It is a pleasure to be here today and I thank you for the opportunity to deliver the keynote address for today's event. 

I have been Minister for Communications and Information Technology for just under six months now, and what an interesting six months they're been. 

Both the challenges and the potential in the telecommunications sector are enormous and I am relishing the opportunity to work with you to overcome those challenges and maximise that potential.

We've covered a lot of ground in six months but there's a whole lot more to be done yet.

The focus of my address today will be on broadband investment and I will give my initial thoughts on the submissions received on the government's draft proposal for the $1.5 billion initiative. 

I will also touch briefly on current issues in the mobile market.

Broadband Investment

The release for consultation of the government's broadband investment proposal at the end of March was the culmination of many weeks of careful planning, discussion and deliberation, and I was impressed by the number and quality of submissions received on the proposal. 

In the end we received 103 submissions.

It is clear to me that the importance of ultra-fast broadband to New Zealand is well recognised, and that the private sector is as excited as we are by the possibilities.

As you will be aware, a proposal was received from Telecom setting out two broad options for the government to consider. 

The lines companies have formed a new industry group (the NZ Regional Fibre Group) to respond to the government proposal. 

There are early signs of healthy competition emerging between the possible participants in the government initiative.

In addition, detailed submissions were received from:

• - Axia NetMedia Corporation (a Canadian FTTH investor/builder)
  
• - the FTTH Council Asia-Pacific (a primarily vendor-oriented industry group based in Australia); and
  
• - Open Network Alliance (a primarily vendor-oriented industry group based in Korea).

The submissions received have certainly provided food for thought and I can tell you the final policy will have benefited significantly for the input that has been given.

I'd like to briefly discuss some of the key themes coming out of submissions, and give you some initial comments on our thinking in relation to these. 

In general, there appears to be significant support for the government's policy and its vision for achieving step-change in the provision of ultra-fast broadband services.

Layer 2 services

One issue that has arisen widely across submissions is the ability for LFCs to provide Layer 2 services as well as dark fibre.  A significant number of submitters appear keen to provide Layer 2 services, and have argued that LFCs should be permitted to do so. 

Although our original proposal signalled that provision of Layer 2 services would be permitted, this seems to be an issue submitters are particularly interested in.

We have taken this on board, and I note that in principle we do not have any problem with allowing LFCs to provide Layer 2 services.

The real issues here are around the principles of open access and equivalence of Layer 2 services in the context of LFCs also providing dark fibre. 

There will likely need to be transparency of the pricing methodologies for the services.  As well, we need to ensure that the Layer 2 services provided will lead to the best possible competition outcomes, ensuring the ability for niche service providers to easily enter the market and provide services over the network. 

In this regard we are looking at the principles required to define a Layer 2 "raw bitstream" service, and note the developments occurring in the UK in this regard where OFCOM and Openreach are looking at the features of an "Active Line Access" bitstream service which supports competition at the services layer.

Because the importance of a competitive Layer 2 service goes beyond our fibre project and appears to be a fundamental aspect of the new "NGN" world, we have also taken on board the comments suggesting there needs to be industry-wide input into the definition of such Layer 2 services.

Coverage areas

Another interesting issue which has arisen is the definition of the relevant coverage areas for the network. 

Some submitters, particularly interested regional groups, regional commercial players and local authorities, have suggested the coverage regions should be determined on the basis of a wider set of factors, including population growth and the potential for economic and productivity benefit. 

We see merit in these comments and officials are looking more closely at the coverage regions.

Others have commented on the need to include rural coverage.  I will come to this shortly.

Regulatory certainty

Some submitters have noted that, despite the indication in our proposal that no initial regulation of LFCs would be necessary, there remains a degree of regulatory uncertainty when investing in LFCs.

To varying degrees, some submitters argue that LFCs are likely to come under regulatory scrutiny at some point in the future. 

In addition, a number of lines companies have raised the potential regulatory issues they may face under Part 4 of the Commerce Act 1986, particularly those issues around cost allocation.

Submitters are saying that the effect of regulatory uncertainty may contribute to difficulty in attracting capital (or will raise the cost of capital).

We have taken these points on board and are looking at the possible ways in which the government could most appropriately provide regulatory certainty in order to improve the investment case.

A number of submissions have proposed that demand-side subsidies may be necessary alongside the 50/50 crown investment to encourage take-up.  We will consider that possibility, but I need to point out that there is a limit to the Crown's support; its called $1.5 Billion; and supplying 50/50 co-investement and some form of demand subsidy in some areas could reduce the available footprint of the network.

A range of other issues have arisen out of submissions, and we are considering all the arguments have been put forward.

Health and education

We can see the advantages of ultra-fast broadband for residential users, but it's the health, education and business sectors where the real immediate gains will be made - not only in economic terms, but also the high social return from improving education and health outcomes.  It makes good sense to focus our investment in broadband on these sectors first.

We are looking at initiatives that government can take to ensure that the education and health sectors are ready to take advantage of the benefits of ultra-fast broadband when it arrives at their door.  This includes the $150 million announced for upgrading school networks. 

Ultra-fast broadband in schools will greatly enhance teaching and learning, and will ensure our kids have access to the same information at the same time as their peers around the world.  It will bring the world into the classroom - giving students the opportunity to videoconference with experts from around the globe.

Submitters noted that fibre to schools needs to be supported with investment in professional development for teachers, educational resources, local champions and technical support.  The North Shore Education Loop (NEAL) was mentioned as an example of low uptake because of lack of support.

My vision is for ultra-fast broadband to enable a transformed schooling experience - where students, teachers and administrators walk into their schools, sit down, turn on their computers and log on.

Students will be able to access an on-line portfolio of their work, their results and comments from their teachers and parents.  Teachers will be able to access on-line teaching resources, evaluation resources and discussion forums.

MED officials are working jointly with the Ministry of Education to ensure our investment meets the promise for the education sector.

Ultra-fast broadband was seen by submitters as having a key role in increasing efficiency in the health sector, which will become increasingly important as the ageing population puts increased demand on the health system. 

Submitters noted that improved access to fibre would be transformational for the health sector, enhancing the quality and flow of information, and allowing them to deliver state-of-the-art digital health services.

It will boost productivity in hospitals and aid medical research. 

It will help our health professionals spend less time on paperwork and more time on the front line. 

Applications such as high definition video conferencing into regional New Zealand to allow remote diagnosing from specialists in other parts of the country or overseas, and the ability for health providers to transfer data such as high resolution scans in real time. 

So, submitters were supportive of our intentions to improve broadband readiness in the health sector, but we face some big challenges in creating change due to the devolved nature of the health system and competing priorities within the sector. 

Health providers will need a compelling case before they decide to further invest in technology, and I believe that government has a role in helping to build that case.  We are currently investigating options for how we can do this.

Rural Broadband

I am aware that a number of submissions on the broadband investment proposal raised concerns about the treatment of rural New Zealand. 

I want to reassure you that we're not just talking about our main centres. 

Our broadband commitment is in two parts - what I've already covered is the first part and rural is the second, but by no means less important, part.

We're dealing with rural broadband separately because the issues we need to overcome are quite different in rural areas than in our bigger centres.

I do understand the urgency to achieve improvements in rural broadband. 

I am considering a number of options to address this issue, and I appreciate that in many cases it is about improving speeds to the point where they are similar to what those in cities and towns are in many cases already enjoying.

I am conscious of the significant role wireless technologies currently play in providing rural broadband services, and I am excited by continuing developments in these technologies that allow higher speed broadband services to be provided to more New Zealanders.

There are, of course, a number of options to be considered for improving the state of rural broadband, and I am sensitive to the need to implement a pragmatic rural broadband policy that can be implemented within a reasonable timeframe. 

Rural broadband is a difficult issue to tackle, and it will be important that the government gets maximum bang for its buck. 

I will be making further announcements about the government's broadband policy in the coming months as the policy direction for the wider broadband investment initiative is finalised.

Complementary Initiatives

In the broadband consultation, we made a proposal to look at complementary measures designed to facilitate the roll-out of fibre-to-the-home by LFCs.  A number of contributors provided us with feedback on this issue.

Those contributors all seemed to share the view that access to existing infrastructure such as ducts and poles would greatly facilitate the deployment of fibre access networks.  

However, they differed to some extent on the question of whether any government action was necessary to ensure that such access was forthcoming.

Duct and pole owners, of course, were hesitant at the idea that there might be mandated access to their assets. Companies without their own passive infrastructure were, not surprisingly, generally more positive.  Both types of companies seemed, nonetheless, to consider that there was scope to improve their access to the land on which such assets were located.

I am of course aware of the importance of private property rights and I have made no decision on whether government action is appropriate in facilitating access to ducts and poles, or access to the land on which they are located.  I do however consider it important that the question be asked.  That is what I have done, and now your responses will assist the Government in coming to an answer.

MOBILE market

On the surface, my role in the mobile sector has been rather less eventful these past six months.

The key regulatory matters - the investigation into mobile termination services and the possibility of a fresh investigation into national roaming - have been, and remain today, in the hands of the Commerce Commission.

However, beneath the surface, my Ministry officials and I have been very busy preparing the ground for our potential role in these two processes.

I have, for example, written to the Chair of the Commerce Commission encouraging him to make a decision on national roaming within the timeframe of the three-month deferral that his organisation announced back in March.

I have, in addition, kept abreast of the proposed termination undertakings submitted by the three mobile operators, and my officials have already started working their way through the revised undertakings submitted to the Commission last Friday [6 May].  This work will help us better understand any proposals on termination put to me by the Commission when it issues its final report in December.

In short, for both national roaming and mobile termination, my officials and I are using our time proactively, so that these matters, when and if they fall to me to decide, can be dealt with in a timely and efficient manner.

Other mobile issues have also crossed my desk.

The most visible has of course been the issue of radiofrequency interference between mobile operators.  My officials kept me fully appraised, and I was pleased to see the announcement that the parties had reached a settlement on Thursday 7 May.

Another matter that has become topical is the issue of international mobile roaming. Australia has begun leading several initiatives within international fora - including APEC, the OECD and the ITU - which aim to improve the information available to international roamers when they make and receive calls abroad.  Officials have recently responded to a request for comments from the Australian government, and I may discuss the issue in more detail later this month when meeting with Senator Conroy - my opposite number in Australia.

Private Sector Investment

While speaking of mobile, I can't let this moment pass without acknowledging the level of private sector investment that we are currently seeing, particularly in the mobile sector at the moment.  The recent 3G investments by Telecom, Vodafone and the new 2 Degrees company add up to more than 1 Billion dollars in mobile investment alone, and as we have seen, they form part of a vigorously competitive mobile environment.  Competition does wonders, and as a result of it, we will soon have a mobile broadband network around the country with speeds we just dreamt of a few years ago.  Mobile broadband is not the whole answer for the provision of urban and rural broadband, but it is a significant part of it.

And that's not the only area where investment is going on.  Telecom and many smaller players are laying fibre around the country, and Telecom's cabinetisation investment continues.  This Friday I will be going to Napier to launch FX Networks  Hawke's Bay network, extending FX's network to over 2,000 Km of fibre optic cable and connecting together urban networks from Wellington to Auckland such as City Link, Vector, Inspire and Velocity.  The new Hawke's Bay network has seen FX work closely with local lines companies and Local Government and is seen as a possible model for Local Fibre Companies.   All this forms part of the wider telecommunications solution.

Closing remarks

While progress is being made, As I have laid out earlier,  there's plenty of work to be done and plenty of challenges ahead.  I for one am excited by the possibilities and I look forward to working with you to achieve our common goals - of ubiquitous high-speed broadband and thousands upon thousands of kilometres of high-speed fibre around New Zealand.