Introduction

I am pleased to present the fourth annual report of the Office of the Communications Authority (“OFCA”) Trading Fund. In 2015/16, OFCA continued to provide professional support to the Communications Authority (“CA”) in discharging its statutory responsibilities as the regulator of the communications sector in Hong Kong.

The communications market in Hong Kong has been vibrant and dynamic in recent years, and 2015/16 was no exception. Our mobile telecommunications market remained very competitive with high quality and reasonably priced services available to consumers. All four mobile network operators are now offering 4G services. The penetration rate of mobile services exceeded 220% as at March 2016, reflecting that mobile Internet has practically achieved full population penetration. Our fixed telecommunications infrastructure is also among the most advanced, with fibre to the home/building household penetration ranked the fifth globally by the Fibre to the Home (“FTTH”) Council Europe. Hong Kong’s Internet service users benefit substantially from the submarine fibre-optic cable systems that landed here. The World Economic Forum’s Global Information Technology Report 2016 ranked Hong Kong as the second among 139 economies in international Internet bandwidth per user. Furthermore, according to the Internet content-delivery provider Akamai, Hong Kong has the second highest average peak connection speeds globally.

There have been changes to the landscape of the broadcasting sector as well. HK Television Entertainment Company Limited (“HKTVE”) started to provide its licensed domestic free television programme (“free TV”) service by using spectrum as an additional transmission means on top of a fixed network from 2 April 2016, following the cessation of the free TV service of Asia Television Limited (“ATV”). A new player is entering the free TV market following the decision of the Chief Executive in Council (“CE in C”) to grant a free TV licence to Fantastic Television Limited (“Fantastic TV”) on 31 May 2016. Meanwhile, a number of free TV licence applications are being processed. The latest developments will have a significant impact on the broadcasting landscape. The coming on stream of new licensed services will enhance programme variety and widen viewers’ choices.

Broadcasting Services

A number of developments are taking place in television and sound broadcasting services in Hong Kong. Following the submission of the CA’s recommendations on the free TV licence application of Fantastic TV in January 2015, in response to the requests of the CE in C, OFCA assisted the CA in following up on the outstanding issues of the licence application and submitting further recommendations on the application to the CE in C in April 2016. On 31 May 2016, the CE in C decided to formally grant a 12-year free TV licence to Fantastic TV.

In parallel, OFCA assisted the CA in processing the application of HKTVE to employ spectrum, on top of a fixed network, for the delivery of its licensed free TV service. Following the agreement of HKTVE to comply with all the additional conditions imposed by the CA, the CA approved in January 2016 HKTVE’s application.

On 1 April 2015, the CE in C decided not to renew ATV’s free TV licence and extended the term of its licence to 1 April 2016 in accordance with the provision of the Broadcasting Ordinance (Cap. 562) (“BO”). This is the first time in Hong Kong’s broadcasting history that an incumbent’s broadcasting licence has not been renewed. We assisted the CA in closely monitoring ATV’s operation, handling regulatory issues arising from the non-renewal of ATV’s licence in the run-up to the expiry of its licence, and facilitating the changeover of part of the broadcasting frequencies withdrawn from ATV to the new spectrum assignees, namely HKTVE and Radio Television Hong Kong (“RTHK”), in a seamless manner.

Apart from free TV services, we assisted the CA in conducting a renewal exercise in respect of the domestic pay television programme service (“pay TV”) licence of Hong Kong Cable Television Limited (“HKCTV”). The recommendations of the CA on this licence renewal application were submitted to the CE in C in April 2016.

We also assisted the CA in preparing and submitting to the CE in C its recommendations on the renewal of the analogue sound broadcasting licences of Hong Kong Commercial Broadcasting Company Limited (“CRHK”) and Metro Broadcast Corporation Limited (“Metro”) in May 2015. On 22 March 2016, having regard to, inter alia, the recommendations of the CA, the CE in C decided to renew the analogue sound broadcasting licences of CRHK and Metro for a term of 12 years.

Regarding new applications for free TV licences, OFCA assisted the CA in assessing the application of Hong Kong Television Network Limited (“HKTV”), which was received in April 2014, in accordance with the BO and established procedures, and the CA’s assessment of and recommendations on the application were submitted to the CE in C in January 2016. We will continue to support the CA in processing the application of Forever Top (Asia) Limited (“Forever Top”), received in April 2015, and such other applications received in accordance with the BO and established procedures.

OFCA continued to receive a large number of complaints about broadcast materials. In 2015/16, OFCA handled nearly 15 000 complaints relating to about 2 000 cases. Using powers delegated by the CA, OFCA handled most of those cases, which involved breaches of a minor nature, or allegations which did not constitute any breach, or fell outside the remit of the relevant ordinances. The CA dealt with 15 cases in accordance with the complaint handling procedures.

Telecommunications Services

We assisted the CA in implementing its decision on the re-assignment of the 3G spectrum in the 1.9 – 2.2 GHz band upon expiry of the existing assignments in October 2016. A working group has been set up to co-ordinate the handover of spectrum between the incumbent 3G spectrum assignees and the new assignee to minimise any impact on the services during the transitional period. Our next major task is to assist the CA in the re-assignment of 200 MHz of spectrum in the 900/1800 MHz bands, with current terms of assignment expiring between November 2020 and September 2021. The first public consultation on proposed way forward was conducted from February to May 2016, and the second public consultation is planned for early 2017. The CA will endeavour to announce its decision on the arrangements for spectrum re-assignment by late 2017, giving the industry about three years to prepare for any change in spectrum assignments.

OFCA provides a single-point-of-contact service to actively facilitate interested parties to obtain the necessary statutory approvals for landing new submarine cable systems in Hong Kong, so as to increase our capacity and resilience of external telecommunications facilities. I am pleased to report that two new systems are scheduled to land in Hong Kong between mid-2016 and mid-2017, potentially increasing our external connection capacity by about 24%.

Hong Kong has since 1995 adopted an 8-digit telecommunications numbering plan. With the continuous growth in the number of mobile service subscribers, it is estimated that all the number blocks currently available for mobile services may be used up by end 2018. Against this background, OFCA assisted the CA in conducting a consultation on 29 October 2015 to solicit public views on five proposed measures with a view to making available additional number resources for mobile services through more efficient use of the existing 8-digit telecommunications numbering plan. Taking into account the views received from the consultation, the CA announced in June 2016 its decision to adopt all the five proposed measures for implementation in phases. OFCA will work with the industry and the concerned parties and monitor the implementation process.

Competition and Consumer Protection

On 14 December 2015, the Competition Ordinance (Cap. 619) (“CO”), a cross-sectoral competition law prohibiting anti-competitive conduct in all sectors, commenced full operation. The competition provisions in the Telecommunications Ordinance (Cap. 106) (“TO”) and the BO were repealed on the same day subject to transitional arrangements. Under the CO, the CA is conferred concurrent jurisdiction with the Competition Commission (“Commission”) to enforce the CO in respect of the conduct of undertakings in the telecommunications and broadcasting sectors, including merger and acquisition activities involving carrier licensees in the telecommunications sector. From the full commencement of the CO on 14 December 2015 to 31 March 2016, a total of 45 complaints/enquiries were received, with 40 cases closed without the need for further actions and five cases under processing. During the period, OFCA also assisted the CA in reviewing two transactions under the merger rule. No further action was considered necessary in respect of those transactions.

The fair trading sections of the Trade Descriptions Ordinance (Cap. 362) (“TDO”) came into effect on 19 July 2013, under which the CA is conferred concurrent jurisdiction with the Customs & Excise Department (“C&ED”) to enforce the fair trading sections in the broadcasting and telecommunications sectors. From 1 April 2015 to 31 March 2016, OFCA handled 899 complaint cases under the TDO, of which 820 were closed due to insufficient evidence to suspect/establish a contravention, or were outside the scope of the TDO. A further 19 cases were closed with the issue of advisory letters to the concerned licensees to draw their attention to the need to observe more closely the requirements in the TDO. One case was successfully prosecuted, with the court convicting the defendant on 14 April 2016. The remaining cases were at different stages of processing.

The CA has no statutory power to investigate service contract disputes, a major area of consumer complaints received by OFCA. With a view to providing further protection to consumers in telecommunications service contracts, OFCA engaged in active discussions with the Communications Association of Hong Kong (“CAHK”), the industry association for Hong Kong’s communications sector, on possible enhancement measures. Following these discussions, CAHK drew up a self-regulatory Code of Practice for Telecommunications Service Contracts (“Industry Code”), which the industry started implementing in July 2011. Taking into account OFCA’s suggestions based on the implementation experience and consumers’ feedback, CAHK made a number of enhancements to the Industry Code, which took effect from 1 May 2015.

Enforcement of the Unsolicited Electronic Messages Ordinance (Cap. 593) (“UEMO”)

OFCA continues to assist the CA in the enforcement of UEMO. In 2015/16, there were 1 725 reports, representing a decrease of about 16% as compared to the 2 068 reports received in the previous year. Regarding the enforcement actions taken in 2015/16, OFCA issued a total of 106 advisory letters, 22 warning letters and two enforcement notices to the senders of commercial electronic messages after investigation. OFCA also mounted a raid operation against a commercial facsimile sender in January 2016, and laid charges against him in May and July 2016 in relation to suspected contravention of an enforcement notice served on him.

Consumer Education

In 2015/16, OFCA continued to run an annual consumer education campaign featuring the theme “Smart Use of Communications Services”. I am grateful to the Professional Information Security Association for providing guest speakers at five public seminars, enabling the audience to learn from experts in the communications sector on how to use their communications services smartly. OFCA also expanded the reach of its consumer education efforts in 2015/16 by holding community talks in 23 social service centres, targeting those who are not well-versed with the new technologies and mobile devices.

OFCA likewise hosted 12 talks for students and participants of a community project on radio programme production in 2015/16, specifically on how the public can make informed viewing choices regarding television programme services, the regulation of television and sound broadcasting services, and the programme standards governing radio services.

External Relations

OFCA participated actively in conferences organised by international and regional organisations, including the International Telecommunication Union (“ITU”) and the Asia-Pacific Telecommunity (“APT”), to keep track of the latest global regulatory developments and to share our regulatory experience. During the year, OFCA also met with its counterparts from the United States, Singapore, Guangdong Province, Macao, and a number of countries in Europe to exchange views and share its experience.

Major Challenges Ahead

The communications sector is characterised by rapidly evolving technologies, market developments and service introductions. OFCA needs to constantly keep itself up to date on developments on all fronts to support the CA in fully discharging its statutory regulatory responsibilities. 2016/17 will be no exception. On the broadcasting front, we will continue to assist the CA in handling free TV licence applications, monitoring new licensees in rolling out their free TV services, and performing regulatory functions. On the telecommunications front, following the 3G spectrum auction, we will continue to coordinate with the mobile network operators to prepare for the spectrum changeover in October 2016. We will also continue to assist the CA in the re-assignment of 200 MHz of spectrum in the 900/1800 MHz bands upon expiry of the existing assignments between 2020 and 2021. Since the CA has made a decision on the measures to be adopted for more efficient utilisation of the 8-digit numbering plan and the timetable, OFCA will work out the implementation plan with the industry and concerned parties and monitor the implementation process. We will also continue to keep track of technology and market developments, and provide support to the CA in streamlining the existing regulatory and licensing regimes to ensure that they are conducive to business innovation and investment.

I am most grateful to all members of OFCA’s three advisory committees for their advice on how OFCA could improve its work. I am very fortunate to have a team of highly competent and professional colleagues at OFCA who have rendered me their unfailing support. I look forward to working with them closely in the coming year to meet the challenges ahead.