Pccw-hkt Telephone Ltd v. The Telecommunications Authority

CACV 300/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 300 OF 2008

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BETWEEN

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Before : Hon Cheung JA, Suffiad and A Cheung JJ in Court

Date of Hearing : 17 and 18 March 2009

Date of Judgment : 2 April 2009

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J U D G M E N T

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Hon Cheung JA :

The change

1.For many years telecommunications service in Hong Kong was provided by a monopoly, namely, Hong Kong Telephone Company (‘HKTC’) whose successor is PCCW-HKT Telephone Limited (‘PCCW’).  By a series of reforms introduced by the government beginning from 1995 the market was opened for competition, first by allowing other operators of fixed line telecommunications services (‘FTNS’), such as Hutchison Communications Ltd, Wharf New T & T Hong Kong Limited and New World Telephone Limited to compete with HKTC and later by allowing other mobile telecommunications operators to enter the market as well.  In 2007 there were eleven companies (including PCCW) licensed to provide local FTNS with 3.8 million exchange lines.  Telephone density was 95 lines per one hundred households - 55.8% by population.  There were also 14 digital network operators in the mobile service with a total of 9.3 million mobile subscribers.  This represents one of the highest penetration rates in the world at about 135%.

2.The liberalisation of the telecommunications market has been in line with the government’s policy on this sector namely,

‘that the widest range of quality telecommunications services should be available to the community at reasonable cost;

that telecommunications services should be provided in the most economically efficient manner possible; and

that Hong Kong should serve as the pre-eminent communications hub for the region now and into the next century.’

See “Government response to the Consumer Council’s Report on Achieving Competition in the Liberalised Telecommunication Market” dated September 1996.

3.The overriding objective of this policy is:

‘The Government is fully committed to the promotion of fair trade and competition.  We firmly believe that market forces and minimum Government intervention bring greatest benefit to the community by enhancing competition and efficiency while keeping costs and prices down.  This notwithstanding, where necessary, we will use appropriate measures to rectify any unfair business practices, safeguard competition and protect consumer interests.’

4.With the opening of the market a Telecommunications Authority (‘the Authority’) was set up to regulate the telecommunications industry.  His work was carried out by the Office of Telecommunications (‘OFTA’).  The legislative framework is the Telecommunication Ordinance (‘the Ordinance’) (Cap. 106).

‘Any to Any’ regime

5.To ensure competition is truly effective in an industry which is network-based, it is a prerequisite for any customer of a network to communicate with, or gain access to, the customers or services to other networks.  This ability to connect is regulated by the Ordinance and in the licence conditions of the operator.  This is known as ‘Any to Any’ (also referred to as A2A) regime : operators are expected to ensure Any to Any connectivity and the Authority is granted powers to compel them to do so by intervention as a last resort.  This is achieved by directing interconnection pursuant to section 36B of the Ordinance on terms and conditions which will be subsequently determined by agreement or the Authority pursuant to section 36A of the Ordinance.

6.An example of the licence conditions relating to ‘Any to Any’ can be found in Special Condition 3 of PCCW’s licence which provides that,

‘ 3.1  The Licensee shall interconnect the service and the network withthe external public telecommunications network and services operated by Reach... under its licence granted under the Ordinance and other fixed carriers or fixed telecommunications networks and services licensed under the Ordinance and, where directed by the Authority, other telecommunications networks and services licensed, or deemed tobe licensed, or exempt from licensing under the Ordinance.

3.2  The licensee shall use all reasonable endeavours to ensure that interconnection is effaced properly, efficiently and on terms, conditions and charges and at charges which are based on the licensee’s reasonable relevant cost attributed to interconnections.’

7.There is a mandatory requirement to be connected to fixed line operators on the one hand and connection to other operators as directed by the Authority on the other hand.

8.As part of the implementation of the principle of Any to Any, the Authority established regulations for payment of interconnection charges between operators for the use of the other’s network.  This is known as the ‘interconnection charge’.  From a historical perspective, PCCW, because of its long establishment with a large infrastructural network received a huge market share of the interconnection charge. 

Statement on ‘Deregulation for Fixed-Mobile Convergence’

9.The liberalisation of this industry resulted in fixed and mobile telecommunications services regulated under different licensing regimes, with different licensing rights and obligations for these two types of operators.  The distinction between fixed and mobile networks and services, however, has become blurred with faster changing technology developments and dynamic market conditions.  This phenomenon is known as Fixed Mobile Convergence (‘FMC’).

10.The Authority reviewed this development and after consultation published a Statement on 27 April 2007 on ‘Deregulation for Fixed-Mobile Convergence’ (‘the Statement’).  In the Statement the Authority considered it should deal with issues relating to FMC without delay. 

11.Among the issues related to FMC is the Fixed-Mobile Interconnection Charge (‘FMIC’).  FMIC is an interconnection charge for circuit-switched traffic (i.e. voice and non-voice traffic over the conventional circuit-switched networks) exchanged between Fixed Net Operator (‘FNO’) and Mobile Network Operator (‘MNO’).  Currently, regulatory guidance is given to the industry in the Authority’s Statement No. 7.  That guidance assumes a payment structure based on a Mobile Party’s Network Pays (‘MPNP’) mechanism.  This charge is paid by a MNO to the interconnecting FNO for telephony traffic both from a fixed line to a mobile phone and from a mobile phone to a fixed line.

12.The Authority is of the view that the market-driven approach should be adopted in relation to FMIC and in this context it has concluded that it is unnecessary and inappropriate to retain the regulatory guidance in favour of MPNP.  The guidance will be withdrawn, subject to a transition period.  However, at the same time, the Authority is of the view that the existing Any to Any regime prescribed in the relevant powers in the Ordinance and the licence conditions should be preserved in its entirety.

Appeal to the Appeal Board from decision of the Authority

13.To ensure that there should be proper avenues of appeal against the decisions of the Authority a Telecommunications (Competition Provisions) Appeal Board (‘the Appeal Board’) was established.

Case-stated to the Court of Appeal from the Appeal Board

14.Section 32Q of Ordinance provides that, subject to section 32R, the determination of an appeal by the Appeal Board or any order as to costs made by the Appeal Board shall be final.

15.However, section 32R, provides that the Appeal Board may refer any question of law arising in an appeal to the Court of Appeal for determination by way of case stated.

The present appeal

16.In the present case, PCCW lodged an appeal to the Appeal Board (Mr. Kaplan SC, Mr. John Scott SC and Mr. Thomas Cheng) against the Authority’s decision arising from the Statement.  PCCW asked for the deregulation of Any to Any.  The Appeal Board, however, declined jurisdiction to appeal on the ground that the statutory provision for appeal had not been engaged and dismissed the appeal on 2 April 2008.  PCCW then applied to the Appeal Board to state a case for the consideration of this Court.  This Court now considers the four questions in the case stated by the Appeal Board. 

Question 1

17.The first question is:

In what circumstances can the Appeal Board state a case for the Court of Appeal and was it competent for the Board to state a case in this Appeal?

18.The first question arises because the Appeal Board wished to clarify the position whether the case stated procedure is still available after it has made a decision.

The Authority’s view

19.The Authority argued against invoking this procedure after the decision had been given by the Appeal Board.

20.Mr. Green QC and Mr. Alder who appeared as counsel for the Authority submitted that the jurisdiction to refer a case stated arises only during the course of a hearing and relates only to issues ‘arising’; it does not relate to issues which ‘arose’ but which have been determined in a judgment.  They argued that the logic behind this is that the Appeal Board is instituted to hear appeals relating to anti-competitive behaviour; appeals will involve complex economic and accounting evidence and are time consuming and expensive; if an important point of law arises, it makes sense that it be determined before the Appeal Board determines the appeal, otherwise the Appeal Board risks ruling upon an incorrect legal premise which will be inefficient.

My view

21.The finality of the decision of the Appeal Board under section 32Q is subject to the provision of section 32R which enables the Court of Appeal to hear an appeal from the Appeal Board by way of case-stated on a point of law.  The use of the phrase ‘subject to section 32R’, means section 32R is the prevailing provision.  As Cooke J (as he then was) so succinctly stated in Harding v. Coburn [1976] 2 NZLR 577 at 582 the qualification ‘subject to’ is a standard way of making clear which provision is to govern in the event of conflict, see further C & J Clark Ltd v. Inland Revenue Commission [1973] 1 WLR 905 at 911 per Megary J (as he then was).

22.My view is that as a matter of statutory interpretation the case-stated procedure is available to a party during an appeal as well as after a decision has been rendered by the Appeal Board for the following reasons:

(1) Apart from the word ‘arising’ which is an ordinary word there is no indication in the section that the case-stated procedure is available only during the currency of an appeal before the Appeal Board.  The use of a present participle, namely ‘arising’ instead of the past participle ‘arose’ cannot be determinative of the issue.

(2) While points of law may be identified in the course of appeal before the Appeal Board, there clearly are occasions when points of law can only be appraised after a decision has been given by the Appeal Board.  In such a situation and if the Appeal Board has erred on the point of law, justice requires the Court of Appeal to determine the law and to make consequential directions,  including an order to remit the case to the Appeal Board for reconsideration in the light of the Court’s determination (section 32 R(2)(b)).

(3) Although in Harris Simon & Co. Ltd v. Manchester City Council [1975] 1 All ER 412, Lord Widgery CJ in construing the appeal by case-stated procedure provided by section 10 of the Courts Act 1971 stated that ‘it is a form of consultation with the Court of Appeal to obtain an answer on law’, it does not mean in the context of this case that the consultation must be done in the course of an appeal before the Appeal Board.

(4) Even where a point of law has been identified in the course of appeal, there may well be situations where the Appeal Board may choose to proceed with the appeal instead of interrupting the appeal and referring the point of law to the Court of Appeal first.  For example, it may be of the view the point of law is not of such a significance that the proceeding should be suspended pending determination by the Court of Appeal or that the interest of the parties may require a decision to be given first.  The Appeal Board is of course entitled, as it did in Appeal No. 24, to give a provisional decision, subject to the parties applying for it to state a case within a specific period, before the decision becomes final.  But ultimately it is a matter of statutory interpretation as to whether the case-stated procedure is available after the final decision.

(5) The provision of section 32R(3) that the Appeal Board shall not determine an appeal before the Court of Appeal determines the point of law is relevant only where the reference is made in the course of an appeal.  This does not preclude a  referral to be made after a decision has been given.

(6) The absence of a time limit for referral should not be used against a referral after a decision.  Section 32U provides for the Secretary for Commerce and Economic Development (‘the Secretary’) to make rules to provide for the lodging of appeals and relating to the practice and procedure of the Appeal Board.  The relevant time limit to state a case is clearly a matter relating to the practice and procedure of the Appeal Board.  The omission is in the making of the rules only.  The Authority is urged to ensure that subsidiary legislation should be promulgated by the Secretary as soon as possible.

Jurisdiction of the Appeal Board

23.I turn now to the issue of jurisdiction.  The jurisdiction of the Appeal Board will only be invoked if the appeal falls within the ambit of section 32N of the Ordinance which provides that

‘ (1) Any person aggrieved by­ ―

(a) an opinion, determination, direction or decision of the authority relating to ―

(i) Section 7K, 7L, 7M or 7N; or

(ii) Any licence condition relating to any sub-section; or

(b) Any sanction or remedy imposed or to be imposed under this Ordinance by the Authority in consequence of a breach of any such section or any such licence condition,

may appeal to the Appeal Board against the opinion, determination, direction, decision, sanction or remedy, as the case may be, to the extent to which it relates to any such section or any such licence condition, as the case may be.’  (emphases added)

Sections 7K and 7L

24.The issue before the Appeal Board was whether sections 7K and 7L were engaged. 

25.Section 7K as its heading shows is concerned with anti-competitive practice.  It provides that a licensee shall not engage in conduct which has the effect of preventing or substantially restricting competition in a telecommunications markets. 

26.Section 7L deals with abuse of dominant position.  It states that a licensee in a dominant position in a telecommunications market shall not abuse its position. 

27.In this Court, Mr. Farmer QC who appeared with Mr. Beresford as counsel for PCCW, further limited the issue of the appeal to those relating to section 7K only.

CACV 274/2003

28.This Court (Ma CJHC, Rogers VP and Le Pichon JA) had  considered  the effect  of  section  32N(1)(a)(i) in PCCW-HKT  Ltd-Telecommunications  Authority (CACV 274/2003).  Ma CJHC stated that:

‘  In my view, the effect of section 32N(1)(a)(i) of the TO is as follows:­-

(1) It is not enough simply for the relevant opinion, determination, direction or decision of the TA [i.e. the Authority] to have some connection (however strong) to competition (or anti-competition), abuse of dominant position, misleading or deceptive conduct or non-discrimination.  If this were the only criterion needed, the phrase “relating to” would refer to exactly such terms rather than specifically to sections 7K, 7L, 7M and 7N.  Something else must therefore be required.

(2) What is required is that the person who is aggrieved by the relevant opinion, determination, direction or decision of the TA must also establish that one or more of sections 7K to 7N have been truly engaged.  This means that the TA (in issuing or making the relevant opinion, determination, direction or decision) must, expressly or by implication, have arrived at an opinion that the licensee concerned has engaged, or will (if the relevant opinion, determination, direction or decision is not complied with) engage or continue to engage in conduct that contravenes one or more of sections 7K to 7N.  I put it in these terms to emphasize that not only is past or present conduct covered but also future conduct.  The language of sections 7K to 7N is sufficiently wide (and for good reason) to cover such situations.  A good measure of flexibility is therefore given to the TA.

(3) Whether or not in issuing or making an opinion, determination, direction or decision, the TA has arrived at such opinion, is in any given case a question of fact.  In his submissions, Mr Roth raised the spectre of the possibility of there being cross­-examination to establish whether or not the TA has indeed reached such an opinion.  In my view, it will in most (if not all) cases be fully evident whether or not the TA has arrived at such an opinion.  I note here the duty on the part of the TA to provide reasons for any opinion, determination, direction or decision:- see section 6A(3)(b) of the TO.  This will no doubt facilitate the exercise.

(4) As to Mr Gordon’s point that breaches of sections 7K, 7L, 7M or 7N are required to be shown before an appeal under section 32N(1)(a) can be triggered, this is really a matter of semantics.  Section 32N(1)(a)(i) does not use the word ‘breach’ (although section 32N(1)(b) does).  This matters not.  The important point to remember is that an appeal to the Appeal Board under section 32N(1)(a)(i) is possible only where the relevant opinion, determination, direction or decision involves an opinion on the part of the TA along the lines mentioned in sub-paragraph (2) above.  Whether or not one chooses to refer to this as a past, present or future breach is immaterial.  The important requirement is the TA’s opinion under sections 7K, 7L, 7M or 7N.

(5) I am prepared to accept that opinions, determinations, directions or decisions made or issued by the TA may not necessarily engage sections 7K to 7N but the important point for present purposes is that they may, depending on the facts.

(6) I have found the legislative history to be of limited assistance.  The legislative background referred to in the materials shown to us is already evident from the terms of the Ordinance itself.’

29.Mr. Farmer did not challenge the correctness of the judgment.

Reason for declining jurisdiction

30.Although at the hearing below the Authority had raised the jurisdictional challenge, the Appeal Board nonetheless heard evidence from the parties before it decided that its jurisdiction was not engaged and did not address the merits of the appeal.  The reason it gave for declining jurisdiction is that:

‘ The decision to keep the guidance in favour of A2A is more consistent with the TA’s aim to minimize disruption and avoid uncertainty than it is with a fear of market failure.  Even if, which we do not find, the TA had at the back of its mind an unexpressed assumption that an absence of A2A might conceivably lead to market failure, we think that it is far too remote a factor.  The Board takes the view that to engage section 32N the TA has to have in mind the conduct of a particular entity.  Applying the guidelines given by Ma CJHC the Board find it impossible to hold that section 32N has been engaged for the reasons advanced by the TA.’

The reason to retain Any to Any

31.As the Any to Any regime is featured so prominently in this case, I will set out in full the relevant part of the Statement which deals with this issue:

97. The policy objective of A2A is founded upon the long-standing expectation of the public that any telecommunications user can communicate with any other user.  A2A is, in any event, an internationally recognised principle (it is supported by the latest moves of the UK and Australian regulators to introduce mandatory “any-to-any connectivity” regulation) and all interested parties acknowledged in their submissions that the public has this legitimate expectation.

98. A2A connectivity is an important public-interest objective.  It would be confusing and frustrating to the public if a user connected to one public switched telephone network (PSTN) could not call, or be called by, any other user connected to any other PSTN in the market.  The absence of a universal ability to call any other person would severely undermine Hong Kong’s position as a regional telecommunications hub and more broadly, Hong Kong’s position as an international finance and commerce centre.  It would also effectively prevent any new market entrant from offering a service which any customer would wish to use.  Interconnection among the networks and services so as to achieve A2A is therefore clearly in the interest of the public.  As a matter of policy, it would have been a retrograde step if the liberalisation of the market in 1995 had led to a fragmentation and deterioration of service through loss or weakening of the A2A features of the pre-liberalisation system.  Accordingly, the Government took steps to implement this objective by enacting the necessary provisions in the Ordinance and incorporating the necessary conditions in the licences.

99. A2A connectivity can also promote and maintain a competitive telecommunications industry.  Operators have a common commercial interest to connect as many users as possible between their networks.  The greater the number of users to which telecommunications services can connect, the greater the benefit he enjoys from the service he has purchased.

......’

Overview of the dispute

32.In my view it is important to have an overview on the core dispute between the parties.  This is whether the decision by the Authority to retain the Any to Any regime is related to anti-competition conduct of PCCW.  If it is then the matter is within the ambit of section 7K and will engage the jurisdiction of the Appeal Board under section 32N.

33.One of the topics focused in this case is on the term ‘market failure’ used in the Statement.  This term embraces many things.  It includes defective competition caused by reason of, for example, anti-competition conduct of an entity with significant market power.  In the context of this case, the issue is the refusal by such a dominant entity or one with market power to allow new entrants to the market to connect it to the existing network. 

34.Leading counsel for the parties who are specialists in competition law have expertly submitted their respective position.  Without intending any disrespect to them, I will concentrate on the core issue.

PCCW’s case

35.PCCW’s case is that it has some 70% share of the fixed line market.  As the current total payment by MNO’s to FNO’s under the MPNP regime amounted to some HK$600 million per year, PCCW has a high stake in the interconnecting charge.  Irrespective of whether PCCW is a dominant player, the Authority perceived PCCW to have market power which could prevent new market entrant from offering a service as expressed in paragraph 98 of the Statement. 

36.Mr. Farmer submitted that a broad approach should be taken in respect of the interpretation of section 32N(1).  He submitted the retention of Any to Any is linked to anti-competition conduct notwithstanding PCCW has not engaged in any actual anti-competition conduct.  Imposing Any to Any as a legal obligation has been limited to and driven by situations where there are firms with market power who can be foreseen likely to use that market power as a means of preventing competition, in particular, new entry.  He submitted that this is enough to engage section 7K which triggers the jurisdictional requirement of section 32(N)(1).  He contrasted the situation with the more specific provision of section 32(N)(1A) which provides that:

‘ Any carrier licensee aggrieved by an opinion, direction or decision of the Authority published under section 7P(14) may appeal to the Appeal Board against the opinion, direction or decision (but the licensee may so appeal only if the opinion, direction or decision was formed, issued or made in respect of the licensee).’

37.Under this section an appeal can only be lodged in respect of a decision published under a specific section and which is made in respect of a specific licensee.  

38.He further contrasted the wording between section 32N(1)(a) and section 32N(1)(b) : the latter is concerned with breach while the former is couched in general terms.

39.Reliance was further made of the decision dated 27 March 2008 of the Appeal Board (Griffiths SC, Mr. Kwong Kai Sun, Sunny, Professor Malanczuk) in Appeal No. 24 where the Chairman stated that ‘an enforcement of the Any to Any policy against a licensee not wishing to adopt it for any reason, usually will constitute an enforcement designed to prevent anti-competition conduct’.

The Authority’s case

40.Mr. Green, on the other hand, submitted that the retention of the Any to Any regime is not concerned with anti-competition conduct but with the wider public interest consideration which is shown in the Statement.  This includes the provision of a high level of certainty for operators and users (para 96); it is an internationally recognised principle and is followed, for example, in the United Kingdom and Australia (para 97); the public has a ‘legitimate expectation’ to connection (para 97); it would be confusing and frustrating to the public if connection is not available (para 98); the lack of a universal interconnection would severely undermine Hong Kong’s position as a regional finance and commerce centre (para 98) and it would have been a retrograde step if the liberalisation of the market in 1995 had led to a fragmentation and deterioration of service through a weakening of the Any to Any feature of the pre-liberalisation system (para 98).

41.As to the reference in the Statement to the prevention of new entrant to the market, Mr. Green submitted that the Authority did not view a failure of bilateral network access negotiation to be an indicator of market failure.  What the Authority said in its second consultation paper on ‘Deregulation for Fixed-Mobile Convergence Replies to Enquiries from Interested Parties Issue No. 1’ is this:

‘ In the context of the telecommunications industry, a failure of a bilateral network access negotiation can be an indicator of market failure, but specific analysis is always required.  As a rule of thumb, the OFTA would expect that in the situation where the particular market structure is supporting strong competitive activity, the failure of a single bilateral negotiation would require strong evidence in terms of detriments to community welfare over time, to establish it as a market failure.’

42.Mr. Green further relied on the evidence of Professor Ordover, the expert of PCCW, who gave evidence before the Appeal Board that a refusal to connect is not ‘a per se violation of competition law’ and that other factors have to be considered as well.

My view

43.In my view section 32 is not engaged for the following reasons: 

(1) Whether jurisdiction is engaged is a question of fact.  This is a case where the Appeal Board had heard evidence.  Hence its view that the retention of Any to Any is more consistent with the Authority’s aim to minimize disruption and avoid uncertainty than it is with a fear of market failure is a matter that it was entitled to make.

(2) In a general way, the deregulation of the MPNP regime which has a built-in fixed charge element means that the competitors may negotiate freely in a free market and the retention of the Any to Any regime which enables the Authority to intervene in appropriate cases may well have a substantial economic impact on PCCW which has a substantial share in the existing market.  This, however, will not make it an aggrieved person for the purpose of invoking an appeal.  The ultimate question is still whether a section 7K situation has arisen.  What the Appeal Board said in Appeal No. 24 that an enforcement of Any to Any is designed to prevent anti-competition conduct begs the question whether such a conduct under section 7K has been engaged in the first place.  When the Authority actually invokes Any to Any it may be said that anti-competition conduct has taken place which requires the intervention of the Authority.  But this stage has not been reached in the present case.  The retention of Any to Any merely enables the Authority to invoke it as a last resort. 

(3) Even if, for the purpose of argument, the retention of Any to Any is to do with anti-competition conduct in the broader sense, it still will not assist PCCW.  This is because the previous decision of this Court which is binding on us and of which I respectfully agree clearly requires a specific anti-competition conduct rather than a general anti-competition consideration canvassed in a policy formulation.  The wording of section 7K excludes the adoption of a general approach : a licensee shall not engage in (anti-competition) conduct.  The previous judgment is in line with the wording of the section.  Its tenor is not to allow general issues which may arise in policy consideration, as illustrated in the present case by the Statement, to be the subject matter of an appeal by the Appeal Board.  Hence a specific anti-competition conduct based on, for example, refusal to interconnect or interconnection at an exorbitant charge is required.  There is no indication and it has not been suggested that PCCW will engage in any such specific anti-competition conduct or that the Authority is of the view that PCCW will engage in such specific conduct when the new proposals are implemented. 

(4) It is not necessary for me to refer to previous decisions to see whether the view of the Authority on the rationale of retaining Any to Any has been affirmed by the Court.  Even if the rationale for retaining Any to Any is based with the concern of possible anti-competition conduct in a deregulated market, there should not be a quantum leap from that concern to the presence of likely actual anti-competition conduct which engages section 7K.  The current situation is too remote for it to be engaged. 

44.This is a short point and I do not think further elaboration will advance the matter further. 

Question 2

45.Question 2 is:

Whether section 7K and/or 7L can only be engaged if the Respondent can be proved to have had in mind the conductof a particular identified entity which would be in breach of these sections and to have exercised power “under” those sections?

46.What I have said above covers the issue raised in Question 2.  The answer to that question is ‘Yes’.

Question 3

47.Question 3 is:

Whether a finding that a decision of the Respondent was more consistent with an aim by the Respondent to minimize disruption and avoid uncertainty is a sufficient basis for concluding that the Respondent had no relevant concern about market failure or that any such concern was too remote a factor section 7K and/or 7L to be engaged?

48.If market failure is understood in the context of anti-competition conduct, then based on the Appeal Board’s reason, the answer to the first part of Question 3 is ‘Yes’.  My understanding is that the Appeal Board used market failure in that context.

49.In any event irrespective of the concern of the Authority, PCCW has failed to show the presence of specific anti-competition conduct under the ambit of section 7K or 7L.  The answer to the second part of Question 3 is ‘Yes’.

Question 4

50.Question 4 is:

Whether Special Condition 3 in the licence granted to fixed line operators such as the Appellant constitutes a form of regulatory control imposed by the Authority against potential breaches of the competition law provisions of the Ordinance such that the decision not to withdraw Any to Anyas a regulatory requirement must necessarily be regarded as indicating a continued concern that without that requirement breaches of the Competition Provisions would occur?

51.This is a complex question.  It attempts to draw an analogy on the rationale behind Special Condition 3 on the one hand and that of the retention of Any to Any on the other hand.  In my view this attempt begs the question whether section 7K or 7L has been engaged in the present case.  This question assumes that both of these matters are concerned with anti-competition conduct.

52.Again, even if, for the purpose of argument, one proceeds on such an assumption, for the reasons I have given, the situation is still too remote for the jurisdiction to be engaged.

53.The answer to Question 4 is also ‘No’.

Conclusion

54.The answer to Question 1 is that the Appeal Board can state the case both during and after the appeal.  It was competent for it to state the case in this appeal.

55.The answer to Question 2 is ‘Yes’. 

56.The answer to Question 3 is ‘Yes’ and ‘Yes’. 

57.The answer to Question 4 is ‘No’. 

Costs

58.There will be a provisional order that PCCW is to pay the Authority the costs of this appeal.

Hon Suffiad J :

59.I agree.

Hon A Cheung J :

60.I agree.

Mr. James Farmer, QC and Mr. Roger Beresford, instructed by Messrs Herbert Smith, for the Appellant

Mr. Nicholas Green, QC and Mr. Edward Alder, instructed by Messrs Slaughter & May, for the Respondent