The Government has backed down over a clause in the controversial Telecommunications Interception Capability and Security Bill which could have seen big internet companies like Apple and Microsoft banned from offering services in New Zealand.

The bill is companion legislation to the recently passed Government Communications and Security Bureau Act and sets out the access that network operators and internet service companies must give to spy agencies to allow them to monitor communications.

It also places new obligations on network operators such as Telecom, Chorus and Vodafone to consult with electronic eavesdropping agency the GCSB on matters of network security.

It returns to Parliament tomorrow for its second reading.


However, Communications Minister Amy Adams this afternoon announced a series of tweaks to the bill in addition to those recommended by the Law and Order committee recently.

They included the removal of Clause 39, which allows the minister in charge of New Zealand's spy agencies to order a network operator not to resell an overseas telecommunications service here if it lacked interception capability in a way that raised significant risk to law enforcement or national security.

Critics argued the clause could affect companies such as Apple and Microsoft who offered encrypted messaging services and who could be deemed to be network providers under the bill.

Ms Adams said any "non-compliance" issues the clause could have been used to address could instead by dealt with via the bill's proposed compliance framework.

That compliance framework includes High Court imposed penalties of up to $500,000 and an additional $50,000 per day each day of non-compliance.

The change is among those in a supplementary order paper tabled by Ms Adams this afternoon.

Other changes alter the proposed framework under which network operators must consult with the GCSB on matters of network security.

That includes giving the responsible minister the ability to set deadlines for companies to meet network security requirements. However, under the new changes, network operators will have a narrower set of network security matters they have to discuss with the GCSB. Ms Adams said that would reduce compliance costs for network operators.

Where network operators and the GCSB can't agree on how to respond to network security risks, the minister can make a direction or order the company to comply.

Today's changes introduce a further check, requiring the Commissioner of Security Warrants to independently review whether the matter in dispute amounts to a national security risk.

The minister also now has a "strengthened and clarified" set of factors to consider before issuing a direction over network security which Ms Adams said would address concerns from telecommunications companies that the regime could affect competition and place undue costs on the industry.

"Although public input has resulted in significant improvements to the Bill, some of the submissions received did not reflect an accurate understanding of what the Bill does and does not do," Ms Adams said.

"In particular, I would like to reassure people that this Bill does not change the authority of agencies to intercept telecommunications, it does not change existing privacy protections, and it does not require data to be stored or require stored data to be disclosed. The Bill only relates to real time interception."