Mallard Trevor: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — Second Reading 
Mallard Trevor: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — Second Reading 
[Volume:673;Page:19298] 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I start off by broadly agreeing with the opening points that Amy Adams made and at the same time I congratulate her on her promotion to the chair of the Finance and Expenditure Committee. She knows I think she should be in Cabinet because she has more talent than many of the junior members but at least it is recognition and a step in the right direction for her—although it might be some time of course until she gets where she should have been earlier this year. 
The point I agree with her on is that broadband is very important. All of us know that it is important and that the quality of broadband can make an enormous difference to the quality of life for people and to the way our economy works. I also agree with her point—and it is a point made by the Minister in charge of the Telecommunications (TSO Broadband and Other Matters) Amendment Bill Steven Joyce—that this is part of the country’s infrastructure now in a way that sewerage water telephones power and other utilities are. Part of the problem that has occurred with this Minister is that he has been caught up in the excitement of the stuff built on top of this infrastructure—the electronic stuff and the add-ons—and he has therefore lost focus on essentially what is happening here. 
What is happening is that we are having fibre laid. It is effectively a pipe. We are having something through which electronic signals go—I do not pretend to understand how it works—and we are having that fibre laid around the country in places where it would not be laid otherwise. This is being encouraged in two ways. One is by a very attractive subsidy to Telecom in particular from the Government and the other is by a regulatory arrangement that ensures that the company makes hyper-profits as a result of this investment. I say to the Minister that it is my view that Telecom would have done this with either the subsidy or the regulatory preference it has and that he did not need to do both. We have seen a case of his being conned by a company that has clearly superior public relations superior legal and superior technical people compared with the people who were giving him immediate advice. 
I shall focus on the important thing that is happening here. That is the lower level the bottom of this the way it was originally started and that was the laying of the fibre and not the add-ons. That is the difference that is happening here and it is where the focus should be. 
I ask the Government to focus on the returns Telecom is giving. The figures the Minister and the committee got showed an average cost per connection of $2500. Telecom has announced—and the Minister has agreed and has underwritten this figure—a $37.50-a-month charge for basic services. That is an 18 percent per year return. Telecom is getting at least double the risk-free rate of return it should be getting; it is getting 18 percent. I will be interested in the comments from Roger Douglas of ACT about these regulatory arrangements. That figure is for the basic level but Telecom says that the average cost per consumer—and this is the average cost that has been agreed to as part of these arrangements by the Minister—is $50. That equates to a 24 percent—24 percent—risk-free rate of return for Telecom on the $2500 it is putting into every connection. 
I do not want to sound too much like Roger Douglas but I have some sympathy for his views on excessive regulation in this area and I ask the Government what business it is of the Crown to guarantee to Telecom a foreign-owned company a 24 percent rate of return at least until 2020 on its investment. It is wrong and it is excessive and for a Minister to stand behind that company and guarantee that is inappropriate. 
The other question I want to ask is why the Minister last July—and I want to make a water analogy because I understand that better—moved from having the pipe as the key part where the separation would occur to having the pipe and the taps. What we have now is effectively Telecom with the power to turn the tap up or down with the pipe so that individuals can get better quality and they can get a lot more broadband. It costs Telecom nothing extra at all. But if one is prepared to pay $100 or $200 or $400 a month instead of $37.50 one can get what the Government has paid for. I ask people why Telecom should face no additional costs whatsoever. We have an unconstricted broadband arrangement. We were meant to get unconstricted access for everybody but Steven Joyce has given Telecom the right to turn the tap right down for a lot of consumers unless they agree to pay an excessive amount of money to Telecom. That will last until 2020. 
I will be kind to Steven Joyce and say he does not understand what he is doing. I think that is the kindest thing. Otherwise he would understand that he is giving Telecom on average a 24 percent rate of return but more important saying to every school around the country—and it is all very well Anne Tolley effectively paying for pipes to go into schools; that is what is occurring—and saying to the decile 1 schools in my electorate that they do not pay $37.50 a month they pay $400 a month in order to get unconstricted access which is available. It costs Telecom not a cent more to turn on the tap. Why is that fair? How can that be fair? The Government has already paid for this fibre the subsidy has occurred and we are allowing Telecom to extract what is in my view economic rent in a way that is totally inappropriate. 
There has been a lot of discussion about the involvement of the Commerce Commission. There is debate and it will be ongoing about whether the present arrangement is better than the arrangement that was there before. My view frankly is that they are both dogs. But the idea is that the Government will underwrite if Telecom is found to be acting uncompetitively as it has on dozens of occasions in the past; the Government will pay its bills. The Government will pay the bills for anti-competitive behaviour if the Commerce Commission finds it to be that. 
What sort of democracy do we live in? This is the sort of arrangement I would expect from Mugabe or people in the old Soviet Union or countries like that. But what it does show—and I just want to go back—is either we have a Minister who does not understand what he has done or we have someone who is in the pocket of an international company. What he has done is turned on a money tap a 24 percent return guaranteed to Telecom. It stinks. It stinks and it is wrong.