With Chinaís accession to the World Trade Organization likely to happen soon, eyes have turned to the role Hong Kong will play as facilitator to companies seeking a safe harbor to launch services across the border. And itís as well to bear in mind how much more advanced the competitive regime is in the Special Administrative Region than mainland China, thanks to the vision of a transparent regulator with a track record in sustained progress.

The Office of the Telecommunications Authority (OFTA) has orchestrated many improvements in the Hong Kong market since 1997 when director general Anthony Wong was appointed. A philosophy graduate from Hong Kong University, Wong has always been receptive to new ideas. Heís changed the landscape from one dominated by the incumbent Cable & Wireless Hong Kong Telecom (C&W HKT) to one where new facilities-based licences are being issued with reassuring regularity. Unlike the Chinese market on the mainland, Hong Kongís more developed regulatory environment has led to a focus on more advanced services, and not just infrastructure.

ìOur priorities have shifted from just pure coverage issues to a more sophisticated level of services such as wireless, 3G, broadband optical fiber to the home and broadband Internet multi-media services. Weíve had to put a lot of effort into ensuring fair competition between the players, and ensuring good consumer support services,î he says.

Enviably, the current problems being experienced in getting British Telecommunications to relinquish its grip on local loop monopoly in the U.K. are not ones Wong encountered in Hong Kong; C&W HKTís loop has been open to competitors for two years, resulting in a local copper access market which is more mature even than the U.S.

ìWe have set all the rules now, even the tariffs for interconnection, and the system is firmly in place,î says Wong. ìWeíve let the market decide which is the most efficient way to run local access, but we encourage different technologies so that thereís a choice.î

ìFor example, earlier this year I issued five licences for fixed wireless services, and Iím now also looking at issuing satellite licences to do ëInternet from the skyí in addition to pay television services.î Those five ñ Hong Kong Broadband Network, SmarTone Broadband Services, HKNet-Teligent Co., Eastar Technology and PSINet Hong Kong are now licensed to bridge the copper loop with fixed wireless services.

Wong says that in comparison with the European market, OFTA has used a much more ëcarrot and stickí approach in getting C&W HKT to open-up its network. The potential revenue from opening its network to alternative providers seems to have been enough carrot for HKT, and OFTA has not had to use its stick to enforce interconnection rates it considers fair.

ìI canít say HKT were co-operative exactly, but they realized when it was in their interest to do unbundle,î says Wong. Coupled with the mix of access technologies, it means competition to deliver services in the local area is brisk. Competition in international simple resale (ISR) is similarly brisk, almost too well developed. The market is piled high like the residential blocks running up the hillsides with companies competing to offer yet lower call rates. Although controlled, itís an area which is running the risk of becoming too competitive to remain healthy.

ìIt depends what you mean by healthy,î says Wong. ìAlthough a lot of people regard competition in ISR in Hong Kong as cut-throat. Consumers obviously like local calls which only cost HK2c, but the operators which have invested are finding it a tough business to make money out of. But this is the market itself ñ as long as competition is fair, Iím not going to interfere.î

In order to avoid having to step in and actually raise prices to stop ISR businesses from actively leaving the market, OFTA has made it as straightforward as possible to enter the ISR market. Which Wong agrees, also makes it very easy to leave ISR in Hong Kong if thereís little opportunity left.

ìI have made sure the entry barrier is very low. If you want to do ISR here in Hong Kong, you can just walk into this office and take out a licence.î This approach is one which Wong thinks will fit into a broader licensing structure he is pioneering at the moment.

ìYes, itís part of the new legislation to change the current [individual] licensing framework to a class licensing framework, so you donít have to get a licence from us, you just have to register. The only licences this wonít cover are the really big carrier licences; those will remain individual licences.î

Not only will this mean licences are not actually ëawardedí in the traditional sense anymore, but it also contributes to the transparency of OFTA, something of primary importance to Wong.

ìOFTAís already a very transparent organization, but we need to keep on improving. The licensing systems particularly need improving, because at the moment, for example, ISPs still need to come in and apply, and then weíll either approve or reject their application.î

That process can be seen as not transparent enough, so Iíve said weíll change it to a registration process. This means that we set out all the rules in advance, and as a company looking to break into the market, you know that if you fulfill them, youíre automatically licensed.î

This new legislation came in quietly during June this year, so the bulk of itís already on stream, but there are some bits of it which remain to come into force like spectrum auctioning and class licensing.

The reason licensing ISPs probably sticks in OFTAís collective mind because there are so many of them ñ over 200 ñ in Hong Kong. Even Wong admits to ìlosing countî of exactly how many there are, but their number points to the fact that although almost everyone has Internet access, itís still not very high bandwidth access.

ìIn order for the Internet services market to really grow here, everyone within two to three years will want, and will probably have, their own T1 line or even above. Of course, we still wait for the applications for e-commerce,î he says. He may still be waiting for those applications, but much greater bandwidth is just round the corner. Or to be more precise, just under the sea in the harbor.

Level3 Communications became the first carrier to take up one of thirty licences issued to operate a subsea cable during late September. Although itís cable wonít land until the second quarter of 2001, it still has an early mover advantage here and is signing up customers for chunks of its Terabit pipe hand-over fist. Such a large amount of bandwidth arriving on the coast will probably reduce the price on land, and until the other licensees turn up, Level3 is in command of those prices.