Telecommunications (Development Levy) Amendment Bill

I am very happy to take a brief call on this particular legislation. I want to say to the Government, first of all, that there are people in my own electorate—and despite being in an urban Wellington electorate, I have quite a significant rural hinterland in that electorate—and in the rural part of my electorate who are very supportive of the idea of getting better rural broadband. But the issue here is that many of them, according to the Government’s definition, supposedly have already got rural broadband—and yet it does not blimmin well work.

The number of complaints I have had in my office from people whom the Government claims get 5 megabits per second rural broadband but who claim that they do not, has been increasing exponentially. So they are getting flyers in the mail saying “Connect to this broadband service, it’s great—you’ve got rural broadband.” But, of course, what it does not say is that in order to get that particular speed they have to be the only person connected to it at that given time. The more people who connect to it, the slower the speed gets, to the point where somebody at home, if they have cellular connections, getting faster connections through using a cellphone—and in some of these cases they are in a cellphone dead zone, so they are not even getting that—is getting very, very slow broadband speeds like the type that we might have had once upon a time when we had the old dial-up over the old copper network. In fact, they were faster than what they are getting now with, supposedly, broadband connections.

I want to say on behalf of the people in the rural communities in my electorate, and I am talking about Whitemans Valley, Kaitoke, Mangaroa, and those areas, that they—

💬 Clare Curran: The Minister is writing it down.

I hope she is writing those areas down. They do want rural broadband. The Government claims they have got it, but they do not. Their rural broadband is actually slower than what they would have got under the old dial-up system, and the more people who are connected to it the slower it becomes. These are small-business people who might be working from home. There are small farmers in that area and they are not getting what the Government promised them.

They will come to me and ask why it is that the Government is now spending all this extra money to roll this out to its next phase when the first phase is not working, and why is it that they, as consumers, are paying for a service that they are not able to get. These are people who are paying now. They are paying for broadband now, as of today, and they are not getting the broadband they are paying for. The cost of that broadband is potentially going to go up because this is an extra tax, and taxes ultimately get passed on to the consumer, to the end-user.

So the Government is increasing taxes, despite its very clear pre-election promise that there would be no new taxes under National. This debate is the first one on the first of three new taxes that it has introduced with this Budget. Ultimately the consumer will pay the cost of it. It is yet another broken promise.

I want to say that I support full broadband availability to all New Zealanders and I would support reasonable measures to do that where there is evidence that they were working and that they were actually going to deliver it. But spending $450 million—that is what we are talking about, despite the fact that the Ministry of Business, Innovation and Employment has admitted that there is no business case or analysis of the Rural Broadband Initiative’s effectiveness. It is staggering that the Government would spend this quantity of money without actually establishing whether it is any blimmin good. I can tell you now that the people who have been coming into my office to complain about the quality of their broadband connection are very firmly of the view that it is not any good and that they are not getting the speeds of rural broadband that the Government already claims they are getting.

When the Government says—what were the numbers it gave—that something like 86 percent of rural households and businesses are getting speeds of up to 5 megabits per second, it should put a very clear rider on it that it is only if they are the only person connected in that area. The clear reality of this situation is that in many of these rural areas, particularly the rural areas closer to the city centres, where there tends to be higher density population than in a rural area, the broadband speeds are woefully slow—absolutely slow. We have got people getting in their cars with their laptops and driving over the hill, literally, into Upper Hutt, because that is the only way they can get a decent broadband speed. It is good for the cafes in Upper Hutt if you are business person working in Whitemans Valley, because you will end up going over to Upper Hutt and sitting in one of the cafes there so that you have got access to decent broadband, because they are not getting it, despite the Government’s claim that they actually are.

I want to say over and over again that I support rural broadband, but I want to make sure that if we are going to spend money on rural broadband then that is actually what is being delivered. It is not being delivered. The Government claims that Whitemans Valley has rural broadband. It does not. The Government has not delivered it, and now it is saying that it wants to spend more money on a programme that clearly is not delivering what was promised.

Kia ora, Mr Chair. Just taking a quick call in the Committee stage of the bill, I understand what Mr Hipkins is talking about—I absolutely do. I have a 20-year-old son, his mate who ended up homeless, a 17-year-old son, and a 14-year-old daughter, and they complain to me constantly about lag. I am assuming, because I am not that up to speed with IT, that lag is when everybody is on Dungeons and Dragons, or whatever the heck it is that they are playing, and there are too many people on the line, as such, and so it slows down the speed. I understand that.

But what I do not actually understand is the argument that the continuation of the levy is not the answer. I am yet to hear—

💬 Clare Curran: I’m about to tell you all about that.

And I hope Ms Curran will stand and tell me what the alternative is. Who will build this infrastructure and how will it be paid for, if not in this way? Dr Clark is nodding his head, so I am hopeful that those members will stand and take a call—and Dr Woods, apparently, is also going to stand and give us an alternative way to make this work.

Nothing is worse than spending $300 million and then changing direction and spending $150 million in another direction while some people still have nothing. Nothing is worse than that. I take up Gareth Hughes’ contribution around the Commerce Committee and while it is at it, have a look at it, do a review, do an inquiry, and let us see how it went. But do not let us not change horse mid-stream after $300 million has been spent. Let us not leave the Robin Dixons and the Ōmaha residents and ratepayers out there on their own yet again with a levy that has been in place since 2011. Let us get real.

There is no cause for Spark to raise its charges. Let me just ask you: who actually pays this levy? Spark, formerly known as Telecom, pays $25 million per year of the $50 million levy because it is a percentage of what its take is of the market. I would say to its customers that if Spark decides to pass on the cost to them, which they have already been passing on to them since 2011, then change your provider. Change your provider. That is why we have 22 providers: Vodafone contributes $10 million, Chorus contributes $6 million, Vodafone fixed contributes $4 million, 2degrees contributes $1 million; Orcon, TeamTalk, Vector, FX Networks, CallPlus Services, BayCity Communications, World. Where is the press release from all those providers? Where is the press release from the 21 other providers apart from Spark? The reason why Spark has put out a press release is that it has the largest amount of your business, New Zealand, and it does not want to pay this levy. But this levy is required in order to deliver for the rest of New Zealand, no matter whom you have your business with. So I suggest that to you if Spark is not happy about paying its fair share around infrastructure.

New Zealand First agrees that there should be a review on the $300 million. There is nothing to be afraid of if it is doing well, and we could learn some lessons about it. What we know from inside our schools is that telecommunications can be a black hole of money. Everybody comes up with another great idea. But what is a sustainable idea, are we on the right track, and what is the cost of switching horses mid-stream?

So I hope Ms Curran will tell us how the Labour Party would fund this infrastructure throughout New Zealand. I hope that Dr Clark and Dr Woods will, because right now as far as—

💬 Dr David Clark: I hope New Zealand First will change their vote if there’s a good idea.

If you give a good enough argument, Dr Clark, you never know your luck. Today is Friday; it could happen. But at the moment New Zealand First stands with the Green Party. This infrastructure is required. The rural areas require it and, actually, most of the super-city of Auckland requires it. That is the most bizarre thing. Many parts of the super-city of Auckland like Wellsford, Te Hana, Tapora, Ōmaha—these places are in the super-city of Auckland created by this Government—still cannot get reasonable broadband. Sitting in Warkworth—what are we called? We are a satellite town of Auckland. We are going to go from 10,000 dwellings to 30,000 dwellings in 20 years, but apparently we have got lag.

So New Zealand First will continue to support the bill but I will be listening to the contribution from the Labour Party. I am looking for alternatives but at this stage we see it as appropriate that the infrastructure is built on a levy that has already been in existence since 2011. They have already passed on the cost. Do not up your prices any more, Spark, using this as an excuse. We will be watching. Kia ora.

There are so many things to say. I am going to start my contribution in the Committee stage, addressing clause 1, by talking to the history of the telecommunications development levy and the legislation within which it sits. The Telecommunications Act was passed in this House in 2001 with a vote of 65 to 52. One of the most interesting things about that vote was that the ACT Party, which then had five members in the House, split their vote. Three members voted against and two members voted in favour. The two who voted in favour were the two who had been sitting through the select committee process for the whole time.

That piece of legislation split Telecom in half. It was structural separation. The Labour Party did not oppose that. It did not oppose that at all. The person sitting on my left was the Minister for Communications who brought in the legislation for the operational separation of Telecom. We did not oppose that. What we opposed was the process and the setting up of a monopoly—a monopoly that is now called Chorus, which was set up to be given, handed over on a plate, the contract for the ultra-fast broadband project. We opposed that implacably, we opposed the way it was done, and we opposed the concessions and handouts that it was given along the way to do that.

Chorus has now become the monopoly provider of 60 percent of the roll-out of ultra-fast broadband at the same time as being the monopoly that has the copper network, which sits alongside that and has continued to provide problems.

In that legislation was the establishment of the telecommunications development levy. Labour did not oppose that part of the legislation. We never opposed that because we knew the benefits of providing a fund that was provided by the industry for the provision of services that could not be got through the market. My colleague over here talked about the market gap. There are many market gaps in this country with regard to the digital divide. There are market gaps within urban areas as well, with people who cannot afford to access broadband, cannot afford to access home phones anymore, and use prepaid mobile phones. There are people who are disadvantaged, particularly families with children, which is the biggest problem.

Nobody—nobody—could say that the Labour Party has not stood up for those people. Nobody could say that the Labour Party has not been the champion of closing the digital divide in this country and has not led the charge on that. It led the charge in that select committee, which you referred to earlier, around it, and has pushed and pushed around those issues, so nobody could say that.

That telecommunications development levy—and, by the way, everybody should remember that this was Steven Joyce’s baby; the brainchild of Steven Joyce was to create this—has caused so many ongoing headaches for the Government. He created the legislation that set the terms for that levy to be reduced to $10 million next year. What the National Party—and the Minister in the chair sitting over there was a candidate in the election—introduced 3 weeks before the election, out of the blue, was to just willy-nilly extend that levy. It extended it, created a new levy, and came up with more money. This was because National members knew—their market research was telling them—that there was a big problem in rural New Zealand because there were too many people getting crap broadband. It was turning out to be a problem for National members in their polling and in their market research.

So what happened? All of a sudden we get $150 million. There was no consultation, no reports, no analysis and, interestingly, since the election—and it is now more than 6 months since the election—we still have not seen any reports. There still has not been any analysis, and the regulatory impact statement admits it. It is embarrassing for the Ministry of Business, Innovation and Employment, I have to say, that it has put out a regulatory impact statement that acknowledges that it has not done the work. What we have got is a levy that was supposed to go to $10 million and now—oh—it is up to $150 million.

I think that my colleague David Parker made it clear that if there had been a different process around this, if there had been full consultation around how to spend that $150 million, how to do that with the community, not just with the providers who are paying the levy but full consultation about whether the Rural Broadband Initiative worked and which bits have worked, which bits have not worked, and then how could we do it better, if they had done that in a way that had been contestable and fair, we would not have opposed this—because we had never opposed it at the time when it was made before the election. What we said was that it needed to be contestable. It absolutely needed to be contestable and fair.

What we are seeing in the regulatory impact statement is that there could be capture by the big providers again, which is a rort, an absolute rort. This is why we are opposing it. This is why we are retaining our consistency of opposing something that is wrong. It is putting good money after a bad outcome, and we are terribly concerned about that.

I want to turn to a curious thing. My colleague Chris Hipkins referred to the fixed wireless broadband and the terrible situation that is occurring out there. Well, what we think we have discovered—and this is one of my questions or many questions that I have for the Minister tonight during this debate—is that there is some information around the number of customers. This goes to the 8,500 customers on fixed wireless broadband, which looks as if it has cost around $7,000 per customer. Who are they and who are the providers behind them?

💬 Dr David Clark: How much?

It is $7,000 per customer. That is a rough estimate, but it is just doing some basic maths.

💬 Dr David Clark: No evaluation.

We have no other information to go on, Dr Clark—no other information. There have not been any reports produced.

Well, let us have a wee look at who those customers might be and who is doing the connecting. Well, the top provider—self-described top provider, actually—for the Rural Broadband Initiative’s fixed wireless connections is a company called Farmside. It describes itself as that, and I have even got a piece of paper here that I would be very happy to table if anyone wanted me to. It talks about how it provides fast broadband via satellite, Rural Broadband Initiative’s fixed wireless, and fixed line solutions, as well as phone and mobile access. It says it has got more than 15,000 rural customers.

Well, that is really interesting, because what I have heard is that it is transferring many of those customers over to fixed wireless broadband, which is fine in itself, but it might be interesting for the House to know that the managing director of TeamTalk, which is Farmside’s parent company, is David Ware, who is the—

💬 Hon Amy Adams: Brother-in-law, yes.

—husband of Belinda Milnes, who happens to be the Minister’s sister. It is curious—

💬 Hon David Cunliffe: —and Jason Ede’s employer.

Oh, and Jason Ede’s employer. I forgot about that. The fact remains that it is a little bit curious that Farmside, which describes itself as one of the top providers for fixed wireless broadband, which has got very few customers—and I think everyone would acknowledge that, given that it has had 5 years, has spent $60 million, and now it has got 8,500 customers, which equates to about $7,000 each.

💬 Dr David Clark: Good transparency. It’s an evaluation.

I think there is a really important issue here around transparency and around what actually is going on here with rural broadband. There are questions about how the money is being spent on the towers and there are questions around what actually is being delivered out there for rural New Zealand.

So I say to the House tonight and I say to anyone from the other parties who wants to listen that there are some very, very good reasons to say: “Hang on a minute. Let’s not commit another $150 million to a programme that is highly questionable and needs scrutiny. Let’s take a pause.” We are absolutely committed to rural broadband and delivering that infrastructure and delivering it in the best possible way.

I have been listening to the debate on the Telecommunications (Development Levy) Amendment Bill, and I am trying to sum up what the different objections and questions are that have been raised by various members previously—and there are nine that I can discern. I just wanted to flag these and to ask the Minister in the chair to provide some kind of response to these questions.

The first question is, of course, about the concern that was raised earlier tonight when Spark released a press release saying that it was going to be passing along these costs to its customers. What is her response to Spark about that?

The second question that I have got is around some of the questions that were raised to do with the quality of the connection. Is the work that has been done so far actually producing the kind of result that we would want it to? Are those connections actually working for people? Are they providing the kinds of benefits that we would expect?

The third question is about the evaluation and the reporting of the existing Rural Broadband Initiative. Is it an effective way to spend the money? There have been questions raised about the sheer amount of money per connection. That has come up, so we would want an answer to that.

The fourth question that we have got, which Gareth Hughes raised earlier, is about the extent to which we are considering new technologies as part of this initiative. Is that being considered? And is the pace of change in these new technologies being considered? Is it possible that there will be a disruptive technology that will come along while we are still rolling out the existing solution that may actually render it redundant?

The fifth question that we have got is about whether companies will have two bites of the cherry. As we understand it, when the Government auctioned off the 700 megahertz spectrum, it reached a contractual arrangement with Spark and with Vodafone to roll out cellphone towers, which meant that they got a slightly reduced price on the spectrum. If that is correct, will they be bidding for this new money, essentially to be doing the same work? Will they get two bites of the cherry for the same piece of work?

The sixth question is around process. Why is this being considered under urgency? I will leave it at that.

The seventh question is related, which is: why are we seeking funding for initiatives now, before the policy details about how that money is going to be spent have emerged, and while the policy design is still being consulted on? Why do we have the cart before the horse, in terms of seeking funding before we know the details of the policy?

The eighth question is in relation to competition and our concern that was raised earlier about needing a more diverse and multiparty approach with different solutions for different rural communities.

And the ninth question is: what is the Minister’s response to the two Supplementary Order Papers that are being put forward by Gareth Hughes and me?

I do not know whether that is comprehensive. I have been trying to discern what the different objections and questions are that various members have raised. I may have missed some, but if we could start with those nine, I would be delighted. Thank you.

I rise to speak in the Committee stage of this bill, the Telecommunications (Development Levy) Amendment Bill. I want to speak a little bit about the title of the bill because I think that there are some more fitting titles for this bill. I think it would be useful to consider them as sensible amendments to the bill, to illustrate more clearly just what this bill is doing and to make it transparent to the public what will happen when this bill is passed—so that people are not surprised when their bills go up further down the track, so that they are not surprised when a new tax is put on them, so that they are not surprised when there is Government waste, and so that they are not surprised when there is another broken promise from this Government.

I want to address, though, a point that was first raised by Tracey Martin in her contribution earlier, which was a good one, I have to say. The issues are being debated here, and although we may disagree on whether this bill should be supported or not at this stage, part of the point of the Committee stage is, of course, to hammer out the ideas and to have a full debate and to ask whether this is a good idea or a bad idea. We are pretty firmly convinced that it is a bad idea, but Ms Martin raised a very sensible question: how otherwise would this be funded? From this side of the House—from the Labour side—there are two things that we would say are obvious. The first is that it is not wise to fund something that is not working. And because there has been no evaluation of the existing programme, it makes very little sense at all to continue to fund something that has not been proven to be effective or to be working.

Let us put that to one side, because we all want good rural broadband. I think that is the one point that everybody around the House is unanimous on. It is something that will take the country forward. The Government seems to have a somewhat limited vision of what might be possible, but we would all agree that rural broadband needs to be better. I wonder whether the Government might consider investing its Future Investment Fund in such an activity. I mean, what is that fund for if it is not for investing in future infrastructure? That the Government might choose to invest that money in it seems the most logical thing in the world.

Let us put to one side the fact that it has promised to spend that money 10 or 15 times over. It talked about paying off debt at one stage; well, it is $88 billion in debt. The $4.8 billion it got from flogging off the family silver will not cover that. But if we actually take the promises that it has owned up to and has put in ink, in terms of the Future Investment Fund, this would seem to be a sensible thing to fund that out of, rather than by imposing a new tax on users. We have seen earlier this evening Spark come out and say that this is a tax that it will be transparently passing on to its customers. We have had the Telecommunications Carriers Forum come out and say that it has been bearing the cost in this industry and that it cannot continue to bear it any longer. It thought this tax was time limited, but a new tax has been issued that takes it for ever into the future. This Government has promised not to introduce a new tax and now it is.

So the first of the alternative titles that I suggest should be considered by the Government is—let us just call it what it is—the “Telecommunications (Development Tax) Amendment Bill”. This is a Government that is trying to introduce three new taxes, despite having promised—crossed fingers behind its back—that it would introduce no new taxes if it was elected. In this Budget we have got three of them. This is a Government that is introducing a new tax, and we have had the proof of that, of course, in the departmental disclosure statement, which says quite clearly: “Does this bill create or amend a power to impose a fee, levy or charge in the nature of a tax?”. And the department says, in the biggest letters on the page, “Yes”. This is in the nature of a tax. Bill English has tried to deny that, but the public of New Zealand know a tax when they see one. It is an additional charge on top of what they are currently being charged—exactly what the industry now proposes to pass on transparently as an additional charge.

So we have got that, and it makes sense, therefore, to call this bill the “Telecommunications (Development Tax) Amendment) Bill”. That would be plainer. That would be clearer. More people know what a tax is than what a levy is. It is a nice clear way of saying what it is. This tax, of course, is going to be imposed on small businesses around the country.

I have to say that I was enjoying the contribution of my colleague David Clark, and I will pick up where he left off. Members opposite seem to be disputing the question of whether this is, in fact, a tax. In this Committee stage, it is proper for us to address that question in the debate on clause 1 of the Telecommunications (Development Levy) Amendment Bill, because that contains the title. The fact that this is a tax is, I think, quite plain. It is a cost that is imposed on members of the public through this instrument that applies through the companies concerned. We had a statement out today from Spark—the old Telecom New Zealand—which uses the language of a tax and which makes it clear that it is going to have to pass the cost on to its customers. What is more, it is looking at doing so with an explicit splitting out in everybody’s phone bills so that they can see what this extra tax is. This is an extra tax, and it will be shown on people’s phone bills. That is a statement from Spark. I think that colleagues and members of the public know that in the past I have had cause to take issue with some of the statements from the old Telecom New Zealand, so I do not give it a soft run, but I will take it at its word on this.

If that was not good enough for people, let us turn to the statement published today, Friday, 22 May, on the Telecommunications Carriers Forum. This is the industry body. It is not one company pushing its own barrow; this is the forum of all the players. It talks about this being unnecessary to pass under urgency “in order to tax the industry”—this is quoting from it. This is the industry body. The industry body is calling it a tax: “The bill extends a tax, which to date, has not been explicitly recovered from consumers. However, the industry cannot continue to absorb ongoing costs of this magnitude.”

Members opposite have said “Look, we don’t need a select committee process because there is nothing new in this.” Well, what is new? I think Mr Moutter, the chief executive officer of Spark, makes the point very clearly: the original tax was a one-off to support the development of ultra-fast broadband through the Rural Broadband Initiative. It was time limited, and the downsizing of those taxes was legislated for in the formal bill. So to change the law is, in fact, a change, because, under the continuous disclosure rules of the stock market, the companies’ concerns have to build that into their forecasts, and that has to be notified to the exchange and made public. If Parliament wants to override—people will see the irony of my having to set this out for members opposite—those private property rights that are enshrined in the securities legislation, then we are using legislation to do it; therefore, something is definitely changing. We are overriding legal rights.

What then is the proper framework of objectives to consider the questions? I want to commend our Green colleagues for the list that they have come up with. I am going to refer to it again. Let me just set out for the public what Labour’s goals are here, when we look at this type of policy issue. The first one reminds me of the old digital strategy with the “three Cs”. We want great connectivity for all New Zealanders. To be frank, we want faster, cheaper broadband wherever you are in New Zealand. We support the goal—I think every member of this House does—that broadband ought to be ubiquitous and available anywhere in New Zealand. The whole country benefits from the fact that everybody is on the network. You can ring people up; their phone numbers are in the phone book or they are on the net, or what have you. Nobody is left out, and the whole country benefits. That is the first goal: faster, cheaper, ubiquitous connection. But it leaves open the question: is this the right instrument? Is this helping? How would you know? There has been no evaluation done.

The second one is user capability. We are opposed to digital divides. We abhor the digital divide, which is an income-related divide where about a third of households—low-income households—do not have fast broadband access. And that impedes children’s learning and all sorts of things, such as access to Government services. We want every New Zealander to have access to the net at speeds that they can use. We are also concerned about the rural-urban divide. We know that there has to be a technology mix, starting off with fibre in the backhaul, out to, perhaps, ADSL, copper, VDSL, or whatever else is the current flavour of technology, and then out to mobile and then out to satellite. Or perhaps Project Loon will bear fruit and we will have a mesh network of balloons—who knows. The technology frontier will shift. That is the point. Because the technology frontier is shifting, because technology is changing, it is prudent and proper, and really important, for the Government of the day to carry out a proper analysis of how the tax has been operating, before imposing a new tax over the top of it. That brings us, of course, to the third “C”: content. We want a vibrant content environment. We want there to be competitive conditions online so that New Zealanders can access the content that they need and want on the cheapest possible terms.

Those are the goals. What questions arise? I am just going to come back to Mr Shaw’s list. I think it is a really good one. Will these taxes be passed on to consumers? Well, we have the industry body and one of the largest players saying that they will. That is, at the very least, a very important and open question. Secondly, what about the quality of connections? There are two issues. There is a technical sufficiency argument, and there is a benefit-flow argument—who gets what? They need to be answered. The third issue: has there been sufficient evaluation and reporting? Well, there clearly has not been, because there is not a proper regulatory impact statement and there has not been an options analysis done by officials. Fourthly, what do we know about disruptive technologies? I mentioned Project Loon; there could be others. The point is: who would know? The Government has not done the work. Fifthly, will companies have two bites at the cherry? Are they under existing obligations? I do not know, we do not know, and the public does not know, but that is a very important question, because we are opposed to companies double-dipping. If they are contractually bound because they have concessional terms under a previous spectrum licence auction, then we should not be making New Zealanders pay twice by imposing a new tax on them, especially not under urgency, in the dead of night.

Was the process proper? Well, clearly it was not. There has not been an options analysis done, and there has not been a regulatory impact statement done. Why should seeking funding from policy have been designed in this way? Was the cart before the horse? It looks like it was. To answer that question, we turn to the OECD’s telecommunications policy unit and a very major report on telecommunications development obligations or levies, which was published in 2012 and which was widely regarded at the time as “the gospel”. The report sets out the following points, which it is a shame that the Government has not, apparently, addressed. First, “define the specific features of the service under consideration,”. Second, “determine whether broadband is essential for full participation in society,” and therefore in the public interests. Third, “establish that market mechanisms are insufficient to ensure that service is available”. Fourth, “assess the options of imposing a universal service obligation relative to other policy alternatives,” Note: that has not happened in this case. Fifth, “evaluate those alternatives in light of the broader policy objectives and other ongoing programmes.” That has not happened, either. What are the criteria that an evaluation should take care of? Page 24 of the OECD study lists parsimony, sufficiency, neutrality, focus, adaptability, predictability, accountability, and effectiveness. It is quite a long list. The OECD has done a lot of work.

Well, what are they saying? Turn to page 27. “At present, revising universal service policies to include service from any location may not be feasible in all OECD countries.” It goes on to say that those with high population density like Korea will have no problem. Those with low population density like Sweden, Australia, or New Zealand may well have a problem, and the issue of a universal service obligation is a very pertinent issue to be evaluated and raised. There is certainly, in terms of the OECD’s work, no case for an automatic roll-over. This is highly contentious stuff. What issues arise? Well, what they name is cost relative to benefits. “In large countries with large unpopulated or sparsely populated areas”—like the South Island of New Zealand—“…the cost of providing access from any location would exceed the benefits.” How much is too much? How far away is too far away? We are never going to run a fat fibre pipe to Mount Cook. There are not enough people there. But we may want to use mobile broadband, satellite, or “Loon”—who knows. The point is, the work has not been done and the public does not get access to that information.

The OECD asks what the range of services to be provided is. What is the impact on competition of imposing a TDO? What is the impact on the quality of service? What about the affordability of the service if the tax is passed on to the consumer? What about technical issues like emergency services and social tariffs, and so on and so forth?

Given that the debate on clause 1 is quite a wide-ranging debate, it is probably a useful chance to take my call on this matter. I was not otherwise intending to speak on the title, but I do want to make a few comments. The first is that we have heard repeatedly from Labour in this debate—as if saying it often enough makes it true—that this is somehow a new tax. It has been in place in its current form and at its current level since 2011, and it was in place at a higher level under the telecommunications service obligation before that. Neither is it something that we have decided to do post-election without telling anyone. It was announced in August as part of our election manifesto, which said that, if elected, this is what the National Government would do. So there is no question that this is in anyway inconsistent, nor can anybody, through any sort of twisting of the facts to suit the argument, suggest that this is new. It is not new.

The costs are in place. The costs of this are already in place. There is zero increase to the costs to the telecommunications companies. I have said that there is zero justification for any increase in their bills. I have never said that they will not be opportunistic and craven and try to justify some profit grab through it. I have said that there is no increase in costs to the telecommunications companies, and, therefore, zero justification for them to increase their fees. If Spark wants to announce that it is going to put its prices up, that is something it will have to explain to its consumers, but let me tell you, as others have said in this Committee, it cannot sensibly justify raising prices because of this legislation. These levy extensions that we are talking about tonight do not take effect until 2016. So if they do put the cost up, let us remember two things: when and by how much will they go up? At the very most we are talking about cents per bill, per month. So if they put costs up from 1 July 2016 by more than 19 cents for a prepaid plan and maybe up to 80 cents for a consumer, then they are not being honest with New Zealanders. Even then, it is already in your bill, so they would be double-charging you.

Can I make the point that it is very easy to stand in this House and say how much you support rural broadband but not be prepared to do anything to make it happen. Here is the reality: we are building infrastructure in rural communities that telecommunications companies will use to sell their products. The telecommunications companies that are paying this charge use this for their business services. So who should pay for it—taxpaying mums and dads or the telecommunications companies? My view is that the telecommunications companies should pay. When Labour says to take it out of general taxation, it is saying that we should pay for the infrastructure that Spark, Vodafone, Chorus, MyRepublic, CallPlus Services, and all of the others use to carry on their business. That does not make sense. That would be irrational and unreasonable. It should fall on the industry. Those in the industry should not be allowed to sell the service just where they can make a lot of money. Instead, we levy them to say that, actually, we have an expectation that they will provide services everywhere. That money then provides the communal infrastructure that those same companies provide their services over.

The question that has come up also is: “Why is it urgent?”. This is a fair question. I accept that, because, yes, the extension takes effect from July 2016. I will tell you why it is urgent. It is because anyone who understands how these processes work will know that I cannot go out and start negotiating for contracts for this to work until the money is legislated for. So the first step is that there has to be a legislative mandate to say that the money is available; then I can start the process. The longer that is pushed out, the longer it will be until people get better broadband. To every member in this House who has talked meaningfully about “Oh, we have got to get better broadband, it is taking too long.”, I say that that is where the urgency is. The urgency is that New Zealanders want this, and they want this as soon as possible. This bill has been made the simplest bill possible. It does not talk about the levy’s operation, how it is allocated, how it is spent, or how the Commerce Commission divides it. It simply provides the basis for the money, so that we can get out and start getting these processes in place.

Let me close by just saying this: broadband is critical to everyone in New Zealand—everyone. Somebody has to pay, and I am absolutely comfortable that the right place for that payment to fall is a levy on the telecommunications companies that will use it and that will benefit. There is zero justification for anyone to increase prices as a result, and if they do, that is a conversation that they should be having with their consumers. If I was their consumer, I would be looking to shop around.

I would like to thank the Minister for taking a call, because now everything is as clear as mud. I am really happy, because it is so clear that it actually goes against what the Telecommunications Carriers Forum has said in its press release tonight. The Minister has said that the telecommunications companies are the ones to blame here, and that this is not a tax. But it is clear from the press release put out by the Telecommunications Carriers Forum, I guess a couple of hours ago, that this situation, as I said before, is as clear as mud.

The Minister said that because of the level of levy—or tax, I should say—the prices should have come down. Well—

💬 Hon Amy Adams: No, I didn’t.

Yes, you did. But the Telecommunications Carriers Forum disputes that, and in its press release from this evening, I guess, it says that the bill that we are currently debating “extends a tax, which to date, has not been explicitly recovered from consumers. However, the industry cannot continue to absorb ongoing costs of this magnitude.” So who is right? Is it the Telecommunications Carriers Forum, which is saying that “We have absorbed this for some time and now we have to charge.”, or is it the Minister, who says: “Well, it shouldn’t be double-charging.”? I guess that is why we have got a problem with this piece of legislation, because, as I said, the situation is as clear as mud.

This is a new tax. In fact, the departmental report on this bill says it is a new tax. It has been quoted, but just because the Minister said that this is not a new tax I will quote it again. Part 4 of the departmental report asks a very specific question, at 4.2. That question is: “Does this Bill create or amend a power to impose a fee, levy or charge in the nature of a tax?”, and the answer is yes. The answer is yes. And then Spark—[Interruption] Here is a question for the Minister, if she is disputing a lot of things that I have said today. Does she dispute something that she said today? In her first reading speech she said: “… the industry will not need to put its prices up, or explain to its customers why their bill is changing.” Well, that would be great because she is obviously trying to cushion the market, and people at home will be worried if they are going to have to pay more in their bills. But the reality is that less than an hour later, Spark said it was going to put its prices up by $1 a month. You can question whether that is the fault of the company—and that question has been asked by New Zealand First and also by the Minister—or whether it is the fault of the Government, but the reality is that people are going to be paying more for their monthly bill. They are going to be paying more for their monthly bill—that is the cold, hard reality of this.

This is a new tax, and this Government is trying to spin its behind off to say: “Oh, well, it’s not our problem. It’s not our fault.” Well, you created this problem—you created this problem. We are not going to vote for this piece of legislation, for a very good reason: $300 million has already been spent and, as we on this side of the Chamber have said, the assessment and the critique of the Rural Broadband Initiative phase one has been, well, less than ideal. So if we are going to go and spend another $150 million, which is going to be put together by this tax in this bill, I think the New Zealand public would like us to know whether the Rural Broadband Initiative phase one has been effective or not.

The Government claims that 86 percent of rural users now have access to this. Well, we do not necessarily think that that is the case. There has been no assessment of the Rural Broadband Initiative phase one. This issue was before the Commerce Committee yesterday morning. InternetNZ wants us to have an assessment of the $300 million—which is, you know, not pocket change—to find out whether it has been effective. I do not think it is a bad thing for members on this side of the Chamber to say: “Was that $300 million spent well, so that we can commit another $150 million to the next phase of this programme?”. We cannot sit here and say: “Well, yes, go and do whatever you like.”

We absolutely agree with the objectives of the Rural Broadband Initiative, but $450 million is a hell of a lot of money, and we want to know whether the first $300 million has been effective or not. We have big questions about that. We have had a number of communities come to our select committee and say: “Well, our experience hasn’t been that flash.” So, is this something that is happening up and down New Zealand? Is it something that we need to address, and is it something systemic?

I want to talk again about the title of the bill because I had raised only one of my suggestions when the bell so rudely interrupted me earlier. The second suggested title that I have for the bill is “Telecommunications (Government Waste) Amendment Bill”, because that would label clearly the problem that we have here, where the Government is refusing—refusing—to evaluate this proposal before it takes any further steps.

Before I elaborate on this, I want to touch just quickly on a point raised by my colleague Mr Faafoi in his contribution. He talked about how things are now as clear as mud, and whether this is a tax or a levy. The Minister says that it is a levy; the industry says that it is a tax. Mr Cunliffe has raised the point that the OECD would probably define it as a tax, and we have numerous other references, including from the Minister’s own department, referring to it as “something in the nature of a tax”. The Minister now claims that she is the only one who is right on that point and that everybody else is wrong, and perhaps it is as clear as mud, in the same way that the Prime Minister’s promise not to raise GST was as clear as mud—and the promises made by the Government that it would raise wages by $7,000 by 2026 were made in the same vein. All these promises were meant one way, and now the Government is trying to say that they mean something else. It said that it would get to surplus. That was the central promise of this Government’s last election campaign. Well, we know now that that has not been achieved.

It is not clear whether this is a bill about a development levy. It is a development tax, as I have suggested in my previous contribution, but it might well be labelled “waste”. If something is not measured—and this is a simple precept—we do not know whether it is actually being spent well or not. We have suggested alternative ways that it could be funded, and we have asked the Minister to explain—or others in this Committee have—why it will not be evaluated properly. Questions that hint at conflicts of interest have been raised. I am not aware myself of the detail of that, but I think the Minister ought to be on her feet explaining why she is not going to evaluate it. Even if she is going to press ahead without public scrutiny of this bill, I think it would be reasonable for her to explain to us why no evaluation is happening. This is why it could well be called the “Government Waste Bill”, because the facts that we have, insofar as we have them, are that $60 million has been spent on this particular initiative so far, to get only 8,500 connections. That is the best estimate available. That is $7,000 per connection, and the quality out there is not great. We have heard that from several MPs who have had people coming into their offices to complain. I have certainly had them. I took the petition to the select committee, which has seen a change in behaviour as a result, and I know that my colleague Clare Curran has done the same, and I encourage others to do so.

This is a wasteful bill. If we are not going to evaluate whether the programme works—and all of the evidence points to it not working and not being an effective use of taxpayers’ money—then there is an arrogance in not evaluating it, in not being able to explain, and in not being able to actually front up and say “This is why we think it is worth investing again.” I do not think the public at home are going to say that $7,000 per connection is good value for money. There are plenty of other ways that we could get broadband there more quickly. I think the overseas experience would be that it could get there more cheaply and be of a better quality. This is a Government that needs to do some explaining. So I am hoping that the Minister will soon get to her feet and explain to us why it is that what appears to be incredibly wasteful spending is not being evaluated. We all want better broadband—we all want better broadband. All of us would like to have happy people coming through our electorate offices saying: “Look, I’ve just started a new business and I’ve got this great fast broadband, and now I’m able to participate in the world.” The reality is that that is not the experience.

This Government has been in Government for nearly 7 years now. We heard Melissa Lee earlier complaining about the poor quality of broadband. The irony of Government members also complaining about the poor quality of broadband despite their having been here for quite some time seems to be lost on them. So I suggest that in addition to the title “Telecommunications Tax Amendment Bill” being considered, the alternative title “Telecommunications (Government Waste Amendment) Bill” also be considered. Thank you.

I will give a call shortly, but by way of being helpful and in no way being patronising, I will note that the debate is becoming somewhat repetitious at the moment. The discussion around this clause 1, “Title”, is the widest ranging part of this debate. After that we move on to clause 2, “Commencement”, clause 3, “Principal Act”, the amendments that are around clause 3A, and then clause 4, “Schedule 3B amended”. These will be very narrow debates, and very little leeway will be given in so far as members must address those parts. Members seeking clarification on this could look at Speaker’s ruling 114/7. I just draw to the attention of members that now they should be looking to draw on new, novel, and innovative avenues of inquiry or debate or discussion.

I will definitely try to be original; thank you very much, Mr Chairperson. First of all, can I thank Dr Clark. I am actually enjoying myself. This is a debate, but I find it very interesting that I am doing the Government’s work. Not a single member of the Government, apart from the Minister, has stood up to actually address the issues that the Labour Party has raised. So first of all—

💬 Hon Judith Collins: You’re doing a great job, Tracey.

Thank you, Ms Collins. First of all, New Zealand First would agree absolutely with the comments around evaluation that Dr Clark raised. Absolutely we would agree. It has been raised also by the Green Party, and previously in conversations we have said that the Commerce Committee would be a perfect organisation through which to do an evaluation. But that is no reason to stop this bill.

We can accept that urgency may not be the best thing, but even if we—[Interruption] I think I am in a parallel universe. I am standing here arguing against the Labour Party about a levy on a corporation. Can I just talk about a press release from Friday—

💬 Hon David Cunliffe: I raise a point of order, Mr Chairperson. The member’s address raises an interesting point. If the New Zealand First Party were in the position where on the basis of its concerns about the lack of an evaluation it wished to change its vote, is there any possibility of correcting the record on clause 1, which has already passed?

The CHAIRPERSON (Hon Chester Borrows): No, it is not an issue and it is not a point of order. Continue.

Speaking to the point of order, New Zealand First is quite clear in its own mind how it votes and when it votes. It does not require the Labour Party—

The CHAIRPERSON (Hon Chester Borrows): That is a matter for debate, not a point of order. The member may continue with her call.

Thank you, Mr Chair. And the evening goes on, so there you go. Can I just draw the Committee’s attention to a press release on Friday, 22 August 2014, headed “Spark annual profit almost doubles … grows mobile revenue”. It said: “Spark New Zealand … the rebranded Telecom, almost doubled annual profit on the sale of its Australian AAPT unit, and grew mobile revenue as it repositions itself away from relying on dwindling landline use.” It made that record profit with this levy in place—with this levy in place. And that net profit rose to $460 million, or 25c per share—25c per share—but 22c only per month is what it needs to recover on mobile calls to actually pay this levy. Yet it made 25c per share in the 12 months ended 30 June from $238 a year earlier.

I am arguing this against the Labour Party. I find that unfathomable. I would not have believed, when I came down to the Chamber today, that I would be standing here doing the Government’s job—doing the Government’s job on a Government bill. Why on earth am I doing your job for you? Get up and argue.

I agree that there needs to be an evaluation. Surely, because the National members are not rising to their feet, National must agree also, because the Green Party and New Zealand First appear to be doing their job for the consumers of New Zealand and those in rural New Zealand who want broadband. The other thing that Dr Clark said, if I can just address it, was that the alternative way to pay for this infrastructure, which, as the Minister quite rightly pointed out, is used by every one of the 22 telecommunication companies—upon which a percentage of their profit is paid into to create this infrastructure. [Interruption] For goodness’ sake, Mr Jami-Lee Ross, please take a call and stand up for your own Government bill. This is just so unusual that I am having difficulty dealing with it. One of the things missed out that Dr David Clark said was that the Future Investment Fund could pay for this.

💬 Hon David Cunliffe: Would the member change her vote if the National Party—

No, we will not change our vote, Mr Cunliffe, because you have not provided enough evidence to suggest that this is the way that we should go. The Future Investment Fund—New Zealand First quite clearly said that we believe that 49 percent of our State-owned assets should not be sold. How on earth now could we vote for the use of those profits, when we said that they should be reinvested in income-earning assets that provide an essential service such as power, which has been sold off? How on earth would New Zealand First then actually stand by and support some organisation that said we should take it out of the income of the Future Investment Fund?

But here is the irony that blows my mind. Whether the consumer is currently paying 22c per month for a mobile call or 80c for any other service because the levy is currently in place, or whether, as the Labour Party suggests, we actually take that money out of another taxpayer bucket, they are the same people—they are the same people. The consumers of New Zealand who have got the mobile phone in their hand, and I suggest if Spark puts up its prices they change their provider—

I move, That the question be now put.

It is my great pleasure to take a call on the widest-ranging part of this debate, as you identified, Mr Chairman, on this Telecommunications (Development Levy) Amendment Bill. This is a seemingly very short piece of legislation that we have before us of just four parts. But I, as a number of my colleagues have done before me, want to talk about the title of this bill in terms of the Telecommunications (Development Levy) Amendment Bill. One of the objections that has been raised from Labour members who have spoken previously is that this is an increase in tax from a Government that purported that there would be no new taxes. What do we have here? A new tax and an increased tax. It is dressed up. We are trying to call it a levy, trying to soften the blow, but let us call this what it is.

We have had the industry come out today, and one of the questions we have had is why there is the need to use this process of urgency to go through this. I think that that is a real question that does need to be addressed. Why is it that we are not having the chance for the industry and the concerned players—the people who need this broadband in their small businesses and the rural families and families in our regions that need this access to broadband—to be able to come and speak to the people making the decision and to have that chance to have submissions at the select committee stage? Urgency should be used for real reasons, not just as a way to ram through some legislation that you think might be a little bit unpopular, and where you do not want to give people a chance to front up and have some objection to it.

But this legislation is absolutely on message for the Government. Its Budget was one that was long on broken promises. It was from a Government that is short on vision. It is a Government that all round tried to scurry around the fact and get as close to reaching the non-surplus as it could—the non-surplus, of course, otherwise known as a deficit. What we do have here is a piece of legislation and a title that is quite misleading for people.

Of course, it goes without saying that Labour supports more people getting connected to broadband. We know that this is absolutely imperative for the future of New Zealand. We know it is important for education. We know that it is important for our businesses. We know that it is important for our industries. We know that it is absolutely vital. We have consistently focused on getting rural and regional New Zealand a plan for community-based fibre schemes. This is something that has occupied our minds and our actions when we have been in Government. However, the existing rural broadband scheme has been a flop. It is a rural broadband scam. It is not working. Not only is it a waste of Government money but it lacks accountability and transparency.

Once again, what we are seeing here is economic mismanagement from a panicking and desperate Government. We can hear the shrieks from the other side that are serving only to underscore this point, from the reaction that comment got over there. It is another example of how it is that National is neglecting the regions and treating them like the poor country cousins. Rural customers are going to end up paying more for this, far from less.

💬 Dr David Clark: It’s shocking in Waitaki.

It is shocking in Waitaki—that is what I am told by my colleague Dr David Clark. He wants to know why the member Jacqui Dean, barracking from the other side, does not stand up for those constituents in Waitaki who are experiencing shocking internet and broadband connections, and why it is that instead of taking a call and explaining to her constituents why she will not back them and stand up for them, she chooses just to interject in an incomprehensible way from the benches opposite. So, get on your feet, take a call, and stand up for the people who elected you to represent them. It would be great to hear from you. We are all holding our breath and would like nothing better at this time on a Friday night.

The Rural Broadband Initiative was supposed to deliver speeds of 5 megabits to 86 percent of rural households and businesses. At the time Steven Joyce said that this was meant to mean 252,000 customers in rural New Zealand getting access to high-speed broadband comparable to urban levels of services and prices.

I was not sure whether I was going to take a call on this when I came down here, but listening to the debate, I feel that I cannot not take one. I do want to talk about the title. I think the two words that really matter most are “telecommunications” and “development”. Frankly, I do not care whether we call this thing a levy or a tax or a koha or a Danegeld or anything else; what matters is that it is money that gets paid.

I agree absolutely with Minister Adams that it should be the telecommunications companies that pay it, because it is actually the companies who, since privatisation, are responsible for the fact that we have not had development in telecommunications in the rural areas.

I am going to put this from a slightly different perspective from some of my Labour colleagues because I actually live in the boondocks. I live in a cellphone blackspot—it is called rural New Zealand. There is no coverage. I have got maybe one little sweet spot up by my garage where I can get two bars if I hold the phone up there—sometimes, on a good day, if it is not raining. But in the house? No chance. This is 40 minutes north of downtown Christchurch, so it is hardly the middle of nowhere.

We moved up to Canterbury about 6 years from Central Otago. The previous 2 years we had been enjoying blisteringly fast broadband speeds of about 2 megabits, and that was because they had upgraded the cabinet round the corner, finally, but prior to that we were on dial-up. If you wanted to look at a picture, you just sort of set the thing going and then went to bed, and in the morning your 14 kilobyte photo had come through—if you were lucky, if the thing had not logged off through the night.

Going back a little bit further in time, when I was growing up I remember the telephone was a black Bakelite thing on the wall with a crank handle. To use it you would pick up the handle, crank the handle, and the nice lady on the other end would say “Number please?”, and so you would say whom you wanted to talk to. Being a little boy at the time, of course the nice lady in the phone exchange was in the post office and she could see the town. She knew everybody, and she knew whom I was probably talking about. She would say “Do you want to talk to Paul?” and I would say yes, and she would say “I’ve just seen him go out.” And that was the way that rural New Zealand was. Actually, in broadband terms most of rural New Zealand is still like that. Most of rural New Zealand would just like to have broadband.

So in 2009 we moved to Canterbury and Telecom said yes, that was fine, it could hook us up to broadband, it had checked our lines and they were all fine. It sent us a nice free modem, and that was all going to be good. And then Telecom came to hook it up, and said actually, no, our line could not take it. We asked when that was going to happen, and Telecom said it was looking at upgrading the exchange—maybe in about 2012. We asked what we were going to do until then. A couple of the Labour members mentioned companies like Farmside. In those days, that was pretty much one of the only alternatives. It was doing mostly satellite internet in those days. So we looked into that and we looked into radio, and ended up getting a radio link with a company out of Christchurch. We were on the outer edge of where it could reach. It was slightly cheaper and slightly faster than the terribly slow speeds that that satellite was offering.

I think it is a bit rich that we have got members—and they are mostly Labour members—who are standing up here talking about rural this and rural that and provincial this and provincial the other thing. They talk about constituents coming to see them and they relate these second-hand stories about the services that are provided in the provinces, kind of holding it out at arms’ length as if it is some sort of distasteful thing—“We’ve heard about the countryside. We see documentaries about it on television from time to time. Every now and then an angry person from rural New Zealand will phone us up, and sometimes a scruffy one will come into our office and sing us a tale of woe about how terrible things are. Of course, we sit there and smile sweetly and nod and take these concerns on board—at a distant academic level, because, actually, we do not live that.”

Well, people like me do live it. I understand that maybe the upper levels of the National Party have lost touch with the heartland but there are plenty of members on the Government side who still live in the rural areas, who still know. They themselves experience these things. And so I agree with my colleague Tracey Martin that it is a bit odd that here we are, doing the Government’s work for it, but in actual fact, as far as this is concerned we agree with them entirely. I heard Ms Lee talking earlier about the plight of some travel writers, I think they were, who were having difficulty out in the cellphone blackspot that is called rural New Zealand, trying to get a link to their Twitter. These things do not mean anything to urbanites who understand them at an academic level. Of course, here we have got connectivity. We have got cellphones that have got lots of bars on them all the time. We can go up to our offices and we have got high-speed broadband. Members can go back to the hotel and they have got broadband. They can go back to their apartment and they have got broadband. They can go home to their urban electorate offices and they have got all of these things. And so they hear this sort of whining noise from people—“Oh, the poor people of the country have not got fast broadband.”—and talk in highfalutin conceptual ideas about having another review or perhaps forming a committee and looking at things again.

People in the provinces have actually had a gutsful of that. It is the provinces that earn this country’s living. It is the provinces that create the wealth. It is the provinces who are always on the rough end of the stick.

I move, That the question be now put.

I will just remind members that votes are to be heard in silence. We have had previous precedent today when that was breached, and there were ramifications. We will hear votes in silence.

Clause 2 Commencement