Keynote address at NetHuiCommunications and Information Technology
Good morning. It is a pleasure to be invited to speak at this year’s NetHui.
Can I begin by acknowledging InternetNZ for organising this event, and for their on-going work in ensuring that key issues affecting the development of our digital future continue to be prominently and actively debated.
In particular, I want to acknowledge InternetNZ’s ongoing work on:
- The World Internet Project looking at the state of the Internet in New Zealand;
- The transition to IPv6;
- Fostering discussions on human rights and the Internet; and
- Helping to promote broadband access
The theme of this conference, the next 25 years of the Internet, is certainly topical when you consider how essential the Internet has become to our economic and social lives in a very short time.
Twenty-five years ago, New Zealand became the first nation in the Asia Pacific region with a full connection directly into the United States Internet backbone.
The ANZCAN undersea cable ran from Hawaii to Waikato University and provided a humble 9.6 kilobits per second connection.
25 years on, New Zealand now connects to the world through the Southern Cross cable system with a capacity of 2.7 terabits per second and growing.
This is a speed improvement of more than 280 million times.
As you will be aware the Government has recently announced an agreement to provide $65 million towards Hawaiki Partnership’s proposed new second international telecommunications cable.
This on the basis that a second cable would add even more capacity and raise the level of competition in the market and meet our future traffic requirements.
But predicting exactly what the next 25 years will hold is extremely difficult.
What is certain, though, is that there will be digital disruptions occurring in every sector of our economy, and while that will challenge the business models of many, the opportunities that come with it are almost infinite.
In my capacity as the Minister for Communications and IT, for me, a core part of the question around the next 25 years of the internet revolves around the role the Government should play in supporting New Zealand's digital future.
I see this as broadly two fold:
Firstly it is clear that the Government has an important role to ensure the wider ICT ecosystem – including infrastructure, regulation, skills training and trade – supports and adapts to whatever the future holds.
Secondly, as a major player ourselves in the New Zealand economy, we have to think incredibly carefully about how government procures and uses digital technologies to better meet the needs of our citizens.
Looking first at our role in the wider ecosystem, I'm of the view that both the internet and the internet economy have been successful largely because they were not led by Government.
In my view the optimal role for Government is to work on removing barriers and creating an economic environment where IT companies can thrive.
Positioning New Zealand for a digital transformation is not about launching trendy tag lines and strategies, but about real action.
Our Business Growth Agenda has recognised for some time that information technology is a key driver for economic growth which is why across the areas of infrastructure, skills, innovation, capital markets and trade we've set out the specific actions we are taking to support the sector.
Amongst these initiatives is of course our $1.65 billion investment in UFB and RBI infrastructure that is on track and on budget and which opposition parties opposed.
In terms of skills you have seen from us increased funding for computer science courses, software engineering and other related science and technology tuition, and of course the $28 million recently allocated to the creation of three new ICT graduates schools.
As for innovation support just yesterday, my colleague Steven Joyce announced funding for three new technology focused incubator programmes.
He also confirmed that tech businesses being incubated in these hubs will also be able to access the $31 million we have dedicated to our new repayable grants scheme available to start-up companies.
And on the capital side it has been great to have the support of Commerce Minister Craig Foss in passing the new patents law protecting the status of software, providing a clear framework for crowd sourced funding and just this week confirming the creation of a streamlined Growth market on the NZX, making it easier for earlier stage companies to list.
In terms of the second part, our impact as a purchaser and user of digital services, we are aware that this is a critical factor for both the way the ICT sector operates and the efficiency with which we can offer public services.
Because of this we have made considerable change over the past three years including creating the role of Government chief information officer as a functional leader across government.
What that means is that for the first time the GCIO is charged with ensuring an all-of-government approach to the acquisition and use of technology and the delivery of our Better Public Service result area 10.
This result area is focused on ensuring New Zealanders can interact with Government easily through digital channels.
The GCIO reports to a group of senior ICT ministers and has been given the mandate to drive real change in this area.
So what about next steps?
Well, now that the development of communication infrastructures are well underway through the UFB/RBI programmes, and implementation requirements of 90% coverage within 5 years on the 4G networks, the next stage will be to consider further how connectivity can continue to be enhanced for those outside the UFB footprint.
Of particular interest will be the needs of the remaining 2.2 percent of New Zealanders outside both the UFB and RBI programmes.
I have recently asked the Ministry of Business, Innovation and Employment to undertake a market study that will identify exactly what telecommunications coverage and services are available in these areas, to properly understand market limitations.
This study will help us to understand where we are now and identify future challenges and opportunities that may arise in the provision of telecommunications services to rural and remote areas.
Looking further ahead, there are many issues concerning the future of the Internet that you will be talking about at NetHui.
With the time I have left with you today, I would like to touch on three in particular:
- International trade in ICT;
- Internet Governance; and
- Net Neutrality
New Zealand’s digital economy contributed more than $2 billion in export earnings last year, making it our third biggest export earner behind dairy and tourism.
Within this, IT design, consulting, and development services are our biggest ICT service sector export, valued at $300 million, accounting for one in every five New Zealand ICT export dollars.
While New Zealand is proud of our growing expertise and reputation in ICT, we can also learn from other countries that are making excellent progress.
The New Zealand Government participates in the Korea, Australia, New Zealand Technology Summit – KANZ – which is held every 18 months.
It has a strong trade focus and aims to build and maintain commercial co-operation and partnership between the three countries.
This year New Zealand is hosting KANZ in Auckland at the same time as NetHui. I had the pleasure to attend and deliver the opening address at the summit yesterday.
South Korea and Australia are ideal markets and partners for New Zealand ICT companies.
As you know, Korea is an ICT powerhouse, a world leader in broadband penetration, and home to millions of tech savvy early adopters of technology.
It has a thriving start-up community and some of the world’s most sophisticated ICT companies - Samsung and LG are two shining brands with a global supply chain.
However, through involvement in previous KANZ events, it has become clear to me that leading Korean companies recognise that they cannot necessarily develop the full range of technology and solutions that the markets demand.
They are looking for partnerships with innovative companies that have technology or applications that can be embedded in their products, and that creates a significant opportunity for New Zealand.
A number of New Zealand companies have already capitalised on this and successfully entered into business-to-business relationships in Korea.
For example, Flightcell and Rakon are component suppliers to manufacturers, and others are software solution providers including MetraWeather, Right Hemisphere, and Vista.
The Government, through NZTE, is also working closely with New Zealand ICT companies to establish and grow their presence in Australia, with a focus on secure payments, GPS systems and social media monitoring tools.
I see tremendous potential for New Zealand ICT companies with new products and ideas to further develop business-to-business partnerships with South Korean and Australian companies.
Collaborative trade relationships are critical to position New Zealand to stay on top of fast evolving ICT research and development, and capitalise on these opportunities.
Through events like KANZ, the Government is ensuring that New Zealand strengthens these key international relationships so that our technology sector can thrive into the future.
As well as having a thriving technology sector in overseas markets, I also regard it as crucial that New Zealand’s voice is represented in international debates on issues such as Internet Governance and Net Neutrality.
How these issues are handled will have a significant effect on the future of the Internet.
I am particularly interested in the recent international debate on Net Neutrality – which, as you know, is the high level principle that all Internet traffic should be treated equally by ISPs.
As you will be aware, the default public Internet model is that services are provided to customers on a best efforts basis, with no service guarantees for any particular user, traffic type, application or service.
I certainly support the core principle of neutrality but, of course, as consumers the challenge for us all is to decide which rules we want in place and which departures from the principle are acceptable and indeed necessary.
Despite the core neutrality principle, it is common for many countries to support some departures from the rules, such as legal orders to block harmful websites and the filtering and blocking of undesirable traffic such as email spam.
New Zealand has not yet had to have this debate in any formal way as ISPs have not sought to push the boundaries of consumer acceptability.
But I have no doubt it is a debate we will have in time, so I am very interested in what is happening in the United States and the European Union at present.
In the United States, the Federal Communications Commission has issued a Notice of Proposed Rulemaking – “Protecting and Promoting the Open Internet” for a four month public consultation.
The Notice contains three key rules; transparency, no blocking, and no commercially-unreasonable practices.
One of the key areas of debate in the United States is whether internet service providers should be permitted to charge application or content providers for a service that is better than a best-efforts service, or effectively create premium "fast lanes".
This is certainly an approach I think we would need to approach with some caution and I note that the rules in the proposed Notice do not explicitly resolve this issue so I am keeping a watching brief on how this debate plays out in the US.
In Europe, the European Parliament voted to enshrine Net Neutrality rules in legislation in April this year. The draft legislation requires all Internet traffic to be treated equally, but exempts specialised services.
The Council of Ministers of the European Union, comprising telecommunications Ministers from the 28 Member States, must approve these rules before they become law.
With the rules facing strong criticism in a number of countries, it is not a foregone conclusion that they will be endorsed.
In New Zealand, the level of interest in Net Neutrality has been less intense.
Some characteristics of our telecommunications market may explain this, including the relative competitiveness of our fixed line broadband market, as well as there being less integration of broadband and paid television provision.
For example, in the UK, Sky provides Pay TV and ISP services.
However, our telecommunications market is evolving.
We are seeing increases in data consumption and greater pressure on our networks.
The Annual Telecommunications Monitoring report released in May, found that connections with a data cap of 50GB or more doubled in the year to June 2013, to reach half a million.
As people move to fibre services, consume more and more data, and expect better speeds, traffic management and other policies put in place by ISPs may become more obvious to the average consumer and increase the debate about Net Neutrality.
Other factors, such as the potential for smaller providers to consolidate or ISPs to offer their own content directly, could increase the urgency around addressing Net Neutrality issues in New Zealand.
New Zealand has a regulatory system which encourages competition and ensures consumers have choice between ISPs.
These features may prevent Net Neutrality from becoming a significant problem but that isn’t something we can take for granted.
When the Commerce Commission considered Net Neutrality in 2012, it noted that it shouldn’t be an issue if ISPs are transparent about the limitations or restrictions placed on their broadband services, the ISPs marketplace is sufficiently competitive, and that consumers are able to switch relatively easily between providers.
In New Zealand, the protections of the new Broadband Product Disclosure Code provide greater transparency for customers about what their ISPs are doing.
The Code specifically requires broadband providers to state the circumstances in which traffic management may apply and the effect this may have on customers.
As well as increased transparency measures, ISPs have an obligation not to be misleading under the Fair Trading Act.
I have also previously flagged that Net Neutrality is an issue that will be considered as part of the Telecommunications Act review in coming years if a need for more specific rules emerges.
Any outcomes on Net Neutrality could have significant implications for the way telecommunications companies operate; including their future business models, revenue streams and the ability for the industry to innovate.
We want a sector that supports investment and innovation, but not to the detriment of critical neutrality principles.
I am looking to you as experts in this field to spearhead the debate in New Zealand, to ensure we are proactive and on top of what could eventuate here in the future.
For me, the key question is – where is the line between legitimate, competitive differentiation and the point at which it becomes detrimental to end users?
The discussions you have at NetHui will be very useful for gaining a better understanding of Net Neutrality in a New Zealand context.
The final matter I want to touch on is that of Internet Governance.
Once the domain of engineers and techies, Internet governance now has implications that reach a more general consumer audience.
Over the past two years there has been a growing and contentious international debate occurring on how internet governance and cyber-security should be managed.
There is currently no international agreement on what Internet governance includes.
Often internet governance is characterised as consisting of three possible layers of governance:
- The physical infrastructure layer, consisting of the tangible equipment in which the internet operates.
- The code layer controlling the infrastructure; and
- The content layer: the actual information – bits and bytes travelling through the network
At last year’s NetHui, I spoke about how the New Zealand Government had joined several other OECD member states in rejecting a push to bring the Internet under stronger state control at an ITU treaty conference.
I can confirm that the Government continues to support the multi-stakeholder approach. As I noted earlier, in our view the internet and digital economy to date has largely been because of its decentralised, multi stakeholder led origins, allowing it to be open, responsive and innovative.
This approach has worked well in the past. This model promotes open political discourse, human rights, and encourages economic growth and innovation.
New Zealand supports Internet governance principles that ensure the Internet is accessible to all, is inter-operable and governed by principles rather than rules so it is able to cope with rapid change.
In our view, the principles must also be governed by arrangements that recognise the breadth of users and stakeholders, and discussions and governance models should be more sensitive to the needs of stakeholders who do not have significant resources.
New Zealand officials, along with representatives from Internet NZ, attended the International Corporation for Assigned Names and Numbers summit held at the end of June in London.
The focus for the Government at ICANN50 was on the discussion of the transition of responsibility for the Internet Assigned Numbers Authority (IANA) to the wider Internet community.
This is the last technical role held by a government, instead of a multi-stakeholder agency.
The transition is a key step towards the wider internet community taking on the responsibility for managing the Internet, and moving governance towards a more global system.
Fifteen years ago, only 4 per cent of the world’s population was online. Now, that number is 40 per cent.
As the Internet matures, there are complex issues to manage such as how our freedoms are protected, fostering access for developing countries, and how to deal with legal matters based on a system of jurisdiction boundaries in an internet without borders.
Once more, I will be interested to hear how you see internet governance evolving in the future, and what contribution you would like to see New Zealand make to this debate.
Like NetHui, our approach to Internet Governance forums recognises that the management of the Internet isn’t an issue for Governments alone.
It takes all the stakeholders – the technical community, civil society, the academic community, business, and Governments to work together to find solutions.
It is events like NetHui that will help us to shape the future of the Internet over the next 25 years, where we can work together to raise and solve issues, and discuss what we want the future to look like.
I wish you well for the remainder of your conference.