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LCQ11: Government's broadcasting and telecommunications policies

Following is a question by the Hon Claudia Mo and a written reply by the Secretary for Commerce and Economic Development, Mr Gregory So, at the Legislative Council meeting today (December 11):


The Government has earlier decided that a gradual and orderly approach should be adopted in introducing competition into the free television (TV) market and it thus refused to approve all three applications for domestic free TV programme service licences (TV licences). On the other hand, on the ground that there are intense competing demands in the telecommunications service market for the 2 x 59.2 MHz of paired spectrum in the 1.9 - 2.2 GHz band (3G Spectrum), the authorities have decided to re-assign a portion of the 3G Spectrum by way of auction upon the expiry of the existing assignments in October 2016. Some views query that the Government has adopted double standards in handling TV licences and the assignment of 3G Spectrum, and the reason behind such a move is to provide tailor-made business environments to individual TV and telecommunications service operators. In this connection, will the Government inform this Council:

(a) as it has been reported that in response to the allegation of adopting double standards, a senior official had indicated that the TV market should not be compared with the telecommunications service market given the different developments of the two markets, of the specific differences between the developments of the two markets, which have caused the Government to formulate entirely different long-term development policies for them;

(b) as the authorities have reportedly said that should there be five free TV operators in the market, it will ultimately lead to the closure of several TV operators at the same time, bringing shocks to society, whether the authorities' not giving approval to all three TV licence applications was aimed at protecting individual TV operators which are less competitive from closing down; if so, of the details and the reasons for that; if not, whether it has assessed if the decision on TV licence applications made by the authorities has interfered with free market operation and obstructed fair competition;

(c) as the managing partner of the consultancy firm which wrote the reports on TV market for the Government had disclosed to the media that she had asked the authorities several times if it was necessary to update the consultancy reports regarding information on the market and the applicants, so that the authorities might make decisions on TV licence applications based on the most updated information, why the authorities have all along not requested the consultancy firm to update the consultancy reports; given that the consultancy firm had openly questioned certain approaches adopted by the authorities in handling TV licence applications, whether the authorities will penalise the consultancy firm by never hiring it again; and

(d) whether it has assessed if state-owned enterprises with abundant funds will pocket all the re-auctioned 3G Spectrum, as well as the implications of such a situation on the public; if so, of the details; if not, the reasons for that?



My reply to the four-part question is as follows:

(a) Domestic free television programme services (free TV) and telecommunications services are subject to different licensing regimes, governing legislations and regulatory frameworks. Besides, while the Government's broadcasting and telecommunications policies have all along encouraged competitions, the present conditions and pace of development of these two different markets vary from each other. We therefore consider it inappropriate to make a direct comparison between these two markets.

(b) On October 15, 2013, the Government announced that, under the gradual and orderly approach in introducing competition into the free TV market, the Chief Executive (CE) in Council had decided to grant approval-in-principle to the applications of Fantastic Television Limited and HK Television Entertainment Company Limited for a free TV licence (the Decision). By virtue of the Decision, the number of free TV stations is expected to double from two to four, with an addition of four more free TV channels. It is the first time in nearly four decades that more competition will be introduced into the free TV market. The Decision could reap the benefits of introducing competition into the free TV market, and at the same time ensure a healthy and orderly development of the market for the protection of public interest. The Decision is not meant to protect the interest of existing licensees.

(c) The consultant's reports on the impact of introducing new competitors on the competition environment of the free TV market (the Consultant's Reports) are but one of the many factors the CE in Council had taken into account when considering the three free TV licence applications. The Government has never stated that the Decision was the recommendation of the Consultant's Reports. Apart from matters in relation to the Consultant's Reports, the consultant was not involved in other procedures in processing the three free TV licence applications, including rounds of representations submitted by the applicants. We consider that the consultant's recent public remarks on the Decision are probably based on incomplete information and misunderstandings about the Decision and the Government's explanations. We have openly expressed that it is very regrettable for the consultant to choose to express its views in public discussions, hence causing confusion to the public.

Based on the business plans and estimations submitted by the three applicants, the consultant assessed the impact on the free TV market in Hong Kong if licences were to be granted to them. The consultant's findings indicated that the local free TV market could hardly sustain a total of five players. The Communications Authority (CA)'s and the Government's understandings of the consultant's findings are the same. The CE in Council had considered all relevant factors, including but not limited to the Consultant's Reports, all representations submitted by the relevant parties subsequent to the completion of the Consultant's Reports and the latest market situation, before making the Decision based on adequate information.

The Government's practice is to commission outside consultants as necessary to provide analysis and advice on particular issues, and to procure such consultancy service in accordance with the Stores and Procurement Regulations.

(d) The mobile telecommunications market in Hong Kong has all along been open to all without restriction on ownership by non-domestic capital. Judging by past experience in spectrum auction, the situation mentioned in the question does not arise. Moreover, to ensure a level playing field, the CA has already decided to impose a 40MHz spectrum cap to all spectrum assignees in this spectrum reassignment, so as to limit the amount of spectrum in the 1.9-2.2 GHz band to be held by each operator.

Wednesday, December 11, 2013