Friday, May 29, 2009

Is the Internet Broken? Do we need a new model?

One thing I find fascinating in discussions about the Internet filtering trial is the extent to which industry professionals seem prepared to wash their hands for responsibility for the experience of users.

After all, it doesn't seem like an unrealistic expectation that for people using the World Wide Web specifically, rather than the internet in general, shouldn't be able to be afforded the same protection as they get with movies or television of being advised of the nature of the content they are about to navigate to. That is, a person just "surfing" through a standard browser looking at html pages.

To make that happen would require develoment of standards that could lead a global debate on unified content standards. It could be conducted in a secular manner so that the classification scheme was against some objective criteria. But the industry response is it is eithr too hard because it is global or because it can be subverted.

But it is not the only place where the model of the intrnet is broken. Everyone seems to accept that IPv6 implementation is critical, but doesn't do much about it. At least IPv6 activists who want to Act Now have a place they can go.

Another interesting avenue is the The Pouzin Society whose purpose is "to provide a forum for developing viable solutions to the current Internet architecture crisis." The crisis itself is described in the following terms;

About 15 years ago, it became clear that IPv4 was reaching its limits, and the IETF responded by creating IPv6. In 2006 came the tacit admission that there continue to be fundamental scaling problems in the Internet routing architecture which would only be exacerbated by IPv6, and that Moore's Law could not save us this time. Several solutions were proposed, all based on revising IPv6 addressing using the concept of a locator/identifier split. Work has proceeded diligently, but a few months ago, it became clear that not only was this approach fatally flawed, but by implication, so was IP, or any variation of it. Academic efforts, beginning with NewArch and continuing with FIND and GENI are no closer to finding a solution than we were a decade ago.

A jumping off point for this work is John Day's Patterns of Network Architecture, and I think the society's name is in honour of Louis Pouzin whose main claim to fame seems to be criticism of the US centric model of Internet governance and architecture.

My policy question is whether we are thinking of any of this as we sail off to build the world of the Australian NBN.

e-waste --- wrong model

Australian environmental Ministers have supposedly agreed upon a new plan for dealing with "e-waste". This is a plan to charge a "levy" on computer equipment to institute a recycling program, and a "reverse channel" collection model like the old fashioned bottle collection model.

I have some experience in Australia's only successful e-waste program being AMTA's Mobile Muster. I also have been a zealous e-waste recycler taking my e-waste out to the one place in Girraween where I know they wil take my waste (for a fee). One of the challenges with e-waste is the perception by the consumer that handing the device over for "recycling" isn't just giving the equipment to someone who will then profit from it - mainly through re-use rather than the value of recycling.

The model proposed by the Ministers doesn't overcome this problem. It also seems to me as a taxpayer somewhat ludicrous that there will be a levy on one kind of good but not on other goods that wid up as "waste". Used furniture winds up in landfill, but we don't tax it upfront for its disposal costs. Cars get dumped but we don't tax them upfront for their disposal costs.

The second ludicrous part is the idea - like bottles - that taking waste back to a retailler is a good model. The efficient retail logistics model takes goods to stores for sale, it doesn't have a return chain. The efficient waste logistics model takes all waste to central locations (waste disposal centres) where it is sorted and further distributed.

When I buy a new computer I don't have the old one ready as a trade in to take to the store - especially these days where you can copy the data from one to the other directly. So the store as waste point means another trip.

Why in heavens name can't we just put e-waste into our ordinary recycling bins - at least in those enlightened areas where the recycling bin is co-mingled? Maybe monitors won't fit - but let these be delivered to the local waste disposal centre or - like my Council Ryde - provide the same kind of kerbside collection that you can book for bulk green clippings.

Please can we stop the ministers from implementing what looks like a seriously dumb scheme.

Bing and Wave

It is getting increasingly hard to keep up with the new releases and technologies that the real geeks are developing.

This week we've seen Google announce Wave and Microsoft announce Bing. Totally different products but with similarities. The first similarity is the use of really simple words as brands. The second is that these are products that are "sort of like what we know but not quite".

Wave is supposedly something that integrates email, instant messaging and collaboration saying a "Wave" is equal parts conversation and document, where people can communicate and work together with richly formatted text, photos, videos, maps, and more". Bing is supposedly something more than search, it will be helping users make "specific decisions". Bing in this sense is a bit like Stphen Wlfram's Wolfram Alpha, though it is unclear whether like Alpha this depends on information being formatted into the data set accessible by the tool.

I can't help feeling that both of these are missing the point, and both are over-buying the appliancised PC. My experience is people like thinking and they like the tools that help them do so. So Bing looks like it is off the money. As to Wave I'm just wondering what they are offering that isn't what Skype can already deliver - plus I really worry about "the cloud" as a computing machine.

Meanwhile I noticed that Austar (through their owner Liberty Global) is promoting the integration benefits of the Digital Living Networks Alliance.

In related digital news Ruprt Murdoch has declared Newspaper future is digital. Exciting and interesting times ahead.

Thursday, May 28, 2009

The New Opium Wars?

The British Empires claim of "extraterritoriality" was one of the causes of the Opium wars in China in the nineteenth century. This was the claim by the British that their subjects should be covered by British justice not Chinese justice even when on Chinese soil.

The concept seems rude, arrogant and so completely out of touch with the post World War II environment that has seen the end of empire and the acknowledgement of the rights of citizens to run their own countries.

Except of course if you are the Tele and the subject matter is an Australian convicted of drug smuggling. In today's Tele Tracey Spicer makes a case that Schapelle Corby should not "die in Bali".

However, it seems that the core basis for the claim is that "A crime which would have garnered a short period of humane treatment in an Australian jail has left her rotting in a foreign hell hole." This seems to be the thrust of the argument, and is a construction of one of three possible underlying beliefs;

1. Australia is culturally superior to Indonesia and therefore our laws ae more appropriate than theirs.
2. If two laws could apply, only the most lenient should, or
3. The laws that apply to a citizens home country should apply no matter where the person commits the offence.

The reasoning can't be 2, because then if an Iranian citizen had conducted the fatwah against Salmon Rushdie in Australia, there would be no penalty because the murder would ot have been a crime in Iran.

The reasoning can't be 3, because then if a Saudi citizen was found guilty of theft in Australia they should have their hand cut off.

Therefore the claim is the cutlturally arrogant option 1.

Now Spicer might defend herself, and argue that really all she is trying to argue for is the right for prisoners to serve their gaol terms in their home countries because this would be better for them psychologically. That is a claim that has some merit, but it is a claim that should apply to all criminals bilaterally by treaty. Those treaties need to reflect that the purpose of the exchange is not to provide leniency on the sentence but to facilitate the incarceration.

But that case would have nothing at all to do with the nature f the crime and how it would have been treated differently under Australian law.

That said, I do believe it is acceptable for citizens of one country to "moralise" over the laws of another. Howevr, to be effective this would really be best conducted on a platform of a worked through secular moral code. I'm not holding my breath for the Tele to do that!

Tuesday, May 26, 2009


It is well known that, to the surprise of many, I took the route of joining the Australian Demcrats in 2006, and contested the 2007 State election in the seatof pping and sought preselection for the Senate.

They have of late resorted to e-mailing me again seeking support. They aren't spamming, they checked first and do provide an unsubscribe option. I find it all amusing. I actually wish them well, but my disagreement with them amounts to the fact they think their future is about campaigning without definition. They focus on who they are not (not the major parties, not bastards) rather on who they are.

I just thought I'd share with you the latest begging e-mail from them.

Dear David,

In the past weeks, we’ve made good progress in our rebuilding efforts, taking on many new members and renewals. For the first time in a long time, our party is growing.

With this growth comes new challenges: many functions of the party, from policy development to technology were run in the past by paid staff, directed by our Senators.

Volunteers have kept things functioning these last years, but there are numerous areas of need, including:

* Funding for a upgraded, more reliable website that not only allows for greater discussion, but allows for members to connect, discuss and post their own local events and news in a secure area.
* Funding for advertising and other outreach to reintroduce the Australian Democrats to the public and remind them of why we are here
* Printing and postage costs for better communication to members and prospective members.

Please help fund our efforts with a tax deductible donation.

Our membership is still very diverse, with very technically savvy members and equally large groups who are not online. Getting policy and proposals approved, therefore, can be a complicated and costly endeavor. It can only happen with your support.

If you’re in a position to help, please contribute today.

Three decades ago, long before email or social networking, our party was able to quickly rise to power through a strong message: Politics is about people, not special interests – and the Australian Democrats were fighting to make sure policy reflected that.

Now, our country needs a better alternative to the two dominant parties. We can reignite our support very quickly, but we need to be able to do more than talk to each other. We need to be able to efficiently push our message to a larger group of people, and have the mechanisms in place to allow them to directly engage their areas of interest.

Please make a donation today to help us in these efforts.

We understand not everyone is capable of contributing. But if you’re doing ok, and believe in the Democrats, please help us get into a position to succeed. Donations up to $1500 are tax deductible.

With federal elections due just 17 months away, and talk of an early election, we must act quickly. Thank you for any assistance you can offer.

- Australian Democrats

The stand out phrase is "our party was able to quickly rise to power through a strong message: Politics is about people, not special interests". I hate to disapoint them that they did not rise to "power". I also want to acknowledge a comment to an earlier post that questioned whether the Democrats could claim to be a "libertarian" party compared to the LDP. The answer is relatively simple, that most libertarians are only libetarian in relation to the things they want to be free on. It is notable that the Australia Party was notably more libertarian than the Democrats.


Racism is a very pernicious form of discrmination. At its most extreme racism bridges into genocide, seen all too frequently in the 20th and even 21st century, but at its less extreme it comes in the form of active discrimination against certain racial groups on the presumption that "that race is the primary determinant of human traits and capacities and that racial differences produce an inherent superiority of a particular race."

Today we have seen the former CEO of Telstra return to territory that he has visited before - the suggestion that a range of references to his ethnic origins in Australia amounted to "racism". It is a very big claim, especially when it is extended to the Prime Minister's one word "Adios" as a comment on Sol's departure.

It is nonsense. There is no suggestion or evidence that Mr Trujilo was ever discriminated against, nor indeed that the references to his Hispanic origins was anything other than the process of characteture that draws attention to people's noses, eyebrows or - in relation to Sol's predecessor - degrees (Ziggy was a nuclear scientist). None of the references suggested that he was in any way "backward" for being Hispanic.

Trujillo goes further and claims that Australia is "backwards" because it was only thirty years ago that we changed our discriminatory immigration policies. This is the most outlandish claim of all. Firstly "white australia" was retired forty years ago, not thirty. Secondly at the same time it was retired, the United States was still practicing segregation in its Southern states.

Finally one is left with the presumption that Mr Trujillo thinks his Hispanic background was the matter that was focussed on. But being a Hispanic business man is part of Trujilo's "claim to fame" as in this hort bio;

Sol Trujillo, Chief Executive Officer, Telstra Corporation Ltd
On 1 July 2005, Mr Solomon (“Sol”) Trujillo joined Australia’s leading telecommunications company, Telstra Corporation Limited (Telstra) as its Chief Executive Officer (CEO). Prior to joining Telstra he was CEO of London-based Orange, the first American to lead a CAC-40 company; President and CEO of US West Dex Inc.; President and CEO of US West Communications; and CEO and Chairman of US West Inc.

Mr Trujillo holds a Bachelor of Science with a major in business and a Masters of Business Administration (MBA) from the University of Wyoming. He was granted honorary doctorates from both the University of Wyoming and the University of Colorado. Mr Trujillo was the first native-born Hispanic-American to serve as CEO of a Fortune 150 company.

In fact Hispanic Business welcomed his return without being accused of "racism".

Meanwhile, it was Telstra that pursued the xenophobic criticism of Optus - frequently referring to it as Singapore and foreign.

I am extremely happy to see the back of Trujillo and his "amigos". His claims of racism are extravagant, extreme and unfounded.


Okay well I hope you've all seen the original of Chk-Chk-BOOM. But in case you haven't...

It is a great story as it unfolded that Clare's story was made up, which you can figure out when she didn't have an answer to the question of "where did this occur." If she doesn't get a gig in front of the cameras she could at least be a script writer.

Now that scion of quality commentary Piers Ackerma has decided in the Tele to use "Chk-Chk Boom" as an epithet he'll attach to things he thinks are just spin if not outright lies.

A nice piece of using something contemporary to draw up a list of things he doesn't like about the Rudd Government, but the list has flaws. Let's talk examples.

Remember the computers for schoolchildren? Well, yes. The money has bee allocated to States. In NSW that went to a new tender won by Lenovo. In Victoria schools are ordering off their panel contracts. In fact the election pledge was increased to cover the cost of additional school networking, a contract won by IBM in NSW. Promise delivered in full as far as responsibility of the Australian Government is concerned.

Rudd’s claim that “I am not a socialist. I have never been a socialist and I never will be a socialist?” A bald assertion by Piers with no actual prof. Rudd seems to believe in Keynesian stimulus and Government investment in national infrastructure - but so did Menzies and I don't think he was a socialist. I certainly don't see Rudd pursuing any agnda for the socialisation of the means of production, distribution and exchange. He hasn't proposed nationalising the banks (which has happened by default in some countries). No, sorry no socialist here.

His claims not to know he was to attend a fundraiser with disgraced former WA premier Brian Burke I've not seen any evidence other than this assertion that Rudd had any more prior notice than he has publicly stated.

Denials his soft policy on boat arrivals has driven a new wave of people smuggling Well I know that Piers and others are keen on this theory but as (a) global refugee movements have spiked dramatically and (b) we happen to have seen the spike that follows the end of the cyclone season there are other causes of the "new wave".

Piers use of the chk-chk boom device was clever - but all it showed is that he is as fanciful as Clare.

UPDATE: Piers also claims "Rudd and Obama used activists behind the political agencies GetUp and MoveOn to sign up supporters and publicise their propaganda before their elections. Having snowed their audiences, it is now chk-chk BOOM time." It is offensive to both Rudd and GetUp to infer a link between them. In case Piers hasn't noticed GetUp's current campaign is opposing the Government's internet filter trials which were a core component of the Rudd promises.

More on our States

Further to my constitutional discussion Geoff Gallop has defended the States in today's SMH.

His core thesis is the idea of "competitive Federalism", wherein the various States vie to achieve relative advantage against each other and that certain positive initiatives might not emerge were it not for Federalism. That two of his examples are bottle deposits (SA) and no pokies (WA) makes the argument less than brilliant. He is perhaps on safer ground with the Victorian Charter of Rights and the NSW safe injecting room trials. But there is no reason to believe that a properly functioning (i.e. with a parliament that works) unitary system can't get this outcom.

He also tries to have a second bite by then extolling the benefits of "co-operative federalism", the need or he states, territories and feds to co-operate on major initiatives. A key drawback however with the co-operative model is the extent to which it disempowers Parliaments - the Parliaments very much gt presented with "take it or destroy it" outcomes from often "secret" negotiations. While eight Parliaments get to legislate to support the scheme, none of them can scrutinise the Bills the way they are normally done, and there is no viable option for the legislation to be amended.

The article refers to some online debate at iQ squared - but frustratingly the online version doesn't include a link to it on the SMH website. For those who want to participate the site is I suggest the SMH needs to improve its idea of being the "media partner". Pity it is being held on a Tuesday - that's bridge night and we've missed the last two weeks.

Monday, May 25, 2009

Will it happen to the Democrats again?

The Australian Democrats could, amongst other things, lay claim to being Australia's first enviromental party. However, they also were a fairly broad church party representing a range of "progressive" causes. In the analysis of its demise a number of potential causes can be identified. One was the agony caused by regular fracturing between the broad progressive causes - usually a fight amongst priorities. The second was the practical problem once a balance of power was achieved of having to make real choices about real issues rather than working in theory.

But a third was the emergence of a single issue environmental party, The Greens. This party was modelled on the party of the same name established in Germany then spreading across Europe.

I've noted the revived Democrats attempt to recreate its niche as the libertarian party. No sooner have they done so than the first vestiges of a new niche party in Europe has emerged.

Sweden is the first country to have outlawed peer-to-peer internet activities that mostly constitute copyright theft. The political response is the launch of a new political party called the Pirate Party.

The question is will this party also morph into an Australian version and steal the Democrats new chosen ground?

Future Summit II

One of the few comments I've received on this blog was in response to my questioning of the whole Davos thing.

It will not surprise my readers that I didn't attend the latest "Future Summit" but Cassandra Wilkinson gives us a summary in the Oz. Her experience was another meeting of capitalists wallowing in a sea of regret trying to appease the anger of those who feel capitalism has let them down. Her response was;

Capitalism has bubbles, and from time to time the animal spirits rise and fall, but historically we find ourselves better off over time with continuing gains in living standards, health and literacy. While unemployment and the other impacts of the recession will be everyone's problem, we need to be careful in regulating against the bubbles, lest we curb too much of the animal spirits that have seen free market societies feed, house, educate and connect citizens faster than any planned economy.

This is an incredibly blasse response from someone who seems to have heard about classical (or neo-classical) economics but never actually studied, and certainly one for whom (a) the entire Keynesian theory never occurred and (b) hasn't read any of the stories that explain exactly how perverted the unrestrained financial markts became with people trading assets with absolutely no idea of the risks they were engaging with.

All credit to Future Summit for at least trying to engage with the issue, but I must confess that judging by the program this was another one of those "capitalism apologist" sessions, a small bit of self-flagellation and promises to do better without really deep philosophical analysis. Meanwhile the promised "blog" seems to have stopped before the conference began.

Note: Another interesting element of the discussion of the future of capitalism is the definitional issues surrounding "capitalism". The most general version seems to be equating capitalism with a market economy, but one of the lessons of communism is that certain aspects of markets occur everywhere. Nothing you can do as Government removes the fact that people make choices and the aggregation of choices is a market.

The equating of capitalism with "unregulated markets" clearly gets you into a mess because all effective markets are regulated in some way. Look at listing rules on stock exchanges or the importance of regulation of both money, property rights and contract law to make most markets for physical goods and real property work.

The classical definition of capitaism was the system wherein the ownership of the means of production is separated from the actual producers. A more extensive definition relates to the importance of capital accumulation. The big difference between capitalism and pre-capitalist economic organisation is the fact that capitalists intentionally generate surpluses which are saved for reinvestment. This explains the fundamental shift in economic growth with the advent of capitalism.

But early capitalism was still dominated by "capitalists", a class of people who undertook the capital accumulation process and were also typically the entrepreneurs. The modern era of capitalism is mostly managerial capitalism, where the accumulated capital is run by a group of professional managers running the business on behalf of a dispersed group of shareholders.

It is this version of capitalism that is failing. No amount of clever remuneration plans fixes the principal/agent problem btween CEO and shareholder interests. The role and reward for entrepreneurial activity is largely lost and very discontinuous (some get really lucky, the rest miss out).

A good Future Summit would ask the question "what comes after managerial capitalism"?

Is our constitution under threat?

That got your attention.

The good news is that it is not the democratic part of it but the Federal part of it. It has historically been assumed that the Federal nature of our constitution has been zealously defended by the conservative side of politics, whereas the ALP was more centrist.

This has probably been an illusion. Our parties id not set out with a fundamental cleveage between centrists and states righters like the original division between Republicans and Democrats in the US (Republic = an elected strong central power, Democrat - highly dispersed authority), though that American distinction is now more historic than current (also, did you know the US Civil War was more about the question of the power of the national government to legislate about slaves than the right to own slaves).

In our history it so happened that Labor Governments had most of the responsibility for prosecuting WWI and WWII, both of which necessitated national approaches. But he Gorton and Howard Governments were far more centrist than the Hawke Government, but not as much as hitlam.

But now we have two elements of the conservative side questioning the current constitutional arrangement. Firstly Barnaby Joyce writing in the SMH does some interesting analysis of the composition of the Senate to demonstrate that the current arrangements result in a metropolitan focussed Senate, whereas one version of its purpose was to ensure against "dictatorship by the majority" that being ensuring that the big states didn't dominate the small. Joyce proposes a revision to the geographic areas that elect Senators - though I would caution against his proposal of regions electing two senators.

As I wrote in a submission to the Howard Government review of the question of the double dissolution provisions having equal numbers results in a very distorted relationship between voting preference and outcome. (I can't find the submission on-line).

Barnaby seems keen on also reforming the underlying concept of regional government, but also on generally dispensing with States.

Meanwhile another column has appeared about Tony Abbott's forthcoming book. This again reminds us that Abbott plans to have a crack at the underlying constitutional issue. My understanding is that he addresses the procedural conundrum of abolishing states - you almost need a set of seven simultaneous referenda that all succeed. His alternative is to amend section 51 of the Australian Constituition in such a way that the "default" position is that the Federal Parliament can legislate on anything. In this way the Australian Government can progressively take responsibility for greater areas of activity, with an endpoint of rendering the States irrelevant.

The two processes can work in tandem.

I'm forming the view that this is a far more important question of "national governance" than the current republican proposals. I just don't know what to call the movement. For the Abbott proposal I've thought of "Change 51" which sounds sort of funky. For the Joyce proposal I don't know. These are both more sopphisticated than the "Shed a Tier" crowd.

All suggestions welcome.

Note: Just to declare my interest on the republic question. I actually think a directly elected President is an important move, but only if we go the whole hog for an executive presidency like the Americans. Revitalise the Parliament, and create distinct contests between voting for the government and voting for parliamentary representation.

Friday, May 22, 2009

Economic Impacts

Access Economics has recently released reports for IBM and Telstra on the economic impacts of "intelligent technlogies" and "high-speed broadband" respectively.

Question: Do these studies measure the same benefit or do they measure different benefits?

Hopefully over the weekend I'll work out the answer. If anyone else knows please post a comment.

UPDATE (Monday 25 May). I've been assured the two papers don't double count. In fairness I thought I'd also link to a CIE presentation on the same subject.
(Perhaps unrelated on the piece of paper I found the reference to that paper on I found these definitions;
Monopoly - one person makes a lot of money
Duopoly - two people make a lot of money
oligopoly - one person makes a lot of money and the rest spend their margins on marketing

What's in a name?

Interesting document from that hotbed of radical right thinking The Centre for Independent Studies on the subject of neoliberalism.

It is a spirited defence of the concept of "neoliberalism" and is very worthwhile as a reading in the formation of ideas, and indeed the concept of a "new liberalism" developed between the world wars as an alternative to both forms of corporate state (fascist and communist). However, it is completely irrelevant in its rebutal of anything Kevin Rudd wrote about in his The Monthly essay. The answer has far more to do with Humpty Dumpty than political theory, or simply philosophy of language rather than political philosophy.

In the famous passage in Alice Through the Looking Glass;

`When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean -- neither more nor less.'

`The question is,' said Alice, `whether you can make words mean so many different things.'

`The question is,' said Humpty Dumpty, `which is to be master -- that's all.'

For somebody to say Rudd is wrong because the word "neoliberalism" means the view established in Germany between the wars is to make an error, because Rudd is referring to what he means it to refer to.

It would be like me in business hearing my colleagues talk about the the responsibility for "marketing" and assume the meaning was the same as in this passage from Mrs Beeton's book of household management;

It will be one of the duties of the housekeeper to attend to the marketing; in the absence of either a house steward or man cook.

To argue that "the context" makes the difference is only to prove the point, the context of Rudd's usage is the early 21st Century and his need to find a word for the group of political philosophies that espoused a greater reliance on the free-market than had existed in the post-war "accomodation" between liberalsm and socialism partially informed by a Keynesian theory that classical economic theory ignored the capacity for markets to result in sustained underemployment of resources and hence the need for Government action in the creation of aggregate demand.

Rudd, in common with many others, chose to call it neoliberalism. An American would call it conservatism but that usage does not fit the British meaning of "conservative", and indeed fits uneasily with Hayek's own essay on "Why I am not a conservative" (in The Constitution of Liberty).

So, nice essay Oliver Marc Hartwich, very informative, but completely and utterly irrelevant in the context of the Rudd essay.

Plus Ca Change, Plus Ca Reste La Même

An excellent industry newsletter, Exchange, has just passed its twentieth anniversary and has added a "twenty years ago" column to its previous "Ten Years Ago" one. Today it says;

From Exchange 12 May 1989
• Downfall of newspapers foreshadowed
The Australian Financial Review on May 8, 1989, carried
a story headlined ‘The humble telephone may threaten
newspaper revenue.’ It said that “last month, a gathering
of American newspaper publishers was dominated
by discussions about how to respond to moves by the
telephone companies to break into information services
and classified advertising that are the bread and butter
of most newspapers.”

That's just about the hottest story right now - but it is the Internet not telephones!

Raunchy? Website?

I love the Tele (not). Under the heading Raunchy Young Liberals website triggers division they reported on a "website" created supposedly "to recruit more men into the Libs based on its women. "

Well let's get some facts here, firstly the material was merely a a blogpost but the page has been temporarily removed from the blog. The blog itself is one I love - a good example of the lunar right in the extreme.

As to the central thesis, that the Young Liberals is a great social club with hot chicks, that was actually a claim made in Joh Hyde Page's Education of a Young Liberal, a book that is unfortunately no longer available due to some legal problems. However, in that book it was made as a criticism of the Young Liberals whereas the turkey blogger was "serious".

He did post two updates before taking the page down that said;
UPDATE 4: To all who disapprove, do us all a favour and grow a humour bone. I mean really.

UPDATE 5: Please, for the love of God, do realise that this post is little more than some light-hearted humour. The consent of everyone involved was obtained, everybody involved got the joke, and this isn’t some new Liberal recruitment ploy etc. So lighten up & enjoy this in the spirit in which it was written! And to my friends in the media, please, do contact me before you start contacting others about this. Bit of courtesty like that never goes astray…

We should of course point out that both the major parties use the "hot babe" theory in allocating parliamentary seating. The "hot babes" are seated behind the PM and Opposition leader so that speakers at the dispatch box always get filmed with the hot babe in view. In fact the one sitting behind Wayne Swan on budget night had her head at an angle to ensure it was "within frame" for the speech...presumably the treasurer was a bit of the taped cross on the floor that marks where heis meant to stand.

So what's the overall score? Well zero for the Tele for confusing a blogpost with a website. A bigger zero for the blogger for his outright stupidity. es it was funny, but actually it was counter-productive. As for the girls? My only comment is that Atlas Shrugged is a destructive book and the girl reading it should seek therapy.

Thursday, May 21, 2009

Migration to FttH

One of the big conundrums for the Fibre to the Home deployment in Australia will be how to maximise take-up early. Other big services projects haven't faced this challenge. When areas get connected to sewerage and water for the first time householders are required to pay the conection fee and disconnect sceptic tanks and water tanks.

With the FttH the expectation is that it might be a little more like the PayTV model where connection is voluntary. But that doesn't really work if we want a port on the fibre available for smart metering.

The idea that the citizenary can be forced to pay to continue to enjoy a service is already getting a work-out with conversion to digital TV, so we shouldn't say that's not possible.

Anyhow here's three ways it could be done;
1. Have a two price offer for connection - the price for connection at the time of deployment is X while the price at a later date is X+Y. Also advertise that the existing network will be cut off in Z years - make Y sufficient incenive to spend X now.
2. Create a giant credit scheme. The value of connection is X. If the customer elects not to pay it it is treated as a secondary (or new kind of) mortgage on the property and needs to be discharged before the property can be sold - interest can accrue at whatever rate is neceessary to fund it plus a cost of scheme administration. This could be paired with the scheme above.
3. Create 9 million shares (or whatever the number of houses is) and give each householder a share in the NBNCo when they pay for their connction.

Interestingly model 2 is a way that householders could be required to pay the entire cost of the network not just their connection charge. That would create equity with the Greenfields scenario. The share concept could be added to it.

Automatic stabilisers in interest rates

In the first of my posts on The Tanner Thesis I noted the way a more sophisticated set of tools could be used in prudential regulation to manage asset price bubbles. Crikey today reported a speech by RBA Assistant Governor Guy Debelle in which he talked about why central banks can't just raise interest rates to control asset price bubbles, as the consequence is flattening of the economy.

This point was well made by J.K.Galbraith in his The Great Crash that was his analysis of the crash of 1929. His analysis was that the central banks couldn't have stiffled the asset price boom in shares without killing the economy - though I guess the economy tanked anyway.

Anyhow Debelle said "But other tools, most notably the much-touted (although not clearly defined) macro-prudential instruments, should be used to address asset price and credit imbalances. I do not think that a slightly tighter setting of interest rates would have prevented the development of the imbalances that have led to the current financial crisis."

So I went to figure out what these tools are and they do look like what I have been talking about for use - changes in the capital adequacy rules under positions of asset price inflation. This is explained in more detail in the Turner Review in the UK.

One other point that they suggest is a similar regime for "mark-to-market". This is the policy that assets get revalued to market - but this could be amernded to say the upward revaluation is limited by some overall "speed limit".

The bad news, however, is that once we work out this lot of stabilisers the next economic crisis will come from another area where we haven't yet identified the need for a stabiliser.

NBNCo and the MFP

Many years ago when I worked for Telecom Australia (1987 to be precise) I was called by my boss to do some reserach on a policy that Australia had just received from the Japanese Government's MITI for a thing they called a "multi-function polis" or MFP. The idea was a high tech city - though in part it looked like just a giant retirement village. Part of the pitch was that the new location was to be environmentally attractive - like the Queensland coast. One of these days I'll put my copy of the original proposal up on my website.

As the Australian Government got into the detail there was a bidding war between the States, then the concept was floated of a "vitrtual" MFP so it could have bits in every state! In the end the cause of marginal seats in South Australia won out and a swamp near Adelaide was chosen for a proposal that never happened.

On Wednesday night at the Fibre to the Home Council Asia Pacific conference "Gala Dinner" the representative of the Victorian Government gave a speech which was a repetition ad nauseum on why the NBNCo head office should be based in Melbourne. This was wildly inappropriate for the audience, and probably a waste of syllables because no one who could make it so was in the room.

Apart from the similarity with the MFP, the other bit that struck me was how misrepresented the material was. See every advantage that the Vctorians claimed was really the consequence of one "accident" of history. The accident was the fact that telecommunications became a Federal power in 1901, because of the international dimension of the services, nothing else. The first Federal Parliament met in Melbourne and all epartments were established there. With the foundation of Canberra and the move of the Parliament in 1927 Departments were progrssively relocated. The PMG never was, an so with the split of Post and Telegraph both Commissions established HQs in Melbourne. Only HQ made purchasing decisions so most supply firms built facilities in Melbourne. In 1987/88 Telecom finally addressed its dysfunctional Federal Structure and built customer facing divisions. The heads of these divisions and the GMs beneath them were smeared across the Eastern seaboard capitals.

When Frank Blount arrived to take up AOTC (that became Telstra) he was pressured to Choose between the Telecom HQ in Melbourne and the OTC HQ in Sydney. In reality he never really chose. He went so far as to have the same phone number in each of Sydney and Melbourne. While Ziggy made Telstra feel more Melbourne again I challenge anyone to figure out how Sol ran it!

The Vics also wanted to claim the regulators are based in Melbourne. Well when AUSTEL was formed by being carved out of Telecom, surprise, it was in Melbourne. When AUSTEL was split into the ACA and the ACCC the teams were in ... Melbourne. But the ACCC Telco commissioner is based in Sydney as is the ACMA chair.

The reality is that there will be no "head office" of the NBNCo. It will have to have big teams in every city. Any return to a "singular" head office would be a tragic mistake!

I'm reliably informed that the speech occurred because the Vics had heard a rumour that it was about to be announced that Queensland would be the head office. That would be a tragic mistake given the lack of staff who already live there, and I don't see any need to provide growth into the naturally growing states.

But most importantly there should be no single hard office. NBNCo should look just like Telstra has for twenty years - two locations from which the show can be run, talent can be employed where talent is - and the technology that is being built can be used.

To announce a headquarters location before a chair, board and CEO would be a farce!

Democrats in search of meaning

The "resurgent" Australian Democrats continue there attempt to search for meaning. Following their serious of BastardWatch activities they have dug into the bag of lessons from the great leader (Don Chipp) and lighted on censorship.

Now there is certainly plenty to be proud of in Chipp's achievements in this field, and it may be churlish to note these were achievements he made as a Liberal. It is also worth noting that censorship was a policy area on which the Australia Party alays distinguished itself, before indeed Chipp made his impact I believe.

But they have not here found a place to distinguish themselves. Their campaign jumps on the no internet censorship bandwagon on the usual littany of lies that it won't work (let's do the trial), is ineffective (so we shouldn't outlaw murder because outlawing it doesn't stop it), or that the list is scret and wrong (well that's the existing list, the ALP always said it would revise the list).

At least they are going to seek an alternative. However they say
We will also be working on a new censorship policy that seeks to limit all censorship as much as possible, allowing adult Australians to choose for themselves what they want to see...This will include a consistent approach to classification and censorship across all media.

But as they seem to have decided that you can't block things on the net, that means they won't limit access to anything. That means that to deliver a consistent approach there would no longer be a Refused Classification group of material and tis would be available under the (presumably) same conditions as X18+ material.

It is an interesting proposition. Not one that I think will see a great revival. And also one that sees them trailling GetUp! yet again.

If they had real balls and policy brains they'd be addressing the question of the role of large corporations in all their guises in policy making and control of debate, they'd address how massive companies are inconsistent with the assumptions of market capitalism. They'd be at the forefront of the demands for better prudential regulation!

But no, censorship seems to be the big liberal issue. They truly are the embodiement of a "post-materialist party", but hardly relevant in the mioddle of an econmic crisis.

Wednesday, May 20, 2009

People like this give the ICT sector a bad name

I've spent the last two days at the 4th Fibre to the Home Council Asia-Pacific conference in Melbourne. It was a very interesting two days - as with all conferences some of it was patchy.

But nothing was as bad as Bret Swanson who has a background amongst other things at the Progress and Freedom Foundation. That immediately puts me off - this makes me immediately think I'm going to hear something that comes from that school of thought that thinks markets are perfect and firms are even better.

He calls his company "Entropy Economics". He explains the name as being about the a concept of entropy in information theory rather than the physics concept of randomness - but having heard him present it is certainly the random that fits.

His presentation was about a thing he wants to call the "exacloud" - which at first telling is a simple forward projection of a 56%pa growth in bits carried on the internet. His graph howed the wonderful glitch from 94 to 96 where it grew faster than that, but which WorldCom famously was telling us was still happening into 2000. Thus was the the fibre bubble formed.

He glossed over the fact that half the traffic on the net today is theft (peer to peer). He qoted again he 13 hours per minute of uploads to YouTube of which a HUGE amount is duplicated uploading of illegally copied segmnts of TV shows etc and most of the rest is not watched by anyone. In fact, as an economist he should be wondering why we are spawnng a model of such massive technical inefficiency.

The forecaster who I want to listen to is the one who is going to forecast the shake out in the internet whre demand for QoS means we drive neconmic traffic off the net - which is the point at which the exponential growth in backhaul might decline but a greater growth in valuable services emerge.

As for the rest he came out with some really interesting examples of huge processing capability to "render" digital video and tried to argue his was about some huge requirement for computing power. It was he greatest load of old-cobblers bcause he wasn't talking about anything that was to do with more efficiently producng pictures on a PC. Somehow lots of video gamers using the net to put load on this machine to render their video was better than putting the processing under he desk - sorry the processor under he desk is THE BEST example of distributed computing or parrallel processing you can find.

Being me I challenged hm on all this - and he got into the whole defensive thing about cloud computing now being an established business model. Bulldust. I will save for another day the showdown between Nicholas Carr and Jonathan Zittrain. But cloud computing is NOT the way of the future in the sense of "software as a service", it is when it comes to collaboration.

Which is better - Microsoft Office, Google Apps or Open Office - discuss?

Unfortunately just as I had Bret on the ropes Ravi Bahtia go up and made some nane comment about the size of the first ARNET connection versus Pipe's PPC-1. The true believers in he room gave him a round of applause.

I am a fan f Fibe to the Home, I am a great believer in the need for more bandwidth - I just don't believe it is about cloud computing, about videos and games - and that people like Bret damage the cause of those of us who believe in the transformation of the Digital Economy.

And I may blog later about the Communications Alliance discussions.

Coalition tax review

People who follow my writing might have seen me getting stuck into Henry Ergas in the Oz and at Crikey for not declaring the work he is doing for the coalition as a tax review. In today's SMH they report that he tax review is seriously stalled.

The egregious part is the reference to Ergas as "Dr", he is a plain ld "Mr" with no research degree and as far as I can figure out exactly one articl in a refereed journal.

In CommsDay Eras claimed that I was certainly no economist. My problem is trying to figure out what basis Ergas has for claiming to be one.

Certainly he is taking hi time letting us see his work on tax policy. At least from my interaction with Ergas in Crikey we know the coalition aren't paying him for this work. If they don't declare his work as a donation "in kind" I guess we can assume his contribution is "worthless".

Monday, May 18, 2009

Mobile operators slammed

In case there is any confusion, the releases today by ACMA and Minister Conroy are a significant rebuff for the mobile operators and Communications Alliance.

After months, if not years, of trying to come up with a self-regulatory scheme ACMA has registered the code but added some significant additional regulations. These are elements that could and should have been dealt with by the code.

Hopefully those in the industry who care about the self-regulatory model will reflect on this experience. Ultimately this was a matter inside the telcos of the marketing departments beating the regulatory teams into not constraining their behaviour, only to force the regulators to do it for them.

Hopefully the CEOs will reflect that just maybe they need to change their thinking or risk further trashing the reputation of the industry. They currently com across as distrustful and requiring fir action to control their markting xcesses.

I have long believed that this results in an overall loss of revenue to industry - as it makes customers more cautious than they need to be. It is a simple economic model of consumer behaviour, but one not perceived by people who model the industry from a win/lose framework.

How much travel is too much?

Wow. It seems like we the taxpayers are meant to begrudge our politicians travel expenditure. Lindsay Tanner has been holding out the hope of videoconferencing, but it seems that is about domestic meetings and the copmplaint is about international meetings.

And little Malcolm Turnbull wants us to compare and contrast the Howard recordof travel with the Rudd record. It might have escaped Malcolm's attention, as so much seems to, that the bulk of the Rudd travel has been to international meetings at head of government level - APEC, Pacific Forum, G20 and the like. A little thing Rudd calls the GFC has seen a lot more of these lately.

Given the choice of whether I want Australia's leaders to engage with the rest of the world or not, I vote for engagement. I know it makes the opposition seem even more irrelevant than it usually is because the opposition leader doesn't get to travel on the same trips (though Brendon Nelso seemed to suggest he should - under a Government in exile mindset).

Even when we solve the problem by hosting the meetings it costs more - just look at the 2007 APEC. It can also be embarassing - think the Chaser. At least that meeting did give the opposition a moment to shine, but I don't think Malcolm speaks Mandarin (though I believe his Latin is very good).

Meanwhile good to see that someone is paying attention to the fact that Kevin Rudd really is trying to keep away from just being a merchant of spin while noting that that is really what Turnbull did in his reply speech.

As well there is commentary focussing on how character building dealing with the deficit will be. It is a great pity that Swan and Rudd have thus far failed to point out that the stiulus could have been faster and more focussed if there had been more infrastructure planning under Howard. We needed more projects through the planning phase and, in that delightful phrase "shovel ready". But Howard and his crowd just fiddled and ponitificated and pointed fingers at unions, at the States, heck at everyone but themselves!

And they don't seem to have the excuse that thy were never in the country. Maybe if they'd travelled more they would have seen some opportunities for governing differently to the Goerge Bush model.

Illegal brothels and adverising

Those wonderful folks at the Daily Telegraph tell us that illegal brothels are blloming across Sydney. In the article they suggest tough new laws are having no impact.

Meanwhile further back in the paper there are one and a half pages of ads for "adult services". This number is matched in all their sister publications in the Cumberland Press stable of local newspapers. This level of advertising suggests this is a very important part of the brothel eco-system. How else do you find a brothel (which, of course, is different to the streert walkers used to add visual colour to the story).

How about the Tele suggests an obvious law change. Make it illegal to advertise "adult services" unless the business has a "licence" - the structure of such licencing needs to be worked out but from my view it is something that would be issued by the State Government and require the endorsement of the relevant local council. To avoid the obvious concerns about the State Government endorsing brothels, rather than merely not prohibitting them, the "licence" need only be a licence to advertise an adult service.

I wonder how the sales and marketing (of ads) department of News Corp would react to that? At least it is good to see a clear separation of editorial content from adverising policy. Pity that the separation occurs in a field of moralising in which the Tele and the rest of News could provide their own moral lead.

And the winner is ...

with a record score...Norway

Friday, May 15, 2009

Andorra was robbed

I've just been told that Andorra is the largest country in the world without an airport. Great shopping, but no fast way out.

I guess there is some way other than walking over the Pyrnees though.

Meanwhile in shocking news Andorra was eliminated from this year's Eurovision song contest in semi-final 1. Maybe it didn't look as good o stage as in the clip - or just maybe people found it a bit repetitive.

Will I live blog the final when it is covered in Australia? No probably not.

Who will win - your finalists are;
01 Lithuania
02 Israel
03 France
04 Sweden
05 Croatia
06 Portugal
07 Iceland
08 Greece
09 Armenia
10 Russia
11 Azerbaijan
12 Bosnia & Herzegovina
13 Moldova
14 Malta
15 Estonia
16 Denmark
17 Germany
18 Turkey
19 Albania
20 Norway
21 Ukraine
22 Romania
23 United Kingdom
24 Finland
25 Spain

Go Moldova!!!!

I just learned something

Buried in Annabel Crabb's item in the SMH today was a line that "a search engine and 15 keystrokes (K-E-V-I-N-R-U-D-D-E-A-R-W-A-X) are all it takes to summon a visual reminder of the weird stuff our Prime Minister gets into."

I thought - 15? What about the spaces. So I tried just the string "KEVINRUDDEARWAX" and what do you know - Google figures out you meant to put spaces in. How clever is that?

And that is all I intend to write about the whole matter. Except to ask why the ABC thought it relevant to name one of the participants in the Christchurch incident. Did naming that one player change the weight of the story?

Monday, May 11, 2009

More about Telstra

The news on Telstra and the NBN flows thick and fast. We've seen a former communications minister offer his views on the topic. He's really a bit everywhere in this piece, but still seems to be wedded to an infrastructure competition view of life. He also doesn't get it that an all-fibre network deployed aerially can be run at the same level as the electricity wires and not cause the angst of the HCF roll-out.

What's more worrying is that he doesn't really get the fact that Conroy has as a primary goal the restructuring of the industry. John Durie got this writing in the Oz on the weekend, saying;

Taken at face value, Communications Minister Stephen Conroy has one mission and that is to overturn the mistakes made by a predecessor, Kim Beazley, in giving Telstra control over the wholesale and retail markets.
(though as I note in my forthcoming eview of Paul Fletcher's book that I've previously mentioned, the realit is that it wasn't Beazley's mistake it was Alston and Howard - they are the ones who privatised without separation).

But Durie goes on;
The new broadband network can only be part-owned by Telstra, but it makes sense for it to sell parts of its fibre network into the pool to give it the maximum 20 or 25 per cent stake allowed.

This model seem to be the one preferred by the Australian Government and seemingly acepted by the markets. However, it is a suboptimal outcome for both Telstra and the Australian Government.

It is suboptimal for Telstra because they wind up being a major shareholder in an entity that they have little control of, yet their ownership position will still be seen to be advantaging them so the regulatory battles will not completely go away. It is suboptimal for the Government because ultimately they want to sell down their 51% and the entity left after they sell down will have a controlling shareholder.

The only model that makes sense is for the Telstra Board to do a "One Steel" following the split of BHP's steel assets. All the assets to be sold into the NBNCo are identified and parcelled into a subsidiary company. All the contracts between the Telstra and the NewCo necessary for existing services are entered into. The shareholders in elstra are issued with shares on a 1 for 1 basis in the NewCo. The NewCo is merged into NBN Co so that each share on NBNCo becomes a share in NBNCo, but the total of NewCo shares only equals 20% (or whatever is figured out as the right number) of the total shares in NBNCo. (Another possibility is that NBNCo simply gets formed by the directors of NewCo forming it, and issuing new shares as needs be for capital).

That creates the real split and avoids any ongoing ownership elationship between Telstra and NBNCo. It would be a pity to screw up the chance to get the structure right!

Is Davos irrelevant? And what would they know about the future anyway?

I've stumbled upon an event happening next week called Future Summit 2009 which is run by an organisation that calls itself The Australian Davos Connection. This body describes itself as;
While ADC was originally founded in 1996 to: (a) promote the World Economic Forum (WEF) within Australia; (b) promote Australia's interest within the broader WEF community; and (c) share the richness of ideas within the WEF community to a wider Australian audience; the organisation's charter has since expanded to include the broader aims of:

* Promoting business excellence by encouraging policy debate on global issues;
* Improving the quality of leadership;
* Enhancing Australia's position in the region and the world;
* Encouraging Australian leaders to help improve the quality of life of all Australians;
* Encouraging Australia to play a responsible, and leadership role where appropriate, within the global community; and
* Exposing Australian leaders to international experts and key international leaders.

The interesting part is that the group doesn't seem to have a formal tie to The World Economic Forum. While the Chair in his newsletter talks about his recent visit to Davos, there is nothing on the ADC site nor the WEF site specifically referring to any formalised link.

So we then focus on the idea of the "Future Summit". It has an interesting draft program and list of speakers but they are not presented so that one can be related to the other.

It is really hard to give the event much credibility. The whole exercise looks a bit like a "big end of town" event - not just corporate Australia, but super-corporate Australia.

We need less of these kinds of events, not more.

Saturday, May 09, 2009

What do you do with a BA in English

The musical Avenue Q opens in Melbourne in June. One of its songs is What do You Do With a BA in English.

A few years ago I introduced David Thodey at a conference and noted that the answer was "become a GMD at Telstra." That has now become "become CEO of Telstra".

Meanwhile outgoing CEO Sol Trujillo has written his own veledictory for the Smage. He claims "many people forget how Telstra's critics described it before I arrived: timid, bureaucratic, slow-moving, indecisive and siloed." He goes on to claim that his legacy has been "to transform, rewire, and unwire the company with fixed and mobile investments, Telstra has improved growth and boosted productivity while improving network quality and employee engagement." Finally he claims "we have created a New Telstra — one that is competitive, differentiated, innovative and continually enhancing the customer experience."

There is much to dispute in all this. One of the biggest remains how much of the "transformation" really amounts to innovative or market genius versus how much relates to the decision to prosecute the exercise of market power for all its worth. What Sol describes as being "regulatory focussed" was the previous policy of recognising that excessive use of Telstra's incumbent position will merely bring bigger and more severe retribution.

And this is indeed what has come to pass. There is no doubt that underlying the Rudd Government's broadband plans remains a core purpose of dealing with the structural issues in the industry. Stephen Conroy repeated this as recently as last Thursday at a Paull Budde roundtable where he said he wanted to redress the errors of twenty years of policy by both sides of politics.

This was the point the strategies of previous Telstra management had sought to avoid. I am fascinated by the fact I didn't see it would happen. I used to debate with Telecom NZs Teresa Gattung as far back as 2001 how Telstra management would behave once privatised. Theresa said they would go completelt feral, whereas I said that they wouldn't because it would be a short run play at best.

In the end she was right and I was wrong. The process started earlier than the full privatisation though because once the coalition had control of the Senate in 2004 the full sale of Telstra was effectively a "done deal". In the long run though I was right, it has been a flawed short-run strategy. And Theresa herself fell on her own version of brinkmanship with the New Zealand government.

In an article headed Trujillo takes one last swipe at critics Matt O'Sullivan quotes Sol as saying "I'm going to go and spend some time with my parents … and children because I have been gone for six years out of the US. That's my first priority." Given that Matt has pursued Sol endlessly on exactly how little time he actually spent in Australia, I was disappointed that he let that comment go through to the keeper.

Friday, May 08, 2009


Both the AFR and SMH this morning are declaring that Telstra's Board meeting yesterday endorsed David Thodey as CEO. The AFR goes further to suggest there was a Board row over chairman McGauchie.

The significance of this news isn't the appointment, it is that the discipline around the Board table that has been the hallmark of the McGauchie/Trujillo period seems to have cracked wide open. This was their big problem under Mansfield with at least one director, thought to be Sam Chisholm, leaking.

Meanwhile we know the answer to the Avenue Q question "What do you do with a BA in English?" the answer is become CEO of Telstra.

Wednesday, May 06, 2009

RadComms'09 and mobile fantasies

Competing for spectrum

I had an entertaining time at RaComms'09 last week.

I learnt that spectrum management is really very easy, at least according to some. Various presentations had a flavour of “spectrum management is easy, all you have to do is the following things for the telecommunications/radio/mobile/fixed link/satellite/astronomy/regional community”. The challenge being of course that the lists was in direct conflict.

Clearly a lot of the noise is about the future Digital Dividend (700MHz), with both TV and radio still interested as well as the mobile operators. But similar contentions arise between mobiles and news gathering at 2.5GHz, and between WAS operators and satellite operators in 3.6GHz. Even the discussion about 400MHz had disputes between various users and a big concern about "spectrum squatting" by Government users.

A couple of really interesting prersentations by the radio and television sectors on the prospects for further digital radio services and television developments to 3D and super HD. The funy part was that no one mentioned the NBN once and what the implication of fibre everywhere might be to the desirability of wireless based services. However the question is starting to get some coverage in the industry media.

Mobile fantasies

But the biggest bit was the bid by the mobile operators colectively (as AMTA) and individually (as Telstra) trying to argue for both the Digital Dividend (700MHz) and the ENG (2.5GHz) spectrum for mobiles. The latter presentation was written up in both Communications Day and the AFR under the theme that "Australia is at great risk of lagging behind the rest of the world on LTE deployment."

The presentation by Telstra's Dr Tony Warren was funny, but on detailed analysis was also highly fanciful. What amounted to special pleading was masked by some impressive figures that did an excellent job of hiding the fact that this was a biased reconstruction of history and relied on dodgy forecasts.

The selective history came with an attempted comparison between European 3G auctions and those in Australia. The thesis advanced was that the Europeans got it wrong by creating an “artificial scarcity” by having four lots for six bidders whereas Australia got it right so we didn’t bankrupt the industry. It is nonsense because;
• there isn’t enough 2GHz spectrum to create six lots,
• the Australian experience of narrow lots has resulted in some odd allocations,
• the outrageous prices paid for 3G in the UK were actually preceded by the ridiculous prices paid in Australia for the 1.8GHz spectrum in the infamous “One.Tel auction”,
• and the number of bidders in Australia was reduced from five to four by Telecom NZ entering a JV with Hutchison.

As it transpired these four winners of the 2GHz spectrum co-operated to build only two physical networks.

We were entertained by a series of interesting forecasts. These included a reference to an assertion from Telstra’s own Hugh Bradlow that at some point in the future three-quarters of internet access would be by wireless devices. This begs the question of three-quarters of what? If it is just the number of devices I think he is seriously underestimating that – given the already high use of connections through WiFi in public and private spaces. If he means by downloaded data he is seriously mistaken because of the existing and projected price differences.

We were also entertained to some data from Ovum forecasting both connections and dollars of revenue for wireless data into the future. Over at Unwired they remember well the same sets of industry analysts claiming a few years ago that there was no market for wireless data. Dr Warren informed us the chart’s obvious decline in ARPU represented the effect of competition, whereas a more studious approach might conclude that competitive intensity is not increasing over that time, but the combined effects of increasing economies of scale and the experience curve effect in device cost resulted in price declines to attract more marginal consumers. To put it simply, the quantity demanded has increased (and price declined) not because the demand curve shifts up but because the supply curve shifts down.

We were also entertained with a slide that purported to be a projection of future spectrum requirements based on an ITU-R study. However this started with the assumption that the services in 2010 are being supported using the entire available spectrum, including the mobile (850MHz, 900MHz, 1.8GHz and 2GHz) and WAS (2.3GHz, 3.4GHz) spectrum. This ignores the fact that the WAS spectrum is currently lightly used, half the 850 MHz is unused (in metro) and at least two-fifths and probably more of the 1.8 GHz is unused.

But the funniest parts were the sources that Dr Warren relied upon for vindication of his views. The GSMA had written to the G20 leaders to argue the case for co-ordinated action on spectrum, and they were most proud about the endorsement they got from Gordon Brown. Given the state of the British economy this is like a telco relying on an endorsement from Jodee Rich! Later Dr Warren quoted approvingly from Lord Carter’s Digital Britain report, conveniently forgetting that he isn’t as full in his praise of Carter’s earlier work at Ofcom in structurally separating BT. (When challenged on this he did say Lord Carter has got some things right - I agree, but which bits).

But ultimately it is the twin claims that failure to move quickly (or more quickly than the existing plan of 2012) on reallocating the 2.5GHz and of imposing any competition limits will impede LTE deployment that need to b tested. The practical reality is that LTE can and will be deployed in many bands, not just 2.5GHz. Telstra itself is proud of its unusual use of 850MHz for W-CDMA. Lower frequencies like the unused 1.8GHz will actually get better returns.

The issue of competition limits is far wider than just the creation of artificial demand. A big issue with using the 2.5GHz is that out of the 190MHz there may only be 2*60MHz arrangement for LTE. Telstra is right, that is probably best sold as one lot. But should it be sold to the guy who already dominates every other access technology in the market?

The rush to allocate happened in the 2GHz band as well. Australia was about the third market to auction the spectrum. Despite that rush the first network deployment wasn’t till 2003. Despite that rush the leading 3G network actually operates at 850MHz.

A measured approach of making the reallocation together with the Digital Dividend and together with any re-allocation decisions of existing 15 year licences will achieve a far better outcome.

The meaning of words and pictures

Another bit of humour was the need to point out the disclaimer on Telstra’s 21Mbps speed claim because, according to Dr Warren, apparently Australian consumers are stupid. By this I think he means that the ACCC shouldn’t be constraining the Telstra speed claims because no consumer would believe that is the speed they get. I suppose this begs the question of why you would make the speed claim in the first place if consumers didn’t believe it.

It was also interesting to note that this was now a new disclaimer. The original said that typical speeds range from 550Kbps to 8Mbps. I believe the new disclaimer states that these will be typical speeds in regional areas, but 550K to 3Mbps is typical for metro. My apologies to Telstra if I didn’t get that right, but it was small print and I don’t have the best eyesight.

Later Dr Warren presented an impressive chart of 3D columns going through different iterations of technology and describing their peak speeds. He again drew our attention to the disclaimer. The fact that the columns were not drawn to scale belied the impressive gesture he had used to describe the burgeoning capacity. (Admittedly these columns would not have worked in a linear scale, but a logarithmic scale would have allowed them to be drawn to scale).

Concluding impressions

The conference provided both a very practical view of the challenges in spectrum management, but also a very instructive view of the ways various participants frame public policy discussion. This ranged from heavy focus on impacts on national income, to selling the sizzle of new services, through to the benefits of sheer outright perserverence.

Friday, May 01, 2009

Sainsbury v Trujillo

The first time I met Michael Sainsbury was on a plane from Canberra to Sydney, he'd been down covering a Senate committee I had appeared before. He had the advantage of me, he knew who I was but at the time I didn't know who he was. Thankfully that got worked out before I blabbed too much!

On that flight Michael put me onto an excellent book, Broadbandits by Om Malik. His liking of that book reflects a keen interest Michael has as a journalist in the human factor in business, how boards and management go about making their decisions. This is an interest he has applied with particular zeal to reporting on Telstra.

He has provided a very fascinating summary of the Trujillo experience, with not only an analysis of the CEO's modus operandi but also (with echoes of Mark Antony's "friends, Romans, countrymen" speech) some conclusions about the sets of decisions the Telstra Board has cumulatively made over the last 4 years.

His summary is a nice match to the Scales piece I have already written about. Both make interesting additions to the ongoing thesis about the conceit of management, and its counterpart, the inadequacy of the relationship between shareholders and companies (and the intermediation of various analysts).

I have a developing theory about the failures of "managerial capitalism", and they relate specifically to the supposed solutions to the supposed principal/agent problem. The problem is that identified by Berle and Means back in the 1920s that firm management pursue goals other than maximising shareholder value, and the presumed solution has been both the rhetoric that "the purpose of the firm is to maximise shareholder value" married with the creation of financial incentives for management in acieving that goal. There are a number of really poor consequences of that approach, including an excessive focus on the asset value of the shares rather than the income stream of dividends, and the sense that strategy is about "outperforming" the market rate of return.

The reality is, however, that in both the history of the development of the common stock firm, and the spcifics of the formation of almost all firms, the "purpose" of the company has been to meet some identified market need at a price that is sufficient to cover operating costs and provide a return to capital. Indeed, the idea that the objective is to "maximise shareholder value" can run counter to this actual purpose as it implies increasing the cost of capital rather than decreasing it (On a more specific point, the cost of capital will be technically lower if the income stream is stable. The objective of the firm to meet its purpose is actually better achieved by focussing on the stability of returns rather than the variability inherent in strategies to maximise value).

This suggests that in the wash up of the GFC we need to dramatically revisit the assumptions of corporate governance. We need to rewrite corporations law to re-elevate the concept of the "purpose" of the company, and to require these to be closely and narrowly written. We need to redefine the fiduciary duty as being the performance against the purpose. There will be much objection from corporations, especially based on the supposed problem of seeking shareholder approval for changes in purpose or on the whole basis of the strategy conversation (are railways in the railways business or the transport business). My responses to these (I have them) need to wait for a longer discursion.

In the meantime, let's hope that Michael Sainsbury continues his forensic examination of the decision making of corporations. I've previously described Michael as the "Shane Warne of journalism" because he successfully builds a false sense of confidence in his subjects, the equivalent of bowling up a stream of innocent leggies. He had Telstra and Sol in this mode, to the point where they invited him to an exclusive interview with Sol. I guess the timing to line up with one of Sol's visits to Australia was tight - because Michael actually abandoned an interview with another industry CEO to immediately respond to the call.

But the story that followed was Sainsbury's wrong'un - completely taing Sol and the Telstra flacks by surprise. This has earned him a place amongst those the "Telstra luvvies" revile over at nowwearetalking. I call it good journalism, and hope that he might find time from China to put more of his investigative skill together to write a small monograph called either "The Sol Experience" or "Telco Icarus; getting too close to Sol".