Background

The Class Licence for Offer of Telecommunications Services (CLOTS) regime was introduced in 2007. Its main purpose was to regulate the offer of telecommunications services to the public without operation or establishment or maintenance of means of telecommunications equipment, such as for example, the provision of public WiFi services, in-building telecommunications systems, etc. Over the last decade, major changes have occurred in the Hong Kong telecommunications market (e.g. increased use of online platforms or smartphone apps and increased number of consumer complaints regarding CLOTS licensees). On 4 January 2019, the Communications Authority (the "CA") issued a consultation paper, seeking public and industry comments on proposals to amend conditions of the CLOTS licensing regime. The proposal aims to ensure that the administration of the CLOTS remains efficient, proportionate and up-to-date to facilitate business innovation, while ensuring sufficient consumer protection.

Proposals

1. Registration by CLOTS Licencees

Under the current regime, companies that offer services which fall under the CLOTS are not required to make any application to or registration with the CA before offering any such telecommunications services in Hong Kong. Instead, CLOTS licencees must simply comply with the conditions or criteria specified in relation to the relevant class licence in order to be automatically deemed to be granted such class licence.

However, the CA now considers it necessary to require CLOTS licencees to provide their essential operational information through a registration process which will allow the CA to communicate with CLOTS licencees more efficiently, monitor compliance and handle customer complaints. A similar regime is already in place for the Class Licence for Provision of Public Wireless Local Area Network Services.

Under the proposed new registration regime, CLOTS licencees will need to register with the CA before the offering of any telecommunications services in Hong Kong and provide a list of information (including name, company registration number, customer service hotline number(s), contact details, type(s) of telecommunications services to be offered under the CLOTS, name(s) of cooperating telecommunications operators, and other information as specified by the CA).

In addition, CLOTS licencees will be required to update this information upon any change. Any failure or refusal to comply with these requirements will constitute a breach of the conditions of the CLOTS, which may result in sanctions being imposed by the CA.

The CA is considering whether or not this registration requirement should apply to all CLOTS licencees or only to those providing certain telecommunications services with a customer base exceeding a certain threshold.

The CA may exercise its discretion and refuse the registration of a CLOTS licencee in certain circumstances (for example if the intended licencee’s licence was refused, suspended or withdrawn by the CA previously).

2. Providing Regular Updates

The CA proposes that CLOTS licencees will also be obliged to provide regular updates on the number of subscribers and types of services provided, as well as the identity of licensed telecommunications operator(s) who have been granted the right to resell the licencee's telecommunications services.

Specifically, CLOTS licencees will be required (regularly and as necessary) to provide updates on the type(s) of telecommunications services provided to the public, name(s) of all licensed telecommunications operators with whom the CLOTS licencees have entered into arrangements for the provision of the services, number of subscribers to each type of telecommunications service and any other information as specified by the CA.

3. Amendments to the CLOTS to Align It with the Licence Conditions of the Unified Carrier Licences (UCL) and Services-based Operator Licences (SBO)

The CA also proposes to amend the conditions of the CLOTS to ensure that the CLOTS, UCL and SBO licencees offering similar telecommunications services will be subject to the same obligations.

In particular, the CA proposes to extend the following requirements imposed on UCL and SBO licencees to CLOTS licencees:

  1. Offer of Satisfactory Service: the CLOTS licencee must provide its services on its published terms and conditions and at the published tariff, as requested by a customer (where such services can reasonably be provided by the CLOTS licencee to that customer);
  2. Inspection: the CLOTS licencees must provide adequate support at their own cost (as may be reasonably required by the CA) to demonstrate that their services comply with the requirements imposed by the Telecommunications Ordinance or any other instrument issued by the CA;
  3. Number Portability: the CLOTS licencee must make arrangements to facilitate, at its own cost, the fulfilment of the obligations to facilitate number portability from the numbering plan of Hong Kong.

In addition, the CA will also use this opportunity to remove some outdated licence conditions (e.g. telecommunications number translation device, i.e. a requirement to have a device which translates a number input through the normal dialling pad into another number for access to specified destinations or services).

Conclusion

A balanced approach needs to be struck between monitoring CLOTS licencees and protecting consumers, without stifling market growth. Considering the number of companies that are providing, say, public WiFi services, it may be impractical and inefficient to require all CLOTS licencees to be registered with the CA, and to actively oversee them. Instead, a more efficient approach would be for the CA to limit the registration requirements to certain services that pose a greater risk to consumers and/or to those that have a large customer base.

Another area that may require some further thought is whether a grace period of a number of months should be granted to allow existing CLOTS licencees to transition to the new system and complete the registration process.

The consultation paper remains open for comment until 1 February 2019.