Thank you and Good Morning.

This job requires me to think a lot at a conceptual level about the importance of technology such as broadband. At a practical level I forget how much I take it for granted and have come to rely on it for my work. My family and I moved house in January. An addition to the family necessitated another bedroom and we found something just across the road. But from a digital perspective it may as well have been to Mars. For a couple of weeks we had no broadband, barely even a phone jack. My wife was on maternity leave but was still taking 100 emails a day from her office, at 56k.

I was having trouble getting the information I needed. My staff have become so accustomed to being able to get large files to me immediately. They also wanted to get faxes through but that's difficult when the modem is plugged in trying to download emails in slow motion.

We felt like we were wading through quicksand and aside from being enormously frustrating it greatly affected our productivity. I have said time and time again that technologies such as broadband are key productivity drivers, but it wasn't until I was deprived of it that I was so keenly aware of the truth in that statement.
That is why I see you, as members of the industry, as so important for New Zealand's future growth.

It is a great pleasure to be here to talk with you today.

I imagine everyone in this room has a view on the benefits that Information and Communication Technology can bring to all areas of New Zealand’s society. You may to have similar visions for what the future might look like. I think we can all agree that the key driver for future economic success is going to be how we encourage the best use of information and communications technologies. That is a role we all share. It is wider than just government.

Information is not a new resource. But using ICT to quickly combine information with wisdom, knowledge and judgement is how we can improve productivity and make the most of being globally connected. This will be a key contributor to economic growth and improved standards of living for New Zealanders. It is something we all need to focus on.

Farms are a great example of a business where innovative use of ICT can increase productivity. At the recent Field Days it was a hot topic and it was also the example Alan Freeth, the new CEO of TelstraClear and former head of Wrightson’s used recently to be provocative about the potential of ICT.

If it can be done on the Farm, by developing killer farming applications, then it can be done anywhere.
Farmers have always been early users of advancements in technology when they contribute directly to productivity improvements. It’s no surprise that some new services are gaining interest in the market. These are services that allow our farming business colleagues to collect more data on how their business is operating.
Data can be gathered from a variety of sources and used to measure farm performance. Data is gathered on soil and air moisture and temperature, wind speeds, equipment settings, vat temperatures, and farm security. This data is then used by farmers to better understand what’s happening around their farm and to make adjustments accordingly.

This is a perfect example of using ICT to get information to the right person who can then make a judgement about what that information means. That is how we improve productivity. That is how we move up the OECD ranking. And that is really what is at the core of the Digital Strategy.

Overview of the Digital Strategy

As you are no doubt aware I recently had the pleasure of launching New Zealand’s Digital Strategy. The Strategy is the result of hard work by government, businesses and community including organisations such as the New Zealand Computer Society.

I believe the Digital Strategy will make a significant difference to New Zealand’s usage of ICT in all aspects of society.

It’s more than a policy document – it is a practical and achievable action plan for ensuring all New Zealanders benefit from ICT. It is a strategy that stretches across boundaries, extending the reach and richness of technology, and the opportunities it offers – to individuals, communities, businesses and government.

So what is the Digital Strategy about?

First and foremost, it’s not about technology. It’s about people first and technology serving people – not the other way around. It’s also about making sure all New Zealanders have the confidence and capability to use technology and are connected so they can make the most of the digital opportunities open to them.

The Digital Strategy identified three enablers – content, confidence, and connection – and three agents of change – communities, business and government. It set out the key challenges that lie ahead, and put forward specific targets to be attained within definite timeframes.

Addressing each of these areas will help to create an environment where ICT can be used in new and productive ways to grow the ICT sector, increase our rate of economic development and enhance our cultural and social well being.

In the area of content we are seeking to unlock New Zealand’s immense store of information that is potentially valuable to businesses, communities and individuals.

The second enabler, confidence, is one of our greatest challenges. New Zealand must address how access to information technology can be maximised and overcome existing divides of wealth and poverty. Businesses too, also need to develop the capabilities to make the best use of ICT.

The New Zealand Computer Society does a lot of valuable work in this area, helping people to achieve ongoing improvement in the ICT sector. There will be a continuing need for organisations such as yours to continue this work and continue to partner with the wider industry to ensure that business people develop the ICT skills New Zealand will need.

The third development, which is the last of the enablers, is getting improved rates of connection within New Zealand. Our target is to achieve upper-quartile OECD broadband performance by 2010 – this means a far higher uptake by residential customers, probably around 80 percent. In other words, to compete with our target OECD peers today, we would need over 600,000 residential broadband connections. By 2010 that will mean at least 800,000 broadband customers.

It also means better broadband pricing and connection for business, so that new ICT options can be implemented to improve the overall productivity within the economy. It will allow you as members of the ICT industry to improve services for your own businesses and those of your customers and suppliers.
There is plenty of important work going on in the regulatory space to improve connection. You may be aware that this week the Commerce Commission is holding a conference to discuss TelstraClear's bitstream applications. I also have before me a recommendation from the Commerce Commission on the regulation of mobile termination rates. As you can imagine there is plenty of interest from industry players in both areas. I see that as a healthy sign that we are making progress. Regulatory decisions are never easy and nor should they be.

I am also undertaking implementation review of the Telecommunications Act. It is really an exercise in refining and streamlining to ensure that the Act works as well as it can.

What is in it for the ICT Sector?

What makes the Digital Strategy unusual when compared with previous government initiatives in this area is that it is not about the ICT sector.

Having said that, because it is about creating demand for ICT it has the potential for boosting growth across the sector
The ICT Sector is a leading growth sector and has significant export potential. But it faces challenges.
Most New Zealand ICT firms are very small by world standards and operate in isolation from each other. As a result many lack capital and specialist business skills, and have limited offshore presence.

New Zealand is also beginning to face skill shortages for some ICT related careers and this is only going to get worse if we don’t do something about it. Last year's statistics indicated an 84% increase in advertised ICT jobs – great you say.

But many ICT positions remain a struggle to recruit for. This is made worse by the fact that New Zealand saw a disappointing 20% drop in the number of students graduating with ICT degrees, including an increasing drop out rate in the first year of study.
These and future skills shortages need addressing now. High-technology careers need to be promoted better to young people.

Overall ICT’s contribution of 4.7% to GDP in New Zealand is relatively small by OECD standards. New Zealand’s ICT industries contribution to GDP is only 60% of the OECD average.

That is the challenge you have before you. It is also the challenge I have before me. I hope to have open and meaningful dialogue with you on that challenge.

What will the Strategy do on a practical level?

The Digital Strategy outlines a number of key initiatives. Overall the government has committed to spend $400 million on ICT development over the next five years to make the Strategy happen.

This will be spent on a range of programmes and initiatives lead by Government Agencies aimed at addressing specific requirements related to the Digital Strategy. Many of these are detailed in the published Digital Strategy document and include programmes such as the Fluency in IT initiative that was launched last week by the HiGrowth project and Ministry of Education.

Fluency in IT initiative

The initiative, also known as "FIT NZ", is designed to create a work programme that will be used to create a framework of ICT Programmes in schools for year 11-13 and help to map pathways for them to gain employment in the ICT sector.
The program has been developed with the e-regions Trust, a national non-government organisation that grew out of regional partnerships forged during the Government’s nationwide rollout of high speed Internet.

The first task for FIT NZ will be to get a good grasp on what is already out there by mapping existing public and private ICT education programmes and initiatives. I expect FIT NZ to work closely with organisations like the NZ Computer Society and to provide a two way development process to ensure we plan for out future. It is expected that the first stage of FIT NZ will be completed by late September.

FIT NZ is an example of a group of public and private interests recognising a gap and coming up with a collective response - something we encourage through the Digital Strategy.

Digital Strategy Funding

But all of this activity and the funding associated with it won’t be enough on its own to achieve all of our objectives under the Digital Strategy. There are areas where the only viable way to achieve sustainable development is to encourage partnerships between community, business and government at the coalface.

To make a real difference on the ground, the government is providing more than $53 million to implement the Digital Strategy as part of Budget 2005.
This includes $39.7 million of contestable seed funding over four years which will be available directly to communities and local partnerships. It will encourage local government, economic development agencies, private businesses and others to take action at the local level.

There are two programmes. The first, called the Broadband Challenge, is a fund of $21.3 million. It is for the development of affordable broadband networks based on competitive open-access principles. This fund will promote high-speed capacity in regional centres and support innovative ways of making broadband available to smaller communities.

You may have heard this fund being referred to as funding for MUSH networks. MUSH networks by definition refer to urban fibre networks. While Urban Fibre Networks are an important part of the Broadband Challenge, they are not the only way we will partner with local areas to bring enhanced Broadband services. As the Digital Strategy sets out other options for smaller communities may be more appropriate and I encourage further thinking and involvement in these areas.
The second programme is the Community Partnership Fund. This is an $18.4 million fund to support grassroots initiatives that will build ICT skills in communities and regions, and help Kiwis create distinctive New Zealand material in digital form.

Both of these programmes are going to require local help to make them happen – your help.

I encourage you to think of innovative ways businesses can partner with others to strengthen our skills base and to strengthen our local communities.

What else is the Digital Strategy funding?

Both the Broadband Challenge and Community Partnership fund have received significant interest already. I am very much looking forward to seeing them rolled out.

The Government is also providing $9.9 million over 4 years for increasing ICT productivity in businesses by developing the existing biz.org website – www.biz.org.nz - further to make it into a world class business portal.
Government wants the Biz portal to be the first place that businesses and their advisors go to access the services and information they need to become successful. Feedback to the Draft Strategy indicated that businesses needed access to quality, trusted information quickly, so that they get on with developing.

There is $3.6 million to support the development of a cultural portal to provide an online presence for New Zealand’s creative sector. This portal will include a cultural events website aimed at increasing domestic and international audiences for our cultural goods and services, as well as increase cultural tourism.

Project PROBE continues its roll out, delivering high-speed internet access to all schools and their surrounding communities.

Further work on the establishment of an Advanced Network is progressing. The Advanced Network will feature fibre optic connection at a minimum of 1 gigabit per second. While this is designed for use by researchers, academics and the pre-commercial innovation sector, I am expecting that it will create a significant ripple effect throughout the economy.

ICT Procurement

Another area that will no doubt be of interest to a number of you here is government ICT procurement.

The government is a big ICT customer, spending up to $2 billion each year on ICT. Our procurement practices are therefore critical to the domestic ICT market.

In partnership with the ICT industry, the government wants to introduce programmes to ensure a more competitive domestic ICT sector and to achieve more cost-effective procurement for government.

We want to ensure that New Zealand ICT vendors have a sound understanding of government procurement policy and processes.

As a starting point ITANZ and NZ Trade & Enterprise have been hosting a series of workshops aimed at increasing awareness and understanding within the ICT vendor community of the procurement policy, processes and guidelines used by public entities when procuring ICT goods and services.

The State Services Commission has also been running some seminars for the state sector to educate purchasers about ICT procurement.

Training seminars and workshops, are of course only the start, and will form part of a set of longer term actions that will be undertaken to ensure that New Zealand ICT firms and government purchasers are able to apply government procurement policies effectively.

I recognise that small providers can sometimes face an uphill battle getting recognised, and that one's own government can be an important reference client for offshore transactions.

I also believe we need to ensure that that government tendering processes are appropriate for the size of the job and that there is reasonable consistency of approach between government agencies.

So what else is going to happen as a result of the Digital Strategy?

The government is investing 10s of millions each year in education and in local communities to ensure all New Zealanders have the digital skills and confidence to find and use the information they need. Those of you with school age children will appreciate what I’m talking about – schools with access to computers using them to advance your child’s education.

ICT skills in education are important, but they are not the only area we’re focusing on. We also need to improve the skills of people already in work, from senior management to front-line staff.
Why? Because 80% of today’s workforce will still be working in 10 years’ time and if they haven’t learnt new ICT skills then we’re probably no where near achieving what we need to.
We’re also working to ensure people have confidence in technology.

The Anti-Spam Bill is one key area that I’m happy to say that we are making progress on. I hope to make an announcement on that in the very near future. The Digital Strategy will also support industry groups like the Internet Safety Group which will soon be launching a National Computer Security Education Campaign.

We have also made great strides in making our cultural and heritage information available online through the National Digital Heritage Archive and developments like Te Ara – The Encyclopaedia of New Zealand.

The people driving the Digital Strategy

I left this until near the end. Not because it is the least important. Quite the opposite. The Strategy's success rests on the shoulders of the people driving it. On the 23rd June I announced the members of the Digital Strategy Advisory Group. The people chosen bring a wealth of talent and experience to the group's role of advising ministers on the strategic direction and focus of the strategy.
The ICT industry is well represented and you may have recognised some of the names from my announcement.

I will be working with the Advisory Group to achieve the strategy's vision, including developing the selection criteria for project proposals for the new Broadband Challenge and Community Partnership Funds. It is expected that more detailed information around the application process will be available in September
The Digital Strategy is about partnership and collaboration. Funding under the Digital Strategy is seed funding. Local government, Businesses and Communities need to work on crystallising the ICT projects they are proposing and contribute to their sustainable development. Local groups involved in placing applications for funding will be expected to make in-kind contributions. We will match those contributions with seed funding so we achieve the best outcomes for the funds invested.

We all need to share in making the investment because we will all reap the benefits.

Within government, implementation will be coordinated by a steering group of senior officials who will report to an ad hoc group of Digital Ministers, including myself. We will ensure practical gains are made and real benefits flow to communities.

A rigorous evaluation process is also being implemented so that New Zealand can be 100% confident that funding is working to achieve what is supposed to – helping to create our Digital Future.

The launch of the Digital Strategy is only the beginning.

I realised on the day of the strategy's launch, after weeks of late nights with officials beating the final version into shape, that the hard work has only just begun. We've drawn the roadmap and now we have to start the journey.
As we all know, the ICT industry is changing rapidly, with new technologies, new innovations and new ways of using technology appearing all the time. The Digital Strategy will need to evolve as time goes by, and to evolve we are going to need ongoing support from industry groups, like the New Zealand Computer Society.

To help with the necessary evolution of the Digital Strategy and wider government ICT policy, the Digital Strategy is also a living website, www.digitalstrategy.govt.nz – that will develop with the Digital Strategy.
This website is the place to find out more about the Digital Strategy programmes and funding. It’s also the place where over time you’ll be able to see how government, business and communities are working together to build on our digital future.

In summary, I believe we have a bright, connected, digital future ahead of us. I look forward to working with you and with many other groups to help realise that future.

Thank you.