REGULATION OF INTERNET PROTOCOL _IP_ TELEPHONY

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					                                                                        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.




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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.




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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



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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


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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



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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



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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



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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



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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



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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



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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



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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



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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



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“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



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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
which are originally allocated for public paging and personal numbering
services, for IP Telephony services as the consumer in HK already perceived
and accepted the mobility characteristic of using pager and personal numbers.

68.      It is HKISPA’s opinion that the introduction of new services like
ENUM and convergence of voice services with the Internet is the trend. The
potential stress on existing numbering resource by the introduction of IP
Telephony is not short term, and should be considered together with the new
and evolving communication technologies and their associated
naming/numbering plans.

Number portability

53(a) Should the requirements of number portability be applied to IP
Telephony services intended to be a substitute for the conventional public
telephone service?

69.      15 out of the 18 respondents submitting views on this question
support that the requirements of number portability should be applied to IP
Telephony services intended to be a substitute for the conventional public
telephone service. The respondents who are supportive of the position include
PCCW, HKBN, REACH, CM Tel, SmarTone, CSL, Peoples, e-Kong, Pacific
Supernet, CompTIA, ELN, WTIA, ETS Society, HKISPA and Consumer
Council.

70.       While supporting the proposal, HKISPA considers that OFTA should
mandate for one fixed network telephone service provider to operate as a
gateway for IP Telephony providers to facilitate full call delivery and number
portability between IP Telephony network and fixed network. Peoples suggests
that the number portability requirement should be imposed to the relevant IP
Telephony service providers after a transition period of 2-3 years. PCCW
considers that number portability is a right rather than an obligation. As such
only the VoIP service which meets all the conditions of the FTNS licence,
satisfies the requirements of the Ordinance and TA Statements, and complies
with market best practice (and hence is substitutable with the existing fixed line
voice services in terms of functionality) should be entitled to number
portability.




                                       24
71.       Ms. Chan holds a different view. In considering that IP Telephony is
new to the market, Ms. Chan suggests that number portability service should
not be a mandatory requirement and thinks that this may help simplifying the
initial introduction of the new technology. iBBS considers that the IP
Telephony number issue can be addressed by ENUM implementation and urges
OFTA to speed up the process in this area instead. SUNDAY submits that
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

53(b) Is number portability necessary for IP Telephony services not
intended to be a substitute for the conventional public telephone service?

72.       There are 19 respondents submitting views on this question. Four of
them including HKBN, e-Kong, Consumer Council and HKISPA support that
number portability is necessary for IP Telephony services not intended to be a
substitute for the conventional public telephone service

73.      Ten respondents including PCCW, HGC, NWT, REACH, Peoples,
SmarTone, CSL, Pacific Supernet, AT&T and ELN consider that it is not
appropriate to mandate number portability requirement at this nascent stage.

74.       The other respondents have different views. The ETS Society and
Zone 1511 share the view that it would be optimal for the IP Telephony service
operators to decide whether to entertain this requirement, when offering
complementary services. CM Tel considers that such services should not be
classified as public telecommunications service and therefore they are not the
subject matter of this Consultation Paper. WTIA suggest that the TA should
consider to combine the Number Portability and the Dipping Databases on
mobile and fixed networks so that number portability among different type of
services can be implemented. SUNDAY proposes that 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

(C) Interconnection and charge settlement

Any-to-any connectivity



                                      25
58(a) Should any-to-any connectivity principle be adopted for IP Telephony
services intended to be a substitute for the conventional public telephone
service?

75.      There are 15 respondents submitting views on this question. 14 of
them agree that any-to-any connectivity principle should be adopted for IP
Telephony services intended to be a substitute for the conventional public
telephone service. They include PCCW, HGC, REACH, CM Tel, Peoples,
SmarTone, CSL, SUNDAY, Pacific Supernet, ELN, WTIA, ETS Society,
HKISPA and Ms. Chan.

76.     iBBS is the only respondent objecting to the proposal. iBBS submits
that OFTA should play a role in speeding up the ENUM implementation.

58(b) Is any-to-any connectivity necessary for IP Telephony services not
intended to be a substitute for the conventional public telephone service?

77.      There are 14 respondents submitting views on this question. They
include PCCW, HKBN, HGC, CM Tel, REACH, Peoples, SmarTone, CSL,
ETS Society, HKISPA, ELN, iBBS, WTIA and Ms. Chan With the exception of
HKISPA and WTIA, all of them consider that any-to-any connectivity is not
necessary for IP Telephony services not intended to be a substitute for the
conventional public telephone service.

78.       Specifically, REACH considers that interconnection rights should be
reserved for those FTNS operators with an obligation to enable any-to-any
interconnection until an interconnection review on network configurations and
associated charging arrangements is conducted and completed. During the
transition, non-FTNS IP Telephony operators who do not provide access to
emergency services should not enjoy interconnection rights but obtain such
interconnection through commercial negotiation. Similarly, PCCW submits that
such a requirement should be optional and the service provider concerned has
to reach a commercial agreement with a FTNS operator if it wants to have
any-to-any connectivity. The ETS Society and Ms. Chan believe that it should
be up to the IP Telephony service operators to decide on the kind of
connectivity they would like to offer to the market. HGC is concerned that,
even subject to commercial agreement, a sudden surge in the number of



                                     26
operators requesting interconnection can be very disruptive to the market and
proposes that a more efficient way of going about it would be to make it a
licence condition that the said IP Telephony service providers can only obtain
interconnection via hosting connection with one of the FTNS operators.

79.       Nevertheless, HKISPA strongly advocates that any-to-any capability
should be adopted for IP telephony no matter whether it is marketed as a
substitute for traditional telephony service under the conditions of traditional
voice services or as a new class of service. HKISPA considers that this will
benefit the consumers most and offer them full flexibility. WTIA considers that
the TA should encourage innovation in the provision of any new
telecommunications services and any-to-any connectivity should be necessary
for IP Telephony services no matter whether the service is intended to be a
substitute for the conventional telephone service.

Interconnection between operators

63(a) Should we extend our existing interconnection regime to IP
Telephony services?

80.     There are 17 respondents submitting views on this question. 8 of them
agree that we should extend our existing interconnection regime to IP
Telephony services. They include CM Tel, ETS Society, HKISPA, AT&T, ELN,
e-Kong, WTIA and Ms. Chan.

81.       Among the respondents who support the proposal, ETS Society and
HKISPA have some further views. ETS Society believes that we should extend
our existing interconnection regime to IP Telephony service if it is intended to
be a substitute for the conventional public telephone service. For IP Telephony
Services not supplied as a substitute, it should depend on commercial
circumstances and the kind of services to be introduced to decide on the
interconnection arrangements. HKISPA advocates that OFTA should mandate
one FTNS service provider to act as a gateway between PSTN and IP
Telephony for call deliveries and number portability. HKISPA considers that
this is a necessary step to enable healthy IP Telephony market competition,
shorten the time-to-market of the service and help speed up the IP Telephony
service adoption in Hong Kong, which is lagging way behind other countries.




                                       27
82.       NWT, Peoples, SmarTone, HGC and iBBS are the 5 respondents who
hold opposite views. NWT opines that IP Telephony service providers do not
have rights of interconnection and should enter into commercial arrangement
with a fixed network licensee for access to the PSTN in order to terminate and
receive calls on the PSTN. Peoples considers that we should not extend our
existing interconnection regime to IP Telephony services in considering the
existing interconnection regimes has created a number of market distortions
between fixed network services, mobile network services and external
telecommunications services in the past 8 years. With the emergence of IP
Telephony service, Peoples urges the TA to carry out a thorough review of the
existing interconnection regimes. SmarTone considers that the proliferation of
IP Telephony services renders the need to review the interconnection charging
regime. And submits that it is an appropriate time to rectify the imbalance in
the fixed/mobile interconnection regime which has been strongly in favour of
the FTNS operators/fixed carriers.

83.       PCCW, HKBN, SUNDAY and Pacific Supernet do not directly
address the question but offer some relevant comments. PCCW submits that
interconnection rights should be extended to VoIP service providers who are
FTNS licensees or have a “carrier” status while VoIP service providers offering
service under a PNETS licence should not be entitled to FTNS interconnection
rights. HKBN submits that, as long as the IP based network of each operator
may interconnect with each other directly without the need to transit through
the PSTN, it is not necessary to extend the PSTN interconnection regime to IP
Telephony for which the light-handed regulatory regime is devised.
SUNDAY submits that the interconnection principles and methodology should
be completely reformed with a view to accomplishing the objectives of (a)
establishing the “calling party pays” principle which is able to remove the
historically unequal and imbalanced phenomenon in the interconnection
markets and (b) setting a benchmark rate for each type of interconnection
charges so that the rates will prevail if commercial negotiation fails. Pacific
Supernet considers that the existing interconnection regime is too complex and
time consuming to new service entrants and suggests that one fixed carrier
should be mandated to act as a gateway for connection between IP Telephony
provider and the PSTN while other fixed carriers can voluntarily provide
similar services on a commercial basis.

63(b)   Should we prescribe technical standards for network-to-network


                                      28
interconnection and user-to-network interface of IP-based technologies or
should we simply allow the market to evolve and determine the standards
itself?

84.       Among the 15 respondents submitting view on this question, 3 of
them including CM Tel, Peoples and Ms. Chan support that OFTA should take
the role to prescribe the technical standard while 9 other respondents including
Zone 1511, ETS Society and HKISPA consider that we should simply allow the
market to evolve and determine the technical standards for network-to-network
interconnection and user-to-network interface of IP-based technologies.
Specifically, PCCW considers that it would be more efficient and appropriate
for technical standards to be defined by the market and that OFTA should not
simply mandate a standard for the industry. Nevertheless, PCCW accepts that it
may be necessary for OFTA to facilitate this process by way of industry
consultation in order to ensure that an agreed set of technical standards are
established as quickly as possible.

85.         SmarTone, CSL and ELN do not directly address the question but
offer some other relevant comments. SmarTone submits that the existing
technical standards should be sufficient for the IP Telephony purpose and there
is no need for OFTA to prescribe standards. CSL opines that it is inappropriate
to mandate stringent interconnection standards as IP Telephony technology is
still in its infancy. It suggests that OFTA should hold an industry consultation
on the types of standards which may be acceptable for interconnection
determination. ELN may have a different interpretation on the question and
expresses different view. It opines that standards that encourage consistency
and help guarantee universality of connectivity should be aggressively
supported while proprietary standards that favour specific products and services
should be discouraged.

63(c) Is it necessary for OFTA to play a role to facilitate the establishment
and interconnection of E.164 number/IP address databases of IP-based
networks?

86.       15 respondents have submitted views on this question. 9 of them
including CM Tel, PCCW, CSL, Pacific Supernet, HKIRC, ELN, Zone 1511,
ETS Society and Ms. Chan agree that it is necessary for OFTA to play a role to
facilitate the establishment and interconnection of E.164 number/IP address



                                       29
databases of IP-based networks. Among them, CSL suggests that OFTA should
also assist the industry to obtain government funding for the initiative. HKIRC
further opines that a standard approach like ENUM should be adopted and
considers that adoption of ENUM by all IP telephony operators will eliminate
the need for them to devise proprietary conversion schemes and number
portability becomes easier.

87.    SmarTone and HGC expressly disagree with the proposal where
SmarTone considers that it is not necessary for OFTA to fix the conversion of E.164
with IP address at the moment.


88.       Peoples, WTIA, iBBS and HKISPA have some different views on the
question. Peoples submits that the TA must ensure the industry to comply with
international practice and considers that, under the EU regulatory framework,
some market offerings are excluded from regulatory control (e.g. through a
software on PC, inside a corporation). WTIA, iBBS and HKISPA believe that
OFTA should play a role to facilitate the establishment, standardization and
interconnection of ENUM. WTIA suggests the TA to initial “test-bed”
implementation for ENUM and co-operate with educational institutes, HKNIC
and interested telecom companies to establish ENUM testing sites in HK.

Calling Line Identification

66     Should operators providing IP Telephony service be obliged to fulfil
the requirements of sending/receiving CLI to and from other fixed network
operators/service providers?

89.       Thirteen respondents including PCCW, HKBN, CM Tel, SmarTone,
CSL, Peoples, Pacific Supernet, WTIA, ELN, ETS Society, HKISPA, iBBS and
Ms. Chan have submitted views on this question. Except iBBS and Ms. Chan,
all the respondents agree that operators providing IP Telephony service should
be obliged to fulfil the requirements of sending/receiving CLI to and from other
fixed network operators/service providers

90.      Among the respondents who support the proposal, SmarTone and
Pacific Supernet share the view that CLI should only be required for IP
Telephony service that is intended to substitute public telephony services while
it should be optional for IP Telephony service not intended to be substitute of



                                        30
conventional telephone service. In contrast, PCCW opines that CLI
requirement should be mandated for IP Telephony services no matter whether it
is intended to be substitute of conventional telephone service. CSL considers
that, if only IP Telephony to IP Telephony calls are being made within the IP domain,
the CLI should not be mandatory as there are currently applications which are buddy
lists, IP addresses or the URL, instead of CLI..


91.       Ms. Chan considers that it should not be a mandatory requirement
since it is not the core-functionality of IP Telephony. Ms. Chan expects this
requirement to be fulfilled at a later stage of the new services as an
enhancement or refinement. iBBS may have a different understanding on the
functionality of CLI and opines that it is up to consumer to choose if his/her IP
phone can get the CLI and no obligation should be applied.

Payment of Interconnection charges, LAC and USC

71(a) Do you agree with the above approach on the interconnection
charges between IP-based networks and conventional circuit-switched
networks?

92.      A total of 15 respondents have submitted views on this question.
PCCW, HGC, NWT, Zone 1511, AT&T, ETS Society and ELN are the 7
respondents supporting OFTA’s position on the interconnection charges
between IP-based networks and conventional circuit-switched networks while
HKBN, CM Tel, HKISPA, WTIA, e-Kong and Ms. Chan express disagreement.
The other respondents including Peoples, and Pacific Supernet express some
other views instead of providing a definite answer to the question.

93.      Among the objecting respondents, HKISPA considers that the current
PNETS charge regime should not apply to the IP Telephony scenario because it
is unfair to the IP Telephony service provider to pay for calls from both
directions while the PSTN or hosting service provider, if any, is under a mutual
arrangement on interconnection charges with other PSTN operators. HKISPA is
inclined to the idea that the interconnection charge should be zero for IP
Telephony for the following reasons: (i) the nature of interconnection charge is
in the form of call settlement and statistically it should be balanced; (ii) the
interconnection charge discourages origination of calls, so if there is
interconnection charge in place for IP Telephony then users might be



                                         31
discouraged from making calls; and (iii) the telecommunications trend is
towards flat rate accounting. HKBN and CM Tel consider that the
interconnection charges in question should not be subject to commercial
agreement and believes that the existing charging principle as in Statement
No.7 should be adopted for IP Telephony services, regardless of the
transmission technology being deployed for voice services. CM Tel further
comments that, for the scenario described in paragraph 69 of the Consultation
Paper, PNETS operators which are allowed to provide IP Telephony service
should not be granted the interconnection right/obligation unless they could
fulfill the minimum regulation to preserve the attainment of certain social
objectives. e-Kong submits that OFTA should set reference rate for each type of
interconnection charges in considering that it would be difficult for the smaller
IP telephony service providers to negotiate with the big players on an equitable
basis. Similar to e-Kong, Ms. Chan suggest that, just like the PNET charge, a
fixed rate charge could be levied by the fixed carriers or the broadband
connection suppliers when the IP Telephony service provider is going to use
their network to provide service.

94.      Peoples considers that Paragraph 67 is not always acceptable and
there must be an additional requirement that the IP Telephony behind the media
gateway is operated over a "managed network" if the "Carrier-to-Carrier
Charging Principles" for interconnection based on the circuit-switched
technologies is to be applied.

95.      In order to expedite interconnection between IP telephony providers
and fixed carriers, Pacific Supernet submits that OFTA should mandate one
fixed carrier as the default gateway between the IP Telephony providers and all
the fixed carriers and regulate the relevant charges. It also proposes that IP
Telephony should pay for traffic originating from their networks and receive
payments for traffic terminating on their networks.

71(b) Do you agree with the above approach on the interconnection
charges between IP-based networks?

96.      There are 15 respondents submitting views on this question. 7 of them
including PCCW, HKBN, HGC, CM Tel, AT&T, ETS Society and Zone 1511
support the TA’s proposed approach on the interconnection charges between
IP-based networks. In particular, PCCW agrees with OFTA’s proposed



                                       32
approach on the interconnection charges between IP-based networks but
suggests that OFTA should not seek to regulate the level of charges applicable
to the interconnection in question. HKBN also supports the view that the TA
should not intervene in IP-based interconnection but leaving it to service
operators to conduct and strike their own commercial negotiation arrangements
where required.

97.      Five respondents including Pacific Supernet, iBBS, e-Kong, HKISPA
and ELN disagree with the approach. Among these respondents, e-Kong
submits that OFTA should set reference rate for each type of interconnection
charges in considering that it would be difficult for the smaller IP telephony
service providers to negotiate with the big players on an equitable basis.
HKISPA expresses its disagreement with the same view as that given in
response to Question 71(a) above.

98.      Peoples, WTIA and Ms. Chan have some different views. Peoples
considers that the TA should issue specific guidelines under the
Telecommunications Ordinance for the interconnection charges if the
"any-to-any" principle is enforced between IP-based networks. Ms. Chan
expresses the same view as that given in response to Question 71(a) above.
WTIA does not address the question directly but agrees with the TA’s view
discussed in paragraph 68 and welcomes the TA to intervene or give guidance
when consider necessary.



71(c) Do you agree with the above approach on the interconnection charges
between the IP Telephone service provider and the supplier of the broadband
Internet connection?

99.      Among the 22 respondents who have submitted views on this question,
14 of them including HKBN, NWT, CM Tel, SmarTone, Peoples, CompTIA,
ELN, Zone 1511, Pacific Supernet, iBBS, Microsoft, WTIA, AT&T and
HKISPA agree with the TA’s proposed approach on the interconnection charges
between the IP Telephone service provider and the supplier of the broadband
Internet connection.

100.       Specifically, AT&T, HKISPA and CompTIA expressly support the
TA’s view, as given in para. 70(c) of the Consultation Paper that (a) there is no
justification for a broadband connection supplier to ask the IP Telephony


                                       33
service provider for an additional payment of interconnection charge for the
conveyance of the IP Telephony traffic over the broadband connection and (b)
there is no justification for the broadband connection supplier to block the IP
Telephony traffic if such payment is not made. HKBN considers that IP
Telephony services operating on the application layer of the broadband
connection should be similar in nature to other Internet peer-to-peer
applications, such as BT, WinMX, ICQ, MSN, Kazaa etc. The subscriber would
have already paid the broadband connection (either the network operator
operating the broadband connection or PNETS licensee) for the access of these
applications and it is therefore not necessary for IP Telephony service providers
to pay any additional interconnection charges. Although it supports the TA’s
view, Zone 1511 considers that, if an IP Telephony service provider has
preferred internet service provider and requires a special level of service from
them, there might have interconnection charges, based on the principle that the
originating party pays to the terminating party, and should be subject to
commercial negotiation and arrangement by the related parties.

101.      PCCW, WT&T, HGC, HKCTV, ETS Society, HKTUG and Hon. Sin
Chung Kai are the 7 respondents disagreeing with the TA’s view. In particular,
PCCW submits that whether or not the ISP acts to charge the VoIP service
provider using its network is a matter for the ISP to determine and the extent of
the usage is irrelevant to the question of whether or not the ISP should be
permitted to charge the VoIP service provider. PCCW opines that these are
purely commercial decisions driven by market forces, business plans, corporate
strategies and revenue estimates. OFTA should not intervene (i.e. engage in
economic regulation) unless an ISP’s actions violate Sections 7K, 7L or 7N of
the Ordinance Sin Chung Kai considers that, in order to keep the network
operators’ incentive for infrastructure investment and promote effective market
competition, any kind of service providers should be subject to interconnection
charge if they are using the network of other providers to offer services. WT&T
objects to the proposal and submits that the TA should implement a user-pay
system under which all IP telephony service providers piggybacking on
network operators’ network for customer access would pay access
fees/interconnection charges to the network operators, where the quantum of
the access fees/interconnection charges should be determined by commercial
arrangements amongst the concerned parties, or failing which by TA’s
determination in accordance with established proceeding. HGC considers that
the TA’s view appears to contradict the view of the TA in respect of the
interconnection charging arrangements applicable to the International Call
Forwarding Services (“ICFS”) in which an ICFS provider is required to pay an
access charge to an MNO for making use of the call forwarding service of the


                                       34
MNO in the circumstances where the relevant customer of the MNO has,
arguably, already paid for the same call forwarding services. 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

102.     Ms. Chan offers a different view. She suggests that, just like the PNET
charge, a fixed rate charge could be levied by the fixed carriers or the
broadband connection suppliers when the IP Telephony service provider is
going to use their network to provide service.

LAC

78(a) Do you agree that the existing charging principles of LAC should be
continued for interconnection between IP Telephony and circuit-switched
networks?

103.     The views on the question are quite diversified. Among the 19
respondents, 7 of them including PCCW, HGC, CM Tel, CSL, ELN, HKTUG
and Hon. Sin Chung Kai support the proposed approach that the existing
charging principles of LAC should be continued for interconnection between IP
Telephony and circuit-switched networks.

104.      Nine respondents including SmarTone, Peoples, Pacific Supernet,
Zone 1511, ETS Society, iBBS, WTIA, HKDotCom and Ms. Chan disagree
with the proposal. Both Zone1511 and ETS Society share the same view that
LAC is applied to the delivery of external traffic to and from customers in
Hong Kong and IP Telephony services are provided through a local IP network
only. On this basis, they submit that interconnection charge should be applied
instead of LAC. WTIA submits that the charging principle should only be
applied to ETS operators who are using IP technology to deliver international
traffic. WITA further submits that IP Telephony service providers that are
permitted to use telephone numbers with prefix “2”, “3” and “8” should be
entitled to levy interconnection charge at the same level as being collected by
FTNS operators and that IP Telephony service providers that are allowed to use
mobile phone numbers of prefix “6” and “9” should be entitled to levy



                                       35
interconnection charge at the same level as being collected by MVNO. Pacific
Supernet share the view of WTIA and agrees that IP Telephony provider should
be eligible to receive incoming LAC payment as the IP Telephony provider has
invested money in renting broadband access, buying equipment to provide
traffic termination for its customers

105.      As for the other 3 respondents, they do not provide a clear-cut answer
to the question but offer some other relevant comments for our consideration.
NWT considers that OFTA needs to examine LAC arrangements to ensure that
local fixed network operators are adequately compensated for use of the local
loop by IP Telephony service providers. HKISPA believes that IP Telephony
service provider is providing the delivery service on behalf of their customers
and therefore financially and legally entitled to any benefits generated by using
the circuits they lease from the network operator including receiving LAC
payments from ETS operators. The HKISPA is inclined towards the idea that IP
Telephony service providers should not be subject to any LAC, if consensus
cannot be reached on this point. HKBN believes that, under the technology
neutrality principle, there is no need for the regulator to intervene in
interconnection arrangements between IP-based networks.

78(b) Do you consider that fundamental changes to the LAC mechanism
should be made to cater for the IP-based environment?

106.      Nine respondents including PCCW, SmarTone, Peoples, CM Tel,
Pacific Supernet, ELN, WTIA, ETS Society and HKISPA have submitted views
on this question. Their views are quite diversified.

107.      Peoples, Pacific Supernet, HKISPA and SmarTone support that
fundamental changes to or review on the LAC mechanism should be made to
reflect the current market situation after proliferation of various new services
and cater for the IP-based environment. Peoples opines that all types of
interconnection charges such as LAC, MIC, USC, etc should also be reviewed.

108.     PCCW and CM Tel submit that it is not necessary to make any
fundamental changes to the LAC mechanism for the time being. PCCW
considers that the basic premise should still remain that LAC is payable for the
use of local network facilities and to encourage local network rollouts and
upgrades while CM Tel considers that IP-based environment when mature will



                                       36
diminish contribution to LAC naturally.

109.     ETS Society considers that the existing LAC mechanism cannot easily
cope with the structure of this technology and will present a hindrance to the
development of IP Telephony. ETS Society recommends the cancellation of the
LAC mechanism and have it replaced with a local interconnection charges
mechanism, which should be designed to fairly share the burden of LAC
recoveries among all the services accessing the local loop such as IP Telephony,
ETS, mobile, ISP or broadband services.

110.      WTIA agrees with the scenarios described in paragraphs 73-77 and
supports the TA’s view that there would be no need for the equivalent of the
LAC mechanism to be developed for the IP-based environment. ELN may have
a different interpretation on the question and submits that additional charges are
not justified because access has already been made via the broadband network.

80(a) Do you agree that the type of traffic described in the preceding
paragraph generated by IP phone at local or overseas locations should be
regarded as local traffic?

111.      Among the 12 respondents, 7 of them including HGC, CM Tel,
Pacific Supernet, ETS Society, HKISPA, WTIA and ELN agree that the type of
traffic (as described in paragraph 79 of consultation paper) generated by IP
phone at local or overseas locations should be regarded as local traffic while
PCCW, HKBN, NWT, Peoples and Ms. Chan disagree. Apparently, there are
two camps of view on the issue.

112.      Specifically, Peoples submits that the principles of cost causality and
actual cost recovery should be maintained whatever the traffic routing is. It is
not a matter of classification whether the traffic is regarded as "local traffic" of
not. If the service enables communication across the territories, certain
compensation should be provided to the operator who has invested in the local
access network carrying such call traffic. Otherwise, the continuous and
sufficient commercial incentive for investment in the local infrastructure will
be diminished. In addition, it should be possible for the mobile network
operators to collect LAC from ETS operators. However, as OFTA does not
intend to regulate the charges, it is not practical for a mobile network operator
to negotiate a LAC due to a lack of bargaining power under the "any-to-any"



                                        37
principle. In case where the call traffic is between an "overseas" IP phone and
a local mobile phone, the mobile network operator should be entitled to collect
LAC regulated by the TA or through S36A determination as a last resort.
PCCW-HKT considers that for the purposes of LAC, calls should be classified
in accordance with their nature (international or local call). As such, calls
made between two countries should be treated as external calls regardless of
what telephone numbers or networks have been used. This is a technology
neutral approach and maintains network investment, rollout and upgrade
incentives. HKBN submits that any changes to the existing LAC mechanism
before the IP Telephony market has evolved would be premature.

80(b) If the answer to the above question is “no”, how do you propose to
meter the above type of traffic for LAC payment purposes?

113.      There are 3 respondents submitting views on this question. PCCW is
of the view that devising a means of detecting and logging international calls is
a task which requires the concerted efforts of the industry. A useful starting
point may be for the VoIP service provider to collaborate with the broadband
Internet access provider or the underlying network operator to work out how
such traffic can be properly recorded. In the alternative, a flat rate fee may be
created based on industry averages and market experience.

114.      The ETS Society recommends that LAC be replaced by a mechanism
of local interconnection charges in which the traffic generated by some
specified services other than ETS are also required to pay LAC. The proposed
traffic types include (a) Calls to and from fixed lines, whether PSTN, IP
Telephony or ETS; (b) Calls to and from mobile phones; (c) Dial-up calls from
ISPs; and (d) broadband usage.

115.     Peoples does not propose solution to the question but emphasizes that
it will be necessary to distinguish all traffic types so that charges can be
accurately applied.

USC


85(a) Do you consider that the USO and USC sharing mechanisms should
be overhauled because of the development of IP Telephony services?




                                       38
116.      Thirteen respondents have submitted views on this question. 10 of
them agree with the proposal, one disagrees and the others two do not provide a
clear-cut answer but offer some other views instead.

117.     CM Tel, HGC, Peoples, SmarTone, CSL, iBBS, Pacific Supernet,
WTIA, HKISPA and Ms. Chan are the 10 respondents who support the
proposal that the USO and USC sharing mechanisms should be overhauled or
reviewed because of the development of IP Telephony services.

118.     ELN is the unique respondent not agreeing with the proposal. It
opines that there is no such a need to overhaul the mechanisms but definitions of
Universal Service Obligation and Universal Service Contribution may need to be
modified to better accommodate VoIP service providers.


119.      PCCW and ETS Society do not provide definite answer to the
question but offer some relevant comments. PCCW submits that, whether the
application of the USC to Internet minutes requires an overhaul of the system is
not directly relevant, what is relevant is the continuation of this important
subsidy scheme and the support of this scheme by all providers of international
traffic on a fair basis. PCCW further opines that, with the increasing use of IP
technology to deliver voice calls (which have traditionally been delivered using
circuit-switched networks), there are good reasons to take into account
international Internet voice traffic when determining the share of USC between
the operators, and to subject such traffic minutes to the USC regime. The ETS
Society firmly believes that USO is irrelevant to IP Telephony services and is
becoming increasingly irrelevant to the society in Hong Kong and proposes to
release the fixed line operators from the USO obligation for the following
reasons (a) Hong Kong residents have alternatives to basic fixed-wire services,
mobile and Wi-Fi being examples; (b) the geographic reach of mobile services
provides substantive coverage of Hong Kong; and (c) mobile substitutes are
easily used and cost effective. For those people so disadvantaged (presumably
being a very small number), a direct social security subsidy should be more
cost efficient and target-oriented than a total-system subsidy such as USC.
Accordingly, the ETS Society proposes that the USC charge be cancelled in
full.


85(b)   Do you consider that all providers of IP Telephony services should be


                                       39
obliged to share the contribution to USO, even though their traffic may not
traverse the PSTN at all and some of them may be local IP Telephony service
providers?

120.     Among the 14 respondents who have submitted views on this question,
7 of them including PCCW, HKBN, NWT, CSL, WTIA, ELN and Ms. Chan
support that all providers of IP Telephony services should be obliged to share
the contribution to USO, even though their traffic may not traverse the PSTN at
all and some of them may be local IP Telephony service providers. 6
respondents including CM Tel, CompTIA, Zone 1511, Pacific Supernet,
HKISPA and ETS Society disagree. Peoples does not provide a definite answer
but offers some relevant views.

121.      In view that the USC sharing exercise is based on international traffic
minutes, PCCW submits that all operators who provide international services
should be required to contribute to the USC and it may now be appropriate to
broaden the source of USO contributors to include other service providers,
since all these service providers have ultimately benefited from the
implementation of the incumbent’s ubiquitous network. HKBN opines that any
telephony service providers in Hong Kong providing telephony services should
be obliged to comply with the existing USO and USC sharing mechanisms, no
matter whether their services are provided through conventional circuit
switching technology or the IP technology. WITA considers that, other than the
call minutes generated by ETS operators, the following should also be required
to share the contribution to USO:
(i)       Basic phone call minutes to and from all basic fixed telephone line
          operators or Fixed Carrier Licensees,
(ii)      Basic phone call minutes to and from all mobile and MVNO
          operators,
(iii)     Basic phone call minutes to and from IP Telephony services providers
          that need ordinary telephone number on the termination or origination
          of the call,
(iv)      Dialup access minutes from dialup access services of all ISPs,
(v)       Data volume in and out of a Broadband ISPs. For conversion of
          circuit-switched telephone call minutes to measurable data volume,
          we can use a formula for example, “1 sec of telephone calls equal to
          12 K of Internet Protocol (IP) data bases on H.323 protocol G.729
          Codec”



                                       40
122.      Regarding the views of the opposing respondents, CompTIA strongly
supports the goal of Universal Service as a matter of public interest as well as a
matter of technology adoption. However, CompTIA recognizes that the
regulatory programs to achieve that goal needs to be reformed first and believes
any attempt simply to include VoIP services in the current mechanism is not
only harmful to emerging VoIP providers, but consumers reliant on the
Universal Service for affordable service. Zone 1511 submits that USO is
irrelevant to IP Telephony services because it is not intended to be a substitute
for the conventional public telephone service. Pacific Supernet submits that
only IP Telephony service that is intended to be substitute of conventional
public telephony is obliged to USO and USC contribution.

123.     Peoples agrees that the USO for fixed line to provide basic telephone
service remains no matter what technical developments are introduced but a
complete review of the USO and USC needs to be undertaken.

85(c) If the IP Telephony service providers should be obliged to share the
contribution to USO, and if there are practical difficulties in metering the
volume of “external” traffic for USC purposes, what should be the basis for
the sharing – number of telephone numbers assigned to customers, revenue,
etc.?

124.     Only 7 respondents have submitted views on this question. 5 of them
offer proposals on the basis for the sharing of USC and they are summarized as
follows:

1)   Request all IP Telephony service providers to report the actual call minutes,
     and these figures should be subject to external audit. (Peoples)
2)   Based on the number of telephone numbers assigned to customers
     (PCCW)
3)   All external traffic should be accessed through the designated access code
     with leading digits 00XX or 15XX/16XX. Telephony services operators
     could use the traffic recorded to meter the volume of “external” traffic for
     USC purposes. (HKBN)
4)   Basis should be gross call volume biased between number of calls and
     number of call minutes. (ELN)
5)   Use methods which have to be agreed among the both IP-based and



                                       41
    conventional telephony service providers, e.g. the number of subscriber.
    (Ms. Chan)

125.      ETS Society concurs that there is no obvious or fair way to make an
apportionment between local and international traffic and believes that the USC
weighting should be regarded as zero, based on the assumption that the
majority of IP Telephony calls will not terminate outside of Hong Kong.
Alternatively, ETS Society proposes that the USC charge be replaced with a
charging mechanism that may utilize minutes, subscribers or access events with
its underlying aim to ensure that all services equally bear this cost burden. ETS
society suggests the mechanism should include (a) Calls to and from fixed lines,
whether FSTN, IP Telephony or ETS; (b) Calls to and from mobile phones; (c)
Dial-up calls from ISPS; and (d) Broadband usage.

126.      CM Tel does not think that it should jump into conclusion on which party
should be obliged to share the contribution to USO now. It would be unfair and
dangerous to make any assumption before they are allowed sufficient time to fully
study and analyze on this topic.


(D) Consumer and other issues

Directory enquiry

92(a)   Is there any practical problem for a FTNS operator or fixed carrier

(i) to include the customers of an IP Telephony service in the unified
directory database; and
(ii) to provide unified printed directory and telephonic directory services to
their customers subscribing to an IP Telephony service?

127.    The question attracts the views of 11 respondents including PCCW,
HKBN, CM Tel, Peoples, Pacific Supernet, Zone 1511, ELN, WTIA, HKISPA,
ETS Society, and Ms. Chan.

128.     Only ELN considers that there would have problem for a FTNS
operator or fixed carrier to implement (i) and (ii) above and the problems may
include the rapid change/churn of subscribers in any connectionless (IP)
network and the lack of geographic boundaries.



                                       42
129.      PCCW, HKBN, CM Tel, Pacific Supernet, HKISPA and Ms. Chan
commonly consider that there is no problem at all. Specifically, PCCW
considers that there should be few practical difficulties for the FTNS operator/
Tier 1 service provider to also include in the directory database the names and
telephone number of Tier 2 VoIP subscribers, as the systems and procedures to
collate telephone numbers should already exist today. However, PCCW opines
that this should be done by the FTNS operator/ Tier 1 service provider under
commercial arrangement with the Tier 2 VoIP service providers. PCCW
indicates that there is no difficulty in providing unified printed directory and
telephonic directory services to their customers subscribing to an IP Telephony
service if the customers of an IP Telephony service can be included in the
unified directory database.

130.      The ETS Society and Zone 1511 do not address the question directly
but commonly consider that IP Telephony services intended to be a substitute
for the conventional public telephone service should have its customers
included in the unified directory database while commercial arrangement
between FTNS and IP Telephony service providers should be entered to
determine the listing of IP Telephony numbers in the unified directory database
if the service provider is not a substitute for the conventional public telephone
service. Similarly, WTIA propose to keep the current directory services
practice of the industry.

131.     Peoples may have interpreted the question in a different way and
opines that that the need for printed directory may be required. Peoples’
comment seems to be irrelevant to the question.

92(b) Which types of IP Telephony services should be required to provide
printed directory and telephonic directory service to the customers?

132.     A total of 15 respondents have submitted views on this question. 6 of
them including PCCW, HKBN, CSL, Peoples, e-Kong, and Consumer Council
have specified the types of IP Telephony services which should be required to
provide printed directory and telephonic directory service to the customers, the
other respondents do not consider such a requirement is necessary or have
some other views.




                                       43
PCCW, CSL and Consumer Council commonly share the view that only FTNS
licensees or IP Telephony services that are intended to be substitute of the
conventional telephone service should be required to provide printed directory
and telephonic directory service. Furthermore, PCCW considers that the FTNS
operator should be entitled to charge for these services because there is no
reason why directory services should continue to be made available to
customers free of charge. HKBN and e-Kong submit that all types of IP
telephony services should be required to provide printed directory and
telephonic directory service. HKBN believes that subscribers of IP Telephony
services should be able to enjoy the same grade and type of directory enquiry
services that a conventional telephony service subscribes could enjoy. Peoples
considers that IP Telephony service providers that are assigned local telephone
numbers should be required to provide printed directory and telephonic
directory service to the customers

133.      CompTIA, ELN, and AT&T share the view that IP Telephony services
should not be obligated initially to provide a unified printed directory or
telephone directory services of IP Telephony customers, but be permitted to do
so on a voluntary basis. Similarly, HKISPA believes that the issue of directory
listing for IP telephone should be left to the market to decide. ETS Society does
not believe that any requirement should be made for the provision of a printed
directory and considers that the users of IP Telephony are unlikely to require
such a service but are likely to prefer an electronic directory.

134.       CM Tel, WTIA, iBBS and Ms. Chan do not address the question
directly but offer some relevant comments. CM Tel believes that the main
consideration is that the IP Telephony services should be public
telecommunication services meeting minimum regulation to preserve the
attainment of certain social objectives. WTIA considers that the original
purpose of the number will go away as time go by and the distinction between
fixed, mobile and IP Telephony will be blurred or even disappear over time.
Therefore, whether or not the IP Telephony services provider need to provide
Directory Services is questionable. iBBS agrees to maintain a directory enquiry
service for customer’s benefit but suggests not to apply the directory
requirement to IP Telephony service providers and should explore in the
direction of having one single directory service under ENUM in future. Ms.
Chan opines that only the telephone numbers of those commercial or public
facilities subscribing to IP telephony service need to be printed on telephone



                                       44
directory.

Access to emergency services

97(a)    Should all IP Telephony services intended to be substitutes for the
conventional public telephone be obliged to provide access to emergency
services? Should similar requirement be extended to other types of IP
Telephony services?

135.     Sixteen out of the 20 respondents submitting views on this question
agree that all IP Telephony services intended to be substitutes for the
conventional public telephone should be obliged to provide access to
emergency services. Three respondents consider that the requirement should be
optional or simply not necessary while the remaining one respondent has some
other comments.

136.      PCCW, HKBN, HGC, CM Tel, Peoples, CSL, SmarTone, e-Kong,
Pacific Supernet, ELN, ETS Society, HKISPA, WTIA, Consumer Council,
SCHSA and Ms. Chan are the 16 respondents who support mandating the
access-to-emergency requirement for IP Telephony services intended to be
substitutes for the conventional public telephone. Among these supporting
respondents, only CSL and HGC considers that access-to-emergency
requirement should be extended to other types of IP Telephony services.

137.      Zone 1511 submits that it should be optional for the IP Telephony
operator to provide access to emergency services. Similarly, AT&T opines that
OFTA should leave the decision to the service providers if they would like to
provide access to emergency services on the condition that precise information
is given to customers as to the capabilities and limitations of the service to
reach the emergency agencies. AT&T considers that allowing service provider
differentiation, when accompanied by clear notification of service capabilities
and limitations, is an appropriate approach to encourage IP Telephony
innovation. iBBS submits that no emergency services access obligation should
apply to IP Telephony providers.

138.     CompTIA does not offer a direct reply to the question but offer some
views on the capability of IP technology in the future. It predicts that not only
will current issues be satisfied, but as the technology matures, IP emergency



                                       45
services will offer significantly enhanced features and controls that both first
responders and citizens will value.

97(b)   If service providers were exempted from such an obligation, what
should be done to protect the interest of end-users and to avoid confusion?

139.      A total of 14 respondents offer views on this issue including PCCW,
CM Tel, CSL, SUNDAY, Peoples, iBBS, e-Kong, Pacific Supernet, HKTUG,
ICC, ETS Society, HKISPA, ELN and Zone 1511. In general, a majority of
them share the same view that customer education is important and service
providers should be required to clearly communicate to the end customers the
capabilities and limitations of their IP Telephony service before signing up
agreement with the customers. Some of them such as SUNDAY, CSL, HKTUG
and iBBS also opine that OFTA has a key role to play in facilitating and
providing consumer education such as distributing material to the public to
educate them on the attributes and disadvantages of IP Telephony and ensuring
that service providers communicate to their end-users about the accessibility of
emergency service. Furthermore, CSL also proposes that OFTA must consider
whether it should be an obligation for customers to have a primary fixed line in
order to ensure emergency service access is provided. PCCW submits that
penalties should be imposed on the IP Telephony service provider if it is found
that the service provider has not provided sufficient information to its
customers regarding access to emergency services.

140.      On the other hand, HKISPA is of the view that end-users are not
deprived of any benefits if they are well aware that IP telephone is a service
that relies on the IP transit. Peoples considers that IP Telephony service must be
distinguished from conventional PSTN services through the allocation of
special number range and porting should not be allowed initially.

97(c)     What technical or operational solutions are available for the supply
of reliable information on the locations of callers using IP Telephony services
to the emergency services?

141.     A total of 13 respondents have submitted views on this question. 8 of
them including PCCW, CSL, CM Tel, ELN, Pacific Supernet, WTIA, HKISPA
and Ms. Chan propose solution to the problem while the others give some other
comments.



                                        46
142.      CM Tel, CSL, Pacific Supernet and ELN commonly consider that one of the
methods is to request timely update from customers to maintain accuracy of customer
database information. ELN further indicates that the inclusion of GPS transceivers
into IP phones might be a possible solution but it would be intrusive, expensive,
and unreliable (GPS operates at ~13GHz and the signal cannot penetrate
buildings well at such frequency). HKISPA opines that it would be technically
feasible to trace the IP address by the AS path from the global BGP table so
that the ISP hosting that IP address can be identified. The ISP can then be
contacted for information about the physical location of that specific IP address.
This is currently feasible but not administratively efficient when the ISP is
located overseas. Ms. Chan believes it is a very important function of the
telephony industry to provide reliable information on the locations of callers
when they call for emergency services. She proposes binding the physical
location to the IP Address instead of the telephone number may be an option.
PCCW suggests that the IP address from which the call is generated can be
used to pinpoint the geographical location of the caller. Besides, PCCW
considers that it will need to ask the caller for his current location if it is known
by the telephone number shown on the CND that the caller is using IP
Telephony service. WTIA considers there may be a need that the TA, HK
Police Emergency Centre and IP Telephony services provider should setup a
special workgroup to take care and keep track of the technical issues,
development, advancement and implementation on the access to emergency
services using IP Telephony.

143.      Both Zone 1511 and ETS Society believe that IP Telephony operators
should not be obliged to supply call-by-call information on the locations of callers to
emergency services. If correspondence or registered access address is useful
information or required under certain circumstances, IP Telephony operators should
be obliged to provide such information. SCHSA express their concern on the fact
that it would not be feasible for the IP Telephony service provider to provide
reliable information to the emergency service centre of the location of a caller.
SCHSA indicates that the access to emergency service and reliable
identification of the caller location are of paramount importance to the timely
rescue of the elderly in need.

144.     HKBN proposes that, before solutions for the provision of location
information is available, service operators should inform users as to whether



                                          47
the service they offer can or cannot provide calling location to emergency
agencies once relocated from the previous installation address. ICC It is
expected that the long-term VoIP solutions will improve from what is possible
in today’s circuit-switched environment, particularly in areas such as
IP-enabled emergency services. However, these efforts will take time and will
best develop by cooperation and not by mandate.

Backup power supply

102(a) Do you agree with the above initial views and clarifications with
respect to the requirement of the backup power supply for IP Telephony
services?

145.     There are 12 respondents submitting views to this question. 8 of them
including HKBN, CM Tel, Peoples, SmarTone, HKISPA, WTIA, e-Kong and
ELN agree with the TA’s initial views and clarifications given in paragraphs 98
- 101 with respect to the requirement of the backup power supply for IP
Telephony services. Specifically, HKISPA agrees that IP telephone service
marketed as ordinary telephone service should fall into that category but IP
Telephony service not intended to be a substitute of the conventional telephone
service should not be obliged to provide backup power supply.

146.     The ETS Society believes that backup power supply is not required as
IP Telephony services are not a direct substitute for the conventional public
telephone service. Similarly, iBBS also agrees that no backup power supply
obligation should be applied to IP Telephony providers.

147.     However, PCCW does not agree with the above views. PCCW
submits that the obligation to provide continuous service, even in the event of a
power failure, is an FTNS licence obligation and hence any operator providing
service under the FTNS licence (regardless of the technology it adopts) must
satisfy this requirement. On this basis, PCCW considers that those IP
Telephony service providers (in a technology neutral regime) offering service
under the FTNS licence should be obliged to provide power backup. SCHSA is
deeply concerned that IP telephony service cannot function normally during
power outage because it is during such a time period that the elderly who live
alone particularly need urgent assistance.




                                       48
102(b) Do you consider that the existing backup power supply requirement
for “basic telephone line service” should be extended to the IP Telephony
services?

148.      Among the 19 respondents who have submitted views on this issue,
10 of them including PCCW, HGC, CSL, SmarTone, Peoples, ELN, WTIA,
SCHSA, Eric Kwan and Ms. Chan consider that the existing backup power
supply requirement for “basic telephone line service” should be extended to the
IP Telephony services. Specifically, PCCW and SmarTone submit that IP
Telephony services that are intended to be substitutes for traditional voice
services should be subject to the same obligations and hence should be required
to provide backup power. SCHSA recommends mandating the requirement as a
licensing condition and clearly communicating to the customers the impact to
the service due to the failure of public electricity supply during the transition
period. HGC considers that obligation relating to consumer welfare and
protection should not be dropped lightly without full justification.

149.      The other 8 respondents; namely HKBN, CM Tel, HKCTV, AT&T,
Zone 1511, ETS Society, HKISPA and Consumer Council hold the opposite
view and consider that the existing backup power supply requirement should
not be extended to these IP Telephony services. In particular, Consumer
Council considers that imposing backup power requirement for IP Telephony
will not enable consumers to use telephony services during the outage of power
supply since the modem, PC and the device access to broadband cannot
function without power supply from the premises. HKBN considers that the TA
should allow the industry and market to develop solutions to resolve the
problem rather than extending the existing backup power supply requirements
to IP Telephony services. HKCTV supports the TA’s view that IP Telephony
service that involves the installation of a broadband modem falls outside the
definition of “basic telephone line service” under the TA Statement on “Backup
Power Supply for Fixed Telephone Line Service during Failure of Public
Electricity Supply” issued on 26 September 2003.

150.      Pacific Supernet submits that backup power should be optional and
indicates that the Internet access is likely to fail during a power outage.



102(c)   If the backup power supply requirement for “basic telephone line


                                       49
service” is not to be extended to IP Telephony services, what should be done
to protect the interest of customers who may be relying on the telephone line
services for critical applications (e.g. “life-lines”)?

151.      There are 17 respondents submitting views on this question. 12 of
them including PCCW, HKBN, REACH, CM Tel, SUNDAY, CSL, e-Kong,
Pacific Supernet, Zone 1511, HKTUG, ETS Society and HKISPA share the
view that IP Telephony services provider should be required to fully educate
users and clearly inform prospective subscribers about the limitations /
shortcomings of the IP Telephony service so that customers can make an
informed choice before signing up a service agreement with any IP Telephony
service provider. Specifically, SUNDAY also considers that it may be desirable
if OFTA will, through launching programs, issue material to educate the public
about the attributes and disadvantages of IP Telephony. In order to ease the
concern on this issue, HKBN indicates that the actual reliability of electricity
supply in 2003 was as high as 99.999%, based on the information provided by
an electricity company. In addition to customer education, CSL also proposes
that IP Telephony service providers should be restricted from providing service
to customers who may be relying on the services as “life lines”.

152.     ELN does not agree with the proposal and considers that exempting
the IP Telephony services from such an essential service would be taking a
dramatic step backward with respect to public safety and technology
advancement.

153.      The other 3 respondents offer some other views. Peoples submits that,
to protect the interests of customers, IP Telephony must be distinguished from
conventional PSTN services through the allocation of special number range and
porting should not be allowed initially. CC suggests that, for certain groups of
the community (for example, the elderly) relying on the “basic telephone line
service” for critical applications such as “life-lines”, the Government should
state clearly in the license provisions that local telephone services provided for
customers who are relying on the telephone line services for critical
applications have to satisfy the backup power supply requirement. Ms. Chan
opines that, if IP Telephony really cannot provide the “basic telephone line
service”, the copper wire telephone service should be maintained to a certain
extent, e.g. at least a building should have one. As the mobile phone or device
is very popular, access to emergency service can be made by mobile phone. In



                                        50
considering that some elderly or less advantaged citizen may not afford a
mobile phone, Ms. Chan suggests that some free of charge phone for making
emergency call may be installed just like those we can find in the country park
for the ease of reporting crime or calling for emergency service.

Quality of Service (QoS)

109(a) Should IP Telephony services intended as a substitute for the
conventional public telephone service meet minimum quality standards?


154.      OFTA received the views from 20 respondents concerning this issue.
13 of them including PCCW, HGC, WT&T, CM Tel, SmarTone, Peoples, ETS
Society, HKISPA, e-Kong, ELN, Consumer Council, SCHSA and Ms. Chan
agree that IP Telephony services intended as a substitute for the conventional
public telephone service should meet minimum quality standards.

155.      Specifically, WT&T indicates that studies and recommendations made
by international standardization bodies, such as ITU-T, ETSI, TIA, suggest that
end-to-end speech quality of IP Telephony can be classified into three classes;
namely Class A (equivalent to fixed telephones), Class B (equivalent to cellar
phones) and Class C (required for voice communications in particular). In order
to ensure that consumers are well informed of the class and quality of
telephony services they are using, WT&T submits that Hong Kong should
follow overseas recommendations in requiring IP telephony service providers
and terminal equipment vendors to affix/associate appropriate service/quality
marks to their products/services in all their sales/promotional
activities/documentation and service contracts with customers, in accordance
with the certain classification system to be defined by OFTA in consultation
with the industry. Peoples submits that IP Telephony services intended as a
substitute for the conventional public telephone service must be required to
operate over "managed network" in order to meet minimum quality standards.
HKISPA considers that a different set of standards shall apply for IP telephony
service that is not intended as substitutes. SCHSA opines that, in addition to the
imposition of minimum QoS, OFTA should offer comprehensive information
and education to consumers so as to assist them in understanding the pros and
cons of various modes of IP Telephony services. PCCW, e-Kong and SmarTone
share the view that IP Telephony service which is intended as a substitute for
conventional voice service should be subject to the same quality standard as


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normal fixed line voice services while IP Telephony services which are not
offered as a substitute for the conventional voice service should only be
required to satisfy certain bare minimum standards.

156.      HKBN, CSL, Pacific Supernet, iBBS, WTIA, CompTIA and AT&T
are the 7 respondents who disagree with the proposal of minimum QoS.
CompTIA, WTIA, AT&T, and CSL commonly suggest that QoS of IP
Telephony services should be determined and driven by market. In addition,
CSL considers that quality of service is an issue that is best regulated by the
market and regulators should not impose quality of service standards. However,
if OFTA sets minimum quality standards for conventional telephone services,
then IP telephony service intended to be substitute of conventional telephone
service should also be subject to the same standards in order to ensure a level
playing field between providers. Besides, HKBN believes that providing
precise information to subscribers as to the capabilities and limitation of the
service upon subscription would be more important than setting minimum
quality standards of service.

109(b) What QoS monitoring and reporting requirements should be
adopted for IP Telephony services?


157.   There are 9 respondents submitting views on this question including
PCCW, CM Tel, Peoples, ELN, iBBS, WTIA, ETS Society, CC and Ms. Chan.

158.     WTIA, ETS Society and Consumer Council share the view that the
Billing and Metering Integrity Scheme (BMIS) may be extended to cover the IP
Telephony services

159.      PCCW and ELN consider it unnecessary to impose QoS monitoring
and reporting requirements for any kind of service, including VoIP services.
PCCW opines that, as long as a minimum standard of service is established for
the service across the industry, and each operator institutes internal procedures
to ensure compliance with these standards, there should be no need for any
kind of QoS reporting to OFTA. ELN believes that enforcing QoS requirements
could prevent development of the VoIP infrastructure. CM Tel opines that it
would be desirable to develop such standard(s) in the TSAC forum because
there is no common standard over QoS for IP Telephony services. Peoples
submits that the QoS monitoring and reporting requirements for IP Telephony


                                       52
services should follow international best practice. iBBS proposes that IP
Telephony service providers can work with broadband providers to provide
certain criteria like minimum delay, jitter, etc. Ms. Chan proposes the following
items as the measures of QoS for IP Telephony:

   • Voice quality, e.g. distortion, noise, echo, transmission delay, problem
     with half-duplex or duplex
   • Connection delay and traffic jam e.g. error message re-bounce,
     accidental packet broadcasting
   • Compatibility with other technology e.g. wireless IP Telephony and use
     of mobile IP or IPv6 etc.

109(c) Should the customer charters requirement under FTNS and Fixed
Carrier licences be extended to cover the IP Telephony services provided by
PNETS licensees?

160.   There are 14 respondents submitting views on this question including
PCCW, HGC, CM Tel, SmarTone, Peoples, e-Kong, iBBS, Pacific Supernet,
WTIA, Consumer Council, HKISPA, ELN, ETS Society and Ms. Chan.

161.     4 respondents including HGC, CM Tel, Consumer Council and Ms.
Chan supports that the customer charters requirement under FTNS and Fixed
Carrier licences should be extended to cover the IP Telephony services
provided by PNETS licensees.

162.      PCCW, SmarTone, e-Kong, iBBS, Pacific Supernet and HKISPA are
the 6 respondents who do not agree with the proposal. Specifically, PCCW
does not consider it necessary for a customer charter to be introduced for this
group of service providers as this requirement would only serve to increase
their compliance costs. Pacific Supernet submits that customer charter
requirement under FTNS licenses should not apply to IP Telephony since IP
Telephony should be treated as a new class of service. e-Kong proposes that the
requirement should be optional instead of mandatory. HKISPA believes that a
different set of minimum service standards shall be established for the specific
environment of the Internet Protocol.

163.     ETS Society, Peoples and ELN do not directly address the question
but opine that the charter requirements should be enforced for IP services that



                                       53
are intended to replace PSTN based services.

164.      WTIA has a view different from the other respondents. It considers
that the customer charters declared by the operators is not useful enough and
suggests that the TA should consider extending some industry’s Code of
Practice to IP Telephony on areas including (1) protection of customer
information, (2) service contracts, (3) handling of customers’ deposits and
prepayments of charges, (4) verification of the addresses of potential customers
and (5) advertisement.




Office of the Telecommunication Authority
20 June 2005




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