Telecommunications Amendment Bill — First Reading 
Telecommunications Amendment Bill — First Reading 
[Volume:632;Page:4071] 
Telecommunications Amendment Bill 
First Reading 
Hon DAVID CUNLIFFE (Minister of Communications) 
: 
 I move  
That the Telecommunications Amendment Bill be now read a first time. 
 At the appropriate time I intend to move that the bill be considered by the Finance and Expenditure Committee that the committee report finally to the House on or before 6 November 2006 and that the committee have authority to meet at any time while the House is sitting except during oral questions during any evening on a day on which there has been a sitting of the House and on a Friday of a week in which there has been a sitting of the House despite Standing Orders 192 and 195(1)(b) and (c). 
This bill is a central part of the Government’s package of measures to assist the New Zealand telecommunications sector to catch up with leading OECD countries. It implements the findings of two separate but related review processes: the implementation review in 2004 of the Telecommunications Act and the recent Telecommunications Stocktake Review. This bill introduces changes that are needed to make the catch-up process possible. It is the keystone of a package of measures designed to improve the performance of the New Zealand communications sector. 
The four components of that package include first this legislation which will deliver an effective wholesaling regime; second measures to encourage infrastructure-based competition including developing a package for rural communities and ensuring we have a competitive cellular market; third the future-proofing of the regulatory environment to technology change including by reviewing telecommunications service obligations and preparing for next-generation networks; and fourth the continued development and implementation of the Government’s digital strategy to encourage the smart use of information and communications technology. The package is a commitment to make New Zealand a world leader in information and communications technology. 
This legislation is focused on the first component of that package: developing an effective wholesale regime. That is done in three main ways: first by extending the range of services subject to regulation second by enhancing the ability of the Telecommunications Commissioner to implement those services and third by empowering the commissioner to effectively monitor and enforce compliance. 
Before going into further detail on these reforms it is important to understand why they are needed. Effective regulation of the communications sector is necessary in order to ensure that the Government’s objectives in telecommunications are met. The Telecommunications Act 2001 dealt with a number of key issues in the sector. However the development of competition in the New Zealand communications sector has not met expectations. Analysis has clearly shown that the Government’s objectives in telecommunications would not be met under the status quo. The performance of the New Zealand sector is in the bottom third of OECD markets. In particular that is a result of the limited degree of competition. 
This bill accordingly focuses on measures to comprehensively address those competition concerns. The Government regards progress in that area as a matter of national importance. Information and communications technologies have been shown to be crucial enablers of business productivity and economic growth. Our comparatively poor performance in telecommunications is likely to be negatively impacting on the international competitiveness of our economy. Combined with other measures which include further policy reviews and a digital strategy the regulatory improvements proposed by this bill will accelerate progress towards the Government’s objectives by promoting competition in telecommunications markets for the long-term benefit of end users by increasing broadband service uptake and the timely availability of cost-effective broadband services and by facilitating the supply of telecommunication services to New Zealanders who may not otherwise receive those services on a commercial basis or at an affordable price. 
The bill itself can be summarised into three main parts: extending the range of services enhancing the ability of the commissioner to implement regulated services and empowering the commissioner to monitor compliance in the sector. On the first of those regulated services are at the heart of the regulatory regime. The bill brings New Zealand into line with international best practice by first unbundling the local loop and second removing restrictions on the existing unbundled bitstream service and clarifying that naked DSL—the separation of voice from data streams—can be purchased. 
Second it is important to ensure that the commissioner can effectively monitor the regulation of those services and implement that. This bill introduces new and enhances existing processes under the Act to ensure that service providers can get effective and timely access to regulated services. The bill allows the commissioner to set terms of supply for regulated services by providing a multilateral process for setting those terms. That will allow the commissioner to resolve supply terms for regulated services once rather than for each and every access seeker separately. Section 22 of the Act is amended and thereby the bill enhances the ability of access seekers to seek regulatory redress by removing provisions that previously restricted access seekers from seeking determinations where they had commercial agreements for supply of the service. Access providers are also restricted from taking prejudicial action against an access seeker who applies in such circumstances. The commissioner is empowered by the bill to initiate a determination on the terms and conditions of regulated multi-network services rather than relying on access seekers to apply. 
Third the bill introduces a number of key changes that empower the commissioner to monitor and enhance compliance with regulatory obligations. They include the accounting separation regime which is hereby introduced. The commissioner will be empowered to require Telecom New Zealand to prepare and disclose information about its retail and wholesale business activities as if they were independent entities. The accounting separation regime will allow the commissioner to define how Telecom’s business activities and services are allocated between wholesale and retail. The regime will increase the transparency of the sector and that is crucial to ensuring efficient commercial and regulatory outcomes. 
Telecom has recently announced its intention to voluntarily separate its wholesale and retail businesses and to put in place externally auditable non-discrimination measures. That is a potentially positive development that the Government wants to consider in detail. Consideration will also be given to potential implications for the proposed accounting separation regime. Telecom New Zealand among many others will also make submissions on that important issue to the select committee that considers the bill and officials will work in parallel with it to assess the submissions that are made. 
On the issue of information disclosure I say the bill also includes an information disclosure regime that empowers the commissioner to require access providers to prepare and publicly disclose relevant information. That will increase the overall transparency of the sector by giving the commissioner and access seekers certainty that providers are meeting their regulatory obligations. A sector monitoring role for the commissioner is introduced. The commissioner will be required to monitor competition in and the performance of telecommunications markets. That includes making reports and summaries of relevant information publicly available. 
The enforcement regime is strengthened in this bill. It is also standardised in order to ensure compliance with the regulatory obligations under the Act. The commissioner will be able to take direct enforcement action and will have a wider range of tools at his or her disposal. 
The Telecommunications Amendment Bill is an important piece of legislation that in conjunction with other initiatives announced by the Government will accelerate progress towards achieving the Government’s objectives in telecommunications. The bill implements a bold vision—it has to do so. If we are serious about our economic transformation and if we are serious about building a knowledge-based economy then we must have a bold vision and we must take definite steps to achieve it. 
In that vein I expect that in 2015 when we will measure the success of our National Digital Strategy we will no longer be talking about broadband at all. The size of the pipe will not matter as it will be taken for granted. Connectivity will be ubiquitous. New Zealanders can expect to see a greater variety of end-user devices and the convergence of broadcasting telecommunications and information technology adding mobility where we demand it increasing choice reducing prices and putting users firmly in control. The possibilities are endless and this Labour-led Government is providing a responsive legislative framework that will better allow those possibilities to become a reality in New Zealand. 
Hon GEORGINA TE HEUHEU (National) 
: 
 Did I hear the Minister of Communications say he looks forward to our being a world leader? Well actually we all look forward to that but introducing this bill does not necessarily make it happen. Even if this bill works in the way the Government intends we will still be a long way off being a world leader. The reason is that so many other infrastructural issues need attending to. 
But National supports this Telecommunications Amendment Bill going to the select committee. It provides for local loop unbundling which has been the catchphrase for so many years now ever since this Government came into power in 1999. It has had a long gestation. Today the library provided me with all the investigations the Cabinet papers—it just goes on and on. “Sooner rather than later” is a phrase I think I also heard the Minister say. Well the record to date does not bear that out. 
Local loop unbundling we are told will allow competitors such as TelstraClear CallPlus and IHUG to access Telecom’s copper wires running into people’s houses and to offer services on a more equal footing. That is obviously to be welcomed. The bill contains the ability for the Commerce Commission to set the terms and conditions for competitors to access Telecom’s wires and to constantly monitor performance of the market. Currently it can respond only to issues formally raised by companies. The Minister can also recommend regulations to the commission but we hope the Minister would do that only in a constructive intelligent and sensible way. 
The bill also allows for the accounting separation of Telecom between its wholesale and retail arms. However Telecom announced this week that it would go further and voluntarily separate its operations. All I can say to that is “We’ll see.” The whole unbundling announcement was hurriedly announced by the Minister on 3 May. It was meant to be the flower of the Budget but is known now as the billion-dollar Beehive leak. I hope the shambles of that gigantic muck-up is not a pointer to the way that this Government manages what is definitely a very important process for New Zealand and for New Zealanders. 
National members support the bill going to the select committee but we have a number of observations that we would like to put on record. We would also like to express some reservations on behalf of the many doubters out in the community that this measure indeed will deliver what the Government says it will. For instance we want the Labour Government to come up with some evidence as to why it thinks unbundling is the panacea for broadband development in New Zealand. We want to see the results of a rigorous cost-benefit analysis that proves this measure is worth doing. We also look forward to the Telecommunications Commissioner Douglas Webb fronting up to the select committee to say why he recommended against it in 2003. We see that as somewhat of an anomaly but we do recognise that having the bill go to the select committee gives us an opportunity to explore those very important issues. We will be looking to ask the Telecommunications Commissioner what has changed since his recommendation in 2003. 
We also observe that a plethora of new technologies are streaming down the pipe that mean high-speed Internet will be delivered by a whole host of different means. We note also that Australia unbundled in 1999 and by 2005 it had made almost no difference. Korea is No. 1 in the world but it got there long before it unbundled. I also understand there is a strong correlation between GDP per capita and broadband penetration. So it is not as clear as the Minister purported to make it when he introduced the bill. There is also no real correlation between those who have unbundled and broadband penetration. 
Lastly in terms of expressing reservations and raising issues there are serious property rights issues here. We are wondering whether the Minister will make any statement on that matter. Will the Government be offering any compensation to Telecom shareholders? With the muck-up of the announcement we saw millions and millions of dollars of value wiped from those shares. That is not something to be taken lightly but we have heard nothing from the Government or from this Minister on that matter. So there are a number of issues that we want to explore and that we expect the Minister and the Government to address as we go through the select committee process. 
New Zealand is currently ranked 22nd out of 30 in the OECD ladder of broadband uptake. That is not acceptable. We call ourselves a developed nation amongst the group of Western nations but really honestly that is scandalous quite frankly. Minister Cunliffe had previously promised we would reach the top half of the OECD by 2007 which of course is just next year and the top quarter by 2010. However when the unbundling decision was announced he quietly moved those targets out to 2010 and 2015 respectively. We do not hold our breath too much because it is likely in terms of the way this Government manages most infrastructure issues and regulatory issues that there will be a change to those dates as well. We hope not but as I say we are not holding our breath to see the results promised by this Government. 
The Minister has also been backing off on the date when customers will see the benefits of unbundling. He initially said consumers would see the benefits by 2007 but more recently he has stated that the benefits would “take time” and that the “Full market effects of the reform may not be felt until 2007/08.” so I think that in that regard too we will see the date move out. 
Also we are told that the main thrust of the new investment will focus on densely populated and profitable urban areas. That is important. But we do ask then what about the benefits of competition moving from the cities out to rural areas? After all that is where a lot of our country’s wealth is generated and we do not have any certainty of the Government’s intention in that regard. Telecom has promised to continue investment in rural areas but we have seen it fight this process for so long now. Again we are not holding our breath but we hope for something better. 
National supports the first reading of the bill. We support access to quality high-speed broadband for all New Zealanders.They are as entitled as their global counterparts and citizens everywhere to be connected in today’s environment and to have access to the best in communications technology in especially their business lives and also their personal lives. We support infrastructure that boosts economic growth productivity and prosperity for the benefit of New Zealanders and that assists the country’s entrepreneurs exporters and business people who invest their resources to create jobs and wealth for all. Hopefully this move will see New Zealand move back into the top half of the OECD sooner rather than later. We also recognise that this unbundling has long been called for by many groups including competing telecommunications companies industry groups and the general public. For those reasons we support the bill but as I said we have our reservations. 
SHANE JONES (Labour) 
: 
 Tena koe Madam Assistant Speaker. Firstly as I rise to welcome this bill’s arrival at our Finance and Expenditure Committee I must say this. A me mihi ahau i te tuatahi ki taku hoa ki a Rawiri Cunliffe mona i maia ai ki te hari mau i tenei kaupapa ki te Whare. I first want to acknowledge my colleague David Cunliffe the Minister of Communications for having the courage to act in such a bold fashion in the construction of this proposal before the House. It is something that earlier Governments never had the courage to do. The fact that Maurice Williamson is absent today speaks volumes. 
The ASSISTANT SPEAKER (Ann Hartley) 
: The member will withdraw and apologise. He cannot refer to members being absent. 
SHANE JONES 
: He did not take the call. 
The ASSISTANT SPEAKER (Ann Hartley) 
: No I am sorry. Perhaps the member did not understand. 
SHANE JONES 
: I withdraw and apologise. I note the presence of our whanaunga from Ngati Tuwharetoa the Hon Georgina te Heuheu. Anyway I will move on to more important matters. 
This is a strike for economic development. It is an example of how this Government is prepared to use the remedial powers of the State rather than to allow personalities to intone policy odes and elegies to a time that has gone by. We are no longer captured by a false belief that our economy can grow through an exclusive reliance on market mechanisms and we do not want to go back to a time when Governments feared to use the remedial and positive impacts of the State’s regulatory power-making facility. We are confident that with this proposition we will expedite and hopefully achieve the statistics that  
The Economist 
 magazine makes reference to—that there is within the next 7 to 8 years $13 billion of potential wealth that our economy can capture by enhancing broadening and deepening the role of information and communications technology through better broadband provision to our economy. 
Did members know that it is about 20 years since the first telephone company was privatised it is about 10 years since the World Wide Web emerged and it is about 5 years since the Telecom bubble burst? This area changes constantly. The important role that we must never avoid taking up is insisting upon and implementing the right regulatory framework. Indeed no less than the World Bank has identified that there is a key and overdue role for the State to play in ensuring that broadband and information and communications technology grow and drive efficiency within the economy. What does the World Bank say is needed in less-developed and OECD economies in order for them to grow? It says that open entry is needed. This legislation insists that there be far more open far fairer entry for other providers in the sector. Not only does this bill achieve this it is a statement and a move towards transparency through cost-based pricing. Costing models will provide a return on capital but the legislation will no longer provide refuge for unscrupulous costing models or provide a basis for barriers to be put in the way of competitors. In addition the bill talks about cost-based interconnection—something else that we are addressing. 
With regard to access to infrastructure recently I had the pleasure of going through Kaikohe and Dargaville where I met a number of women of a similar age to myself. They applauded the initiative that the Minister has brought to the House today. Why? The reason is they could see that it would enable them to pursue education that had been denied them because of the tyranny of distance. They are looking forward to the opportunity of second-chance education to advancing their qualifications and to growing their role in the local economy through a more efficient provision of information and communications technology. That sort of outcome is a key contributor to our economic transformation. 
Obviously the fifth thing that we are addressing and which is referred to in this World Bank report is access to radio spectrum—but let me continue. What has been the approach from the Opposition? I look forward to John Key leading the National Opposition members on our select committee in a constructive way. I hope to see them developing a regulatory framework that will send an undiluted message to all players in this sector that this Parliament governs for the public interest—not just for the shareholders. Yes the interests of shareholders have to be borne in mind but consumers need a voice as well. The question of what is in the public’s interest is the essential pith of what causes this Government to deliver wealth and outcomes that will benefit everyone. And that in my view is the key distinguishing feature in terms of what members of the Opposition say about this bill—admittedly in a confusing way—and what we have heard today from the Minister. 
What has been the approach taken by Telecom? Well it was very pleasing to hear the Minister speak quite admiringly of Telecom’s willingness to take it on the chin and to provide for the opportunities that we have for so long waited. Naturally the devil is in the detail and the officials no doubt will burn the midnight oil studying whether their proposal will deliver the goods. But we look forward to a positive approach from Telecom. Some of the antics of the last 5 to 10 years reminded me of the actions of businesses in the time of Muldoon. In that era a tremendous amount of effort and expense was incurred to enable firms to lobby the Government of the day to ensure that their legacy remained intact. This was a legacy of monopoly pricing and monopoly power. Fortunately we will see less of that from entities such as Telecom. I look forward to seeing what the new board is likely to do in terms of direction and what the executive will present to us. 
Perhaps the most important thing about this proposal at a very basic level is that it actually provides for competition. It makes the process simpler for people to ply their services sell their wares and enable consumers to exploit the full benefit of e-health e-business and e-commerce. Unless our economy—so distant from markets—is able to capture and enjoy a worldwide world-beating communications service we will not achieve what we deserve and want to hand on to future generations. This is why when our Prime Minister stated that economic transformation was going to be a defining theme she focused very quickly on this overdue area of reform. This reform is good for business. This reform is good for consumers. This reform is good for Aotearoa. I welcome the bill and look forward to seeing it at the select committee that I chair. Kia ora tatou. 
PANSY WONG (National) 
: 
 That was a very telling speech. That was Shane Jones Labour member and chairman of the Finance and Expenditure Committee telling the public that the Labour Government does not care about shareholders. That is quite interesting. The Government basically says to hell with shareholders today because it would not hesitate to come in to write off wealth belonging to shareholders. But not that long ago the Minister of Commerce stood up and said she wanted the capital market of New Zealand to work. She wanted mums and dads to take shares. That is why the Labour Government is confusing. It actually does not know what it wants and how it wants to deliver it. 
That is consistent because the Minister of Communications the Hon David Cunliffe has no regrets over the total inadequacy and incompetency of the handling of the announcement of the unbundling relating to Telecom which led to a billion dollar write-off from shareholders’ wealth in that company. He went on to comment on the appropriate future dividend policy of Telecom which is still a subject of inquiry by the Securities Commission. I am a bit sceptical because at the moment the Labour Government is delaying the debate of the Committee stage of the Securities Legislation Bill. That bill introduces a tighter definition of what amounts to insider information. I am sure that if that bill is passed the Minister of Communication’s comments with regard to Telecom’s appropriate future dividend policy—which he reckoned was too high in the past—would get him into real trouble. 
Let us look at this bill from three perspectives. Firstly would it work? I wonder whether the chairman of the Finance and Expenditure Committee has forgotten that in the last 6 years the telecommunications industry has not been left entirely to so-called market mechanisms. He was not aware that the Labour Government introduced in 2001 the Telecommunications Act which put the telecommunications industry in a sector-specific regulatory framework. So we cannot actually say that in the last 6 years the telecommunications industry was in his words almost subject to the Wild West of the market economy. I counted up—alongside my diligent and hard-working colleague the Hon Georgina te Heuheu—statistics from the library for the years 2001 to 2006 and there have been 69 reports and inquiries into and amendments to the Telecommunications Act 2001. So I am relieved that my competent diligent colleague John Key will be on the Finance and Expenditure Committee to make sure that the chairman Shane Jones will get the best advice because Mr Jones seems to have forgotten that the telecommunications industry actually is subject to a legislative framework. The question has to be asked—after 6 years 69 reports inquiries and amendments and a promise by the Labour Government that New Zealanders would get there by next year—of whether this legislation will work. The 2001 Act did not work and whether this one will work is yet to be seen. 
The second perspective relates to what the legislation will cost in terms of compliance costs and costs to the wider economy. I looked at the regulatory impact statement. It states that it was not possible or necessary to provide the cost. That is another contradictory statement because the Minister of Commerce went on and on about her dynamic regulatory review and insisted to the Commerce Committee that from now on any legislation that did not come with a compliance cost statement would not be entertained by Cabinet. She said Cabinet would not consider any legislation without an accompanying compliance cost statement so I wonder how this legislation got past Cabinet and landed here in the House without even an attempt to establish what the compliance costs are. 
It seems to me that the fact that this legislation will also allow the commissioner in the future to start inquiring into practices—whether or not they are perceived as a problem—will cause even more uncertainty in the telecommunications sector. None of us wants to see those providers spending a lot of time arguing and debating in front of the Commerce Commission but the fact is that these types of intrusive tools will without clear guidelines of when the Commerce Commission might interfere cause even more anxiety in the sector. I am not too sure that this Big Brother bully-boy tactic is the best way to develop and encourage the various providers in this sector. I hope the Labour Government will be more consistent and certainly try to live up to its word about providing good analysis of regulatory and compliance cost statements to accompany this legislation. 
The other perspective that I hope the Finance and Expenditure Committee will consider is the bigger picture of the impact of a move like this on New Zealand’s competition law. There is a lot of anxiety out there in the wider commercial world as to when the Labour Government will blame businesses companies and operators when a goal it has set is not achieved. We have all learnt and seen that the Labour Government is always putting the blame on companies and on the market when it does not actually know what it wants. In 2003 the Telecommunications Commissioner was threatening to unbundle then he retracted from that. Then 2 years later unbundling was suddenly dropped on the scene again and Telecom was set up to be the fall company. 
But there is a bigger and quite frightening message. It was given today by Shane Jones when he said that the Labour Government does not care about shareholders. The bigger message is what the Labour Government is trying to tell all companies public and private. When is it their turn for this intrusiveness that infringes on their property rights? In our mind for 6 years the Labour Government has failed to look at the Commerce Act and at whether the Commerce Commission understands the telecommunications sector and what some of the barriers are. 
National is willing and happy to send this legislation to the Finance and Expenditure Committee. I am sure that members on this side of the House will give this legislation the rigorous assessment it deserves. 
Hon BRIAN DONNELLY (NZ First) 
: 
 New Zealand First and particularly the Rt Hon Winston Peters has long called for mechanisms to lower the costs of telecommunications in this country including broadband communications and a wide range of things. We believe that this legislation is a step in that direction and will have that effect although we do not believe that it is the total package; there are other things that need to be done. 
To understand the reason for this legislation we really need to go back to the 1980s and to the attempted redesign of our whole society around market mechanisms—a process known as Rogernomics. This legislation is a demonstration of some of the flaws in the design of that system. One of the chief architects was Roderick Deane who not only has his fingerprints all over Rogernomics but also is closely associated with this legislation in other ways. As a result of the economic transformation that took place during that time our public telecommunications monopoly company was converted into a private telecommunications monopoly company. The market can operate favourably only when there is genuine competition and ready access by new players. Unfortunately with the monopolistic system that was created what we had in New Zealand certainly did not allow genuine competition and therefore the market mechanism did not operate as it should. Telecom of course had ownership of the physical infrastructure which had been initially funded by public money. 
The public has observed since that time the highly predictable behaviour of this monopoly. If one thinks about it why would a cartage company with a fleet of trucks for example allow a new competitor without any trucks to use its trucks to cart product and undercut its cartage costs? It is not logical behaviour for any commercial entity. Telecom’s behaviour was highly predictable given its monopolistic situation. Of course its main purpose since its inception has been to retain that monopoly. Rather than focusing on improving customer service and reducing prices Telecom’s energies have been diverted to fiercely fought fracas to maintain its privileged position. We have seen the battles over telephone services over many years. 
What was never conceived at the time of the conversion of Telecom to private ownership was that the copper wires that connect homes to the national landline network would become of value for computer usage. No one had conceived of ADSL technology which cuts up information into discrete bits that can then be sent at speed along the copper wires. As a result of this new technology the physical infrastructure owned by Telecom suddenly became extremely valuable both to Telecom and to competitors wanting to get into the market. There was no way that a market mechanism would ever have caused Telecom to relinquish its monopoly—it just would not have taken place in an unregulated situation. As one commentator has stated Telecom had become a law company with a telecommunications unit attached. 
The result was that New Zealanders faced the most expensive and slowest computer services in the developed world. When there is a monopoly the market cannot be depended upon to deliver good services or low cost. Regulation in those circumstances is necessary. I think the Hon Georgina te Heuheu made a very telling point when she said that questions have to be asked of the regulator as to why he made the decision in 2003 not to regulate given the situation that existed. Anyone who did not see that unbundling the local loop would have to be imposed by regulation on Telecom had to have his or her head in the clouds; it was staring that person right in the face. Therefore the loss of Telecom value on the sharemarket actually reflects its overvaluation based upon its monopoly rather than any leakage of documents that may have occurred pre-Budget. Readjustment was going to happen; it took place a little bit more prematurely than it would have otherwise done but it certainly was going to happen when the inevitable unbundling was announced. 
However while such unbundling was inevitable and we support this particular move there could be a downside—and the Hon Georgina te Heuheu made mention of it—unless the whole issue is dealt with very very carefully and that is that investment in rural infrastructure could dry up. Newer entrants into the broadband market will inevitably cherry-pick more densely populated regions. Telecom itself will have its profit margins cut and will be less capable of the infrastructural investment into rural areas that it possibly had planned. New Zealand First has already signalled its concerns around this issue and we will be holding the Government to account for creating a workable rural package. That is not just to ensure that the important economy of the rural sector is maintained at an optimum but also to ensure that our rural education services are able to be delivered in an equitable fashion—and we go back to that famous statement by Peter Fraser about equality of opportunity. We believe that this is an important element and we will be keeping a close eye on the development of the rural packages over the next 12 months to ensure that that becomes a reality. 
We note the introduction of the accounting separation requirements for Telecom in order to increase the transparency of its wholesale and retail operations and we note it particularly with regard to the announcement this week that Telecom will be voluntarily splitting its operations into two autonomous businesses—even though they will come under the umbrella of one entity. Once again I think Georgina te Heuheu quite rightly expressed a degree of cynicism because one might ask why that provision is needed in this legislation when an announcement has already been made that it will happen. Georgina te Heuheu said “We’ll see.” I think it is appropriate that it is in this legislation but it is good to see that Telecom is already moving in that direction in anticipation that the legislation will go through. We think Telecom is starting to demonstrate some positive behaviour—possibly behaviour that will enable it to operate successfully in what essentially will be a new regime. We think that will be good for all New Zealanders and for the nation as a whole. 
The bill introduces a range of other measures to strengthen regulatory potency which is necessary—enhanced enforcement mechanisms and an information disclosure regime for example. So it is not just the unbundling that is brought to bear by this legislation; we believe that it regulates and tightens up things in a range of different fields and we believe that the result will be—somewhat belatedly we have to say—some meaningful gains in terms of increased services and reduced costs for users of telecommunications and broadband. Therefore New Zealand First will be supporting the bill going to a select committee. We will certainly be examining very carefully the submissions to make sure that the details are right because in such legislation the devil is in the detail but we do believe that it is on the right track and therefore is worthy of our support. 
Of course there is a difference between 2003 and 2006 in that New Zealand First was not a confidence and supply partner of the Government at that particular time. It could be considered that New Zealand First provided the little bit of steel in the backbone of the Minister of Communications that was needed for him to make the necessary changes that are proposed in this legislation. With that I think I had better wind this up! 
TE URUROA FLAVELL (Maori Party—Waiariki) 
: 
 Kia ora Madam Assistant Speaker. Tena tatou katoa a tena tatou wananga nei i tenei take. 
[ 
Greetings to us all especially those of us debating this matter 
.] 
The art of whaikorero is a skill that is frequently commented upon in Te Ao Maori. In reflecting on our finest orators we will often speak of those people who have that expertise in their ability to connect people along lines of whakapapa. We speak with awe of the way in which these master orators are able to define relationships and link individuals to histories and to collectives. The key to our ongoing survival as people is in such connections. 
It is within this context therefore that we turn our attention to the proposal to unbundle the local loop to unbundle bitstream and to introduce naked digital subscriber line broadband services. I have to say from the start that this is new vocabulary. The terminology of telecommunications does not come easily to me. But I understand the value of communication. The bill amends the Telecommunications Act 2001 to ensure the efficient and effective regulation of the telecommunications sector. This means that in effect the bill is sending a strong public policy signal to Telecom and to Vodafone that they will be subject to a greater degree of Government regulation. I understand that the bill enhances the ability of the Commerce Commission to intervene strategically to promote the development of competition in the telecommunications markets. Phone and Internet providers can now present a deal just for the individual. 
In case people are not aware that there is actually already a choice of providers just listen to the list of those that are currently tendering for our business: Hautaki Trust Saturn Communications Econet Holdings ACN Kwiknet Netsurf Splurge Internet Surfnet Slingshot Supra Actrix Networks Raider TelstraClear Wave and IHUG. I could go on; that is probably just the start. Our rangatahi know these names like they know clothing labels. Indeed their cellphones are the fashion accessory that every rangatahi wants when he or she hits school or kura. Those who do hook up to a provider will jump from provider to provider depending on which has the best offer on line for that month. That is precisely how it should be. 
Under a virtual duopoly consumers have not been well looked after and some basic questions remain. Why does Aotearoa have the highest mobile phone rates in the OECD? Why does it cost exactly the same in real terms to make a voice call from my office here in Parliament to my Wellington home as it does to make a call to my home in Ngongotaha—that is Rotorua for those who do not know? I am charged extra relative to the physical distance yet there is no electronic distance involved. 
The ability to be well-connected now means far more than the quality of our social networks as perhaps it did in previous generations. Being well-connected is now driven by something as basic as telephone and Internet access. Indeed  
Social Report 2005 
 describes how Internet and phone access is one of five significant variables that help us to understand social well-being. What do we find? People living in Pasifika families have the lowest levels of telephone and Internet access in the home—88 and 16 percent respectively—followed closely by the levels of access of people living in Maori families which are 92 and 28 percent. The other groups featured in the low-level rankings are families with unemployed adults and sole parent families. Sole parent families are half as likely as two-parent families to have Internet access—25 percent compared with 50 percent. 
The Maori Party is keenly motivated by the need to ensure we do everything in our power to enhance social well-being. Therefore we come to this bill with the hope of ensuring that there are other opportunities for other providers to compete for clients and force our fixed-line communications costs and indeed our mobile prices down to a realistic global price. I have found that fixed-line communication costs in New Zealand including ADSL broadband are much higher than in most other OECD countries and it is artificially kept that way. My question is why is that so. 
We are concerned that this bill is primarily focused on regulation of the fixed line and it completely ignores mobile issues. Our concern is that the bill will pass without mobile issues being discussed and that it will take another amendment bill whenever that might be to address the mobile market concerns. It is the cost of our mobile technology that Ernie Newman boss of the Telecommunications Users Association of New Zealand has labelled as scandalous alleging that New Zealanders are being ripped off by the current duopoly of the two big providers. New Zealand has the highest overall mobile calling rates out of 30 OECD countries which is entirely due to the lack of competition in the mobile industry. This is particularly urgent for tangata whenua as our Maori spectrum interests are associated with mobile. Until the mobile issues are sorted tangata whenua access to the telecommunications industry and the $3 billion mobile market is restricted. 
The other key interest we have in the Telecommunications Amendment Bill is the distinction being made between specified and designated services. Specified services are services where the Telecommunications Commissioner can regulate everything except price. Designated services are services where the Telecommunications Commissioner can regulate everything including price. Regulation of everything except price is not regulation at all; it is a complete nonsense. There is a current mechanism in the Telecommunications Act to move specified services into the designated services category. However this mechanism is slow and cumbersome. 
Generation Y want a regulated roaming solution now and the way of achieving that is through deleting specified services and moving the specified services into the designated services category. Generation Y Maori are online as well and to be frank they astound me with their versatility and command of the technology. Our kids are able to hold an old-fashioned conversation with me while at the same time texting their cousins. They can download electronic screensavers and MP3 files faster than I can work out how to answer the cellphone. I consider myself a pretty techno-smart sort of guy but I am still pretty hooked into the idea that a cellphone is basically a small phone. However my children and my nieces and nephews see their cellphones as the doorway to a world far beyond the white pages. They take infrared photos of each other while I am still searching for the on-off button. At least I am one ahead of one of my co-leaders who calls his new-age cellphone his raspberry. 
The Maori Party will vote in support of this bill to support the right of all of our rangatahi to expand their knowledge and their capacity to communicate even further. We are also of the view that we want the debate to go ahead to allow healthy competition in order to achieve world-class broadband or high-speed Internet services for New Zealand. Ultimately it is our belief in he whakapapa ta te korero—the value of maintaining and expanding our communication with each other—that leads us to support the opportunity for further debate. Kia ora tatou. 
NANDOR TANCZOS (Green) 
: 
 I rise to speak on the Telecommunications Amendment Bill on behalf of the Green Party. I begin by congratulating the Minister David Cunliffe on making a courageous move and moving swiftly to implement the Government’s policy decisions by bringing the bill before the House. I commend the Minister because it is an issue that has been raising its head over a number of years. It has gone backwards and forwards; it has been before the House and in the public domain. The Minister has now grasped the nettle and done something about it and I commend him for that. 
 Mr Donnelly was a little bit unkind to imply that one would have had to have one’s head in the sand not to see this coming. I guess his implication was with regard to the position Telecom had taken. But I think it was a bit unkind because Telecom managed successfully to stave off these kinds of moves for a very long time and it clearly thought that it could continue to do so. As I said it is a credit to the Minister that some action is now being taken. 
The reality is that just about everyone has been calling for these kinds of moves except perhaps for the Business Roundtable and Federated Farmers. I have never quite understood the position of Federated Farmers who seem to have taken the position that Telecom’s maintaining of a monopoly over the copper wire would improve services in the rural community. Farmers have absolutely no reason to be satisfied with the service they have been provided with so far and there is a very good chance that this legislation in conjunction with some of the investment announcements the Government has already made may well mean a significantly better service in the rural community. So this is a thing that is being broadly supported it seems in the community. Up until now Telecom has seemed to be immune from regulation and this bill means those days are no longer with us. 
During the debate on the previous telecommunications legislation Sue Kedgley moved some amendments on behalf of the Greens to introduce local loop unbundling but they were not supported by the House. Those moves were in a sense ahead of their time. We saw other opportunities under the previous Minister of Communications Paul Swain to take some action and again unfortunately it did not happen. I am just saying these things—giving that historical context—to indicate really clearly that the Greens are totally supportive of this bill and of the policy behind it. We look forward to seeing it enacted by this House as soon as is practically possible with regard to good legislative decision-making. 
Mr Donnelly said this bill was not the total answer and he is right. It is part of a package announced by the Government that has a number of other components but it is to enact certain parts of those decisions that were announced at the time of the Budget. Really a key part of the Greens’ support for this bill is that we think it is a crucial part of making us a more sustainable economy and a more sustainable nation. If we are going to reduce our dependence on fossil fuels and make things like telecommuting and the like an actual reality in the day-to-day lives of ordinary New Zealanders then unlocking the potential of broadband in our telecommunications infrastructure is exactly what we need in order to do that. Those concerns were recognised by the Telecommunications Users Association when Ernie Newman commented on the logical support the Greens would give to local loop unbundling and those other measures because of the concerns about sustainability and reducing our dependence on fossil fuels. 
Because of New Zealand’s geography and remoteness it is crucial that we get serious about the telecommunications infrastructure. We have a creative and an innovative population that is very quick to take up new technologies. That has been demonstrated for a very long time. In fact when Pakeha came to these shores Maori were very quick to take up new technologies that were available. The Pakeha population—the people who have come here—is equally quick to take up new opportunities. We are an entrepreneurial nation. Unlocking the potential of the information technology infrastructure is crucial to unleashing the potential of New Zealanders. 
Like Mr Donnelly I was pleased to see the announcement that Telecom has made around voluntary moves to create a separate independent wholesale operator. That is really encouraging and we congratulate Telecom on those announcements. They were made subsequent to the assurances that Telecom and in particular Theresa Gattung have made that Telecom sees the writing on the wall and is not going to play an obstructive role but will embrace the new environment and move forward positively and cooperatively. So we are cautiously optimistic that this announcement is about putting those assurances into practice. Cautious is the operative word—there is no reason to be naive and we have to look at what is actually put in place in practice. As has been said by previous speakers the devil is in the detail. Nevertheless we are cautious but optimistic because here is an opportunity to see some really positive moves and not to have to wait for legislation to pass through the House. 
Telecom has the opportunity to take some independent positive steps forward. Of course the provision that allows the Commerce Commission to recognise formal undertakings and accept and enforce voluntary supply commitments and the like in lieu of regulation is in line with that position. So we support that. It has been a reality of moves to regulate telecommunications incumbents overseas that often the strategy of incumbents has been to stall obstruct and obfuscate. I and I think everyone in this House will be very pleased if that proves not to be the case in relation to Telecom in this country. 
In looking at some of the provisions the bill introduces we see that it is quite a complex and comprehensive bill. It addresses a number of different issues. It provides for the introduction of a standard terms determinations process that will allow the Commerce Commission to set access terms and conditions for regulated services for both multiple access seekers and access providers. The ability of the commission to set access terms and conditions is crucial. We have seen this in the international context in relation to local loop unbundling. It is an issue around the whole mobile phone industry in this country. As I mentioned the process allows the commission to enforce voluntary commitments in lieu of regulation and we support that. It allows those voluntary commitments to be made and negotiated in good faith. 
It empowers the commission in a number of ways. We think that that is good because one issue has been the ability of the commission to intervene and regulate and to actually have some teeth. The bill will start to put some of those measures in place. It is important there be a body that can intervene and look out for the strategic interests of New Zealand and New Zealanders and the introduction of local loop unbundling is at the heart of that issue. 
The bill also provides for backhaul and co-location of equipment. I will touch on that subject briefly because it is crucial and has been a big issue in respect of mobile phones. There is anecdotal evidence that Telecom’s network roll-out is installing roadside cabinets that are physically incapable of supporting co-location. I do not know whether that is true—it is just something I have been told although I have not checked it out for myself. If it is true it is a big issue and Telecom would need to be taken to task. Transparency is really needed in that area. 
The bill amends the unbundled bitstream service and provides for naked DSL. That is good particularly since the recent Commerce Commission decision in relation to Vodafone offering competition to the landline service through its mobile network. Again the provision of naked DSL is important. 
The bill is to be very much encouraged and the Minister is to be commended. The Green Party totally supports it. 
GORDON COPELAND (United Future) 
: 
 I rise on behalf of United Future to take a call on the Telecommunications Amendment Bill. I want to begin by just talking about the principles that underlie competition and therefore competition law. It is absolutely vital to establish the framework in such a way that we remove barriers to new entrants to come into the telecommunications market. That is because competition is actually a public good. It incentivises economic efficiency it lowers prices to consumers and it incentivises the introduction of new technologies. For example we need to incentivise faster Internet speed because that in turn flows through to increased productivity which is a key requirement if we are to set the New Zealand economy on the road to growth. Growth in today’s world is inextricably related to the Internet in terms of both speed and access. This bill assists those goals. 
I need to inform the House that unbundling of the local loop for Telecom actually adopts United Future’s policy in relation to that matter. We went into the 2005 elections—and if people look up our Internet site and our policies they will see this—in favour of unbundling Telecom’s local loop in relation to both the copper wire and the exchanges which are pivotal to the creation of competition. We adopted that policy if you like more in sorrow than in anger because Telecom could we believe have avoided regulatory intervention if it had resigned itself to the desirability of competition and opened up the loop and exchanges to genuine multi-company access. That could have been done on normal commercial terms. 
I will give the House an example to do with exchanges which was brought to me by competing Internet providers. I often think of unbundling being about using the copper wire but I have been told that some of Telecom’s competitors would go to them and say that they would like to put such and such a piece of technology into Telecom’s exchanges and Telecom would say no they could not. Telecom said it had selected the technology that would go into its exchanges and would do a deal with the competitor to use “that” piece of technology but not the one the group wanted to use. Clearly that is restraining competition; it is a big negative when one thinks about it if our desire is to go for economic transformation. New Zealand needs to be able to use the best most cost-effective technology at any point in time. So that is an example of why the exchanges are a very important part of the transaction. 
That might have been expecting a little bit too much but it is true that Telecom as the owner of the copper wire and the exchange with ample spare capacity could have developed a commercially rewarding business and centred that business on renting access to its competitors. However whatever the merits or otherwise of that alternative the die is now cast and New Zealanders overwhelmingly welcome the decision of the Government to unbundle the loop. We will support the Government in bringing about that forced change. In the end this was really the only way to serve the common good. I think that in effect the Government was left with no alternative and I join with others in saying that if anything the only criticism we would have is that we have acted rather too slowly and perhaps should have got there faster than has been the case. United Future supports the bill and will continue to support other initiatives that create a competition platform for new innovative entrants in all the telecommunications and information technologies. 
The member Te Ururoa Flavell mentioned in his speech the question of mobile phone services. I believe also that that is another area the Government has to look at and look at quickly and seriously. I for one was staggered to learn that cellphone prices in New Zealand are up to 10 times—that is right 10 times—higher than in Nigeria and Ghana which are Third World economies. We need to understand why that has happened and the reasons for the disparity. Then we need to take the necessary actions to change it. That may be very difficult for the Government because it has set the current regime in place in respect of mobile services and it is possible that in doing so we have made a massive mistake. 
As the member Shane Jones pointed out where the State itself is responsible—because the State also makes mistakes—for something that is actually counter-productive in terms of our goals of increased competition the transformation of our economy and getting better productivity out of our businesses then we have to be able as a Parliament to face up to that squarely and to change the position even if it requires the payment of compensation for the removal of property rights. The issue is just too big for us to leave on the side—otherwise we will stagnate as an economy and begin to go backwards. We need to focus clearly on whether there are barriers to new entrants. If there are barriers then even if our costs are five times 10 times three times or even twice those of other countries then our failure to address the issue will have a detrimental impact on the chances of our having a successful economy. 
In today’s world it is all about being internationally competitive. Given our present balance of payments and low GDP growth we cannot afford to place our economy at a competitive or comparative disadvantage relative to the rest of the world. When I thought about those principles I was thinking primarily in terms of maintaining our place in the OECD which is actually the Government’s goal. But we know we need to go further than that when we find out that most of the population of nations like Ghana and Nigeria—I have not been to those countries but I have been told—are walking around with cellphones way beyond what we see in New Zealand. Even though those people have very very limited economic and earning power they still have access to mobile phones and mobile phone services. Why? It is because there are no barriers to those people setting up businesses there. We have considerable barriers in this country so we still have some distance to go. We need to be ahead of the game not behind it. 
United Future’s vision for New Zealand is that we should be at the cutting edge of new technologies we should be at the cutting edge of understanding what grows an economy and we should make the changes that we need to make legitimately in terms of the State’s essential function of getting the framework right which is where Parliament comes into the picture. We should not then be frightened to address those other issues as well so that we can continue to bring about a genuine transformation of our economy. That can become a buzzword—we want the “transformation” of our economy. No one in this House will say we do not need to transform our economy but my point is that we need to understand what it is we need to do to bring that about. We need to go beyond window dressing and reach genuine solutions that will also allow the private sector to flourish. United Future is a pro - private sector party and a pro-competition party but markets need to be fair balanced and open to new entrants for that to happen. 
With those remarks I have pleasure in signalling our support for the bill. I too would like to offer my congratulations to Minister Cunliffe on having the courage to take this major step forward. There were risks around it. In my spokesperson’s role on communications since the 2005 election I have come to understand some of the pressures he might have been under but I think this is the right course of action and we will work with the Government to see this thing through to completion. 
RODNEY HIDE (Leader—ACT) 
: 
 I rise on behalf of the ACT party which is the only party to oppose the Telecommunications Amendment Bill. I will explain why ACT opposes it. In hearing the speeches today I noticed there were some indications of concern about this bill and I think those concerns will be more serious than we appreciate. 
If we are to transform our economy to develop technology and to have the services utilities and infrastructure that we so desperately and earnestly desire then that will take significant investment. When investors make their investments they do so on the basis of risk and return. They like to have a nice set of stable rules and property rights. This bill pinches a serious number of property rights off a private company—so much so that the Government announcement of this measure knocked $3000 million off the value of one private company. That is not a loss to the company; it is a loss to the shareholders and to the people who invested in the very infrastructure that this country so desperately needs. The fact that the Government could so casually make that decision to regulate telecommunications is not lost on other investors. We have already heard other people in this Parliament say we should do the same thing to the mobile phone companies or to this or that business. 
But why would anyone invest in roading in New Zealand in airports in utilities or in a water development facility or a dam when the Government could come along and say it does not actually like what is happening there—it does not like the price or it does not understand what is going on—so it will just regulate the return— 
Shane Jones 
: What about the public interest? 
RODNEY HIDE 
: The public interest is in getting a good telecommunications industry. What I am trying to explain to the member if he would pipe down and listen is that that requires investment. It requires people to look at New Zealand and ask whether it is a good country to invest in. 
I make this point about New Zealand. Countries like the United States the UK and even countries like Australia and the countries of Europe can afford to have dopey policies because no company can miss investing in them. But in respect of a country like New Zealand it is very easy for Vodafone to say things have just become too tough so it will not put in any more money. I ask Pita Paraone how much he thinks Vodafone has invested in New Zealand. It is serious serious money. If we go around and regulate robbing those companies and their investors of their return they will not invest in New Zealand. 
We should even look at the way this has been done in respect of Telecom. Not only did we pinch Telecom’s property rights and knock $3 billion of shareholder value south but the Minister David Cunliffe—who is supposedly a big courageous guy but who has done nothing brave in his life—turned around and said what Telecom should be doing with its profits and what its dividend policy should be. The Minister should not do that; it is the job of business to run business. I am pleased to see the Minister nod his head in agreement with that. But then we saw Helen Clark the Prime Minister launch a personal attack on the chief executive officer of Telecom. Apparently the chief executive officer of Telecom should have seen this decision coming although the chief executive officer of Telecom—somewhat misguidedly I guess—did not think the Government would be so stupid as to come along and pinch the property rights of the largest company in New Zealand. She was wrong; the Government was as stupid as that. We have to ask ourselves what sort of banana republic we are becoming when our Government can say that because it does not like the result it will pinch a company’s property rights without paying any compensation then decide what the dividend policy should be or regulate it and then have the Prime Minister launch an attack on the company’s chief executive officer for not seeing that coming. 
Another new development is that the Minister and the Government have come along and said that if they do not like what this company does they will cut it in half—split it up—even though they know nothing about telecommunications or how the company operates and the Government has not put a dollar in. Pita Paraone sits there. He has not put in a dollar towards providing telecommunications in New Zealand. But other people have. Why pinch it off them? That is my point. Why would the Government do that? I think there is a bit of a problem with the chairman of the Finance and Expenditure Committee Mr Shane Jones. He has not yet heard a submission on this bill but he has already made up his mind about it. What sort of signal does that send to the people who want to make submissions to the Finance and Expenditure Committee? 
I have two final points to make. One is that in a big regulatory move such as this we would expect to see some analysis. I look across to the Government members and ask them where even the rudimentary cost-benefit analysis of this proposal is. What we see is their assumption that pinching the property rights of Telecom will open up the market and add to GDP growth. 
Hon David Cunliffe 
: www.med.govt.nz. 
RODNEY HIDE 
: The Minister calls out but this is a very very serious piece of regulation. I say to him that if this move is as worthwhile as Pita Parone says it is and is in the public interest then that means it would have to create more than $3 billion worth of value for society would it not? It would have to mean that. In that case if it meets the public interest test in a cost-benefit sense why is the Government in the interests of society as a whole not compensating the losers? 
Let us understand this: those people own that copper wire and they own that exchange. I saw people get very upset—and rightly so—about the Government’s moves to regulate away the ability of iwi to go to court and have their claim for the foreshore and seabed heard because their property rights were being pinched. But what about the mum and dad investors in Telecom? And what about the big investors in Telecom who have had their property rights pinched—not just their opportunity to go to court but their property rights pinched? And if this move does meet the public interest test then the Government on behalf of each and every one of us would be able to afford to pay compensation for those rights because the gains would be large enough. 
Shane Jones 
: Parliament’s sovereign. 
RODNEY HIDE 
: Of course it is. No one is arguing that it is not. I know that the member gets himself into much trouble because he does not understand the rules of this place. I suggest to him that we are not arguing about whether Parliament is sovereign. I am not arguing that Parliament has no ability to do this; I am just arguing about whether it is a good idea. That is why I oppose this bill. 
If Mr Jones thinks it is wrong to pinch people’s property rights—and I know he does think it is wrong—and if he thinks it is wrong to deny people the ability to go to court but then says it is OK if it is in the public interest to do so then those people should be compensated. Of course if the plus is as big as the Government says it will be then the compensation can be afforded. 
Shane Jones 
: When did you give up on the consumers?  
RODNEY HIDE 
: Well I give up on Mr Jones because he is one of those interesting people who knows everything. He actually knows everything. 
I now turn to my friends in the National Party and I say I am a bit disappointed in them because the National Party should actually stand up for private property rights. It should be very cautious about the Government’s moves to come along and somehow regulate for competition—the belief that somehow pushing companies around and taking their property rights will lead to a more competitive environment. [ 
Interruption 
] He is witty Mr Jones is he not? It must be Thursday afternoon for him. I hope that the National Party will come to its senses and will when this bill comes back from the select committee see fit to oppose this intrusion of the State into business. That will be a cost to New Zealand. Thank you very much. 
SHANE ARDERN (National—Taranaki-King Country) 
: 
 National will support the Telecommunications Amendment Bill going to the Finance and Expenditure Committee. I start by saying that this would have to be the biggest bungle ever made by any Government ever—that is the announcement and the handling of the announcement of this bill. That having been said—and the fact that the way it was handled in my view contributed substantially to the amount lost by mum and dad investors “Joe Hard-worker” investors in Telecom as a result of that announcement—let us address a few of the points on which we do agree. 
One is that the whole structure of telecommunications in this country has not lived up to and met the demands of a growing commercial sector. So let us agree on that. That is a fact and we need to do more in that regard. We need to enhance our broadband access and the speed of it and investment therein. Let us also agree that in a modern economy business is highly dependent on these forms of modern telecommunications and if we want to see New Zealand get back into the top half of the OECD as the Prime Minister has said on many occasions then we need to do something about the state of that infrastructure. 
 But the area where we totally disagree and where I have a huge amount of anxiety—I am speaking in the House this afternoon in favour of the introduction of this bill and its referral to the select committee but with anxiety—is the area of property rights which the previous speaker touched on. We cannot send a signal to the international investment community that if an autonomous company—a company that runs its own business—is not run in the way the State likes then the socialists will step in and say how it must be done. We cannot do that; that is the worst thing any Government can do in terms of encouraging investment. 
Let us do away with some of the myths that have been built around this debate. One of the myths is that Telecom is some multinational corporation acting in an uncompetitive way in the telecommunications field and it needs to be dealt with. This may surprise those on the other side of the House who of course have much smaller minds when it comes to business affairs but Telecom is a minnow. Telecom is a very small telecommunications company on world scale. If the large telecommunications companies in the world with all of the modern technology that has been available to them for a long time could not come into New Zealand and make that alternative technology viable on a commercial footing without tapping into yesteryear technology—the old copper wire infrastructure—then how do we imagine this legislation will now encourage them to do that? I ask that question. 
I also raise a major question—and I welcome the Minister for Rural Affairs to the House—with regard to telecommunications for isolated rural areas out there where telecommunication is more important than it is anywhere else. I need to remind the House once again—we keep saying it over and over—that that is the heartland of this country the heartland of the economy. That is the area where the greatest economic gains could come from. I will make a prediction now and I invite members to look up  
Hansard 
 in a few years’ time pull it out again and tell me whether I am right or wrong. I think this move will slow down the investment in that area short term. I also think it will create extra costs in that area in the short to medium term. Long term will it overcome the problem of what has now become a historic agreement which is the old Kiwi share? 
I think we probably should remind ourselves in this debate of how this structure came about. It came about through the sale of this country’s post office and telecommunications structure by the former Minister for State-owned Enterprises the Hon Richard Prebble who was a Labour Minister of course at the time. When that happened the Government put in place a regulation that was known as the Kiwi share. It required Telecom to maintain its copper wire infrastructure at 1989 levels. The incoming Helen Clark Labour Government in about 2000 looked at what had happened with regard to the Kiwi share structure and decided to revamp it. It went through a major consultation process at that time and I believe that in the ensuing 6 years something like 69 different reports were produced. That was typical of this Labour Government—get another report put it on the shelf and do not take any notice of what it says. Then finally by accident the new Minister fumbled around and stumbled out with this announcement. 
I say to the House that I have some major concerns. I hope the members on the Finance and Expenditure Committee will listen with an open mind. I say to them—and to the chair of the select committee—that they should listen with an open mind to all of those who submit and have a look at international experience. I tell them not just to make up their minds that “we know best” and the State will always get it right. They should have a look at what has happened internationally in countries that have similar geographical problems to ours like Australia which is our nearest neighbour and other nations around the world like the US and see what they have done. They should have a look at what has worked and what has not and come back to this House with legislation that may—and I emphasise the word “may”—help to enhance our telecommunications in this country. 
We are I understand 22nd out of 30 countries in the OECD in terms of our access to broadband. Is that not an indictment on this Government which claims to have been a business-friendly proactive Government with regard to getting things done? We are 22nd out of 30 countries in the OECD. I ask another question. Why in 2003 did the Telecommunications Commissioner Douglas Webb come back to the Government with one of the 69 reports and say that introducing regulation to allow access to Telecom’s infrastructure would not work? Why did he do that? On what basis did he make that decision? Can we say with any certainty here today that what is happening or is about to happen will bring about the panacea as it were that this Government claims it might? 
Telecom has announced in the last few days that it is looking at splitting its telecommunications infrastructure—that is the copper wires infrastructure—from the rest of the business. I think that is to be encouraged. I do not know whether that will enhance what is being proposed by the Government but I think it is a good step. 
Shane Jones 
: Not on their own free will. 
SHANE ARDERN 
: I look forward to hearing from the member who is interjecting when he gets to the select committee and some facts are presented to him. I look forward to his taking on some of these major telecommunications providers and telling them straight pan-faced that they are wrong and he knows best. Those people have invested millions of dollars in this area and I think they would have done some pretty robust analysis of what works and what does not work. 
The major concern however having said all of that is that at the end of this process the major digital divide as I and others have taken to calling it between rural and urban New Zealand is able to be closed. It is absolutely essential for this economy that that happens. It is essential not only from an economic point of view but also from an educational point of view. 
Major parts of the economy out there still do not have basic access to broadband and Internet connections. The fact that we are still trying to find ways to push more of that information down a 1989—or even older in some cases—kind of technological structure is absurd. Of course when that technology was put in place we did not yet have Internet access facsimile access or that kind of thing; we were talking about analogue rather than digital information exchange. The fact that there is new technology now to enhance that situation is a great thing but we just need investment in that technology. I say to the Government that it will have to look seriously at what happens with regard to that rural infrastructure and there may well be an argument that can be put forward for some kind of cross-subsidy for doing that in a socially responsible way. 
I look forward to the findings of the select committee. We support this bill going to the select committee. 
A party vote was called for on the question  
That the Telecommunications Amendment Bill be now read a first time. 
Ayes 117 
New Zealand Labour 50; New Zealand National 48; New Zealand First 7; Green Party 6; Maori Party 2; United Future 3; Progressive 1. 
Noes 2 
ACT New Zealand 2. 
Bill read a first time. 
Hon DAMIEN O'CONNOR (Minister of Corrections) 
 on behalf of the  
Minister of Communications 
: I move  
That the Telecommunications Amendment Bill be considered by the Finance and Expenditure Committee 
referred to Finance and Expenditure Committee 
 that the committee report finally to the House on or before 6 November 2006 and that the committee have authority to meet at any time while the House is sitting except during oral questions during any evening on a day on which there has been a sitting of the House and on a Friday in a week in which there has been a sitting of the House despite Standing Orders 192 and 195(1)(b) and (c). 
Motion agreed to.