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Hide sight: Telco report puts our future at risk

Friday 7th July 2000

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We are about to see another big boost in telecommunications around the world and the good news is that big business is delivering the benefits to us in New Zealand.

ADSL (asynchronous digital subscriber line) boasts speeds up to a hundred times faster than modems and is already installed in 69 Telecom exchanges. Telstra plans to make cable available to 65% of New Zealand homes and 80% of New Zealand businesses. That means bundled services including telephone, fax, email, internet and up to 80 TV channels. Telstra Saturn's cable already runs past 100,000 Wellington homes, with a 25% uptake.

Radio-based telecommunications will wire us to the internet on the run. Third-generation mobile phones will boost data transmission 100-fold and provide us with fast multimedia, online booking, mobile banking, video-conferencing, stock trading and so on.

Ten years ago telecommunications was simply a bunch of copper wire you talked down. Now it is literally everyone's personal window on the world.

These developments require cash - heaps of it. Vodafone is pouring $300 million into wireless telephone technologies. British Telecom (Clear) is putting $330 million into retiring debt and expanding its network.

Telstra is spending $1.1 billion on cable. Telecom is putting $1 billion into the Southern Cross fibre optic cable linking Australasia to North America and another $200 million on the new CDMA mobile network that makes cell-phones internet browsers. Superway New Zealand is spending some $300 million on the North Shore fibre optic cable network.

That's $3.2 billion in investment alone. It dwarfs Jim Anderton's "job machine" of $100 million of taxpayers' money dished out by politicians and bureaucrats.

The telecommunication companies can afford it. Vodafone's market cap alone is 10 times that of New Zealand's entire sharemarket. But these companies don't have to invest into New Zealand.

That's why economic policy in general and telecommunications policy in particular is so crucial to economic development. What we have is working and is working well. But the government refuses to leave well enough alone. Its intention is always to meddle.

The Hugh Fletcher ministerial inquiry, for example, is right off beam. It has a simple enough thesis: property rights, the legal process and free trade don't work for telecommunications. They are too inefficient and too slow.

The recommended solution is also simple: a compulsory cartel of "registered telecommunications and broadcasting network operators" called an "industry forum" to develop standards and codes of practice. It would be subject to ministerial direction and would work to settle any disagreements.

It is hard to imagine a more backward step. This approach survives now only in the remnant socialist states of North Korea and Cuba.

It's impossible to see how this will benefit consumers. Nor will it encourage investment, innovation or development. Mr Fletcher doesn't even explain the constitution and voting rules of his proposed forum. For example, is it one member, one vote or is voting strength related to investment size. Whatever the rules, the outcomes will be perverse.

But it gets sillier. Mr Fletcher is also proposing a telecommunications tsar with despotic powers. His "electronic communications commissioner's" job will be to declare parts of the industry "designated" and subject to his or her regulation and "pricing principles." That's arbitrary power and the fatal flaw in the proposal. The high-tech money won't flow in unless the rules are clear and investors' investments are secure.

Mr Fletcher's solution is wrong. But this left-wing government may well buy into it.

Government leaders spent years in opposition demonising Telecom. Their tactic now is to declare the problem is a lack of competition. This is richly ironic.

This government opposes competition. It has moved fast to re-monopolise accident insurance, industrial relations, schools and universities. But now it wants competition in telecommunications and its solution is more regulation, despotic power and arbitrary decision-making.

It is doubly ironic the same leadership opposed the original opening up of telecommunications to competition. It would have preferred the Post Office as a government department retain its monopoly.

At least in the old days the rules were clear. The old Post Office Act declared no one could engage in any telecommunications activity "for any purpose which might be construed as an attempt to deprive the Crown of revenue." That's clear enough. Mr Fletcher's proposal does away with clear rules in favour of a tsar's whim.

This country is in danger of becoming once again a technological backwater.

The government should dump this report real quick so the much vaunted "knowledge economy" doesn't falter and fizzle.

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