I OVERVIEW

Hong Kong has one of the most developed telecommunications and internet services markets in the world. Its legal and regulatory system promotes competitiveness while at the same time striving to enhance and facilitate business investment.

In terms of telecommunications, there are in total four mobile network operators,2 25 local fixed network operators3 and 264 external fixed telecommunications service providers4 serving Hong Kong’s population of slightly over 7.32 million in a land area of approximately 1,000 square kilometres.5 The residential fixed line penetration rate is 94.99 per cent6 and the mobile subscriber penetration rate is 227.8 per cent.7 The competition for internet services is intense, with a total of 219 ISPs.8 The number of registered customer accounts with broadband access exceeds those with dial-up access by approximately 2.17 million, and the household broadband penetration rate is 84.7 per cent.9 According to OFCA, there are approximately 2.34 million subscribers to licensed domestic pay television services in Hong Kong,10 and there are, according to Nielsen Hong Kong, around 2.49 million households in Hong Kong.11 There are more than 43,000 public Wi-Fi access points in the city,12 and the numbers continue to grow. As these figures demonstrate, the use of telecommunications services is advanced and widespread in Hong Kong.

In terms of television broadcasting, Hong Kong is a peculiar place in that, despite the fact that there is no limit to the number of licences that can be granted, until 2015 there had only ever been two domestic free-to-air television programme service providers in Hong Kong for the past 30 years. Recently there have been some major changes in respect of domestic free-to-air television programme service providers. On 1 April 2015, the Chief Executive in Council granted a third domestic free-to-air television programme service licence to HK Television Entertainment Company (HKTVE), enabling HKTVE to provide free television services in Hong Kong using a fixed network as its transmission mode for 12 years. HKTVE commenced its service on 6 April 2016 with a Cantonese language general entertainment television channel, ViuTV. PCCW, HKTVE’s parent company, also operates an internet protocol television (IPTV) platform – Now TV – and a media streaming service Viu. Further, Asia Television Limited, one of the two original domestic free-to-air television service providers, ceased to be a domestic free-to-air television programme service licensee on 1 April 2016 following the expiry of its licence. On 31 May 2016, the government announced that the Chief Executive in Council had decided to grant a domestic free-to-air television programme service licence to Fantastic Television Limited (Fantastic TV). The licence will be valid from 31 May 2016 for 12 years until 30 May 2028, subject to a mid-term review around 2022. Fantastic TV is yet to launch its integrated Cantonese Channel and integrated English Channel. The number of licensees is therefore currently three. There are currently three domestic pay-TV service licensees (Hong Kong Cable Television Limited, PCCW Media Limited and TVB Network Vision Limited).

In addition to domestic free-to-air and domestic pay-TV service providers, there are two other main categories of television broadcasting licences: non-domestic television programme service licences (mainly satellite television services) and other licensable television programme service licences (mainly hotel room television services).

Domestic television licences (both free-to-air and pay) are granted and renewed by the Chief Executive in Council (with recommendations from the Communications Authority (CA)), while the CA issues and renews licences in the other two categories. Post-licensing, the responsibility for regulating compliance with the relevant rules and regulations and monitoring compliance and non-compliance rests mainly on the CA.

There are three providers of analogue sound broadcasting services.13 Of the three providers, one is funded by the government (and does not hold a sound broadcasting licence). Hong Kong’s close proximity to mainland China means it is not uncommon for radio signals from radio stations on mainland China to be picked up in Hong Kong. In March 2011, the government granted 12-year sound broadcasting licences to three providers for the provision of DAB services in Hong Kong. They are required under their licences to provide 24-hour DAB services within 18 months of the licences being granted and launched in stages, with a wide variety of programmes. On 7 November 2015, one of the licensees, Phoenix U Radio terminated its service. On 8 August 2016, another licensee, Digital Broadcasting Corporation Hong Kong Limited (DBC), which is the largest digital radio broadcaster in Hong Kong, announced its intention to return its operating licence to the government. In September 2016, another DAB service provider, Metro Broadcast Corporation, announced that it would return its DAB licence to the government citing that the development of DAB has been unsatisfactory.14 The government is reviewing the development of DAB in Hong Kong and a report is expected later this year.

The Chief Executive in Council is responsible for issuing sound broadcasting licences.

II REGULATION

i The regulators
The Telecommunications Authority (TA) and the Office of the Telecommunications Authority (OFTA)

Prior to 1 April 2012, the Hong Kong telecommunications industry was regulated by the TA through its executive arm, OFTA. OFTA advised and regulated the telecommunications industry with a view to formulating macro-supervisory policies, while at the same time supervised the licensing of telecommunications services providers (such as unified carriers, space station carriers and mobile virtual network operators). Its other roles included enforcing fair competition in the market, formulating, allocating and managing radio frequency spectrum and satellite coordination. OFTA was also responsible for supervising and overseeing the implementation and enforcement of measures against unsolicited electronic messages. OFTA also represented Hong Kong in the International Telecommunication Union and other international forums.

The Broadcasting Authority (BA) and the Television and Entertainment Licensing Authority (TELA)

Prior to 1 April 2012, the broadcasting industry in Hong Kong was regulated by the BA, an independent statutory body established under the Broadcasting Authority Ordinance15 comprising members appointed by the Chief Executive of Hong Kong. The BA’s responsibilities included handling licence applications and renewals, handling complaints, conducting enquiries, overseeing the enforcement of fair competition and levying sanctions on licensees who breached the laws, rules and regulations. It relied on the Commissioner of TELA to discharge its executive functions.

As the executive arm of the BA with regard to broadcasting regulation, TELA was mainly responsible for dealing with complaints against the contents of broadcasting programmes and complaints regarding anticompetitive behaviour, and for processing applications (new and renewals) for television programme service licences.

Further, as the regulatory agency responsible for the entertainment, film and newspapers industries, TELA also monitored publications, handled film censorship, and processed applications for other entertainment and gaming licences (such as amusement arcade licences and mahjong licences) and the registration of newspapers.

The CA and OFCA

In light of the continued blurring of the roles of the BA and the TA, on 1 April 2012, the Communications Authority Ordinance16 came into operation, and the CA was created as a unified regulator to service the broadcasting and telecommunications (including internet) industries. The functions of the BA and the TA were transferred to the CA. Like the TA before it, the CA operates through an executive arm, OFCA. OFCA is a combination of the broadcasting arm of TELA (other TELA functions were transferred to other government departments) and OFTA. The Office for Film, Newspaper and Article Administration under OFCA took over TELA’s previous functions in relation to film classification, control of obscene and indecent articles and newspaper registration, but the issuance of entertainment licences was transferred to the Home Affairs Department. The CA took over all powers and functions of the TA and the BA, and the TA and the BA were both dissolved on 1 April 2012.17

The major pieces of legislation administered by OFCA are:

  • a the Communications Authority Ordinance;
  • b the Telecommunications Ordinance;18
  • c the Unsolicited Electronic Messages Ordinance (UEMO);19
  • d the Broadcasting Ordinance;
  • e the Competition Ordinance;20
  • f the Broadcasting (Miscellaneous Provisions) Ordinance;21 and
  • g the Trade Descriptions Ordinance (TDO).22

The purpose of the Telecommunications Ordinance is to ‘make better provision for the licensing and control of telecommunications, telecommunications services and telecommunications apparatus and equipment’. For this purpose, the Telecommunications Ordinance contains provisions regulating, inter alia, licensing, preventing some anticompetitive practices and imposing some restrictions on ownership.

The Legislative Council enacted the Competition Ordinance in June 2012, giving the CA concurrent jurisdiction with the newly established Competition Commission with regard to the investigation and bringing of enforcement proceedings in respect of competition cases in the communications sector before the Competition Tribunal (the tribunal established within the judiciary to hear and adjudicate competition cases). The Competition Ordinance fully came into force on 14 December 2015 and the competition provisions in the Broadcasting and Telecommunications Ordinances were repealed simultaneously.

The UEMO ‘provide[s] for the regulation of the sending of unsolicited electronic messages and for connected purposes’ and was adopted in 2007. All forms of commercial electronic messages with a ‘Hong Kong link’ are regulated so as to monitor and regulate ‘professional spamming activities’. Users of telecommunications services in Hong Kong now have an option to register on facsimile, short message and pre-recorded message do-not-call registers. As of June 2016,23 more than 2.8 million numbers have been registered. However, the effectiveness of this legislation is sometimes queried, as service providers in various industries still appear able to circumvent the regulations and restrictions, and continue to make or send unsolicited marketing calls, facsimiles and text messages.

The purpose of the TDO is:

[to] prohibit false trade descriptions, false, misleading or incomplete information, false marks and misstatements in respect of goods provided in the course of trade or suppliers of such goods; to confer power to require information or instruction relating to goods to be marked on or to accompany the goods or to be included in advertisements; to restate the law relating to forgery of trade marks; to prohibit certain unfair trade practices; to prohibit false trade descriptions in respect of services supplied by traders; to confer power to require any services to be accompanied by information or instruction relating to the services or an advertisement of any services to contain or refer to information relating to the services; and for purposes connected therewith.

On 19 July 2013, amendments to the TDO came into effect to ‘provide greater protection for consumers by extending its coverage from goods to services and specified unfair trade practices’24 by prohibiting false trade descriptions of services, misleading omissions, aggressive commercial practices, bait advertising, bait-and-switch and wrongly accepted payments. The CA has concurrent jurisdiction with the Customs and Excise Department to enforce these provisions in the broadcasting service sector. The CA does not preview or pre-censor any material before it’s broadcast. Editorial responsibility lies with the licensees themselves. The CA has promulgated a set of codes of practice for television and sound broadcasting services to provide guidance on these issues to the service providers.

The Office of the Privacy Commissioner for Personal Data (Privacy Commissioner)

Hong Kong was the first territory in Asia to legislate and establish an independent privacy commissioner for personal data, covering both the private and public sectors. Hong Kong’s Privacy Commissioner has formulated operational policies and procedures relating to the implementation of privacy protection provisions, and is responsible for ensuring the protection of the privacy of individuals with respect to personal data and for overseeing the administration and supervision of the Personal Data (Privacy) Ordinance (PDPO),25 the legislation that regulates the collection and use of personal data in Hong Kong.

There are six data protection principles under the PDPO that must be adhered to, the fourth of which deals with the security of personal data. Telecommunications and broadcasting service providers must be prudent at all times to safeguard personal data that are in their possession against unauthorised or accidental access, processing, erasure or other use. There have been several incidents in Hong Kong regarding the alleged breach of this principle: for example, the leakage of personal data by members of the Hong Kong police force as a result of a peer-to-peer application that was installed on their personal computers. The Hong Kong police force’s alleged lack of awareness of the potential impact of such programmes led to the leakage of important personal data to the public via the internet. A second example is the alleged misuse of the personal data of more than 2 million individuals in Hong Kong that had registered under a rewards programme run by the service provider of the biggest electronic payment system in Hong Kong (Octopus).26 The leak of the personal data of Octopus users was so significant that the Privacy Commissioner issued its first-ever interim report on its investigation into the matter at the end of July 2010. The final report was published in October 2010.

In response to increasing concerns over the alleged misuse of personal data, the PDPO was amended in 2012 to:

  • a address the unauthorised disclosure of personal data by a person who obtained such personal data from a data user;
  • b extend the enforcement power of the Privacy Commissioner;
  • c clarify the requirements when using personal data for direct marketing and when providing personal data to another for use in direct marketing; and
  • d provide legal assistance to an aggrieved individual seeking compensation from a data user for damages suffered as a result of the data user’s contravention of any requirement imposed by the PDPO in relation to their personal data.

The Privacy Commissioner has published codes and guidelines on personal data privacy protection regarding the internet for information technology practitioners, biometric data users, CCTV and drone operators as well as mobile service operators.

The Hong Kong Computer Emergency Response Team Coordination Centre

The Hong Kong Computer Emergency Response Team Coordination Centre (HKCERT), managed by the Hong Kong Productivity Council, is the centre for coordination of computer security incident responses for local enterprises and internet users. It facilitates information dissemination, provides advice on preventive measures against security threats, and promotes information security awareness, as well as issuing security alerts to warn about vulnerable computer systems.27

Sources of law

Hong Kong’s laws governing broadcasting, communications, media and the publication of books and newspapers are scattered across multiple pieces of legislation, including:

  • a the Communications Authority Ordinance;
  • b the Broadcasting Ordinance;
  • c the Competition Ordinance;
  • d the Film Censorship Ordinance;28
  • e the Interception of Communications and Surveillance Ordinance;29
  • f the Telecommunications Ordinance;
  • g the UEMO;
  • h the Books Registration Ordinance;30
  • i the Registration of Local Newspapers Ordinance;31
  • j the TDO; and
  • k the PDPO.

The Communications and Technology Branch of Hong Kong’s Commerce and Economic Development Bureau (CEDB) is the policy bureau responsible for broadcasting and telecommunications policy. However, the responsibility for supervision of licensees rests with the CA.

ii Ownership restrictions
The Telecommunications Ordinance

The CA has power to impose conditions, including the period of validity, in respect of the licences issued under the Telecommunications Ordinance. In addition, the CA has authority to require a licensee to comply with the terms of its licence and any applicable legislation, regulations and codes of practice, and to suspend or revoke licences in accordance with the Telecommunications Ordinance or other rules or regulations to protect the public interest.

The Telecommunications Ordinance disqualifies two categories of person from controlling an entity with a sound broadcasting licence: ‘disqualified persons’ and ‘unqualified persons’. Subject to exemptions, disqualified persons are restricted from exercising control (or increasing control) over a sound broadcasting licence holder.32 ‘Disqualified persons’ include advertising agents, suppliers of broadcasting materials to licensees, a sound broadcasting licence holder, any person who (as its business) transmits sound or television material, whether in Hong Kong or outside Hong Kong, a domestic free-to-air or a domestic pay-TV licensee, or an associate of any of such persons, or any person who exercises control of a corporation that is a person referred to above.33 ‘Unqualified persons’ refers to persons who are not for the time being ordinarily resident in Hong Kong34 and who have not at any time been resident for a continuous period of no less than seven years; or, in the case of a company, is not a company that is ordinarily resident in Hong Kong.35 The aggregate of the voting shares that can be held by ‘unqualified persons’ may not exceed 49 per cent of the total number of voting shares of a sound broadcasting licence holder.

The CA also imposes a disposal restriction after the grant of a sound broadcasting licence.36 Unless the CA otherwise agrees, the right, title or interest in 15 per cent or more of the shares in a sound broadcasting licence holder may not be transferred or acquired, directly or indirectly, within a three-year period after the grant date. Any agreement or similar arrangement or understanding that breaches this requirement is void.

The regulation and classification of internet and IP-based services fall under the purview of the Telecommunications Ordinance. There is no separate regime insofar as internet services are concerned. All sectors of Hong Kong’s telecommunications market have been liberalised with no foreign ownership restrictions.37

The Broadcasting Ordinance

The Chief Executive in Council grants licences under the Broadcasting Ordinance for domestic free-to-air and domestic pay-TV programme services, whereas the CA is responsible for granting licences for non-domestic and other licensable television programme services.38

Control restrictions for broadcasting licences are set out in Section 8(4) of the Broadcasting Ordinance. The restrictions in relation to domestic free-to-air and domestic pay-TV programme service licences are:

  • a the exercise of the control and management of the licence holder must be bona fide in Hong Kong and, where there are two or more directors (the majority being individuals as opposed to corporates), the individuals who actively participate in the company must satisfy a residency requirement.39 The residency requirement is equally applicable to those directors who actively participate in management and operations, and to the principal officers (being those in charge of the selection, production or scheduling of television programmes) of the licence holder; and
  • b no disqualified person or their controlling entities or persons or associates (unless otherwise disclosed in the licence application) can exercise control over (or remain in control of) the licence holder. The purpose of this is to restrict cross-media ownership.

The restrictions are less stringent for non-domestic and other licensable television programme service licence holders, which are only required to have at least one director or principal officer satisfying the residency requirement.

Broadcasting licences ownership and voting restrictions

The Broadcasting Ordinance sets out detailed restrictions regarding the holding, acquisition or exercise of voting control of licence holders (except for domestic pay-to-air television programme licence holders) who are not qualified voting controllers. A qualified voting controller is someone who, in the case of an individual, has resided in Hong Kong for a period of no less than seven years or, in the case of a corporation, whose directors satisfy the Hong Kong residency requirement. An ‘unqualified voting controller’ is anyone who is not a qualified voting controller. Unqualified voting controllers cannot exercise voting control in excess of 49 per cent of the total voting control at any time. Further, prior approval of the CA is required for the holding, acquisition or exercise of voting control by an unqualified voting controller of 2 to 6 per cent or 6 to 10 per cent, or more than 10 per cent of a licence holder. If an unqualified voting controller holds more than 10 per cent, only up to 10 per cent of the voting rights can be exercised by such controller.

Further, a domestic free-to-air television programme service licence will not be granted to a company that is a subsidiary of a corporation.40

iii Competition measures
The Competition Ordinance

On 14 June 2012, the Competition Ordinance was passed as a general and cross-sector competition law curbing anticompetitive conduct across all industry sectors. The Competition Ordinance came into full force on 14 December 2015. Under the Competition Ordinance, the CA has concurrent jurisdiction with the Competition Commission to enforce the Competition Ordinance in respect of the conduct of telecommunications and broadcasting licensees, including merger and acquisition activities involving carrier licensees.41 A memorandum of understanding was entered into between the CA and the Competition Commission in December 2015 to affirm their commitment to exercising their functions with a consistent interpretation and application of the provisions of the Competition Ordinance.42 The CA will ordinarily take the role of lead authority on matters that fall within the concurrent jurisdiction.

The Competition Ordinance provides for a cross-sectoral competition law prohibiting anticompetitive conduct through three competition rules:

  • a The First Conduct Rule:43 an undertaking44 must not make or give effect to an agreement, engage in a concerted practice, or, as a member of an association of undertaking, make or give effect to a decision of the association, if the object or effect of the agreement, concerted practice or decision is to prevent, restrict or distort competition in Hong Kong;
  • b The Second Conduct Rule:45 an undertaking that has a substantial degree of market power must not abuse that power by engaging in conduct that has as its object or effect the prevention, restriction or distortion of competition in Hong Kong; and
  • c The Merger Rule:46 an undertaking must not, directly or indirectly, carry out a merger involving telecommunications carrier licensees that has, or is likely to have, the effect of substantially lessening competition in Hong Kong. When determining whether a merger has, or is likely to have, the effect of substantially lessening competition, the CA may take into account: the extent of competition from competitors outside Hong Kong; whether the acquired undertaking, or part of the acquired undertaking, has failed or is likely to fail in the near future; the extent to which substitutes are available or are likely to be available in the market; the existence and height of any barriers to entry into the market; whether the merger would result in the removal of an effective and vigorous competitor; the degree of countervailing power in the market; and the nature and extent of change and innovation in the market.47

For the telecommunications industry, in addition to the provisions of the Competition Ordinance, the Telecommunications Ordinance also contains a further provision relating to dominant licensees – Section 7Q (exploitative conduct). Under this section, a licensee in a dominant position in a telecommunications market must not engage in conduct that, in the opinion of the CA, is exploitative. In determining whether a licensee is dominant, the CA must take into account, inter alia:

  • a the market share of the licensee;
  • b the licensee’s power to make pricing and other decisions;
  • c any barriers to entry to competitors in the relevant market;
  • d the degree of product differentiation and sales promotion; and
  • e any other matters stipulated in guidelines issued for the purposes of Section 7Q.

 

III SPECTRUM POLICY

i Development

Spectrum policy in Hong Kong encompasses management, pricing, supply and rights relating to spectrum. It was monitored and regulated by the former TA prior to 1 April 2012, and is now monitored and regulated by the CA. Since 2007, the government has adopted a market-based approach to spectrum management,48 and it will not depart from this approach unless there is a public policy reason to do so. The CA is open about the availability of spectrum, and a spectrum release plan governing a three-year period going forward was released pursuant to the Radio Spectrum Policy Framework that was announced in April 2007. Under the spectrum release plan, industry participants can bid for spectrum use rights through an open bidding or tendering process. To ensure industry participants are kept aware of the availability of spectrum, the spectrum release plan is updated annually on a rolling basis or as required taking into account the latest developments. Spectrum availability determines the number of market players in the industry. Currently, spectrum is auctioned and allocated by the CA through the latest spectrum release plan. Where spectrum has been previously allocated under an earlier release plan, it will be clearly stated in the current release plan.

The CA announced the spectrum release plan for 2016 to 2018 on 24 March 2016. According to the plan, no spectrum will be available for release during this period.49 Nonetheless, the CA has clearly stipulated that the release plan is non-binding, and it is not bound to allocate or assign any spectrum to any industry player. All allocation of spectrum, as and when such allocation is made, is subject to the CA’s discretion.

As part of the spectrum management policy, Hong Kong is also considering spectrum trading to create a market for secondary trading of spectrum use. The government is understood to have commissioned feasibility studies, but it has yet to make the consultant’s report publicly available.50 However, the consultant’s conclusions can be inferred from the reports of the Subcommittee on Telecommunications. These suggest that, in jurisdictions where it is permitted, spectrum trading does not occur frequently. Further, while demand for spectrum remains incessant, few holders of spectrum rights are willing to transfer their rights to other operators. The administration did not therefore consider spectrum trading a matter of priority, even though it is viewed as desirable under the Radio Spectrum Policy Framework.51

In November 2013, two Hong Kong TV stations were fined by the OFCA for renting transmission capacity without the prior consent of the CA, per the licence requirement, constituting illegal spectrum trading under the current legislation.

In February 2016, the CA and the Secretary for Commerce and Economic Development (SCED) jointly published a consultation paper in relation to the arrangement for re-assignment of the frequency spectrum in the 900MHz and 1,800MHz bands upon expiry of the existing assignments between November 2020 and September 2021.52 The 900–1,800MHz spectrum consists of 50MHz of spectrum in the 900MHz band and 150MHz of spectrum in the 1,800MHz band. It accounts for 36 per cent of the 552MHz of spectrum already assigned to the industry for the provision of public mobile telecommunications services.53 According to HKT, Hong Kong’s largest operator of fixed-line and mobile networks, it is the largest amount of spectrum ever assigned in one lot, and the frequency bands are critical blocks for the provision of 3G, 4G and future 5G services. In essence, there are three proposals put forward by the government: (1) a full-fledged administratively assigned approach that assigns all the spectrum to the incumbent mobile network operators through the offer of a right of first refusal; (2) a full-fledged market-based approach that re-assigns all the spectrum by way of auction; and (3) a hybrid approach that re-assigns 40MHz or one-fifth of the 900–1,800MHz spectrum to the incumbent mobile network operators through the offer of the right of first refusal and the rest by way of auction. This consultation paper has renewed calls to allow spectrum trading among Hong Kong’s telecommunications network operators. The Commerce and Economic Development Bureau stated in April 2016 that spectrum trading was again on its agenda, and a consultant would be asked to revisit the issue. The consultancy study is planned to be completed next year.54

If spectrum trading is adopted, relevant competition measures may be required; there may be allocation of spectrum bands that are permitted for secondary trading; and a new licence category for spectrum use may be created. The CA takes the view that this subject should be dealt with in the long term.55

ii Broadband and next-generation mobile spectrum use

With over 43,000 registered Wi-Fi access points, Hong Kong has extensive public Wi-Fi service coverage. Wi-Fi operates on unlicensed spectrum in the 2.4GHz and 5GHz bands. Small cells are installed in payphone kiosks, bus stops, shops and on lampposts to boost mobile network capacity and improve signal reception. OFCA facilitates the extension of mobile broadband coverage by use of microwave backhaul links for the connection of small cells to the core network.

The CA adopts a light-handed licensing and regulatory approach for public Wi-Fi services.56 As of March 2016, five carrier licensees are authorised to provide municipal Wi-Fi services. The CA aims to release available spectrum blocks as soon as they are made available to the public so that the public might enjoy the benefits of advanced wireless technologies as early as possible.

It is expected that there will be greater demand for radio spectrum for the development and commercial application of 5G mobile technologies, which is expected to launch in the market in around 2020. The SCED indicated in his written reply to a question raised in the Legislative Council that, since it is expected that 5G services will use radio spectrum above the 6GHz band, the CA will closely monitor the latest developments in the allocation of the concerned spectrum for the provision of 5G services in the international arena, and plan for the necessary supply of spectrum having regard to the actual situation in Hong Kong.57

iii Spectrum auction and fees

Since it is a limited resource, and demand is high, the government imposes a fee on the use of spectrum. This fee (the spectrum utilisation fee (SUF)) is applicable to all use of spectrum save that reserved for government use. As an example, in March 2013, a total of 50MHz of radio spectrum in the 2.5–2.6GHz band was sold for HK$1.54 billion to four bidders.58

The results of the latest auction of spectrum in the 1.9–2.2GHz band were announced by the OFCA on 10 March 2015. A total of 49.2MHz of spectrum was reassigned after the incumbent spectrum assignees exercised their right of first refusal. Following the decision of the CA on the arrangements for reassignment of the spectrum, and its decision to give conditional consent to the acquisition by HKT Limited of CSL New World Mobility Limited, the other three incumbent spectrum assignees accepted the right of first refusal for the reassignment of 68.2MHz of the 118.4MHz of paired spectrum that were assigned in 2001. The remaining 49.2MHz was reassigned through auction, where a non-incumbent spectrum assignee was assigned a total of 19.6MHz of spectrum, with the rest being assigned to the incumbent spectrum assignees. Together, the winners of the auction paid SUFs of HK$2.42 billion for their 15-year licences, which commenced on 22 October 2016.59

IV MEDIA

i Mobile services

To facilitate the development of broadcast-type mobile TV services, the government announced the Framework for Development of Broadcast-type Mobile TV Services in Hong Kong in February 2010. In the Framework, the government announced that the radio spectrum of 678–686MHz would be released for the introduction of broadcast-type mobile TV services in Hong Kong with at least 75 per cent of the transmission capacity to be used to provide mobile TV services, with the operator entitled to harness the remaining capacity of the UHF allocated for delivery of other services such as datacasting.60

Pursuant to the Telecommunications Ordinance, an operator of the network used to transmit mobile TV services via the assigned spectrum is required to obtain a UCL. The government has also indicated that the content of mobile TV, either local broadcast-type or streaming-type, should be subject to regulation by general laws rather than under the Broadcasting Ordinance. To enable self-regulation, the industry will be required to develop codes of practice on the provision of mobile TV services prior to service commencement. The codes should include, inter alia, the requirement of conditional access with a view to protecting public morals and children.61

The radio spectrum of 678–686MHz was auctioned off in June 2010, with China Mobile Hong Kong Corporation Limited successfully bidding for the spectrum at an SUF of HK$175 million. OFTA announced that, after payment of the SUF and submission of the performance bond, China Mobile Hong Kong Corporation Limited will be assigned the spectrum under a 15-year UCL. The licensee would be obliged to provide service coverage to at least 50 per cent of Hong Kong’s population within 18 months from licence grant.62

V THE YEAR IN REVIEW

i The Competition Ordinance63

The Competition Ordinance came into full force on 14 December 2015. Its operation is not restricted to broadcasting or telecommunications, but applies to all sectors and industries in Hong Kong. Competition provisions that were previously embedded in the Telecommunications Ordinance and the Broadcasting Ordinance (and subsidiary legislation) were amended or repealed. Some of the more important changes are described below.

In April 2013, the Competition Commission was established under the Competition Ordinance as an independent statutory body responsible for the general competition regulations. The Competition Commission has developed regulatory guidelines to provide clear guidance on the Competition Commission’s interpretation and implementation of the competition rules, and to explain the procedures for handling complaints, conducting investigations and considering applications relating to exclusions and exemptions. Six draft guidelines under the Competition Ordinance were released for public consultation in October 2014 and, following the consultation exercise, final form guidelines were issued jointly by the Competition Commission and the CA on 27 July 2015. The six separate guidelines pertain to complaints, investigations, applications for exclusions and exemptions, the First Conduct Rule, the Second Conduct Rule and the Merger Rule.

Pursuant to Part 11 of the Competition Ordinance,64 the CA has concurrent jurisdiction with the Competition Commission with regard to telecommunications and broadcasting-related competition matters. The CA has jurisdiction over entities licensed under the Telecommunications Ordinance or the Broadcasting Ordinance; unlicensed entities whose activities require them to be licensed under the Telecommunications Ordinance or the Broadcasting Ordinance; and entities exempted pursuant to Section 39 of the Telecommunications Ordinance. The ‘merger rule’, set out in Schedule 7 of the Competition Ordinance, applies only to the telecommunications sector. Unless exempted, undertakings that are subject to the merger rule are prohibited from ‘directly or indirectly, carrying out a merger that has, or is likely to have, the effect of substantially lessening competition in Hong Kong’. Factors that can be taken into account in determining whether there is a substantial lessening of competition are set out in Schedule 7 of the Competition Ordinance.

The Competition Ordinance also contains provisions enabling competition-related matters to be transferred between regulators with concurrent jurisdiction.

Sections 7K (anticompetitive practices), 7L (abuse of position), 7N (non-discrimination) and 7P (authority may regulate changes in relation to carrier licensees) of the Telecommunications Ordinance, and Sections 13 to 16 of the Broadcasting Ordinance, were repealed and replaced by the conduct rules set out in Part 2 of the Competition Ordinance. The new Section 7Q (exploitative conduct), as mentioned above, was added to the Telecommunications Ordinance.

On 19 November 2015, the Competition Commission published its leniency policy for undertakings engaged in cartel conduct (leniency policy). Pursuant to Section 80 of the Competition Ordinance, the Competition Commission may make a leniency agreement with a person that it will not bring or continue proceedings in the Competition Tribunal for a pecuniary penalty in exchange for the person’s cooperation in an investigation or proceedings under the Competition Ordinance. Under the leniency policy, the Competition Commission will agree not to bring proceedings in the Competition Tribunal for a pecuniary penalty against the first cartel member who reports the cartel conduct to the Competition Commission and meets all the requirements for receiving leniency under the policy.

On the same day, the CA announced that it has decided not to adopt the leniency policy for its enforcement of the Competition Ordinance. The CA may consider making leniency agreements with telecommunications and broadcasting licensees on a case-by-case basis. The CA also indicated that it would revisit the need or otherwise for it to adopt a leniency policy and the underlying principle of leniency at a later stage, if necessary.65

ii Full withdrawal of the licensing exemption for PHS radiocommunications apparatus

The licensing exemption for personal handy phone system (PHS) radiocommunications apparatus operating in the 1,895–1,906.1MHz band was fully withdrawn on 10 May 2016. PHS is a short and medium-range mobile communications technology introduced into Hong Kong mainly for use as cordless telephones in 1997.66 Its development in Hong Kong has not been successful and such PHS-based products are no longer available for sale in the local market and have not been for quite some time. This decision was intended to vacate and deploy the radio spectrum in a more effective manner for the provision of other services. From 10 May 2016, no person shall possess or use any PHS apparatus in Hong Kong. Any person who contravenes the provision shall be liable to a maximum fine of HK$50,000 and to imprisonment for two years upon conviction.

iii Recent enforcement cases

On 14 April 2016, a telecommunications service provider was convicted of supplying local prepaid SIM cards in contravention of Section 7A of the TDO.67 OFCA determined that the telecommunications service provider had unilaterally extended the period to which peak-hour surcharges would apply, contrary to the information as pre-printed on the packaging of the prepaid SIM cards. The telecommunications service provider plead guilty to nine summonses laid against it and was fined a total of HK$45,000.

On 27 May 2016, OFCA prosecuted a commercial facsimile sender (the Sender) for his alleged contravention of Section 39 of the UEMO by sending commercial facsimile messages that did not contain his name or address. OFCA also received complaints that the Sender’s unsubscribe facility had been disconnected and the recipients of the Sender’s messages could not send unsubscribe requests to the Sender. After investigation, OFCA served an enforcement notice on the Sender in October 2015 pursuant to Section 38 of the UEMO, requiring him to stop sending further facsimile messages in contravention of the UEMO. However, OFCA continued to receive reports that the Sender was continuing to send commercial facsimile messages, suggesting that he might not have complied with the enforcement notice. After conducting a raid operation in January 2016 and collecting further evidence, OFCA proceeded to take prosecution action against the Sender.

Footnotes

1 Simon Powell is a partner and Chi Ho Kwan is an associate at Latham & Watkins.

2 As of July 2016, provided by the Office of the Communications Authority (OFCA).

3 i.e., licensees authorised to provide facility-based local fixed telecommunications services under an FTNS licence, an FCL or a UCL using wireline or wireless technology (as of July 2016, provided by OFCA).

4 i.e., licensees authorised to provide facility-based external telecommunications services (ETS) under an FTNS licence, an FCL or a UCL, and those authorised to provide service-based ETS under SBO licences (as of July 2016, provided by OFCA).

5 As of end-2015, provided by the Census and Statistics Department (CSD).

6 The residential fixed line penetration rate is calculated by dividing the number of residential fixed lines by the number of households in Hong Kong (as of May 2016, provided by OFCA).

7 As of May 2016, provided by OFCA.

8 i.e., licensees authorised to provide internet access services under an FTNS licence, an FCL, a UCL or an SBO licence (as of July 2016, provided by OFCA).

9 As of May 2016, provided by OFCA.

10 As of December 2015, provided by OFCA.

11 According to statistics from March 2016 to May 2016, provided by the CSD.

12 As of July 2016, provided by OFCA.

13 As of November 2015, provided by OFCA.

14 South China Morning Post article ‘Third Hong Kong digital radio station folds after struggling to make ends meet’, published on 12 September 2016.

15 Chapter 391 of the Laws of Hong Kong.

16 Chapter 616 of the Laws of Hong Kong.

17 Part 2, Section 7 of the Communications Authority Ordinance.

18 Chapter 106 of the Laws of Hong Kong.

19 Chapter 593 of the Laws of Hong Kong.

20 Chapter 619 of the Laws of Hong Kong.

21 Chapter 391 of the Laws of Hong Kong.

22 Chapter 362 of the Laws of Hong Kong.

23 Based on the Registration Statistics on Do-not-call Registers published by OFCA.

24 Press release of the OFCA dated 15 July 2013.

25 Chapter 486 of the Laws of Hong Kong.

26 Octopus runs a rewards programme for customers to incentivise the usage of the Octopus card. When one registers for the Octopus reward programme, certain personal data are provided to Octopus. In the summer of 2010, it was revealed that Octopus had been selling personal data of those registered for the reward programme to other unrelated service providers (such as insurance companies) for direct marketing purposes. In July 2010, Octopus disclosed that it had made HK$44 million since early 2006 by selling personal data.

27 See, for example, HKCERT’s Security Bulletin entitled ‘Android “QuadRooter” Multiple Vulnerabilities’, released on 9 August 2016.

28 Chapter 392 of the Laws of Hong Kong.

29 Chapter 589 of the Laws of Hong Kong.

30 Chapter 142 of the Laws of Hong Kong.

31 Chapter 268 of the Laws of Hong Kong.

32 Section 13G of the Telecommunications Ordinance.

33 Section 13A of the Telecommunications Ordinance.

34 ‘Ordinarily resident in Hong Kong’:

a in the case of an individual, means:

(i) resident in Hong Kong for not less than 180 days in any calendar year; or

(ii) resident in Hong Kong for not less than 300 days in total in any two consecutive calendar years; and

b in the case of a company, means a company:

(iii) that is formed and registered in Hong Kong under the Companies Ordinance (Cap 622);

(iv) in which case: if not more than two of its directors take an active part in the management of the company, each of those directors is for the time being ordinarily resident in Hong Kong and each of them has at any time been resident for a continuous period of not less than seven years; or, if more than two of its directors take an active part in the management of the company, a majority of those directors are each of them, for the time being ordinarily resident in Hong Kong and have at any time been resident for a continuous period of not less than seven years; and

(v) the control and management of which is bona fide exercised in Hong Kong.

35 Section 13I of the Telecommunications Ordinance.

36 Section 13J of the Telecommunications Ordinance.

37 Telecommunications Overview published by OFCA, June 2016.

38 Sections 8(1) and (2) of the Broadcasting Ordinance.

39 Such individuals must be ordinarily resident in Hong Kong, which means the individual must reside in Hong Kong for no less than 180 days in a calendar year or have done so for no less than for a total of 300 days in any two consecutive years and, further, such individuals must have ordinarily resided in Hong Kong for a period of not less than seven years.

40 Section 8(3) of the Broadcasting Ordinance.

41 Section 159 of the Competition Ordinance.

42 Press release of the Competition Commission and Memorandum of Understanding between the Competition Commission and the CA dated 14 December 2015.

43 Section 6(1) of the Competition Ordinance.

44 ‘Undertaking’ means any entity, regardless of its legal status or the way in which it is financed, engaged in economic activity, and includes a natural person engaged in economic activity.

45 Section 21(1) of the Competition Ordinance.

46 Section 3, Schedule 7 of the Competition Ordinance.

47 Section 6, Schedule 7 of the Competition Ordinance.

48 ‘Market-based approach’ for spectrum management means ‘methods relying on market forces to ensure the efficient use of spectrum as a public resource’. (From the Radio Spectrum Policy Framework (April 2007) published by the Communications and Technology Branch of the Commerce, Industry and Technology Bureau of Hong Kong).

49 Spectrum Release Plan for 2016–2018 dated 24 March 2016 published by the OFCA.

50 OFTA’s 2008/2009 Trading Fund Report.

51 Report of the Subcommittee on Telecommunications, LC Paper No. CB (4) 170/12-13; LC Paper No. CB (4) 364/12-13(05).

52 Arrangements for the Frequency Spectrum in the 900MHz and 1,800MHz Bands upon Expiry of the Existing Assignments for Public Mobile Telecommunications Services and the Spectrum Utilization Fee – Consultant Paper dated 3 February 2016.

53 Press release of the CA dated 3 February 2016.

54 South China Morning Post article ‘Spectrum trading back on agenda for Hong Kong telecom operators’, published on 9 June 2016.

55 Radio Spectrum Policy Framework published by the Commerce, Industry and Technology Bureau in April 2007.

56 OFCA Presentation ‘Facilitating the Wireless Broadband Connection of Hong Kong’ by Sanda Cheuk, Assistant Director (Regulatory) dated 9 March 2016.

57 Commerce of Economic Development Bureau, Legislative Council Question 22: Efficiency of radio spectrum utilization dated 29 June 2016.

58 Press release of the OFCA dated 19 March 2013.

59 Press release of the OFCA dated 8 December 2014 and the Successful Bidder Notice published by the CA dated 10 March 2015.

60 Framework for Development of Broadcast-type Mobile TV Services in Hong Kong (February 2010) published by the Communications and Technology Branch of the CEDB.

61 Ibid.

62 Press release of the OFTA dated 29 June 2010.

63 No. 14 of 2012 of the Government of the Hong Kong SAR Gazette.

64 Part 11, Sections 159 to 161 of the Competition Ordinance.

65 Press release of the CA dated 19 November 2015.

66 Press Release of OFCA dated 12 April 2016.

67 Press Release of OFCA dated 14 April 2016.