PCCW argues that the Hong Kong Broadband Network VoIP service offered by City Telecom represents a violation of the firm's fixed-line telecom license, which contains a requirement that telecoms companies must invest in the development of their networks or lease capacity from their competitors.

The larger firm has taken exception to the fact that City Telecom does not pay it a fee for the use of its Netvigator service, via which HKBN users connect. However, HKBN (with OFTA's support) has countered that no such fee should be paid because Netvigator customers have already paid for their broadband connection.

Speaking to the AFX news service last week, an OFTA spokeswoman confirmed the regulator's position, announcing that:

"Under the existing telecommunications ordinance and license conditions of telecom providers, VoIP services are allowed and legal. We will contest PCCW's court action according to legal procedures."

However, she would not elaborate on OFTA's planned response to the PCCW challenge, explaining that the case is already pending in the courts.