Telstra has been playing a high-risk strategy over tendering for the National Broadband Network, submitting a deliberate non-compliant tender which the government has now confirmed excludes it from the process. The brinkmansip game appears to have failed at the first hurdle, though the implication is that the government should reshape the tender process to its parameters after other bids are considered or face years of litigation. The inducement to the government to play the game Telstra’s way is the inevitable further delay of the construction of the NBN.
The share market hasn’t received Telstra’s strategy benignly, though, to understate the point, with 12% of its market value being wiped out yesterday.
But Telstra has one friend – “free market” thinktank the IPA. IPA Research Fellow Chris Berg writes:
Governments are going to have to step back from micro-managing the telecommunications sector. Market forces need to determine the shape of such a quickly developing industry, not regulators.
Apparently that translates into support for a quasi-monopoly keen to destroy its competitors, avoid structural separation and gouge its customers. Intriguing.
Elsewhere: Gary Sauer-Thompson and Paul Budde in New Matilda.
Update: Bernard Keane in Crikey.
Update: Peter Martin on Telstra’s “war on everything”.
Elsewhere: Gary Sauer-Thompson and Paul Budde in New Matilda.
You gotta love it when Telstra get shafted. May they choke on their arrogance.
Serves ‘em bloodsy right.
Update: Bernard Keane in Crikey.
Have you even read Chris Berg’s piece? If so, you’d know that he is not a ‘director’ nor does he condone ‘a quasi-monopoly keen to destroy its competitors’ – rather he condemns a regulatory model that has failed to deliver a competitive telco industry. My fave quote is
I could be wrong, but November 2008 was last month.
Forgiveness begged for the typo – fixed to “research fellow”.
But, yes, I’ve read the piece. Aside from reciting the same talking points as Nick Minchin – small business, how unimportant (bizarre from the Liberals) – what’s Berg arguing for? Deregulation. How’s that to be reconciled with competition? The only possible upshot of his article is that Telstra should be allowed to do exactly as it wants.
“I could be wrong, but November 2008 was last month.”
No, that’s the part you got right.
Update: Peter Martin on Telstra’s “war on everything”.
To put it more bluntly – either Berg has no position on what ought to occur and is merely taking ideological potshots at “regulation” or he believes that deregulation should occur (strongly implied by the conclusion about “market forces”). Berg surely understands that “market forces” in this context means that the biggest player elbows its rivals aside and further approaches a monopoly.
So at a practical level, “free market” thinkers advocate a policy direction which sacrifices competition to the self-interest of the biggest market player. I’m unable to see any other logical implication from Berg’s argument.
Please do correct me if I’m wrong.
Who else would have the arrogance to submit an 8-page response to a tender worth $4.5bn?
It’s actually a good thing that the NBN is going nowhere.
The sad reality is that the internet is not mainly high minded stuff like LP. It is mainly porn and games. Do we need to spend billions of dollars to get high speed broadband just so people can watch porn in HD? I think not.
But Spiros, it’s also commerce (in capital letters with bells and whistles attached), and that of course is its importance, to governments, anyway. The fact that much of the commerce is also porn is neither here nor there.
Mark, I think if you read the piece again, then you would realise I’m arguing for a regulatory framework that encourages investment, not just for some vague, amorphous “deregulation”.
Admittedly I didn’t include an itemised, fully-costed, 10-step plan to a more liberal telco marketplace in the 700 words I was given. But that absence doesn’t necessary imply that I’m pro-monopoly – the point of the piece is to say that a) the 11-year-old regulatory device used to inject competition into the industry has failed to do what it says on the box, b) that device has created a gigantic web of opposing interests that is almost impossible to untangle, and c) the Rudd government’s hope that it could just buy its way out of that mess was wrong.
So the government needs to focus not on building a broadband network, but on regulatory reform which allows private firms to do so. I maintain that reform should be in the direction of allowing market forces to determine the shape of new networks and products. If you have a way to do this without reinstituting some degree of private control over existent and future networks, then I’m all ears.
But I guess that argument doesn’t have your catchy narrative of dastardly companies gouging customers and destroying their competitors.
The NBN was always supposed to be an end-run around the missed opportunity of breaking up Telstra along infrastructure/business lines way back when it was privatised. That Telstra bleated the breakup was unfeasible should have been a big indicator that it was necessary.
Even in my tiny corner of the world, we hold out hope that greater and better access to the internet will help our clients in real, practical and tangible ways: many of them still suffer with dial-up access (and *really crappy* dial up it is too for a lot of them). This limits our ability to service these people. I would imagine we are far from alone.
It isn’t just “pr0n and games” – it’s a host of things (banking is one thing that immediately comes to mind). With enough bandwidth, suddenly you can run multiple telephones on different numbers with a cheap Asterisk server and VOIP providers. You can circumvent the closed shop TV infrastructure. If you’re running a small business like most farmers, you can better service your own clients in turn. You can research products you need, you can market products you provide.
I don’t think anybody realises just what a massive handbrake on the economy that Telstra is. The combination of over-charging and under-investment represents real opportunity cost for a large section of the community (and not just in the bush).
Telstra should shut their whining gobs and build another network if they think they can compete with the public NBN tender. That’s competition, innit?
That’s extremely vague, Chris, and surely as the person advocating such a position, the onus is on you to fill in the detail or even describe what sort of regulatory architecture would achieve such an aim, rather than pass the ball to others.
Extra ! Extra! read all about it!
http://www.news.com.au/heraldsun/story/0,21985,22182719-5012062,00.html
“TELSTRA poured $165,000 into a supposedly independent think tank that tailored its output to favour the telco’s interests, a book has revealed.
In his award-winning book about Australia’s public relations industry, Inside Spin: The Dark Underbelly of the PR Industry, investigative journalist Bob Burton reveals how in February 2004 the Senate representative of communications minister Rod Kemp admitted that Telstra, then majority government owned, had funded the Institute of Public Affairs (IPA) more than $165,000 over the previous five years.”
You can’t hide from Google.
Mark wrote:
That’s asking a bit much for a “cash for comment” organisation like the IPA Mark – they’re paid to obfuscate, not illuminate (thanks spiros for reminding us).
Mark, briefly, in my view the first step would be to make the use of the Telstra network marginally less attractive than using already-built networks of competitors. This has been the fault of the ACCC, but would likely require legislative change to fix. Henry Ergas has written a book about the ACCC’s systematic underpricing of telco access and its conflict of interest problems in this area.
The second step would be likely to give either an access holiday, excuse future networks from access requirements, or at the very least provide some sort of assurance that the network will be able to recover the investment put into it.
None of these measures is without winners and losers. But the point is to set up the industry for technological advances in the next few decades, not just fumble through an NBN in the short term.
Good work Spiros, you can use a search engine. Its always a bit odd to be told that I don’t actually believe the things I believe.
Yes, the IPA would be rather more believable if it was honest about who paid the bils.
Chris, I’m sure you believe it. Just so long as everyone understands, as the Telstra spokesman put it
“Telstra makes no apology for supporting organisations that we believe advance our interests.”
“Its always a bit odd to be told that I don’t actually believe the things I believe.”
There’s a missing ingredient required to turn believing something into having others believe you. It’s called credibility. Sincerity is only a small part of it.
Telstra also gives money to the Ballet and WWF – damn sell-outs.
“Telstra also gives money to the Ballet and WWF – damn sell-outs.”
Not to provide ‘independent’ opinions. Trust you can spot the difference.
“Telstra also gives money to the Ballet and WWF – damn sell-outs.”
Do the Ballet and WWF publish opinion pieces on the regulation of Telstra?
Thanks for putting it in perspective Sinclair – it’s advertising with a different gloss. The ballet players prance about on stage performing various fictions and Telstra hope the feel-goods will rub off on their brand. The IPA has now been properly categorised by the people who work there.
Telstra also gve money to the government who provide regulation.
Independent of whom? I have no doubt that Chris holds the opinions he published under his own name.
No doubt Chris Berg holds those opinions – also the reason why I never ask a ballet dancer which phone company I should be using.
You could ask her what phone company she uses.
The Australian Ballet, like Telstra, is a near monopolist in its market, so no wonder Telstra feels an attraction.
Sinclair Davidson wrote:
Nah. Easier to ring up Sol Trujillo and ask him directly. While I’m on the phone, I’ll ask him what his preferred telecoms policy looks like and cut out all the middle men
Incidentally, Stephen Conroy will be on the 7 30 Report tonight talking about the NBN tender.
I think a Telstar sized Bell telephone company in the 1960’s was why the US then invoked anti-trust to create the Baby-Bells. Now if they’d only kept on using anti-trust against these ‘ too-big-to-fail ‘ behemoths…
The govt would be wise to hasten-slowly on this imo. Look how much cheaper tech-gear is today than it was a few years ago. One of the most ergonomic ideas I’ve seen was was for Global Hawk style unmanned planes to deliver wireless over cities. But finally for my 2c I do prefer market-solutions in general. Its just that when markets create monopolies – that’s when you need anti-trust.
Market forces–under the guise of either ignorance or wishful thinking–have seen such elaborate corporate brilliances as the market of Iraq witnessing $79,000 of labour creating a $7.1 million bill.
When we have a generation–who believe such outcomes are fair spoils to organisations that exist on the AGREED NO ACCOUNTABILITY–ie shareholders are the last paid in any default–then we have a population that is so deluded that perhaps invasion by another land is perhaps the reward they would be better supporting.
FREE TRADE and FREE MARKETS is just mercantilism parading as “high tech’–and finacial wizardry is as complicated as the honesty behind it.
Nothing more and nothing less.
The FTTH network is as complicated as digging a hole.