Friday, January 18, 2008

TUANZ - socialism in telecommunications

Ernie Newman has been head of the Telecommunications Users Association of New Zealand (TUANZ) for some years now. TUANZ has been one of the leading lobbyists for the so called "rights" of telecommunications users, rather than producers. It has supported the government's decimate of part of Telecom’s property rights over its infrastructure, and compulsory funding of telecommunications infrastructure. Of course, TUANZ, you see, produces absolutely nothing.
As an association of users, it seeks to represent their interests. Now this isn’t in itself a bad thing. There is always value in consumers having product information, and to inform suppliers about demand and what they are interested in. However the agenda of TUANZ is a bit more than that. TUANZ demands that the state ensure that suppliers provide it with what they want.
Imagine a FUANZ for food. FUANZ would demand that the state regulate the price of food, guarantee a certain variety of produce and foods be available across the country at a similar price, and probably would want supermarkets which had no competition within a certain area to open up parts of their property to competing retailers. FUANZ would be ridiculous, so why isn’t TUANZ?
TUANZ talks as if competition in telecommunications is new, just because Telecom is forced to allow other companies to use its property at a price dictated by the state. It largely takes for granted the vast reduction in prices for many basic telecommunications services, such as national and international calls, internet provision, mobile phone services, which all arose without local loop unbundling. TUANZ would say it wasn’t enough- but did you see TUANZ investing a dollar in a network? Well it might argue some of its members did, as TUANZ has been supported by many of Telecom’s competitors for years. At one point if I recall correctly, Telecom gave up on membership of TUANZ, because it was sick of helping funding a lobbyist that was so against it, and was effectively representing the interests of its competitors.
TUANZ has long supported local loop unbundling, which is now compulsory in NZ (as it is in many countries admittedly, but then so is a state monopoly on postal services). It is predicated on it being economically unviable to duplicate Telecom’s twisted copper pair local telecommunications network, and therefore the provision of broadband internet capacity.
Funnily enough, it hasn’t been predicated on competition in local phone services, largely because the price of these has never really been seen to be too high. Besides, with the Kiwishare Obligation, Telecom has been required to grossly cross subsidise rural phone consumers from the cost of urban phone consumers.
Ironically, having achieved the effective nationalisation of the local phone network of Telecom (though not the duplicate one of TelstraClear in central Auckland or suburban Wellington and Christchurch – one rule for one), Ernie Newman is not yet happy. Decimating Telecom’s property rights of course decimate its interest in investing in that network, something dismissed by Newman and the Labour regime as being of less interest than competition. You see, it wasn’t seen to be reasonable to simply sit back and let competitors invest in a duplicate network. Telecom's competitors wanted access to Telecom's network to resell its services under their brands.
Somehow building duplicate networks was deemed uneconomic even though:
- Bellsouth, then bought by Vodafone, virtually duplicated Telecom’s entire mobile phone network within five years;
- Saturn/Telstra-Saturn/ Telstra-Clear duplicated Telecom’s residential phone network with a combination twisted copper pair/hybrid fibre coax network in most of suburban Wellington/Hutt Valley/Kapiti Coast and Christchurch;
- Satellite based broadband (high speed downloads not uploads) has been available nationwide for around nine years.
Don't forget the barriers that local authorities through the RMA have imposed on this network duplication, but that is an aside.
Now Newman in the NZ Herald is saying”
As telecommunications increases its role as a dominant force in our lives, a small country like New Zealand has a vast amount to gain in productivity and lifestyle terms from taking the extra step to be an early adopter.In the 21st century this means replacing copper wires with fibre optic cable”.
Words of a sector seeking protectionism or subsidies if ever there was one.
To which I say – what the hell was the point of decimating Telecom’s property rights in technology you now deem obsolete? He talks of it bringing great benefits, with high speed video, voice and data services – great. You might ask yourself what else you might like at home, like a jacuzzi, home gym, you might like more overseas holidays, so bear this all in mind.
Newman continues:
In total, the cost of digging up the nation's footpaths and rose gardens to replace copper with fibre looks daunting.”
Surely not Ernie, if after all, everyone wants what you say they want, they’ll pay for it! He says it will work this way:
Fibre to the street cabinets is the job of the phone companies - they've already started.”
The “they” are interesting, I would have thought it was all the job of the phone companies, but then Newman wants to make it easier for them and for his members. He goes on:
From the street cabinet to the letter boxes should be a job for local authorities or power companies - provision of infrastructure services is work they excel at.”
Should be? Why did Telecom do this in the 90s, why did Telstra Clear? Since when did local authorities “excel” at provision of infrastructure services? Has he seen how water/sewer infrastructure in some rural districts is in a crisis? Roads in Auckland? The great days of municipal electricity companies underinvestment and regular power cuts? What’s stopping power companies now Ernie? What has been smoking? Either he wants to force them to do it, or with local government force us to pay for it – given what he says in his next statement – it sounds like a bizarre string of payments.

And the letter box to the living room should be the customer's contribution - once I have fibre running past my letter box I'll gladly pay to get it to the house to improve my quality of life and ability to work, and add value to my home.”

Well Ernie good for you, surely you would pay the phone company for the lot directly or through the fees you pay for the services you think everyone wants to improve their productivity.

You see, Mr Newman sees telecommunications like roads – except roads are paid for by users of course, and he ignores the tragedy of the commons of roads – which is congestion, gross overpayment by some users (trucks on rural Canterbury state highways) and gross underpayment by others (car commuters on most congested Auckland routes).
He says:
Broadband is infrastructure - the "roads and railways of the 21st century". Investment in infrastructure is inter-generational and has an economy-wide payback.”

Complete rubbish of course, as broadband infrastructure hardly has a depreciated life anywhere approaching a road or a railway line. It doesn't justify why those who DON'T use it should be made to pay for it. It is easy to physically duplicate telecommunications infrastructure, and it can be done wirelessly as well as by cable. Roads aren’t quite as easy. The “economy-wide” payback is the same sort of socialist nonsense that farmers, motor vehicle manufacturers, and ever other featherbedded industry put forward for state protection and subsidy. The truth is that state investment in infrastructure has been incredibly wasteful in many many cases. Why should it be any better now?

You see governments tend to invest not based on commercial returns at all, but on a combination of economic appraisal and political imperatives, because they are not spending their own money, but other people’s for which they are not accountable fundamentally.
He goes on about fibre networks being “common roadways” so everyone uses and no one takes responsibility. He calls for public investment in broadband – which to get rid of the euphemism is forcing you to pay for a network you may or may not use. He wants a sharing of the cost between public and private sectors.

TUANZ is now the telecommunications subsidy association of New Zealand. New Zealanders should tell Newman to get the hell out of the wallets and that if he stopped lobbying for government to hamstring the largest investor in telecommunications then he might get more investment in new technology and networks. Newman might ask Telstra Clear why the hell it doesn’t roll out a competing network and if it isn’t economic then he might ask his members to invest in one themselves. Newman might wonder why the hell he thinks the people he represents are more important than consumers of books, music, shoes, air travel, antiques or the like, or why telecommunications providers are more deserving of taxpayer support than farmers, manufacturers, restaurants, trucking companies or others?

Or maybe why people need to be forced to pay for something? Maybe people don’t really want the “triple play” of high speed services he says are so compelling, or rather they wouldn’t choose to pay for that over a new car, overseas trip, new shoes, reducing their mortgage or a nice bottle of wine. He uses the arguments of a socialist, and does no service to users or producers in doing so.

1 comment:

Railways of New Zealand said...

Good post, now how do I get an RSS feed from this blog?

Maybe if you just update to the new Blogger, it comes with built in RSS.