ICT Minister confident Telco Amendment Bill will pass

Q and A with Steven Joyce

Despite vocal opposition at the Finance and Expenditure select committee hearing last week on the Telecommunications Amendment Bill, ICT Minister Steven Joyce is confident it will pass into legislation.

The deadline for the committee to report back to Parliament is May 16. Computerworld sent Joyce the following questions and he replied via email.

Computerworld: What is your reaction to widespread opposition - TUANZ, Vodafone, Orcon, TelstraClear, InternetNZ etc (indeed every organisation that presented a submission except Telecom) - to the regulatory forbearance period of ten years?

Minister: The regulatory forbearance period, which is in fact for a maximum period of eight and a half years, is to help provide certainty to the successful parties that the contractual arrangements they have agreed with the Crown during the important set-up phase of the new network won't be re-litigated by the Crown (in the form of the Commerce Commission) over that period.

This will reduce the commercial risk for the bidders, which will lower tender prices and ensure lower prices for users and greater uptake.

It is important to note that the successful bidders won't be able to increase their prices, as those prices will be set as maximums by contract. I am confident that the prices negotiated by CFH will be attractive to service providers over the length of the forbearance period.

In any event, Commerce Commission regulation would be unlikely to occur over the 8 1/2 year forbearance period anyway as the new network won't be a monopoly and will be competing against the regulated copper product. The bigger challenge will be ensuring sufficient uptake, so any pressure on prices is likely to be in a downward direction. Notwithstanding that, having the regulatory forbearance period will give investors certainty against any residual regulatory risk.

We note that the Commission will still play a critical regulatory role in ensuring the UFB regime is open access - it will be monitoring and enforcing open access deeds of undertaking and will have extensive information gathering powers.

Therefore I think some of the concerns outlined show a failure to understand basic supply and demand economics.

How confident are you that the Telecommunications Amendment Bill will be passed, given that the Maori Party issued a statement on Friday, which read: "We supported the first reading of the Bill because we wanted to hear from our constituents but the message we’re getting is that the Bill will create a monopoly because it won't have any regulation".

Also the Act MP Roger Douglas, who is part of the committee said "It is a legislative subsidy" and National is "selling the law"?

Without Act and Maori Party support it is difficult to see how National could get this passed. What is your view?

Yes, we are confident that the legislation will pass.

How are negotiations on the Rural Broadband Inititive proceeding - Vodafone appeared confident a contract would be signed by 31 March, is this likely?

We have said previously that RBI negotiations would happen in the first quarter of this year and we have seen very good progress.

We don't have a date for the announcement at this stage but will in the next few weeks.

How are negotiations on the Ultra Fast Broadband proceeding?

Crown Fibre Holdings advise me that negotiations are progressing well.

How can Parliament pass legislation amending legislation that has a direct impact on industry investment without these two schemes - RBI and UFB - being decided?

The Government has released the SOP at this stage:

To provide some clarity to the public about what any regulatory environment proposed as a result of a Telecom de-merger would look like, and to seek their feedback on the proposals;

To give clarity to Telecom shareholders so that it can make an informed judgment on whether to de-merge, if Telecom is successful; and

Because the Bill is the only current appropriate legislative vehicle to attach these issues to. Introducing new legislation at the point of any agreement being reached would significantly delay any UFB arrangement involving Telecom and therefore fibre being put in the ground.