Monday, October 28, 2013

Abbott and the NBN

The fact that Tony Abbott referred to the previous Government as "wacko" in an interview with the Washington Post has received some coverage.  But most of it has missed the point that the reference was to broadband.

An excerpt:

What have you actually accomplished?
The flow of boats is significantly reduced. We have drafted legislation to repeal the carbon and mining tax. We’ve just announced a commission to review the size and efficiency of the government on an agency-by-agency basis. We’ve taken control of the national broadband network, and we will deliver faster broadband much more quickly and less expensively than would have been the case under Labor.
Labor wanted a national broadband network?
It’s a government-owned telecommunications infrastructure monopoly, which was proceeding at a scandalous rate without producing any commensurate outcomes. We are changing the objective from fiber to every premise in the country to fiber to distribution points, and then we will use the existing infrastructure to take the broadband to individual premises.
Is that cheaper and more efficient?
But Labor wanted to extend fiber to every household?
Welcome to the wonderful, wacko world of the former government.
So you believe the former government was doing a lot of things that were bad for the country?
I thought it was the most incompetent and untrustworthy government in modern Australian history.
Be more specific.
They made a whole lot of commitments, which they scandalously failed to honor. They did a lot of things that were scandalously wasteful and the actual conduct of government was a circus. They were untrustworthy in terms of the carbon tax. They were incompetent in terms of the national broadband network. They were a scandal when it came to their own internal disunity. They made a whole lot of grubby deals in order to try and perpetuate themselves in power. It was an embarrassing spectacle, and I think Australians are relieved they are gone.

So there we have it - the NBN was "wacko".  A new term for it.

Some people have noted that the PM seems to still be behaving like an Opposition Leader campaigning rather than a Prime Minister governing.  That theme also came through in the PM's interview with Andrew Bolt.
Here the PM said;

One of the differences between the good government that I served and the poor government that I replaced, is that the good government didn't feel that its main job was manipulating the media.

It still contrasted Howard with Rudd/Gillard, not Abbott with Rudd/Gillard.

But in the conclusion of the interview he denied there was an issue in this exchange.

AB: There's a thing called impostor syndrome, this feeling of, 'My God, am I really up to this?' I think you suffered that early on as Opposition Leader. I don't get that sense of you now as Prime Minister.
PM: The short answer is no … I know exactly what you are talking about, but no, this is a position that I have every right to hold. And these are duties and responsibilities that I think I am more than entitled to discharge.

I keep going back to the way the PM deals with the NBN though, where it still seems the dominant theme is about the cost.  So I think I see the PMs hand leading the pen for Bolt to write today;

[Shorten] praised the National Broadband Network, which the Coalition will soon expose as a financial disaster worse than most critics warned.

Meanwhile on the other side of the world Google continues to provide reasons for a fibre to the home network.

Over here the simple fact is that the job of delivering a broadband network now rests with Tony Abbott and Malcolm Turnbull.  And while the Minister seems to understand that, the PM still doesn't.

NBN Review and Henry Ergas

NBN Co has announced the selection of three advisory firms to contribute their services to the strategic review process:
  • Deloitte will provide governance and the program management office services to ensure the Strategic Review fits within the parameters and tight deadline for submission set by the Government;
  • KordaMentha will contribute to the analysis of the current NBN operational and financial performance;
  • Boston Consulting Group will participate in the review of the timing, financials and product offers under alternative models of delivering very fast broadband They are Deloitte, Korda Mentha and BCG.

A forensic accounting firm is an interesting choice that reflects the conviction that the books have been cooked.  It will be very interesting to see what comes of that.

The selection of Deloitte is a bit unsurprising in that both KPMG and E&Y had done work verifying earlier plans for the shareholders and board.  But a concern with Deloitte is the possible presence of Henry Ergas among their number, though this my be slight given the scope of work they have been contracted to do.

Ergas was a champion of competition reform in the 1980s before going on to establish his successful economic consultancy NECG. This firm gained a reputation as an adviser to the big end of town, defending them from regulation designed to introduce competition, especially Telstra. I've previously mentioned on this blog a bit of criticism Ergas scored from a judge about his conduct as an independent expert.

After he sold his business to Charles River Associates (CRA) Ergas did some work for the Liberal party.  One was a flawed study for the Menzies Research Centre on productivity in state governments.  This was followed by a tax policy for Malcolm Turnbull that was never released.

Ergas was a persistent and early critic of the NBN.  In some ways it was like the criticism of Kevin Morgan because it unpicked work he had done.  In the case of Morgan it was the creation of Telstra from the Telecom/OTC merger (in which Ergas was on the other side). In the case of Ergas it was the defence of the vertically integrated Telstra.

Ergas rushed to print soon after the April 2009 announcement claiming services would cost $215 per month.  He also whipped up a cost benefit analysis that claimed the network was worse than an alternative plan by some $17 billion (by recollection).  That CBA assumed there was no need for services at higher speeds achieved with FttN, was over a shorter period than the NBN case (10 I think, rather than thirty) and used a commercial discount rate.

Today in the Oz Ergas has again shown his ability as an advocate rather than as an expert. His theme is a "pathology" of high cost projects.

He claims that a common feature of such projects is that:

The goals being pursued by new programs are not clearly defined, and the difficulties and risks involved not rigorously and transparently assessed.

Of the NBN he writes;

In the case of the NBN, the decision to proceed was largely based on unpublished advice from the Australian Competition & Consumer Commission, which lacked the capability to evaluate the options and bore no responsibility for the outcomes. By the time a more thorough analysis was commissioned, the government's decision was well-entrenched, and the analysis was limited in ways that precluded that commitment being questioned.

He then returns to the general theme;

That troubled programs prove such hardy survivors is partly because the "tyranny of sunk costs" comes into play. Projects that would never have been undertaken if their total costs had been known at the outset are not cancelled because each evaluation concludes spending a (relatively) little bit more might still make the exercise worthwhile. As hope triumphs over experience, natural selection is put on hold.

Ergas then goes on to make some specific assertions about how the NBN fits this description, including reference to a report that shows "accumulated losses" that supposedly wasn't released.  This is somewhat confusing since both the 2011-14 and 2012-15 Corporate Plans made it clear that like any large project there are losses before turning an EBITDA return.  This is confirmed in the 2013-16 Plan that has since been released.

But the crux of the story is the implication that Ministers have lied about the project.  He refers to a July launch of the NBN in Coffs Harbour for a switch on event, and the accusation that nothing was actually switched on. It is true the building was not in the fibre footprint, but that was not an assertion made by the Minister.  Equally the demonstration at the back of the room of an application was not at the request of the Minister.

He then asserts that "the stunt" could have landed the Minister in gaol if he had been a company director.

This must be interesting for the former executives of Optus who launched the Optus local call service over their HFC network - because they actually used a Telstra local call for the event.

Ergas is wrong on the facts of what the Minister actually asserted, and he is wrong on the claim of the extent of the penalty that would apply.

Finally, let's just reflect on another great project - the Jindalee Operational Radar Network.  JORN is another ripper case of a big project that had early implementation problems - when managed by Telstra - but now is usually touted as an outstandingly brilliant part of our defence capability.

Critics of the NBN like Henry Ergas have focussed on its choice of objective and the challenge of delivering that objective, and have developed a narrative that there is some "truth" to be revealed.  The risk is that those revealing the "truth" have invested so much in their own narrative that the counter claim is more flawed than the original.


Thursday, October 17, 2013

Nicola Roxon's John Button Memorial Lecture 2013

The full text of Nicola Roxon's John Button Memorial Lecture 2013 makes interesting reading.

Bernard Keane in Crikey has labelled it "revisionism", but primarily for the comments made about the PJCIS review of data retention.  He has found a few quotable sources to regret the focus on Kevin yet again, and to create concern that it will provide the basis for yet another Rudd set of whispers.

But the speech was structured around ten points as a guide to future leaders. Ms Roxon said it herself best;

I want to provide some practical tips for the next Labor Government, and for Labor MPs, on how best to conduct themselves. And how to ensure that a fresh Labor purpose is constantly in focus, and ways that mission can be delivered. I hope it might be of use to Bill Shorten as the new leader, and to others, as they go about their work of regaining ground for Labor.

Superficially it may seem boring to talk about housekeeping and conduct, when a party of progressives wants to be about ideas and improving lives. But I use examples to highlight their necessity if we want to deliver fabulous policies effectively.

We can want power, but we have to want it for a purpose. So we have to know how to use that power well, and to full effect.

The structure of her speech necessitated talking about bad examples from the party's immediate past, and it didn't focus on KRudd exclusively for that.  Of course, the structure could have been chosen just to provide an excuse for that, but the points she made seem appropriate when stripped of their examples.

The focus should be on her "ten points".  I've listed these - with an additional sentence or two in some cases - below. 

1) Labor must always focus on the fact that good policy improves people’s lives and that is why the party exists.  (and a related issue here is: don’t do too many things at once.)

2) Governments as a whole, and the prime minister in particular, need to keep their focus high level - spending time and energy on the things that really matter.
If you can’t describe what you are doing in general terms, and its purpose, then either the policy isn’t right, or you’ve descended into detail most people don’t need and probably don’t want to know.

3) Good leaders are good delegators.

4) Labor needs to welcome debate, not fear it.
A progressive party needs to be able to argue over issues and not see it through the prism of internal politics.

5) Be polite and be persuasive. Or I could call this "Keep yourself nice".

6) Always ask what you can do for the party (and the nation) not what it can do for you (with apologies to JFK).

7) Good governments run best with good diaries - so boring, but universally true.
This is not just about housekeeping, as it seems, but you actually can get better policy, get more done and protect against foreseeable problems if you plan a diary and run to plan. You can only get to an end game if you have planned where you want to go.

8) Choose good people - as leaders, as MPs and as staff.
In every walk of life, successful organisations need a pool of talented people, and politics is no different.

9) Accept you are not always right, and cannot always fix everything. It’s easier with this as your starting point.
If the public is promised a messiah, they’re inevitably going to be disappointed.

10) And lastly, never forget polling is only a snapshot, not a predictor.

She makes the case well for the leader in the Hawke tradition.  One who delegated.  One who was able to engage in a public discussion on policy.  The secret to that discussion was always to have a range o options, and include in it something more extreme than you were happiest to go.  Coming back from that extreme is then seen as a consequence of consultation. 

On the point of polls it is surprising that Labor has never developed a better understanding of the way Mark Textor uses polls for the Liberals.  Textor uses polls to determine HOW to frame the Liberals messages, not WHAT the message is.  They use polls as part of the process of persuasion, not as a way to decide what to reflect.

Roxon finished with a rallying cry.

And now the invitation is to the next generation to think how they will refresh the Labor purpose - to pump some new blood into its beating heart. And to be ready to conduct themselves with dignity, so they get time to bed down the vital reforms of the next generation, reforms that we know only Labor will deliver.
We should never, ever as a Party be ashamed of our past.
We should celebrate it, learn from it, and use it to improve our nation’s future.
Good luck - and thank you.

That is a great peroration.

The speech as a whole makes a great manifesto for aspiring politicians.  It should be read as such, and not as a critique of one or two PMs.

Sunday, October 13, 2013

Keep the faith

The historic first ALP leadership ballot is over.  It generated a new level of interest in the party, received widespread community attention, and provided media coverage that belied the election loss.

The results are in.  The rank and file voted nearly 60/40 for Anthony Albanese, but Bill Shorten won on the strength of the caucus vote.  

Some party members are already reacting with desperation, feeling that the initial foray into democratising the party has been frustrated by the caucus ballot. Some are reaching out on social media suggesting they will now 'give up on the party.'

I can understand the reaction but would counsel all of them to stay and continue to drive further reform.

The move to democratising the party by allowing a member vote for leader of the FPLP was championed by Sam Dastyari.  That should tell the members something. It was the one move that he felt comfortable with not affecting the power of state secretaries and the factional system that underpins them.

But this is not a genie that can easily be put back in a bottle.

Members of the party need to do the following.

- ask your mp or duty senator how they voted and why, they didn't represent views of the base so let them know your displeasure
- discuss with your fellow members the areas of further reform you want to see
- continue to promote the values of the ALP which seeks to represent the people who make a living by what they do, not what they own.  The party that stands for jobs and growth, opportunity, sustainability and a fair go
- encourage more people to join

Leaving will not create change! The only option is to stay and fight for it.

Tuesday, October 08, 2013

ABS Internet Activity - June 2013

The latest version of the ABS series 8153.0 - Internet Activity, Australia was released today.

This is an incredibly useful series, but one that inexplicably the ABS seems to continually wilfully misrepresent in its accompanying media releases.

In the period from June 2011 to Jun 2012 as the number of wireless broadband connections passed the number of fixed the ABS reported the stats using proportions in such a way as to suggest the actual number of fixed connections was declining rather than merely growing at a slower rate.

Over the last three halves the ABS has gathered data on mobile handsets but as far as I can tell only includes the data in its summary and not in the actual data tables.

That doesn't stop them screeching about it though.

Today's full media release is fascinating. 

Australian mobile handset downloads surge

 Nearly 20,000 terabytes of data was downloaded by Australians with internet access connections via a mobile handset in the three months to June 2013, which is an increase of 6,000 terabytes according to figures released today by the Australian Bureau of Statistics (ABS).

"Download volumes for mobile handsets have really seen explosive growth," said Lesley Martin from the ABS, "and while it's true that the number of mobile handset internet subscribers has also increased, that's been much smaller growth."

The total volume of data downloaded via mobile handsets between April and June 2013 was 19,636 terabytes, which is a 43 percent increase from the previous period of October to December 2012.

Between December 2012 and June 2013, the number of mobile handset internet subscribers grew by 13 percent.

"Mobile handset downloads contribute a small percentage of our total internet downloads - in the three months to June, Australia's total download volume hit 657,000 terabytes, which is up 18 percent compared to the three months ended December," Ms Martin said.

"Australia had 12,358,000 internet subscribers - not including mobile handsets - at the end of June 2013, showing a three percent annual increase.

"In pure percentage terms fibre has been the fastest growing type of connection, with a 26 percent increase since December 2012; but it should be remembered that this growth is from a low base.

"There's now 115,000 fibre connections compared to 6.2 million mobile wireless broadband connections such as a dongle or tablet SIM card, 4.8 million by DSL, 93,000 by satellite, and 227,000 still on dial-up."

Further information is available in Internet Activity, Australia, June 2013 (cat. no. 8153.0) available for free download from
The headline and first paras screech about mobile handset download growth.  Only much later do you get to the real story that the handsets are a very small share of the overall data.

Let's just look at the three main trends.

First there is the total number of connections.

The number of fixed and wireless data connections both continue to grow slowly.  They are dwarfed by handset connections which tend to be personal whereas connections tend to be for households.

Then there is the total downloads.

And while there has been a surge in the total data downloaded by handsets as a proportion it really is a miniscule amount.

The best measure is the download per month per service.

This is the biggest killer for both the claims of both wireless (dongles etc) and handsets versus fixed broadband.  The downloads per service per month continue to increase on fixed and barely move for the others. 
Another way to look at this is the proportion of all data that is downloaded over fixed line versus wireless and handsets.

Overall fixed line is slowly taking an even greater share of the overall traffic.
It is no wonder that Malcolm Alder, an author of the NBN Implementation Study, is reported by the AFR today as saying the NBN may result in fewer "mobile only" households than first thought.
Assuming that the proportion of mobile only would actually be greater was one of Malcolm Turnbull's four bases for asserting a higher cost for the NBN.  It was the only one which NBN Co itself had not earlier refuted.
So, simply put, the ABS release is misleading in the extreme.  The data continues to support the need for a fixed broadband network engineered for continued growth in data demand.

Sunday, October 06, 2013

Meanwhile in Tasmania

Having woken up to the fact that "honouring contracts" never meant finishing the NBN FttH build there, Tasmanians are getting a tad upset.

Mr Turnbull is quoted by ABC as blaming the former Government saying

The contractor has basically stopped work for several months.  There's nothing we could do to slow down the rollout in Tasmania because it has been dead stopped.

This is technically incorrect because the contractor was still at work in areas not affected by the remediation pause, and has restarted work already.

This is typical Malcolm Turnbull.  Rather than directly respond to the fact that he knows he misled Tasmanians he reaches for a distraction with a false claim about current roll-out.

For the record - mid election (17 August) the Examiner ran a story under the headline Turnbull confirms NBN will honour contracts. It included the following line.

"Tasmanian Senator David Bushby also dismissed Ms Collins by saying the Liberals had costed their policy on Labor's full Tasmanian roll-out, confirming  it would honour Mr Turnbull's earlier pledge to fulfil all contracts."

Mr Turnbull knew that to be a false statement at the time and did nothing to correct it!

To regulate or to deregulate - that is the question...

Communications Minister Malcolm Turnbull appeared on ABC's Insiders today.  In the midst of semi-predictable gumph about the NBN there was a short exchange about the Government's deregulation agenda.  Mr Turnbull said;

Well, we have got an overall policy right across the government of cutting regulation and red tape and both telecommunications and the media, the broadcast media, obviously, are very heavily regulated. What we are undertaking or commencing now is a study of the level of regulation, so the question is what objectives, what is the policy objectives these regulations seek to serve? Is that objective relevant any longer? If it is not, the regulation should go. If it is still relevant, can we achieve the objective more cost effectively?
I am very focused on reducing the cost of doing business in my area and all of my ministerial colleagues are doing the same thing in theirs.
His colleague, the Minister for Foreign Affairs Julie Bishop meanwhile was having a good old spray, reported in the Sunday Tele and other News Corp papers by Sam Maiden, about mobile roaming charges.  Ms Bishop said:
Since I have been travelling more extensively, I have received some extraordinarily high bills for global roaming, running into the thousands and thousands of dollars. [The regulator should] have the power to carry out a market investigation but also to determine what was a reasonable price.  In Australia I understand that we actually need to enhance the ACCC's powers. I will be talking to Malcolm Turnbull about this.
Ms Bishop was apparently aware of the moves already taken by the ACMA - at the direction of the former Government - to insist travellers are informed of the cost.  Despite this Ms Bishop seems to still have been shocked by her bill.

Ms Bishop praised the approach of New Zealand and suggested they had seen good results from a threat to regulate.  She might like to note that the "threat" was made bilaterally by PMs Gillard and Kay in February 2013.

She might also note that the Gillard Government proposed to bring this legislation forward in the Winter sitting period, appearing on the list as

Telecommunications (International Mobile Roaming) Bill
-          amend telecommunications legislation to clarify that international mobile roaming services are services that can be regulated where reciprocal arrangements apply with another country
Reason for legislation:  to implement coordinated action with New Zealand on measures to address the prices to consumers of trans-Tasman mobile roaming
 By recollection the Bill wasn't introduced in June, but it should be already prepared.

So the challenge for Mr Turnbull is whether he dusts off the Bill and introduces it in the first sitting week of the new Parliament - or whether he decides that is not a good look with the overall deregulatory flavour.

Note:  the case is a fascinating one in regulation theory, because the market position with high roaming charges is stable...there is no simple way for competition to solve the problem.

Friday, October 04, 2013

Proof that Paul Howes is as thick as be seems.

At last there is proof that Paul Howes is as thick as he seems.  Having had his Parliamentary ambition recently thwarted he has signed up to write monthly essays for the AFR to demonstrate his credentials as a leader of extra-parliamentary Labor.

He has made the amazing discovery that investing in infrastructure builds the nation from which the opportunity to make life better for all can come.  Pity he didn't notice that investing in infrastructure is what Labor in Government did.  Pity he didn't notice that at the first leadership debate Anthony Albanese said he'd be a PM who invested in infrastructure.  But I think Howes is part of the right backing for Bill Shorten.

But when he makes claims that a worker might like an infrastructure investment that HALVES a commute time over a wage increase, it is clear he has no idea what you would need to do to halve most commuting times.  Take mine to the city - 15 minute walk to station, 45 minute train ride, 15 minute walk from station to office.  You can't even make the train trip happen in half the time.

Then he talks about wanting to tap into super savings to fund infrastructure, which then has to be privatised so the super fund can get a return.  Well hand off my super!  Issue infrastructure bonds a proposed by Hockey and backed by McKibbin and let my fund invest, fine. But don't try to create investments with market rate returns.

But the whole point of super is to take future liability for pensions to of government by creating private savings.  If those private savings just get used by government now as a trade for a new future government liability the whole thing becomes absurd.

If this man is a Director of AustralianSuper maybe the Coalition is right to be concerned about union officials on industry super fund Boards.

Novae Meridianae Demetae Dexter delenda est