Speeches

Opening address to Media Technology-Pacific Conference, Auckland

Thursday, March 3, 2016 - 10:30
Broadcasting
Communications

Good morning

It’s a pleasure to be here this morning to present the opening address at the 2nd Media Technology Pacific conference representing both my Communications and Broadcasting portfolios.

It’s no accident that I hold both those roles. 

After serving as Communications and IT Minister for three years during our previous term it had become clear to me that the space between these areas was shrinking so quickly that to deal with one without the other risked missing the realities of what was occurring in the real world. 

So I asked the Prime Minister to give me both roles specifically so that I could take a comprehensive look at how Government intersects with these rapidly converging sectors.

In days gone by of course, broadcasting sat as a distinct area with a dominant, and seemingly impenetrable, role in how we receive our information and entertainment. But in this modern age, as we experience the digital revolution, things are changing. In fact digital disruption means that everything is changing.

Specifically for our purposes the nature of how we communicate, conduct business, and access information and entertainment is shifting rapidly.

Digital disruption in media and communications takes many forms but the area I want to focus on is that of market convergence.  

Near ubiquitous access to high speed and increasingly cheap broadband has enabled digital communication platforms like websites, blogs and social media to transform the way we learn, do business, socialise and consume content, but this certainly won’t be news to any of you here.

The days when telephones, televisions and radios all had separate functions are well in the past.

Businesses now face competition not only from new players but from whole new sectors.  In just a few years some businesses have gone from being seen by some as in far too dominant a position in the market to now urgently looking at how they compete.

So what’s the role and the responsibility of Government in this period of intense change?

Well in my view it’s not to dictate how these shock waves should play out, nor to try and preserve existing business models. 

What I think we must do is firstly make sure our regulatory settings are not unintentionally constraining how markets evolve.  Where possible we should seek to deliver a level playing field between competitors. 

Secondly we need to ensure consumers interests continue to be protected in a way that reflects how they are actually behaving, not based on models of how they used to behave. 

New Zealand’s regulatory and policy framework in this area have served us well for many years, but because of the dramatic shifts in the broadcasting and communications landscape, it is now showing signs of being outdated and out of step with today’s realities.

Digital convergence presents significant opportunities for New Zealand consumers and businesses – but before this can happen, we need to give our regulatory and policy frameworks a ‘health check’ to ensure they are fit-for-purpose in a modern and converged world.

In 2015/16 Government will invest more than $200 million in the public broadcasting sector and of course we are in the middle of investing more than $2 billion in high speed communications infrastructure up and down the country.

These are not small sums of money.

In this era of fiscal constraint we’ve maintained this funding because we understand the critically importance of the digital economy for New Zealand and because we back New Zealand-made content and recognise the value that publicly funded broadcasting plays in our communities.

We want New Zealanders to be able to receive and view content that is relevant and interesting to them when they want, and on the platform of their choice, while at the same time reflecting the Kiwi identity.

This morning, I’ll speak about how the phenomena of convergence is changing the way we think and operate, and how the Government is responding.

I’ll also touch on pieces of work, such as the Telecommunications Act review, and the Government’s work around cybersecurity.

What are the challenges?

But first some of the challenges.

Our Broadcasting Act came into effect in 1989.

At that time, TV3 had just begun broadcasting and the first international internet connection had only just arrived on our shores. 

Back then to download an average song would have taken you about 2 hours.  Now that same song could be downloaded 67,000 times every second.

The idea that two decades later we would use this thing called the internet to stream and download news, movies and TV shows in high definition from anywhere around the world, or run video conferencing from mobile phones, was unimaginable – and because of this, it was not reflected in policy.

This misalignment of policy with market and technological realities in 2016 poses several risks.

At the moment, individual platforms are treated differently in the eyes of legislation. We regulate based on the method of transmission.

Restrictions which apply to television and radio under the Broadcasting Act do not apply to online platforms, even if they are delivering exactly the same content.

Classification regimes and advertising restrictions for example can be entirely different for exactly the same content, accessed at the same time, by the same people simply because of the technology they use to access it.

Even our election rules apply differently to print, broadcasting and the online space.

It is increasingly hard to see how these discrepancies make sense in 2016 and we need to question the ongoing relevance in each case. I’ll come back to these issues shortly.

The legislation around the use of radio spectrum also warrants further examination. We need clearer ways to manage the process of spectrum acquisition and ongoing compliance.

And in the telco world, convergence is raising issues of how we regulate companies with effective monopoly positions in a world where the copper line to your home is now being challenged by fibre and high speed fixed wireless and cellular options. 

How do we ensure a climate that continues to encourage investment and provides business certainty while still ensuring consumers get the best prices and service possible at a time when data hungry consumers are demanding more and more from networks that still face very high capital expenditure but may deliver increasingly reduced marginal returns.

Finally, as Government we’re thinking about what regulation means in a world that is increasingly borderless.  Where our domestic businesses face their biggest competition from offshore providers in a greater way than ever before and yet those competitors operate under different regulatory systems and cost structures.

But for all that we can focus on the challenges, the fact remains that convergence brings with it many opportunities.

As well as facing competition from offshore, our local providers are increasingly able to compete on a global scale, and New Zealand consumers can take advantage of lower prices and a much wider range of content and services.

Yet in order to ensure that businesses and consumers are fully able to realise these benefits, our legislation and policy need to be fit for purpose, flexible, and, most importantly in such a fast-moving area, durable.

Last year I launched an important piece of work around convergence.

I released two discussion documents: a green paper on to test what convergence is, how it impacts on the sectors, and its implication for policy and legislation.

The other paper presented a more detailed discussion on how content is regulated and where there is room for improvement.

Six months on from the initial release of those convergence papers, feedback and valuable insights from submissions are informing the next steps of our work plan around convergence. 

Your input into these issues is incredibly important to ensure our approach to legislation in this space reflects the realities of a converged market.

Convergence is a global phenomenon

As I’ve said, we live in a world where business models are changing and geographical boundaries are no longer obstacles to doing business and communicating.

Air BnB is the world’s biggest accommodation provider and owns no beds.

Uber, which is now the largest transport company in the world, doesn’t own any vehicles.

With a smartphone, New Zealanders can order an Uber driver to pick them up from almost anywhere at any time, track where they are, pay electronically and rate the service all within seconds.

Services like YouTube allow New Zealanders to access all kinds of content from any device – and of course creative Kiwis can upload original content to their own YouTube channels to be viewed by audiences around the world.

Consumers are also controlling what they want to view and when to view it through video on demand and subscription services such as Netflix. The traditional broadcast model of appointment viewing is increasingly seen as outdated.

And a third of households for people under 40 no longer both to have landlines at all.

This globalised, converged state of affairs poses challenges for all nations, not just New Zealand, and other jurisdictions have also started to tackle the issues brought about by convergence.

For example, the Australian government released a Convergence Review in 2012 which discusses many of the same issues we’re facing here in New Zealand.

Their review also recommended that unnecessary and outdated regulation around broadcasting and communication should fall away to encourage innovation and competition.

It also identified three areas where continued government regulation is was seen as justified in the Australian public interest.

For them, those areas were around media ownership, media content standards, and the production and distribution of local content.

The European Commission also released a consultation paper in 2013 about audio-visual convergence. The European Union certainly has its work cut out for it in this area with so many distinct cultures and languages, but there are also clear advantages in having a flexible and responsive policy framework.

What is the New Zealand Government’s response?

Building a more competitive and productive economy for New Zealand is one of the key priorities that Prime Minister John Key has laid out for our Government to achieve.

The convergence work programme is part of this business growth agenda on building innovation. 

Ensuring our regulatory system remains healthy and responsive to convergence requires a thorough understanding of the overall system, and collaboration across government and industry.

In the digitally converging world, the Government’s long-term vision is to have high quality and affordable communications services and media content available to New Zealanders in ways that meet their needs - enabling our economy to thrive and compete in a dynamic global environment.

UFB and RBI

To help achieve this, the Government is rolling out the biggest infrastructure project ever untaken in New Zealand.

We’re upgrading New Zealand’s communications network through our Ultra-Fast Broadband and Rural Broadband Initiative programmes.

Ultra-Fast Broadband is now available in 33 towns and cities across the country.

Sixty percent of the build in the first phase of Ultra-Fast Broadband areas is completed and demand for this world-class infrastructure is sky-rocketing.

Just this week I announced that uptake on the network has already reached 20 per cent.

For our rural communities, the Rural Broadband Initiative is delivering outstanding results.

RBI has meant that over 280,000 households and businesses in rural areas now have access to faster broadband and better mobile connectivity with uptake sitting at around 36 per cent.

Across both programmes, we’ve connected all schools and hospitals and are providing nearly one million New Zealand premises with better connectivity.

There’s little doubt that New Zealanders are thirsty for that sort of connectivity.

Like running water and electricity, connectivity has become a vital service for homes and businesses.

That’s why I’ve launched a $360 million extension to both the UFB and RBI programme which provides the opportunity for more New Zealanders to connect to access to a world-class connectivity.

These programmes have helped New Zealand climb the OECD rankings.

Internet speeds have already tripled since 2008 – and we are looking at this speed more than doubling again even before we move into the expansion of our flagship UFB and RBI programmes.

Our average internet speeds are now faster than Australia’s and broadband penetration has recently surpassed that of the USA for the first time.

What this shows us is that in case it wasn’t already abundantly clear is that the direction of travel from the static, analogue world to the anywhere, anytime digital world is only going one way and its happening faster than would have been predicted even a couple of years ago. In fact the average household in NZ now uses as much data in one month as the entire country did in 1995.

Digital Economy

Having the infrastructure is of course only the first step, it’s how we use it that provides the opportunities. 

To this end, a cross-government Digital Economy work programme is underway that aims to enable all New Zealanders to access the digital world.

This work programme has identified specific areas of focus that are critical to ensuring that New Zealand is adaptable and ready to take advantage of the opportunities driven by technological change.

The Government’s Digital Economy Work Programme will see agencies collectively focusing on the right initiatives, in the right areas, to support the growth of New Zealand’s Digital Sector and the uptake and smart use of ICT across the economy.

Content regulation

As I mentioned earlier, the merging of previously distinct industries which characterises convergence can generate all sorts of thorny situations.

In the realm of media content, there is currently a lack of clarity around the classification of content and rules around election programmes.

For example, there is the question of how on-demand online content should be classified.

Current classification and standards legislation came into effect over 20 years ago so it’s inevitable there would come a time when the current regime would need updating.

There needs to be a clear set of rules and a comprehensive framework on delivery of content. The sector’s regulatory system needs to be flexible and fair to enable it to cope with future change and it should focus on the content, not the way in which it is provided.

Based on the feedback received on our convergence discussion documents, there is clearly agreement that some sort of regulatory change is needed.

Overall, there is support for amendments to current legislation to address gaps created by convergence. 

Through submissions, there was a clear message from the sector for consistency in the regulation of content.

At the same time, we will need to maintain a balance between respecting the principles of freedom of expression and acknowledging issues of fairness, security and privacy.

Similarly, there was an overall preference for greater clarity and equality around election programming and for a move to a single regime for election programming and advertising.

Among possible ways of supporting desired local content, New Zealand focuses on contestable funding, owning and mandating public broadcasters, and providing spectrum and funding for regional and community broadcasting.

Cyber Security

Paramount to the success of a more connected society is ensuring individuals, businesses and schools are safe in the online space and have confidence in the networks and platforms available to them.

If we can ensure safe and secure access to the internet for all then New Zealand as a whole will benefit.

Cybercrime is becoming increasingly sophisticated and pervasive as our reliance on the internet increases. For each of you with businesses operating in the digital environment, whether it relates to your product offerings or simply your business processes, it is critical that you understand and have a plan to respond to cyber threats. 

You only have to look at the Sony pictures event to understand the devastation that can occur through poorly thought through cyber policies.

Cyber security is a critical issue for New Zealand and coordination and capability in this space is vital. This is one area where our position at the bottom of the world no longer protects us.

A recent Norton report noted that almost $257 million was lost to cybercrime in the past year, affecting around 856,000 New Zealanders.

Building a secure, resilient and prosperous New Zealand is at the heart of our refreshed Cyber Security Strategy that I launched late last year.

The Strategy and Action Plan includes a range of initiatives, including the creation of a NZ CERT, expansion of the Connect Smart cyber security awareness campaign, a toolkit for small and medium businesses, and capability building to address cybercrime.

The Telecommunications Act review

One last topic I want to touch on is the review of the Telecommunications Act – although I have to say I find that term increasing outdated.

This is about helping to ensure New Zealand has the right laws for our communications networks to meet the changing needs of consumers and businesses, and to help keep our economy growing.

We’ve seen significant change in the New Zealand communication sector in recent years.

The last decade has brought the structural separation of Telecom into Chorus, a wholesale-only network provider, and Spark, a retail service provider.

And the rollout of Ultra-Fast Broadband fibre networks is revolutionising the communications landscape.

In 2015, the Government consulted on a wide-ranging discussion document seeking views from the public and industry on whether the telco regulatory regime is fit for purpose and options for change.

The discussion document looked at market conditions in New Zealand, and asked whether our regulatory system is appropriate for a converged communications sector, with changing consumer expectations.

The Government is considering how we can make the price-setting processes for broadband simpler and more predictable, with a view to the long term.

We’re also examining how we can support continued competition and coverage in mobile markets.

Concluding remarks

So overall it’s an exciting time to be involved in the communications and broadcasting sectors.

The old rules no longer apply, and we have access to tools and services that can be of huge benefit in connecting our small, faraway country to the rest of the world but that will also challenge almost everything we thought we knew about content creation and delivery across Government and the private sector. 

In order to get the most out of these developments, we need to ensure that we’re well equipped to deal with the challenges that are arising, as well as those which are yet to arise.

We need policy and regulation that is technology-neutral and doesn’t constrain innovation or consumer choice.

We need to ensure the safety and privacy of all New Zealanders in the online space and have confidence in the networks and platforms available to us.

Convergence means different things to businesses, consumers and policy-makers but ultimately it will be consumers that decide how the future looks and we need to be ready to respond.

So thank you for those of you here who gave your considered feedback and recommendations to the various consultation processes we have underway. 

I know you’ll be interested in what we decide and I hope to be making a number of announcements in this regard over the next few months.

Can I conclude by wishing you all the very best for what I know will be an insightful, thought-provoking and productive conference.

Kia ora kotou.