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Introduction

On 25 November 1998, a statement was made by the Telecommunications Authority on "Local Access Charge and Modified Delivery Fee Arrangements" (the Statement). In paragraph 37 of the Statement, it was stated that the Telecommunications Authority (TA) would set only the level of local access charge that could be imposed by Hong Kong Telecom (HKT) on the external services/gateway operators, due to its dominant position in the local service market. The other fixed telecommunication network services (FTNS) licensees (the new FTNS operators, i.e. Hutchison Communications Ltd., New T&T Hong Kong Ltd. and New World Telephone Ltd.) could set their own level of local access charges. In case the external services/gateway operators find the level of local access charge imposed by the new FTNS operators unreasonably high, the external services/gateway operators could seek a determination of the interconnection charge by the TA under section 36A of the Telecommunication Ordinance. In the determination of 30 December 1998, the TA set the local access charges which may be levied by HKT. The new FTNS operators proceeded to publish their local access charges under their licence conditions. In early February 1999, one external service operator made a submission to the TA, putting forward the view that the level of local access charge of the new FTNS operators is unreasonably high and asked the TA to make a determination.

Revision of Local Access Charge

2. In accordance with the "Procedures for Making Determinations on the Terms and Conditions of Interconnection Agreements" published by the TA, before the TA initiated the formal determination process, the TA invited representations from the new FTNS operators on why the TA should not make a determination on the local access charges of these operators. Submissions were received from the new FTNS operators, advising the TA that they would adjust their local access charge (transit) (LAC(T)) to the same level as that determined by the TA for the LAC(T) of Hong Kong Telecom, that is, 12.9 cents per occupancy minute, for incoming and outgoing external traffic of their directly connected customers and the effective date is 1 January 1999. In other words, the same rate of 12.9 cents per occupancy minute will be applied by all FTNS operators as the rate of its local access charge (transit) from 1 January 1999.

3. Although the three new FTNS operators have not made any commitments to reduce the local access charge (the LAC) for directly connected external service/gateway operators, a lower local access charge (transit) has indirectly set the ceiling for such charges. If the LAC is set at an unreasonably high level, external services/gateway operators may choose to be directly connected to the network of another FTNS operator, thereby avoiding the payment of the LAC to the former operator. With agreements from the new FTNS operators to set the local access charge (transit) level to not higher than 12.9 cents per occupancy minute, the TA considers that it is not necessary to proceed with the determination at this point in time.