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Swain Speech 4th annual telco ICT Summit

Paul Swain Speech 4th annual Telecommunications and ICT Summit

Good morning. This Summit is a useful occasion to take stock of all we have achieved, and to share with you the focus for this term of Government.

Key Government Objective

It is the Government's goal to return New Zealand's per capita income to the top half of the OECD over time.

The role of Government to achieve this can on one level be relatively minimal, such as setting the rules for market conditions under the Commerce Act, and at other levels can be quite involved, such as in building roads or running public health and education systems.

The role of the ICT in propelling New Zealand up the OECD ladder is equally broad.

New Zealand is already in the top half of the OECD in terms of ICT infrastructure and uptake of the technology by business. But ICT can play a significant role in stimulating the rest of the economy towards achieving that wider goal.

Over recent years there has been a significant convergence between Information Technology and Communications to the point now where we talk about the ICT sector rather than the IT sector. As both IT and Communications Minister for the last three years I have witnessed this process first hand.

The Labour Party's manifesto in 1999 spelled out the focus for this Government in its first term. In the ICT sector the key pieces of work were telecommunications reform to improve competition in the sector; and a focus on e-commerce and e-government.

This work has largely been completed. The focus for this term of Government is improving access to the new telecommunications infrastructure, promoting the ICT industry as one of the growth sectors of the economy, and ensuring that business can take advantage of the new technologies.

I would like to talk about what has already been achieved in the areas of telecommunications reform, e-commerce and broadband, and our focus for this term.

The Telecommunications Act

I wanted the regime created by this landmark piece of legislation to result in as much market as possible and as much Government as necessary.

A key purpose of the Telecommunications Act is to promote competition in telecommunications markets for the long-term benefit of end-users in New Zealand, and to provide for efficient and fair dispute resolution.

One of its key pillars is the Telecommunications Commissioner within the Commerce Commission.

His role is to: - Resolve disputes over access to regulated services in the event of failure of commercial negotiation; Recommend regulation of new services or changes to the scope of existing regulation, if the need arises; and Provide a process for implementing, costing and enforcing Telecommunications Service Obligations (TSOs).

Recent determinations include his first in November last year, on the price for interconnection with Telecom's fixed public-switched telephone network - when he more than halved the cost of interconnection to 1.13 cents per minute.

More recently, it's been on supply of wholesale services. The Commission set a wholesale discount of 16% and determined that 98 services in specified markets are to be made available by Telecom for resale to TelstraClear customers on that basis.

The parties involved in the interconnection and the wholesaling determinations have now sought pricing review determinations from the Commission.

The Government recognised early in the development of the Telecommunications Act that price would often be the sticky point in such access disputes, and as such, provided a pricing review process in the Act.

The key point is that under the Act the original determination continues to apply pending completion of the review - this ensures that time can be taken to soundly review the access price, allowing for business to be conducted in the meantime.

E-Commerce

The Government's vision is for New Zealand to be world class in embracing e-commerce for competitive advantage.

The strategy involves three key roles for the Government - a model user, building capability, and ensuring an enabling regulated environment.

The e-govt strategy has been released, which says that the internet will be the dominant way that people will access Government information and services.

Already a Secure Electronic Environment has been created, a number of Departments are providing electronic services, including the Companies Office and IRD, the NZ Government Portal was launched last year and the Business Portal will be launched shortly.

The E-Commerce Action Team (ECAT) has been responsible for building capability among small business. As part of their brief they conducted regional e-commerce roadshows. ECAT has recently released its final report.

ECAT is a successful example of government and business working together to improve conditions for the economy as a whole, and it can take much of the credit for lifting the profile and understanding of e-commerce.

The regulatory environment includes the Telecommunications Act I have already covered, as well as the Electronic Transactions Act, and the anti-hacking legislation due later this year.

Project PROBE

This has a goal of providing all New Zealand Schools and communities with access to broadband by the end of 2004, and tens of millions of dollars have been set aside.

A secondary objective of PROBE is to increase levels of competition in the telecommunications sector outside of the main metropolitan areas.

Government announcements on successful tenders will be made shortly.

PROBE has already had a considerable impact on competition within the telecommunications market, and there is a high level of interest from suppliers, many of whom are new to this sector.

Very high-speed Internet networks, known as Next Generation Internet or Internet 2, are developed around the world, to provide a connection so fast that it provides sufficient speed for almost any applications.

The provision of very high speed Internet in New Zealand is being investigated by the Next Generation Internet Consortium, made up mainly of research institutions and universities. The Government is very supportive of this project and provided funding for a feasibility study.

Recently the able Associate Minister for IT and Communications, David Cunliffe, was appointed in this sector. I have asked him to, amongst other things, concentrate on the next-generation internet issue.

There are four broad work streams we are focussing on this term.

The ICT Taskforce

The ICT industry accounts for 4.3% of our GDP - if we want to get back into the top half of the OECD, then it needs to be more like 10% of GDP.

The Taskforce has set the goal of New Zealand producing 100 additional ICT companies each doing over $100 million in sales per year by 2012. Currently we have 16 ICT companies doing more than $100 million in annual sales so this is an ambitious target.

The ICT sector sits alongside biotechnology and the creative industries as one of three key areas where the Government is focussing resources and attention.

I convened the ICT Taskforce in May last year and after six months work it produced its draft report, with challenging goals and concrete recommendations.

The ICT Taskforce's primary concern was growing the industry through exports. I agree with this but I am also very interested in how ICT can improve the productivity of the whole economy.

The Taskforce has since undertaken further discussions with the industry and will release its final report soon.

A paper with the Government's response will go to Cabinet in late July, with a possible public announcement in early August.

Outstanding issues

There are several outstanding issues for the Telecommunications Commissioner and his team this year.

Kiwi Share Costing - this determination is due shortly.

It will determine the overall loss incurred by Telecom in meeting its obligations under the TSO and how much the other companies connected to the network should pay.

What the Act has done, however, is for the first time bring the process for calculating the cost of the TSO out into the open, allowing telcos to have a say in the final figure.

The issue of number portability has been around for some while, and the length of time it has taken to make progress has been very frustrating. We have a form of portability at the moment, but if we want to make progress to a more advanced portability system, it raises contentious questions as to who should pay. I am aware some carriers have taken this issue to the Commissioner for determination.

Local loop unbundling is the second significant issue before the Commission this year.

This review is whether local loop unbundling and data network unbundling should be regulated under the Telecommunications Act.

The Government recognised during the development of the Act that regulation of local loop unbundling is a complex issue with major implications for the industry; the report back date is 20 December.

Telecommunications Relay Service

The Government is also continuing with its process for establishing a Telecommunications Relay Service as a TSO to facilitate wider participation by Deaf, Hearing and Speech impaired.

It has taken some time to develop a detailed service description for the relay service, including getting input from the user community and telcos.

I expect that we will shortly be in a position to seek wider public consultation on the service description.

Small Business issues

Improving conditions for business across the economy involves a whole of Government approach, not just in ICT policies.

We are offering better assistance and information to foreign investors; promoting a fair regulatory environment; a more structured and targeted tertiary education system; a more effective programme of industry and regional development; and a more pro-active immigration system to recruit those with hard to find skills.

The Budget this year unveiled plans for a Small Business Advisory Group; we are on the verge of announcing the membership.

It will deal with key issues like assistance measures, compliance costs, access to Government, and wider questions about e-commerce and e-business.

Infrastructure Development

The OECD goal mentioned earlier arose as part of the government's Growth and Innovation Framework - which seeks to add value to the country's traditional strengths

Infrastructure forms a key component of that Framework, or rather the lack of investment in infrastructure that characterised the 1990s and a large part of the 80s.

A key infrastructure initiative for the Government this year is an Infrastructure Stocktake, which will provide an independent assessment of the quality of sectors like telecommunications, energy, water, and transport for the first time.

As the Minister of Transport and Communications I am deeply involved in this work.

However the extent of business use of ICT infrastructure places New Zealand well into the top half of the OECD. But there are more opportunities, many in the public sector.

Activities in the economy that are information rich, like health, education, and indeed agriculture, can benefit from having information used, moved, accessed or processed more efficiently and in new ways.

Conclusion

Much has been achieved.

There is no fundamental problem with supply of ICT to New Zealand businesses. The issue is turning this top performance to our competitive advantage. This will require a more sophisticated policy approach than we have employed so far, an approach that takes account of the unique structure of the New Zealand economy, builds on our traditional areas of strength and leverages the different economics of information.

The Government's response to the ICT Taskforce will look more widely into maximising the benefits of ICT, and will be the beginning of a new and ongoing engagement with the ICT industry.

Closer analysis is needed of the areas of greatest potential for improving productivity through ICT.

The average New Zealand firm has fewer than 5 employees, a small customer base and a limited supplier base. For these firms generic applications such as email, web-browsing (and applications based on this such as online banking) are well suited and are already heavily used.

The future for ICT in New Zealand is bright. The country is well positioned to take advantage of ICTs to improve the economy. Now it is up to all of us to make it happen.

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