ICT Minister speech notes:TelCon11

Thursday April 7, 2011

The following speech notes were provided by officials to ICT Minister Steven Joyce for a speech he gave at the Telecommunications and ICT conference (TelCon11) in Auckland on Thursday April 7, 2011. Please note that Joyce may or may not have used these notes in his actual speech and he cannot be quoted as having said any of these points unless there is an independent note or recording that he did so.

Steven Joyce – It’s Decision Time

Speech to 12th Annual Telecommunications and ICT Summit

Acknowledgments

  • Conference Chair Rosalie Nelson
  • Conferenz for organising the event
  • Clare Curran

Canterbury earthquake

  • Before we get into it, I want to take a moment to talk about the Canterbury earthquake and in particular the way telecommunications companies (in particular) rose to the challenge.

  • There are no bones about it – the earthquake was a game changer.

  • And while the footage has now been dwarfed by the tragic events in Japan, in terms of the relative sizes of our economies, the events in Christchurch and Japan are in the same league.

  • The information technology industries, and telecommunications companies, responded quickly and effectively to help with the initial disruption in Christchurch.
  • Damage to land lines was always going to be a huge problem but the mobile systems stood up well despite the disruptions to the power supplies. I want to take this opportunity to thank the companies involved for that.
  • Local and international IT companies have stepped up in response to the disaster. There have been generous donations of notebook and laptop computers and communications and other equipment.
  • The list of contributors is long and if I were to mention some I would inevitably miss out others so I will not attempt to do so. But again, I want to take this opportunity to express my thanks for the generosity.
  • In the period immediately after the earthquake, a few in the media asked if the government would need to peel back from its broadband commitments to free up more money for the rebuild.
  • The answer is no.
  • While the recovery of Christchurch is a top priority, our infrastructure plans are crucial for achieving stronger economic growth, and that remains the case. The reality is without the growth that UFB, RBI and other key projects will bring, we will really struggle to get Christchurch back on its feet.
  • So we can’t afford not to do it.

Where we're at - excellent progress

  • And in the past six months we’ve started to see real, tangible progress with both the RBI and the UFB.
RBI
  • In February, after an intensive evaluation process, the government commenced negotiations with Telecom and Vodafone for the RBI. I am seeking contracts to be signed with Telecom and Vodafone for their separate parts of the proposal in the next fortnight, with the roll out due for completion by 2016
  • Currently, 20 percent of customers in rural New Zealand (zone 4) can access peak speeds of at least 5 Mbps. This will rise to 86 percent of rural households and businesses and 95 percent of rural schools receiving ultra-fast connection of 100 Mbps per second. The extension of the fibre backbone into rural areas (3,100 kms of open access fibre on top of existing 26,000 kms) means more customers living on the RBI fibre routes will be able to get fibre-to-the-door.
  • Some further highlights regarding the technology options that will be available in zone 4:
  • DSL coverage extended to 57% at >5 Mbps, with 10 Mbps available to 50% and >20 Mbps to 34%;
  • Wireless solutions at minimum 5 Mbps extended to 83%;
  • DSL + wireless solutions infrastructure competition extended to 54%;
  • DSL + wireless solutions + FTTP infrastructure competition extended to 46%;
  • 154 open access cellsites allowing co-location for 2degrees, Vodafone and XT and wireless access seekers;
  • Mobile voice coverage increased by 6,200 sq kms to 125,700 sq kms;
  • 88% of Marae will now get mobile coverage;
  • 4,500kms of new road mobile coverage; and
  • All six hospitals will have a fibre connection available at the gate.

  • Under the RBI, Telecom and Vodafone are expected to consult and work with communities to understand demand, opportunities for investment and finalise detailed deployment plans.
  • There are significant opportunities for communities to participate in extending the ‘last mile’ benefits of faster broadband by improving connectivity for marae, health sites, farms, businesses and residences. For example, a local business could leverage off RBI funded infrastructure and provide fibre to the premise, terrestrial wireless or DSL services to communities.

UFB

  • In late 2010 the government signed the first deals under the UFB with Northpower Limited for the Whangarei area and Ultra-fast Broadband Limited owned by WEL Networks Limited, in the central North Island.
  • CFH has further prioritised negotiations with Telecom for all remaining regions and a number of members of the Regional Fibre Group for a number of key regions throughout New Zealand, including Enable Networks in Christchurch and Vector in Auckland.
  • I am confident that in the coming months CFH will complete negotiations and receive binding offers from these parties, which will enable the government to achieve its UFB objectives by 2019. Work is also underway to ensure a consistent product offering nationally whether under a Telecom or a regional solution.
  • Together, the UFB and RBI will have the potential to deliver a real step change in our economy.

Don’t throw the baby out with the bathwater

  • And we know we want that – we want broadband to deliver for us. We want that step change.
  • There’s been a lot of discussion and a fair amount of negotiation.

DateConsultation
29 September 2009TSO reform discussion document released which set out a proposal for reform of the Local Service TSO and for funding telecommunications development.
30 October 2009Submissions close, 23 received (including from TelstraClear).
16 March 2010Minister announces final proposal for Rural Broadband Initaitive and reform of TSO.
15 September 2010Discussion document released Regulatory Implications of Structural Separation, submissions called for.
15 October 2010Submissions close, 17 received (including from TelstraClear).
Late 2010Workshops on the discussion document were held by the Telecommunications Carriers Forum, Telecommunications Users' Association of New Zealand and InternetNZ. All were attended by officials.
5 November 2010Cross-submissions close, 7 received (including from TelstraClear).
10 December 2010Telecommunications Amendment (TSO, Broadband and Other Matters) Bill introduced and made publicly available.
16 February 2011Supplementary Order Paper tabled and made publicly available.
11 March 2011Written submissions on Bill (including SOP) close.

  • You the industry have told us that you support the concept. You’re enthusiastic about it.
  • And now we’re at the business end of the game.
  • We’re getting close to decision time.
  • We’ve talked the talk for a couple of years, can we actually talk the talk.
Regulatory forbearance
  • If you listen to the criticism of the regulatory forbearance period anyone would think the new fibre network we're building is just like the old monopoly copper. It's not.

  • You shouldn't feel they have to apply the lessons of the 'old war'. The network we are building is different:

  • It's new - it will be starting with no customers, and its owners will be working hard to gain customers, when you're trying to drive uptake you don't behave like a monopoly

  • It will be competing with copper - for the eight and a half years or so of regulatory forbearance you can bet that products offered over copper will put competitive pressure on fibre operators and ensure they keep their prices low. In the long term copper is likely to be superseded by fibre, but not in the initial period

  • And if those dynamics weren't enough to keep prices low we are ensuring that they will be low, by contract. CFH has negotiated competitive prices that serve as caps on what LFCs can offer. During regulatory forbearance they can put prices down, but not up. And the prices already released in terms of the deals with WEL and Northpower are hugely competitive. They include prices which are comparable to copper.

  • So we’re confident that the fibre players will not have the opportunity to extract excessive monopoly rents.

  • Those who argue against regulatory forbearance claim to do so in the name of lower prices. The irony is that removing regulatory forbearance would actually result in higher prices.

  • When bidders submit their proposals to CFH they have to factor in risk. What they've said to CFH is that, if their bids have to provide for the possibility that despite having reached an agreement with one arm of government that'll be overturned by another arm of government, they have to price that risk into their bids.

  • In the context of building a new network with uncertain uptake, and trying to get the lowest possible prices for consumers, the more that the Crown can safely to do remove risk, means the better the pricing will be.

  • Some people have said to me if you're certain that the fibre won't be a monopoly - and I am - then where is the harm in allowing the Commerce Commission oversight of prices. Well, investors have said they are would price in that risk without regulatory forbearance. Maybe they're being overly risk averse, but the point is this - with regulatory forbearance we will deliver better prices for consumers.

Closing remarks

  • So my challenge to you today, is that we’ve been around the park on this – its decision time.
  • Do we want the UFB and the RBI and the gains they’ll bring?
  • My vote is yes. Let’s get on with it.

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