Monday, October 31, 2011

Australia's Shrinking ICT Policy Engagement

It is really quite hard to come to grips with exactly what has been happening in the ICT lobbying space over recent years. Australia had three groups with a policy focus in the ICT space.

The user side was represented by the Australian Telecommunications Users Group (ATUG) which this year celebrated its 3oth anniversary by closing its doors. The charitable interpretation was that the organisation had achieved its objective, as competition in telecommunications was secure and indeed the structural separation of Telstra (a long held ATUG goal) was occurring.

At the time I questioned the decision noting that ATUG had been trying to create a role as the Digital Economy Stakeholders Forum. I noted that the AIIA has rebranded itself as The Voice of the Digital Economy, and this organisation was even touted as a possible merger partner for ATUG.

Now we hear that the Australian Information Industries Association (AIIA) is halving its head count and declining a role to promote our ICT industry. There are no advices of these on the AIIA website, though both the AIIA CEO and Chair are quoted in the stories.

The CEO maintains there has been no decline in membership, but the section of the website that identifies members seems to be not accessible today. However it was noted that the AIIA board consists of ten reps of multinationals and only six from domestic firms.

Finally the Internet Industry Association has been undergoing turmoil and has appointed as interim CEO the same person who performed the close down role at ATUG.

In the case of both ATUG and the IIA it is known that a factor was the decision of Telstra to rationalise the associations it participated in. It is unclear whether Telstra has also withdrawn from the AIIA.

Outside of Telstra support comes from multinational ICT firms that must increasingly wonder about the value of involvement in Australian policy work, especially as the Australian government seems to have downgraded its own direct involvement in this work.

There is a case for "middle power diplomacy" for Australia in global ICT policy. But the Government has to recognise there is no "industry" to speak of that is uniquely Australian to take up these issues.

It is also becoming apparent that the decision of the ALP to remove the IT component of policy from the Department of Communications etc has led to a significant reduction in policy interest.

Novae Meridianae Demetae Dexter delenda est

NBN Confusion

The coalition doesn't like the NBN - we know that. Malcolm Turnbull, Paul Fletcher and Barnaby Joyce go on about it.

But coalition backbenchers don't like the NBN - because residents don't know when they are getting it. Government backbenchers have also been known to complain about the inadequate roll-out schedule.

The public in general really wonders if the coalition can "stop the NBN." There is no evidence Telstra would have an appetite for negotiating a different deal. There is no evidence a structurally separated copper business could raise any capital in private markets for an FTTN upgrade.

But more significantly, like climate change, everyone wonders whether the coalition could get any enabling legislation through.

The biggest difference between Paul Keating winning the 1993 election against Fightback and Beazley losing the 98 election against the GST was that Keating promised to support ANY Fightback legislation if he lost. Beazley promised to oppose the GST. The people voted strategically in 98 to keep Howard and against the GST - which worked until Meg Lees ratted.

The ALP should go to the next election saying it will oppose legislation to change the carbon tax, because the coalition doesn't believe in any action. They should however say they will support any change the coalition wants to make on broadband policy because Mr Abbott and Mr Turnbull claim to be supportive of the intent.

That would make the issue of cancelling the NBN very very real for many people....maybe enough to make a difference.

Novae Meridianae Demetae Dexter delenda est

On patents

Stumbled upon this blurb for a book on patents. looks to be worth a read if I had time......

Novae Meridianae Demetae Dexter delenda est

Queensland and Northern Territory Air Services

The history of commercial aviation in Australia prior to the 1980s is one of the many subjects on which I have very little knowledge.

Somehow leading up to that point a private sector domestic airline had morphed into a government owned international carrier. Clearly delineated were two domestic inter-capital carriers, one Government owned the other privately (TAA and Ansett). Finally there were a host of regional airlines.

The domestic airlines were tightly regulated - the purpose being the usual one of cross-subsidy. To guarantee flights everywhere, entry to the business was constrained to limit "cherry-picking" on the popular routes. International airlines were tightly regulated globally with most countries desperate to ensure air services to their country and thus regulating access to favour their "flag carrier." (Note that there was actually a major communications link here as the Government sponsorship of air services was linked to mail carriage services).

Australian aviation policy was one of the first areas to be subject to the 1980s and 90s wave of "competition reforms". In this they were following the work of Alfred Kahn in the great work The Economics of Regulation. Details of the reforms in Australia can be found in S.G.Corones Competition policy and international trade in air transport and telecommunications services (first published in The World Economy) gives a good theoretical outline of the issues as they apply to international services.

The primary consequence of the deregulatory thrust was the facilitation of a series of mergers that resulted in operators involved in all the markets. The biggest of these was the merger of Australian (the rebadged TAA) with Qantas. But most of the regional airlines were merged into either Qantas or Ansett as well.

The first consequence of deregulation was the collapse of Ansett, an event that occurred through a whole host of reasons, but mostly through a poorly thought out strategy by Air New Zealand to obtain the same kind of structure as Qantas. Two attempted entries under the brand Compass had put some pressure on both airlines, but both Compass attempts collapsed.

Following the Ansett collapse, Richard Branson's Virgin brand entered the Australian market, with some success. Qantas responded by creating an off brand product called Jetstar that sat at a price point below Virgin, and cleverly was structured to obtain different employment conditions. Virgin has recently responded to Jetstar and Tiger by moving itself slightly up in the quality/price stakes.

The simple facts are that the domestic operations of Qantas are still trading profitably. The reality is that we still have much the same market structure in domestic aviation as we had before, however, rather than an duopoly mimicking each other we have an oligopoly that displays the characteristics of "monopolistic competition" of differentiating themselves to different markets. This is in part managed by differentiation of service - like whether the meal is included with a ticket, etc.

The biggest development has been the application of price discrimination which entails having different ticket classes with different restrictions on changes, but more importantly different prices for each ticket type depending on the actual flight time and when it was booked. This yield management, by filling planes, has been responsible for the lower cost per seat kilometre passed on to customers.

That is, the benefits to the flying public have mostly been from the application of ICT, not the consequence of competition policy. The policy question is whether the market could have been "reregulated" in a different way to encourage these investments without the destructive consequences of the Ansett collapse and the two Compass failures.

But the issue Qantas faces today is not the domestic business, it is the international one. And in that market it is the privatisation of Qantas rather than deregulation that has the most impact. International air travel is competitive and there are less controls on obtaining route rights than their used to be. But the problem for Qantas is that some of the airlines it competes against are Government owned, and some governments subsidise air travel for the "externality" of the economic benefit of visiting passengers. Such a strategy is particularly attractive to any location that can develop as an airline "hub". Australia has no city with such an advantage.

Michelle Grattan is describes the story as having three villians and no heroes. There are actually a set of three related stories here. The first is the story of Qantas and its strategy. The second is the story of Government transport policy. The third is the question of industrial relations law itself.

Qantas is faced with a challenge in its international operations. Paul Sheehan neatly listed what he claimed were ten errors in the battle for "perceptors". The bottom line is that Qantas has announced a slash and burn and off-shoring strategy without trying to get any stakeholders on board. Most notably the current qantas strategy seems to be in breach of the articles of association provisions in the Qantas Sale Act.

But ultimately the question is whether simple off-shoring is better than reverting to the previously thwarted strategies of global merger. In this we think of the inherent logic of "code sharing" on flights, and the global "alliance" structure and question whether a better strategy is simply to fully merge a set of operators, maintain a set of brands but not actually ever fly the same segments. In such a strategy Qantas wouldn't just cut some of its UK flights, but all of them. But equally BA would stop its flights to Australia. Qantas branded flights would fly to Asian hub points to connect with BA branded flights. There seems to be no reason for the actual "code share" crap which simply makes departure and arrival boards at airports totally unintelligible.

A good first partner in such a venture is Air New Zealand. To overcome some of the initial concerns from such a strategy both airlines would fully separate their domestic and international arms.

What needs to occur first I suspect is to unstrap the CEO, and possibly the chair, so that they rethink strategy. The only truly valuable thing in Qantas is its brand - that needs to be revived before it is totally destroyed. (And it is probably better that the brand be preserved internationally rather than nationally - in other words rebrand the domestic operation).

To support this strategy the Australian Government needs to take action. To get the Government to take action requires a far more sophisticated approach than exhibited by Joyce over the weekend. To ring the PM who you know is involved in CHOGM, having already relayed to the relevant Minister the position that the shutdown was irreversible, and expect her to either take your call or call you back is the height of arrogance.

The management of Government Relations at Qantas also raises interesting questions. The report of the attempt to contact the PM shows the contact was made by Olivia Wirth who is Group Executive Government and Corporate Affairs. It looks like Qantas handles everything in house as there is no entry for Qantas as a client on the register of lobbyists.

Wirth was recruited to Qantas in 2009 to head PR where she was to report to David Epstein and work alongside Jane McKeon. The former is a long-time Government insider, the latter was the head of Government and international relations.

McKeon was poached by Virgin in June 2010 at the same time as they hired the candidate Joyce beat for the top job at Qantas - John Borghetti. Wirth was appointed to the top job in April this year following the departure of David Epstein.

Having lost its government relations expertise the decision to not employ a lobbyist reflects great hubris on the part of management and the Board. I should note that Singapore Airlines, Air Pacific, Air New Zealand, Emirate and Etihad all employ lobbyists - as do Telstra, BHP and Rio Tinto). I do not doubt the ability of Qantas management to talk directly to Government. Lobbyists however provide three essential benefits. 1. They are not as deeply involved in your strategy and will tell you the unpalatable truth about how your messages will be received. 2. They are in far more regular contact than you can ever be...they have a permanent presence. 3. They provide a very useful conduit for "unofficial" communication.

Separately from Qantas' own strategy the Government needs to urgently review its own airlines policy. Most importantly the failure to allow Qantas to become part of something bigger has to be addressed.

The first is to speed up the process of mutual border recognition with New Zealand so that the direct flights between the two are domestic flights not international. That then means these flights stay in the merged domestic Qantas Air NZ merged business. It also facilitates entry to those routes. (But a flight like the Emirates one through Sydney remains international and passengers need to do full customs and immigration.

The second is to adopt a new "competition policy" on landing rights. Basically if an airline that flies to Australia is government subsidised in any way then it faces an additional landing tax.

The third is to make the necessary changes to the Qantas Sale Act to allow Qantas to reorganise its business.

Finally, there is a "national security" argument for maintaining flight servicing facilities in Australia (could we face isolation if we could no longer access the Qantas "fleet base" in some other country). The extent to which that national security requirement exists and how much it is "worth" needs to be the subject of proper investigation.

Behind all these there is the Industrial Relations policy issue. While some like Malcolm Colless have argued that this dispute highlights the weakness of the Fair Work Act, there is actually little reason to believe that similar industrial action could not have occurred under Work Choices.

However, to the extent it is a test for the Fair Work Act, the alternative view is that it could provide a definitive case of the Act working.

But let's be abundantly clear, the issue and dispute is far more about airline competition policy than it is about industrial relations policy. But I suspect the CEO and Board of Qantas don't actually get that.

Novae Meridianae Demetae Dexter delenda est

Wednesday, October 26, 2011

As if by magic

I write about the issue of power, and lo I then discover a story about the 147 companies that control everything. An interesting read about modelling of networks really.

These are mostly financial houses as per my note about corporate power.

A retort tried to argue that these finance companies were ultimately just agents for all of us as investors - but that is technically rubbish, especially if what we "own" is an investment in a super fund.

Meanwhile in another observation on complexity economics we learn 'Groupon Is A Disaster'. Anyone who lived through the tech boom and bust of the 1990s could have told you that.

That is about as un-newsworthy as is The Internet is Insecure. Problem with that report is the assertion "Australia is taking a positive lead by working with other nations to identify and try to solve some of the issues with the internet. But the pace of this world-wide effort is glacial and more needs to be done." Stuffed if I can see that happening given the very low Australian presence at ISOC and IETF meetings.

Novae Meridianae Demetae Dexter delenda est

A good read on global warming

Why you should not be a sceptic from the WSJ.

Novae Meridianae Demetae Dexter delenda est

On Democracy

This is one of those grab bag posts caused by a flurry of stories in today's press.

It starts with an item by Peter Costello in which he bells the cat on the "faceless" "powerbrokers", most notably those in the ALP. After an introduction about the influence of Deng Xiaoping after he formally "retired" (and one could add Lee Kwan Yu) he writes;

In Australia we have people who imagine themselves as latter day Dengs - who hold no office but boast that they can make and break party leaders and governments. These are the people the press describe as the ''faceless men'' [although we are getting heartily sick of seeing their faces these days], factional warlords, or ''party powerbrokers''.

The way to become a powerbroker is to spend an inordinate amount of time on internal party ballots. It doesn't matter that these ballots relate to non-positions of no influence. A powerbroker must engage in ceaseless activity. This shows everyone how important they are. It helps to have a union or followers who provide the factional boss with some bragging rights. But the most important skill of all is to cultivate good relations with the media.


It has always amazed me that the right wing operatives of the NSW branch of the Labor Party get such a soft run in the mainstream media. This is a group that brought the public the most incompetent state government in modern memory - from Carr to Iemma to Rees to Keneally. Outside their little fiefdom, where loyalty is rewarded with patronage, most of them would be unemployable. So what are they good at?

I would disagree with the assessment of the NSW Labor Government as "the most incompetent in modern memory", not least because of what it says of the Liberals that took so long to unseat it! I also think the accusation of being "unemployable" is odd - Karl Bitar has a nice little earner at Crown Casinos now, while I'm yet to hear of Costello having found a job.

But he absolutely nails the "modus operandi". After commenting on the stories about Sam Dastyari wavering in his support for Julia Gillard he writes;

There is nothing worse than being a powerbroker who has no power. So if Gillard is going down then the powerbrokers need to get off her bandwagon and take credit for her demise as much as they took credit for her ascension.

And there indeed is the rub, the ability of the faceless men or power-brokers to take the credit for events that have unfolded without their influence. The scribes who write about this no doubt also believe in the "great man" theory of history - events happen because of specific individuals, rather than (the more accurate) specific individuals fall into roles created by events.

Elsewhere the ever-impressive Jessica Irvine cautions about a completely different group of powerbrokers and influence peddlers, the business lobby groups. She writes;

Politicians and the media cop most of the blame these days for the dumbing down of the political debate. But let's not forget this entire industry of rent-seekers who are doing the best they can to muddy the waters of good public policy and confuse everyone.

Politicians need to wake up to the way they are being played. The public needs to switch on their rent-seeking bullshit-ometers when watching the next round of self-serving business advertising and learn to think: ''Well, they would say that, wouldn't they?'' And the media needs to rediscover its love of man bites dog tales and stop giving these guys a free kick.

Occupy Wall Street protesters in the United States are leading a global backlash against crony capitalism and special government favours for finance sector chief executives.

Australians have invented our unique brand of corporate rent-seekers, and far from standing up against them, we've often been complicit tools in their trade, shifting our opinion on public policies in response to their self-interested advertising campaigns.

When government thinks it's doing what the public wants, but what the public wants is in fact what big business wants it to want, we have a problem.

And that note to recognise the rent-seeking flavour of all the admonitions we hear from the corporate sector about public policy, provides a nice segue to the latest flurry of pieces on the Occupiers.

Shaun Carney rambles on a bit before noting that the Occupiers are going to have to get used to a bit of discomfort if they want to effect change. On the way through he notes the difference between Australia and the US that we actually have some elected representatives of a radical kind - the Greens. But he also notes the difference between the Greens trying to be an ordinary organised political movement, and the Occupiers who eschew such structures.

He also does a neat job of summarising the Occupiers;

The local version is a series of protest groups in the literal sense: they are protesting about just about anything you can name, from a left perspective. If interviews with members are any guide, they are variously against rising inequality, corporate and financial greed, our system of representative democracy, political parties and their leaders, failures of social justice and environmental degradation.

Sarah Caslan writing in The Conversation picked up the strand of the validity of protesting what is, without having to advocate for what you want. She wrote;

If you can’t validly protest the status quo without knowing exactly how to change it (particularly difficult for those without power who are most likely to be dissatisfied), that’s a playing field designed to entrench “the way it is” (whether one likes it or not).

Instead it is surely legitimate, as is happening with Occupy, to start conversations on change, whether they result in concrete steps or not. Part of the point of Occupy is to get people talking about political and economic systems and the possible need for change, and in that respect it is probably succeeding.

The validity of those concerns has been well detailed by James Arvanitakis in The Punch. He goes into detail about the problem of the distribution of wealth, putting profits before well-being, and finally the problem of "corporate power". (The first of these was Irvine's subject in her weekend column, and the latter of course today's). He concludes;

The Occupy Movement may not have a catchy slogan like “save the whale”. What they have done, however, is identify a sense of unease that the economic system is letting down a majority of the world’s population: and the evidence is there to support them.

Meanwhile The Conversation also reports on an ANU poll that shows a dramatic lift in the proportion of people "disastisfied with democracy" from 14% in 2007 to 27% now.

The utem tries to place the "blame" for this with the Government of Julia Gillard. What the Occupiers are trying to highlight is that the problem is much, much bigger than that.

The thesis as it is unfolding to me is that the initial "impetus" to democracy can be described as an approach to limiting power of one group over society (or citizens) as a whole. The motivation in the UK model built in the 17th century was about limitation of the arbitrary power of the monarch and aristocracy. The history of that evolution goes back further to the empowerment of the aristocracy over the monarch in the Magna Carta.

Before all of these the real "authority of the state" comes from the way it protects citizens from the exercise of power by force, be that defence against external aggressors, or the protection of life and property from local aggressors.

Ever since "corporations" were imbued with the "rights" of a natural person - including in the US the political right to campaign - there has grown a new unchecked power, the power of the corporation. The power of these corporations does not rest with their shareholders generally, but with the executives of the corporations and with the executives of the financial corporations (investment banks and pension funds) that can and do exercise shareholder control.

And in this mix elected representative politicians are seen increasingly as part of the power mix, not part of the restraint of power.

Novae Meridianae Demetae Dexter delenda est

Tuesday, October 25, 2011

The Sorry State of Telco Regulatory Affairs

I probably need to do a longer piece on this, but saying as I do there is a sorry state in Telco regulatory affairs will win me no friends. Indeed, it might even find a few people ready to hurl personal accusations about me as being "bitter" over some imagined slight.

The reality is that the state of affairs I describe is one which is driven by the same set of issues that drove the GFC (the corporate focus on the short-term outcome) and the political values of Grahame Richardson (whatever it takes).

My first case is the Mobile Terminating Access Service (MTAS) and the ACCC's process for reaching a Final Access Determination (or FAD).

The process of the ACCC setting Access Determinations was the final abandonment of the approach that initially promoted self regulation (through the TAF) and "guided" market mechanisms (negotiate-arbitrate). The experience with both of these is worthy of analysis of their own on another occasion.

The position we now have is of a central price setting regulator with limited opportunity for judicial review of decisions. The first ACCC guidance on MTAS pricing principles was to utilise a retail benchmarking approach, that access fees had to decline at the same rate as retail prices. The consequence was actually a temporary stall on price competition, as the effect of a price decline for an operator were magnified.

The Commission's next approach was based on top-down cost models from two operators. These models in one case included a highly fanciful claim for a recovery of a notional fixed line externality through a "Rohlfs-Griffin" effect, and a claim for Ramsey-Boiuteux recovery of common costs. I say fanciful because the first exercise relied upon a number of parameters that had to be guessed, not just because they hadn't been estimated but because there is no methodology to measure them. It was also fanciful because it only introduced half the externalities present in the market. The R-B pricing was fanciful because instead of estimating an Australian set of own price elasticities they used the average of various studies from other markets. They then applied these - which had been estimated using a constant elasticity assumption - to a model with a linear demand curve (where the elasticity varies along the curve).

The Commission then commissioned a bottom-up model from WIK. As I wasn't actively engaged at that time I never analysed the WIK model.

The Commission commenced its current inquiry with a radical discussion paper that considered (1) the prospect of moving to LRIC rather than TSLRIC+ pricing, (2) the option of pricing mobile-to-mobile termination differently from fixed-to-mobile and (3) the option for a "pass through" mechanism of declining MTAS rates on fixed-to-mobile calling.

A consequence of the appeal to LRIC (which really takes common costs out of the equation) is an erroneous presumption that in the long run the cost of terminating a call is zero. The most egregious part of this is the error of assuming that as a curve approaches zero then it eventually reaches it, but the zero line is an asymptote of the curve and really is never reached. The per call cost approaches zero because, in part, of increasing volumes. If calls cost 0.001 cent per minute but there are billions (or trillions) of minutes then the payment owed is still positive and significant.

The draft decision thankfully walked away from all three "radical" endeavours, but in doing so has inadequately supported the prices it has determined. This creates the image of the ACCC as a capricious regulator.

Nowhere is this more apparent than in the F2M pass though argument, where Telstra has provided evidence to the Commission that its net take on fixed calling after costs has declined not increased. The ACCC could have done that investigation itself using its investigatory powers but has declined to do so. They also seem to have declined to even acknowledge the point Telstra has made. Mind you, Telstra seems to have insisted on keeping these details Commercial-In-Confidence even though they probably don't meet the formal definition (i.e. there is nothing in the data which would aid Telstra's competitors). (Note I provided a very simple version of Telstra's argument using publicly available data).

Meanwhile, Optus and Vodafone who both complain MTAS reduction without F2M pass through is a free kick to Telstra have not explained why if it is such easy money they haven't entered the market (in Vodas case a very simple F2M product by override code for existing Voda mobile customers would be relatively inexpensive to create, in Optus case add an F2M only override product).

Macquarie Telecom goes to a whole other plane of idiocy. They carefully argue that they don't actually acquire the MTAS (because they are a switchless reseller) and that the product they buy costs more than the sum of PSTN originating access (0.95c/min) and MTAS (9c/min). They don't seem to acknowledge that there is obviously a cost incurred in turning the two access components into a call, they also don't seem to contemplate the obvious answer - if you believe the cost of doing that is less than the difference between the sum of the access fees and what you pay for an FTM call, then bloody well just build the infrastructure.

The complete flip-side of that is Lycamobile pointing out that as an MVNO they are paying their wholesale provider an "airtime" rate for originating and terminating calls and that they are recipients of MTAS fees, so the decision results in a price squeeze on them. Well hello, whatever made you think MTAS wouldn't decline in the future? Have you got a regulatory events clause in your contract to trigger a renegotiation right? If not, go sue your lawyers and leave the ACCC alone.

The submissions are all the classic worst case of self-interest submissions that are not framed on the basis of an established view of how the market should operate, but instead focus on the specific "ask" of their business. These reflect the operation of the regulatory craft as something that takes instruction "from the business" rather than is intimately involved as the expert on the external environment on the development of strategy.

The ACCC deserves to be resoundly criticised for the way it has handled the MTAS determination thus far, but equally the submissions from industry players do little to handle the ACCC to account.

Nowhere, however, is the sorrt state of affairs more apparent than in the bleating by Internode (among others) of wanting to be "compensated" for the stranded asset of their DSLAM investments. The assets were not deployed like an HFC network with a thirty year or more life expectancy, more likely 2 to 3 years. None of them need to be retired immediately. The "exchange exit cost" has always been something they need to consider as a future liability.

Novae Meridianae Demetae Dexter delenda est

Monday, October 24, 2011

Occupiers again

I can't seem to get over my obsession with the Occupiers. Following their eviction in Melbourne and Sydney in recent days, there is a new flurry of confused commentary.

The standard line gets repeated that the occupiers need a point not just publicity.

A new avenue is found by David Penberthy who tries to claim that it is a left-wing protest about left-wing problems. He makes a number of errors, first by grouping everything that is not conservative into one basket of "the left". Yes some of the occupiers are your usual group of Trots who practice continual revolution, object to everything etc. But a slab are not, they are more thoughtful.

The second is to try to use the European protesters in Greece as if they are the same as OWS. They are not. To go to blame US problems with;

it is highly debatable whether the broader economic troubles are being caused by the kind of obscene and indefensible greed demonstrated by the likes of Goldman Sachs, or excessive government spending and sloppy banking policies which meant that hundreds of thousands of people were given money for mortgages which they could never repay.

is to suggest that "sloppy banking policies" had nothing to do with lax regulation. The "excessive government spending" has mostly been on very un-left war efforts.

A more thoughtful piece notes;

Not surprisingly, the 1 per cent are fighting back. Given their disproportionate wealth, power and privilege compared with the demonstrators, their PR message is cutting through. It is that the dissidents are ridiculous and their message unclear.

To make the point the author provides some snippets from the New York "Declaration of Occupation";

As one people, united, we acknowledge the reality … that no true democracy is attainable when the process is determined by economic power. We come to you at a time when corporations - which place profit over people, self-interest over justice and oppression over equality - run our governments. We have peaceably assembled here … to let these facts be known.

They have taken our houses through … illegal foreclosure … they have taken bailouts from taxpayers with impunity and continue to give executives exorbitant bonuses.

They have continuously sought to strip employees of the right to negotiate for better pay and safer working conditions …

They determine economic policy, despite the catastrophic failures their policies continue to produce … join us and make your voices heard!

To put the US housing experience in perspective - why is it that the financially illiterate people who borrowed money on the professional advice of their bankers and brokers are the ones to suffer, while the bank executives have been still taking their salaries and bonuses, and the shareholders who failed to appoint competent Boards have been largely protected?

And it is not true the movement has no demands, their eight demands include specific ones about revamping financial and corporate regulation. Some of these are as appropriate in Australia.

Novae Meridianae Demetae Dexter delenda est

Experts and the Public

Social analyst David Chalke in this morning's National Times writes

The political classes of Australia are living in one world and the public in another. In the words of eminent American social researcher Daniel Yankelovich, these worlds have different agendas, vocabularies and concerns and they are barely connecting with each other. The consequence is a significant and serious disconnect between public policy and the Australian people.

That is a strong thesis, but my perception is the void is not as great as the phrase suggests. (Note, the attribution to Yankelovich led me on an interesting search which is detailed at the end).

Chalke writes;

Public policy appears to be focused on the environment, public transport, the NBN and gay marriage, which are of low priority for the public, according to our own research. People are far more concerned about the future of the economy, rising unemployment, the cost of living and traffic congestion.

As a consequence, people have now stopped listening to the political classes and are focusing on their own lives until they can take their revenge at the next election.

The response of the "political class" would probably be that the environment and the NBN are both very much focussed on the future of the economy, both are about what a sustainable future looks like.

Unemployment is slightly rising again, but the ABS trend line below shows that this should be far from a major issue.

Equally the "cost of living" seems to be somewhat spurious, as the long run trend in CPI increases below shows.

Finally a policy discussion on public transport and a public concern of traffic congestion are clearly related to the same topic. (And indeed the NBN can also be related to it).

In fact, a better diagnosis of the malaise is not that politicians and the public have different agendas, it is that politicians have lost the capacity to explain the relationship between the political agenda and what matters to people.

Former Labor insider Karl Bitar has described it;

The problem with politics in general is that the process involved in getting promoted up the political ladder causes most people to lose their values, passion and beliefs. Political advancement favours those who can recruit members, attend campaign events and suck up to the right people rather than those with a passion for policy.

It's this very system [that] drains most people who climb the political ladder of their beliefs.
The policy failures of Labor governments are due, in part, to the lack of strong policy values some among ministers.

By the time many of our politicians and officials reach senior positions of power, they are no longer driven by the core policy values which brought them to be involved in politics in the first place. That's one of the reasons why Labor has this problem of defining its policy purpose in the 21st century.

In other words, if you aren't allowed to debate policy inside the party, you can't be expected to successfully debate it outside.

The corollary is that there will always be the senior sources happy to talk about leadership counts and factional positioning. That's what they know.

It is not just, as attributed to Anthony Albanese the 'need to have told our story better", it is to have a story to tell.

It is so interesting to hear these comments come out of the mouth of Bitar. It is a pity that he doesn't precede them with an acknowledgement that he and his mentors in the NSW Right, and those of the NSW Left who went along with destroying policy discussion within the party, was the architect of the problem.

It is a pity that he doesn't acknowledge that the problem can only be fixed in the ALP by bringing to an end union control of the party.

It appears that the Bitar quotes will appear in a new book by Tony Branston Looking for the Light on the Hill. It will be an interesting read, but I wonder if it will address the "Lord Voldemort" of the ALP - union control.


On the Yankelovich statement.

Chalke attributed the line to Daniel Yankelovich. Under Yankelovich's name in the online article he gave a link to the website of one of Yankelovich's companies, not to the original quote. I found the insight interesting and wanted to know more.

However, attempts to find the original only found a reference to the idea in a New Atlantis column (from 2008) and another reference by David Chalke in an Australian Magazine item from December 2008.

The author of the first piece, Thomas Fitzgerald, states it as;

One such problem was raised by Daniel Yankelovich, a senior eminence in the polling industry and the founder of the opinion research organization bearing his name, when speaking at a 1998 conference on wider participation in policy development for genetic research. He pointed out that such public policy issues often lack resolution because of a failure of engagement with the affected public, and the continuing disconnect between policymakers and the public itself: “Experts and elites live in one world, the public in another. These worlds have different concerns, agendas, vocabularies, and subcultures, and are barely connecting with each other.” His diagnosis can be confirmed throughout standard opinion polling, mostly done not in face-to-face interviews or in focus groups, but by telephone calls.

Chalke in his piece states it as;

“Experts live in one world, the public in another. These worlds have different concerns, agendas and vocabularies, which rarely connect with each other. The result has been a serious and growing disconnect.” So wrote Daniel Yankelovich, the √©minence grise of American social research in the 1990s. What Yankelovich identified then has grown into today’s public scepticism of, and weakening faith in, experts and “the system” in general.

Googling the first phrase of the first sentence of the latter only results in the item itself, Googling the first sentence of the former results in the item and one other reference by Chalke as the lasy slide in a 2004 presentation.

So what did Yakelovich claim? was it in a speech or in writing? His website gives his speeches, including one to the Kellog institute in 1998. In this Yakelovich says;

The second obstacle is the enormity of the communication gap between citizens and government. Government officials and the public do not speak the same language and often do not share the same values. The public is almost always poorly informed, it puts values ahead of facts, and it typically finds itself at an earlier stage of thinking about issues than experts and officials who have been deeply immersed in them. Under these conditions, ordinary methods of public education and discussion do little to narrow the gap between citizens and officials. Special skills are needed for this kind of citizen engagement, skills that are in short supply.

This looks close enough to be the sentiment referred to, and the rendition from Chalke and Fitzgerald possibly comes from someone's notes from the talk. But the context is significantly different. For Yankelovich this was one of three obstacles in a move from "public paticipation" to "citizen engagement" and the other two were bureaucratic criticism that citizen engagement is too cumbersome and expensive, and "leadership resistance" (which really means leaders who think they know better than the masses).

Novae Meridianae Demetae Dexter delenda est

Thursday, October 20, 2011


The Australian Government released its State of Australian Cities 2011 report today.

Despite the comment that;

Analysis shows a strong positive correlation between cities with robust information and communications technology and strong intellectual assets.

The word "broadband" seems to only appear twice in the report, both times in reference to a ranking of Sydney in a PWC report.

What hope is there for public understanding of the importance of broadband if in can receive such scant treatment in a 257 page report issued by the Department of Infrastructure?

I think this reflects the comment I made way back in May that the Government as a whole doesn't seem to get the whole Digital Economy thing.....

(Note. I'm happy to be corrected if I've misrepresented the report. I did rely on a simple search for the word "broadband").

Novae Meridianae Demetae Dexter delenda est

Technicians and true politicians

A theme in Frank Sartor's new book The Fog on the Hill is the relationship between policy and politics. Sartor propounds the view that too many in the NSW ALP were putting politics before policy; they wanted to say what the public wanted to hear, not work out what they wanted to say and then figure out how to present it.

Ultimately, it is a false dichotomy. Good policy is good politics. It is much easier to present an idea that you actually believe in than to present an idea just because it is what you think the audience wants to hear. And ultimately the problem is that simple pursuit of what is popular ultimately leads to a blind alley. The US is a particular example - more services is popular, less taxes is popular ... but continual deficit budgets are unsustainable.

Fred Chaney recently addressed the Accountability Roundtable at Melbourne Uni's Centre for Comparative Constitutional Studies. After reflecting on his own dissafection at the last election he said;

Rather than collecting the many expressions of dissatisfaction it may be more constructive to look at what are the foundations of purposeful politics directed to the national interest and in particular the longer term interest of Australia.

What are the sea anchors in a system, stabilising factors which enable the electorate to discern the direction of travel, to put individual decisions whether popular or unpopular into an understandable context? Where is the story to come from which enables single issues to be seen as part of an overall program which can be judged within a context rather than a freestanding publication to be judged in isolation on the basis of who loses?

There are a number of factors which in isolation or together can clarify what a government stands for, a number of ways in which politicians may demonstrate with some clarity how they will judge where their duty lies and we can see integrity in their actions.

The answers he provided were -
1. purposeful leadership,
2. adherence to a coherent and declared ideology,
3. broad-based political parties with large numbers of members exercising real authority over policy and candidate selections

On the last point he said;

The professionalisation of politics and the party system is the opposite of a sea anchor. The political technicians have taken over from the policy makers. The increased skills now available to read the public mood, to determine what the public will accept today and what words can be heard today without rejection has led to reversal of the rule laid down for me by my friend and colleague Jim Carlton, himself for a time a party professional.

When we worked together on economic issues during the 1980s he made the point that the first task is to find the right answer, the second task is to work out how to sell it. This is the antithesis of an approach based on finding out what you can sell today to provide the answer for tomorrow.

This last sentiment brought to mind again the observations made about the marketing skills of Steve Jobs. He relentlessly pursued developing the products to met the needs of people, despite the fact that those people could not describe their needs. To do so he created a relentless organisation.

That I think encompasses the troika identified by Fred Chaney. Put simply the troika is - leadership, policy (or philosophy) and organisation - the three themes I wrote about in my piece for the Southern Highlands Branch Newsletter.

The thing is that achieving just one of these doesn't improve things. The good news is that between them they should form a virtuous circle, improving each makes improving the others more achievable.

Novae Meridianae Demetae Dexter delenda est

On tablets and brands

Language is a funny thing. I recall working with an American consultant in 1991. Just as we were about to go into a meeting he looked at me and said "I know this isn't the word you use, but do you have a tablet I could use?"

Luckily I was able to interpret that he was after a writing pad and not some kind of pill.

Today there is news that Telstra is abandoning the marketing of the Telstra T-Touch. This was their own branded tablet - but it was a white-labelled Huawei device.

Huawei has been an active provider of white labelled modems - if you have a 3G wireless dongle there is a very good chance that it is a Huawei device. But they have not been making big moves into the direct consumer branded device market yet.

Telstra has discovered the limitation of their brand - in quite an interesting way. Where the device is clearly identified as being integral to the operation of the network - the dongle - Telstra branding works. However where the device is largely independent of the network then other branding is potentially more useful.

This is an important lesson for Telstra as it continues to think of its growth opportunities in media and applications. It should form an important consideration in its approach to partnering and co-operation - issues I've recently written about and had echoed by other execs.

Brand has always been a challenge for telcos. For example I can recall one case where a service provider could not reach agreement for resale of a mobile network's offering, even though the service provider's parent owned a big hunk of the mobile operator. Each party insisted on its own brand being on the mobile service. I couldn't understand why the SP (who I worked for) didn't agree. We only wanted to sell it in a bundle, the MO didn't sell bundles. We had no "brand" in mobiles, the MO had invested a lot in brand.

And I looked at my laptop, which was branded IBM (at the time), the software was Windows and the processor was Intel - the latter had their brands proudly attached to the case of the laptop with stickers (as they both do on the HP machine I'm on now). Each of those parties benefits by being associated with a leading brand in the related field.

Telcos have learnt this with phones. They need to learn it about content and applications.

Novae Meridianae Demetae Dexter delenda est

Wednesday, October 19, 2011

Channelling global execs

In my iTnews column last week I wrote;

Telcos have made a habit of telling us that they aren’t each others’ main competitors, that the “real competition” is Google, Facebook, Apple, Microsoft or some other device.

They need to take this opportunity to act like they believe that their real competition are the application providers. They need to acknowledge that years of “competing on service” has just left customers frustrated...

A real commitment to customers in everything they do - and demanding the best from themselves - would identify the need to fix brand “telco” before investing in their own brands.

It was therefore nice to read that at an event for top 100 telcos the regional VP for AT&T said;

[Telcos must] all work together more often. We're going to have to work with different partners, to serve customer requirements.

This was in the context of;

A key telecoms operator event in London on Tuesday sent a clear message to the industry: telcos need to work together, and with other players in the value chain, to enable them to adapt to the changing needs of their customers.

Nice to see global telcos agree with me!!!!

Novae Meridianae Demetae Dexter delenda est

Cultural Policy

In a two-part item on cultural policy on The Conversation, Stuart Cunningham first outlines the contribution of the cultural sector to the economy, including jobs, and then introduces a Culture Consumption Price Index (CCPI)

The introduction to the National Cultural Policy discussion paper says;

The arts and creative industries are fundamental to Australia’s identity as a
society and nation, and increasingly to our success as a national economy.

We could first spend some time distinguishing between "Culture" and "culture". The latter represents all the various common behaviours, language, idioms and imagery of the society. The former is a formal representation of these in a specific form. The former play an important role in reflecting and creating the latter and are an important part of their diffusion throughout the community.

So "Culture" matters because of the role it plays in establishing "culture" - our social norms.

But it also matters economically. Firstly, citizens do pay to access Culture - and one issue is whether that is imported or locally produced, or indeed exported.

Discussion of the economics of Culture often leave people bemused who think that "economic production" is about the material essentials of life; food, housing etc. However the most salient observation of market theory is that markets develop anywhere and are driven by the consumption preferences of individuals. People do want to spend their money on Culture, and given that fact it is just as important that the activity occurs "efficient;y" as any other activity.

In brief disparaging high-speed broadband because one of its uses is the consumption of Cultural elements reflects a lack of understanding about the subject of economic inquiry.

The CCPI then provides evidence of significant disparity between regional areas. That is not surprising. The item in The Conversation doesn't link to the actual study, but having found it more information on the six goods in the basket can be found.

The study notes;

This constrains the basket to appear simplistic at first, seemingly missing
the texture and the fullness of contemporary cultural consumption possibilities.
But a good index is a simple index of as few items as is defensible, with their
criteria for inclusion being representativeness in cost structure.

The six goods listed are;

((1) mass culture (blockbuster movie); (2) high culture
(theatre); (3) family culture (library); (4) cultural learning (music lesson); (5)
social interactive culture (festival); and (6) home culture (music download).
While there are many other aspects we may have sought to include, we maintain
that these six dimensions capture a significant range of variation in the full cost
of cultural consumption in Australia.

The methodology of the price index construction includes direct cost and opportunity cost of time involved to travel to a cinema, theatre etc. It is hard to understand from that the assertion made that;

And Minister Simon Crean has dubbed the NBN “the most important piece of cultural infrastructure Australia has ever seen”.

One of the most important dimensions of the NBN – one that differentiates it from almost all other fast broadband plans – is the symmetry it offers between download and upload capability.

Regional Australia will enjoy much faster downloads (cultural consumption will be easier and cheaper), but there will also be huge new potential for cultural participation, exchange and profiling.

A snippet of that potential includes hyperlocal journalism providing coverage lost through broadcasting aggregation, hundreds of regional museums displaying their wares across the nation and new businesses made viable by the access provided by fast broadband.

Very few of these factors would actually change the CCPI. They don't reduce the travel costs of the mass cultural items, and possibly only a music lesson benefits from improved uplink speed (real two-way video conferencing).

An interesting dimension would be to add to cultural policy things like a "virtual cinema" which streams first release movies but can only be received by households in areas defined to be outside the catchment of real cinemas actually showing the film. The same could be constructed for broadcasting of live theatre production to remote areas.

It is a pity that such a good piece of empirical work (the CCPI) has been mis-used by simply making assertions. The NBN is an enabler for reducing regional cultural disadvantage, but it requires other policy developments as well.

Novae Meridianae Demetae Dexter delenda est

Tuesday, October 18, 2011

Is it weird?

Four resolutions were voted on at the Telstra AGM; the NBN transaction, the re-appointment of the Chair and another Director and the remuneration report.

99.45% supported the NBN agreements. Is it weird that it received the biggest majority of the four votes?

As the Telstra meeting was going on the Prime Minister announced the release by NBNCo of the twelve month schedule.

Was it weird that the Government blurred the message? By waiting a day it could have been messaged as either "good news we can release the schedule with more confidence the agreement with Telstra will come into effect" or, if the result had been bad, "we continue regardless."

Was it also weird that the Prime Minister announced anything? This is NBN Co's schedule, it is their job to do it. The Government should be not politicising the schedule so much - save its moment to stand in the sunshine when there are more services and an election is looming.

I've also said before that the PM has got to stop wanting to announce everything. Let Ministers announce without her. Maybe even go back to the Whitlam-esque once weekly press conference and do a weekly sweep of "all the good things our Government ids doing" - build the image of a team of achieving Ministers.

So I think the answer to all of the above is - yes it is weird.

Novae Meridianae Demetae Dexter delenda est

Telstra AFR

Very pleased with my first ever Op Ed piece run in the AFR this morning. (Behind paywall).

As 99% of proxies voted for the resolution it didn't really matter, but it was important to inject a dose of reality into the conversation given the politically motivated campaign to derail the deal.

Novae Meridianae Demetae Dexter delenda est

Monday, October 17, 2011

Can the Government win on Australia Television tender

Ultimately it is absurd to have a Government funded national overseas television service operated by anyone other than the Government funded broadcaster. However, since the commercial networks first had the Australia Television service tendered out under the Howard Government (won by Seven) that has been the accepted position.

Perhaps having it in commercial hands can provide greater cover for the service upsetting foreign powers; but the powers likely to be offended won't really comprehend the nicety.

The Australian today reports that the second assessment of tenders is going to recommend Sky.

But with its high News Ltd relationship making the decision either way can be spun by the Opposition. If the tender is awarded to the ABC then the action is to "punish" News for its coverage; if it is awarded to the ABC it will be a "bribe" for News to change its coverage.

Ultimately that is always the problem with any process where a media player is the potential beneficiary of a Government contract.

That is an additional reason to have the service run by the ABC. But the decision should be made not to award the contract to the ABC, but to abandon the tender process totally and to amend the ABC charter so that the provision of Australia Television is part of its ongoing function. That change should be accompanied by legislation that entitles Australia Television to a mechanism to "compulsorily acquire" sporting and other culturally (yes sport is cultural) significant coverage content if that content is not otherwise being internationally distributed.

Novae Meridianae Demetae Dexter delenda est

Occupiers and Pirates - a reprise (updated)

I'm going to link the two movements again because they both represent a shift in thinking. They know what they are against but haven't yet figured out what they are for.

Today Peter Shergold tells us that what the Occupiers hate about business is the "unconstrained pursuit of high-risk short-term profits." For him the solution is just a nice dose of good old fashioned "Corporate Social Responsibility" (or CSR).

I wondered how he went pitching this to John Howard when he was Secretary in PM&C. Then I remembered that Howard did have a go at promoting corporate philanthropy, but as Shergold points out that is not the same thing. That is the activity that does usually get short shrift as "launch, lunch, logo." Shergold sumarises it as;

The challenge for those of us who believe in market economics is how to restore business legitimacy. The 'licence to operate' needs to be rearticulated. Business must be able to exhibit its societal value, not to trade-off against the social and environmental costs of economic success but as integral to the supply-chain by which goods and services are produced. 'Giving back' is no longer sufficient. Charity won't save capitalism.

But Shergold does nothing to rebuff the most compelling counter-argument from Milton Friedman, who argued The Social Responsibility of Business is to Increase its Profits.

Yes there are good examples of CSR or triple bottom line - but as one blogging former exec notes individual KPIs still reflect revenue growth well above the CSR stuff.

There is a logical case that CSR in fact drives better financial performance long-term, but the issue remains the focus on short-term results. Short-term results have become significant through the inadequate response to the principal-agent issue; that is tying managers to the interests of shareholders.

The interests of shareholders - especially those whose retirement savings are invested - is in long term returns not short-term share price. As I commented before a way of dealing with this issue is by changing the remuneration basis of executives.

But Shergold also has to deal with the unfortunate facts of capitalism in America. Decades of focus on economic efficiency over equity have resulted in a dramatically less equitable society. CSR might knock the unpalatable edges off business, but will it change the equity trend?

I think the answer is "no.' I think that change requires a fundamental reset of the values espoused in public policy - away from "economic efficiency" and towards "growth and equity". They are very very different things.

Finally, the Pirate Party in Germany grapples with the question of what next from a totally different stance. In a discussion about the fact the party is very male oriented the political director (a female) said;

We don't keep track of our members' gender. We believe true equality starts when we stop counting women.

That is possibly the best indication that we are now in a "post-sixties" generation. Popular movements from the mid 1960s on have built on the themes of peace, environmentalism, and feminism. The current generation of "young radicals" take these as given - whether rightly or not. They may not be universally accepted across society, but they are almost universally adopted in the younger persons value set. They aren't, therefore, worth campaigning about.

Update: Ross Gittins this morning offered an interesting take of the failure of most economists to address some of the issues. He cited a book The Economics of Enough. A quick "thumb through" of the copy I just bought for my "Kindle for PC" (don't you just love that immediacy) says it is a very good book written from the basis of an orthodox economist recognising some of the empirical results (inequality, recession) and other theoretical work (institutionalism, behavioural economics). It deserves a more thorough read.

Novae Meridianae Demetae Dexter delenda est

The other lessons from Jobs

I've alreadt blogged about my little homily on the lessons telcos could learn from Steve Jobs.

But not all the lessons we learn from Jobs are good ones - indeed there are some important public policy ones.

The management homily by example is given another good run by Dr Ray Welling in NETT magazine.

They list six Jobs statements;

* Things don’t have to change the world to be important.
* The cure for Apple is not cost-cutting. The cure for Apple is to innovate its way out of its current predicament.
* It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.
* They can have any colour they like, as long as it’s black (actually a mis-quote of Henry Ford - but the essence is the same - simplification is a key to success).
* It’s more fun to be a pirate than to join the navy.
* I think if you do something and it turns out pretty good, then you should go do something else wonderful, not dwell on it for too long. Just figure out what’s next.

But there are other lessons to be learned.

Sam Varghese reckons that Jobs deserves more criticism for his obsessiveness about "proprietary software."

The issue isn't just about software. It is about the whole management of "intellectual property" as I wrote recently.

As the case between Apple and Samsung now moves in the US to a phase of Apple needing to establish the validity of its patents analysis of the Australian case reveals that the patents being relied on could potentially stop all other tablets. The article specifically mentions Android based ones, but the patents cover the navigation interface being first a "multipoint touchscreen" and second a "touch screen device, method, and graphical user interface for determining commands by applying heuristics".

One gets the feeling that if Jobs hadn't actually just lifted the Mac GUI from Xerox that there would have been a patent on mice and MS-DOS could never have become Windows.

If I can patent these kind of new ideas, could a professional athlete patent a new technique used in an event - think the first person to jump backwards over a high jump. Is that what we want?

Of course the law and economics types who think that property rights are what propel an economy would disagree.

But last week also saw the passing of Dennis Ritchie, whose development of UNIX and C has been described as a legacy that;

is the rich suite of devices and applications that we use on a daily basis. Everything from televisions to phones, tablet computers, mainstream computers, online e-commerce and banking — all of these things we enjoy on a daily basis stretch back to the work done by Ritchie.

Part of the issue is a very straight forward economic one (or industrial organisation) which is when does the exercise of the property right amount to monopolization and when does it merely amount to just reward for the innovation? The choice is not binary between having inventions in which there are property rights and a totally open source/IP free world. The question is whether there is a point at which refusal to licence, or unreasonable terms of doing so, is injurious to "economic prosperity".

The term "economic prosperity" has been carefully chosen here to incorporate both the idea of static efficiency but also the growth consequences of "spillovers."

It raises the really interesting question of whether the patent system that fuelled so much of the US economic success from the middle of the nineteenth century could be now harming the US economy. (Alexander Graham Bell's evidence to the 1910 Royal Commission into the Postal Service provides a nice comparison between the US and British patent systems then applying.)

Finally, just as a reminder that no one is a saint, the Jobs fixation on achieving low input prices could well be driving labour exploitation.

Novae Meridianae Demetae Dexter delenda est

Friday, October 14, 2011

On double dissolutions

With Tony Abbott having made a "commitment in blood" (but we don't know if it is written down) to repeal the carbon tax, the question has been raised whether it is possible to do so.

The issue rests on timing and our weird electoral system.

In his Media Watch Dog Gerard Henderson takes Richard Dennis to task. Denniss it is claimed said on the BCs The Drum

Richard Denniss: …Even if there’s a 2013 election, the new Senate doesn’t take office until 2014. And you can’t use your double dissolution triggers until the new Senate arrives, you’re not going to have a double dissolution before 2015. The idea that we introduce a carbon price, scrap it in 2015 or 2016, even Greg Hunt says the direct action scheme is an interim measure and by 2020 the Liberals might support a carbon tax. It’s good politics, it’s good theatre. But we’re putting politics ahead of democracy and politics ahead of the economy here.

Henderson's reply is

What a load of tripe. Richard Denniss reckons it is putting politics ahead of democracy to respond to the wishes of a majority of electors. Fancy that. And his political calculations are simply incorrect. If, say, a Coalition government won an election in August 2013 it could put legislation through both the House of Representatives and the Senate by the end of the year. If the legislation is defeated, it could be re-submitted after three months. A further defeat would set up a double dissolution trigger – which could be held by mid-2014.

And Richard Denniss reckons that double dissolution triggers do not apply until a new Senate is in place. Can you bear it?

My problem is that the position advanced by Denniss I heard being advanced after the 2007 election on Rudd's prospects. He is also not alone in advancing it now.

Two clauses of the constitution matter;

The first is the one that determines a Senator's term;

13. As soon as may be after the Senate first meets, and after each first meeting of the Senate following a dissolution thereof, the Senate shall divide the senators chosen for each State into two classes, as nearly equal in number as practicable; and the places of the senators of the first class shall become vacant at the expiration of three years, and the places of those of the second class at the expiration of six years, from the beginning of their term of service; and afterwards the places of senators shall be vacant at the expiration of six years from the beginning of their term of service.

The election to fill vacant places shall be made within one year before the places are to become vacant.

For the purpose of this section the term of service of a senator shall be taken to begin on the first day of July following the day of his election, except in the cases of the first election and of the election next after any dissolution of the Senate, when it shall be taken to begin on the first day of July preceding the day of his election.

The second is the rules for double dissolution;

57. If the House of representatives passes any proposed law, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, and if after an interval of three months the House of Representatives, in the same or the next session, again passes the proposed law with or without any amendments which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may dissolve the Senate and the House of Representatives simultaneously. But such dissolution shall not take place within six months before the date of the expiry of the House of Representatives by effluxion of time.

If after such dissolution the House of Representatives again passes the proposed law, with or without any amendments which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may convene a joint sitting of the members of the Senate and of the House of Representatives.

The members present at the joint sitting may deliberate and shall vote together upon the proposed law as last proposed by the House of Representatives, and upon amendments, if any, which have been made therein by one House and not agreed to by the other, and any such amendments which are affirmed by an absolute majority of the total number of the members of the Senate and House of Representatives shall be taken to have been carried, and if the proposed law, with the amendments, if any, so carried is affirmed by an absolute majority of the total number of the members of the Senate and House of Representatives, it shall be taken to have been duly passed by both Houses of the Parliament, and shall be presented to the Governor-General for the Queen's assent.

Nothing in the second clause seems to specify an earliest date at which the double dissolution can be triggered. I suspect, however, the issue is that the Governor-General can't dissolve a house before it has formed. The Senators elected due to take office in July 2014 would not have been "dissolved" by the GG in any dissolution before they take office.

The current version of the definitive Parliamentary document makes no reference to an earliest dat, but that could be because it was written after the new Senate sat.

Antony Green on his blog makes the assertion "With the new Senate taking its place on 1 July, it is now possible for the next election to be held as a double dissolution where the House and the whole Senate are dissolved together."

He goes on to note;

While it is not explicit in the Constitution, I believe it is implicit in the fixed terms of the Senate that a double dissolution trigger can only apply to legislation first blocked by a Senate in place after 1 July 2014. The Constitution states the Senators take their place on the 1 July after their election. Any double dissolution triggers attempted before new Senators take their seats would not allow the new Senators to vote on the legislation.

Ultimately there is the issue. The Constitution is unclear and the constitution only refers to the GG may call a double dissolution. I'm prepared to take a bet that NO GG will be prepared to agree to a Double Dissolution before the new Senate assembles. I'd also be prepared to be that following a November 2013 election Abbott couldn't get the Bills twice to a vote before July 2014, and I think it needs to be "the same Senate" that rejects the Bill.

Novae Meridianae Demetae Dexter delenda est

Thinking out loud

We've been told that the joint NBN Committee is going to hear from New Zealand so that;

The conversations are hoped to settle an ongoing argument from shadow communications minister Malcolm Turnbull that a fibre-to-the-node rollout would cost a quarter or a third of the $27 billion headline currently set for government contributions to the NBN.

I am a little bemused by the claim, and indeed how it relates to Turnbull's other claim that FTTN is a good interim technology, again because New Zealand has done it.

The New Zealand government has committed $1.5B to be a co-investor in delivering FTTH to 75% of premises. They are funding half and as the Government investor intend to accept a lower return than the private investors. I haven't seen the rest of the detail.

The population of New Zealand is roughly one fifth of Australia's, and the coverage of 75% is roughly 80% of our target. The $NZ3B investment for the coverage equates to about $NZ18.5B for the Australian FTTH coverage. Allowing for a 1.2 exchange rate we can tweak that back to $15.4B.

But we aren't doing apples for apples. The $26B of Government funding in Australia funds $43B investment in the NBN (P.365 of the implementation study). Not all the $43B funds the fibre build - in fact the breakdown from the implementation study is shown below.

At the simplest we can say one eighth of the total cost funds the satellite and fibre solution, so that means the Govt funding for the fibre part is seven-eighths of $26B, or $22.3.

But so far we've assumed that servicing 75% of premises would cost the same per premise as 93%. The implementation study conveniently provided a chart relating cost to penetration, below.

A generous interpretation is $2000 per premise for the first 75% and $5000 per premise for the additional 18%. That comes to the cost of the first 75% being 62.5% of the total fibre cost.

Or stated another way, if all the premises were covered at $2000 the project would cost 77.5%. If we simply use three-quarters the investment required to do 93% if it cost the same as 75% would be three quarters of 22.3 or $16.725B

So my numbers to compare are NZ $15.4B, Australia $16.7B. That variation could be potentially explained by the fact Chorus has built fibre to the node, but nothing in it deals with their lost sunk investment in nodes.

No wonder after Turnbull used the EIU report the EIU analyst pointed out that their report favoured the Australian solution over New Zealand (behind AFR paywall).

The difference is that Turnbull consistently ignores 25% of the people. I continue to ask where Fiona Nash and Barnaby Joyce are on this?

Novae Meridianae Demetae Dexter delenda est

Huawei and Trade

Yet more interference with Huawei in the US on spurious security concerns.

Is the next step for Huawei a WTO action to argue that this is US protectionism under another name?

Novae Meridianae Demetae Dexter delenda est

Berating telcos

Today I again use my iTnews column to berate Australia's telcos.

This time I've used Steve Jobs to try to analyse what a truly customer focused telco would look like.

I really feel for all my colleagues in the corporate affairs and regulatory space because they cop the brunt of the commentary from the ACMA, ACCAN, the TIO and Minister about the need to improve customer service, but don't control any of it.

The people who do control it are in denial. The marketers believe they are competing on service, the customer service managers are focused on answering the phones quickly and the IT guys think they are being forever asked to change the systems for some new customer friendly tweek.

I'm going to keep banging on about it till the telcos show more signs of the need to do more things collectively. It won't win me any friends.

Novae Meridianae Demetae Dexter delenda est

How much is your MBA worth?

The latest ranking of MBAs by The Economist is accompanied by a simple summary of the impact on income, tuition fees and completion time for the top twenty.

It raises the simple question of "is the MBA worth it". For the analysis below I've made the following assumptions.
* The starting salary (salary at graduation less the percentage increase) would have been salary in perpetuity without study.
* The starting salary is income foregone for the duration of study (note this could be adjusted to add a variable number of months to gain post-study employment)
* The post graduation salary is salary in perpetuity after graduation.
* Total investment is salary foregone plus tuition fees (it might also need to include travel fees and a marginally increased accommodation cost).
* The benefit of the study is the salary increase.
* The total costs are incurred at the end of the study period.
* The discount rate is a bank rate (in Australia) that the individual could have earned on their investment, not what it would cost to borrow it.

The table below then lists the breakeven period in years from studying the MBA;

School             Breakeven (Years)
Dartmouth       4.739753219
Chicago          7.099505598
IMD               2.38168461
Virginia           5.229798065
Harvard          6.226036989
Haas               6.012883336
Columbia        6.691201258
Stanford         5.634683547
York              2.201795183
IESE              2.314012985
MIT Sloan     6.221474851
New York     4.934890324
London          4.234646527
HEC Paris      1.801230378
Penn Wharton 6.147176899
Carnegie Mell. 5.233258692
ESADE          2.193307709
NW Kellog     6.443697885
INSEAD        4.23724441
Duke              4.430517136

(analysis available here)

This doesn't take into account other "opportunity costs" (or benefits) of locking yourself away (or networking).  But I think I know why I never bothered.

Novae Meridianae Demetae Dexter delenda est

Asher's foolishness

So Allan Asher has been caught out providing Greens Senators with questions to ask him at estimates. The action has been called unwise and grubby.

It has been met with calls for explanation or resignation.

I agree with all those comments. Asher himself said;

I chose this unorthodox approach to bring my concerns to the attention of the Parliament and the public. I would welcome a discussion regarding the establishment of a parliamentary committee or some other accountability mechanism to specifically review my work and with whom I could raise issues of concern without compromise to the independence of my office.

Therein lies the particular issue. We have a number of statutory offices that are not subject to Ministerial direction like a Department. The ACCC, ACMA and ASIC are such bodies. Minister's can't really be "held to account" for administration in some ways by pleading the agency's independence.

Asher is not the first head of an agency to find budgets an issue. The ACMA utilised a number of channels to make submissions about the impact of Tanner's "efficiency dividend" on small agencies. There are routes other than feeding questions to Senators.

However, there does appear to be merit in creating more direct parliamentary oversight of agencies that are created to be independent of the Executive.

That said, it is hard to understand why Asher was not simply patient enough to include the issues in his annual report.

Novae Meridianae Demetae Dexter delenda est