business arms to the TA quarterly and annually. Secondly, if there was a complaint, the TA would conduct a thorough investigation. Moreover, HKTIMS's ISP licence also required its accounts to be separated from those of HKT.

20 In reply to Mr Fred LI on the availability of adequate resources for the TA to take preventive measures against anti-competitive behaviours, DG Tel confirmed that the TA had sufficient resources to deal with anti-competitive practices. At present, guidelines and information on fair competition were available on the TA's web site, and researches were being conducted from time to time. On the TA's existing power to take action against anti-competitive practices, DG Tel explained that all ISP licences contained competition safeguards and the TA could issue directions to the licensee concerned requiring it to stop anti-competitive acts, and even suspend or revoke the PNETS licence.

21 Regarding proposed amendments to the Telecommunication Ordinance to enhance competition safeguards, the Principal Assistant Secretary for Information Technology and Broadcasting (E) explained that the legislative amendments would have the effect of clarifying the TA's power in relation to measures to ensure fair competition. Moreover, based on submissions received during the public consultation on the 1998 Review of Fixed Telecommunications, the Administration had also proposed to raise the maximum fine to $1 million for each breach of the pro-competition provisions to be introduced into the Ordinance, and to confer additional powers on the TA to impose other kinds of sanctions, including corrective advertising. The Administration planned to introduce these legislative proposals into the Legislative Council within this legislative session.

22 As to concerns that suspension or revocation of an operator's licence as a form of penalty might jeopardise the interests of its users, DG Tel assured members that the TA would give careful consideration to consumers' well-being before resorting to suspension or revocation of licence. He nevertheless added that under existing market conditions, a switch to another ISP could be effected swiftly at low costs. Hence, the likelihood of consumers being adversely affected was low.

V A common interface for the use of Chinese in electronic communication
(LC Paper No. CB(1)709/98-99(02) and a set of powerpoint presentation material tabled at the meeting and circulated to members thereafter vide LC Paper No. CB(1)740/98-99)

Development of the International Standards Organisation (ISO) 10646 standard

23 With the aid of powerpoint presentation, the Director of Information Technology Services (DITS) briefed members on the way forward for the development of a common Chinese language interface in Hong Kong. Members noted that the current critical issue of using the Chinese language in electronic communication revolved around the existence of multiple coding standards with each of them covering only a subset of known Chinese characters. Hence, there was a need to develop an open and common Chinese language interface for users in the community who preferred to communicate in Chinese in carrying out electronic transactions. In this regard, Hong Kong was working closely with other governments and institutions under the aegis of ISO in the development of the ISO 10646 standard which was an international coding standard aimed at developing one single common character set to encompass the "Han" characters of all Asian languages.

24 On countries participating in the above international exercise, DITS reported that communities using Han characters including Hong Kong, Taiwan, the Mainland of China, Singapore, Japan, Korea, Vietnam and an international trade organisation - the Unicode Consortium were involved.

25 Regarding how characters which could take different written forms would be handled when developing the ISO 10646 standard, DITS advised that linguists would be responsible for deciding which written version to adopt for the character concerned according to a set of rules agreed by them. In this regard, Mr LAW Chi-kwong proposed that in consideration of the limited capacity of ISO 10646, Hong Kong should adopt ISO 10646's version of certain Chinese characters. In response, DITS and the Deputy Secretary for Information Technology and Broadcasting (DS/ITB) pointed out that the Official Languages Agency (OLA) would be consulted in determining which version to submit to ISO. DITS supplemented that the Administration would actively work within the framework of the ISO to include all Chinese characters commonly used in Hong Kong. Those Hong Kong - unique characters which were not included in ISO 10646 would be put in the end-user defined area with Hong Kong's own assigned internal codes.

26 On whether characters that were used in colloquial conversations would be included in ISO 10646, DITS confirmed that the standard only aimed at including characters used in the written language with reference to the dictionary.

Adoption of the ISO 10646 standard

27 As for technicalities of adapting to the ISO 10646 standard, DITS explained that this would only involve the upgrading of software. However, problems common to upgrading from one version of software to another might be encountered and hence, there was a need for conversion software to act as a bridge between different coding standards and ISO 10646 to cater for their co-existence during the transitional period.

28 On the need for legislation requiring all software to adopt the ISO 10646 standard, DS/ITB pointed out that mandatory adoption of the standard through legislative measures might not be appropriate. However, with the development of software adopting the ISO 10646 standard, she believed that more people would voluntarily switch to the standard.

Other concerns

29 As to the progress of the ISO 10646 standard and whether its publication could tie in with the ESD scheme, DITS advised that as the standard was scheduled for release in phases starting from 2000, its progress should be able to tie in with the implementation of the ESD scheme. In addition, the Administration would also require the future ESD operator to be ISO 10646 ready so as to minimise major adjustments to the ESD system to cope with the introduction of future versions of the ISO 10646 standards. For the time being, for the purpose of ESD the Administration intended to use the BIG-5 characters commonly used in Hong Kong, complemented by the updated version of the Government Common Character Set (GCCS) which was developed to facilitate electronic communication within the Government by encompassing common characters not included in the BIG-5 coding scheme. For systems which were not using the BIG-5 scheme, data interchange between them and the ESD system would be achieved by conversion.

30 On updating the GCCS, DITS explained that such efforts mainly involved expansion to accommodate new characters developed, which would also be reported to ISO for incorporation in ISO 10646. He emphasised that the GCCS was only a transitional arrangement pending finalisation of ISO 10646 as the universal standard.

31 Regarding concerns about implications of data exchange problems arising from the existence of multiple coding standards on electronic commerce, DS/ITB reported that such problems would be resolved in due course with the adoption of the ISO 10646 standard.

32 The meeting ended at 4:30 p.m.

Legislative Council Secretariat
2 March 1999