For a while now I’ve hoped that given I will dance merrily when Labour loses office, I’ll relax knowing that a National government led by John Key will do a little better. This is even though the list of things that could be better has shrunk on a weekly basis.
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National was once the party of big government investment into infrastructure. Many wont remember the age when oil was at record prices and that the economy was being strangled by the threat of disrupted oil supplies and inadequate electricity.
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So came Think Big- a phrase that lives in infamy for anyone with economic rationalism in their veins.
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Taxpayers paid for a gas to gasoline plant at Motunui. I remember how Rob Muldoon and Bill Birch cheered it on, saying it would produce half of the country’s petrol. By the time it was completed, it was reportedly cheaper to convert all vehicles in NZ to CNG and LPG. The cost of building it was written off as government debt before Petrocorp was sold. The plant is no longer in operation. One wonder if the public would have paid for gas conversion kits themselves if the government of the day didn’t have marginal tax rates approaching 66%. However, central planning lost.
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Central planning lost again when, after years of badgering by the Railways Department, the National government decided to approve the Railways borrowing to electrify the central part of the North Island Main Trunk railway (Hamilton to Palmerston North). Apparently the export boom of the late 1970s had strangled the capacity of the line (which through that segment is particularly steep and windy) and electrification would allow longer and faster freight trains. NZ$350 million was the final cost of electrification. However whilst it seemed a good idea at the time of high oil prices, another move by the same government eliminated the capacity problem. You see the railways had a capacity problem whilst having a legislated monopoly on almost all freight consigned for distances of over 150km. So in 1983 that monopoly was removed, and funnily enough the railways lost about 18% of its freight tonne-kilometres carried relatively quickly. Problem solved. Furthermore having corporatised the railways (Labour didn’t start it), the newly business like Railways Corporation had a study undertaken which demonstrated it had enormous scope to cut costs and increase productivity, through measures like eliminating guards vans. So more could be carried without pouring concrete and stringing up wires. That same corporation commissioned the then Coopers and Lybrand to investigate if the electrification could be an economic investment, but it concluded it would lose money even if electricity were free.
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As a result of that the Labour government of the time bailed out the Railways Corporation (for the first time since its creation) by taking over the entire debt for the electrification. It is notable that the sale price of New Zealand Railways on privatisation roughly equated to that debt. Another failure for central planning.
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So now the National Party thinks it knows best again announcing that it is forcing YOU to pay NZ$1.5 billion to “invest” in a broadband “fibre to the kerb” network. This will be one of the biggest handouts to an industrial sector since Think Big. The term “invest” is thrown about with abandon by politicians who want to use your money, after all “spend” is honest but sounds less worthwhile, “subsidise” is more honest but it’s a bad word. So it’s invest. I’m sure we can all come up with things that we’d like to force others to “invest in”. Of course unlike roads, this network wont reach virtually every property now, will it? You'll all pay though!
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So what is this all about? Well besides all the hype about generating jobs and investment (yes heard it all about Think Big too, and Jim Anderton hyped it up about his own Ministry of Economic Subsidisation), Key says this new socialist programme (which it is) involves five principles:
- The network being open-access (like the roads, and every peak period in Auckland you see how that works);
- ensuring the investment does not see already-planned investments cut back (of course not, after all the government building a network in competition to your own, or one you could use instead of building one. Why would it? Of course it will, we’ve already seen how local loop unbundling killed Telstra Clear’s investment programme in hybrid fibre-coax broadband/cable tv networks);
- ensuring increased broadband services (meaningless. It’s like saying I hope building this road means more freight and people get moved); and
- making sure we do not end up lining the pockets of incumbent industry players (ohh the “boot into Telecom” point. No, you’ll line the pockets of the contractors who build it and whoever has the job to manage it. You see they wouldn’t have had to do it unless you’d taken money off of other people and forced them to pay for this.
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So it’s time to ask some questions:
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1. What would happen to broadband services if this DIDN’T happen? Wouldn’t those who would benefit immensely from it continue to buy existing services creating a market for new infrastructure?
2. Has Labour’s socialisation of Telecom’s local loop hindered and will it continue to hinder private sector investment in alternative broadband technologies? If so, wouldn’t it be wiser to let Telecom make money out of its own network and for competitors to build duplicate ones? (hey if its such a great investment it will happen wont it? If it’s not why are taxpayers paying?)
3. What other barriers exist to private sector roll out of broadband, such as the RMA and local authority preciousness about overhead wiring?
4. Who would run this broadband network, what happens if it goes wrong? Will it charge to make a commercial return on investment?
5. Why is telecommunications so special it needs a massive subsidy from the rest of the productive sector?
6. Are those who will benefit from faster broadband willing to pay for this, and if not, why should everyone else do so?
7. What could the rest of the productive sector do if the money, that was their’s in the first place, was handed back to them in tax cuts?
8. Why shouldn’t software, fruit growers, painters, watchmakers, publishers, plumbers, taxi firms, pharmaceutical companies, biotechnology firms, caterers, hoteliers etc etc get a handout too?
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Finally, John Key’s claim that “One hundred and fifty years ago the government had the vision to build railways and highways to facilitate the movement of goods” is nonsense. There were no railways in New Zealand 150 years ago for starters, the first was opened in the 1860s but construction didn’t really take off till the 1890s. Some were built by private enterprise, such as the line from Wellington to Palmerston North, and much of the line through Arthurs Pass. Many of the railways built were marginal and served, well nowhere. Noticed Waikaia, Waikaka, Eyreton or Tokarahi on the list of great booming towns? No – they were all lines built for political reasons, to prop up land prices and win elections. The government funded railways were actually primarily funded by local and provincial governments, as were the roads. Central government had little to do with it. Local governments did this as they could raise money from land released for sale and developed. There was no such thing as national highways until 1922.
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So there you have it. Will ACT resist this Think Big attempt to bribe the IT sector? David Farrar, as always liberal on most things, is singing the praises of this enormous handout to the sector he is involved in, rather disappointingly.
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After all, is the telecommunications sector so strapped for cash that it can’t invest? If it is a matter of wont rather than can’t then why not ask why rather than make everyone else step in?
