SUMMARY OF THE SUBMISSIONS RECEIVED ON CONSULTATION PAPER OF REGULATION OF INTERNET PROTOCOL (IP) TELEPHONY

Annex SUMMARY OF THE SUBMISSIONS RECEIVED ON CONSULTATION PAPER OF REGULATION OF INTERNET PROTOCOL (IP) TELEPHONY INTRODUCTION On 4 October 2004, the Telecommunications Authority issued a consultation paper on Regulation of Internet Protocol (IP) Telephony (the Consultation Paper). The Consultation Paper aimed at soliciting the views and comments from the industry and interested party on some significant issues related to IP Telephony services such as (a) policy and licensing, (b) numbering resources, (c) interconnection and charge settlement and (d) consumer and other issues. The views collected will form the basis on which the TA would consider when formulating the policy framework and regulatory requirements for the emerging IP Telephony service and related applications using IP technology. 2. The consultation officially ended on 4 December 2004. A total of 38 submissions were received: Companies AT&T Global Network Services Hong Kong Ltd. China Resources Peoples Telephone Company Limited CM Tel (HK) Ltd. e-kong Group Limited EasyLink Networks & Belgravia Group (Asia) Limited (ELN) HKdotCOM Ltd. Hong Kong Broadband Network Limited Hong Kong Cable Television Limited Hong Kong CSL Limited Hutchison Global Communications Limited Interactive Broadband Services Ltd. (ibbs) Microsoft Corporation

New World Telecommunications Limited Pacific Supernet Limited PCCW-HKT Telephone Limited REACH Networks Hong Kong Limited SmarTone Mobile Communications Limited SUNDAY o/b Mandarin Communications Limited Systech Telecom Limited Wharf T&T Limited Zone Limited Organisations The Computing Technology Industry Association (CompTIA) Consumer Council Hong Kong Internet Registration Corporation Limited (HKIRC) Hong Kong Internet Service Providers Association (HKISPA) Hong Kong Wireless Technology Industry Association (WTIA) Hong Kong Telecommunications User Group (HKTUG) International Chamber of Commerce (ICC) The Law Society of Hong Kong Senior Citizen Home Safety Association (SCHSA) The Society of Hong Kong External Telecommunications Service Providers Individuals Dr. Xu Yan Eric Kwan Ms. Chan Dr. John Ure Legislative Councillor Hon Sin Chung Kai, JP NAC members PCCW-HKT Telephone Limited Wharf T&T Limited 3. The submissions have been published on the website of the Office of the Telecommunications Authority (OFTA) at www.ofta.gov.hk. 2

4. The submissions are summarised in this document.. REGULATORY ISSUES OF IP TELEPHONY 12(a) Are there any other issues in addition to those listed above that should be considered in formulating the regulation for IP Telephony services? 5. Dr. Xu Yan submits that as long as a user is able to connect to the IP platform, it makes no sense for the regulator to pay a specific attention to a specific service (e.g. VoIP) as the IP platform is supposed to support every service. On this basis, Dr. Xu proposed the concept of universal connection, namely every citizen shall be guaranteed to be able to connect to, or connected by, the IP platform. Although the concept of universal connection may be a relatively advancing and challenging target as far as this point is concerned, Dr. Xu considers that it will help formulate a forward looking policy when reviewing the existing universal service mechanism. 6. Hon. Sin Chung Kai shares similar view with Dr. Xu and considers that the policy framework should not narrowly target on specific service. Instead, we should keep our eyes on the development of IP technology and the emergence of multimedia applications to be delivered over NGN. In addition, Hon. Sin Chung Kai has reservation towards the adoption of the Chinese term 寬 頻 電 話 for IP Telephony initiated by the industry and followed by users and OFTA. In considering that broadband services always give people an impression that it is better than existing services like broadband internet access service is better than narrowband dial-up service, he suggests that OFTA should officially define a correct Chinese term for IP Telephony so as not to mislead the customers into recognizing it as a service superior to conventional telephone. In his submission, he uses the term 網 際 規 約 電 話 as the Chinese term of IP Telephony, which is the same as the Chinese term we use. Hon. Sin Chung Kai views IP Telephony as an Internet application only and it is not going to substitute conventional telephone service. In this regard, Hon. Sin Chung Kai suggests that OFTA should regularly conduct survey on user penetration of IP Telephony service and carry out review on the regulatory policy should the survey indicates that IP Telephony has superseded or become a substitute of the conventional telephone service. 3

7. CompTIA also has a view similar to Dr. Xu Yan and Hon. Sin Chung Kai. It believes OFTA should recognize the significant industry convergence which is occurring between IT and telecommunications sectors and develop a relevant policy framework. It urges OFTA not to regulate IP-enabled services in a piecemeal fashion since regulating a single IP-enabled application will have a profoundly negative impact on all IP-enabled applications. 8. PCCW suggests that, with the recent and rapid introduction of VoIP services in Hong Kong, the TA s decision-making in this important area should serve to assist in preserving investment incentives, encourage innovation and facilitate the continued development of new services and technology. 9. SmarTone considers that the Consultation Paper has not addressed fully the issues concerning how IP Telephony would affect the mobile market as well as the convergence of mobile and fixed services. SmarTone opines that IP Telephony is not only applicable to fixed services, but also to mobile services. As such, mobile operators should be allowed to offer IP Telephony services using the existing mobile numbers 6X and 9X if FTNS operators are allowed to offer IP Telephony services using the existing fixed numbers. SmarTone suggests that OFTA should look into the licensing requirements and spectrum assignment policy for the IP-based broadband wireless solutions such as WiFi or WiMax. CSL shares with SmarTone s view and considers the Consultation Paper does not adequately recognise or contemplate the wireless aspects of an IP Telephony service. It 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, 2G mobile network operators and mobile virtual network operators (MVNO) and other providers of wireless services are provided a proper context in which to submit their views to OFTA about this important subject. 10. ELN suggests that issues such as number transparency, connectivity, features (call forwarding, call waiting, conferencing) and etc. should also be addressed. 11. Consumer Council considers that the government should enhance consumer education on IP Telephony service and make it a regulatory requirement for the relevant operators or service providers to communicate their service information to the consumer in a comprehensible manner so as to 4

assist them in understanding the pros and cons of different modes of telephone services. Consumer Council also suggests that OFTA should closely monitor the marketing activities of service provider ensuring that they provide correct information of their service to their customers. Besides, OFTA should strengthen its capacity to handle complaints against IP telephony service. Some sort of penalties should be imposed onto the offending service provider. Similarly, Dr. John Ure suggests that, in the telecom environment that VoIP will usher in, regulation will have to adapt to the fact that levels of service will differ, and steps must be taken to keep the public informed of these issues. This may require information obligations on service providers and safeguards, including a requirement to offer emergency services. 12. ICC submits that the Government should ensure that VoIP services are open to provision by all interested service providers and that where licensing conditions exist, they are objective and non-discriminatory and the criteria for granting authorization are transparent. 13. HKTUG considers that VoIP opens up a number of issues in exposure of personal communication to unprotected environment and requires close examination on the following issues: o Security - since the caller need to authenticate himself to his number for remote access, there should be a secured way to protect his authentication pin from being exposed. o Since the voice call conducts over a shared network, the service provider should specify a reasonable means to protect exposure of the conversation. o If a VoIP service deliver over a segregated network vendor, there is no formalities to govern end to end service level and end users will eventually suffers. This issue will be further complicated if the network vendor provided similar and competitive service. o The service providers should provide a means for the police to track down a caller should the call originated through VoIP into 999. This issue will be complicated due to segregation between network provider and service provider. 14. Ms. Chan suggests that issues like (a) spamming of programmed 5

voice advertisement, (b) security of voice information over the packet-switched network and (c) how to maintain a fair market for the network operators should also be considered when formulating the policy framework. Besides, Ms. Chan also proposes that OFTA should help shape the new technology in considering that a majority of the general public do not have the knowledge in deciding which technology best suit their needs and that the conduct of some of the operators or individual staff may mislead the public and create confusion and unhappy experience. Similarly, Dr. John Ure considers that an IP networked telecom world will raise many potential issues such as the threat of viruses, the need to map telephone numbers onto IPv6, the demand by consumers to use the same number for multiple access devices and by implication the convergence of fixed and mobile services. Dr. John Ure suggests that it would be helpful for OFTA to map out some of these issues for industry discussion and public information. (A) Policy and licensing Policy 18(a) Do you agree with our proposed approach that the minimum and proportionate regulation should be applied to IP Telephony services? 15. There are 22 respondents submitting views on this question, including NWT, CM Tel, Peoples, HKCTV, PCCW, HKBN, Pacific Supernet, ibbs, e-kong, Microsoft, Systech, CompTIA, ELN, Zone 1511, AT&T, HKISPA, ETS Society, WTIA, Law Society, ICC, Hon. Sin Chung Kai and Ms. Chan. All of them unanimously support OFTA s position of applying minimum and proportionate regulation to IP Telephony services. 16. Specifically, Peoples indicates that regulation should be proportionate but not necessarily be minimum and considers that "Like services should be regulated under like conditions". ELN submits that the existing requirement on access to emergency services should be maintained even though the policy of minimum regulation is adopted. HKISPA opines that the minimum regulations should be designed to remove some market or administrative barriers so as to encourage and facilitate introduction of new services like IP Telephony. Law Society opines that, if any regulation is to be adopted, there should be a light-handed approach in relation to the adoption of specific regulation and 6

such regulation should focus mainly on consumer protection. Any regulation of IP Telephony services should be considered in a broader context under the formulation of a general policy for regulating the offering of telecommunications services to the public pursuant to section 8(1)(aa) of the Telecommunications Ordinance (which is yet to commence operation). 18(b) Do you agree that the technology neutrality principle should continue to be applied to IP Telephony services? 17. A total of 26 respondents including WT&T, CM Tel, Peoples, NWT, PCCW, SUNDAY, HKBN, SmarTone, CSL, HGC, Pacific Supernet, Zone 1511, Microsoft, e-kong, ibbs, ETS Society, HKISPA, Consumer Council, AT&T, ELN, WTIA, Law Society, HKTUG, ICC, Hon. Sin Chung Kai and Ms. Chan have submitted views on this question. All, except HKISPA, support that the technology neutrality principle should continue to be applied to IP Telephony services. Taking into account that IP Telephony is in essence a fundamentally different service when compared with traditional voice services and that consumers are well aware that their IP phone would not work if their Internet connectivity does not function, HKISPA submits that the technology neutral concept for voice services does not apply. 18. Among the supporting respondents, both the ETS Society and Zone 1511 believes that the technology neutrality principle should continue to be applied but it should remain subject to review when there are significant changes or new developments in IP Telephony, such as MMS delivery and video telephony transmission. SUNDAY submits that mobile operators should also be permitted to provide services deploying IP-based technology under their existing licences 18(c) Do you agree that the market should be left to manage the shape and the pace of transition of the operating environment? What role should the regulator play in the transition? 19. Among the 18 respondents who express views on this question, 12 of them including NWT, PCCW, HKBN, Pacific Supernet, ELN, Zone 1511, Microsoft, ETS Society, Consumer Council, WTIA, Law Society and Hon. Sin Chung Kai agree that the market should be left to manage the shape and the pace of transition of the operating environment. Regarding the first part of the 7

question, Ms. Chan has a different view from the above 12 respondents. Ms. Chan suggests the authority to manage the ultimate shape of the operating environment rather than freeing its hand and let the market developed by itself. She considers that, if not doing so, the ultimate shape of the market may be determined by the industrial giant(s) who may only focus largely on monetary gain as their ultimate goal. On the other hand, Ms. Chan is concerned that the general public may not have the technology expertise to decide the best technology to use. Hence, what the shape of the future telephony will be better left to the authority to decide. However, Ms. Chan submits that pace at which the market is transit to the ultimate shape as predicted by the authority should be left open. 20. Eight of the respondents including NWT, PCCW, HKCTV, ELN, Zone 1511, ETS Society, WTIA and Law Society support that the regulator should play minimum role in the transition and should not interfere with the development of the free market unless there is clear market failure and consumer interest, such as access to emergency or safety, is jeopardized. Specifically, NWT considers that OFTA s role during the market transition should be (a) to impose regulation only where there is market failure (economic regulation) or overriding public interest in regulation to achieve certain social objectives (social policy regulation); and (b) to ensure regulatory equivalent treatment across technologies ( technology neutrality ) and among licensees. Similar to NWT, PCCW submits that only if there is evidence of consumers being harmed or anti-competitive practices taking place should the regulator be justified in stepping in to address economic market failure. 21. Seven respondents including Consumer Council, HKISPA, CM Tel, Peoples, Pacific Supernet, ibbs and Ms. Chan have some different views on the role the TA should play in the transition. Consumer Council opines that it is essential to have clear and unambiguous regulatory rules in order to avoid causing confusions to consumers and operators when IP-based technology telephone services are being adopted in the market. The HKISPA believes that the objective of the regulation should be to enable wide availability of IP Telephony services in the market to enable customers to make their own choices in their own paces. In consideration of the significant impact of telephony service to the community, CM Tel opines that the regulator should define a set of rules correctly designed to facilitate healthy development of the telecommunications industry and ensure that there is adequate IP-based 8

operating environment. Besides, CM Tel recommends not to adopt laissez-faire approach to avoid disorder and ill-conditioned over-competition. Peoples suggests that OFTA should make sure that the consumers are well educated of the pros and cons of IP Telephony so that they are allowed to make informed choices. Pacific Supernet opines that OFTA has to set the framework for licensing, number portability and interconnection between fixed carriers and IP Telephony providers so that these issues will not be obstacles for IP Telephony providers. ibbs proposes that the regulator should pay a role of monitoring fraud or misleading behaviour of service providers. Ms. Chan suggests the authority to manage the ultimate shape of the operating environment rather than freeing its hand and let the market develop by itself. Licensing framework 27(a) Do you consider that the conditions under the current licences for fixed and mobile carriers should be fully applied to the provision of IP Telephony services? 22. A total of 24 respondents have submitted views on this question. 9 of them support while 14 of them do not support the proposal that the conditions under the current licences for fixed and mobile carriers should be fully applied to the provision of IP Telephony services. The remaining one respondent does not provide a direct answer to the question but offer some relevant comments. 23. HGC, CM Tel, PCCW, HKBN, SmarTone, CSL, e-kong, ICC and Consumer Council are the 9 respondents who express their support to the proposal. However, 5 of them consider that such licensing conditions should be applied to those IP Telephony service provider who would act as a substitute of the conventional telephone service provider. Specifically, CM Tel considers that service-based operator with less commitment to the society and less service reliability, can hardly meet with these social expectations and therefore should not given the same carrier status. 24. WT&T, Peoples, Pacific Supernet, ibbs, Microsoft, HKISPA, ETS Society, Zone 1511, CompTIA, ELN, WTIA, Law Society, Hon. Sin Chung Kai and Ms. Chan are among the 14 respondents who disagree with the proposed approach. In particular, WTIA considers that TA should create a new class license for IP Telephony service such that only partial of the conditions 9

under the current licenses for fixed and mobile carriers should be applied, like the case of MVNO. Similarly, Peoples submits that IP Telephony services should be treated as a different class of services and a different set of licence conditions should be applied. 25. REACH is the only respondent who does not directly address the question but offers some other comments. REACH considers that licensing arrangements (or rather rights under the respective licences) should align with the service levels provided by respective IP Telephony operators (for example, numbering rights varying depending upon provision of access to emergency services). 26. Regarding the TA s view given in paragraph 22 of the consultation paper, both PCCW and the Law Society consider that it is wrong for OFTA to suggest that applying a different set of conditions to IP telephony may not contravene the technology neutral principle. They also opine that it is also incorrect for OFTA to justify this departure on the basis that VoIP is a new type of service with new functionalities (e.g. video and multimedia capabilities) not found in conventional public telephone services. With all due respect, PCCW considers that OFTA s argument guts the principle of technology neutral regulation and should not be adopted. The Law Society opines that such new functionalities can in fact be provided using copper wires and are being so provided by fixed carrier licensees (the conventional public telephone service providers). The Law Society also considers that the existing licensing regime is in fact more technology based than function based. In order to maintain a level playing field it suggests that the same conditions should be applied to fixed carrier licensees when they provide IP Telephony if OFTA decides to apply a set of conditions to IP Telephony based on its functionalities. 27(b) If the answer to the above question is no, do you agree that an IP Telephony service intended to be used as a substitute for the conventional public telephone service should be required to meet a minimum set of conditions? 27. There are 17 respondents submitting views on this question. 9 of them including CM Tel, Peoples, Zone 1511, Pacific Supernet, ETS Society, HKISPA, Consumer Council, WTIA and the Law Society are supportive of the position that an IP Telephony service intended to be a substitute for the 10

conventional public telephone service should be required to meet a minimum set of conditions 28. While supporting the proposed approach, Consumer Council considers that the minimum regulation should include access to emergency service and backup power supply. Zone 1511 considers that the minimum set of conditions should cover provision of numbers, any-to-any connection, payment for local interconnection charge, etc. while the ETS Society recommends that access to emergency services, number portability, directory enquiry capabilities, and any-to-any access should be the minimum regulatory requirements. 29. WT&T, REACH, PCCW, SUNDAY, e-kong and ELN are the 6 respondents who disagree with the proposal and share similar views that regulatory requirements comparable to those of Fixed Carrier or FTNS licence should be imposed to the IP Telephony service intended to be substitute for the conventional public telephone service to protect consumers interests and avoid consumers being misled. Specifically, REACH submits that regulation should not unreasonably exempt services provided by one means of technology from such obligations if similar services provided by another technology still carry these obligations. ELN considers that the VoIP service should have to meet the same conditions that are imposed to the FTNS operators if the service is intended to actually replace the PSTN. PCCW is of the view that the minimum set of conditions for VoIP services intended as substitutes for conventional public telephone services and enjoying the rights of an FTNS licence should be the General Conditions already specified in the existing FTNS licence, the Ordinance and TA Statements, including GC 10 (backup power facilities), GC 13 (Interconnection requirement), GC 14 (Number portability), GC 25 (Directory enquiry service) and 26 Access to emergency services) 30. Microsoft and Ms. Chan offer some other views instead of giving a definite answer to the question. Microsoft considers that the imposition of required features and other regulatory obligations in these circumstances would discourage the launch of new voice services and therefore limit the choices available to consumers. Nevertheless, Microsoft agrees with OFTA s proposal given in paragraph 25 of the Consultation paper that it may be useful to have a mechanism, such as a formal declaration or a recognised logo, whereby consumers could quickly and easily tell whether a service provider has chosen to implement a service that offers a particular set of capabilities. Ms. Chan 11

considers that whether the new technology can substitute the conventional technology should leave to the consumer market to decide and she believes that IP Telephony cannot be a 100 % substitute to the conventional carrier. In this regard, she does not offer any reply to the question, which has assumed that IP Telephony service can be a substitute for the conventional telephone service. 27(c) What are the criteria for classifying an IP Telephony service as one intended to be used a substitute for the conventional public telephone service? 31. A total of 10 respondents offer views on the criteria for classifying an IP Telephony service as one intended to be used a substitute for the conventional public telephone service. They include PCCW, HKBN, NWT, CM Tel, Peoples, ELN, ETS Society, HKISPA, the Law Society and Ms. Chan. 32. Specifically, PCCW considers that a VoIP service should be regarded as qualifying for treatment as a substitute for conventional public telephone services if, as a minimum, it offers the same level of functionality as circuit-switched voice services and satisfies all the requirements of the FTNS licence. In particular, all social welfare requirements stipulated under the FTNS licence and the Ordinance must be met. 33. After consolidating the various views of the respondents, the proposed criteria can be summed up as follows: (1) Any-to-any connectivity, (2) Access to emergency services, (3) Directory enquiry services. (4) Number portability (5) Good, efficient and continuous service in a manner satisfactory to the TA (6) Service agreement in place to ensure appropriate level of QoS (7) Allocation of number blocks (8) Local battery backup (9) Location information (10) Low cost terminal (11) Voice conferencing capability (12) Normal telephone numbers 34. The Law Society does not offer any proposal on the criteria but 12

considers it is inappropriate to attempt to distinguish IP Telephony services which are intended to be used as a substitute for conventional public telephone services and those which are not and attempt to introduce different sets of regulations for the following reasons: (1) Any distinction is likely to be very controversial and will make the regulatory regime unnecessarily complex. (2) Users choices and preferences regarding how different services are to be used should not be pre-empted, especially as they change from time to time. (3) The underlying assumption in the Consultation Paper that people rely on PSTN (and therefore FTNS) as their basic telephone is gradually becoming untenable, as more and more households cease to subscribe to FTNS and switch to mobile services. As long as Users understand the differences between the services they should be allowed to make an educated choice. 27(d) Do you consider that a new type of licence needs to be created for regulating IP Telephony services which are intended to be a substitute for the conventional public telephone service? 35. There are 11 submissions to this question. NWT, Peoples and Ms. Chan supports that a new type of licence needs to be created for regulating IP Telephony services which are intended to be a substitute for the conventional public telephone service while PCCW, HKBN, CM Tel, e-kong, ETS Society, HKISPA and ELN disagree. 36. CM Tel and e-kong share the same view that it would be more logical and appropriate to modify the existing FTNS/Fixed Carrier License to suit the new operating environment so that operators who intend to adopt the new technologies are placed in a level playing ground. Both ETS Society, HKISPA, PCCW and ELN considers that the same regulations currently imposed to FTNS / Fixed Carrier licensees should apply if the new service is intended to replace the conventional public telephone service. However, HKISPA opines that IP Telephony is a different class of service and should not be collectively treated as substitutes for traditional voice services at the regulatory level unless it is advertised or marketed as traditional telephony service and consumer is not aware that it is indeed IP telephony. HKBN submits that any regulatory arrangements should focus on the nature of services rather than on the technology used to provide the services. HKBN believes that this would signal a departure from the "technology neutrality" principle if a new set of rules/license conditions be imposed just because IP technology is used by 13

operators. 37. Pacific Supernet does not reply the question but simply opines that service conditions such as number portability should be optional. 27(e) Do you agree that minimal regulation should be applied to IP Telephony services not intended to be used as a substitute for the conventional public telephone service? 38. Seventeen respondents including PCCW, NWT, WT&T, SmarTone, CSL, CM Tel, Peoples, ETS Society, HKISPA, the Law Society, ICC, WTIA, Pacific Supernet, Zone 1511, ELN, Hon. Sin Chung Kai and Ms. Chan express their views on this issue. All the respondents except NWT, Peoples, Pacific Supernet, Hon. Sin Chung Kai and Ms. Chan are supportive of the position that minimal regulation should be applied to IP Telephony services not intended to be used as a substitute for the conventional public telephone service. 39. While WT&T supports the proposal, it emphasizes that there must be clear declaration in all relevant marketing or sales communication materials of such IP Telephony services indicating the weakness and strengths of the services so as to protect consumers interests. CM Tel believes that minimal regulation should address requirements from both sides, i.e. operating environment and social objectives. CM Tel opposes to an IP Telephony service that is labelled as service not intended to be used as a substitute for the conventional public telephone service and so is allowed to escape from fulfilling several basic requirements of a public telephone service. 40. NWT and Hon. Sin Chung Kai share the same view that IP Telephony services should generally be not subject to regulation and let the market or service providers to determine the quality standards, service features and price. Hon. Sin Chung Kai opines that OFTA should request the service providers to communicate correct information to the consumers and clearly describe the capabilities and limitations of their service. He considers that OFTA should set up licensing requirement to regulate the conduct of IP Telephony service providers in marketing their services. Peoples suggests that such service can be treated as an ordinary Internet application where the service providers cannot enjoy the rights of FTNS operators such as allocation of number block and any-to-any connectivity. Ms. Chan opines that regulation applied should be 14

appropriate in which the regulations should not hinder the development or enhancement of new technology while maintaining a fair and competitive market and providing sufficient consumer protection for the public. Pacific Supernet recommends that OFTA should amend the existing ISP PNETS license to include IP Telephony as soon as possible and the license obligations should be light, similar to other value added service licence such as ETS or IVAN licenses. Separation of service provision from network operation 34(a) Do you agree that the provision of IP Telephony service accessible over the broadband connections provided by others should be permitted? 41. A total of 22 respondents express their views on this issue including PCCW, HKBN, WT&T, CM Tel, Peoples, SmarTone, REACH, HKCTV, CompTIA, ELN, Zone1511, Pacific Supernet, e-kong, ibbs, Microsoft, AT&T, ETS Society, HKISPA, WTIA, HKTUG, Consumer Council and Ms. Chan. In general, all of them are supportive of the position that provision of IP Telephony service accessible over the broadband connections provided by others should be permitted. 42. Nevertheless, regarding the TA s view given in paragraph 31 on whether the network operator should be allowed to levy charge on the IP Telephony service provider, there are two camps of views. The network operators such as PCCW, WT&T, CM Tel, Peoples, REACH and HKCTV generally support that the IP Telephony service providers should be subject to some conditions in the provision of their services. WT&T considers regulatory framework must necessarily recognize the differentiation of service provision and network operation so that service providers who do not invest in network infrastructure do not take a free ride of others investments. Such differentiation is also necessary so as to encourage continual investment in infrastructure. REACH considers that some sort of charge should be levied on the IP Telephony service provider while HKCTV submits that the TA should require a service provider to enter into an agreement with a network operator to lease the latter s bandwidth. Furthermore, HKCTV opines that the customer of the broadband connection has paid for the connection for selected purposes only and the fee he has paid does not cover the service for IP telephony. Peoples 15

supports the proposal on the condition that an agreement of a "managed network" is in place to ensure an appropriate level of QoS that will satisfy customer expectation. PCCW submits that the provision of VoIP services over the broadband Internet service provided by another operator should be permissible but should be subject to commercial arrangements being made between the VoIP service provider and the broadband service provider. The relationship between the ISP and its customer is contractual and driven by market forces. 43. The other respondents are supportive of the proposal unconditionally. In particular, HKBN, CompTIA and AT&T expressly supports the TA s view that VoIP carried over existing broadband lines should not attract additional charges as the subscriber has already paid for the bandwidth being utilized. They consider that the subscriber is merely sending additional packets of information on the service already being subscribed to, and therefore already paid for. CompTIA considers that all current fixed line providers will benefit from the infrastructure improvements that will be required to ensure ubiquitous broadband service because VoIP penetration drives broadband adoption, which in turn promotes broadband deployment and thus achieves a win-win scenario. 34(b) How should consumer interest be protected in the provision of IP Telephony services accessible over broadband connections provided by other operators? 44. There are 12 respondents submitting views on this issue including PCCW, WT&T, CM Tel, Peoples, Pacific Supernet, ETS Society, HKISPA, WTIA, Zone 1511, AT&T, ELN and Ms. Chan. The views submitted are quite diversified. 45. WT&T indicates that IP Telephony services may be classified into Tier-1 service type and Tier-2 service type depending on the means and forms they are being delivered to the end customer such as end to-end managed network or third party uncontrolled network. To promote transparency and to avoid confusion to end customers, regulations should be formulated to provide clear distinction between the 2 classes of IP Telephony services as identified above. This should be achieved by requiring the IP telephony service providers to self-declare to which tier they belong and clearly advertise the level of their services in all their sales and marketing communications materials. 16

Additionally, the TA should consider adopting a quality mark/label system for service providers for identification purposes. 46. CM Tel, ETS Society and Zone 1511 believe that consumer interest protection may be well addressed through education to consumer on choice of broadband service providers. Additionally, CM Tel considers that the TA should also request service providers (including providers of broadband connection services and IP Telephony services) to provide customer charter to address QoS. CM Tel considers that the consultation paper of Providing Quality of Service Information to Consumers of Public Telecommunications Services dated 23 July 2004 is a good start. 47. Peoples, PCCW, AT&T and ELN share similar views that the consumers should be well informed of the difference of the capabilities and limitations of different IP Telephony services such as that provided over a "managed network" or that provided over the Internet by "best effort". In addition, ELN considers that guarantees of accessibility, access to emergency services, power failure operation and etc. should all be highlighted. PCCW suggests that penalties should be imposed if service providers are found to be representing their VAS service as a direct substitute for conventional voice services. Regarding its proposed 2-Tier service regime, PCCW suggests that, in relation to Tier 2 VoIP services, consumer interests will be protected in several ways. Firstly, distinct numbers will be allocated to these VAS suppliers of VoIP services. Secondly, number porting will be limited to help ensure that users are neither confused nor misled by what Tier 2 VoIP service is and is not. Thirdly, market forces (over time) will encourage Tier 2 VoIP service providers to improve their services to obtain Tier 1 status. Lastly, consumer interests will be safeguarded via a comprehensive and substantial consumer education process 48. WTIA considers that the TA should consider extending the coverage of the Consultation Paper entitled Partial Commencement of Section 8(1)(aa) of the Telecommunications Ordinance and Creation of a Class License to Regulate Resale of Telecommunications Services issued on October 15 2004 so that all the Resellers and/or Distributors within HK of any local or overseas IP Telephony services should also require a class license. 49. HKISPA considers that protection of consumer interest is not a 17

concern as the consumers have got used to the separation of network connectivity and service delivery in the IDD and dialup Internet services, which have been proven practical and successful over the years. In the light of such customer experience, HKISPA believes that provision of IP Telephony service in a similar manner shall suffice to protect consumer interests. Similarly, Pacific Supernet considers that consumer interest protection should not be an issue as long as consumer is aware that they are using IP Telephony service over broadband connection provided by other operators. 50. Instead of advising how to protect consumer interests, Ms. Chan considers that (a) charging scheme, (b) QoS, (c) maintenance of a free and fair market for the service-providers and (d) personal data privacy are customer interests to be protected and requests the TA to consider. Provision by service-based operators 39 Do you consider that service-based operators (i.e. PNETS licensees) should be allowed to offer local voice telephony services using IP technology? 51. Among the 19 respondents expressing views on this question, 15 of them including NWT, PCCW, HKBN, SUNDAY, Pacific Supernet, ibbs, e-kong, ETS Society, HKISPA, Consumer Council, CompTIA, ELN, Zone 1511,, AT&T and Hon. Sin Chung Kai are supportive of the proposal that service-based operators (i.e. PNETS licensees) should be allowed to offer local voice telephony services using IP technology. 52. Although they generally support the proposal, some respondents have further comments on the question. NWT considers that the PNETS licence can be modified to allow non-facilities based service providers to provide IP Telephony services in Hong Kong. ELN submits that there should be some contribution levies in order to make the competitive landscape level and fair to all operators. Consumer Council supports the policy of allowing service-based Public Non-Exclusive Telecommunications Service (PNETS) Licence holders to use IP Telephony technology to provide international call services but opined that opening the local voice services market to these service operators at this stage could hinder the infrastructure investment and the IP Telephony service development, ultimately affecting the choices of consumers in the future. Regarding paragraph 36 of the Consultation Paper, HKISPA disagrees with the 18

argument that this new service is diverting revenue from fixed network operators and discourages investment in network construction. Instead, HKISPA believe introduction of IP Telephony and other new services through the Internet Protocol would create demand for the local network and that is itself an incentive for investments into the network, as evident from the revenue volume that ISPs pay for local access provided by existing FTNS service providers. PCCW proposes that there must be a separate class of service (i.e. Tier 2) to those offered by FTNS licence-holders which fully satisfy the FTNS licence requirements (i.e. Tier 1), with different rights and obligations. This regulatory framework is somewhat the same, in principle, as the current licensing regime for 3G mobile services, where Mobile Virtual Network Operators are able to offer 3G services without acquiring a 3G licence. 53. CM Tel, WTIA, Peoples and Ms. Chan offer other views on this question. CM Tel submits that the current PNETS license is not designed by its nature for operation of local voice telephony services. CM Tel agrees that some extent of flexibility can be allowed for IP Telephony service in the consideration of additional and more advanced and distinctive functionalities available on IP Telephony service such as the mobility via Internet access. To this end, several current requirements like access to emergency services, backup power supply, quality of service, etc. need to be reviewed to correctly respond to the new market situation, so as not to obstruct the adoption of new technologies. WTIA opines that the TA should issue a new class license for IP Telephony Services Providers and suggests that, once the PNETS licensees offer IP Telephony services that need any local or overseas PSTN interconnection or ordinary telephone numbers, then they should apply for this new class license. Ms. Chan shares the same view of WTIA that we need to have additional clause or annex or even a separate license to be issued for the IP Telephony operators. Peoples submits that IP Telephony as a substitute for the conventional public telephone service should only be allowed when the service provider has established agreement for "managed network" with network operator. (B) Numbering Issues Conformance to numbering plan 19

50(a) Should the traditional PSTN services and IP Telephony services which are intended to be a substitute for the conventional public telephone service share the same number blocks? 54. The submitted views on this issue are quite diversified. Among the 25 respondents, 17 of them including PCCW, HKBN, HGC, CM Tel, SUNDAY, SmarTone, CSL, HKISPA, ETS Society, e-kong, Pacific Supernet, ELN, AT&T, ICC, WTIA, HKTUG and Ms. Chan are supportive of the proposal that traditional PSTN services and IP Telephony services intended to be a substitute for the conventional public telephone service should share the same number blocks. 8 respondents including NWT, WT&T, REACH, Peoples, CompTIA, Zone 1511, Consumer Council and Hon. Sin Chung Kai disagree with the proposal. 55. Among the respondents who do not support the proposal, the network operators NWT, WT&T and REACH submit the only fixed network licensee should be permitted to use 8-digit fixed line numbers for IP Telephony services as this is consistent with the Hong Kong Numbering Plan. Peoples believes that these two types of services should not share the same number blocks and porting between them should not be allowed until 2-3 years later when the consumers become fully familiar with IP Telephony. CompTIA submits that a non-geographic number may be desirable in considering that VoIP is independent of any physical location. Hon. Sin Chung Kai, Zone 1511 and Consumer Council submit that separate 8-digit number blocks should be allocated to help discriminate IP Telephony from conventional telephone service. 50(b) Should IP Telephony services which are not intended to be a substitute for the conventional public telephone service be allocated with special number blocks or the normal numbers for conventional local fixed line telephone? 56. The submitted views on this issue are quite diversified. Among the 24 respondents, 9 of them are supportive of the allocation of special number blocks (i.e. prefix + subscriber number) to IP Telephony services not intended to be a substitute for the conventional public telephone service, 9 respondents are supportive of allocating 8-digit telephone numbers and two suggest no number allocation at all. The other 4 have some other comments. 20

57. The 9 respondents who support special number block allocation include PCCW, HGC, NWT, WT&T, REACH, ELN, AT&T, ETS Society and Ms. Chan. While supporting the option of special number block allocation, AT&T put forward another proposal of establishing a new number block (i.e., called non-geographic numbers in many geographically larger jurisdictions) for IP Telephony, particularly if this will create efficiencies that improve the ability of new IP Telephony providers to obtain and use number resources. ELN submits that special numbers/email-addresses should be allocated if they will be part of the current VoIP island but normal numbers should be allocated if the IP Telephony service will be transparently accessible from the PSTN. 58. Among the 9 respondents who support 8-digit number allocation, some of them suggest that the existing 8-digit telephone numbers of prefix 2 & 3 and separate 8-digit numbering blocks in the existing numbering plan (e.g. 38XX-XXXX, 39XX-XXXX) should be allocated for the IP Telephony service in question. Some of them such as CSL, Pacific Supernet, Consumer Council and Hon. Sin Chung Kai opines that separate 8-digit number blocks should be allocated to help discriminate IP Telephony from conventional telephone service while some of them such as HKBN, SmarTone, and HKTUG consider that the existing 8-digit numbering resources for conventional telephone services are more appropriate. In particular, HKTUG indicates that business user is concerned with the potential issue of number range changes especially quite a number of business operation and information flow rely on automated dialer (e.g. telemarketing, banking, financial market information distribution and etc. ) will be affected. 59. ICC and ibbs submit that both geographical and non-geographical numbers may be appropriate for VoIP services. SUNDAY opines that IP Telephony service providers should be allowed to apply for numbers from OFTA or they may collaborate with fixed carriers or mobile carriers and obtain numbers from them. This concept is analogous to MVNO s numbering arrangements. SUNDAY considers that the number range and format as well as number portability issues should be further discussed by the industry under the Numbering Advisory Committee ( NAC ) for the purpose of settling the implementation plans and related issues. WTIA considers that IP Telephony services provider can allocate numbers that are not associated with a telephony service, a provider can allocate numbers that are not associated with a 21

telephony service at fixed locations such as mobile or personal numbers. 60. CM Tel and Peoples are the two respondents suggesting not to allocate telephone numbers to the IP Telephony service provider not intended to be a substitute for the conventional public telephone service. 50(c) If IP Telephony services are allocated with special number blocks, should all or only certain types of IP Telephony services be allocated with the special number blocks? 61. There are 12 respondents to this question and the views are diversified. Three respondents including NWT, WTIA and Ms. Chan support that all types of IP Telephony services be allocated with the special number blocks. 62. PCCW, WT&T, Peoples, ETS Society consider that only IP Telephony service not intended to be substitute of conventional telephone service should be allocated with special number blocks. 63. ELN opines that a normal number should be allocated if the IP phone is callable from the PSTN. CM Tel objects allocation of special number blocks to IP Telephony services of any kind, CM Tel considers that it is not justifiable for those arguments of using special number blocks to distinguish IP Telephony services from conventional public telephone service. Consumer Council and Pacific Supernet supports the allocation of a special number block with 8 digits to both carrier operators and IP Telephony service providers and considers that this would facilitate number portability and make it easier for consumers to switch to IP Telephony if they prefer. CLS submits that, before creating a whole new category of numbers (i.e. prefixed long-form numbers) which may cause confusion to the general public, OFTA should 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. 50(d) How should the numbering resource challenge arising from the proliferation of IP Telephony services be tackled? 64. A total of 10 respondents have expressed their views on this question. CM Tel submits that, at the current stage, it would be too early to worry of 22

numbering resource challenge arising from the proliferation of IP Telephony services. The consumption of numbering resource for IP Telephony services will depend on further development of telecommunications market, which will be affected by various factors such as economic climate, regulation design, technology advancement, change in consumers perception, and also flow between IP Telephony services and conventional public telephone service. CM Tel suggests an allowance of close observation of 12 months on the usage of existing numbers, before we can make a meaningful improvement of the existing numbering plan. Similarly, CSL also considers that it is too early to foresee the demand for IP Telephony services and it is premature for OFTA to conclude that 8-digit numbers cannot be allocated to different types of IP Telephony services. CSL adds that 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. Pacific Supernet submits that, instead of going to a new prefix with additional digits for IP Telephony, we should allow the numbering plan to be expanded on an as required basis. 65. Peoples and WTIA share the view that number blocks should be allocated in small range (i.e. 1000) and the applicant has to reach high utilization (say 90%) of the allocated number blocks before new blocks are allocated. 66. PCCW suggests that the length of the existing 8-digit telephone number be extended to accommodate IP Telephony services, such that an additional prefix needs to be dialed in order to reach the VoIP service subscriber. This special prefix could also serve to earmark the service as a Tier 2 VoIP service. ELN and ETS Society share similar view with PCCW. ELN suggests adding digits or expanding the number space while the ETS Society considers that the options could be (a) adding another digit to the normal number blocks; or (b) assigning a prefix as access code for the IP Telephony services. 67. SmarTone is of the view that the pressure on numbering resource could be relieved if both mobile number ranges and dedicated access codes are allowed for use by Non-Substituting IP Telephony Services. The spare number level 5X can also be used for IP Telephony services. Furthermore, the number level 7X can also be used for IP Telephony services provided that the remaining numbers under number level 8X can be released for mobile usage. Similarly, WTIA also propose allocating the numbering block with prefix 7 and 8, 23