Faafoi KrisTELECOMMUNICATIONS (NEW REGULATORY FRAMEWORK) AMENDMENT BILLSecond ReadingHon KRIS FAAFOI (Minister of Broadcasting Communications and Digital Media): I move That the Telecommunications (New Regulatory Framework) Amendment Bill be now read a second time.Could I also thank the Economic Development Science and Innovation Committee for their work and consideration of the bill. I'd also like to thank all those who submitted on the bill for their valuable feedback. I also wish to thank officials for their work on progressing the bill to this stage. We are moving to a new fibre world and this bill modernises the Telecommunications Act to reflect that. It will establish a stable and predictable framework for fibre access services here in New Zealand. In light of the fibre roll-out the bill removes copper regulation; it also streamlines regulatory processes to enable a rapid response to any competition problems. In addition the bill gives the Commerce Commission greater oversight over retail service quality and puts in place wider consumer protections. The roll-out for broadband is making good progress. The ultra-fast broadband (UFB) programme is ahead of schedule and the second phase of the Rural Broadband Initiative and Mobile Black Spot Fund is picking up speed. Overall the bill will provide a stable platform to further enhance New Zealand's connectivity and meet the growing demands of consumers and business in New Zealand.I'd now like to discuss the new regulatory arrangements in the bill. The changes made in the bill can be grouped into four main categories. First is the new utility regulation framework and under the new regime UFB providers can expect reasonable rates of return. They'll also be incentivised to make ongoing investments in maintaining and upgrading their networks. However the system will ensure that they cannot make excess profits at the expense of consumers. Under this new regulatory framework Chorus will be subject to a revenue cap. The revenue cap gives Chorus flexibility in how it sets prices for most of its product but it also ensures that Chorus does not earn excessive returns on its fibre assets.In order to protect consumers Chorus will be required to supply price-regulated entry-level voice and broadband anchor services and this will also anchor the prices of other products it offers. Chorus and other local fibre companies (LFCs) will be subject to information disclosure regulation and this means that they will be required to disclose information publicly to enable scrutiny of their performance and profitability. LFCs will face competition from copper cable and fixed wireless networks so they will not be subject to revenue caps. However they can be regulated further if problems arise in line with other Part 4 regulation.The second set of changes relates to the deregulation of copper services. In areas where fibre services are available Chorus will be allowed to remove copper services subject to consumer safeguards being met. Consumers will have a wide range of choices in these areas including the option of moving to fibre networks with better services and similar prices. In areas where fibre is not available the telecommunications service obligation applies which provides for price-capped landline and dial-up services and they will be retained. Chorus will be required to continue supplying copper services at prices capped at 2019 levels with inflation adjustments over time. This will ensure consumers continue to have access to basic telecommunications services at affordable prices even when alternative networks are not available.The third set of changes provide greater consumer protections. The bill improves the Act by boosting consumer protections because it's clear that the telecommunications industry needs to do better in meeting the needs of consumers. The bill augments consumer safeguards and provides for more regulatory oversight of retail quality standards and dispute resolution processes.Finally in this area the process for regulating services is being streamlined. The bill will encourage further competition in telecommunication services through streamlining the process for the Commerce Commission's investigations into regulating telecommunications services. These changes allow for more timely intervention by the commission when issues are identified and further encourage commercial settlements as an alternative to regulation. Changes were made at the Economic Development Science and Innovation Committee. They supported the bill and as I say recommended some changes and I'll discuss five of those main recommendations. First of all the line of business restrictions—the bill as introduced relaxed what are known in the Act as the line of business restrictions. These restrictions limit the kinds of activities that Chorus can be involved in. Submissions to the committee raised concerns about the relaxation of these restrictions but the committee considered the concerns held by the retail service providers and others that lifting the restrictions would distort the market. On the other hand Chorus and the other LFCs supported the relaxation of the restrictions noting that the change would allow them to provide innovative products and stimulate competition. To address this issue the committee has recommended retaining the restrictions while creating a new exemption power for the commission to enable innovative solutions for consumers that would not harm competition.The bill as introduced did not provide specific guidance on how the Government's contribution to the costs of building the ultra-fast broadband network would be treated in the new regulatory framework. The committee considered it would be helpful to clarify how this concessional finance would be dealt with and the committee has recommended that in relation to the asset valuations of UFB providers they should be given the opportunity to recover actual costs to finance they have incurred—in other words the commission should take into account the concessional finance received from the Government and should not assume that commercial finance rates were applied to the whole asset base. In addition the committee recommended that the bill make it clear that regulated providers will not be protected from all risk of recovering their costs.Thirdly the purpose statement for the new fibre regulatory framework in the bill had a focus on outcomes for fibre users. The committee recommended a change to enable the commission and the Minister to consider all end users' interests where relevant not just the interests of fibre users.Fourthly the convergence of broadcasting technologies is blurring the boundaries between providers of broadcasting and telecommunications services. For example it's now common for consumers to stream television through the internet. To address this issue the committee accepted advice and recommended that the definition of a telecommunication" be amended to include broadcasting transmission services also. This proposed change could improve consistency in how the servers are treated in the future particularly given the emergence and growth of fibre as a means of transmission for TV. The commission will be able to monitor or investigate the commercial conditions for digital terrestrial transmission through its existing Telecommunications Act processes if this is needed.And lastly as I noted earlier the new system will require Chorus to provide price-regulated anchor services in order to protect consumers. The bill specifies that the price of the anchor services is based on the prices Chorus charges in 2019. The committee received submissions raising concerns that consumers could face a substantial increase in prices because Chorus could raise prices before the new system kicks in. The committee considered that consumers should not be exposed to price shocks but that there was not sufficient time to address the issue at the committee stage of the bill. So I would like to note that I will be putting forward a Supplementary Order Paper for this bill at the committee of the whole House stage.In conclusion the new regulatory framework put in place by this bill will bring the Telecommunications Act up to date in light of New Zealand's fibre-focused telecommunications environment. The system will encourage further investment by network providers while also protecting consumers. The coalition Government commends this bill to the House and hopes that the National-led Opposition will too."