Address to the 10th Annual Telecommunication and ICT Summit
Address to the 10th Annual Telecommunication and ICT Summit
Hyatt Hotel, in Auckland
23 June 2009
We live in an exciting time. Huge technological developments are changing the way we communicate and interact with each other.
At no other time in history has information and communications technology been more important.
The complexity and sheer number of devices, services and technologies can be confusing to consumers, to businesses and to the state attempting to develop policy, anticipate future developments and get the competitive and legislative framework right.
When my grandmother was born, aeroplanes had only just been invented. Now, my children (twin boys), who turned 9 yesterday are becoming frighteningly computer competent, the latest craze is a game called Club Penguin they play with all their friends on the internet. They are more familiar than me with all the various controls in the house and they know more functions than I do on my Blackberry. I will say up front that I’m not a geek. I think that’s a plus. My background is communications, public relations. I’m an aware consumer; I’m a politician (new to parliament, but not new to politics). I’m also a big picture kind of person, a future thinker and that’s strength, because I can look at this industry with a critical eye.
Every time human society has developed a new network infrastructure, huge changes have resulted.
Think of the effects of roads, railways, the shipping lanes, the electricity and telephone networks and air routes have had on our society, our economy and our understanding of the world. And now broadband. And wireless networks.
This broadband and computing revolution we are living through is like these previous technological leaps and but also unlike them at the same time.
It is like previous revolutions because it is a new network, and will give people new ways to work together, to be together, to share and grow and enjoy life.
It is unlike because it deals not with goods, not with travel, but with information. The network and the digitisation of data mean we have immediate access to more knowledge and information than ever in history, and we can do what we like with it. And we, the consumers, are not only passively receiving the information; we’re starting to do stuff with it ourselves – and as time goes on we’re producing it, too.
The effects are huge and far reaching.
We don't know what they all are yet: who would have thought that e-commerce, free distribution channels for music by budding artists, live video conversation, social networking sites, blogs, Google Street-View, or even God help us Twitter, would have come about? I have to admit I have started twittering, to the dismay of some of my family, and interestingly, to the obvious close interest of some on the other side of the political fence.
Many people think twittering is for twits, but who would have thought it could become a major organising tool as it has in Iran in recent weeks in the wake of the recent election?
There are so many new and emerging applications it’s hard to keep up. Easy bank payments replacing cheques. Live video streaming of concerts, conferences, big events. The ability stick a Radio Frequency ID tag on each cow in your herd all linked to an Internet- based automatic milking system and make use of the data to improve agricultural productivity. AirNZ RFID tags that many of us have got attached to our mobile phones now.
Tracking the news online and the unrelenting online transformation of our traditional media. The impacts on schools, universities, workplace training, health service delivery. My Sky, HD TV, 3D TV, Blue ray game consoles, Skype, 3G… the list goes on.
We know there’s more to come and that all these changes add up to a faster, freer and more prosperous society.
But we’re yet to properly discuss the extent to which some of these technologies are becoming essential services and not merely utilities or devices for gratuitous entertainment.
And there’s a great deal more discussion required on the role of government in developing, fostering and growing the information and communications industry. Where to invest? What sort of investment, how much? And what mix of policy settings? And what sort of leadership can government provide?
There’s pretty much universal agreement in this country that widespread, high-speed broadband is essential for New Zealand to participate effectively in the contemporary world.
The issues are about how to deliver it, where to deliver it, how much it will cost and what role the state needs to have. Let alone what it will be used for and who will deliver those services.
And the importance of future thinking and vision in the industry. When the Dick Seddons, Peter Frasers and Michael Joseph Savages invested taxpayers’ money in the road, rail and electricity networks that make up our modern society they took a leap of faith. They had the foresight to know that public investment was required in infrastructure that the private sector couldn’t or wouldn’t deliver equitably across society in order to drive our economy, create jobs and take us forward as a nation. That was Government’s role. And it is government’s role to make sure it’s done equitably.
The previous Labour Government had a sound strategy to reform this industry and it delivered results. Our focus was around a couple of key principles:
- access, and
- affordability
We wanted to make sure that people had meaningful access to technology. That's what our Digital Strategy was built around. I pay tribute here to my predecessor in this portfolio and previous Communications Minister David Cunliffe for his intellect, foresight and his grit.
Let’s just spell out some of what the Labour Govt did: unbundling the local loop, strengthening the Commerce Commission, installing the office of the telecommunications commissioner, operational separation.
Collectively, this added up to world’s best practice in regulatory terms. It was about reinforcing a competitive market, never about replacing the market.
We understood - in a way the current government sadly does not - that it's about more than connecting people up. They need to know how to use the technology they have access to. It has to be relevant to their lives. They need to feel that it's a secure environment where they and their kids can learn about the world and each other.
Affordability is a big issue too. Labour thinks a digital divide is a bad thing, and money is a big issue for a lot of Kiwi families. People won't use services if the price isn't right.
So that speaks to universal service requirements, so everyone can access technology. Digital inclusion, no matter where you live or what your socio-economic circumstances. That’s not woolly thinking. Inclusion is good for this industry, and it’s good for society.
We also know that educated users and content are just as important. Along with connectivity. Getting people connected. I’d just like to point out here that despite being in power for seven months, this government hasn’t sorted that bit out yet.
I also want to point out for the record that the previous Labour Government didn’t get it right on everything. One area it particularly didn’t get right was copyright. As the new spokesperson for communications and IT I’m proud to say we’ve shifted on that issue and are doing some new thinking. More about that later.
So thinking about what Labour’s key drivers were in government:
- Developing a NZ Digital Strategy
- Balanced policy and funding
- Not pushing the market around too much
- Competition at the heart of an efficient market
The 2005 reforms were not red-tape reforms, they were pro-competitive. And they’ve seen some results.
OECD statistics show New Zealand has seen the third highest growth in broadband connections in 2008 - up 3.77 connections per 100 homes.
And we are now in 18th place out of 30 - continuing the gradual improvement from No 23. And as even David Farrar noted on Kiwiblog, the Labour Govt’s telecommunication reforms were partly responsible for the very significant closing of the gap. Yes we have a way to go, but we’re moving in the right direction. And let’s hope we continue to do so.
Being in Opposition now, our role is to be out there as much as possible, listening, learning and engaging with the industry, as well as holding this government to account on its policy (not that there’s been a lot of policy announced) and watching closely on how it delivers on that policy.
And what we’ve observed is that there are worrying signs of backsliding in the progress that has been made.
What signs? Take unbundling. Last week’s decision on sub-loop unbundling has resulted in most competitors saying the access rates are prohibitive and has caused a 10% jump in Telecom’s share price. It was a fundamental tenet of the unbundling process to have open and competitive terms, down to the cabinet. The reforms of the last government simply won’t work without getting the price and the terms right.
Keeping wholesale prices competitive.
And take undertakings. Last week’s government decision giving Telecom leeway in its separation undertakings may not have appeared to amount to much, but could be the start of a negotiated package. So I ask the Minister and his new government today to confirm that it will protect the total operational separation undertakings and that any future amendments be granted only after full consultation with the parties affected with the opportunity to make written and public submissions.
Moving on to the rollout of broadband, firstly, it is now out there that the National Government’s $1.5 billion policy to deliver ultrafast broadband to 75% of NZ homes is unachievable. Even with a matching dollar for dollar investment from the private sector. The Australian Government has put a figure of $43 billion, because they know that’s around what it will cost. Originally they were going to invest $4.7 billion, but revised that figure earlier this year because they were advised it would not provide value for money to the commonwealth.
So I think it would have been a brave for this government to either acknowledge it wasn’t going to deliver to 75% of homes and revise expectations, or to say well it’s going to cost more, we know we’re in a recession, but here’s how we’re going to do it.
It’s like providing the money to build a big flash highway (something this govt likes to do) forgetting that all the people in the houses have got driveways full of potholes and older cars in their garages which will struggle to get onto the road and then wont know what to do when they get there. Unless they pay for the new car and the new driveway themselves.
However, we are watching with great interest to see how the government plans to roll out its $1.5 billion. The choice appears to lie between a Telecom-led rollout or a growing coalition of electricity lines companies and independent fibre operators called the "Regional Fibre Group".
As a lot of these are trust-owned this approach could return the core infrastructure to community ownership.
If they go with the regional fibre group approach they’ll be essentially following the previous Govt’s BIF model, with one important difference.
Instead of seed investments in projects to kick-start the rollout of ultrafast broadband in communities across New Zealand, they expect a return on that “investment”. We don’t yet know what sort of return. I have asked.
Conversely, if the government goes for a Telecom-driven model what then? How will the rest of the industry have confidence that Telecom won’t revert to some of its previous behaviours? Would the whole of Telecom’s network be available open access, or just those parts that attracted the Crown investment? Giving a whole new network to a single company when the past experience of single-company networks hasn’t been so crash hot is probably something to think about very carefully.
I want to be clear here that this isn’t about being anti-Telecom. It’s about government needing to demonstrate how a rollout of broadband by a unitary network would have an overwhelming public benefit in the marketplace.
And that’s impossible to determine because there are so many unanswered questions and there is no detail in the public domain about how the government expects to get a return on its investment.
I am compelled to point out here that it’s been seven months since the election. The rollout of broadband was a central promise in National’s election campaign. We’ve seen the tax cuts come and go. We’re starting to hear commentators argue about what levels of co-investment is viable. We had the BIF. It was ready to roll-out with high levels of seed investment. They could have re-branded and restructured it.
I think the hiatus caused by this government has caused a chilling effect on investment. There’s a cloud of uncertainty hanging over the rollout of broadband and it’s time to spell out some detail. There’s been $290 million allocated in the budget for this financial year. No detail on how it will be spent. Is this the fast start that we were promised?
I want to mention the Treasury-led review of the Telecommunications Services Obligation and the Kiwi share. Under the previous Labour Government, a review of the TSO was an essential part of its rural broadband strategy. We have no issue with a review by the current government, but expressed alarm that the terms of reference of the Treasury review were to consider abolishing the TSO framework and scrap the Kiwi Share requirements to potentially open up opportunities for capital injection into Telecom from foreign shareholders.
If the government is ruling out changes to free local calls and foreign ownership caps then what else is the review about? Is it about encouraging more competition in the market so that the consumer (no matter where they live) has access to a cheaper service that is of a guaranteed quality? And more efficiency, transparency and contestability? How would the TSO levy be calculated? Would there continue to be a TSO levy? And how would it contribute to a rural strategy?
Now there’s a question! A rural strategy. It appears this government doesn’t have one. For delivering broadband services anyway. This is something I haven’t talked about much yet, but gives Labour real concern, because $48 million, the amount of money this government is allocating to fund broadband to New Zealanders who live in rural areas is a pretty paltry sum to provide an essential service to one quarter of New Zealand homes. Especially when you’re looking at $1.5 billion for the rest of New Zealand. In relative terms, it should have been an investment of $500 million.
Federated Farmers aren’t happy. Rural Women NZ aren’t happy. Their president Margaret Chapman has been quoted as saying “Rural people must not be left out of the loop.”
Well it seems they are being left out of the loop. You know I’ve been thinking about this quite a lot, because Labour doesn’t like leaving anyone out of the loop. We haven’t always seen eye to eye with Federated Farmers, but on this issue they have a pretty strong case. I know that a NZ Institute report released in late 2007 argued not only that NZ must invest in ultrafast broadband as soon as possible, but that the initial focus should be on high-value segments from which benefits can be realised rapidly. That was true then, and it remains true now, though we’ve seen a big pause while this govt works out which direction to go in.
But surely, if government wanted to stimulate investment in broadband and create a competitive environment, then it could pick businesses, schools and hospitals and quickly realise benefits, but also the part of NZ where the private companies were unlikely to get an easy return on their investment - rural and regional NZ.
If the government was to think again about how it invests its $1.5 billion in a way that will truly stimulate the economy, then surely that’s worth thinking about!
Finally, the previous Labour Government put a lot of effort into strengthening our regulatory framework after the devastation of the 80s and 90s. In 2008, reforms to strengthen our legislation were supported by the then National opposition.
Now it seems, in 2009, there are worrying signs of a right wing shift in approach to regulation. There’s been much speculation about the terms of the departure of the previous chair of the Commission. There is a huge need for the new chair, Dr Berry, in the light of speculation around his appointment and that of the new Minister responsible for the Commission, Rodney Hide, to clearly and publicly reinforce the Commission’s role as an independent statutory authority.
We believe there can be streamlining and updating of our regulatory settings, but that the goal of such work should not be cutting red tape for its own sake, but to provide a more competitive environment for all the players in the market, those wishing to enter the market and to protect consumers.
We believe we were right to highlight concerns about the Government's approach to a review of the Telecommunications Act right along with a collection of other legislation which is also up for review, including the Overseas Investment Act.
We believe in strengthening the Commerce Commission’s powers to tackle anti-competitive conduct and impose real sanctions against those who engage in such activity (not just in the telecommunications industry). We were heartened to hear Commerce Minister Simon Power’s comments in last week’s Commerce Select Committee that his government did have on the table the possibility of criminal and not just financial penalties for cartel behaviour.
Also in that Commerce Select Committee I raised the issue of the Government’s lack of action in reappointing Dr Ross Patterson as the Telecommunications Commissioner, or announcing a new appointment. I understand from the Minister, that Dr Patterson has fulfilled the terms of his medical leave and with due respect to the Commission say that I believe the industry looks forward to his return to the role as soon as possible.
Our role in opposition is to watch all these developments carefully, as well as to be on top of the changes and the challenges the industry faces.
To be part of, and also initiate, regular round tables, chats, and coming along to conferences like these. And to begin to develop policy going forward that will support relevant existing policy directions but differentiate in ways that show the industry the choice that can be made at the next election.
Labour is committed to doing things differently. We acknowledge that Labour needed to learn from its election loss.
That’s what we’ve been doing. For the last seven months. Listening to people. Taking stock. Doing things a bit differently. Being committed to reconnecting.
We’ve developed a Labour MPs blog called Red Alert. You can find it at blog.labour.org.nz. It’s the voices of Labour MPs on issues that we care about. It’s new, it’s different and it’s about actively engaging with people. I’ve been blogging about some of these issues and encourage interaction...
I think the approach that we’ve taken on copyright also demonstrates we’re taking a different approach to policy-making and are keen to listen and engage. And prepared to shift our position when it’s shown to be untenable. Not for political expediency, but because it’s just not working. We want to develop policy that’s going to work, as well as deliver on our core values.
I don’t want to pre-empt the current government process around copyright. But to be frank it doesn’t look promising. This is a critical issue and government needs to pay attention and get it right.
Looking forward, I want to return to the issue of to what extent has the technologies and the delivery of those technologies become essential services. And the importance of access, affordability and a consumer voice.
I’ve just been reading an interesting research paper called Preparing for the Broadband World, produced for the Australian Communications Alliance out of the University of Western Sydney, which talks about consumer bewilderment and how “the consumer confronts an almost unbelievable complexity and is literally overwhelmed by the volume of available information.” And that “the notion that consumers are able to properly understand and make informed choices in this environment is impossible to sustain.”
In Australia, there are high increases in the number of complaints to the Telecommunications Ombudsman, particularly around internet services. Faster broadband and the trend towards converged devices means consumer experience and knowledge lags well behind these changes in technology. This can leave the consumer confused, vulnerable and exposed to making poor choices purely based on price, or on clever marketing.
Consumer protection and equitable consumer access are critical as is a strong consumer voice. In Australia I was interested to learn about the considerable government investment in ACCAN, the Australian Communications Consumer Action Network, a new body formed to strengthen Australian consumer representation across a wide range of telecommunications issues. $8 million over four years! We don’t have anything like that here and I think it’s worthy of discussion.
Content, connectivity, capability were all tenets of the Labour Government’s digital strategy. Based on inclusion. There is no technological reason for people to be excluded.
Let’s hope I’m not standing in this room in two year’s time putting across this same argument. Essentially this is a values argument and it could be a major thing that differentiates Labour and National. What possible reason could there be to exclude a quarter, or even a tenth of our society from the technologies available to us?
To wrap up I want to touch on Labour’s policy thinking for 2011. It’s early days. We’ve been in opposition seven months. We had strong policy going into the election, but we must not stand still.
Our policy needs to take account of:
- A mysterious Broadband proposal that is so far absent in detail.
- confused signals sent to the big investors who are not part of the deal the govt sets up
- a reviving global economy that will resume the draw of skilled people from NZ
- Australia's plans and the impact that will have on us – such as the human capital we will lose to them doing the same stuff in the same industry on a much larger scale
- untested new procurement policies at the central govt level and how that will be working
- The continued development of cloud computing and implications for local software developers etc...
- coming up with sound policy frameworks that work with the industry not against the grain
- Integrating innovative IT policies into other core policies.
- And the inevitable imperative for policies that don't cost a lot, for money is one thing we won't have as we sit down to write the 2012 Budget.
I’m looking forward to working with you and alongside you as the month’s progress and to the debates and challenges that lie ahead. Thanks for listening.
