Consumer choices for residential broadband services are dwindling as resellers exit the market, citing tough competition with wholesaler PCCW. Resellers HKNet and So-net have quit the residential market, transferring their accounts to PCCW. This has left just a handful of resellers to compete with the big guys: PCCW, Hutchison Global Communications, Hong Kong Broadband Network and i-Cable. 'The wholesale price charged by PCCW represents up to 70 per cent of the total cost for an internet reseller,' said Lento Yip Yuk-fai, director of Netfront Internet Services, a reseller targeting the corporate market. 'This does not take into account other overheads such as rental for data centres, servers, one-off installation fees, upstream bandwidth charges and so on.' PCCW refused to comment. The company charges internet resellers $110 monthly per residential broadband line. Its Netvigator service is as low as $198 per month. 'With pricing like that, where is the margin for profit?' Mr Yip said. Hong Kong has 190 internet service providers, but just a handful provide access services to homes. HKNet deputy managing director York Mok did not expect resellers to be forced from the corporate market as there were a number of wholesalers in addition to PCCW. In the residential market, however, PCCW is the primary wholesaler. 'It's not that we don't want to choose other wholesalers. There simply is no choice in the residential market except PCCW,' said Mr Mok, who is also chairman of the Hong Kong Internet Service Providers Association. Industry players complain that the Office of the Telecommunications Authority (Ofta) has not done enough to provide a level playing field between PCCW and resellers. Ofta does not presume PCCW to be dominant in the wholesale broadband market, meaning it does not need the authority's prior approval to set wholesale charges. Consumer choice is further limited by the fact that the major players do not have full coverage of Hong Kong. According to Ofta, the combined networks of Hutchison Global Communications and Hong Kong Broadband reach just 53 per cent of the city. Although i-Cable's broadband services reach more than 90 per cent of Hong Kong, its download speeds are slow because users share a network. Ofta does not require fixed-line licence holders to open their networks to broadband resellers. 'In general, we rely on market forces to encourage fixed-telecom network services carriers to open their network for wholesale. If they do wholesale their network, they need to comply with anti-competitive provisions,' an Ofta spokesperson said. In November 2003, Ofta received a complaint which argued PCCW's fixed-line division was abusing its dominant position to unfairly squeeze margins in the residential broadband sector. But in September, Ofta said PCCW was not earning an excessive profit in the setting of wholesale broadband prices charged to rivals. Critics said the authority's move was out of touch with international developments. They pointed to Australia, where competition watchdogs were considering action against Telstra to force it to lower broadband wholesale prices in what might be Australia's biggest antitrust case. Matt Healy, a former director at the Australian Competition and Consumer Commission, said: 'The Hong Kong regulator may be out of step with other jurisdictions if it is not taking similar steps.'
