ALPURT toll road might not be viable

According to the NZ Herald, the Order in Council approving tolling on the motorway extension from Orewa to Puhoi has been amended, in that the Minister no longer needs to be satisfied as to the financial viability of it as a toll road.
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It is not a surprise for two reasons.
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First, ALPURT has been green-plated. Transit deliberately increased the cost of the project because it believed that if a toll road is built it should be of better quality than the similar untolled road. It put a tunnel in where a gully would have done the same job, and made it all four lanes instead of four and three lanes (the latter makes sense, but the tunnel was green-plating). This is even though the toll on ALPURT wouldn't actually pay for the full cost or even more than half of the cost of the road. A road that once was costed by Transit at just over $90 million in 1999 is now $360 million. Part of that is inflation, part of that is the inflation of the contracting sector due to the government spending up large on roads.
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Second, the tolling of ALPURT was politically driven. Transit sought a whole programme of toll roads to be built, including the Tauranga Harbour Link. These would share the cost of the back office and billing systems to operate tolling (which is to be fully electronic free flow with no toll booths). Now with only one and Transit having funding to build the toll system for a whole set of roads, it isn't quite the economies of scale of transactions Transit had hoped. You might think it is odd that road users pay for the cost of building a tolling system, after all shouldn't a tolling system pay for itself? Yes, good question. One that hasn't been properly answered.
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So you see when road users finally pay to use ALPURT as a toll road, they will be using a road other road users have paid for too. Yes every motorist paying fuel tax and road user charges is paying for a road that they have NO right to use. Interesting that. It would be fine if the fuel tax and road user charges used to pay for ALPURT equalised those used by the people USING the road, but this is a subsidised toll road, green-plated for political reasons.
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Will it work? Will it be well used and popular? Will it be empty with people not wanting to pay to use it? or will many use it, fail to pay and face unpopular penalties for not paying a couple of dollars? We can only hope that the new Land Transport Agency - a big government bureaucracy can make it work. Bureaucracies are good at customer service after all....

Future of petrol tax?

Here's a thought. Bearing in mind the report in Stuff today about regional fuel tax being rethought, should the way people pay for roads move away from fuel tax?
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At the moment diesel vehicles pay for road use through road user charges. Now there are some problems with it, but it means you pay directly for the distance you travel. You pay more by weight so the more damage you cause the road, the more you pay. However the system used in New Zealand, while once revolutionary, is being superseded in other countries by an electronic system that allows charging by time and place.
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Now there are plenty of governance issues that ought to be resolved first. For starters who sets the charges and where does the money go. Charges should be set on a reasonably economically efficient basis, to make a commercial return on running roads - and the money should go to road companies. However I don't want to focus on that for now... but on the technology and the practicality of it all.
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Tolls sound like a useful option, but they are really only practical on crossings or motorways which have few alternatives. So that in itself is no solution except for maybe the occasional road - Auckland Harbour Bridge could be tolled and that could pay for another crossing which could be tolled too, for example.
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Congestion charging is more useful, but again you have to be careful how it is applied. It could replace rates funding for cities, but shouldn't be used to pay for public transport. Public transport users should pay for that. If done well, congestion charging can reduce delays and mean road users are paying to use scarce road space. However London is not the way to do it for New Zealand.
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Longer term it would be better if everyone had the option of road user charges, in an electronic form. The first step would be changing the current road user charging system to vary by location, weight and time (if only night and day), so that trucks and diesel cars would pay closer to the costs of using different types of roads - motorways, urban streets, lightly sealed rural roads and unsealed roads. It would also improve enforcement and mean trucks pay according to route, like trains have been. More accurate charging of trucks, buses and diesel cars wouldn't be a bad thing, especially if the money was better linked to the cost of maintaining and building roads. The second step is to offer it to all other vehicles. You pay by distance and road you're on, and you get a fuel tax refund - a full fuel tax refund (including the GST on fuel tax).
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Meanwhile fuel tax can continue to increase, but more and more people would move off of fuel tax onto road user charges, because they would vary only according to what was needed to maintain and upgrade roads. There would also be a change as to how road improvements were funded, because it could be linked directly to money raised from road users on that road. No longer could improvements be made on empty roads, and improvements on busy roads would be less likely to be delayed.
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However there is little sign Labour wants to move away from fuel tax, in wanting to introduce regional fuel taxes for petrol and inexplicably, diesel (for which half is not even used on the roads). National in 2005 supported moving from rates, motor vehicle license fees and fuel tax towards tolls and road user charges.
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Can National get this right? Does it want some help?

40 years since the Wahine

New Zealand's biggest shipping disaster in recent history happened 40 years ago on 10 April. Patrick Dunford's blog reports on the details surrounding that tragedy. It was in the twilight years of the Wellington-Lyttelton ferry service on the long gone Union Steam Ship Company. I remember being taught vividly about this at school in Wellington, it left quite a mark on people in Wellington around at the time.
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The Wahine, along with Tangiwai and Erebus, was one of the three major transport disasters since World War 2. They all seemed to show how small New Zealand's population was (and still is) in that so many knew someone or knew someone who knew someone who was part of it. Indeed, today you can't take a ferry from Wellington to Lyttelton, or an overnight train from Wellington to Auckland or take a sightseeing flight from Christchurch to Antarctica.

Broadband Think Big - so where is the demand?

Well as David Farrar posts there has been a lot of positive about National's proposal to make you pay for a network you may never use. Even some snarking from the left, which of course means nothing, because as Owen McShane pointed out on Kiwiblog - Labour (and the Greens) want to pour over a billion dollars of your money into public transport that hardly anyone will use, and which will lose money and make hardly a dent on congestion in Auckland.
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So in some ways you can see that spending $1.5 billion on broadband makes more sense that on railways. No study asserts that Auckland rail improvements will generate new income or even generate net economic benefits.
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However, it is important to remember Telecom's (ha!) network of twisted copper pairs is not the only telecommunications network to many homes in the country. In Christchurch and Wellington (including the Hutt Valley and Kapiti, but not Porirua except a small part of Whitby) almost all homes have access to, not fibre to the kerb but the next best thing - a hybrid fibre coax network. What this means is that fibre optics provide the backbone, but this is broken out into networks for streets with coaxial cable, which is far higher capacity than twisted copper.
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This network is TelstraClear's and it sells cable TV services and highspeed broadband over that network. In Christchurch it offers 25 Mbps, and 10 Mbps in Wellington.
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So I want to ask, given TelstraClear isn't the majority provider of broadband in either major city, given it is technologically more advanced than current ADSL services, why aren't Wellington and Christchurch enjoying the rapacious economic "boom" promised by National?
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Meanwhile, the reaction from other parties is instructive:
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ACT has actually shown some principles and argued that (funnily enough) it is Think Big all over again (gee who said that first?) . Rodney Hide said:
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Who will invest now, when National is promising one or other company a $1.5 billion investment subsidy?.... Telecommunications has suffered hugely from government-induced risk and an uncertain regulatory environment. National has thrown the existing regulatory framework back into chaos.... It’s 'Think Big' all over again, with John Key 'picking winners' in an industry remarkable for its innovation. He has set an arbitrary goal of 75 percent "Fibre to the Home" by 2014 with no clear analysis of the costs and benefits. And it's a backward step for competition in the industry as the $1.5 billion subsidy will deliver a state-sponsored monopoly."
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Indeed Rodney, well done, although he didn't explicitly say ACT rejects it, it was as good as doing so. Naturally Libertarianz rejects it out of hand.
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NZ First is just stupid saying National wants to do a deal with Telecom. It's almost as if its geriatric voters don't understand the idea of open access or competition. Nonsense that home phones are dear (with unlimited free calling) and cellphones are expensive is just plain old fashioned pig ignorance.
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Peter Dunne likes it, but then he worships the cargo cult of Transmission Gully - another $1 billion waste of money that needs general taxpayers to prop it up. He funnily said ACT "delivered a standard libertarian rant", ah we can dream Peter. You deliver the standard "government should spend other people's money" rant.
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So I do wonder, should National sacrifice Transmission Gully in favour of transmitting broadband? Or should it just remember whose money it is?
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Oh and for all the arguments about lifting GDP - here's one, for National - cut spending and cut taxes! That means company tax at 20% not 30%, the top tax rate not at 39% but at 20%... it means New Zealand being attractive for investors, businesspeople and professionals.
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It's called the level playing field - you might even find telecommunications investment increases then.

John Key's Thinking Big

eh heh heh heh, well done John Boy. I can almost hear Sir Robert Muldoon chortling away. National's gone back to the 1970s. Welcome back the words "subsidies"and "state socialism" all shrouded in the word "investment". It's revolting.

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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?