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The Forum > Article Comments > National broadband: what kind of monopoly? > Comments

National broadband: what kind of monopoly? : Comments

By Tristan Ewins, published 13/1/2009

It is time for Labor to divest themselves of neo-liberal shibboleths and reconsider the potential role of a public Telstra.

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Infrastructure is the area where Government performs better than private enterprise. Rail systems and communication networks need to be government owned because private enterprise can seldom make them pay, but they are vital for business. The national communication network needs to be government controled for other reasons such as emergencies. The idea that Telsta should be the provider of infrastructure with no retail outlets has been around for many years and I support that concept. Let the telcos rent form the national network, but keep the network itself safe, secure and modern. Only governments can do that.
Posted by Daviy, Tuesday, 13 January 2009 1:56:37 PM
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Do you remember what it was like when Telstra/Telecom/PMG had a monopoly? How long it took to get a phone connected? How long it took to get one repaired? How you had to buy all equipment from Telstra?
Do you remember what it was like with regulated banks? How you had to beg and plead to get a housing loan? How savings earned interest of about 3%, whatever the market rates were?
If anyone - government owned or no - is given a broadband monopoly we will have frozen infrastructure and technology, which is a particularly dopey thing in a field where technology is changing so rapidly. I once bought a modem which had a speed of 9600kbs and was assured by the vender that this was the absolutely top speed possible.
I agree that there is an argument for governments financing and therefore owning capital intensive assets as their cost of money is lower. But they should not manage them. I don't believe the airports should have been sold, for instance, but the private managers are doing a much better job than the government did.
Posted by Ken Nielsen, Tuesday, 13 January 2009 2:18:49 PM
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Once again Tristan attacks a caricature of “neo-liberalism” bearing scant resemblance to actual ideas and practices in Australian public policy.

Many utilities provide revenue to their government owners. But unless the utility is run as efficiently as a private entity, the amount they return to their taxpayer “shareholders” is less than alternative investments, so they are not usually very good investments.

And there is opportunity cost. The social cost of tying up resources in businesses like banks (which the private sector runs perfectly well), is that less is available to spend roads, hospitals etc (which the private sector does less well, or does only for those willing to pay).

Tristan implies that without cross-subsidy, the needy will not get access to essential services. But there is no dispute over whether the needy should be guaranteed access to essential services like water and electricity, only on how best to achieve it. Cross-subsidisation lost favour because it is opaque, causes inefficiency by distorting prices and requires anti-competitive restrictions to prevent the subsidising customers switching to alternative suppliers. The needy still get subsidised access to these services, but generally the subsidy is nowadays paid for by a direct government subsidy. This is an improvement.

The “strategic” direction of the lending practices of government-run banks degenerates too easily into political direction. The lessons of WA Inc, Rothwells, the Bank of Victoria and SGIO should not be forgotten.

Comparing Telstra’s performance against the OECD average as evidence of the failure of deregulation is deceptive. All OECD countries have privatised and/or deregulated telecommunications in the past 20 years. Our failure to match the performance of the OECD average could as well be down to too little deregulation as too much. Indeed, the OECD report Tristan cites argues “markets with healthy levels of competition have led to the introduction of innovative services and appealing pricing packages.”

I have looked at the tables on relative prices in the OECD report (tables 7.3 to 7.5, pages 229-231) and can’t replicate the 15% premium (I get 3%-12.0%). Does anyone know where this estimate came from?

http://www.oecd.org/document/17/0,3343,en_2649_33703_38876369_1_1_1_1,00.html
Posted by Rhian, Tuesday, 13 January 2009 2:24:11 PM
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Ken; I think you’ll find many of the issues re: the quality of service in the past – had a lot to do with technology: and as I argue in the paper, these matters stood to be redressed regardless of privatisation.

Re:Telstra holding a monopoly on equipment–indeed such a situation is not ideal. But there’s no reason why we cannot continue to purchase mobile phones, i-phones, modems etc through retailers outside of Telstra. As Optus’s network is established,competition will persist-but all of us pay for the duplication.

Indeed - I don’t see a reason why there could not be a public monopoly of infrastructure.

But retailers should be charged a fair market rate for access to the network.Customers of a public Telstra shouldn't be expected to subsidise rent-seeking enterprises. A Telstra GBE/retailer should be able to pass on the benefits of its economies of scale – while cross-subsidising those who would otherwise be disadvantaged. (the poor, rural customers etc)

Also it's true - technology seems to always be advancing. But the situation is Catch-22. We could put off investment in crucial infrastructure forever–in anticipation on new technology. But surely this cannot go on forever. And in the meanwhile there is lost productivity and poorer quality of service.

If, say, new infrastructure required $20 billion–that’s less than 2% of GDP… A big investment, yes, but what if it lasted us 20 years – or more?

And what of the benefits in productivity and service lost in the meantime? Surely we are capable of these kind of nation-building projects – if only we could take it in the proper perspective.

BTW–you’re right that public finance is far more cost-efficient. And I agree that airports should never have been sold… Destinations may compete–not the airports themselves. Neo-liberal ideology taken to extremes.

Finally – I’m open-minded about private management… if there is real competition… But what if – instead of competition – you get rent-seeking behaviour, favouritism, corruption?

Thanks for commenting :)
Posted by Tristan Ewins, Tuesday, 13 January 2009 2:43:41 PM
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Tristan

What makes you think Kevin Rudd have the expertise to operate a National broadband service, do you think anyone in this government or in the opposition knows how to run a boardband service?

I would suggest the best people to run this service are the experts in the field, ie Telstra and Optus. They know what to charge and how to run the services most efficiently

As for other services run by the government, living in NSW has shown me that Governments cannot provide the services required by the community. For example, the NSW government knew for 15 years that there need to be a North West rail link, and it is still not built yet. It is arguable that if the demand was there (as the NSW government thinks it is) A private enterprise would have build it.

As for pricing, you are correct in saying that public utility pricing would be lower. However that is because its inefficiencies are being subsidised by taxpayer's money. Instead of providing the discount to everyone, the government can save money, and return these money to the needy, or provide Australia with other infrastructure need.

The government does not have a role to compete with private enterprise, it is an argument that was lost 20 years ago. It is inefficient. cost ineffective and a drain on the taxpayers.

Stop living in the past and please return to the 21st century
Posted by dovif2, Tuesday, 13 January 2009 2:47:22 PM
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"I think you’ll find many of the issues re: the quality of service in the past – had a lot to do with technology: and as I argue in the paper, these matters stood to be redressed regardless of privatisation."
No, they were the result of poor, unaccountable management and the (almost inevitable) union capture of government monopolies.

I do not object to anyone making an investment in national BB infrastructure - just in whoever it is being given a monopoly which would prevent new and better technology being introduced.
Posted by Ken Nielsen, Tuesday, 13 January 2009 3:24:31 PM
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