Submission on Review of the Regulatory Framework For Universal Service Arrangements

1. The Consumer Council (CC) welcomes the Government's proactive step in reviewing the scope, funding mechanism and a number of specific concerns regarding the universal services arrangements to take account of the rapid development of the telecommunications services market in Hong Kong.
    
2. Universal service arrangements affect consumers at large. CC considers telecommunications service an essential service for everyone so it is important to ensure that affordable basic telephone services will continue to be available to all people in all areas of Hong Kong. As such, CC agrees with the Telecommunications Authority (TA) that the universal service arrangements should be maintained.
    
3. Some concerns identified by the TA cover such areas as costing and administration matters which are relevant to the implementation of the arrangements but are related to industry and regulatory practices. In making this submission, CC would like to focus on the following issues relevant to consumers for the Government to consider when formulating the new universal service arrangements: 
   1. Scope of universal service;
   2. Exclusion of areas with alternative fixed network coverage from the universal service obligation (USO) scheme;
   3. Competitive provision of universal services; and
   4. Funding arrangements for USO.

Scope of universal services

4. CC believes that in the foreseeable future, the voice services will remain a basic utility essential for everyone so the telephony services ("public switched telephone service") should remain as part of the Basic Service.
    
5. On services to be covered by Basic Service, CC notes that it is stated in the Government's Digital 21 Strategy that " the Government undertakes to lead discussion involving ICT¹industry and the community ... to move towards an inclusive, knowledge-based society. ... Our vision is to make broadband Internet access available to all citizens in Hong Kong, regardless of whether they are at home or on the move using mobile facilities ... to ensure affordable access to Internet as a utility service available to every Hong Kong resident. "
    
6. CC believes that extending the scope of universal service to cover broadband Internet access services may be more in line with the expectation of the general public and the strategy of the government and invites the government to consider its inclusion.
    
7. CC urges the Government to continue the provision of helplines in Country Park trails for making emergency calls free of charge, particularly in areas without mobile phone coverage. CC also considers it important to retain payphone services as alternative services for consumers particular in emergence situations. CC supports introduction of a mechanism for the TA to direct additions to, or removal from, the list of payphones eligible for USC if circumstances justify, after consultation with the community. 
    
8. CC considers that if the universal service provider is receiving contribution to fund USO, it seems logical that any revenue generated from advertisements placed on its public payphone kiosks should be contributed back to the USO fund and be included as relevant revenue in calculating USC.
    
9. Since directory information is now available through other medium, full directory enquiry services may no longer be an essential attribute of conventional telephone services. CC suggests that consideration may be given to requiring all network operators, mobile and fixed, to provide free directory enquiry limited to public and government services, non-government organizations such as social service agencies, public utilities and essential services such as banking services and public transport services.
    
10. CC agrees with the TA that weather warning services could be removed from the scope of universal service in future.

Competitive Provision of Universal Services

11. CC supports the principle that universal service should be provided by the most cost-effective operator irrespective of whether they are mobile or fixed operators. CC considers that competitive provision should be introduced to the universal service arrangements such that the universal service will be provided by operators for different areas that can provide the service in the most cost-effective manner.

Exclusion of areas with alternative fixed network coverage from the USO

12. Accessibility to services is likely to be improved as competition develops. CC supports the TA's preliminary view that areas or buildings with alternative fixed network coverage should be excluded from the USO scheme. Likewise, uneconomic payphones in the vicinity of locations where competitive or alternative service is offered could be excluded from the USO scheme, subject to approval by th TA in each circumstance.

Funding Arrangements of USO

13. CC notes that existing funding of the USO is such that operators and service providers providing external telecommunications services (ETS, essentially IDD services) make USC on the basis of external traffic minutes handled by them. CC is aware that IP Telephony traffic is increasingly bypassing the circuit-switched network with the advent of IP Telephony provided over broadband connections. As such, it is appropriate to review the current USC mechanism based on IDD minutes delivered through the circuit-switched network.
     
14. The status quo option (Option 1) for which sharing is based on IDD traffic minutes through circuit-switched networks has become unsustainable in face of advancement in IP telephony. Under Option 2, sharing will be on the basis of eligible revenue. This entails a detailed procedure for reporting and auditing of the eligible revenue which will be administratively burdensome and not cost effective. In view of the important role assumed by mobile telecommunications services in Hong Kong, it seems more equitable for the mobile telecommunications operators to share in the contribution towards provision of the universal services with fixed network operators.
     
15. Considering the tight number resource, CC believes that option 4 may be more effective to prompt operators to make better utilization of the number resource and take up a fair share of the obligation, i.e. USC sharing should be based on numbers allocated to all fixed and mobile services operators.

Notes:

1. ICT is the term refers to all technologies and applications that involve information processing and/or exchange over communication networks, including the Internet.