Report on the Committee’s Visit to New Zealand
Introduction
The reciprocal Australia New Zealand Parliamentary Committee
Exchange Program (NZCEP) has operated on an annual rotational basis between the
respective Australian and New Zealand Parliaments since 1989. In addition to
bringing together Members of Parliament from both countries to discuss apposite
issues of mutual interest, the NZCEP contributes to consolidating the existing
Australia-New Zealand economic and diplomatic relationship.
Although a newly established committee in the 43rd
Parliament, the Joint Committee on the National Broadband Network (the
committee) eagerly welcomed the opportunity to represent the Australian
Parliament in the 2012 NZCEP to learn about the New Zealand experience in
developing its high speed broadband network. The committee was also pleased to
offer its views on the Australian experience in development and implementation
of the National Broadband Network (NBN).
The committee undertook the 2012 NZCEP from 24 to 28
September and met with a range of private sector, government officials and
parliamentarians, including the Commerce Select Committee and the Speaker of the
New Zealand Parliament. The committee also undertook a half day inspection of
fibre and copper broadband network infrastructure, including a central exchange.
This delegation report contains a summary of the information
presented to Members and the associated issues discussed during the 2012 NZCEP.
Visit Objectives
The objectives of the 2012 NZCEP were to:
- Reaffirm existing links with the New Zealand Parliament
- Establish links with the Commerce Select Committee, selected
private sector organisations and Government agencies responsible for delivery
of New Zealand’s high speed broadband network
- Gain a practical insight into the workings, policies and funding
arrangements underpinning the Ultra Fast Broadband and Rural Broadband
Initiatives. In particular to explore:
- The mix of technologies incorporated in New Zealand and the
rationale for technology selection;
- The logistic, budget and time implications of selected
technologies and the possible impact on subsequent wholesale products and
potential retail service provider take up;
- Associated telecommunications regulatory issues in relation to
the demerger of Telecom New Zealand (Telecom NZ);
- Wholesale pricing issues;
- Community consultation and community education strategies;
- Government, corporate and community readiness;
- Existing employment and skilling issues.
Visit Program
Meetings
The delegation commenced its visit program in Auckland where
it met with the National Industry Organiser, Telecommunications of the New
Zealand Engineers, Printers and Manufacturers Union and discussed labour force
issues such as potential skilling opportunities, future employment demand and
supply for construction of the high speed broadband network, and skilled
workers being lost to Australia as part of its higher income and demand for the
NBN build.
The committee also met with representatives of Crown Fibre
Holdings Limited (CFH), which is responsible for the management of New
Zealand’s high speed broadband network, with the telecommunications company
building the wireless network under the Rural Broadband Initiative (RBI):
Vodafone New Zealand (Vodafone).
Finally the committee met with Northpower Fibre Limited
(Northpower), one of four local fibre companies tasked with building part of
the fibre network under a public-private partnership arrangement with CFH as
the company representing the New Zealand Government.
In Wellington, the committee met with former and present
Ministers responsible for the establishment, policy development and current
build of New Zealand’s high speed broadband network and associated public
service departments and agencies such as the: Ministry for Business Innovation
and Employment, Treasury, and Ministry of Education.
The committee also met with the Commerce Select Committee
and former Chair and members of the Finance and Expenditure Select Committee
which inquired into the draft legislation underpinning the reform of the New
Zealand Telecommunications industry, including the demerger of Telecom NZ.
The committee gained an appreciation of the broader regulatory
processes surrounding the establishment and build of the New Zealand fibre
network by meeting with the Commerce Commission which is the equivalent of the
Australian Competition and Consumer Commission.
The committee also met with Chorus which was formerly the network
arm of Telecom NZ prior to its voluntary demerger.
NZ Figure 1 Delegation Members in front
of the New Zealand Parliament Building
NZ Figure 2 Delegation Members with Dr
the Rt Hon Lockwood Smith MP, Speaker
NZ Figure 3 Delegation Members with Hon
Craig Foss MP, Minister of Commerce and Broadcasting and former Chair, Finance
and Expenditure Select Committee
Infrastructure Inspections
The committee undertook a half day inspection of newly built
and installed fibre network components and existing copper network
infrastructure at the Wellington Central Exchange and at the Churton Park
subdivision respectively.
As part of these inspections, the committee was shown the
internal components of a newly built fibre cabinet that premises and households
may elect to connect to and receive high speed broadband. The committee was
also shown the existing cable television infrastructure and copper network
broadband infrastructure located within 100 metres of the fibre network
cabinet.
As the committee had previously inspected NBN
infrastructure, Members were able to compare the visual impact and also gain a
basic understanding of the practical component parts of New Zealand’s cabinetisation
infrastructure of its fibre network in relation to its existing copper network.
The 2012 NZCEP official program is attached at the end of
this delegation report.
NZ Figure
4 Delegation Members at the Wellington Central Exchange
NZ Figure 5 A
Chorus representative showing the cabinet infrastructure supporting the copper
and fibre networks
New Zealand’s High Speed Broadband Initiatives
Background
In September 2009, the New Zealand Government announced that
it would provide up to NZ$1.5 billion to fund the rollout of a high speed
broadband network or Ultra Fast Broadband Initiative (UFB). The New Zealand
Government implemented its UFB policy to:
...improve productivity in the economy, New Zealand’s global
competitiveness and the lives of New Zealanders. To this end it has put in
place the Ultra-Fast Broadband Initiative to assist and encourage the private
sector to invest in early deployment of fibre, with a particular focus on
sectors that are expected to yield the greatest productivity benefits.[1]
The UFB is also expected to improve social policy outcomes
for education and health.[2]
The high speed broadband network policy would be realised
through the combination of the Ultra Fast Broadband Initiative (UFBI) and Rural
Broadband Initiative (RBI).[3]
The UFB and RBI will be rolled out over a ten year period
(due for completion in 2019) and are intended to reach 75 per cent of New
Zealanders to provide download speeds of at least 100Mbps and upload speeds of
up to 50Mbps through the combination of a fibre-to-the-premise[4]
and fibre-to-the-node network[5]. Priority for network
rollout for the first six years (ending 2015) is for: broadband
users such as businesses, schools and health services, as well as Greenfield developments
and certain areas of residential areas. The UFB
will be rolled out to urban and suburban residential areas gradually with
completion expected by 2019.
Funding Arrangements for Fibre Network Build
The network is being funded through a combination of public-private
partnership[6] and joint venture
arrangements between the New Zealand Government and its UFB partners. The Government
established Crown Fibre Holdings Limited (CFH)[7] to manage its investment
in UFB infrastructure and manage and monitor the rollout of the UFB by local,
partner fibre companies (Local Fibre Companies).[8] Crown
Fibre Holdings has negotiated agreements with four providers to connect fibre
to different regions and be directed to create open access infrastructure.
These four companies are:
- Chorus Limited (formerly the network arm of Telecom NZ)[9]
responsible for 69.4 per cent of total UFB coverage
- Enable Services Limited responsible for 15.3 per cent of
UFB total coverage
- Waikato Networks Limited responsible for 13.7 per cent of
UFB total coverage
- Northpower Fibre Limited responsible for 1.6 per cent of
UFB total coverage[10]
Chorus Limited (Chorus) was created in December 2011
following the voluntary demerger (or structural separation) of Telecom NZ.[11]
Crown Fibre Holdings will invest NZ$929 million directly into Chorus with
50 per cent being non-voting shares and 50 per cent interest free loans. For
the other three companies, they will each form a joint venture known as a ‘Local
Fibre Company’ (LFC) with CFH.[12]
Effectively the LFCs will build the fibre network and
provide the wholesale platform from which telecommunications retail service
providers (RSPs) will be able to seek access and provide an internet service to
end users. To foster competition and ensure a more level ‘playing field’ into
the longer term, the wholesale LFCs are prevented from providing a retail
service across the fibre network.
Ultra Fast Broadband Initiative
Overview
The UFB will be spread over 33 towns and cities across New
Zealand as indicated in the coverage map with the largest population centres
selected as the fibre rollout locations. The boundaries of the UFB coverage do
not overlap exactly, with the ‘UFB being built in the most densely populated
parts of metropolitan areas.’[13]
The four LFCs are responsible for the build of the fibre
network across the major cities and towns across New Zealand as follows:
- Chorus – Auckland, Waiheke Island, Pukekohe, Waiuku,
Whakatane, Rotorua, Taupo, Gisbourne, Napier-Hastings, Palmerston,
North-Fielding, Masterton, Wellington, Levin, Kapiti, Nelson, Blenheim,
Greymouth, Ashburton, Timaru, Oamaru, Queenstown, Dunedin, Invercargill
- UltraFast Fibre – Hamilton, Tokoroa, Tauranga, New
Plymouth, Hawera, Wanganui
- Enable – Christchurch, Rangiora
- Northpower Fibre Limited – Whangarei.[14]
Deployment, Pricing and Future Demand
As at the end of June 2012 (represents a year of
deployment), there were 76 311 premises passed under the UFB.
The pricing offered at the wholesale platform level is
creating a situation where pricing at the retail level is currently lower than in
the former retail market for ADSL broadband.
In line with international trends, CFH has estimated that as the fibre network
build accelerates, demand for faster broadband will increase. Crown Fibre
Holdings has estimated residential demand will be driven by ‘back-up and cloud
based storage, working at and from home, extended school learning, advanced
gaming, real-time entertainment, home security and triple play.’
[15]
Source Crown
Fibre Holdings, <www.crownfibre.govt.nz/ufb-initiative/rollout-timetable/>
Rural Broadband Initiative
Overview
In February 2011, following a tender process, the New
Zealand Government entered into negotiations with Vodafone New Zealand
(Vodafone) and Telecom NZ for the delivery of the RBI. The terms of the
final agreement were accepted by the Government on 20 April 2011. Following the
demerger of Telecom NZ in December 2011, Chorus Limited (the newly created
company from the demerger) retained responsibility for implementation of the
RBI.
Chorus Limited (Chorus) is responsible for the delivery of
‘fibre to schools, upgrading the rural network with fibre cabinets and
broadband equipment, and fibre to the Vodafone mobile sites.’ While Vodafone has
created a wireless network for rural areas which is designed to overcome distance
and terrain challenges.
Broadly, the RBI is designed to enable 252 000 rural households to receive high speed
broadband at prices and levels of service comparable with urban areas. Around
86 per cent of rural households and businesses will receive broadband at
peak speeds of at least 5Mbps.
The fibre network will be extended to all rural public
schools and hospitals, as well as a large number of rural public libraries. Mobile telephone
coverage will also be extended by 6200 square kilometres.
Improvements to access to high speed broadband through the
RBI is expected to benefit rural and remote parts of New Zealand by enhancing
the efficiency of agri-business (which contributes to two thirds of New
Zealand’s export income), as well as improve access to health services and
education.
Community Consultation
Community consultation for the RBI has been enabled by the
LFCs responsible for its rollout. Chorus and Vodafone are meeting with regional
and local stakeholders on a six monthly basis to ‘build
constructive collaborative relationships and identify potential efficiencies
and benefits.’[16]
In addition, a National Advisory Committee (NAC) was
established ‘to provide advice and guidance to maximise benefits
for rural communities.’ The NAC’s function is to ‘provide feedback on the
RBI plans and guidance and advise on a range of issues during the
roll out. It will also facilitate collaboration between RBI partners and
key rural stakeholders and identify opportunities to raise awareness of the
initiative and stimulate demand for rural broadband services.’[17]
Source Vodafone Rural
Broadband Initiative coverage
Reform of the New Zealand Telecommunications Sector
Telecom New Zealand Demerger
Recent reform of the New Zealand telecommunications sector
was implemented through the demerger (structural separation)[18]
of Telecom NZ. Telecom NZ as the largest fixed line and IT services industry
market operator held significant market share and power and in order to
participate in the wholesale provision of the new fibre network had to divest
itself of its retail component.[19]
The New Zealand Government’s proposed regulatory changes to
implement the UFB were conditional on the Telecom NZ demerger. The post
demerger Telecom NZ would be subject to less of the previous Telecom NZ-specific
regulation allowing it ‘to compete on a similar regulatory footing with its
market peers.’[20]
On 26 October 2011 Telecom NZ shareholders approved the
demerger of its Chorus[21] Unit (which became a new
entity – Chorus Limited), with the separation day occurring on 30 November
2011.
Chorus then entered into a public private partnership with
the New Zealand Government to build the majority of the fibre network[22]
and provide wholesale services through this network. The value of the
investment provided to Chorus by the New Zealand Government is $929 million.[23]
Having divested its network arm, Telecom NZ became a retail service provider
after the demerger.[24]
In its presentation to shareholders, Telecom NZ outlined the
benefits of the demerger as:
- ‘Facilitates Chorus undertaking a leading role in the Government
led fibre initiative
- Aligns the interests of Chorus with the Government’s UFB
objectives
- Avoids Telecom NZ competing with Government backed fibre
competition
- Leads to the introduction of a simplified regulatory regime with
greater certainty, reduced burden and less associated cost
- Allows Telecom NZ and Chorus to further focus on their
independent strategies and core competencies
- Enables tailored capital structure and financial policies for
Telecom NZ and Chorus
- Allows for improved alignment of management incentives with
performance at Telecom NZ and Chorus
- Provides greater transparency and flexibility for investors.’[25]
Inquiry into the Telecom New Zealand Demerger
Prior to structural reform of the industry, the New Zealand
Parliament’s Finance and Expenditure Select Committee was referred for inquiry
and report the Telecommunications (TSO, Broadband, and Other Matters) Amendment
Bill. The Bill would amend the Telecommunications Act 2001 to provide the
framework for the Ultra Fast Broadband and Rural Broadband Initiatives, and
implement the Government’s telecommunications service obligations.
While inquiring into this Bill in an effort to provide
parliamentary oversight, the New Zealand Parliament also referred Supplementary
Order Paper (No 204) which contained the matter of the Telecom NZ demerger (and
associated implementation framework).
The committee gave in principle support to the Bill and
accompanying contents of the Supplementary Order Paper with recommended
amendments. The main areas of discussion undertaken centred on:
- Pricing to ensure competition and adequate consumer take up to
support a fibre network
- Migration of customers to the fibre network
- Attracting private sector financing for the fibre network build
- Regulation of the major industry entities such as Crown Fibre
Holdings and the Local Fibre Companies (whether pricing measures should be contained
in a special access undertaking or whether to install a forbearance period
preventing the Commerce Commission from investigating prices set for supplying
the UFB until 31 December 2019.
- Bringing forward the timeframe for review of the policy framework
regulating telecommunications services in New Zealand to 2016 and widening the
scope of the review to include:
- Consultation
with interested parties, the commerce Commission, consumers, and Maori
- Development
in wireless technologies
- The
experience of comparable jurisdictions such as Australia where appropriate and
relevant.
In regard to the TSO inquiry the committee met with the Commerce
Select Committee. As a number of members of the Commerce Committee also
participated in or had knowledge of the TSO inquiry, through its discussions the
committee gained an insight into the types of discussions undertaken during the
inquiry.
The committee also met with other previous members of the
Finance and Expenditure Committee, two of which are now Ministers, all of whom discussed
their experience in undertaking the TSO Inquiry.
Managing the Fibre Network Build and Rollout
The New Zealand Government established CFH in December 2009
to ‘ensure the implementation of the Government’s UFB policy, specifically:
- ‘Manage contracts to deliver the UFB objective
- Monitor Crown investments in the UFB initiative
- Support Government policy objectives’[26]
This requires CFH to:
- ‘Manage contracts, payments milestones, approvals
- Manage Crown risk and financial exposure
- Ensure deployment achieved and prioritised appropriately
- Ensure UFB consistency’[27]
In this context, CFH discussed:
- the Government mandated UFB rollout target of reaching 75 per
cent of premises by 2019
- the investment structure of the UFB
- how fibre network partners will build parts of the UFB
- technologies used in the rollout
- current UFB deployment progress
- product pricing and Australia-New Zealand network comparisons and
organisational relationships
- Network security
As at the end of June 2012, 76 311 premises had been passed,
with a view to having an accelerated rollout over the next seven years to reach
over one million premises passed.
Network Partner Companies
The committee met with Northpower and Chorus, two of the
LFCs responsible for the build of the UFB. Chorus is the largest LFC building
the network to connect 24 of the 33 fibre selected locations and Northpower is
the smallest, building the fibre network for one of the 33 selected locations.
The committee also met with Vodafone in regard to the build of the wireless
network for the RBI and also providing services over the UFB.
Chorus
As New Zealand’s largest telecommunications infrastructure
company, Chorus discussed how it is preparing to build the majority of the UFB
and the planned reach of the UFB. Chorus representatives discussed their
experience after a year of build which included:
- extending the fibre network to schools
- extending the fibre network to apartment blocks
- future migration planning and factors and incentives to drive uptake
of future demand for fibre
- educating the consumer on the benefits of a fibre connection
- funding arrangements and Universal Service Obligation
- overview of negotiations in reaching an agreement prior to Telecom
NZ demerger
- current challenges of building a fibre network while maintaining
a copper network
- subsidy structure of connection per premise.
Northpower Fibre Limited
Northpower is a trust owned company with 53 000 shareholders
and is the smallest LFC. Northpower discussed its method of build, with 60 per
cent overhead and 40 per cent underground and its aim of having a minimal
impact on the environment and existing amenity.
Northpower also spoke about the efficiency of its method of
build and the low cost of overhead fibre deployment in comparison with the
Tasmanian NBN rollout.
Vodafone New Zealand
Vodafone discussed the aims of its RBI rollout and its build
of the wireless network expected to reach a greater number of premises in
remote areas of New Zealand as well as improve mobile telephony in rural
and remote areas. In this context Vodafone discussed or commented on:
- Exploring the span of the satellite option (expected to provide
broadband to between 2-3 per cent of New Zealand)
- Size of the wireless network build
- Consulting and working with local government
- Building and pricing of towers
- Number of homes covered per cell site
- Pricing data model and funding arrangements for build
- Interest from RSPs
- Network security
Regulatory Matters
The committee met with the Commerce Commission and discussed
a number of matters relating to regulation of the Telecommunications industry
and the recent impact of the structural separation of Telecom NZ. In particular
issues discussed included:
- Legislative requirements of the Telecommunications Act
- Regulatory implications of the forbearance period and role of the
Commerce Commission in relation to the fibre network during this time
- Expected national contribution of the fibre network build and use
- Regulation of the copper network
- Retail and wholesale structure of the UFB
- VoiP services
- Transition from a copper network to a fibre network
- Wholesale pricing framework
- Raising public awareness of the fibre network and services
available through such a network
Policy Considerations
The committee also met with a number of Government agencies
and discussed the objectives of the policies underpinning the UFB and RBI. Those
agencies were the: Ministry of Business and Innovation and Employment, National
Infrastructure Unit, Treasury and the Ministry of Education. Areas discussed
included:
- Momentum of the UFB and RBI build
- Negotiations over wholesale pricing and RSP offerings
- Measuring the impact of the services on business productivity and
getting small businesses on line
- Pricing of the end product
- Level of regulation to maintain competition and uptake in the
market
- Considering the need to decommission the copper network
- Cost and logistics of moving from a fibre-to-the-node to a
fibre-to-the-premise model
- Creating local employment opportunities
- Improving learning outcomes for students and in particular remote
students through use of advanced technologies
- Objective of the School Network Upgrade Project
Concluding Comments
During the course of the 2012 NZCEP, the committee met and
spoke with a wide range of parliamentary and industry representatives and
organisations, all of which are participating or have participated in contributing
to the development, build and regulation of the UFB and RBI. From these
discussions, the committee has greatly expanded its knowledge of the types of
issues, challenges and short term outcomes that are common to Australia and New
Zealand in working towards and building a high speed broadband network.
The committee has also been privileged to be privy to
information on which it has not reported, but which was useful in setting the
scene for Members to gain an appreciation of the ongoing and future challenges
facing New Zealand in the delivery of high speed broadband.
The committee thanks all the individuals and organisations
who freely gave of their time and knowledge to discuss topical issues with
Members and increase their understanding of the issues currently facing New
Zealand in the continuing development and build of the UFB and RBI. The
committee also thanks the Hon Amy Adams MP, Minister for Communications and
Information Technology, Hon Craig Foss MP, Minister of Commerce, Hon David
Cunliffe MP, Spokesperson for Economic Development, Mr Jonathan Young MP, Chair
of the Commerce Select Committee and Members of the Commerce Select Committee.
To this end, the committee exceeded the objectives of its New Zealand visit as
part of the 2012 NZCEP.
Lastly, the committee thanks Dr the Rt Hon Lockwood Smith
MP, Speaker of the New Zealand Parliament and His Excellency Michael Potts,
High Commissioner for Australia for their hospitality and ensuring the visit
was memorable.
Membership of the Delegation
Leader
|
Mr Robert Oakeshott MP
|
Deputy
Leader
|
Mr Rob Mitchell MP
|
Members
|
Senator Doug Cameron
|
|
Mr Paul Fletcher MP
|
|
Senator Alex Gallacher |
|
Mr Luke Hartsuyker MP
|
|
Hon Sussan Ley MP |
|
Mr Mike Symon MP |
Delegation
Secretary |
Ms Stephanie Mikac |
Official Visit Program
Tuesday, 25 September
8.00 am Meeting
with the Engineering, Printing and Manufacturing Union
9.00 am – 10.00 am Meeting with Crown Fibre
Holdings Limited
10.15 am – 11.15 am Meeting with Vodafone New
Zealand
11.30 am – 12.30 pm Meeting with Northpower Fibre
Limited
2.25 pm Depart Auckland for
Wellington
3.25 pm Arrive in Wellington
4.30 pm – 5.30 pm Meeting
with Hon David Cunliffe, Opposition Spokesperson for Economic Development
5.40 pm – 6.30 pm Telecommunications
Forum Function hosted by Hon Amy Adams MP, Minister for Communications and
Information Technology
7.00 pm Official
Dinner hosted by the Speaker, Dr the Rt Hon Lockwood Smith
Wednesday, 26 September
9.45 am – 12noon Site
inspection of the Wellington Central Exchange and the Churchton Park
telecommunications and network infrastructure
12.30 pm – 1.50 pm Meeting
with Hon Amy Adams MP, Minister for Communication and Information Technology
1.40 pm – 2.45 pm Observe Question Time
3.00 pm – 4.00 pm Meeting with the Commerce
Commission
4.15 pm – 5.00 pm Meeting with Ministry of
Education
6.15 pm – 7.30 pm Drinks
with New Zealand Parliamentary Friendship Group hosted by Ms Denise Roche MP,
Chair, Australia-New Zealand Friendship Group Committee
Thursday, 27 September
9.15 am – 10.30 am Meeting
with Dr the Rt Hon Lockwood Smith, Speaker, House of Representatives, New
Zealand
10.30 am- 11.30 am Private Meetings
11.30 am – 12noon Meeting
with Hon Craig Foss MP, Minister for Commerce and Broadcasting
12.15 pm – 2.15 pm Meeting
with the Chair and Members of the Commerce Select Committee
2.30 pm – 3.30 pm Meeting
with Chorus New Zealand
3.45 pm – 4.45 pm Meeting
with the Ministry for Business Innovation and Employment, National
Infrastructure Unite, the Treasury, Ministry of Foreign Affairs and Trade
4.45 pm Return
to hotel TNPLH
7.00 pm – 10.30 pm Official
Dinner hosted by His Excellency Mr Michael Potts, High Commissioner for
Australia