Three Digital Myths

My favourite morning reading is Chris Wallace's simple list of links she calls Breakfast Politics. It is an easy way to pick the eyes out of the daily media - and being totally neutral and not pretending to be anything other than mediation it doesn't have the source biases of The Punch or The National Times.

It provides many of the stories on which I blog each day - but by no means all. Though I must admit it is often the easiest way for me to find an on-line link to something I've already read in print.

More impressive is the collection of five or six international links she provides that range from politics to art to sport. This morning had a beauty - a story on Three Digital Myths. The story has been partly inspired by recent activity at Wkikileaks. The three myths identified are;

Myth 1: The power of social media
Myth 2: The nation-state is dying
Myth 3: Journalism is dead (or almost)

My own view is that, like most universal statements, there is a degree of truth in the statement but the application is nowhere near as broad as is claimed nor is the consequence necessarily that that would follow.

Anyhow, the article points out the following simple facts, that Wikileaks isn't social media, that Wikileaks isn't stateless - in fact it carefully manages what states it does things in, and Wikileaks still relied on journalism to have an impact with the Afghan story.

The more nuanced view is that social media is grossly over-blown in terms of its ability to be a real "news breaker". It is, however, often incredibly influential in affecting how rapidly something is spread - we need to understand bandwagon effects better and how they affect democracy. Professionally I see lots of people promoting "social media" as a new marketing engine. I have two thoughts. The first is that it doesn't work to simply translate old world media ideas to the new world...prettied up company facebook pages are just another website. Secondly social media works well if you can "go viral" but it is a hit and miss affair.

The place of the nation-state is also a far bigger issue. I've written before of my admiration for Phillip Bobbit's Shield of Achilles and Terror and Consent. This positions the "nation-state" as merely one phase of a whole sequence of "constitutional orders", and there is no doubt that we are in need of a new such order to cover what he calls "the market state of consent". But exercises like Wikileaks simply emphasise the need for the evolution, not the demise of the state.

Finally, the story about journalism is also complex. Many of us think it is already dead. Few journalists "report" anymore the simple who, what, where, when story. They do spend an inordinate amount of time on "why" - trying to ascribe motives to individuals. The call about the end of journalism is often pitched as the end of "investigative journalism" - a long term commitment to a story to dig out hidden facts. The end of this is meant to be that there is no business model to fund the investment. The reality is possibly more mundane - given the economics of information it doesn't make sense to have so many separate "brands" of investigative journalism.

I have no idea what the management consultants have told Fairfax. But my suggestion would be to "divisionalise" around frequency. All the real-time (on line) and daily news resources acrioss all the titles should be conflated. The Age and the SMH should continue to be different papers and have their unique State/Ci9ty coverage (ditto the Illawarra and Newcastle papers). The Business Section should be renamed the Australian Financial Review - but be very slim - the bulk of the AFR content should be subscription online only.

Then be very very good at delivering news in that model. Don't try to charge for an on-line version of the daily paper, don't try to charge for access to a spewing "Just In" feed. Do charge for a structured "push news service that is user controlled - both by selection of key terms and by a learning algorithm that learns from readers ranking of stories).

There are many more than three digital myths. They all share the trait of over-reach.

This policy is a dud

I shouldn't really make a claim about a policy being a dud merely on a press report of what someone is reportedly about to announce, but I've been around long enough to know what looks like a stage managd bagrounder designed to get two cycles of coverage from one announcement.

This morning the Tele (or more generically the News Ltd press) reports that the ALP will announce a policy designed to improve financial literacy. It reports;

The nation's top financial watchdog will train teachers to give their pupils lessons in how to get the best mobile phone plan and the cheapest credit card.

The idea is apparently that ASIC will provide training to maths teachers on how to do this. I would like to suggest that this is a naive hope. As a person with a first degree in Pure Mathematics and a grad dip in economics I am confidant in my assertion that it is actually not possible to do such a thing.

The simple reason is that the plans themselves are largely impenetrable. As I noted recently there is no logic in the plans to begin with and the providers are able to create "headline" rates that have no basis in reality.

Meanwhile Frank Zumbo has been railing again about the big banks and the lack of competition. But it isn't so much the lack of competitors but the inability of a consumer to make an accurate comparison beteen the offers.

Thaler and Sunstein in their excellent book Nudge suggest the alternative isn't more "education". The problem that humans aren't perfect calculators isn't solved by making them better calculators, it is solved by outsourcing the calculation.

They propose a concept called a RECAP - which is a standardised electronic form of a consumer's last twelve months (or other period) of activity - for example on their mobile or their credit card. This must be provided to the consumer on request and can be presented to an alternative provider who then calculates what the consumer's outcome would be with that usage pattern in the plan under consideration.

A truly useful consumer protection policy would harness behavioural economics rather than rely upon faith in the ability of humans to make the "rational decision" if only we give them more knowledge.

The "pie-eaters"

In my earlier post I commented on an item by Paul Sheehan in which he wrote of the six "gut issues" working in Labor's favour. His sixth was;

The pie-eaters. Finally, we get to the most structural and disturbing aspect of the election, the growing primacy of the pie-eaters. As the recent British election showed, when sections of a country become addicted to government spending (Scotland and Wales), the electorate will vote out of self-interest and vote for the party of big government. That is, vote Labor, no matter how bad the record.

Voters are expecting more from government on healthcare, education and social security and expectancy creates dependency. One in four Australians now depends on the government for the bulk of their income. Another one in four Australians depends on government spending, directly or indirectly, for their jobs. That's half the electorate depending on tax transfers.

The "one in four" Australians dependent on Government for their income includes all the aged pensioners. It has been the aged pensioners that have brought the budgets in Greece, Italy and Spain to their crippling levels. In Australia we have a medium term solution to that problem - it is called compulsory superannuation. It now runs at 9%. It was introduced by Labor (Keating) with the aim of getting it to 15%. Howard stopped that. In the current campaign illard is proposing to again increase it - it is part of the plan from the Mining Tax.

Labor is the party that has a plan for not having to rely on large Government transfers in the future. The presumption that the Liberals stand for small government is also false - Government expenditure as a proportion of GDP grew under John Howard despite the rhetoric.

Sheehan shows the traditional technique of a right-wing commentator - never let the facts get i the way of an argument.

Why leave it blank?

In his 60 Minutes piece, Mark Latham has urged voters to vote informal, saying;

When it comes to good ideas for Australia's future, Gillard and Abbott have given the voters a blank piece of paper. I say let's give them a blank piece of paper in return. They say voting is compulsory in Australia, but it's not compulsory to fill out the ballot paper. You can put it straight into the ballot box totally blank - that's what I'll be doing next Saturday, and I urge you to do the same. It's the ultimate protest vote.

His critique of the election and how the parties and the leaders have presented themselves has some merit. However, his solution is deficient and devoid of logic.

Firstly, if you want to encourage an informal vote encourage people to number the squares incorrectly not leave it blank. Thankfully in most polling booths where it matters there are enough party scrutineers to ensure that an unscrupulous polling official couldn't put numbers on an otherwise blank ballot paper - but why leave the opportunity?

Secondly, there is no way for the major parties to interpret an informal vote as a protest vote. A real protest vote would number every square to make a formal vote and put the major parties last.

Thirdly, as some commentators have rightly noted, once you decide to vote informal you should bloody well shut up for the next three years - you've lost your right to complain about it

Finally, the real correct response is to get active, a point well made by Natasha Stott-Despoja.. Go join a political party and try to make a difference. Don't come complaining that they are dominated by unions/factions/big business or anything else. There is always an option for action. And narrow single issue parties like the sex/pirate/greens just don't cut it. Worse is to imagine that involvement with lobby groups like "GetUp" make a difference.

Note: Encouraging people to vote wisely is not helped by commentators like Paul Sheehan who display their own inadequate understanding of our voting system. He wrote as one of "six gut issues working for Labor":

The Greens. As if the Greens would ever do a preference deal with the Liberals. The Greens' preference agreement with Labor, plus compulsory preferential voting, means a vote for the Greens in an election for the House of Representatives can serve as a protest vote against Labor but still end up as a vote for Labor.

Preference deals have some meaning in the Senate where the above the line vote follows the registered party ticket. But in the HoR the voter still has to number every square. And most Green voters don't see a poll worker handing out an HTV anyway! The reson most Greens voters will preference Labor has nothing to do with preference deals - how could a person vote Green - presumably believing in anthropogenic climate change - preference a party whose leader says it is "crap" and is singly most identified with his opposition to putting a price on carbon?

For anyone voting just remember the bulk of your preferences really don't matter - what counts is the order you put the coalition and the ALP on your ballot.

The Queen My Lord is Much Much Better

This is not a reference to either Liz the second, her representative in Australia or the person the latter, acting on the authority of the former, has charged to run the executive government. (Imagine that - all three are sheilas..... That must really confuse Tony Abbott what with his comment that it would be folly for women to approach equality as quoted in the GetUp ad).

In this election campaign it is pretty clear that "debating" is an important skill. Buried away in the ranks of the Liberal Party are two former representative debaters from my old school - Sydney Grammar (Malcolm Turnbull and Paul Fletcher).

Far more interesting is another former SGS debater - Bob Kuhn. After careers as a mathematician (I came second to him for Wigram Allen Prize in Year 12) and CTO he has now turned his hand to being a professional "voice".

As a bit of fun he has made a short flick of an old satirical story about industrial action by thespians. It is very amusing and a very good ad for his services - which in this day and age can be delivered anywhere on the globe.

Convergent Media Review

Buried away behind the policies on NBN and cyber-safety is the media policy question on how to treat the broadcasters once IPTV content is available on-line.

Senator Conroy has talked a number of times about the "convergence review", but more recently this has been limited to a "Convergent Media Review". It appears to be a classic case of bureaucratic conservatism that the review will be constrained in its scope and not really deliver a totally convergent legislative framework to go with the converged regulator that is the ACMA.

There were some in the telco industry who held hopes that necessary reforms could be achieved through this process. But unfortunately those will now be constrained to elements being implemented through the framework of the NBN and the Government's deal with Telstra to make it happen.

Anyway for nyone interested SaintyLaw has published a white paper on the issues that confront a narrow media driven review. There will not be much joy from the exercise.

And now just sad

I spent a decade of my life trying to get debate about telecommunications policy to be wider than the question of Telstra privatisation. It was an incredibly frustrating time as the issue at hand wasn't really ownership. Unfortunately the discussion about contending NBN plans doesn't seem to be shaping up much better.

Stephen Bartholomeusz writes that the Government NBN wins on glitz alone. While Grahame Lynch gets a column he wrote for CommsDay recycled in the Oz in which he argues the industry is at fault for the coalition not "getting it".

In both these stories the picture is created that the Coalition plan is the economically sound one while the Labor plan is the one with vision. A lot of the distinction seems to hinge on the now over-worked line that there is no "cost-benefit analysis" for the NBN. In Lynch's words;

The subsequent refusal to submit the NBN policy to normal checks and balances such as a cost-benefit analysis or compliance with competitive neutrality rules fed this narrative and guaranteed that a Coalition that self-identified as a responsible economic manager would never support it - which was exactly what the government wanted as it provided a clear point of differentiation on vision that it could milk for political advantage.

It has been fascinating to see the number of commentators who have parroted the line about a cost-benefit analysis (CBA), usually with the presumption that a CBA is "normal" or "usual". I'll offer a bottle of good red to the first commentator who shows me the CBA that accompanied the Broadband Connect program that was awarded to OPEL. Indeed to claim the prize you can even show me the CBA for the sale of Telstra, the Australian Broadband Guarantee, the switch from analog to digital television, or Malcolm Turnbull's $10B Murray-Darling Basin project.

Part of the issue here is that people are confusing a CBA - which measures social benefits and social costs - with a business case or financial analysis of a project - which measures private benefits and costs. To do a good CBA you really need to be able to measure social benefits. The only purported CBA virtually discounted the willingness to pay on the grounds that compression techniques would remove the need for greater speed and discounted all network effects as being fully captured in the private willingness to pay (an error).

The letters page of this morning's SMH was filled with comments that suggested that because the writer had a good speed (ranging from 1 to 15 Gbps) they didn't need more. The sorry fact is that when they first got 128Kbps or 256Kbps they probably said the same thing.

The benefits of ubiquitous broadband include the potential to undertake remote health monitoring and greater use of distributed educational resource from the home. They also include the benefits of telework as outlined by Access Economics for the Government. But these are mostly social benefits - they aren't benefits that an individual consumer can evaluate. It is the kind of "externality" that you need Government to address.

Finally the methodology of CBA is embedded in a theory known as the compensation principle - we should do stuff if the gainers could compensate the losers. But we never do the compensation. It is really an actively anti-egalitatrian methodology. Commentators should be arguing that the Dept of Finance notes promoting CBA are what should be eliminated - not that CBAs should be done.

The real difference is as Peter Wotton summarized in Crikey;

The Liberals want to give away tons of money to a wide range of internet service providers in the hope that the market will cobble together some sort of high speed web access.

The Labor Party wants to invest a lot more money in a system which will provide state of the art access speed. Additionally at some stage this investment is to be recovered.

We appear to have a choice between Father Christmas or a sound investment in upgradable infra-structure.

Sorry

It took a lot for the Australian Government to say sorry to the stolen generations. It is always hard to express an emotional reaction of regret for the predicament of others.

But I really do feel sorry for the coalition. They launched their broadband policy yesterday. It got roundly criticised in the twitterverse and by seasoned commentators.

The reason I feel sorry for them is that they are captives of their past and hence constrained dramatically o the policy dimensions. The constraints they face are the fact that as vendors of Telstra they feel responsible to Telstra shareholders (the infamous Mums and Dads), as the 'privatizers' of Telstra they have an abhorrance for further Government ownership, and as the imagined architects of competition they flounder for a market based solution to a problem they couldn't solve in Government.

The policy is a mish-mash that doesn't address any real issues. The valid criticisms that could be made of the NBN are not made because to make them entails accepting principles that are unpalatable to the coalition because of its past.

Before I go through the policy let's just note that communications policy featured highly in the campaigns the last two times government changed i Australia. In 1996 John Howard won in part on the support of the environmental movement, support he won by promising to create a $1B environment fund. That fund was tied to the proposal to sell the first third of Telstra. So communications policy delivered the environment vote that was important in the outcome.

In 2007 the NBN (Mark I) was the defining policy (other than climate change) that delineated the ALP with having a view of the future.

Both of these policies were launched well ahead of the relevant election; they became part of the narrative delineating the parties. This coalition policy has been snuck out eleven days from polling day. Worse the leader wasn't able to stand beside the shadow releasing it, and couldn't personally defend it (see note).

The coalition finds itself in the same position as the ALP was in 1998, 2001 and 2004. Writing a policy to defend a previous position rather than moving on.

Now to the actual policy; it is hard to figure out other than there will be a new beast called the National Broadband Commission that will advise the Government on what actual projects to sponsor to fulfill its grab-bag of plans. Not to be called an "expert group" this time since both parties have had one of those before - the coalition as an expert group to determine a tender for policy, the ALP to determine a winner for NBN Mark I. The coalition has no plans for any fibre network - they even seem to want to back away from mandating fibre in greenfields estates.

They do plan to build a "national broadband database" - not a bad idea that someone should actually map exactly what service is available by every address in the country. Unfortunately this is not as simple as it sounds because the availability of broadband depends on the cumulative demand i an area (elstra can run out of copper). The problem with this plan is that the coalition previously proposed in the Broadband Blueprint in 2006 to map backhaul. The policy stated;

Access to efficiently-priced backhaul is important in a competitive market because
it allows new carriers to provide a service in places where they do not own their
own networks. The more competitive the backhaul networks the lower the prices
that will be paid by consumers.
In the past, commercial sensitivities have prevented sharing of the extent of
networks across Australia, particularly backhaul. For the benefit of all providers
and government these issues need to be resolved as far as possible.
For the benefit of all providers, the Australian Government will continue to work
with industry to develop an interactive map of backhaul supply.

I'm prepared to be corrected, but in the period following the release of that blueprint it seems absolutely nothing was done.

The NBC will now be charged with "picking winners" for the handing of $5B in grants to the private sector. These grants will cover five areas - fixed broadband optimisation ($750M), regional fixed wireless ($1B), metro fixed wireless ($1B - this one is an investment), satellite services ($700M) and backhaul ($2.75B). At least the one body will be deciding, not like the tender for Broadband Connect being conducted at the same time as the coalition expert group that was going to assess the "tender for policy" for FTTN.

Let's unpack these. Fixed broadband optimisation. This is talking about places where there is copper but it is not a clean path to the exchange - typically due to "pair gain". How do you replace a "pair gain" - either by deploying a whole new copper loop or moving to an FTTN architecture. But the FTTN architecture will be little pockets of orphan architecture. What will be the access regime to these? Can anyone other than Telstra build them? I think not. So the deal is to offer Telstra $750M to upgrade their network.

The regional wireless is really the bit that looks like retendering OPEL. At least if the real broadband database is completed first then there can't be the embarrassing disagreement about coverage that plagued that contract.

The metro wireless is a new promise and idea. The timing (doesn't start till 2013-2014) makes it clear this relies upon the 2.5 GHz and/or 700 MHz spectrum. That's all there is and despite the coalition proposing to be "proactive" on spectrum one should note that neither of these can be brought any further forward than they are now, where they are now has been entirely the achievement of the Labor Government and the spectrum section of the 2006 "Broadband Blueprint" is an embarrassment that the coalition would hope to ignore.

It is hard to figure how the metro wireless promise fits with the fixed optimisation program. Why not simply fix all the copper - that is by FTTN to only those parts of exchanges where the copper runs are too long.

On satellite there is basically no difference between the coalition and the ALP - merely a note to history that AUSSAT was the right idea too early. I've already commented on backhaul. But let me add it would be cheaper to nationalise the existing Telstra fibre network and sell it at a subsidised nationally averaged price than it would be to invest in duplicating fibre on routes that already have more capacity than required.

Meanwhile the NBN itself escapes the scrutiny it should have. Firstly there is no convincing story on the backhaul versus access network component of the national network. Secondly the priority for deployment of the NBN is unclear - commercially you would build it first where the broadband density is highest, for policy you'd build it first where there is no DSL. Thirdly the timescale to improve the really unserved areas is too slow. Fixed wireless now would be a good infill service but lack of clarity about hen areas will be reached by the FTTP creates an overhang for the market in meeting it.

Conroy and Tanner hatched the NBN in part as a way to restructure the industry into structurally separated components. Telstra could have won NBN I by agreeing to it - but didn't. The coalition can't disconnect itself and realise that a policy that does not separate Telstra is an insufficient policy.

Finally, the coalition has its obsessive fear about investing in telecommunications. It was the sale of Telstra that ultimately paid off all the debt paid off by the Howard Government. But the "carrying value" to the Commonwealth of Telstra was zero - it had received no government funds from the budget since 1959.

The NBN will in the long run be the same. Twenty years after it is built it will "owe" the Government nothing. The cash-flow from its revenue will justify a multi-hundred billion dollar sale price. Building the NBN is the best "Future Fund" the country could have.

The coalition are captives of their past and cannot see this.


NOTE: At least Abbott was kinder to Smith than Howard had been to Abbott in the 2007 campaign. It was Howard's insistence that Abbott travel to Melbourne for a policy launch that made the then Health Minister late for the health debate at the NPC. Abbott's lateness and subsequent treatment of Nicola Roxon was an enduring memory of the campaign.

Tomatoes

Fresh from the NewsMail deep in the heart of Hinkler comes a story about a local tomato grower looking forward to the NBN to be able to sell the crop.

The story has drawn a comment from one person who discusses the opportunity of putting tomatoes in a .zip file...and then accuses the person in the story of being a wacko.

The bottom line is that the process of ICT to transform supply chains is just as valid in primary produce as it is in manufacturing. The case studies are numerous, the implications enormous. But while the global leadership on comms matters has its head in the clouds talking "trans-sectoral" is it any wonder the NBN is treated with some cynicsm?

I'm going to regret this

At heart I'm an "internationalist". As an example, I hate economic discussion where we talk about economic policy for Australia couched in terms of what our "global competitors" are doing. The theory of free trade is that everyone benefits from trade.

Similarly issues like displaced persons and climate change require international solutions. Ultimately I'd like to believe that we all have a responsibility for ensuring that everyone on the planet doesn't suffer from poverty or oppression.

But then you turn to the realities. Those realities are the talk-fests that the U and its forums become. In my sector of interest there has been many hours devoted to WSIS (the world summit on the information society I think). This has now been passed by the The Broadband Commission for Digital Development.

What I will regret is that I simply can't believe the "puffery" of this thing - let alone an interview with the "lead author". This starts by posing the question of how to best use Broadband for societal goals. The big unifying concept according to report author Paul Budde will be for governments themselves to make broadband a trans-sector initiative.

Those of us in Oz are used to this abominable Budde-ism. Sensible people would note that "broadband" is a general purpose technology and is trans-formative of all segments on its own. Those of us who really back market capitalism would say that the beneficial outcome of optimal usage is more about market structure than active Government involvement. My single biggest concern is the idea that structural separation alone gets you to the right outcome but then still allow bundling of access services with content.

This is the risk in the confused "trans-sectoral" thinking because it promotes the idea of big opportunities for both media companies and telcos in the wider service provision context. Let's be clear that the real opportunity is in genuinely delivering any-to-any connectivity - this is about standards and co-operative business models, not about bundling and opportunities for existing large firms to become larger.

Was this praise?

In his Media Watch Dog on Friday Gerard Henderson recounts some correspondence between sports writer Peter FitzSimons and a catholic priest. Before I get to this it s worth noting that earlier in the piece he had a go at the ABC's The Drum for excusing an abhorrant piece of Bob Ellis writing on the basis of hyperbole.

Henderson summarises the correspondence as;

A Catholic priest writes a fan letter to Peter FitzSimons which, in passing, proposes that he resiles form using the word “bejesus”. And the Angry Atheist goes into meltdown by telling his reader to (i) free himself from his ancient superstitions, (ii) live and (iii) abandon his mumbo-jumbo.

Problem is I think he misrepresents the original letter. While the first and last sentences of the original letter praise the columnist it reads to me that the purpose of the letter was the second sentence, the request about “bejesus”.

That said a better response from FitzSimmons would have been “Thank you for your letter of appreciation and I will endeavour to keep up the good work. As to your request I will agree to stop using the word “bejesus” in respect of your beliefs if you can get the Pope to stop promulgating the view that those who have my belief system will, deserve to, burn for all eternity.”

Henderson goes on to say;

Nancy wonders whether Mr FitzSimons would get into angry mode if an imam wrote to him requesting that he desist from using a word which might be construed as an improper use of the Prophet’s name. Probably not. Without an intact neck, your man Peter would not be able to wear his fashionable red bandanna.

The trouble is that there is no reason why FitzSimons would think of such a ting. As we are regularly reminded we live in a country with a Christian heritage and as a consequence have lots of Christian derived blasphemy. To say "bejesus" is pretty standard English; to use a name for the Islamic god would be an affectation.

At least we should all be grateful that due to the great schisms within the Christian churches - over which much blood was spilled - we have a society in which religious tolerance is practiced. On that basis my support goes to FitzSimons.

This election isn't boring, it is depressing

That was our conclusion at the weekend. Stripped of all the guff about whether there are any policies to debate, or whether the media is or is not doing a good job, or whether the campaigns are all too much spin, there is a truism of politics that you get the politicians you deserve. Just how bizarre this has become was revealed by the presence of Mark Latham.

If the best we can offer our country is a choice between the ALP that is in one of its "whatever it takes to win" modes and the Liberal Party (there is no effective coalition - the Nationals have no impact on policy except the climate change decision that created the opportunity for the Liberal right to roll the moderates) that is trying to make a campaign based on how badly it would have handled the GFC into a positive...then we really do need to (to borrow the Democrat line) "change politics".

The bad news is that no amount of voting for the Greens for balance of power, or pining for the Democrats or finding some new single issue (or narrow base) party - think Sex Party, Family First etc - will change the fundamentals. In fact the small party vote is part of the problem - campaigning for preferences rather than votes.

I briefly thought that Tim Blair was giving me suopport today on my plea for a bit of policy distinction. But no, he was doing the usual right-wing thing of imagining a homogeneous "left" that he claimed wanted policy to be the issue this election but was happy to talk about leadership at the last election. Apart from the fact that there is no such uniform "left" view, the last election actually did revolve around policies on reconciliation, climate change and - above all - Work Choices.

I don't know how he can construct the line "Forget policy. An entire government is in vicious collapse, which overrides any interest in minute policy discussion." This I simply don't get. Yes Labor hasits raving looney on the fringe - Mark Latham - but Malcolm Fraser could almost match that.

There really is an issue here and it is starkly represented by how the Liberal Party would have responded to the GFC. Tony Abbott is promising four things, cut the waste, pay off the deficit, stop the new taxes and turn back the boats. The last of these is just populous nonsense as there is very little effective difference in how many refugees will be settled under either policy and the Liberals have already been caught on their immigration lie.

The first three are all GFC related. They are really saying we didn't need the stimulus and we didn't need the waste.

Meanwhile Nobel laureate Joseph Stiglitz has written today that the Labor Government put in place "one of the best-designed Keynesian stimulus packages of any country". He goes on to note that our deficit is small compared to any other country and that it would be wrong to reduce it if thatmeant not investing in future capability. On waste he points out that economic theory and notes "it is wasteful to spend too much money preventing waste".

Ross Gittins separately reports on the review of the BER, which reached the same conclusion. Basically they said "waste" of 5% was a reasonable trade-off to deliver the speed of the expenditure.

But it is erroneous to claim Abbott did nothing on policy (despite this sarcastic take on a campaign memo) - one report notes that he "is considering taxing all but a fraction of Australians at one simple flat rate, exempting from tax the first $25,000 each Australian earns." (The campaign launch seems to only be available as a video not text). The actual policy commitment was merely " that within 12 months of taking office the Coalition would outline plans for tax reform" - and this despite the other Henry Tax Review.

But in choosing the flat tax (and it is not really a flat tax just a change in the progressive steps) Tony is reported to also reject the tax concession on interest income and the simplification of work expenses claims. He of course also rejects the mining super-profits tax - something Stiglitz points out sits oddly with an obsession about the deficit.

So we do have a choice between two parties that are very clear on what their approach to the GFC was/would have been.

All this then makes anoyther piece in the press today - Lucy Turnbull's speech for a debate on capitalism. After good work in indentifying the benefits of the market as a conduit of information and the failure of central planning to make production decisions, she goes on to write;

The roots of the global financial crisis largely lie in government meddling to privilege particular groups. The crisis confirmed capitalism works better when individuals are treated equally and vocal or powerful interests don't get special treatment.

This I cannot understand. To the extent there was Government interference it occurred because the US Govt was promoting greater home ownership, which did result in more loans to the so-called NINJAs (no income, no job, no assets). But the Government policy was predicated on the assumption that the financial markets adequately managed risk. They did not. They did not for three main reasons; that risk was measured by rating agencies rather than the old Basel 1 rules, that the banks had been allowed to merge/expand to be involved in non-bank activity and there was no open market for derivatives.

These were all "institutional design" failures. Markets all rely upon "institutions" - the most notable of which is the institution of private property itself, but also that the enforcement of private property rights is a "public good" and why Government funds and operates police forces and courts. A second is the institution of "contract law" (and I guess torts).

Turnbull is right to note;

Meeting the challenge of climate change will demand courage, commitment and technological ingenuity. Just as price signals, fair markets and free trade are the cornerstones of the capitalist system for creating goods and services, they should be the foundation of our response to climate change.

Only by harnessing them will we be able to unleash human ingenuity to reduce our emissions cost-effectively. The alternative is heavy-handed regulation and governments trying to pick technological winners. Much of today's awesome technology was unpredicted even a decade ago. The best mechanism for realising the infinite ingenuity of humankind is the market itself.

There are two parties contesting the 2010 election. One of them actually stands for market capitalism - that is the Labor Party. The Liberal Party stands for money and privilege - it is not the Liberal Party created by Menzies but the re-incarnation of the UAP.

What to do with the NSW Right

Bernard Keane nails it in Crikey today, the Federal ALP has been infected by a kind of anxiety disorder that they have picked up from the NSW Right.

While the Victorians and South Australians (Feeny/Shorten/Farrell) were the real deciders of Rudd's fate the shots seem to be called by Mark Arbib supported by Karl Bitar. The fascinating thing is that until recently Crikey itself was full of stories about just how much KRudd was doing things for them to support him from a challenge from one J Gillard when no such challenge was in the offing....until they made it so.

No matter whether the ALP wins or loses, it is impossible to know the outcome under the counterfactual of no leadership change. What one can say is that for the period before the change the NSW Right was far more influential than its political experience in Canberra and its responsibilities within the Government deserved to be. Someone needed to tell Kevin to use cabinet rather than small committees and it certainly wasn't the advice Arbib and Bitar gave him.

Crikey over the last two days has suggested the ALP has already begun to squabble over the spoils of defeat - that is who would be leader after Julia. Bill Shorten's name has popped up, and of course Wayne Swan has been reported as being the surviving "rooster" with a claim.

Actually irrespective of the result the ALP has to do something about the structure of the party and the political class that knows patronage and polls but does not understand policy.

Can anyone explain the Optus Mobile Broadband Plans?

I have long had a concern with the practice that I refer to as “jewellery store pricing”. This is the practice of advertising goods as being on sale by specifying a discount to a price that never applies. The example is diamond rings at sale of 30-50% off - but they seem to always be at that discount, never the "real" price.

The use of “capped” in mobile services I think has been a classic case of this – quoting that a $50 capped plan has $200 of included “value” where that value is specified as the rate charged for excess calls over the plan amount and is not an otherwise observable price.

Optus seems to have taken this to an absurd level. Their new pricing plans contains the usual structure of a monthly fee and a matching data limit. They have moved on from charging for excess usage and sell extra capacity in "data blocks". They specify an off-peak and peak rate as $0.04/MB and $0.08/MB respectively.

These data rates are then used to say that, for example, a customer of their $20/2GB plan can get "up to $80 value" and this is interpreted to mean that the customer can choose a combination of usage up to $80 - at the extremes they would get 2GB if all use was at off-peak times and only 1GB if all use is at peak times.

The really fascinating thing is that having moved to add-on data blocks there is no longer a real rate that is charged for "excess usage". But the prices charged for the add on data blocks are at an effective rate of 1c off-peak and 2c peak.

And here's the rub - if Optus were to say that the data rates were 1c/2c rather than 4c/8c per MB then their $20 plan would only generate an "up to" value of ... $20. When one recognises that really the plan is $20 for 1GB it is fascinating how much publicity Optus has generated despite having the dearest mobile broadband entry level plan in the market.

I may, of course, be wrong. There might be some aspect of this plan that I don't understand. I'd be grateful if anyone could explain to me what the significance of the 4c/8c per MB prices are other than to generate extravagant "up to" claims that would not be made? Shouldn't they be using 1c/2c?

(Note the argument is slightly different in relation to the higher value plans - the comparison is below;

Plan rate 20, 30, 50, 80,100
Advert Value 80,240,560,720,800
"Real value" 20, 60,140,180,200)

Why is MS Office still a suite of programs?

Can anyone answer me a simple question - which is why Microsoft Office is still a suite of programs? I really mean the three standard applications of Word, Powerpoint and Excel.

Since their very separate creations - Word as the word processor that succeeded Word Perfect as the standard, Excel as the inheritor of the Visicalc/Multiplan/Lotus 1-2-3 development and Powerpoint as a PC Incarnation of what I think was first "Pagemaker" - they have been increasingly integrated.

So we now see that the drawing tools are common between Word and Powerpoint, that Excel objects can be embedded in Word and Powerpoint. What we don't have is the same text editing support in powerpoint that we have in word. We also have very limited text support (including simple things like super and subscripts) in Excel.

Two things made me think of this today. The first was yet another exercise of seeing an information paper for a Board being rendered in Powerpoint. I actually don't get that as a method. In all the Boards I've been a member of I'd prefer a standard A4 word doc. But corporate Boards seem to like the presentation format even if it isn't presented. Telecom NZ allowed ONLY presentation format but that was because they also only read papers on screen and so needed a landscape format.

The second was a really good item of the 12 Rules for better spreadsheets. Ultimately a lot of these rules are about the TEXT that needs to be included rather than the format of numbers etc. The ABS does a reasonable god job with their workbooks of including an Index up front that hyperlinks to relevant sheets and columns. I know that i the last two days I generate about five workbooks all of which were undernoted.

This posed two simple questions? Why is Powerpoint still a separate application rather than a front end to word - that is a set (for slides handouts etc) of ways of presenting what is ultimately prepared as a Word document? Secondly why isn't it possible to include a Word page as a sheet in Excel?

More specifically why doesn't the whole suite distinguish between "objects" made up of "pictures"- including drawings, pictures and other graphics, "spreadsheets" = tables of all kinds the contents of which can include simple text and formulae, and "text" = formatted text with all the bells and whistles of a word processing come desktop publishing suite.

These objects all then can get presented in two fundamental formats, workbook or document. "Workbooks" are where each tab is either a "text" document (good for the text explaining the rest of the workbook), a "spreadsheet" - a standard table or a "picture" - most commonly the type of picture that is a graph generated from the data that is a spreadsheet.

A "document" is a single sequential and formatted presentation of text, pictures and "spreadshhets" (as in tables). What we know and love as Powerpoint slides is really just one version of a document. All Documents should have Templates that designate different parts of each page to be occupied by certai carry over info. In Word they are climitted to Headers and Footers whereas you get more control on Powerpoint. On top of standard documents there should be Meta-documents - which is what the "Notes" version of a powerpoint preso is - but you should be able to completely control the format of both - e.g. why not a landscape doc that in the left panel has the representation of the A4 pages of a piece of text and the right hand allows for commentary on it.

I'm sure someone will tell me that something else does this .... but I don't know it.

More on e-books

One of the great promises of e-books is the opportunity to bring books back into print. Interesting story about doing just that with a book about Apple's process of marketing, The Macintosh Way.

The article refers says the book "outlines the principles of technology evangelism". Obviously a lot of firms now use the technique - but few have got to the level of the messianic Steve Jobs.

What is also interesting is that the release of the book has been accompanied by a video that is the equivalent of "unboxing" - which is all the rage among the tech crowd.

When I've read the now e-book and when I watch the video I might come up with a new plan for technology evangelism for e-book standards.

Interesting note Ian commented on my earlier comment about e-books on the screens being too small because he reads *.pdfs. If the pdf is of text not an image Amazon will convert it for free to the standard the Kindle uses but I think it is still DRM managed. Next job is to find an open version of that so that I can publish my own docs that way.

Are you confused?

So what is the link between the Coalition and the tobacco industry funded campaign at the election?

Well the first question you might ask is - what tobacco industry campaign. The ads that are appearing are from the "Alliance of Australian Retailers" and it is reported that they are "fronting the campaign".

The only real link suggested is between strategy firm Crosby Textor and BAT - not confirmed but not denied.

The ads themselves are a disgrace. The retailers dress it up as a concern over "regulation" that the excise increase makes them a greater target for theft and that plain packaging isn't required because packets can't be displayed. The logic is breathtakingly stupid - as if the only time a potential customer or actual addict only looks at a packet is when it is being bought.

They resort to the worst argument of all - other countries have rejected plain packaging. As I note on all such arguments it was good that Australia and New Zealand didn't rely on it and decided to give women the vote before any other country did.

Tony Abbott needs to be stronger in his response. He is quoted saying "The Liberal Party has absolutely nothing to do with any sort of pro-smoking campaign. And as far as I'm concerned, if we are returned on August 21, we will certainly consider going ahead with the Government's plain packages for cigarettes."

His promise is to "certainly consider going ahead" - seems to me given what he's told us about what he says rather than what is in writing and given the Liberal Party takes tobacco industry money and the ALP doesn't - that we know what that really means!

How Evil is the Evil Empire?

For those of you not in the telco biz this is a reference to Telstra. It is an apposite question because the Competitive Carriers Coalition has come out today to say that telco reform including splitting Telstra is more important than the NBN.

When you live in telco land it is easy to frame everything in its relationship to Telstra. I recall two particular issues from my earliest days at AAPT. The first was the accusation that Telstra was intentionally frustrating our access to exchanges to install the very earliest DSLAMs (for ADSL broadband). The second was that Telstra improperly used information about our customers, that was provided to retail information their wholesale business obtained.

Both of these types of behaviour have been recently subject of court action, so it provides an apportunity to really review the outcome.

Firstly we'll talk about exchange access. Much later than my involvement this became an issue of exchange capping, that is saying there was no more space, rather than truly "lost keys" which is not turning up to give access at the appointed time. My comments back in 2000 were that we should always assume that Telstra management was honourable and that failure to gain access was the result of over-zealous employees. In those days my expectation is that field techs would think they were "doing the right thing" in not assisting a competitor.

The Gederal Court has just determined a case that dealt with the issue of exchange capping. The facts that access seekers had been improperly denied access were agreed, what was at dispute was the size of the fine - how guilty was Telstra. Clayton Utz have prepared a short summary of the matter. Where Telstra erred was in not having in place systems to ensure compliance with their obligations and how they responded when it was found they didn't.

Interestingly the penalty of $18.5M falls way short of the $300M that an early report suggested they would face - which was the actual maximum they could face under the Act. In reality it is almost the midway point between the $34M the ACCC sought and the $3-5M Telstra believed it was worth.

The second matter about misuse of wholesale information was also subject of a case about different matters decided in April 2009. In that decision the judge only found that there was a breach of the access conditions. There are reports that a full bench of the Court ruled that Telstra also breached confidentiality and that Optus will now claim a percentage of Telstra's profit. (I can't find the judgement and suspect that this was a procedural decision in the appeal not the end of the appeal).

The interesting thing is this case is over very very old material, and relates only to Telstra using wholesale information to prepare market share reports. I recall that I was at Telstra at the time and used to argue that (a) the use of the info was probably dodgy and (b) that it wouldn't be dodgy if we decided to publish market share info (or agree with Optus to do so). There is unfortunately a real fear in business about releasing information for "commercial confidentiality" reasons when its absence means that not only are the assumptions of the economics invalid but also the firms in the market are "guessing".

Telstra can be a bit stupid, a bit slow to react. Despite the fact I'll call it the "evil empire" till the day it is separated it ultimately is more dumb than malicious.

AAPT Consumer business sold to iiNet

Well, the AAPT Consumer business has been sold to iiNet for $60M. In the various announcements this is about 120,000 customers so on the old $/sub methodology a customer is worth $500. Interestingly Telecom expects the sale to decrease EBITDA by $10M while iiNet expects to increase EBITDA by $20M. Where they will find $10M of synergies that weren't available to AAPT (which owns significant fibre backhaul of its own) is interesting.

More interesting is that the transaction includes the "billing system" which presumably means Hyperbaric which cost AAPT somewhere over $100M.

Yesterday I blogged about purpose and used AAPT as a case study. The history of AAPT's consumer business alone is somewhat entertaining.

AAPT's initial business was heavily focussed on the business market - by connecting up company PABXs. In the post 1992 era a business was to be had by using the corporate pricing plans of Telstra - the Strategic Partnership Agreements (which I had a big role in creating) to access corporate discounts which were arbitraged to as resale. I also had the experience of losing the News Corp account which I was running (and we were JVing with for Foxtel)to AAPT - as News also owned almost half of AAP.

Telstra eventually (I think Feb 1995) massively revised these deals mostly eliminating the savings on local calls. AAPT at that point massively contracted its business. AAPT also commenced a long dispute with Telstra over the charges - quite frankly the billing system implemented for SPAs was never equipped to provide the functionality wholesale customers required.

However in 1998 the ACCC decided to "declare" the local call service. Both One.Tel and AAPT got into the consumer voice market in a big way - and both priced local calls at 15c when the retail price was 25c. Telstra responded with a very cute structure that included dropping the main price to 22c but expecting to return it to 24.2c with the GST (I think those were the numbers)and matching the 15c for calls within an exchange area. The Telstra plan came a bit unstuck when Richard Alston said his promise that local calls wouldn't go up under the GST didn't mean they wouldn't go up from 25c - they wouldn't go up - so Telstra got stuck at 22c.

It was about this point when I arrived at AAPT and I distinctly recall having to explain to AAPT management that the ACCC wasn't going to set the wholesale price at a number that was determined by what AAPT chose to sell calls at. Neither One.Tel nor AAPT made any money from this foray - the wholesale price never did make the call price attractive.

After Telecom acquired AAPT and changed out a lot of managers (the first of three full changes in my time there) the consumer business imposed a price change that put a surcharge on the bill if the customer didn't make "enough" long distance calls. It was the only way to try to shed 100,000 loss making customers.

But Telecom's first big strategic error was to decide to run its mobile and internet business from 2000 to 2002 as Trans-Tasman businesses - AAPT was just the "voice and data" business. Worse the separated internet business then got into a consumer business JV with America On Line. So just at the time when as a consumer business AAPT should have been building the start of its broadband business it couldn't. That AOL customer base was eventually sold to Primus.

But the latest sale I think has generated the single most memorable line from a telco media release. Two management team changes later than the first Telecom acquisition at AAPT we were having a management meeting to determine the key messages for PR. The new self-styled Chief Mrketing Officer lent forward and earnestly said "it is important that we communicate that we are customer-centric". I looked up and said "yes that is important because I'm sure that all the other telcos are saying they want to communicate that they are network-centric".

I see in the announcement from Telecom today what I thought was sarcasm was instead foresight of the eventual strategy. I quote;

"Together these transactions rationalise non-core assets, strengthen
Telecom’s financial position, and help reposition AAPT’s operations into a
focused, network-centric wholesale and corporate business that is wellpositioned
for future growth."

Purpose and AAPT a case study

I stumbled upon an odd little group yesterday that calls itself the Ideas Lunch which is an extension of a book summary activity called Book Rapper. A pleasant enough activity.

Yesterday's lunch was on a book by Daniel Pink called Drive: The Surpising Truth of What Motivates Us.

The discussion probably wasn't that much on the book, which tries to make its theme that it is intrinsic motivation rather than extrinsic motivation (the carrot and stick of the corporate world) that motivates us. I tried to put the excessive reliance on extrinsic motivation into what I think is its correct institutional and political context.

The concept of a firm as it is applied in standard microeconomics relies upon the concept that the firm is a "profit maximiser". All the actions of the firm are understood, indeed predicated on, this being the firm's motivation and the prediction of how the firm will behave rests on it. Standard theory then suffered a major crisis when Berle and Means undertook their empirical study, published as The Modern Corporation and Private Property.

This book neatly explained why CEO's might pursue other strategies, most particularly things like a revenue maximisation rather than profit maximisation. The response of economics was not to change their theory to match behaviour, but instead to mount an attack on what was labelled the principal/agent problem. And thus began the tradition that mouths "the purpose of the firm is to create shareholder value".

But this is patently a nonsense. It describes neither the history of the development of the concept of a joint stock firm, nor the process by which any individual firm comes into being. The history of the firm as a concept was the development of big or risky projects - initially major sea trading expeditions and "city" works projects - that could not be accomplished without sharing the risk or adding capital from multiple sources. In all cases the purpose - the voyage or the sewerage system - preceded the capital formation.

The same is true of any other new business. The fundraising prospectus does not say "let's form a company to deliver shareholder value" it says "we have identified this market need and by doing these things we can meet that need and pay investors a return for their capital employed". The real "purpose" of the company precedes the generating of the return to shareholders, but return to shareholders is still a necessary condition.

This feeds into motivation by understanding the work of Blake and Moutton in
The Managerial Grid. This book suggests that managers make a choice between focusing on the task and focusing on their people. They describe a manager as sitting on a Cartesian grid of these two dimensions. A (9,0) focuses only on people a (0,9) focuses only on the task.

They suggest most real managers are "statistical (5,5)'s". That is one day they worry about the task then the next have a staff picnic to worry about the people. But they also suggest that managers can be a (9,9). The path they build rests on the fact that people feel happy when they can understand their contribution. So by being clear about the task and how it contributes to the firm's purpose and encouraging them an d supporting them can result in a focus on the task AND on the people.

Of course the success of the strategy needs a firm purpose that is grounded in what the firm exists to do - not just how it pays for capital. My thesis is that the vision and mission "thing" is vital to company success.

The reference to AAPT is fed by the plethora of stories about the impending sale of AAPT. It made me think about the varieties of telcos and how they succeed or fail.

AAPT grew out of the news service AAP. When AAP started selling news services direct to corporates in the 1980s they fell foul of the rules prohibiting "interconnection". AAP became a leading firm lobbying for change to the rules, and then put its money where its mouth was and spawned a competitive telco. As such the company always had a purpose - to bring the benefits of competition to telecommunications users.

When the firm was acquired over 1999-2000 by Telecom New Zealand this changed, not least because the parent firm didn't believe in that purpose. Telecom itself attempted a project in about 2004 to define its own purpose beyond generating shareholder value. It composed a very powerful narrative of its purpose as being to fulfill people's need to communicate. Unfortunately it was never allowed to dominate the strategy discussion (and I think the whole episode is left out of Theresa Gattung's memoir Bird on a Wire.

As AAPT lost its purpose the next generation of "telco" found theirs. What defines Internode and iiNet is that they are companies driven by people whose passion was to make the Internet available to everyone. I don't think Simon Hackett or Michael Malone sat down and said "I can make money by being an internet service provider". The reason for building an ISP from scratch was so they and their mates could enjoy the Internet.

A company's "purpose" doesn't have to be "causal" - the need of people they want to satisfy can be mundane or even outright evil. But to be truly successful the company has to know and explain what is the purpose that comes before "making money".