LC Paper No. CB(1)1176/98-99
(These minutes have been
seen by the Administration)

Ref : CB1/PL/ITB/1

Legislative Council
Panel on Information Technology and Broadcasting

Minutes of meeting
held on 8 February 1999, at 2:30 p.m.
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
Hon David CHU Yu-lin
Hon Eric LI Ka-cheung, JP
Prof Hon NG Ching-fai
Hon James TO Kun-sun
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Hon Emily LAU Wai-hing, JP
Hon CHOY So-yuk
Hon Timothy FOK Tsun-ting, JP
Hon LAW Chi-kwong, JP

Members absent :

Dr Hon Raymond HO Chung-tai, JP
Hon Fred LI Wah-ming

Public officers attending :

For Items II and III

Secretary for Information Technology and Broadcasting

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

For Item II

Mr Stephen MAK
Principal Assistant Secretary for Information
Technology and Broadcasting (D)

For Item III

Director - General of Telecommunications

For Item IV

Mr Eddy CHAN
Commissioner for Television and Entertainment Licensing


Assistant Commissioner for Television and
Entertainment Licensing Authority (Entertainment)

Miss Joanna CHOI
Principal Assistant Secretary for Information
Technology and Broadcasting (B)

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Ms Sarah YUEN
Senior Assistant Secretary (1)4

I Confirmation of minutes of meetings and matters arising
(LC Paper Nos. CB(1)716 and 773/98-99)

The minutes of the special meetings held on 4 and 10 December 1998 respectively were confirmed.

II Date and items for discussion for next meeting
(LC Paper No. CB(1)854/98-99(01))

2 Members agreed that pursuant to the decision of the Panel at its first meeting, the regular meetings for the period from April to July 1999 would be held on the second Monday of each month at 2:30 p.m.

(Post-meeting note: The above schedule of Panel meetings was circulated to members vide LC Paper No. CB(1)889/98-99.)

3 Members agreed to discuss the progress of the Year 2000 compliance exercise in Government, Government-funded and Government-regulated organisations at the next meeting to be held on Monday, 8 March 1999, at 2:30 p.m. and all LegCo Members would be invited to join the meeting. They also agreed in principle that concerns in respect of specific policy areas expressed at the March meeting should be followed up by respective Panels concerned.

III 1998 Review of Fixed Telecommunications
(Paper and powerpoint presentation material tabled at the meeting and circulated to members thereafter vide LC Paper No. CB(1)888/98-99, and the relevant LegCo Brief (File ref.: ITBB CR 7/4/6 (99)XIII) tabled at the meeting and circulated to all LegCo Members thereafter by general despatch)

4 The Secretary for Information Technology and Broadcasting (S/ITB) informed members that at the present meeting, the Administration would only be able to brief the Panel on some of the policy decisions arising from the 1998 Review of Fixed Telecommunications, namely, the principles of legislative amendments to the Telecommunication Ordinance (Cap. 106) relating to competition safeguards and improvements to interconnection and access arrangements. The policy decisions on the following two issues were still pending -

  1. the licensing of additional external facilities-based telecommunications operators; and

  2. the moratorium on the issue of additional local Fixed Telecommunications Network Service (FTNS) licences.

5 The Chairman and Miss Emily LAU urged the Administration to finalise the above policy decisions early, failing which an early decision on (a) should be made first to facilitate the timely establishment of the infrastructure to support the liberalisation of external facilities-based telecommunications services in 2000 as part of the Government's commitment when paying Hong Kong Telecommunication Limited (HKT) $6.7 billion to end its monopoly in the external telecommunications market. In response, S/ITB advised that the Administration had to consider all relevant factors carefully but it would endeavour to finalise the decisions on the two outstanding issues as soon as practicable.

6 In response to queries from Mr Kenneth TING and Miss Emily LAU about the late submission of the paper, S/ITB explained that because of the complexity of the issues covered by the paper, he would like to have the opportunity to answer any questions members might raise at the meeting before the paper was made available to the media and the public. The Director-General of Telecommunications (DG Tel) then briefed members on the paper with the aid of powerpoint presentation. Members noted that the Administration would draft the amendment bill as soon as practicable having regard to the views of members and the industry and would aim to introduce it into the Legislative Council within the current legislative session.

Fair competition

7 On measures to provide a level playing field so that the existing three new FTNS licensees could compete with HKT in the supply of local fixed lines to effect genuine consumer choice, DG Tel pointed out that anti-competitive practices could be deterred by the proposed tenfold increase in the maximum penalty which the TA could impose from $100,000 to $1 million for every breach, the proposal that the court could impose even higher penalties, suspension or revocation of a licence in whole or in part, and clarification on the Telecommunications Authority (TA)'s power in relation to measures to ensure fair competition.

Abuse of position

8 As to whether the legislative proposals would also define market dominance and hence abuse of market position, DG Tel emphasised that while TA would issue guidelines as to whether any conduct enabled by one's market position would in his opinion have an anti-competitive purpose or effect, no definition could be exhaustive as regard had to be given to the conditions of the market at the time and other specific considerations in each case.

9 At Mr James TO's request to clarify paragraph 13 of the relevant LegCo Brief, which said TA should be allowed to select from alternative economic methods an appropriate one in deciding whether a conduct would amount to an abuse of position instead of referring to only one set of economic principles, DG Tel explained that since the offer of service at below cost fees would amount to an anti-competitive practice and possible abuse of market position and that there were different ways of calculating costs, it was necessary to empower TA to specify in the said guidelines the different cost calculation methods to apply in different circumstances. Addressing Mr TO's concern about adherence to the guidelines, he confirmed that since the industry would be consulted before the issue of the guidelines, the Administration would adhere to them until market conditions had changed to necessitate further consultation and revision. Moreover, as these guidelines were issued under a legislative provision, deviation of TA from the guidelines might be liable to judicial review.


10 Addressing members' concern about refusal to provide information on anti-competitive practices to TA on grounds of commercial secrets, S/ITB assured members that this should not be a problem if the circumstances under which TA could request such information were clearly stipulated in law. He further pointed out that the TA would be obligated to keep the information so obtained confidential.


11 Mr James TO opined that the proposal for the Court of First Instance to, upon application by the TA, impose fines of up to 10% of the turnover of the company in the concerned market segment during the relevant period or $10 million per breach, whichever was the higher, fell short to reflect the seriousness of anti-competitive acts. He proposed that all profits derived from the anti-competitive act concerned should be confiscated on grounds that they were "unjust enrichment". In response, DG Tel said that the approach was undesirable because of difficulties in ascertaining the amount of such profits. As to why the European Commission's practice of imposing a financial penalty amounting to 10% of the turnover of all business of the licensee concerned was not adopted, S/ITB explained that considering HKT was operating many kinds of services while its competitors might be operating just one kind of service, adoption of this practice might prove excessive and unfair. DG Tel supplemented that as the Administration was also proposing to allow a person affected by the breach to recover his actual financial loss arising directly from it by bringing an action for damages, the proposed level of financial penalty, though based on turnover in the concerned market segment only, should suffice.

Access to buildings and land

12 Mr LAW Chi-kwong was concerned about how a licensee's right to enter buildings and land to extend the coverage of his fixed network could be enforced on the ground of public interests without jeopardising another individual's right to his property. To address his concern, DG Tel advised that while trying to ensure non-discriminatory access for all fixed network operators, the Administration would take into consideration the views of the owners' corporation. However, in safeguarding public interests, it was necessary to see to it that no one requiring a certain service would be denied it because of the conditions in the Deed of Mutual Covenant. DG Tel stressed that each case would be considered on its merits. S/ITB supplemented that in cases such as the installation of mobile communications equipment where alternative sites were available, there might not be the need to enforce the access right after all as this should be the last resort. In this connection, Mr James TO urged the Administration to state clearly in law that all possibilities should be exhausted before enforcing the right to access.

13 Pointing out that the adverse effects of network coverage on health might emerge only years later, Mr James TO urged the Administration to conduct relevant studies and enforce the access right sparingly. In response, DG Tel pointed out that the draft bill would contain provisions requiring the Administration to consider the availability of other technical alternatives and any possible health hazards before enforcing the access right.

14 As to the availability of a reliable mechanism for the calculation of payment for the access to and use of certain premises to install equipment, DG Tel advised that in setting the level of such payment, reference could be made to market rents in the neighbourhood or the rateable values determined by the Rating and Valuation Department.


15 In reply to Miss Emily LAU's enquiry about " the new spirit of co-operation in the industry" referred to in para. 22 of the LegCo Brief, DG Tel explained that as the industry had been consulted several times on the legislative proposals to clarify the powers of the TA on interconnection, they well understood that should they fail to reach a commercial agreement, TA could use his powers to set these charges as the last resort. Moreover, the Administration had made every effort to mediate between HKT and the existing three new FTNS licensees on the interconnection arrangements. As a result, all parties were presently more willing to co-operate knowing that this would be the best way forward. In reply to Miss LAU, DG Tel also reported that the code of practice for the implementation of Type II interconnection agreements would be ready within a few weeks.

Other concerns

16 On whether issues related to merger would be covered by the legislative proposals so that TA might refer to some guidelines when deciding whether to approve a merger, DG Tel advised that although the Administration had no plan to draw up such provisions, reference could be made to fair competition principles in other advanced countries in making such decisions. He further advised that there were already guidelines in the FTNS licence as regards the approval of a transfer of assets and TA would post such guidelines on its web site within one to two months.

17 At Mr James TO's request to include provisions in the amendment bill to address concerns about the abuse of interception and encryption, S/ITB undertook to examine the issue of interception in conjunction with the Security Bureau but emphasised that for the time being, the proposed legislative amendments would mainly be targeted at ensuring fair competition in the telecommunications market. He further pointed out that encryption was presently not covered in any telecommunications law as it might not necessarily be done electronically.

IV 1998 Public Opinion Survey on the Film Classification System
(LC Paper No. CB(1)854/98-99(02))

18 With the aid of powerpoint presentation, the Commissioner for Television and Entertainment Licensing (C for T & EL) briefed members on the findings of the 1998 public opinion survey on the film classification system (the Survey).

19 Noting that some 66% of the respondents aged 13-17 had seen Category III films (i.e., films suitable for persons aged 18 and above only), members cast doubt on the effectiveness of the three-tier film classification system in protecting youngsters from the bad influence of Category III films. In response, C for T & EL pointed out that as none of the respondents in fact saw such films in cinemas, this reflected that the current enforcement by regular inspections had been effective in preventing youngsters from seeing such films in cinemas. He further pointed out that the main reason given for viewing such films was curiosity (63%). Moreover, most of the Category III videotapes and discs youngsters had access to were either provided by their friends or owned by themselves. Parental guidance and public education therefore had an important role to play.

20 On whether pornographic videotapes and discs were required to be sold in opaque wrappers, C for T & EL advised that the Film Censorship Ordinance (Cap. 392) applied to films for public exhibition. If a film was classified as Category III, subsequent release of it in the form of videotapes or discs would have to comply with the statutory requirements, including prominent display of the appropriate classification symbol; sale or rental to persons aged 18 and above only. As for films not intended for public exhibition, their control was under the purview of the Control of Obscene and Indecent Articles Ordinance (COIAO).

21 On the classification of articles under the COIAO, C for T & EL said that it also followed a three-tier classification system. The system of classification was: Class I articles were neither obscene nor indecent and could be published without restriction; Class II articles were indecent and could only be sold to those aged 18 or above; and Class III articles were obscene and were prohibited from publication. Members noted that for films not intended for public exhibition and hence not regulated by the Film Censorship Ordinance, the Television and Entertainment Licensing Authority (TELA) would refer obscene videotapes or discs to the Obscene Articles Tribunal for classification and where appropriate, institute prosecution under the COIAO.

22 In response to members' call for TELA to play a more proactive role in the enforcement of the COIAO and to take action against the proliferation of cheap pirated pornographic discs so as to reduce access by young persons to these films, C for T & EL emphasised that TELA had to act within its powers under the COIAO which was currently enforced by three departments. The Police was mainly responsible for dealing with the sale of pornographic articles at the wholesale and retail outlets, the Customs and Excise Department (C&ED) would tackle pornographic articles at the entry points, and TELA would monitor articles (particularly printed articles such as newspapers, magazines and comic books) on sale in the market. He further emphasised that the three enforcement agencies had a close working relationship. From time to time, they launched special joint operations against retail black spots and wholesale outlets upon receipt of complaints or intelligence. At the Chairman's request, he agreed to provide the Panel with a report on the enforcement of the COIAO.

(Post-meeting note: The said report was circulated to members vide LC Paper No. CB(1)974/98-99)

23 In reply to Miss Emily LAU's question on controversial movie themes, C for T & EL confirmed that the 18 different controversial or sensitive themes of films referred to in paragraph 14 of the paper mainly involved morally controversial subjects and did not include politically sensitive ones. He confirmed that films with political themes were subject to the same classification criteria as any other films. There was no political censorship under the Film Censorship Ordinance. Exhibition of films with political themes was solely the decision of individual film distributors.

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

Legislative Council Secretariat
15 April 1999