The government has agreed to accelerate the phasing out of its mandatory fixed-line and broadband interconnection policy after intense lobbying by dominant carrier PCCW. In a compromise decision, the compulsory network leasing policy will be completely rolled back by June 2008, instead of 2010 under the original proposal. The Executive Council endorsed the new policy yesterday. 'We listened to operators' opinions and had discussions with them,' Secretary for Commerce, Industry and Technology John Tsang Chun-wah said. 'We believe this is a balanced policy that can encourage operators to invest in self-built networks and, secondly, protect consumer interest and maintain competition.' The phase-out will start on October 1 and finish in June 2008. However, buildings that have more than one network - about 53 per cent - will be withdrawn from the interconnection scheme, known as Type II, at a faster pace of three years. In the first two years, operators can continue to lease PCCW's network to sign up new customers. This is to ensure no service disruptions while rivals build their own 'last-mile' connections. In the third year, no new customers can be connected, although existing customers can continue to be served on PCCW's leased network. To ensure consumer choice in remote areas where it is not economically viable for rivals to build a competing network, PCCW will still be obligated to lease its last-mile connection. This will apply to 20 to 25 per cent of the buildings in Hong Kong, according to the Office of the Telecommunications Authority. 'Our decision to withdraw Type II interconnections will send a clear signal to operators to invest in advanced networks and allow reasonable time for them to adjust their business strategies and carry out the roll-out work should they so decide,' Mr Tsang said. But the government's concession did not leave everyone satisfied. PCCW welcomed the decision to phase out compulsory interconnections over a shorter period, but was worried the implementation arrangement was too complex and said administrative difficulties might lead to disputes and delays. Wharf T&T vice-president Raymond Mok Wai-man was disappointed by the shorter phase-out period, saying it would deprive consumers of choice. He said Wharf planned to ask Ofta to determine whether PCCW had charged too much for interconnections. 'We may recover $100 million in overcharges from PCCW,' Mr Mok said, adding the money would be used to expand the firm's network. PCCW typically charges a minimum $2 million for site preparation work, $475 per line for installation and $42 in rental per month. Lehman Brothers analyst Peter Milliken said operators should be pleased with the compromise policy, despite its imperfections. 'Wharf and New World should be happy given they still have a long lead time [to build their own networks]. PCCW is happier but they will not open the champagne yet.' Mr Milliken estimated PCCW had lost about 20 per cent of its market share over the past four years. HGC chief executive Peter Wong King-fai said: 'This is a better than nothing deal.'