Trading Fund Report 2022/23

It is my pleasure to present the Trading Fund annual report 2022/23 of the Office of the Communications Authority (OFCA). The report contains three sections. Firstly, I would like to share the updated status of the communications landscape of Hong Kong. I would then highlight our major work in the past year and address the potential challenges ahead.

Market Overview

Telecommunications Market

In the past year, the communications sector was coping with the challenges brought by the COVID-19 pandemic. Nonetheless, I am pleased to report that Hong Kong’s telecommunications market remained strong and resilient in both the development of fixed and mobile services. During the year, Hong Kong continued to maintain its leading role in terms of the penetration rate of mobile service subscriptions, recording some 22 million mobile service subscriptions representing a remarkably high penetration rate of 282% among the local population. The substantial growth in mobile data usage also reflected that the mobile internet market continued to flourish despite the economic challenges. In March 2023, more than 167 401 Terabytes of mobile data were consumed, or over 22 Gigabytes per capita, both representing increases of over 30% as compared with that reported in March 2022.

On the front of the fifth generation mobile (5G) services, it is encouraging to see that since its commercial launch on 1 April 2020, 5G coverage in Hong Kong has expanded by leaps and bounds. Thanks to the active network expansion by local telecommunications service operators, Hong Kong now possesses an extensive 5G network covering 90% of the population. The network covers populated districts, popular shopping centres and all mass transit railway stations, serving about 5.1 million customers, representing 68% of the population. The enormous potentials of 5G technology will bring about a wider range of innovative applications and new business opportunities, benefiting various industries and the Hong Kong society as a whole.

I also take great pleasure to report that Hong Kong’s fixed-broadband network has achieved over 99% household penetration rate, among which 85% of households are enjoying the high-speed broadband services via optical fibre. Optical fibre, as the dominant fixed network access technology in Hong Kong, enables both business and personal users to have access to various state-of-the-art communications services and applications.

Broadcasting Market

Hong Kong’s broadcasting market continues to be robust in spite of the rapid emergence of Internet-based media services. In 2022/23, the public was able to access around 800 local and overseas television programme channels in various languages through free-to-air, pay and satellite television services as well as 14 local radio programme channels. With our pre-eminent geographic position and well established infrastructure, Hong Kong is an ideal regional satellite uplink location with nine non-domestic licensees delivering around 140 satellite television programme channels throughout Asia-Pacific. With the adoption of Open Sky Policy by the Government, around 500 free satellite television programme channels are now available for reception in Hong Kong.

Highlights of Our Work in 2022/23

Despite economic challenges in Hong Kong and abroad, OFCA made substantial strides in 2022/23. Below are some of our major highlights.

Telecommunications Services

Last year, OFCA assisted the Communications Authority (CA) in assigning 70 MHz of new spectrum in the low frequency bands to support 5G services, making a total of 2 130 MHz of spectrum in the low, mid and high frequency bands assigned for the provision of 5G services. We have set up an in-house task force on spectrum supply to ensure the timely release of spectrum and to keep pace with emerging communications demands from the industry and consumers. Besides, we are also actively taking heed of development trends in both global and regional telecommunications and spectrum planning initiatives. In particular, we have been closely monitoring the development of the potential identification of new frequency bands for mobile services, including 5G services, by the International Telecommunication Union at the upcoming World Radiocommunication Conference 2023 to be convened in late 2023.

One of the major activities during the year involved lifting of the “3.5 GHz restriction zone” in Tai Po by relocating or upgrading the satellite facilities in the area. One satellite operator has decided to relocate its facilities from Tai Po to the Chung Hom Kok Teleport and another satellite operator has undertaken to install band-pass filters at its satellite facilities to prevent radio interference. While the “3.5 GHz restriction zone” is expected to be lifted before the end of 2024, mobile network operators (MNOs) are now making use of other frequency bands or re-farming existing bands for 3G/4G to provide 5G services in Tai Po.

For strengthening 5G infrastructure, the Chief Executive announced in the 2022 Policy Address that the Government would amend the legislation and relevant guidelines to ensure appropriate space will be made available in new buildings for installation of mobile communications facilities. In this regard, OFCA assisted the Commerce and Economic Development Bureau (CEDB) to formulate the proposal and conduct an industry consultation to collect the views of relevant stakeholders.

To encourage various sectors to deploy 5G technology early to foster innovation and smart city applications, OFCA has been administering the “Subsidy Scheme for Encouraging Early Deployment of 5G” (the Scheme) launched under the Anti-epidemic Fund since May 2020. Under the Scheme, the Government will subsidise 50% of the cost of deployment of 5G technology in an approved project, subject to a cap of HK$500,000. The Scheme has received very positive responses across different sectors, and brought about many novel 5G applications to enhance business operations and quality of services, benefiting the society at large. Overall, the Scheme facilitates smart city development while opening up more business opportunities and room for development of start-up businesses and enhances their competitiveness in today’s digital landscape.

In support of the Government’s policy initiative, OFCA is also implementing a subsidy scheme with a funding of HK$770 million to provide financial incentives for fixed network operators (FNOs) to extend their fibre-based networks to 235 villages in remote areas (the Subsidy Scheme). Following the award of all six tender projects under the Subsidy Scheme between November 2019 and May 2020, the FNOs selected have now extended their fibre-based networks to more than 120 villages and rolled out three submarine fibre cables connecting Lamma Island, Cheung Chau and Peng Chau in May 2023. OFCA will continue to monitor the implementation of these projects and target for full completion of the Subsidy Scheme by 2026.

The Telecommunications (Amendment) Ordinance 2021 that sought to amend relevant provisions of the Telecommunications Ordinance (Cap. 106) (TO) came into operation on 24 June 2022. The amended TO aims to update the regulatory arrangements on telecommunications functions of 5G and Internet of Things (IoT) devices, enhance the protection of underground telecommunications infrastructure, simplify the issue of non-carrier licences and improve the appeal mechanism under the TO. Having the amended section 18A of the TO in force for just over a year to provide protection of underground telecommunications facilities, four successful prosecution cases had been brought with fines ordered by the Magistrates, and five cases are under investigation or prosecution. It is anticipated that the enforcement actions will raise public awareness of the need for such protection and minimise the potential disruption caused by accidental damage to these facilities during the construction work.

OFCA also supported CEDB to fully implement the Telecommunications (Registration of SIM Cards) Regulation (the Registration Regulation). Starting from 24 February 2023, all subscriber identification module (SIM) cards issued and used locally must complete real-name registration before service activation. As of 31 March 2023, about 13 million SIM cards (including SIM service plans and pre-paid SIM (PPS) cards) had completed registration. OFCA has been working closely with relevant licensees to undertake monitoring and enforcement actions, including regular inspections, market surveillance and public education, to ensure the effective implementation of the Registration Regulation.

In view of the marked increase in the number of telephone fraud cases, OFCA, the Police and MNOs have set up a working group in September 2022 to devise and implement technical measures against fraudulent calls and messages delivered through telecommunications networks. With our coordination, a number of new measures have been implemented successively since the fourth quarter of 2022 by the telecommunications industry, including (a) sending voice or text alert for incoming calls with caller number prefixed with “+852” to alert mobile service users that the calls are from outside Hong Kong, (b) blocking transmission or delivery of calls bearing suspicious or spoofed calling line identification (CLI), and (c) blocking access to suspicious websites and suspending telecommunications services of local phone numbers involved in scam cases based on information provided by the Police. According to the Police, such measures are effective in combating fraudulent calls and messages.

OFCA will continue to review the situation and explore additional measures with various sectors to combat phone scam, including the work with the telecommunications industry, the banking industry and the Police to set up a registration scheme for Short Messaging Service (SMS) senders which aims to assist the public in ascertaining the authenticity of SMS sender addresses.

Fraudulent calls have caused severe social and financial impact on people in the community. In collaboration with the industry and the law enforcement agency to combat fraudulent calls from the telecommunications perspective, OFCA assisted the CA in issuing a Code of Practice on Management of Scam Calls by Mobile Service Providers in April 2023. The code of practice, which came into operation on 30 June 2023, provides practical guidance to mobile service providers in managing suspected scam calls made through local mobile networks and systems as well as ensuring the efficient and reliable operation of mobile networks and systems. From July to August 2023, mobile service providers have suspended the telecommunications services of about 200,000 local telephone numbers in accordance with the code of practice.

Last but not least, in order to strengthen Hong Kong’s status as a pre-eminent communications hub in the Asia Pacific region. OFCA collaborated with the Lands Department (LandsD) to invite tenders for suitable land lots at the Chung Hom Kok Teleport for the establishment of additional external telecommunications infrastructure. Two land lots were awarded to successful tenderers in August 2022 and March 2023 respectively.

Broadcasting Services

During the year, OFCA assisted the CA in completing the mid-term review of three free-to-air television and two sound broadcasting licences with recommendations submitted to the Chief Executive in Council (CE in C). The CA’s recommendations, covering a variety of aspects including encouraging further investment in the industry, relaxing the designated language requirements and refining the programme requirements (such as increase in local productions, provision of subtitling and sign language, and enhancement of positive programmes) for the interest of the viewing/listening public, were accepted and endorsed by the CE in C in February 2023. The recommendations have been implemented by way of licence amendments and directions by the CA.

Following the CE in C’s approved termination of the domestic pay television programme service (pay TV) licence of Hong Kong Cable Television Limited (HKCTV) in February 2023 following the latter’s application, OFCA had actively followed up with HKCTV to ensure its proper implementation of the committed exit arrangements and the relevant technical adjustments in the run up to the cessation of HKCTV’s pay TV service on 1 June 2023, with a view to protecting customer rights and the interest of the viewing public at large. HKCTV’s exit arrangements were smoothly completed under OFCA’s monitoring.

Major Challenges Ahead

On the broadcasting front, we will assist the CA in conducting a review of its codes of practice, along the general direction of refining the regulatory regime to facilitate the operation of the licensees in meeting the challenges of the rapidly evolving business environment. It is expected that the review will be completed within 2023.

With respect to the 2022 Policy Address initiative to ensure availability of space in and access to new buildings for installation of mobile communications facilities, OFCA will continue to support CEDB in taking forward the proposed legislative amendments and liaise with relevant government departments in making corresponding amendments to the relevant administrative guidelines to implement the proposal for the expansion of mobile networks. OFCA will also assist the CA in formulating a Code of Practice for the Provision of Mobile Access Facilities in Specified Buildings for the Provision of Public Mobile Radiocommunications Services, setting out the standard and minimum requirements for developers and MNOs for the installation of mobile communications facilities in specified new buildings.

We will continue the liaison with telecommunications operators interested in landing submarine cables to Hong Kong to seek necessary statutory approvals.

Following the promulgation of decisions of the CA and the Secretary for Commerce and Economic Development (SCED) by way of joint statement on 2 May 2023 on the arrangements for re-assignment of 20 MHz of spectrum in the 850/900 MHz band and 90 MHz of spectrum in the 2.3 GHz band as well as the related spectrum utilisation fee (SUF), OFCA will support the CA to conduct the corresponding spectrum auction in 2024. Moreover, OFCA will support the CA to make available new spectrum in the 6/7 GHz band for continuous development of 5G and other mobile communications services. As announced in the 2023-24 Budget, we will also incentivise the provision of mobile communications infrastructure through deducting tax payable on SUF for future bidding of radio spectrum by MNOs.

To combat fraudulent calls and messages transmitted via telecommunications networks, OFCA will continue to maintain close collaboration with the telecommunications industry, law enforcement agencies and relevant stakeholders including the banking sector in combating deception activities in order to safeguard the integrity of telecommunications services and the security of communications networks.

In addition, OFCA will continue to closely oversee the effective implementation of SIM card registration by licensees in accordance with the requirements specified by the Registration Regulation. OFCA will actively conduct market surveillance and publicity activities to ensure full compliance with the real-name registration requirements by the industry and the general public.

To conclude, I would like to thank the Chairman and Members of the CA for their invaluable guidance. My gratitude also goes to our licensees who have been rendering unfailing support to OFCA in performing its regulatory role and actively contributing to the rapid development of the communications sector in the past year. With professionalism, wisdom and dedication of OFCA’s work team, I am confident that we will take the local communications market to a new level.