Hong Kong Issues Consultation On New IP Telephony Licence

by Mary Swire, Tax-News.com, Hong Kong

26 August 2005

Hong Kong's Office of the Telecommunications Authority (OFTA) has issued a consultation paper to solicit public views on the licensing conditions and licence fee structure for the creation of a new Services-Based Operator (SBO) Licence for the provision of Internet Protocol Telephony Services.

The proposed SBO Licence is to implement the regulatory framework for IP telephony services as set out in the Statement by the Telecommunications Authority (TA) issued on June 20, 2005. Under the proposal, the SBO Licence will be a services-based licence operated under a two-class licensing regime.

"Many incumbent carriers have already grasped the business opportunities by providing an array of innovative IP telephony services for consumers' choices under the existing Fixed Telecommunications Network Services (FTNS) Licence/Fixed Carrier Licence. The establishment of the IP telephony regulatory regime will further enhance the market competition by enabling service-based operators to enter into the market. This will not only induce investments but will also benefit consumers as a whole," a spokesman for OFTA said.

The scope of services that the SBO licensees are allowed to operate includes Class 1 services (services that have all the attributes of conventional telephone services) and Class 2 services (services that do not have all the attributes of conventional telephone services), as well as other telecommunications services such as Internet services, international value-added network services, external telecommunications services, etc.

"Because the SBO Licence is a services-based licence, the licensees will not be granted the facilities-based rights that are related to building network infrastructure such as opening roads. As such, in order to ensure that they can roll out services smoothly, IP telephony service providers should make commercial arrangements with fixed-network operators for hosting connections," the spokesman continued.

"Like other services-based licences, the proposed SBO Licence is valid for one year, and is renewable on an annual basis. A licence fee structure comprising fixed and variable fees on the cost-recovery basis is proposed. The SBO licensees are required to pay an annual fixed fee of $90,000 if Class 1 services are provided, or $25,000 if only Class 2 services are provided, and an annual fee of $7 for each number of telephone numbers in the numbering blocks to be assigned by the TA," the spokesman added.

"It is expected the first SBO Licence will be issued in early 2006 after the confirmation of the licence conditions," the spokesman said.

In regard to the special characteristics of the IP telephony services, the new regulatory framework also covers measures for consumer protection. They include requiring SBO licensees to provide back-up power supply to the IP telephony equipment for use by "life-line" users if the service is to be sold to these users, and free access to emergency services if the IP telephony services use Hong Kong telephone numbers.

Interested parties are invited to submit comments on the licensing conditions and fee structure of the SBO Licence by October 3, 2005.

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