There’s lots of commentary in the mainstream media and in the blogosphere about the government’s broadband plan – in essence, they’re going to throw money at the bush; the towns will get fibre to the node, rural areas will get WiMAX wireless broadband, and the back of Bourke will soldier on as before. Meanwhile, a committee will be set up to decide who gets the rights to build the same network in the cities, and under what terms they will have to share it. In other words, the tough decisions will wait until after the election. Sound familiar?
If you want economic commentary, you could do a lot worse than Joshua Gans’s series of posts on the matter, or Peter Martin, who notes that the government has finally stood up to Telstra. But what has been largely missed in all of this was that the seeds of these problems were sowed years ago, when a series of decisions were made that resulted in Telstra becoming the rapacious private monopoly it is today.
Martin argues that the first bad decision was made on the behest of Kim Beazley back in 1990:
If so, the government has done us all a favour. Telstra’s present behaviour can arguably be traced back to a Cabinet win by Kim Beazley, Communications Minister in the Hawke government in 1990 who pushed for the creation of a “megacom� made up of Telecom Australia and the previously separate Overseas Telecommunications Corporation. The Treasury and the Treasurer Paul Keating condemned the move and wanted the OTC to form the nucleus of a competitor that would stand up to Telstra.
Beazley won and the megacom has thrown around its weight ever since.
There’s something to that, but I’d have to assign much more of the blame to the current government when it privatized Telstra as-is, leaving it as a private monopoly supplier of local access to its competitors. It wasn’t like the problem was unknown at the time. Shadow Communications Minister back in 2002, Lindsay Tanner, released a discussion paper canvassing the option of splitting Telstra up, along either a wholesale-retail split or along geographical lines. While this was problematic both technically and politcially (at the time, Quiggin argued for renationalization and a sell-off of non-core activities; the telco unions were implacably opposed), the fact is that anybody with half a brain, including Labor, knew that leaving Telstra intact and completely privatising it would result in Telstra seeking to use its monopoly local network to screw everybody else – the worst of all worlds.
So what did the government do? Privatised Telstra, leaving it intact, to maximise the value it got for its shares. And thus we’ve had the past few years of stalemate between a company trying to leverage its monopoly position, the ACCC trying to protect competition and prevent Telstra screwing the rest of us, and a government caught between Telstra shareholders and telecommunications users.
For a bit or informed perspective, I recommend Roger Clarke’s 2004 Origins and Nature of the Internet in Australia.
A sample:
To be fair, they were before privatisation, a rapacious public monopoly. I remember before privatisation how long and hard it was to get a phone line installed, with no compensation if they just didn’t turn up for appointments.
But I do agree they should have been split up separately with the infrastructure component at least in a separate company if not retained in public ownership.
I wish they had retained the infrastructure. Lease it out to whoever wants it with conditions on minimum utilisation levels to prevent monopolist buying leases for the sake of preventing competition from using them. We would have had the best of both worlds. Even now if we were smart we could build a fibre to the home network in the major cities based on this model.
The biggest criticism that could be made of the Howard government is that it is all politics all the time. Is it too much to ask that someone in the PM’s office make a decision based on the long term national interest once in a while? at least on something as important as broadband. Imagine how far behind our Asian neighbours we’ll be on broadband, higher education etc in 2017 if the next ten years are managed as badly as the decade.
God this post is so right. Really the blame has to be sheeted home to the intolerable Nick Minchin, who was always obsessed with getting as much cash out of the Telstra sale as possible. Unfortunately, the real neo-liberals lost on this one and we now have the worst possible industry structure. Telecommunications has to be one of the biggest single policy failures of this Government, if only because the right approach was obvious to anyone with the slightest degree of economic literacy.
BBB
Fair call.
Did anyone see our Kerry O’Brien interviewing Helen Coonan on the 7:30 report this week? They both sounded completely out of their depth on the discussion. My fear is that the I.T. experts are right in saying the whole ‘fibre to the node’ thing is already outdated, and we need to move to the next level.
But what’s truly appalling is that the government’s incompetence on this continues. The WiMAX model pushed by Optus & its bedfellows is, technically, a bloody joke. It operates in the public frequency range, yes in the same frequency range as your microwave oven or remote garage door. It will not be portable – you will have to create a wireless system in your home by using a wireless router at the point of connection. It is not secured, its download capacities are very wobbly, & it will not be compatible with the new generation of WiMAX protocols already appearing in newly shipped hardware.
For anyone in government to believe they can crow about this decision – well, I’m frankly speechless. We are about to be lumbered with an outdated untried irrelevant broadband scheme for non-urban Aust – right that’s it, where the hell are the tin cans & string?
Bernice, are you sure? You can use WiMAX in unregulated public frequencies, but as I understood it telcos were going to buy pieces of spectrum for their WiMAX services just like they do for mobile networks.
A-b-s-o-l-u-t-e-l-y sure. At least as regards the Optus proposal. Austar & other WiMAX users have bought spectrum, but its gunna be toytown for the Optus/Howard vision thing. Or complete lack thereof. As I said, speechless. & pity on anyone out there who gets conned by this… or maybe they’re just hoping that whoever is silly enough to sign up for Optus Woeful WiMAX doesn’t live anywhere near other humans with microwave technology..
The mystifying thing here is how wimax can be seen as a legitimate long term substitute for fibre.
While Moore’s law has “taken care” of the fibre speeds (ie same basic fibre, but faster and faster speeds In fact fibre has increased 200 fold in 10 years), wireless has not (to date) increased at the same rate and importantly has never even been close to fibre speeds. Cables may be annoying but they are still the fastest!
Someone rightly pointed out that by the time we deliver these new technologies, then we risk them already being redundant. I am on Telstra cable (15mbit) and can’t get ADSL II. I want (neigh, I DEMAND) the highest speed possible and I’m prepared to pay it. More more more! Wimax will offer 12Mps max. TOO SLOW already! Add to that the line that Telstra use when mobiles drop out “anything wireless is not a guaranteed service…” (only land lines have a service guarantee) and the bush folk will feel very short changed.
I think the sooner we recognise that state-of-the-art telecommunications infrastructure is as important as roads and schools, then the sooner we may realise that the government needs to build it and lease it back to the “competing” companies. Parallel networks will be overkill and expensive (we will all be paying for their overspend) and it is ridiculous to have company like Telstra build FTTN and then force them to lease it to the likes of Dodo who contribute nothing other than appalling technical support (and cheap prices).
But we are talking about a minister who doesn’t know a megabit from a megabyte, and please don’t get me started on Richard Alston’s “competence”. (on a side issue I had a friend who was a ministerial adviser to a state gov’t IT minister who
Here’s a suggestion for both parties- get a superstar candidate from a web 2.0 company and make them the minister…?
Tom
whoops deleted the story:
on a side issue I had a friend who was a ministerial adviser to a state gov’t IT minister who had “insulted” the opposition minister by saying “he can’t even logon to the internet!”. My friend asked him if he had any idea that saying such things made him look cosmically stupid.
He did not.
Too true. God knows what would have happened if there’s been this much bleating about the ‘impracticality’ of running out firbre networks when the telephone was introduced: “What are ya gonna use it for? All ya gonna do is yap.”
This is basic bloody infrastructure for crying out loud.
*head explodes*
Actually, I was interested to read earlier this year that when the telephone was first introduced in London, people couldn’t figure out what to use it for. One use was listening to sermons and concerts via phone receiver. It was also used to speed up messenger services. But it took quite some time for people to figure out they could use it to yap to each other.
Yep & papers like SMH keep running ed & cartoons portraying demands for something approaching a second world broadband network as nothing other than middle class welfare for the cyber dependent. Which I suppose goes a LOOOONG way to explain why print journalism has falling revenue & as much idea about its future in this brave new world as Peter Costello will after the next election…
I have a copper landline. On the end is a telephone. I have a PC. It uses the phone line. It cannot access broadband. Wireless modem doesn’t work. Fibre could be my landline. Rudd would make it so. Howard says I can have wireless. Is this too simple? I’m not at the back’o'Burke. Just three hours from Melb.in country where those conned into using next G call the service next t’useless!
Mark,
The more interesting thing is that only 30 yers ago, when I startd work, that a phone line was only used for voice communication.
It is impossible to have even imagined the depth and breadth of the communications revloution that has occurred since then.
The lesson is that new technology is not about doing what you do better, it is about creating opportunities to do new things that you never imagined were possible.
100 years ago people had no idea or desire to talk to people on a device.
Though I’m not sure I like your tone young man, Alan Kohler has an interesting piece in today’s SMH. Mr Kohler suggests that the very fact that because the winning Optus SingTel does not own WiMAX spectrum, this will force them to have to negotiate with Austar/Wireless who of course do own a chunk. If they wish to offer full mobility at 802.16e.
& of course poor old Telstra having lost its place at the trough will have to use its OWN money to roll out its version of ADSL 2 . As well as having to decide whether to even bid for the right to build the urban based fibre network.
And yet yet there’s still that little unanswered question about governmental decisions regarding all this when our yes OUR Future Fund owns a bloody big chunk of Telstra…
& can someone tell the SMH that its getting very tiresome to keep reading their journalists insisting that all this bleeting about speed is simply so we can download Britney’s latest rehab moments from Youtube. I believe that dirty word productivity comes into play here chaps. Productivity. Ah yes productivity that is now good when low because it means we hire more unskilled workers. Silly me. Obviously bring back dial-up. No wait – telegram boys – bicycles – yellow envelopes – can we make them wear the peaked caps?
Bernice,
The comment you are about to read is OT, with apologies.
You’ve missed the point about productivity entirely. Low productivity is never good. However, low productivity growth over time can be explained by growth over time in the employment rate of low-skilled workers. This is just common sense. Labour productivity is really just GDP per hour worked.
For example, if we immediately sacked the one million least productive workers in this country, it would be a disaster. And yet labour productivity would skyrocket.
Rudd may be in for a real hiding on productivity. There are only so many low-skilled workers to hire. Once the unemployment rate stabilises and the significant level of business investment begins to fuel increases in output, productivity growth could move above its long-term average. Not to mention the possible breaking of the drought (here’s hoping).
Cheers
BBB
Not sure BBB that we are singing from a different page – what I object to is the smiley spin presented by ministers that capital productivity somehow matters not as regards measuring productivity & only labour participation rates do.
But let me quote Saul Eslake:
“whereas Australia’s productivity fell from almost 180% of the OECD average in 1950 to less than 88% of the OECD average in 1990 – with the inevitable result that our standard of living (as measured by per capita GDP) slipped from 6th among OECD countries to 19th over the same period – between 1990 and 1999 our productivity rose to almost 95% of the OECD average, which in turn helped to lift our standard of living back to 10th among our OECD peer group.
According to the University of Groningen database, Australian productivity growth between 2000 and 2005 averaged just 1.5% per annum, below the OECD average of 1.8%. As a proportion of the OECD average, the level of Australian productivity has slipped back to 90.6%. As a percentage of the level of productivity in the US (often regarded as ‘best practice’), Australia’s productivity has fallen from a peak of 86% in 1998 to 79% in 2005, the lowest since 1990. The only reason Australia’s standard of living has continued to improve relative to our OECD peers this decade – to 8th in 2005 – has been the improvement in our ‘terms of trade’ driven by the effect China is having on the prices of our mineral and energy commodity exports.
Sadly, the Government appears to have ‘given up’ on the objective of regaining the productivity growth rate achieved during the 1990s. In the Mid-Year Economic and Fiscal Outlook released in the week before Christmas, the Treasury’s projections for economic growth in 2008-09 and beyond were quietly revised down by one-quarter of a percentage point to 3% per annum, just six months after the 2008-09 projection was revised down from 3½% to 3¼% in the May Budget Papers on account of the expected impact of population ageing on labour force participation.
The most recent downward revision was explained in the MYEFO papers as being to ‘reflect Australia’s long-run average productivity growth rate of 1¾%’, without further elaboration.
So there you have it – the ‘productivity revolution’ is officially over. And so too, inevitably, is the recovery in Australia’s standard of living relative to that of other industrialized economies, even though for the time being that is being disguised by the strength in mineral and energy commodity prices.”
So I’m not quite so sure that Rudd has stepped in something he’d rather not wipe on the carpet. & its an area where ICT is one of the most important avenues we have to weather the likely effects of resources prices beginning to fall. Such as nickel which has headed south by 10% since the beginning of the year.
Thanks for that link on productivity, Bernice. It’s worth a separate post.
My memory takes me back to Grassdale not far from Merino in Victoria,where my dear mum,now long gone,handled the work as rail station mistress and telephone exchange personnel. That was 49 years ago approx. and I remember her doing the telephoney and sending the older sister in to do it too. You will not find these places anymore on a relevant map of population.Please,and I know this sounds awkward,be Australian..and do not pretend to have the last say..practice your opinion,because right now there are so many failing opinions that simply are exercises of computer literacy. I was shocked recently that welders were considered highly skilled..they are..in comparison to my experience with welding devices… If someone goes on about sacking the lowly skilled in a hurry the same person simply wouldnt survive.This endless shot at low skilled in terms of language appreciation is the dramatic downfall of the so called Left..if they find themselves in the sin bin with the trade and blue collar set,the non-qualified in anything brigades,be warned I know how to use a computer in a limited sense. And it really is probable that the keyboard is holding back all those not yet fully engaged in computer use. The history of the present keyboard was built on the basis of slowing down the message typable into the typewriter,previous typewriters with different keys for letters were simple and quick to use..alas the other parts of the typewriter couldnt handle the speed. As a corollary,if that is correct spelling,the broadband argument is just one of many within the technology in use debates that have been completely stalled by making decisions.The cities of Australia should be definitely well served,but why would anyone decide they have to hold back a service to people you dont know on the basis of the ,any number of contentions to do so that are expressed here in part or full. Stranger danger,amongst the citified!? I dont think Australians are being well served and the country is obviously part of that. I cannot guess as yet,what will fail with the Liberals latest decision,I can say Telstra bills frighten me regularly,and the nostrums of who receives welfare also,given the marketplace can only operate intelligently to its own requirements,be it telecommunications or labor as a market of skills.Both do not present themselves with the obvious needs of humans without many difficulties. I personally cannot accept copper wire has reached its full potential and that it couldnt be more directly linked to fibre. Its crazy here! I have out of my window on this farm a view of where glass fibre has been placed,whilst my exchange quickened service isnt connected to the disadvantaged primary school use.As a adult,I suffer the slow and costly copper wires,whilst the kids and their parents have the fastest at the school at least,and cannot to their homes outside the five kilometre zone. Gee! Why dont they just build another telephone exchange equivalent,and experiment with electrons as light,and light as electrons!?
Interesting comment about why Australia lacks unlimited internet plans