Mallard Trevor: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee Speaker Recalled In Committee 
Mallard Trevor: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee Speaker Recalled In Committee 
[Volume:673;Page:19465] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I am somewhat surprised to get to my feet relatively quickly. While the Minister in the chair the Minister for Communications and Technology was playing games on his phone which has been generally ruled out of order by Chairmen he was asked a relatively serious question that could make quite a lot of difference as to how this legislation goes. It goes to the effect of the changes to the Kiwi share obligation which is in his Supplementary Order Paper 247. I reinforce the comments that have been made by my colleague Clare Curran. I think a number of members have today been approached by telecommunications companies that are uncertain as to the effect that those changes have. I think it is very important to get clarity around these issues. If they are minor effects then that is fine. If they mean that the rights that the Crown retained on the sale of Telecom—effectively the Kiwi share rights—are being lost completely then that should be made clear. If they are being lost for a particular part of what is currently Telecom on separation we should know that. 
With no disrespect the Minister is a relatively new parliamentarian and I think the tradition is that when a serious question is asked by an Opposition spokesperson in the Committee stage a response is given in order to let the Committee have an informed debate. Clearly there are some issues that are political and there are certainly some very political issues sitting as part of this bill but there are some matters of fact. Getting that matter of fact sorted I think would be in the interests of the Minister and the Committee. It could have been sorted relatively quickly with a response from the Minister. 
I know that the Minister has been somewhat disparaging of my description of broadband fibre and the electronic things at the end of fibre. I note a smile from the Hon Maurice Williamson who we know knows a lot more about this issue than the vast majority of members in the House through his vast experience both before he became a parliamentarian and since. I have yet to hear a cogent explanation as to the reasons why the Minister made the changes that he did in July last year. I have gone back and looked at the press statement he gave and I think it is fair to say that no one could tell from reading that press statement the effect of those changes. It has been only as we have looked at subsequent documentation that it has become clear. What effectively happened was that there was a change at the point of separation between what I described as the pipe the cable the fibre which was originally to be the area that was to be separated and the wholesale level that if one likes would have been above the point of separation previously and is now below that point. 
Why is this important? In my view it is absolutely vital because what is happening here is that control is being given to Telecom or Chorus—whatever it is to be called—around the strength of the flow through the pipe. It is simpler for people like me who do not understand this electronic stuff and the way that the internet and fibre work to use a plumbing analogy. We have a pipe through which a flow occurs. The pipe could be built so that the flow could be unconstricted. People could maximise out at very high levels. But what has been given to Telecom or Chorus—whatever the organisation at the base level is to be called—is an ability to turn taps on the pipe to restrict the flow. What effectively is happening is that the telecommunications company the group that controls the fibre can control the flow and can decide how much individual users can download and can price differentially on that basis. 
One might say that maybe that is fair enough but this is a State-subsidised pipe and this is State-subsidised fibre. There is no additional cost whatsoever to the telecommunications company for people to use extra flow. So people can download a lot more and it does not cost the telecommunications company a jot. At the basic level we have been told—and I thank the Minister or his officials for giving us the information about the average cost of the connection being $2500—that the pricing structure proposed for Telecom is $37.50 per month as the minimum charge. At $37.50 for something that is a minimal service because they have turned the tap down the new company will have a return of 18 percent per annum risk free—a risk-free return of 18 percent per annum because the charge is $37.50 a month on a $2500 total average investment. Those are the figures that officials have given us. If they are wrong someone should tell us but those are the figures that have been supplied. We are told that the average fee is expected to be at the $50 level—$50 per month. If it is to be at a $50 per month level on average then the actual cost—the average risk-free return on capital—will be 24 percent. I just ask what Minister in his or her right mind subsidises a telecommunications company that will already get a 24 percent risk-free rate of return for its $2500 average per household investment. 
The Minister might smile but I tell members that he is not smiling as much as Telecom is smiling. He is not smiling as much as Telecom is smiling at this sweetheart arrangement. The feedback I have had from those involved in the industry including some not very far from Telecom at all is about the sorts of regulatory arrangements that he has made in this legislation in particular in the Supplementary Order Paper to the legislation. I note that the normal practice of putting substantive Supplementary Order Papers to the select committee did not occur notwithstanding the fact that the decisions were made before the select committee was due to report. 
I am told that Telecom would have done this for nothing. It did not need a subsidy. It did not need the $1.5 billion subsidy because it was going to get a massive return for something that is risk free and guaranteed. Even in the days of Muldoon—and I say the member is growing a resemblance in his behaviour to that former Prime Minister— 
Hon Steven Joyce 
: Heh heh! 
Hon TREVOR MALLARD 
: The Minister might say “Heh heh!” but he is behaving like Muldoon in that he is regulating and at the same time subsidising a monopoly. I am very rarely in the Roger Douglas camp in these matters but I say to the Minister that he has to choose his methods. It is wrong in principle and it is wrong in practice to subsidise a monopoly. It is even more wrong to protect it against the Commerce Commission which is what he has done. He has said “You lose we’ll pay.”