The prior approval requirement on PCCW-HKT telephone prices under its licence to operate residential and business fixed line telephone services could be lifted.

The Office of the Telecommunications Authority makes the proposal in a consultation paper released today.

It means the company will not have to get its prices approved by the authority, including moves to offer discounts and other benefits in response to price competition from the 10 other active fixed line providers.

The authority is confident the proposal will enhance competition of fixed telephony services.

It said when Hong Kong's telecommunications markets were deregulated nine years ago, it was necessary to impose more stringent price regulations on PCCW-HKT because the company was then in a much stronger market position to thwart the development of competition before the new fixed line network entrants could establish a foothold.

However, fixed telephony competition has become more firmly established since 1995, not only from the new fixed line operators but also from other sources, such as mobile phone services and new broadband facilities.

Broadband phone services have been launched commercially. The prior approval requirement becomes disproportionate in the current market situation.

The authority said it is a fundamental principle that the level of regulation should be adjusted to be commensurate with the effectiveness of market competition. Hence, it seeks industry views on the best way to implement a change in the supervision of PCCW-HKT's prices.

New fixed carrier licence proposed

The specific proposal put forward for comment is to lift the prior approval requirement on PCCW-HKT's prices, by issuing a new fixed carrier licence without the price approval conditions.

Using this approach, it is not necessary for the authority to make a determination on the two applications received from PCCW-HKT for it to be declared non-dominant.

The authority has identified legal concerns with making a finding of the applications. A finding on the applications now, under the licence conditions, could be a barrier to the application of the abuse of dominance provisions of the Telecommunications Ordinance. Those rules which can penalise "predatory pricing" must continue to apply to PCCW-HKT, especially if there is no prior approval of its prices.

The paper includes the form of a new fixed carrier licence to give effect to the alternative method. Affected parties, being the other fixed network operators, have six weeks to respond to the terms of this new form of licence and the related issues identified in the paper.

The authority proposes to maintain some publication and prior notification requirements on PCCW-HKT's prices. In particular, it may publish PCCW-HKT's prices on residential services to enhance transparency which in turn will better protect consumer interests.

Industry urged to examine proposal with open mind

To facilitate the information provision process and to avoid unnecessary delays, which is crucial for the effectiveness of an ex-post regulatory regime under the pro-competition provisions of the Telecommunications Ordinance, PCCW-HKT will be asked to furnish current cost accounting information.

The authority said market deregulation should be proportionate and timely, and believe that the proposal will be conducive to further development on the telecommunications industry led by market forces, and will benefit consumers.

It urged the industry, especially PCCW-HKT's competitors, to examine the suggestions with an open mind as the momentum for change is clear.