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Telecommunications Industry Reform Conference

Hon. Paul Swain
12 June 2001 Speech Notes

9:10 am - Telecommunications Industry Reform Conference, 2001 Air NZ Suite, Wellington Town Hall

Thank your for the invitation to speak to you today.

I was asked here to talk about the expectations and challenges for the industry and how we are encouraging accessibility and competition in the provision of IT and T services.

This is a wide-ranging area so I would like to focus on just a few key points today.

Firstly let me provide a backdrop for the telecommunications issues you have asked me to address.

Modernising the economy

The greatest challenge facing New Zealand right now is the modernisation of our economy.

By this I mean changing change from a country that is overly dependent on commodities to one where information and knowledge both add and generate value for traditional and new products and services.

This does not mean turning our backs on our traditional sectors. The primary production sector accounts for about 67% of export earnings. The sector's R&D, technological developments and expertise make us one of the best and most efficient food producers in the world.

Fencepost.co.nz, RD1 and Woolnet are great examples of how new economy tools are being applied to this traditional industry.

We've got to be world class and in the end world leaders of the new economy and we're on a path to achieving this.

We do have some advantages. We are a predominantly English speaking nation with a stable government and good working environment. We are in the right time zone, have good infrastructure by and large and our education and skills are well regarded, however we must do more.

The most important thing we did was to reject the old, last century thinking that governments have no role in economic development. They do. This government has rolled its sleeves up, and is working in partnership with business and communities to provide opportunities for all New Zealanders.

The government has started getting the infrastructural support in place for this modernisation programme. We have, among other things:
- Established Industry New Zealand.
- Established support for regional economic development.
- Introduced venture capital funding for start-ups.
- Developed an incubator programme
- Designed a major overhaul of the tertiary education system
- And we are refocussing our immigration policy to target business and skills areas including IT.

We are using a whole of government approach. The e-government programme is helping to break down the old 'silos' in the public sector. We are making sure that government agencies are focussed on common goals.

Of course the government is only one player in this. Industry itself has to up its performance as well.

We need to work in partnership to not only provide greater opportunities for New Zealanders, but to encourage greater investment, growth and ultimately better life-styles for New Zealanders.

Critical to the modernisation of the economy is the telecommunications infrastructure. It is as important as the provision of roads and rail in previous centuries, which is why I have devoted so much time to getting it right.

Most of you will be familiar with last year's Ministerial Inquiry into Telecommunications and the government's response to that – the Telecommunications Bill.

One of the key intents behind the Telecommunications Bill is to provide an ordered dispute resolution process to reduce the bickering and litigation which has driven the telecommunications industry here for more than ten years.

I would like to refresh your memories of the types of litigious disputes I'm talking about.

This has been a bone of contention particularly between CLEAR and Telecom in the first half of the 1990s. CLEAR invoked the Commerce Act and the case took about five years to resolve and ended up being considered at Privy Council level. As a result interconnection is being designated under the Telecommunications Bill in part to avoid such lengthy disputes in relation to this critical service.

This was a dispute between Telecom and others, particularly CLEAR, over Telecom's decision a couple of years ago to impose conditions on its customers who wished to call ISPs. It was alleged that Telecom was behaving anticompetitively. The terms of the interconnection designation are designed to address issues related to this problem.

Number portability
This contentious issue has centred around the industry reaching agreement on the best number portability system to adopt. The Numbering Administration Deed was entered into in 1998 to create a process by which the industry could resolve these issues. Certain issues to be resolved under the deed are still being debated. Designation of this service is intended to encourage a quick resolution to this issue.

Overall our objective is to encourage greater competition and more investment in this industry, and a better deal for consumers.

The Telecommunications Bill is about a framework for dispute resolution, it uses the principle of as much market as possible and as much government as necessary.

It outlines the steps that are taken when a dispute occurs and puts the emphasis on the industry players resolving the dispute, but provides for a telecommunications commissioner to make a determination when no other solution can be found.

The key elements of the Telecommunications Bill are:
- The establishment of a new Telecommunications Commissioner operating from within the Commerce Commission, funded by the industry.
- Regulation of key services including interconnection with Telecom's fixed telephone network, wholesaling of Telecom's fixed network services, fixed to mobile and number portability.
- An updated Kiwi Share, including bringing basic Internet access to virtually all New Zealanders by upgrading Telecom's network to provide 9.6kbps data capability to 99% and 14.4kbps to 95% of residential lines.

Our upgraded Kiwi Share compares favourably with other universal service obligations. In the USA, Canada and the UK the USO is simply to provide a basic telecommunications service.

In our closest comparable neighbour, Australia, the obligation is to provide a basic telecommunications service, with 2.6kbps data service. There is also an obligation to provide 64kbps on demand but the user has to pay all costs.

In addition to the changes outlined above, the industry has established an industry forum, to develop industry codes and standards. This is a positive move which requires no government involvement. It is a reflection of the growing maturity of the industry that the forum's work is underway without fuss or fanfare.

My hope for the future is that the regulatory regime will be used as little as possible. I have no desire to regulate this industry – I believe the industry has the expertise to resolve its own disputes. Government regulation on a dispute will always be the second best option.

You may have heard me say before that telecommunications infrastructure is the platform for the knowledge economy – a vital aspect of that is accessibility of integrated high speed internet services.

If we're to participate fully in the knowledge economy we have to ensure that everyone in this country has high speed internet access or broadband.

If the telecommunications regulatory regime was my priority last year, this year it is broadband. This has been reinforced by my trip to England, Ireland and the US.

All countries are trying to resolve this issue particularly in rural and provincial areas and we have a window of opportunity.

There is now a sense of urgency with this work. You may be aware that the Prime Minister has asked me to chair a group of ministers who are involved in what we consider to be our digital initiatives.

This group includes Jim Anderton – regional economic development, Steve Maharey – tertiary education, Trevor Mallard – e-government and education and Pete Hodgson – industry assistance and research, science and technology.

The issue here is to get a coordinated approach across government's initiatives. The key thing we have identified is broadband and I am in the process of preparing a paper to take to Cabinet by mid-year.

Currently there are a number of initiatives in this space going on around the country. These include projects in Northland, Waikato, New Plymouth, Wairarapa, Hutt City, Timaru and Otago-Southland. These are just a few.

The key question is how government can help to get better telecommunications services in rural and provincial New Zealand.

We need to be able to market New Zealand as a place where you can work, play or learn with the same high-speed internet access as you would in any of the major cities. We will be setting bold targets for all New Zealanders to have high-speed internet access.

Government, industries and the community will need to work together in a number of key areas, including:
- Promoting the business case for regional broadband.
- Identifying the local commitment to delivery.
- Facilitating, where necessary, the bundling of local demand in consultation with local government.
- And using in a smart and intelligent way the instruments the government has at its disposal including BCL and spectrum.

On spectrum I was heartened to read in the New Zealand Herald recently a report reinforcing our belief that New Zealand looks well placed to be one of the first countries to use new 3G technology.

While other countries ran get-rich-quick lolly scramble by hocking off their spectrum at astronomical prices, New Zealand's relatively cheap frequencies look like they may be the first to be used.

That is great news for consumers here and for New Zealand as a whole if it is to compete effectively in the global marketplace.

If I can leave you with one thought it is that if we are to achieve our vision of New Zealand being a leader in the knowledge economy race, government, business and wider community leadership need to work together for our national interest. We are determined to play our part, I hope you will play yours.


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