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Speech by SITB at the Hong Kong Day of the Forum on City Informatization in the Asia Pacific Region in Shanghai

May 25, 2001

Following is a speech on "Hong Kong: Asia's Capital of Wireless Technology" by the Secretary for Information Technology and Broadcasting, Mrs Carrie Yau, at the Hong Kong Day of the Forum on City Informatization in the Asia Pacific Region in Shanghai today (May 25):

Deputy Director-General Zhao, Deputy Mayor Zhou, Vice Secretary Hu, Mrs Lai, Distinguished Guests,

I am most honoured to deliver the opening remarks for the Hong Kong Day of the City Informatization In the Asia-Pacific Region (CIAPR) Forum this morning. Let me first welcome our Mainland participants as well as those from other countries who attend the Forum and are interested in the Hong Kong Day, which is co-organized by the Information Technology & Broadcasting Bureau of the HKSAR Government and the Hong Kong Trade Development Council.

Hong Kong is very proud of our leading role in developing wireless technology and services. Credit should go to our mobile operators who are pioneers in applying new technology, who are always on the look-out for innovative service and content to please our astute consumers. Indeed, Hong Kong mobile consumers are amongst the most sophisticated compared with other communities. Competitive mobile services, in terms of quality and price, have spurred the take-up rate to 79 per cent of Hong Kong's population. Young and old, men and women, workers and students, now consider their mobile phone an essential service as other utilities. This creates tremendous business opportunity for the wider economy, paving way for the mobile Internet and M-commerce in the 2.5G world, as well as the 3G world.

Amidst all this excitement, I would like to congratulate the United Nations and the Shanghai Municipal People's Government for their foresight and efforts in organizing this forum. I hope to contribute to the discussions by sharing with you my thinking on the opportunities arising from wireless technology, and how Hong Kong can contribute to the development now and in the 3G world.

Opportunities Arising from Wireless Technologies

The potential of wireless technologies is undisputed. A small community like Hong Kong, which has made a head start in liberalization, has more mobile phone users, at 5.5 million, than the number fixed lines, business and residential combined, at 3.9 million lines. Mobile penetration continues to grow at a rate higher than fixed lines. In the year of 2000 alone, the mobile penetration rate grew from 59 per cent to 76 per cent at end 2000. Spending on mobile services has increased by more than ten-fold in the last five years, from slightly less than US$4 to US$46 for each household a month. We represent a fairly typical example of a city with an advance and competitive telecommunications industry. The figures for China, which is expected to become the world's largest mobile telecommunications market, are even more staggering. With an astonishing growth of 97 per cent in year 2000, 100 million people are mobile users, representing a penetration rate of 7.7 per cent. At the regional level, the penetration rate of Asian mobile market grew by 50 per cent in 2000, compared with the average growth rate of 31 per cent in the US. There can only be one conclusion: a formidable customer base has been formed in Asia and is growing at an unprecedented pace. It is now a matter of making sure that high value added mobile services and new applications reach these customers.

So we see, whether on a city, country or regional basis, the unparalleled expansion of wireless communications serving the average citizen and creating exciting business opportunities. On a social level, wireless technology provides a means of communication to remote areas yet to be reached by wirelines because of the prohibitive high capital cost. With the emergence of "Mobile Internet", we have a precious window to leap-frog the information gap. It is estimated that by end 2002, 700 million people will reach the Internet through mobile means. Some of these people may not ever own a computer or live near an optical fibre network. The telecommunications and information technology industries will play a pivotal role to ensure that the new generation of hardware, software and the wealth of information in the World Wide Web can be made to adapt to the mobile environment, not merely for buying or selling of goods and services, or facilitating communication, but addressing the Digital Divide, bridging the information-rich and information-poor.

Strategies for New Opportunities

To grasp the opportunities ahead, we in Hong Kong have strived to make ourselves a mobile telecommunications hub in the region. We have adopted a progressive liberalization policy under which there is no constraint on the number of mobile licences issued subject to availability of spectrum only. We have also introduced the first sector-specific pro-competition law in the telecommunications industry in June last year to provide the firm legal basis for a pro-competition regime. As a result, we have not only achieved ubiquitous mobile coverage over Hong Kong's territory, but also a highly competitive mobile market by all standards. Our six mobile operators are offering services with eleven networks operating on practically all technical standards. Prices are highly competitive, and I would say very reasonable (too reasonable according to our operators), at US0.9 cents a minute. Our key policies: "Competition" and "Open Market", have enabled a first class wireless infrastructure to be built in Hong Kong, delivering quality service to consumers.

Such wireless infrastructure will need to be supported by innovative services and applications. The Cyberport - which is our IT flagship project in Hong Kong - will have an important role to play. We believe the Cyberport will be able to draw companies with an edge in wireless service and applications to Hong Kong. Construction works are now progressing well, in time for the Cyberport to open in phases in the next two years. We will provide a state-of-the-art information infrastructure capable of providing secure and seamless fibre-optic connectivity at the Cyberport. There will also be a Wireless Local Area Network to provide wireless connectivity throughout the development.

The Cyberport will attract, and retain, a strategic cluster of 150 to 200 companies. These will be multinational, overseas and local corporations which specialize in applications of information technology, information services and multimedia content creation. Some of their productions may take wireless technologies and services to a new height. We are also in discussions with the prospective tenants and other interested parties in developing suitable and useful academic programs to nurture talents at the Cyberport, including manpower for wireless applications.

Opportunities Ahead: Third-generation mobile services (3G)

Having given you my views on how we have capitalized on the opportunities to date, we need to set our eyes on the future. There is no escape but to talk about 3G service. There has been much hype with the advent of 3G. The market downturn to some extent forced the investors and financiers to re-think their whole business case, which is no bad thing from the perspective of the long-term health of the 3G industry. In Hong Kong, we are ready to issue four 3G licences before the end of the year. In pursuance of the objectives of promoting the development of telecommunications industry, to protect consumers' interest and to maximize benefits to the society as a whole, we have decided to adopt a hybrid method to award four 3G licences. There will be a pre-qualification exercise to ensure the quality of the 3G network. This will be followed by a spectrum auction based on a royalty percentage to award the spectrum in a fair and efficient manner. We have opted for a royalty scheme rather than a cash auction in face of the market downturn and the investment risk in 3G business. We believe the Hong Kong SAR Government has responded positively to market realities.

We have also spearheaded the introduction of the "Open Network Requirement" whereby 3G licensees must make available at least 30 per cent of their network capacity to Mobile Virtual Network Operators and content providers. This means that even small content operators may have access to the 3G network to provide attractive and innovative services to their customers. We firmly believe that this will provide a vibrant and competitive environment for content and service applications to flourish on the 3G platform, making the 3G phone the most powerful and versatile information and communications tool in the next century.

Conclusion

The new generation of wireless technology gives the Information World a new definition, a new meaning. It goes beyond crossing physical boundaries. New forms of communication and new means of access to information will change how we work and live. We must anticipate the changes ahead and get ready for the exciting development of truly boundless communications across Asia.

Finally, I look forward to the exchanges we will have on this important issue in the ensuing discussions. The program today is excellent and we have a team of distinguished speakers who are leaders in their own field. The holding of Hong Kong Day brings the industries of Mainland and Hong Kong together to share our vision in the future development of wireless technology and how we could work together to create synergies. It also allows Hong Kong industry to position itself so that we could contribute effectively and positively to the development of wireless technology in the Mainland, especially when China enters into the World Trade Organization. I wish you all have a fruitful gain from the Hong Kong Day.

Thank you.