Re-assignment of Frequency Spectrum in the 1.9 – 2.2 GHz Bands

Among the 17 million mobile service subscribers in Hong Kong, 88% or 14.7 million subscribe to mobile data services provided on 3G and 4G networks. The 3G network is supported primarily by 2 x 59.2 MHz of spectrum in the 1.9 to 2.2 GHz band (“3G Spectrum”), which was assigned through auction to four mobile network operators in October 2001.

The existing assignments of the 3G Spectrum will expire in October 2016. The CA announced on 15 November 2013 its decision to adopt a hybrid administratively-assigned cum market-based approach to re-assign the 3G Spectrum for a new 15-year term, starting from 22 October 2016. On 15 November 2013, the Secretary for Commerce and Economic Development (“SCED”) also promulgated the related arrangements for determining the spectrum utilization fee (“SUF”) of the re-assigned spectrum under the TO.

Taking into account the merger of two incumbent 3G operators in 2014 and the associated spectrum divestment direction of the CA, the remaining three incumbent 3G operators were offered the right of first refusal for re-assignment of a total of 2 x 34.6 MHz of the 3G Spectrum, the level of SUF for which was prescribed by subsidiary legislation enacted in July 2014. All three incumbent 3G operators accepted the offers in August 2014. Following the right of first refusal exercise, the remaining 2 x 24.6 MHz of the 3G Spectrum was assigned to two incumbent 3G operators and a mobile network operator through an auction conducted in December 2014. The auction fetched a total SUF of $2.42 billion, or $49.2 million per MHz. Based on the method for setting the SUF as prescribed by the subsidiary legislation, the SUF of the 3G Spectrum re-assigned administratively through right of first refusal stood at $4.57 billion, or $66 million per MHz. Therefore, SUF totalling $6.99 billion, covering the new 15-year term of assignment commencing on 22 October 2016, would be paid by the spectrum assignees to the Government by August 2016.

29.6 MHz out of 118.4 MHz of the 3G spectrum re-assigned through the auction conducted in December 2014 would change hands with effect from 22 October 2016. The incumbents and the new spectrum assignee need to prepare for the necessary network reconfiguration and roll-out of their networks respectively. In order to facilitate a smooth spectrum handover among the spectrum assignees, OFCA set up a Technical Working Group in March 2015 with the participation of all relevant mobile network operators to discuss and coordinate the technical arrangements to be adopted in relation to the spectrum re-assignment. With active contributions from the members of the Working Group, the coordination work is progressing smoothly. OFCA will continue to work with the operators to avoid any service impact on customers during the handover of the spectrum on 22 October 2016.

Re-assignment of Frequency Spectrum in the 900 MHz and 1800 MHz Bands

Frequency spectrum in the 900 MHz and 1800 MHz frequency bands is currently deployed for the provision of 2G, 3G and 4G mobile services. The existing assignments for 49.8 MHz of spectrum in the 900 MHz band and 148.8 MHz of spectrum in the 1800 MHz band will expire within the period between November 2020 and September 2021.

The CA and the SCED jointly launched a public consultation on 3 February 2016 in order to solicit the views and comments of the industry and other affected parties on the proposed arrangements for spectrum re-assignment and the related SUF. Three options were proposed for spectrum re-assignment, namely (1) a full-fledged administratively-assigned approach; (2) a full-fledged market-based approach; and (3) a hybrid administratively-assigned cum market-based approach. The CA will adopt the option that would best meet the four objectives in spectrum re-assignment, namely ensuring customer service continuity, efficient spectrum utilisation, promotion of effective competition, and encouragement of investment in and promotion of innovative services.

Upon the close of the three-and-a-half-month consultation on 18 May 2016, 325 submissions were received from the industry, business organisations and members of the public. There was support from different industry players for all three of the proposed re-assignment options. An external consultant has been engaged to carry out a technical study on any impact on service quality arising from different spectrum re-assignment scenarios. After considering the views and comments received from the first consultation as well as the results of the consultancy study, the CA plans to put forward a detailed proposal for spectrum re-assignment in the second round of public consultation to be conducted at early 2017, with a view to announcing its decision on the arrangements for spectrum re-assignment by end 2017. This will allow a lead time of three years for the industry to prepare for any change in spectrum assignments.

Reduction of Telecommunications Licence Fees

In November 2012, the CA and the SCED issued a joint statement that promulgated their decision to reduce the customer connection fee level of Unified Carrier Licences (“UCLs”) from $800 to $700 for each set of 100 customer connections, and to reduce the mobile station fee level of Public Radiocommunications Service Licences (Paging) and Services-Based Operator Licences (Class 3) from $800 to $700 for each set of 100 mobile stations. Following the completion of the legislative procedure, the new licence fees took effect on 1 March 2013. In February 2013, PCCW-HKT Telephone Limited and Hong Kong Telecommunications (HKT) Limited (“PCCW and HKT”) applied for leave to lodge a judicial review (“JR”) against the CA and the SCED on their decisions on licence fees reduction. The Court granted leave to PCCW and HKT’s application for the JR in July 2013. The substantive hearing was held from 17 to 19 June 2015 with the judgment handed down on 11 August 2015. The Court of First Instance ruled in favour of the CA and the SCED and dismissed the JR application. PCCW and HKT lodged an appeal to the Court of Appeal on 4 September 2015 and the hearing was held from 19 to 20 April 2016⁶.

Regulation of Broadcast-type Mobile TV Services

Since the launch of broadcast-type mobile television services (“Mobile TV Services”) in February 2012, the China Mobile Multimedia Broadcasting (“CMMB”) standard has been used as the transmission standard. In January 2014, Hong Kong Mobile Television Network Limited (“HKMTV”), the licensee holding the UCL which authorised it to provide Mobile TV Services (“Mobile TV Licence”), indicated to OFCA its proposal to switch from the original CMMB standard to the Digital Terrestrial Multimedia Broadcast (“DTMB”) standard.

As the executive arm of the CA, OFCA expressed its views to HKTV and HKMTV that Mobile TV Services using the DTMB standard without effective technical measures to prevent fixed reception by specified premises will render the Mobile TV Services available for reception by an audience of more than 5 000 specified premises in Hong Kong and hence should be subject to regulation by the BO. On 11 April 2014, HKTV and HKMTV applied to the court for leave to apply for a JR of OFCA’s positions. After the substantive hearing conducted on 26 and 27 November 2014, the Court of First Instance handed down its judgment on 29 September 2015 in favour of OFCA and dismissed all the grounds of JR brought by HKTV and HKMTV. Subsequently, HKTV requested OFCA to process HKMTV’s proposal of using an alternative transmission standard for the provision of its Mobile TV Services. Since then, OFCA has been diligently following up with HKTV in respect of its alternative proposal. The CA and OFCA will continue to facilitate HKMTV to provide its Mobile TV Services in compliance with the requirements of the relevant legislation and its Mobile TV Licence.

Continued Efforts to Strengthen Consumer Protection in the Use of Telecommunications Services

Ongoing Implementation of “Mobile Bill Shock” Preventive Measures

The growing popularity of smartphones and advanced mobile devices has driven the growth of and demand for mobile data services in recent years. At the same time, the increase in the number of consumer complaints relating to mobile broadband billing disputes has become a common concern among consumers. Many of these complaints involve “mobile bill shock”, which refers to the shock consumers experience upon receiving unexpectedly high mobile bill charges. “Mobile bill shock” is mainly caused by unintentional or inadvertent usage of mobile data services, locally or while roaming overseas.

To address this problem, OFCA has promulgated a series of preventive measures for the industry since May 2010. These measures include allowing customers to opt out of individual services; setting a charge ceiling; setting a usage cap for all kinds of usage-based mobile services; and alerting customers through short messages when their pre-determined usage threshold is reached, or when their roaming data usage is triggered.

To increase the transparency of the relevant service information, OFCA has published measures implemented by individual operators on its website and provided regular updates. In parallel with these measures, OFCA has organised a series of consumer-education programmes to enhance consumers’ awareness and knowledge of mobile data services. OFCA has also posted a data usage calculator on its website, which serves as a tool for consumers to estimate their data usage consumption. With the implementation of the abovementioned preventive measures by mobile network operators and mobile virtual network operators as well as our on-going consumer education efforts, the number of complaints in relation to “mobile bill shock” decreased from 615 cases in 2014 to 289 cases in 2015, representing a drop of 53%.

Progress of the Implementation of Fair Usage Policy Guidelines

Fixed and mobile broadband service providers offer a variety of service plans to consumers, including plans with “unlimited usage”. However, certain “unlimited usage” service plans are in fact subject to usage restrictions imposed by service providers in the name of Fair Usage Policy (“FUP”). The FUP is intended to prevent excessive usage of network resources by individual customers, which may adversely affect the network performance and hamper other customers’ use of the service. For example, service providers may impose restrictions by lowering the network service priority or reducing the access speed for customers whose data usage has exceeded certain threshold. Nevertheless, consumers may not be aware of the existence of the FUP or understand the relevant terms and conditions. Customers of “unlimited service” plans in particular feel aggrieved when their data usage is subject to restriction because of the FUP.

In order to protect consumer interests and enhance the transparency of service information, the CA issued a set of FUP guidelines in November 2011, governing how service providers should implement their FUP. The mandatory guidelines have been in effect since February 2012.

In 2015, OFCA assisted the CA in handling six FUP-related complaint cases. None of them was found to be in contravention of the FUP guidelines.

Enhancement of the Broadband Performance Test System

Since December 2010, OFCA has posted on its website a broadband performance test system to enable broadband service users to measure the performance of their broadband connections, including download and upload speeds, network latency, packet loss and jitter. Apart from users of desktop and notebook computers, users of smart phones and tablets running iPhone operating system (“iOS”) and Android operating systems may also make use of the test system.

From time to time, we review and upgrade the test system to further enhance its capability and performance. Currently, it offers desktop users and users of iOS- and Android-based mobile devices speed tests of up to 1 000 Mbps and 400 Mbps respectively.

The broadband performance test system was accredited with a Certificate of Merit under the category of “Best Public Service Application (Web/Mobile Application) Award” in the “Hong Kong ICT Awards 2013”. From service launch to March 2016, more than 64 million tests were performed under the system.

Continuing to Facilitate the Implementation of Self-regulatory Measures

Enhancement of the Industry Code of Practice for Telecommunications Service Contracts

In order to provide guidelines for the industry on drawing up telecommunications service contracts so as to improve transparency in the contracting process and increase customer satisfaction, CAHK, an industry association, promulgated a self-regulatory Industry Code in December 2010, which was implemented by all major fixed and mobile network operators starting from July 2011.

Having regard to the implementation experience and consumers’ feedback, OFCA made a number of suggestions to CAHK for further enhancement to the Industry Code. CAHK revised the Industry Code in October 2014 following discussions with participating operators. Major revisions include:

• improving the arrangement for contract termination so as not to cause inconvenience to customers or involve unreasonable delay;
• improving the arrangement for the provision of written confirmation for extension or renewal of contracts;
• stating clearly in the contract the calculation of the termination charge or the maximum amount involved if it is not feasible for the operators to provide service at the relocated premises due to the absence of network coverage;
• stating clearly in the contract the calculation of the first bill and the last bill within the contract term; and
• encouraging operators to implement better cooling-off period arrangements with greater flexibility.

The revised Industry Code took effect on 1 May 2015.

Since the implementation of the Industry Code in July 2011, the number of complaints related to service contract disputes has been decreasing continuously, from 1 277 cases in 2011 to 458 cases in 2015, representing a drop of more than 64%.

Code for the Provision of Chargeable Mobile Content Services

To safeguard consumer interests and increase the transparency of the pricing information related to Mobile Content Services (“MCS”), OFCA has worked closely with the industry to draw up the voluntary “Code for the Provision of Chargeable Mobile Content Services”. Promulgated and put into effect by CAHK in January 2010, the code governs the practices of third-party Content Service Providers (“CSPs”) in providing MCS and the establishment of an industry self-regulatory scheme. Under the code, all third-party CSPs are required to indicate clearly to their customers the chargeable nature of the services and obtain their clear consent before initiating the delivery and provision of MCS. They are also required to set out clearly the unsubscribing mechanisms, which should be simple and convenient.

The code also provides for the establishment of an Administrative Agency (“AA”), which is responsible for assessing the capability of CSPs and securing their pledges in complying with the requirements of the code, as well as monitoring their compliance through complaint handling and random checks. A mobile network operator may only enter into a commercial contract with a CSP that has obtained a Letter of Positive Assessment (“LPA”) from the AA regarding MCS delivery and billing. As at the end of March 2016, seven CSPs were holding the LPAs issued by the AA.

Since the adoption of the code in January 2010, OFCA has been closely monitoring its effectiveness, and recorded a continued decrease in the number of related complaints, which has remained at a low level. During the year under review, less than one complaint case was received on a monthly average, reflecting the compliance of CSPs with the voluntary code and satisfaction of customers with the MCS.

Code of Practice in Relation to Billing Information and Payment Collection for Telecommunications Services

In October 2011, the CA issued a voluntary code of practice entitled “Code of Practice in Relation to Billing and Payment Collection for Telecommunications Services”, with a view to reducing billing disputes and enhancing the transparency of billing information. This code of practice provides guidance to telecommunications operators on chargeable items to be included in their bills, and arrangements for payment collection. As at March 2016, seven local fixed and four mobile network operators had pledged compliance with the code. We have published on our website a consumer alert as well as a summary of the compliance status of all operators for the information of consumers. We will continue to closely monitor the implementation and effectiveness of this code of practice.

Industry Code of Practice for Provision of Mobile TV Services

According to the Framework for Development of Broadcast-type Mobile TV Services in Hong Kong, which was promulgated by the Government in December 2008 and revised in February 2010, the industry is required to develop a code of practice on the provision of Mobile TV Services, both local broadcast-type and streaming-type, for the purpose of self-regulation. In August 2012, CAHK issued a code of practice for Mobile TV Services. With a view to protecting children and public morals, the code requires Mobile TV Service providers to implement access controls for pornographic and obscene content. Mobile TV Service providers should also have regard to the prevailing standards of morality generally accepted by society, and in particular be vigilant about the likely effects of their television content on children.

Long-term Implementation of the Customer Complaint Settlement Scheme

To help resolve billing disputes in deadlock between telecommunications service providers and their residential/personal customers by means of mediation, OFCA facilitated the setting up of a voluntary Customer Complaint Settlement Scheme (“CCSS”) by the telecommunications industry for a trial period of two years starting from 1 November 2012. The mediation service was provided by an independent mediation service centre (“CCSS Centre”) set up under CAHK with voluntary participation of all major telecommunications service providers in Hong Kong. OFCA supported the CCSS by contributing the necessary funding, vetting the CCSS applications against the acceptance criteria, and monitoring the performance and the governance of the scheme.

Following completion of the trial scheme on 31 October 2014, OFCA conducted a review of the effectiveness of the CCSS and its usage by the public. Having regard to the encouraging outcome of the CCSS trial, the proven demand from customers and the positive feedback from the industry, OFCA decided to support the long-term implementation of the CCSS on the basis of the framework adopted in the trial scheme. The long-term implementation of the CCSS commenced on 1 May 2015.

During the implementation period from 1 May 2015 to 31 March 2016, there were 145 eligible applications, 73 cases of which were resolved before referral to the CCSS Centre, 64 cases were satisfactorily settled through mediation by the CCSS Centre, four cases were not settled, and the remaining four cases were being processed by the CCSS Centre.

To raise public awareness of the CCSS, a series of publicity activities were conducted, such as publication of comic strips and advertorials, as well as the conduct of roving exhibitions and public seminars. OFCA will continue to support the CCSS and monitor its effectiveness.

Facilitation of the Landing of New Submarine Cable Systems in Hong Kong

During the year, OFCA continued to provide a single-point-of-contact service, assisting operators to apply for the necessary statutory approvals to land two new submarine cable systems, namely the Asia-Pacific Gateway and the Asia Africa Europe-1, in Hong Kong. These two new systems are scheduled to land in Hong Kong between mid-2016 and mid-2017. During the year, OFCA also took the initiative to discuss with other relevant Government departments on possible ways to speed up the processing of the applications for the necessary statutory approvals to carry out installation works and emergency repairs of submarine cable systems in Hong Kong waters. As a result, the application procedures and requirements concerned were simplified and streamlined. We have accordingly updated the “Information Note on Applying for Required Government Permits/Approvals/Visas to Carry out Works Related to Submarine Cable Systems within Hong Kong Waters” to set out the streamlined application procedures and requirements, and published it on OFCA’s website for the industry’s information.

Development of Fixed Broadband Services

Broadband access to various applications and content services has become an integral part of people’s lives in Hong Kong. With the continuous network rollout of fixed network operators, the Hong Kong community is able to enjoy nearly ubiquitous coverage of broadband networks deploying various technologies. As at March 2016, there were around 2.35 million residential and commercial fixed-broadband subscribers, with a household penetration rate of 84%. Broadband services are now available at speeds of up to 10 Gbps. Around 86% of fixed broadband subscribers use broadband services with a speed of 10 Mbps or above. With a view to enhancing the provision of fixed broadband services in villages in rural and remote areas through increased competition in the market, the CA has amended the unified carrier licence of the 21 ViaNet Group Limited to enable the licensee to provide wireless fixed broadband service using radio spectrum in the 2.3 GHz band. It is expected that the choice and service quality of fixed broadband services in rural and remote areas will improve progressively with the rollout of the wireless fixed network to those areas as well as the on-going expansion of coverage by the wireline fixed network operators.

According to a press release issued by the FTTH Council Europe in February 2016, Hong Kong ranked the fifth worldwide in fibre to home/building household penetration among the 54 economies under comparison. According to the “State of the Internet 1st Quarter, 2016 Report” published by Internet content delivery provider Akamai in June 2016, Hong Kong has an average peak connection speed of 110.3 Mbps, which is the second highest in the world.

Review of Licence Conditions in the Carrier Licences

Alongside the evolution of the carrier licensing regime over the past years, cross-sectoral legislation or regulation on specific matters which apply across the board to all sectors including the telecommunications sector, have come on stream. The introduction of and further enhancements to these cross-sectoral regulatory regimes over time have served to supersede the sector-specific controls imposed under the telecommunications licensing regime and rendered the latter inappropriate and unnecessary.

With a view to removing the anomaly of subjecting telecommunications licensees to both the sectoral and cross-sectoral regulatory controls on specific matters, and following a public consultation, the CA and SCED announced on 10 March 2015 their decisions to remove five special conditions (“SCs”) governing road-opening works and one general condition (“GC”) relating to restrictions on attachment to public buildings and trees from carrier licences (“the Decisions”). Pursuant to the Decisions, OFCA issued a circular letter inviting the licence holders to return their licences to effect the corresponding removal of the SCs. Most of the major carrier licensees have already returned their licences for removal of the concerned SCs. It is necessary to introduce legislative amendments to the Telecommunications (Carrier Licences) Regulation (Cap. 106V) (“Amendment Regulation”) for the removal of the GC. OFCA provided support to the SCED in introducing the Amendment Regulation, which commenced operation from 1 July 2016.

Measures for More Efficient Utilisation of the 8-digit Numbering Plan

Since 1995, Hong Kong has adopted an 8-digit telecommunications numbering plan. With the persistently high demand for mobile service numbers, as well as the advent of future generation mobile services such as the Internet of Things and fifth generation (“5G”) mobile services, it is expected that the consumption rate of mobile numbers will be sustained in the years to come. It is forecast that the 8-digit numbers currently available for allocation to mobile services will be used up by end 2018 if no mitigation measures are taken. Against this background, OFCA assisted the CA in conducting a 2-month public consultation from October to December 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. By the close of the consultation, 20 submissions were received. Having carefully considered the views and comments from the industry and interested parties, as well as taking into account the need to ensure that adequate number resources shall be made available to cope with the development of 5G mobile technologies in the coming years, OFCA supported the CA in finalising the measures to be adopted and the implementation plan for the respective measures, and announcing its decision in June 2016. OFCA will follow up with the industry and other affected parties in respect of implementing the necessary changes to their networks and systems in relation to the new numbering blocks to be released under the respective measures.