This weekend, New Zealand’s IT industry will make its calls on which party — or group of parties — will look after its interests for the next three years. Given the current economic climate, with many predicting prolonged gloom if not outright pain, it’s a decision that has to be weighed carefully.
ICT people have their own particular concerns, but they are also part of broader society, using road and rail daily, hospitals and schools and many other services. Policy in those areas is being thrashed out daily in the media. Here we take on last look at the policies that directly affect the ICT industry.
Broadband and telecommunications
Despite protestations that New Zealand would not follow Australia’s example with a broadband bidding war, that is exactly what has happened, with two very distinct proposals now on the table.
National plans to invest $1.5 billion in public-private partnerships to drive fibre to the home. The plan aims to have 75% of homes connected by 2014, with fibre supported by mobile and satellite solution “where it makes sense”. National says this will be an open access network; but the detail on that remains light. It’s a bold initiative aiming to take New Zealand’s broadband performance into another league.
Labour countered that proposal with one of its own. Communications minister David Cunliffe managed to prise Michael Cullen’s wallet open to offer a plan that is essentially a major extension of the government’s earlier Broadband Challenge programme, in which the government partners with providers to drive broadband development, first around key infrastructure such as hospitals and schools and then out to the broader community. It describes its $340 million plan as a “downpayment”.
“Labour is already investing $500 million across New Zealand in a first five year down-payment for fast broadband. A similar sized investment is expected in the second five years, taking the total potential Crown investment in fast broadband to over $1 billion with a projected private sector investment of around an additional $2 billion,” Cunliffe says.
Labour has been active and innovative in its approach to telecommunications regulation, passing the Telecommunications Act 2001 and extensively revising it in 2006. It unbundled the local loop and operationally separated Telecom to boost competition. Labour argues that National’s network, when built, could be captured by incumbent provider Telecom because the regulatory foundations for such a project have not been laid. National says its network will be run by a new regulated utility and will not be captured by any single provider.
National’s plan is bold, but fraught with danger, as the example of Australia’s stuttering National Broadband Network plan shows. National’s communications spokesman, Maurice Williamson, recognised these difficulties in an interview with TV One’s Agenda programme in August:
“It would be an open access network,” he said, “so it wouldn’t be owned by any one entity. So if you came in with some investment if you wanted to be in investment, say a pension fund, and put some money into the entity or you were a technology company — [it] might be that Vector wanted to put something in the North Shore and be a partner there, it might be City Link in Wellington — you wouldn’t have any rights other than the flat rate of return on your investment over that but it would be open access to any product supplier that wanted to put its product over that network.”
Questions have also been asked about whether there are the required skilled people in New Zealand to meet National’s rollout schedule. TelstraClear CEO Alan Freeth also criticized the plan for its focus on the home, rather than on business.
Labour’s plan, conversely, is incremental and has been criticised for not being bold enough. Rather than talk simply about fibre, Cunliffe uses the phrase” fibre-equivalent speed Broadband”. Critics say a plan based on DSL technology will not drive New Zealand up the OECD broadband rankings. Copper is just not good enough, they say.
Digital economy and society
Labour has also created new industry representative bodies and developed its revised Digital Strategy 2.0, which Cunliffe says “provides a bold vision and concrete actions to help New Zealanders become leaders in the digital world”.
“DS 2.0 challenges us to go further to secure outcomes from technology, including: increased digital productivity; reduced environmental footprints, and communities that are locally networked and globally connected,” he says.
The strategy includes programmes such as a Connected New Zealand and the Digital Content Innovation Cluster.
With the economy heading down, everybody is dusting off their Keynsian economics textbooks. Both parties are promising to spend on broader infrastructure. Labour has been doing this for some time, but National is now promising to spend twice as much: $8.55 billion over six years including promised broadband investment.
If National wins, you can also expect reform of the Resource Management Act to speed project approvals and reduce compliance costs. Nick Smith, National’s Resource Management Act spokesman, says fixing the Act is a top priority.
“We are not about dropping environmental standards. We are about reducing the bureaucratic costs, delays and uncertainties. Our plan is a two-phase process,” he says.
”The first phase of reform will be about streamlining and simplifying the Act. Our reform bill will include over 20 amendments. Things like getting rid of the Ministerial veto, like limiting vexatious and frivolous objections, like reducing the number of consent categories, like stopping trade related objections, like making greater use of national standards, like enabling direct referrals to the Environment Court as part of a new process of ‘priority consenting’. Such consents will be required to be determined within nine months.
”Our second phase of reforms will look at bigger questions. We want to revise the interaction between the Resource Management Act and the Public Works Act so as to reduce timeframes but more generously compensate.”
Tax and R&D
Labour belatedly delivered tax cuts after lifting the tax rate when it first came to office and at the same time delivering Working for Families to redistribute income to a broad set of families. It has also reduced the business tax rate from 33% to 30%.
National’s promises more and better tax cuts, $47 a week for people earning over $50,000, but research and development tax credits and Kiwisaver have been casualties in funding those cuts.
The elimination of the 15% R&D tax credit will be a blow to some start-up and early stage technology companies, especially if capital markets remain tight for any period of time. Auckland-based network technology developer Endace last week expressed its disappointment in the plan.
CEO Mike Riley said Australia is boosting its commitment to R&D and when Endace come to make its next big R&D investment it will be forced to look at what’s on offer.
He said when the credit was introduced, earlier this year, he thought it was a good start and it would get better over time. However, now the company faces the prospect of it going away altogether.
“If it stayed we wouldn’t even consider going elsewhere,” he said.
Labour predicts with the credit R&D will increase from one third of the western world average to two thirds in four years.
National says it will ensure 40% the New Zealand Superannuation Fund is invested in local infrastructure and other investments.
On the skills front, National has leveled damning criticism at Labour’s NCEA qualification and promises an overhaul with clear literacy and numeracy achievement standards.
Labour, as it did in the last election, has made a play for the student vote, promising a universal student allowance by 2012. National says it will also introduce a scheme that will be more generous, but not universal.
It is also promising to increase industry training and the number of apprentices in training by 1,000 a year so that by December 2011 there will be 17,000 in modern apprenticeships.
Both parties are committed to negotiating free trade agreements and boosting exports. Labour has brought into effect an agreement with China, concluded negotiations with Asean countries, and won agreement with the US to commence negotiations for free trade, says trade minister Phil Goff. Work towards an FTA is also taking place with other markets including Korea, India, the Gulf States, Malaysia and Japan.