Labour has called on the government to halt decisions on its $300 million rural broadband contract, finalised this morning, and its $1.35 billion ultrafast broadband (UFB) urban initiative.
The call follows the revelation that Ministry of Economic Development (MED) mandarin Bruce Parkes - the government's chief broadband advisor - was, during his time with Telecom, a central figure in the so-called data tails case.
Telecom was fined $12 million yesterday over the case, with a High Court judge finding the company guilty of anti-competive wholesale network pricing between 2001 and 2004, putting the squeeze on retail customers such as TelstraClear and Orcon.
In his judgement, delivered yesterday, Justice Rodney Hansen specifically name-checked Mr Parkes, putting him at the centre of the affair (albeit at the same time attributing a relatively benign quote to him):
Justice Hansen wrote:
"Telecom’s strategy was understood and approved at the highest levels of management. Mr Bruce Parkes, who headed Telecom’s Industry Services Unit, which was responsible for the development and sale of commercial products to other service providers, said in a memorandum to Ms Teresa Gattung, the then Chief Executive Officer of Telecom:
Our negotiations to date with carriers have been to treat them exactly like other large corporate customers ... carriers such as Telstra are obviously competitors in the retail market for any services but for data they are actually primarily resellers of our retail data services ... and as such are growing the market for our benefit and theirs.
Justice Hansen continued "Mr Stuart Goodin, Telecom’s Strategy and Pricing Manager, worked under Mr Parkes in developing CDPs. He acknowledged in evidence that Mr Parkes’ philosophy was that there would not be price competition between Telecom and other TSPs, only competition on service quality."
Call for indepependent review
"Bruce Parkes gave Teresa [Gattung] the advice on the anti-competitive product. He's now presiding over the biggest fibre infrastructure project with taxpayers' money," Labour communications spokesperson Clare Curran said this morning.
Communications minister Steven Joyce "is batting away criticism saying it's cabinet that makes the decisions not officials. Based on what advice? What is its integrity? The 'trust me I know what I'm doin'g message no longer washes," Ms Curran told NBR.
Later, she said in a statement:
“In the light of the anti-competitive breach found against Telecom in yesterday’s court decision and in the knowledge that Bruce Parkes, who has been named as being at the centre of this case, and who is now the government’s chief adviser on broadband, all broadband decisions should come to a halt,” Clare Curran said.
“The Government is trying to legislate for a 10-year regulatory holiday for Telecom, and Mr Parkes has been involved in the design.
“An independent review must urgently be conducted of both the process and system of the rural broadband initiative (RBI) and the Ultrafast Broadband scheme (UFB).
“Labour calls on Prime Minister John Key and the Minister responsible Steven Joyce to stop broadband decisions right now.
“The review should be undertaken by an international expert as the New Zealand industry is too involved and inter-connected on these issues."
Career develpment, or cronyism?
It's no secret - at least to regular NBR Technology section readers - that personnel have shifted between Telecom and the MED.
The most famous example is Ralph Chivers, who founded Crown Fibre Holdings while at the MED before skipping over to Telecom (in an appointment announced practically on Christmas Eve) to head government and corporate affairs (read
Crown fibre kingpin takes Telecom lobbying job; Mr Chivers recently
moved to a new position in charge of Christchurch reconstruction; Telecom's UFB and RBI negotiations were led by Chorus head Mark Ratcliffe).
Crown Fibre Holdings' chief executive, Graham Mitchell, is
another ex Telecom senior manager (who has also held positions at a number of other companies inbetween), as is Crown Fibre Holdings director
Murray Milner (although the CFH board is also notable for including
sworn Telecom enemy Jack Matthews).
One counter-crony argument is that it's a good thing for the MED to hire people from the private sector, given the perspective and experience they can bring.
NBR put this to Ms Curran.
She replied:
"If someone is named in a High Court ruling that imposes a $12 million penalty for anti-competitive behaviour who is currently employed to design and be deeply involved in rolling out a government-funded programme which claims to be competitive but had a vast number of people and organisations claiming it shows anti-competitive traits, and that person is the chief adviser to the Minister who is in charge of making the decisions about who gets taxpayers money, then yes it is a problem.
"[In terms of] other people it depends on what they are actually doing and how close they are in their previous roles to doing similar work. There are certainly a wide range of important issues."
