Hon Amy Adams

Minister for Communications and Information Technology


21 February, 2012 Speech
Address to the Commerce Commission conference

Good morning. It’s a privilege to have the opportunity to speak at this important event highlighting the benefits of bringing faster broadband to New Zealand.

First, can I thank the Commerce Commission for organising this conference, and for the work that has gone into the three demand side issues papers.

I particularly want to acknowledge and thank Dr Ross Patterson for his commitment to the telecommunications industry since 2007, the work that he has done in times of significant change and the even hand he is renowned for.
Let me begin by saying that despite considerable global uncertainty, I’m extremely positive about the next three years.

While I’m a new face to many of you, my role as Minister for Communications and Information Technology allows me to draw on my background in law and commerce.

It connects seamlessly with my responsibilities as the Minister of Internal Affairs, overseeing ICT investment across central government, and it positions me well, as Associate Minister for Canterbury Earthquake Recovery, to ensure 21st Century technology is at the heart of the rebuild of our second largest city.

It seems to me that we’ve moved beyond a time when anyone seriously argues with the vital importance of high-speed broadband for economic growth and better outcomes.

We know faster broadband has the potential to lift GDP by about 1.5 per cent, and we know that broadband penetration is now seen as a key economic indicator.

While good progress has been made in major cities upgrading broadband availability, I have long advocated the need to bring faster broadband and better connectivity to rural communities. I’m equally convinced of the benefits it will bring to other sectors of our economy and society.

Over our first term, the Government made excellent progress toward the delivery of faster broadband services. We delivered on our commitment to provide $1.35 billion for ultra-fast broadband and $300 million for the rural broadband initiative.

We locked in contracts, deployment is underway and we secured competitive wholesale prices for UFB and the RBI that will deliver comparatively low retail prices and prices that are competitive with copper.

We made changes to the Telecommunications Act and have mechanisms in place to monitor the UFB and RBI networks, services and prices, and investigate issues that arise.

We also began the digital switchover and re-stacking projects, and planned allocation of the 700 Mhz band to enable better data access on the go, a move that has the potential to bring even faster speeds and better coverage to rural and provincial areas.

A key focus for me for this term will be making sure the spectrum is available for industry use as the digital switchover is completed, and that the digital dividend will be commercialised in the way that is of most benefit to New Zealand.

In many ways, it can be said that the preparatory work has been done. My focus now is on making sure uptake of UFB and the RBI is maximised to deliver the productivity gains and other benefits the Government expects to achieve from its investment. We see little point in laying fibre optic cable in the ground or building new cell towers if the infrastructure doesn’t ultimately deliver productivity gains and better outcomes.

I have commented previously that if Steven Joyce was the Minister of getting the infrastructure built, I aim to be the Minister of making it productive, realising of course that delivering on the potential of UFB involves a 5-10 year outlook beyond the build cycle.

A host of factors will influence the success of the initiatives – including retail pricing, the quality and speed of services, access to content and innovation applications, along with effective promotion and encouragement in key areas.
None of these are a silver bullet on their own. However, I’m confident that, together, government and industry can deliver on the potential of fast broadband.

Overseas experience tells us that the greatest benefits are to be gained from encouraging early uptake by schools, health providers, government agencies and businesses.

That is why these sectors are the focus of the Government’s five point broadband action plan and are a priority for deployment. They are also the areas where the Government has the greatest ability to influence uptake.

We’re making steady and encouraging progress on the action plan announced late last year, working with sectors like education and health to deliver better, smarter services through the use of faster broadband.

Within the e-education space, the Network for Learning is one of the most important initiatives. This initiative – along with government payment of fibre drop costs and subsidies for wiring upgrades and services – will connect schools across the country and around the world. They will be able to pool resources, talk to each other and share information with parents in a secure and dedicated environment.
About $550 million has already been committed by the Government to fund the School Network Upgrade Project, fibre drop costs and the Network for Learning, over and above our core $1.5 billion investment in the infrastructure.
The Network for Learning will open up a range of resources, and opportunities for schools to work together. With the power of this network at their fingertips, New Zealand students will be in an enviable position internationally, and we will be able to lift achievement for young New Zealanders, wherever they are located.

What happens in our schools will in turn flow into our communities. Students won’t want to leave the technology they can access at school and come home to slow broadband and legacy uses.

Health is another priority area. Faster broadband is a core part of the Government’s vision for improving overall performance of the health sector. It has the potential to revolutionise how we gather, store and access information, giving clinicians easy access to the detail they need for optimum patient care. It also offers a huge leap forward for primary care, particularly in rural and provincial areas.

We are working with Integrated Family Health Centres to make sure that they are ready for fibre and can take advantage of the benefits of faster broadband. Better use of broadband provides for the development of shared records across providers, end-to-end medicine tracking and will permit necessary blood tests and x-rays to be done before the patient sees a doctor and that information to be immediately available at the consultation. Patients will be able to access information on their care plan and appointments online at any time.

The delivery of health services through tele-health tools also offers significant options in the way care can be provided. From electronic monitoring systems to video conferencing between health providers and remote diagnosis, these tools will enable the provision of more convenient monitoring of chronic conditions and faster access to health services for patients who don’t live near a major hospital.

Fibre optic technology and the rural broadband initiative are also key enablers for improving government services. Faster broadband can speed up a potential move towards cloud computing, more centralised ICT services and responsive delivery of citizen-centric online services to New Zealanders.

That’s why with my combined roles of Minster of Internal Affairs (which encompasses the office of the Government CIO) and Minister for ICT, I consider myself ideally positioned to ensure that UFB is used effectively as an enabler for the Government ICT work programme.

Of course, business, also, has much to gain from both UFB and RBI, particularly in Heartland New Zealand.

New Zealand already leads the world in agri-business, and has one of the most productive dairy industries in the world.

The RBI is, in my view, unparalleled in its ability to secure noticeable productivity gains from early in the deployment cycle given the significant parts of our economy operating in the rural sector and the fact that those areas are still under-represented on most connectivity measures.

Besides active encouragement of uptake in key sectors, I want to ensure that New Zealanders get the performance quality and the services they are expecting from UFB and RBI at an affordable price, and on a transparent and readily comparable basis.

This requires that the whole end-to-end network be reliable and is working efficiently and effectively. It also requires that consumers and businesses know what they are paying for.
The Government has a project being led by the Ministry of Economic Development that is looking to benchmark and monitor factors that might limit uptake, and consider whether there should be greater transparency around product offerings.

The Commerce Commission demand-side issues papers and this conference will be a valuable input into this work.

While I will be closely monitoring issues that might limit uptake or the effective implementation of faster broadband, I expect industry to show leadership in resolving such issues.

Where that does not occur, I’m more than prepared to step in, but I’m also aware that regulation can be a blunt tool. It is my view that in most cases, industry-driven solutions are better for industry and customers, and are more enduring.

One such example is content.

The Commission’s papers include a useful discussion of the importance for consumers of premium content – that is broadly speaking, live sport and first-run movies.

While I recognise the value of such content for consumers, and the role it will play in initial domestic uptake, I will signal now that I’m cautious about reaching for regulation as a solution at this stage when it is still too early, in my view, to anticipate how the competitive content market will look in a UFB environment.

Over the last few years new suppliers of video content have emerged in overseas markets. They have provided over the top services in a much more flexible way than traditional subscription and free-to-air broadcasters we are familiar with.

While the innovative services that have been launched in overseas markets are yet to make a significant impact here, I’m concerned that premature government action could in fact stifle innovation in this space.

There have also been calls for a single regulator for broadcasting and telecommunications to deal with issues of this kind, but I’m equally sceptical about the benefits of shaking up the regulatory structure to deal with an issue that has yet to form into a clear shape and which the markets may yet solve. The Prime Minister has used the expression of it being a solution in search of a problem and I share that view.
I’m mindful that this industry has been through a period of considerable regulatory change in recent years and my preference would be to let those changes bed in before more upheaval where that is possible.

I do note that the current regulatory structure has not prevented the Commission from performing a very useful role in gathering information about the way video content markets function

The Commission’s focus is likely to be on competition and market dynamics, as is appropriate for an economic regulator. It will be up to the Government to balance the broader interests of consumers and stakeholders in the context of the UFB policy objectives.

To sum up, there would have to be clear evidence of a significant long-term problem for the Government to cut across the market response.

However, you should know that I will continue to monitor developments very closely for evidence of the innovative and flexible solutions that are beginning to emerge overseas, and I would be disappointed not to see signs of this occurring.

The Government is playing an important role in the roll-out of faster broadband but we can’t, and shouldn’t, be dictating how use evolves.

I want to acknowledge the time and resources the industry has put in to these initiatives so far and the commitment made by investment partners. We are very aware that you are a key component in the success of these initiatives.

But the work is just beginning. Industry must take the lead in some areas - marketing and promoting new services to business and consumers is one such area. It’s crucial, and it’s something you are able to lead much better than government.

New Zealand is looking to you for innovation and forward thinking.

These are exciting times for industry. UFB and the use of the digital dividend are a game changer. They bring huge opportunities for new services and new content – and New Zealanders are hungry for both.

Overseas, we have seen new players emerge and existing ones transform their business models, with telecommunications companies becoming major content providers of both television and music.

It is no different here. The market is evolving rapidly and throwing up exciting challenges. Those who grab them early will flourish, but those who don’t may not survive.

It rests on industry to ensure that New Zealanders get the quality and performance they expect at a price they can afford. Government can help but it is industry that ultimately carries responsibility for delivery of faster broadband in the marketplace in an attractive way.

UFB and RBI are one part of the delivery of better connectivity to New Zealanders - the upcoming allocation of the 700Mhz spectrum is of another equally important part.

The Ministry of Economic Development has recently completed consultation on how the digital dividend spectrum might be allocated, and I thought I would take this opportunity to mention some of the clear messages that have come through from that consultation:

There was broad agreement that this is valuable spectrum and that its allocation will have a major impact on the shape of the industry over the next 10 years.

There was clear support from many for the Asia Pacific Telecommunity band plan, but also some nervousness about the international uptake of this plan, and there remains a live debate around various technology options.

And there was recognition that there would be additional costs if New Zealand tried to go it alone and take a technology path not shared by some larger economies.

The Government is now considering its options for allocation of the spectrum and I’m focussed on ensuring that this spectrum is allocated in good time so that industry can put it to new uses as soon as it becomes available. A key consideration for me in that allocation process will be to gauge the net gains in the access New Zealanders have to faster broadband from the use plans proposed.

Before I finish, I want to take just a moment to reflect on the impact of these various initiatives in my home region of Canterbury.

Tomorrow marks one year since the day that 185 people were killed and thousands more were injured and traumatised as an earthquake ripped through our city. It led to the condemning of more than 1300 commercial buildings and more than 450,000 claims to EQC alone. Vast areas of the city are now unrecognisable.

But as our buildings, and often our worlds, have fallen apart and we have had to react to unimaginable circumstances, our preconceived notions around how things are, and how they have to be, have also crumbled.

The result of this is that the people of Canterbury are hungry for innovation and new approaches in a way that I’ve never seen before. I’m in no doubt that the rollout of UFB, RBI and the new spectrum in my region will be seized by Cantabrians in a way that would have been impossible to imagine a year ago.

These are exciting times in one of the most innovative countries in the world, and I’m looking forward to working with you all on harnessing the potential of better, faster broadband for the benefit of all New Zealand.

Thank you.

ENDS

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