According to some industry predictions, the boundary between fixed and mobile technologies will largely be dissolved by 2010. If the forecast is anything to go by, we are only several years away from a fundamental transition to seamless telecommunications.

Not surprisingly, fixed-mobile convergence puts more pressure on a telecoms market which is already highly competitive and saturated. But from a policy perspective, there are also challenges facing policy makers and regulators. While we cannot influence technological development in this fast-moving industry, our major challenge is to remove regulatory uncertainties so that existing players or potential entrants can make informed investment decisions in the era of fixed-mobile convergence.

To pave the way for migration towards fixed-mobile convergence, the Office of the Telecommunications Authority (OFTA) issued a proposal for public consultation on a new unified licensing framework on September 22, 2005. Under the proposed framework, carriers are allowed to offer both fixed-line and mobile services with one single license. Also, OFTA will not set any limits on the number of new licenses, and the current license holders are not required to obtain new ones until their existing licenses expire.

Fixed or mobile?

When the demarcation between fixed and mobile service is blurring in the current environment of fixed mobile convergence, it is apparent that OFTA will find it harder to classify a service as either a fixed or a mobile service, as the service may be used by customers at fixed locations at some times and while on the move at other times. To remove any uncertainties that would arise as to which set of rights and obligations is pertinent to a particular telecoms service, migration to a unified licensing system is desirable--and in line with international trends.

Hong Kong is not the first location to consider the convergence of fixed and mobile service licenses--South Korea is expected to launch its first "merged" license later this year.

Interconnection conundrum

The OFTA consultation paper also raises several issues that require examination prior to beginning the process of moving towards a unified license. The interconnection charging arrangement, for example, is a critical issue for most operators, but is not covered in this proposal. At present, for every call made from a fixed line to a mobile phone, or from a mobile phone to a fixed line, the mobile network operator pays an interconnection charge to the fixed network operator. This arrangement differs from the symmetrical arrangement for interconnection between fixed networks--for each call between fixed networks, the originating network operator pays a termination charge to the terminating network operator.

While this interconnection charging arrangement may seem esoteric, it?s high on the industry?s agenda because a substantial amount of money is involved. For instance, under the current asymmetric interconnection charging regime, a fixed operator in Hong Kong could receive hundreds of million of dollars of interconnection charge a year. For this reason, any change in this arrangement will involve a redistribution of benefits between the fixed network operators and mobile network operators and thereby, significantly affecting the costs structure of the telecoms market. Whether it is justified to make the change requires careful cost-benefit studies.

A further issue to be considered is the portability of telephone numbers between fixed and mobile networks. Except for special access numbers, telephone numbers for fixed services in Hong Kong currently start with "2" or "3", while telephone numbers for mobile services start with "6" or "9". In the era of fixed-mobile convergence, it would no longer be possible to simply use a telephone number to identify whether it is connected to a fixed or a mobile network. However, allowing the telephone numbers to be ported between fixed and mobile networks could create problems for current arrangements which are dependent on the telephone numbers to identify the characteristics of a caller. Such arrangements may lead to additional cost burdens on the industry and procedures for implementation will also need to be developed.

In the era of fixed-mobile convergence, migration to a unified license is the right direction for Hong Kong in preparing our policy and regulatory framework to welcome the converged services. Although the new proposal put forth by OFTA will raise a host of issues, this proposal deserves wider public discussion. We need a new environment more conducive to the development of innovative services.

--Sin Chung Kai is Hong Kong?s Legislative Councillor for IT. Contact him at cksin@sinchungkai.org.hk