Cunliffe David: Telecommunications (Development Levy) Amendment Bill — First Reading Second Reading In Committee Third ReadingText is incorporated into the Bound VolumeCunliffe David: Telecommunications (Development Levy) Amendment Bill — First Reading Second Reading In Committee Third Reading[Sitting date: 21 May 2015. Volume:705;Page:3735. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn): I have to say that I was enjoying the contribution of my colleague David Clark and I will pick up where he left off. Members opposite seem to be disputing the question of whether this is in fact a tax. In this Committee stage it is proper for us to address that question in the debate on clause 1 of the Telecommunications (Development Levy) Amendment Bill because that contains the title. The fact that this is a tax is I think quite plain. It is a cost that is imposed on members of the public through this instrument that applies through the companies concerned. We had a statement out today from Spark—the old Telecom New Zealand—which uses the language of a tax and which makes it clear that it is going to have to pass the cost on to its customers. What is more it is looking at doing so with an explicit splitting out in everybody’s phone bills so that they can see what this extra tax is. This is an extra tax and it will be shown on people’s phone bills. That is a statement from Spark. I think that colleagues and members of the public know that in the past I have had cause to take issue with some of the statements from the old Telecom New Zealand so I do not give it a soft run but I will take it at its word on this.If that was not good enough for people let us turn to the statement published today Friday 22 May on the Telecommunications Carriers Forum. This is the industry body. It is not one company pushing its own barrow; this is the forum of all the players. It talks about this being unnecessary to pass under urgency “in order to tax the industry”—this is quoting from it. This is the industry body. The industry body is calling it a tax: “The bill extends a tax which to date has not been explicitly recovered from consumers. However the industry cannot continue to absorb ongoing costs of this magnitude.”Members opposite have said “Look we don’t need a select committee process because there is nothing new in this.” Well what is new? I think Mr Moutter the chief executive officer of Spark makes the point very clearly: the original tax was a one-off to support the development of ultra-fast broadband through the Rural Broadband Initiative. It was time limited and the downsizing of those taxes was legislated for in the formal bill. So to change the law is in fact a change because under the continuous disclosure rules of the stock market the companies’ concerns have to build that into their forecasts and that has to be notified to the exchange and made public. If Parliament wants to override—people will see the irony of my having to set this out for members opposite—those private property rights that are enshrined in the securities legislation then we are using legislation to do it; therefore something is definitely changing. We are overriding legal rights.What then is the proper framework of objectives to consider the questions? I want to commend our Green colleagues for the list that they have come up with. I am going to refer to it again. Let me just set out for the public what Labour’s goals are here when we look at this type of policy issue. The first one reminds me of the old digital strategy with the “three Cs”. We want great connectivity for all New Zealanders. To be frank we want faster cheaper broadband wherever you are in New Zealand. We support the goal—I think every member of this House does—that broadband ought to be ubiquitous and available anywhere in New Zealand. The whole country benefits from the fact that everybody is on the network. You can ring peopleup; their phone numbers are in the phone book or they are on the net or what have you. Nobody is left out and the whole country benefits. That is the first goal: faster cheaper ubiquitous connection. But it leaves open the question: is this the right instrument? Is this helping? How would you know? There has been no evaluation done.The second one is user capability. We are opposed to digital divides. We abhor the digital divide which is an income-related divide where about a third of households—low-income households—do not have fast broadband access. And that impedes children’s learning and all sorts of things such as access to Government services. We want every New Zealander to have access to the net at speeds that they can use. We are also concerned about the rural-urban divide. We know that there has to be a technology mix starting off with fibre in the backhaul out to perhaps ADSL copper VDSL or whatever else is the current flavour of technology and then out to mobile and then out to satellite. Or perhaps Project Loon will bear fruit and we will have a mesh network of balloons—who knows. The technology frontier will shift. That is the point. Because the technology frontier is shifting because technology is changing it is prudent and proper and really important for the Government of the day to carry out a proper analysis of how the tax has been operating before imposing a new tax over the top of it. That brings us of course to the third “C”: content. We want a vibrant content environment. We want there to be competitive conditions online so that New Zealanders can access the content that they need and want on the cheapest possible terms.Those are the goals. What questions arise? I am just going to come back to Mr Shaw’s list. I think it is a really good one. Will these taxes be passed on to consumers? Well we have the industry body and one of the largest players saying that they will. That is at the very least a very important and open question. Secondly what about the quality of connections? There are two issues. There is a technical sufficiency argument and there is a benefit-flow argument—who gets what? They need to be answered. The third issue: has there been sufficient evaluation and reporting? Well there clearly has not been because there is not a proper regulatory impact statement and there has not been an options analysis done by officials. Fourthly what do we know about disruptive technologies? I mentioned Project Loon; there could be others. The point is: who would know? The Government has not done the work. Fifthly will companies have two bites at the cherry? Are they under existing obligations? I do not know we do not know and the public does not know but that is a very important question because we are opposed to companies double-dipping. If they are contractually bound because they have concessional terms under a previous spectrum licence auction then we should not be making New Zealanders pay twice by imposing a new tax on them especially not under urgency in the dead of night.Was the process proper? Well clearly it was not. There has not been an options analysis done and there has not been a regulatory impact statement done. Why should seeking funding from policy have been designed in this way? Was the cart before the horse? It looks like it was. To answer that question we turn to the OECD’s telecommunications policy unit and a very major report on telecommunications development obligations or levies which was published in 2012 and which was widely regarded at the time as “the gospel”. The report sets out the following points which it is a shame that the Government has not apparently addressed. First “define the specific features of the service under consideration”. Second “determine whether broadband is essential for full participation in society” and therefore in the public interests. Third “establish that market mechanisms are insufficient to ensure that service is available”. Fourth “assess the options of imposing a universal service obligation relative to other policy alternatives” Note: that has not happened in this case. Fifth “evaluate those alternatives in light of the broader policy objectives and other ongoing programmes.” That has not happened either. What are the criteria that an evaluation should take care of? Page 24 of the OECD study lists parsimony sufficiency neutrality focus adaptability predictability accountability and effectiveness. It is quite a long list. The OECD has done a lot of work.Well what are they saying? Turn to page 27. “At present revising universal service policies to include service from any location may not be feasible in all OECD countries.” It goes on to say that those with high population density like Korea will have no problem. Those with low population density like Sweden Australia or New Zealand may well have a problem and the issue of a universal service obligation is a very pertinent issue to be evaluated and raised. There is certainly in terms of the OECD’s work no case for an automatic roll-over. This is highly contentious stuff. What issues arise? Well what they name is cost relative to benefits. “In large countries with large unpopulated or sparsely populated areas”—like the South Island of New Zealand—“…the cost of providing access from any location would exceed the benefits.” How much is too much? How far away is too far away? We are never going to run a fat fibre pipe to Mount Cook. There are not enough people there. But we may want to use mobile broadband satellite or “Loon”—who knows. The point is the work has not been done and the public does not get access to that information.The OECD asks what the range of services to be provided is. What is the impact on competition of imposing a TDO? What is the impact on the quality of service? What about the affordability of the service if the tax is passed on to the consumer? What about technical issues like emergency services and social tariffs and so on and so forth?