The prior approval requirement on PCCW-HKT Telephone's prices will be lifted through the issue of a new fixed carrier licence. The Office of the Telecommunications Authority said today the new regulatory approach can secure competition in fixed telephony services.

Under the new licence, PCCW-HKT does not have to get its prices approved by the authority, including moves to offer discounts and other benefits in response to price competition.

The new licence will be effective once the company accepts it in exchange for the existing fixed telecommunications network service licence. Two applications PCCW-HKT made to declare non-dominance in business and residential direct exchange line services will become redundant upon the surrender of the company's existing licence.

The authority said other fixed-telecommunications network service and fixed-carrier licensees will also be able to exchange their existing licences for new ones with similar conditions as applicable.

Market deregulation timely

The authority stressed market deregulation should be proportionate and timely, and believes the decision will be conducive to further development on the telecoms industry led by market forces, and will benefit consumers.

When the local telecoms markets were deregulated 10 years ago, it was necessary to impose more stringent price regulation 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.

Since 1995, however, fixed telephony competition has become more firmly established, not only from the new fixed line operators but potentially from other sources, such as mobile phone services and new Internet Protocol phone services which have been launched commercially.

The prior approval requirement has become disproportionate in the current market situation. It is a fundamental principle that the level of regulation should be adjusted to be commensurate with the effectiveness of market competition.

New licence best

After consulting the industry, the authority concluded that the best way is to implement the change through issuing a new licence to PCCW-HKT.

In response to a consultation paper issued on October 8, in relation to the subject, the industry in general concurred the market had moved on since 1995, the level of regulation should stay proportionate, and ex-post regulation reflects the international best practice.

They also recognised replacing PCCW-HKT's licence instead of declaring PCCW-HKT non-dominant allowed regulatory measures to be imposed on a proportionate rather than an 'all-or-nothing' basis.

The authority has duly considered some useful comments on the implementation details, in particular, it has decided to maintain ex-ante regulation on the existing interconnection tariffs of PCCW-HKT so as not to disturb the status quo with respect to interconnection arrangements.

Sanctions thwart anti-competitive conduct

In response to concerns over the effectiveness of ex-post regulation against potential anti-competitive conduct, particularly in relation to bundling and price discrimination, the authority said sanctions of anti-competitive conduct have long been in place under the Telecommunications Ordinance, and the criteria does not change after the implementation of ex-post regulation.

The authority pledged to continue to devote resources to detecting and acting against anti-competitive conduct in a timely manner.

Under the new licence, the authority's access to information for investigation purposes has been enhanced. In addition, PCCW-HKT must notify its actual prices to the authority one day in advance so they can be published, if it is in the public interest.