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Speech by Mrs Carrie Yau, Secretary for Information Technology and Broadcasting moving the Second Reading of the Telecommunications (Amendment) Bill 2001 in the Legislative Council on 14 February 2001

February, 14 2001

Madam President,

I move the second reading of the Telecommunications (Amendment) Bill 2001.

Background

Under the Telecommunications (Amendment) Ordinance 2000 (Cap 106) passed by the Legislative Council in June 2000, the Telecommunications Authority is empowered to issue various telecommunications licences under section 7, including the carrier licences for third generation (3G) mobile services, and allocate frequencies of the radio spectrum under section 32H. Section 32I provides that the Secretary for Information Technology and Broadcasting (SITB) may by regulation prescribe the level of, or the method for determining, the spectrum utilization fee which is above the simple recovery of cost of government service. There is however no express provision to empower the Telecommunications Authority (TA) to consider the payment of spectrum utilization fees in issuing telecommunications licences and in allocating spectrum, as would be required in a licensing or allocation exercise where spectrum auctioning is involved.

As regards the licensing of third generation mobile services (3G), we have widely consulted the industry and the community in March and October last year respectively. Following the consultation, we announced yesterday (13 February) our decision to issue four licences for 3G mobile services by a pre-qualification exercise followed by spectrum auctioning. We believe that this method will be generally accepted by both the industry and the public. Given that this is the first time spectrum auctioning is involved in issuing telecommunications licences in Hong Kong, and taking into account the recent experience of European auctions for the 3G licences, we propose to make some technical amendments to the Telecommunications Ordinance to provide a firm legal basis for the chosen licensing method.

Objectives of the Bill

The proposed amendments to the Bill aim at clarifying the power of the TA and SITB in spectrum auctions and tenders. Specifically, the Bill has two main objectives as follows:

  • Firstly, the Bills seeks to remove any uncertainty on whether the TA has the power, in issuing licences and allocating spectrum, to take into account considerations such as the spectrum utilization fees of qualified bidders in a spectrum auction; and

  • Secondly, the Bill will establish clearly the respective roles of SITB and the TA. SITB will prescribe the level of, or the method for determining, the spectrum utilization fee (e.g. by cash or royalty auction), and the TA to set the terms and conditions of the auctions and tenders apart from issuing licences and allocating spectrum.

Main Provisions of the Bill

Now let me go on to brief Members on the major provisions of the Bill.

Clauses 2 and 3 amend Sections 7 and 32H of the Ordinance to expressly provide that, in issuing licences or assigning spectrum frequency, the TA is empowered to regard the fees arising from the auction, tender or other methods under Section 32I(2)(b) as a determining factor. This aims to stipulate clearly the relevant considerations that the TA may take into account in exercising his power.

Clause 4 amends Section 32I of the Ordinance to clarify that SITB will prescribe by Regulation the level of spectrum utilization fees, or the methods for determining the spectrum utilization fees, including auction, tender or any other method she thinks fit. The Regulation may also empower SITB to specify the minimum amount of the fees. In case of an auction or tender, the Regulation may empower the TA to specify the terms and conditions of the auction or tender. Breaches of these terms and conditions may lead to penalties including disqualification, forfeiture or enforcement of the security lodged, and where the applicant has already obtained the licence, cancellation, withdrawal or suspension of the licence. Such penalties are intended to serve as a deterrent against collusion or other malpractices during and after the bidding process which are detrimental to public interest. To prevent the abuse of this avenue for delaying or challenging the grant of licence by a dissatisfied bidder, the newly added Section 32I(6) provides that such power could only be exercised by the TA if the complaint is made by the bidder within three months after the date on which the outcome of the exercise has been publicly announced.

Lastly, Clause 5 amends Section 34 of the Ordinance to expressly exclude from consideration by the TA and the Chief Executive in Council the payment of spectrum utilization fees under Section 32I of the Ordinance or other licence fees a licensee may have already made when they exercise their power to cancel, withdraw or suspend any licence. This is to avoid undermining the effectiveness of the deterrent power under Section 34. Moreover, the Clause also provides that, like other licence fees, no spectrum utilization fees would be refunded.

Conclusion

The Telecommunications (Amendment) Bill 2001 is an important Bill proposing technical amendments to the Ordinance. It aims to provide a firm legal basis for the 3G licensing exercise and any future licensing exercises involving the payment of spectrum utilization fees.

To tie in with the grant of licences for 3G mobile services, we plan to finalize as soon as possible the proposed Regulation to be made by SITB under the new Section 32I(2) after tabling the Bill to the Legislative Council. The Regulation is to prescribe the method of spectrum auctioning based on royalty payment, subject to a minimum guaranteed payment, as we announced yesterday. We intend to make public the proposed Regulation shortly not only to allow the Legislative Council to consider the proposed Regulation in conjunction with the Bill but also make clear to the interested bidders the legal basis on which the 3G licences will be granted. The Regulation will implement the chosen method which, as I mentioned yesterday, is the best way to balance the views of various parties after the extensive consultation we had conducted, taking into consideration the fast changing developments in global telecommunications market, as well as the characteristics of the Hong Kong market. It best meets our policy objectives and is in line with the long term interests of Hong Kong.

The enactment of the Bill is the prerequisite to the invitation of applications for the licences for 3G mobile services. I therefore appeal to this Council's support in passing the Bill as soon as possible. The timely issue of 3G licences will allow Hong Kong to enjoy 3G services at the same time as other advanced economies and hence keep Hong Kong in the forefront of the mobile services of Asia.

I hereby commend the Bill to the members.