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Taking a dump on the public: the Telstra Fiasco

Tony Phillips is a regular Webdiarist. His last piece was How do we tell if there was a serious bomb plot? His last Telstra piece was Is Telstra right this time?

Last Friday, after months and months of coy will we, won’t we, games, the Federal government announced that it would indeed proceed to sell off more of Telstra. Not the full 51.8%, just about $8 billion worth. The rest would be parked in the quaintly named Future Fund. Apparently the latter is a place where you put taxpayers’ money in preference to investing in the nation or returning it to them as currently surplus to requirements. But this is a whole other world of wonderland. What about Telstra?

I’m not going to pretend to know the definitive reasons why this is taking place. I would note a couple of salient features though.

One, it’s not going to maximise the taxpayers returns on their asset since the price is low, it will however give government revenue another injection, which is always handy going into an election year.

Two, the window to sell off Telstra irrevocably is closing. Finance Minister Nick Minchin admitted on the weekend it would be difficult to sell Telstra in 2007, an election year. After the election the government, if it is returned, may no longer have the Senate. The bill to sell Telstra is already passed but lack of Senate control could make life difficult. More importantly the government might not be in government. Prices for Telstra shares are so cheap it could conceivably be re-nationalised (by Kim Beazley? Don’t think so) or perhaps broken into the more reasonable components of retail (private) and wholesale (state owned) arms. If you are ideologically committed to the sale of Telstra you really have to go now. However, that only $8 billion is going on the block is an admission that this is bad business on the part of the government.

Overall this is thus perhaps a case of electoral pragmatism, or ideological rigidity, or a combination of both. Regardless it’s ugly politics and even poorer policy. Which brings us to policy.

Currently good telecommunications policy would be about things such as: maintaining and intensifying competition where possible; extending and improving the range of services available as quickly as possible and; balancing the demands of international competitiveness with concerns of equity and level playing fields within Australia. It once would also have been about projecting Australia as an international frontrunner in this new and booming industry; however that prospect died with the competition and privatisation policies Howard introduced. It’s been dealt a bit of further corpse mutilation via the new media laws that ban developments such as internet TV. Australia’s telco and media market is now rather a source of profits for overseas investors. (Note that T3 shares will be available to overseas investors, though they may find it strategic to wait until the price drops further.)

Current government policy, especially including this sell off, addresses none of the above policy concerns. For a start the hindering of information flows is likely to get worse rather than better. Telstra will be even more emboldened and beholden (to its shareholders) to dig its heels in over infrastructure investment.

There is a political win for the government here, in that a hobbled internet plays into the hands of Australia’s existing media and entertainment companies. They see a faster and faster internet as a threat to their market. Living their lives largely behind the protection of government regulation, and offered new opportunities for profits with the changes to media laws, they must be cock-a-hoop with the government blundering in this area. Howard will be hoping they remember to be grateful in the run-up to the next election.

The sell off is also a win for Telstra’s management since it does set them even freer from government control. In that sense Telstra boss Sol and PM Johnny are batting for the same team. Sol wants to tell the government where to go and Johnny doesn’t want responsibility for telecommunications.

But what about the regulator you say, aren’t things now more straightforward, no more conflicts of interest? The government regulates and private business competes, all in the government sanctioned arena. Oh for such an economic model simple world. Telstra is a big, big player. Even regulated it has been able to beat up its competition pretty regularly. Moreover, as I noted in my last piece on Telstra it’s often not in a competitive market relation with them, rather it is forced to support their existence and subsidise country users as well. In a free market Telstra would eat its competitors before lunch.

What changes now, with Telstra right out there as a private company, is that it starts really playing politics as well. Just like it has been only much more so. It starts lobbying, advertising, supporting “internet consumer groups”, and commissioning reports that support policy and regulation it would like implemented. Expect to see (or not) the odd political donation as well. Like the fossil fuel lobby has already done so successfully in its area, Telstra can set out to capture the relevant ministers and departments. And now it can do so without the politicians being accused of a conflict of interest. They can just act in the interest of Telstra while Telstra supplies a script to the public that this is in the national interest.

Oh, and if I was advising the Telstra manager Sol Trujillo, I would be bringing to his attention that a whole lot of Australian media is about to go up for grabs next year. Then again he seems to already know this. He’s on the record as stating Telstra is better viewed as a “mediacoms” company. Buying into the mass media industry would make a good fit with the company’s profile, and Telstra could even argue it was a new player adding to media diversity (don’t mention Foxtel of course). Indeed because Telstra largely is the internet in Australia it would actually be in a position to leap ahead of its other mass media competitors. But most of all, owning a media company in Australia has been a very lucrative way to interact with the government, important if you are unhappy with the current regulatory regime. And, good heavens, at some time down the track Telstra could diversify into a government protected gambling monopoly as well. That should send the share price up!


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Half time score

Half time score: Sol Trujillo 1, John Howard 0.

An extraordinary future is almost upon us. The home, be it individual or family, is in makeover, yet again.

No longer need it be a manifestation of social alienation, or for that matter a response to it. Less and less is it a little box of enforced privacy, it is becoming more like the front porch with a chair on it, where interaction takes place with the passing parade in the street. Except that the interaction can be as two-way as you want it to be, and you can choose who is in the parade.

Podcasting is already with us over the internet, with higher quality in audio rather than video (also called vodcasting). Check samples from this site. But a 30 minute video on demand (VOD) segment can require up to 100 Mb in free space on a computer hard drive even at the moment, and high definition for the lounge room HD TV (with a screen taking up half a wall and surround sound through say six channels) will need more. Download time with this technology will determine its appeal, as will ease of download. Fiberoptic is the only conceivable way to go in my opinion.

Judging by present technology and trends, it will be possible to bypass conventional TV programming, and program the TV set with your own chosen schedule of programs selected from a variety of ‘stations’ – ie glorified websites located in different parts of the world. Here is one of my favourite podcast sites, in case you have not heard it before. Click on ‘listen to our show’, though you won’t hear much without a sound card and speakers in your system. Here’s another.

So maybe before too long in my urban lounge room I will sit down, boot up the infotainment system, cruise around using a keyboard or remote to schedule podcasts – that is, building my own TV guide in place of someone else’s, or going live on the system myself to videophone a friend or relative, order parts for a machine or locate buyers for what it produces.

Many of the podcasts will come from websites holding vast stocks of movies and TV programs, making for video on demand on a grand scale. Just as movie studios are bypassing the cinemas and selling DVDs of their latest releases direct to the public today, so these websites will bypass the TV networks.

Ah, the networks. Now we are talking big money, and big influence in the major political parties, whose policies to date have been text book material on how to serve the interests of the network moguls and avoid economic change that might threaten them. The nobbling of Telstra, which has forced it to abandon its fiberoptic rollout, has been discussed recently in two excellent articles for the Melbourne Age by Kenneth Davidson (‘We shall all pay the price for the economic lunacy of T3’) and ‘Australia risks its economy if broadband is allowed to stagnate’ by Bruce McCabe.

TransACT Communications is progressively cabling up the ACT at the moment, and offers bundled internet connection, cable TV, VOD, phone, and specialty services. It is one of those service providers (Vodaphone, Optus, etc, etc) that accesses the Telstra cable network at rates Telstra says are below cost, but are forced to provide by the ACCC. For future cabling of the ACT, it makes more sense for Telstra now to do a deal and get access to the TransACT fiberoptic cable than to roll out a parallel one of its own. But it would have been better the other way around.

In major cities, there are a number of electricity providers one can have an account with, but only one set of power lines supplying streets and houses. Multiple sets of telecommunications cables makes about as much sense as multiple roads (tollways), gas pipes and water pipes, each with an independent provider at the other end.

J Bradford DeLong in his Man’s fate/Man’s hope thread says: “The use of information technology to manage transportation and distribution channels is likely to have a similarly profound effect [as globalisation]. Moreover, the advent of the Internet and the fiber-optic cable will do as much to make service-sector work internationally tradable as the coming of the iron-hulled steamship a century and a half ago did to make bulk agricultural products and manufactures internationally tradable.”

Telstra’s loss has been gain for the likes of Optus, and for Optus read the Government of Singapore.

All of the above applies equally or more so to business communications, which as Roger Fedyk points out, needs all the bandwidth it can get to just tread water in today’s global commercial environment. John Howard at ease within his Chesterfield listening to his Doris Day LPs on his Pye stereogram, within his 19th Century harbourside palace, encourages in a shrinking number the feeling that all’s well with the world. That’s if the latest polls are anything to go by. Let them eat lamingtons.

Disclosure: I own a small parcel of Telstra shares. Sol to win.

Sloppy definitions make for sloppy thought

Rod Lever, I am well and truly with Hamish here.

You say Howard “is lecturing Muslims, telling them to dump their language, their culture and their burkas and become suburban yobbos, mowing their lawns on Sundays, drinking beer and telling dirty jokes (ie Australian values).”

By all means correct me if I am wrong, but he said he thought they should integrate, rather than form themselves into inward-looking ghettoes. Learning English is essential to that.

Becoming suburban yobbos, mowing lawns on Sundays, drinking beer and telling dirty jokes might be your stereotypic conception of ‘Australian values’, but it does not project well onto the rest of the country, or even onto Howard himself. There is more to everyday life than that.

"‘Islamic fascists’ is not only a silly phrase but a dangerous one for Bush. The Islamic nations are as far from the fascism of Hitler and Mussolini as far as the semi-planet Pluto is from Earth. America and Australia function more closely to the classic definition of modern fascism than does Islam."

‘Islamic fascism’ is a very useful term, distinguishing the Islamic form of fascism from say the Nazi or Christian variety. (I think ‘Islamofascism’ is an awkward pseudo-technical term meaning exactly the same thing.) Christian fascism took hold in Spain and other parts of the Spanish speaking world in the 1930s and after. While Hitler devised his own religion, Franco’s ideology was an extremely authoritarian form of Catholicism, fully supported by the Spanish clerical hierarchy.

The term ‘Christian fascism’ does not imply that all Christians are fascists, and the same holds for the term ‘Islamic fascism’ with respect to Muslims. But if you wish to argue that, say, Iran and Syria are a long, long, long, long way from being fascist, and Australia and the US are much closer to it, then you are entitled to your opinion, but that is about all. It all depends on your conception of ‘the classic definition of modern fascism’. Perhaps you could enlighten us in your next post.

I was in Iran a few years ago. It is a highly regimented society in which thought and expression are tightly controlled by narrow-minded leaders, who base themselves on a mass movement of people only too willing to be led. There are no blackshirts and brownshirts goose-stepping down the streets, but there don’t have to be. Police spies (volunteer and professional) are everywhere, and infractions are soon spotted and dealt with. Public executions take place on Fridays after prayers.

Trade unionists are bashed into submission: witness the recent Tehran bus drivers’ strike.

Close enough to fascism for me.

Oops, I blundered into the wrong forum

Now, what about Telstra? Here we have the convolution of political ideology, business and technology swirling tightly around this company.

I'll deal with the political ideology and business later because they are less important than understanding what the technology that only Telstra can currently deliver means to Australia in the next 100 years.

The technology is not just a good idea or something we ought to have. Without a competitive, modern, broadband structure underpinning everything in the fields of telecommunications and multi-media, Australia is not a "banana republic", it is a failed state.

In Asia, the state of Australian telecommunications is a laughing matter. But we will not get too much advice or criticism from any Asian country which is our competitior. We are patsies waiting to be exploited or trampled.

We are not A-league, we are not even B-League we are already relegated to the minor divisions with infrastructure more akin to what you will find in a third-world country.

What this means to business is that our competitive advantages will be gone within a decade as faster, smarter competitors out-analyse, out-deliver and out-perform us.

Forget about "global warming", the biggest catastrophe facing Australia is the utter refusal of the current Government to understand anything at all related to technology and its applicability to business. They understand holes-in-the-ground and political games, little else.

You can see this in the Ministers assigned to oversee Australia's future in the last five years. Firstly Richard Alston, a political hack and dunderhead and now Helen Coonan. Both political lightweights.

Look at Coonan's title, for chrissake, Minister for Communications, Information Technology and the Arts. What a joke! I am all in favour of Art and Culture but IT is a senior, full-time endeavour well beyond the abilities of Coonan to manage.

Now the disappointing part of this debacle relates to ideology and business. If Coonan is not on top of her game, don't take any comfort in the idea that in the boardrooms of Australia we have industry leaders who understand what their company and what this country needs.

Ideology means that the Corporate Australia will support "their man" Howard and if he is not worried why should they be. Businesss will take place in the thrall of inertia until the pain is unbearable. Considerable profits will be made before we hit the brick wall.

Sol Trujillo is not responsible for what Australia needs to do to secure its future. It is not in his job description. He is here to run a company. Telstra, the company is stuffed fast between a rock and a hard place by  Howard's contempt for a long-term solution. He sees no political gain in it.

What this will bring, soon enough, is a train-wreck of massive proportions when other countries start to leverage their 20-100 times better/faster/cheaper broadband over Australia's steam-driven alternative. At that point we will be reduced to Howard's real vision of Australia, a giant quarry and mine.

Also, don't think that Labor have anything better to offer. Their party is populated with the same sort of ideological/technological/business bumpkins.

Subjugated knowledge

You can always tell that John Howard is getting into his election routine when he plays the race card again. Can anyone forget 1956 when he held up maps in front of the television cameras to warn us how native Australians were planning to take over our suburban backyards?

Now he is lecturing Muslims, telling them to dump their language, their culture and their burkas and become suburban yobbos, mowing their lawns on Sundays, drinking beer and telling dirty jokes (ie Australian values). He is, of course, groping for an issue which will bury industrial relations and the emerging truths about foreign affairs for the next few months.

Referring to the United States in an article he wrote for a British newspaper last week, John Pilger produced a lovely phrase: “An insurrection of subjugated knowledge,” to suggest that more and more Americans are waking up about the extent of their own government's capacity for outrageous lying.

I suspect the same is happening here in Australia. We are become a little too knowledgeable about John Howard's fundamental ignorance about everything but gaining and holding political power and are becoming more wary of his puppy-like devotion to everything marked “Made in USA.”

It is his buddy in the White House who may give him his next election issue. If George Walker Bush decides to bomb Iran and continues to refer to “Islamic fascists” and the Australian government supports him, it is an issue which might just blow up in Howard's face as it certainly will for Bush.

“Islamic fascists” is not only a silly phrase but a dangerous one for Bush. The Islamic nations are as far from the fascism of Hitler and Mussolini as far as the semi-planet Pluto is from Earth. America and Australia function more closely to the classic definition of modern fascism than does Islam.

Even worse it will bring much more attention to George's grandfather Prescott Bush and the love affair between the United States and the German Nazi Party from the early 1920s through to 1941. As late as 1942 American schoolchildren were still reciting a Pledge of Allegience with their right hands raised in an exact copy of the Nazi salute.

At the same time Prescott Bush, an insurance salesmen who joined his father-in-law's banking firm, was the principal American source for loans and money laundering for the German Nazi Party. Anti-semitism and anti-Negro racism in the American South, reflected in the power of the southern Republicans in Congress, prevented Franklin Roosevelt from supporting Britain in the early stages of the war in Europe and he had to resort to the subterfuge of lend-lease to supply Britain with warships, arms and military equipment.

Will Bush's America attack Iran or will Israel do so under Bush's imprimatur? We just don't know yet. There is strong opposition in the American military, where the generals it see such an attack as creating an even bigger disaster than Iraq and Lebanon; but do they have the stomach to refuse an order from the White House?

John Howard, for all his artfulness, won't be able to bury this in a barrage of weasel words...

More poor trenches

Rod, I share many of your concerns. The Bush and Howard administrations are taking our countries toward the Right, no question, and this is an enormous concern, especially in the absence of political forces which may actually take the country in the opposite direction. It's a concern that all decent people need to fight politically.

But then you say that Australia and the USA are closer to fascism than Iran (actually you say, 'Islam' but you seem to mix this up with 'Islamic nations' so I'm taking a small liberty for the sake of clarity - if I'm wrong please make yourself clearer in your own way).

It's just not true. I'd be dead in Iran, and so would you. Please do some research into what happens to the Left in Iran, let alone what happens to, say, a woman who commits adultery. Personally I'm quite happy with the term 'Islamofascism' to describe the Iranian regime, though 'Islamic fascism' is subtly not as adequate to me, because it seems to implicate the religion itself, rather than just describing the type of fascism.

I reckon there is an identifiable political force in the USA that might accurately be termed, 'Christofascism'. Fortunately it has so far not gotten hold of the institutions of state of any country, though it has some influence.

You leave yourself in a hopelessly indefensible trench, one indeed which will not merely be ignored but will actually be used as a weapon against your position. Our country remains with levels of freedom and legal equality virtually unprecedented in human history. Let's try to keep it that way, and indeed to do even better. Calling our society fascist, or, 'more fascist than Iran' - an utter nonsense - will not help the endeavour.

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