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Liberalisation and Growth in Liberalisation and Growth in Telecommunications Telecommunications -- Hong Hong Kong, China's ExperienceKong, China's Experience
T F So, Assistant DirectorT F So, Assistant DirectorOffice of the Telecommunications Office of the Telecommunications
AuthorityAuthorityHong Kong, ChinaHong Kong, China
AgendaAgenda
Key Milestones in LiberalisationKey Milestones in LiberalisationIndependent RegulatorIndependent RegulatorLocal Fixed NetworkLocal Fixed NetworkExternal Fixed NetworkExternal Fixed NetworkMobile NetworkMobile NetworkInternet Access ServiceInternet Access Service
Liberalisation Benefited HKCLiberalisation Benefited HKC’’s s economyeconomy
Background Information about Background Information about Hong Kong, ChinaHong Kong, China
Special Administrative Region of the Special Administrative Region of the PeoplePeople’’s Republic of Chinas Republic of ChinaArea 1,100 sq kmArea 1,100 sq kmPopulation 6.909 millionPopulation 6.909 millionNumber of Households 2.237millionNumber of Households 2.237millionGross Domestic Product per capita in Gross Domestic Product per capita in 2006 2006 –– US$ 27,000US$ 27,000Services constitute about 91% of Services constitute about 91% of economyeconomy
Key Telecom StatisticsKey Telecom Statistics
52885288Public WiPublic Wi--Fi access pointsFi access points
US$ 0.8 billion (2007)US$ 0.8 billion (2007)Annual capital expenditureAnnual capital expenditure
US$ 6.6 billion (2007)US$ 6.6 billion (2007)Annual revenueAnnual revenue
26262.5G/3G customers as a percentage 2.5G/3G customers as a percentage of mobile customersof mobile customers
5 (four 3G operators)5 (four 3G operators)Number of mobile operatorsNumber of mobile operators
143.4%143.4%Mobile penetrationMobile penetration
75% by households75% by householdsBroadband penetrationBroadband penetration
1010Number of local fixed operatorsNumber of local fixed operators
56% by population56% by populationTelephone line densityTelephone line density
Independent RegulatorIndependent RegulatorLegal basis Legal basis –– Telecommunications Telecommunications OrdinanceOrdinanceTelecommunications Authority (TA) Telecommunications Authority (TA) ––Independent regulator empowered by the Independent regulator empowered by the Ordinance to regulate the Ordinance to regulate the telecommunications industrytelecommunications industry19931993•• Office of the Telecommunications Authority Office of the Telecommunications Authority
(OFTA) established as the executive arm of the (OFTA) established as the executive arm of the TATA
•• paved the way for liberalisationpaved the way for liberalisation
Liberalisation in Local Fixed Liberalisation in Local Fixed Network and ServiceNetwork and Service
19951995End of domestic telecommunications End of domestic telecommunications franchisefranchiseThree new companies licensedThree new companies licensed•• New World Telephone LimitedNew World Telephone Limited•• New T&T Hong Kong LimitedNew T&T Hong Kong Limited•• Hutchison Communications LimitedHutchison Communications Limited
to compete with the incumbent operator, Hong to compete with the incumbent operator, Hong Kong Telephone CompanyKong Telephone Company
Interconnection rules establishedInterconnection rules established
Liberalisation in Local Fixed Liberalisation in Local Fixed Network and ServiceNetwork and Service
19971997Fixed number portability introducedFixed number portability introduced
2000 2000 –– further liberalisationfurther liberalisation5 wireless local fixed networks licensed5 wireless local fixed networks licensedCable TV operator allowed to provide Cable TV operator allowed to provide telephone servicestelephone services
Liberalisation in Local Fixed Liberalisation in Local Fixed Network and ServiceNetwork and Service
2003 2003 –– fully liberalisedfully liberalisedNo limit on number of licencesNo limit on number of licencesTechnology neutralTechnology neutralNo restriction on foreign ownershipNo restriction on foreign ownershipServices fully privatised, no government Services fully privatised, no government subsidysubsidyNo control on tariffs No control on tariffs Competition provisions introducedCompetition provisions introducedMarket driven, proMarket driven, pro--competition, procompetition, pro--consumer policyconsumer policy
Telephone LinesTelephone Lines
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
BusinessResidentialTotal
No
of L
ines
True Competition Developed True Competition Developed in Marketin Market
Incumbentnew entrants
Incumbentnew entrants
Market Share of incumbent in 2006 -2007
Business lines 69.4% Residential lines 65.9%
Liberalisation of External Liberalisation of External Network and ServiceNetwork and Service
Hong Kong Telecommunication Hong Kong Telecommunication International (HKTI) held an International (HKTI) held an exclusive licence for external exclusive licence for external services in 1990services in 1990’’ssIn 1998, HKTI received HK$6.7 In 1998, HKTI received HK$6.7 billion cash compensation from the billion cash compensation from the government to surrender its government to surrender its exclusive licence, eight years earlier exclusive licence, eight years earlier than the scheduled expiry in 2006than the scheduled expiry in 2006
Liberalisation of External Network Liberalisation of External Network and Service and Service
19991999External serviceExternal service--based competition introduced based competition introduced
20002000External facilitiesExternal facilities--basedbased competition introducedcompetition introduced
New Technologies lowered operating costNew Technologies lowered operating costSubstantial reduction in IDD tariffsSubstantial reduction in IDD tariffsNo limit on number of operatorsNo limit on number of operatorsMandatory interconnection between external and Mandatory interconnection between external and local fixed networkslocal fixed networks
IDD TrafficIDD Traffic
-
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
8,000,000,000
9,000,000,000
10,000,000,000
96 97 98 99 00 01 02 03 04 05 06 07
Outgoing IDD
Incoming IDD
Total
No.
of M
inut
es
IDD TariffsIDD TariffsLiberalisation of external fixed Liberalisation of external fixed networks/services brought about networks/services brought about substantial reduction in IDD tariffssubstantial reduction in IDD tariffsIn 1999 In 1999 –– 2002 (4 years) alone, estimated 2002 (4 years) alone, estimated consumer saving reached HK$ 25.5 billion consumer saving reached HK$ 25.5 billion (much higher than the compensation (much higher than the compensation granted to the incumbent operator)granted to the incumbent operator)International private leased circuits price International private leased circuits price also dropped substantially (eg. in 2001, also dropped substantially (eg. in 2001, price of IPLC for US/HK dropped by 50%) price of IPLC for US/HK dropped by 50%)
Liberalisation in Mobile Network Liberalisation in Mobile Network and Servicesand Services
19841984First mobile network introducedFirst mobile network introduced
1985 1985 –– 19891989Four analogue licences issued, later switched to GSM Four analogue licences issued, later switched to GSM 900 and CDMA900 and CDMA
19961996Additional 6 licences issued to provide GSMAdditional 6 licences issued to provide GSM--18001800
19991999Mobile number portability implemented, triggered Mobile number portability implemented, triggered acute market competitionacute market competition
Liberalisation in Mobile Network and Liberalisation in Mobile Network and ServicesServices
20012001Four 3G licensed issued through spectrum auctioning; Four 3G licensed issued through spectrum auctioning; First MVNO licence issuedFirst MVNO licence issued
20072007One additional licence for CDMA 2000 issuedOne additional licence for CDMA 2000 issued
NowNow152% subscriber penetration rate152% subscriber penetration rate
Near futureNear futureSeveral licences for broadband wireless access to be Several licences for broadband wireless access to be issued through spectrum auctioningissued through spectrum auctioning
Liberalisation in Mobile Network Liberalisation in Mobile Network and Servicesand Services
All liberalisation policies for fixed All liberalisation policies for fixed network applynetwork applyNatural limitation on number of Natural limitation on number of licensees due to limited availability of licensees due to limited availability of spectrumspectrumSpectrum auction Spectrum auction -- to ensure open, to ensure open, fair and efficient use of spectrumfair and efficient use of spectrumSpectrum trading to be consideredSpectrum trading to be considered
Cellular TelephonesCellular Telephones
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
CellularTelephones
Num
ber o
f Sub
scrib
ers
Internet Access ServiceInternet Access Service
Open to full competition since Open to full competition since launched in 1990launched in 1990’’ssNo/Low market entry barrier No/Low market entry barrier Low licence fee (HK $750 per year)Low licence fee (HK $750 per year)LightLight--handed regulationshanded regulations
Number of Licensed Internet Number of Licensed Internet Service ProvidersService Providers
0
50
100
150
200
250
300
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Licensees
Internet Traffic VolumeInternet Traffic Volume(Customer Access via Broadband Networks)(Customer Access via Broadband Networks)
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
97 98 99 00 01 02 03 04 05 06 07
viaBroadband
Tera
bits
All Sectors Now Open to All Sectors Now Open to CompetitionCompetition
Paging services Paging services –– since 1970since 1970’’ssValueValue--added services added services –– 19851985Mobile phone networks and Mobile phone networks and services services –– 19851985Local fixed networks and services Local fixed networks and services ––19951995External services External services –– 19991999External facilities External facilities –– 20002000
252252248248226226230230217217213213External telecom External telecom services operatorsservices operators
242421212020191918181818CableCable--based external based external fixed carriersfixed carriers
666666554455SatelliteSatellite--based external based external fixed carriersfixed carriers
111111112222WirelessWireless--based fixed based fixed carrierscarriers
101010101010999977WirelineWireline--based fixed based fixed carrierscarriers
200720072006200620052005200420042003200320022002
Liberalisation Benefited HKCLiberalisation Benefited HKC’’s s EconomyEconomy
Consolidated Hong KongConsolidated Hong Kong’’s position as a s position as a telecommunications hub in the Asiatelecommunications hub in the Asia--Pacific Pacific RegionRegionHigh quality, low price services enhanced High quality, low price services enhanced competitive advantages of other sectorscompetitive advantages of other sectorsReduced cost of telecommunications to Reduced cost of telecommunications to business and residential consumersbusiness and residential consumersCompetition drove service innovation, Competition drove service innovation, which in turn enhanced productivity which in turn enhanced productivity (increase in capacity, decrease in unit cost) (increase in capacity, decrease in unit cost) Facilitated the rollout of information Facilitated the rollout of information infrastructure in Hong Konginfrastructure in Hong Kong
Fixed Line TariffsFixed Line TariffsMonthly subscriptionMonthly subscription
0
20
40
60
80
100
120
140
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Residential
Business
3
Hon
g Ko
ng D
olla
r
Mobile Services Tariffs (PreMobile Services Tariffs (Pre--paid)paid)Local call (peak vs offLocal call (peak vs off--peak rate)peak rate)
0
2
4
6
8
10
12
14
16
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
3-min.localcall (peakrate)3-min.localcall (off peakrate)
Hon
g Ko
ng D
olla
r
Total Telecom Services RevenueTotal Telecom Services Revenue
0
10,000
20,000
30,000
40,000
50,000
60,000
93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07
Mill
ion
in H
K $
FullFull--time telecommunication stafftime telecommunication staff
05000
10000150002000025000300003500040000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
staf f
GDP and Services contributionGDP and Services contribution
0
5,000
10,000
15,000
20,000
25,000
30,000
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
GDP
US
$
91.391.391.391.390.690.689.989.989.289.288.388.387.387.386.586.586.186.185.785.785.985.985.285.284.784.784.284.282.382.3%%
070706060505040403030202010100009999989897979696959594949393YearYear
Service contribution :
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