Profiles of Hong Kong Major Service Industries

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Last updated: 12 September, 2008

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Telecommunications



Overview
  • Hong Kong's role as a leading business centre in the Asia-Pacific region owes much to its advanced telecommunications infrastructure, which facilitates domestic and international communications by voice or data. The role of telecommunications is especially vital to Hong Kong's competitiveness in the age of electronic commerce. The industry's contribution to GDP at current factor cost was 1.8% in 2006.

  • Digital 21, the blueprint for Hong Kong's information and communication technology (ICT) development, was updated in 2008. The updated document highlighted five action areas: (1) Facilitating a digital economy; (2) promoting advanced technology and innovation; (3) developing Hong Kong as a hub for technological cooperation and trade; (4) enabling the next generation of public services; and (5) Building an inclusive, knowledge-based society.

  • Internationally, Hong Kong's broadband penetration rate is among the highest in the world - 76% of the households are using broadband service.

  • The advanced technology and quality services of Hong Kong's telecommunications sector attract multinational companies to choose Hong Kong as their hub for telecommunications services in the region.

  • Hong Kong's telecommunications industry is totally privately owned and faces no restriction on foreign investment. All telecommunication services are open for competition.

  • With the opening up of the telecommunications market in most countries, many Hong Kong operators have gained a foothold in overseas markets, particularly in the mobile phone sector. For example, Hutchison operates 3G mobile phone services in many countries under the brandname "3".

  • In the Global Information Technology Report 2007/08 by World Economic Forum, Hong Kong ranks third in Asia (11th in the world) in the Network Readiness Index, indicating Hong Kong's advance position in telecommunication infrastructure, regulatory environment, and business readiness of using information technology.

Industry Data

-

Q4, 2007

No. of Establishments

334

Employment

17,353

Source: Statistical Digest of the Services Sector, Census and Statistics Department


Business Receipts (HK$ billion)

-

2002

2003

2004

2005

2006

Telephone and telegraph services

22.6

19.8

20.0

19.5

18.2

Mobile phone services

14.8

16.1

16.4

16.1

16.6

Other telecommunications services

11.2

12.0

13.3

16.6

19.4

Total

48.6

47.9

49.7

52.2

54.2

Sources: Report on Annual Survey of Storage, Communication, Financing, Insurance and Business Services (2002-2006), Census and Statistics Department


External Telephone Traffic Volume (million minutes)

-

2004

2005

2006

2007

Total Outgoing Calls (million minutes)

4,937

5,638

6,542

7,239

Total Incoming Calls (million minutes)

2,037

2,168

2,233

2,262

Source: Office of the Telecommunications Authority


Local Fixed Telecommunications Network Services (FTNS): The FTNS market has been fully liberalised since 1 January 2003, with no pre-set limit on the number of licences issued, nor specific requirement on network rollout or investment. There were eleven companies licensed to carry out FTNS as at January 2008. As of December 2007, there were about 3.8 million exchange lines in the city, a density of 95 lines per 100 households or 55.8% by population, which was among the highest in the world.

Mobile Services: As at January 2008, there were 14 digital networks operating in the 800/900 MHz (Megahertz) bands (4 networks), 1,700-1,900 MHz bands (6 networks) and UMTS bands (4 networks). In December 2007, the number of mobile service subscribers reached 10.6 million, representing one of the highest penetration rates in the world at about 152%. Among these subscribers, two million were 3G service customers.

Broadband Services: As at January 2008, there were 171 Internet Service Providers (ISPs) licensed to provide broadband services. More than 1.87 million customers are using broadband services with speed up to 1,000 Mbps (Megabits per second), accounting for over 26% of the total population. In the residential market, 76% of the households are using broadband service. Internationally, Hong Kong's broadband penetration rate is among the highest in the world. This has facilitated the development of IPTV - as at end-December 2007, there were nearly one million IPTV subscribers.

The International Direct Dialling (IDD): International Direct Dialing (IDD) service to most countries and regions of the world is available. In the year ended December 2007, the volume of outgoing and incoming traffic for telephone calls were 7,239 million minutes and 2,262 million minutes respectively. Cost of IDD calls has gone down significantly since January 1999, when fixed-line operators were allowed to offer non-exclusive international services.

Satellite: There were six licensees operating satellite-based external fixed network facilities in Hong Kong as at January 2008, with more than 60 satellite earth station antennas in operation. Hong Kong adopts an open sky policy in regulating the provision of satellite services, with APT Satellite Co Ltd, Asia Satellite Telecommunications Co Ltd, etc as the main service providers. Hong Kong provides dedicated relay services for multinational companies, international press agencies and TV channels to downlink or uplink their satellite signals over the Asia Pacific region.

Submarine Cable: Hong Kong is connected to a number of submarine cable systems, including: (re-arranged into bullet points only)

  • The Okinawa-Luzon-Hong Kong system connects Hong Kong to the Philippines, Japan and North America.
  • The Singapore-Hong Kong-Taiwan system links Hong Kong with ASEAN countries, Australia and Europe.
  • The Hong Kong-Japan-Korea (H-J-K) system connects Hong Kong, Japan, South Korea and North America.
  • The Hong Kong-Taiwan (HONTAI-2) optical fibre cable connects Hong Kong and Taiwan.
  • The Asia Pacific Cable (APC) system links Hong Kong to Malaysia, Singapore, Taiwan and Japan.
  • The Thailand-Vietnam-Hong Kong (TVH) system connects Hong Kong to Thailand and Vietnam.
  • The Asian Pacific Cable Network (APCN) system connects Hong Kong to Taiwan, Korea, Japan, Thailand, the Philippines, Malaysia, Singapore, Indonesia and Australia.
  • The Fibre-optic Link Around the Globe (FLAG) connects Hong Kong to Thailand, Shanghai, South Korea, Japan and other countries around the world.
  • The SEA-ME-WE-3 cable connects Hong Kong to various countries in South East Asia, Middle East and the Western Europe.
  • The Asian Pacific Cable Network 2 (APCN2) connects Hong Kong to the Chinese Mainland, Taiwan, Korea, Japan and other Asian countries.
  • C2C Network connects Hong Kong to the Philippines, Taiwan and Singapore.

Seven overland systems have been put into operation to service the growing traffic between Hong Kong and China.


Exports

The main form of cross-border exports of telecommunications services is through incoming calls from another country, in the form of revenue collected for the service of completing the call.

Other export incomes are derived from:

  • offering roaming services to overseas mobile phone users;
  • selling satellite transponder capacities to other telecommunications operators, broadcasting and multinational corporations to meet their regional communications, broadcasting and international communications needs;
  • consultancy services (e.g. technology transfer and training programmes) to overseas customers; and
  • telecommunications services provided to travellers to Hong Kong.

With the opening up of the telecommunications market in most countries, many Hong Kong operators have gained a foothold in overseas markets, particularly in the mobile phone sector. For example, Hutchison Telecom has won 3G mobile licences across different countries (e.g. UK, Denmark, Italy, Sweden, Norway, New Zealand, Australia and Austria). Many other operators have invested in the development of telecommunications networks in Asia, including India, Indonesia, the Philippines, Taiwan and Australia.

The bulk of Hong Kong's international call traffic is now with the Chinese mainland. International private leased circuits are offered to several mainland gateway cities, while some operators provide roaming services to mobile phone and pager users when they are on the mainland.


Exports of telecommunication services (HK$ million)

-

2002

2003

2004

2005

2006

Exports - Telecommunication services

4,789

5,073

5,452

5,320

4,396

Sources: Report on Hong Kong Trade in Services Statistics for 2006, Census and Statistics Department


Industry Development and Market Outlook

Local industry developments

  • As of end-June 2008, mandatory type II interconnection policy has been withdrawn. Type II interconnection is a regulatory tool widely deployed in the world, requiring the incumbent fixed network operator ("FNO") to open up its copper-based customer access network (CAN) to new entrants so that the latter may provide competing service to customers in the start-up phase when their own self-built CANs are not as extensive as the incumbent's. Now over 80% of households have the choice of more than one FNO.

  • Digital terrestrial television services (DTT) was successfully launched in December 2007. It is estimated that over 75% of the population had had access to DTT signals as of August 2008.

  • In January 2006, the Telecommunications Authority introduced a new licence for Internet Protocol (IP) telephony services, facilitating the availability of greater choices of innovative telecommunications services for consumers' benefits.

  • MATV, operated by Mei Ah Entertainment, has launched a 24-hour TV channel showing its movies in Japan since March 2008, following a similar achievement in Singapore last year.

  • Some public utilities companies, such as China Light and Power, Hong Kong and China Gas, as well as Mass Transit Railway, have diversified into the telecommunications business by utilising their physical infrastructure in Hong Kong.

Macro-trends in the industry

  • "Going wireless" continues to gain momentum in the global consumer market - according to the GSM Association, mobile networks will provide coverage to 90% of the world's population by 2010, compared with 80% in 2006.

  • Mobile broadband is expected to become more common. According to Screen Digest, mobile broadband speed is expected to reach 14.4 mbps by end of 2008, and 28.8 mbps in 2009.

  • With larger bandwidth, mobile TV has great development potential. Hong Kong may release up to 26 channels for bidding of mobile TV service by 2009, and such service may be able for launch by 2010.

  • The mobile phone has been increasingly integrated into users' daily life. Services and functions that can be done through the mobile phone include payment, receiving news, exchanging files, music, and movies, trading, etc.

The China market

  • The restructuring plan for China's telecom market was confirmed in May 2008. Under the plan, China Telecom shall acquire the CDMA network of China Unicom, and China Unicom will merge with China Netcom. China Mobile shall merge with China Tietong. Hong Kong-listed Tencent Holdings Ltd, is one of the major mobile and internet value-added service providers on the mainland.

  • According to the Ministry of Industry and Information Technology (MIIT), total fixed investment in the telecommunications sector reached Rmb 113.6 billion as of June 2008, up 9.9% YOY. For the first six months of 2008, total revenue of the industry reached Rmb 398.9 billion, up 9.2% YOY.

  • As of June 2008, China had 600.8 million (45.6 subscribers per 100 persons) mobile phone users and 356.3 million (27 subscribers per 100 persons) fixed line phone subscribers.

  • As of July 2008, China Mobile is the largest mobile phone operator on the mainland, with 421.7 million subscribers; while China Telecom is the largest fixed-line operator, servicing 214.3 million local access lines as of the same period. China Telecom is also the largest broadband service provider on the mainland, with 40.8 million subscribers as of July 2008.

  • The first-phase testing of the China-developed 3G standard, the TD-SCDMA, which initially covered 10 cities, has completed. The second phase shall cover 38 cities is expected to commence in June 2009.

The Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

Under CEPA, Hong Kong companies can set up joint venture enterprises on the mainland starting from 1 October 2003 to provide 5 types of value-added telecommunications services without geographic restriction. These services include Internet data centre services, store and forward services, call centre services, Internet access services (ie ISP) and content services (ie ICP). Hong Kong services suppliers' shareholding in the joint venture should not exceed 50%.

From January 2008, Hong Kong service suppliers can additionally provide mainland-IP-based Virtual Private Network (VPN) services as defined in the Telecommunications Business Classification in the form of a joint venture, with the Hong Kong service supplier holding a stake of not more than 50%.

As at end-July 2008, there were 32 approved Hong Kong services providers in the sector of value-added telecommunications services, out of a total of 36 applications.

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