Hong Kong CSL Limited s submission. in response to the consultation paper released by the Office of the Telecommunications Authority on:

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1 Hong Kong CSL Limited s submission in response to the consultation paper released by the Office of the Telecommunications Authority on: Regulation of Internet Protocol (IP) Telephony 22 December Introduction 1.1 Hong Kong CSL Limited ( CSL ) is pleased to comment provide its comments in response to the consultation on Regulation of Internet Protocol (IP) Telephony issued by the Office of the Telecommunications Authority ( OFTA ) on 4 October 2004 ( Consultation Paper ). 1.2 The comments set out in this response are only CSL s initial views about internet protocol telephony ( IP Telephony ) as the Consultation Paper focuses primarily on IP Telephony from a fixed telecommunications perspective. IP Telephony is as much a wireless as a fixed telephony service as access by wireless or mobile means can be demonstrated now and will become more prevalent in the future. As a consequence, IP Telephony should not be viewed merely as a fixed line replacement or associated service as it is also a wireless service which has value-added features unrelated to existing fixed telephony services. In the 3G wireless environment, when full internet protocol ( IP ) core networks are realised, the role of the mobile carriers will be analogous to that of wireless internet access providers. In this scenario, the wireless mobile device will be an IP device, similar to a personal computer ( PC ) connecting to an IP network. 1.3 As the Consultation Paper does not adequately recognise or contemplate the wireless aspects of an IP Telephony service, CSL strongly urges OFTA to conduct further industry consultation on this issue and in particular suggests that a wireless industry forum be held so that 3G mobile carriers ( MCs ), 2G mobile network operators

2 ( MNOs ), mobile virtual network operators ( MVNOs ) and other providers of wireless services are provided a proper context in which to submit their views to OFTA about this important subject. 1.4 Given that the Consultation Paper, and the questions posed in the Consultation Paper, are skewed to be viewed and/or answered from a fixed telecommunications perspective, CSL has not specifically answered each question posed by OFTA, however has contained its comments to general principles pending further industry consultation via papers and discussion groups. 2 Summary 2.1 Regulators have generally taken the path of trying to fit IP Telephony services (of which voice over internet protocol ( VoIP ) is but just one application) into the current definitions of public telephony services (in the case of Europe) or label it as a telecommunications service (in the case of the United States of America ( USA )). Accordingly, a VoIP service would be extended to provide the full functionality so that customers can enjoy well-established quality of service standards. 2.2 A global scan of VoIP regulation illustrates that most countries have a non-regulated starting point (e.g. USA and most European Union ( EU ) countries, Japan), then attach various minimum requirements with the obligation to educate consumers about the differences between the VoIP service and the existing fixed or publicly available telephony service. However, in Hong Kong, Singapore and Australia the starting point has been to try and fit VoIP into existing regulations. 2.3 Some regulators (e.g. Netherlands, Spain, Austria) have attempted to regulate VoIP according to the category of VoIP traffic it falls under i.e. PC-to-PC, PC-to-phone, and phone-to-phone. For example, in the USA, PC-to-PC and PC-to-phone constitute information services, while phone-to-phone calls constitute telecommunications services. 2.4 While OFTA advocates the minimum level of regulation on IP Telephony, it should be necessary for IP Telephony services that are intended to be used as replacements for the conventional fixed or mobile public telephone services provided by fixed telecommunications network service providers ( FTNS ), fixed carriers ( FCs ), MC and MNOs (collectively, Conventional Telephone Services ) to meet the same conditions as the existing fixed and mobile operators in order to protect public interest 2

3 and avoid consumer confusion. It will be necessary to define, in a definitive manner, what constitutes a replacement of a Conventional Telephone Service. CSL suggests that OFTA provide some suggestions for contemplation by the industry and the public in the next round of consultation. 2.5 However, as IP Telephony may be regarded as a new class of service different from the traditional circuit-switched telephone service regulated under the FTNS and FC licences or the radiocommunications service regulated under the MC and MNO licences, the set of conditions applicable to IP Telephony services need not be identical to those under FTNS/FC licences or MC/MNO licences (if a replacement service is not being provided). 2.6 One of the key issues which has not be sufficiently dealt with in the Consultation Paper is the economics of IP Telephony. The existing telecommunications regulatory framework in Hong Kong has been designed to subsidise the circuit-switched networks of FTNS/FC licensees in the form of access payments by other licensees (for example, local access charges ( LAC ), interconnection charges, and universal service contribution ( USC ) charges). With the introduction of IP Telephony services into the Hong Kong telecommunications landscape, the same regime needs to apply to IP Telephony providers. In other words, these providers should also make access payments to FTNS/FC licensees otherwise the economic framework which has been created by the Government will be completely undermined as the underlying network providers will receive no compensation for access to their networks. 2.7 If OFTA is contemplating to exempt IP Telephony service providers from making access payments to network providers then it will need to consider the implications for continued investment in access networks from a maintenance and innovation perspective. If the Telecommunications Authority ( TA ) changes the existing economic model because of a change in technology then this will significantly undermine the PSTN. In itself, such an action would be contrary to the technology neutral policy which has been put forward as a guiding principle. Alternatively, if this route is followed, the regulatory framework will need to be re-balanced and existing access seekers should therefore also be exempt from paying access providers as otherwise there will be a major disparity between different industry access seeker players. 3

4 2.8 In general, current IP networks are not yet built with the same degree of redundancy as fixed and mobile networks, and therefore cannot offer the same reliability. In addition, fundamental services expected by consumers that are inherent to these networks cannot yet be offered with the same degree of certainty on IP networks. For instance, consumers can be reasonably certain that dialing 112 or 999 will give them access to the emergency services, while the same cannot yet be argued for IP Telephony services, and caller location capability for emergency calls is currently even more difficult for IP Telephony services. 2.9 Another important issue is that the purchasing consumer is not always the actual user of the product. Any person can have access to a VoIP phone, which can look like a regular telephone, and it is therefore important that these secondary users of VoIP services are also aware of limitations in emergency access. Specifically in relation to the provision of access to emergency services, it should be noted that international groups such as the International Telecommunications Union and the Internet Engineering Task Force are currently working on solutions to this issue It is the opinion of many in the industry that these issues need not hinder the roll-out of VoIP services, but it must be ensured that the consumer is aware of any fundamental differences from Conventional Telephone Service performance when taking up the new products. How these limitations are most effectively communicated to consumers is still a matter of some debate but at a minimum the consumer should be advised of them and OFTA should take a leading role in providing information to consumers. For example, it is arguable that more immediate point-of-use advice (or alerts) might be needed for users of VoIP handsets concerning 112 / 999 calls, bearing in mind they will not always be the actual customer and may be unaware that support is different. 3 Policy and licensing Policy 3.1 CSL strongly urges OFTA to consider the fundamentals of the licensing regime and the economic framework that has been constructed around it. On the one hand, the fundamental principle is to provide for adequate return for the building of access networks so access to the consumer is economically viable. Funding could be achieved in at least two ways. One would be that the charging framework be 4

5 constructed in such a way that the access providers would recoup their costs and return on investments in full directly from consumers who are actually purchasing access to the network. The other is the variation on the existing regime, ie. the consumer pays in full to the access provider and access providers compete on the basis of providing access to the consumer. Service providers then acquire access without having to compensate the access networks. 3.2 The other possibility is that the access providers are compensated only in part by the consumer seeking the access service and the other part is recouped through charges levied on the service providers by the access providers. If there is a clear enough competitive arrangement where access providers are competing against other access providers for the purpose of providing access to the end user, then it may not be necessary to receive charges from other service providers. The access providers would then also be service providers and compete on the basis of the services supplementary to access with the service providers. 3.3 This latter possibility is more complex and it is unlikely it could be effectively introduced because consumers are unaccustomed to purchasing access without some associated service. It would seem that some basic service would need to bundled with the basic access and then additional things that the customer can do are added on top of the basic service. The question then becomes where do you draw the line between an access service and the value-add supplementary services? When does an access provider become a service provider and then need to compete with other service providers? 3.4 The entire interconnection framework needs to establish parity between access providers. In other words, there should be peer to peer interconnection between access providers as opposed to the access charges that would be associated with service providers seeking access to the access networks. 3.5 A VoIP service is but just one IP application, which can be delivered over an underlying broadband or 3G wireless service. As an example, consumers may use a VoIP application on an IP network to make and receive calls, and their VoIP service provider may offer the ability to log-on at any IP broadband network anywhere in the world. There could be any number of IP Telephony applications or service providers but only a few underlying broadband network providers or 3G wireless access providers ( Access Providers ) in the market. There is a real need to clearly define or 5

6 separate the different types of providers in the market. From CSL s perspective the IP Telephony provider market will consist of Access Providers, service providers and resellers, the characteristics of each are described below. 3.6 Access Providers (theoretically MCs, MNOs, FTNS and FCs could be Access Providers): operate and maintain networks, or network access, soft switches and services/equipment; must use its own infrastructure or secure access to leased infrastructure to reach out, or build, to the last mile so the means of accessing a IP Telephony service is available to the customer (bi-lateral commercial arrangements may be required); provide the core and peripheral infrastructure required to provide the IP Telephony service, ie. make substantial investments to provide IP Telephony access services (largest amount of investment of the different types of provider); are responsible for interconnection between networks (traditional circuit-switched, wireless and IP networks); and due to the substantial infrastructure and investment in networks, should be provided with compensation for access to their networks such as in the form of LAC, USC, interconnection charges. 3.7 Service providers (theoretically MVNOs, value-added service providers (including application and content providers) could be service providers): add or alter features of the IP Telephony service over and above the basic service provided by the Access Provider (for example, addition of media gateways and other value added services); will invest in some core network (eg. switches) so as to control IP Telephony traffic; and will provide physical access methods or devices to customers (eg. modems, wireless devices) ( Service Providers ). 3.8 Reseller providers (theoretically the slated prepaid reseller class licensees could be resellers): 6

7 have the ability to control the tariff of the IP Telephony service only; have no ability to control the quality of the IP Telephony service; and make relatively small investments in IP Telephony technology or infrastructure ( Resellers ). 3.9 Access Providers may also be Service Providers, however the converse is not true, ie. Resellers and Service Providers cannot be Access Providers. It may well be the case that Access Providers will always (or in the majority of cases) also be Service Providers in order to maximise the commercial benefits available to them, however two different licences would need to be acquired if an entity wanted to operate as both types of provider CSL suggests that the current licensing regime is not structured to adequately regulate the differences between Access Providers, Service Providers and Resellers, particularly with respect to the different rights and obligations which apply, both between each type of provider, as well as to the consumer Service level agreements will need to be established between Service Providers and Access Providers to set out the access service framework between such providers (including the access charges to be paid by the Service Provider to the Access Provider). As yet there are no technical standards to base these service level agreements on, but there are already a number of international network provider agreements in the market which specify what performance criteria are required to be met by both parties IP Telephony is the seminal service that is now coming into play which has the potential to topple the economic house of cards which has been constructed around the existing regulatory framework. It is essential that OFTA addresses the economic cross-subsidy that has been constructed. It is extremely important to get this right early on because to introduce new services which effectively compete with existing services but for which different charging or economic factors apply will distort the competitive landscape (possibly to the point where legacy services which may be quite viable become non-viable because they are economically disadvantaged, artificially through an unbalanced application of the objectives) For example, plain old telephone services ( POTS ) may be performing adequately, but if an IP Telephony service is afforded an economic advantage (eg. noncontribution to the universal service obligation ( USO )) then POTS may become 7

8 non-viable and we may find ourselves in a position where POTS although desirable, may disappear from the landscape because it cannot compete and is hamstrung. Consumer interests may not be served by dispensing with POTS As part of the POTS, an entire network must be built to support USO, it is not just last mile services. The nature of the network itself may become non-viable and the ability to deliver a traditional POTS service may be at risk because it is only viable if there is scale. If scale is reduced, then all the existing services providing contributions would be cross-subsiding and maintaining a legacy network which is not viable (and it has been made non-viable at the retail level). The more attractive the non-subsidising IP Telephony services become, the more unattractive the POTS become. All the older services become increasingly non-viable and contribute to supporting the legacy service, whereas new IP Telephony services, free from the contributory burden are able to flourish. There should not be an economic advantage afforded to IP Telephony service providers in this regard. It should be self balancing and we should be able to assume that the correct cross subsidy will be applied. A higher burden needs to be imposed on IP Telephony services and a new economic balance needs to be maintained in order to set the correct cross-subsidies. Otherwise if the USO is funded incorrectly it will endanger the entire existing scheme It is important not to take a static view of the telecommunications market in Hong Kong. OFTA should undertake a review of existing obligations across all voice technologies (PSTN, mobile and IP Telephony) every two to three years. Such a review would help to establish consistency across the various voice technologies, thereby ensuring: certainty of investment for all providers; that such obligations are technology neutral and therefore of relevance into the future; and that consumers are not confused as to the regulatory safeguards that apply to each type of service relative to technology. Licensing framework 3.16 By adhering to the existing principle of technology neutrality the provision of IP Telephony under existing fixed and mobile regulations will provide the market with certainty of investment and foster product and service diversification and innovation. 8

9 3.17 The TA has often expressed his preference for a technology neutral approach to regulation and in particular in the licensing of services 1. As such, if a provider wishes to provide an IP Telephony service which is meant to be a replacement for an existing Conventional Telephone Service (irrespective of the method of achieving the IP Telephony service), then it should be subject to the same licence conditions as the Conventional Telephone Service licensees. To do otherwise, would result in an imbalance between the regulatory conditions required to be adhered to by different industry players based on the technology employed The regulator should remain open-minded on whether or not the existing Conventional Telephone Service licence conditions can accommodate IP Telephony. If the existing regulations or new regulations are set too high, this may prevent investment and may deter market entry by new players. However, some market players may purposely choose to offer IP Telephony services that fall outside the current obligations so as not to comply with existing conditions and would need to be monitored for adverse industry and public impact In the short term at least, existing obligations should continue to apply to IP Telephony services, to protect consumer interests and provide certainty to the industry. If however, policy makers consider this is inappropriate or would stifle investment or innovation, then any regulatory distortions would be minimised, and consumer safeguards protected, by granting industry exemptions to the existing Conventional Telephone Service obligations If exemptions are granted from these obligations, then such exemptions should: be achieved via industry exemptions; be based on clear guidelines as to when and in what circumstances any exemptions would be granted; ensure that measures are put in place to clearly advise customers that the full range of consumer safeguards are not in place; be time limited (but with a presumption of renewal); and 1 See consultation released by the TA on 19 March 2004 in relation to the licensing of second generation mobile services on the expiry of the existing licences 9

10 be granted within a framework of overarching policy objectives that include the protection of consumer interests and promotion of consumer awareness about the nature of the IP Telephony services being supplied in the Hong Kong telecommunications market In considering whether to grant any such industry exemptions, OFTA should take the following factors into account: whether the regulatory obligation is currently technically capable of being complied with and if not, whether it is reasonably likely that the regulatory obligation will be technically capable of being complied with within a reasonable time (if, for example the exemption was not granted); the financial burden of complying with the regulatory obligation; whether the consumer benefits stemming from the application of the regulatory safeguard outweigh the consumer detriment in not granting the exemption; and whether the consumer benefits stemming from the application of the regulatory safeguard outweigh the cost of the application or the cost of developing the technology required to comply with the regulatory safeguard CSL believes it is important that any exemption process, and indeed the exercise of OFTA s enforcement powers, be transparent, undertaken consistently across the industry and reasons for taking a particular view or granting an exemption published Providers seeking to offer a service which is a replacement for an existing Conventional Telephone Service should be required to comply with the same licence conditions as the MCs and FTNS/FCs. In other words, the provider should obtain both an Access Provider licence and a Service Provider licence and in combination the licence conditions should at least replicate the existing Conventional Telephone Services licensees licence conditions. As MCs and FTNS/FCs would already be subject to such licence conditions under their respective licences they would not be required to obtain additional IP Telephony service licences, however it may still be necessary to enter into appropriate commercial arrangements to achieve the status of an Access Provider if they wish to be involved in the IP Telephony services market With respect to providers which are not seeking to provide a replacement to a Conventional Telephone Services, CSL suggests that the same licence conditions be 10

11 imposed on these providers as existing Conventional Telephone Service licensees, however as part of the exemption process described above, these providers would be exempt from complying with a significant number of the network-related conditions of the existing FTNS/FC and MC licences. However, the providers would be required to comply with the service-related conditions of the existing FTNS/FC or MC licences and the conditions set out in existing demonstration licences (required if the Service Providers intend to sell the physical means of acquiring the IP Telephony Services to consumers). Naturally, as exemptions are granted, benefits would fall away and the providers would not be entitled to certain benefits. As set above, the exemption should be time limited so the regulator may impose additional licence conditions on the Service Provider should it be the case that the provider is in fact providing a replacement to the Conventional Telephone Service and has sought to avoid Access Provider type conditions Resellers which have no control over the quality of the IP Telephony service and are merely re-selling the existing service of a Service Provider and are only able to control the tariff or branding of the service should be exempt from most of the conditions of the existing MC and FTNS licences (and not be entitled to any of the benefits). Again, if Resellers intend to sell IP Telephony-related equipment (such as modems or wireless devices), a demonstration licence should be required to be obtained by the Reseller In order to ensure that entities are complying with their obligations, OFTA should regularly investigate whether providers are meeting their licence conditions and/or holding the correct licence. 4 Numbering Issues Conformance to numbering plan 4.1 The Numbering Plan for Telecommunications Services in Hong Kong as amended by OFTA from time to time ( Numbering Plan ) conveys information to consumers about the type of service which is being acquired by the party being called and importantly signals information about tariffs, features and obligations. In terms of obligations, consumers are likely to assume that an existing fixed number or mobile number will have all of the features of the existing MC/MNO and FTNS/FC services including associated emergency service access. 11

12 4.2 From CSL s perspective Access Providers should have access to existing nondirectory numbers in accordance with the Numbering Plan as they will be responsible for interconnection between fixed, mobile and IP networks, need to be allocated with point codes and need to comply with existing or legacy regulations. For those Access Providers which choose not to provide IP Telephony retail services to consumers, they would not be given directory number resources as these numbers are services and not necessarily related to access. 4.3 If an IP Telephony service provider intends to be an Access Provider and a Service Provider (ie. it intends to provide a service which is a replacement to a Conventional Telephone Service) then it should be allocated with numbers blocks within the existing fixed and mobile number ranges (as set out in the Numbering Plan) provided it holds the relevant licences. As existing MCs, MNOs, FTNS and FCs have access to number resources, if they intend to provide IP Telephony services which are replacements to Conventional Telephone Services then they should be permitted to use their existing number resources. 4.4 As Resellers can only resell the services of others they should not be allocated with number blocks directly from OFTA, however could use number resources allocated to Access Providers (or combined Access Provider-Service Providers). 4.5 This approach is in line with the TA s stated technology neutral policy as numbers are allotted according to the service (eg. specific numbers for fixed line services, specific numbers for mobile/radiocommunications services) and not the technology required to provide the service. If an IP Telephony service is meant to be a replacement for a Conventional Telephone Service then numbers in the existing number blocks should be allocated/used in accordance with the Numbering Plan. If special number blocks are assigned to IP Telephony services, in order words on the basis of the technology rather than the service (or the service features), then this potentially could cause problems and confusion amongst consumers and the industry as the existing number allocation rules that apply to the existing Numbering Plan are intended, inter alia, to minimise number changes that would be costly and disruptive. 4.6 If Service Providers and Resellers are providing services which are not replacements for Conventional Telephone Services then telephone numbers, other than the current number assignments as set out in the current Numbering Plan, should be allocated to consumers. This will provide certainty to consumers and minimise confusion amongst 12

13 them as consumers currently understand the difference between 8-digit numbers with leading digit 2 or 3 (generally fixed numbers) versus leading digit 9 or 6 (generally mobile numbers). 4.7 Currently, it is too early to foresee the demand for IP Telephony services. It is premature for OFTA to conclude that 8-digit numbers cannot be allocated to different types of IP Telephony services. The role of OFTA should be to ensure there is sufficient flexibility in the Numbering Plan to cope with growth in demand for services and changes in consumer need. Before creating a whole new category of numbers (ie. prefixed long-form numbers) which may cause confusion to the general public, CSL suggests that OFTA assess the likely growth in IP Telephony services, whether telephone numbers longer than 8 digits are required at this point in time and if not, when that need may arise, eg. in two, five or 10 years time or longer. Number portability 4.8 Some customers migrating from traditional public telephone service providers to IP Telephony providers may wish to take their phone numbers with them, while others may be content to receive new numbers. Depending on the classification of the IP Telephony provider concerned, those customers may or may not be able to port their numbers across to the new IP Telephony service. 4.9 There are also questions as to whether number portability should only be available where the IP Telephony applications are equivalent (i.e. they have corresponding obligations and features as a Conventional Telephone Service) The current system only allows for porting of numbers between service providers providing similar services, ie. a mobile customer can retain their number when changing to another mobile service provider. CSL believes this policy should continue as IP Telephony services become more prevalent. This will minimise confusion amongst consumers as it will provide clarity about the features of different services. For example, a customer will know that a number associated with an IP Telephony service which is a replacement for a Conventional (mobile) Telephone Service will continue to be able to receive and send SMS and MMS even if the number associated with the service is ported to another provider offering a similar replacement service or an operator of a Conventional Telephone Service. 13

14 4.11 If OFTA allows porting between non-like services, another problem will arise if the regulator is considering using a prefix and an 8-digit number to identify IP Telephony services that are not replacements of Conventional Telephone Services. If these types of numbers are able to be ported to Conventional Telephone Service providers (or replacements to Conventional Telephone Service providers) then this will cause a substantial impact on the existing Numbering Plan as well as mobile systems and networks which are currently constructed for 8-digit numbers only. 5 Interconnection and charge settlement Technical aspects 5.1 As IP Telephony technology is still in its infancy it would be impractical and inappropriate to mandate stringent interconnection standards, however OFTA will need to recognise appropriate standards for interconnection regulatory purposes. In other words, the TA should publish those standards which he will only consider when making interconnection determinations. CSL suggests the TA hold an industry consultation about the types of standards which may be acceptable for interconnection determinations. 5.2 With respect to OFTA s question about the establishment and interconnection of E.164 number/ip address databases of IP based networks, CSL is of the view that such databases will be an important component of communication services as network convergence becomes a reality. CSL suggests that as part of its role as a facilitator, OFTA should also assist the industry to obtain government funding for the initiative. Interconnection and access 5.3 The existing regulatory framework has been designed to subsidise the FTNS circuitswitched networks by access seekers paying the FTNS access providers with access payments, such as LAC, interconnection charges and USC. 5.4 The same regime should apply to IP Telephony providers as they are, similar to existing licensees, seeking access to the networks of others. In other words, these providers should also make access payments to FTNS/FC licensees to maintain a level playing field between providers and maintain a technology neutral approach. To do otherwise may undermine the economic framework created by the Government as 14

15 underlying network providers will receive no compensation for access to their networks and violate the technology neutral policy. 5.5 If OFTA is contemplating exempting IP Telephony providers from making access payments to network providers then it will need to consider the implications for continued investment in fixed and mobile networks from an innovation, coverage and maintenance perspective. If maintaining the existing access regime is problematic or technically infeasible with the introduction of IP Telephony then a level playing field should be maintained by removing all existing circuit-switched access payments otherwise there will be major disparities between different industry access seeker players. Universal service obligation 5.6 CSL agrees with OFTA s intention to carry out a comprehensive review of the scope of the USO and the USC sharing mechanism. From CSL s perspective, there needs to be a holistic examination of what sort of USO is required, the purpose of the USO and the policy objectives. In particular, there should be an examination of whether the USO is restricted to a basic fixed telephone service or also other services. Further, the USC funding base may need to be tailored to suit the IP Telephony environment (for example, Service Providers should also contribute to the USC). 5.7 Funding of the network at the retail level should not necessarily be provided via voice variable call charges only. Other options such as funding via fixed access fees or via other products may need to be explored. There are also wholesale implications the access regime with respect to the pricing of access facilities may need to be amended to ensure funding going forward eg include a USC charge. 5.8 There is a need to look at this issue soon and to consider the issue carefully as infant industry protections are very hard to remove later, especially when business cases have been built around differential treatment (cf. USA exemption for USO). Any-to-any connectivity 5.9 Any-to-any connectivity is one of the key regulatory principles in Hong Kong. If this policy is to be maintained, users of IP Telephony services whether fixed or mobile, should be able to place calls to, or receive calls from, any other customers connected to other IP-based or non-ip-based networks or service platforms. Consumer confusion is likely to arise if an IP Telephony service is marketed as a substitute for an 15

16 Conventional Telephone Service however does not have any-to-any connectivity capability However, for closed IP Telephony networks it may be the case that the closed user group does not seek, and therefore does not need to acquire, any-to-any connectivity. In such instances, the IP Telephony services are not being intended as replacements for Conventional Telephone Services and provided users are aware of the limitations of the service (and may pay less for the service as a result of the reduced functionality) the any-to-any connectivity principle should not be enforced. Calling line identification ( CLI ) 5.11 CLI is the only unique official identifier to represent the caller in the circuit-switched world. It is currently used in fixed and mobile operations in many critical business processes (such as billing and authentication). As such, whenever an IP Telephony call enters the circuit-switched domain, OFTA s CLI Code of Practice and other regulator and industry codes of practice (including the Numbering Plan Code of Practice) should be followed by the IP Telephony provider However, if only IP Telephony to IP Telephony calls are being made within the IP domain, the CLI should not be mandatory, although this will depend on the particular service offering, as there are currently applications which use buddy lists, IP addresses or the URL, instead of CLI. 6 Consumer and other issues Directory issues 6.1 If the IP Telephony service is a replacement for a Conventional Telephone Service then the provider of the service should comply with the regulations relating to directories that are imposed on existing FTNS, FC, MC and MNO licensees. However, if the IP Telephony service is not intended to be a replacement for a Conventional Telephone Service then the provider should not be required to provide a printed dictionary service or telephonic directory services. 6.2 Having said this, CSL notes that management of numbers is not easy in an era when IP Telephony services, including VoIP over wireless broadband, enables customers to become nomadic, and where the same person may have many identities and number 16

17 locations. It will be difficult to provide a service address for a nomadic service but the billing address may be substituted. Calls to 999 emergency services 6.3 International regulators require that VoIP service providers give precise information to clients on how the VoIP provider will provide access to emergency service access and caller location. Additionally, there is strong emphasis on VoIP operators to undertake all reasonable efforts to ensure availability of emergency service access, without having to meet all the requirements of a traditional telephone service. The minimum regulation should be applied while preserving the achievement of certain social objectives such as consumer protection and access to emergency services. 6.4 Guaranteed connection to emergency services may not be available if a consumer s broadband network connection is not working. If the number used is a new VoIP number or another number in nomadic mode (or indeed no number), the emergency service agencies may not be able to locate the consumer s position as they may be able to when the consumer uses a conventional fixed phone. In this regard, a situation may arise where a visitor to a home who expects to be able to call the emergency services discovers at the time of an emergency that although access may be available, locating the position of the consumer may be more difficult. 6.5 Access to emergency services for voice consumers has become an expectation among the Hong Kong population. At minimum, consumers expect to be able to pick up a phone, dial an emergency access code (999) anywhere anytime, and speak to an emergency call services operator. However, at this time, VoIP services cannot offer reliable emergency service access all of the time. 6.6 CSL believes that all voice IP Telephony services should continue to provide emergency service access, in line with the current obligations. In order to deal with the nomadic nature of IP Telephony services, OFTA could consider requiring customers to register the location of their IP Telephony equipment each time they use their service so that emergency service personnel are able to verify location information and provide services in the case of an emergency. However, this is not a completely reliable or flawless approach. 17

18 6.7 If IP Telephony service providers are required to provide access to emergency services then it should be mandatory that Service Providers enter into service agreements with their relevant Access Provider in order to ensure service standards are in place. 6.8 If OFTA is considering exempting IP Telephony providers from this obligation, then: OFTA must consider whether it should be an obligation for customers to have a primary fixed line in order to ensure emergency service access is possible; consumers must be adequately informed about the possibility that they may not be able to access emergency service before subscribing for the service. OFTA has a key role to play in facilitating and providing such consumer education; and both consumers and the emergency services agencies must be able to readily determine if the location of a caller can be accurately identified. Backup power supply 6.9 Back-up or reserve power for a VoIP service is seen as a major problem when the Service Provider is not also the Access Provider. However, the issue is shared with many cordless and advanced handsets. Like many VoIP applications, they depend on mains power rather than the line power used by the traditional phone. Mains power is usually required for the (depending on broadband access method) computer, cable modem or ADSL modem or the plug pack for the IP or SIP phone CSL is of the view that back-up power supply should be required for IP Telephony services, particularly for those services which are replacements for Conventional Telephone Services. However there are technical feasibility issues about providing back-up power supply so OFTA needs to consider whether a mandatory obligation could be technically met at this time and if not then whether such a service would qualify as a replacement for Conventional Telephone Services With respect to OFTA s query about protecting customers interests who may be relying on telephone services as life lines, again CSL is of the view that back-up power supply must be required if the IP Telephony service is a replacement for a Conventional Telephone Service. The other alternative is for the Service Provider to be restricted from providing an IP Telephony service to this type of customer. In all situations customers need to be well informed about the power back-up supply issue before subscribing for a service. 18

19 Quality of service requirements 6.12 Quality of service is an issue that is best regulated by the market, and it is reasonable to expect that differentiation of products will, at least at the beginning, and not exclusively, focus on price or quality The IP Telephony market has the potential to be competitive. In a competitive market customers will choose the quality/price of service combinations that best suit them. Product diversification and innovation are benefits that competitive markets such as Hong Kong deliver and as such regulators should not impose quality of service standards that could prove to be unnecessary or overprotective. Consumers will be able to decode on their own what minimum requirements they need provided that a proper consumer protection (and awareness) framework and education is provided Different elements make up the quality of experience that a consumer can enjoy; including reliability, availability of service and latency. These elements may not be the domain of a Service Provider or Reseller as they may not have complete control over the access infrastructure. Nevertheless, consumers may wish to sacrifice quality in exchange for a lower cost to them, or vice versa. Intervention in this area by the regulator may be considered to be micromanagement, and instead should be left to market forces to determine the quality of service that a consumer chooses However, if OFTA sets minimum quality standards for Conventional Telephone Services and some IP Telephony service providers seek to provide a service which is a replacement for the conventional service, then IP Telephony providers should also be subject to the same standards in order to ensure a level playing field between the providers. Consumer Protection 6.16 There can be no objection to a customer knowingly selecting any particular service, complete with limitations, so long as the selection is done with full knowledge of what to expect Proper consumer protection (and awareness) is a very important facet of introducing new services to the public, which can make the difference between success and failure. Differences between the new IP Telephony services and conventional ones should therefore be clearly and honestly outlined to the purchaser in a forthright way, both at 19

20 the time of signing-up and subsequently (e.g. via alerts or voice announcements) when features unique to IP Telephony are being operated It is also important in the case of critical services such as emergency calling - to note that there may be other users of these services that will not be aware of the limitations of IP Telephony unless alerted somehow. In this case it is important to involve the purchaser in communicating these limitations effectively to those others It important that consumers should have sufficient information to enable them to confidently select the type of service they need. For example, this may be a conventional mobile service, a new VoIP service that may at least be the same as the conventional mobile service, or it could be one which offers a more limited service, but is cheaper. The important point is that a consumer s choice can be an informed one Consumers should be fully informed and then can make their own choice whilst encouraging providers to innovate. OFTA will need to be actively involved in educating customers about the features and limitations of IP Telephony services Much of the worldwide debate surrounding VoIP issues focuses on the need to educate the consumer as to the differences between traditional POTS products and VoIP products. In Australia a self-regulatory approach has worked well. It is based on an industry forum with terms of reference aimed at tackling some specific problems. A possible outcome could be industry code of practices for dealing with technical and consumer issues that, on the one hand encourage a positive view of the benefits of IP Telephony, while on the other hand ensuring that consumers receive proper guidance on any characteristics or limitations of individual IP Telephony services compared with their expectations. CSL suggests that OFTA allow the industry to develop a selfregulatory approach to this issue. 7 Confidentiality 7.1 CSL does not regard any part of this submission as confidential and has no objection to it being published or disclosed to third parties. -END- 20

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