Back in the mid 2000s when I worked for Telecom New Zealand subsidiary AAPT I tried to convince Telecom that structural separation would be in its strategic interest, and that following that separation Telstra would be able to be forced to follow. This culminated in my 2008 paper for the TJA.
At the same time I was advocating in Canberra that while structural separation was desirable it was hard to force onto incumbent telcos but would be possible at the time of new investment in fibre access networks.
Now, on top of the developments with the NBN and Telstra in Australia comes news that Telecom NZ subsidiary Chorus has won the FTTH contract for most of the country and will "de-merge". That this announcement was made by Paul Reynolds is somewhat interesting. In her book Bird on a Wire former CEO Teresa Gattung makes the claim that Telecom was close to separating before her departure but the incoming CEO from the UK placated the Board and convinced them that the line could be held at operational separation.
The financial models in the two countries are different, and the timescales are different. But now in Australia and New Zealand the former incumbents will not own the access network.
For the financial press, watch this space. Telstra's strategy in the medium term has to be to find a buyer for Telstra Clear. That could be very easily Vodafone or SingTel. It could very easily be one of the up and coming Australian Service Providers like iiNet or TPG.
Once divested of Clear and with separation progressing Telstra can then move to a merger of the retail companies. It would suit their objectives in the corporate market and would provide reasonable leverage for both in the residential market (growing the addressable market of the same applications and services). the Telecom and Telstra mobile networks also now fit well together.
Novae Meridianae Demetae Dexter delenda est
Showing posts with label Telecom. Show all posts
Showing posts with label Telecom. Show all posts
Tuesday, May 24, 2011
Wednesday, March 30, 2011
KM in the Oz
Kevin Morgan in the Oz today tries to neatly dust off a diatribe delivered through the pages of Communications Day yesterday. He seems to forget what he battled for all those years ago at the ACTU - which was Government control and social outcomes - and to have instead thought his mission was to preserve the behemoth Telstra.
The so-called "world wide" trends Australian governments followed in our deregulation cycle started in the UK, NZ and Australia. We were in the vanguard not the cravan. Just as we are now.
The single biggest achievement of the NBN policy is the structural reform of the industry that was not completed prior to privatisation - largely due to a union backed campaign by Telstra. Conroy to his credit has pursued this single mindedly. It was the one thing Telstra under Sol demanded be dropped to secure Telstra's participation in 2008, and Conroy, unlike every Comms Minister for the last fifteen years stood up to Australia's largest totally domestic corporation and chose consumers and public interest over thuggery.
In response to his longer piece in Comms Day I have written and submitted the following.
It is disappointing that my fellow student of telco policy history Kevin Morgan is prepared to be so wrong in his recollection of the seventies – and indeed the eighties.
We can ignore little things like Telecom getting a monopoly in the “1976 Act” when the Act was 1975, the same year Telecom was formed and Telecom2000 saw the light of day. The single biggest technology change that the report missed was not the growth of wireless but the development of the PC. While it did see a broadband fibre based future it was in either a circuit switched or broadcasting mode.
In his prelude to discussing the Davidson Inquiry, Kevin writes “Telecom could no longer rely on the Budget to support investment plans”. Unfortunately he is one of the few people who I know knows that Telecom had seen no support from the Budget for anything since 1959, the year that the PMG was required to become self-funding. The entire $4.5B debt of the PMG was assumed by Telecom Australia.
He is right to note that the Hawke Government did increase the interest rate payable by Telecom on that debt. Unfortunately for his argument though the discrepancy between the 13% and 7% is entirely explained by the difference in the applicable Government Bond (or risk free capital) rates then and now.
He goes on that “As Telecom became capital constrained in the late 1980s the fibre vision waned.” The fibre vision however at that time had been extinguished by the successful lobbying by the free to air television moguls against Pay TV. Pay TV only re-emerged on the policy horizon – according to Mark Westfield’s The Gatekeepers – at the insistence of Richard Li, then still working for his father at Hutchison. He told the Minister that there was no interest in bidding for AUSSAT if they couldn’t do Pay TV.
Finally, I was left confused by the foray into laws of physics and laws of economics. Wireless isn’t “challenging the laws of physics” – it is actually conforming to them. No part of standard electromagnetic theory has yet been challenged by the development of wireless, and even the information theory of the Shannon limit isn’t even tested.
The non physical laws of relevance are Moore’s Law that the capacity of microprocessors doubles every eighteen months and Cooper’s Law that the capacity of wireless systems doubles every thirty months – wireless capacity keeps falling behind demand which is why there are ever greater demands for more spectrum. The CEO’s of the three mobile networks – Thodey, O’Sullivan and Dews – are all on the record stating that wireless networks cannot meet the bandwidth requirements of citizens.
As for the economics of monopoly, there are plenty of examples where one technology has monopoly characteristics but inter-modal competition can be sustained. We have one electricity distribution network in our suburbs, and no one suggests we duplicate it. We have in some places one gas network, and no one suggests we duplicate it. But they compete to carry energy to premises, energy that has different features and characteristics (or strengths) just as fibre and wireless do.
Kevin started his piece with the saying that if you can remember the seventies you weren’t there. The real saying though is about the sixties and is variously attributed to Grace Slick, Robin Williams and others. What does it say about me that I too have a bookcase full of reports from the era, but my copy of In the Court of the Crimson King is a CD (a girlfriend used to own the record).
NOTE I hope to have a copy of Telecom 2000 up on the DigEcon website in the next day!
Novae Meridianae Demetae Dexter delenda est
The so-called "world wide" trends Australian governments followed in our deregulation cycle started in the UK, NZ and Australia. We were in the vanguard not the cravan. Just as we are now.
The single biggest achievement of the NBN policy is the structural reform of the industry that was not completed prior to privatisation - largely due to a union backed campaign by Telstra. Conroy to his credit has pursued this single mindedly. It was the one thing Telstra under Sol demanded be dropped to secure Telstra's participation in 2008, and Conroy, unlike every Comms Minister for the last fifteen years stood up to Australia's largest totally domestic corporation and chose consumers and public interest over thuggery.
In response to his longer piece in Comms Day I have written and submitted the following.
It is disappointing that my fellow student of telco policy history Kevin Morgan is prepared to be so wrong in his recollection of the seventies – and indeed the eighties.
We can ignore little things like Telecom getting a monopoly in the “1976 Act” when the Act was 1975, the same year Telecom was formed and Telecom2000 saw the light of day. The single biggest technology change that the report missed was not the growth of wireless but the development of the PC. While it did see a broadband fibre based future it was in either a circuit switched or broadcasting mode.
In his prelude to discussing the Davidson Inquiry, Kevin writes “Telecom could no longer rely on the Budget to support investment plans”. Unfortunately he is one of the few people who I know knows that Telecom had seen no support from the Budget for anything since 1959, the year that the PMG was required to become self-funding. The entire $4.5B debt of the PMG was assumed by Telecom Australia.
He is right to note that the Hawke Government did increase the interest rate payable by Telecom on that debt. Unfortunately for his argument though the discrepancy between the 13% and 7% is entirely explained by the difference in the applicable Government Bond (or risk free capital) rates then and now.
He goes on that “As Telecom became capital constrained in the late 1980s the fibre vision waned.” The fibre vision however at that time had been extinguished by the successful lobbying by the free to air television moguls against Pay TV. Pay TV only re-emerged on the policy horizon – according to Mark Westfield’s The Gatekeepers – at the insistence of Richard Li, then still working for his father at Hutchison. He told the Minister that there was no interest in bidding for AUSSAT if they couldn’t do Pay TV.
Finally, I was left confused by the foray into laws of physics and laws of economics. Wireless isn’t “challenging the laws of physics” – it is actually conforming to them. No part of standard electromagnetic theory has yet been challenged by the development of wireless, and even the information theory of the Shannon limit isn’t even tested.
The non physical laws of relevance are Moore’s Law that the capacity of microprocessors doubles every eighteen months and Cooper’s Law that the capacity of wireless systems doubles every thirty months – wireless capacity keeps falling behind demand which is why there are ever greater demands for more spectrum. The CEO’s of the three mobile networks – Thodey, O’Sullivan and Dews – are all on the record stating that wireless networks cannot meet the bandwidth requirements of citizens.
As for the economics of monopoly, there are plenty of examples where one technology has monopoly characteristics but inter-modal competition can be sustained. We have one electricity distribution network in our suburbs, and no one suggests we duplicate it. We have in some places one gas network, and no one suggests we duplicate it. But they compete to carry energy to premises, energy that has different features and characteristics (or strengths) just as fibre and wireless do.
Kevin started his piece with the saying that if you can remember the seventies you weren’t there. The real saying though is about the sixties and is variously attributed to Grace Slick, Robin Williams and others. What does it say about me that I too have a bookcase full of reports from the era, but my copy of In the Court of the Crimson King is a CD (a girlfriend used to own the record).
NOTE I hope to have a copy of Telecom 2000 up on the DigEcon website in the next day!
Novae Meridianae Demetae Dexter delenda est
Monday, January 09, 2006
The Whitlam Legacy
The Australian editorial for 7-8 January, 2006 (" The Whitlam Myth") repeats the common criticism of the Whitlam government, that no matter how progressive its social record may have been it was an absolute failure in economic management. It further suggests that the social record is over-promoted, but it is the economic record I wish to defend.
Two major policy decision set up the Australian economy for the reforms and changes we had to wait for the Hawke-Keating era to conclude. The first was the 25% across-the-board tariff cut - the first dramatic step in opening the Australian economy. The second was the passing of the Trade Practices Act 1974, the first coherent step to make corporations more competitive.
A third but less significant step was the creation of Australia Post and Telecom Australia, the first major Australian step in the program of what became known as corporatisation and privatisation.
Yes, during the Whitlam Government both inflation and unemployment grew. This was the consequence of stagflation - a rise in the input costs of factors of production (in that case oil). The Keynesians who occupied all senior economic posts had no idea what to do.
Modern textbooks explain that you need to "free up the economy" - and reducing protection, improving competition policy and removing Government from the direct running of enterprises are pretty good starts.
Lord knows how the country would have faired under the Coalition as their record up to 1969 and from 1975 to 1983 was that they knew absolutely nothing about how to reshape the Australian economy.
Two major policy decision set up the Australian economy for the reforms and changes we had to wait for the Hawke-Keating era to conclude. The first was the 25% across-the-board tariff cut - the first dramatic step in opening the Australian economy. The second was the passing of the Trade Practices Act 1974, the first coherent step to make corporations more competitive.
A third but less significant step was the creation of Australia Post and Telecom Australia, the first major Australian step in the program of what became known as corporatisation and privatisation.
Yes, during the Whitlam Government both inflation and unemployment grew. This was the consequence of stagflation - a rise in the input costs of factors of production (in that case oil). The Keynesians who occupied all senior economic posts had no idea what to do.
Modern textbooks explain that you need to "free up the economy" - and reducing protection, improving competition policy and removing Government from the direct running of enterprises are pretty good starts.
Lord knows how the country would have faired under the Coalition as their record up to 1969 and from 1975 to 1983 was that they knew absolutely nothing about how to reshape the Australian economy.
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