PCCW, HK Telecom file lawsuit against government's 'unreasonable' fees

Telecommunications companies challenge government's 'unreasonable' licence fees which they say allow it to reap huge profits at their expense

PUBLISHED : Friday, 01 March, 2013, 12:00am
UPDATED : Friday, 01 March, 2013, 3:59am

Hong Kong Telecommunications (HKT) and PCCW-HKT Telephone have mounted a legal challenge to the government's licence fees, saying reductions which take effect today do not go far enough.

The companies filed an application for judicial review in the High Court on Wednesday against the secretary for commerce and economic development and the broadcasting and telecommunications regulator, the Communications Authority.

They say the "unreasonable" rates they and other licensees have been charged have resulted in the government getting "far in excess" of what it should.

The government earlier announced that it would reduce annual connection fees from HK$8 to HK$7 per customer for carrier, paging and services-based operator licensees.

The two companies, which are joint holders of a unified carrier licence, say they are backed by Wharf T & T, Hutchison Global Communications, Hutchison Telephone, SmarTone Communications, SmarTone Mobile and CSL. These and three other companies - New World Telecommunications, Hong Kong Broadband Network and China Mobile - have been listed as interested parties to the lawsuit.

The Commerce and Economic Development Bureau and the Communications Authority declined comment, citing the legal proceedings.

Fees are collected to recover the authority's costs in administering the licences and go into a trading fund. The financial secretary sets a target rate of return on the fund's fixed assets which, based on the fund's 2011-12 annual report, was 8.5 per cent a year.

But HKT and PCCW-HKT say the fund has recorded annual returns of 16 to 49 per cent over the past six years. They say there can be "no doubt" the authority is "well funded" and "earned far in excess of the statutory levels". In 2011-12, for example, the fund recorded a profit of HK$67 million in excess of the stipulated rate.

This is against legislation governing trading funds, they say, adding that the current reductions would lower the return on fixed assets, for example, from 49 per cent to 40 per cent, which is still "hugely in excess". Wharf T & T has suggested that the fund's income can be reduced by HK$72.8 million. It asked for a reduction in the unified carrier licensee's connection fee from HK$800 per 100 customer connections to HK$500. The companies say they made submissions to the government, but it rejected their requests that included a further reduction of the fees.

The two companies say they disagree with the reasons given for the rejection. With their filing, they seek to have the court throw out the government's decision and order it to reconsider after a consultation. The filing says there are 18 companies licensed to provide local fixed carrier services, five mobile network operators, eight public radio-communication services licensees, and hundreds of service-based operators. The last group provides services including local voice calls.