Curran Clare: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — Second Reading 
Curran Clare: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — Second Reading 
[Volume:673;Page:19295] 
CLARE CURRAN (Labour—Dunedin South) 
: 
 Let me say from the outset that Labour opposes the Telecommunications (TSO Broadband and Other Matters) Amendment Bill and we will vote against it. Labour is committed to faster broadband. We are committed to delivering a digital transformation for this country. We are not committed to supporting a charade and the formation of a new fibre monopoly that encourages anti-competitive price-gouging behaviours and that will not be good for consumers. 
This bill takes us backwards and creates a new monopoly for broadband that is free of proper regulatory control and will increase the cost of broadband for New Zealanders. The bill that came out of the Finance and Expenditure Committee was an extraordinary thing to behold. It included as its centrepiece a 10-year regulatory holiday for the winning bidder which we all knew would be Telecom. This is Steven Joyce’s baby. It was the price he was prepared to let the country pay for the new fibre network by handing the price-setting powers to a secret contractual arrangement between Crown Fibre Holdings and the contractor with no ability for the regulator to intervene. Thankfully he has ditched it but he did so at the last minute after his bill came back to the House and it was done under force. Consequently the compromise position allows the Commerce Commission to regulate pricing on fibre but if the commission believes that prices should go lower at some point Steven Joyce says the Government should wear that risk not the consumer and he gets to make the decision on whether to regulate. Why would the Minister ever agree to regulate if it will cost the Crown? What is the nature of the compensation being promised to the contractor rolling out broadband? It effectively insulates the contractor from any risk. Steven Joyce has confirmed that no analysis has been done of the risk to the Crown. 
Labour has indicated publicly—and I repeat it—that it may repeal other sections of this legislation that it believes will have an anti-competitive effect on the telecommunications industry to the detriment of consumers. John Key’s personal guarantee was to deliver ultra-fast broadband fibre to 75 percent of New Zealand homes by the end of this decade for $1.5 billion. People thought that sounded good. It was No. 2 in John Key’s top 10 pledges before the 2008 election. Instead they will get Telecom taking its time to deliver the vast bulk of the Ultra-fast Broadband Initiative to New Zealanders. Telecom has a long and infamous track record of price-gouging and monopolistic behaviour. It is not even committed to New Zealand’s need for a fibre scheme. It is committed to its existing copper asset and believes that New Zealanders can receive adequate broadband services over it for at least the next decade and possibly longer. It has a string of court convictions for ripping off the public for charging too much and for not providing accurate information on the services it is offering. This Government swore it was not in collusion with Telecom but took us all through an elaborate charade to get to the point where it awarded Telecom the bulk of the contract. 
Labour believes that this bill is deeply flawed and allows anti-competitive behaviour. Even though the last-minute amendment allows some influence by the independent regulator this legislation will disadvantage New Zealand consumers. From the start this bill has been severely hampered by the rushed and secretive drafting process and a complete disregard for potential compromises. The Government used the commercial tendering process as an excuse to avoid proper consultation. 
The bill does a number of things. The most significant thing it does is set out a process for Telecom to separate into two companies so it can qualify for the majority taxpayer-funded stake in rolling out ultra-fast broadband. That contract as we know is now being let to Telecom which we all knew it would be. Many submitters expressed concern about the bill’s potential to entrench anti-competitive behaviour by blocking the influence of the independent regulator. Concerns were expressed that it would result in the price of broadband fibre to New Zealanders rising rather than falling and Labour shares those concerns. 
It is important to put on the record that much of our opposition to this bill lies in the way it came before the House and before the select committee the secrecy and lack of transparency surrounding that tender process for ultra-fast broadband the method in which the Supplementary Order Paper to this bill was put before the select committee and the speed with which it was rushed through—as well as the substance. 
In addition to this I will talk about the perceived conflicts of interest on two fronts within the tender process. The first relates to revelations that Murray Milner who is a director of Crown Fibre Holdings acted as a consultant for Chinese telecommunications firm Huawei while simultaneously serving as a director for Crown Fibre Holdings. That represents a potential conflict of interest in that Crown Fibre Holdings is managing the tendering process to provide coordination assistance and commercial technical advice to the ultra-fast broadband selected partners in electing the equipment suppliers for passive infrastructure and layer 2 equipment for the Ultra-fast Broadband Initiative. That is the same contract that Huawei is vying for to provide equipment for the roll-out of ultra-fast broadband. 
The second conflict of interest relates to Bruce Parkes who is currently the deputy secretary at the Ministry of Economic Development for the energy and communications branch. He was a senior Telecom executive who was involved in what was later found to be anti-competitive practice by a High Court judge Rodney Hansen in his judgment that penalised Telecom for historical breaches to the Commerce Act. Bruce Parkes’ responsibilities as a deputy secretary are for the information and communications technology policy and the ultra-fast broadband plan which means that he is heavily involved in the development of and advice on the broadband policy. 
This comes down to the fact that before the election this Government made a promise to the New Zealand public that it could not keep. It promised that 75 percent of homes businesses schools and hospitals would be connected by fibre within 10 years for $1.5 billion. But the promise was too big and the Government could not deliver. Steven Joyce has spent the last 2½ years working out how to come up with an elaborate way of appearing to deliver a service that many New Zealanders will just not get—certainly not within 10 years and not at the speeds being promised. 
In September 2009 the Government released its final proposal for the Ultra-fast Broadband Initiative. At that stage the Government investment would have been directed to an open-access wholesale only passive fibre network infrastructure and let us remember why the Government wanted it. The Government was looking for a step change in broadband services to deliver economic benefits to New Zealand. However in July 2010 the policy was changed; no longer was the focus on providing passive infrastructure that anyone could use. Instead the local fibre companies—the LFCs as they are called—would not have to share that passive infrastructure and they would be protected from the regulator until 2020. This meant they would have the power through to 2020 to restrict access to the network and impose value pricing so that consumers would get only what they were willing to pay for. This would result in much of their fibre capacity not being used even though the cost of letting consumers have that capacity would have been close to zero. It would allow the local fibre companies to make more money potentially reducing the capital cost to the Government of the roll-out. But the price being paid instead is that this country will miss out on the full potential of that step change which is at odds with the rationale for the intervention in the first place. 
Telecom seems to have won the majority of the contracts because of a perception that selecting the lines companies would not guarantee fibre coverage or uptake due to competition from Telecom even though that competition would arguably produce better results for consumers including better speeds across the board. So we have ended up with legislation before this House that will allow and even promote anti-competitive behaviour which will promote monopolistic behaviour that will likely result in higher costs to consumers for the new broadband network. What this is all about is a good deal for New Zealanders and a step change for the economy. We will get neither through this legislation.