The Government has announced its long-awaited shake-up of the accounting arrangement between Hongkong Telecom, its local fixed-line rivals and new operators for services after the opening of the international market in January. One of the main areas of contention is the local access charge. Here the Government has bowed to pressure to lower the cost of the original proposed charge, cutting the fee by up to 30 per cent. Officials have abandoned the first proposed flat rate of 31.3 cents a minute for all operators in favour of a two-tier system. Operators of international simple resale (ISR) services, which become legal on January 1, will pay 25 cents a minute, while the three fixed telephone network service (FTNS) companies will pay 22 cents a minute. An industry-wide grouping of international and local operators had been lobbying the Office of the Telecommunications Authority (Ofta) to lower the charge, claiming it is too high to allow them to run profitable businesses and cut charges to the consumer. The charge - including the universal delivery charge - reflects the cost to either Hongkong Telecom or the FTNS operators of maintaining local networks. In reality, the bulk of the charges will be paid to Telecom, which still has 98 per cent of lines in Hong Kong. The charge will apply every time a customer makes a call or receives a call from an international call service. Although not paid by the customer, it will be factored into the pricing of international services. Callback operator City Telecom (HK), which intends to move to using ISR to deliver international services from January 1, said the new, lower charge would enable it to price services even lower than its present cheapest figure of 99 cents an off-peak minute to the United States. The second key move is the rejigging of the delivery fee structure, originally designed to subsidise the FTNS operators while they built out their own local networks. Under the old regime, the three FTNS operators (Hutchison Telecom, New World Telephone and New T&T) received $2.23 from Hongkong Telecom for every minute of international traffic they generated. Most of this was callback and appeared as incoming traffic to Hong Kong. Telecom benefitted because it received from other international operators (usually in the US) a settlement for accepting those calls which was higher than the delivery fee. Ofta is proposing to break routes into two types according to whether they are available to operate ISR services. On ISR routes and potentially on routes that use part-ISR and part-refile, the delivery fee would be dropped in favour of using the local access charge as a way of helping to subsidise FTNS operators. On so-called category B routes - those where there is no competition available because ISR is not allowed - a new delivery fee calculation method is to be employed. The new fee will be equal to half of the rate settlement in payment after deducting the costs of external switching, transmission and domestic interconnection, plus the local access charge.