The most powerful techies - and those that missed out

For better or worse, New Zealand’s IT scene is dominated by politics and regulation – and nowhere more than in telecommunications and the internet. Here’s NBR’s pick of the most influential players:

1. Steven Joyce, Minister of Communications and Information Technology
Love it or hate it, the Telecommunications Amendment Act was the biggest re-shaping of the industry since Telecom was privatised in 1990.

Telecom Wholesale and Chorus will be split off into a separate company, with its own NZX listing, chief executive and board, and the remaining company – dubbed “New Telecom” - will be roughly half the size it is today.  More, with the Kiwishare gone, New Telecom is open to foreign ownership.

Telecom won major concessions, rendering the final shape of the $1.35 billion Ultrafast Broadband (UFB) project unrecognisable from that originally proposed by Crown Fibre Holdings.

Yet Telecom never wanted to be split in two. But it will be, under the Act, and the wholesale/retail carve up is one of the more extreme measures taken by any government against an incumbent telco.

The cheerfully interventionist Joyce regime has also introduced New Zealand’s first ever mobile calling price regulation. The minister is now evaluating whether to put controls on the cost of transtasman mobile calls and data roaming. And Mr Joyce has also been one of the ministers behind the centralisation of government IT buying into all-of-government contracts, changing the way local and multi-national IT companies have to deal with their largest New Zealand customer.

What’s next? Likely nothing.  At least in technology. With the heavy lifting over in mobile market reform and Crown Fibre, Beehive gossip has Mr Joyce swapping ICT for a new portfolio after the election. The so-far low-key Craig Foss tipped as his replacement.

2. Paul Reynolds, chief executive, Telecom
The Telecom boss can’t sit at number one. He didn’t want his company to be split, but that will happen later this year as the price of admission to the Ultrafast Broadband magic circle.

But otherwise, Dr Reynolds has played a strong game. When the UFB initiative was first announced, Crown Fibre Holdings proposed up to 25 Local Fibre Companies, or LFCs (later expanded to 33). The focus of the original tender was on “dark fibre” - or the most basic wholesale level - suited lines companies like Vector. Telecom submitted a non-complaint bid, and suggested that its Chorus division be responsible for the entire project. Apart from a few pockets of the country, that’s how it turned out.

And along the way, the tender was revised to allow Telecom (and others) to offer not just dark fibre, but more advanced 2 services as sell – putting the experienced Chorus in a stronger position.

“New Telecom” could lose its dominant position in the landline market, but with the decline of copper and the rise of internet calling, that was always going to happen anyway.

But Chorus will maintain its near-monopoly on Crown fibre at the wholesale level.

And to help with the fibre roll-out, Chorus is getting $929 million from the Crown in a mix of non-voting shares and interest-free debt, with repayments scheduled for between 2025 and 2036.

Dr Reynolds issued a thinly-veiled threat to cherry-pick the most lucrative fibre business if his company was left out of the UFB. It seems like it sharpened the minister’s mind, and made him more open to writing that billion-dollar cheque.

And while the XT launch was an unmitigated balls up, and subscriber uptake to the new network slower than expected, Telecom has this year enjoyed the fruits of putting infrastructure partner Alcatel-Lucent "on notice". The Franco-American company has so far paid Telecom $41 million in compensation payments; industry scuttlebutt holds that total compo will be $100 million).

Dr Reynolds won’t get $7 million this year. Ironically, he deserves it. For Telecom investors, he’s brought home the bacon. And his company’s assertive UFB negotiation over the past 24 months – for ill or good – will shape the industry for decades to come.

What next? The Telecom boss has said he will say on for the transition period as Telecom splits into "New Telecom" and "Chorus2", but beyond that, he's yet to commit.

3. Simon Power | Minister of Justice
The Copyright (Infringing File Sharing) Amendment Act, for which Simon Power was the minister responsible, is a dog’s breakfast of a law. The public is confused; many businesses are unaware they’re liable for their employees’ net surfing behaviour under the new legislation; ISPs have no mechanisms in place to cope with infringement notices; and if they music and movie companies pursue cases in anything like the numbers anticipated, it’s unclear how the five part-timers on the Copyright Tribunal (all of whom have full-time day jobs) could come close to coping. 

Google criticised the law for a clause that assumes all peer-to-peer file sharing equates to piracy; all-comers criticised its presumption of guilt on the accused.  All sides are dissatisfied, but until a review in six month’s time, Mr Power’s law will cast a large shadow over the internet in New Zealand.

What's next? Mr Power has announced his retirement from politics after the next election. The record numbers watching th final reading of the file sharing bill on Parliament TV wondered if he'd checked out early.

4. Senator Stephen Conroy | Minister for Broadband, Australian Federal Government
Where the Senator goes, New Zealand follows. A move to all-of-government IT contracts? Check. Handing a big chunk of money to the incumbent telco to buy its support for Crown fibre? Check. Regulating mobile termination rates? Check. Leaning on ISPs to install state-sponsored filtering software to block some websites (albeit voluntary for NZ internet providers to install the MED’s filter)? Check. Now, New Zealand and Australia are holding a combined investigation into the price of mobile roaming between the two countries. We’ve yet to see if it will result in more price controls, but it’s already led to Telecom, Vodafone and 2degrees making steep cuts to their roaming rates.

5. Mark Ratcliffe | Telecom Chorus chief executive
Mid-July, Mark Ratlciffe was confirmed as CEO-in-waiting of the spun-off Chorus, assuming Telecom’s “de-merger” is approved by share and debtholders later this year.

The standalone company will be considerably larger than Chorus the Telecom network division (2010 revenue: $1.03 billion) by dint of Telecom Wholesale (2010 revenue $1.29 billion) being rolled into the new entity.

The appointment caps a boomer year for Mr Ratcliffe, who temporarily stood down from Chorus to lead Telecom’s 100-strong team dedicated to pursuing the $1.35 billion UFB and the $300 million Rural Broadband Initiative – both of which resulted in strong wins for Telecom.

What’s next? Watch for Chorus to expand its Crown Fibre tentacles, starting with a joint venture with Christchurch UFB winner Enable.

6. Russell Stanners, Vodafone NZ chief executive
It’s been a mixed year for Vodafone. Minuses include a failure to head off regulation of mobile termination rates, which according to its UK parent’s financial commentary, have hit the company in the pocket. On the plus side, a major détente with Telecom has seen Chorus consolidate its position as infrastructure partner for Vodafone’s existing network, and two companies mount a successful joint bid for the $300 million Rural Broadband Initiative.

Rival bidders, including the Kordia-led consortium (supported by 2degrees), howled about the Telecom-Vodafone win, but to no avail; they’d been out-manoeuvred.

In the urban Crown Fibre project, Vodafone played a complex game, eventually supporting Chorus, but also joining the broad coalition that campaigned successfully against the so-called 10-year regulatory holiday for Crown Fibre winners (read: Telecom).

What’s next: with arguably only enough airwaves for two of the three mobile carriers, the 2012 4G spectrum auctions have already sparked fierce attempts to outfox Telecom and 2degrees.

7. John Stanton | Chairman, Trilogy International Partners
The former government, the Commerce Commission and iwi spectrum helped pave the way for 2degrees to launch as New Zealand’s third mobile operator.

But ultimately it was Mr Money Bags - aka US telco investor John Stanton, the man who made his first billions building then selling the company today known as T-Mobile - whose cash funded much of the telco’s start-up costs. (Mr Stanton, centre, is pictured with Trilogy president Brad Horwitz as the pair received an American Corporate Excellence award from US Secretary of State Hillary Clinton in recognition of their company's Haitian quake relief efforts).

Last year, Mr Stanton’s Trilogy International Partners gained Overseas Investment Office approval to raise its stake in 2degrees to 100%, and took majority control (it currently owns 58% of the carrier. Meanwhile, cornerstone shareholder the Hautaki Trust has seen its holding reduced to 10% as Trilogy, and others, have picked up new shares it was unable to afford).

Over the past year, 2degrees has launched its first post-paid plans and, last month, its first business plans.

And after a quiet 2010 on the cap-ex front, the carrier has started extending its 3G network beyond Auckland, Wellington, Christchurch and Queenstown.

A $100 million line of credit, arranged with infrastructure partner Huawei earlier this year, will help fund the expansion. 

2degrees has gained customers faster than expected (580,000 at last count), but also lost a lot of money ($76.8 million on $107 million revenue last year).

Mr Stanton’s major US investment, Clearwire – which is building a nationwide 4G network in partnership with Sprint – is following a similar fast growth/big loss trajectory, only with a few more zeroes added, keeping life interesting for this New Zealand, and international, influencer. 

8. Rod Dury, Sam Morgan, Sir Stephen Tindall | Pacific Fibre co-founders
The Rich Lister trio want to bust the 50% Telecom-owned Southern Cross Cable’s monopoly on New Zealand’s broadband connection to the outside world.

And over the past couple of months, their $US400 million plan to build a submarine cable link between Sydney, Auckland and LA has looked more and more concrete.

The project has received public support – in the form of a $98 million anchor customer contract with the government-owned Riannz (operator of the education and Crown Research Institute network Karen). And public support in the form of a 10-year capacity deal with iiNet, one of Australia’s largest ISPs.

A third major recent development has seen Pacific Fibre sign US company TE Subcom to build and lay its cable (after a long courtship that included a Pacific Fibre-Subcom hookup at an American Chamber of Commerce event for visiting Secretary of State Hillary Clinton).

It now looks like the new cable is going to happen. That should mean cheaper, faster international internet for everybody; a bit of a dent in Southern Cross’ profit and, just by the by, could make life easier for the various other tech start-ups Messrs Drury, Morgan and Tindall have stakes in.

9. Brendan Boyle | CIO, New Zealand government
Just as large companies have a chief information officer, in overall charge of IT budget and strategy, so it’s become the vogue for governments to have a CIO.

In New Zealand, the position of CIO looms larger than most places, given our government’s IT and telecommunications budget – at around $2 billion a year (between departments, agencies like the police, schools and local authorities) - dwarfs that of any private technology buyer.

Brendon Boyle, appointed in February, is not the first government CIO. But the former Department of Internal Affairs chief executive has a stronger mandate than his predecessors. A cabal of cabinet ministers – including Prime Minister John Key, Finance Minister Bill English, Communications Minister Steven Joyce and Internal Affairs Minister Nathan Guy – were behind the prosaically named Directions and Priorities for Government ICT initiative – which boils down to: duplication and fragmentation between departments and agencies is out; shared services and buying are in.

Under Mr Boyle, the government is increasing efforts to throw its buying weight around, with all-of-government contracts – already in place in areas such as PC buying and telecommunications contracts – being extended to government-as-a-service (known by the cringing acronym GaaS), with the likes of Datacom, IBM and Revera vying for a huge infrastructure tender covering utility computing, storage and data centre services.

Mr Boyle’s mission is to do more for less through more centralised contracts, shared services, e-government (interaction with the public and companies via the internet) and more open and transparent data sharing. And anyone who wants to do business with New Zealand’s largest tech buyer needs to get with his programme.

10. John Fellet | chief executive, Sky TV
If pay TV and on-demand content are the killer apps for ultrafast broadband, then Sky TV holds all the cards. Its iSky service has had a leisurely launch this year. But then again, with no serious competitor for broadband-delivered content in key areas like sports and recent-release Hollywood movies, iSky can roll out at its own sweet pace.

In 2009, Telecommunications Commissioner Ross Patterson flagged pay TV as a potential roadblock to fast internet up-take. A dominant pay TV provider has little incentive to experiment with new technologies, or to partner on low cost internet/pay TV bundles that will incentivise people to upgrade to fibre. But Mr Fellet managed to persuade the government he had no monopoly and, so far, the Commerce Commission has only tentatively sniffed around (pay TV escaped explicit mention in the terms of reference for the watchdog’s investigation into broadband demand barriers, currently underway).

More, withholding Prime TV electronic listings has hobbled the TVNZ-owned TiVo, and its putative broadband paid content-on-demand service Caspa.

Telecom, abandoned its partnership with Sky TV in to become TiVo’s exclusive retailer has now returned to the fold this year. The companies’ new compact could see Telecom Retail offering set-top boxes that offer Sky TV content – mirroring the arrangement that the pay TV provider already has in place with TelstraClear. Sky TV has mobile video content agreements in place with Telecom and Vodafone, too. In a world of proliferating platforms, Mr Fellet’s company remains the single source for most A-list content.

THE OTHERS
(In diplomatic alphabetical order.).

Simon Allen (Crown Fibre Holdings chairman) | Graham Mitchell (Crown Fibre Holdings chief executive) 
DISTANCE FROM TOP 10: FAR
Crown Fibre Holdings produced pristine, innovative plans for public-private ultrafast broadband partnerships. But much of the final UFB was shaped by old fashioned poltical brawling and horse-trading by politicians (notably the Maori Party), telcos and lobby groups, much of it last-minute. 

Paul Brislen | chief executive, Tuanz
DISTANCE FROM TOP 10: NEAR
Ernie Newman's successor kept the heat on issues like mobile termination rates, transtasman roaming and the campaign against the UFB bill's so-called 10-year regulatory holiday, for which he became the de facto spokesman.

Clare Curran | Labour spokeswoman for information technology and communications 
DISTANCE FROM TOP 10: MIDDLING
Ms Curran has had a difficult time landing blows on Steven Joyce. The Communications Minister has, after-all out-Laboured Labour with his interventionist action on Crown fibre, and mobile regulation. The Dunedin South MP has landed a few jabs, however, around the secretive nature of negotiations in the ultrafast broadband project. And she was one of the ultimately successful agitators against the Telecommunications Amendment Bill's so-called 10-year regulatory holiday. Ms Curran was also one of those behind moves to moderate the The Copyright (Infringing File Sharing) Amendment Act (notably in the successful effort to marginalise the possibility of account disconnection) and one of the few politicians - along with the Green Party's Gareth Hughes - who seemed to have the technical chops for the copyright debate.

Allan Freeth | Chief executive, TelstraClear
DISTANCE FROM TOP 10: NEAR
The TelstraClear boss hasn't been short of opinions, weighing in strongly against the government's poorly thought-out copyright law, and elements of the $1.35 billion UFB project - around which his company ran a TV campaign.

It was all heady, thought-provoking stuff, but undermined by TelstraClear's relatively weak effort on the ground. With no mobile network (it re-sells a re-badged version of Vodafone's 3G network) and its residential cable network restricted to Wellington and Christchurch, his company was an inadvertent poster boy for Steven Joyce's maxim that, left to their own devices and commercial imperatives telcos will under-invest in infrastructure - to the detriment of business as a whole.
 

Allan Gourdie | Chief executive, Telecom Retail

DISTANCE FROM TOP 10: NEAR
A mixed year saw Telecom Retail (whlch includes the company's mobile operation) hold the line in retail broadband, but so-so progress with XT uptake - although the company has had the confidence to take on Vodafone with a head-too-head advertising campaign recently.

An exclusive retailer alliance with TiVo was poorly thought out, and poorly implemented, leading to an eventual about-face on Telecom's earlier decision to drop its Sky TV partnership.

As for the "Abstain for the Game" campaign ... Well, at least Mr Gourdie had the sense to concede defeat and knock it on the head within 24 hours.

John Holdsworth | Executive Chairman/majority owner, Datacom
DISTANCE FROM TOP 10: NEAR
Wellington-based IT services outfit Datacom - which recently reported ebitda of $63.8 million on revenue of $725 million - is New Zealand's fastest growing tech company, according to the NZTE-backed TIN 100 list. Increasingly, revenue is coming from Australia and Asia. Mr Holdsworth owns 54% of the company (NZ Post holds a minority stake), as well as a range of side-investments including a small holding in Pacific Fibre. What's next? Datacom is looking to make a push into China.

Vikram Kumar | Chief executive, InternetNZ
DISTANCE FROM TOP 10: NEAR
InternetNZ makes its money from administering .nz domains, but earns its salt through educating internet users, and advocating on their behalf on issues from the political (such as copyright) to the technical (such as IPv6). Mr Kumar has proved an articulate advocate for both.

Ross Patterson | Telecommunications Commissioner, Commerce Commission
DISTANCE FROM TOP 10: MIDDLING
The Commerce Commission originally ruled (in a split decision) against regulation of mobile termination rates (MTR, or the fees phone companies charge each other when mobile calls, or txts, terminate on a their network and a key component of priicing). Communications Minister Steven Joyce told them to go back and re-think. With mobile price regulation now in place, Telecom, Vodafone and 2degrees have to report to the commission on their mobile pricing every month. Dr Patterson has said more regulation could follow if MTR cuts don't flow through to mobile pricing.

The original legislation around the ultrafast broadband project gave Crown Fibre contract winners a 10-year holiday - officially a "forbearance period" - from Commerce Commission scrutiny. (Across the Tasman, the ACCC has been proactive in challenging a number of aspects of the National Broadband Network's setup). A campaign by a number of players saw the watchdog brought back into the frame. 

What's next? The commission's current investigation into demand-side barriers to ultrafast broadband uptake (not due for final report until April next year) could turn into a platform to challenge long-loathed barriers, such as data caps, and Sky TV's near-monopoly on pay TV (now spilling over into online, on-demand content). Or it could turn into a damp squib. 

Chris Quin | Chief Executive, Gen-i Australasia
DISTANCE FROM TOP 10: NEAR
There are a number of big players on the local IT services scene, including global names that are making big plays - such as IBM, HP and Fujitsu spending somewhere in the region of $200 million on cloud-friendly data centres. But their local brass has limited room to manoeuvre within tight multinational management structures. Mr Quin is close to being in charge of his own destiny. And his $1.5 billion revenue division is one of Telecom's few avenues of potential growth as its traditional business declines - making Mr Quin a key influencer on the success, or otherwise, of our largest technology company.