03 April 2008

Telecommunications nationalisation

Not PC has said much of what I want to say, and I have said much in the past about the absurdity of local loop unbundling, and the de facto decision by the state to decimate investment in competing telecommunications networks by granting property rights over Telecom's network by its competitors.

There is a story about the success of deregulating telecommunications from 1989 through to 2001, the time that getting a phone line installed became quick and easy, when national and international call prices plummeted, as did cellphone calls. This is the time that a company came in and built, from scratch a duplicate nationwide telecommunications network - it was BellSouth at first, but Vodafone built the bulk of it. It is the time that Saturn (later Telstra Saturn and then Telstra Clear) built a hybrid fibre/coax telecommunications network to homes and businesses on the Kapiti Coast, Wellington City, Lower and Upper Hutt, Christchurch city - and planned to do the same in Auckland, Hamilton, Tauranga and Dunedin - yet, funnily enough, decided not to when the government started granting property rights over Telecom's network.

Now the very same people who wanted Telecom's network to be everyone's to use, but not anyone's to make an investment out of - decry that there might not be the incentives to build a next generation network of fibre optic capacity to the kerb. Funnily enough, when dialup internet was king in the late 1990s there WAS the incentive for two firms to do it - Telstra Clear as I mentioned, but Telecom did so also in parts of Auckland and Wellington, until it decided ADSL was cheaper to roll out in the meantime.

So what has been created in the last eight years of Labour government reforms has been to incentivise usage of Telecom's existing network - which is all very well if you believe that is the beginning and the end of telecommunications - except most don't. Some believe that fibre to the kerb is the next step - some believe it is wireless, some may argue that satellites can offer a solution. The state wont of course know best - in fact not one company will. Telecom got it wrong on mobile phone standards, and got it wrong on hybrid fibre coax in the late 1990s. The Post Office got in wrong in the 1970s by having triple twisted copper wire lines installed in parts of Wellington. How can the state get it right now?

and no. The arguments that "we'll all benefit" and it's "like the roads" are just fatuous. Those who will benefit from state subsidised investment (which all state investment) are those who will be internet intensive businesses. They aren't special any more than energy intensive, labour intensive or land intensive businesses. Remember how the great state folly in the late 1970s, early 1980s was replacing foreign oil - when all those "investments" were written off, as the price of oil plummeted and energy was no longer a problem (funny how most of those are irrelevant now when oil prices ARE high).

and roads? Well let's remember how roads are managed. When most people want to use them, they queue for them and get appalling service, some are in excellent condition, others are barely usable, there has been a massive backlog of deferred investment, except in politically driven projects which have dubious benefits. It takes years to get any extra capacity built, and there are plenty who lobby against it - and if you don't like the service, you generally don't have a competitor (except the railways, which may be akin to the postal service competing with email).

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