Hong Kong's telecommunications market is one of the most advanced, dynamic and competitive in the world. At present, there are 38 different paging companies, four licensed CT2 operators, four cellular operators, four fixed line service providers and there are 28 licensed Internet service providers.
Penetration rates for fixed line and mobile telecommunications systems are among the highest in the world with over 3.1 million phone lines installed, over four million telephone sets in use and over 500,000 cellular phone and 156,000 CT2 subscribers (as of May 1995).
OFTA
On July 1, 1993, the Office of the Telecommunications Authority (OFTA) headed up by Alex Arena, the territory's first Director General of Telecommunications was established. OFTA was handed a charter to oversee:
- the economic and technical regulation of Hong Kong's telecommunication sector
- the management of the use of the radio spectrum
- the approval of radio equipment,
- the processing of licensing applications (radio, telecommunications services, radio dealers, satellite television, ship station among others) and
- the investigation of radio interference
- Internet traffic comes under its jurisdiction
OFTA also was given an advisory role to government with regards to telecommunications matters and charged with the responsibility for monitoring the technical standards of radio and television broadcasts. Soon after its formation, OFTA initiated a thorough review the overall state of mobile and wireless communications in Hong Kong. While charged with protecting Hongkong Telecom's monopolies (Hongkong Telecom has satellite uplink/downlink rights and its monopoly on international telecommunications traffic is valid until 2006) OFTA also has maintained a policy of encouraging competition in services that do not impose on Hongkong Telecom's franchise. Among its more important initiatives has been the licensing of new fixed line and wireless mobile service providers.
Fixed Line Services
One of OFTA's most profound and important initiatives was the introduction of competition in fixed line telecommunications services resulting in the cessation of Hongkong Telecom's 100-year monopoly on fixed line domestic services on July 1, 1995 However Hongkong Telecom's new competition, Hutchison Communications, Wharf's New T&T and New World Telephone, had little tangible to offer on July 1st aside from advertisements and promotions for new services.
New World Telephone, which is 80 per cent owned by New World Development, one of the territory's largest property companies, and INFA Telecom Asia Ltd began services on July 1, 1995. Longer term, its strategy will be to push value-added services such as centrex, remote switchboard operation, personal numbering and a single number service hotline.
New T&T stated it would first offer fixed line services along Mass Transit Railway (MTR) stations in October and launching residential services early next year. The company's strategy will be offer voice and data services at rates ten per cent below existing prices for local and long distance services.
Hutchison announced that due to deadlocks in negotiating interconnection and line sharing arrangements with Hongkong Telecom, it would not begin active recruitment of fixed line customers until the last quarter of 1995. Unlike its rivals, Hutchison already offers or will offer CT2, GSM and CDMA cellular and paging services and therefore can offer its clients a single billing arrangement for all these telecommunications services. Plus as the leading pager and CT2 company in Hong Kong and the second largest cellular provider, it has a vast base of existing subscribers to tap.
All three of the new fixed line providers have talked about new types of services, including Personal Number' -- providing subscribers a single phone number for all their different telecommunications services and new service niches such as home banking and home shopping.
Theoretically, with no installed infrastructure to worry about, the new players can technologically bypass Hongkong Telecom. However the amount of investment all three will have to undertake is massive. New World Telephone has publicly stated it will invest HK$2 billion over the next three years while rival New T&T expects to inject over HK$6 billion in its operations over the next decade. Hongkong Telecom has the advantages of being the incumbent player, the largest mobile subscriber base in the territory, a monopoly on satellite uplink services, a substantial financial base however, and also an international gateway monopoly that it retains until 2006. The company has additionally upgraded its infrastructure to full digital switching, added high bandwidth fiber lines, streamlined its operations announcing staff cuts earlier this year and preempted its rivals in offering a personal number service. It also has begun pilot runs of video on demand service, the precursor to a range of interactive services that will include home banking and home shopping.
Part of the reason for the newcomers' slow start has been the problem of line interconnection. In order for the four providers to interconnect seamlessly with each others' networks, calls will be coordinated by a Caller Line Identification (CLI) numbering scheme which will encode information about the caller such as the number, date, time, duration and routing. The aim of the CLI scheme is to provide an equitable means of distributing revenue among the four fixed line franchises but it also makes tracing of calls faster and can allow call recipients to know where an incoming call is coming from. As of June, Hongkong Telecom had implemented CLI in the majority of its exchanges. However talks between Hongkong Telecom and the new providers dragged on for months prompting the Office of the Telecommunications Authority to issue a series of guidelines.
Video on Demand (VOD)
Hongkong Telecom began a pilot for a Video on Demand system in 1994 with IBM. On March 3, 1995, it announced that it received OFTA's approval to initiate a six-month commercial trial for VOD. OFTA stipulated that other potential VOD operators be allowed to use the telephone company's network for similar trials.
Hongkong Telecommunications Ltd. has narrowed it choice of technological platform providers for interactive multimedia services and short-listed AT&T, IBM, NEC, NPB Partners and Iwatani International as possible partners. Hongkong Telecom is currently testing a video on demand service in 400 sites around the territory and plans to begin offering interactive multimedia services in 1996. It plans to select the final winner by the end of this month.
The successful bidder will help Telecom develop interactive home shopping, home banking and interactive network games. Electronic Payment Services (EPSCO) was formed by a group of some 30 banks to replace physical paper transactions with electronic ones. EPSCO's network has been operational for a decade and users can now, through its network, pay for purchases or settle bills electronically. The network boasts average usage rates of over three-quarters of a million transactions daily. In addition, banks in Hong Kong not only boast a superb Automated Teller Machine infrastructure but also have introduced several network-based services such as banking by phone using interactive voice response technology, automated on-line passbook updates and account balance inquiry terminals. Not only have U.S. firms done well in the Automated Teller Machine market, NCR being the unquestioned leader, networking firms such as IDEA have also benefited by selling equipment to support these services. Electronic Data Interchange (EDI) SPEDI (Shared Project for EDI) was a jointly funded HK$39 million initiative by the government and Tradelink consortium, set up in March 1990 to develop a detailed business proposal and technical specification for a selected range of EDI services and facilities. IBM had initially been signed on as primary contractor for the EDI project. However in 1994 this link was broken and Hewlett-Packard superseded IBM as lead contractor.
Next month: Part 2 - Wireless Service
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