Tuesday, December 30, 2008

Bits of Destruction

While DBCDE has ended its DE blog, and started its more formal consultation, there are signs that they still underestimate the magnitude of the question "what is the digital economy?"

Their discussion paper starts with an objective that;

The Australian Government is seeking to increase the effective use of networked information and communication technologies (ICTs), especially the internet, by consumers and all businesses to drive higher productivity growth and community participation in the digital economy.

In my own discussions I've tried to suggest that the issues of the DE are far greater than this. It is not just about driving greater use of online transactions but recognising the wider impacts that these have on economic and social structures. The British MP Tom Watson included a link to this venture capitalist blog post under the heading Bits of Destruction. The post started;

The news is full of stories this year end about the impending bankruptcies of retailers, newspapers, auto manufacturers, banks, and a host of other businesses that have been the mainstay of corporate america for the past 100 years or more.

Clearly the economic downturn is the direct cause of most of these failures but I believe it is the straw that broke the camel's back in most cases. The internet, now closing in on 15 years old in its mainstream incarnation as the world wide web, is in many cases the underlying cause of these business failures.

He goes on to list the obvious areas impacted, retail banking, retail shopping, news and entertainment media. But even he misses the big one - that the whole fanciful structures of securitised debt, and then securitised risk (credit default swaps) instruments are as much products of the internet as they are of the "quants" that were hired to Wall Street. You can't create, market and manage these products without electronic settlement systems. But it is the facility of these systems that means the instruments could become so abstract and so divorced from the underlying asset (in the bulk of the cases houses).

Hopefully I will be able to include more of this in a more formal submission.

My Escape

The instructions with an Esteelle suacepan say if overheating occurs leave the pan where it is to cool. I know because I just had to buy a new one and read them.

The longer versuion of the story is that yesterday I put a little water on to boil to steam some asparagus. I then came in to do some e-mails etc. I forgot about the saucepan till I smelt a strange metallic smell.

Sure enough the saucepan had boiled dry. I turned off the heat and thought I'd just leave it where it was. Then (stupidly) I thought I'd check how hot it might be (whether I could cool it down by putting cold water in it.

So I tilted the pan towards me to have a ook. Suddenly molten metal is pouring TOWARDS me. Thankfully (and remarkably) it splashed on the side of the stove and scattered across the kitchen everywhere but on my (or my legs or my feet - I had shorts on and no shoes).

The explanation was it was the solder that attaches the copper base to the stainless steel saucepan - so it had been pouring from the bottom of the saucepan. The stove cleaned up Ok but the floor has burn marks all over it as have some of the cupboard plinths. It is the second kitchen I've damaged like that (the first was burning oil).


I was just watching the telecast of the cricket from Melbourne and they showed three dudes in the crowd dressed as Batman, Spiderman and Superman. This suggests there should be a joke available along the lines of...

Superman, Spiderman and Batman went to the cricket. Each of them planned to catch a ball in the outer. After half a day nothing had been hit in their direction. Eventually a ball is hit vaguely in their direction ... Superman jumps the fence, runs catches the ball and runs back to his seat. As he runs faster than a speeding bullet no one saw anything other than the ball taking a really strange flight over the boundary.

The next ball is hit away from them. Spiderman sends out his web, sticks to the ball and pulls it towards him. Once again the crowd just see a ball take an unusual path.

Next ball Spiderman and Superman look expectantly at Batman.

Any ideas on what he does?

Thursday, December 25, 2008

To my readers

To my small but loyal band of readers, I'd like to wish you all a Merry Christmas. Let us hope that the Christmas message of love and peace is not drowned out by sermons on satan.

Wednesday, December 24, 2008

There ought to be a law

Is a familiar refrain, one I respond to regularly by pointing out that laws alone aren't enough.

There are, of course, other laws like the laws of physics or economics. Then there are the funny laws.

Anyhow I tumbled onto this list under the heading of this post when helping with a crossword.

As an aside, the crossword had already used Murphy's Law and Gresham's Law in clues, and then asked simply "Cole's Law?" (7,3,6,5). The answer I got as a variation of the one in the linked list is simply "cabbage and carrot salad."

Tuesday, December 23, 2008

Socialism and all that

The Fabian Society held a forum in Sydney earlier this year titled "What happened to the Left?" For some reason nothing about it appears on the Fabian website but here is one informative blog about it.

Rodney Cavalier's speech has been subsequently published in his Southern Highland Branch Newsletter, a fact that was referred to in one of Alan Ramsey's last columns for the SMH. This article concluded with a neat summation of the Cavalier thesis, "What Happened To The Left? It Died", an essay on the end of pretence by the Left that any shred of socialist ideology remains in its character.

Basically Cavalier's point is that there are no socialists anymore because no one believes in the "socialisation of industry, production, distribution and exchange" anymore. It is an interesting point, but to explore it let's look at the full phrasing from the ALP Objectives.

The Australian Labor Party is a democratic socialist party and has the objective of the democratic socialisation of industry, production, distribution and exchange, to the extent necessary to eliminate exploitation and other anti-social features in these fields.

The question really is what does "socialisation" mean. The Free Dictionary provides three definitions.
1. socialisation - the action of establishing on a socialist basis; "the socialization of medical services"
2. socialisation - the act of meeting for social purposes; "there was too much socialization with the enlisted men"
3. socialisation - the adoption of the behavior patterns of the surrounding culture; "the socialization of children to the norms of their culture"

Clearly Cavalier is interpretting the word under its first definition - while being silent on whether the socialist objective necessitates ownership by Government or by co-operatives or collectives.

What is possible though is that the phrase could be interpretted as being about the third definition, that "socialisation" simply requires driving industry etc to "adopt the behaviour patterns of society" and hence include all the attributes of moral persons. This outcome can be achieved with different policy levers, not the least of which is to ensure that companis understand they exist to serve the needs of all stakeholders, not just investors.

That conversation is for another day. But if the meaning implied by the ALP objective was the "socioal ownership of ..." rather than the "scialisation of ..." one wonders why they didn't just say it.

Strange Bed Fellows

It is fascinating to see how people line up in the whole NBN story.

Australia's last remaining old style socialist, Kenneth Davidson, wrote in The Age

If Telstra's fixed network monopoly had been maintained so that its economic rents had been retained instead of distributed to its competitors via arbitrage, the introduction of fibre to the node would probably now have been connected to up to 80 per cent of network customers.

Of course, Davidson's position is that the monopoly should have remained in public ownership. The main Telstra union, the CEPU, has been simultaneously engaged in an industrial dispute and in the defence of their employer's market power.

Perfectly logical really, as historically monopoly rents aren't returned to shareholders but dispersed across a whole coalition of supporters of the monopoly. However, when management repeatedly claim that the only reason the company exists is to create shareholder value, you might think the union would adopt a different strategy.

Back to Davidson. He is on the point that the cross subsidisation of access lines from call charges was how the network was built and that the recognition that the marginal cost of a call was close to zero resulted in "arbitrage dressed up as competition". Apart from the error i thinking that arbitrage is by definition "wrong" (it is after all what every retailer does), this creates the error of assuming that the network effect from new connections is infinite, and also ignores the signficant endowment effect.

While there are not many people connected to a network, creaing low price access and higher priced call charges is a good way to grow subscribers - as the benefit to other subscribers from the new connection is priced into the calls they will make. However, the more people that are already connected the less the marginal benefit to existing users.

In addition, an endowment effect operates. The price a consumer will pay to continue to rent a phone line is higher than the price they will pay to acquire one in the first place. Once the phone becomes something everyone has experienced there is no longer an economic case for the subsidy.

In any case the historical analysis is technically wrong. When the Federal PMG was created it charged users a flat rate for connection and did not charge for any calls made within the exchange area. The flat rate varied depending on the size of the exchange.

Davidson's conclusion is apparently simple;

Does Conroy seriously want to put the Commonwealth in danger of a multibillion-dollar compensation claim from Telstra shareholders when the alternative is to abort the tender or let it run its course and admit that there is no practical, economic alternative to letting Telstra continue upgrading the network? All the Government has to do then is change the regulatory structure to put adequate return on capital for new investment ahead of the present ersatz competition requirements and let Telstra get on with the job without cost to the taxpayer.

This is a strange calls for a private monopoly. Presumably despite the professed concern about the possible need for compensation, Davidson would follow-up with re-nationalisation.

Meanwhile Telstra has said pursuing legal action against the Rudd Government for kicking it out of the NBN tender is not a priority, though the telco has not ruled it out.

Nothing quite like a good threat, beats action any day.

Monday, December 22, 2008

It is a rank not a score.

Under the headline It's a record: 23 HSC students hit 100 the SMH on the weekend confused the UAI with a score.

The UAI is a rank - the candidates are all ordered (actually they apply a notional rank to the population old enough to sit the HSC who don't) and given their rank in the UAI. There is basically the same number on each index point. If the total population increases (as it has) the total awarded a UAI of 100 will increase.

These students did not get "perfect" scores, they got the "best" scores - which is an equally great achievement. And they are a group of students who surely know the difference between a rank and a score.

A mixed bag

A really mixed bag of political news from which I wish to extract a theme.

First was the PM being asked to comment on the video released of a drunk Andrew O'Keefe. The PM responded "No one is perfect and most people stuff up". Which is a really good answer.

What made it particularly interesting was that he was asked the question while launcing policy on the homeless, and thus was standing by Tanya Plibersek. Her husband is the head of the NSW Education Department over whom so much noise was made when it was discovered that he is a former heroin addict.

Oh, if only more people could be so realistic. It is not as if O'Keefe engaged in any physical violence while drunk.

Meanwhile Malcolm Farr thinks Malcolm Turnbull will be in a good position over climate change. Farr's analysis seems to be that the Government will need to negotiate with the Liberals as they won't come up with an outcome that the Greens will support. Firstly, this is fanciful because in the end Bob Brown knows the ETS will be stronger if the Government reaches a deal with the Greens tha the Coalition - and Brown can make thunderous speeches in support of any legislation that condemn it. Secondly, it is hard to imagine any leader of the Opposition actually revelling in the idea that they have been reduced to the position of "balance of power" party.

Talking of revelling, we discover that the PM and the leader of the opposition will Christmas in Sydney, while both their deputies will holiday in Adelaide (where they both come from). What else do we learn from this amazing revelation of Christmas plans? Well, that pollies like to spend their Christmas much the same as the rest of it. Next year expect the headline Research shows politicians are people too.

Meanwhile the member of the coalition most pumped by the moderates as their hope for the future, Christopher Pyne, has chocolate on his mind. I must admit I've never seen the potential in Pyne that some have, but this is a thoughtful piece. He is higlighting th plight of child slaves in Africa, many of whom harvest cocoa for chocolate. He deals with the vexed problem that just deciding not to eat chocolare does more harm than good because you dry up national economies. His suggestion is a selective boycott by the Australian Government in its chocolate purchases.

"What chocolate purchases?" you might ask. Well, he means the chocolate in vending machines across the buildings occupied by public servants. There is only one flaw with this - the Government doesn't buy that chocolate/ Vending machines are usually run by small businesses that "place" them, and in many organisations the machine belongs to the staff club.

Does anyone have a better idea we can offer to Mr Pyne?

Friday, December 19, 2008

Senator Conroy

Part of the fall out from the Telstra exclusion from the NBN process has been the whole question of what happens next, and to whom.

Following Senator Conroy's media release where he said "Telstra's Board will have to explain to its shareholders why it has decided to sideline itself" there has been a lot of attention to the question of where the accountability lies. Usually the kinds of share price declines don't go unpunished by shareholders.

In today's SMH Matt O'Sullivan has asked a few fund managers there views. It looks like they agree with the Minister, one (drawing on card and snooker metaphors)saying "They overplayed their hand...they miscued badly ... and they are going to suffer the consequences."

However there have also been those trying to suggest that Senator Conroy will also be under pressure, but these stories as far as I can see are all sourced from inside Telstra (though some have come from the CEPU who bizarrely thinks Telstra is their friend). This would be the view I guess if you were like Telstra and believed the only people who could build the network are Telstra, so having Telstra not in the field must mean Conroy screwed up.

This is really interesting. Telstra has convinced many with their "only Telstra has the funds, the vendors and the skills" story. The reality of course is that there are multiple vendors out there and Telstra outsources most of its engineering build work these daya. The funds one is the fun one. Firstly, it is an admission by Telstra that they are the only ones mking a profit - which sounds like an admission of market power. But the rumoured disagreement between the CEO and Board over whether to lodge a bid was apparently due to the CEO being concerned about the wisdom of committing cash i the current climate - though we do suspect he spends more time in the US than here and does confuse the two economies (and political environments).

What's the rest of the substance? Well Conroy has been coming under sustained attack over recent days over the internet filtering plans. The SMH had another item this morning, this time about the reactions online to filtering.

I have my own view that the filtering storm is a bit like the tabacco industry fury over advertising and its encroachment on freedom. I think the industry itself has a lot to answer for in its persistent determination to claim no responsibility.

In other areas of the portfolio there seems to be real progress on Digital Switchover, which could never be said under Alston, Williams or Coonan. There also seems to be both a process and a prospect for decent funding of the public broadcasters.

Those who want to believe that Conroy is under pressure want to ask themselves two questions. The first is whether there is anyone in the Ministry who would want the job or that the PM would want in the job. The second is that there seems to be no other compelling reason for change. As Bernard Keane noted in Crikey One year into the Howard Government and there were already a half-dozen ministerial corpses. That Rudd’s ministry has entirely avoided scandal of any kind in its first year is testimony not to luck, and not merely to Rudd’s control freak nature, but to his knowledge of the pitfalls of new governments.

Meanwhile it is interesting that only a week ago the SMH published a feature on Conroy as the Minister for the Future. Even the current runctions in the Victoria right are unlikely to cause any sleepless nights when Conroy holidays on the NSW South Coast.

Thursday, December 18, 2008

For the graphic alone

For the graphic alone today's CBD in the SMH is worth a look.

Telstra hits back

The big news of this week has been Telstra's exclusion from the NBN process. For students of "public affairs" (or corporate spin) this has led today to two stories that make interesting reading.

First some context. Telstra decided not to submit a full bid for the NBN but instead made a "proposal". Their reason for not bidding were based on the Government's refusal to rule out structural separation and supposedly the risk that the information in the bid could have facilitated the Government in instituting that separation.

Interestingly the proposal made great play about the national security qualifications of their equipment supplier, saying;

As part of the merger between Alcatel and Lucent Technologies, Alcatel-Lucent entered into a National Security Agreement with the United States Government to protect the security of many of its products and services. This unique arrangement provides Alcatel-Lucent's customers with confidence in its equipment for securing information and protecting networks and users, including law enforcement and national security purposes.

When Telstra was excluded from the NBN the CEO conducted a conference call with analysts. Twice in that conference call he referred to Telstra's ability to deliver broadband using wireless. The Minister in his press conference later in the day was asked about this claim and indicated he didn't take it seriously as the Telstra 3G network can't sustain the speeds or volume.

So there you have it, Telstra's attempt to differentiate itself on security concerns and Telstra's need to build credibility in its wireless capability.

And so we come to today's media. The front page of The Australian screams Chinese spy fears on broadband frontrunner that claims that the Government has security concerns about Huawei, a possible vendor to Optus. Meanwhile an industry news-sheet called Communications Day (subscription required) led with the headline Telstra launches international search for LTE engineers.

So there you see the wonders of the PR machine. Tweak up the security risk, build the credibility in the threat.

Only the strategy still suffers from some weaknesses. Firstly they need more than engineers to build LTE - they need some spectrum to deploy it in. And as for security someone needs to tell these guys that Australia isn't the USA. In fact the last foreign country to use its miltary to sink something in our vicinity was the - you remember - the FRENCH who sank the Rainbow Warrior in New Zealand. Alcatel, of course, is a French company.

Wednesday, December 17, 2008

Avenue Q - and the filter

OK OK folks. I know this will be old news for some of you. But every day I hear one of these new comments about filtering I keep thinking of the song from Avenue Q. The show is opening in Melbourne in June so presumably Senator Conroy will see it then - if he hasn't already on an overseas trip.

Here we go.

Telco news

Embroiled as I still am in some telco matters I thought I might just share some information.

Firstly a great little article about the LTE vs WiMAX discussions. Worth a read for anyone who believes the LTE hype.

Next up an article about Mobile Number Portability implementation in India. What I find interesting is that we implemented MNP in Australia in 2000 with what I believe to be still a world's best implementation. While we complain about our telco regulators maybe we should also recognise how well we have done on some fronts.

The next is a new internet map that shows the data flows over the internet around the globe. The equivalent map on submarine cables is often made into a corporate give away - maybe a great idea for this too.

And finally an article that makes it clear that operational separation doesn't make all those pesky regulatory issues go away. But that's a discussion for another day.

Network effects and Government information

I mentioned the new Digital Economy blog. I also referred to the blog tracking it by Verity Pravda.

This lady has been very busy posting to the DE site as well. In a post today she notes the need for the Trade Practices Act to reflect the consequence of "network economies" (by which I guess she means "network effects").

In a speech I gave in February I referred to a consultancy that the then DCITA commissioned on the policy issues of next generation networks. I know one of the authors and he told me that he was stunned at how little departmental officers seemed to understand about the sigificance of network effects.

Thinking of that report in this context intrigued me because that report has not been released - which is interesting in the light of the inclusion of a topic of public access to Government information in the DE blog.

10 Worst Predictions of 2008

Thanks to Tom Watson MP for the link to this list.

Never have truer words been spoken ...

Stephen Conroy appeared on The 7:30 Report last night. In it he included this memorable exchange;

HEATHER EWART: Are you prepared for legal challenges from Telstra?

STEPHEN CONROY: [Laughs] Look we've been prepared for legal challenges since the beginning of this process from all sides. There have been threats of legal challenges, complaints about the process from all of the major players involved in this sector. This is par for the course in this sector.

I said yesterday that this exclusion of Telstra just demonstrates that the processes that this sector is normally engaged in are completely out of control. We have a situation where the sector can't cooperate, it can't have a discussion, it can't reach a common position.

Seldom have truer words been spoken (ignoring the philosophical question of whether there can be degrees of truth). There are some who would claim that "the processes [the] sector is normally engaged in" are "completely out of control" because of the continued distorted market structure. There are others who would argue that it has been the consequence of Government policy, in particular the distorted role the Commonwealth had for so long as a regulator and vendor. There are still others who would like to blame just the personalities involved, from the CEOs to the "spin-meisters" (like me I guess).

If you want more evidence just look at the column in today's SMH by Paul Fletcher, who was formerly the regulatory head at Optus. It isn't so much the content of the article, which is a fairly measured assessment of the ways Telstra has gone about Government engagement, but the proposed title of his forthcoming book "Wired Brown Land? Telstra's Battle For Broadband".

Having heard Fletcher on the topic I anticipate this book will be full of ascriptions of motives to Telstra of various actions over time rather than the a historical anlysis. It will be interesting to see how he deals with the way Telstra approached ULL pricng, because Fletcher fully appreciated the outcome. I have been somewhat more distraught about the outcome, I think a higher ULL price is apprpriate. But I think it was Telstra who missed the opportunities the regime presented to lock in a higher price.

The kind of unedifying slanging match can also been seen in my review (in the TJA (subscription required) of the Henry Ergas book Wrong Number.

Some like CommsAlliance CEO Anne Hurley believe the industry can rise above this , as she wrote in an Obamaesque way in Communications Day;

Can our industry heal its wounds and accept that we have a broad social responsibility to move forward and harness our best technology for Australia’s broadband future by cooperation and collaboration? Yes we can!!

The Minister clearly believes we are the nation's dysfunctional child. I tend to agree.

Tuesday, December 16, 2008

The Digital Economy

When I was unsuccessful in getting selected to the 2020 summit at the start of the year I posted about the experience of nominating for a committee that wound up never existing.

Ever since then I've threatened to write a paper titled (as a play on the Bill Clinton slogan) It's D. Economy, Stupid. I'll get to it eventually.

When I do I'll have the ability to include the "wisdom"(?) coming forward from the Department of Broadband, Communications and the Digital Economy "blog" that is being used to consult on the DE.

I won't repeat here the number of criicisms that have been made of it. Nor do I want to belabour the point that they should have guessed they'd be swamped with posts on filtering (I'm reliably informed that there is a page coming on the topic - though personally I think that should have been a different blog).

It is interesting that some luminaries have graced the blog comments, the CEO of Telecom New Zealand Paul Reynolds dropped in as did Carolyn Dalton the regulatory and policy dude for Google. (I'd link to their posts if I could find them - it is not easy to find comments on the blog). More recently I see that Laurel Papworth, who is a wow at all the on-line communities stuff, has engaged.

The blog is getting some coverage from other blogs. Andrew Bartlett has made some comments. He has also identified that there is a blog that has been blog tracking the discussion.

I encourage my small but loyal readership t have a look. So far the topics covered have been DE definition, use of government information and most recently the appropriate regulatory framework.

Unfortunately as a piece of consultation it looks very much like an ordinary consultation/discussion paper has just been cut into bite sized chunks for distribution. If the folks who've tried to scream the Government down on filtering could just get out of the way a bit some discussion might flow.

We live in hope.