27 August, 2002
Hon Paul Swain
Speech Notes

Going for Growth – The Government’s Role in Providing Telecommunications in the New Economy

This government has set itself the goal of lifting New Zealand back into the top half of the OECD and a vibrant and competitive telecommunications industry has a vital role to play in getting us there

Telecommunications is the nervous system of the knowledge economy and a critical enabler across the whole economy.

For New Zealand businesses to be truly competitive on an international stage, world-class competitively-priced telecommunications services are key.

Unlike previous government’s last term’s Labour-led government decided that the hands-off approach was not working and that the local industry had become bogged down in costly disputes, which were impacting on investment decisions and preventing the consumer from getting a better deal.

Progress to date under the Telecommunications Act

The government took the view that a regulatory regime was needed. However we were also aware that too much regulation would stunt the industry, send the wrong investment signals and harm the consumer in the long run. This ‘as much market as possible as much government as necessary approach’, ultimately resulted in last year’s Telecommunications Act.

One of the Act’s key planks is to provide an ordered dispute resolution process to reduce the drawn out litigation that has mired the New Zealand telecommunications industry over the last decade.

The Act also brings New Zealand into line with most other OECD countries. Prior to the Act we were in the unique position of being one of the first countries to deregulate its telecommunications sector but one of the last to introduce a sector-specific regulatory regime.

Central to the new regime is the Telecommunications Commissioner. There was much debate about whether the commissioner should head a stand alone agency or be located within the Commerce Commission. We decided on the latter which I’m confident was the right choice.

After a long search we appointed Douglas Webb as the Telecommunications Commissioner to oversee the process and act as a final arbiter in disputes when required.

Douglas Webb is a New Zealander who has returned from overseas to take on this challenging role. He joins us from his previous position as managing counsel and deputy to the vice president in the legal department at the World Bank.

He has advised and made decisions on telecommunications reform, including the design of regulatory systems, in a number of countries. We are very fortunate to have someone of his calibre serving as our Telecommunications Commissioner.

Given that the Act has been in place since late last year and that Douglas Webb has now well and truly got his feet under the table, I know that many people are starting to ask ‘well how is it working out in practice?’

While it is clearly preferable for the industry players to negotiate commercial agreements between themselves where no agreement can be reached the commissioner is there to expedite the resolution process.

Already we have seen two disputes, over interconnection and wholesaling, referred to the commissioner. This is where the rubber will meet the road.

The commissioner has held hearings on these and other issues, such as the costing of what used to be called the Kiwi Share, but is now known as a Telecommunications Service Obligation or TSO.

The feedback I have is that the hearings have seen a wide range of information and views brought before the commissioner and that there has been an openness to the process that has been welcomed.

But I know that everyone is waiting with great interest on the initial decisions from the commissioner. These will obviously have a great bearing on how happy parties are with the new regime.

I am very happy with the progress made in bedding down the regime to date and I am confident that we will see positive outcomes in both areas.

Local Loop Unbundling

One of the big issues on the horizon will be whether to introduce local loop unbundling.

No issue was more hotly contested during the passage of the Telecommunications Act.

There are divergent views on whether local loop unbundling would be to the ultimate benefit of New Zealand consumers.

To regulate for local loop unbundling unquestionably affects the incentives investors face in deciding whether and where to invest.

To decide to regulate or not to regulate is to make a judgement that net benefits – that is what investment takes place and the returns on it to society – are better under one scenario than the other.

The Government took the view that it would be appropriate for the new Telecommunications Commissioner to look at this issue and make recommendations to me as Minister of Communications about whether local loop unbundling should be regulated or not.

Under the Act the commissioner must report to me by the end of 2003, with his review to begin no earlier than 19 December 2002.

I remain strongly convinced that it was a very sound decision to hand this issue to the commissioner and to delay the start of the review until the end of this year.

It has given the commissioner time to begin dealing with the backlog of outstanding issues in the industry, which is no small task.

Delaying the local loop unbundling debate also means it will be conducted in the more constructive environment between the players, which has been fostered by the Act.

I look forward to the commissioner’s report next year.

Carrier Forum

The establishment of a Carrier Forum is a significant step forward for the New Zealand telecommunications industry.

The forum is an independent self-regulatory body that will develop standards and draft industry codes for regulated services. It presents a great opportunity for the industry to build on the co-operative endeavours that occurred in the administration of telephone numbering.

Yesterday six telcos – Citylink, Ihug, Telecom, TelstraClear, Vodafone and WorldxChange – announced they had formed a Telecommunications Carriers’ Forum in accordance with the Telecommunications Act.

The six carriers along with other parties and TUANZ have been working together to agree a structure and rules for the forum and I congratulate them on their success.

I would also like to touch on a couple of issues that, strictly speaking, are outside the scope of the summit but are important to achieving New Zealand’s growth target.

Broadband Project

In my view the most exciting initiative to come out of this year’s budget was the broadband project, which will see most New Zealanders have access to broadband internet by the end of 2003 and all have access by the end of 2004.

The roll-out of broadband can be likened to the roll-out of roads and rail in previous centuries and the Government has identified a role as a facilitator in the roll-out.

Steady progress is being made on the broadband project, now known as PROBE. Regional task forces have been set up for the 14 regions and Probe project
directors and Ministry of Economic Development officials have been attending taskforce meetings. The Requests For Information were issued on 25 July. Approximately 110 suppliers requested them including all major telcos, international telcos and satellite companies, regional groups and some power companies.

The deadline for responses has been extended to 9 September as a number of
companies were finding it difficult to meet the tight time frames. The major telcos are putting in a lot of work preparing their responses to the RFIs and the two week extension has been granted so additional engineering work can be done in some of the more remote parts of New Zealand.

ICT Taskforce

Another initiative that I’m really excited about is the Information and Communication Technologies Task Force. Announced in May, the task force
was formed to identify ways in which the ICT sector can boost its already substantial contribution to the economy. It is one of three taskforces – the others are in biotech and the creative industries – in the Government’s Growth and Innovation framework.

We’ve managed to attract a group of high-calibre entrepreneurs running successful ICT companies to the task force. Sol Net executive director Murray McNae and myself are co-chairs. Other members include: David Bibby, general manager of science policy at Industrial Research Ltd; John Blackham, ceo of software company Xsol; Catherine Calarco, marketing director at Hartford Consulting; Dennis Chapman, managing director of Chapman Management Services; Jim Donovan, managing director of Isambard Ltd; Steve Harris, Wellington regional manager of the Engineers Printers and Manufacturers Union; Peter Maire, founder and president of Navman NZ; Ian McCrae, founder and ceo of Orion Systems; Jenny Morel, founder and director of Morel & Co and No. 8 Ventures and Ian Taylor, founder and managing director of Taylormade Media.

We’ve already held a very positive weekend workshop followed by another meeting just before the election. An initial draft report has been produced, the detail of which is currently being discussed with key government officials.

We’re hoping to publish the report in September and then consult more widely with people in the sector.

I am certain that the report will show how the ICT sector can contribute to the government’s goal of achieving growth levels that will move us into the top half of the OECD.

In conclusion the government is proud of the achievements of last term. We tackled issues that were in the too hard basket for over a decade and the industry has responded positively.

When I announced the new regime I described it as world leading. I am sure that history will prove that to be the case.

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