For Maurice Williamson, cutting code in C++ ranks just below sex in terms of pure pleasure. Such enthusiasm for the lingua franca of engineering programming would be unremarkable if Williamson were a propeller head, but the 44-year-old Eric Clapton look-alike happens to be a government minister. More specifically, the Honourable Maurice Donald Williamson MP is Minister of Transport, Minister of Communications, Minister for Information Technology, Minister of Broadcasting, Minister of Statistics, and Associate Minister of Health of New Zealand, a Pacific island nation known to its inhabitants as "God's Own Country," or simply "Godzone."
Having so many portfolios to look after prevents Williamson from surfing the Net for more than half an hour each night. But communications and broadcasting don't take up much of his time because New Zealand has radically deregulated both. Anybody - including foreign telcos and cable operators - can do anything they like in these areas. Williamson will freely tell you that Saddam Hussein could run a radio station in New Zealand if he wished. If you own spectrum, which you can purchase in a government-run auction, you can use it for cellular phones, TV, radio, whatever - you and the market decide. This freedom from red tape puts Godzone, in the words of Nicholas Negroponte, director of the Media Lab (see our cover story "Being Nicholas"), "so far ahead of the US, it is the mouse that roared." Make that the kiwi that roared, after the long-beaked flightless bird Godzoners have adopted as their national symbol.
In the wake of radical deregulation, telcos have flocked to New Zealand. Ameritech and Bell Atlantic own just under half of Telecom Corporation of New Zealand Ltd., a former government monopoly. MCI and Bell Canada are backing a long-distance competitor to Telecom New Zealand, BellSouth runs a cell-phone network and, as Telecom New Zealand begins trial testing fibre-to-the-curb video, at least two US cable operators are gearing up to build their own full-service broadband networks.
What they have found is an astonishingly beautiful country - hot springs and geysers in the north, forests and fiords in the south - coupled with what appears to be an astonishingly beautiful regulatory environment. In fact, it goes far beyond what deregulating British and American legislators have laboured to create.
"There are very few places in the world where things are so driven by business realities," says Jack Matthews, a US expatriate who manages Kiwi Cable Company Ltd., the country's first cable TV operator. "What's happening here in New Zealand is a precursor for what will happen in other countries."
"It's an experience the US government should look at care-fully," affirms Bell Atlantic CEO Ray Smith, "especially as Congress rewrites the United States telecommunications law." Here's some advice from Rod Deane, CEO of Telecom New Zealand, on what to do with Oftel (and, for that matter, the FCC): "Put a bomb under it, blow it up," Deane says. "Regulations slow the pace of competition."
That may be hyperbole, given that the government in Godzone does have a role, if a limited one. There are basic antitrust regulations on the books, and the state acts as a clearing-house for resources such as spectrum. "In New Zealand, the current policy regime aims to encourage competition and development in the industry," Williamson explained in a recent speech. "Entry into the market is restricted only by willingness to pay the market price for a radio frequency license, if required. There are no specific restrictions on the introduction of new broadcasting technologies. There are no restrictions on the level of overseas ownership. There are no 'must carry' rules for cable operators. Essentially, the government aims to encourage investment in the industry. You are free to prosper in the broadcasting industry. You are equally free to misjudge the market and go broke."
Williamson describes New Zealand as "a little country at the bottom of the wrong side of the world," an isolated place where sheep outnumber people by almost twenty to one. An unlikely location, you might think, for the shape of convergent things to come. But it turns out that New Zealand has a long history of radical and innovatory behaviour. Kiwis were the first to give women the vote for national elections (a radical move back in 1893) and the first to achieve powered flight (in March 1903, a full nine months before the Wright brothers). They were among the first to introduce a welfare state and to adopt sustainability as their environmental management policy. They climbed Mount Everest before anyone else, and, more recently, they invented bungee jumping. Wellington, New Zealand's capital, was one of the original municipal governments to have a presence on the Internet. New Zealand was one of the first - and is still one of the few- countries to charge for Internet usage with a volume-based rate on an international link.
It was the welfare state that got Godzone into trouble. Health care, job security, pensions, and the like were introduced by the government during the 1930s in response to widespread unemployment. By 1984, New Zealand had run up an external debt big enough to make a Latin American country blush, largely to pay for pensions and social security. The Kiwis had also constructed for themselves what was arguably the most tightly controlled economy this side of the Iron Curtain. Wages, prices, interest rates, foreign exchange - as Donald Brash, governor of the Reserve Bank of New Zealand recalls: "Anything you might think of that could move, the government controlled it."
Ironically, Robert Muldoon, prime minister from 1975 to 1984 and a principal architect of this nanny state, was himself a conservative. Even more ironic, the reformers who set New Zealand on its course of radical free-market deregulation were nominally socialists. Elected in 1984 to govern a country teetering on the edge of bankruptcy, the cabinet - whose average age was in the early 40s - embarked on a programme of economic deregulation that moved faster and went deeper than anywhere else in the world.
And they did this without a popular mandate. In fact, the Labour government reformers sprang their programme without warning on an unsuspecting electorate - it wasn't even an issue during the election. Many voters bitterly resented initial effects of deregulation such as soaring prices - subsidies disappeared - and the loss of thousands of jobs as industries were privatised.
How did this radical élite get away with such unpopular policies? Political commentator Colin James explains that New Zealand is a small country of only 3.5 million people, where the one-chamber system of government has few checks and balances, and it is normal for the cabinet to be run by a handful of senior ministers. "Few other democratic systems, if any," James says, "would have permitted so much to be done by so few."
One of the radicals' most unpopular decisions was to sell off government monopolies - including the shipping line, railroads, and telecommunications - most of which were bought by foreign, mainly US, firms. Opinion polls showed that up to 90 per cent of residents opposed the 1990 sale of Telecom New Zealand to a consortium led by Bell Atlantic and Ameritech. But what people objected to most of all was the foreign ownership element - there was little love lost on the old phone company.
With a payroll of 24,500 employees, the monopoly was grotesquely overmanned. For example, it had one department devoted to maintaining its fleet of motor vehicles and another to making furniture. It even had a special section whose sole function it was to deal with telecommunications complaints sent to members of parliament, of which there were plenty. In the central business district of Auckland, home to almost one-third of the population, lines were so clogged you could hardly make a call after 10 a.m. The average wait for installation of a new phone line was 48 days. Today, it's more like 48 hours. In a transformation that would bring tears of joy to the eyes of Milton Friedman, Telecom New Zealand has reinvented itself as a lean, market-driven organisation whose stated goal is to be one of the best service providers in the world.
Now New Zealand's largest listed company, Telecom has reduced its work force by two-thirds and invested more than £3 billion in upgrading its nationwide network, which is now 98 per cent digital. As of June 1995, Telecom New Zealand had enjoyed seven consecutive quarters of revenue growth, and an earnings growth rate that ranks it with the top 15 per cent of telcos worldwide. Since 1988, the price of long-distance calls has dropped in real terms by more than 50 per cent.
Perhaps the best indication of the kind of changes Telecom is going through comes from one of its recent recruits, Theresa Gattung, the company's 33-year-old general manager of marketing. "Telecom is coming to grips with what it means to be a market-led organisation," she says. "Now, when the company proposes the introduction of a new service, instead of wondering what the regulators will say, everyone asks, But what will the customers say?" An example of a new customer-driven service is Talkaround, which Telecom began trial-testing last February. It's a system that merges mobile and fixed-line networks and gives mobile subscribers a single, common number.
Freedom to introduce such services is enough to turn an RBOC green. Unencumbered by line-of-business regulations or the need to file for approval, Telecom is jumping into all sorts of new markets. Since introducing a mobile service, the company has signed up 290,000 cellular subscribers, giving New Zealand one of the highest rates of cell-phone penetration in the world. "You see more flip-phones here than in Dallas," says John Clark, a 16-year US cable industry veteran hired to develop Telecom's nascent video business. Clark's initial responsibility is running two fibre-to-the-curb trials in Auckland. (One just happens to be in Pakuranga, Maurice Williamson's yuppie constituency, the other in a somewhat less upmarket district represented by the previous administration's communications minister. Telecom insists the choice of locations was a coincidence.)
At present, the service delivers 22 channels of video, some basic and some delivered, on a pay-per-day basis to 600 homes. A modest menu perhaps, but a veritable feast for New Zealanders, who receive only three basic over-the-air channels. (Five pay channels are available via UHF from Sky Network Television Ltd., a joint venture whose partners include Ameritech, Bell Atlantic, TCI, and Time Warner.) Such limited choice represents a unique opportunity for Telecom. "Nowhere else in the world," Clark claims, "is the telephone company entering into video where there is no cable competition there already."
Like telcos elsewhere, Telecom has been slow to embrace online services, but is now gearing up to get into that business, too. The Ministry of Commerce estimated that only 60,000 to 100,000 New Zealanders are online. "The scale of the opportunity is huge," enthuses Phil Norman, a former Microsoft exec drafted to oversee Telecom's entry into this market. Telecom currently provides Internet access via an informal joint venture with a local academic operator. Norman says this partnership will be dissolved, allowing Telecom to step into the driver's seat for a relaunch of the service early next year as a content host based on Web technology.
Since privatisation began in April 1987, Telecom New Zealand has gone from being little short of a laughingstock to a firm that today claims to command a 70 per cent approval rate. By any measure, this is an impressive accomplishment. And in keeping with New Zealand's overall performance (its economy is growing at 6 per cent annually). But before other countries rush to emulate New Zealand's example, they should remember there never was a rose without a thorn. And the thorn in Godzone's rosy deregulated environment is whether Telecom's smaller rivals can compete with the big guy.
Telecom faces different competitors in each sector. Prime among them is Clear Communications Ltd., which competes against Telecom in the long-distance and international toll markets. Since commencing operations in April 1991, Clear has been tremendously successful in terms of growth (and recently in profitability). The firm achieved its current share of around 23 per cent in just four years, extraordinarily fast compared with new carriers in other deregulated markets. Clear's service culture (learned from its American equivalent, MCI) proved hugely attractive to long-suffering Telecom subscribers - both business and residential - who signed up in droves.
Almost immediately after launching long-distance services, Clear decided it wanted to offer local services, initially in the central business districts of Auckland, Christchurch, and Wellington - New Zealand's three largest cities. This required an agreement to interconnect with Telecom's network so Clear customers could call Telecom customers and vice versa. Interconnect negotiations began in May 1991, breaking down in August that year. Whereupon Clear sued Telecom, alleging that the latter had violated Section 36 of New Zealand's Commerce Act, which is intended to prevent dominant companies from acting in anti-competitive ways.
The central issue in the interconnect dispute is the cost of the so-called Kiwi Share, known elsewhere as universal service obligation. This imposition requires Telecom to provide service in residential and rural areas, a significant undertaking in a country as sparsely populated as New Zealand. Initially, Clear refused to recognise that there was a cost attached to the Kiwi Share. But the company has since come around to accepting that if Telecom can indeed demonstrate a financial burden, then Clear should make a contribution.
The question on everyone's lips is how much they should pay. More than four years later, the issue remains unresolved. Clear and Telecom have dragged each other through the courts, both sides playing hardball, wheeling in an array of international experts on regulatory economics to argue their respective cases. Judgments seesawed between the two parties all the way up to the Privy Council in London. In October 1994, the Council ruled that in denying Clear interconnect, Telecom had not done anything deemed illegal. New Zealand's Ministry of Commerce officials have since provided the government with a detailed report on the Privy Council's judgment, and a ruling on the matter is expected before the end of this month.
In May of this year, the two sides came close to settling the impasse on their own, but negotiations ultimately broke down. Telecom's Deane claims Clear is not yet ready to enter the local market and is holding out for better terms. For his part, Clear's CEO, Andrew Makin, has called upon the government to intervene to establish procedures for the resolution of disputes. Clear also wants the government to ensure competition by legislating a requirement for interconnection "on a fair and reasonable basis."
It is a position heartily endorsed by Keith Davis, Makin's counterpart at BellSouth. "This is not a deregulated environment," Davis complains grimly. "This is an environment where the power of regulation has been passed to the incumbent." BellSouth has found itself at the mercy of the dominant player - Telecom. And there are no government offices to which it can send its scurrying lobbyists. Since purchasing a spectrum license in 1989, BellSouth has poured close to half a billion New Zealand dollars (approximately £200 million) into the construction of a nationwide cellular-phone network.
But the company has suffered some rude shocks since entering the mobile market in July 1993. As a late entrant, BellSouth is pinning its hopes on a new, digital mobile technology, the Global System for Mobile communications, known as GSM. It is this digital technology that offers several competitive advantages over Telecom's network; better security (no need to worry about what many industry wags call the "Prince Charles' problem" - eavesdropping) and international roaming, the ability to use the same phone in other countries that have adopted GSM (count among these Australia and most of Europe). The major stumbling block was that in order to deploy international roaming, BellSouth had to ask Telecom to provide the necessary authorisation signals. Telecom's engineers are said to have stalled, giving their mobile-phones colleagues enough time to patch together a competing product. "Business is all about time," contests Davis angrily. "The whole cornerstone of Telecom's policy is delay."
Another thing that really bugs Davis is the interconnect agreement that BellSouth signed with Telecom. "It's unfair," he declares, "we're a network operator, yet they charge us full retail rates for interconnect, while their resellers get a 20 per cent discount for carrying calls." This is certainly not the comfortable level playing field that Davis claims the Godzone government promised BellSouth, whose market penetration remains very small. And Davis is not alone.
His complaints are echoed by another new entrant, international carrier Sprint, which in March wrapped up bruising interconnect negotiations with Telecom. "More active regulatory participation would be desirable," said a Sprint spokesperson, "especially in negotiating the interconnect pricing regime."
A interesting side effect of a fully deregulated environment, it seems, is a constant clamour by new competitors for more regulation (to their benefit, of course). So far, the government has chosen to ignore them.
But the concern is not limited to foreign companies looking for a fast New Zealand buck. As sheep graze contentedly in front of satellite dishes out in Paraparaumu, an affluent residential community about an hour's drive from Wellington, Kiwi Cable's managing director, Jack Matthews, is also fretting about competing with Telecom New Zealand, the dominant player in his market.
Kiwi - 50 per cent of which owned by United International Holdings, an aggressive international cable operator (based in the US) with telecom savvy - is planning to drop the "Cable" from its name as it builds a nationwide broadband communications network. To do so will require piggybacking on Telecom's utility poles. "We have an agreement to put our cables on their poles," says Matthews. "But what happens when we start offering telecoms and they say, Get off?"
The crux of the matter for all new market entrants is that competing effectively requires Telecom's cooperation, which, as a publicly held company intent on maximising shareholder returns, the company has little incentive to provide. Telecom's only real concern is that if rivals can prove the company is obstructing competition, the government will be forced to step in and re-regulate the market.
Telecom CEO Roderick Deane is sensitive to this possibility. In a country that reveres fair play both on the sports field and off, four years of high-profile legal battles have done nothing for the phone company's image, or for the image of Godzone as a deregulated nirvana.
If New Zealand's unique deregulatory regime is to be preserved, then "all the outstanding issues must be resolved," says Deane. On the interconnect issue in particular, he impresses: "The only way people will truly believe that the deregulation model is successful is if there is competition in local access."
Not surprisingly, Deane would like to see competition for local access happen without government intervention. Yet even Telecom's rivals do not want the government to intervene much. "What's needed," asserts BellSouth's Davis, "is fine-tuning of what is basically a very good concept." Jack Matthews agrees: "What we need is just a little bit more, but that last little bit seems awfully hard to get." At the same time, Matthews is optimistic about the future. "Unlike in the US," he says, "where public will and public policy are thwarted by powerful interest groups, in New Zealand the process is more responsive." How will the process respond? Much depends on the attitude of the minister of communications, Maurice Williamson.
Williamson was not one of the original architects of New Zealand's radical deregulation, but he is one of its most passionate supporters. Since taking over as communications minister in 1990, he has played the role of a light-handed helmsman - an appropriately nautical metaphor for this yacht-crazed nation and for a keen former yachtie like Williamson - holding the regulatory regime on course. "We'd never have got to where we are if we hadn't had someone like Williamson driving us forward, arguing strongly for deregulation," says Pat McCabe, a senior advisor on telecommunications policy at New Zealand's Ministry of Commerce.
Arguing strongly is something Williamson does well. At secondary school, his big mouth kept getting him into trouble until a teacher suggested that he join the school debating team. This led naturally to an interest in politics. A lifelong liberal on social issues, Williamson joined the conservative Nationalists because they were the free-market party.
While attending the University of Auckland, where he majored in physics and maths, Williamson displayed all the classic symptoms of nerditis, like blowing dinner dates because he couldn't tear himself away from debugging code for an old IBM mainframe. Before his election to parliament in 1987, he worked for Air New Zealand Ltd. as a programmer.
Williamson has carried his love of technology into politics. He relishes his evangelical role as Godzone's first minister for information technology. "I've been a be-liever in the power of information from Day One," he says. As proof, he delights in showing visitors the database-handling routines he designed for his Wellington office files store lists of his constituents and their interests so that, come election time, he can mail merge customised form letters to canvass their votes. When Bill Gates visited New Zealand before the release of Word 6.0, Williamson gave him some ideas for improvements to the software's mail-merge functions. Williamson was gratified to note that many of his suggestions seem to have been implemented. "Of course, it was probably just coincidence," he admits.
A brisk winter morning in June - this is the Southern Hemisphere, remember - finds Williamson at an Auckland hotel kicking off a conference on the future of computing. The opening remarks give him a chance to air some of his favourite topics. Foremost among them is the Technology and Crimes Reform Bill, a recent initiative tabled by Williamson's fellow Minister of Parliament and archrival, Trevor Rogers.
Godzone's answer to US Senator James Exon has proposed extreme measures to protect children from exposure to online pornography. The initial version of Rogers's bill threatened not only to make Internet providers responsible for monitoring all information they handle, it would also give authorities the power to take away the phones of parents who allowed kids to download undesirable material. After a public furore, Rogers has claimed that further revisions would make access providers exempt from responsibility. But some remain sceptical.
The misconceptions that obscure this high-profile populist issue exasperate Williamson. "We're not asking the right questions," he tells the audience. "The question is not should we control access to the nasties, the question is can we."
Williamson knows very well that regulating bits isn't possible, but he frets that his fellow politicians don't understand.
"My parliamentary colleagues think that a byte is something you take out of a sandwich," he says. Later that morning in a limo on the way to the airport, Williamson gets word over the mobile phone that his rival has resigned from the Nationalists and joined a much smaller party. This could mean the end of Rogers's political career. Certainly, that is what Williamson seems to think. "He's dog tucker [dog food]!" the excited minister exults.
With Rogers safely out of the way, Williamson moves on to explain his position on the Clear-Telecom interconnect impasse. As the dispute enters its fifth year, the minister's patience seems to be wearing thin. "It's very disappointing to see CEOs carrying on like little children," he chides. "I've told them it's in your interest to sort this out - you don't want me to do it, because I'll come up with an awful solution." But though Williamson confesses he's "hugely reluctant to do any-thing," he also warns the litigants that "There's very limited time left - you'd better bloody put your minds to it, because this is your last chance."
If New Zealand's "light-handed" regulatory regime does manage to pass this first major test, one consequence might be a lower public profile for the communications minister. "The best thing people could have is to not know who the minister is," Williamson says. Somehow it's hard to imagine such a conspicuous character becoming anonymous. On the other hand, a successful solution to the dispute might allow Williamson more time for his favourite late-night, nonsex pastimes - cutting code and surfing the Net. n
Johnstone (tone@twics.com is the Wired Japan correspondent and reports on technology trends in the Pacific Rim. His article, "True Boo-roo," appeared in Wired US 3.03.
God's Own Country is about as far away from anywhere as is possible - its nearest neighbour is Australia, over a thousand miles to the northwest. New Zealand consists of two main islands, North and South, whose climates range from subtropical to subarctic. The country is roughly twice the size of England, with about one-thirteenth the population. More than 80 per cent of New Zealand's 3.5 million people are of European (predominantly British) descent, most of the remainder being Maori, the Polynesian folk who inhabited the islands before the British settlers arrived.
But today, according to Kiwi historian Keith Sinclair, "in their way of life, New Zealanders belong to a branch of New World civilisation, the main centres of which are Sydney, San Francisco, and Auckland - the Pacific Triangle." Comparisons to California are not far-fetched. Wellington, with its picturesque bay location, numerous cafés, and nearby wineries, resembles a pocket-sized San Francisco (to the unfortunate extent of being built on a major seismic fault).
As their recent, almost embarrassingly one-sided triumph in the America's Cup yacht race demonstrated, Kiwis have always excelled at sport. But New Zealanders have also begun to make their mark in other areas. In movies, for example, award-winning directors such as Jane Campion (The Piano) and Peter Jackson (Heavenly Creatures) have recently come to the fore internationally.
Granted, Godzone has no Silicon Valley, but the country is not short on entrepreneurial flair. As you would expect from an isolated nation, New Zealand boasts a long history of individuals rolling up their sleeves and doing their own thing. New Zealanders pride themselves on being able to fix anything with number eight wire, thick-gauge cable that farmers use for fencing. In banking technology, for example, they long since wired up an overnight check-clearing system. More recently, Kiwis have implemented a nationwide funds-transfer scheme that enables customers to pay for their purchases at petrol stations, supermarkets, and other stores using an ordinary bank card to direct-debit their accounts.
Ask Net luminaries like Vint Cerf or Steve Cisler for models of community networks in action, and they will tell you the US has a lot to learn from the example set by Richard Naylor and Wellington City Net. Depending largely on goodwill and with virtually no budget, Naylor has chalked up a remarkable string of firsts. Thanks to his efforts, Wellington was one of the first cities in the world to put documents such as bylaws on a gopher server. Most recently, Naylor used his trusty Mac, some fibre (probably number eight), and CU-SeeMe to feed a televised choral music festival from a Wellington suburb onto the Internet - a month before the Rolling Stones concert on Mbone. "I had a lot of fun with that," Naylor grins.
The world may also have lessons to learn from the pioneering experience of John Houlker. Houlker is the keeper of Godzone's Internet gateway at the University of Waikato, south of Auckland. Commissioned to provide Internet connectivity to two sets of customers - the nation's universities and its national research institutes - each of whom suspected that the other would use more than its fair share of the available bandwidth, Houlker came up with the idea of volume-based charging for Internet usage. The scheme has worked well in New Zealand, and though Houlker thinks it will become more prevalent elsewhere, he warns, "We have a very simple network here, with only one link. The general case is much more complex."
Houlker was also the one who came up with the idea for the World Communications Laboratory. This was an ambitious proposal to take advantage of New Zealand's deregulated environment and homogeneous fibre-based infrastructure to attract broadband trials from all over the world. Although the laboratory sparked some interest, it never managed to muster sufficient resources, and as other countries began to initiate their own broadband trials, New Zealand lost its window of opportunity.
In retrospect, Houlker believes the whole concept of the laboratory was flawed. "I used to think that having a lot of fibre up and down the country was a big deal," he concludes. "But in fact, it's irrelevant." What you need to make the whole thing work, he explains, is high-speed access to the local loop. "But no one was willing to pay for the cost of laying the high-speed links into the sites."
Houlker's response to such inertia is characteristic. He and his co-workers are laying ATM links between the University of Waikato and two neighbouring research institutes. Meanwhile, back in Wellington, Naylor and some of his pals are quietly wiring the city's downtown area with fibre ready for an independent broadband network. Godzoners, it seems, continue to do their own thing.