Cunliffe David: Telecommunications Amendment Bill — Second Reading In Committee Third Reading 
Cunliffe David: Telecommunications Amendment Bill — Second Reading In Committee Third Reading 
[Volume:636;Page:7149] 
Hon DAVID CUNLIFFE (Minister of Communications) 
: 
 I move  
That the Telecommunications Amendment Bill be now read a third time 
. Today is a landmark day for telecommunications in New Zealand. It is a day on which we see the most significant change in the legislative and regulatory framework since Telecom New Zealand was privatised nearly two decades ago. As such it is appropriate at the third reading of the bill that we reflect on where telecommunications policy has come from what role this bill plays and where it is heading henceforth. 
This bill is a central part of the Government’s package of measures to assist the New Zealand telecommunications sector to catch up with leading OECD countries and to keep up once it is there. Combined with the Government’s broader information and communications technology and economic transformation programmes this bill will promote and enhance competition in telecommunications markets for the long-term benefit of New Zealanders. It will facilitate innovation and investment in telecommunications infrastructure and services and it will contribute to New Zealand’s transformation to a dynamic knowledge-based economy and society underpinned by fairness opportunity and security. 
It will also pick up the theme introduced by the Green Party of course. Advanced telecommunications will make a contribution to environmental sustainability as well by creating new opportunities to telework and teleconference and reduce the burden of travel on our environment. So it is all good. 
Information and communications technologies are recognised internationally as fundamental enablers of economic social cultural and sustainable development. If New Zealand is to succeed on the world stage we simply cannot afford to fall behind in adopting advanced information and communications technology. New Zealanders are hungry for the advances and benefits that information and communications technologies can bring and as a country we have shown on many occasions our capacity to adopt adapt and benefit from technological innovation. The Government recognises the importance to New Zealanders of information and communications technology. New Zealanders have made very very clear in many opinion polls their support for the reforms being carried through the House today. 
The Government’s policy framework was laid out in the Digital Strategy released in April 2005. The Digital Strategy emphasised the importance of progressing in parallel the three key enablers of information and communications technology—connection confidence and content. Eighteen months on we can see that that strategy has been a success. Broadband Challenge the Community Partnership Fund and a range of other initiatives have been launched under the strategy but today we tackle those key connection issues that if not resolved become the bottleneck on the achievement of the broader strategy. 
So it was that in November 2005 I launched the stocktake review of telecommunications which reported on 3 May to the public. It is probably appropriate at this point to note that in the second reading debate a point was made by a member that the release of that review was under less than desirable circumstances. I agree with that point. Nobody was more shocked or annoyed than I was that a messenger in another department would see fit to breach his employment obligations and transmit a Cabinet paper to a member of the market. That having happened the Government’s obligations were extremely clear. Upon receiving legal advice we knew we had to make the same information available to the whole market—which we did—after the New Zealand market was closed. That was as has been proven the appropriate step to take. As other members have said any reactions in the market place would have been for a wide range of reasons including the consideration of previous investments by the incumbent and factors such as the economic rents embedded in the market up to that time. 
The public and the sector on the basis of submissions have very broadly supported the telecommunications stocktake the main findings of which were as follows. Historically New Zealand was and has been up until now in the bottom third of OECD countries across a range of telecommunications services and pricing and about 3 years behind the pack. A factor in our poor broadband performance was the lack of effective competition and we needed to fix that if we were to get the broadband we needed at prices the public could afford to facilitate consumers’ demands and our economic growth. I note that Doug Woolerton in his second reading speech noted the need to set right what had been wrong in the past including issues of unfair competition in the sector and that has been recognised by a range of people. 
The Green Party contributed to the debate by pointing out that here was one of those excellent opportunities to do good for the environment good for our people and good for the economy all at the same time. We appreciate that party’s support and we appreciate the Maori Party’s support for this bill. That party knows that the bill is good for its people and for other New Zealanders. Its members raised some important issues about mobile and a process is already under way to address those issues. I think we need to respect the proper institutions that are conducting that process but my door is open to them. 
Both New Zealand First and United Future raised the issue of the important balance that is required between sustaining investment in this sector and creating fair competition for high-speed broadband. This bill is extremely carefully crafted in that regard. It follows the OECD and European Union mainstream approach called the ladder of investment that gives a reasonable discount for the entry-level services around the unbundled bitstream through something called retail minus pricing. The bill going beyond that to local loop unbundling then gives much deeper discounts through cost-plus or total service long run incremental cost lyric pricing which means there is a strong incentive for entrants to really enter the market put in some of their own gear and invest in their own networks thereby building stronger and stronger competition as their customer bases get a foothold. That is what has worked internationally and that is what will work in New Zealand. The early evidence since 3 May is that there have been an increased number of investment inquiries in the sector increased coverage of new players and new technology in the media and very strong support for the direction the Government has shown. 
In the second reading debate the ACT party the only lonely party to oppose this bill raised the old saw of property rights. I think this is an opportunity to debunk that approach once and for all. I commend the Finance and Expenditure Committee which considered that issue. All parties considered the issue very carefully and in some detail but ACT said at the end of a long passage in the committee report that it disagreed. Why was that? Well firstly I think the ACT party has been a bit disingenuous in saying that this is about old ladies’ pension plans. The fact is that there is a very broad shareholding for the incumbent—but that is not the issue as most of it resides overseas. The key issue is that regulatory risk is built into the share price of any incumbent telecommunications company anywhere in the world. A telecommunications company has to manage that regulatory risk by not playing too hard in the market to the exclusion of others. That is what Mr Woolerton was referring to when he talked about this bill marking a point of atonement for the past and creating a fair pathway to the future. 
Secondly shareholdings change hands many times. The shareholding of that company has changed hands many times since it was privatised and as those transactions occur the risks need to be assessed by willing buyers and willing sellers—and they have been. Clearly at the time of privatisation the Government’s right to regulate the sector was underlined and that has not changed. So we have discussed and I think dealt with those issues. We have dealt with investment issues going forward. 
So what happens now? When this bill is implemented the next stage as set out in the report from the select committee will be a process of negotiating undertakings where Telecom in consultation with officials will draft undertakings that will be worked through with the Government through the Minister. We will end up with an enforceable binding robust three-way operational separation that will require non-discrimination in wholesale markets and fair access to bottleneck and wholesale services. It will also underpin the other pro-competitive disciplines in this bill. 
This has been a long and eventful road. The day is a very important day for New Zealand. It is not just about local loop unbundling and it is not just about any separation issues; these are elements of a thoroughgoing raft of reforms that are part of a broader coherent digital strategy that will bring the benefits of information and communications technologies to all New Zealanders at the prices New Zealanders can afford. 
In closing I pick up on one important set of issues that remains to be further progressed and that is of importance to many parties here. It concerns rural telecommunications services. This is not the end of the road for the rural sector; it is the starting point for a new wave of analysis and investment in rural services. We have a rural strategy under way now we are reviewing the telecommunications services obligations and this Government pledges to ensure that rural New Zealanders will also benefit from the reforms going forward. I commend the Telecommunications Amendment Bill to the House.