Speech to Telcon Conference 2011

Clare Curran
Labour spokesperson, communications and IT and broadcasting

I want to start with our economy. Our future.

It’s estimated that the ICT industry contributes nearly $20 billion to the New Zealand economy

According to the Technology Investment Network report 2010 (TIN100), exports of the top 100 technology companies are $4.9 billion annually, now ranked second only to the dairy sector

28% of venture capital and seed funding goes into ICT companies in NZ

The industry employs approximately 40,000 people

And yet annual industry employment vacancies trend at 2000 positions per annum, filled predominantly over recent years by skilled worker immigration

Leading technology companies continue to invest on average 9 per cent of revenue in R & D

If our ICT and Hi-Tech industry can double its revenues over the next few years, it will become NZ’s largest export earner

But our ICT and Hi-Tech industry growth is limited by a skills shortage, availability of capital and knowledge of international markets and distribution models

These figures come from NZICT, which is trying to articulate to the rest of NZ, what many in this room already know. Our future as an economy lies in weightless exports.

Stuff we make. By Kiwis. That’s considered valuable overseas. Technology-based.

As people like Rod Drury from Xero and Selwyn Pellet from the Productive Economy Council keep telling us, it’s so important for us as a country to be earning foreign currency. I don’t think anyone is this room would disagree.

But we have some serious structural issues. Which I’ll address.

I also want to start with our kids. Because they are our future.

Twenty years ago, computers were pretty much a novelty in schools and the Internet as we know it did not exist, yet today it’s the backbone of business and social communications for most New Zealanders.

Our schools are challenged with preparing young New Zealanders to navigate and prosper in a digitised world that we can only barely envisage 20 years from today. It is no longer adequate to prepare young people for high levels of learning and technological literacy; we must prepare all New Zealanders for the demands of a world in which workers will be required to use and create knowledge, and embrace technology as a powerful tool to do so.

Almost all jobs now require digital literacy.

By fully integrating technology into NZ schools we give tomorrow’s adult citizens the skills to unlock their creativity and enable a more diverse knowledge-based economy.

For all students to achieve digital literacy, all students need access to technology at school and at home. And often in between.

These views are widely held. The Business NZ submission to the Welfare Working group said that computers in homes were a proven programme for improving employment outcomes for disadvantaged communities. In particular; homes with sole parents.

The submission said that young people typically already have an aptitude for engaging with technology, through their use of mobile phones, game consoles and on some cases computers. Capitalising on this interest by engaging them in more structured literacy training creates immediate employment opportunities.

This isn’t rocket science. If you give poor kids an internet-enabled device in a structured school environment and allow them to take it home, then the home environment is also likely to benefit.

And when they leave school they’ll be better equipped to get a job, or go into further training.

Some are continuously disadvantaged
It’s estimated that approximately 20% of NZ households do not have a computer, these unconnected homes are predominantly in lower socio-economic areas and likely to be Pasifika and Māori families. Programs such as Computers in Homes do great work in increasing digital literacy, their success is sporadic. Because their funding is insufficient. One method to increase the connectedness and literacy for many New Zealand households is to leverage the education system by ensuring every child has access to a computer. We are thinking about that.

Computers in Homes has estimated that there are 100,000 NZ families with dependent children who do not have access to a computer at home. These are the poorer families and these children need access to a computer at home in order to be able to participate equitably in digital learning and using technology.

There is no govt programme to systematically provide NZ children with a portable device. Some schools have parent-paid laptop programmes. All schools have PCs, but the numbers vary depending on the capacity of the school to purchase and the internal ICT capacity.

Digital literacy in NZ currently receives token funding. It is probably one of the most important areas of broad education that we should be ensuring we get right. And it’s not just kids who need to be digitally literate.

Couple this with the lack of access to effective broadband in many parts of rural New Zealand. One million Kiwis live in rural NZ. Many of them are trying to make businesses work. Businesses that need better connectivity. If they had better connectivity then maybe more people would try to make businesses work in rural and regional NZ. That’s part of our vision.

Put all this together. We’ve got the weightless economy being our future. We’ve got a skills shortage of people we need to help make that happen. We’re not adequately preparing our kids for that sort of future. We have vast gaps in adequate connectivity in this country; whether it’s a socio-economic divide or a geographical divide.

We have serious political and structural issues in attempting to resolve these problems.

And then there’s Christchurch.

We need a broad vision. And I contend, we all need to buy into it.

Broadband should be a bi-partisan consensus policy area. And it’s a damn shame that it’s become a battleground and a shambles. Two and a bit years ago it was a well crafted, well thought out policy that underpinned a digital strategy. That was David Cunliffe’s legacy. Which has been whittled away.

I think one thing is pretty much assured and that is that the current government’s broadband plan wont result in a truly competitive market for the services of the future, for the means to be able to grow our economy.

It wont be the first time we’ve stuffed it up.

Over a decade ago National and Max Bradford made a bold promise: that restructuring the electricity sector would lead to increased competition and low electricity prices for all. The National Minister of Finance at the time was explicit:

By introducing more competition into the electricity sector… we could not only reduce prices to the consumer, but drive down the cost of supplying electricity.

After 10 years, we find ourselves well short of the utopia promised by Bradford.

National created a pretend market, with monopoly profits reaped at the expense of consumers.

This was pointed out by my colleague David Parker at a recent speech to the Energy Management Association

He said that as every notable economist from Adam Smith onwards has noted, truly competitive markets DO act as an effective constraint on costs, profits and prices.

As David does, I and Labour, believe in competitive markets. Because uncompetitive markets allow excessive costs, prices and profits.

I’ve tried pretty hard in the last two years to be measured about criticising the government’s broadband plans. It was pretty obvious right from the start that there was no comprehensive plan on how to deliver their one liner flagship policy.

As you know, the Finance and Expenditure Select Committee is considering submissions on the Telecommunications (TSO, Broadband and Other Matters) Amendment Bill. I can’t say too much about the discussions that are currently happening at the committee but I will say some things about who’s opposing this Bill.

The Minister may say he’s not interested in what the industry thinks, and only interested in what people think, but is he listening?

Consumer NZ chief executive Sue Chetwin says it is vital New Zealand broadband customers did not lose huge gains seen since competition was introduced on Telecom's network in 2006 - but the legislation would bring that to an end.

InternetNZ. chief executive Vikram Kumar says customers are being asked to pay higher prices for broadband today to pay for the promise of ultra fast broadband in the future.

Higher prices for most urban customers and reduced choice while we wait for the future to arrive.

Tuanz says much the same thing and raises alarm bells about sidelining the regulator.

And then there’s Federated Farmers. Labour’s not normally on the same side as Fed Farmers on most issues. But we were on MTR and we are on broadband.

Their chief executive Conor English points out the legislation exempted specific bidders in the Rural Broadband Initiative from restrictive trade practices which were specified in the Commerce Act.

There are some frightening provisions in the SOP around automatic authorisations for both urban and rural broadband to conduct anti-competitive deals under the Commerce Act. Retrospective and future. We’re talking big brother here. Or as I’ve described it, the Daddy State.

Conor, not Bill English has said: "The sections of this legislation that give that exemption need to either go, or be substantially tightened up, so that whomever wins the RBI has to comply with competition law once the tender is over, and scope for unintended consequences is eliminated.

I have to say there is a sense of deep discomfort building across much of the political spectrum. And sitting in the select committee hearing submitters on this Bill there’s been discomfort among those on the government side of the table.

It’s pretty much all a dog. It’s agreed by my caucus and we will announce new policy initiatives before the election.

I’m mindful that we don’t want to turn the industry upside down. We certainly don’t want the create the ridiculous situation that we’ve experienced for the last nearly two and a half years, where activity has largely halted, investment has been frozen and we’re no closer to a nationwide broadband scheme.

We’ve got an overly complex two tier system, which has largely been formulated behind closed doors in secret using the mask of commercial sensitivity. We haven’t had the proper debates about all the issues.

We’re taking away the powers of the regulator on price setting. We’re locking up the conditions for open access into contracts negotiated between the Crown entity and private operators. The lack of public scrutiny, transparency or even debate has been astonishing.

On first glance, the fibre prices appear low. But it is simply not possible to know today what the right prices are over a ten year period for something that changes as quickly as the internet and technology.

Quoting Internet NZ again: “The Government promises good prices for ultra fast broadband on day one, but setting prices for ten years may mean that while the rest of the world is benefitting from falling prices, our prices either rise or decline much more slowly.”

The key to building a truly open, competitive and dynamic information economy and Web Services sector is to ensure that the broadband utility is un-conflicted and does not compete with its customers.

What does it all add up to?

Well Labour has major concerns about the Telecommunications Bill and the accompanying SOP. We fundamentally oppose it in its current form. Simply put, this Bill puts prices up. There’s no guarantee that people will connect. And there’s no guarantee that there will be a competitive market to stimulate demand. And no guarantee to be honest that it will actually happen.

We do not believe that this legislation and the accompanying programme developed by Crown Fibre Holdings and the Ministry of Economic Development will deliver affordable access to ultrafast, or even fast broadband for the vast majority of NZers in the foreseeable future. It’s too complex and it’s too skewed towards suiting the needs of part of the industry.

We believe that the extraordinary situation that we’ve ended up in is the result of a Ministry and an entity, Crown Fibre Holdings, being forced to create a framework which is bad practice, bad law and simply won’t work for the market, for consumers in order to fulfil a policy pledge; to spend $1.5 billion to deliver ultrafast broadband to 75% of NZ homes. It just can’t be done. I said it at the beginning of this process and I’ll say it again. It can’t be done.

We believe ultrafast broadband will be a critical infrastructure investment for New Zealand in the next 40-50 years. Labour believes the Bill will cause a dramatic reduction in competition and investment in the New Zealand telecommunications market. It has become increasingly clear that if we are to have a durable ultrafast broadband network there needs to be cross-party consensus.

We cannot support the Bill in its current form, because we believe it has critical flaws. Specifically the key issues we are concerned with are:

• The 10 year regulatory forbearance period which locks the Commerce Commission out of reviewing the regulation of prices and access. This is not in the long term best interest of consumers;

• The requirement that the Commission determine a geographically averaged price for the copper local loop and unbundled access services. This could lead to increased prices for all urban consumers whose broadband is carried over copper telephone lines.

• The structural separation of Telecom raises another series of concerns which will set up a monopoly over the fibre network. This is not good for competition and for a flourishing market.

• No equivalence of inputs standards on mass market fibre til 2020. Less choice and less diversity of services

• And that’s just for starters

Let’s go back to some first principles.

Labour believes affordable broadband Internet access service should be available to all NZers

Labour believes that every New Zealander should be able to access fast and ultrafast broadband no matter where they live

We believe there should be one broadband scheme for the whole of NZ. We believe that there should be a strong fibre backbone. A grid that connects all NZ communities. Fibre is a utility.

Our policy remains committed to being technology neutral, truly open access and credibly supports a pro-competitive environment.

We will commit to stimulating demand. We commit to a converged industry between telecommunications and broadcasting. We commend the Commerce Commission announcement this week that it will investigate potential barriers to end-user uptake of ultra-fast broadband. We think this could be the first important step in achieving a converged regulatory framework across New Zealand’s broadcasting and telecommunications industries.

Labour will ensure the regulator gets to do its job.

I won’t say any more here today about our policy announcements because they’ll have to wait.

Labour has a track record on making effective interventions into the telecommunications market in order to create fairness and competition and choice for New Zealand consumers. An effective market in both telecommunications and broadcasting is essential for New Zealand’s economic future. For our kids.

This telco law is bad law and bad policy. It is not a durable solution. It’s unacceptable to us in its present form. We cannot live with it. I hope you are hearing this message.

If the government does not moderate it significantly. If the law is driven through without significant change, then we cannot say we will uphold it, should we be elected. We cannot announce a hard and fast position until the select committee has finished its work and the Bill is reported back to the House.

This is why my Leader Phil Goff has written to the Prime Minister today requesting his engagement to achieve a consensus on the Bill and work through the amendments needed to ensure bi-partisan support. This is a reasonable and responsible position and not taken lightly.

We want to minimise any risk to investors, we understand the importance of this network. We want New Zealand’s future to be linked to a high speed digital network that will provide the bedrock for an innovative export-led recovery and for sustainable jobs to be created for our children.

That’s not pie in the sky. It should be a single-minded focus. Labour will do what it can before the election to sort out the mess.

If we win, we’ll have strong policies to reshape the current direction, provide sound structure and provide a concrete vision for our digital future. They’ll be well thought out.

But we won’t do it in isolation from the industry. And it will be in the interests of competition, choice and affordability.

That’s what New Zealand deserves.

ENDS

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