Kiwiblog

Steven Joyce has announced:

Minister Responsible for Novopay Steven Joyce today announced that Talent2 will continue to administer the school payroll – but that the long-term future of the system will stay under review.

“The decision to stay with Novopay at this point was made very carefully after a great deal of consideration and weighing up of all the risks,” Mr Joyce says.

“The improvements we have seen in delivering school pay from pay period to pay period and the progress to date in clearing bugs, means it wouldn’t be sensible to make a change at this point.  Making a change now would increase the work for payroll administrators in the short-term during the cut-over from where we stand today, not decrease it.

“Three out of the last four pay periods have had a reported error rate of less than 0.5 per cent – which we have been advised by our independent technical reviewers is a reasonable error rate for a stable system. However, that is not to say that we are out of the woods yet or endorsing the current state of the pay system.

The error rate for the last pay round was 0.26%, which is well below what the previous system even had.

“The only other realistic option at this point was to switch back to the old Datacom system and then upgrade again later to a new Datacom system.  That would mean substantial additional work and two further changes for school administrators.  We would do that if required, but it is not a step to be taken lightly.

“You can’t just switch a complex $4.4 billion a year payroll that pays around 90,000 people every fortnight without creating more issues – no matter which system you are using.

“A go or no-go decision had to be made at this point because the current Datacom backup proposal is time-sensitive, and has now reached the point where it will have to be re-worked for them to be able to assist.

Datacom have made it clear they remain ready to assist if they are required at any further stage. I appreciate that, and may call on them again at any time. I thank them for all their work and assistance to date.”

Mr Joyce says the focus for the next two months will continue to be on the Novopay system remediation in which progress will continue to be monitored on a daily, weekly and monthly basis.

“Staff from the Ministry, Talent 2, and schools are working hard on the remediation.  I appreciate all their efforts as we work towards a business-as-usual state,” Mr Joyce says.

The next key milestones are the Novopay Ministerial Inquiry, which is due to be presented to the Government at the end of this month, and the review of progress in the Remediation Plan at the end of June.

The report of the inquiry was be very interesting I suspect.

Steven Joyce pointed out today:

Labour and the Greens have jumped the shark with a half-baked Soviet Union-style nationalisation “plan” for electricity in New Zealand, Economic Development Minister Steven Joyce says.

“This is truly wacky and desperate stuff obviously made up in the last minute in the Koru Lounge between comrades Norman and Shearer,” Mr Joyce says.

“Their crazy idea to have both a single national purchaser of electricity and to exempt Government-owned companies from both company tax and dividends would effectively demolish private investment in the electricity industry overnight. It would also raise real questions as to why any individual or company would want to invest in businesses in New Zealand.

I never thought we’d see parties in NZ advocating socialist nationalisation policies from decades ago. Stuck in a time warp.

Anyway Russel Norman responded:

Minister Joyce’s release on the Greens and Labour’s electricity announcement is full of basic inaccuracies: he says that NZ Power would exempt electricity companies from corporate tax and dividends, which is completely false and not backed by anything in the discussion document.

So is Russel correct that Joyce has it wrong? Let’s look at the press release from no less than David Shearer:

The Crown will forgo dividends and tax revenue from the power companies.

I say game and set to Joyce.

Bad enough to have a mad Soviet style policy. Even worse to not even knowing what is in it, when you are auditioning to be Finance Minister for a Labour-Greens-Mana Government.

From Parliament:

2532 (2013). Hon Trevor Mallard to the Minister for Economic Development (19 Mar 2013): Has he or any predecessor expressed a lack of confidence or indicated a relationship breakdown with any staff of any department, agency or ministry for which he has responsibility to the staffer’s Chief Executive or their officials since 19 November 2008; if so, on how many occasions, is he aware of or has he received any reports on what occurred, and if so, what did occur?

Hon Steven Joyce (Minister for Economic Development) replied: No. With regard to any predecessor in my portfolios, the only instances I am aware of relate to comments made by Hon Trevor Mallard, describing an official as incompetent.

Steven Joyce has announced assistance for schools:

The $6 million package will be allocated as a one-off payment across the sector, calculated on a formula of $105 per Full-time Teaching Equivalents (FTTEs) plus $500 per school. For example:

• A small school of 5 FTTEs will receive $1,025
• A medium school of 20 FTTEs will receive $2,600
• A large school of 120 FTTEs will receive $13,100.

If there is eventually a court battle between the Government and Talent 2, then this will be added to the disputed bill!

Joyce also updated on the system:

“In the last three fortnightly pay periods, the percentage of complaints and notifications received dropped from 2.2 per cent to 1.9 per cent to 1 per cent while at the same time the total number of people being paid increased from 74,373 to 84,822.

“Following Pay Period 26 this week, the next big challenge will be Pay Period 1, in which significant changes occur for the start of the new financial year, including adjustments to KiwiSaver and student loan repayment rates. These changes may introduce new issues. The Ministry is working closely with Talent2 to minimise any increases in error rate.

So it has got better, but may get worse with the new financial year.

Out of interest does anyone know what the error rate with Datacom was?

“In regards to bug fixes, 87 defects have been resolved as part of the remediation plan to date, with 143 scheduled for resolution in a release on 23 March and a further 46 currently scheduled for 20 April. 228 defects are being managed through business as usual processes and we are looking at a fourth release to deal with remaining defects and usability issues.

The total number of current defects is 526. These include 49 Category Two defects (very serious), 320 Category Three defects (serious), 115 Category Four defects (moderate), and 42 Category Five defects (cosmetic). It is planned that the number of Category Two defects will be reduced to 12 on completion of the second release this coming weekend.

I guess a category one defect is the system is offline!

Adam Bennett at NZ Herald reports:

Speaking to the Herald about economic development prospects that he believes will drive growth and job creation, Joyce said there were significant opportunities in forestry and wood processing.

While the opportunities to add value to the logs produced here rather than simply exporting unprocessed timber had been talked about for years, Joyce said Chinese interest in the industry made the prospect more likely.

The topic had been discussed during the recent visit by senior Chinese politician Liu Yandong.

“Their view is they have to do something about their electricity consumption so they’re looking to offshore effectively some of the processing cost of some of their industries. So they’re looking and saying well, maybe we should invest.

“New Zealand has renewable energy, maybe we should invest there. If it’s competitive it also reduces the amount of stuff we’re bringing into China.”

Sounds excellent. No doubt the xenophobes will oppose anything to do with China.

Joyce believes New Zealanders now “are pretty awake and pretty realistic” about economic development opportunities. That, he says, could prove an increasing problem for Labour and the Greens. “For a start the Labour Party is now scared of its shadow when it comes to oil and gas – it doesn’t know what to say. A year ago they were bashing the hell out of us for it. The Labour Party is embarrassed by the Greens always turning stuff down.”

Joyce says polls suggest public attitudes to development opportunities have moved so far in the past two years that a Labour and Greens coalition that continues to oppose them as strongly as they have will find itself offside with a significant proportion of voters at the next election.

“The punters will turn around in 2014 and say, we’re not that interested because you guys are actually anti-jobs.”

Can anyone name a commercial development opportunity they have not opposed?

Fran O’Sullivan at NZ Herald writes:

Economic Development Minister Steven Joyce has taken a leaf out of Obama’s book by taking to Twitter to chew out high-tech entrepreneur Selwyn Pellett for raising hell over the Endace takeover.

Joyce’s Twitter exchange was more prosaic than the US President’s, but no less focused.

What got up Joyce’s nose was the implication that Pellett – who is a cherished Labour Party favourite – was having a bob each way on the issue du jour: whether Endace should pay back $11 million of Government R&D loans it received before it passes into 100 per cent foreign ownership, substantially enriching its founders.

Let’s say upfront that Pellett has been a thorn in the Government’s side.

I expect he will be on the Labour Party list. He is their biggest cheerleader on Twitter.

He is a spokesman for the Productive Economy Council and has kicked the Government’s shins hard over its plans to sell down its holdings in state-owned assets. So it’s no surprise that Joyce – who has been remarkably unrestrained recently – took the opportunity to have a slash back. …

The Twitter battle between Joyce and Pellett was great sport:

“So you collect taxpayer support, decide to sell shares, make lots of money & then moan about it in @nzherald #unbelievable … BTW R & D co-funding is about doing R&D in NZ, not supporting individuals. But happy 4 u 2 repay so we can fund others,” Joyce tweeted at Pellett.

Pellett tweeted back: “Mr Joyce, you should check all yr facts. Interesting a Minister would target an individual for speaking out on policy.”

It’s called hypocrisy. It is fine to target people for that.

Simon Collins in NZ Herald reports:

Tertiary Education Minister Steven Joyce told a Herald series on job/skill mismatches, which began yesterday, that he would direct the university to take more engineering and science students if it did not do so voluntarily in response to funding changes.

This year’s Budget lifted funding for engineering by $42 million, or 8.8 per cent, and for science by $17 million (2 per cent), while funding for all other subjects was frozen.

But Auckland vice-chancellor Stuart McCutcheon told the Herald that the increases were paid as a bulk fund and the university did not have to put it all into engineering and science.

Ummm. Do I have this right? The Government gives Auckland University some extra money for engineering and science (because we have skill shortages in those areas) and the university thinks it can just take the money, and spend it on the Arts Faculty???

A Pacific community leader has warned of a “Pasifika uprising” if the Government goes through with a threat to force Auckland University to take more engineering students, which may cause redundancies in other faculties.

Rev Uesifili UNasa, the university’s chaplain and head of Auckland Council’s Pacific Peoples Advisory Panel, said the move threatened Pacific participation in the university, which was concentrated in faculties such as arts and education.

“I’m very disturbed by the threat from minister Joyce. I can see a Pasifika uprising on this threat,” he said.

Wouldn’t the better thing be to encourage more Pacific students into science and egineering?

Another Pacific leader at the university, Dr Airini, head of the School of Critical Studies in Education, said more Pacific students needed to be recruited into engineering and science. “Mr Joyce is right. We do need to see that profile of Pasifika people in engineering. We also need to see that profile in education. It’s not an either/or, it’s a both/and,” she said.

“This is actually about New Zealand’s workforce development. We need to see a Pasifika presence in all of these areas because Pasifika are actually a big part of our younger population that will be essential for driving ahead NZ Inc’s future.”

A much more sensible view.

From written questions:

Hon David Cunliffe to the Minister for Economic Development(01 Aug 2012): Has the Ministry of Business, Innovation and Employment deleted any tweets from members of the public which reference the Ministry’s official Twitter page; if so, why?

Hon Steven Joyce (Minister for Economic Development) replied: I am advised that the Ministry has no ability to delete ‘tweets’ of members of the public, their Twitter accounts, or their Facebook pages. I am unaware of any legislation proposed by the Government which would give the Ministry this power. Should the Member wish to pursue this possibility, I suggest he does so by way of a Member’s Bill.

Audrey Young reports at the Herald:

Economic Development Minister Steven Joyce made a stinging attack today on Labour and the Greens accusing them of being “snake oil salesmen” and by pretending they could stop development and still have more jobs.

“It’s fairy tale stuff,” he told delegates to the National Party conference in Auckland.
They had to be called out for their “intellectual dishonesty”. …

Mr Joyce said the greatest risk for New Zealand was that it could “ankle-tap” itself by not developing because of small vocal minority who hated change and hated progress.

“It’s about the mitigation of the risk, it’s not about saying no. Every time you say no, it’s less jobs.”

He said Labour behaved different in Opposition to Government. It opposed the part sales of State owned enterprises but in Government had supported the privatisation of SOE subsidiaries which was only a subtle difference.

This is absolutely true. In fact Labour Ministers approved the sale of a mine from Solid Energy to the private sector.

It had also encouraged oil and gas exploration and celebrated the building of the Sky City casino.

“Those people are beneath contempt because they want to slow down New Zealand’s development for their own political ends.”

Good to see Ministers willing to hit back.

A guest post by the Tertiary Education Union on the Performance Based Research Fund:

A recent report on the behaviour of New Zealand’s universities around research performance funding confirms a truism – you get what you reward. And when rewards for universities are based on their ability to generate research outputs, we should not be surprised at the lengths they will go to in order to be on top.

The Tertiary Education Commission confirmed last week that universities were gaming its performance research funding scheme (PBRF) to make sure they could get a higher ranking in the exercise than other universities. Universities have been changing people’s employment agreements, restructuring departments and people’s jobs and in some cases making teaching-focused academics redundant simply so that they can appear higher on a rankings ladder than other universities.

While institutions get no more tax-payer dollars from improving their rankings in the PBRF exercise, they are fighting for prestige – to be “New Zealand’s Leading University” or our “top ranked university for research quality”. This race for rankings was not the intent of the research performance exercise and the commission now believes the system warrants change.

But the commission faces a Herculean task in reforming PBRF while trying to remain true to the core principle of performance based research funding – that you can drive up research performance with the right competitive incentives.

One thing we have learned in recent years from universities is will take the most direct route to the cash and the rankings no matter what stands in their way (think Pamplona’s running of the bulls for the right mental image of universities pursuing performance funding).

A decade ago, when the incentive was ‘bums on seats’ tertiary institutions restructured courses and sucked students out of schools and other tertiary education providers onto their campuses. Some of the outcomes of this market model were positive – New Zealand has one of the highest tertiary education participation rates in the world. However, there were, as has been widely documented in the past, many perverse outcomes – from massive marketing budgets to the now infamous ‘twilight golf’.

So we identified the perverse outcomes of funding based on student numbers and declared the way forward was not about mass participation but about high-end research.

Student numbers were capped and a new competitive incentive introduced centred on published research ‘outputs’ (primarily peer reviewed articles in international journals written for the academic community). 

The aim was to calculate an aggregate research performance score for each institution in order to allocate them funding commensurate with their overall research performance.

TEU has no problem with rewarding excellence in our institutions, but research outputs are only one part of the work of tertiary education staff – academics also are responsible for teaching, administrative tasks, engaging in public meetings to share their knowledge, and so on.

Yet the lure of being ranked number one has meant universities have punished award-winning teachers; asked academics to shift their focus from community research to peer reviewed journals; and questioned the future of academics who perform vital administrative roles, because this takes time away from writing journal articles.

So how do we stop universities from narrowing the role of an academic down to ‘research’, when that is what is what the government rewards?

TEC has proposed changing the way the ‘rankings’ are put together, by only calculating the average quality score of tertiary institutions based on those staff who actually receive one of the quality scores (As, Bs, and Cs) and excluding those who (for a whole host of good reasons) don’t even reach the bar in this narrow performance measure.

This move will not help students who have lost their favourite university teacher, departments who have lost great administrative academics, or communities who couldn’t find an academic expert to attend a public meeting because they are all too busy writing journal articles.

It is a warranted action and will reinforce what the PBRF exercise was about and show institutions they should ‘play by the rules of the game’ with integrity. After all the rules are explicit: PBRF scores are not to be used for hiring and firing academics; not to be used for promotions or performance management. What PBRF aggregate scores are for is to provide an auditing and accountability tool that can help the government dish out the dollars ($1.6 billion over six years) to institutions.

However, changing the rules for calculating the average scores of universities is only a stopgap measure. What the latest report from the commission highlights are fundamental problems with designing performance measures in the tertiary education system. This means a much bigger debate is needed: how do we get the best out of our tertiary education staff?

TEU often argues that the evidence shows performance incentives do not work – you need only look at the mostly incentive-based packages of today’s CEOs to see that any chief executive not worth his or her salt is still clever enough to rort the system and generate an exponentially increasing take home pay. And the creative industries – such as major companies in Silicon Valley – are again realising that giving workers greater autonomy (rather than strict line-management) is the way to get great work from staff. Our worry is that the government sees the perverse outcomes of auditing measures like PBRF but thinks this can be solved by just adding in more performance incentives.

So instead of rethinking whether performance measures work in the tertiary sector, the government has set up a performance exercise looking at student retention and completion. For tertiary institutions the quickest route to achieving in this exercise is making sure students pass their courses. The simplest way to ensure students pass is to put pressure on academics to elevate grades (and in a few isolated cases this is already beginning to happen in a range of institutions across New Zealand).

Should we just sit back and hope that gaming is not so accepted by our tertiary providers, and that they will not pervert good credentialing (the awarding of qualifications) or research performance exercises just to be ranked number 1? Or should we review whether performance based funds really help us get the best out of tertiary education sector?

Only the commission and the government can decide where we head next, but to us it seems clear – the report into PBRF gaming shows it is time to sit down and talk about how we protect the reputation of our tertiary education sector and ensure that we are getting a well-rounded set of outcomes from universities. 

Dr Sandra Grey
TEU National President

Tertiary Education Minister Steven Joyce also said:

But he has now revealed further reforms are planned for universities, including a review of the councils and a separate review of a the controversial Performance Based Research Fund (PBRF). …

Joyce, meanwhile, said funding for engineering and the physical sciences would get a boost in the Budget.

Research would also get a boost, though a modest increase in funding to the controversial Performance Based Research Fund (PBRF).

The PBRF, set up under the previous Labour administration, has been the subject of allegations of rorting by universities hiding away their least productive researchers to maximise their share of the funding. There has also been growing concern about the amount of time wasted by academics tinkering with their PBRF portfolios.

While the PBRF had been ”broadly successful,” Joyce said there were problems which would be addressed in a review this year.

“Frustrating gamesmanship” needed to be addressed and the Government was also keen to look at introducing incentives for the commercial success of research.

”You make it [PBRF] all about [publishing] papers, so if somebody steps out of the system for a year to go and work on a commercial project somewhere, does that damage their PBRF score so that they can’t contribute to what the university is being asked to contribute to?” Joyce said.

There may be a way to introduce incentives to the PBRF process for commercialising research, he said.

”You’ve got to be careful because obviously, it’s fine in engineering and economics and science and things but it’s a little bit harder in humanities.”

So further change looks likely, but whether there will be agreement on what it should be is another matter.

An excellent op ed by Steven Joyce in the Herald today:

Most of us agree that for New Zealand to be successful longer term, we need more and higher-paying jobs. Jobs provide the incomes that people use to help their families get ahead. Jobs give people the income to pay taxes for the health and education services we value, and well-paying jobs are what keep more of our people making their lives in this country – and that keeps families together.

So we largely agree on the what and the why, but often the consensus unravels a bit when we get to the how. This is a little surprising because in fact the how is not that hard.

Jobs of the long-term, sustainable kind depend on businesses that provide something that people value. That is, something unique, or something of quality at a lower price than their competitors.

There is no other effective way to create long-term sustainable jobs.

And in turn those businesses depend on six key things:

1. ideas and innovation to create the business (entrepreneurs and ideas people)
2. money to build the business (capital)
3. access to raw materials (resources)
4. skilled people to work in the business
5. the public infrastructure which the business depends on (power, broadband, transport) and, 
6. most importantly, customers who want to buy the product.

So if we want more jobs, then we need to look at how to provide more capital, have better access to resources, a more skilled workforce, and good public infrastructure.

We need an environment that is encouraging to entrepreneurs and ideas people. We need to ensure we make resources available for businesses to use. We need stronger and more internationally integrated capital markets that provide money for investment. We need to ensure our people have the right skills. And we need to remember that we have a small domestic market, so our businesses will need to access world markets a lot earlier than similar businesses in countries located in larger world populations.

That doesn’t mean handouts. It just means removing more of the roadblocks that stop people from doing things.

And that’s when the problems start to arrive. The people who say “we want jobs” but then in the next breath say “but you can’t do that … you can’t build that there … you can’t expand that … you can’t explore for that there … you can’t live here … you can’t invest in property here – you just can’t do that!”

And very quickly we start limiting our options. Through the 2000s, as a country, we progressively boxed ourselves in more and more to depend on fewer and fewer industries based on what the “can’ts” said. At the end of it the government of the day was pretty much down to talking only about two of the ingredients – skills training and subsidising entrepreneurs that don’t use resources (the so-called clean-tech sector) – as the bits the “can’ts” were most comfortable with. The rest was off the table.

That attitude made it much harder to pay our way in the world and, as a result, we went into recession before the rest of the world in early 2008.

I am hoping National in their second term will stand up to the “You can’t brigade” and give us more meaningful RMA reform amongst other things.

We live in a world increasingly without borders – at least not as our grandparents knew them. People these days can base their skills, their capital and their ideas just about anywhere. They don’t have to be in New Zealand.

So when we think about the “you can’ts” we need to think about the mobility of people and money. Each time we say “you can’t” carries a cost. That doesn’t mean we should always say “yes”, but we do need to carefully weigh up the consequences of saying no.

And we should learn to stop listening to people who in the one breath chant “more jobs, more jobs” and then in the next breath say “but don’t do that, or that, or that”.

Hear hear.

Great to see a Minister sticking up for foreign investment. The Herald reports:

Not enough New Zealanders appreciate the benefits of foreign investment and economic growth, says Economic Development Minister Steven Joyce.

The reaction of too many people was “you can’t do this, you can’t do that, you can’t do the other thing”, he said, with little thought to the impact it had on potential jobs.

“The same people tend to turn around and demand more jobs one minute and then declare that they don’t want to see any things over here happen.”

Exactly.

Mr Joyce said that if people wanted more job growth, they had to take a more positive attitude to investment in the New Zealand environment, especially given the mobility of people and the mobility of capital. …

Economic growth required the use of capital, resources, skilled labour, infrastructure, innovation and a market.

“So all those things have to be managed. It’s not a case of carte blanche but every time you say ‘I don’t want that’ that shuts off another opportunity.”

Too many people see foreign investment as bad, or at best a necessary evil.

At Stuff I blog on the train blame game.

Danyl blogs:

Senior government Minister and key National Party campaign strategist Steven Joyce will be spotted to the Labour Party for the election campaign, Prime Minister John Key announced today.

The surprise announcement comes after weeks of dire polling for the Labour Party, compounded by a series of public relations fiascos. Joyce is regarded as Key’s closest advisor, and National’s strategic mastermind.

‘This will make the 2011 General Election a fair fight instead of a somewhat undemocratic cake-walk,’ Key said in his Beehive Press Conference. He added that came to the decision after speaking with Joyce, who ‘loves a challenge.’

Heh.

Joyce will work closely with senior Labour MP Trevor Mallard, who is currently running Labour’s election campaign. Joyce has insisted that the two men will work together as equals.

‘Trevor’s role will be crucial to our success’ Joyce announced in a joint press conference with Labour leader Phil Goff. ‘In light of recent information security problems, Trevor will safeguard our campaign strategy documents in a tent on the Auckland Islands.’

The Auckland’s are an unpopulated sub-Antarctic island group with no phone or internet access. ‘Everything depends on this,’ Joyce insisted, as Mallard’s tiny orange dinghy sailed out from Invercargill into fearsome three meter swells.

Well they will be safer there, than backing them up to the webserver.

In the interests of party balance, Labour has traded Joyce for Dunedin South MP Clare Curran, and she’s believed to be behind the Prime Minister’s shock announcement that he will conduct the remainder of his campaign in virtual reality environment Second Life, and prefix every single word he speaks with the letter ‘i’.

The Prime Minister’s fairy-winger avatar commented on the new strategy when he addressed an online press conference of goblins, virtual journalists and the National Party Cosplay Association this afternoon.

‘iI imay ihave imade a ihuge imistake,’ Key said.

I love the phrase “the Prime Minister’s fairy-winger avatar”

Michael Field at Stuff reports:

Horotiu, the taniwha potentially blocking the tracks of Auckland’s multi-billion dollar rail dream, is the latest celebrity to open a Twitter account.

The taniwha has also gone global, with London’s Daily Telegraph headlining: “‘Swamp monster’ threatens Auckland railway project”.

Drawing on a Stuff story, the Telegraph quotes Glenn Wilcox, a member of the Auckland City Council’s Maori Statutory Board, demanding protection for Horotiu.

“As kaitiaki, or guardians, they protect people, but they also get up and bite you if they do not like what you are doing,” Mr Wilcox said.

On Twitter the debate has sparked two new accounts – TaniwhaHorotiu and HorotiuTaniwha.

The first carries an early complaint that taniwha do not make an international list of mythical creatures.

The two twitter accounts have even been chatting to each other Some of the tweets have been:

• @TaniwhaHorotiu Yur a dirty faker, I’m the real Taniwha, go find your own drain bro
• @LIVENewsDesk What about hate crimes against taniwha? Lots of haters out there dissing Horotiu
• @AKcitymission Can i join youse fellas?…i’m about to be made homeless by Len Brown
• Steven Joyce has been bad mouthing my bros the Fiscal Taniwha http://bit.ly/jZcjWG

Steven Joyce’s quote was superb:

Transport Minister Steven Joyce said the project appeared to be plagued by taniwha.

“It does not massively surprise me,” he said. “Treasury found a few fiscal taniwhas as well, so it doesn’t surprise me that another one has turned up.”

I think the term “fiscal taniwha” should be adopted by Treasury for use in all future business case evaluations.

Steven Joyce has announced:

The government has today reached agreements with Telecom New Zealand and Enable Networks that will complete the roll out of ultra fast broadband (UFB) to 75% of New Zealanders where they live, work and study.

The government will partner with Enable Networks, which is 100% owned by Christchurch ratepayers through the Christchurch City Council, to build an ultra fast broadband network for Christchurch, Rangiora and surrounding areas.

The Telecom deals will see a fibre optic network built in Auckland, the eastern and lower North Island and most of the South Island.

As part of the deal, Telecom must split off its network arm, Chorus, into a completely separate company, so that all broadband retailers can compete fairly to on-sell wholesale ultra fast broadband. Chorus will maintain the Kiwishare obligations currently placed on Telecom.

Congratulations to Telecom, and commiserations to Vector and the Regional Fibre Group. Also congrats to the Minister for turning an ambitious policy into a reality.

There were pros and cons with either party winning, and I suspect the negotiations were very tough.

The major focus for many now will be on the structural separation of Telecom. This is probably going to the biggest change in the telco sector since Telecom was created out of the Post Office. The details of the separation are quite vital – Chorus needs to be totally independent from Telecom as quickly as possible.

Today’s agreements with Telecom and Enable mean the government will reach its goal of bringing ultrafast broadband to 75% of New Zealanders by 2019. The rollout will start immediately with schools, hospitals and 90% of businesses covered by 2015.

I believe the fibre rollout will change New Zealand. With fibre to the home, you will get far far more people working from home, less demand for office space, video-conferencing will be as routine as changing the channel on your TV etc.

Wholesale household prices will start at $40 or less per month for an entry level product and $60 per month for the 100 Megabit product. There are no connection charges for households.

Mr Joyce says today is a very exciting day for New Zealand.

“The future of broadband is in fibre, and taking it right to the home will bring significant gains for productivity, innovation and global reach.”

The prices seem pretty reasonable. What will be interesting is what retail services develop to use the fibre. such as combined phone/Internet/TV/movie packages.

The future is in fibre, and I do believe this will be a contributor to increased productivity and economic growth.

Chorus is going to become (for most of NZ) the provider of both copper and fibre access. It will be an infrastructure company. Over time, I’d like to see Chorus (and the other local fibre companies) move towards providing cellphone towers to retail telcos such as Vodafone, 2 degrees and Telecom. It would make a lot of sense as the LFCs will have the fibre connection for the backhauls, and it would mean each telco wouldn’t need to get consent for their own individual towers, but could just hire space on a tower for their transmitters.

I blogged back in March on the Telecommunications Bill going through Parliament, and some of the issues around it which were causing concern.

Steven Joyce has just announced:

Regulatory forbearance on wholesale prices for the ultra-fast broadband network will be replaced with contractual mechanisms that would apply if the Commerce Commission regulates prices lower than those contracted, Communications and Information Technology Minister Steven Joyce announced today.

In announcing the move, Mr Joyce says that he had listened carefully to industry concerns in regards to the plan for regulatory forbearance over the 8 ½ year build period of the contract.

“While I think their concerns are more theoretical than real, given that pretty much everybody has been happy with the very competitive prices announced by CFH to date, we have been able to find an alternative solution which will give the infrastructure builders confidence to stay committed to their low capped prices, and customers confidence that they are will continue to get the best prices over that 8½ year period.”

This is an excellent outcome, and congrats to the Minister for devising it. It retains price certainity for investors (which means we get more fibre laid for $1.5b) but also leaves in place the security of the Commerce Commission to ensure consumers are not being over-charged.

If for some reason the Commerce Commission found prices should be lower than contracturally agreed (which is unlikely but predicting the future is difficult in such a innovative industry), then the Government bears the risk as the entity that entered into the contracts with the local fibre companies.

The Minister get big kudos for making the decision. I think it is also worth handing out kudos to the various ICT groups and Opposition MPs who pressed for changes. Both Labour and ACT MPs on the Select Committee were very receptive to pushing for changes.

I had been concerned that all the good work the Government was doing in investing the $1.5b into fibre would get over-shadowed by the arguments over the proposed regulatory forbearance period. This decision means all eyes will now go to whom will get the contract for the 85% of areas not yet allocated.

That decision is due in a matter of days, maybe weeks. And after that then there’s going to be a lot of work for people in digging up roads, putting in trench, laying fibre etc. The combined public and private spend will probably be $4 to $5b over the next eight years or so.

As we head towards fibe connected homes, I think we will see significant changes in society – many more professionals working from home, virtual offices for some firms, video-conferencing as common as TV,  movies and TV on demand etc, mass storage on the cloud etc. It’s an exciting future.

Vernon Small writes in in the Dom Post:

I come to defend Steven Joyce, not to bury him. In the fracas over the Government’s decision to let radio companies pay for their licences over five years, rather than pay $96 million up front, he has taken more than his fair share of unfair criticism.

Oh dear. I expect Vernon will now be pilloried on certain left wing blogs.

Suggestions that Mr Joyce, the communications and information technology minister, had some sort of conflict of interest in helping out the Brent Impey-led company (that Mr Joyce established) survives only till you know that Mr Joyce and Mr Impey are . . . errr . . . not close.

Mr Impey, with Canwest, led a successful “unfriendly takeover” of MediaWorks in 2001- that is, one bitterly opposed by Mr Joyce.

I was unaware of this, and not seen this in any other media. It is a good story that adds new facts to an issue.

The minister initially opposed any deal with the commercial radio sector. To protect himself further, he also sought advice from the Cabinet Office and was told he did not have a conflict of interest. It might have been wiser politically for him to step aside anyway, but that is miles away from any wrongdoing.

Those who have never actually worked in business (like most Labour MPs) have no real idea of what does and does not constitute a conflict of interest. They think that any affiliation or association what-so-ever means you must recuse yourself. This is not so. This would see the Minister of Finance unable to own a home, or the Minister of Agriculture unable to be a farmer.

Of course, it fits Labour’s narrative of a Government pandering to the few not the many, feathering the nest of its rich mates and acting as lobby-fodder for business.

But is Labour saying it wants a hands-off approach to business, whether or not that involves job losses?

WE SHALL never know what would have happened had MediaWorks been denied the payment relief and asked to stump up the full $42m at the end of 2009 – as advertising rates were falling, the economic outlook was bleak and banks were ultra-cautious about lending.

If one or more major media companies had failed, more than 1000 jobs could have been on the line. …

Mr Joyce is also blunt about the political fallout if the Government had said “get stuffed” and one of the big companies had collapsed. Once it was known the Government had rejected a deal at commercial interest rates with all the frequencies held as collateral, ministers would have been pilloried as hard-hearted, far-right, hands-off ideologues.

Is there a single person who doesn’t think Labour wouldn’t have done exactly what Vernon writes above, and lashed the Government for destroying jobs if it had refused the deferred payment scheme, and a major broadcaster collapsed?

There’s been a number of news stories on the Government’s Telecommunications Amendment Bill, which is currently before the Finance & Expenditure Select Committee. A typical story is this one at Computerworld.

The telecommunications sector is always somewhat controversial, but this bill has attracted criticism from just about everyone – telcos, ISPs, the Commerce Commissions and user groups. This post is aimed to explain what the debate is about, and reflects my views.

It is worth noting that most of what is in the TAB is not controversial, and is generally well supported.

Three aspects which are controversial are:

1. a “regulatory holiday” for the local fibre companies until 31 December 2019.
2. “re-averaging” the costs of local loop unbundling and unbundled bitstream, which will lower the wholesale cost in rural areas but increase the wholesale cost in urban areas by around 20%
3. possible structural separation of Telecom if they win the majority of regions for fibre rollout

In this post I will leave (3) for now as that little baby is so complicated it needs its own post. I want to focus on (1) and (2) and these will apply (if passed) regardless of whether Telecom wins most of the regions for urban fibre, or the lines companies led by Vector win most of the regions.

You may ask why would the Government consider giving the future fibre companies an exemption from the normal regulatory oversight of the Commerce Commission? Well the short answer is because the companies bidding to be future fibre companies have asked for it.

Okay well companies ask for lots of things from the Government. Many companies would like to be exempt from the Commerce Commission until 2010. Why would the Government agree to this?

The answer is because then the bidders will make better bids. They value having a regulatory holiday, so they will agree to roll out more fibre for the same subsidy. It is what Sir Roger Douglas (very perceptively) said was a regulatory subsidy instead of a greater direct financual subsidy.

Now before we talk about the pros and cons of this approach, you need to know the background. In the 2008 election National pledged $1.5b towards having ultra-fast broadband rolled out to 75% of NZ over the next decade. This was a lot of money (Labour committed only $300m – 1/5th of what National did) and it was in my opinion a great policy.

Work done by the NZ Institute concluded that investing in ultra-fast broadband, would result in significantly higher economic growth, and there is evidence from other countries to back this view up.

Now the cost of rolling out fibre to 75% of NZ is hard enough to estimate, let alone what the direct commercial returns will be on doing so in ten years time. The amount of subsidy needed to achieve the 75% target was estimated at $1.5 billion, but this was an estimate. An opposition does not have the resources available to get a precise projection, and even when you do have access in Government to Treasury, even then projections can be wrong.

To some degree one was never going to know until the actual commercial negotiations conclude, whether $1.5b was enough. InternetNZ did try to get some idea of how much it would cost to reaach the goal of 75%, and what would be the best way to go about it. They (which includes me)  commissioned a report from Network Strategies, a specialist economics consulting firm, which is here.  It was published in 2008.

The report concluded that the cost of fibre to 75% of NZ was around $3.3b if one utilised existing utility companies for at least half of it, and that the government’s contribution would need to be around $1.75b. So the $1.5b was a pretty good estimate, but may be not quite enough.

So this takes us back to why the Government is seeking to legislate a regulatory holiday – it makes it more attractive to its potential commercial partners, and helps close the gap. So the motivation is good – to save the taxpayer money.

However that does not mean it is the right decision. If there is a funding gap between the 75% target and what you can achieve with $1.5b, I would rather it be dealt with directly, not indirectly by way of regulatory holiday. Options are to increase the $1.55b on offer, or to reduce the coverage area from say 75% to 70% or push out the timeframe from say 10 years to 12 years etc.

The concern over the regulatory holiday is that whomever wins the contract, will be exempt from the Commerce Commission regulating access to their services until 2010. The Government will be relying just on the contracts they had to regulate the price, However this places Crown Fibre Holdings in the unenviable dual role of being an investor and a regulator. Also 2020 is almost nine years away, and that is a lifetime in the Internet world. The costs and prices of fibre and data may have changed massively in that time. Many people are very nervous about what could happen in the next nine years. This is partly because of the lessons from the past with Telecom (note again they may not be the fibre companies).

Now the Minister has pointed out that as the local fibre companies can not be owned by a company that will provide retail services over them, then it is less likely there will be a need for regulation, as the fibre companies should operate on an open access platform to all providers. But a lot of devil is in the detail. For example you could have Chorus (if they win) saying it will operate a volume discount scheme that only Telecom Retail will qualify for due to its size.

The Minister also says that as the fibre products will be competing against the regulated copper and that the challenge will be ensuring uptake, which will keep prices down also. I suspect Steven is right on the prices – but from my thinking why remove the safety net of the Commerce Commission, in case you’re not.

Now the other major change is that the calculation of costs and hence prices for the current copper based broadband services is to change from deaveraged to reaveraged. At present the costs and prices reflect the fact it is cheaper in urban areas than rural areas. The Government is proposing to legislate to change this, which means the price of broadband over copper will increase in urban areas. The estimate I have seen is by 20%.

So again why would you do this? The answer is the same. It means those bidding for the fibre contracts will be motivated to invest more money into them. Because if the price of broadband over copper increases, then you can be confident that more customers will switch over to broadband over fibre.

So again the rationale is quite understandable, but again that does not mean it is necessairly a good thing. It means people in urban NZ will pay higher prices than they should for broadband over copper for the next six years or so. Should the Government be effectively tilting the playing field to favour fibre over copper?  Again I’m in favour of tilting the field by way of Government subsidy, but not in favour of tilting the field by interfering with a regulatory regime that actually has worked very well in the last few years.

As I said, in a separate post, I’ll cover the possible structural separation of Telecom, and how this may result in a really great outcome or a really lousy outcome, depending on how the structural separation is done. And the consequences of getting it wrong will reverbate for a couple of decades. This is not something to rush.

Dave Burgess in the Dom post reports:

Intoducing legislation to reduce or cap the number of taxis in Wellington would be a move back to the bad old days of the 1970s and 1980s and will not happen, Transport Minister Steven Joyce says.

The Government’s position goes against that held by Wellington Mayor Celia Wade-Brown, who has said that limiting taxi numbers was an area for lobbying the New Zealand Transport Agency, which issues taxi licences.

The Taxi Federation also supported a cap on the 1237 taxis licensed for Wellington.

“The Taxi Federation regularly is nostalgic for the good old days and periodically says it wants to restrict the number of taxis,” Mr Joyce said. “I notice they never volunteer to reduce the numbers in their own fleets.”

A good point, and nice to see the Minister resisting a step back in time.

The lack of action in cutting cab numbers may disappoint a significant number of Wellingtonians, if a poll on dompost.co.nz is anything to go by. Three- quarters of the 664 respondents said they believed there were too many taxis in the city.

“At different times there can be too many, but I notice that whenever you are looking for a cab you are never too worried about the number of taxis,” Mr Joyce said.

“You get more concerned if you aren’t looking for a cab and you see them around.”

Also often you don’t just want any old cab, but one from a company you trust. Some taxi firms are very much a matter of using only as a last resort.

No Right Turn has breathlessly labeled as corruption the Government’s announcement of the first ultra-fast broadband contracts.

Why? He blogged:

So, what does this look like by electorates? UFB will be rolled out to:

• Whangarei, held by National’s Phil Heatley, with a majority of 14,663;
• Hamilton East, held by National’s David Bennett with a majority of 8,820;
• Hamilton West, held by National’s Tim Macindoe, with a majority of 1,618;
• Taupo, held by National’s Louise Upston, with a majority of 6,445;
• Taranaki-King Country, held by National’s Shane Ardern, with a majority of 15,618;
• Tauranga, held by National’s Simon Bridges, with a majority of 11,742;
• New Plymouth, held by National’s Jonathan Young, with a majority of 105;
• Whanganui, held by National’s Chester Borrows, with a majority of 6,333.

So, the first thing to note is that only National-held electorates get broadband; those with Labour MPs need not apply (sorry, you voted for the wrong person and so must be punished). The second thing to note is the targeting of marginal seats New Plymouth and Hamilton West. It’d be interesting if someone who knew about IT policy used the OIA to delve into National’s rollout decision, but from here it looks like pure pork-barrel politics. And I don’t like it one bit.

Idiot/Savant is like the boy who cries wolf. He slanders so many people as corrupt, that it becomes a meaningless label. Basically it just all comes over as hysterical rants.

His idiocy was picked up and blogged by Clare Curran, but even Clare worked out what weak ground he and she were on, and later did updates backing away “before David Farrar at Kiwiblog has a go”.

I will indeed have a go at such gross stupidity, and even worse effectively slander. Where do I start.

1. National holds every single seat outside the four main cities (which due to their size are more complex decisions) except for Palmerston North. So I guess the first contracts should have gone to Tasmania, to stop them including National held seats.
2. Six of the eight seats listed are very safe seats with majorities over 5,000
3. This is not a case of some areas getting funding, and some not getting funding. All medium to large urban areas will be getting fibre to the home. This is purely an announcement of the first two contracts. Other contracts will be announced in the near future – the difference between being announced first and second is absolutely minimal.
4. Ever heard of MMP?

Clare initially blogged:

Steven Joyce is a crafty fellow. But even he will overplay his hand one of these days.

Then later as she realised every non metro seat bar Palmie is national held:

Oh and before David Farrar at Kiwiblog has a go and points out that Labour holds only Palmerston North of the general electorates outside the metropolitan centres, that’s true. But it would have been smart for the government to think about this. Instead it doesn’t look so good.

So Steven in the one blog post goes from the too crafty manipulator of funding to National seats to being not very smart for not thinking about the look. He can’t win can he!

Frankly I am sure Steven didn’t spend one second thinking about electorate boundaries with the contracts, and am personally very pleased with that.

Oh and here’s one for the conspiracy nutters. 25% of NZers will not be covered by the UFB initiative. And pretty much 100% of them live in National held seats. So 100% of people in Labour seats will get UFB and only around 65% of people in National sears. Yes, obviously pork barrel politics.

Steven Joyce has announced:

The cities of Hamilton, Tauranga, Whangarei, New Plymouth and Wanganui will be among the first to benefit from the government’s rollout of ultra-fast broadband (UFB), says the Minister for Communications and Information Technology Steven Joyce.

Crown Fibre Holdings has concluded negotiations with two partner companies, following shareholding ministers’ approval of the deals over the weekend.

The partners are:

• Northpower Limited
• and Ultra Fast Fibre Limited, owned by WEL Networks,

The new companies will rollout fibre in Whangarei, Hamilton, Cambridge, Te Awamutu, Tauranga, New Plymouth, Wanganui, Hawera and Tokoroa.

Northpower will commence its roll out in Whangarei before Christmas with Ultra Fast Fibre expected to begin laying fibre early in 2011.  Both companies will have completed their rollouts by 2015.

These joint ventures represent nearly 16 per cent of UFB premises and a combined value of more than $200 million.

This is excellent news. It shows the regional approach has worked, in preference to one nation-wide contract.good to see there will be some fibre laid before the end of the year.

There was some suspicion that Northpower and WEL would not end up with the contracts, despite being announced as preferred bidders. People speculated that Telecom might grab it away from them in a negotiation for a nation-wide contract.

So good to see there will be some fibre laid by the end of the year.

CFH will shortly announce a list of parties with whom it will next elect to negotiate with in the remaining 25 UFB regions.

All eyes are on this.

My view is that Telecom/Chorus will be successful if their price is the same or close to the Regional Fibre Group – say within a couple of hundred million. There are long-term benefits to getting Telecom to structurally separate, and having Chorus as a stand alone infrastructure company.

But it is possible the Regional Fibre Group will have undercut Telecom. They have certain cost advantages such as current ducts and poles and resource consents. Over 70% of the cost of fibre is digging up the road, and the less of that you have to do, the cheaper you do it.

In an ideal world I’d have Telecom sell Chorus to the Regional Fibre Group – then you’d have an integrated infrastructure provider. However I’m not sure Vector and co could afford to buy it!

Tracy Watkins at Stuff reports:

Parliament’s Speaker Lockwood Smith has confirmed he will stand down from his Rodney seat at the next election and seek to be returned to Parliament on National’s list instead.

The move follows months of speculation that Dr Smith would not seek re-selection in the blue-ribbon seat because of the constraints of his role as Speaker.

Dr Smith said he would continue to help his constituents and push the major roading projects in the electorate, “but as Speaker I have found it to be a little more difficult to be involved in political debate”.

“By my seeking a place on the National Party List, I feel that no matter what the future may hold for me the people of Rodney will be able to select a new member better able to voice their views in wider political debate.”

Lockwood has been a very popular MP in Rodney, and they will be sad to see him go. He will probably romp in at the top of the National Party list also. Lockwood frequently forces Ministers to ask questions they don’t want to, but this doesn’t dampen his popularity in the party. To the contrary he gets treated as a rock star at conferences, with delegates lining up to say how wonderful it is to have a Speaker who holds the Government to account -even if it is their Government.

I would not be entirely surprised is Sir Lockwood ends up in a diplomatic role towards the end of the next Parliament (if National is in Government again).

The selection for Rodney will be interesting. Steven Joyce lives in the electorate and is a popular person in the party (chairing winning campaigns does that). However there is no guarantee that there won’t be many strong candidates seeking the nomination and Steven I suspect will want to be careful he does not do a Phil Twyford and go for a nomination, and fail to gain it

I’m in Rotorua for the NZ Computer Society 50th anniversary conference.

Steven Joyce spoke on how Governments are not good at innovation – tried that in an experiment known as the Soviet Union. Said innovation happens in all the companies and firms that are represented at this conference, and the Government’ job is to try and facilitate a supportive environment.

He said that copper has done better than anyone expected, but fibre is the future. The current investment in copper is about catching up with the rest of the world, while the planned investment in fibre is designed to give NZ a competitive advantage – an advantage that the NZ Institute says could be worth over $2b a year in extra GDP.

While most focus is on the $1.5b urban fibre project, Joyce said he considers the rural broadband situation is more urgent as around half our rural citizens still can only get dial-up. I thought this was ironic as the speed at the conference hotel had slowed down to dial-up also!

I missed most of Paul Matthews response, as both the wireless and mobile Internet connections were frozen so had to reboot my laptop.

Conference Chair Liz Eastwood is doing a show and tell of technology from the past – the slide show projectors we used to use to show off our holidays, and the telex machines etc etc. You do forget how much the world has changed!