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Cunliffe: Keynote Speech to KANZ Broadband Summit


Hon David Cunliffe
Minister for Communications and Information Technology

19 June 2008 Speech Notes

Keynote Speech to KANZ Broadband Summit


Anjo Hasayo, bam gap sum ni da

I would like to recognise the Hon See Joong Choi, Chair, Korean Communications Commission, and Hon Senator the Hon Stephen Conroy, Minister Department of Broadcasting, Communications and the Digital Economy, and distinguished guests.

I would like to thank our Korean hosts for the amazing success of the OECD Ministerial Summit. I would like to acknowledge the leadership of Korea with regard to the fine effort in organising the meeting. I note the importance of the conclusion of the summit in respect of Convergence, Creativity and Confidence. Its busy agenda has covered both the further deployment of fast broadband and, even more importantly the new and expanded range of commercial, social and environmental applications.

I want to recognise the vision of the Australian government in renaming the Department of Communications to Broadband Communications and the Digital Economy, and the broad and determined new ICT agenda this change represents.

This is the third KANZ meeting that New Zealand has attended, and the second that I have had the pleasure of attending. It is a particular pleasure to recognise the useful outcomes from these meetings. They have been of immense value in informing policy decisions taken in the last two to three years in New Zealand. Spin-offs for industry from these meetings and other bilateral agreements with both our KANZ partners are also proving to be of immense value to New Zealand.

There are a number of items I want to cover but I will begin by responding to the question posed by our hosts in organising this meeting:

“promoting the wide availability and take up of broadband to promote the use of the Internet for advancing sustainable economic development, social cohesion and cultural identity.”

The last three years in New Zealand have seen revolutionary change in the telecommunications regulatory environment. We believe that we have learned some useful lessons from this experience which I would like to share with you.

The Road Travelled

Broadband is, as we have heard, an essential international and domestic economic and social issue in all our countries. In this context it may be useful for me to outline some of the recent history of ICT policy in New Zealand.

In response to a poorly performing telecommunications sector, and recognising the critical importance of ICT to New Zealand, the incoming Labour-led government made a commitment to improve service performance and affordability. We passed pro-competitive telecommunications legislation on 2001 but by 2005 it was clear that the pace of change was not meet our expectations.

In 2005 the ground-breaking Digital Strategy was released, clearly signalling the government’s commitment to ensuring all New Zealanders are well serviced with world class ICT and have the capability to make best use of it. We established a goal of reaching the top half of the OECD for broadband performance, and aim to reach the top quartile by 2015.

The Strategy stated that user capability and confidence, and digital content are as important to realising the socio-economic benefits of ICT as the connections themselves. It also identified three key agents of change – communities, businesses and government, for responding to the challenges and opportunities of a rapidly-changing digital environment.

However, it was evident that the existing regulatory processes were not delivering at the rate required to successfully implement the Strategy. Investment and performance levels were "static" at best. New Zealand languished in the bottom third of the OECD for broadband uptake and investment. New Zealanders demanded change.

These shortcomings were the subject of the 2005/6 Telecommunications Stocktake review, from which we decided to:

• unbundle the local loop and bitstream services;

• future proof a proactive role for the Commerce Commission and accelerate their regulatory processes: introducing multilateral Standard Terms Determinations, Undertakings, a consumer complaints code and more;

• review our Universal Service Obligations regime and develop a rural broadband strategy;

• encourage investment in alternative infrastructure such as fibre, wireless and satellite networks by measures including a review of public sector investment in telecommunications infrastructure to encourage a whole-of-government approach; and

• create a fairer and more competitive environment by requiring the operational separation of the access, wholesale and retail layers of the incumbent Telecom NZ and establishing a new wholesale environment.

This policy framework represents a robust and competitive approach to overcoming the problems of dominance by an incumbent telecommunications operator. We now have an unbundled local loop, unbundled bitstream, Naked DSL, number portability and, most notably, an operationally separated incumbent provider.

Commentators such as the OECD, OFCOM and Budde.com have indicated that New Zealand is now at the forefront of international telecommunications regulatory practice. Recent data indicates that over the past year the rate of growth of New Zealand broadband connections has been the sixth highest in the OECD even though the impacts of many of our reforms have yet to take full effect.

Operational Separation

Reform did not stop there. While local-loop unbundling is a significant step towards greater competition in the sector, it is much more powerful in the context of an operationally separated incumbent. We finalised negotiations with Telecom New Zealand on its operation separation in March this year. These undertakings, while voluntarily entered into, are legally binding, contain clear milestones and timetables and strong penalties if breached.

Operational separation will deliver non-discrimination at a deep wholesale level and an access layer that is open to entrants and competitors on an equivalence of inputs basis.

The robust operational separation of Telecom New Zealand is expected to foster increased competition and access to a wider range of new and improved broadband-based services at better prices.

This is important because offering competing facilities-based services over the existing infrastructure was only going to take us so far up the international ladder – we also need increased investment in that infrastructure – beginning with shortening loops in order to make fibre to the premise a viable prospect for the future.

Next Steps

Our work on regulatory reform is continuing.

Closing the gap between the aspirations of remote and rural users and their broadband availability is also an important issue for all three economies. For all of us, reaching the most isolated few percent remains a key and complex task.

To this end, we are reviewing New Zealand’s Telecommunications Service Obligation (our USO regime). The review is a fundamental reconsideration of the TSO framework and is focused on the Local Service TSO for the supply of local residential telephone service.

It is essential that it be fit for purpose in the light of the new challenges that face us posed by new technologies and the fact that digital inclusion has never been more important than now. There are questions about the fairness of the current regime, especially for new entrants to the market.

Two key strategic issues under review are the need for the TSO to include the supply of broadband service to rural and remote areas and if it should be available on a contestable basis not solely to the ubiquitous provider. We note that the same questions are under study in the EU, and many other countries.

Turning to the convergence of telecommunications and broadcasting, we are also looking into how the regulatory framework should be transformed in order to meet the challenges of current and emerging applications ranging from Internet-based information to Internet TV and beyond. Any proposals to change the current broadcasting and telecommunications regulatory frameworks must encompass the needs of public service broadcasting, infrastructure providers and the end user.

The Future of Broadband

Turning to the future of broadband, may I note my agreement with Senator Conroy: broadband is the basis for a profound social and economic revolution. May I also endorse Chairman Choi’s comment that Korea is a mecca of the fast broadband economy.

We recognise that a significant gap remains between our level of aspiration for New Zealand as a centre of innovation and technology, and the existing commitments of market participants.

Having established our strong regulatory framework we now have the necessary condition to allow for a degree of direct government supply side intervention to stimulate new investment. The economic case for this is clear: market participants themselves do not internalise the full economic and social benefits of broadband, so stimulus to accelerate broadband rollout is appropriate.


In the 2008 Budget, the New Zealand government committed $500 million over the next five years to digital initiatives. This is a first five-year down payment on a 10 year plan to bring fibre or equivalent fast bandwidth to all New Zealand homes. The core part of this package is the Broadband Investment Fund.

We are making available $250m for urban projects, $75m for rural, and $15m for international connections, as well as $160m+ for connectivity in health and education and around $10m for other new Digital Strategy initiatives.

Investment will not only be based on open access principles, but will require, as a minimum, the deployment and wholesaling of passive infrastructure in urban centres.

The widespread availability of ducting throughout urban centres and deep into surrounding suburbs, will improve investment incentives and substantially lower the costs of future investment for all operators (all operators can utilise infrastructure to provide fibre/wireless/DSL connections to end-users).

Importantly, it will lay the foundation for the subsequent deployment of FTTH within a decade, without adopting an overly prescriptive approach in such a dynamic industry.

The government will leverage private sector funding by providing grants rather than by equity funding or regulatory concessions.


Digital Strategy 2.0

Regulation and investment stimuli are playing, and will continue to play, a critical role promoting the wide availability and take up of broadband in New Zealand. But they are not sufficient to secure New Zealand’s digital future. We need to stimulate demand and make the benefits of being digital flow to all New Zealanders.

This was a key rationale for the 2005 New Zealand Digital Strategy, which had a focus on the three “C”s of Connection, Confidence and Content. While these are remarkably similar to the OECD Ministerial themes of Convergence, Creativity and Confidence, the subtle shifts in international thinking are very important. For the New Zealand Digital Strategy moving forward, convergence and creativity are key new themes.

The Internet generation is entering the workforce, bringing new ideas and different values. They will be our future innovators and leaders in the digital space.

The current digital environment is transforming business models. Users are generating their own content and enhancing the way they relate to friends, work colleagues, businesses and government.

In response, the 2005 digital Strategy is being refreshed. Digital Strategy 2.0 has an explicit focus on productivity, community, and sustainability outcomes whilst still recognising the importance of the enablers identified in 2005: connection, confidence, and content.

It is no longer about the technology per se but how we apply and use it to transform our businesses, communities and environment.

NZ firms attending showcase

I recognise that events such as this as important networking opportunities for our three countries.

I am proud to associate myself with the New Zealand firms who are exhibiting in the World IT Showcase. The large New Zealand business delegation includes two groups; ICT software and hardware developers, and digital content providers and researchers. All of them are world leaders in their particular area and a number of them already have close and valued links with each of our three economies.

As examples:

• Southern Photonics manufactures test and measurement instrumentation for use with high speed optical communications systems;

• NextWindow is a designer, developer, manufacturer and marketer of touch screen products, including very large touch screens for interactive whiteboards and large format touch screens for digital signage and interactive public information displays;

• Rakon is the world leader in the development and production of high performance quartz crystals and oscillators (TCXOs and OCXOs) for GPS and telecommunication applications;

• Telecommunications leaders, Telecom New Zealand and Kordia are also here to explore opportunities;

• On the film side WingNut Films and Park Road Post, so famous for their contribution to the Lord of the Rings trilogy, are seeking bilateral cooperation opportunities.


Future of KANZ

In conclusion, as I said at the beginning of this speech, I have found KANZ of great value in enhancing relationships between our three countries.

I am keen to assist in further developing our relationships within the KANZ forum. At the last meeting in Adelaide, I signed on behalf of New Zealand an Arrangement for Cooperation in Information and Communications Technology. The intention of the arrangement is to encourage the development of cooperation and exchanges between business, research and educational institutions, government policy and regulatory agencies and other organisations.
There is a maturing and increasingly fruitful relationship with Korea in science and technology. In 2005, New Zealand and Korea agreed to run a joint Focal Point Programme (FPP) providing for collaborative pre-research activities in four priority areas: environmental science, ICT, biotechnology and materials science. There have been a number of interactions between New Zealand and Korean officials since. A second FPP is to be launched this month and is intended to run for three years.
I am very pleased that the University of Auckland (UoA) and Electronics Technology Research Institute of Korea (ETRI Korea) are looking to establish new cooperation opportunities. A formal announcement with regard to this is pending.
Cooperation between New Zealand and Australia is, of course, broad and deep with six Australian ministers travelling to New Zealand last weekend for bilateral economic discussions.

We have been very pleased to participate over the past three years in this innovative trilateral exchange between our three governments and our innovative industries. We are very keen to see these highly fruitful exchanges continue.

The New Zealand government provides support for our innovation and creative industries to seek wider global markets. We all know that that is where all our futures lie, in the innovative application of broadband technologies.

We think that KANZ will continue to be of immense value to our three countries if it continues to reflect this balance as it has in the past.

I would like to extend an invitation for you all to come to New Zealand for the next KANZ meeting. We will need to confirm a date but are looking at possibly November 2009, obviously this will need to be confirmed.

Finally, I take great pleasure in again thanking our Korean hosts for their gracious hospitality and the extraordinary efficient and effective organisation of this event.

Thank you.


ENDS

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