Nasty stuff, competition.

One of the (many) reasons governments should not start or run businesses it that they have an irrestible urge to rig the game in their favour. Competition is wasteful and competitors usually try to just take the best bits of a market.

The NBN Implementation Study suggested that there could be a levy to discourage its competitors (Telstra) from cherry picking by supplying an optical fibre service to businesses in CBDs. “If we must supply fibre to 90% of the population, including many people who don’t need it, Telstra should not be allowed to provide it to those who do need it”. (My paraphrase).

Optus agrees. If there is to be cheap rent about, you can bet that companies will seek it.

I do hope that Telstra will not sell its pipes and ducts to NBN and remain as a competitor, but I suspect that NBN cannot afford to have competition so the government will make Telstra an offer it can’t refuse.

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31 Responses to Nasty stuff, competition.

  1. Andrew Carr says:

    It’s unfortunately the case that Australia’s political parties are more pro-business than pro-market. Howard’s advisor Arthur Sinodonis apparently wasn’t even allowed to say the word competition(no joke).

    If he had, then Telstra would have been split, we’d actually have a competitive ISP market, and there wouldn’t be any need for the NBN. That was the big mistake, the lure of big money on offer from selling Telstra as a whole, which has lead directly to the NBN and such anti-competitive moves as now seen.

  2. drscroogemcduck says:

    NBN is about giving subsidies to rural people without insulting them by giving the direct cash payments.

  3. JC. says:

    Andy:

    Shorter Andy:

    Blame Howard for the NBN.

    You gotta stop it with the lobbying without disclosing you “lobby number”. You were allocated a number yesterday which means you’re required to disclose it every time you post now.

  4. daddy dave says:

    NBN is about giving subsidies to rural people without insulting them by giving the direct cash payments.
    .
    Then why put the NBN into major cities? Just for show? Unless I’m mistaken, it will go to every single household, not just rural areas, at a cost of over $5000 per household.

  5. Andrew Carr says:

    Its the simple truth JC. If we had a competitive telecom market there would be no NBN.
    We’d have had such a market if Telstra had a) remained in public hands, b)had been split, or C) if greater effort to improve competition had occurred along the lines of the Keating govt installing Optus.

    Any of those three options would have forced Telstra to invest in upgrading its infrastructure when it first had the new technology, not wasting a decade sitting on the old lines with anti-competitive pricing structures. If it had been forced to invest (ideally from competitive market pressures) there would be no NBN.

  6. jtfsoon says:

    Andrew
    How does splitting up a company encourage investment?

    If we wanted to take the blame game far enough, we could blame Kim Beazley. he was the one who prevented Keating from doing the radical deregulation option from the getgo.

  7. Butterfield, Bloomfield & Bishop says:

    well you recognise the wholesale market is different to the retail market and you can’t be in both.

  8. “If we had a competitive telecom market there would be no NBN.”

    Right. We’d be on VOIP and wireless.

  9. JC. says:

    Its the simple truth JC. If we had a competitive telecom market there would be no NBN.

    Yep, just as I thought, NBN is Howard’s fault.

    Look doofus we had a Sovietized communications set-up since the time of PMG-Telecom-Telstra was setup. It takes more than a decade in that sort of market to unbundle that monstrosity and allow the market to do its thing. That would mean we regulate it at first and perhaps splitting it into two, however the idea that we need NBN to now take another monopoly position is a sick fucking joke, quite frankly.

    We’d have had such a market if Telstra had a) remained in public hands, b)had been split, or C) if greater effort to improve competition had occurred along the lines of the Keating govt installing Optus.

    How the hell do can you say we’d have such a market if it had remained in public hands? That’s insane. If you’re so optimistic about that you could try to explain why NBN is already showing signs of monopoly behaviour.

    Any of those three options would have forced Telstra to invest in upgrading its infrastructure when it first had the new technology, not wasting a decade sitting on the old lines with anti-competitive pricing structures.

    And how the fuck do you know Telstra’s lines need upgrading to the extent you’re asserting? Show me the economics and the rationale.

    In the US predictions are that Wireless will take 10 times the traffic than the wires, so how can you be so sure this is a good bet and won’t be basically redundant by the time it’s finished?

    If it had been forced to invest (ideally from competitive market pressures) there would be no NBN.

    Forced to invest? Do you realize what you’re saying? Do you listen to yourself? In a competitive market no one is “forced” to invest, Andy.

    Telstra already said they would have built a shadow system for around $2 billion.

  10. daddy dave says:

    In the US predictions are that Wireless will take 10 times the traffic than the wires, so how can you be so sure this is a good bet and won’t be basically redundant by the time it’s finished?
    .
    It will be redundant. By the time it’s finished, wireless will be king.
    And don’t forget, this monstrosity costs about $5000 per household, for every single household in Australia.

  11. dover_beach says:

    If we had a competitive telecom market there would be no NBN.
    We’d have had such a market if Telstra had a) remained in public hands,

    I’m gobsmacked.

  12. JC. says:

    I know it’s amazing what these ALP “telemarketers” dredge up.

    he doesn’t bleive that swill as no one is that silly.

    I like how he said:

    If it had been forced to invest (ideally from competitive market pressures) there would be no NBN.

    Which investor in a free market has ever been forced to invest. You aren’t “forced” to invest. you want to invest for advantageous reasons.

    ALP telemarketers should try and learn this stuff.

  13. Andrew Carr says:

    Jason – You’re right. The ALP is even more guilty than the Libs over Telstra. Their anti-privatization binge under Beazley was bizarre and bad policy. They ought to have made splitting Telstra the price of their support. But the libs also let a lust for a higher sale price lead to bad policy.

    Splitting Telstra before sale would have allowed the government to either keep control the wholesale section, making upgrades and charging ISP’s to sell retail on it. Or it could privatise the wholesale too, bind it under strict regulation and let it worry about investment with the odd govt help along. The latter would be my preference, though I included option A) in my previous comment simply to cover the range of options, not as a preference.

    As it stood, a private Telstra (as it considered itself from end of 96 onwards) had no incentive to spend big on upgrading its service because it was already dominating the market. That’s beginning to improve, but at times even in 2006 Telstra was selling some wholesale access to ISP’s higher than it was charging for basic retail access. There was no competitive pressure for telstra to improve the service it was offering, meaning that even minor improvements such as ADSL took many many years to be rolled out. Australia sat well behind many other countries in the first world, not for lack of demand, (and even just looking within the major cities) simply because Telstra had no competitive pressure to upgrade. They still don’t face such pressure given their size and control.

    If the telecom market had been competitive, there would be no NBN. It has all flowed from that.

  14. JC. says:

    As it stood, a private Telstra (as it considered itself from end of 96 onwards) had no incentive to spend big on upgrading its service because it was already dominating the market.

    andy,

    You’re making up shit as you go along aren’t you?

    Dude, their cap ex has always been pretty high and..

    1. They like everyone else didn’t know which way the market was going in terms of wireless or fiber.

    2. They’ve been battling governments since 2004 and regulatory uncertainty is responsible for 100% of delays.

    They’ve been sitting around twiddling their thumbs as two governments made their minds up

    Andy, you have to stop the telemarketing.

  15. daddy dave says:

    The NBN boosters make out like internet speed is slower than it is. It’s certainly true that premium plans in the US run faster than here; but most people in my experience have pretty fast internet. You can watch streaming video and play real-time online games no problem, which are about the biggest bandwidth eaters.
    Everyone repeats the talking point that we have “third world standards” because that’s what the Labor Rudd government has been telling them. It’s certainly not based on personal experience.

  16. daddy dave says:

    What I’m saying is that the need for the NBN has been exaggerated.

  17. Why do we need it?

    Private firms have already sold 100Mbit+ plans at comparable prices.

  18. JC. says:

    Andy:

    One other thing. Telstra was NEVER going to replicate the NBN as they correctly maintained it was uneconomic to do so.

    The only reason we have this NBN is because we have two unadulterated doofuses on the levers of government trying to push for this uneconomic irrational swill as part of ” Nation building” reasons.

    The NBN will never ever be profitable and will most likely be redundant by the time the thing is complete which looks increasingly unlikely as the ALP is probably going to get its arse kicked from here to Birdsville in the election and Abbott has rationally said he will stop this infantile stupidity…. This irrational overconfidence based on poll driven research that incorrectly informed Rudd people wanted him to be a “nation builder”.

  19. daddy dave says:

    incorrectly informed Rudd people wanted him to be a “nation builder”.
    .
    A good nation builder will merely help the nation build itself.

  20. JC. says:

    Why do we need it?

    For two reasons….

    Some people many want to download porn at a faster rate and find it useful for that

    … and others like Andy- ALP telemarketers- think they will be able to get a faster service and thereby influence more people in voting ALP.

  21. JC. says:

    Telstra has already said that they build the NBN equivalent for around $2 billion in the suburban areas and go wireless in the bush.

    That’s good enough for people in the sticks. If they want faster service they could always come and live in the burbs. There are trade offs no matter where you live.

  22. JC. says:

    A good nation builder will merely help the nation build itself.

    Did read or hear how the NBN was conceived? There was no real research done at first as they just swung for it.

    Apparently Rudd and Controy were on the PM’s private jet traveling somewhere and Controy approached Rudd that instead of letting Teslstra build their version the government ought to do a nation building project of this size and it would make them look good with the punters.

    I can imagine Rudd falling for that swill in second. There he is 35,000 feet up in a private jet, the world is at his feet literally and he gets all misty eyed having these irrationally overconfident views about his place in history and that sort of bullshit. So they announce it when the plane lands. That’s why there was never any research on it at the very beginning. They were just swinging for the fences.

  23. Fleeced says:

    Isn’t there around 8 million households in Australia? So the NBN is costing over $5,000 per household! Seems a bit on the pricey side.

  24. asf says:

    The fact that a service is provided by government doesn’t make it cheaper. What most Australians want is something for nothing: they want faster broadband at no more cost than what they pay for their current connection (and would like it even more if it was cheaper). I don’t see that desire being compatible with the claim that this network can deliver a modest return to the taxpayer over the long term given its $40 billion+ price tag.

  25. dover_beach says:

    Yes, even if we accept the folly of previous policy it doesn’t justify the monumental folly that the NBN represents.

  26. ken n says:

    Yes, the NBN is a dud investment – tho apparently the government is allowed to keep it “off budget” because it will be a profit making business.
    Once or twice in my career I came to a business that had stuff on its balance sheet that sholud not have been there and I was the bloke who had to write it off…
    Aside from the waste of taxpayers’ money (we are getting kind of used to that) the serious harm will be if the government hobbles competition by buying out Telstra and/or preventing it getting spectrum for 4G.
    AS I said at the start, governments almost always protect their businesses from competition which in a field like this will be disastrous.

  27. Entropy says:

    Correct asf, if telstra is a separate entity with a still active copper network alongside the NBN, the NBN will be a monumental disaster.

    Even thieving extorting mongrel telstra will be a better deal than the likely prices of the NBN. People will rather pay $50 for 10mb/s than pay eighty or even $100 for 100mb/s. ADSL2 is fast enough for pron.

    So the government has to kill telstra to save the NBN.

  28. Peter Patton says:

    Tax-eaters and dole-bludgers go nuts!

    Not only did Abbott take the obvious route, for a Liberal, of public service bashing, but he also affected a disdain for the public sector which would put even John Howard to shame.

    Ah, a few corrections:

    1. The biggest cuts in public service expenditure and employment in Australia’s history were made by Bob Hawke and Paul Keating.

    2. Kevin Rudd’s dislike of public servants and teacher’s unions earnt his name Dr. Death in QLD.

    3. OTOH, under Howard they increased.

    Make no mistake, this dude is as right wing as they come.

    Did you get, all of you who were on the verge on making a mistake!

    the one theme that did emerge from Abbott’s speech was a complete disdain for anything the public sector, and public spending can achieve.

    Such as? Inflation, huge public debt, and sociology tutors on the dole?

    What we’re seeing is a brazen agenda to discredit public purposes in favor of corporate interests, and his conservative rhetoric about government eschewing worthy causes is only the tip of the iceberg.

    Imagine if students see us using dole cards in the supermarket!

  29. C.L. says:

    “…disdain for the public sector…”

    Woo-hoo! Good to see.

  30. Andrew Carr says:

    Careful CL, no sensible libertarian or even small govt conservative would line up behind Abbott. He’s a big spender, big paternalistic government supporter at heart. Read his book, or his many speeches calling for higher spending on welfare and health under Howard. Hell even on the day of his budget reply he was musing about simply giving away $10k to stay at home mums for… well something.

    Abbott may be donning the mask of fiscal constraint but it’s even more transparent than Rudd’s claim to be an economic conservative.

  31. dover_beach says:

    Careful CL, no sensible libertarian or even small govt conservative would line up behind Abbott.

    The choice is between Rudd and Abbott and thus every sensible libertarian and small govt conservative will line up behind Abbott.

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