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September 21, 2009
The reaction against the Rudd Government's proposed separation of Telstra is in formation. The resistance is being flushed out, as we can see from two recent op-eds in the nation's broadsheets.
Kenneth Davidson in his Protection racket is bad policy in The Age is blunt. His position is that Telstra should be given carte blanche in its operations, that its competitors ("basically marketing and billing organisations") are parasites in a protection racket, and this is Rudd Labor's equivalent of WorkChoices with the same capacity to destroy the Government! This bloated rhetoric is not backed by an argument:
What is unfolding in the policy announced by Communications Minister Stephen Conroy is a $43 billion protection racket designed to keep Telstra's competitors in business....In Devonport and Hobart, where the Tasmanian Government has been experimenting with building fibre to the home at Commonwealth expense, shows nobody wants it while the cheaper copper alternative is available...As the experience in Tasmania makes blindingly obvious, the only way customers can be induced to take up the fibre-to-the-home option is if the copper network is closed down..It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years.
Davidson says that Rudd + Conroy are doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now.
Firstly, the shift to new publicly owned infrastructure technology is the core point of the reforms designed to address Australia's low quality broadband: slow average speed broadband services that are also amongst the most expensive.
Secondly, the copper network is 19th-century technology and its days are numbered. Reliance solely on old-style copper networks is a pathway to oblivion. Given the limitations of the old copper network--expensive to maintain as people move to other modes of communication delivery --- it will be replaced by new fibre-to-the-premises network.
Thirdly, fibre-to-the-premises provides productive opportunities for new data information services (video and internet tv). Davidson, however, claims that households or business do not want or even need the extra services, but he makes no argument for this.
Glenn Milne, the Liberal apologist, argues in The Australian that the intervention into the telecommunications market indicates that Australia is a command economy. Milne relies on Charlie Aitken, formerly of Citibank, runs Southern Cross Equities, part of Australia's largest independent stockbroker and financial advisory groups. His concern is regulatory risk, and he argues that the Rudd government is putting the state at the centre of the market economy. The emissions trading scheme, banking and superannuation are mentioned by Aitken as examples of the Rudd Government's interventionist tendencies, which are spooking the market.
Milne then loads Telstra onto Aitken's account without arguing how greater intervention into the market constitutes the emergence of a command economy. The inference is that government intervention equals command economy. Yet Telstra was created by government intervention----privatisation! Milne's defence of Telstra is wrapped up the rhetoric of the free market orthodoxy under assault from a socialist government.
This anti-reform commentary from Left and Right is poor in policy terms. The two op-eds ignore the need to correct 20 years of policy failure --a deeply flawed policy regime that delivered a private monopoly. No mention is made of Telstra gaming the telecommunications regulatory system, delivering ultimatums to government, delaying the rollout of high-speed broadband and suppressing competition in lieu of bigger and better profits. No mention of the prohibitive cost of backhaul (especially for Tasmania) or that Telstra--the traditional phone network-- also owns the cable TV network.
The anti-reform stance basically amounts to little more than a defence of old technology, old industry and monopoly. The free market crowd of finance capital assumes that government invention to create markets is good but regulation of those markets is bad; and that state-sponsored monopoly's are bad whilst private monopolies are good.
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What needs to addressed is not heavy or light regulation but regulatory layers based on functions of a network. taken a silo approach to communications regulation. In other words, each mode of communication is considered and regulated differently---a silo approach. There are silos for broadcast television and radio, cable television, satellite television, cable Internet access, DSL Internet access over a copper telephone line, telephone service over a copper line, and so forth.
The regulatory process would better take into consideration the similarities and differences between the different modes of communication and the technology platforms that underlie each and thus eliminate the disparate “silo” regulations that arbitrarily govern identical content differently.
This would make the regulatory system more efficient and level the playing field between the different communications providers.