Authority should no longer stall and just make the right call

PUBLISHED : Friday, 04 May, 2007, 12:00am
UPDATED : Friday, 04 May, 2007, 12:00am

'The role of the [Telecommunications] Authority is to ensure that the regulatory environment is conducive to the development of new technologies, products and services. Operators should be able to respond promptly to consumer demand for FMC [fixed-mobile convergence] ... without unnecessary regulatory constraints.'

Telecommunications Authority press release,

April 27

And then the authority did exactly the opposite of what it said it would do. Instead of allowing operators to respond promptly, it imposed an unnecessary regulatory constraint that will delay a major telecommunications reform for at least two years and probably much longer.

Nothing in the telecommunications business is ever simple if it can be made difficult, which it always can, but I will try to express the basic problem as simply as possible.

When you make a call from a fixed-line telephone set to another fixed-line set the billing rule is 'caller pays'. This has long been the practice and everyone accepts that it is a fair one.

When you make a call from a mobile phone to another mobile phone the billing rule is 'bill and keep'. The two network operators charge their customers separately and keep whatever they charge. There is no sharing arrangement. This is also accepted as a longstanding and fair practice.

But things are different in calls between mobile and fixed-line phones. It is always the mobile phone operator who pays the fixed-line operator, irrespective of who initiated the call. In this ultimate heads-I-win-tails-you-lose game the fixed-line operator is always paid and never pays.

It is clearly an inequitable practice and it arose because mobile phones evolved as adjuncts to fixed-line phones. Things have obviously changed, as the first chart makes clear, but billing rules have not.

The authority has now decided that these must change too. The only difficulty, however, is that it has not decided how they must change. The industry has been told to work this out in discussions between fixed and mobile operators and two years have been allotted for the discussions.

Now, let us have it clear first of all that there is no difficulty in determining the best billing practice to adopt on calls between fixed and mobile phones. It is the mobile to mobile system of 'bill and keep' and this is the one at which we will arrive in the end.

The difficulty is that fixed-line operators have no interest in seeing any change at all. At present they take in HK$600 million a year from mobile operators with PCCW alone taking in more than HK$400 million, and they do very little for it. They don't want to lose this income. They want things to stay exactly as they are.

Thus what they will do for the next two years is stall and stall and, when two years are up, they will tell the authority that it is all very difficult and could we please have another year at least to work it out.

Eventually their stalling will have to come to an end and the authority will have to make a determination (inevitably 'bill and keep') because the market cannot agree. The fixed-line operators will then demand a judicial review on the grounds that the authority is biased (they have done it once already) and buy themselves even more time.

We could easily be looking this way at four years and up before we get an obvious reform to improve telecommunications in Hong Kong and reduce billing costs.

So why, oh why, did the authority come up with this ridiculous notion of a two-year discussion period? Why didn't it just bang a few heads together and say: 'Next week, fellas, or we'll make the choice for you. It's an easy choice anyway.'

But if it has to do things this silly way, let me at least suggest one measure to speed up the discussions. We shall make the new billing system, whatever it turns out to be, retroactive to today.

The authority can tell the industry that, until the billing decision is made, all payments from mobile to fixed-line operators will go into an escrow account to be paid out in line with that decision.

Just listen to how PCCW will scream if this idea is even proposed and you will instantly understand the real dynamics of this particular game.