The Greens ICT discussion paper

December 17th, 2012 at 3:54 pm by David Farrar

The have put out a nine page discussion paper on some ICT issues. Good to see some policy discussion occurring. Some of the challenges they cite are:

New Zealand is reliant on a single fibre optic cable system connecting us to the rest of the world. This vulnerability is an issue for the entire New Zealand economy, not just the sector.

Reliance on a single provider for our  means higher prices, data caps, and less innovation for services. In time, international capacity will also become an issue. And a single cable system means that our link has less resilience. If the cable breaks or a technical fault occurs (as it did on November 9, 2012) then New Zealand may remain disconnected from the rest of the world until the connection is repaired.

I certainly agree it would be great to have competition for , and lower prices and larger (or no) data caps. This is generally occurring anyway, but international cable competition would help further.

The technical vulnerability is somewhat over-stated as the Southern Cross Cable is a figure of eight loop and even if one portion falls over, service shouldn’t be significantly disrupted.

As fibre to the home gets rolled out, bandwidth needs will increase almost exponentially.  However against this cable technology improves and SCC has already increased their capacity by 700%.

The New Zealand Government is indifferent to the local ICT sector in its current procurement policies, resulting in the purchasing of proprietary software from foreign companies. For example, the first part of a $2 billion Inland Revenue IT contract was awarded to French firm Capgemini and was designed in a way to make it nearly impossible for any New Zealand provider or group of providers to bid for the contract.

When all other things are equal, of course you want NZG to use local firms. But all other things are rarely equal.  All oppositions always complain about overseas companies winning tenders, but never change anything much because it is both illegal to do so under many trade agreements, but also it is impractical. Do you put in place a rule such as go with a NZ company unless they are 5% more expensive? Why 5%? Why not 6% or 4%?

Anyway the proposals:

The Green Party proposes that the Government takes a $100 million cornerstone investment in a second fibre optic cable to ensure it is successfully constructed and stays in New Zealand control.

The NZ control part is silly xenophobia. Southern Cross Cable majority shareholder is a NZ company.

As to the substance, I am unsure that the reason Pacific Fibre failed was lack of capital. Many people were willing to invest in it. Their failure, to me, appeared to be an inability to get enough long-term customers to make it profitable. This was no fault of the directors. It is a very very difficult proposition to get long-term customers against an incumbent who already has customers at very high initial rates, and can lower marginal rates massively and still be competitive.

Competition would be good to set off such a price war, but merely having the Govt invest $100m into a company does not mean it could successfully compete.

While this is a significant investment, it amounts to 0.8 percent of the National Government’s $12 billion spend on new motorways. Reprioritising this spending would enable a $100 million investment in a second cable without adding to Government debt.

Oh this is nonsense. First of all the motorway spending basically comes from petrol tax. Are the Greens really saying they will use petrol tax to fund a part-share in a fibre cable? Secondly the Greens have already claimed all the motorway funding for rail and other projects.

There are pros and cons of a Govt investment into an international cable. However it is dishonest to claim it won’t lead to extra debt – of course it would.

We propose that government agencies be required to consider the wider economic benefits to New Zealand of supporting the local ICT industry when making purchasing decisions.

I think you will find most already do. This won’t change anything I’d say.

As a first step towards developing awareness, government agencies will have to measure how much of their current ICT spend is going to local companies and report on it.

That’s not a bad idea though. In fact I believe all government contracts quantums should be publicly disclosed

Government agencies will be required to use open standards for new projects and use open source software, where possible.

Many government agencies are already big open source and standards users. I’d be careful though about making open source software a requirement, unless impossible. That is a step too far. For example it would mean no school would be allowed to use Microsoft products.

Finally, we need to amend the Patents Bill to prevent the patenting of software

And here I agree.

Overall some good issues the Greens have touched on, but the solutions are very debatable. But that is what discussion documents are for.

You can provide feedback to the Greens on their discussion paper here.

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25 Responses to “The Greens ICT discussion paper”

  1. Dave Stringer (183 comments) says:

    AS I said on FrogBlog

    Hmmm, let’s look at the three initiatives.

    We can include ICT in our apprenticeship scheme and encourage IT companies to develop their own apprenticeship/internship schemes, investing in staff development at home rather than buying it from overseas.

    An excellent concept that, while it has a few obstacles to address could be a safe bet.
    The challenge is to arrive at standards which are common not just throughout New Zealand, but on a broader international scale. The NZ Computer Society considered the establishment of such a scheme a few years ago; however, to make it work required establishment of an organisation with as much power and credibility as the Legal and Accounting professions enjoy.

    We can help the ICT sector to overcome the distance from markets by supporting promising local developers to visit key ICT clusters overseas and gain experience there.

    This is a bit of a misnomer. If we’re talking about development companies needing support to get to their markets, it doesn’t strike me that there is much of a barrier there, and NZTE already has mechanisms for such support. If, however, were talking about helping individuals, this strikes me as about the same as WINZ paying for people to fly to Australia to get jobs – an unproductive investment. Sorry, I see this as a waste of taxpayers’ money

    Finally, we need to amend the Patents Bill to prevent the patenting of software, which is chilling software development overseas

    OUCH. You want innovation and investment without the ability to protect the return on that investment. WHy on earth would we do that? Can you imagine Xero getting into the black, just to have their software pirated by a bunch of well funded silicone valley garagetechs who go on to grab the lions’ share of the USA market by claiming to be local providers? Would you design a new vehicle engine that delivered 100 miles per litre of alcohol and happily give it away without ensuring royalties to the investors who funded you?
    Please – don’t go this route, it will lead to our most innovative leaving NZ (still) to live in a place where they can protect their inventions.

    As for the second link across the pacific – some very credible, and very rich, entrepeneurs tried to put together a consortium to do exactly what you are proposing. They had more than enough wealth between them to cornerstone the investment, as well as total credibilty in the market tey were proposing to enter. They failed to raise the required funds because the owner of the existing link has sufficient available capacity to create a price war that would be disasterous for the new competitor; their current (depreciated) investment would have such a significant advantage over a new entrant as to ensure they couldn’t make money while the established competitor could.
    PLUS, is it really appropriate for the government to go into competition with its local merchants? My own view is that if a private venture is prepared torisk capital to make money, no local government should set up in competition with them as they enjoy a potential financial advantage (recycling taxes/rates back to the business) that favours the nationalisatio of ALL industry IF government owned enterprise is what a country believes it should have. Mind you, to establish that I think you would need a clear platform of nationalisation in front of voters prior to an election, rather than the ‘behind your back’ approach that was taken to the purchase of Kiwi Rail and Air New Zealand – both of which shouldnot, in my opinion, have had public funds put into them.

    Finally, our local suppliers have to be fully competitive with the international market. This means that the NZ Government should be able to purchase its software from the most cost and service effective provider available, and that our domestic suppliers shoul be those suppliers – otherwise they are doomed to failure.

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  2. berend (1,634 comments) says:

    The Greens want more competition? Pigs can fly!!

    Ah, they want it buy the government creating a competitor. I.e. force us to pay for a competitor.

    It seems pigs can’t fly after all….

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  3. anonymouse (695 comments) says:

    So does the the Green party now support PPP’s ???? :)

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  4. Pete George (22,865 comments) says:

    This is a good way to develop policy, airing it as widely as possible and gauging responses and looking for ideas, enhancemenrs and risks.

    Once again the Greens are a major step ahead of Labour, who announce policy that hasn’t even been seen or discussed by the party members (there’s 100,000 reasons why not to build policy like that).

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  5. Pete George (22,865 comments) says:

    So does the the Green party now support PPP’s ????

    anonymouse – make a submission suggesting that Government contributes 51% ownership to ensure the project is completed and stays in New Zealand control. I think there’s already a framework along those lines.

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  6. labrator (1,750 comments) says:

    Where was this policy when it actually mattered, before we committed all the cash to fibre to the home? Seems more like they saw how popular it was when Kim Dotcom started mindlessly raving about it and thought “we’ll have some of that popularity thanks”. It’s ok as a policy but it seems a little late and a little against their modus operandi of public partnerships. Can we have private roads now?

    Can you imagine Xero getting into the black, just to have their software pirated by a bunch of well funded silicone valley garagetechs who go on to grab the lions’ share of the USA market by claiming to be local providers?

    Quite how any one is going to get the sourcecode of Xero is something you’ve not answered, or what particular part of Xero would even be patentable. Local providers? Since when did people start looking up who owns an online business before they use it. Did NZers suddenly drop TradeMe when we sold it to the Aussies? There were plenty of alternatives. In fact there’s even a local alternative to Xero in the states already, a couple of them, they could copy Xero’s interface exactly at the moment if they liked but it won’t make a lick of difference.

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  7. sparky (235 comments) says:

    Quite frankly The Greens live in fantasy land. Most of what they say is just not practical. God help NZ if they ever get anywhere near the Government books. That would be a MAJOR disaster.

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  8. Manolo (13,392 comments) says:

    The communits Luddites are avowed and eternal statists and will run down the private sector of the economy as much as they possibly can.

    Capitalism and profit are dirty words in their vocabulary.

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  9. queenstfarmer (748 comments) says:

    @Dave Stringer:

    Can you imagine Xero getting into the black, just to have their software pirated by a bunch of well funded silicone valley garagetechs who go on to grab the lions’ share of the USA market by claiming to be local providers?

    Dave, you need to wise up. Do you seriously think that Xero has a US patent for online accounting? Of course they don’t. They are quite happily competing in a number of markets around the world without patents, which wouldn’t be possible anyway for what they are doing. The threat to Xero is FROM patents, not that they can’t get them (if they wanted them).

    Would you design a new vehicle engine that delivered 100 miles per litre of alcohol and happily give it away without ensuring royalties to the investors who funded you?
    Please – don’t go this route, it will lead to our most innovative leaving NZ (still) to live in a place where they can protect their inventions.

    Again, you need to wise up: the policy is about software patents, not machine patents.

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  10. David Farrar (1,856 comments) says:

    If you could patent online accounting, I suspect Xero would never have been able to compete, as a US firm would have patented it first, even if they never rolled it out.

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  11. RRM (9,475 comments) says:

    We propose that government agencies be required to consider the wider economic benefits to New Zealand of supporting the local ICT industry when making purchasing decisions.

    LOL – It’s interesting that they never seem to consider that savings to the NZ taxpayer arising from using overseas suppliers might be one of “The wider economic benefits to New Zealand” that someone, somewhere, might perhaps have taken into account in making purchasing decisions.
    Oh no, doubtless they are all incompetent, cynical, neo-con bastards :-)

    I seem to recall similar waffle around the Matangi trains coming from Korea…. which was “wrong” because there is a long-established Hillside railway workshop in Dunedin that “should” have been given the contract… even though they were not really geared up and capable of building new electric multiple units from scratch, nor had they any track history of building such things.

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  12. bhudson (4,734 comments) says:

    I agree on software patents – let’s not forget that Intellectual Property rights still apply, protecting their source code and investment. Items such as software routines cannot be claimed as unique inventions and patented – that is as it should be.

    Local content rules are something of a joke – PC manufacturers used to claim content through the cardboard used in packaging. The tender process should select the right company for the project, irrespective of location.

    Also most major offshore-owned companies have local structures – e.g. IBM, HP, Oracle. Surely they are considered local? If not, then all ‘local’ companies would surely have to disclose their sources of funding and shareholders – many may not be quite as ‘local’ as assumed simply because they are not a local subsidiary of a multi-national.

    If we do consider local subs to be local businesses for the purposes of procurement rules then, quite frankly, the Greens’ policy is simply going to discriminate against the Indians and Chinese. That’s a really good plan to encourage trade with them isn’t it? (And we have FTA’s with them both – how will this policy contravene those?)

    It is contrary to good governance that we take on additional risk by choosing a supplier simply because they are local – a “local [business] for local people”…

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  13. chris (567 comments) says:

    OUCH. You want innovation and investment without the ability to protect the return on that investment. WHy on earth would we do that? Can you imagine Xero getting into the black, just to have their software pirated by a bunch of well funded silicone valley garagetechs who go on to grab the lions’ share of the USA market by claiming to be local providers?

    You seem to be confusing patents and copyright.

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  14. Reid (15,970 comments) says:

    Sadly the Gweens didn’t mention the Celtic Tiger model which saw in the early noughties Ireland become the largest software exporter in the world surpassing the US.

    The way they did this was by focusing like a laser on two specific industries, one of which was bioinformatics which is number crunching for genetic research. They did two things. One, they designed their educational institutions to produce the right graduates and two, they created low tax zones to encourage multinationals to setup R&D centres in those zones which were usually in depressed areas in the country.

    I doubt the Gweens would have any stomach for the latter, but this is what will need to be done. Recall several years ago when Hulun was in power when we lost the Motorola R&D centre to Australia. We do have a highly creative and highly agile workforce capable of achieving what the Gweens suggest, but the horses won’t come together unless they receive wise political direction from politicians who acutely understand business, as opposed to employment relations. Last time I looked the Gweens have none of the former but plenty of the latter.

    Thus we are doomed, I predict it will turn out a bit like Hulun’s “Knowledge Wave” conference, lots of talk but nothing, absolutely nothing, will ever come of it. I hope I’m wrong.

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  15. Mobile Michael (414 comments) says:

    There are lots of original software solutions to problems that are easy to replicate in code. Not being able to patent them means you original solution is worthless. The issue around patents is that some of them have been made solely for the purpose of leveraging licencing – several years ago I recall a case where someone patented a web based checkout system for sales at online stores – which should not be allowed.

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  16. Richard29 (377 comments) says:

    “Do you put in place a rule such as go with a NZ company unless they are 5% more expensive? Why 5%? Why not 6% or 4%?”

    From what I understand their position was more around breaking up contracts into smaller parts where it is possible to do so (e.g. perhaps a local IT provider providing support and maintenance contract)

    The issue is scale – there are not really any local providers who have the scale to deliver the 2BN overhaul at IRD – but it becomes a bit of a catch 22 because without access to any large government contracts it is hard for mid sized NZ companies to grow to the size required to take on these jobs. This is the same reason Westpac has had the government banking contract for years – there is no local bank with anywhere near the scale required to service a client that size.

    Some kind of supporting policy framework in this spoace would make sense – rather than seeing the bid as an all or nothing (where kiwi companies get a 5% pricing advantage or whatever) have some provision for giving preference to NZ or joint bids. The likely scenario might be that with two big international bidders for a job if one of them structures the bid as a joint venture with somebody like Datacom they gain the advantage by still having the international scale and backing but also having a local presence.

    This is the kind of policy that countries like Korea, Taiwan and China have been following for years – encourage foreign direct investment but as a means to grow local capability not as an end in itself.

    In terms of what the tipping point should be for a bid – rather than having a fixed percentage as you’ve stated above, a better idea would be to get all bidders to indicate in their level of local investment (all bidders will have some local investment but some will have morethan others) and then approve based on total cost to the taxpayer. If you have similar priced bids on a 2Bn contract but one of the bidders is proposing to hire staff locally while the other plans to do most of the development in Paris or Bangalore then the total cost of the job to the taxpayer will be substantially less for the first bid by the time the local workers have paid income tax. What we need is a procurement policy that is allowed to be flexible enough to account for this rather than forcing the government to take the lowest bid as if where the tax dollars are spent was immaterial…

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  17. lightweight (13 comments) says:

    @bhudson and @David Stringer – I suspect you don’t fully understand why the NZ software industry doesn’t want. The fact is, however, that they don’t. Either you’re not software developers, or you’re part of a small minority who do want patents but probably don’t understand the implications for the industry. The thousand+ developers who signed http://no.softwarepatents.org.nz have made their position clear, as have a huge majority of the IITP’s membeship (90%+). If you don’t understand, then I encourage you to read some of the background on the site, as it might help clear things up.

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  18. lightweight (13 comments) says:

    (first sentence above) …doesn’t want *patents*…

    *sigh*

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  19. bhudson (4,734 comments) says:

    @lightweight,

    If you had actually read my comment you would have seen that I advocate against software patents. “I agree on software patents…” has context – the context being I was agreeing with DPF (and the Greens) that we should not endorse software patents.

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  20. lightweight (13 comments) says:

    @bhudson – apologies, I did misread your comment. Consider my dressing down amended to exclude you :)

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  21. ricknz (16 comments) says:

    Lets not build a fibre route to the U.S. as it comes with to many rules from U.S. authorities like the NSA.

    http://www.interest.co.nz/business/60485/kiwi-pacific-fibre-cable-project-sunk-us-fears-about-chinese-investment-espionage-it-

    If we want access to high bandwidth we either need to have our own cable to China, Japan, South America, or South Africa.

    Check out the link below to get an idea of where fibre is being put down.

    http://www.cablemap.info/

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  22. ricknz (16 comments) says:

    After looking more at the cables it seems a cable from Bluff to Perth about 2600 nautical miles might be the best route to link up with a (2013) 6.4Tbps cable to Signapore which in turn connects to a (2014) 12.8Tbps cable to Cape town and Brazil on one side and China and Russia on the other.

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  23. wat dabney (3,672 comments) says:

    A recipe for rent-seeking and cronyism, and all paid for by the long-suffernig taxpayer.

    Why am I not surprised it comes from the Greens.

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  24. BigFish (132 comments) says:

    Software patents don’t tend to benefit software developers. Everything conceivable gets snapped up by large international corporates to prevent local competition or by patent troll type organisations that act to hold actual software developers to ransom for obvious processes. Evidence of this is abundant in the USA.
    Neither of these types of entities add value to the NZ software development sector, they just tie up the process and force software development to me made based on avoiding legal challenge rather than purely addressing the technical challenge using obvious, simple and efficient processes.

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  25. Azeraph (603 comments) says:

    Patent trolls just need one thing to back them off, accept the court challenge.

    Aren’t we a bit late with this paper? I’m all for a second cable as we face a changing system that will need better access than what is currently available. The average kiwi household will pay for their net access if it guarantee’s better bandwidth and faster D/U, Business will pickup and knowledge access won’t be regarded as too costly to a families budget as the net changes over to video education and live conferencing.

    It may seem like a joke but if the average kiwi on the street is dissatisfied with access then the greater whole will be doubly disappointed. We’ve fallen too far behind where the average D/L speed is 2mb/s. The Greens are a little too late and a little too slow and it shows just how out of touch people are here on this blog is.

    Let’s just right off the 100 mil and let business do what business does best, Are we not a nation of little business guys?

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