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Is Telstra right this time?
Tony Phillips has worked as a broadcaster, a freelance journalist and as an academic in politics, history and public policy. His last piece for Webdiary was Workchoices under fire.
by Tony Phillips
Telstra spinner, the unfortunately American accented Phil Burgess, has been all over the airwaves today defending Telstra’s decision not to spend $4 billion providing fibre to the node infrastructure. To the non tech savvy let me say simply that this infrastructure would have allowed an easy doubling or even tripling of broadband speed for average users of the internet, and would be of massive benefit to speeding up the global net’s access to Australia. For Australian companies that work or sell across the internet, where people increasingly just won’t wait, the lack of speed is a big problem. As the spinmiester pointed out, the productivity gains flowing to the United States from the internet in the last decade dwarf the figures for the rest of the 20th century. Australia, the less and less clever country, is now on the way to being the slower and slower country as well.
The debates I heard, leaving aside the more Neanderthal kneejerk anti-americanism/ dinkee di Aussie patriotism provided by the otherwise right wing pundits at the bottom of the barrel, see-sawed around Telstra as the big baddie with big prices on the one hand versus Telstra as home to Mum and Dad shareholders on the other. Shareholders who shouldn’t be forced, through imposed price regulation, to donate their capital to the profits of the overseas multinationals that are Telstra’s competitors. On the whole I find myself more or less in agreement with the Telstra position.
However what is being lost in this debate, stuck at the "for or against Telstra" level, is that all this is a shambles resulting from the appalling telecommunications policy of the Federal government. While the ALP should wear some of the blame for poor policy on new technology and media in the early 1990s the mobile phone and internet revolutions are really post 1996 products. Thus most of the blame goes to John Howard’s hacks. Though one could note the public service and its poor advice may be also be counted a major player. After all John took at least a little while to reduce the public service to functionaries who only told ministers what they might want to hear.
The privatisation of Telstra was both an ideological flagship for the Liberal party and also a convenient way to give some big financial gifts to their friends at the big end of town. Now the big end of town isn’t so happy (though let’s face it they always want more) and those wallies that bought the shares aren’t so happy either.
Telstra was a publicly owned monopoly providing telecommunications infrastructure to Australia. Public ownership softened its monopoly status: its profits flowed back to the Australian people and its community service obligations served to provide a level of equality of access across the nation. However, at the very time that telco infrastructure was to become more valuable and important than it ever had been, the government, making a series of unsubstantiated and ideological claims about efficiency and the merits of competition, decided to privatise it.
Due to political difficulties and economic realities they were unable to privatise it all in one go and still own just over 50% of it. However, they did not break it up into competing companies but rather left its monopoly hold on infrastructure intact. From the point of view of neo-liberal economics this was heresy but presumably the bigger share price to be obtained by keeping Telstra intact had over-riding appeal. At the same time, in order to both be fair to, and appeal to, private shareholders, the Howard government freed Telstra (indeed legally obliged it) to be precisely a normal capitalist company, despite its majority government ownership. This of course means that Telstra’s management have a duty to protect the company’s interests from competitors, and maximise both its market share and its profits. This hardly makes it likely they will consent to being told to supply capital goods to competitors at below cost. Their mission is to destroy their competition not finance it.
Because Telstra is so big, and owns so much of the infrastructure, the only way to create "competition" has been by price regulation and other punitive measures imposed by government. Now Telstra has had enough. It says it shouldn’t have to provide services to its competitors at under the cost of creating them just so the competitors can re-sell them to consumers at a slightly lower price. By forcing it to do so the government has created an illusion of competition but all that’s really happening is Telstra is being forced to subsidise a stage set pretension of competition. The winners in this play acting are its competitors, who get to make handsome, government guaranteed (and thus taxpayer and Telstra shareholder subsidised), profits for merely acting as agents for Telstra services.
For some reason this message is not getting through, the magical word competition, plus the common mentality of demanding price controls and services for nothing, is trumping it. Perhaps what is happening can be made clear by example.
Say it’s the 19th century and private company X puts a railroad through from town A to town B. They can run 100 trips a day and figure they need a minimum of $15 a trip as a return on their expenses for setting up the track and keeping it going. However, the government says this rail line is a monopoly and demands that they sell 30 trips a day at $10 a trip to rival railroad companies, even though these companies own neither trains nor track, just ticket offices. The other companies go on to sell the tickets for $14 a pop. Company X is now down $150 a day on needed revenue and needs to get it by either putting up prices on the seats it still has or from elsewhere in its business. The other companies are $120 better off between them. Consumers save a dollar per trip. Telstra, not surprisingly, says it is no longer willing to be company X, it would rather let the railroad rust.
Under the present conditions, determined by a government indulging an ideological fantasy of privatisation, the Australian economy is likely to continue suffering a major brake on its productivity. There is an answer but it will never be embraced by this government because it would involve a "we were wrong" and they never do those. This answer was suggested this morning by, of all people, a stockbroker on ABC local radio 774. That the government could just accept that telecommunications and the internet were a vital national infrastructure (in other words a public good) and re-nationalise Telstra.
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A Country bereft of Truth.
When the "Howard" Liberals begin their diversions at a greater than normal rate, one can be sure they are hiding the truth yet again.
The current saga concerning Telstra reminds me of an article I wrote for the Canberra Times HYS on 12 September 2005 viz:
"COMMENT to Come of [sic] it Barnaby. (id=104040)
Howard doesn't want to sell Telstra until 2006 to fit in his agenda - so time is on his side and his patrons.
He will encourage the lowering of value of Telstra shares and, when Mums and Dads bail out to minimise their losses, it will increasingly provide for a "fire sale" to big business and foreign interests.
This "fire sale" and transfer to foreign ownership, will raise share value to perhaps four to five dollars and he will claim he did well by our taxpayers!! Fair dinkum.
And YOU Barnaby (and Fiona) will DO AS YOU'RE TOLD.
Just 15 minutes of fame - but a lifetime of Shame."
Subsequently I wrote these excerpts on 14 October 2005:id=106470):
Perhaps people contacting Senator Barnaby Joyce could achieve something in favour of an "independent" voice - but I seriously doubt it. And... With respect to Barnaby, I said from the outset that it is easy to "talk the talk" but you prove your point if you are prepared to "walk the walk".
However, the case here deserves some reasoning in that Barnaby DID break his word to the people who elected him after "extracting" (his word) a bribe from Howard for the sale of Telstra. This means, as the respectable Tony Windsor opined, "the Nationals not only offer bribes - they take them". Barnaby betrayed his constituents on an issue of extreme importance to them. Remember Howard's cavalier attitude to one of his sycophants "rocking the boat"? And then (Added - about his crossing the floor on an unimportant ACCC issue allegedly for small businesses)
"No Sir - he has NOT gained ANY credibility from me for doing what hundreds have done before him - and on an issue of such obscure value. The "appearance" of a "rogue conservative" would suit Howard's minders very well in their manipulation of our people's opinions. It would not only give the impression of a decent "keep the bastards honest" Senator, but would be intended to make many people believe that, whatever Barnaby Joyce agrees to in the future, MUST BE OK? And the Senate is not a "rubber stamp"? Fair dinkum.
No Chris old friend - IF Barnaby Joyce, or any other conservative, votes against the "White Coolie" legislation, (which is the most evil and debilitating ever to even be considered, let alone drafted) and that conservative does it continuously - THEN I will say that he is indeed an Independent in the mode of the Ancient Greeks and Romans".
NE OUBLIE.
What a character is Howard.
Howard is quoted in the press thus: "Governments are bad at running businesses," he said, "Governments have no business running major corporations." Fair dinkum.
The "Howard" Liberals have ALWAYS boasted that they runAustralia
They have never done anything that has not been mostly to benefit the corporations and the very wealthy.
He is performing with Telstra as if he was still dealing from his father's corner store.
He managed to get the mandate to sell Telstra against the wishes of the majority of Australians, with the help of Barnaby breaking his promise to his constituents, for a massive "slush fund" bribe.
Now Howard wants to pad that even more at the expense of the mums and dads that he has betrayed so often.
Government of Businesses for Businesses.
A few questions about Howard's statement that Business is not Government's business.
I agree most heartedly that his government's attempts to run our country as a business has failed miserably, but that's because none of them has been successful in anything - 18 of his front bench are failed lawyers.
It is typical that the "Howard" Liberals have come out blaming the State Labor governments for the under-achieving in a Federal Liberal debt based "prosperity". Will we ever hear the last lie from this person and his conga-line of sycophants? IF the State Labor governments are responsible for the faltering economy then, by logic, they must have had a lot to do with Howard's claimed prosperity? And employment? Surely they can't have it both ways.
It is also symptomatic of a government in panic when "Howard's" Liberals start offering Australian taxpayer's funds as "cash incentives". There was the 30% support for the people who enter into private health funds which then, immediately raised their costs by the same amount.
There was the $7,000 "debt launcher" for the housing industry which, with his other mismanagements, will mean a lot of Australians who foolishly trusted him will now find themselves losing whatever THEY have put into the unsustainable result of that bribe.
Let's not forget the "up to" $2,000 that Howard offers those who want to change to LPG. But he cannot advise HOW it will be administered (and by what private company); when the "people" will receive the taxpayers' money; how they will "police" the "beneficiaries" or the stations who provide LPG? And WHO will issue licences to the eventual temporary explosion of people to "fit the dangerous tanks"?
Then he has to admit that the so-called "record" unemployment figures are really another Howardistic con by the massive rates of unemployment in certain areas (and underemployment in the employment figures). So Howard's answer with "on the run" politics, offers $5,000 of taxpayer's funds to "eligible" people who are willing to leave their homes, family, friends and their environment to travel the breadth of our nation, to hopefully be able to find employment and a place to rent.
Of course the Liberals haven't thought it through, but it suited their purpose as a diversion at the time - they'll do a "Scarlet O'Hara" and think about it tomorrow - and then blame Labor for it anyway.
And now "Howard's" Liberals are stating that there will be some financial "incentive" for the mums and dads who may still have some of their savings left after Howard's disastrous T2, to throw away on T3. Thanks to the liar Barnaby Joyce.
Just another way to make our people poorer in every possible way.
There is no TRUTH - only the powers that be
Firstly, the continued ambiguity of Howard's place in the Federal Liberal government is frustrating to say the least. How many times has he said "I dismiss that", "I will not tolerate that", "I will consider that", "I, I, I" ad infinitum.
Then, the about face (he is not two faced otherwise he would not be wearing the one he is) when he says that "I will stay as long as my colleagues want me", "I was not informed", "I was not involved", "I knew nothing" etc. And, approaching an election, "the people".
In the former he implies that he is unaccountable for anything, any group or any electorate. In the latter he implies that he is just a figure-head. And he loudly defends the Ministers, Departments and Public Servants who have "ignored" him. Fair dinkum.
Mark Latham said it all - "How does Howard get away with it?"
Lets have a reality check - the media of course. Just a little thought and reasoning will enlighten those who really care.
Corporations are businesses. Businesses are in business to make money - making as much profit as the regulations (if any) will allow. This requires "salesmanship" of which, the biggest and most powerful of all, is the media.
Where their profit comes from is advertising, both commercial and now, with Howard's High Court Decision - political - which is paid for by taxpayer's funds.
To be profitable to the "advertisers", the media must help to "sell" their products or they lose their custom - therefore they have an incentive to "push" the product to the smaller "profit" supplier, the public, which buys the ultimate product, commercial or political.
"Costs should be as high as the market will bear" said "Ming the Merciless".
So, perhaps it MAY be alright to believe the media but only when people like Harvey Norman says that their retail services are blatant cons for the purpose of financial gain and a trap for young players.
Of course, when he said he would employ young people IF THEIR PARENTS PAY THEIR WAGES, he was doing the right thing by the Australian society - wasn't he?
Just imagine that you are a de-regulated business person when you go to buy some product which has been advertised in the media as "you cannot do without it" and consider what that person would really believe.
I simply raise the fact that we all know, in our heart of hearts, that the media advertising is not intended to be for the benefit of those who accept completely that which is advertised. It has a place in a commercial democratic society but, NOT POLITICS.
Menzies' benevolent dictator government was Salvation Army compared with this "New Order" Liberal government.
Indeed, the "Howard" Liberal government is creating a Corporation's Nation which will only benefit the Corporations themselves.
NE OUBLIE.
The Telstra i want to invest in.
Right.
But see i don't have shares in telstra.
But i'm thinking I might buy in.
And what would make me want to buy shares in Telstra?
If Telstra up graded the nods with optics.
Cause I want my network to work for me - not have it devoured in chunks at the neck.
All those copper wire sub networks?
Bo -ha -ha.
They just break down the signal in chunks.
Remember:
Cable TV is wired to virtually every home in North America
It took 20 years for that foundation to be laid mind you, but
My internet speed in Vancouver is great because it's cable based.
Its perfect for audio visual you see,
Its used for TV.
It can swallow signals whole.
The speed has only to be powered up,
Mind you, (those blackouts?)
Telstra cable, thats the answer!
Telstra fibre optic cable.
With Australian content
Cable TV, thats the answer.
It is a mistake that Telstra makes,
It really should invest in the nod upgrades.
An Octypuss does need its blood pumping brain.
To move its tenticles efficiently.
To feed.
I can't see how,
An Octypuss, with copper nods,
Joining its head with arms
works very well?
The signal Australia is sending out, is ultimately fragmented.
Audio Visual content in particular is fractured and delivered in chuncks.
This is really unacceptable to a North American consumer.
They demand smooth fast delievery,
Cause thats what they get with local content.
(They all have cable wiring.)
Our net work has this copper based nod system that just fractures the signal.
Like a bottle neck,
But right at the neck
Telstra, if it wants to survive, has to upgrade.
And then it simply re-gains the use of its tenticles again.
Information moves faster,
less frustration.
More satisfied customers.
Price war challenge
I have taken advantage of Telstra's woes. I suggest everyone else does too.
What I did was check with other service providers as to the prices on offer. I spoke to one ISP regarding leaving Telstra Bigpond and they could arrange it in 3 hours. I then made sure my Plan period had expired with Telstra and it had.
I was now in a position to negotiate a better deal with Telstra. I am on an unlimited plan at 512 mbs for $69.95 per month. As of the 1st of September I will be on 1500 mbs for the same price.
YeeHa! No need to change email address, no need to inform friends and businesses, no need to waste time on such tasks.
It was a 'kick 'em while their down' approach that has paid off. I know this has little to do with the topic but it does show that a consumer can play the same game as Telstra against it's competitors.
I'm not the sharpest tool in the shed so I fall back on what I have learnt over time in a variety of work positions. I am fortunate that I have been involved in purchasing but others may not have the skill to do as I have. So if you are with Telstra Bigpond do the same or if you know someone who is help them out with this tip.
As nationalistic as I am, I'm not a shareholder and don't care about them, nor do they care about me.
This is the nature of capitalism. If you have the smarts you can manage but if you don't you will be 'sucked in, chewed up and spat out'. It has taken me awhile to develop the will and the skill to fight for myself.
As Ronald Reagan used to say "One for the Kipper" this time, not John Howard, Sen. Coonan or that bloke Sol whats his name, ha ha ha.
Rob Banks
"There is no part of me that is not of the Gods"
Telstra profit dives $1BN
SMH view, or "at better end of guidance and transformation on target" (telstra view)
PS: for historic interest, my pieces from 2002 and 2001 on why I think Telstra should be broken up before selling it are here and here. (Latter is a .doc file, as the original was written in a subscription-only telecoms industry newsletter)
The Clayton's Privatisation
A good piece here from Tony Phillips. See also an excellent article on the subject by Kenneth Davidson in this morning’s Age.
There can never be any such thing as a deregulated economy. All we can ever have is selective deregulation, which is where economics a la Adam Smith and his successors bows out, and political economy takes over. Governments deregulate in favour of their key supporters (who turn out to be pretty much the same crowd for both Labor and Liberal) and regulate where it suits those supporters as well.
Telstra was subjected to a Clayton’s privatisation. (Clayton’s you will of course know well as the drink you have when you’re not drinking). The Clayton’s privatisation pushed a drugged and shackled giant called Telstra out into the arena where he now faces the other gladiators. A monstrous ball and chain called The Bush slows him down. And though he lands the odd blow on the odd adversary, the drug causes him to hit himself equally hard every time he does so.
Telstra was to be privatised in such a way as to generate massive funds for the Federal Government out of the pockets of Mum and Dad shareholders, produce dividends so bountiful as to keep those Mums and Dads ever grateful to the Liberal Party, and at the same time make its copper network available to any competitors who wanted to use it at a price which would keep those competitors happy and in business, thus providing ‘competition’ to keep Telstra on its toes. Most 5 year olds could probably see the deluded thought behind this, even if the ministers responsible preferred not to.
Under this arrangement, Optus and Vodafone were able to pick the eyes out of the market, moving into the capital cities and taking huge custom off Telstra, while leaving the bush to fend for itself. Telstra was forced to subsidise them, while at the same time maintaining the copper network throughout the bush. So it could never be a level playing field. (I for some reason have been plagued over the last year by landline calls from people with Indian accents offering me fantastic deals on mobile phone connection, which a few questions reveal to be based on buying bulk capacity at a discount on Telstra’s network. But they will never say how they got my number.)
It makes no sense to require all providers to roll out cabling to anyone who wants it anywhere in Australia. Yet that would be the ‘fair’ thing to do. It would force Telstra’s competitors to meet the real cost of the services they enjoy from Telstra at such a bargain price.
Alternately, the physical network (both copper and optical fibre) could be resumed by the Federal Government, and operated as a government instrumentality just as the roads are, but on a genuine user pays basis, leaving Telstra as a service provider, and with Optus, Vodafone and the Bombay bargain pushers forced to contribute their share of the real cost, along with Telstra. I suggest that they would all decamp pretty smartly.
(Disclosure: The computer I am typing this on is connected to the net at 21.6 kbps, with our local telephone exchange about 15 km away. Neighbours in the area are amazed at this fantastic speed over the phone lines from our place, having been forced by the lame snail’s pace of their connections to the more distant exchange in the local town to get into satellite connections. I also have access when interstate to a broadband connection, so am under no illusions on that score. I own a small parcel of Telstra shares, which are either going to drop through the floor or head for the stars, depending on how the government handles the competitor-friendly, Mum-and-Dad-thrashing ‘privatisation’ of the telco from here on.)