The future of Hong Kong's pay-TV market was thrown into confusion yesterday after telephone operator City Telecom (CTI) revealed that the government would allow it to offer Internet-based pay-TV services without a broadcast licence. CTI chairman Ricky Wong Wai-kay said the government's Information Technology and Broadcasting Branch (ITBB) had exempted CTI's Internet business unit, Hong Kong Broadband Network (HKBN), from the licensing requirement, which stipulates that pay-TV operators pay an annual fee of HK$1.37 million plus HK$4 for every subscriber. According to HKBN, the ITBB granted the exemption because the company's pay-TV service is based on an open Internet platform. Quoting the Broadcasting Ordinance, the company said that 'services not to be regarded as television programme services' include 'any service provided on the service commonly known as the Internet'. HKBN hopes to launch its pay-TV service by June, providing up to 180 channels. An ITBB spokesman said current legislation allowed companies to roll out Internet-based pay-TV services without having to apply for a broadcasting licence. The spokesman added that HKBN was not the only firm to be exempted from obtaining a licence. 'Hong Kong Broadband is not the only one to provide video content through the Internet,' the spokesman said. He said other Internet providers, such as PCCW's NOW.com, were also exempted from a pay-TV licence. However, industry players and analysts expressed surprise at the ITBB's ruling. 'I am very surprised they can offer the service without a licence,' said HSBC analyst Anne Ling. Merrill Lynch analyst Agnes Ho added: 'It seems unfair. I don't think the others will let it go.' An incredulous Stanley Tang See-tin, general manager of pay-TV operator Galaxy, asked: 'Are you really sure [HKBN does not need a licence]? Have you checked with the government? 'As technologies and industries converge, the government, as a regulator, should always review its legislation and make sure it keeps pace with changing technologies.' After the revelation, the government confirmed that it was preparing a review of its regulatory framework for the broadcasting industry, including the pay-TV licensing system. 'We will take into account market changes and advances in technology when we review the regulatory framework,' the ITBB spokesman said. 'There is no timetable for the review, but it will definitely take place this year.'