Cunliffe David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeCunliffe David: Questions for Oral Answer — Questions to Ministers[Sitting date: 17 September 2013. Volume:693;Page:13365. Text is incorporated into the Bound Volume.]1.Hon DAVID CUNLIFFE (Leader of the Opposition) to thePrime Minister: Does he still think that Chorus “will go broke” if his Government does not intervene to change the pricing for access to the old copper-based broadband network as proposed by the Commerce Commission; if so why?Rt Hon JOHN KEY (Prime Minister): I stand by my original statement which is basically that the Commerce Commission ruling states there is a chance Chorus will go broke. I stand by my view for a number of reasons not the least of which being Chorus’s own statement from last year in which it indicated that the impact of the Commerce Commission’s draft determination could require Chorus to fundamentally rethink its business model and capital structure. Chorus also said that under the draft determination of the Commerce Commission it could lose up to $160 million of annual earnings. To put this in some context Chorus’s net profit for the 2013 financial year was a touch above that; $171 million. Given the flow-on effects that a reduction on earnings has on borrowings and Chorus’s investment grade this would have significant impacts for any public company.Hon David Cunliffe: Given that answer was his advice based on any information not already in the public domain; if not did he assess the risks of his observance of the Securities Act when making his forecast of Chorus’s profitability?Rt Hon JOHN KEY: Advice was provided to Cabinet by officials based on commercial-in-confidence discussions between Chorus and Ministry of Business Innovation and Employment officials. Unlike a Government that he was a member of under Helen Clark we actually observe the laws—[Interruption]Mr SPEAKER: Order!Hon David Cunliffe: Was any of that “commercial-in-confidence information” conveyed in the phone call that he received from the chair of Chorus shortly after the commission’s decision was announced in December 2012?Rt Hon JOHN KEY: Probably yes; I mean the chairman gave me an indication of her thinking about the impact that would take place and that gave me some understanding of the issues that it would face. In the end the Government chose to take the action of having a discussion document because it believes that fundamentally the determination for copper pricing should be reached by considering all of the factors that the Government put into the 2011 legislation and that includes section 18(2A) which the commission itself said it did not actually take into consideration because it was not sure how to interpret it.Hon David Cunliffe: Why following the call from the chair of caucus—Chorus—did he see it fit—[Interruption]Mr SPEAKER: Order! I invite the member to start his question again.Hon David Cunliffe: Why following the call from the chair of caucus did he see fit—[Interruption] Why do we not take that a third time?Mr SPEAKER: Order! I have called for a supplementary question from the Hon David Cunliffe.Hon David Cunliffe: Why following his call from the chair of Chorus—Hon Members:Yay!Mr SPEAKER: Order!Hon David Cunliffe: —we will see whether the National backbench will be as happy with the second half of the question—did he see fit to override the lawful regulatory process employed by the Commerce Commission which requires them to issue a draft then consult and then issue a final recommendation before that is considered by Cabinet?Rt Hon JOHN KEY: There are two things. One thing is true: I do get a phone call from my caucus but they all voted for me.Mr SPEAKER: Order!Rt Hon JOHN KEY: I can only imagine what the phone call from Trevor is like in San Francisco at the moment.Mr SPEAKER: Order!Rt Hon Winston Peters: I raise a point of order Mr Speaker.Mr SPEAKER: I have point of order from the Rt Hon Winston Peters. [Interruption] Order! This is a point of order; it will be heard in silence.Rt Hon Winston Peters: The Prime Minister on the first supplementary answer offended and now he has started out with the offence before he even gets to answer any question—not just once; he has done it twice—and he was not stopped.Mr SPEAKER: Order! I thank the right honourable member for his advice.Grant Robertson: I raise a point of order Mr Speaker. [Interruption]Mr SPEAKER: Order! Points of order are to be heard in silence if members want to stay to hear.Grant Robertson: In two straightforward questions today the Prime Minister has taken political slaps. You in the past have said that that is unacceptable and I would ask that you hold the Prime Minister to the standard that you have previously set.Mr SPEAKER: I also thank the member for his advice. This is a robust debating chamber and although the comments from the Prime Minister were not helpful to the order of the House as soon as he embarked on that particular line of answering I stood and called him to order.Grant Robertson: I raise a point of order Mr Speaker.Rt Hon JOHN KEY: Do you want me to answer?Grant Robertson: Yes we do want you to answer so get on with it.Mr SPEAKER: Order! It would be helpful—[Interruption]. Order! I now invite the Prime Minister to complete his answer.Rt Hon JOHN KEY: And the Labour Party members did get on with it and they said they did not want you Grant.Mr SPEAKER: Order! The Prime Minister will simply rise and answer the question without adding any political connotations at the start of his answer.Rt Hon JOHN KEY: The Government is not overruling the Commerce Commission. The Government has put out a discussion document because it believes that it is important to understand at least the possible thinking on what could take place during this build period. In saying that it is worth remembering this point: there was a submission—I think received today or in the last few days—from the former Telecommunications Commissioner Dr Ross Patterson who I might add was appointed by the then communications Minister David Cunliffe. I quote Mr Patterson when he said: “The Government has made it clear that it does not intend to provide a demand side subsidy to incentivise migration to fibre. Under those circumstances the only practical option is to adjust copper pricing along the lines proposed in the Discussion Document.”Hon David Cunliffe: Speaking of submissions does the Prime Minister agree with Vodafone that the unbundledbitstream access (UBA) pricing proposal delivers “unnecessary corporate welfare to Chorus at the expense of all consumers who will pay more for telecommunications services”; if not why not?Rt Hon JOHN KEY: No; because under every scenario consumers will pay less.Te Ururoa Flavell:Tēnā koe Mr Speaker. Kia oratātou. Is he concerned that artificially increasing the price of copper will increase the digital divide between the haves and the have-nots and will make even cheap and slow internet access completely unaffordable for many Māori and ruralwhānau?Rt Hon JOHN KEY: Firstly no there is no increase in copper pricing. I say again: under every scenario proposed by the Government copper pricing will be reduced. The question is the size of that and whether all of the factors that the Government intended for the commission to take into consideration should be and are taken into consideration. It is the view of the Government and actually the Commerce Commission that section 18(2A) of the Act has not been taken into consideration. The Rural Broadband Initiative is about creating competition which will drive down prices over time as you get competition between new technologies.Hon David Cunliffe: Why does the Prime Minister say that it would be cheaper than under every scenario when relative to the scenario proposed by the regulator Kiwi consumers will be paying up to $150 a year more per household?Rt Hon JOHN KEY: Under every scenario proposed in the discussion document there will be—Hon Members: Oh!Rt Hon JOHN KEY: Well that is what we are talking about. Under every scenario proposed in the discussion document there will be a reduction in price to consumers. That will have an impact on Chorus of somewhere over the 5-year period between $100 million and $500 million. But it is worth remembering what the price is at the moment. It is $44.98. I go back to 2007 when the total copper price was $47.28 and I do not remember the Labour Government back then demanding—Mr SPEAKER: Order! That is a sufficient answer.Dr Russel Norman: I raise a point of order Mr Speaker. The question was a very straight question and it was about comparing it with the Commerce Commission proposal not with the Government’s proposal and the Prime Minister has refused to address the question.Mr SPEAKER: Order! That was not the question as I understood it. The question asked why the Prime Minister is saying it is cheaper under every scenario and the Prime Minister sought to answer that.Hon David Cunliffe: Given that it was his Government that negotiated and signed the ultra-fast broadband contract with Chorus and that he now says that under that contract Chorus will go broke why did his Minister Steven Joyce get the ultra-fast broadband contract so wrong? The Government cannot have it both ways.Rt Hon JOHN KEY: Under no scenario is the Government saying it got the contract wrong with Chorus. What the Government is saying is that the Commerce Commission should have taken into consideration in our view all parts of the determination or the indication that we gave. That included benchmarks with other alternatives which is the standard practice and Sweden and Denmark were the only two benchmarks that in fact actually the Commerce Commission believed it could get a similar view from. The Commerce Commission itself said that under section 18(2A) it was not sure how to interpret it so it ignored it. Actually section 18(2A) spells out very clearly the expectations of what the Government thought pricing should be.Hon David Cunliffe: Given that the Prime Minister’s actions have overridden both the contract entered into by his Minister Steven Joyce and the regulatory process of the independent regulator to provide a $600 million subsidy to one of New Zealand’s most powerful corporates would he agree that this smells and tastes of crony capitalism?Rt Hon JOHN KEY: On so many fronts the member is wrong; it is not funny. Firstly the Government is not unhappy with the contract between Chorus and Crown Fibre Holdings and nor is it actually seeking to make any adjustments there. Secondly the Government has not overridden the Commerce Commission; it has put out a discussion document. Thirdly under every scenario consumers will pay less.Hon Amy Adams: Has the Prime Minister seen any reports analysing the claims of the imposition of a so-called $600 million copper tax?Rt Hon JOHN KEY: Funnily enough I have. I have seen the reports issued byCovec and let me run through a few of the interesting points in that. Firstly the methodology is fundamentally flawed.Covec attributes $126 million transfer to Chorus in 2014 as a result of the Government’s proposal. Actually it is a material error because the current pricing prevails until the end of December 2014.Covec speculates what the final UBA price will be from the commission. None of us actually knows that so how could we actually adopt that?Covec does not accept fibre as the modern equivalent asset for copper which is completely out of step with the European Commission and others who have made statements on this matter. TheCovec report misrepresents the proposal as a tax when in fact—Hon Annette King: It’s a long answer.Rt Hon JOHN KEY: Well it is actually a very thorough answer to the best question I have had today to be perfectly honest.Hon David Cunliffe: Given his reliance upon reports what reliance is he placing on media reports that this $600 million botch-up is the end of Minister Adams’ chances of succeeding him as Prime Minister?Rt Hon JOHN KEY: I need to be honest. I really do not think our caucus is looking for a new leader right at the moment but after question time today the Labour Party—Mr SPEAKER: Order! That is sufficient.