Snow, foxes and where is Brian Tamaki?

It snowed!! For the first time during the day this year, in London.

I have seen foxes twice in the small park in the middle of my street too, and I'm only in Camden borough!

and where is Brian Tamaki? No, really, he maintained a very high profile running up to the election and for at least a year and a half beforehand - and now, with the party having got less than 1% of the vote (and no press release from it since September) - is it over, or is he making hay (=$$$$$$$) while he still can, or is something else going on? Even the pisstake site is down but is available cached on my mislocated lower sidebar!

Telecommunications and Russell Brown

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I have refrained from writing on telecommunications, although I have a background in telecommunications policy until now – and it is partly in response to the inaccuracies in Russell Brown’s column cited by David Farrar. Russell wrote a lot, and this post is in response to some of what he said which is clearly wrong.
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Paul Hewlitt’s article he cites is largely quite good although out of date (Vodafone does make a profit in New Zealand), fails to criticise major reports that are full of errors, such as the Todd report commissioned by Clear Communications and the Australian Productivity Commission report (both using out of date data, besides why would Clear produce an objective report?) and makes claims about Ministry of Commerce analysis which are false such as "The Ministry has no real view about these critical issues, despite 'presiding over' ten years of a deregulated marketplace, because it has no objective information, having done no work on behalf of the Crown or taxpayer to understand what has been taking place in the market. " He might want to do an OIA request on this.
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Russell criticises the regulatory regime, which relied on the Commerce Act and threat of regulatory intervention by saying “It is difficult now to credit the stupidity of those who devised the policy.” Really Russell? New Zealand was the first country in the world to fully open up its telecommunications market to competitive entry – the US still had protected infrastructure monopolies for local calls, and the UK had a regulated duopoly. Those were better models? At the time, it made perfect sense to treat telecommunications like every other industry, and use the agreement with Telecom to provide fair and reasonable interconnection as the benchmark, and the Kiwishare obligations to protect a certain level of local service. The Internet, as far as New Zealand was concerned, did not exist.
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"After Telecom was sold to Ameritech and Bell Atlantic (themselves, ironically the product of the greatest regulatory intervention in telecommunications history - the forcible break-up of AT&T in 1982) for $4.25 billion (the money was prudently used to retire external debt) in 1990". First, the break up of AT&T was by court order, not an action by a regulator (although it is in response to anti-trust law which was generic), secondly Telecom’s sale money was only partly used to retire external debt, the remainder was used to finance Labour government social spending in the ill-fated 1990 budget.
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“It wasn't all bad: Clear Communications entered the market, negotiated an interconnection agreement for distance calling and set toll rates on a steep slide.” Well when Clear’s entered the market, its toll rates were the same as Telecom’s for residential customers. Clear made it "Clear" it entered the NZ market to compete on service NOT price. It wasn’t until 1995/1996 when Telstra, Worldxchange and Sprint entered the market that Telecom was the first to dramatically reduce national toll calls with $5 weekends- Clear followed. It took the extra players to encourage competition, and Telecom was the price leader. Note also that on international routes Telecom faced competitors with significant overseas partners able to undercut it on key routes, BT and MCI owned Clear in those days, but Telecom introduced capped international calls to Australia, UK and the US - not Clear!
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Meanwhile, other nations began to embark on a different path. When they broke up their public monopolies, they either completely separated the wholesale and retail elements of those networks, or foreshadowed local loop unbundling, Nobody broke up their public monopolies, they tended to be corporatised, privatised and opened up to competition. Most foreshadowed local loop unbundling, but it was a new concept in 1996. Nobody completely separated wholesale and retail! Australia had a regulated duopoly until 1996 and most of the European Union did not open its markets until 1999, and the incumbents were not split.
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The various permutations of Saturn, Clear and Telstra installed cable in parts of Wellington and Christchurch but ran out of money. Telstra ran out of money? The majority Australian federal government owned behemoth? Give me a break Russell – it simply changed its business model and when government policy changed in 1990, the incentives changed. It also faced enormous RMA issues in Auckland as NIMBYism meant people didn’t want overhead wires for a competing network. Once Auckland became too hard it abandoned Hamilton, Tauranga and Dunedin.
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Russell also talks about how great the British unbundling experience is. Well this needs some closer examination. I used to live in Chelsea, hardly remote and somewhere you’d think you could get high speed broadband via BT unbundled line, but no – 512kb/s was what was available from my exchange. I could have gone to NTL, which has a competing network and got 2Mb/s of course, but ended up moving anyway. Not that this is much evidence, but it is as valid as ones of people Russell DOES know.

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The current price range for broadband in the UK is between £13 and £25 a month, costing more if you don’t want to be hooked into a 12 month contract – so this is about NZ$35 to NZ$60, cheaper than NZ when you consider that plans tend to have no download cap. Yes, the UK has cheaper, faster broadband, but in main cities there is infrastructure competition from cable operators too. The main cable TV providers NTL and Telewest are about to merge making them a more formidable force in broadband.
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"The British regulator's report had another line of considerable interest: "There are no Disputes in progress at the present time." In a market where there is "a dispute in progress" most of the time that sounds pretty damn good. " Not the regulator Russell, the Adjudicator. The regulator is Ofcom, and its report is here, there are plenty of disputes.
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“Woosh Wireless may have sorted out its technical issues by now, but its residential service offerings are abysmal. BCL shows no sign of moving into the residential market and, even with WiMax looming, I'm still waiting for someone to show me that wireless will be anything more than a niche” Well, BCL wont, but people thought DSL was a niche in the mid 90s, because Hybrid Fibre Coax was the way of the future – and were proven wrong. Unbundling will help to kill off wireless as a competitive option, and the uncertainty around the regulatory regime wont be helping wireless.

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Yes, the number of New Zealand broadband connections grew nearly 70% between Q3 2004 and Q4 2005, but that's still less than Thailand, India, China, Pakistan and Australia, in the Asia-Pacific region alone. Oh please Russell, if National quoted all the developing countries and said how appalling our GDP growth rates are compared to them you know what you would say. Australia IS legitimate, but it is also working off of a similarly low base, with unbundling.
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"Full LLU would also, of course, immediately introduce something that the nearly 20 years since corporatisation has conspicuously failed to deliver: nationwide competition on residential voice calling services. " What nonsense, there has been nationwide competition on national and international calls for over ten years. For local calls there is Telstra Clear reselling Telecom services, and Vodafone provides a competing voice network (not as cheap, but it can be used without line rental).
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McLeod's column hails the progress of Vodafone in our "competitive" mobile calling sector, without acknowledging that the benefits of that competition have failed to flow through to the consumer: our mobile termination rates (especially when calling from fixed lines) are the highest in the OECD. Oh the consumers have not benefited from a second cellphone operator? Would we have prepaid phones and text messaging if it were not for Vodafone? There is plenty of opportunity to have a third network – the spectrum is held now, and if Bellsouth/Vodafone can do it, so can Telstra Clear or Orange or another major international operator – might help if the RMA wasn’t such a barrier though. Other countries have additional networks, and that is reflected in price.

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Finally specious phrases like “Let's put it another way: would we want our roads run like our telecommunications? You won't get many backers for that motion, Rob.” Why is this a bad idea? Do you find it hard to get a phone call through at peak times Russell? Why is it that new technologies get implemented roughly according to demand, but that money for roads is always short?

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So things are not as clear as he makes out. I will blog later on what I think should be done about New Zealand telecommunications, after reading the report from InternetNZ. It comes down to being more creative than simply the government taking away property rights, but about those who want a better deal negotiating it and using the power they have. After all, Telstra is hardly a minnow in the lake.
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Mugabe's last birthday (please)

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Following on from Kim Jong Il, Robert Mugabe has turned 82. May he never reach 83.

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The government owned Zimbabwe Herald published a 16 page supplement congratulating him. A four day party is being held to celebrate it. You can read about it on the paper’s very slow website (you see there is no hard currency to pay for hosting it outside Zimbabwe).
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The Zimbabwe Herald said:
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“the whole nation joins the First Family in celebrating the life of the greatest hero ever to grace Zimbabwe and Africa.”

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However, as reported by the Daily Telegraph:
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“The National Oil Company of Zimbabwe, unable to import fuel for a year, said in its quarter-page birthday advertisement that it valued his "wisdom". The Zimbabwe National Water Authority, unable to supply clean drinking water to the capital Harare, congratulated his "legendary existence".”
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The forced takeover of farms, destruction of homes, rigging of elections and jail and torture of dissidents in Zimbabwe is well known and does not need repeating here, simply read the report The starvation in a country that once exports food is another legacy of Mugabe.
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However, one small reflection should be about those who supported him through the 80s and 90s – the ones who ignored the murderous record of ZANU, and who saw in Zimbabwe an optimistic “African democracy” – former ambassador Chris Laidlaw once wrote of this optimism, about a one-party state that was destroying property rights.

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Meanwhile, may Mugabe be captured, tortured and killed sometime in the near future - he deserves nothing less, and may his flunkies run like the vile rats that they are. However, if you want a taste of day to day life in Zimbabwe, try the blog of journalist Peta Thornycroft, reporting for the Daily Telegraph.

Khrushchev and Stalin

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Today is the day that Khrushchev made his famous “secret speech” on the last day of the 20th Party Congress of the Communist Party of the Soviet Union in 1956, denouncing Stalin. The day that the human excrement called Stalinists were stunned, and either followed Khrushchev or refused and continued to follow their blood thirsty hero. Think about those who deny the crimes of Stalin's regime in the context of Holocaust denial today!
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The speech rejected Stalin’s personality cult as being contrary to Marxism-Leninism (Mao, Hoxha, Kim Il Sung and Ceausescu all ignored this), it spoke of Stalin’s oppression and murder of Communist party members and innocent civilians, and the forcible deportation of nationalities or any groups Stalin feared.
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Around 2.9 million were deported under the rule of Stalin, as he shifted populations around from borders or regions that he thought might just be disloyal. However, this is nothing compared to the culture of fear and mass murder, directly through executions and sending dissidents to Siberia to die in gulags, and indirectly through ruinous policies that starved millions. He ignored warnings of the coming Nazi Germany invasion, costing millions of military and civilians lives in the siege of Leningrad. He had policies such as summarily executing soldiers if they retreated without orders and terrorising the families of those who did. The hero status he gained from World War 2 was unearned – the cost of Stalin’s regime is estimated at around 20-30 million people.
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Stalin was responsible for the invasion and occupation of Lithuania, Latvia and Estonia, the forced communisation of Poland, Hungary, Czechoslovakia, Romania and Bulgaria, and east Germany. He was responsible for the blockade of Berlin after the war, and for instituting communist rule in the northern half of Korea, putting Kim Il Sung into power and encouraging him to start the Korean War in 1950. He refused US offers of help to rebuild eastern Europe through the Marshal Plan, and because of the implementation of Stalinist economics, is responsible for eastern Europe today being a generation behind in GDP terms from western Europe.
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He was one of the most avid warmongerers of the 20th century.
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Stalin put enormous effort into making Soviet scientists develop nuclear weapons, as he was convinced of the inevitability of armed conflict with the west, Berlin and Korea were his two attempts. He strongly supported Mao Tse Tung, and rejected Tito of Yugoslavia, for taking a softer line by allowing small business and private property to exist.
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Khrushchev repudiated the inevitability of armed conflict as he believed that the “superiority” of the Soviet system would win out over capitalism by example, and revolution would happen abroad because people would want it.
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Khrushchev’s speech had two impacts:
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- It destroyed the personality cult of Stalin in the USSR and most of its eastern European allies. Czechoslovakia even destroyed an enormous monument to Stalin in 1962 after pouring a fortune of national GDP into it. The level of repression eased, summary executions became less common, but the apparatus of Soviet terror remained; and

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- It precipitated the Sino-Soviet split. Mao was close to Stalin and did not believe in peaceful co-existence and believe it was important to support revolution abroad, and to remain in conflict with the capitalist world. This split continued through till Gorbachev led the final years of the USSR. It saw border skirmishes between the USSR and China in the 1960s, China developing nuclear weapons on its own, aimed at the USSR and much endless rhetoric from China about the Soviet “revisionists”, and from the USSR about the Chinese “ultra-leftists”.
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Of course, there was a time when Stalin was much loved in the West - Time magazine made Stalin man of the year twice (1939 and 1942)! The repudiation of Stalin also had one very convenient effect for communists – they blamed the extremes and repression on Stalin, not Lenin. This ignores the apparatus of terror and culture of murder and deportation that Lenin instigated. Lenin was no angel, he expanded labour camps and engaged in deportation and mass executions – but he is still the pinup boy of the left. The difference between Lenin and Stalin is one of scale, and it was natural that Stalin follow from Lenin.
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Of course, Khrushchev did not mark the end of Soviet totalitarianism. The USSR suppressed the popular uprising against the Stalinist regime in Hungary in November 1956. Dissidents were still arrested, imprisoned and sometimes executed – simply the hysterical mass expulsions and extermination of groups had ended. He precipitated the Cuban Missile Crisis, and because he withdrew, was deposed, replaced by Brezhnev and placed under house arrest. The USSR until Gorbachev reformed it in the late 1980s was still a state of terror, where you dare not challenge the power or decisions of the Party, and where you didn’t complain or talk about things you shouldn’t.

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Today is a day to remember how lucky we all are that the USSR is gone. Stalin was the 20th century's second most murderous tyrant (after Mao), Khrushchev was not averse to spilling blood, just less thoroughly and more selectively, we can be glad that Khrushchev took one bold step to pull the USSR out of the sheer hell of Stalinism, and place it one step better than that, but that is all.

Highway hoo ha

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Today Transit will release its draft 10 year State Highway plan for 2006/07-2015/16 – and the media will make it an enormous deal, the one-time ACT supporting Kim Ruscoe already has (I know this because I overheard her saying so a few years ago), even though it really isn’t meant to be.
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The plan is a forecast, based only on the revenues and anticipated allocations of Land Transport New Zealand over the next ten years. It does not mean any project will or will not proceed – at all. Funding is NOT decided by Transit New Zealand, it is decided by Land Transport New Zealand (formerly Transfund), which most reporters in New Zealand can't grasp, even though every frigging year the process is the same, and has been since 1996 when it was changed by National!
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The process goes like this:
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- Transit every year prepares a draft State Highway Programme, a bidding document which outlines the projects and outputs it will seek funding for from Land Transport NZ in the following financial year. This is based on the priorities for the current year and indications of available funding provided by Land Transport NZ based on the latest forecasts of revenue from fuel tax, road user charges, motor vehicle registration/licensing fees and Crown account allocations. The draft is for consultation with the public and local authorities, largely on the priorities Transit has set and also because local authorities produce their own bidding documents for funding their local road networks (and for subsidising public transport).
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- The draft Programme consists of detail of the projects and outputs for the following financial year as the focus. However, to give context and to encourage Transit to plan and prepare for the ongoing maintenance and development of its network, it also prepares a plan for the following nine years as a forecast, to indicate what might be done under current policy and revenue settings.
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- Following consultation, Transit’s board takes this into account and agrees on a final State Highway Programme which is submitted to the board of Land Transport New Zealand. Land Transport NZ, along with the programmes of 86 local authorities, considers the latest revenue forecasts (this is May by now) and prioritises the expenditure across all those entities, and releases the National Land Transport Programme for 2006/2007. That programme determines the allocations by activity class (e.g. State Highway Construction) and the amounts for maintenance, public transport subsidies and bulk funding for projects (and the list of approved projects) that are worth less than $3.5 million each.
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- Transit simultaneously releases the final agreed State Highway Programme for 2006/2007, which INCLUDES a forecast for following years.
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- However, final approval for funding for any single project over $3.5 million still requires signoff by the Land Transport NZ Board following evaluation of the costs and benefits of the project.
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So what does this mean? Once it is released, it is a draft and when it is finalised it is still only an indicative programme.

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Ruscoe's interviewing her typewriter with claims like "The worst-hit site in the Wellington region is believed to be the planned Paekakariki interchange, a flyover to move traffic safely on and off State Highway 1. It was set down in a proposed western corridor plan for 2007, but Transit's forecast stated that the earliest start date would be 2015, a source said."

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Well Kim, read the CURRENT year's final plan and there was no year for the Paekakariki Interchange. The proposed western corridor plan is a consultation plan, and has not been approved, and was prepared based on forecasts that are now over 6 months old.

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Yes, there is probably a funding gap, although Transit theoretically should not develop a programme which is unfundable – that is the whole point of this sort of forward planning. The big issue is whether the amount of road construction underway now, which is at levels unprecedented for over 30 years, is entirely efficient. In many cases it is, but you have to ask yourself questions about why the new motorway north of Orewa is in a tunnel now, instead of the original design for a cutting, in order to reduce environmental impact - for a good $35 million?

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There are two big issues:

- Inflation of project costs (caused by increases in oil prices, increased construction margins because of the huge rampup in road spending in the last two years and greenplating/goldplating by Transit engineers blaming the Land Transport Management Act for requiring high standards of environmental and social mitigation);

- Decreasing petrol tax revenue (caused by reducing traffic growth and increasing efficiency of the petrol vehicle fleet - this doesn't effect road user charges revenue of course).

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The appropriate answer is for Transit to become a company and to run at a profit, and to shift funding from being bureaucratic to being Transit charging customers directly - like National once proposed. Then it could borrow to build roads, paid back from road user charging.

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You see, Telecom, Contact Energy and Air New Zealand don't decide the amount of money they spend on capital every year based on annual surplus cash flow, and just spend that - they borrow, to spread the cost of the new asset across its depreciated life. Road users, on the other hand, pay taxes now, which are spend to build roads, that future road users use (albeit most of them are current ones, but since the depreciated life of a highway cutting is over 50 years) and don't pay anything towards the capital of. The Auckland motorway network was paid for by past generations, and only maintained by current ones - but phone lines, power lines and aircraft are not funded that way. If they were, you'd get congested lines, old planes as Air NZ saves up for new ones and slow progress. Imagine if you could never borrow for a home, you'd have to save up for decades until you could buy it - cash - while chasing the price of property.

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- then Transit would be engaging in cost control, but also delivering what its customers wanted and charging them appropriately for it. In the absence of that, the funding system should be revamped to have a tighter focus on economic efficiency and to ensure that projects don't proceed if they have benefit/cost ratios that are very low - and there needs to be a bigger shift to user pays, which means, for now, moving more petrol tax revenue into roads - and looking more to direct user pays to replace petrol tax.

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By the way, if the SH20 Avondale extension was not built, all the other roads could be easily funded, because it is estimated to cost around $1.2 billion, which over five years sucks out $240 million a year - but if you borrow over 35 years, it would spread it out, even taking into account the cost of borrowing.