Tuesday, October 26, 2010

Howard on Costello

I have not yet had the pleasure of reading John Howard's autobiographical work Lazarus Rising. I am looking forward to it because Howard at his best was forthright and honest and should be so in the book. Of course, I will also think he will be mostly wrong.

I'm particularly looking forward to Howard on his formative years and the dark days after losing the leadership the first time. I've been led to believe that the book tells the story of the four defining political combatants of Howard's career - all notionally on his side - Fraser, Peacock, Bjelke-Peterson and Costello.

On Costello the Oz published an extract on the weekend. This covers only the latter phases of the decision not to stand aside. In various articles Howard's actions have been described as hubris and arrogance as he first in trying to pressure him to quit, Costello completely misread both [Howard's] temperament and personality and then showed what was best for the Coalition took second place to Howard's concern that he might appear cowardly.

Paul Kelly declares that the repeated theme in Mr Howard's reluctance to retire is the fear that such action would be interpreted as cowardice.

Interestingly that is not at all how I read what Howard wrote. Howard was clear that the leadership could change by Howard standing aside or by Costello mounting a successful challenge. Costello never had the patience for the former, nor the support for the latter.

The telling portion for me is the conversation Howard initiated in 2003. Howard writes;

I told him that it was the views of colleagues that mattered most. He never seemed very receptive to this notion. His rather elitist dismissal of what his fellow MPs thought on a whole range of issues was one of the main reasons why the widespread respect for Costello's abilities within the parliamentary party never translated into enthusiastic support for him as party leader.

Peter is not a good listener. His colleagues knew that. They had experienced it first-hand.

Howard was always encouraged by his front bench to stay because they didn't want to be led by Costello. Howard tried to coach Costello that this was the issue he had to fix, but he never did. On the few occasions where he did try to stake his claim it was by either making public positions about it being time or by trying to broaden his appeal to the public at large.

Neither endeared him to the front bench colleagues whose support he needed most.

The ultimate reason why Costello didn't do a "Keating", that is challenge, fail and return to the backbench to wait the fall of the leader was that Costello could ONLY succeed Howard by default. To stand aside would have seen his colleagues all fall in and support an alternative new leader.

It was not Howard who ever stopped Costello, it was Costello.

Friday, October 22, 2010

Hock-onomics and co-operatives

It would be cruel to use the term "Hock-onomics" to make fun of the shadow treasurer if it weren't for the fact that he invented the term himself.

His latest embarrassment is over calls for what seemed to be regulation (though he changed it to a social compact) of the banks to stop them increasing interest rates by any more than any increase in "official" rates. In doing this Hockey continues his ongoing confusion that low interest rates are necessarily good.

History records that one factor that contributed to the GFC was Alan Greenspan's determination to keep rates artificially low. Not only did it help cause the debt binge, it also meant the US was extremely limited in the monetary stimulus it could provide.

More importantly, the RBA sets its official rate with the spread between official and retail rates in mind. They know that it is the retail rates that affect the level of economic activity. If the retail banks increase the spread by 0.25% then that is one rise the RBA simply doesn't need to make.

What lies behind Hockey's concerns, and indeed Treasurer Wayne Swan's, is that as a consequence of the GFC there was a further concentration of the retail banking industry. The Oz reports;

Bank chiefs such as the Commonwealth's Ralph Norris and Westpac's Gail Kelly have gone to great lengths to explain that in a new world, post-global financial crisis, the cost of raising funds on the international markets is increasing as investors take on a tougher view of risk, thanks to a range of ill-advised investments by banks thousands of kilometres away from Australia.

But this story is totally inconsistent with the suggestion that one source of the strength of the Australian dollar is capital inflows seeking Australia's already high (by global standards) interest rates.

Ultimately the concern is that policy makers have no real way to discern the difference between collusive rate increases to capitalise on market power and genuine need to reflect increased costs of funds. At least ACCC chair Graeme Samuel is alert to the potential for the banks to collude by public signalling of their intention on rates.

Against direct intervention on rates, a potential solution is to resolve the market structure issue. Some have bemoaned the loss of the mortgage originators like Aussie and Rams, forgetting of course that their model of securitised mortgages created the market for un-valuable and ultimately valueless derivatives.

There has been some suggestion that Australia Post could go the route of its New Zealand counterpart and get into banking. David Murray's call for AP in banking stopped well short of that. His vision is more about the opportunities for Australia Post to exploit its distribution network as a financial services "supermarket". However, Australia Post already provides many of these agency services for bank and non-bank financial institutions.

Certainly it would seem mighty strange for the CEO of the Commonwealth Bank at the time of its privatisation to be now calling for effectively a Government owned bank. In any case Australia Post already provides a range of agency services for non-bank financial institutions.

Others have bemoaned the loss of the mortgage originators like Aussie and Rams, forgetting that their business model of securitised mortgages created the underlying product from which the un-valuable derivatives emerged.

At core though, the real concern with the "big banks" is the for "for profit" model. No one objects to the shareholders in banks getting a reasonable return on capital invested, except for the fact that the shares traded on the stock-market bear no relation to actual investment, and the returns seem excessive.

The not-for-profit "bank" sector in Australia (Credit Unions and Building Societies) suffered discrimination by the "system" for many years, most notably their exclusion from direct participation in the payments system. Far worse they lost their income tax exemption in the mid 1990s.

The loss of that exemption was argued by the banks as a requirement to remove the other barriers affecting the not for profit sector. But the logic of the income tax exemption is still valid. The for-profit banks face income tax but they pass profit on to shareholders as dividends which are "franked" - that is the shareholder is credited with the tax already paid. The not-for-profits provide their profits to members in lower prices or higher deposit rates the consequence of which is to mean the full benefit is effectively taxable for the shareholder.

Any not-for-profit whose constitution prohibits the distribution of profit to shareholders/members/customers as dividend or capital return should have its tax exempt status restored. That, combined with the aggressive expansion by AP of its agency facilities, has the potential to dramatically change the dynamics of the Australian retail (consumer) banking market.

There is no need for AP to vertically integrate into being a Deposit Taking Institution to leverage its distribution strength, but this valuable public asset should be used to service a revitalised not-for-profit banking sector.

Novae Meridianae Demetae Dexter delenda est


I'm very pleased with my two items for itNews on CBA. Now I just need to master the art of "tiny URLs" to tweet that ....

Tuesday, October 19, 2010

After all these years

After all these years I've finally had a plastic surgeon go to work on my nose.

But don't get too excited, I haven't had a reduction. Nor have I had the scar across it (caused by a fall on a toy truck when I was 2).

No quite simply had a BCC cut off the bridge. So if you see me in the next few days, that's the explanation of the bandage.

Novae Meridianae Demetae Dexter delenda est

Monday, October 18, 2010

Power Crisis; a review

I had the great pleasure of attending the launch (see me at 3 minutes 50 seconds) of Rodney Cavalier’s Power Crisis last week.

The title is a cute play on words, as the book covers the recent ALP history over power privatisation while putting it in the context of the history and structure of the ALP. In doing so Cavalier covers the difficulties of the contemporary left, the ineptitude of political reporters, the absence of leadership and the failing structure of the ALP.

Cavalier has great credibility as a commentator of the Left, having been an active protagonist in that cause for four decades. Over those decades he has gathered a wide reputation for his prodigious written output. Significantly the book portrays Rodney’s love of language and the art of writing. This is not just a book on politics, it is an example of the kind of mastery of the non-fiction craft that is now displayed all too rarely.

The plot of the book is the attempt by Morris Iemma and the Parliamentary Labor Party to pursue electricity privatisation against the wishes of the Party as expressed in a resolution of annual conference. The backdrop to the tale is the history of the party, its great splits and the existence of factions and fractions within the ALP.

Where Cavalier is most critical is the fact that the labels of those divisions within the NSW ALP of Right and Left no longer have any meaning that distinguishes between the beliefs of the two groupings, they are merely the labels of two groups for political patronage.

This provides the opportunity for an excursion, that is based on a Fabian Society address, that addresses the question of what happened to the Left. He notes that the Left no longer has any belief in the socialist objective – be that the broader left as in the ALP nor the group within the ALP that calls itself the Left. Instead of a commitment to “the socialisation of the means of production, distribution and exchange” there is substituted a motley collection of causes, in Cavalier’s words “In the absence of an ideology, gesture politics has become all important to those wearing the label of ‘Left’”.

It is reasonable to ask how it has come to this. After all as Cavalier also notes “The broad discourse of Australian politics from 1941 to 1983 was inside a Leftist prism”.

I will write later more on the whole question of what happened to the Left. For now let me observe that the future for the Left is in redefining what it stands for, and that will be found in the words "the socialisation of the means of production, distribution and exchange". The difference is that it is now not a matter of public ownership versus ownership by a select class called "capitalists", because by dint of things like superannuation "we are all capitalists now".  (And by recollection once Cavalier was asked in parliament why he as a socialist owned BHP shares, to which his reply was something like "There is nothing in the socialist scriptures that requires you to impoverish yourself in the capitalist phase).

The path to a new understanding of "socialisation" is by the rejection of the fundamental precept of the neo-liberals  - that all individuals acting in their own self-interest is the best organising philosophy, both economically and morally. In reality the "golden rule" of acting towards others as you'd like them to act towards you is the most important moral rule. It transpires it is also a fundamental requirement to make market economies work.

The public would have little idea of what is really happening in politics. Cavalier's second target in his book are those paid to report on politics. He makes the criticism that these "journalists" make no effort to understand the historical context of anything, that they rely excessively on the tit-bits they are fed by politicians rather than what they find out and that their writing fits the narrative of power and power struggles rather than a contest of ideas. (My own observation has been that in an election campaign the reports on a policy launch are more about what sector of the community a policy is designed to please, rather than analysis of the substance of the policy itself).

He makes this point throughout the book in a series of boxes in which contemporary press reports incorrectly report what is going on and what will happen. No one features more highly for inaccurate reporting than the Daily Telegraph's Simon Benson who has written his own version of these events as Betrayal. That book ultimately tries to sheet the blame to Kevin Rudd for not delivering Federal intervention. As Cavalier notes, expecting Rudd to be able to deliver the numbers on National Executive was as naive as believing that Iemma could get the vote out of State Conference. Neither controlled the right-wing union dominated citadels of the party.

It is in contrasting the approaches of Curtin and Iemma to implementing a policy that was in conflict with the principles of the party that Cavalier does his best work. In this he is describing political leadership, irrespective of the specific constructs of a party. The story itself, though, is described within the framework of the ALP. However, the words of a leader not able to convince his party could just as well be those of Malcolm Turnbull to the Liberals on climate policy (I am the leader and you will follow me!).

Ultimately Cavalier's major concern is with the structures of the ALP. He has long been an opponent of the union control of the party conference, and rightly notes that the Crean reforms were totally inadequate for the goal of affecting change. In noting that Iemma did not try to sell his case to the party membership he notes there was no membership to sell it to. While making the case for reform to remove the votes of the unions at annual conference, Cavalier reminds Iemma and others that this is a cause he has championed for some time and which others should have joined.

But in this analysis, Cavalier makes this out to be a particularly ALP problem. Elsewhere political scientist like Ian Marsh (in Political Parties in Transition) identify four eras of political parties; from cadre parties, to mass parties, then catch-all parties and finally cartel parties. The catch-all party is the one that on the ALP right represents every polling driven outcome, while on the left it represents the loose collection of "progressive" causes. The cartel party refers to the process whereby parties are publicly funded, both for campaigns and the fact that all "operatives" wind up on various staff.

This disease exists on both sides. Unfortunately John Hyde Page's The Education of a Young Liberal had to be withdrawn from sale, but it told the same tale of a party driven by patronage not ideal, where even sharing the spoils of opposition is more important than prosecuting any case of philosophy.

The disease though is worse for labour. John Faulkner in his launch address (not on line that I've found) referred to the ALP as the political wing of the union movement. This is historically incorrect. The ALP is the political wing of the "labour movement" (or Laborism) while the trade unions is the industrial wing of that movement and philosophy. But the consequence of cartel parties is that both parties become clients of those other factors inside society that are able to exercise power. The most obvious is the power of the capitalists as represented by "business", but close behind them are well organised groups of various beliefs, be they religious or environmental. In the modern age these other forces can be little more than mobs whipped up into momentary hysteria through cascades of tweets and texts and facebook messages and youtube videos. It is the cause of labour that gets overwhelmed in these moments.

But given where we are, how can anything change? Loss of Government in NSW will only make paid positions in unions more important as a place to house operatives. The "reforms" to conference (e.g. central branch) only serve to further hollow out branches. The umions will be just like the Labor appointees to the Legislative Council who failed to vote for the abolition they had been appointed to bring about. Worse the bulk of remaining branch members are aged unionists who date from the days where workers were habitually union members.

My own sorry tale is that I left the ALP in 2006 after the realisation that the Crean reforms meant nothing and nothing could shake union control. At the time I'd read Graham Freudenberg's A Cause for Power. It appeared to me that all previous reform of the ALP had occurred as a consequence of pressure from the outside, not within.

Rodney Cavalier's book and John Faulkner's speech had me regretting that decision. They know what the cause of labour is, and they know what the failings of modern democracy are. I'm just not sure that hankering for the old days and old ways is the solution. Perhaps there are ways through the legislative route, such as requiring that organisations that want to endorse candidates for election must be organised on democratic grounds. But why would the cartel parties pass laws that break the cartel?

But then again I don't have any better ideas. And for anyone who is despairing, this book is an excellent place to start; we need someone to work out an answer.

Novae Meridianae Demetae Dexter delenda est

Tuesday, October 12, 2010

You wouldn't know it from their submission

itNews has reported that Telstra PP&C chief David Quilty has told the CommsDay conference in Melbourne that "chickens were coming home to roost on customer service" and called for action to head off the potential for tighter regulations to be introduced.

Separately he and IBES executive director Kate Cornick argued that the industry needs to do more to spruik the value it delivers to the economy. One should note that AMTA has been doing that brilliantly for about a decade. Meanwhile the ACMA publishes its result on the benefits of competition each year.

It is unclear from the report whether Quilty made the logical leap that the customer service issue needs to be resolved before the industry can sell its value adding story. AMTA got into the value adding story bit at the same time as it was fighting environmental concerns. But it didn't just talk up the value, it acted to significantly reform the way infrastructure was deployed and communities were consulted.

The problem for me is that Quilty's call for effectively industry wide action isn't reflected in their submission to the ACMA's Reconnecting the Customer inquiry. The only co-ordinated action they saw was for an industry skill program on complaint handling and action to remove "confusing" regulation (see below). Equally in the Telstra strategy on customer service the measures they propose to use are private customer satisfaction and TIO complaint volumes.

This should be contrasted with financial services where the major financial services clients rely on the Nielsen Financial Services Monitor "for comprehensive reporting on the levels of customers’ satisfaction with their main financial institution and/or their home loan provider. Published quarterly using the latest trends data from Panorama, these reports tap into Australian consumer sentiment and reflect the dynamic nature of the Australian Financial sector."

(A report I only became aware of because of Crikey's report of a copyright scrap in relation to the report.)

I've previously noted the available public data on industry "satisfaction." Hopefully the industry, the regulators and/or consumer advocates will decide to draw a line in the sand and establish a single uniform satisfaction measure.

NOTE (for regulatory geeks): Telstra's submission makes the outrageous suggestion that the rules on pre-selection and override codes be eliminated as there are over 24 million mobiles and customers take up bundled offers. Now were Telstra to be suggesting a restructuring of the fixed line resale service that bundled pre-selection and wholesale line rental that would be okay - it was after all the core of a submission I drafted for AAPT in 2005. At that time I suggested that the idea of LCS/WLR and pre-selection being acquired by access seekers separately should be abandoned in favour of a single integrated wholesale product. That product could have resolved the definitional issue between PSTN OTA and the LCS by being a product in which a call that would be terminated in the same LAS as it originated would be done so, while a call that traveresed two LAS's would be routed through the access seeker's network. Interestingly there are "local" and "long distance" calls in both categories.

Novae Meridianae Demetae Dexter delenda est

Monday, October 11, 2010

CIS fantasies

The Centre for Independent Studies is renowned for its fantasies about how “free” markets work. In today's SMH their director and economics research fellow write about Hayek, the free market and interest rates.

Interest rates in Australia are actually controlled, though for economic (price stabilisation) not political (home ownership) goals.

They are right to point to the role of artificially low interest rates in creating the US bubble from which the GFC emerged. Would they like to explain why these rates were imposed by the supposed paragon of the free market, Alan Greenspan?

Will they also educate Shadow Treasurer Joe Hockey on why it is appropriate to keep economic stimulus in fical policy while allowing interest rates to return to normal levels?

Novae Meridianae Demetae Dexter delenda est

Saturday, October 09, 2010

How Iraq was like Gallipoli

An excellent column today in the SMH by Peter Hartcher. While this is about the strategy to "win" in Afghanistan it starts with an interesting pen portrait of Lord Downer as Minister for Foreign Affairs.

This portrays Downer as little better than one reading of the Australian Government's engagement in Gallipoli; that is an Australian Government following another Government's instructions for war with no concern for the strategy or the welfare of Australian troops. Is it any surprise the Howard Government as a body rejected any other than the triumphalist, nation building narrative of Gallipoli? They were after all reliving history.

The second part reflects on the honour of defence force personnel, who saved the story till long after it was politically relevant. One of the outraged - Mike Kelly - acted by becoming a successful ALP candidate for election. If only others - like the infamous Godwin Grech - were to follow a similar course.

Finally the substance of the article is excellent on the strategy required. The best quote belongs to Australian strategist David Kilcullen;

It turns out people don't like being invaded - who knew?

It makes an interesting story to stand beside Malcolm Fraser's piece earlier in the week on whether democracy can be "imposed". (Note, this was presciently titled "Libs fail to learn from past wars.")

Novae Meridianae Demetae Dexter delenda est

Friday, October 08, 2010

More on CBA

Phil Dobbie on his Twisted Wire has joined the calls for an NBN Cost Benefit Analysis. He has compiled a pastiche of talk-back commentary trying to suggest a mounting wave of opposition.

That commentary covers the usual list of alternatives; (1) my internet is already fast enough (2) everyone will use wireless instead (3) there are other things (hospitals etc) that the money should be spent on. He unfortunately tags the CEDA front man Michael Porter as the other Michael Porter (he of competitive strategy fame). The Porter analysis is so ridiculous as to be laughable - it is a carry-over from Phil Burgess attempt to convert Australia's think tanks into mirrors of their neo-liberal/neo-conservative US counterparts. Dobbie gets that a lot of this is crap, but argues we need to dispel the crap with facts.

Elsewhere Alan Kohler has repeated that three Australian business leaders have called for a Cost Benefit Analysis. Unfortunately these dudes like many others confuse a CBA with a financial plan or business case for the investment.

Dobbie reports that the Institute for the Broadband Enabled Society is researching how to measure the benefits with work by Richard Hayes. He waffles a lot about how to value the NBN benefits. Ho confuses measuring economy wide benefits with the consumer benefit as measured by willingness to pay. (Though he rightly points out that a CBA values the consumer surplus not just the amount they pay).

But one of the biggest benefit measuring issues is the impact of ubiquity and the fact there are common costs. Let's envision an application relevant to only 100 households. We don't know which they are but know the benefit accrues if broadband is available. That benefit is then only available by ubiquity. If there are thousands of these then their combined effect justifies ubiquity.

But in common with all technology, what benefit can be assessed is constrained by both the inability to envision the future innovations and the over-optimistic transformative scenarios.

As I've previously written it is time to undertake CBA work not to rule the project in or out but to assist in risk and uncertainty management.

NB Can I repeat that Malcolm Turnbull's $10B water plan was never subject to a Cost Benefit Analysis.

And as a further aside. The business leaders interviewed suggested it was time for business to "stand up" to the Government. It is distressing to think business can still run an agenda that suggests it is anything other than complicit in the process of Government - not separate from it. The morphing of political parties from mass movements to what theorists call "cartel parties" has been accompanied by both being captured by the interests of the big end of town.

Novae Meridianae Demetae Dexter delenda est

Thursday, October 07, 2010

Methinks he protesteth too much

That's the alternate headline for Simon Benson's article yesterday in which he recounted Mark Arbib's claims that the NSW Right doesn't control Federal Labor.

The reality is somewhere in between. As Rod Cavalier says in his new book Power Crisis the Left and Right are now no longer about philosophy but patronage. In the stoush in Canberra last June the fact it was the Right that moved was merely a reflection of the fact that it creates communication channels and paths. It wasn't a particularly Right revolt - Kevin Rudd went down because of Kevin Rudd.

Ultimately the issue of the NSW Right predates that and it is their control of "internal polling" rather than factional numbers that leads to their influence as Lenore Taylor revealed in the SMH on the weekend.

The NSW Right still represents all that is wrong with the ALP. Removing the cancer may not heal the patient, but without action the patient will surely die.

What's the difference between the NSW Right and the NSW Left? There are some things a member of the Left just won't do for their faction. In my own ALP experience I really didn't want to join either faction, but disliked the Right more than the Left because of the Right's "bovver boy" approach.

Novae Meridianae Demetae Dexter delenda est

Wednesday, October 06, 2010

The law and competition

I had the pleasure of attending most of a two-day seminar on Contesting Markets organised by the Markets and Society Research Network.

The symposium was a collection of academics highly critical of market theory in all its forms, most crucially of the reliance on "competition" as a policy tool. The range of views was great, from Fred Block who talked about the social construction of the mechanisms by which markets "cascade" - rightly pointing out that the theory of market clearing fails because markets will always have "stickiness" made up of social resistance. There were interesting divergences on labor markets, reproductive biology markets and weather futures markets.

One of the features was a rejection of the mathematical approach of neo-classical economics. This is a point at which I deviate (and in a long ago post on Galbraith I noted this). The issue is not with the use of maths, but the use of the wrong maths. Too much of neo-classical economics rests on assumptions about economic behaviour that primarily exist to make differential calculus work - not because they in any way reflect reality. In this they find comfort in Friedman's fanciful methodology of positive economics.

I really believe that all the factors from market power, expectation, institutions and rules can be modelled - it is just that you end up with complex and potentially chaotic systems.

However, for me a big question remains whether policy makers really understand this stuff. A discussion point is whether the policy makers understand the theory or merely the policy rhetoric of competition, efficiency and market failure. If you do as Lynne Chester has and examine actually existing markets you'd have to conclude that they don't get the theory.

One participant thought they had to understand the theory to buy the rhetoric. But I pointed out, following an excellent presentation from Evan Jones, that "competition" isn't defined in policy. Indeed the definition of competition used in law is a high court definition that refers to competition as rivalry and admits of the concept of seeking to damage competitors. This definition therefore admits into "competition" the kind of "strategic interaction" that the neo-classical model assumes does not exist.

Ultimately the problem is, as Jones has pointed out previously is with law firms who not only represent the big end of town but are the big end of town.

How to deal with the calls for a CBA

Seems that Malcolm Turnbull is going to make an NBN CBA his singular crusade. He returned to it again today in the Fairfax press.

I've written previously about CBA and some of its failings. A CBA certainly won't do what Malcolm thinks it will unless a CBA is conducted on every piece of Government expenditure.

My suggestion that Malcolm is again taking advice from Henry Ergas receives support from Malcolm's suggestion that the CBA should investigate the cost and benefit of upgrading the existing network.

And if the national broadband network is the answer, what was the question? Given millions of Australians already have access to high-speed broadband and the public debate has been how to ensure all Australians have that access, why has the government failed to investigate what the relative cost of upgrading our existing telecoms network would be as opposed to trashing it and building an entirely new one?

This brings us to the question of how exactly a CBA would be conducted. The Senate NBN Select Committee famously recommended that Ergas be commissioned to do the CBA. However, the original piece of work from Ergas wasn't really subject to much analysis. He and I did trade blows in the pages of Communications Day but that isn't online (the CD original report is though.

For the record I'll note two of the problems with the Ergas analysis. The first is that it assumes away the benefits of higher bandwidth by arguing that content will simply be compressed - despite that not being the experience in the real world. The second is that in considering the alternative of upgrading the existing network it ignores the eventual investment in an FTTH network. In fact the expert panel report found that an upgrade of the existing network was;

unlikely to provide an efficient upgrade path to fibre-to-the-premises (FTTP), because of the high costs of equipment associated with rolling out a FTTN network that would not be required for a FTTP network (i.e. FTTN is not a pre-requisite for the provision of FTTP)

However, the fact that one CBA is flawed doesn't invalidate all CBAs. Senator Conroy's argument has been that the benefits (and to a degree the costs) are so uncertain that a CBA would be meaningless. However, that isn't necessarily the case. Michael Gordon-Smith (formerly of the ABA) is now the Australian Director of Hubbard Decision Research, the company built off the book How to Measure Anything. This makes the case that anything can at least be estimated and the process of estimation can be used to identify the size and consequence of uncertainty.

That would certainly be worth doing and is not the same thing as the business case nor the implementation study. In fact providing more information could resolve other simple issues like the confusion over how expensive it will be. Writing on Business Spectator Rob Burgess has compared a BT FTTP roll out to the NBN and questioned why ours is so expensive. In the end he answers it by noting that we are going to 93% coverage not 80 to 90. What he ignores is that the McKinsey/KPMG Implementation Study resulted in the 93% figure because that was what was achievable within the envelope of $43B.

My suggestion is that in conjunction with the NBN work that DBCDE should undertake a CBA of the NBN. However, the purpose of the CBA should be about managing risjk and uncertainty and ensuring optimal timing, not deciding if to build an FTTP network. Similarly there should be no slow down in any construction as it the initial construction will be the only definitive way to reduce some of the uncertainty.

More importantly it would suit new paradigm politics.

Tuesday, October 05, 2010

Who is advising Turnbull

So Malcolm Turnbull reportedly thinks $65 per month for NBN broadband will be too much for households. Problem is the same article points out the entry price in Tassie is $35.

The claim sounds suspiciously like the numbers thrown around by Henry Ergas. We should remember that Turnbull commissioned Ergas for a tax report that never saw the light of day.

I suggest Malcolm broaden his advisory net.

So how is Intel different

News last week that the Government has signed an MOU with Intel under which the Government will;

•provide Intel with updates on progress and development of the Government’s Digital Economy Strategy
•work with Intel as a sounding board on possible initiatives to promote an NBN-enabled Digital Economy
•Share relevant research on an NBN-enabled digital economy.

Nothing in the release seemed to advise what Intel is giving the Government. It does say that,

This MOU will enable Australia to benefit from Intel’s global experiences in using high speed broadband in areas such as health, education, business and environmental management.

The problem is that Intel is a simple for-profit firm and would have every intention of ensuring Australia would benefit from buying more Intel chips.

It raises the interesting question of exactly what kind of "updates" on the Digital Economy Strategy Intel will receive that other firms (especially Australian firms) will not. Or is this merely a piece of paper promoted by Intel to the Government signed by the Government to create five minutes of positive press?

Fluff not substance. A pity.