Telecom to split
June 27th, 2006 at 4:32 pm by David FarrarA few minutes ago Telecom have announced they are going to separate their wholesale and retail operations.
This is an excellent step – probably more important than all the regulation which is a last resort. How-ever it does depend on how far they go with a split. It should be at least as far as British Telecom with a separate board. Personally I’d prefer a full structural split into different companies.
Related posts:
- Telecom to split voluntarily?
- The Telecom Split
- Telecom split confirmed
- Telecom to announce network sale today?
June 27th, 2006 at 5:05 pm
Agreed, good to see.
The question is “Why did they not spit the dummy a few years ago”?
Vote:June 27th, 2006 at 5:37 pm
From my memory wasnt Telecom Corporation of New Zealand , as the old SOE was before being sold off, actually in retail and wholesale divisions.
There was ‘Telecom Networks’ and 4 regional Telcos, plus the mobile business which itself had 3 or 4 retailers selling Telecom mobile connections. Remember Ericsson , Motorola and so on.
Looks like the state owned company had the right structure back then.
Vote:Wheres Prebble when you need to put him up against a wall!
June 27th, 2006 at 9:34 pm
How does this split impact on NZ shareholders of Telecom?
Vote:June 28th, 2006 at 8:02 am
Mc Phee Good call!..you said…..
“Looks like the state owned company had the right structure back then.
Wheres Prebble when you need to put him up against a wall!’
No doubt also ACT’s Rodney Hide will be choking over his Super Size Mc D’s when he heard this news. After all Hide & his ACTiods view is NZ Telecom Foreign investors profits come before NZers! NZ1 & RT Hon took this issue on board sometime back and pushed the present Govt to look into it, and the govt have, and now Telecom is coming to the party. Again you won’t read one thank you NZ1 & Rt Hon!
When it comes to traitors it reminds me of the rope & the Liberty Tree & “Don’t tread on Me”
As far as Prebble & associates go, Tar & Feathers could make a come back. But I understand many would prefer the wall.
Vote:June 28th, 2006 at 8:06 am
Mr Bean the same as it Does Foreign investors of Telecom. BTW NZers have only a small share holding in the company. It was mainly flogged as a payback to certain interest groups.
Vote:June 28th, 2006 at 8:15 am
Mr Bean…
Vote:Preusmably, Telecom shareholders will become the owners of two separate individually tradeable companies/shares, that at the time of the initial split, have the same total value as the old single company…
June 28th, 2006 at 8:35 am
The role of the board of directors of a company is to govern and issue direction to management that is in the interest of the shareholders – not the government or other interest groups. The management should carry out the direction laid down by the board to the benefit of the shareholders.
We may as well be in Communist China with the way execs like Gattung are cowering to the government’s wishes.
Instead of spending time and money re-organising Telecom to suit the wishes of it’s competitors and the government, Gattung should be working on strategies to attract and retain customers and generate profitable new revenue streams for the benefit of Telecom shareholders.
Cadmus – You talk about the “Foreign investors” -what about the New Zealand direct shareholders in Telecom, the taxpayers whose money is in the NZ superfund which has shares in Telecom, and the investors in pension funds that hold Telecom shares?
And with respect to those shareholders outside of NZ, how would you like it if you invested money in infrastructure in another country and that country’s government forced you to make that infrastructure available at cut-price rates to your competitors who had invested next to nothing so that they can profit off your years of work and investment?
Vote:June 28th, 2006 at 8:46 am
The split won’t have much impact upon shareholders unless Telecom decides at some stage in the future to sell the wholesale or retail arm.
I think telecom’s recent visit to BT had a big influence on this policy. Earlier this year BT agreed to split its wholesale & retail divisions. They agreed 230 condistions (230!) with OfCom to ensure that the system was transparent and fair. I imagine Telecom is trying to circumvent those 230 conditions. TUANZ had a good artical about BT Openreach in its Feb/March edition of TUANZ Topics: https://www.tuanz.org.nz/library/16a9c2fc-f419-4d63-a05d-9af36da70fdf.cmr
Cynicism is still rife though, and Gattung sounded pretty shrill on the radio this morning, so we will see.
Vote:June 28th, 2006 at 8:54 am
Battler, even Gattung recognises the right of the government to make laws governing how people do business: it’s called sovereignty.
Telecom management now needs to look at how to deliver shareholder value under the new laws, not bitch about property rights. To their credit, that is exactly what this is.
If anything, I think Telecom may have realised that LLU is not the sky falling at all, copper wire is old technology and any company with the beginnings of a fibre optic network (like telecom or Vector) are well placed for the future. Copper is important for giving the smaller companies a leg up, but not the be-all and end-all
Vote:June 28th, 2006 at 9:00 am
Corporate Social Responsibility is driving this move by Telecom.They like a number of NZ listers are shivering at the thought of legislation which is passing as we speak in the UK House of Lords.Telecom like many other NZ companies score zero on the international scale of CSR.The NZ model until now has been maximise shareholder returns and to hell with the consequences.As someone who thinks Ghengis Khan was a left wing socialist Im all for the shareholders however the touchie feelies are shifting the goal posts and Telecom wants to control its strategy as much as it can rather than having its srategy imposed on it.
Vote:June 28th, 2006 at 9:06 am
PabloR
The role of government is as the protector and defender of our fundamental rights, not the dictator of how we go about our day to day business activities.
Sovereignty does not equal servitude.
What the government has done is effectively transfer wealth from Telecom’s shareholders to the shareholders of other companies.
Telecom is now having to do the bidding of it’s competitors under the Government’s smoking gun.
The government should be the servant of the people, not the people servants of the government.
If you want to be a servant to government, go and live in Communist China.
Vote:June 28th, 2006 at 9:13 am
“Corporate Social Responsibility” is just spin for the government dictating how society should be through imposing regulation on companies rather than individuals.
It is easier for government’s to intrude into our lives by regulating “corporations” rather than people. It is the road of least resistance for a government with a penchant for interfering in people’s lives. People think of “corporations” as deserving of govt. regulation more than themselves.
What people forget, is that corporations are just entities on paper. The real effects of corporate regulation are borne by shareholders, directors, managers, employees and customers, who all are ultimately PEOPLE.
In the end, as customers of these businesses adopting “Corporate Social Responsibility”, we are effectively paying our hard earned money for these corporates to implement the government’s social agenda.
Slowly but surely, power passes from the people to the government…..right under our noses and even with our approval, under the guise of “Corporate Social Responsibility” and other wooly phrases such as “Sustainability”….even though the earth has been sustaining itself for thousands of years without government dictates…
Vote:June 28th, 2006 at 9:53 am
battler Right on!! However governments are increasingly enacting laws that mean directors and senior management are spending more and more time on stuff other than maximising shareholder value.Think the US of A and Sarbanes Oxley and the UK and the soon to be introduced Company Law Reforms. Even in Australia where they are moves to amend their Corporations Act put more liability on middle management. Its getting to stage where before directors and managers can even fart they have to consult the lawyers to see if they are in breach.The supporters say that “good” companies will be doing this anyway so its just codifying good behaviour and ensuring “bad” companies comply.Opponents say its government interfering in business and killing off genuine risk for results behaviour.I dont have the answer except to say Im in the camp that believes government should deliver the mail defend the shores and get the hell out of my life
Vote:June 28th, 2006 at 9:59 am
I hardly think it’s time to break out the champagne. As with all of Telecom’s moves, this is most likely an attempt to head the Government off at the pass and get some kind of break-up-facade that will preserve their existing power structures.
That said, *if* they do it in a way that promotes competition that’s great. But I’d be incredibly surprised, since Telecom has never, ever acted that way in the past. Nor *should* they if the free market theorists are right.
I can’t see it working though. The government has plans, and if Telecom follows them without prompting, great. If they don’t, then the details will be forced on them, to the huge benefit of consumers.
CSR? Is that a Tui billboard in the making?
Vote:June 28th, 2006 at 10:10 am
GD, you already stated the answer, except for the bit about delivering the mail….does the Govt. have any more business delivering mail than they do delivering milk?
At the end of the day Companies are just groups of people banded together under a single entity to carry on business.
In the same way you wouldn’t marry someone whose behaviour you found obnoxious, you can choose not to purchase goods & services from companies whose behaviour you don’t like.
Companies who find themselves on the wrong side of the ledger regarding their customers expectations will soon find themselves going out of business.
We wouldn’t want the government dictating who we marry and how they behave, so why should we tolerate the government meddling in the business of our companies.
The role of Government insofar as companies are concerned should extend only to upholding common law and contracts etc. If companies breech contracts which they have signed and refuse to remedy this, then of course the justice system should hold them to the contracts they have signed.
But as for all the other wooly fluff about “Corporate Social Responsibility”, “Tripple Line Reporting”, “Environmental Sustainability” etc, that is a load of government, u.n. and leftie concocted rubbish promoted in the main by people who haven’t done a real day’s work since they were born.
If companies want to sponsor community groups with in-kind or cash contributions in return for brand exposure & promotion – go for it. If companies want to offer online access to statements etc to save paper and money – go for it. If companies want to give their staff paid parental leave or 4 weeks annual leave in order to boost staff retention and reduce recruitment costs – go for it. But don’t force companies by law to do all this stuff.
Customer’s will soon stop buying from companies that don’t honour their contracts, and employees will soon move into greener pastures if their companies don’t offer what they’re looking for. In terms of environmental costs – these should be imposed on companies as a monetary cost. I.E. they should pay the full cost of rubbish disposal etc instead of city councils flogging ratepayers to subsidise landfils. In that way, the economics of recycling, paper saving etc can come into their own without govt. regulation.
And while speaking of environmentalism, you’ll often hear greenies saying we should use less paper to “save trees”. They are so shortsighted they forget that we are planting more trees than we cut down, and that the whole reason investors invest in plantation forests is because they can sell the wood, some of which is made into paper. If people stop using paper, people will stop planting the trees that are used for the paper and the net number of trees standing will be unchanged. A course in basic economics would do a lot of greenies good.
Vote:June 28th, 2006 at 10:16 am
Ben,
I predict that even if the government carries through all of it’s threats, the benefit’s to consumers will be no greater than they would be under the current regeime as time goes on and broadband infrastructure reaches greater economies of scale etc.
Adding more retailers into the mix and transfering the profit’s that would have gone to Telecom to those players as more people switch from dial up to broadband will not actually lift infrastructure investment substantially beyond what would have happened anyway.
It is just shifting the portion of profit in the retail side from Telecom to these other players.
Infact it could be argued that the moves by the Govt. are actually a discouragement to investment since once you grow your business and are seen as a “Big corporate” the Government will deem you should let others who have invested stuff all come and profiteer off your network.
Vote:June 28th, 2006 at 10:41 am
Battler, I’m surprised that someone who sounds like a free market advocate would not see any benefit in increased competition, from theory alone, let alone the actual practical experience of LLU around the world. You talk as though monopolies can’t and don’t exist, despite the clear example that Telecom provides. It makes me wonder if you are really familiar with the theories you are propounding.
Vote:June 28th, 2006 at 10:59 am
Hi Ben
Firstly, from a consumer’s point of view, of course there is benefit from competition.
What I am saying, is that there will not be such a great benefit from forcing companies to allow other companies to profiteer off of their own investment, when these other companies haven’t invested themselves in order to reap the rewards.
As for weather or not Telecom is a “Monopoly”, this is debateable.
If we look at the service as being “Communication”, they clearly do not hold a monopoly. One can aquire Cellphone service in this country through Vodafone and Telstra, operating on a network completely independent of Telecom’s cellular networks.
Wireless internet is coming more available through Woosh which if you combine with things like skype enables relatively cheap calling anywhere in the world without Telecom.
Further, Telecom already offer a vast array of wholesale services to other retailers, creating competition for retail customers.
Competition does benefit customers. Eroding property rights in order to force “big corporates” like Telecom to let competitors profiteer off their network in the name of “increased competition” looks attractive on the outside but it’s got a nasty red underbelly.
The lefties promoting this appearing to support competition are just repackaging their tired old welfarism and wealth transfer philosophy.
Real competition is where companies put their money where their mouths are like vodafone and woosh, and invest in their own infrastructure. They deserve the fruit of their labour for the work and investment they have put into developing alternate product offerings in the market.
Sour puss Annette Presley and her ilk are not real business people at all, they are corporate welfare bludgers masquerading as champions of the consumer, while using their lobbying power with government to leech profiteer for themselves and in the process root the battlers who invested in Telecom either directly or through institutional fund managers.
Vote:June 28th, 2006 at 11:00 am
“What the government has done is effectively transfer wealth from Telecom’s shareholders to the shareholders of other companies.”
Telecom has used its market dominance to transfer wealth from individuals to itself and make monopoly profits. If you are a free marketeer you should be opposed to monopolies which are inherently inefficient ways of maximising the use of resources. The new system temporarily takes away Telecom’s ability to charge monopoly prices for its services. In other words it creates choice for the consumer, another holy grail of the free market.
The govt regulates many things and is not accused of being totalitarian for it. For example, it prohibits the small minority of employers who would exploit their workers if they could from doing so.
Even the most capitalist country on earth recognises that allowing makets to work unfettered can create imperfections, something Marx pointed out a century and a half ago, which is why there are laws to prevent price collusion, anti-competitive practice, insider trading, accounting oversight.
Telecom’s directors are doing exactly as they should to rebuild shareholder value in their company, according to the new rules.
Vote:June 28th, 2006 at 11:21 am
Battler,
“Firstly, from a consumer’s point of view, of course there is benefit from competition.”
Indeed, and that’s the side of the equation most of us care about. Telecom shareholders can look out for themselves, perhaps having a good long look at their concept of capitalism.
“As for weather or not Telecom is a “Monopoly”, this is debateable.”
Is that another Tui billboard? LLU only applies to broadband. It’s got nothing to do with voice services. And you only have to look abroad to see how far behind the world NZ is, how much we have been gouged.
Vote:June 28th, 2006 at 11:25 am
Battler, I know that, but you will find the vast amount of telecom shares are owned by overseas shareholders.
Vote:Infustructure???????/
The people of NZ owned the lines, cables, Buildings etc. The overseas shareholders were given our infustructure, by Prebble & Co
June 28th, 2006 at 11:49 am
Good heavens Cadmus, you mean the government didn’t even demand that the so called buyers actually paid for it. That was careless.
And here’s me thinking that at the time people were generally surprised at how much the government got for the company, best known at the time for its absolutely horrendous customer service ethic.
Vote:June 28th, 2006 at 12:05 pm
PabloR
If Telecom has been making such huge “monopoly profits” why don’t all the roosters who have been squaking from the sidelines put their money where their mouths are and build their own network and then charge everyone (including rural customers) less than Telecom charges.
Since you say Telecom has been making “monopoly profits”, surely these other companies could still generate what you would call a “fair return on investment” ?
If you read Telecom’s annual report, you will see that their revenue stream from the copper network (which is the part of their business that the roosters squak most loudly from the sidelines about) has been basically static and is starting to fall.
So of course, the competitors don’t want to build their own copper network. BUT, they expect Telecom to pay for the maintainence of the existing copper network, and then let them piggy back on it at cut-price rates, while Telecom itself is squeezed in the residential landline sector and in the last financial year didn’t even increase line rental enough to cover inflation. .
In the mobile sector Telecom are lucky if they hold 50% market share at any one time and they have to offer all sorts of deals like $10 texting, giveaway phones etc in order to maintain their position.
In the ISP sector we are spoilt for choice in terms of retail options for both dial up and broadband, with wireless & mobile options slowly but surely coming on stream.
When Telecom are being squeezed on their landline revenue streams, they struggle to hold 50% in mobile, and there are huge numbers of ISP competitors with the prospect of increased uptake of Mobile & wireless internet near on our horizon, plus they are already wholesaling most of their product offerings to competitors I would hardly suggest that Telecom are sitting pretty extracting monopoly profits.
If you still insist that Telecom are making monopoly profits, I offer two suggestions – either buy some Telecom shares and share in the profits, or better still, rally up enough investors who are as confident as you are of the profits to be extracted from telecommunications and put together a prospectus for investors to invest in a competing network of infrastructure to break in and share in the vast profits of the Teleco sector.
Vote:June 28th, 2006 at 12:23 pm
Cadmus,
The people of NZ DID own Telecom, and they swapped the run down old dog for $4,250,000,000 in cash.
The Telecom of today and the infrastructure thereof is vastly different to the old dog the investors bought 16 years ago. We have a completely new CDMA 027 mobile network built from scratch by the new investors, plus most of the exchanges have been massively upgraded to offer more lines, new services such as call waiting, call minder, call diversion, caller id, jetstream/adsl etc etc etc
In real terms prices have fallen and services have improved. Connections to services are very quick, with account credits often provided in the event of failure to provide service in an agreed timeframe.
New internet services have been provided and new data services for business are on the offering.
In addition, most of Telecom’s services are offered as wholesale services to companies wanting to enter the Teleco market without building infrastructure. One could set up a niche teleco serving a particular market and offer a whole raft of services on a retail basis, wholesaled from Telecom.
And all of this without one cent of Govt. subsidy and in the face of competition from newcomers Vodafone, Telstra et al.
Do you really want to back track to 1990, hand the investors back their $4,250,000,000 and put us back to the service offerings of that old dog Telecom that Mad Dog Prebble thankfully offloaded from the taxpayers back?
Vote:June 28th, 2006 at 12:28 pm
Ed Snack, It was a gift to overseas interests from Prebble in my view. The countries Telecomunications flogged off for a song.
Vote:Wasn’t it a few Mill down and pay it off over the next few years. I bet they are still laughing!
June 28th, 2006 at 12:33 pm
Battler for a lost cause, the reason noone has competed in the copper network area that was handed to Telecom shareholders on a platter in the 1980s is because it represents a vast capital outlay with dubious return. To have the first network and a monopoly has a pretty good return. To have the second and an even share is a risky proposition indeed. Telecom has exploited this risk, gouged customers for decades and we’ve collectively got royally sick of it.
Your suggestion that we should buy Telecom shares would not stop us being gouged for Telecom services. In fact it would be rewarding them for gouging us. And being a gouging monopoly is no guarantee of having high profits or returns to shareholders anyway, since such a situation encourages fat lazy management and bloated inefficient structures. It encourages short term tricks to make profits look higher whilst running down the capital value of the organization. Both of these criticisms apply in spades to Telecom.
It is a well known fact that capitalism can only work efficiently in the presence of strong competition. Only anti-capitalist fatcats in secure corporate positions or the most blinkered idealists can fail to see that sometimes property rights come second to the public good.
Vote:June 28th, 2006 at 12:39 pm
Ben,
“”Firstly, from a consumer’s point of view, of course there is benefit from competition.”
Indeed, and that’s the side of the equation most of us care about. Telecom shareholders can look out for themselves, perhaps having a good long look at their concept of capitalism.”
How about the roosters squaking from the sidelines look after themselves instead of inisting that the government legislate for them to profiteer off of 16 years work and investment put in by Telecom’s shareholders, directors, management and staff. It’s funny how people want Telecom’s shareholders to “look after themselves”, but the people who say that are the ones who want to be looked after by Telecom instead of looking after themselves. Double standard?
“”As for weather or not Telecom is a “Monopoly”, this is debateable.”
Is that another Tui billboard? LLU only applies to broadband. It’s got nothing to do with voice services. ”
It has everything to do with voice services. Have you not yet heard of VoIP?? This will have a major impact on Telecom’s voice revenue.
“”And you only have to look abroad to see how far behind the world NZ is, how much we have been gouged.”"
We have not been gouged. Other countries like the UK etc have much much greater population density than NZ enabling Teleco’s to achieve economies of scale that Telecom NZ could only dream of. Telecom is obliged under Kiwi Share to provide free local calling and is also basically the only Teleco in NZ that properly caters to the rural sector. Telecom’s return on equity is in line with the risk it takes investing in the Teleco sector in NZ.
If Telecom has been gouging us so greatly, why have it’s competitors resisted the the temptation to build their own network and service all the small towns and cities and rural areas and take their share of the vast profits some people claim Telecom is making from it’s position?
Vote:June 28th, 2006 at 12:48 pm
“Battler for a lost cause, the reason noone has competed in the copper network area that was handed to Telecom shareholders on a platter”
So charging $4,250,000,000 is handing it to them on a platter??
” in the 1980s is because it represents a vast capital outlay with dubious return. ”
And Telecom’s shareholders have to take the “dubious return” and then allow their competitors to use the network at cut price rates as well?
“To have the first network and a monopoly has a pretty good return. To have the second and an even share is a risky proposition indeed. Telecom has exploited this risk, gouged customers for decades and we’ve collectively got royally sick of it.”
Then quit buying their services and sign up with other providers such as Vodafone, Testra etc.
“Your suggestion that we should buy Telecom shares would not stop us being gouged for Telecom services. In fact it would be rewarding them for gouging us. And being a gouging monopoly is no guarantee of having high profits or returns to shareholders anyway, since such a situation encourages fat lazy management and bloated inefficient structures. ”
This is what happens when shareholders don’t vote their stock. Thankfully the likes of Bruce Shepherd and the NZ Small Shareholders association are encouraging shareholders to vote their stock, show up at AGM’s and hold directors to account.
“It encourages short term tricks to make profits look higher whilst running down the capital value of the organization. Both of these criticisms apply in spades to Telecom.”
The answer to that is to get involved in organisations like the NZ Small Shareholders Assn and put the spotlight on their accounting practices and the quality of governance and management. To get rid of the dark you just have to shine a blow torch on it.
“It is a well known fact that capitalism can only work efficiently in the presence of strong competition. Only anti-capitalist fatcats in secure corporate positions or the most blinkered idealists can fail to see that sometimes property rights come second to the public good.”
Sacrificing property rights is not the answer. Shareholders enforcing their property rights and holding bad directors to account is. And shareholders can bring pressure to bear on directors such that if the directors don’t either gee-up or fire the lazy fatcat management, the shareholders will sack the directors and hire directors that will get management doing it’s job properly.
Vote:June 28th, 2006 at 1:03 pm
Battler
I quite unashamedly have a ‘double standard’ when it comes to the property rights of the bulk of NZ society, and the rights of a small group of investors who are gouging them.
“It has everything to do with voice services. Have you not yet heard of VoIP?? This will have a major impact on Telecom’s voice revenue.”
With any luck. I’m still having trouble seeing what you think is bad about that. Why Telecom did not simply move to VOIP years ago is simply a function of the profits they were making from their antiquated alternative that the NZ taxpayer originally built, and the difficulties imposed by Telecom on any viable competition.
“We have not been gouged. Other countries like the UK etc have much much greater population density than NZ enabling Teleco’s to achieve economies of scale that Telecom NZ could only dream of.”
The United States has a very similar population density to NZ and is light years ahead of us because of competition. How deep is your head under the sand?
You continue to suggest that monopolies can’t form because competition is ‘possible’. You utterly miss the difference between ‘possible’ and ‘probable’. Under the model of Telecom owning every copper wire in the entire country it is extraordinarily unlikely that even a very large foreign investor will try to step in and set up a comparably large competing network, much less some local crowd with 10,000th of Telecom’s resources and influence. The simple fact that they haven’t is testament to the obviousness of this fact. Your solution is just to sit here year after year eating shit from Telecom and loving it because it conforms to some ideological model that you and a very small bunch of others agree with.
“So charging $4,250,000,000 is handing it to them on a platter??”
Yes.
“And Telecom’s shareholders have to take the “dubious return” and then allow their competitors to use the network at cut price rates as well?”
You’re catching on.
“Then quit buying their services and sign up with other providers such as Vodafone, Testra etc.”
Noone else offers DSL. No service that I have tried is even in the ballpark. And the DSL we have is not in the ballpark of even Australia, with a far worse population density factor.
“This is what happens when shareholders don’t vote their stock. Thankfully the likes of Bruce Shepherd and the NZ Small Shareholders association are encouraging shareholders to vote their stock, show up at AGM’s and hold directors to account.”
Yup, and we’re all sick of it.
“The answer to that is to get involved in organisations like the NZ Small Shareholders Assn and put the spotlight on their accounting practices and the quality of governance and management. To get rid of the dark you just have to shine a blow torch on it.”
You’ve got your blowtorch which has been completely unsuccessfully in operation for about 20 years, now we’re going to try another one.
“Sacrificing property rights is not the answer. Shareholders enforcing their property rights and holding bad directors to account is. And shareholders can bring pressure to bear on directors such that if the directors don’t either gee-up or fire the lazy fatcat management, the shareholders will sack the directors and hire directors that will get management doing it’s job properly.”
It is one answer. You don’t find it palatable, preferring to get ripped in the dot. I don’t and neither do most of NZ consumers or businesses. Your model was tried and it failed. Badly. Sorry.
Vote:June 28th, 2006 at 2:06 pm
“”Battler
I quite unashamedly have a ‘double standard’ when it comes to the property rights of the bulk of NZ society, and the rights of a small group of investors who are gouging them. “”
At least we now know that you do operate from a double standard and we shouldn’t expect consistency to be applied in your arguments.
“”It has everything to do with voice services. Have you not yet heard of VoIP?? This will have a major impact on Telecom’s voice revenue.”
With any luck. I’m still having trouble seeing what you think is bad about that. “”
I don’t see anything bad about VoIP competing with the current services.
I do see something bad about forcing a company to allow free-riding corporate welfare bludgers like Annette Presley and co to profiteer in a dubious government sponsored arrangement that will not demonstratably improve overall investment in the sector, but simply transfer the profits from the investors to the free-riders.
“”Why Telecom did not simply move to VOIP years ago is simply a function of the profits they were making from their antiquated alternative that the NZ taxpayer originally built”",
The fact that the taxpayer funded the building of the original network is hardly relevant. The taxpayer sold it for $4,250,000,000.
“and the difficulties imposed by Telecom on any viable competition. ”
The competition should “look after themselves” in the sameway you expect Telecom shareholders to “look after themselves” If Telecom’s network is so “antiquated” why don’t the newcomers build their own up-to-date infrastructure and reap the vast profits to be made in telecommunications?
“”We have not been gouged. Other countries like the UK etc have much much greater population density than NZ enabling Teleco’s to achieve economies of scale that Telecom NZ could only dream of.”
The United States has a very similar population density to NZ and is light years ahead of us because of competition. How deep is your head under the sand?”"
There are pockets of much greater density allowing for better economies of scale. For example, the state of California has 39 million people on a land mass a similar size to NZ.
That is 10 x as many potential customers in the same area as you would have in NZ. So if you were to roll out infrastructure the size of NZ’s in california and capture 10% of the california market, it would be the same as having 100% of the market in NZ.
“”You continue to suggest that monopolies can’t form because competition is ‘possible’. You utterly miss the difference between ‘possible’ and ‘probable’. ”
I haven’t suggested that monopolies can’t form under any circumstances. I am challenging the notion that Telecom has a monopoly on NZ telecommunications services, given that Vodafone has successfully built a digital mobile network from scratch and taken close to 50% of the mobile market. Woosh is starting to offer wireless internet which completely cut’s telecom out of the picture for those taking full advatage of Woosh services. Toll-call competitors abound. And retail internet competitors abound.
The only thing Telecom really has over the other’s is a copper network that you call “antiquated”, which Telecom’s investors paid $4,250,000,000 to aquire.
“”Under the model of Telecom owning every copper wire in the entire country it is extraordinarily unlikely that even a very large foreign investor will try to step in and set up a comparably large competing network,”"
You call the copper network “antiquated”. That it may be. Vodafone has rolled out a nation-wide digital mobile network that has captured nearly 50% of the mobile market. Woosh is rolling out wireless internet.
I don’t deny that Telecom owns the copper network (the one they paid $4,250,000,000 for 16 years ago and have spent huge sums of money upgrading the exchanges on).
I do deny that it is impossible to enter the Teleco market in NZ, build infrastructure and capture market share becuase that is demonstratably not the case.
” much less some local crowd with 10,000th of Telecom’s resources and influence. The simple fact that they haven’t is testament to the obviousness of this fact. ”
No. The fact that they have, is testament to the fact it can be done. Why build another “antiquated” copper network when you can do what vodafone did and roll out a nationwide digital mobile network, or do what woosh is doing and roll out wireless internet?
“Your solution is just to sit here year after year eating shit from Telecom ”
No. If you don’t like the services and pricing options of Telecom, move to a competitor for your mobile, internet and tolls. Over time if enough people move it will be economic for vodafone to offer mobile data over it’s network and for woosh to expand. People who sit using all of Telecom’s services and then complain about the result when there are other options deserve what they get. I happen to use some of Telecom’s services and some from other providers depending on the prices/services offered so that my complete package suits my needs and budget.
“”and loving it because it conforms to some ideological model that you and a very small bunch of others agree with.”"
My “ideological model” is people freely exchanging goods and services at prices agreed amongst themselves without govt. interference, and if you don’t like the service you get you quit paying for it and move on. you don’t lobby the govt to interfere because you’re a baby and need nanny state to take care of you.
“”So charging $4,250,000,000 is handing it to them on a platter??”
Yes.”"
Perhaps you could provide an analysis of what you would have vauled Telecom at in 1990 and why?
“”And Telecom’s shareholders have to take the “dubious return” and then allow their competitors to use the network at cut price rates as well?”
You’re catching on.”"
How would you like it if you had boarders in your house paying “retail” room rates and the government forced you to lease some of your rooms to Housing NZ at cut-price rates?
“”Then quit buying their services and sign up with other providers such as Vodafone, Testra etc.”
Noone else offers DSL. No service that I have tried is even in the ballpark.”"
If the alternatives aren’t in the ballpark doesn’t that demonstrate Telecom is providing some sort of satisfactory service?
“” And the DSL we have is not in the ballpark of even Australia, with a far worse population density factor.”"
Their major cities have higher critical mass of potential customers than ours.
“”This is what happens when shareholders don’t vote their stock. Thankfully the likes of Bruce Shepherd and the NZ Small Shareholders association are encouraging shareholders to vote their stock, show up at AGM’s and hold directors to account.”
Yup, and we’re all sick of it.”"
Sick of what?
“”The answer to that is to get involved in organisations like the NZ Small Shareholders Assn and put the spotlight on their accounting practices and the quality of governance and management. To get rid of the dark you just have to shine a blow torch on it.”
You’ve got your blowtorch which has been completely unsuccessfully in operation for about 20 years, now we’re going to try another one.”"
The Shareholders Assn hasn’t been going for 20 yrs. The blow torch has been left in the garage most of the last 20 years which is why some investors have got the poor returns they deserve for thinking they can passively entrust their money with corporate raiders and not hold them to account.
“”Sacrificing property rights is not the answer. Shareholders enforcing their property rights and holding bad directors to account is. And shareholders can bring pressure to bear on directors such that if the directors don’t either gee-up or fire the lazy fatcat management, the shareholders will sack the directors and hire directors that will get management doing it’s job properly.”
It is one answer. You don’t find it palatable, preferring to get ripped in the dot. “”
I don’t get ripped in the dot. I look out to make sure I don’t. I learn’t ‘Caveat Emptor’ when I was still at High School.
“”I don’t and neither do most of NZ consumers or businesses. Your model was tried and it failed. Badly. Sorry.”"
No it hasn’t.
The tired old welfarism and wealth transfer model that has created tens of thousands of welfare dependents on nanny states tit is now extending into the corporate sector and will no doubt leave us with the same disastarous long term results.
Vote:June 28th, 2006 at 3:51 pm
Cadmus…There are 57,000 New Zealanders and many NZ Managed funds holding 30% of the shares in Telecom. In each of the past two years Telecom has spent over 600 million on Infra structure.. It is by far and away our largest company and was a safe harbour for people saving for retirement as urged by Cullen. Now the goverment seem intent on destroying it. Clark in particular seems most vindictive and I suspect she is driven by the fact GATTUNG was seen as a straight woman with a higher profile than her, as with Christine Rankin and the female Chief Justice (whose name escapes me)before her…How can anyone invest in the NZ Sharemarket with any confidence when we don’t know where the axe will fall next, yet Cullen’s new Capital gains tax will force many to repatriate their overseas holdings as the goverment lurches closer and closer to Communism.
Vote:June 29th, 2006 at 8:24 am
Battler
“At least we now know that you do operate from a double standard and we shouldn’t expect consistency to be applied in your arguments.”
I never said I was a true believer in property rights. Double standard is your term, which you hope to attach some kind of moral value to. In fact it is simply having views that are slightly more complex than your simplistic model. Adding complexity to simple models is part of life, and a failure to be able to do so is being a mindless idealist.
“Then quit buying their services and sign up with other providers such as Vodafone, Testra etc.”
They don’t offer DSL, or any kind of broadband service comparable.
“The only thing Telecom really has over the other’s is a copper network that you call “antiquated”, which Telecom’s investors paid $4,250,000,000 to aquire.”
That is a source of huge competitive advantage, a massively expensive undertaking, bought for a song. I didn’t say the copper network was antiquated, I meant using it just to provide an analog voice service is antiquated.
“You call the copper network “antiquated”.”
No, see previous point.
” That it may be. Vodafone has rolled out a nation-wide digital mobile network that has captured nearly 50% of the mobile market. Woosh is rolling out wireless internet.”
And neither is broadband, which is what we’re talking about, and what LLU is about.
“I do deny that it is impossible to enter the Teleco market in NZ, build infrastructure and capture market share becuase that is demonstratably not the case. …..No. The fact that they have, is testament to the fact it can be done. Why build another “antiquated” copper network when you can do what vodafone did and roll out a nationwide digital mobile network, or do what woosh is doing and roll out wireless internet?”
I concede it is not impossible, but it is improbable. Your entrants to the NZ market are not viable competitors in the broadband arena. Do you actually use broadband at all or is this all just talking out your dot? I happen to have tried a number of competing services and they were all even more shit than Telecom DSL.
“No. If you don’t like the services and pricing options of Telecom, move to a competitor for your mobile, internet and tolls. Over time if enough people move it will be economic for vodafone to offer mobile data over it’s network and for woosh to expand. People who sit using all of Telecom’s services and then complain about the result when there are other options deserve what they get. I happen to use some of Telecom’s services and some from other providers depending on the prices/services offered so that my complete package suits my needs and budget.”
Dude, you’re really not getting it. I do use Vodafone for mobile, and we’re not talking about ‘all telecommunication services’. We’re talking about LLU, which is about giving competitors access to existing copper lines to provide broadband services.
“My “ideological model” is people freely exchanging goods and services at prices agreed amongst themselves without govt. interference, and if you don’t like the service you get you quit paying for it and move on. you don’t lobby the govt to interfere because you’re a baby and need nanny state to take care of you.”
Yep, we got it man, it’s not exactly a new idea. And in the case we’re talking about it leads to you getting ripped in the dot for DSL. And you clearly do love it because it gives you some sort of sanctimonious feeling that at least it’s the free market making people eat shit instead of communists. Well, dude, shit is not to my taste no matter who’s dumping it.
“Perhaps you could provide an analysis of what you would have vauled Telecom at in 1990 and why?”
I would not have sold it at all. Why? Because the inevitable result was a telco that used its monopoly to rip consumers right where it hurts.
“How would you like it if you had boarders in your house paying “retail” room rates and the government forced you to lease some of your rooms to Housing NZ at cut-price rates?”
If I owned every house in the country your analogy might have some validity, and the answer would be that I would still think I was in a pretty sweet spot.
“If the alternatives aren’t in the ballpark doesn’t that demonstrate Telecom is providing some sort of satisfactory service?”
Only if you have never experienced comparable services anywhere else in the industrial world.
“Their major cities have higher critical mass of potential customers than ours.”
I think the ‘critical’ part is your only valid point. You are uncritical, and happy with your lame lot. Even in huge, empty places like Texas the services make us look like a joke. It’s not like Telecom has to invent the technology man.
“Sick of what?”
What you said. Your method of holding Telecom accountable has not worked.
“The Shareholders Assn hasn’t been going for 20 yrs. The blow torch has been left in the garage most of the last 20 years which is why some investors have got the poor returns they deserve for thinking they can passively entrust their money with corporate raiders and not hold them to account.”
Since you said ‘*like* the NZ Small Shareholders Assn’, this misses the point. Associations to hold companies accountable have been around since before Telecom and Telecom laughs at them, always has, always will. They are toothless debating societies.
“I don’t get ripped in the dot. I look out to make sure I don’t. I learn’t ‘Caveat Emptor’ when I was still at High School.”
If you have broadband, then you do get ripped. Sorry to be the bearer of bad news but there’s a gaping hole there. Check the price of broadband in pretty much anywhere except the third world (and even parts of that!).
“No it hasn’t.”
OK, then what glorious concessions has your precious “Shareholders Assn” acheived in broadband?
“The tired old welfarism and wealth transfer model that has created tens of thousands of welfare dependents on nanny states tit is now extending into the corporate sector and will no doubt leave us with the same disastarous long term results.”
I can’t see what welfarism has to do with any of this, other than it’s a pet peeve of yours. Wealth transfer seems to only embitter you when it goes the wrong way, the original sale of Telecom seems to be a wonderful example of justice to you. We’ll have to wait and see what the disastrous effects of LLU will be. So far it’s been a massive drop in prices for broadband services, welcomed with open arms by 86% of businesses in NZ.
Christ even as I conclude this my DSL craps out, randomly, and I’m on hold for 30 mins to XTRA. Great.
Update: After 25 minute hold, put through to a message “Sorry, that number is either busy or disconnected. Please call again later”. Repeat x 3 followed by disconnect. Even better. ‘Property rights’ are really impressing me at this point. Tempted to dial the 0800 from my Vodafone mobile just for kicks.
Update: Finding hearing “I hope I never have to seeeee you again” by Split Enz for the 5th time deeply ironic.
Update: Finally get a person. “There is an outage in your area, no estimations available on an ETA for a fix.”. But I did get a case number!
Update: 19 hours later I can finally make this post.
Vote:June 29th, 2006 at 10:40 am
“”Battler
“At least we now know that you do operate from a double standard and we shouldn’t expect consistency to be applied in your arguments.”
I never said I was a true believer in property rights. Double standard is your term, which you hope to attach some kind of moral value to. In fact it is simply having views that are slightly more complex than your simplistic model. Adding complexity to simple models is part of life, and a failure to be able to do so is being a mindless idealist.”"
You are showing that your philosophies are inconsistant. When models suit you personally, you support them and when they don’t suit you you find other models to suit you instead and to hell with anybody elses fundamental rights. You remind me of a time when Helen Clark was questioned on the role of Government and she replied “Whatever it decides it to be”.
“”Then quit buying their services and sign up with other providers such as Vodafone, Testra etc.”
They don’t offer DSL, or any kind of broadband service comparable.”"
Woosh offers a broadband internet service.
“”The only thing Telecom really has over the other’s is a copper network that you call “antiquated”, which Telecom’s investors paid $4,250,000,000 to aquire.”
That is a source of huge competitive advantage, a massively expensive undertaking, bought for a song.”"
According to the RBNZ of inflation calculator, in todays dollars the purchase price would be $5,948,623,359.20 If we say there would have been roughly 1.6 million telephone connections in 1990 (if anyone can provide an exact number that would help) then Telecom’s investors paid roughly $4,285 in today’s dollars, PER CONNECTION. I would hardly call paying $4,285 per connection buying the copper network for a “song”. I don’t see the other teleco’s how are squaking from the sidelines saying they are prepared to invest $4,285 per new customer on infrastructure…they just want to profiteer off the back of Telecom’s investment.
“”I didn’t say the copper network was antiquated, I meant using it just to provide an analog voice service is antiquated.”"
Which is why Telecom has spend hundreds of millions of dollars upgrading the exchanges to provide Jet-stream over the copper network (and now all the other ‘me-too’ teleco’s want cut-price access).
“You call the copper network “antiquated”.”
No, see previous point.
“” That it may be. Vodafone has rolled out a nation-wide digital mobile network that has captured nearly 50% of the mobile market. Woosh is rolling out wireless internet.”
And neither is broadband, which is what we’re talking about, and what LLU is about.”"
Telecom already offer these things on a wholesale basis to other providers wanting to access their network and market the services on a retail basis. There is no sound reason for the Government to be doing what they are doing other than political motivation to be seen to be “doing something” to “fix telecom”.
“”I do deny that it is impossible to enter the Teleco market in NZ, build infrastructure and capture market share becuase that is demonstratably not the case. …..No. The fact that they have, is testament to the fact it can be done. Why build another “antiquated” copper network when you can do what vodafone did and roll out a nationwide digital mobile network, or do what woosh is doing and roll out wireless internet?”
I concede it is not impossible, but it is improbable. Your entrants to the NZ market are not viable competitors in the broadband arena. Do you actually use broadband at all or is this all just talking out your dot? “”
Yes I do use broadband, both at work and at home.
“”I happen to have tried a number of competing services and they were all even more shit than Telecom DSL.”"
Then perhaps those teleco’s should get their own “shit” together and invest the sort of money that Telecom’s shareholders have in infrastructure.
“No. If you don’t like the services and pricing options of Telecom, move to a competitor for your mobile, internet and tolls. Over time if enough people move it will be economic for vodafone to offer mobile data over it’s network and for woosh to expand. People who sit using all of Telecom’s services and then complain about the result when there are other options deserve what they get. I happen to use some of Telecom’s services and some from other providers depending on the prices/services offered so that my complete package suits my needs and budget.”
Dude, you’re really not getting it. I do use Vodafone for mobile, and we’re not talking about ‘all telecommunication services’. We’re talking about LLU, which is about giving competitors access to existing copper lines to provide broadband services.”"
Even though Telecom were previously under no real obligation to do so, they have been wholesaling these services for some time. Giving competitors access to Telecom’s network in the way the Govt. is doing doesn’t actually improve the network. It just transfers the profit’s from the people who invested in the network in the first place to the people who are free-riding and profiteering on the back of this Govt. sponsored theft of Telecom’s return on investment.
“My “ideological model” is people freely exchanging goods and services at prices agreed amongst themselves without govt. interference, and if you don’t like the service you get you quit paying for it and move on. you don’t lobby the govt to interfere because you’re a baby and need nanny state to take care of you.”
Yep, we got it man, it’s not exactly a new idea. And in the case we’re talking about it leads to you getting ripped in the dot for DSL. And you clearly do love it because it gives you some sort of sanctimonious feeling that at least it’s the free market making people eat shit instead of communists. Well, dude, shit is not to my taste no matter who’s dumping it.”"
I remember back in the late 90′s when it cost around $60 per month for dial-up access + you had to have a second phone line at a cost of say $30 per month in order to use the phone & internet at the same time. Total cost to have an unlimited dedicated dial-up service per month was $100. In less then 10 years, we now can have unlimited broadband over a single phone line for between $30 and $40 for a home user. So in less then 10 years a 60% cost reduction (and that’s not even taking inflation into account) with exponentially faster speeds. Considering the challenging population distribution in NZ and therefore difficulties in achieving good economies of scale, as a customer I’m reasonably happy to paying 60% less than I was 10 years ago for exponentially faster internet.
“”Perhaps you could provide an analysis of what you would have vauled Telecom at in 1990 and why?”
I would not have sold it at all. Why? Because the inevitable result was a telco that used its monopoly to rip consumers right where it hurts.”"
So you’d like to be back in the late 80′s when the post office was loosing money, it took 6 weeks to get a phone connection, there were no smartphone services and no jetstream?
“”How would you like it if you had boarders in your house paying “retail” room rates and the government forced you to lease some of your rooms to Housing NZ at cut-price rates?”
If I owned every house in the country your analogy might have some validity, and the answer would be that I would still think I was in a pretty sweet spot.”"
What if you paid full market value at the time for those houses and were already being squeezed in your income/expense margins??
“”If the alternatives aren’t in the ballpark doesn’t that demonstrate Telecom is providing some sort of satisfactory service?”
Only if you have never experienced comparable services anywhere else in the industrial world.”"
Yeah in countries like Japan with 125,000,000 potential customers , or in Hong Kong with huge huge population density of course there is more of an incentive to spend on infrastructure than in NZ with a potential 4,000,000 cutomers all sprawled out over two long islands and a hotch potch of smaller islands.
“Their major cities have higher critical mass of potential customers than ours.”
I think the ‘critical’ part is your only valid point. “”
No. The higher the number of customers, the lower the fixed costs on a per customer basis for overheads etc which enables better pricing and/or more money available to spend on the infrastructure.
“You are uncritical, and happy with your lame lot. Even in huge, empty places like Texas “”
Texas has over 22 million people in a land area only slightly larger than the land area of NZ”
the services make us look like a joke. It’s not like Telecom has to invent the technology man.”"
No. I think we do quite well in comparison when you consider a State like texas has 5 times as many potential customers as NZ and with higher GDP per capita than NZ. Of course better services than ours are going to be available in a place with 5 x as many potential customers all with more money to spend than the people in NZ.
“”Sick of what?”
What you said. Your method of holding Telecom accountable has not worked.”"
Customers should hold them accountable by switching services if they don’t like what Telecom is doing, and shareholders should hold them accountable by voting their stock and grilling their directors at AGMs. I would suggest that neither has happened to a great enough degree in this Nation of mainly sheeple with a “she’ll be right” attitude.
“The Shareholders Assn hasn’t been going for 20 yrs. The blow torch has been left in the garage most of the last 20 years which is why some investors have got the poor returns they deserve for thinking they can passively entrust their money with corporate raiders and not hold them to account.”
Since you said ‘*like* the NZ Small Shareholders Assn’, this misses the point. Associations to hold companies accountable have been around since before Telecom and Telecom laughs at them, always has, always will. They are toothless debating societies.”"
Shareholders with voting stock are not toothless. They have the power to sack directors. And the associations are good as smaller investors can pool resources to fund analysts to comb through the accounts and spot any areas of concern.
“”I don’t get ripped in the dot. I look out to make sure I don’t. I learn’t ‘Caveat Emptor’ when I was still at High School.”
If you have broadband, then you do get ripped. Sorry to be the bearer of bad news but there’s a gaping hole there. Check the price of broadband in pretty much anywhere except the third world (and even parts of that!).”"
I don’t consider paying 60% less than I did a decade ago (before even taking inflation into account) for exponentially better service getting ripped off. See previous points about the examples you cite which have far greater numbers of potential customers with more money to spend which results in greater investment and economies of scale, resulting in better service at cheaper prices. For the population and disposal income spread over the geographic area we have in NZ, along with the “she’ll be right” mentality of customers and shareholders, I think we do reasonably well and get what we deserve.
“”No it hasn’t.”
OK, then what glorious concessions has your precious “Shareholders Assn” acheived in broadband?”"
The Shareholders assn is not there to achieve conessions in broadband, it is there to represent the interests of shareholders.
In any case, we now have broadband at 60% cheaper prices than dial up was less than a decade ago.
“”The tired old welfarism and wealth transfer model that has created tens of thousands of welfare dependents on nanny states tit is now extending into the corporate sector and will no doubt leave us with the same disastarous long term results.”
I can’t see what welfarism has to do with any of this, other than it’s a pet peeve of yours. “”
The welfarism I am referring to in a corporate sense is the free-riders like Annette Presley and her ilk who want to reap the profit’s of other people’s years of investment instead of doing their own.
“”Wealth transfer seems to only embitter you when it goes the wrong way, “”
No. I am oppossed to any form of wealth transfer that is involuntarily co-erced and unfair.
“”the original sale of Telecom seems to be a wonderful example of justice to you. “”
As I’ve outligned, the investors paid roughly $4,000 per connection. This seems fair. If you can provide an alternate analysis showing that the taxpayers of NZ were in fact short-changed I’d be genuinely interested to see it.
“”We’ll have to wait and see what the disastrous effects of LLU will be. So far it’s been a massive drop in prices for broadband services, welcomed with open arms by 86% of businesses in NZ. “”
The drop in prices was happening anyway as always happens the longer new technology is available. Adding a few free-riding retailers to the mix is not what is largely responsible for the reduction in pricing.
The businesses that are applauding it are the business sector version of the able bodied beneficiares crying out for higher dole payments.
“”Christ even as I conclude this my DSL craps out, randomly, and I’m on hold for 30 mins to XTRA. Great.
Update: After 25 minute hold, put through to a message “Sorry, that number is either busy or disconnected. Please call again later”. Repeat x 3 followed by disconnect. Even better. ‘Property rights’ are really impressing me at this point. Tempted to dial the 0800 from my Vodafone mobile just for kicks.
Update: Finding hearing “I hope I never have to seeeee you again” by Split Enz for the 5th time deeply ironic.
Update: Finally get a person. “There is an outage in your area, no estimations available on an ETA for a fix.”. But I did get a case number!
Update: 19 hours later I can finally make this post. “”
So the outage was fixed in less the 24 hours. I wonder how long it would have taken if the Government still owned Telecom (that’s if a Government owned Telecom would have even been offering DSL in the first place by this time…)
What we do know is it used to take 6 weeks just to get a basic phone line. Heaven only knows how long it would have taken to fix a DSL outage….
Vote:June 29th, 2006 at 11:24 am
Can I request something from all you free-marketeer true believers? Every time this topic comes up you mention fucking Woosh. Have you ever tried their service? Compared it to even the terrible DSL we have in New Zealand? And every time we have one of these threads I’ve written a post explaining why Woosh are total shit and why their service is not adequate competition technologically with DSL.
And every time it gets ignored.
So, if nobody is going to address the fact that Woosh actually sucks and is more comparable to mobile dial-up rather than actual broadband can we have an agreement that they’re not to be mentioned again?
Here’s the simple thing: When it comes to non-mobile (office or home) broadband internet in a country with a network of wired copper lines there quite simply is no realistic technological competitor to DSL that’s going to be deliverable at the same price for the same investment. Telecom having a DSL monopoly renders them the de-facto market leader because DSL is the current state of the art in terms of what we’re able to do here on a large scale. This will likely remain true until fibre gets put down in any serious quantity.
Every other solution on the market has problems with weather-sensitivity, reliability, bandwidth, latency, range, expense of client-side hardware etc etc.
Woosh is not a realistic competitor to DSL for the majority of people in New Zealand. So please, stop mentioning it. Please? Or at least get down to the dirty details and explain why it actually isn’t crap…
Vote:June 29th, 2006 at 11:56 am
err,
I have two key issues with LLU.
Firstly, at a fundamental level, it is a clear violation of property rights. What we have here is investors who 16 years ago purchased a run down old dog of a company with some underground copper wires. Over the last 16 years the investors in this company have poured hundreds and hundreds of millions of dollars into installing new lines and upgrading exchanges in order to offer new and faster services at reduced prices. Not only this, but the company is offering it’s services on a wholesale basis to other companies looking to compete on a retail level.
Now for all the complaints about Telecom’s current service levels, it is indisputable that the service levels today are far ahead of where they were 16 years ago, and in real terms the services on offer are far cheaper and we have a whole raft of previously unavailable services. There will always be complaints about businesses service – that is the nature of the game and businesses need to be on a continual quest for improvement. It is not a reason to force that company to hand it’s investments over to others.
Now we have some newer kids on the block like Annette Presley and her ilk, who have invested next to nothing in building infrastructure etc who have used political lobbying pressure to force via legislation access to the resources of Telecom.
This basically says, that if you invest in a large network of any sort and pour hundreds of millions of dollars into it, don’t expect to be able to control what happens to it, because the Government will be subject to lobbyists who wish to commandeer your infrastructure for their own profiteering.
The 2nd issue, is that LLU will not necessarily achieve the stated objective of the Government. The Government waxes lyrical about slow uptake and not enough investment in broadband. I have two issues here – firstly, it is none of the government’s business whether or not people choose to take up broadband instead of dial-up. Broadband is already available in most parts of the country, and it’s up to people to choose whether or not they subscribe to the services.
Secondly, even if it was the Government’s business to decide whether or not we all take up broadband, forcing the companies who already invested to hand over their infrastructure to johnny come lately’s and forfeit the rewards of investment, is not a very smart way to encourage increased investment.
Vote:June 29th, 2006 at 12:26 pm
Battler
“You are showing that your philosophies are inconsistant. When models suit you personally, you support them and when they don’t suit you you find other models to suit you instead and to hell with anybody elses fundamental rights. You remind me of a time when Helen Clark was questioned on the role of Government and she replied “Whatever it decides it to be”.”
No, you are showing that you don’t have an ability to understand a model outside of your own prejudices. There is nothing ‘inconsistent’ about thinking property rights should apply in one place and not another. It is just ‘complex’. In actual fact, I barely tolerate property rights, seeing them only as a manifestation of other far more important rights, and to be put aside instantly the moment those rights are compromised.
“Woosh offers a broadband internet service.”
LOL, I’m sorry man but when I used Woosh it was slower than dialup. I have actually tried it rather than just buying what their marketing department spins.
“According to the RBNZ of inflation calculator, in todays dollars the purchase price would be $5,948,623,359.20 If we say there would have been roughly 1.6 million telephone connections in 1990 (if anyone can provide an exact number that would help) then Telecom’s investors paid roughly $4,285 in today’s dollars, PER CONNECTION. I would hardly call paying $4,285 per connection buying the copper network for a “song”. I don’t see the other teleco’s how are squaking from the sidelines saying they are prepared to invest $4,285 per new customer on infrastructure…they just want to profiteer off the back of Telecom’s investment.”
It is a song if what you are supplying is pretty much an essential service over which you have an instant monopoly. Most people pay something like $600p/a for voice services to Telecom, and businesses pay a heck of a lot more than that. So the time to complete payback from that infrastructure was in the order of 5-8 years. That is a really, really good deal.
“Which is why Telecom has spend hundreds of millions of dollars upgrading the exchanges to provide Jet-stream over the copper network (and now all the other ‘me-too’ teleco’s want cut-price access).”
No, you don’t understand LLU at all if you think that. The other telcos will have to supply their own equipment in the exchanges if they wish to directly compete.
“Telecom already offer these things on a wholesale basis to other providers wanting to access their network and market the services on a retail basis. There is no sound reason for the Government to be doing what they are doing other than political motivation to be seen to be “doing something” to “fix telecom”.”
It is utterly impossible to compete with Telecom in that model, since everyone must pay Telecom for access. They profit from their competitors, and obviously outcompete them on that score alone.
“Yes I do use broadband, both at work and at home.”
How much do you pay, what speed are you supposed to get, what do you really get, what is your data cap, and what are the costs per MB after that? Put those factors into a nice equation and compare it with anywhere in the OECD, then tell me your dot feels just fine.
“Then perhaps those teleco’s should get their own “shit” together and invest the sort of money that Telecom’s shareholders have in infrastructure.”
If you think it would only cost about 5 billion to lay copper cables to, and build exchanges for, every house in the country you are dreaming, my friend. That deal is not on the table because Richard Prebble is not in Parliament selling assets in a fire sale for cut prices.
“Even though Telecom were previously under no real obligation to do so, they have been wholesaling these services for some time. Giving competitors access to Telecom’s network in the way the Govt. is doing doesn’t actually improve the network. It just transfers the profit’s from the people who invested in the network in the first place to the people who are free-riding and profiteering on the back of this Govt. sponsored theft of Telecom’s return on investment.”
They have been wholesaling them to create a facade that only simpletons can’t see through about a competitive market, in the hope that the government won’t wise up and regulate. It worked for many years.
“I remember back in the late 90′s when it cost around $60 per month for dial-up access + you had to have a second phone line at a cost of say $30 per month in order to use the phone & internet at the same time. Total cost to have an unlimited dedicated dial-up service per month was $100. In less then 10 years, we now can have unlimited broadband over a single phone line for between $30 and $40 for a home user. So in less then 10 years a 60% cost reduction (and that’s not even taking inflation into account) with exponentially faster speeds. Considering the challenging population distribution in NZ and therefore difficulties in achieving good economies of scale, as a customer I’m reasonably happy to paying 60% less than I was 10 years ago for exponentially faster internet.”
It’s way behind the rate of growth in the rest of the world using exactly the same technology and faced with exactly the same challenges. That it’s been improving is not a cut down argument to say it’s good enough. If it was then you’d have to say Telecom when it was owned by the government was a splendid organisation for all of your above reasons – more people had more phones with less congestion, dropping costs, etc etc. But it wasn’t enough and that was obvious when we compared the situation to what they had in the rest of the OECD. Why you can’t bring yourself to make that comparison now can only be explained by your blind idealism, or perhaps bitterness at your share prices collapsing.
“So you’d like to be back in the late 80′s when the post office was loosing money, it took 6 weeks to get a phone connection, there were no smartphone services and no jetstream?”
The telephone services were not losing money. And all of the services you describe were invented overseas and inherited by Telecom, something that could just as easily have happened if it was government owned.
“What if you paid full market value at the time for those houses and were already being squeezed in your income/expense margins??”
I’d have to have fucked up my business pretty badly to lose anything in that situation. Owning every house in NZ I could charge any rent I liked, to cover my expenses, pay off my debts and live like a king. Naturally the people of NZ would probably have a revolution, the way people tend to when they find they are being oppressed by people who were simply luckier a bit earlier in time and able to seize ownership. And that’s pretty much what’s happened with Telecom, except nobody had to get killed.
“Yeah in countries like Japan with 125,000,000 potential customers , or in Hong Kong with huge huge population density of course there is more of an incentive to spend on infrastructure than in NZ with a potential 4,000,000 cutomers all sprawled out over two long islands and a hotch potch of smaller islands.”
This seems to be your meme, that somehow Japan, using the exact same technology to provide services to comparable numbers of people per unit of technology, has a huge advantage over Telecom and thus ought to outcompete. The fact that even buying 10 square metres to put an exchange anywhere in a Japanese city costs a fortune doesn’t seem to enter your equations. And NZ is far less ‘sprawled’ than Australia who also make us look third world in this arena. Your points all have counter examples, places with lower population, lower density that outcompete us by orders of magnitude.
“No. The higher the number of customers, the lower the fixed costs on a per customer basis for overheads etc which enables better pricing and/or more money available to spend on the infrastructure.”
Telecom has most of NZ as a customer base. This is comparable to Singapore’s population, a good example of somewhere that shits on our services. Yeah I know, now you’ll say that Singapore is geographically smaller, and that would be a good point if NZ’s copper network hadn’t already been laid decades ago. Now it’s just a lame excuse for a substandard result. The exchanges in Singapore, where the bulk of DSL infrastructure resides, are the same size.
“Texas has over 22 million people in a land area only slightly larger than the land area of NZ”
Actually it’s 2.7 times the size of NZ, but fair enough it’s got some big cities. Australia is a better example.
“No. I think we do quite well in comparison when you consider a State like texas has 5 times as many potential customers as NZ and with higher GDP per capita than NZ. Of course better services than ours are going to be available in a place with 5 x as many potential customers all with more money to spend than the people in NZ.”
Their services are more than 5 times better though. Try more like 100 times. Over there they actually have “unlimited broadband”. Which is to say they have both parts of that phrase, properly applied. Unlimited means no data caps, no throttling when the cap is reached. Broadband means that speeds in excess of 10Mb/s are commonplace. And they pay less than us for both of those things. In Texas I could download a terabyte of data in a month for about $30. Try that in NZ. If you use Jetstream you might actually be able to get that much data in a month, but it would cost you $10,000 in excess data charges (actually it would cost me $200,000, but I’m being really generous and assuming you have some massive plan). Are you starting to feel a tingling in your date or do you simply limit your usage to what Telecom says is ‘acceptable’?
“Customers should hold them accountable by switching services if they don’t like what Telecom is doing, and shareholders should hold them accountable by voting their stock and grilling their directors at AGMs. I would suggest that neither has happened to a great enough degree in this Nation of mainly sheeple with a “she’ll be right” attitude.”
If there was any viable alternative I would have, and very soon I will be able to.
“Shareholders with voting stock are not toothless. They have the power to sack directors. And the associations are good as smaller investors can pool resources to fund analysts to comb through the accounts and spot any areas of concern.”
Tui commercial anyone? I imagine Gattung was shivering in her shoes about all the pissant small shareholders who didn’t like getting ripped by Telecom. And the major shareholders liked the fact we were getting screwed. You idea is laughable. You suggest buying stock and then trying to force the company to make less profit by not gouging, thus hurting yourself financially. Is it the least bit surprising this didn’t happen?
“I don’t consider paying 60% less than I did a decade ago (before even taking inflation into account) for exponentially better service getting ripped off.”
OK, then, perhaps you’re still happy to by my old 386 for $2000? That’s 60% off the marked purchase price. Or maybe you’ll note that you could get a machine about 200 times more powerful for the same price and start to realize that the technology industry has had exponential performance increases far outstripping 60% in 10 years in almost every arena, bandwidth included.
“The Shareholders assn is not there to achieve conessions in broadband, it is there to represent the interests of shareholders.”
Yeah, exactly man, so why are you even bringing them up?
“In any case, we now have broadband at 60% cheaper prices than dial up was less than a decade ago.”
That really floats your boat doesn’t it? Hey, guess what man, I also have a cellphone which costs about 1/20th of what it cost me then, is about 1/20th the size, supplies me internet and voice, has a battery that last 3 days instead of 2 hours, and cost me $200 instead of $2000. I can also use it almost anywhere on the planet, rather than in a small part of the CBD. Are you starting to get a feel for the numbers now?
“The welfarism I am referring to in a corporate sense is the free-riders like Annette Presley and her ilk who want to reap the profit’s of other people’s years of investment instead of doing their own.”
Aha, I see, you have a private definition of welfarism.
“”"Wealth transfer seems to only embitter you when it goes the wrong way, “”
No. I am oppossed to any form of wealth transfer that is involuntarily co-erced and unfair.”
I think that the ‘unfair’ point is where we diverge vis a vis Telecom. To me it seems the height of fairness that they are being forced to allow competition in the broadband market.
“As I’ve outligned, the investors paid roughly $4,000 per connection. This seems fair. If you can provide an alternate analysis showing that the taxpayers of NZ were in fact short-changed I’d be genuinely interested to see it.”
How about this one: Most of NZers did not want the sale to happen. At the time it happened, ever since, and now. Does that tell you anything?
“The drop in prices was happening anyway as always happens the longer new technology is available. Adding a few free-riding retailers to the mix is not what is largely responsible for the reduction in pricing.”
Too slow, too late. Too bad.
“The businesses that are applauding it are the business sector version of the able bodied beneficiares crying out for higher dole payments.”
86% of NZ businesses? I’m starting to get the feel for your private definition of welfare now. It seems to be what most other people would call ‘a fair go’.
“So the outage was fixed in less the 24 hours. I wonder how long it would have taken if the Government still owned Telecom (that’s if a Government owned Telecom would have even been offering DSL in the first place by this time…)”
We’ll never know.
“What we do know is it used to take 6 weeks just to get a basic phone line. Heaven only knows how long it would have taken to fix a DSL outage…. ”
Actually it took me 6 weeks to get my DSL connected, but that could have been because I wanted to use an ISP other than Telecom. And I can’t think of any time as a child when my telephone went down for anything more than a few hours, and that includes once when a truck knocked over the pole outside on our street corner at 3am. It was fixed within a few hours.
Vote:June 29th, 2006 at 12:47 pm
“err,
I have two key issues with LLU.”
I don’t care. Just stop trying to argue there’s any competition in the market at present, it’d be much easier if you just tried to defend your position on those key issues rather than trying to claim everything is actually fine.
Your position is an absolutist on based on a near-religious belief in property rights, even in the absence of competition. That’s not mine. I’m a technologist, I look at what can physically be done by people and what has been done in New Zealand – and the divide is obvious. Then we go looking for solutions: One is the centralised, socialist solution of having the government fund the necessary investment and manage the resulting infrastructure. I agree this is probably not the most efficient approach, historically – governments don’t hand big technology systems very well anywhere.
Then there’s the free-market solution: having competition between multiple providers and letting people choose the fittest solution for their particular circumstances. I actually agree this is the best approach here, so I’m not diametrically opposed to your philosophy. But on the other hand, you seem to have taken that philosophy to such an extreme that it’s become a religion, not a solution to any real-world problems. Indeed, the way you think your philosophy is actually a barrier to achieving things because there are rights you consider invariable without any concession to communal obligations. In your eyes Telecom has the invariable right to operate its network as it sees fit at the pricing it chooses, without any actual responsibility to offer services that keep New Zealand internationally competitive for companies that rely on these services.
You’d rather see a situation where competition is absent than one where property rights are violated. I actually think this is backwards, because property rights are about protecting what people already have and the free market is supposed to be about allocating property to people based on the merits of what they can provide to others – competition. Defending property rights in the absence of competition is just defending tyranny.
You seem to understand this, so you guys always play the Woosh card. But Woosh is not a good competitor technologically with DSL. Quite simply, Woosh requires all its investment to be made to provide dial-up internet and all its customers must come to it with this in mind. DSL, on the other hand, is a freebie that runs over largely existing infrastructure and gives much better performance for customers and much lower initial overhead to providers. In the world you’re proposing it would be acceptable to only have one manufacturer of powered vehicles because there are horse dealers available to compete with them. The problem in New Zealand is that we have no technologically comparable competitor to DSL, yet DSL has its gateway controlled by a single company.
So, again, my challenge is this: Either admit that there is no competition to Telecom in New Zealand or demonstrate how the alternatives are technologically competitive at the same price. If you can’t do either I’ll have to assume you’re scared to reach the obvious conclusion that the majority of the country has already arrived at.
Vote:June 29th, 2006 at 12:48 pm
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Vote:June 29th, 2006 at 12:57 pm
Battler
I notice your response to err does not address his challenge at all. I had similar actual experiences (as opposed to sanctimonious theorizing) of Woosh. It was utter crap and I considered suing them to get the cost of the hardware back, except that I would have lost more money that way even if I won.
Instead you go back to your precious paramount property rights, a theory that is not bought into by the majority of NZers.
You say a message is being sent that businesses can’t invest in infrastructure because the government might take it off them. But the difference in this case is that the government gave them that infrastructure in the first place, with the *very* strong proviso that anti-competitive practices and gouging were not to take place. Telecom has fought a rearguard action against that promise ever since. Finally, they are getting called on it.
The message is thus a very positive one: Fuck around with promises to the Government and suffer the consequences.
Vote: