Cunliffe David: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee 
Cunliffe David: Telecommunications (TSO Broadband and Other Matters) Amendment Bill — In Committee 
[Volume:673;Page:19614] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is traditional in the debate at the Committee stage on the title and commencement clauses to use the debate on the title to draw together some of the themes of the discussion. The Opposition is with a certain sense of sadness I guess witnessing the Telecommunications (TSO Broadband and Other Matters) Amendment Bill moving its way through the Committee. Maybe one could call it the “What a Difference a Day Makes Bill” if that day were the day of the last election. There is a contrast between the regulatory framework that was pro-competitive which led to an upswing in investment and a better deal for consumers under the previous Government and this slide back to the bad old days of Maurice Williamson’s wet bus ticket where the legislation favoured the dominant incumbent. Here sadly we are creating a new monopoly structure on fibre to replace the existing monopoly or dominant structure—or the pre-reform dominant structure—on copper.  
There are a number of reasons why that is true. The first is the so-called regulatory forbearance period—the regulatory holiday—that the Government proposed which took the cop off the beat. The Commerce Commission is the industry cop that stops people from abusing market power but that regulatory holiday would have tied the industry cop’s hands for a decade. That was obviously a nonsense. As my colleague Trevor Mallard said it is a matter of great regret that only late in the piece did the Maori Party apparently wake up and have a discussion with the Government about that period which apparently led to some change although not good change. Part of the regulatory holiday is still there on point-to-multipoint services which in Labour’s view is inappropriate and which the Minister for Communications and Information Technology has never explained.  
More important the rest of the regulatory forbearance period has been exchanged for a taxpayer-funded guarantee to an incumbent. If it is caught out in future years with excessive margins because the cost of providing the service has fallen but the price has not that incumbent will not pay if it is penalised by the Commerce Commission; the taxpayer will pay. That is extraordinary. An extraordinary insult is being added to injury; the original injury was to the regulatory coherence of this industry. That is why everybody in the industry except for the incumbent telecommunications company was united in saying that the Government’s legislation was utter and absolute rubbish. The Finance and Expenditure Committee heard submission after submission and although the submitters raised a range of issues they were unanimous—other than Telecom—that this bill should not proceed. But here we are. What a difference a day makes. The Government is simply using its numbers to put through what in its heart of hearts it must know—the Minister must know—is simply misguided legislation.  
The second key issue why this is a very very bad bill concerns the lack of rigour in the open access regime. That is less important we agree in terms of retail because we assume that the structural separation of Telecom will proceed but it is crucially important in wholesale and network access. It is crucially important in that critical dark fibre access where other wholesalers now have no guarantee that they will be able to access the same product at the same price and in the same way that Chorus will provide to its own. We are replacing a problem of vertically integrated dominance on copper with a new problem on fibre. That will mean that everybody who is in the gallery watching will pay too much for their broadband in years to come—for at least a decade to come—under this bill. 
Hon Trevor Mallard 
: Or for their copper. 
Hon DAVID CUNLIFFE 
: That is right. Mr Mallard raises an important point—it is the next one on my list—which is the mandatory averaging on copper pricing. The broadband costs in fibre are so high that the only way the Government could make it worthwhile for the industry to play was to raise the price on everybody’s existing phone bill for no change in service. The brief to us said that it would be $5 a month extra for the average house in a city. But the price will now be averaged as a matter of Government policy between city consumers and rural consumers. Once again it looks as if the farming sector is getting a sweet deal out of this Government while urban consumers are being penalised.  
I tell people that their phone bills are being put up by this Government to make it look like a better deal—or a no-worse deal—for them to swap to fibre which is too expensive. Why is it too expensive? Because the Government subsidy was inadequate. There was not enough money but the Government wanted a commercial rate of return on the deal. The telecommunications company said it could not pay so the Government sold the law to the tune of what the officials have advised was between $400 million and $600 million of disguised subsidies. It made the rules slacker and allowed the telecommunications companies to rip off the consumer. That is an outrage; it sets the course of the industry back a decade.  
It was painful to get the progress that was made but the progress was real—the progress was real. Here is the proof of the pudding: New Zealand climbed up the broadband rankings in the “noughties” but it has fallen back since 2008 from being about 5th or 6th on those criteria to being about 12th or 13th. We have tumbled down the international rankings because the Government and this Minister went around parading the $1.5 billion broadband plan but—like everything else under this dishwater-shallow National administration—there never was a plan.  
There never was a plan. There was a marketing slogan designed by Crosby/Textor or some foreign spin doctor to get National elected but there never was a plan. I can think of no other reason why it took an intelligent man like Steven Joyce 2½ years of nothing to come up with a policy. But 2½ years later he has come up with an absolutely rotten retrograde policy that will set the industry back a decade. It will cost everybody in the gallery and everybody out in New Zealand 5 bucks a month more on their existing phone bills and will consign them to higher prices on broadband—ultra-slow broadband—for 10 years to come. This is not UFB—ultra-fast broadband. It is USB—ultra-slow broadband. It took Steven Joyce nearly 3 years to think up a set of dumb rules that cost the public too much money: mandatory averaging an open access regime that does not work and a stupid regulatory holiday that even in the end the Maori Party could not support. 
Here is the next bit: an asset split. This Government is supposed to be running the show. How do members like this? Telecom gets to decide how it structurally separates and it tells the Minister only after the fact. After the board has signed off to its own internal commercial satisfaction the Minister has zero prerogative to override the substance and zero requirement to consult the industry and Telecom—how do members like this—has zero requirement to put all the details in the public domain. A summary of the asset split is OK. Who would know? If I were running that company now and under an obligation to my shareholders to maximise profit I could certainly hide a few lurks and perks in the detail that neither the Minister nor the public would ever know about until it was too late. Has the Government been asleep for the last 20 years? Does it not know the games that are played in this industry? Why is it playing back into the hands of dominant incumbents and creating a new problem of monopoly on wholesale fibre just as existed with copper?  
There is much more to say but I will not go through it all now. This bill is so bad that it probably breaches New Zealand’s World Trade Organization undertakings because it is a disguised subsidy to a local incumbent. How bad is that? It also probably—or possibly we should say; there is conflicting advice on this—conveys some favourable tax treatment on certain members of the industry. We are not quite sure about that but it certainly was not case proven in the select committee.  
To sum up very briefly this is the “What a Difference a Day Makes Bill”. We used to have fast broadband but now we get ultra-slow broadband. People are paying too much for their phones. They will be consigned to slower more expensive fibre than they would have had if this bill was not passed.