Voice and fax-over-Internet telephony could deliver cheaper international phone rates to Hong Kong subscribers almost immediately if a telecom industry review takes into account a new model of service licensing proposed by the Hong Kong Centre for Economic Research. Regulations prevent handset-to-handset via Internet or fax-to-fax via Internet telephony from originating in Hong Kong, although such calls can terminate in the territory. In light of Hong Kong's telecoms liberalisation in the past three years - and competitive pressure from North America, Europe and elsewhere in Asia - a Hong Kong Government telecommunications review team is studying more than 30 responses to a recent consultation paper issued by the Economic Services Branch. Alex Arena, former director-general of the Office of the Telecommunications Authority (Ofta), said submissions had been received from leading telecom operators, industry and umbrella trade groups as well as individuals. Mr Arena, who has been seconded by the Economic Services Branch to head the telecoms review, said there was no specific time frame on the review but said it was best for Hong Kong policy for it to end as soon as possible. Separately, a committee has been formed to advise Ofta on physical infrastructure for broadband communications. A visiting scholar from New Jersey's Rutgers University, who prepared a submission on behalf of the Hong Kong Centre for Economic Research (HKCER), said the licensing concept should be dropped. 'In the past it has been taken for granted that when a new telecommunications service starts, the government defines it and limits the number of providers,' Milton Mueller told a HKCER lunch last week. 'This notion should be challenged.' Mr Mueller is writing a book on the telecoms industry to coincide with the handover. His comments raised protest from Hongkong Telecom regulatory affairs spokesman Keith Bernard after he suggested an inquiry into the structure of Telecom's Interactive Media Services (IMS) division, which has become the territory's largest Internet service provider in one year of operation. Ironically, it is niche market services offered by the nimble Internet service sector start-ups that have proven the old model to be slow and inflexible. The United States telecoms regulator, the Federal Communications Commission (FCC), last month released a working paper on Internet communications - subtitled the Digital Tornado - also focusing on the theme of digital convergence. 'Because it is not tied to traditional models or regulatory environments, the Internet holds the potential to dramatically change the communications landscape,' the FCC paper said. 'The Internet creates new forms of competition, valuable services for end users and benefits to the economy. Government policy approaches towards the Internet should therefore start from two premises: avoid unnecessary regulation and question the applicability of traditional rules.' Mr Mueller said licensing was a form of protectionism, which also created a political situation, whereby licence holders held a perfectly rational claim to tell government that they did not want any more competitors. He said the Pnets (Public Non-Exclusive Telecommunications Service) licences, which include Internet service providers, disproved the theory that investment in telecommunications could be encouraged only if licensees had a degree of exclusivity. Ofta lists 96 companies with Pnets licences to operate as Internet service providers, up from only a handful of outfits two years ago. Mr Mueller's report urged the Government to transform Pnets and other licences to be expanded into broadly defined 'class licences' so the licensees could expand and alter their business capabilities as the businesses grew. Ofta said last week that fax-to-fax via Internet and phone-to-phone via Internet were not yet licensed categories for telecoms services. Although they used technologies based on Internet technologies they could not be approved under the existing Pnets framework. An Ofta spokesman said fax-to-fax Internet calls also were outside the scope of the International Value-Added Network Services (Ivans) specifications but might fall within a new category of services technically known as International Simple Resale (ISR) for fax and data 'The guidelines for the submission of applications for ISR for fax and data will be issued later this year,' the Ofta spokesman said. Ofta said the handset-to-handset Internet calls might be a form of external public telephone services and fall within the exclusivities of the Hongkong Telecom International licence.