Genuine Choice of Fixed Network Operators Demonstrates Success of the Type II Interconnection Policy
The Office of the Telecommunications Authority (OFTA) today (3 July 2008) concluded that the objectives of introducing the mandatory Type II interconnection policy in 1995 when the local fixed market was first liberalized, and its subsequent phased withdrawal beginning in July 2004, have been fully achieved. The latest figure indicates that over 81% of the Hong Kong households enjoy a genuine choice of at least two fixed network operators, demonstrating that facility-based competition has developed in the fixed market successfully.
After a comprehensive review, the Government announced in July 2004 that the mandatory Type II interconnection policy would be fully withdrawn as from 1 July 2008. The Telecommunications Authority (TA) today published a statement to update the latest market development and set out the issues to be followed up after the full withdrawal.
"We are pleased to report that out of the total of 2.5 million households in Hong Kong, 2.03 million, or 81% of, households are provided with at least two customer access networks while 1.46 million, or 58% of, households are provided with at least three customer access networks.," the spokesperson of OFTA said.
"When the decision to withdraw the Type II interconnection policy was first announced in July 2004, only about 53% of our households were provided with two customer access networks. Over the years, there is a significant increase in the number of such households. This testifies to the success of our policy on facility-based competition, and the continual effort made by fixed network operators in investing in the infrastructure," the spokesperson continued.
Hong Kong has been in the leading position in the world with regard to the development of telecommunications infrastructure and services. According to a recent report published by the FTTH Councils of Asia Pacific, Europe and North America, with a household penetration of 23.4%, Hong Kong ranks second in the world in the penetration of fibre-to-the-home (FTTH) and fibre-to-the-building (FTTB) plus local area networks.
"Although the mandatory Type II interconnection policy is fully withdrawn, the fixed network operators may still arrange for Type II interconnection based on commercial negotiation. The TA will continue to facilitate the rollout of network by fixed network operators," the spokesperson concluded.
Type II interconnection, a regulatory tool widely deployed in the world, requires the incumbent fixed network operator to open up its copper-based customer access network to new entrants so that the latter may provide competing service to customers in the start-up phase when their own self-built customer access networks are not as extensive as the incumbent's.
In Hong Kong, mandatory Type II interconnection was introduced in 1995 when the local fixed market was liberalized. It was applied to the three fixed network operators that entered the market in 1995, namely Hutchison Global Communications Limited, Wharf T&T Limited and New World Telecommunications Limited, with the incumbent customer access network of PCCW-HKT Telephone Limited mandated to provide interconnection on request.
As a result of a comprehensive review, the Government announced on 6 July 2004 that the regulation for mandatory Type II interconnection at telephone exchange level would be gradually withdrawn, on a per building basis, starting from those buildings already connected to at least two self-built customer access networks and be fully withdrawn by end-June 2008, except for buildings meeting the "essential facilities" criterion.
The TA issued a statement on 3 July 2008 giving his assessment on the latest situation and setting out issues to be followed up after the full withdrawal. The TA Statement can be downloaded from OFTA's web site at http://www.ofta.gov.hk .
The report published by the FTTH Councils of Asia-Pacific, Europe and North America is available at http://www.ftthcouncil.org/?t=282.
Office of the Telecommunications Authority
3 July 2008