Date :29 June 2010 | Source :Minister for Communications and Information TechnologyOpening address for Tel.Con 11th Annual Telecommunications and ICT Summit 29 June 2010
Thank you, Rosalie for your warm introduction and for welcoming me to the Tel.Con 11th Annual Telecommunications and ICT Summit. It is a pleasure to be invited to attend today as a speaker at this yearly event. Apologies that I was unable to attend in person as other commitments have kept me here in Wellington. However, it does seem appropriate for the Minister for Communications and IT to be giving a speech to a telecommunications conference via videoconference.
Before I start, I’d like to acknowledge IDC and Conferenz for hosting today’s event. This annual summit provides a well established and respected platform for discussing business and policy issues in the telecommunications industry.
I also want to welcome all of the various industry and consumer representatives in the audience and encourage you to make the most of this opportunity to hear from and interact with the policy makers, operators and technical experts here today.
As Rosalie has already touched on, the telecommunications sector is going through a period of rapid transformation. Changing industry dynamics, structure and business models are putting significant increasing pressure on telecommunications carriers. All of you here are facing similar challenges right now and I believe that we can learn a lot from sharing our thoughts, experience and expertise.
There has been some serious consideration by industry players about what happens next in New Zealand telecommunications. I am mindful that the Government’s plans are an important factor in those considerations so today I want to recap of our progress to date, and plans for the coming year.
The past year has seen much work by the Government in many areas, including of course our broadband initiatives. I am pleased at what we have achieved so far but it will be in the next 12 months that we will begin to see the first results from these policies.
I’ll say at the outset I am not able to talk in great detail about the UFB Initiative, in terms of the whys, wherefores, and a blow-by-blow account because the commercial process of evaluating proposals is ongoing. I will be able to outline in greater detail the work the Government has done on the Rural Broadband Initiative and where we are with that.
As we move closer to the implementation of our broadband plans, I also want to talk about our plans for the ‘demand side.’ These plans concern in part the benefits that ultra-fast broadband will bring in the government sector, notably in the health and education sectors.
The Government is absolutely committed to delivering on our broadband objectives as key enablers for the delivery of an economic step change for this country. In the wider sense it is one of the many planks this government is working on to achieve a faster growth rate.
Recent OECD reports show that broadband networks are an increasingly integral part of the economy, generating increased efficiency, productivity and welfare gains. Broadband is also increasingly important as an enabling technology for structural changes in the economy, most notably through its impact on productivity growth, but also by raising market competition and enabling innovation in many sectors.
It is with this background that the Government recognises this and is committed to creating a step-change in New Zealand’s broadband services.
As many of you will know, the Government is investing $1.35 billion of taxpayers money to accelerate the rollout of ultra-fast broadband services to three-quarters of New Zealand within the next ten years. This objective remains firmly within our sight.
The Crown-owned company, Crown Fibre Holdings (CFH), established by the Government last year, is tasked with evaluating the 32 proposals received from 18 different parties. I am pleased with the level of interest received in the UFB Initiative and the progress being made in evaluating proposals.
CFH has completed its initial analysis of proposals. This has included significant engagement with respondents, and CFH has updated me on this engagement in terms of policy. A clear theme has been a wish by many respondents to revisit the services Local Fibre Companies (LFCs) will be required and allowed to provide, and the regulatory arrangements that will apply to LFCs.
Specifically the suggestion has been made that LFCs should be required to provide ‘layer 2 services’ – those which involve active electronics – along with ‘layer 1 services’ – provided at the passive infrastructure level. This feedback has been echoed by service providers who will be purchasing ultra-fast broadband services, and selling them on to end users such as businesses, consumers, health users and education.
The layer 1 versus layer 2 debate is not unique to this country. Governments around the world who are encouraging the widespread deployment of next generation networks are considering how best to encourage investment in what will initially be infant industries selling services based on emerging technologies.
The recent McKinsey/NBN report in Australia recommended their National Broadband Network be providing services at layer 2. Providing layer 2 services is seen as important to facilitate the business case for next generation networks, because it allows the provision of services at different specifications and price points for different market segments.
CFH has also received feedback from respondents about the appropriateness of the regulatory setting proposed for LFCs – especially the requirement to provide services on an equivalence of inputs basis from the outset – and has also heard concerns that the potential for price regulation from the Commerce Commission in the initial period of operation could limit the ability of respondents to put their best foot forward.
The government has no intention of compromising the strong competitive environment we expect the UFB to create, underpinned by its open access principles. However, neither are we interested in regulatory settings for new enterprises that are unnecessarily burdensome or undermine the certainty that the potential partners seek to allow them to put their best foot forward.
My colleagues and I have been considering this feedback we have been given, and pragmatic changes which we may make to the UFB model which may in turn further improve the case for private sector investment and secure the achievement of our UFB objectives without compromising the open access and regulatory principles which underpin the initiative.
CFH will shortly be releasing a request for refined proposals. This is a commonly used tool in RFP processes to deliver greater value to the requestor. It allows CFH to fine tune its requests, having reviewed initial proposals from respondents. I expect the request for refined proposals will also include any changes to the UFB model, or the regulatory settings that surround it.
Once responses to the request for refined proposals have bee received CFH will begin commercial negotiations on the Crown’s behalf with respondents.
The Government made a deliberate choice to establish a Crown-owned company to evaluate proposals with commercial scrutiny, rigour and probity. I am confident that the recommendation to be made by Crown Fibre Holdings later this year will lead to a successful outcome for the UFB.
I understand that you will be hearing from Graham Mitchell, CEO of Crown Fibre Holdings later today.
Facilitating Fibre Deployment
What I can talk about are the policy issues which need addressing to assist the effective and efficient deployment of broadband infrastructure for the UFB Initiative.
One of the greatest challenges the Government faces in achieving the UFB Objective is addressing the cost of deploying broadband infrastructure. Estimates suggest that deploying the “passive infrastructure” required for broadband represents between 50 and 80 percent of the total cost of building a fibre access network.
Both the Government and Crown Fibre Holdings are therefore interested in understanding the benefits to be gained from enabling a greater range of deployment techniques to be used in the broadband roll-out, in terms of both reduced cost and reduced disruption.
A key policy issue is the requirements that must be adhered to for deploying fibre cable in and over road-reserve land. Of particular difficulty currently for cable deployment is the inconsistency in the rules and processes applied by individual local authorities across the country.
MED officials, Crown Fibre Holdings and the Digital Auckland Working Group have this month released a discussion document on developing nationwide standards to cover shallow trenching and other fibre cable deployment techniques.
The proposal includes piloting such techniques in New Zealand, to test the feasibility of the standards developed and ensure they are robust and will endure. The expectation is that the standards developed from this project will find their way into the Utilities Code which will have regulation status under the Utilities Act 2010.
The process for developing deployment standards for cabling on road-reserve land has to be a collaborative effort to get the right balance between protecting the integrity of public roads and allowing the deployment of cable to proceed without unnecessary hindrance. The Government is seeking feedback and Expressions of Interest in participating in the initiative. I therefore urge participation by fibre companies, telecommunications providers, local authorities, roading controllers and other interested parties so this can be achieved.
As well as the UFB, the Government has also announced the Rural Broadband Initiative (RBI) to address the specific broadband infrastructure needs of rural New Zealand. Together, these two broadband initiatives will help the Government to achieve its aim of ensuring all New Zealanders are able to take part in the benefits of a 21st century economy.
Broadband services are recognised as a contributor to economic growth and the development of a knowledge-based economy. Food and agri-business products contribute two thirds of New Zealand’s export earnings so it is obvious that the benefits of improving rural broadband could be significant.
Rural New Zealand poses a different set of challenges to our cities as there has been a long history of under-investment in rural telecommunications infrastructure. Much of this under-investment has stemmed from the low population density of rural areas, making the investment less economic than in the cities. This under-investment has led to the current unacceptable state of telecommunications services in rural New Zealand.
The RBI will ensure that 93% of rural schools will receive fibre, enabling speeds of at least 100Mbps, with the remaining 7% to achieve speeds of at least 10Mbps. But schools are not the only focus of this initiative. Over 80% of rural businesses and households will have access to broadband with speeds of at least 5Mbps, with the remainder to achieve speeds of at least 1Mbps. If you think these speeds sound low, you should recognise that around half of the rural community is currently experiencing only dial-up speeds.
$300 million will be spent on improving rural telecommunications under the RBI. This $300 million will be specifically made up of a $48 million direct government grant and $252 million from a new Telecommunications Development Levy.
Two areas where the RBI will significantly open new doors are the health and education areas which I will briefly mention here.
In the health and disability sector, the RBI aims to provide more efficient healthcare through better broadband services. Fibre-based broadband could potentially improve health care delivery in several ways, such as:
- a. providing video-based services to rural users to reduce access barriers to health care and to support rural clinical education and peer support;
- b. extending hospital-based services to allow for wider exchange of high-resolution images between health providers; and
- c. allowing health providers to give patients, family and communities access to more valuable health care services from their homes. This would support self-care, education and treatment for long term conditions.
The RBI will also provide many new opportunities in the education sector. It will help ensure that 97 percent of schools will be connected to broadband.
The Government is also working on plans to improve broadband for the 3% of remote schools unable to be connected to fibre, using alternative technologies. A 10Mbps satellite trial has been run with two South Island rural schools in Haast and Winchester to determine the suitability of satellite technology to provide fast broadband to remote schools. Through broadband, schools will be able to use video conferencing to enhance and provide new learning options for students.
As many of you will know the Government has been working on a National Education Network (NEN). This provides schools with access to online education content and services through a dedicated private network. The NEN trial was initially extended to 200 schools and Budget 2010 will now allow an additional 300 schools to take part in the project.
Broadband will also allow students in rural schools who require specialist support such as reading recovery and specialist subjects such as physics or Maori to seek these services from teachers online.
The Government is also helping schools to upgrade their internal networks so that teachers and students are able to make the best use of new technologies. The first 114 schools to receive internal network upgrades have now been confirmed. A further 140 schools will have their internal networks upgraded. These schools will be announced later this year.
This Government is making solid progress to implement the RBI. The Government has now received 39 expressions of interest in the first stage of the Rural Broadband Initiative tender process. The response is very pleasing – in both number and breadth.
Of interest were the number of national expressions of interest that covered the country including:
- Compass Communications
- Fed Farmers and Fedztel
- FX Networks
- OPTO Network
- Woosh, and
- Some NZRFG members.
The responses have generated numerous options for the deployment of fast broadband to rural communities and schools. Ministry of Economic Development officials will be considering these over the next couple of months before the release of a Request for Proposals in August.
I am excited about the progress being made on this initiative and look forward to allocating the funding to successful bidders before the end of the year.