PCCW counteroffer tries to slipstream around Ofta

PUBLISHED : Thursday, 16 August, 2007, 12:00am
UPDATED : Thursday, 16 August, 2007, 12:00am

'As the regulator of the industry, the TA will continue to strive for the maintenance of effective market competition and protection of public and consumer interests.'

Office of the Telecommunications Authority,

August 10

There is something a little pathetic about a peacemaker pleading for fair play with two sluggers who have already taken off their jackets, rolled up their sleeves and started throwing punches.

It is particularly so when the first punch has actually been thrown at the peacemaker. This is what our dominant telecommunications operator, PCCW, has done with its counter-attack on mobile phone operators seeking to undermine its hold on the industry. PCCW wants blood and is trying to knock the Office of the Telecommunications Authority (Ofta) out of the way.

Of course, a slugging match these days is not actually done with knuckledusters. It is done with lawyers' briefs; a much deadlier instrument. PCCW's was one of 37 pages heralded as a 'Unified Interconnection and Local Access Services Tariff'.

But first some background. We have a skewed system in Hong Kong for interconnection charges between fixed-line and mobile phones. It doesn't matter which calls which, it is always the mobile phone that is billed for the call and the mobile alone. The fixed line pays nothing.

This anachronism stems from the day that mobile phones were treated only as adjuncts to fixed-line phones. It obviously makes sense, however, to change things now so that the two share the revenue or, better yet, each is left to collect from its own customer - bill and keep.

Ofta thinks so too but, being a government agency, it moves very s-l-o-w-l-y. First came a consultation paper and then the announcement that it would give mobile and fixed-line operators two years to work out an arrangement for themselves.

The trouble is that this is business. It's not about sense but cents, or rather, dollars, and, in this case, hundreds of millions of dollars. This is what PCCW, as Hong Kong's dominant fixed-line operator, stands to lose each year if a change to a bill and keep system goes through.

And if it indeed goes through, behind it are other proposed reforms that could threaten PCCW's fixed-line business directly. This old dinosaur is not fighting for its life just yet, but it conceivably could be doing so at some point.

Its first response to Ofta's two year talk-it-out ruling was to try to get the courts to rule that the authority was unfairly biased in favour of mobile operators.

Go away, said the courts in response and at that point many people expected PCCW just to sit on its hands for two years and then say it could not get co-operation from the mobile operators. But no, instead it has decided to counterattack.

What PCCW proposes is that when a mobile phone calls a fixed-line phone, the mobile network operator will pay 9.5 HK cents to PCCW for every minute of connection time. The current rate is 4.36 HK cents per minute.

But when a PCCW fixed-line customer calls a mobile phone, PCCW will pay that mobile phone network operator only 1.43 HK cents per minute of connection time, rising to 3.81 HK cents in five years.

Cute, isn't it? This is a grand new way of playing heads-I-win-tails-you-lose.

There is more. As I read it (but this is lawyerese), section 1.3 of this PCCW tariff proposal says that any mobile phone operator who wants to sign up to this new tariff proposal can start getting money from it right away but must agree to be bound by it for a minimum of five years.

You can see the attraction - 'Here's your candy. It's not much but if you want more it may take you years to get it and in the meantime you get nothing.'

Then, and this is where PCCW is trying to knock Ofta aside, section 1.8 (d) says that any mobile operator who signs up forgoes any right for at least five years to get a determination from Ofta on interconnection charges.

Finally, and again knocking Ofta out of the way, section 14.1 says that if Ofta makes a binding determination on charges, anyone who has signed up to the PCCW tariff must still agree to pay PCCW all that it would have been paid under that tariff irrespective of what Ofta rules.

I'm sure the only mobile operator that will sign up is PCCW's own captive one, the former Sunday Communications. The others will reject the deal.

It is an outrageous one and I think PCCW only advanced it as a way of cashing in on Ofta's slow pace in bringing interconnection reform to fruition. If Ofta were to move faster and the industry could expect the obvious bill-and-keep reform within a year, the idea would be just laughable rather than outrageous.

In my opinion, this is an insult to Ofta and a double one in that the proposal takes cynical advantage of the amount of time Ofta is willing to grant for the reform and also attempts to shunt the authority aside.

I think it was just the other day that I introduced the Spine Test in this column - who in government has a spine and who has jelly where that spine should be?

Hmmm ... let's pay a visit to Ofta.