ENG-1998 — Page 414

COMMUNICATIONS, THE MEDIA & INFORMATION TECHNOLOGY

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Local Fixed Telecommunication Network Services

Hong Kong's businesses and consumers rely heavily on telecommunications services. Hong Kong had 4.8 million telephones served by more than 3.7 million exchange lines at the end of 1998. The telephone density was 71 telephones or 54 exchange lines per 100 population the highest in Asia and one of the highest in the world.

Many data communication services are available in Hong Kong. By the end of 1998, there were more than 359 779 dedicated facsimile lines.

Since deregulation of the Fixed Telecommunication Network Services (FTNS) market in July 1995, the three new FTNS operators Hutchison Communications Limited, New T & T Hong Kong Limited and New World Telephone Limited have rolled out their networks and introduced many new services for both residential and business customers to compete with the dominant operator, a group of companies under Hong Kong Telecommunications Limited (HKT).

External Telecommunications Services

Following an agreement made between the government and HKT, HKTI surrendered the exclusive licence in March 1998, eight years ahead of its expiry in 2006. As a result, HKTI's franchise on the provision of certain external circuits and services, including external public telephone services and television connections; domestic and external telex and telegram services; external private leased circuits; and shore-to-ship and ground-to-air communications from Hong Kong, will come to an end. External services-based competition will begin on January 1, 1999, and external facilities-based competition on January 1, 2000.

The government conducted a review during the year on issues relating to the fixed telecommunications market in Hong Kong. After two rounds of public consultation, the government decided to issue licences for services-based external telecommunications freely based on market demand, for operation from January 1, 1999. By the end of 1998, 26 such licences had been issued for the provision of external telecommunications service. On the other two major issues of the review the licensing of external facilities-based operators and the moratorium on the issue of further local FTNS licences - the government was studying the submissions received in response to the consultation exercise and will make the policy decisions in early 1999.

Public Mobile Radiotelephone Service

The provision of public mobile telephone services, including personal communications services (PCS), has been highly competitive. During the year, Hong Kong Telecom CSL Limited acquired Pacific Link Communications Limited and SmarTone Telecommunications Holdings Limited acquired P Plus Communications Limited. This consolidation left three major operators of both cellular and PCS services and three new PCS operators which are rapidly developing their networks and improving their capability to compete. By the end of 1998, these companies operated 11 digital systems serving a total of 2 858 100 customers. This represents a penetration of about 42 per cent and an annual growth of 37 per cent.

In August 1998, the TA announced the implementation of mobile number portability from March 1, 1999. This will remove a remaining barrier to fully effective competition in the mobile phone market.