Curran Clare: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee 
Curran Clare: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee 
[Volume:673;Page:19581] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 I thank the Minister in the chair the Minister for Communications and Information Technology for taking a call on the Telecommunications (TSO Broadband and Other Matters) Bill. I am very pleased that he got to his feet and talked to us about some of the issues that have been raised and in particular about the importance of equivalence of input as a concept. It is a pity that that concept is not reflected in the bill we have before us tonight in a real open access regime.  
I will address the amendment that the Labour Party has put up to amend new section 156AD(3) inserted by clause 24 by inserting a new paragraph. That amendment basically addresses the issue of the indemnity of Telecom in the contract. Essentially it prevents and puts restrictions in the way of the Crown indemnifying Telecom and placing the risk on itself. I will give some very good reasons for this amendment which some of my colleagues have touched on today. They go to the heart of this bill and they are to do with true competition and with putting the long-term benefits of end-users at the heart of the legislation.  
This bill is the biggest telecommunications change that has happened in this country for a long time and perhaps ever. It involves as my colleague Stuart Nash said the split-up of the State monopoly. It is yet to be determined how that split will occur. The said company Telecom is very silent at the moment. It cannot speak because of the separation that is under way.  
I will address that issue briefly in respect of the amendment that I will put forward today which relates to the Crown taking the risk. When we look at how that split takes place we do not yet know how a three-box model will turn into a two-box model and which bits will end up in the new Chorus2. There are also questions about what the impact on the Crown will be if the pricing situation does not work and if the Commerce Commission decides that the pricing is not right and that it needs to intervene. If the Minister of the day is forced into a situation of agreeing with that decision the Crown then takes the risk. The Minister has freely said in this Chamber and at the Finance and Expenditure Committee that no analysis has been done of what that risk might be. There has been no ability for the public to scrutinise it.  
I will read to the Committee some figures from Telecom’s annual report for the year ended 30 June 2010. It talks about Chorus’ earnings before interest tax depreciation and amortisation which was $754 million. That is Chorus; that is the infrastructure level. Then there is wholesale and international which is $226 million and Telecom’s retail arm which is $396 million. If a good swag of the wholesale and international end up going into— 
The CHAIRPERSON (Lindsay Tisch) 
: The points the member is making are out of scope. The member must come back to Part 2. 
CLARE CURRAN 
: This matter goes to Part 2 and the amendment that Labour is putting up around the indemnity to the Crown and just what that indemnity will involve. If we end up with a separated Telecom that is almost at least two-thirds of Telecom which is what it looks like it will be then that separated company does not have sufficient scrutiny by the independent regulator. First how will that separation occur and second how will the open access regime operate in that environment? That is why when we look at clause 24 and the amendment that Labour is putting up we see that the risk to the Crown is even greater.  
Why is there indemnity to Telecom in this area? Telecom is a company that has a track record of price gouging and anti-competitive behaviour. I have gone to the trouble of finding out and listing some of those breaches that I think are relevant and important to this debate. The public of New Zealand need to know that the Crown will give indemnity to the new monopoly that is being created in case of future price issues for which there might need to be regulation. Any costs of those price changes will be borne by the Crown in some form or another. That form is yet to be determined because there has been no public scrutiny of that provision. It was introduced at a very late stage after this bill was brought back to the House.  
That is why I think this Committee needs to know what it is up for what this new monopoly will look like and just how much of a free ride that monopoly will get under this legislation. The Committee needs to know why investor certainty is being put up as the most important thing to consider before the interests of consumers or taxpayers when we are talking about the Ultra-fast Broadband Initiative and the bill that is before the Committee.  
Let us remember that $1.5 billion is tied up in this scheme overall and it is taxpayers’ money. It is taxpayers’ money and the taxpayers of New Zealand need to feel that it is accountable. We know that it is being looked at. It is being looked at quite hard from outside. There are serious concerns around the impact of the anti-competitiveness of the arrangement. In just the last week we have seen more admissions of errors with Telecom and with how people are being charged. I put on the record that it is not unusual in the telecommunications sector anywhere in the world for there to be errors blunders and breaches for those breaches to be taken into a civil court and for fines to be made. But I look at the history in this country of the monopoly incumbent: it has breached the system and it has been found guilty. The sheer number of them—and I will mention just a couple of them because there have been some very significant cases in recent years. I have a list of cases where it has been fined for failure to disclose costs— 
The CHAIRPERSON (Lindsay Tisch) 
: Order! 
CLARE CURRAN 
: This goes to the heart of the amendment that Labour is putting up around the need for the indemnity of Telecom to be rescinded and for there to be a requirement that the Crown not indemnify Telecom in this legislation. Investor certainty is not the only consideration. Consumer confidence fairness and competition are other values that need to be taken into consideration. I see the Minister is shaking his head and I would be very happy if he wants to leap to his feet and share with the Committee why Telecom needs to be indemnified and how he came to the decision that that was going to happen.  
As I understand it a clause—and he might like to enlighten me and the Committee on this—has also been inserted into the Rural Broadband Initiative that indemnifies Telecom and Vodafone against their non-ability in case they are not able to perform the requirements. They will not incur costs. Explanation of that clause would be useful as well because the indemnity of the companies involved in the broadband environment is not the paramount issue. Somehow it has ended up that that is the case.  
I will mention a couple of these breaches. They go to the heart of why we need to put up this amendment to clause 24. It ensures that the Crown alone does not bear the costs of the ability of Telecom to change its pricing structure if the Commerce Commission decides to intervene in the future between now and the end of 2019. In 2003 Telecom pleaded guilty to fair trading breaches.