Coming and going, PCCW still wins

26 Aug 2008
00:00

The latest in Hong Kong's fixed vs. mobile wars: Hutchison and CSL have taken Ofta to court for approving PCCW's hike in interconnection fees.

The fixed-line incumbent sought to lift the fixed-mobile interconnect charge from 4.36 cents to 5.45 cents a minute in May. Ofta waved it through.

Hutchison and CSL - the territory's largest mobile operators - last week filed separate judicial review applications to have the decision struck down, scmp.com reported.

Hutchison said the decision was "illegal, unlawful, irrational and/or procedurally improper" and that it had been introduced without warning. CSL said it would increase costs by HK$27 million ($2.4 million).

The background to this is that charges for delivering mobile calls into the fixed network has been a nice earner for PCCW. Mobile operators don't have the right to impose the same kind of fees for terminating fixed calls.

But what is especially cute is that what began as a dispensation to PCCW because it was the largest carrier has now become a subsidy because it is getting smaller.

Originally the old Hongkong Telephone was allowed to charge interconnect fees because it was the default operator. Cellcos had to go through HKT in order to get to almost any customer.

Today, with PCCW's share of the fixed-line market at below 70%, and with Hong Kong mobile phone ownership well over 100%, it has a diminishing role in telephony.

Cue the complaint about higher costs.

And yes, in its decision allowing the fee increase to stand, Ofta cited recent studies that had found VAS and interconnection costs to be growing.

"Both traffic and network costs are decreasing; but as traffic volume has

been dropping much faster than network cost, the unit cost would go up. It is expected that this trend will continue if the PSTN traffic of PCCW-HKTC keeps decreasing."

In other words, PCCW has been given a free pass both coming and going. Ofta's decision means that the bigger the fall in PCCW's market share falls, the higher it can jack up prices.

No wonder they've all found themselves in court.

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