08 April 2009

The fast and the furious

Finally, the Federal Government has done what it should have done in the first place. The country will be better for being optic-fibred - not to the network, the node or any other rort but to the very premises where people live and work - on the government coin. Let's hope that the "compensation" that it feels obliged to offer those who had taken part in this stacked game is not too onerous.

The media coverage of this issue has fallen into four predictable ruts:

  • The political: tit-for-tat equal time to the major parties, government proposes and opposition opposes, John B. Fairfax-style "old-fashioned journalism".

  • The economic: whose share price is affected, and the incredible risk-aversion of Australia's fearless capitalists without the government to hold their hands, do their work for them and guarantee them a few dollars into the bargain.

  • The geeky: z0mg, evrything (w4t3vr) wil b fast & kewl?!?!?! :)

  • The Australian: No matter what, it's another stuff-up by the Rudd Government.

Let's take each of these apart to show why the public are poorly informed when journalists jump into the ruts they regard as trenches.

First, the political. This is as straight a piece of reporting as you'll find: description of what the Government is proposing, with quotes, and a response from the Opposition. Neither of these are examined.

The fact that the government is "under pressure" is neither here nor there: the government is always under pressure. This sort of reporting seeks to create drama where none exists. What's missing here is an examination of the issues raised:
But some analysts say the plan will cause broadband costs to rise, especially if there is not a large demand from households for the service.

Analysts should know that both the demand for and supply of increased data traffic over the internet have increased exponentially in recent years, and shows every sign of continuing. Will costs rise in real terms? Will these costs be offset by new economic possibilities not available now? Who are these analysts, and why are they stuck in the present when nobody else - the taxpayer/ citizen/ net-user included - isn't?
Federal Treasurer Wayne Swan has also defended the plan, but will also not say how much the cost will be to consumers.

"I'm not going to speculate about the price, that's why we're going to have the implementation study ...

Oh, so there's an implementation study to deal with the issue of cost? Why wasn't that at the top of the article?

But Opposition Leader Malcolm Turnbull says the Government has no evidence to show the plan stacks up.

"They've said it's a great investment ... and yet we've just heard him say he does not know how many households will take it up. He does not know what price they will pay and, in fact, he does not know whether it's commercially viable at all," he told Radio National.

"This service to be commercially viable would require an enormous number, a very, very large percentage of households to take it up and to pay prices north of $150 a month."

Malcolm Turnbull was a director of one of Australia's first million-dollar internet companies, OzEmail. He should know that scaremongering about the internet is stupid and counterproductive, serving only to discourage the uptake of opportunities. A responsible fourth estate would have called him on it.
Opposition broadband spokesman Nick Minchin says the Government's announcement is just "an extraordinary and brazen cover-up" for the collapse of its previous $9.4 billion plan.

"We've got a $43 billion plan with no business case attached to it, no evidence that people actually want 100 megabits per second of download speed ... to warrant a $43 billion investment," he told ABC 2 News Breakfast.

If you go back through history you'll find some shellbacked reactionary fulminating against every initiative, every technological development big enough to cause some form of social dislocation. What happened here was that the government has decided to wade in and do it properly.

Consider the vast tracts of lands devoted to airports, the noise, and the propensity for planes to crash - Nick Minchin would have voted against air transport at every opportunity, particularly if the cruise liner industry and Cobb & Co brushed a few crumbs at the South Australian Division of the Liberal Party.

Nick Minchin is part of that generation of Liberals who came to office over the dead bodies of the protectionists. For a century up to the 1980s, Australian liberals generally believed that Australian industries needed to be protected from imports by tariffs and import restrictions. South Australia was one of the strongholds of this type of Liberalism, and Minchin was one of the prime movers in replacing them with low-tariff, deregulatory reformers (or with duffers who went along with this kind of policy). Now he's an ossified incumbent, not ready to retire but not willing to adapt to circumstances that he cannot direct, who stands in the way of reform that will enable quantum leaps in the Australian economy. This kind of economic development are simply not possible by sticking with the status quo - or hoping that Telstra may, out of the goodness of its heart and against all evidence, do the right thing and come up with a breathtakingly fast and comprehensive internet access service on its own, now that it can wade into the private market.
It is not yet clear what legislation will be needed to go through Parliament to implement the plan.

However, Senator Minchin denies the Coalition has already decided to block it.

"It's up to the Government to convince us of the merits of this proposal," he said.

No Nick, it isn't. It's up to your consultation with the wider community, business interests and individuals, to tell you whether this proposal is or isn't in the national interest. You demonstrate how well you're in touch with the community in every vote you take on the community's behalf. Then, when you go to the election, you show us how in-touch you are with the community's concerns, and the vote goes to the party that best represents the nation's interests over the coming three years. By waiting for the government to advise you, you're being a reactionary - and while Australians do not always vote for "progress", they never, ever vote for reactionaries. Mark Pesce said it best:
A decade ago [when Minchin was a minister] broadband was a solution looking for a problem. It offered little more than a faster web experience. Then Napster came along, and suddenly everyone wanted to share music, then movies and TV shows, and now everything. This is the age of sharing, both legal and illicit, and broadband internet is principally responsible for that.

Yet none of us knew back in 2000-01 [I hate to labour this point, but back when Minchin was a minister], as the dotcom bubble imploded, that another and brighter future lay just around the corner, driven by broadband. The internet was presented to us as a one-to-many publication medium - and we do use it to get our news. But the second wave of the internet - Web2.0 to its devotees - is all about sharing, collaborating, and pooling resources.

In such a future, there is no place for some pooh-bah to wait for the government of Australia to implore him not to vote against the future. Minchin fails to realise that ten years from now, today will be a decade ago and what people do now will be judged by the standard of the future. Minchin is not being a prudent custodian of the common weal. He is being obtuse and determinedly irrelevant. He thinks he's placing pressure on the government, when all he's really doing is giving them a stick with which to beat his own party.

As to Minchin, he can - to coin a phrase - catch the vision or catch the bus.

Again, "pressure" on government is irrelevant - it's a given. Judiciously applied pressure can be a force for good. Minchin will ultimately be judged as to whether he's a force for good, and journalism should be helping us form a judgment one way or another.

All Dizzy Lizzie Knight can tell you is that someone should be angry - but who, and at whom? Read the article from start to end and it still isn't clear.
The decision of the Federal Government to build a $43 billion high speed national broadband network looks like a bizarre and expensive piece of public policy.

Expensive yes, bizarre no. From the time it was proposed in the early '90s it was clear that separating infrastructure and retail was vital, and even the most basic bit of research should have uncovered that.
Only a few years ago the Howard government finished selling Telstra to the public. Now, having pocketed the proceeds, another government is creating a competitor that will seriously undermine Telstra's value.

Only if the public weren't aware that they were buying a dog of a stock, run by clowns who set themselves against the very people you need to help shore up a monopoly - the government.
It's hard to know which photo Telstra shareholders would rather pin to their dartboards - that of Kevin Rudd or Telstra's chairman, Don McGauchie.

Both the Howard and the Rudd governments have been hopelessly unsuccessful at getting Telstra over the line to roll out high speed broadband.

For its part, Telstra was recalcitrant at every turn, playing hardball with the competition regulators and the Government.

Answered your own question, haven't you? Telstra shareholders should have begged McGauchie and Trujillo not to piss off the government too much, yet they didn't and bought the whole Trujillo dream that a telco can be a feisty crew of free-market buccaneers (nowhere is telco free of close government regulation, not even in the United States - Elizabeth Knight has no excuse for not having called Trujillo and his troupe on this ludicrous position), especially where investments in new technology were almost non-existent.
Telstra took the view, as did many commentators, that no viable bid would be forthcoming because interested parties would be unable to fund such an ambitious project during the current financial crisis.

But no one counted on the fact that the Government would, in effect, go it alone.

Oh come on, massive economic opportunities were going begging. Somebody somewhere would have seen the pitiful infrastructure Telstra was offering and trumped it. This included many commentators - well, those who weren't covered in Trujillo's pocket-lint.
Telstra has now been caught flat-footed ...

Notice how only Telstra has been caught, and not the "many commentators"? Glad I'm not a Fairfax shareholder, I'd be furious.
It is far worse [for Telstra] because now it is faced with a competitor that is prepared to spend whatever it takes to build the best in the world - and it will not have to justify the commercial return.

So much for Telstra shareholders being angry at the government, then. Trujillo has depressed Telstra's share price by 20% since he came to office and he's not penalised for poor commercial returns under his stewardship. There once was a time when Telstra needn't have cared about commercial returns, now it's been hoist on that very petard. Bizarre, eh Elizabeth?
The new government-owned telco will be open access and state-of-the-art. Once it is built there will be little reason for Telstra's wholesale customers to put up with the monopolist a second longer. Those who remain with Telstra would only do so if its wholesale rates were slashed.

Telstra will soon learn what it is like to be on the losing side of competition.

Unless, of course, it gets off its backside and starts developing a network equal to, or better than, the competition. Wonder what the commentators might say about that?
As for the Government, it could have served taxpayers better by negotiating a deal with Telstra rather than replicating the infrastructure - running another set of wires up the same streets and into the same homes.

Firstly, there was no deal to do - this outfit had shirtfronted both Coalition and Labor governments. Secondly, would someone please explain to Elizabeth Knight the difference between copper-wire and fibre-optic cables?

For a start, Elizabeth, it could see the end of that nineteenth-century eyesore, the "telegraph" pole.
So will the Government be able to attract private money to this project in the medium to longer term? Perhaps not.

This may be a project that falls into the basket of public service, as it may never attract the kinds of returns that private money needs. (And selling the communications company to the same people who bought Telstra would be a tall order.)

Yeah, technophobes and Trujillo-lovers, keep whatever money you might have. You'll need it to pay your increasingly expensive Telstra bills.
The new network may generate demand for a better service that justifies higher prices. But only time will tell.

Someone so ignorant of the industry in which Telstra operates has no business commenting (or even commentating) on it.
... it will probably be some years (if ever) before the private sector will be convinced that this new network can supply a commercial return.

Until then the Government will need to be satisfied with the fact that it will enhance productivity and create jobs.

Yeah, talk about cold comfort. The question of the profitability of the fibre-optic telco does not arise until its sale is impending, and frankly it isn't impending in any way. The drivers of profitability are not yet apparent and, given the timescales involved - as well as some understanding of recent developments in telco - Elizabeth Knight should have the modesty to avoid this whole area rather than wade in with such ignorant drivel. If you've gone long on TLS shares and swoon over Sol, Elizabeth, that's your problem not anyone else's. No mention of the implementation study - yet another sign of research aversion.

On the technology, Pesce's article was surprisingly balanced, gushing over the possibilities while navigating the moral shoals of "lifestreaming" without falling into the Conroy pedo-filtering trap. So too, out of sight of the main editorial section of his paper, Mitchell Bingemann's surprisingly positive if lightweight article should have been read by Nick Minchin before he revealed himself as a Cheneyan black hole of negativity.

However, this article is more consistent - you can see Telstra as Atlas trying to shrug off Rudd's attempts to tie it down:
Telstra insiders said the company was concerned about the possibility of functional separation -- a process undertaken by former state-owned monopolies in Britain and New Zealand -- and the sale of its broadband cable network or interest in Foxtel. However, they said Telstra was optimistic that discussions with government would provide positive outcomes for both parties.

Telstra chairman Donald McGauchie said the company looked forward "to having constructive discussions with the Government at the earliest opportunity".

Shares in Telstra rose ... yesterday as investors bet it would be allowed to participate in the proposed fibre-to-the-home network.

McGauchie is talking like a man with a gun to his temple, and Bingemann should know better than to rehash the old "functional separation" thing - didn't work for investment banking and their advisory services, did it?
Lobby group the Competitive Carriers Coalition said it was now only a matter of time before Telstra would be forced to functional separation. "I give them six months," executive director David Forman said. "They can change their ways or they can have their ways changed for them.

"The regulatory paper says today's arrangements are not working and that we need drastic reform before this NBN is completed in the next eight years.

"We need a much stronger, more effective internal separation of Telstra."

Telstra should take the attitude that if people want functional separation, it should give it to them good and hard. Sell off the retail arm and use the cash to invest in the sort of infrastructure that makes NBN look like dial-up - and do it within the eight long, lumbering years Rudd is talking about. Give us some analysis, Mitchell!

A straight reporting piece on Tasmania as the pilot project, but again no forethought:
Mr Bartlett said that by being the first State to benefit from the new $43 billion super-speed internet, Tasmania would steal a commercial edge over other states and much of Asia.

Yes, and when (not if) other states and much of Asia overtakes them, won't they whinge again - just like they did when all that Harradine money melted away. You know it, so let's see it. Do I have to do all the work myself?

In sharp contrast to Elizabeth Knight, Michael Sainsbury called it as a failure for Trujillo, but generally this piece by Jennifer Hewett follows the house line at The Australian that Rudd can't do anything right, that plucky Telstra is just the whipping boy for failed government policy. The whole issue of monopolisation and future growth is completely ignored. Poor stuff, worthy of Janet Albrechtsen at her worst. Then, there's this:
"It's a cliche but the devil is in the detail in terms of pricing," Senator Xenophon said. "We just don't know how affordable it will be for consumers."

We don't know how Telstra can charge us top-dollar for rock-bottom service, but it does. Senator Xenophon, don't fall into the Minchin trap of thinking this is all about the government - hold out for South Australia to get a better deal by all means, but think about what this promises.

Who does Xenophon consult on these matters, Christian? What sources of information - government or not - does he draw upon? Who does he trust?
Senator Fielding has echoed Mr Turnbull's concerns.

"$150 a month is a heck of a lot of money, seriously," he told The Australian.


This is a paltry effort from the Australian media, on such an important issue. It doesn't help us understand what this is all going to mean, with our money, or economy, our government and our society going forward. Nobody need complain that MSM circulation figures are declining when, at the very time you want information on the big issues, they're just not capable of providing it.


  1. Political Headkicker9/4/09 4:10 am

    A brilliant analysis Andrew and some very wry observations on the MSM commentators and my favorite Lib senator Mr Minchin.
    I'm all for this proposal. It will generate business opportunities and economic activities yet to be even thought of and because of this individuals and companies will earn money and pay taxes on that money for years to come that will far outweigh the $43b cost.

  2. Good piece, well written.

  3. Andrew - granted that the MSM is not really up to reporting on this issue, how about you respond to your fellow bloggers' analysis, starting with Quggin's? He cites an article in the Australian which doesn't seem to be completely bonkers, proposing the re-nationalisation of Telstra. Infeasible, not going to happen, etc. yes - but not bonkers.

    Also the goal of reusing Telstra's infrastructure is not so much about the copper wires as the underground ducting... Knight would've been better to say "rather than running another set of tubes up the same streets...". Also it seems like an obvious opportunity to bury the powerlines, etc.

    Also I wonder why this plan couldn't be more nuanced, e.g. FTTN in the short term, then to the premises on a demand-basis in the medium term. I'd like someone to do some research too.

    Thanks again.

  4. Whenever I hear someone talk about a major initiative as "short term", Peter, much less that most nebulous concept "the medium term", I reach for my revolver. Subsidising the car industry in 1946 was meant to be “short term", and what about all those Aussies who went off to World War I on the basis that it would all be over by Christmas 1914?

    Nuance of the type you describe makes for poor policy, half-hearted and lukewarm non-solutions, of which FTTN is a classic example. Did the Bruce, Scullin or Lyons Government insist that petrol stations be co-located with stables and hostelries? Why should it be nuanced? What good has nuance done anybody in this debate?

    And what research would you have people do? Even if some seer managed to put their finger on some minor technology that will force us to rethink ICT entirely - the YouTube or Napster of the next five years - it would be so easy to pooh-pooh it, and to reject any attempts at retro-justification after the fact.

    I have great respect for John Quiggin but don’t get around to reading his stuff – nor he mine, I expect. Just because I blog doesn’t mean I’m obliged to operate the kind of echo-chamber that the MSM do. They might think of the constellation of blogs as a sphere, equidistant from their own fixed point, but I don’t.

    I don’t know why Quiggin and Kerin insist on fighting old battles. The idea that Telstra should be sold off but kept on a short leash was always stupid and did not work either for getting good telco policy nor for the political aim of making the then government look decisive and strong. Leave Telstra to makes its way in the new world. Let’s see all that free-market rhetoric in practice: you’ve been kicked out of the nest, so fly my pretties, fly!

    Finally, there’s the question of burying all the lines – my joy at this prospect came to a crashing halt once I read this. You gotta have your dreams I suppose.