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Regulation and policy in an era of convergence

The Government has a role to ensure that our legislation and policy frameworks remain optimised to support innovation and competition, while protecting the rights of New Zealanders. A priority under the Government’s Business Growth Agenda chapter on Building Innovation is to ensure market regulation supports and does not hinder the development of new and innovative products and services. While the separate TIME markets are rapidly moving toward a single broad communications market, New Zealand’s regulatory and policy systems remain segmented according to the historical separation between the telecommunications and broadcasting sectors.

Implications for regulation

The key challenge convergence presents for policy-makers and regulators is how to ensure our laws remain coherent, fair, and effective despite often dramatic changes in the nature of regulated markets, industries and technologies.

Since the earliest days of the telephone and broadcasting industries it was assumed that these services were natural monopolies and entirely separate industries. As such, the regulatory regimes that developed around them were based on specific technology platforms, with different rules for each distinctly perceived industry. This approach was widely followed around the world.

In addition, in New Zealand each of our communications statutes has a different underlying regulatory purpose. For example:

  • economic regulation, such as the Telecommunications Act 2001, is intended to promote competition policy goals;
  • cultural and social regulation, such as the Broadcasting Act 1989 and the Films, Videos, and Publications Classification Act 1993, is intended to protect and promote community values during content creation and distribution; and
  • enabling regulation, such as the Radiocommunications Act 1989, is intended to provide a neutral framework to facilitate the efficient allocation and use of spectrum resources.

Possible regulatory responses may include:

Figure 6: Regulatory systems for communications in New Zealand
Figure 6: Regulatory systems for communications in New Zealand

The current framework of regulation has worked well for many years. However, the fast-changing environment brought about by convergence makes it appropriate to conduct a health-check of our regulation, to ensure that it remains coherent, and that the current delineations remain appropriate, and to guard against a range of possible risks, including:

  • Misalignment of policy and legislative constructs with market, behavioural and technological realities. For example, over time the importance of competition considerations relating to the allocation of radio spectrum has increased, along with the increased importance of mobile telecommunications. Neither the Radiocommunications Act nor the Telecommunications Act specifically address this. Instead, competition matters have been addressed through sale conditions such as spectrum caps and consideration under the Commerce Act by the Commerce Commission, generating considerable uncertainty during initial allocation processes.
  • Gaps in the existing framework’s coverage of new forms of content, applications, and services. For example, restrictions on advertising timing and placement, stipulated in the Broadcasting Act, affect television and radio and do not apply to online platforms, even if they are carrying the same content at the same time.
  • Reduction of boundaries between historically distinct services, devices and industry sectors, leading to inconsistent treatment of like content, services or devices. For example, the Telecommunications Act is the only form of sector-specific economic regulation for the sector, and broadcasting networks are specifically excluded from that Act – an increasingly arbitrary distinction, given the convergence of broadcasting and telecommunications infrastructure.
  • Institutional ambiguity as a consequence of sectoral convergence such that several regulators – or no regulators – hold the mandate to address pressing market or consumer concerns. For example, with the introduction of new transmission methods which make a wider range of content more easily accessible such as internet-based video-on-demand services, providers of ostensibly similar content or services over different platforms face uncertainty about their regulatory obligations under the Broadcasting and Films, Videos, and Publications Classification Act.

Our regulatory system should reflect reality, ‘treat likes alike’ across the converged sector, and be flexible and durable enough to cope with future change. Policy needs to enable innovation and growth, while ensuring a fair and even playing field for competition. It should enable change in the market without steering it. Policy and legislation should, for the most part, be technology and business model neutral to allow innovation and change within the market.

  • Updating regulation to reflect the realities of the new market environment.
  • Reducing regulation or identifying alternative means of achieving policy objectives.
  • Repealing irrelevant or ineffective regulation.

Implications for policy

In addition to regulation, government policy can have a significant influence on the development of our communications and media markets in other ways. Most notably, to achieve a public good, government may elect to act as an investor or direct participant in these markets. Examples of such policies already cited include:

  • The Government’s investment in telecommunications infrastructure, such as the Ultra-Fast Broadband (UFB) and Rural Broadband Initiative (RBI), which is improving access to high-quality communications services across New Zealand.
  • The Government’s investment in high-quality content through funding agencies such as NZ On Air, and initiatives such as the New Zealand Screen Production Grant.

It is important that policy-makers remain alert to the impacts of convergence in the formulation and review of such policies, and seek to ensure that, wherever possible, future policies are designed to be technology neutral, and do not unduly favour any given service, platform, or content format over any other. For example, with the increase in online accessibility the mixture of tools used by government to support content may have to change as convergence throws up new possibilities and challenges.  The range of tools includes legislation, public ownership, contestable funding, and licence conditions, among other potential measures.

Jurisdictional issues

With geographic barriers becoming less relevant, we now expect to be able to access content and services from around the world instantly, and there are unprecedented opportunities for New Zealand businesses to expand beyond our borders.

Meanwhile, the entry of international players into the New Zealand market online means we need to consider how our regulatory systems should apply to these businesses.  The treatment of national and international players within our market, and how such players are treated internationally, may give rise to cross-border jurisdictional issues.

For example, the arrival in the New Zealand market of on-demand services that are based overseas raises the question of how their content is to be brought within New Zealand’s classifications and standards, whether voluntarily or through legislation.  Similarly, such overseas-based services, like their counterparts in other areas of commerce, are not currently subject to GST, resulting in potentially unfair competition between providers in the same sector. Tension is also rising between the traditional, geographically-bound commercial and contractual frameworks for the copyright and licensing of digital content, and the idea of the internet as a single, free, open, global marketplace.

Another emerging jurisdictional issue is the concept of data sovereignty, in other words that digital information is subject to the laws and regulations of the country in which it is stored.  This is gaining significance as more businesses and consumers use ‘cloud services’ and other services provided by off-shore providers. Such services may reduce the cost of data storage and communications, benefitting small businesses in particular. This may raise issues relating to the security and privacy of New Zealand data stored off-shore. The difficulty of accessing data stored off-shore may also provide challenges for law enforcement and national security. It will be important to get the balance right between trusted international information technology, privacy, security and inter-jurisdictional issues.

 

> Next page: A system wide response