Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill

Hon STEVEN JOYCE (Minister for Communications and Information Technology) Link to this

I move, That the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill be now read a second time. I begin by thanking the Finance and Expenditure Committee for its consideration of this bill. I acknowledge the submissions that have resulted in changes to the bill, and also the Māori Party for its work to ensure that Māori maximise the opportunities provided by the Government’s broadband plans.

During its consideration the committee considered a large and complex Supplementary Order Paper that allows for a structurally separated Telecom. By including Supplementary Order Paper 204, the committee recognised that structural separation will resolve many of the issues that have arisen in the past from a vertically integrated monopoly. The bill contains the regulatory framework for the Ultra-fast Broadband Initiative and the Rural Broadband Initiative, and it enables the funding of the Rural Broadband Initiative.

The key issue raised by the committee and by submitters in relation to the bill was regulatory forbearance, as the bill prevents the Commerce Commission from regulating wholesale prices. Although I consider that the concerns raised were mostly theoretical, officials and I have listened to the committee and have found an alternative solution that will give infrastructure builders confidence to stay committed to their low capped prices, and that will give customers confidence that they will continue to get the best prices over the 8½-year build period. This alternative option relies on a key change made to the bill by the committee, which was to bring forward the general review of the telecommunications regime to 2016. The committee made changes to improve the content, transparency, consultation, and decision-making processes around the development of copper and fibre open-access undertakings. Penalties have also been increased from $300,000 to $10 million for breaches of the fibre undertakings consistent with copper. These amendments give additional comfort to the sector about the robustness of the undertakings and the monitoring and enforcement of them.

The committee has also required that the Chorus copper undertakings must specify reasonable time frames for the transition away from sharing of systems and services between Chorus and Telecom. This amendment is a pragmatic solution that encourages a move away from those sharing arrangements, but that recognises that imposing arbitrary fixed deadlines may have resulted in forced migration from systems or services at the expense of service quality standards for access seekers and consumers, or in complex and costly variations of processes.

I also support the committee’s amendment to the definition of “equivalence” to make it clear that the Government’s intention is to apply the equivalence of inputs standard that applied under the Telecom operational separation regime. This will remove concerns that the previous definition watered down the important equivalence test. Further, making it mandatory in the deed that all local fibre companies build their network equivalence of inputs ready for unbundling at layer 1 in 2020 will ensure that the new fibre network is being built for full open access and competition after the initial build stage.

The committee’s amendments to the Commerce Act authorisations tighten the authorisations so that they cannot be used for arrangements outside those between the Government and Ultra-fast Broadband Initiative and Rural Broadband Initiative providers, and make it clear that they are time-bound. I will be tabling a Supplementary Order Paper at the Committee of the whole House stage that will make the amendments to remove forbearance, and other technical amendments to the bill that have arisen since the report back.

This bill provides the regulatory framework for improvements in broadband that will be truly transformative to this country. The Ultra-fast Broadband Initiative will see New Zealand leapfrog its competitors and become one of the most connected countries in the world. Its broadband speeds will revolutionise the way Kiwi firms do business, the way our kids learn, and the way our health services deliver to us as patients. The Rural Broadband Initiative will deliver on the Government’s plan for vastly improved and affordable broadband services for rural New Zealand. Finally, the bill also facilitates a dramatic improvement in the way New Zealand’s telecommunications industry is organised. I commend this bill to the House.

CLARE CURRAN (Labour—Dunedin South) Link to this

Let me say from the outset that Labour opposes the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill, and we will vote against it. Labour is committed to faster broadband. We are committed to delivering a digital transformation for this country. We are not committed to supporting a charade and the formation of a new fibre monopoly that encourages anti-competitive, price-gouging behaviours and that will not be good for consumers.

This bill takes us backwards and creates a new monopoly for broadband that is free of proper regulatory control and will increase the cost of broadband for New Zealanders. The bill that came out of the Finance and Expenditure Committee was an extraordinary thing to behold. It included as its centrepiece a 10-year regulatory holiday for the winning bidder, which we all knew would be Telecom. This is Steven Joyce’s baby. It was the price he was prepared to let the country pay for the new fibre network by handing the price-setting powers to a secret contractual arrangement between Crown Fibre Holdings and the contractor, with no ability for the regulator to intervene. Thankfully, he has ditched it, but he did so at the last minute after his bill came back to the House, and it was done under force. Consequently, the compromise position allows the Commerce Commission to regulate pricing on fibre, but if the commission believes that prices should go lower at some point, Steven Joyce says the Government should wear that risk, not the consumer, and he gets to make the decision on whether to regulate. Why would the Minister ever agree to regulate if it will cost the Crown? What is the nature of the compensation being promised to the contractor rolling out broadband? It effectively insulates the contractor from any risk. Steven Joyce has confirmed that no analysis has been done of the risk to the Crown.

Labour has indicated publicly—and I repeat it—that it may repeal other sections of this legislation that it believes will have an anti-competitive effect on the telecommunications industry to the detriment of consumers. John Key’s personal guarantee was to deliver ultra-fast broadband fibre to 75 percent of New Zealand homes by the end of this decade for $1.5 billion. People thought that sounded good. It was No. 2 in John Key’s top 10 pledges before the 2008 election. Instead they will get Telecom taking its time to deliver the vast bulk of the Ultra-fast Broadband Initiative to New Zealanders. Telecom has a long and infamous track record of price-gouging and monopolistic behaviour. It is not even committed to New Zealand’s need for a fibre scheme. It is committed to its existing copper asset and believes that New Zealanders can receive adequate broadband services over it for at least the next decade and possibly longer. It has a string of court convictions for ripping off the public, for charging too much, and for not providing accurate information on the services it is offering. This Government swore it was not in collusion with Telecom, but took us all through an elaborate charade to get to the point where it awarded Telecom the bulk of the contract.

Labour believes that this bill is deeply flawed and allows anti-competitive behaviour. Even though the last-minute amendment allows some influence by the independent regulator, this legislation will disadvantage New Zealand consumers. From the start this bill has been severely hampered by the rushed and secretive drafting process and a complete disregard for potential compromises. The Government used the commercial tendering process as an excuse to avoid proper consultation.

The bill does a number of things. The most significant thing it does is set out a process for Telecom to separate into two companies so it can qualify for the majority taxpayer-funded stake in rolling out ultra-fast broadband. That contract, as we know, is now being let to Telecom, which we all knew it would be. Many submitters expressed concern about the bill’s potential to entrench anti-competitive behaviour by blocking the influence of the independent regulator. Concerns were expressed that it would result in the price of broadband fibre to New Zealanders rising rather than falling, and Labour shares those concerns.

It is important to put on the record that much of our opposition to this bill lies in the way it came before the House and before the select committee, the secrecy and lack of transparency surrounding that tender process for ultra-fast broadband, the method in which the Supplementary Order Paper to this bill was put before the select committee, and the speed with which it was rushed through—as well as the substance.

In addition to this, I will talk about the perceived conflicts of interest on two fronts within the tender process. The first relates to revelations that Murray Milner, who is a director of Crown Fibre Holdings, acted as a consultant for Chinese telecommunications firm Huawei while simultaneously serving as a director for Crown Fibre Holdings. That represents a potential conflict of interest in that Crown Fibre Holdings is managing the tendering process to provide coordination, assistance, and commercial technical advice to the ultra-fast broadband selected partners in electing the equipment suppliers for passive infrastructure and layer 2 equipment for the Ultra-fast Broadband Initiative. That is the same contract that Huawei is vying for to provide equipment for the roll-out of ultra-fast broadband.

The second conflict of interest relates to Bruce Parkes, who is currently the deputy secretary at the Ministry of Economic Development for the energy and communications branch. He was a senior Telecom executive who was involved in what was later found to be anti-competitive practice by a High Court judge, Rodney Hansen, in his judgment that penalised Telecom for historical breaches to the Commerce Act. Bruce Parkes’ responsibilities as a deputy secretary are for the information and communications technology policy and the ultra-fast broadband plan, which means that he is heavily involved in the development of, and advice on, the broadband policy.

This comes down to the fact that before the election this Government made a promise to the New Zealand public that it could not keep. It promised that 75 percent of homes, businesses, schools, and hospitals would be connected by fibre within 10 years for $1.5 billion. But the promise was too big, and the Government could not deliver. Steven Joyce has spent the last 2½ years working out how to come up with an elaborate way of appearing to deliver a service that many New Zealanders will just not get—certainly not within 10 years, and not at the speeds being promised.

In September 2009 the Government released its final proposal for the Ultra-fast Broadband Initiative. At that stage the Government investment would have been directed to an open-access, wholesale only, passive fibre network infrastructure, and let us remember why the Government wanted it. The Government was looking for a step change in broadband services to deliver economic benefits to New Zealand. However, in July 2010 the policy was changed; no longer was the focus on providing passive infrastructure that anyone could use. Instead, the local fibre companies—the LFCs, as they are called—would not have to share that passive infrastructure, and they would be protected from the regulator until 2020. This meant they would have the power through to 2020 to restrict access to the network and impose value pricing, so that consumers would get only what they were willing to pay for. This would result in much of their fibre capacity not being used, even though the cost of letting consumers have that capacity would have been close to zero. It would allow the local fibre companies to make more money, potentially reducing the capital cost to the Government of the roll-out. But the price being paid instead is that this country will miss out on the full potential of that step change, which is at odds with the rationale for the intervention in the first place.

Telecom seems to have won the majority of the contracts because of a perception that selecting the lines companies would not guarantee fibre coverage or uptake due to competition from Telecom, even though that competition would arguably produce better results for consumers, including better speeds across the board. So we have ended up with legislation before this House that will allow, and even promote, anti-competitive behaviour, which will promote monopolistic behaviour that will likely result in higher costs to consumers for the new broadband network. What this is all about is a good deal for New Zealanders and a step change for the economy. We will get neither through this legislation.

AMY ADAMS (National—Selwyn) Link to this

It is a great pleasure to rise in the second reading debate and speak in favour of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill, which, as others have said, has spent some time before the Finance and Expenditure Committee, of which I am a part.

I will start my contribution by taking a moment to say broadband is very much infrastructure. You know, it did not use to be as little as 5 or 10 years back, but now I think it is quite safe to say broadband is as important an item of infrastructure as power, phones, or roading. I have been amazed, as I am sure many members of the House have, at how quickly New Zealand has adopted broadband access and taken it to be an absolutely fundamental part of existence. I say that particularly in my capacity as an electorate MP for a largely rural electorate. When people are not in the major cities, they increasingly rely on access to the world through broadband. Having broadband in our houses lets us connect with our suppliers, customers, and advisers—our lawyers, accountants, and bankers—as if we were there. The productivity gains we have made from access to broadband, particularly in rural and more remote communities, are significant.

New Zealand is a remote country, yet through access to good, high-quality broadband we can do business throughout the world in an almost seamless way. It is a way of New Zealand negating the geographical disadvantage that we have. But we were seeing that fibre was not being rolled out beyond very limited central business district areas, and that was tremendously disadvantageous to rural and remote communities. In order for that roll-out to happen, it was going to take the Government to be prepared to put up some money, to incentivise business to get on board. That is what we promised in 2008 to the people of New Zealand; that is what New Zealand elected this National-led Government to deliver. This bill is a large part of delivering that roll-out, which will see 75 percent of New Zealanders have access to high-speed, ultra-fast broadband, and the vast bulk of the rest of New Zealand be connected through our Rural Broadband Initiative. That will make us one of the most connected countries in the world, and I think that is something to be very, very proud of.

One of the things I think it is important to put on record is that this initiative is about the Government and private enterprise working in partnership to roll out the framework. The framework has open access, so as that backbone infrastructure is rolled out any internet service provider can access it and offer services to its customers. This is not about Telecom being the only game in town—and I will come back to Miss Curran’s comments on Telecom in a moment—this is about the backbone infrastructure being rolled out in a partnership between the Government and industry, and every internet service provider being able to access it in order to provide services to New Zealanders.

I will touch on a couple of other things in the bill before I move back to the comments of the speaker who preceded me, Clare Curran. The bill also amends the Telecom service agreements between the Crown and providers. It sets up the telecommunications development levy to fund the service obligation compensations, the upgrade of infrastructure, and the likes of that. It sets out, of course, the functional separation rules for Telecom. So although a big part of this debate will no doubt focus on the Ultra-fast Broadband Initiative and Rural Broadband Initiative roll-outs, there are also those important other aspects to the bill that I think are worth putting on the record.

We have heard an interesting array of objections from Labour. Over the course of the ultra-fast broadband discussions and the rural broadband discussions we have heard Labour members say it is too fast: it is all happening too fast. We have also heard them say it is all happening too slowly. We have heard Labour members say the Government is putting in far too much money, and we have heard them say the Government is putting in not nearly enough money. Now we hear them hammer us for selecting Telecom as the provider.

Let me read a couple of comments from Ms Curran, who just stood there and made a vitriolic attack on Telecom as the provider. Let me read to members some of these comments. “It looks very interesting. I certainly think any proposal that puts Telecom seriously in the frame is worthy of merit and should be looked at carefully by Crown Fibre Holdings and the Government, because the future of Telecom is important.” I thank Ms Curran for that. What about these comments? “We think Telecom should have a future in New Zealand and if that requires it to structurally separate, it should seriously consider doing so. They should have a crack at accessing the broadband money.” “It is obvious to everyone that Telecom desperately want to and need to be in the running.” “It is not in New Zealand’s interests for Telecom to be run into the ground and excluded from the biggest network build for the next generation or more.”

Those comments come from the same member who just stood in this House and attacked this Government and attacked Telecom as the broadband provider. The Labour members need to decide where they stand. Why are they not supporting this bill? Why is the broadband initiative at the same time too fast or too slow, delivering too much or too little, and involving the right provider or the wrong provider? Labour members’ only real objection to this bill is that they did not introduce it and the National-led Government has done so. I am very pleased to commend the bill to the House.

Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I start off by broadly agreeing with the opening points that Amy Adams made, and at the same time I congratulate her on her promotion to the chair of the Finance and Expenditure Committee. She knows I think she should be in Cabinet because she has more talent than many of the junior members, but at least it is recognition and a step in the right direction for her—although it might be some time, of course, until she gets where she should have been earlier this year.

The point I agree with her on is that broadband is very important. All of us know that it is important and that the quality of broadband can make an enormous difference to the quality of life for people and to the way our economy works. I also agree with her point—and it is a point made by the Minister in charge of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill, Steven Joyce—that this is part of the country’s infrastructure now, in a way that sewerage, water, telephones, power, and other utilities are. Part of the problem that has occurred with this Minister is that he has been caught up in the excitement of the stuff built on top of this infrastructure—the electronic stuff and the add-ons—and he has therefore lost focus on, essentially, what is happening here.

What is happening is that we are having fibre laid. It is effectively a pipe. We are having something through which electronic signals go—I do not pretend to understand how it works—and we are having that fibre laid around the country in places where it would not be laid otherwise. This is being encouraged in two ways. One is by a very attractive subsidy to Telecom in particular, from the Government, and the other is by a regulatory arrangement that ensures that the company makes hyper-profits as a result of this investment. I say to the Minister that it is my view that Telecom would have done this with either the subsidy or the regulatory preference it has and that he did not need to do both. We have seen a case of his being conned by a company that has, clearly, superior public relations, superior legal, and superior technical people compared with the people who were giving him immediate advice.

I shall focus on the important thing that is happening here. That is, the lower level, the bottom of this, the way it was originally started, and that was the laying of the fibre and not the add-ons. That is the difference that is happening here and it is where the focus should be.

I ask the Government to focus on the returns Telecom is giving. The figures the Minister and the committee got showed an average cost per connection of $2,500. Telecom has announced—and the Minister has agreed and has underwritten this figure—a $37.50-a-month charge for basic services. That is an 18 percent per year return. Telecom is getting at least double the risk-free rate of return it should be getting; it is getting 18 percent. I will be interested in the comments from Roger Douglas of ACT about these regulatory arrangements. That figure is for the basic level, but Telecom says that the average cost per consumer—and this is the average cost that has been agreed to as part of these arrangements by the Minister—is $50. That equates to a 24 percent—24 percent—risk-free rate of return for Telecom on the $2,500 it is putting into every connection.

I do not want to sound too much like Roger Douglas, but I have some sympathy for his views on excessive regulation in this area, and I ask the Government what business it is of the Crown to guarantee to Telecom, a foreign-owned company, a 24 percent rate of return at least until 2020 on its investment. It is wrong and it is excessive, and for a Minister to stand behind that company and guarantee that is inappropriate.

The other question I want to ask is why the Minister last July—and I want to make a water analogy, because I understand that better—moved from having the pipe as the key part where the separation would occur, to having the pipe and the taps. What we have now is effectively Telecom with the power to turn the tap up or down with the pipe, so that individuals can get better quality and they can get a lot more broadband. It costs Telecom nothing extra at all. But if one is prepared to pay $100, or $200, or $400 a month, instead of $37.50, one can get what the Government has paid for. I ask people why Telecom should face no additional costs whatsoever. We have an unconstricted broadband arrangement. We were meant to get unconstricted access for everybody, but Steven Joyce has given Telecom the right to turn the tap right down for a lot of consumers, unless they agree to pay an excessive amount of money to Telecom. That will last until 2020.

I will be kind to Steven Joyce and say he does not understand what he is doing. I think that is the kindest thing. Otherwise he would understand that he is giving Telecom on average a 24 percent rate of return, but, more important, saying to every school around the country—and it is all very well Anne Tolley effectively paying for pipes to go into schools; that is what is occurring—and saying to the decile 1 schools in my electorate, that they do not pay $37.50 a month, they pay $400 a month in order to get unconstricted access, which is available. It costs Telecom not a cent more to turn on the tap. Why is that fair? How can that be fair? The Government has already paid for this fibre, the subsidy has occurred, and we are allowing Telecom to extract what is, in my view, economic rent in a way that is totally inappropriate.

There has been a lot of discussion about the involvement of the Commerce Commission. There is debate, and it will be ongoing, about whether the present arrangement is better than the arrangement that was there before. My view, frankly, is that they are both dogs. But the idea is that the Government will underwrite if Telecom is found to be acting uncompetitively, as it has on dozens of occasions in the past; the Government will pay its bills. The Government will pay the bills for anti-competitive behaviour, if the Commerce Commission finds it to be that.

What sort of democracy do we live in? This is the sort of arrangement I would expect from Mugabe, or people in the old Soviet Union, or countries like that. But what it does show—and I just want to go back—is either we have a Minister who does not understand what he has done, or we have someone who is in the pocket of an international company. What he has done is turned on a money tap, a 24 percent return, guaranteed, to Telecom. It stinks. It stinks, and it is wrong.

Hon TAU HENARE (National) Link to this

I raise a point of order, Mr Speaker. To say that the Government is in the pocket of some foreign country—

GARETH HUGHES (Green) Link to this

Kia ora, Mr Assistant Speaker Robertson. Ngā mihi nui ki a koutou. Kia ora. It is a real privilege to take a call today on the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. The Green Party supports the bill’s intention of ultra-fast broadband and a roll-out across the country of high-speed broadband, but we thoroughly disagree that this bill is able to deliver that. We support the intention, but we will not be supporting this legislation through the House. We supported it at its first reading, but after going through the select committee process, witnessing the poor process and witnessing the poor outcome that has come out of these last-minute deals that were stitched up in back rooms, the Green Party cannot support this bill, even though we wholeheartedly support better, faster, and cheaper broadband. We will keep working with whatever Government takes the Treasury benches to make sure we get it.

We believe that ultra-fast broadband can transform our economy and our society through better businesses, through lowering air miles and greenhouse gases, through videoconferencing, through better telecommuting, and through medical advances such as sending magnetic resonance imaging scanning images to doctors, potentially all around the country and all around the world. It can make our medical system much more efficient, much cheaper, and much better for both patients and doctors. It could also transform our educational systems. It is disappointing that 500 schools will miss out; they might get this advanced form of microwave or other broadband. But the potential for education is massive.

Lastly, and probably of most interest to me, is the entertainment potential. We have just wrapped up the Copyright (Infringing File Sharing) Amendment Bill in Parliament. We are seeing more and more Kiwis and people around the world living their lives online. They get their entertainment online. More of the business models into the future will provide massive services through broadband. A couple of weeks after the UN special rapporteur’s report that terminating internet access is a breach of human rights, it is great to be having this debate in Parliament.

I thank the Finance and Expenditure Committee members and in particular the chair, Mr Foss, who is going on to other things. I congratulate him. I congratulate all the submitters, who put a lot of effort into the process.

In this call I intend to look at four things. I will look at the bill’s history and process. I will look in particular at the forbearance issue: the embarrassing back-down the Minister was forced to undertake, and the last-minute compromise that was stitched up. I will look at Telecom, which was the winner of the Crown Fibre Holdings contracts. Lastly, I will look again at why we are opposing this bill: the missed opportunity. That is what this bill is: a missed opportunity. We are investing $1.35 billion of Government funds—of taxpayer funds—to roll out broadband across the country with our scarce resources at a time when we are borrowing hundreds of millions of dollars a week. We need to make sure that every dollar counts. Unfortunately, that is not being achieved through this bill.

This bill spends the Government’s money on ultra-fast broadband. It also rolls out the Rural Broadband Initiative, the telecommunications service obligations, and the levy. Although we disagree with the definitions around high-speed broadband, we can agree to disagree on that matter. We would have liked to see much speedier broadband and much better uploading speeds. The internet is not just a way of downloading files, which most people do currently; the real transformative benefits of the internet come from being able to upload files, be they magnetic resonance imaging scan pictures, or a file for a teacher to send all over the country for her class.

When we look at the history of the telecommunications sector in New Zealand, we see that it is older than I am. We have seen a sector characterised by monopolies, poor services, and lack of historical investment. We saw the failed privatisation experiment. I note that Brian Gaynor recently published some research showing that up until 1999 Kiwi taxpayers missed out on more than $8 billion in investment, which they would not have if we had adopted a similar service to the Australian Government with Telstra. We have missed out on infrastructure investment, and we have missed out on dividends to Kiwi taxpayers. In this sector we have seen a significantly anti-competitive Telecom. I note that Telecom just recently received a $12 million fine for its anti-competitive activities between 2001 and 2004.

We have to look at why we are even standing in this debating chamber looking at the issue of ultra-fast broadband. The reason we are here is that historically Telecom, primarily, has dismally and woefully lacked investment in broadband. This was one of National’s major election platforms. Steven Joyce, unfortunately, is also the Minister of Transport. To answer Trevor Mallard’s question, I say that Mr Joyce is more knowledgable when it comes to asphalt and concrete for his “roads of significance to National” than he is about high-tech services such as ultra-fast broadband. He has simply left it too late. He had to get something out of the door before the election in order to realise his election promise.

He left it too late, and because he raced through the process he has alienated businesses and sector groups. We have seen an unprecedented outpouring. We have seen full page ads in the daily papers, and television commercials criticising this Government’s poor process and the poor outcomes of this bill. We have seen the Government in an embarrassing back-down, only 2 days after the Finance and Expenditure Committee report was tabled in this House. We have seen secretive meetings and a lack of cross-party consultation or consensus reached, which is to the detriment of Kiwi consumers and the Kiwi broadband market.

At the select committee it was a real privilege to hear the submissions, and to hear the good questions asked by other select committee members. I heard in the select committee a resounding objection to forbearance from industrial watchdogs, consumer groups, and the players in the industry. They were resoundingly opposed to forbearance, because it was unprecedented. Steven Joyce must be a cowboy movie fan, because it essentially sets up a Wild West situation. We heard from the officials that, quite simply, the Government did not invest an adequate amount of funds to achieve its ambitions of 75 percent coverage, so it had to set up an unregulated Wild West - type environment to stimulate investment. We heard from the Minister over and over again—

Hon Sir ROGER DOUGLAS (ACT) Link to this

At the last election the Government blindly promised to invest in New Zealand’s telecommunications infrastructure—in particular, in ultra-fast broadband. It was a blind promise, because National had no evidence that such an investment was needed or would produce promising outcomes. We are 3 years down the track, and there is still no evidence that this initiative will benefit New Zealanders.

The Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill sees New Zealand embarking on a modern form of Muldoon’s Think Big project. Under this bill, the taxpayer will end up spending $1.5 billion on a gamble. I cannot condone such reckless spending; nor can Heather Roy. The remaining ACT members believe that this was a fundamental election promise made by our coalition partners, and will therefore vote for it. This bill is a gamble because we simply do not know whether it will bring any benefit whatsoever to New Zealand. There is a total lack of a cost-benefit analysis to justify spending taxpayers’ money. As is the case with all significant interventions, the onus is on the Government to show that the investment of taxpayers’ money is warranted, and is beneficial to New Zealand.

There has never been a wide economic analysis done by Treasury on the bill. This bill has been driven by a political imperative rather than an economic one. The lack of a cost-benefit analysis means that the information is not present for anyone to make an informed decision. To embark on major infrastructural development based on very little economic analysis is reckless at best. In the absence of such analysis it is difficult for any side to determine whether there will be a real return to taxpayers. I ask members which is more extreme: National, which is willing to spend taxpayers’ money in times of economic hardship, with no cost-benefit analysis, or politicians who seek fiscal restraint in times of economic hardship and require sound evidence to justify Government spending programmes. On this point alone I urge the House not to support this bill.

The reality of the telecommunications industry in New Zealand is that it is a network industry. Therefore, it is inevitable that the Government has some role to play in regulation. The issue is whether this bill enhances the goals that we as New Zealanders would like to see in the telecommunications industry. The central goal that we are concerned with is enhancing efficiency in the industry. Does this bill seek to further this end? Put simply, it does not.

There are two major reasons in support of this conclusion. First, the Government is once again looking at entering into the telecommunications market with both money and heavy-handed regulation in order to try to actively pick future technology winners with taxpayers’ money. New Zealand and Australia are guinea pigs in going down a Government-determined ultra-fast broadband path. That alone should worry us. There may be a case for Government involvement, as it is a network industry, but this bill imposes a singular future on a complex industry.

The central difficulty with Government investment in this area is that there is a need for significant investment coupled with a high commercial risk. The development and use of ultra-fast broadband in the future is not a fait accompli; if it were, the risk calculus would heavily favour private investment. It is possible that the next generation of wireless networks could potentially deliver the speed of ultra-fast broadband, and on that basis alone some of us do not consider that ultra-fast broadband is necessarily the future of the telecommunications industry in New Zealand. If the Government is wrong and technological developments favour other ways to provide the internet, then there will be a large opportunity cost for New Zealand. The opportunity cost is borne out in two ways. First, in a static sense, $1.5 billion has been invested in a way that has a low return. If the money was left in the hands of private individuals, they could seek out more productive investments, leading to greater prosperity for New Zealand as a whole. Second, in a dynamic sense, there is an opportunity cost for future development in the telecommunications industry.

The bill means that New Zealand companies have been artificially incentivised due to the Government subsidy to invest in the roll-out and development of a technology that may become increasingly irrelevant. This might be particularly true for the Fibre to the Home aspect. This approach will see us down the road of path dependency. Once the network has been built, path dependency will ensure that it keeps on being used and developed because the fixed costs will be much lower. This occurs because the set of decisions that one faces in the future is limited by decisions made today. This hinders the long-term development within the telecommunications industry, to the detriment of us all.

Second, it may be that this investment will produce low-value return for New Zealanders. It is unclear whether New Zealanders are utilising telecommunications infrastructure to its capacity at present. The Motu Economic and Public Policy Research Trust has done the only empirical work in this area, and it concluded that faster broadband speeds are likely to have a negligible impact on the New Zealand economy. Again, such investment is extreme on the part of National. The little evidence there is suggests that we should not invest.

The heart of the problem is that there is not enough information at present to determine whether this project is a waste of money. The Government has moved quickly to implement an election promise and has not been able to produce the evidence that favours support for the proposal. If we are going to spend $1.5 billion, I would rather see greater emphasis given to efficiency and competition within the telecommunications industry. For this to result from current policy, I suggest we would need to create a situation where we have true open access and the development of our network by new consumers taking up the service. This means that the costs involved are met as they sell to consumers. This would be akin to the way Sky television boxes have been distributed. This would maximise competition without the need for heavy-handed regulation. The Government has said that without a regulatory holiday, broadband initiatives will cost at least another $400 million. There is so much uncertainty about the regulatory surroundings that it may well be desirable to spend that $400 million up front, in order to get rid of the regulatory holiday and to allow for greater competition in the future. This is a problem that I faced in the steel industry in the 1980s. I found it better to pay $2 billion up front so that we could get rid of the large tariffs that were impeding competition in the industry.

The second point I make is that we should abolish telecommunications service obligations requirements for Telecom. My first and second points are not mutually exclusive. This would allow costs to fall where they should, which would end the practice of cross-subsidisation from urban to rural areas. In addition, it would force other technological developments to solve the problem. It is not clear that there is a good case for mandating any form of universal service. As part of this, I also advocate getting rid of the Kiwi share and free-calling requirements.

This bill has not been well-thought-out. We have an election promise, and that is what this is all about. In terms of any studies that have been done, the indications are that the money will be largely wasted.

Hon TARIANA TURIA (Co-Leader—Māori Party) Link to this

Tēnā koe, Mr Assistant Speaker Robertson. Tēnā tātou katoa. I am proud to speak on the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill, which is, ostensibly, about supporting a range of measures to facilitate the deployment of broadband.

The Government has had a very clear goal in sight for the Ultra-fast Broadband Initiative, and that is that 75 percent of New Zealand households will be connected. That goal has been advanced for and on behalf of tangata w’enua by the establishment of Ngā Pū Waea, the Māori broadband group. As a result of that group and the advocacy of the Māori Party we can be assured that marae, kōhanga reo, kura, wānanga, iwi, rūnanga, and Māori health and social service providers throughout Aotearoa will benefit from the roll-out of ultra-fast broadband. This is, of course, exactly how it should be, but far too often Parliament falls short of the mark in achieving anything near a Treaty-based solution. This bill has been different, and the Māori Party wants to ensure that Hansard records the contributions of Māori and the difference made by having Māori voices at the table.

The concept that information is power is never more evident than in understanding how the internet can provide us with instant access to information at our fingertips, as well as improving communication and connectivity. Under this bill, Māori will have access to the knowledge, access to the power, and access to the connectivity that links us through to an enormous and influential social network.

So how did it occur that Ngā Pū Waea will oversee the roll-out of the Ultra-fast Broadband Initiative and the Rural Broadband Initiative? During the select committee process some very strong submissions were put forward by Māori, which helped set a new context. Te Huarahi Tika Trust, the Māori Spectrum Charitable Trust, paved the foundation for a new approach. To give some background, Te Huarahi Tika Trust was incorporated as a charitable trust in 2000 to enable Māori to have a right of purchase over the third-generation spectrum radio frequency being auctioned by the Crown that year. By virtue of that experience, Te Huarahi Tika Trust challenged the Crown that it had missed an opportunity to partner with Māori to provide substantially better outcomes for all of Aotearoa with the Rural Broadband Initiative. It also argued that Māori have suffered the consequences of poor regulation in the past, and that it has no confidence that that is likely to change.

The second key submission was put forward by Anthony Royal on behalf of the Torotoro Waea Partnership. The Torotoro Waea Partnership shared much the same view as Te Huarahi Tika Trust. In its view the Crown had overlooked an opportunity to work with Māori in building a better future for our next generations. There were three key platforms that it put forward for consideration. It argued, firstly, that the Crown should be confident in working with Māori, given the extraordinary outcomes that Māori have been able to achieve for all New Zealanders over the last 20 years—an argument that we endorse completely. The second view was derived from a Treaty perspective, and it was that the Crown is failing in its obligation through kāwanatanga to manage the development of our telecommunications infrastructure for the benefit of Aotearoa. The third plank in the submission was to suggest that the Crown has failed in not developing a vision for telecommunications in New Zealand that has as its primary goal what is best for our communities, nor has it involved Māori in developing that vision or communicated it with industry and the public of New Zealand. These perspectives and challenges laid out in submissions provided a vital context to ensure that Māori can maximise the opportunities and that Māori views are represented as the roll-out of broadband progresses.

So what is the litmus test to demonstrate success in opportunities for all Māori to be digitally literate and connected? What measures will be introduced to effect Māori-targeted initiatives in the broadband sector? Inevitably, the increased scope and coverage will have a direct benefit in Maori communities. As a result of this bill, 93 percent of rural schools will receive fibre, enabling ultra-fast speed, with the remaining 7 percent achieving moderate speeds, and over 80 percent of rural households will have access to broadband.

We know that strong connectivity to the outside world is important and that economically it is key infrastructure. But there are some specific initiatives that have come about through the select committee process that particularly relate to, and are influenced by, Māori input. For a start, there is the amendment to clause 18A to require the Minister to consult with interested parties, including Māori, industry participants, the Commerce Commission, and consumers when conducting the review. A particularly significant development arising from negotiations with the Māori Party was the lifting of the 10-year forbearance period, exempting companies that won tenders from Commerce Commission oversight. Our negotiations to remove the forbearance period will help to ensure lower costs for the end consumer, something that is an enormous achievement and will have direct benefits for all our constituents.

Finally, I want to mention the significance of connecting marae to broadband, which could, over time, be crucial to marae retaining their role as the hub of the community, or, indeed, restoring that vital role if lost. If marae become the digital hub, particularly in rural communities, the results could be really exciting, leading to increased participation in the economy, improved educational outcomes, and, ultimately, more resilient communities.

In the community and voluntary sector, I have been delighted to secure additional funding of $3.3 million over 3 years for community-based initiatives to increase digital literacy and connection. That new funding builds on the $8.345 million I announced in last year’s Budget that has given life to an amazing collective of over 1,000 families who have access to the Computers in Homes programme. The funding will also contribute towards the development of a further Computer Clubhouse, which is another fantastic community initiative.

I truly believe that broadband is crucial to the future of Aotearoa, whether it is in greater information technology access in schools, linked-up communities, or greater connectivity for our marae. I am so proud, too, that as a result of our negotiations to remove the forbearance period, the resulting policy will help to ensure lower costs for the end consumer. The development of information and communication technologies within a country is seen as vital. The Māori Party has fought hard to ensure that Māori will benefit from, and be directly involved in shaping, an information-based economy.

We are very pleased to support the second reading of the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. Tēnā koe.

DAVID BENNETT (National—Hamilton East) Link to this

I congratulate the Māori Party on its support of the Government and the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. That shows the true nature of the Māori Party’s desire to have a stronger New Zealand where not only is there economic growth but also there are community linkages we can grow so that we can provide better services to our people and so that our people can have better interaction within themselves and also with the modern world, which this technology will enable. The Māori Party is very progressive in understanding that in these very troubled and difficult economic times we must still look forward in a progressive way.

It is a shame that Labour is not so progressive. It has tried to create a whole lot of issues around this bill, and it has failed in doing so. Labour has shown a lack of desire to see this country go forward. Labour has no intent for economic growth or to see New Zealand progress as a country. That does not fit in with the Labour mantra of how it rules by control. It is very interesting to see Labour members trying to pick holes in legislation like this, which is in the best interests of New Zealanders and in the best interests of building growth and a dynamic and growing economy.

I will quote a section from the commentary to this bill. The commentaries of bills are very rarely read by anybody, but Labour members pore over these commentaries and spend hours on them in select committees. I want to remind Labour members of what they said on this bill. The commentary states: “New Zealand Labour supports the need to improve New Zealand’s telecommunications infrastructure as it will encourage productivity, innovation, and export-led growth.” That is what Labour members said in their minority report. They said that improving New Zealand’s telecommunications infrastructure is a good idea, that it promotes growth and innovation, and that it encourages productivity. Why, then, can Labour not vote for this bill? Why can Labour not support those things? Labour members say they do, but they do not act on it.

The New Zealand public has seen false rhetoric and no action time and time again from Labour. From a National-led Government, with our partners the Māori Party, the public gets an action-led Government that delivers solutions and provides that avenue for growth and success.

This is a good bill.

Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this

The member who has just resumed his seat, David Bennett, the brains trust of the National caucus, has encapsulated the problem with the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. If this is an example of the National Party moving quicker, I point out that it took National 2½ years to even think up what its policy was, because all it was elected with was a slogan. That slogan said—and I call it to mind—“A $1.5 billion subsidy buys fibre to the home for 75 percent of New Zealanders within 10 years.”

PESETA SAM LOTU-IIGA (National—Maungakiekie) Link to this

Thank you for the opportunity to talk on this Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. We have heard from the Opposition the personal attacks on a Minister, the personal attacks on an institution—that is, Telecom New Zealand—and the personal attacks on this Government. But what this Government stands for is about fulfilling our election promises, and one of those promises was about bringing ultra-fast broadband—100 megabytes per second—to 75 percent of all New Zealanders.

This bill is part of an overall plan that this Government has. The Opposition lacks a plan, it lacks leadership, and it certainly lacks the ability to recognise what this bill stands for. This bill stands for infrastructure spend. It stands for bringing about a step change in economic growth. It stands for bringing about the ability of businesses, the ability of individuals, and the ability of communities to communicate in more effective and efficient ways. That is what it presents. It presents an opportunity for this country, for us to better our quality of life, to improve our economic productivity, and to provide jobs and opportunities for our families and our friends.

I put it to members that this bill impacts on our communities in so many different ways. For businesses it allows us to better connect to markets, to better connect to advisers, whether they be professional accountants, lawyers, or advisers, as well as to clients both locally in New Zealand and across the globe. That is what this bill will do for our businesses. For our schools it is about the sharing of content. When I went to one of the schools in my electorate and I saw the communication that went on between 10-year-olds in Tāmaki and young kids in America and the United Kingdom, I saw the ability of these children to learn not just from their teachers and their peers but also from kids across this globe and across this nation. This bill is about positive things for our schools.

It also is about improving our health care. It allows X-rays to be downloaded in seconds and diagnostic tools to be readily available where they are not currently available, particularly in our rural areas. But we did not hear a word about that from Opposition members, because they plainly cannot see the benefits of broadband for our country. It is clear what this Government stands for: it stands for economic growth, and it stands for a plan to develop and benefit our communities and families. However, the Labour Opposition is against this bill. As we campaign later this year on what matters to New Zealanders, let us remind them daily that Labour is against this bill. It is against economic growth. It is clearly against jobs and employment. I do not know how Labour members explain that to their union lackeys and their self-serving union mates, but they are clearly against jobs and employment. It was seen with The Hobbit, it is clearly seen with the convention centre, and in relation to this bill Labour has shown that it is clearly against jobs and opportunities across this country.

Labour is the party of no. It is the party that stands against jobs in our communities. Let the electorate make its decision on 26 November with that in mind. This Government is about supporting the roll-out of broadband. It has been conducted at the Finance and Expenditure Committee in a very timely manner, despite the delaying tactics from the Opposition. It is about the Government building for our future with commercial jobs, connecting families and friends across this country and across the world, and it is about our quality of life. Dare I remind friends across the aisle that this is about productivity and economic growth. I support this bill. Thank you very much.

STUART NASH (Labour) Link to this

The last speaker, Peseta Sam Lotu-Iiga, outlined things that the Labour Party is against, but let me outline what the Labour Party is for. Let me outline why the Labour Party has major concerns about the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. The Labour Party is about consultation. The Labour Party is about going out to the people of New Zealand—the taxpayers who will be funding this bill—asking for their opinion, and listening to their advice. The Labour Party is about proper process. The Labour Party is about listening to everyone involved in this sector. The Labour Party is about transparency. The Labour Party is not about doing deals in secret. The Labour Party is about putting a plan in place that allows consultation, that allows transparency, and that allows proper process to be followed.

The Labour Government was the one that came up with the Digital Strategy, which recognised the need for ultra-fast broadband. The Labour Government knew that if New Zealand was to increase its productivity and get to the upper quartile of the OECD, we needed to have a decent Digital Strategy. What happened to the strategy?

AARON GILMORE (National) Link to this

It is a pleasure to stand and support the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill. This Government is all about the iPad generation, whereas that party over there, who wants to be in Government, is all about blackboards. One of the things we are worried about is getting on and giving people what they really need.