Let market decide, Ofta says
Telecoms competition tsar insists internet service providers must ensure value for money to survive battle of the fittest
The competition tsar for the telecoms sector has hit back at suggestions he is not doing enough to protect small internet service providers (ISP). He also indicated that the Office of the Telecommunications Authority (Ofta) is happy to sit back and watch a Darwinian shake-out in the marketplace.
Small ISPs, who rent lines from PCCW and other network providers, have complained that they are being forced out of the residential broadband market. PCCW charges smaller providers $110 per line but retails its own broadband service at $168, giving them little room for costs, let alone profit.
Citing this squeeze, internet providers HKNet and So-net recently quit the residential broadband market, transferring their customer accounts to PCCW. According to Bernard Hill, Ofta's head of competition affairs, ISP margins are not the regulator's concern.
'The problem is that [smaller ISPs] can't convince the customers to pay a premium for the services they are offering - and that's their problem, not wholesalers,' Mr Hill said in an interview with the South China Morning Post.
'Independent ISPs are not offering what, say, Hong Kong Broadband Network is offering,' he added, referring to HKBN's package of bundled broadband, pay-television and voice-over-IP (VoIP) telecommunication services. '[Smaller ISPs] better be offering some value, otherwise they won't have a place in the market ... triple-play offerings will be a turning point for the telecoms industry.'
Most of the Hong Kong's 1.36 million households are served by five network carriers who compete fiercely among themselves on broadband internet offerings. In addition to PCCW and HKBN, major players include Hutchison Global Communications, i-Cable and New World Telecom.
With an ever increasing number of customers opting for broadband VoIP services, Ofta expects a new wave of ISPs to enter the market and compete on the strength of innovative services rather than price.
Those expecting Ofta to ensure a level pricing field, Mr Hill suggested, 'would be wrong to enter the market altogether - [they] might even be very naive'.
'These ISPs are really expecting PCCW to subsidise them,' he added. 'If they are asking us to interfere, they are asking us to force these subsidies. That is not very appropriate.'
Mr Hill's comments will be music to the ears of PCCW, who the regulator considers a 'non-dominant' broadband wholesaler and therefore allows it greater pricing power. In September, an Ofta investigation cleared PCCW of accusations that it was deliberately squeezing competing ISPs.
The telecoms carrier, however, has been less successful in convincing the regulator that it should be similarly free in the fixed-line sphere, where it retains its unwanted 'dominant' status and limits on its freedom for pricing.
