ITU Session 15 OFTA Regulation of Interconnection in Hong Kong 110802

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Regulation on Interconnection and Related Issues:

What have been done for facilitating convergence

and development of broadband Infrastructure

in Hong Kong?

Regulation on Interconnection and Related Issues:

What have been done for facilitating convergence

and development of broadband Infrastructure

in Hong Kong?

Office of the Telecommunications Authority

4 August 2011

2

AgendaAgendaAgendaAgenda

Hong Kong Market Overview

Background on Regulatory Guidance on

Interconnection

Fixed Mobile Convergence

Type II Interconnection

Registration Scheme for Buildings with

Optical Fibre-based Access Networks

Next Generation Network

Conclusion

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Interconnection






Conclusion

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Hong Kong Telecom Market at a Hong Kong Telecom Market at a

GlanceGlance

Hong Kong Telecom Market at a Hong Kong Telecom Market at a

GlanceGlance

Population: 7 millions; Households: 2.3 millions

No. of operators:Mobile service – Carrier: 5; MVNO: 10

Local fixed telephony service – Carrier: 17; services-based operator: 14

Internet service providers – Carrier: 17; services-based operator: 167

External fixed service: Carrier: 41; services-based operator: 269

Penetration rate: Mobile service: 196%

2.5G/3G subscribers: 100%

3G subscribers: 87%

Household fixed line: 103%

Household broadband: 84%

WiFi No. of providers: 30

No. of access points: >9,000

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Broadband Services in Hong Kong at Broadband Services in Hong Kong at

a Glancea Glance

Broadband Services in Hong Kong at Broadband Services in Hong Kong at

a Glancea Glance

Fixed Broadband ServicesFixed Broadband Services

FTTx, Ethernet, Cable Modem, xDSLFTTx, Ethernet, Cable Modem, xDSL

Speed ranges from a few Mbps to 1GbpsSpeed ranges from a few Mbps to 1Gbps

Tiered speed plansTiered speed plans

Mobile Broadband ServicesMobile Broadband Services

3G, HSPA, LTE3G, HSPA, LTE

Speed ranges from a few hundred kbps to 100MbpsSpeed ranges from a few hundred kbps to 100Mbps

Tiered speed plans and tiered usage plansTiered speed plans and tiered usage plans

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General Regulatory Approach in General Regulatory Approach in

Hong KongHong Kong

General Regulatory Approach in General Regulatory Approach in

Hong KongHong Kong

Pro-competition, pro-consumer and light-

handed regulatory approach

Both facility-based and service-based

competition are available

Technology neutral

Market fully liberalized, with no pre-set limit

on the number of licensees, subject to

availability of scarce resources, e.g. radio

spectrum

No foreign ownership restriction

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Interconnection






Conclusion

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Background on Regulatory Guidance Background on Regulatory Guidance

on Interconnectionon Interconnection



Competition was first introduced to the local fixed market in 1995, and the market was fully liberalised since 2003.

Legal basis for regulatory intervention in interconnection matters Licence Condition: Licensee shall interconnect with other

licensees and effect interconnection promptly, efficiently, and based on reasonable relevant costs

Section 36A of Telecommunications Ordinance: the Telecommunications Authority (TA) may determine terms and conditions of interconnection On a request of a party to the interconnection or if the TA

considers it is in the public interest to do so

The charges in a determination shall be based on the relevant costs attributable to interconnection

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A series of TA Statements issued in 1995 (and

revised in 2002) to provide regulatory guidance

on how to exercise his power under section 36A

Primarily cover interconnection between fixed

networks

TA Statement No. 4 on “Carrier-to-Carrier Relationship”

TA Statement No. 5 on “Exchange of Traffic between

Interconnected Networks”

TA Statement No. 6 on “ Interconnection Configuration and

Basic Underlying Principles”

TA Statement No. 7 on “ Carrier-to-Carrier Charging

Principles”

TA Statement No. 8 on “Point of Interconnection”

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According to TA Statement No.7 (revised in 2002)

Fixed-to-Fixed Interconnection Charge (FFIC) was subject to the “calling-party-network-pays” (CPNP) model

Fixed-to-Mobile Interconnection Charge (FMIC) was subject to the “mobile-party-network-pays” (MPNP) model (regulatory guidance withdrawn in April 2009)

There has been no regulatory guidance for Mobile-to-Mobile Interconnection Charge (MMIC)





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Interconnection






Conclusion

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FMC Regulatory Review in Hong Kong

1. Consultation Paper on Revision of Regulatory Regimes for Fixed-Mobile Convergence

2. Review of the Regulatory Framework for Fixed-Mobile Convergence in Hong Kong

3. Second Consultation Paper on Deregulation for Fixed-Mobile Convergence

4. Deregulation for Fixed-Mobile Convergence

5. Licensing Framework for Unified Carrier Licence

6. Interconnection and Related Competition Issues Statement No. 7 (Third Revision) "Carrier-to-Carrier Charging Principles" (for Fixed Carrier Interconnections)

7. TA Statement on Fixed Mobile Number Portability

September 2005

First FMC Consultation

(UCL)1

July 2006

Second FMC Consultation

(FMIC and others)3

1 August 2008

Introduced UCL5

27 April 2009

End of FMIC transition period6

FMIC is now determined

by commercial agreements

27 April 2007

FMC Statement4

Early 2006

Consultancy Study on FMC2

10 July 2010

Voluntary

Implementation

of FMNP7

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FMC Regulatory Review in Hong

Kong

• Main Conclusions for FMC review :

Deregulate Fixed Mobile Interconnection Charge

(FMIC)

Remove regulatory asymmetry on interconnection

between fixed and mobile carriers

Create Unified Carrier Licence (UCL)

Align licensing regime for fixed and mobile carriers

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Fixed-Mobile Interconnection

Charge (FMIC)

• “Mobile Party’s Network Pays” (MPNP)

arrangement

Introduced 20 years ago

Mobile services were regarded as premium services at

that time

Asymmetric regulatory treatment not conducive to FMC

M pays F

for termination

Mobile

Carrie

r (M)

Fixed

Carrie

r (F)

M pays F

for origination

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Fixed-Mobile Interconnection

Charge (FMIC)

• De-regulation of FMIC came into effect in April

2009

Withdraw regulatory guidance on FMIC based

on MPNP approach, with a 2-year transition

period

No replacement guidance, i.e. FMIC to be

determined by commercial agreement only

Agreements reached among major fixed and

mobile operators mostly based on Bill And Keep

(BAK) model

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Unified Carrier Licence (UCL)

Fixed Telecommunications

Network Service (FTNS) Licence

(from June 1995 to March 2001)

Fixed Carrier Licence (FCL)(from April 2001 to

August 2008)

Public Radiocommunications

Services (PRS) Licence

(from 1996 to 2001)

Mobile Carrier Licence (MCL)(from April 2001 to

August 2008)

Fixed services Mobile services

Unified

Carrier Licence

(UCL)(Since

August 2008)

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Unified Carrier Licence (UCL) Previously separate type of licences for fixed

carriers and mobile carriers

Difficult in the FMC environment to classify a

service as fixed or mobile, or a network as

fixed or mobile

Decided to create a UCL

For any fixed, mobile and/or converged services

Same licence period (15 years)

Harmonised licence fee structure

Harmonised set of licence conditions

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The following licence condition was introduced to UCL to explicitly mention the “Any-to-Any Connectivity” requirement

The licensee shall interconnect its service and network with the services and networks of other interconnecting parties to ensure any-to-any connectivity, i.e. any customer in any one network can have access to any other customer in any interconnecting network and, where directed by the Authority, to any service offered in any interconnecting network.

The majority of fixed and mobile operators have their licences replaced by UCL incorporating the above licence condition

Unified Carrier Licence (UCL)

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Interconnection






Conclusion

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Gateway

POI

Network 2Network 1

Type I InterconnectionType I InterconnectionType I InterconnectionType I Interconnection

Interconnection between network gateways

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互連

SW

MDF

Type II InterconnectionType II InterconnectionType II InterconnectionType II InterconnectionInterconnection at points in the local loop

(equivalent to “local loop unbundling” in other administrations)

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When the local fixed market was first liberalised in 1995, Type II interconnection was considered as the most effective way to allow new entrants to provide alternative choices to consumers before their networks reached the customers

In 2000, Type II interconnection was extended to copper-based broadband network (but not for fibre-based network)

To encourage facility-based competition, new entrants after 2000 were not entitled as of right to obtain Type II interconnection in the form of co-location at exchanges and access to local loops

Type II InterconnectionType II InterconnectionType II InterconnectionType II Interconnection

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Two rounds of public consultation conducted in 2003 to review Type II interconnection

In July 2004, it was decided to fully withdraw mandatory Type II interconnection

at the exchange level (Point A) by 30 June 2008 in an orderly manner

to maintain mandatory interconnection at street level (Point B) and in-building level (Point C)

Buildings meeting the “essential facilities” criterion that justifies mandatory interconnection in the consumer interest are exempt from the withdrawal arrangement to provide safety net in buildings in which it is

technically not feasible or economically not viable for an operator to roll out its customer access network

Type II InterconnectionType II InterconnectionType II InterconnectionType II Interconnection

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Policy considerations in 2004

Transitional arrangement up to June 2008

Buildings connected with at least two self-built customer access networks were subject to a 2-year transition period for withdrawal of mandatory Type II interconnection to ensure no immediate disruption of choice and service to consumers

Full withdrawal after June 2008

To encourage operators to invest in high bandwidth and advanced network infrastructure

To promote market competition and enhance consumer choice

Consumers will ultimately benefit from greater choice of services delivered through advanced infrastructure capable of supporting different forms of innovative services

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Impact Assessment in 2004

2010 : 86%

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Market Outcome

Number of households reached by alternative self-built fixed networks increased from 53% in 2004 to 86% in March 2010

Number of telephone lines served by Type II interconnection dropped by 70% from 438,000 in 2004 to 134,000 in March 2010

Broadband penetration to 84% of households

More innovative and advanced services launchedFaster and more affordable broadband services such as FTTH / FTTB (up to 1 Gbps)

Triple-play / quadruple-play services

Policy goals behind the withdrawal of mandatory Type II interconnection have been achieved

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Interconnection






Conclusion

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A voluntary scheme was introduced in November 2010 to provide information to the public on fibre-based access available to individual residential buildings

Classification of buildingsStar: Building installed with at least one FTTH network

Quality: Building installed with at least one FTTB network

OFTA is maintaining a register for this purpose. In June 2011, around 10,200 buildings have been registered.

For registered buildings, the building management offices can display the label inside the buildings and printing materials related to the buildings

Registration Scheme for Buildings with Registration Scheme for Buildings with

Optical FibreOptical Fibre--based Access Networks based Access Networks


Optical FibreOptical Fibre--based Access Networks based Access Networks

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Some fixed network operators find the

Scheme useful in facilitating them to gain

access to buildings

The Scheme may encourage further

investment by network operators, leading to a

wider coverage and faster rollout of fibre-

based access networks

Next steps

Whether to extend to non-residential buildings?

Whether to disclose the name of operator(s)?


Optical FibreOptical Fibre--based Access Networksbased Access Networks


Optical FibreOptical Fibre--based Access Networksbased Access Networks

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Interconnection






Conclusion

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Migration from PSTN to NGNMigration from PSTN to NGN Traditional public switched telephone network (PSTN)

provides “Single Network, Single Service”

Next-generation network (NGN) supports “Single Network,

Multiple Services” based on Internet Protocol (IP) technology

Advent of NGN is changing the market landscape and may

create new bottlenecks

In the migration to NGN, the regulator needs to answer the

following questions:

How to preserve incentives for efficient investment?

How to safeguard long-term benefits of consumers?

How to maintain a healthy level of competition in the market?

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NGN Working Group &NGN Working Group &

NGN Consultancy StudyNGN Consultancy Study

NGN Working Group &NGN Working Group &

NGN Consultancy StudyNGN Consultancy Study

OFTA has set up a NGN Working Group in 2009 to discuss issues pertaining to technical, economical and regulatory aspects of NGN

NGN Working Group is chaired by OFTA, with members coming from operators and service providers, industry associations, users groups, academics/specialists, etc.

To move forward, there is a need to commission an independent consultant to conduct a holistic review and make recommendations in relation to NGN

OFTA has commissioned a consultant in May 2011 to study the implications of development of NGN on the regulation of telecom services in Hong Kong

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Scope of NGN Consultancy StudyScope of NGN Consultancy StudyScope of NGN Consultancy StudyScope of NGN Consultancy Study

• (1) Whether there is any need to revise the

following regulatory arrangements for

telecommunications services in Hong Kong -Interconnection regime and quality of service

Interconnection charging

Universal service obligation

Emergency calls services

Standardisation and interoperability

Numbering, naming and addressing

Network security

Network neutrality

Release of radio spectrum

Use of Government land for telephone exchanges and other

facilities

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Interconnection Issues to be Examined Interconnection Issues to be Examined Interconnection Issues to be Examined Interconnection Issues to be Examined

Whether existing principles on interconnection developed in the PSTN era still remain applicable

Whether any QoS standards should be prescribed by the TA for services conveyed over an NGN, and between interconnecting NGNs

Whether new interconnection charging regime(s) may be required for the interconnection between a PSTN and an NGN, and for the interconnection between NGNs

What charging principles and costing methodologies should be applied for interconnection at different layers of NGN, and for interconnection of services with different grades of QoS

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• (2) For each of the regulatory arrangements in (1),

if there is a need to revise -How to revise?

What are the possible options?

What are the benefits and impacts of each individual option?

Effective regulation, consumer interests, operator interests,

competition, investment incentives, innovation, ICT sector

development & its ecosystem, social benefits, costs of

implementation, etc.

What is the recommended option?

Relevant issues and approach for implementation, etc.

When to revise?

Timetable, transitional arrangements, etc.

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• (3) For each of the regulatory arrangements in (1), if there is no need to revise -

How can the existing arrangement be sustainable and enforceable?

How can the existing arrangement continue to safeguard consumer interests and ensure that consumers will not be worse off as a result of NGN development?

How can the existing arrangement maintain a level playing field for all market players (including existing players, new entrants, facilities-based operators, services-based operators, etc.)?

How can the existing regulatory arrangement facilitate the development of NGN, as well as the migration of traditional PSTN to NGN, in Hong Kong?

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Interconnection






Conclusion

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ConclusionConclusionConclusionConclusion

Aligned with the Government’s pro-competition and pro-consumer telecommunications policies

Consistent with the light-handed and market-driven regulatory approach Withdraw ex-ante regulation if the market can deliver the policy

objectives

Retain the necessary regulatory tools: any-to-any connectivity, TA’s power to determine terms and conditions for interconnection

Fixed Mobile Convergence Deregulation and removal of regulatory asymmetry

Type II Interconnection Deregulation to encourage advanced infrastructure

Building Registration

Scheme

Facilitation and promotion of fibre-based access to

buildings

Next Generation Network Review with objectives to remove regulatory barriers

(if any), facilitate NGN development and safeguard

consumer interests

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~ Thank You ~

Helen Lai

Principal Regulatory Affairs Manager

Office of Telecommunications Authority

Hong Kong

Email: [email protected]

Documents

ITU Session 15 OFTA Regulation of Interconnection in Hong Kong 110802