Monday, May 31, 2010


Very disappointing that The Age decided to use online a syndicated piece on 4G.

The article itself is right to flag the fact that 4G for the existing mobile customers doesn't really do much except relieve capacity constraints for operators - but in reality that does mean stuff should happen faster for users. The real issue though is whether the existing paradigm of the mobile - a swiss army knife device mostly used for voice and text with a bit of data thrown in - or PDA which is the above plus synced e-mail and calendar (the extra size knife) is really the future.

Where 4G comes into its own is in really doing dta, when you aren't doing data to the hand-held phone like device but really mobile computing.

Where it all gets interesting is what happens with voice. Skype has been offering a Skype App for the iPhone but only for use via the WiFi link. They are now offering to use the 3G data connection. That starts to beg the question - is there any use for the heritage 3G infrastructure? Messaging by Facebook chat, phoning by Skype.

Now that is a generational change. But there simply isn't the capacity on 3G networks for that.


That's the title of a book by John Kay. I've only looked at it but not read it yet.

An idea of its contents though is given in this article. The principle idea is that complex goals are best reached obliquely, not directly. To climb a mountain you traverse it you don't go straight up.

A classic example is the concept of a firm. The profit of a firm is a very complex consequence of the interplay of a number of factors. Many firms when they set profit as an objective fail because they do dumb things - like expand into the wrong markets, cut costs instead of expanding service.

The example he gives is the pharamceutical industry and the relative success of firms that have serving the customers/market need as the goal, versus those that state profit is the goal. The former make more profit!

My current favourite example is what's been happening with telco customer service. As marketing makes the product ever more complex driving more calls to contact centres, the cost f customer service goes up. So the profit maximiser reduces the per unit cost of a call, often by outsourcing. Quality however also declines, and if it includes offshoring, customer satisfaction declines even if due to bias. If the goal was customer satisfaction he strategy would be to remove the need to call or improve first call resolution.

I'm prepared to bet that nowhere in the accountability system do the marketing/product managers have a metric about how mny calls are generated by their individual plan or offer.

If you think about the theory of the firm, it is clear that firms do not exist to "maximise shareholder value". Firms exist because someone identified a need in a market and identified that to meet that need required more capital resources than they could muster and/or required the internalisation of a lot of interactions between individuals. Capital is an input, like labour, that you need to give a return to for its use. The firms objective is actually to minimise its cost of capital - usually achieved by balancing debt and equity financing. The objective with equity financing is to generate a return for shareholders, for their added risk of being unsecured they expect a return higher than debt financers. That can either be through a stable dividend or the prospect of asset growth.

Resource rent tax

I prefaced my original comments on the resource rent tax by noting the difficulty of pursuing reform and balancing policy and politics in a democracy. More recently I noted my concern that we think it a legitimate exercise for corporations to be actively engaged in politics and in particular political campaigns.

Ross Gittins has today written on similar lines. He notes first that the move to resource rent taxes from royalties is a piece of economic reform, not revenue raising, supported by many economists such as these.

He also notes that people crying out for further economic reform, need to reflect on whether a sectoral campaign by the mining industry meets their objectives.

Note: My friends from the right will want to argue the toss about the relative position of collectives to engage in politics, on the thesis that unions started it. My response would be to note that unions are still actually conglomerates of individual people, and within them there is a one-man one-vote democracy. Corporations are not, they are aglomerations of capital, usually only tenuously responsive to the concerns of shareholders and definitely structured on one-dollar one-vote.

As a person involved in the delightful world of "Regulatory and Corporate ffairs" I define my responsibility as being to provide well structured information into the policy process so that the desired outcome of "evidence based policy" can be achieved. I would never propose a direct political campaign and suggest that Telstra's attempts to do so after Sol arrived were destructive to more than just shareholder vale.

Google again

The Google (and Facebook) stories are a journalist's (or blogger's) dream. They just keep on giving.

The Internet Industry association has weighed in to respond to the Conroy criticism of Google at estimates. In a very strange piece headed "More policy less personal attacks" it seems the Chair of the IIA has gone into bat for Eric Schmidt, CEO of Google, as I think he is the only individual named in what was generally a tirade against a corporation.

Personally I recko equating the attitude of the Corporation with that of its CEO is pretty reasonable, and much better than what often goes on in our industry where people who should be able to use the Nuremburg defence get attacked.

I'm not sure why the Australian internet industry thinks it has an important role in defending Google here. Actually Google should consider itself lucky that Conroy is merely open to the accusation of making personal attacks rather than actually directing agencies under his control to investigate and proseute, which is what is happening to Google in other jurisdictions.

I'm also not at all sure that an organisation that seems committed to opposing the policy that Conroy took to the last election (on filters) should be asking for more policy from Conroy.

The great pop song lives....

Message to Fairfax Shareholders


The Fairfax Board has called in Bain & Co to advise on strategy. Mark Day has written an informative piece on the challenge facing the Fairfax Board in not having the media savvy to deal with conflicting recommendations between old media management (Brian McCarthy) and new media management (Jack Matthews).

Actually, I'm not sure I agree with Day. No amount of media experience will help the Board resolve the conflict between new and old. The experience will likely be in just one, as Day observed applied to the only external Board member with any media experience.

Perhaps the Board however needs to focus on finding other external members who are able to facilitate the strategic conversation within the company between the competing models. That would mean directors who had faced this challenge elsewhere and who had a track record as directors of helping management through issues.

Unfortunately they've gone for "option B" - call in the consultants. The last major corporation in Australia that outsourced strategy to Bain was Telstra under Sol. Anyone looked at the share price lately?


The single most over-hyped application for the NBN is e-health. My assertion that it is over-hyped is based on two principles. The first is that there is a dearth of interoperability standards, including the most mundane of identification and security, to realise the opportunities. The second is that most of the benefits accrue through ubiquity not just the start of the network.

Writing in Communications Day today Richard Chirgwin touches on the first of these and the reasons why highly detailed imaging is both reduced to film and distributed with a DVD. The imaging often uses proprietary standards and the DVD needs to include viewing software.

The relevance of the availability of these images and the instruction to the patient "not to lose the DVD" is interesting. I've asked a few doctors whether they look at the film or the DVD and have been told they look at neither, they read the radiologist's report! That's logical, though if the imaging leads to surgery that answer might be different.

That said the standards issue is more likely to be resolved either by the existence of communications links that justify standards, or the use of cloud computing models for health care imaging.

The ubiquity question resolves around the fact there is no marginal benefit of moving from DVD to online till everyone can do it. Further, the major benefits come from tele-health to the home - remote monitoring and conferencing facilities to aid home care.

All of which leads me to a current major issue, the aging of the Australian population. We have been stunningly successful at getting our citizens to live beyonf eighty, but not at all successful in slowing the aging process itself. Many people want to stay in their own homes, and don't want medical intervention to save their lives so they can go to a nursing home.

The system for providing "advanced health care directives" is complex. Firstly it is hard to even be sure who is authorised to give the directive. Even in the case where there is an appointed enduring guardian getting the relevant piece of paper to the doctors, the doctors being satisfied that there hasn't been a subsequent appointment and the very imprecise nature of the power to decline treatment contained in it results in delay in being sure of the power.

As a consequence a doctor will act initially on the assumption they are required to intervene, and the logical point for not intervening can have passed before the decision is properly made.

An example is the situation that recently occurred with my father, who was admitted to hospital with a cough and a little breathing difficulty. The question was whether he should be given an antibiotic for pneumonia. The difficulty was in getting the right information (the choice was communicated as being antibiotic as a prophylactic measure, the reality was it was for treatment), and the doctor knowing who the decision maker was. By the time the family had really got itself up to speed on what decision to make the antibiotics had started.

The outcome is my father is getting better, but will not be well enough to return home. He now will go to a nursing home, something he was keen to avoid.

There is a better way. That is for better health record identification and management so the patient's care directives can be immediately available to any doctor in a authorised manner. There really is a case for our health ID to be implanted in a micro-chip - just as we now do for domestic pets and food animals. What could be simpler than scanning the patient to get a health ID and having a reliable record of health care directives.

Once we have a national standard for the ID, the option for micro-chipping should become an individual choice and commercial opportunity. I for one would prefer that my medical treatment could always start immediately based upon a full health record and on a full understanding of what my own health care choices are (including decisions on organ donation).

Thursday, May 27, 2010

For balance

I'm with Grahame Lynch and Stephen Conroy that the big "new economy" firms need to understand their role, function and responsibilities better.

But to be balanced I thought I'd link two items from The Information Technology and Innovation Foundation (ITIF) which is a US body that favours net neutrality and Government broadband programs. Basically it sounds like a Google/Facebbook kind of place.

In their first contribution they try to excuse Google over the WiFi fiasco because they had no intent to do harm. The question of intent is a murky one both legally and morally. For example, in provisions to criminalise certain anti-competitive practices there was much debate that for it to be a criminal act there had to be intent.

However, in the matter of death we actually have a whole category of crime for causing death without intent, called manslaughter. We even have people advocating that offence apply to a foetus.

The real issue with Google on this one doesn't seem to be just the offence, it is their reaction to the offence. They've just said "Oh sorry, but it wasn't that important anyway" rather than "Sorry. We know we need to review our whole project design specs to make sure an action like this is never repeated". That is the flavour of the Conroy criticism at Estimates - there is no real response from Google that reflects the magnitude of the act.

In the Facebook matter the ITIF response is to laud Facebook for its belated move to improve users privacy controls. Thetyy say in part;

...companies are responding appropriately to their customers' concerns about privacy. In this case, market and customer feedback are more effective tools for meeting consumer needs than heavy-handed privacy regulations that would only impede innovation.

I would normally agree and am a proud supporter of the principle of self-regulation. I am not, however, convinced that firms like Facebook get it yet. That's because this is a response to the market concern, not the process of embedding that concern into product design.

More importantly there remain questions over how users are encouraged to use sites. After all as Thaler and Susskind wrote in Nudge what the default option is is almost more important than what the range of options provided are.

I couldn't have said it better ...

In Communications Day today, Grahame Lynch wrote;

But ultimately, [his] reflexive dismissal of my concerns, to me, epitomises the problem with dotcom culture. Many of its practitioners lack any real sense of seriousness or objectivity about the enormous role they now play in the daily social behaviour of their users — and the fact, that in playing such a role, they serve to reinforce, amplify and exaggerate human failings as much as attributes.

Wednesday, May 26, 2010

Web 2.0 meets 3.0

Web 2.0 is usually associated with social network/UGC sites. Web 3.0 in one configuration is the "cloud computing" model where the application is in the web. has long been a leading example of the latter. Interesting news that they are now adding social networking elements to it.

Does that make it Web 6.0, 5.0 or 2.3?


Robert Reich's book Supercapitalism talks about how individuals roles as investors and consumers has swamped their roles as citizens. (This distinction is a bit like the one I and the ACMA have also made.

Reich's concern is how to reclaim democracy for citizens.

It is distressing therefore to see a columnist of the stature of Elizabeth Knight suggesting in consideration of the NBN;

If a compromise with Telstra cannot be found, if would not be surprising if the first phone call made by Telstra's chief executive, David Thodey, was to to BHP Billiton's boss, Marius Kloppers. They could join forces in a concerted effort to oust the government.

The relation between corporations and democracy has also been on display in the discussion over the behaviour of Google and Facebook. both are emboiled in discussions of privacy and of the way they manage the "appropriateness" of user generated content (UGC).

Stephen Conroy is reported to have claimed that Google intentionally set out to listen in to people's WiFi. Google now claims it wants to delete the data but needs to hang onto it for dealing with any legal action. (The latter seems to ignore the third way of handing the data to their lawyers and not retaining their own copy).

A similar issue has emerged at Facebook though here it is far murkier. It is easy to write about people voluntarily giving up their information and forgoing privacy, but it is a different matter whether the corporation handles the information well.

Perhaps it's time to start listening to Stephen Conroy, who flayed Google and Facebook on Monday night. He's at war with the industry over a contentious mandatory net filter and many saw his spray as a classic shirt-front attack on the opposition.

But the Minister for Communications may still be right when he asks who best to trust, ''a corporate giant who is answerable to no one and motivated solely by profit'' or an elected government?

Facebook also made the news over claims it is hindering police. Once again their spokesman seems to think their corporate policies are more important than Australia's democracy.

This is before we even start talking about take-down policies on content.

The balance between consumer/investors and citizens inherent in Supercapitalism is wrong. We need to fix it.

Note: Is there a commercial opprtunity for a new social networking site that embeds in its business model the idea that it really is multi-domestic not just a piece of US imperial capitalism?

World Metrology Day and Trade Practices

I've been thinking about "standards" a lot lately. I know regular readers might think this is another tangent about ethics, but I'm talking technical and commercial standards.

In particular I've been reviewing the literature on de joure and de facto standards, or standard setting by committees/regulation nd by markets respectively. My interest has been in mobile communications standards with an eye to describing the battle (not yet a war) for 4G standards.

Standards are interesting because they reflect part of the conundrum of capitalist market economies, they represent a need to co-operate to compete. More technically they represent the need to co-operate to trade. I was therefore interested in an item that pointed out that 20 May is World Metrology Day and celebrates the meeting in 1875 that set the global standard for the metre.

The article also gives a really good example of how frustrating our Federation has been and is. Despite weights and measures being a Federal power (logically as Federation was about trade between the States and between us and the world) we are only in the late stages of the latest process to create national standards.

There is so much about economic organisation for a market state that we do very very badly.

I would also share some of the concerns expressed by Frank Zumbo in his questioning of whether anyone stands up for small business. Of course the anti-trust cognescenti would argue that the purpose of the laws are to protect competition not competitors, but that begs the question of whether "competition" as an abstract can be considered outsie of the question of market structure.

The two issues - standards and market structure - are linked though. One of the economic justifications for increasing industry concentration - both vertically and horizontally - is the "cost of co-ordination" or transaction costs. My gut feel is that we benefit more by forcing firms to invest in the means of co-ordination than by allowing them to internalise co-ordination.

That means a major change to the last two decades of trade practices law in Australia. The Act (the TPA) includes per se restrictions and other things prohibited (e.g. mergers) only if they decrease competition or utilise significant market power. The trend has been to change the law so that the per se exemptions are replaced by prohibitions o the equivalent act only to the extent that they increase market power or relied upon market power to be achieved.

The best single example is one Frank mentions as being a requirement in the Act - a prohibition on price discrimination. Section 49 of the Act (TPA 1974 No 51) originally included a prohibition on price discrimination except as justified by differences in cost or by need to meet a competing offer. The provision was deleted by the Competition Policy Reform Act 1995 (No 88) (Bills Digest entry) and the apparent justification was that price discrimination that was a "competition issue" was prohibitted by s46.

A major difference, however, was that s49 placed the onus of proof on the corporation that the price discrimination met the requirements of the exemption. Section 46 is far more problematic and requires the ACCC to prove the misuse of market power. Additionaly, the Commission staff remain very confused - they believe that price discrimination is not illegal and is efficient. They also ignore the theory that says "efficient" price discrimination can only be exercised by a firm with market power - hence the discrimination itself should be evidence of market power. They also ignore the fact that predatory pricing can be "efficient" in the short run.

There is a lot to be said for a thorough review of the TPA. That review needs to focus more on the question of how cases should be made than on what should be illegal. My distinct recollction during the Dawson inquiry was that the committee thought there was no problem with s46 because forthcoming cases would clarify it - they did, but not in the way the committee expected.

Note: As an interesting aside, I was also reviewing the early literature on the idea of auctioning spectrum, and noted that one of the earliest papers (Herzel 1950 - cited in the more famous Coase 1959) actually was a paper about colour television standards, the idea of spectrum auctioning was part of the authors proposition that markets should set colour television standards, not regulators.

Note 2: I must start a calendar of interesting "days" - e.g. Alexander Grahame Bell's birthday (3 March) and now Metrology Day.

Tuesday, May 25, 2010

Telecom New Zealand

I posted a comment about Theresa Gattung's book Bird on a Wire when it was merely forthcoming, and elsewhere made a comment about reports that she was less than generous in her comments about her successor.

I haven't said much more about the book so far, partially because reading a book in which every fourth sentence ends i an exclamation mark is almost as tiring as a conversation with TG used to be.

But the news from across the Tasman this morning that TCNZ is considering structural separation made me think of a small comment in the book. This was that once TG and her team realised that they couldn't continue to promise new services to the NZ Government and not deliver, and that hence (meaningful) functional separation was going to be imposed, that she and Marko Bogioveski concluded that full structural separation was a better alternative.

The book describes how they had convinced the Board, but the Board the went soft on the idea. Theresa suggests the Board's change of heart was a consequence of the comfort they were given by CEO candidates they interviewed that indeed the functional separation was achievable (which is opresumably a veilled reference to Paul Reynolds with his BT experience).

At the time I was still working for Telecom/AAPT and I know I disappointed Marko because I convinced him that structural separation was worth considering but he wanted me to give him a strategy document on it. I simply didn't have the data to turn the proposition into substance, but the broad economic theory I subsequently publuished as Why vertical structural separation is in the interest of incumbent telcos and why they don't see it.

The senior management team and Board at Telstra need to understand the New Zealand journey. The Australian Government has presented them the very best alternative - a staged stuctural separation as the NBN is constructed. They should be grasoing that opportunity with both hands.

Monday, May 24, 2010

Customer Service Survey

I know I've done this before and last time it was stupidly long, but I have another customer service survey. This is realy simple and is only 5 questions long.

It can be found at Feel free to forward the link to as many other people as you like though looking for people who don't work in telco mostly.

Truth in (political) "advertising"

I always greatly admired the position of the Australian Democrats on how the business of politics should be conducted, that was one of the reasons why I briefly joined them. There is much to like in a statement made by former Senator Natasha Stott-Despoja about the need for truthfullness.

There is, however, perhaps an over reliance on the idea that laws can make much difference. The s52 of the TPA certainly outlaws misleading and deceptive conduct and s53 outlaws false or misleading representations. But neither is a particularly easy case to bring.

Polticians of all kinds suffer from the "law" delusion, that passing a law is what will make behaviour change. Out in the real world dealing with firms the idea is building that you need to do more to make sure the decisions of consumers reward the firms you want to reward rather than trying to simply outlaw bad behaviour. Amongst other things that creates incentives to get even better, whereas oultawing only draws a line of minimal acvceptable behaviour.

The difficult juncture is how to get clarity rather than truth. Other reforms might be more effective here. Two I can think of would be to change the parliamentary rules that stop parliamentary benefits once campaign launches occur and to require each party to lodge prior to polling day an 8 page "manifesto" that is the official statement of what they are going to the polls onto be .

The first of these corrects an error we have now. Parliamentarians benefits of office cease in the election period once the official campaign launch occurs - which is why the official launch now happens at the end not the beginning. The media doesn't help, as they report politiciand "promises" more on what effec they think they wll have on popularity/election outcome than as policy proposals and what their real effect will be.

The latter could be married with a "clean booth" policy on polling day. The point is to force parties to refine the overall message dow to eight pages of A4 text, ten point times new Roman, headings in Arial 14, 16 and 18 point. No pictures and no more than five graphs or tables for which size rules can also be imposed. That document is the one to which the public can hold them accountable following the election.

Teacher Evaluation

It was my unfortunate experience to have to write an essay last weekend on school voucher programs. The problem with writing such an essay is that most of the justification for vouchers is US government structures of (a) local school district property taxes being the funding source and (b) the constitutional and philosophical objections to any Government aid to private schools.

Once these institutional factors are taken out the argument revolves around choice and effectively the supposed efficiency of markets and the perceived superiority of private (and hence competitive) schools.

The Australian discussion is pointless becaue of the different institutional structure and the information problem in deciding what good looks like. After all, if we can solve the latter problem then choice applied to the public system should generate the same outcome.

An article today goes to the core of the problem - the failings in existing programs for teacher evaluation. This is not a uniquely Australian problem, nor is it confined to public schools.

Ultimately more than test scores need to count. To the extent test scores do count they need to be adjusted to refer to "test score value added" - how much the individual score has changed from one test to the next. They possibly also need to control for other socio-economic factors (the child who moves school from a less performing to a better performing school would be expected to improve scores even with the same teacher due to some form of Westinghouse effect).

The article and the underlying report from the Grattan Institute unfortunately focus on why evaluation is important, but not perhaps on how to do it.

The problem is the same shared by all employee evaluation systems. If there is no immediate consequence from the evaluation then neither the employee nor the manager takes the process sufficiently seriously. The problem is that once a consequence (usually pay) is added then you get distortions from the consequence outweighing the purpose. Thisbecomes particularly bad in the corporate model where the emphasis is on "at risk" remuneration rather than benefits.

So here are my simple suggestions;

1. Start gathering the data to rate teachers on their test score value added, but the first cycle is only to work out the model that corrects for socio-economic effects.

2. Introduce into principal remuneration a performance based score on how well they implement teacher evaluation in their school. One key score needs to be teaching staff assessment of the quality of the evaluations.

3. Introduce peer ratings of teachers as part of the evaluation process including evaluation of overall contributions.

4. About three years into the process start permitting principals to reward the best performing teachers with pay rises beyond the scale, not bonuses. The principals salary pool needs to be based on the schools overall "rating" based on score value added, and parent evaluation.

5. At the same time schools with underperforming teachers to be given additional budgets for both "remedial teacher training" and the cost of casuals to replace the teacher being trained. The teacher needs to understand that the remedial training is just that.

6. Three more years later start to introduce rules to allow teachers to be managed out for underperformance.


I well remember the outrage in the Australian business community when laws were changed to mandate certain disability access standards. People building new motels had to have disable accessibe rooms. We built buses that kneel, we have put little driveways as footpaths cross gutters.

All of this seems like an imposition to the able-bodied who fund it.

But the sad truth is that you can become disabled at any time. Cynthis Banham has had that experience, surviving a hoorific plane crash in Indonesia. Today she has written in the SMH of her experience. She and her husband made the necessary rearrangements to their own home, but she expresses eloquently her frustration trying to visit even close family where small doors, inadequate toilet spaces and stairs are impediments to her.

Having had both my father and father-in-law "progress" in life to being wheelchair bound I am personally familiar with these issues. My own house is not perfectly accessible, but it is something I will be correcting over time - especially the entrance.

I'm not sure "universal design" needs to be mandated, but I do think housing and architectural guidelines should be updated and houses given accessibility ratings like the energy rating stars on appliances.

Finally, it is only while writing this that I've realised how particularly dumb is the modern trend to putting the toilet in a separate cubicle rather than as part of the bathroom. It guarantees they are not accessible.

Travels in WA

Work took me to Perth the week before last. An item today about the foundation of the "WA First" party reminded me of my conversation with a cab driver.

The cabbie looked at me and asked me as a businessma from the East whether WA wouldn't be etter at going it on its own. I suggested the cabbie think of two things.

The first was defence. WA on its own could not maintain a defence force of the scale and capability necessary to defend WA. The assets and focus of domestic defence continue to be focussed on the North of the country.

he second is the importance of foreign affairs and trade in developing the global environment in which Australia's resource industries trade. As a simple primary produce exporting entity WA would not have nearly the same clout as Australia - which despite being "small" is still about the world's sixteenth largest economy (about because movements in GDP and exchange rates make it hard to measure definitively).

I understand that the WA First thrust is about a "better share" for WA. But that tends to be measured only in transfer payments and actually WA has historically done very very well in the transfer payments field.

It is perhaps unsurprising that WA still harbours these tendencies while the rest of the country just wants to abolish State governments. WA and Perth are a long way from anywhere.

I have a vision for a new set of nation building projects that would help break down some of these issues. The first is a new electricity Transmission line from East to West through the very centre - apart from linking the grids this line could be used to make the geothermal power projects in the centre viable. The same infrastructure could provide a fibre backbone to hook up most of the copmmunities served by radio links.

The second is a national freight rail network - from Melbourne through Parkes, in land Queensland, then to Darwin. From Darwin you come across to Port Hedaland then down to Perth. Dual track fully computerised and electrified using alternative generation sources across the whole route. Sydney and Brisbane are linked with spur lines. Darwin is converted to a port to rival Singapore.

The Amazing World of Spectrum

Two interesting reports from Telegeography.

Firstly for those still coming to grips with the Government's intent to restrict a vertically integrated Telstra from acquiring new spectrum, the FCC is mulling excluding Verizon and AT&T from the next auction because of increasing concentration in the wireless industry. I'm more and more prepared to declare that mobile wireless networks show scale economies that mean highly competitive infrastructure markets are unsustainable.

That doesn't mean you won't see lots of bidding at spectrum auctions, as the outcome in Germany demonstrates. But I still defy anyone to tell me they are going to get meaningful speeds for a significant customer base out of paired 5MHz channels.

Monday, May 17, 2010

The NBN Implementation Study - Part 1

You know, I haven't really read it yet - but I've read a lot about it, including this "thoughtful" piece from Jock Given.

But I do have my quibbles - at one point Jock writes;

What they show is how much of a particular kind of FTTP network you can build for everyone who already gets ADSL and still have enough change out of $43 billion to get the promised 12 Mbps to the rest. The new cost estimate is actually $42.8 billion, a sure sign that the quick-and-dirty $43 billion that started out on the back of an envelope a year ago became one of the policy bedrocks.

There are two errors in this. The first is that nowhere near all of the 90% originally quoted as the FTTH footprint already get ADSL - and most of those who do are struggling to get about 4 Mbps out of it. The second is that the methodology that the study seems to have used is to increase the fibre footprint to 93% because the cost envelope of $43B permitted it. The last 3% of houses cost more per house to connect to fibre than they would wireless. So $3B isn't a bedrock - but it might well be a cieling.

Jock also notes that the study claims that for wireless users 12 Mbps won't be an average but only a peak speed. Given the performance of vividwireless's 4G network I think the stud has got this wrong. By definition the base stations at the 93-97% level are incredibly lightly loaded and WiMAX or LTE in their current version will deliver 12 Mbps....average.

He also notes the debate about cost of capital. There is no doubt that using the Government bond rate does not make it a commercial investment. It does mean that it should not ever be a drain on the taxpayer. More importantly from a full investment case the return to Government in higher taxation levels from higher growth isn't included - which it would be i you were doing a more traditional "business case" for the Government investment.

He also makes a somewhat stupid analysis relating the size of reports to relative effects on industry and suggests that report size doesn't correlate to impact. He should reflect on my post comparing the Henry Tax Review and the Garnaut report. In the particular circumstance he should reflect that the Beazley statement in 1990 (and the Evans one in 1988) may have been short - but they ultimately drew on the longer Davidson report. And I would note that the Vernon report of 1974 was longer than Davidson and almost everything (except merging Telecom and OTC) was implemented within eighteen months.

It is also a pity that Jock doesn't mention that Optus sued Telstra for anti-competitive conduct in the HFC over-build matter. The case was settled but the terms were never disclosed (though Bill Scales did call it a pittance in a Senate committee). It has long been my belief that the matter was settled in conjunction with a renegotiation of interconnect rates - as Optus withdrew from the competition tribunal re-arbitration of the first PSTN interconnect dispute at the same time.

"Is common carrier a useful construction?" (For telco regulation nerds)

The US Federal Communications Commission has an interesting history. It came into being in the 1930s and picked up interstate aspects of telecommunications that had previously been regulated by a more generic interstate commerce regulator. The deregulatory thrust of the 1996 Telco Act created a distinction between telecommunications and information services, with the former included in the FCC remit and the latter not.

The FCC Chairman has recently announced a change in its approach to broadband which had been classified as an information service and hence not subject to the full regulatory powers of the FCC. The announcement is that the transmission component of the access service as a telecommunications service. I find this interesting because I thought the distinction between the two was legislative in definition not just in application, though I suspect the narrow conception will meet legal challenge.

The decision was covered in an excellent article in this week's The Economist. It points out that some of the underpinning theory of telco regulation in the US was based on the concept of "common carrier" which has a long history dating back to road freight by carts. We forget sometimes that the European market and formr British colonies have little history of regulating private sector telcos as the model was primarily about service delivery through legislatively mandated monopoly 'PTTs' (Post Telegraph and Telecommunications authority).

Th article also provides a reference to this article by James Speta. In this article Speta neatly summarises in one sentence the justification for "common carrier" rules;

Common carrier duties have been imposed based variously
upon theories of de facto and de jure monopoly, on the theory that the
enterprise had become “essential,” and upon theories that the enterprise
was publicly concerned in a particular manner.

The monopoly or market power argument is well known and is the only real basis in Australia's telco regime for economic regulation. It can be argued that the three limbs of the Long-Term Interest of End Users test (promote competition, efficient investment and any-to-any conectivity) can be derived from each other, and that promoting competition, where efficient (i.e. beyond the natural monopoly element) is the policy objective.

The concept of the service being "essential" in the common carrier case is not essential facilities doctrine as we are familiar with it in anti-trust - it is not about star-posts being essential for fencing, or PSTN access and egress being essential for long distance telephony. It is that communications services are essential to all other trade and commerce and social engagement. As a consequence it is right and proper that Government regulate to make sure the services are available to all.

The final element is that the enterprise usually obtaind public concessions. In the telco case it is the Low Impact Facilities exemption from planning, and the ability to use public land to string wires and glass. In the road transport case it is publicly maintained roads.

There would appear to be good reasons to embrace common carrier doctrine for communications services generally. Perhaps a greater focus on the wider context than just monopoly might have helped develop a market structure within which a return to Government ownership of key elements (the NBN) was uneccessary.

Mobile phone defence to go into overdrive

The long awaited Interphone study into the health effects of mobile phones is to be released next week.

Initial press coverage has focussed on the result that indicates a potentially increased incidence of one kind of brain tumour amongst the top 10% of phone users. This sort of ignores the rest of the study, that such a widfe ranging enquiry has found very little else.

The correlation itself is not necessarily causal, and the underlying data is incredibly unreliable. High phones usage people are also likely to be high computer users, and may share other behavioura characteristics. The suggestion by one doctor that the phone companies hand over details of usage to enable a better correlation is naive in the extreme. Firstly, customers move between servicer providers and we don't have a unique identifier (heck they haven't even got one for health records yet). Secondly the owner of the phone is not necessarily the user. Thirdly the usage data gives no information about whether a handsfree kit is being used.

More worrying is the assertion that we still mightn't see much results because we've only had mobile phones for a decade. Well actually we've had them for nearly thirty years (AMPS launch in 1981), we've had GSM for nearly twenty years (launched in Oz in 1992, in Europe in 1991). Finally, it is interesting that it is only the mobile phone that is studied and not the simple household cordless phone. Given that it is extended use that seems to be the issue the cordless phone is likely to be a higher source of EME. Additionally mobiles operate over quite a wide frequency range. Unless the issue is simple heating a biological effect is likely to be frequency dependent.

Anyhow, the seriously good news seems to be that the EME issues are only at the user end and not due to base stations. That's not surprising given that 80% of ambient EME is AM radio, signals that have been there for eighty years.

PS Rather than a phone study trying to find an effect, maybe a brain cancer study trying to find a cause may be better? There is an increasing incidence of brain cancer. However, there is also an increase in obesity, in consumption of trans-fats, of hours spent in pressurised airlplane cabins, each of which could have plausible biological connections to an increased incidence. (As could the generational effect of keping people alive longer - hypothesis, the gene for brain cancer development is the same gene as some other cancer that hit particularly young, treatment of the other cancer has improved increasing the ability of the gene to propogate hence increasing its proportion in the population hence increasing the incidence of brain cancers. I don't thik the medical profession would like that hypothesis but it is as reasonable to inestigate as any other).

PPS I work in the industry, and have a distinct aversion to holding anything to my head for more than about ten minutes - thre is a heating effect even if you just hold a book there.

The Federal Parliament is not the protector of State democracy

Steve Fielding has had a dumy spit in today's The Punch over the issue of the ALP handing out HTVs in the SA election to direct Family First second preferences to the ALP.

Okay can we just get one thing clear. We live in a Federal system. Technically both the South Australian Government and the Australian Government are Sovereign States - neither is answerable to the other (their sovereignty is only limited by their constitutions which ultimately are all Acts under the Crown).

To argue that Kevin Rudd should comment on the electoral laws in South Australia is like suggesting Australian politicians should have had an opinion on "hanging chads" in the 2000 US election.

If people want the electoral laws changed in South Australia campaign in South Australia. If you want nationally uniform electoral laws campaign to change the Federal Constitution. When it comes to national electoral laws don't just choose one issue - have you noticed how Labor and Liberal both fiddle with the electoral laws everytime they are in power?

The Senate in its "wisdom" has decided to hold an inquiry into these events. Part of the reference is valid - whether Commonwealth law would prohibit the relevant action - to which should be added whether the action is indeed deceptive. After all, the individuals still put Family First first, and really it is the voter who chooses their preference flow, not the party to whom they give their first preference.

To the alegation of Senator Fielding that the ALP has shown no interest in trying to limit similar conduct, the Special Minister of State Joe Ludwig said in debate on the Committee Reference;

Shortly after the first four paragraphs of the reference were reported to the media I asked the AEC for a briefing on these allegations and whether similar alleged conduct would be in breach of the Commonwealth Electoral Act. The AEC advised that these alleged activities would more likely than not be in breach of the act. However, in order to remove all doubt and to ensure that electors are made aware of on whose behalf how-to-vote cards are distributed, I requested the AEC to prepare possible amendments to the act. These amendments, which I table now, improve the authorisation requirements under the act so that it is made clear at the top of how-to-vote cards whether or not the card is being distributed on behalf of a political party or candidate. I will be seeking support for the amendments when further electoral legislation is debated in June and, of course, I look forward to the support of the movers of this reference for those amendments which make this inquiry unnecessary.

He also made the points I make above about the jurisdiction of a Senate committee inquiring into State Elections. It will be interesting to see if anyone proposes to the Committee the simplest solution to the issue - follow the New Zealand model and have "clean booths". That would have serious repercussions though, as getting the troops out on polling day is the only real reason for mass membership parties.

Mind you, if the supporters of my party were so stupid that they could be misled in this fashion I wouldn't be publicising it.

Friday, May 07, 2010

What can you do in 140 characters?

The short answer appears to be "enough to lose your job, but not enough to be informative."

The ever entertaining Gerard Henderson has brought the evidence together in this week's Media Watch Dog when he covered two Twitter events. He gives s the low-down on the incredibly un-sad demise of Catherine Denvey at The Age for her tweets on ANZAC Day and on the Logies.

He follows this with a piece that demonstrates the complete "inanity" (is that a word? If not it should be.) of the tweets received by the ABC's Q&A.

My recent experience has been attending a really good two day policy conference (RadComms 2010) conducted b the ACMA. The ACMA has engaged Tom Burton as their Gov 2.0 adviser. Full credit for web-casting the conference. But they then decided to have a twitter conversation on it as well, including the ability to ask questions.

I know I'm verbose and also use the opportunity of questions to make statements, but I'm not sure I could ever construct a meaningful question in 140 characters on anything to do with spectrum policy and broadband.

By all means support a webcast with a text conversation. But what was wrong with old fashioned chat room structures rather than twitter?

Recently a judge allowed the decision of a court case to be covered on twitter - i the iiNet v AFACT case on copyright. It allowed me a "small moment of fame" when a journalist tweeted "David Havyatt arrives"

Anyway we now know what to do if - horror of horrors - they ever invite Catherine Denvey back to Q&A. Get your twitter fingers ready! What can we say about Catherine in 140 characters. "Get her off - she is boring"?

Tuesday, May 04, 2010

On policy and politics

The Democrats once campaigned on the slogan "policy not politics", a slogan I rather liked. But it is easy to get overly carried away by exactly what it means.

In that context, I've been intrigued by commentary like this on the Henry Tax Review that labels the response to it "politics". Worse has been the accusation that Rudd's response has been with "an eye to the election".

Last time I looked this is a democracy. In other words we have a system whereby government is expected to do what we want them to do. Ergo we actually want our politticians to have an eye on the election.

There are two ways to do this. The first is to avoid all facts and simply make "populist" responses to current issues. The second is to undertake thorough research on the underlying issues, and then build a process of implementation that involves taking the people as a whole on a journey.

This is actually how the last great cycle of reform was conducted. Could banking de-regulation have occurred without the Campbell and Martin committees? Would we really have ever got a GST without the tax summit?

The Henry Tax Review should be considered in that framework, not the mindset that Government is really just some model whereby you commission a group of experts then slavishly follow their recommendations. That is called a corporation!

There is an interesting side view on this issue of informed policy making. We've also seen the recent decision by the Government to defer the ETS. It is worth remembering that the template for that came from a review conducted for the Government by Ross Garnaut.

It is an amusing fact then that the biggest policy response to the Henry Review was to introduce the Resource Super Profits Tax. This is an instance of what is more formally called a "resource rent tax" wherein a "rent" refers to super-profit following the analysis of David Ricardo. Policy wonks can tell you that the idea of such taxes was first raised in 1975 in a paper by the self-same Ross Garnaut and Anthony Clunies Ross.

That perhaps should give the commentariat some chance to reflect on exactly what the process of reform can look like.

Monday, May 03, 2010

The Convention on Cybercrime

The Minister for Foreign Affairs and the Attorney-General announced last week that Australia is to acede to the Convention on Cybercrime.

This step is a very interesting potential "two-edged" sword. The convention should provide the ability to continue to provide greaer confidence in the online world. The conventions actions to seek aligned action and mutual assistance on issues of child pornography and fraud are hard to object to.

One would think that a similar view would apply to the protections of copyright, except that copyright as a legal concept itself is already heavily strained. This is for two principle reasons. The first is the ongoing tendency to extend the period of copyright - the so-called Mickey Mouse clauses. The second is the blurred boundary between copyright infringement and "reasonable use", this becomes increasingly difficult due to the underlying electronic/digital nature of so much copyright material.

The first of these is related to a far more worrying trend - the invention and perpetuation of "rights" for incorporated entities. The extension of copyright is no longer to protect the rights of the creative individual but instead of the corporation. The idea corporations have "rights" started with the application of the concept that they were a natural person and hence able to offer "limited liability" with respect to claims on shareholders. The US Supreme Court has extended this concept to include free speech rights and hece to strike down legislation that baned corporate political donations.

The requirement to create criminalised offences of copyright infringement is not the primary concern - there are already such provisions in Australia. It is the extent that the convention requires legislation that criminalises "aiding and abetting" which could be the basis for some draconian laws on service providers.

More interesting are provisions in the convention that require additional laws that can require data retention. While the latter is already a live issue for telecommunications companies following the European Data Retention Directive. However, the legislative provision foreshadowed in the convention could apply to ALL computers, not just telcos. The Australian Parliament is limited to acting on telco data retention only under the telecommunications powers. The convention would give the Australian Parliament a head of power under the foreign affairs power that they do not otherwise have.

One would think that the process of stating that Australia would accede to the treaty should be accompanied with the same kind of statement as accompanies major reports - an actual statement of the provisions necessary to be introduced to give effect to the convention.

If Green and Coalition Senators want to use Parliamentary resources effectively they might actually use Estimates and other committee processes to expose the plans for legislation attached to this treaty.