Wednesday, 22 February 2012

Stephen Fry, Steven Joyce and Government broadband

imageHe loves gadgets and he’s tweeted from many places around the world, but Stephen Fry was less than satisfied with government broadband here in EnZed. And he reckons we EnZedders should rise up and take on those responsible.

“You wouldn't put up with potholes in your roads,” he says, though we do, don’t we, “so you shouldn't have to put up with Third World broadband standards as well.”

But we do, don’t we.  We not only put up with it, you vote for it.

So who’s responsible for the potholes in local broadband? Well, it’s fashionable to blame the private telcos, of course.  But consider that around six years ago, right when those private telcos were considering plans to roll out the next generation of broadband across the country, Labour’s David Cunliffe began dismembering Telecom—to the loud applause of  Labour hacks, National stalwarts and Telecom’s competitors—and announcing plans to “roll out” government fibre.

Would-be private investors in next-generation broadband began quietly reconsidering their own investment plans. Why put your own head in the noose when you could reap the benefit of a taxpayer “investment.”

Then around four years ago in a throwback to its Think-Big Muldoonist past the incoming National government began announcing that it would be they who would be “rolling out” the next generation of high-speed, bells-and-whistles broadband, the “roll out” of which would be a flagship policy of their first term.

Potential users and rival telcos alike waited with bated breath while nothing continued to happen. And now that the former promoter of National’s next generation of high-speed, bells-and-whistles broadband Steven Joyce has moved on to bigger, better and brassier things, the non-roll out has been left to first-time minister Amy Adams—who instead of being photographed in front of new high-tech equipment sits in her new office writing press releases boasting :

The Government has set aside $1.5 billion for ultra-fast broadband, and aims to have the service reaching 75 percent of New Zealand in the next 3 5 7 10 years… contracts had been locked in, the rollout was under way, and competitive wholesale prices had been secured, but it was up to the industry to ensure New Zealanders got the quality and performance they expected at prices they could afford…

Or in other words, “we’ve spent lots of your money already with only paper promises and electioneering hype to show for it. But stop whining, because you’ll get it when you get it.”

At least she recognises, if only partially, that government itself delivers nothing. That in the end it is still “up to the industry.” But perhaps she and other EnZedders might reflect that the industry might have done better and much earlier—that big private investment might have been directed into this area much sooner—if big government hadn’t been flexing its muscles for the last six years in the hope of  a political windfall.

After all, it looks like up to $33 billion could be the real return to NZ from the investment, if it ever comes to pass, some of which would have rubbed off on private investors. But when any private investment would have been drowned out by government and (no doubt) damned by luddite nationalists in every party, and when NZ’s largest telecommunications company is being dismembered and partially nationalised as a reward for owning and having rolled out the last national network, it’s no wonder no private investor wanted to take the risk.

As a blogger who’s now left the building once said:

If telecommunications companies think someone is going to steal their networks,they won't build any more of them! It's really simple. Now we are stuck with waiting for the government to waste my tax money building something that every private interest is now too scared to.

Former Telstra Australia head Sol Trujillo said much the same when similar threats were directed his way from the Australian government. He:

derided Kevin Rudd's election-promised "partnership" to build an across-Australian broadband network, calling it a "kumbaya, holding hands" theory. It might have been an election promise, but looks like no- one stopped to ask the company supposedly being partnered. Said Trujillo: "We are only going to participate in the things that we own and control."
    Mr Trujillo, firmly backed by chairman Donald McGauchie, said Telstra was happy to invest $4 billion or more of its own money rather than the taxpayers' - but only on its terms and pricing…
Australia needs a fast, modern telecoms infrastructure [says Trujillo]. And the quickest way to get there is to allow unfettered competition. Mr Trujillo says that America and Europe learned long ago that “to foster competition the government cannot control the levers, it must let the market work. Virtually every other country has moved towards less regulation in telecoms” …
    Worried that giving rivals a free ride would undermine his profits, Mr Trujillo is threatening not to lay the fibre: “My duty is to our shareholders—including 1.6m ordinary Australians. I will only invest where I can earn an economic return.”

So when private investors aren’t able to earn a return? Or they are (falsely) led to believe they can be given an unearned free ride on someone else’s network? Then you end up where you are today. As our late friend Anna Woolf said back in 2008: Remove the Red Tape, the Fibre Optics will follow. Or don’t, and it won’t.

So when you’re complaining about your broadband service today, it’s government broadband you’re complaining about.

Potholes and all.


  1. I was a Telecom shareholder from soon after privatisation and enjoyed the benefits of the company's growth until around 2002 when I decided to sell out because I did not like the threats I was hearing from the Clark Government. My children's education trust remained a shareholder and has suffered significant losses due to the Labour Government's inept handling (or, more to the point, the deliberate leaking) of its unbundling proposals when $2Bn was lost from the value of the company in one day. I wrote to Cunliffe on behalf of my children asking why they should bear the cost of his Government's piracy and did not receive a reply.

    I continue to marvel at the stupidity of expropriating billions from small NZ investors (money that would have been leveraged to fund the expansion of Telecom's fibre network) just so the Government can waste another $1.5Bn of taxpayers money on building a network infrastructure that will now be largely provided by Telecom spin-off Chorus. The transaction costs of this must be enormous compared to leaving the money in Telecom shareholder's hands in the first place (and I have read analyses that says the Government will almost certainly have to bail out Chorus at a much higher cost in future). Add to that the loss of investor confidence in NZ that resulted from this uncompensated expropriation and the true cost to New Zealand is huge. And don't get me started on the morality of robbing my children just so other New Zealanders can download pirated movies quicker.

  2. 1 Steven Fry was guest in a house where they busted the datacap and were down to dialup speeds.

    2 All this talk about slow internet. I had great speeds at my old place (Rural) and great speeds in my new place (Industrial Henderson)

    Am I just lucky?

  3. Maybe time to recall when Telstra-Clear announced it was going to roll out a hybrid fibre-coax network to all homes and businesses in Auckland, Wellington, Christchurch, Dunedin, Hamilton and Tauranga - until Labour decided to "nationalise" Telecom's network. The Christchurch and Wellington networks were largely built by the time that happened. Of course Auckland councils insisting new cables be undergrounded also helped kill it off.

  4. We can't rise up against those responsible because they are called voters and the vote is hidden. Decade after decade, Big Brother grey ooze opm theories are voted in and the results are always the same.

    In the case of optical fibre, in 1987 my neighbour in Belgium [a solid state physicist] had a friend who made optical fibre. I was very excited and told him he could be onto a huge winner.

    Subsequently, optical fibre made huge inroads around the world, removing 1000km wide pot holes in the information super highway.

    I have invested in optical fibre companies and other telecom companies. I wanted to invest in optical fibre in NZ. I bought Vector shares [a piffling allocation after I had offered a huge amount more money]. Lucky for me.

    I had thought that Vector would invest in optical fibre everywhere and had already installed some. That was the plan.

    Then the government decided, having fraudulently sold me Vector shares, that the return on capital would be limited to something less than bank rates [or thereabouts]. The management of Vector sensibly informed the government that capital investment was now on hold and that included optical fibre.

    The government decided they wanted optical fibre and the rest is history. As you write, investors like me won't go near investing in fibre now because our property will be stolen by the government or they will simply establish a "fair" price meaning no return on capital or some pathetic amount for the risk.

    So, I continue to invest in Cyberspace in the USA, Japan, and some here [in Zenbu wifi] but that's relatively immune to government depredations.

    Meanwhile, the government had the vaunted Innovation conference and the great jamboree "The Knowledge Wave" which I did not attend - I was too busy actually building the knowledge wave infrastructure and wasn't invited anyway.

    Then the government made it illegal to inform companies about knowledge wave technology via email. But their "anti-spam" law didn't stop spamsters in Russia, China and Nigeria who never heard of the law.

    Still unsatisfied with their efforts to stop the Knowledge Wave they spent so much opm on, they introduced the copyright infringement law and $15,000 fine and loss of business so that now accommodation providers are frightened of offering more than a smidgeon of wireless internet to their guests lest the accommodation provider be fined for what their guests or others in the vicinity download from Megaupload and others.

    NZ could host 10s of thousands or even 100s of thousands of Geeks who would like to live here, in nice places like Papamoa or Kerikeri, or Taupo Bay, working via Cyberspace, over high speed wireless and supersonic fibre via many redundant routes [for reliability].

    I don't bother writing this to government people because they are immune to such thinking if Helengrad is not in control and clipping the ticket.

  5. @Maurice: "I don't bother writing this to government people because they are immune to such thinking ."

    And that's the sad, sad truth, isn't it. So much potential here, if only the grey ones would get out of the way.

  6. Right on Maurice.

    And there are small businesses like ours that are moving to Kerikeri, but are told we are on a waiting list for a port to become available so we can have broadband. How long? No-one can tell us.

    So it looks like another departure from NZ in the near future.



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