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Renationalise Telstra

June 11th, 2006

Tim Blair cites my recent observation that privatisation in Australia is political poison and goes on to ask for further advice on the issue

Take the next step, Quiggler; tell us which industries or businesses should be nationalised. People will like it, apparently.

I’m happy to oblige. The best case for (re)nationalisation is undoubtedly Telstra, minus peripheral bits like BigPond which should be wholly privatised. I’ve been making this argument for years.

Although Tim correctly points out the logical symmetry – if people hate privatisation, and clearly they do, then they should welcome nationalisation – he seems to be in some doubt about the politics. There are overseas examples to help here. Helen Clark’s government renationalised both accident compensation and Air New Zealand and didn’t seem to suffer any political damage, but of course, that’s New Zealand. More interestingly, the government led by Tim’s UK namesake renationalised Railtrack, to widespread applause, a couple of years ago.

What these examples have in common is that the privatisation was badly bungled, so that renationalisation was easy to sell. Although it isn’t, like Railtrack and Air NZ, on the verge of bankruptcy, Telstra is also a prime example of a bungled privatisation.

As Tim notes, given the deep public opposition to privatisation, exhibited recently over Snowy Hydro, there’s no reason to suppose that renationalisation would be unpopular. The problem is that the elite (not the people who drink cafe lattes, but those in both parties, banks and big business who actually run the show) benefit from privatisation and have no desire to stop it.

Update Tim liked this suggestion, and now he wants more. Next cab off the rank, in my view, should be airports. The privatisation of these monopolies was followed by massive increases in navigation charges, as well as a whole string of petty imposts on travellers. Another large part of the attraction, in Brisbane at least, was the ability to (mis)use the power of the Commonwealth to evade state and local controls on land development. And the involvement of politically well-connected types like Max Moore-Wilton only made the whole thing worse in every respect.

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  1. SJ
    June 23rd, 2006 at 00:42 | #1

    “It is only NPOV in the first few paragraphs. Read on.

    I might go in on the weekend and change it.”

    Nothing in the real world is truly NPOV for libertarian wankers.

  2. SJ
    June 23rd, 2006 at 00:52 | #2

    Turns out that the page is protected, because of earlier attacks from the Ayn Randians.

  3. June 23rd, 2006 at 11:36 | #3

    Terje wrote :

    More likely its monopoly status meant that any technical training had little utility elsewhere so that the people it trained were in effect bonded.

    This is quite an interesting twist to the argument. Most who are against utilities being run as a public service have railed against the alleged feather-bedding and pampering of employees of these utilities.

    To cite from my own experience, I actually was offered such and apprenticeship by Telecom (as Telstra was then called) in 1979, and, for reasons I don’t intend to reveal here, I stupidly dropped out, and have regretted doing so, ever since.

    However, in my brief stay, I was struck by how broad and deep were the range of skills they taught to their apprentices. If they were attempting to just churn out employees who would be of no use to anyone but Telecom, they were gong about it in a very strange way. Certainly, none of the apprentices I knew, considered themselves being exploited and bonded.

    If your argument has any validity for Telecom, it certainly has none for the other public utilities who also offered apprenticships and cadetships : rail, public transport, public works, power generation, etc.

  4. June 23rd, 2006 at 15:54 | #4

    SJ,
    We all are probably wankers (if we are not Roman Catholic priests) but to put “wankers” in a blog comment is then a redundency.
    .
    My point was that the intro was NPOV, but then the rest goes to to talk as if there are natural monopolies. Personally, at least in the short run, I think there are a few natural monopolies. Whether that means that regulation is the best way to deal with them is another question.

  5. Ernestine Gross
    June 23rd, 2006 at 16:47 | #5

    Lindsay, I found your description of your experience in the telecommunicaton sector interesting.

  6. SJ
    June 23rd, 2006 at 20:53 | #6

    …but then the rest goes to to talk as if there are natural monopolies.

    Yeah. It must be an indicator of bias for the page on natural monopolies, even though it presents arguments why might not exist, to also present arguments that they do.

    Personally, at least in the short run, I think there are a few natural monopolies.

    So your point is what, exactly? You admit that natural monopolies exist, but you insist that the same admission in the Wikipedia entry shows that it’s baised?

    I’m gonna bookmark this thread, and point to it in future whenever I need a demonstration you’re a bit, well, lacking in the logical thought department.

  7. June 24th, 2006 at 15:38 | #7

    SJ,
    My opinion on monopolies is not NPOV. Wikipedia should be. Perhaps a revision of your own logical processes would be in order.

  8. June 25th, 2006 at 10:05 | #8

    World Bank attempts to privatise India’s water

    (largely cross-posted from here)

    I also suggest people listen to “Water in India” on Background Briefing on Radio National at 9:05AM, if you can catch it in WA. It’s repeated on Tuesday at 7.10PM (The transcript should be available after a few more days.) It’s about India’s water crisis – falling water tables, dry and and contaminated rivers and lakes – and attempts by the World Bank to ‘solve’ the problem by forcing the Indians to privatise their water utilities.

  9. June 25th, 2006 at 12:58 | #9

    James,
    I don’t know if the water in India has done well from being run by the government. Perhaps some new thinking is needed here.

  10. Ernestine Gross
    June 25th, 2006 at 16:46 | #10

    Useful link, James. The program brings out the distinction between private water (ie people drilling wells on their properties or harvesting water from the roof), municipal water supply, and the global-corporatist version of ‘private’ (multinational firms). It talks about the water conservation customs in India before the rapid industrialisaton of the more recent past, the problem we tend to hear most of, namely the severity of the income inequalities in India and its still growing population. Entrepreneurial activity in the spirit of ‘Catch 22′ is also mentioned. And, that some officials are aware of corruption (involving officials and private entrepreneurs). I suppose, the notion of corruption would have to be interpreted in the context of this very complex democracy built, as it is on a civilisaton much older than ours (‘the west’ including its roots in what we call antiquity).

  11. Terje
    June 26th, 2006 at 00:09 | #11

    SJ,

    You can’t keep yourself out of the gutter can you? It’s pathological I am sure. You really should seek some kind of expert medical advise. Perhaps it is a variant of Tourette Syndrome. As Andrew indicated most of us are wankers. I certainly am. Of long standing I might add. However I don’t see this affliction being related to my libertarian views in any way. Only left leaning socialist tossers with tiny sausages, small brains and an inability to make intelligent conversation seem to find it at all relevant.

    For the last fifteen years or so, though, competition has been regarded by some as an end in itself, the belief being that good outcomes would follow automatically.

    Yes and we are seeing this attitude with the entirely pitiful attempts to regulate Telstra. The thing with competition is that you only need a very small dose, or even just the possiblity of a small dose, to keep the system healthy. What you don’t need is regulations that smother industry with artificial competition constructs or regulation that prohibits any whif of competition. What is called for is Laissez Faire. Unfortunately in politics too few leaders have the backbone to leave alone.

    For what it is worth please humour me with the details of the particular outcome in Telecommunications that is now worse than it was pre-competition.

    Regards,
    Terje.

  12. June 26th, 2006 at 00:52 | #12

    Andrew Reynolds wrote:

    I don’t know if the water in India has done well from being run by the government.

    (Now why wasn’t I able to see this one coming?)

    Andrew, you should have a listen to the program. The Indian public didn’t buy the argument that you are now trying to put:

    There are obvious problems with the government owned water utilities, so therefore the only possible soution is to hand across control and ownership of these utilities, lock stock and barrel to an outside multinational corporation so that they can triple the price of water, sack a large proportion of its workforce, skimp on maintenance, have the Government pass laws to make it illegal to collect rainwater out of the sky (as happened in Bolivia), etc.

    However, when the Indian public learnt of the plans of the Indian Government to privatise water utilities at the behest of the World Bank, they mounted a vigorous campaign in opposition and succeeded in having the plans shelved for the time being.

    I can add that the people of Peru, Bolivia and Mexico have also let the World Bank and the and the Water corporations know in no uncertain terms what they think of their plans to privatise water.

    It is obvious that Australians aren’t altogether impressed, either, with the supposed ‘new thinking’ behind the plans to privatise the Snowy Hydro.

    The Governments of Uruguay, The Netherelands and Belgium have now passed laws, which make the privatisation illegal.

    Ernestine, thanks. As the transpcript has not been put on the web site, I would have to assume tht you must have listened to the podcast? (Haven’t worked out how to do this yet on my non-Micro$oft Linux system.) Must listen again. I seem to have still missed quite a bit.

  13. Ernestine Gross
    June 26th, 2006 at 01:23 | #13

    I would not consider myself a ‘left leaning socialist’. However, I would be very much interested in how Terje goes about proving his assertion that:

    “Only left leaning socialist tossers with tiny sausages, small brains and an inability to make intelligent conversation seem to find it at all relevant.”

  14. June 26th, 2006 at 14:17 | #14

    Andrew, check out The World Today’s web site for the transcript (soon, tomorrow perhaps) of how the privatisation of water services in Angola has led to outbreaks of cholera in 14 of their (18(?)) provinces.

    I would suggest that this further reinforces my point that the people of India were very well advised for having kept (so far) the ownership of their water utilities out of the hands of the likes of Bechtel etc.


    Also, full marks to Terje and Andrew for having the pointed out what should have been obvious : that all of us our wankers.

    However, not nearly as many marks for Terje’s comment as noted by Ernestine.

    I also await Terje’s substantiation of his claim about ‘left leaning socialist tossers with tiny sausages’.

    Still also, being one, myself, I will admit that I have been guilty of having used the term myself, as ‘wanking’ somehow does seem, to me, to be an appropriate metaphor for what I see written on some online forums from time to time (as I think Greg Wood once said somewhere else on this web site).

  15. Hal9000
    June 26th, 2006 at 16:21 | #15

    “For what it is worth please humour me with the details of the particular outcome in Telecommunications that is now worse than it was pre-competition.”

    Yes, Terje, I’ll happily accept the challenge – the closure and abandonment of the analog mobile phone network on the altar of competition. Analog mobile phones had a range of up to 40 km and far better reception where line of sight was a problem – eg in a valley or behind a hill from the transmission tower. This is not just a matter of convenience. It means that folk outside the metropolitan centres now have no communication when, for example, they’re out mustering cattle and injure themselves. The analog network had to be closed because there was not enough bandwidth available to allow a competing network to operate – it was, in short, a natural monopoly and so had to go. Many rural Australians are not unnaturally resentful of this decision, which had everything to do with competition and nothing to do with economic efficiency or outcomes for consumers.

  16. Hal9000
    June 26th, 2006 at 16:35 | #16

    I might add that the analog network’s abandonment meant throwing over $1 billion of public investment into the rubbish bin, as well as significant (if depreciating) private investment in the form of handsets.

  17. June 26th, 2006 at 18:26 | #17

    Hal,
    The CDMA network replaced it – and it works nicely in some of the most remote places. It also offers higher data rates than GSM.
    .
    James,
    I think Terje was referring to a possible general tendency to personalise the argument, at least in his perception, by those more to the Left than himself. Of course, if he got into Catallaxy and read some of GMB’s comments, he may be disabused of this notion.
    .
    I am not saying that every water utility needs to be run by Bechtel. What I did say is that some new thinking is needed – most of the water corporations around the world (including those here) that are experiencing problems delivering water to the people are owned by the government. This is because most are owned by governments. There are more ways to run utilities than have governments run them for political advantage and taking decisions based on political motives.
    For example:
    *a local company can run the mains, subject to a light regulatory touch
    *The government could own the mains, but allow anyone to supply water in to them and anyone to buy the water
    *The English way, (local monopolies on the pipes) is also an option.

    I would prefer that it all be privatised, but gradual moves in that direction I also think will help.
    I always find it odd that you critisise our current federal and state governments for inaction, sloth and general incompetence and yet you consistently say they need more powers. Odd.

  18. Ernestine Gross
    June 27th, 2006 at 01:41 | #18

    Does anybody happen to know whether KPMG was involved in the corporatisation of Telstra or was involved in the partial privatisation of Telstra or is involved in the planned further privatisation of Telstra?

  19. June 27th, 2006 at 01:52 | #19

    Andrew Reynolds, Terje, HAL9000,

    Andrew Reynolds wrote :

    The CDMA network replaced it – and it works nicely in some of the most remote places. It also offers higher data rates than GSM.

    That’s beside the point. They junked $1 billion worth of infrastructure paid for by taxpayers and Telstra’s customers in order to obtain the agreement of Vodafone and Optus to establish digital mobile networks in this country. This was to force people who had bought analog phones to switch over to the digital networks. It made about as much sense as shutting off the water supply in order to force people to buy bottled water.

  20. Ernestine Gross
    June 27th, 2006 at 03:07 | #20

    I understand only Telstra offers a reliable mobile service in rural Australia. Source: Conversations with people from rural Australia.

  21. still working it out
    June 27th, 2006 at 08:30 | #21

    If the telecommunications infrastructure in this country had not improved over the last few years then it would be a pretty damning indictment of privatisation as the cost and capabilities of communications technology have been improving pretty rapidly in recent times.

  22. Hal9000
    June 27th, 2006 at 09:54 | #22

    “The CDMA network replaced it – and it works nicely in some of the most remote places. It also offers higher data rates than GSM.”

    Ask anyone in rural Australia whether CDMA has range anywhere near equivalent to analog and they’ll laugh at you. Actual example: analog worked clear as a bell on a handheld on my cousin’s property 35km outside Warren on the western plains of NSW. CDMA: no signal. The land is flat as a tack, and the transmitter tower sits atop a wheat silo equivalent to a 20 storey bulding. This is not by any means a rare experience.

    At any event, Telstra announced on 15 November 2005 it is closing the CDMA network, having received legal advice it was not required to continue to offer the service by the terms of its licence. Rural Australia is just not profitable enough.

    At any event, my point stands: the introduction in competition in telecommunications led directly to a reduction in service, in this case with potentially life-threatening consequences, and also to the wastage of significant public infrastructure.

  23. Ruth Kershaw
    June 3rd, 2008 at 15:47 | #23

    It would appear as though ‘renationalisation’ has subtly emerged on the Telstra agenda.

    As it appears to be going with the FTTN – the most efficient thing to do would be to ‘structurally separate’ ownership of the national infrastructure from Telstra.

    It seems providing for ‘competition’ in the retail and content providion downstream – requires a nationally consistent infrastructure and pricing base. And not one like we’ve seen, wehere the purely commercial demands of the owners make the infrastructure so slow and expensive that Australia is catapulted backwards against the countries with growing ICT economies.

    Why we have to go around the long way to get back to the efficient way is just frustrating. Bring on one nationally owned (OK with some private equity parties to align incentives) & regulated infrastructure.

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