For Immediate Release                                                           23 December 1998

HKISPA Regrets TA Decision to Approve HKTIMS Acquisition of Star Internet

The Hong Kong Internet Service Providers Association today expresses its utmost regrets over the decision of the Telecommunications Authority to approve the acquisition of the Internet business of Hong Kong Star Internet Limited by Hongkong Telecom IMS.  The Association reiterates its position that the deal is against the interests of consumers and the industry, and contrary to the stated pro-competition and pro-consumer policy of the Government.

The Association expresses its reservation over the effectiveness of the two new special conditions incorporated into HKTIMS's license, for the following reasons:
íP The TA falls short of declaring HKTIMS a dominator of the dialup Internet market, rendering the license condition prohibiting abuse of dominant position meaningless.
íP The TA's recently ruled against HKTIMS's advertisement for "free of PNETS" offer, but did not proceed to "retroactively investigate this offer as it [had] been withdrawn from the market."  (From TA reply to HKISPA, December 9, 1998)  The Association is concerned about such enforcement philosophy, again rendering any license condition inconsequential.

In addition, in light of the license condition prohibiting cross-subsidies of the HKTIMS operation, the Association considers it necessary for the TA to immediately look into possible abuses in the areas of cross-subsidies over PNETS charges and the high barrier of entry for ISPs to provide broadband Internet services.

The Association does not agree with the TA's assessment of HKTIMS's market share after the acquisition as only 51%.  Based on internal surveys we maintain that its market share is substantially higher and over 70%.

The Association continues to be concerned about the competitive situation of the Internet access market.  The TA cites the number of over 130 licensed operators in Hong Kong.  However, the fact that one company dominates over half of the market clearly shows that the mere number of licensed operators is not a good measure of market competition.  The TA should ask why some operators have a near-zero or at-zero market share, and whether such was caused by unfair competition owing to the power of a dominant operator.

The TA also cited that the ease with which customers could switch to other "service providers of their choice at relatively low cost."  In light of this assessment, the Association questions the TA's assertion that in arriving at the decision, the interest of the consumers, particularly the existing customers of Star Internet, has been considered.  If it is easy for customers to switch service providers, then an early approval of the transaction protects not the interests of the customers, but the interests of the acquirer in the deal.

The Association regrets that when the TA considers other related markets that might be affected by the transaction, such as web hosting, advertising and electronic commerce, "the TA is satisfied that at this stage, these are in most cases part of much bigger economic markets or that they are not telecoms related markets - such as advertising - and therefore they are not within his jurisdiction."  This means that without anti-competitive law in Hong Kong, nothing can be done against any abuses of the dominator in "non-telecoms" markets.  This position has very negative implications for Hong Kong's effort to develop into an Internet content hub.

The Association will seek to meet the TA in the near future to express our dissatisfaction with the TA's decision over the transaction, and the level of past enforcement against HKTIMS for violations of license conditions.  Further actions may be pending on the decision of the members of the Association, after further consultation.
 

Notes to editors:

HKISPA is the only independent and non-profit association for Internet service providers and other PNETS licensees involved in Internet business in Hong Kong.  Its primary objective is to represent and develop the local Internet-related industry and market.  HKISPA has a membership comprising of over 50 companies, including local and international companies.  Further information on the Association can be found at its URL: http://www.hkispa.org .

For enquiry:
Ms Sawin Kwan
Phone: 2110-3617
Email: [email protected]