Donnelly Brian: Telecommunications Amendment Bill — First Reading 
Donnelly Brian: Telecommunications Amendment Bill — First Reading 
[Volume:632;Page:4078] 
Hon BRIAN DONNELLY (NZ First) 
: 
 New Zealand First and particularly the Rt Hon Winston Peters has long called for mechanisms to lower the costs of telecommunications in this country including broadband communications and a wide range of things. We believe that this legislation is a step in that direction and will have that effect although we do not believe that it is the total package; there are other things that need to be done. 
To understand the reason for this legislation we really need to go back to the 1980s and to the attempted redesign of our whole society around market mechanisms—a process known as Rogernomics. This legislation is a demonstration of some of the flaws in the design of that system. One of the chief architects was Roderick Deane who not only has his fingerprints all over Rogernomics but also is closely associated with this legislation in other ways. As a result of the economic transformation that took place during that time our public telecommunications monopoly company was converted into a private telecommunications monopoly company. The market can operate favourably only when there is genuine competition and ready access by new players. Unfortunately with the monopolistic system that was created what we had in New Zealand certainly did not allow genuine competition and therefore the market mechanism did not operate as it should. Telecom of course had ownership of the physical infrastructure which had been initially funded by public money. 
The public has observed since that time the highly predictable behaviour of this monopoly. If one thinks about it why would a cartage company with a fleet of trucks for example allow a new competitor without any trucks to use its trucks to cart product and undercut its cartage costs? It is not logical behaviour for any commercial entity. Telecom’s behaviour was highly predictable given its monopolistic situation. Of course its main purpose since its inception has been to retain that monopoly. Rather than focusing on improving customer service and reducing prices Telecom’s energies have been diverted to fiercely fought fracas to maintain its privileged position. We have seen the battles over telephone services over many years. 
What was never conceived at the time of the conversion of Telecom to private ownership was that the copper wires that connect homes to the national landline network would become of value for computer usage. No one had conceived of ADSL technology which cuts up information into discrete bits that can then be sent at speed along the copper wires. As a result of this new technology the physical infrastructure owned by Telecom suddenly became extremely valuable both to Telecom and to competitors wanting to get into the market. There was no way that a market mechanism would ever have caused Telecom to relinquish its monopoly—it just would not have taken place in an unregulated situation. As one commentator has stated Telecom had become a law company with a telecommunications unit attached. 
The result was that New Zealanders faced the most expensive and slowest computer services in the developed world. When there is a monopoly the market cannot be depended upon to deliver good services or low cost. Regulation in those circumstances is necessary. I think the Hon Georgina te Heuheu made a very telling point when she said that questions have to be asked of the regulator as to why he made the decision in 2003 not to regulate given the situation that existed. Anyone who did not see that unbundling the local loop would have to be imposed by regulation on Telecom had to have his or her head in the clouds; it was staring that person right in the face. Therefore the loss of Telecom value on the sharemarket actually reflects its overvaluation based upon its monopoly rather than any leakage of documents that may have occurred pre-Budget. Readjustment was going to happen; it took place a little bit more prematurely than it would have otherwise done but it certainly was going to happen when the inevitable unbundling was announced. 
However while such unbundling was inevitable and we support this particular move there could be a downside—and the Hon Georgina te Heuheu made mention of it—unless the whole issue is dealt with very very carefully and that is that investment in rural infrastructure could dry up. Newer entrants into the broadband market will inevitably cherry-pick more densely populated regions. Telecom itself will have its profit margins cut and will be less capable of the infrastructural investment into rural areas that it possibly had planned. New Zealand First has already signalled its concerns around this issue and we will be holding the Government to account for creating a workable rural package. That is not just to ensure that the important economy of the rural sector is maintained at an optimum but also to ensure that our rural education services are able to be delivered in an equitable fashion—and we go back to that famous statement by Peter Fraser about equality of opportunity. We believe that this is an important element and we will be keeping a close eye on the development of the rural packages over the next 12 months to ensure that that becomes a reality. 
We note the introduction of the accounting separation requirements for Telecom in order to increase the transparency of its wholesale and retail operations and we note it particularly with regard to the announcement this week that Telecom will be voluntarily splitting its operations into two autonomous businesses—even though they will come under the umbrella of one entity. Once again I think Georgina te Heuheu quite rightly expressed a degree of cynicism because one might ask why that provision is needed in this legislation when an announcement has already been made that it will happen. Georgina te Heuheu said “We’ll see.” I think it is appropriate that it is in this legislation but it is good to see that Telecom is already moving in that direction in anticipation that the legislation will go through. We think Telecom is starting to demonstrate some positive behaviour—possibly behaviour that will enable it to operate successfully in what essentially will be a new regime. We think that will be good for all New Zealanders and for the nation as a whole. 
The bill introduces a range of other measures to strengthen regulatory potency which is necessary—enhanced enforcement mechanisms and an information disclosure regime for example. So it is not just the unbundling that is brought to bear by this legislation; we believe that it regulates and tightens up things in a range of different fields and we believe that the result will be—somewhat belatedly we have to say—some meaningful gains in terms of increased services and reduced costs for users of telecommunications and broadband. Therefore New Zealand First will be supporting the bill going to a select committee. We will certainly be examining very carefully the submissions to make sure that the details are right because in such legislation the devil is in the detail but we do believe that it is on the right track and therefore is worthy of our support. 
Of course there is a difference between 2003 and 2006 in that New Zealand First was not a confidence and supply partner of the Government at that particular time. It could be considered that New Zealand First provided the little bit of steel in the backbone of the Minister of Communications that was needed for him to make the necessary changes that are proposed in this legislation. With that I think I had better wind this up!