Thoughts from the Legal Front
Vital Opportunity for Telecoms
Vital Opportunity for Telecoms<br/>電訊業的重要機遇

As this Chamber has consistently pointed out, business regulations need to be regularly reviewed, and amended or withdrawn in the light of changing market circumstances. Otherwise unnecessary costs and red tape will be imposed on businesses, which may ultimately be passed on to consumers. This is particularly true in a very fast-moving sector such as telecommunications, where regulations that may once have been fit for purpose may quickly become outdated due to changes in technology, or the competitive environment.

This is not just a matter of importance to companies in the telecoms sector. Advanced telecommunications services are vital to Hong Kong’s continued success as an international business and finance centre, and to realize the Government’s objective of making Hong Kong a smart city.

The Commerce and Economic Development Bureau (CEDB) appears to have acknowledged these facts in its recent consultation paper “Review of Telecommunications Regulatory Framework.” But do they go far enough?

Bearing in mind that the last major review of the Telecommunications Ordinance was 19 years ago, this latest review is long overdue. However, it is surprising to see that the consultation paper proposes only four, relatively modest, changes to the existing legislation. And none of the proposed changes involve removing provisions that have become redundant in the hugely different market circumstances which exist now. The proposals are, in summary:

  • Given that 5G technology will enable communication between a wide range of devices (not just mobile handsets), to clarify that the Communications Authority will regulate the telecommunications component of such devices;      
  • Imposing a new criminal offence for negligently damaging underground telecommunications cables;
  • Simplifying the issue of non-carrier licences; and
  • Specifying the list of Communications Authority decisions that can be appealed to a new appeal board.    

    In contrast, the Chamber presented a submission to the Government before the consultation paper was issued in which it identified at least 11 legal requirements which should  be withdrawn because any purpose that they had served in the past no longer exists. On the contrary, these requirements impose an unnecessary administrative burden on businesses. 
For example:

  • Telecoms operators are required to notify all of their prices, and any amendments to those prices, to the Office of the Communications Authority (OFCA), for publication; and
  • Telecoms operators are required to notify all of their interconnection agreements (which enable communications from the customer of one operator to be transmitted to the customer of another), and any amendments to those agreements, to OFCA, for publication.

Apart from the unnecessary burden and costs these obligations impose, it is difficult to see how they are (a) compatible with the spirit of the Competition Ordinance, which strictly requires competitors not to disclose their prices or commercial arrangements to each other; and (b) necessary, in a telecommunications market which the Communications Authority regularly states is one of the most competitive in the world. And yet there is no proposal to abolish these requirements in the consultation paper, or justification for their retention.

This leads to another important point. In a comprehensive review of existing legislation, one would expect each legislative requirement to be analysed, and a case made for its retention, amendment, or withdrawal, in the form of a cost/benefit analysis. The consultation paper does not do so. Instead, it simply makes four proposals for amendment, without any cost/benefit analysis for any of them.

In November, the Chamber hosted a conference at which senior officials from the U.K.’s Regulatory Policy Committee explained, to an audience comprising many Hong Kong government officials, how such a comprehensive review (a Regulatory Impact Assessment, or RIA) should be undertaken. It involves four key questions:

  • What is the problem which the legislative provision is seeking to address?
  • What are the objectives it is seeking to achieve?
  • What are the options to achieve the objectives? (Apart from legislation or self-regulation, other possible options, including doing nothing, should be analysed).
  • What are the costs and benefits of each option?

While not following precisely this methodology, the Office of the Privacy Commissioner for Personal Data has published its own methodology for reviewing privacy legislation:

  • The purpose of the legislative restriction must be legitimate;
  • There is a reasonable connection between the legislative restriction and the legitimate purpose;
  • It is entirely necessary to impose such restriction to achieve the purpose;
  • A reasonable balance should be struck between legislative protection and the overall benefits of the community;
  • The interests of all stakeholders should be considered;
  • The local circumstances should be taken into account alongside the global development; and
  • The legislative restriction should not hinder development of information communications technology and the economy.

Whether the U.K. approach or the Hong Kong Privacy Commissioner’s approach is adopted, either would almost certainly produce a far greater number of necessary changes to the Telecommunications Ordinance than the four changes that the current consultation paper proposes.

It is hoped that CEDB will consult the public on a more comprehensive review of the Telecommunications Ordinance, on the lines discussed above, before submitting its final list of proposed amendments to LegCo. Amending legislation is a cumbersome process in any jurisdiction, and the opportunity to do so does not happen very often. It is vital that we seize this opportunity.