Thursday, 30 November 2006

Telecom mugged

I've been interested to see some of the self-seeking justifications for breaking into and breaking up Telecom's private property.

No one but an idiot or a cabinet minister would expect to see businessmen or women making a long-term investment in infrastructure when theft of such an investment is imminent, or the breakup of that investment is on the cards. In Australia for example, Telstra's CEO Sol Trujillo resisted being forced to grant access to Telstra's proposed $3 billion broadband fibre network to its competitors, and indeed has resisted making the investment. Says The Economist:
Worried that giving rivals a free ride would undermine his profits, Mr Trujillo is threatening not to lay the fibre
Good for him. Says Trujillo. “Those who risk capital to earn returns shouldn't have to subsidise those that don't.” Quite right.

But what about the many and various economic advantages of such a network? The fact is, if you want those advantages you need that sort of investment, and you'll only get it if government's keep their hands off -- government intervention such as has happened with Telecom is chilling for investment, not an encouragement, and not just for investment in telecommunications. The investment effect of this dismembering will be felt further afield than just the pocket books of Telecom shareholders.

If you think the breakup of Telecom is all good and will deliver you everything you might wish for, then reflect on the words of Thomas Jefferson: that "the government that is big enough to give you everything you want is big enough to take it all away again."

UPDATE: Liberty Scott has some background on how Telecom came to this, and the alternatives to political dismembering: Telecom - the Left Has Won

LINKS: Telstra shrugs - Not PC (May, 2006)

RELATED: Telecom, Property_Rights, Politics-NZ


  1. I agree with Trujillo's stance. If I was in charge of Telecom I'd threaten to completely close the company down unless the company was allowed to operate in an environment where it kept its own property. And I wouldn't even sell it, or its property for others to use.

  2. Indeed, PC such interference does do that. If the government hadn't of interfered Telecom would be installing ADSL2+ technology right now. But now because of such interference with the LLU proposal that technology isn't due to next year. If the government interferes again we may not see that technology until 2010 or worse.

  3. Here is and exact copy of my response to the same thread topic on David Farrar's website, which is exactly in line with the point that Trujillo has made.

    Falafulu Fisi said...
    [...perhaps go for the more expensive option the hyper-speed fibre-optic networks (non-conventional) which could reach upto 100 Gigabits/s or more.]

    The following paper summarizes the recent advances in the field of Photonics (as in optical communication systems). This hyper-speed network (soliton multiplexing) as I quoted in my previous post has been commercially available within the last 5 years or so. Transmission speed of upto Terrabits/second was first realised by R&D team at Telecom France in 1998.

    "Progress in Ultrafast Photonics"

    David Farrar said...
    [The Telecom network division will now be mandated to not just plan the network for Telecom's needs, but for the industry.]

    David, but that mandate will force Telecom to do nothing (don't plan anything at all) which is exactly what I have pointed out in my previous post. Telecom will STOP altogether doing any plan at all. They will sit idle and let the current network infra-structures wear out or going rusty without any planning or development.

    David Farrar said...
    [And laying fibre to the node and eventually to the home should occur even faster, as there will be more wholesale and retail customers wanting it.]

    Now, perhaps you mean the conventional fibre, which is cheap per unit metre, but the kind of speed described in the paper quoted above does use a non-conventional type of fibre (soliton fibre), which is VERY expensive. It used to be $64 US per mitre about 4 years ago. I assume the price has come down. Now, laying fibre to the node is not going to solve the speed problem using non-conventional fibre. The network has to be ALL fibre, and no copper should be involve anywhere in the transmission lines. Copper will destroy the type of high-bandwidth pulses that only transmit via the non-conventional fibre. So, this means that either the network should be ALL fibre (non-conventional) to achieve the sort of hyper-speed transmission speed described previously or stick with fibre-copper hybrid, ie, fibre only to the node and the national transmission lines network be all copper.

    Again, in this scenario WE are still stuck with copper as I have mentioned in my previous post. Either TELECOM will install a nationwide non-conventional fibre network, which is very expensive ($64 US per mitre), where customers will be charged a huge price for this type of services. This defeats the purpose of the legislation to allow competition, therefore lowering the price. The price will only come down, IF Telecom's competitors, do install their own hyper-speed fibre network to compete with Telecom therefore forcing the prices down, instead of them lobbying for legislation & whinging.

  4. David, but that mandate will force Telecom to do nothing (don't plan anything at all) which is exactly what I have pointed out in my previous post. Telecom will STOP altogether doing any plan at all. They will sit idle and let the current network infra-structures wear out or going rusty without any planning or development.

    Indeed. Look at the fact that Telecom have already delayed the installation of ADSL2+ because of the LLU, and that hasn't even been passed yet! If the government splits Telecom and if it asctually passes the LLU Telecom will create further delays. I also believe that their promised network upgrades will see constant delays if this happens.

    Oh, and fibre-optics aren't the only solution for competition. Slingshot has installed it in parts of Northland and it is cheaper and faster than ADSL offerings and with larger caps. And that is with hobbled WiMax, not WiMax's full capabilities. It's also cheaper to install and maintain than fibre-optic or coper wire.

    There is also broadband over power lines, which allows speeds similar to that of fibre-optic and similar theoritical scability.

    So, in short, fibre-optic is just one potential solution, not an exclusive one.


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