Parker David: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee 
Parker David: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee 
[Volume:673;Page:19616] 
Hon DAVID PARKER (Labour) 
: 
 I would like to focus my comments on the commencement date and the interrelationship between the clauses in the Telecommunications (TSO Broadband and Other Matters) Amendment Bill that were to have limited the ability of the Commerce Commission to intervene in the event of uncompetitive practices by participants in the telecommunications industry and the clauses that are said to be in the contracts under which the Crown indemnifies Telecom in respect of all losses it may have in the future if it is found to have been acting anti-competitively and loses some of its revenue that it was otherwise expecting to get. How could this be relevant? It is possible that in the future part of Telecom could act in a way that abuses its dominant position. There is no doubt that once Telecom builds this fibre network it will be the dominant supplier of wholesale fibre in the country. If Telecom abuses that and charges some of its competitors too much or some of its consumers too much then consumers lose from both the loss of vitality of competition from other telecommunication providers and facing higher prices than need be the case.  
We have already heard David Cunliffe comment that one of the effects of the Government’s policy in this area is to force up the price for people who do not have broadband. The consequence of the arrangements that the Government has seen fit to enter into with Telecom is that those who get their internet connections through the copper network will be forced to pay a higher price than they would pay if nothing had been done. One of the reasons for that is to have a lesser price difference between internet services on copper networks and internet services on broadband fibre networks or fibre-based broadband networks in an effort to improve for Telecom the likely take-up of fibre-based broadband. The cost differential will not be as great as the price of copper has been pushed up falsely. The effect of this bill is just that. People who have existing services will be paying more for them. There will also be a cross-subsidy from urban areas to rural areas.  
This is part of a pattern that we see from this Government. The latest Budget provided a subsidy of $35 million I think to the rural sector for new irrigation schemes. At the very time when the Government will not support jobs in the KiwiRail workshops to build wagons it is subsidising the agricultural sector to that tune. We also have this cross-subsidy in respect of the telecommunications industry whereby copper wire - based internet connections will be charged a falsely high amount in order to make the gap between the price for that service and the price for fibre-based broadband smaller. One can understand why the Labour Party is critical of these decisions. Indeed we are also critical of the fact that there was an over-promise really before the election as National said it would have the fast roll-out of broadband. Here we are 2½ years into the National Government’s term and it is only just passing the legislative framework. The final contracts have not even been signed. The fibre that has to be physically put in place to deliver broadband has not even started to be laid pursuant to the Government’s policy arrangements.  
I am intrigued by how the provisions relating to Commerce Commission supervision of this industry have metamorphosed over the period of this legislation’s stages. The bill when introduced into the House provided that there would be relief from Commerce Commission supervision of this industry and this was achieved by Part 2 inserting some changes into the Commerce Act. This effectively ousted the jurisdiction of the Commerce Commission to take action even if it found that there was anti-competitive practice on the part of a dominant participant in the industry. That ran into problems. There was severe criticism of that move at the Finance and Expenditure Committee by other industry participants who thought that that was inappropriate. They foresaw the risk that Telecom if it was the successful contracting party with the Government would do in the future what Telecom has done in the past which is to use its position of dominance to the detriment of both consumers and other industry competitors. They danced and jumped up and down and said that this is wrong. They convinced every political party in this House other than National that they were right and National was wrong.  
As a consequence National faced the reality that it would not be able to pass the legislation in this House in its then form. There were doubts from the ACT Party from the Maori Party from the Greens and from Labour—all of which said that we should learn from our history. Overly permissive regulatory regimes are taken advantage of by dominant telecommunications company players to the detriment of consumers. If we are creating a dominant player with monopoly powers we ought to make sure that they are overseen with proper regulatory powers on the part of the regulator in this case the Commerce Commission. In the face of the reality that the Government probably could not have passed the legislation in that form the Minister brought forward very late in the process through a Supplementary Order Paper to this Committee changes that backed away from some of those changes to the Commerce Commission’s powers. Again we do not have the benefit of what the competitors in the industry might think of that because they have had no opportunity to submit on what is now proposed. 
In return for the Government moving away from removing those powers from the Commerce Commission we are told that instead it has conferred an indemnity under the form of the contract that it proposes to enter into with Telecom. The indemnity promises Telecom that if it loses revenue because of a future Commerce Commission action then the Government will make good that diminution in revenue even though the abuse of its dominant position in the market would have been the basis for that revenue being taken off Telecom in the first place. The Minister in the chair the Minister for Communications and Information Technology is shaking his head and saying that that is not the case but of course the trouble we have with that is that we have not seen the nature of these indemnity clauses. We are told in the media that that is the effect of these indemnity clauses—that the Government will be indemnifying Telecom against all losses occasioned by Commerce Commission risk. That is how I would paraphrase it. If we have that wrong well how are we to know? At this stage when we are passing this legislation how are we to know? There is a lack of transparency in relation to what exactly is proposed.  
Labour will be voting against the commencement and title clauses of this— 
Paul Quinn 
: David that’s sad. 
Hon DAVID PARKER 
: It is sad is it not? It is sad because we think there should be regulatory certainty that goes beyond one Parliament. We do not think it is desirable that there is regulatory uncertainty. It is true that that creates uncertainty for market participants not just for Telecom which is the market participant in this context that the Government keeps focussing on but also for the other telecommunications providers. We need them to be secure in their future business models in order to compete and to cost-effectively provide services to New Zealand consumers so that we have real competition in this market rather than being even more reliant on the dominant provider Telecom.  
We have a number of problems with the process that has been adopted to get here in terms of the legislation the delays we have had in the practical implementation of broadband policy and the bad policy we have as an outcome of those matters.