LC Paper No. CB(1)244/98-99
(These minutes have been seen
by the Administration)

Ref : CB1/PL/ITB

Legislative Council
Panel on Information Technology and Broadcasting

Minutes of Special Meeting
held on Thursday, 3 September 1998, at 2:30 pm
in Conference Room B of the Legislative Council Building

Members present :

Hon Emily LAU Wai-hing, JP
(Chairman of the meeting)
Hon David CHU Yu-lin
Dr Hon Raymond HO Chung-tai, JP
Hon Fred LI Wah-ming
Hon Howard YOUNG, JP
Hon Timothy FOK Tsun-ting, JP

Members absent :

Hon SIN Chung-kai (Chairman)
Hon MA Fung-kwok (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon Eric LI Ka-cheung, JP
Prof Hon NG Ching-fai
Hon James TO Kun-sun
Hon YEUNG Yiu-chung
Hon CHOY So-yuk
Hon LAW Chi-kwong, JP

Public officers attending :

Secretary for Information Technology and Broadcasting

Acting Director - General of Telecommunications

Mrs Rita LAU
Deputy Secretary for Information Technology and Broadcasting (1)

Mrs Jessie TING
Deputy Secretary for Information Technology and Broadcasting (2)

Mr Eddy CHAN
Commissioner for Television and Entertainment Licensing

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Ms Sarah YUEN
Senior Assistant Secretary (1)4

I Election of chairman of meeting

In the absence of both the Chairman and the Deputy Chairman, the Clerk invited Panel members to elect among themselves a member to chair the meeting in accordance with House Rule 22(j). Nominated by Mr Fred LI and seconded by Mr Timothy FOK, Ms Emily LAU was elected chairman of the meeting.

II Briefing by the Secretary for Information Technology and Broadcasting on the 1998 Review of Fixed Telecommunications and the 1998 Review of Television Policy
(LegCo Briefs (Ref. ITBB CR 7/4/6(98)II and T/C 126/98 in ITBB/B 203/2 (98)) and consultation papers tabled at the meeting and circulated to all Members by general despatch on the same day)

2 The Secretary for Information Technology and Broadcasting (S/ITB) briefed members on the background of the two consultation papers just issued to seek public views on the Administration policy proposals on fixed telecommunications and television. Members noted that the two papers had been released at the same time so that issues of convergence of telecommunications and broadcasting could be considered in a co-ordinated manner.

3 Addressing some members' concern about whether the proposed four-week consultation period was sufficient, S/ITB highlighted the need for the consultation exercise on fixed telecommunications to be completed in time for policy decisions to be made and announced before the end of 1998 to tie in with the proposed liberalisation of external services-based telecommunications on 1 January 1999. As for the TV review, the Administration also considered the consultation period appropriate since most of the policy proposals had been necessitated by technology developments and were not totally unexpected. S/ITB further assured members that the Administration would take the initiative to solicit views of the industries by organising forums and seminars. For example, after holding a press conference following the Panel meeting, the Administration would brief representatives of the telecommunications and television industries. He expected that the necessary legislative proposals could be introduced into the Legislative Council in the 1998/99 legislative session.

The 1998 Review of Fixed Telecommunications

4 With the aid of power-point presentation, the Acting Director-General of Telecommunications briefed members on salient issues in the consultation paper entitled The 1998 Review of Fixed Telecommunications - A Considered View", which set out the Administration's policy proposals as regards the extent of the liberalisation of the local fixed telecommunications network services (FTNS) market and the external telecommunications market, the interconnection of networks and access to buildings and premises for cable laying, and related regulatory issues.

5 Noting that the three new FTNS operators licensed in 1995 could only achieve less than 2% market penetration in their first three years of operation, members were doubtful about the effective competition brought about by these new FTNS operators. In response, S/ITB explained that the "2%" only referred to the customer base and pointed out that it was necessary to consider other factors when assessing the three new FTNS operators' performance. Firstly, installation of network infrastructure took time. Secondly, the three FTNS operators had already installed optical fibre cable rings along the Mass Transit Railway lines to form the 懀runk" network as required under their respective licence. However, interconnection to Hong Kong Telephone Company (HKTC) network in order to reach potential customers had not proceeded at a satisfactory pace due to insufficient co-operation from HKTC. The situation was expected to improve now that Hong Kong Telecom had agreed to open more of its lines for access by other FTNS operators pursuant to the agreement entered into with the Government in March 1998. Thirdly, tariffing would not be conducive to competition as long as local telephone tariffs stayed below cost before the scheduled rebalancing was fully achieved in 2001.

6 In reply to Ms Emily LAU about interconnection charges, S/ITB explained that when considering granting further FTNS licences or encouraging the three new FTNS operators to step up their investments, there was a need to ensure network accessibility at reasonable charges to generate effective competition. At the same time, the Administration also considered it necessary to ensure that the interconnection arrangements would be such as to provide FTNS operators with sufficient revenue to cover all relevant costs of carriage of external telecommunications services on the local networks, including the appropriate cost of capital reflecting the risk involved in investing in the local infrastructure.

The 1998 Review of Television Policy

7 With the aid of power-point presentation, the Deputy Secretary for Information Technology and Broadcasting (1) (DS/ITB1) briefed members on the consultation paper entitled The 1998 Review of Television Policy - A Consultation Paper", which detailed the Administration's recommendations in network sharing, enhancing spectrum efficiency, relieving congestion in in-building networks, the pay television market, regulatory and licensing framework, royalties and licence fees, digital terrestrial television (DTT), and proposed legislation.

8 In reply to a member's question on the development of DTT, S/ITB clarified that a decision on a switch to digital broadcast would not be taken until after technical trials and the ensuing simulcast of analogue and digital terrestrial television had shown that both the technical and market conditions of DTT were ready for its successful introduction.

9 Noting that only 400,000 households had subscribed for Cable TV during Wharf Cable's five years of operation, a member doubted whether the pay TV market could accommodate more entrants and questioned the Administration's decision to remove existing market entry barriers. In reply, S/ITB stressed that there was potential for competition, quoting the example of interactive TV which had already established a subscriber base of around 50,000 some six months after service launch. He also reported that there had been indication of interest in investing in the pay TV market.

10 Responding to a member's call to introduce more competition into the domestic free TV market, S/ITB said that it was doubtful whether more entrants should be allowed having regard to the fact that only one free TV operator had been able to make profits consistently over the past few years. DS/ITB(1) supplemented that the introduction of more competition was restricted by insufficient frequency. However, with the development of digital technology which could make available more channel capacity for a whole range of new services, the introduction of more competition into the domestic free TV market might be possible.

11 In reply to Ms Emily LAU, S/ITB said that the Administration would analyse public views collected in the consultation exercise and formulate proposals for the Executive Council (ExCo)'s consideration. LegCo and the public at large would be informed of the ExCo's decision in due course. Admin

III Any other business

12 Ms Emily LAU informed members that two special meetings would be scheduled at the end of September 1998 to receive deputations on the two consultation papers.

(Post-meeting note: With the concurrence of the Panel Chairman, the two special meetings have been scheduled to be held on Friday, 25 September 1998 at 8:30 am and 10:45 am.)

13 The meeting ended at 3:40 pm.

Legislative Council Secretariat
24 September 1998