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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. June 11th, 2006 at 17:35 | #1

    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.

    Renationalising the Telstra network would be easy given the federal government’s low debt. The Commonwealth should also rename it the PMG and make officers wear uniforms like the good old days.

    I think a Commonwealth Peoples Bank would go down well in the current environment. No fees would save on the need to pay exorbitant CEO salaries. We would have to wait for a property crash for that one.

    Also, a movement to eliminate the plague of toll roads that have infested our suburbs would also be welcome. Macquarie Bank et al have just replaced the old Dept of Public Works, at about 3 X the cost in management fees. With about 10 X the engineering fiascos. Free our freeways now!

    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.

    It is interesting that the most unpopular privatisation in recent years has been Sydney’s Cross City Tunnel. This brought the class war home to the economic elite and they did not like it one little bit.

    PS Elites of all types should have their noses rubbed in it for as long as possible. The latte drinking cultural elite Wets could also benefit from a prolonged period of exile to the Western Suburbs war zone that their nusto cultural policies have helped to create. Bring the cultural war home to the culturati.

  2. Katz
    June 11th, 2006 at 18:19 | #2

    Nationalise latte now!

  3. Dogz
    June 11th, 2006 at 18:28 | #3

    Telstra has one piece that needs to stay in public hands: access rights to the conduits in which their cables run. They don’t even own the conduits themselves – strictly speaking they are owned or at least governed by your local council. But no-one other than Telstra gets to decide who puts cables in there.

    But the rest? None of it is a natural monopoly so why should it be renationalised? Telstra gets its butt kicked in every market other than the ones in which they have monopoly power. Why would the public want to renationalise dog businesses like those?

  4. June 11th, 2006 at 20:48 | #4

    If you did nationalise cable conduits then in my view they should not in fact be nationalised but rather ownership passed to local councils.

    I think the privatisation of Telstra could have been done better. However I don’t support renationalisation. Although I don’t support the future fund either.

    I do applaud John Quiggin for declaring his hand on this issue.

  5. June 11th, 2006 at 20:51 | #5

    Thanks, Professor Quiggin, for helping to breathe life back into this very important issue. I have copied this to the web site of Citizens Against Selling Telstra, which has been badly neglected in recent months. I trust that this is OK under the terms of the “Creative Commons Attribution-NonCommercial-ShareAlike 2.1 Australia License”.

    Also, note the new escape clause in Telstra’s charter that requires that it maintain a presence in the bush:

    Such a presence was conditional on whether it “is broadly compatible with its commercial interests and is not unduly prescriptive and does not impose undue financial and administrative burdens on the company”.

    Barnaby Joyce is again grumbling, but he can’t say that he wasn’t warned by his own constituents who didn’t even want him to vote for the sale in the first place.

    If he had kept his election promise, and voted against privatisation, we would not be in this mess today.

  6. Tom N.
    June 11th, 2006 at 21:10 | #6

    BLAIR’S FAULTY LOGIC

    Q says “Although Tim [Blair] correctly points out the logical symmetry – if people hate privatisation, and clearly they do, then they should welcome nationalisation…”

    At the risk of being pedantic, Blair’s point is based on a non sequitur. “Privatisation” always involves a move away from the status quo. Implied in the term is that the item in question was (prior to its privatisation) in public hands. Likewise, “nationalisation” implies that the item was in private hands. A conservative (in the sense of one with strong faith in existing structures) may logically be against both privatisation and nationalisation.

  7. Dogz
    June 11th, 2006 at 21:30 | #7

    “If you did nationalise cable conduits then in my view they should not in fact be nationalised but rather ownership passed to local councils.”

    In principle a good idea, but in practice it would be very inefficient for a service provider to have to negotiate with each individual council.

    On another note: there’s no way Telstra enjoys the same public status as the snowy scheme. I doubt there’s an Australian over the age of 25 who hasn’t been on the receiving end of a surly, union-protected, Telstra customer support representative, or witnessed the pedestrian work-practices of their non-contract service personnel.

    Telstra is more national disgrace than national icon.

  8. snuh
    June 11th, 2006 at 22:19 | #8

    At the risk of being pedantic…

    well if you won’t, i know someone who will.

  9. observa
    June 11th, 2006 at 22:29 | #9

    If it were certain telephony was always to be delivered efficiently by wires then there is a case for govt ownership of such a natural monopoly. Technological developments suggest no such thing and hence there is no more case for taxpayer risk in owning Testra than there is for them owning the Commonwealth Bank, Qantas, or their own domestic Kodak for that matter. We have already witnessed the significant devaluation of Telstra due to the ALP’s dishonest rearguard campaign. Squandered would be the more apt description. The only way to maximise the sale value would have been an unconditional sale, rather than the cross-subsidy rules for remote users. Taxpayers tend to think this is a costless exercise to them, whereas if cross subsidy is clearly defined on the expenditure side of govt budgets, alongside roads, health, university expenditure and the like, then they can more readily appreciate the true cost to themselves. Unfortunately such gross cross-subsidies can seldom be hidden from the inexorable forces of international competitiveness and that can be expressed in exporting jobs to avoid another weight in the saddlebags of local industry. I guess John needs to ask himself if NZ unemployment is at the same level and trends as Australias, when coming down in favour of more govt ownership or not. So do we all, although the benefits and costs can seem so remote to us individually, as to be meaningless in our overall deliberations. That is a fallacy of composition, as the Soviets found to their dismay. That’s the anomaly over privatisation Tim Blair is rightly alluding to.

  10. June 12th, 2006 at 00:54 | #10

    The best case for (re)nationalisation is undoubtedly Telstra, minus peripheral bits like BigPond which should be wholly privatised.

    John,

    Telstra Mobile currently has significant competition (eg Optus and Vodafone). Would you nationalise Telstra Mobile or would you include it along with BigPond as a peripheral bit that should stay private?

    Regards,
    Terje.

  11. June 12th, 2006 at 03:42 | #11

    I don’t think that Telstra should be re-nationalised, though I do think that the status quo is less than wonderful.

    What should happen (or should have happened prior to the original float) is for Telstra’s wholesale and retail divisions to be forcibly separated. There’s a strong argument for tight regulation of the wholesale division, and even a reasonable argument for keeping it under government control (though I’d disagree).

    Only problem with a float of just the retail division is that with the possible exception of the cable tv and mobile services, it’s going to go down the gurgler over the next decade or so. Every phone company in the world is scared to death of voice-over-IP, and incumbent carriers like Telstra stand to lose 90% of their telephony revenues.

  12. June 12th, 2006 at 06:55 | #12

    >More interestingly, the government led by Tim’s UK namesake renationalised Railtrack, to widespread applause, a couple of years ago.

    Some applause from left-wing columnists, sure, but in reality it’s been a disaster.

  13. Sinclair Davidson
    June 12th, 2006 at 08:57 | #13

    What price should Testra be nationalised at? Current market prices? Historical listing price?, or the price you suggested Telstra was worth at the time it was privatised? From memory, in the AFR, you suggested it was a lot more valuable than it turned out to be. Mind you, rather than engage in foreign adventures etc. Telstra could have paid the money back to shareholders. Huge governance failure on the part of the majority shareholder.

  14. jquiggin
    June 12th, 2006 at 11:00 | #14

    I’m in favour of current market price as the basis for nationalisation. There’s no reason to impose capital losses on shareholders or to give them a free handout.

    I agree that there was a governance failure on the part of the majority shareholder. Even before the first partial privatisation, I was arguing that partial privatisation is the worst of all possible worlds. The government was pretty scathing of this argument at the time, but they seem to have come around now.

  15. Dogz
    June 12th, 2006 at 11:23 | #15

    JQ, instead of just stating Telstra should be renationalized with no supporting arguments (the Evatt link in your post contains nothing of substance), why don’t you instead do a detailed analysis of the competitiveness of Testra’s various business units and show how the public will so drastrically lose out by having such fine businesses in private hands?

    That would at least make me feel like I am getting something for my contribution to your $250,000 salary.

  16. jquiggin
    June 12th, 2006 at 11:32 | #16

    Dogz, instead of silly personal attacks (about which you’ve been warned previously) why don’t you read my numerous publications and submissions on the subject, which are accessible on my website.

    To respond, since the issue has been raised, my work on topics like Telstra is done in my free time. The work I’m doing for my Federation Fellowship is reported here.

  17. gordon
    June 12th, 2006 at 11:38 | #17

    Current market price? A windfall for some who sought to profit from the misguided nationalisation exercise in the first place. They don’t get much sympathy from me. There was no good faith there, just a gravy train. But if some form of payment is thought to be necessary for window-dressing, I would issue ex-shareholders with a bond of equivalent face value, paying, say, 2% and maturing in 150 years. The Govt. would then offer to buy the bonds at market rates – which given the low interest rate would be a healthy discount.

  18. Dogz
    June 12th, 2006 at 12:42 | #18

    JQ, it wasn’t a personal attack. It was a statement of fact: if you performed such analysis I would feel like I was getting better value for my money.

    I read the Evatt article you pointed to in your post. There was nothing of substance there. Certainly nothing that discussed the competitiveness of any of Telstra’s businesses. Rather than force me to trawl through the rest of your writings on the subject, can you point me to a paper in which you have analysed Telstra’s various businesses to determine their market-competitiveness and value to the public upon renationalization?

  19. Mike H
    June 12th, 2006 at 12:51 | #19

    For some, the state or commonwealth selling assets or enterprises; concieved, built and managed publicly is a credo absolutum. For Dogz and others similarly captured by dogma that will not concede the point that there are some activities that benefit us all that are best owned in sovereignty and not privately. Communications, water, air-transport infrastructure, and roads. Any toll system is a financial clamp on that artery of commerce.

    Funnily enough the majority of citizens of this commonwealth do not want Telstra sold so why not live with it. Telstra’s inefficiencies are a minor price to pay compared to the tyranny of business oligopolies or monopolie.

    The pseudo privitisation of air services infrastructure such as airports, air-traffic control has been succesful at providing impetus for the development of those facilities but at the cost of monopoly firms with unfettered market power at selective locations. Problem with that approach is that the rest of the country has been dumped out of the system and the community cost is that with exhorbitant landing charges at Sydney airport for example the operating cost cannot be spread over a larger cutomer base (such as is required to to provide wide bodied transport jets) in smaller and regional markets that wish to travel to Sydney, therefore air transport services to very small markets exit the industry and are not replaced. So community after regional community loose a reliable air transport link and regional and rural councils are left with expensive airport assets and no users. We remove an air traffic control service that provides 24/7 services to most areas in the country and accept the risk that once you leave specific air corridors, it is effectively look out for your self, hardly a triumph for public good!

    As a rural dweller I have seen absolutely no benefits from the privitisation of telecommunications services, my calls cost more, my internet bandwith and speed is sub-standard, my mobile phone only works with specific designated locations and platform changes such as 3G changes only offer further disruption and costs. I liked the system that no matter where I went in this Country that some form of telecommunications system such as a basic phone line was available to all but those who were literally the back of beyond. I liked it so much I did not mind paying but we as a community benefited even if it only reduced risk, that is worth paying for. I am all for re-mutualising telecommunications, airports, roads and water systems, sooner the better.

  20. jquiggin
    June 12th, 2006 at 13:44 | #20

    Dogz, if you’d asked politely the first time, I’d have been happy to help.

    To all readers, please bear in mind that you’re getting this blog free of charge. If you don’t think the service is adequate, I’m happy to give you a full refund.

  21. jquiggin
    June 12th, 2006 at 13:45 | #21

    Scott Campbell, if only leftwing columnists supported renationalisation, presumably the Conservatives would be on a winner promising to restore private ownership. Have they done so?

  22. June 12th, 2006 at 14:00 | #22

    Renationalise Telstra? What crap!

    With the state of the current network, a govt owned telecommunications provider would leave Australia well behind the rest of the world, well more so than we currently are.

    A fully privatised telecommunications industry with effective regulation is the only way to go.

  23. Dogz
    June 12th, 2006 at 14:04 | #23

    Dogz, if you’d asked politely the first time, I’d have been happy to help.

    Uhuh. Since you’re the one advocating renationalization of Telstra, the onus is on you to demonstrate why the public will benefit. In the meantime I’ll draw the most obvious conclusion from your failure to point us to any relevant analysis: you don’t have any.

    Such a conclusion is also supported by the facts: Telstra gets its clock cleaned in every market in which it does not have monopoly power.

  24. milano803
    June 12th, 2006 at 14:28 | #24

    “if only leftwing columnists supported renationalisation, presumably the Conservatives would be on a winner promising to restore private ownership. ”

    Since Railtrack shareholders were given the shaft last time, who would buy shares this go-around? The public in Britain has certainly NOT benefitted from the nationalization of Railtrack. In fact, they’ve taken quite a bath.

  25. June 12th, 2006 at 14:54 | #25

    I was about to state what TomN already did. I can only add a description of the price of change, with the metaphor of repeatedly bending the lid of a tin back and forth. This eventually makes things snap, through metal fatigue.

    Now, I know the perils of argument from analogy. Here I am using two of the three legitimate uses I know of. It’s a metaphor, for illustration – not reasoning, but communication. And, it’s a counterexample to an argument presented in a too general form (as JQ presented it). When an argument is very broad, one can legitimately try it on for size in other areas than the intended subject area, and counterexamples there refute the original general argument, thus showing that you can’t rely on it even in the original subject matter.

  26. Ernestine Gross
    June 12th, 2006 at 15:01 | #26

    “Next cab off the rank, in my view, should be airports.”

    IMHO the argument is not ‘privatisation’ vs ‘nationalisation’ but rather under which conditions one form of ownership is more suitable than another. These conditions may differ across countries.

    In my submission to the 1995 Senate Select Committee on Aircraft Noise in Sydney (published), I gave reasons (conditions) under which I would not recommend privatisation (non-trivial externalities which cannot be internalised). My argument is based on the theory of incomplete markets (general equilibrium theory) and empirical evidence. IMO, Kingsford Smith Airport was not suitable for privatisation on these grounds. However, I did not argue for all airports to be publicly owned. A blanket pro or anti-privatisation ‘position’ is inappropriate. For example, Australia has geographically large privately owned land areas. It is conceivable to have a private airport, used by the public for domestic aviation – say tourism to the outback – on such a private landholding because the externalities (air, noise, water pollution) are internalised by the landowner and the risk of an accident on approach or departure over the private land seems suitable for private insurance. Moreover there are no taxation implications for purely domestic air traffic.

    The terms ‘privatisation’ and ‘nationalisation’ are, in a sense, unfortunate because, from a micro-economic perspective, public ownership is often involved in both organisational forms. The distinguishing feature is the voting mechanism. Under the ‘private public ownership’ (publicly listed companies) the rule is ‘one dollar one vote’ and under national public ownership the rule is ‘one head one vote’ (for citizens). There are accountability issues with both form. However, in the more recent past the ‘private public ownership’ model has thrown up particularly severe accountability problems.

  27. jquiggin
    June 12th, 2006 at 15:01 | #27

    Dogz, I’m sick of dealing with your continued rudeness. You’re barred for a week. Any attempt to evade this will result in a permanent ban. If you choose to come back after that, please avoid any personal comment directed at me or other commenters.

    I remind everyone that I’m doing this for free and I have better things to do with my time than to deal with people abusing me or demanding I do their research for them.

  28. June 12th, 2006 at 16:32 | #28

    The convenience of it all. When educated types want policy to be based on a bit more nuance that what the average person in a marginal seat thinks when given 1/4 of the facts through the conduit of a murdoch bogroll, the Blairettes accuse them of being out-of-touch, latte (insert cliche)s.

    However when most people aren’t so keen on something like privatisation because they can’t see the logic in merely selling off assets so that a political party can spend the proceeds in a few bribes and pork barrel jobs, they are ‘economically illiterate’ masses who should be ignored or forced to accept their medicine.

    I’ll give you an industry- Melbourne’s public transport. It got privatised, its been pumped full of public money regardless like an anorexic having B12 injections, and still, it’s (**John’s not keen on bad language**)ing attrocious.

    At least if it’s in public hands we have the direct ability, via the ballot box, to demand the boss’s head on a plate…

  29. Bemused
    June 12th, 2006 at 17:11 | #29

    Dogz de-barked at last. Long overdue.

  30. SJ
    June 12th, 2006 at 17:14 | #30

    At least if it’s in public hands we have the direct ability, via the ballot box, to demand the boss’s head on a plate…

    In theory, anyway. In NSW it’s in public hands, but I think everyone knows there’s no point voting against Labor because of it. The Liberals would want to privatise it, and make it worse. Everyone, public and pollies alike, understands this, so nothing improves.

  31. Jill Rush
    June 12th, 2006 at 19:05 | #31

    The privatisation of the airports has been very poor in terms of evading development controls and the resultant problems that have been created to make a dollar.

    The comments about the nationalisation of British Rail ignore the rundown of that facility during the years of privatisation – not to mention the accidents and problems. The renationalisation occurred because of serious problems in that very important transport system.

    The problem with privatisations is that it ties everything up in red tape and nobody has responsibility for fixing it. It is one of reasons that privatisation has not been popular. Not every body wants to spend all their time calling call centres and hanging on for half an hour or more just to be told to ring another number and try again. Repeat and talk to a machine etc. Privatisation often transfer publics benefits to private shareholders whilst the society as a whole is left less efficient. Telstra may not be the most efficient organisation but at least we can complain to a pollie and get action if we need to.

    The religion of Privatisation may soon be exposed for the cult it is.

    Good call on Dogz – his demand to get his money’s worth was quite astounding.

  32. June 12th, 2006 at 19:08 | #32

    John – okay, you don’t have to deal with Dogz for a week. So, can I politely ask you the same question he did, namely “can you point me to a paper in which you have analysed Telstra’s various businesses to determine their market-competitiveness and value to the public upon renationalization?” After all, it is a valid question and has some bearing on your above assertions. I understand that you may be busy, so a simple link or reference is more than adequate – no need to go writing War and Peace. Thanks.

  33. June 12th, 2006 at 19:19 | #33

    “The problem with privatisations is that it ties everything up in red tape and nobody has responsibility for fixing it.”

    Um, Jill, I think that qualifies as an own-goal. The major cause of bungled privatisation comes from government-imposed over-regulation of newly-privatised industries – mostly imposed as a sop to the large number of partially reconstructed socialists who love the idea of plodding, monolithic old SOEs dominating the economic landscapes of economies, and can’t stand the thought of their national champions being sold off. Trouble is, the end result is the worst of both worlds. A classic example is the privatised LA power companies, who were forbidden to raise energy prices, despite the fact that the cost of production became much higher than the government-imposed sale price. Result; multi-billion dollar power company debt, no investment in the grid and thus widespread blackouts. So you’re right, red tape is generally the problem with failed privatisations.

  34. Andrew
    June 12th, 2006 at 19:51 | #34

    “multi-billion dollar power company debt, no investment in the grid and thus widespread blackouts.”

    Not exactly. Grid underinvestment (and underutilisation of existing infrastructure) was a deliberate choice, as the power companies realised that they had a great chance to make a killing in the market by deliberately restricting supply, and a friendly regulatory body under Bush Jnr who wouldn’t give them more than a slap over the wrist for doing so. Hence the blackouts – far more a function of under- than over-regulation.

    Massive power company debts were being created simultaneously, but mostly only for Enron, and last I checked there had been a couple of guys sent to the slammer as a result. Not much to do with privatisation at all really.

  35. Andrew
    June 12th, 2006 at 19:54 | #35

    To clarify – the municipalities who had to buy the power from Enron etc did make big losses, but only because the suppliers were artificially inflating the price by restricting supply. (I was living there at the time.)

  36. June 12th, 2006 at 20:12 | #36

    For the record I’m not fazed by telstra…

  37. Paul Kelly the footy player and journo
    June 12th, 2006 at 20:34 | #37

    Renationalise James Waterton! Then strip the parts and do something useful with them. Amalgamate Dogz and Tim Bliar and sell the result to Fox television.

    Brown-nose Blair in case he becomes editor of the Bulletin.

    I demand to see evidence that Waterton has a functioning mind, rather than a cliche-machine. I demand substance!

  38. jquiggin
    June 12th, 2006 at 20:44 | #38

    Since you ask politely, James, I’m happy to point to this list. Perhaps the paper most directly relevant to your query is this one from Agenda in 1998. Although the opportunity has passed, I’d also point to my suggestion in March 2000, to sell off the Internet businesses “while the bubble lasts” here.

  39. June 12th, 2006 at 22:07 | #39

    Andrew – okay, maybe I should make my own clarification. Actually, I’ll just point you to an Economist article – http://www.economist.com/displaystory.cfm?story_id=478833 – (sorry, having trouble embedding the link) which neatly and comprehensively analyses the issue. I don’t think the giant power utilities who lost their shirts big-time can be termed “municipalities”, incidentally. As for blaming it all on Bush (nasty man wouldn’t regulate!) – you do realise the whole thing was largely a state responsibility and the federal government barely has anything to do with such matters? Also, the problem was born, festered and started turning malignant during Clinton’s presidency. Must be his fault! But seriously, the damage that energy crisis wrought on Gray Davis’s governorship led to his downfall at the recall election. Pretty disingenous political point scoring by attempting to lay it at the feet of the new President, wouldn’t you say? (Not that Bush isn’t able to bungle things – he is a bungler par excellence. But this one obviously wasn’t down to him) Slipping Enron in there was a nice touch, too – tweaking all the left-wing gripes, well done – however to say “massive power company debts” had “not much to do with privatisation” is verifiably false. My original point stands; the LA energy crisis was caused by a bungled privatisation that imposed a ridiculous, though politically expedient, regulatory framework on the industry – and the responsibility for that lies at the feet of the state administration running California in the mid-90s.

    John – much appreciated. Thank you; I shall read the Agenda piece shortly.

    Thanks also to Paul Kelly. Blatant displays of risible stupidity, like that we just saw from him, cheer me up no end.

  40. Seeker
    June 12th, 2006 at 23:12 | #40

    “To all readers, please bear in mind that you’re getting this blog free of charge. If you don’t think the service is adequate, I’m happy to give you a full refund.”

    I am happy for you to keep my ‘subscription fees’, Prof Q.

    And as I am feeling generous today, I’ll even cover Dogz’ refund as well. ;-)

  41. Andrew
    June 12th, 2006 at 23:26 | #41

    James, maybe we can meet partway on this:

    “the LA energy crisis was caused by a bungled privatisation that imposed a ridiculous, though politically expedient, regulatory framework on the industry – and the responsibility for that lies at the feet of the state administration running California in the mid-90s.”

    I won’t disagree that the LA power degregulation was a massive screwup that invited the problem, and that “not much to do with deregulation” was a poor choice of phrase. However deregulation was far from the whole story; to quote the official report of that well-known leftist hotbed, the US Federal Energy Regulatory Commission: “…many trading strategies employed by Enron and other companies violated the anti-gaming provisions…” So I’m not just “slipping Enron in” for the hell of it, since they were in the thick of things. (The FERC report dates from 2003 – the article you linked was written at the time of the crisis itself, and much information emerged subsequently, so I can’t agree with your description of it as comprehensive.)

    The deregulation was certainly a screwup, but the power companies didn’t have to break the law. I suspect we’d part company on what a better course of action would have been – I’d say it should never have been deregulated in the first place, since it was because of the deregulation that the market manipulation became possible, and little social good was achieved by it.

  42. June 13th, 2006 at 03:09 | #42

    It should never have been regulated in the first place, and the partial deregulation only creates perverse incentives for the misadventure that you mention. I never said private companies aren’t willing to exploit such loopholes and take advantage of bad legislating. Therein lies the root cause.

  43. rog
    June 13th, 2006 at 07:48 | #43

    From my discussions with long standing public servants it would appear that PPP suffer from lack of proper govt management from the inception stage to execution – this is their opinion, not mine. Private companies are bewildered by the almost daily chopping and changing of the goal posts by Govt bodies – it is hard to meet performance guidelines if the client is not sure what they are.

  44. still working it out
    June 13th, 2006 at 14:57 | #44

    “If you did nationalise cable conduits then in my view they should not in fact be nationalised but rather ownership passed to local councils.”

    That is a brilliant idea.

    Regional communities need to attract high value knowledge workers, and I can tell you that those workers dream of telecommuting from attractive locations far away from giant traffic jams like Sydney. The only thing stopping this happy marriage is the availability of fast reliable broadband. Its crazy that this wonderful outcome is entirely dependent on the indifferent whims of Telstra executives. If local councils owned the infrastructure at least some of them could move to quickly rectify this situation.

  45. June 13th, 2006 at 20:21 | #45

    maybe the best thing to nationalize or unprivatize is the rail assets in the north of WA (kimberly) region. As we’ve seen in recent court cases, the Big Miners (Rio and BHP) have a stranglehold on these important peces of infastructure, hence limiting the ability of junior miners to get up and started.

    Whilst BHP may have paid a substantial majority of the asset (with the rest provided by Tax payer subsidies), the national interest is for as many mines to produce, not for a single company to monopolize the entire region, starving the juniors until they collapse and are then swallowed up.

    Its even more interesting to consider the conflict the federal govt. has with regards to the 30% of the future fund that will be parked in BHP and hence the governments desire for the strangehold on rail infastructure in the northwest to continue – hence limiting supply and keeping prices artificially high!

  46. Lindsay
    June 13th, 2006 at 23:21 | #46

    “With the state of the current network, a govt owned telecommunications provider would leave Australia well behind the rest of the world, well more so than we currently are.”

    The problem is that the current state of the network is a result of the said privatisation

    Prior to the breakup, under the control of the PMG, Australia had one of the best telecommunications systems in the world. Currently I don’t know where it stands but it is probably much lower. It is hard to say however as most of the world telcoes have been either privatised or “de-monopolised” and have probably spiralled down in much the same way as Australia.

    The PMG’s department, and later Telecom Australia were service driven enterprises. Now before you ROFL service driven does NOT mean Customer service. It refers to the technical quality of the service. To the fact that from “ear to ear” the quality of the service was the driving force behind the organisation.
    It is probable that this emphasis left the customer feeling a little out of control and there was an attempt in the latter years of Telecom to move more towards Customer service.
    With part privatisation and the emergence of Telstra the organisation became more a profit driven enterprise, which is of course, the natural result of privatisation. The primary concern is return to the shareholders and if this means the reduction of expenditure on maintenance etc. then so be it.

    I have been in the Telecommunications industry since I was 16 and in the 40 years since I have seen some dramatic changes.
    I am proud to say that I have worked for the PMG’s Dept. I am proud to say that I have worked for Telecom Australia, and I am proud to say that I have never worked for Telstra. I am hoping that I will reach retirement before the whole network disintegrates because there is little left of it that will stand for much longer. This includes that part of the network that has been almost totally abandoned by Telstra, the cabling within private premises.

    In 1966 I commenced a traineeship that lasted for 5 years. A traineeship that provided both theoretical and practical training. In 2006, after the completion of 5 DAYS of training one can be registered as a communications cabler.

    The current situation provides major difficulties in attending to “service faults” as there are so many links in the chain, Each with little or no understanding of the technology or requirements of the adjacent link. It is extremely common to have the situation bounced between Telstra, telco, ISP, premises cabler and IT serviceman and back to the beginning.
    When I first began one organisation was responsible to completely maintain the service from mouth to ear and back again. I know an egg can’t be unscrambled but I do look back with a certain amount of nostalgia

  47. Jill Rush
    June 13th, 2006 at 23:23 | #47

    The red tape which has proliferated with privatisations may have been the result of government but it can also be a failure of the market. It can also be inexperienced public servants who lack corporate memory due to the churn factor within the modern public service.

    The airports are a classic example where federal land is sold and remains federal but local authorities at the expense of ratepayers are left to provide the infrastructure to deal with traffic jams and other inefficiencies.

    The belief that private is always better has been found wanting in terms of the wider society as private firms seek to service a narrow base. After all if the air traveller is unhappy there is no real opportunity to go elsewhere. The Airport share holders will be happy but it doesn’t have to be a happy experience for those who aren’t shareholders, especially if the fees to use the airport are exorbitant which is possible under a natural monopoly.

  48. June 14th, 2006 at 01:55 | #48

    Good posts Lindsay , Jill Rush, ‘still working it out’, Armaniac and SJ.

    Telstra belongs to us and has been paid for, many times over through our taxes and hefty phone bills.

    To sell this asset, when the order of 75% of the public have consistently opposed the sale is morally no better than theft.

    Don’t anyone give me any bulldust about how the Government has obtained a ‘mandate’ to sell. If the public had not been deceived in regard to Telstra and so many other issues the Liberals would have lost the 2004 elections by a massive landslide.

  49. milano803
    June 14th, 2006 at 04:29 | #49

    The belief that nationalized is always better is also wanting. It makes little sense to say that private firms seek to serve a narrow base. Why would anyone interested in making money do that? Of course an air traveller can go elsewhere, they can take another airline, another airport or another mode of travel.

    Let’s think about this logically. Airport shareholders are interested in what? Making money, right? And how do they do that? Well, thay attract lots of customers. And how do they get lots of customers? Well, they provide a service/product that people want. Unhappy customers go elsewhere, leaving shareholders with less what? Less business and less money.

    This frantic clutching of nationalization as a panacea for everything, even in the face of previous disasters, such as Railtrack, is silly. Nationalization is NOT always the answer. Sometimes it IS ok for shareholders to make money.

  50. still working it out
    June 14th, 2006 at 10:38 | #50

    If you own the only international airport in a city of four million people you don’t have to work to attract customers. Customers cannot go elsewhere.

  51. June 14th, 2006 at 11:53 | #51

    miloan803 wrote:

    Let’s think about this logically. Airport shareholders are interested in what? Making money, right? And how do they do that? Well, thay attract lots of customers. And how do they get lots of customers? Well, they provide a service/product that people want. Unhappy customers go elsewhere, leaving shareholders with less what? Less business and less money.

    I suggest you go back and read what has been written by others in this thread :

    Mike H wrote :

    Problem with that approach is that the rest of the country has been dumped out of the system and the community cost is that with exhorbitant landing charges at Sydney airport for example the operating cost cannot be spread over a larger cutomer base (such as is required to to provide wide bodied transport jets) in smaller and regional markets that wish to travel to Sydney, therefore air transport services to very small markets exit the industry and are not replaced.

    And also read what was written by Professor Quiggin, himself, in the original article :

    The privatisation of these monopolies was followed by massive increases in navigation charges, as well as a whole string of petty imposts on travellers.

    And, also, be sure to follow the link in Professor Quiggin’s article.

    The Australian community has lost very badly by privatisation because the corporations which take over the control of these assets are not accountable to the community as a whole.

    They can appear to be more ‘profitible’ and ‘efficient’ by gouging the captive customer base for every possible dollar, whilst shiftng the costs of degraded and eliminated services and job losses away from themselves and onto the wider community.

    The fact that our political representatives have been able to get away with imposing their predictably harmful policies of privatisation, outsourcing, public private partnerships, etc for so long is a damning indictment of our supposedly democratic from of Govenement.

  52. milano803
    June 14th, 2006 at 12:01 | #52

    James,

    “The privatisation of these monopolies was followed by massive increases in navigation charges”

    without privatization, would there have been no increases in navigation charges. Do costs not go up every year, no matter WHO owns the airport?

    There are few entities LESS acountable to the community as a whole than government owned and run entities. Have you ever tried to get anyone on the phone at any government entity to solve a problem? Is there anyone LESS interested in helping you than a government employee?

    If you are suggesting that voters vote the way they do because of service at airports, I think you’re quite wrong. I’m not against nationalization if it makes sense, but I am not for it as a blanket policy. I’ll take my chances with a company, in this case an airport, that actually needs and wants my business, rather than one that couldn’t care less if I travel anywhere at all.

  53. milano803
    June 14th, 2006 at 12:05 | #53

    James, sorry I neglected this quote you gave, think it was Mike who said it.

    “therefore air transport services to very small markets exit the industry and are not replaced”

    I would hope so. Does it make sense to have air transport services to very small markets? Do you want you tax dollars to provide such services in small markets simply so that people, who I would assume are choosing to live in a very small market, won’t be inconvenienced by having to travel to a larger market to access air travel services?

  54. June 14th, 2006 at 12:42 | #54

    milano803,

    The massive increases in navigation charges are clearly much larger than what would have been the case if the airports had remained in Government hands. They were done so that as much wealth as possible could be transferred out of the pockets of the airline operators and the travelling public into the pockets of the likes of the Macquarie Bank and their exorbitanly remunerated CEO’s. I can’t understand why you simply won’t acknowlege the evidence before you.

    The fact that may Government bodies are often so indifferent to the needs of the public they are meant to serve is indicative of the fact they are usually made to run according to a private enterprise business model, rather than as public services. This is not what the public wants and if we could ever get democracy properly working again in this country we should be able to change this.

  55. milano803
    June 14th, 2006 at 12:46 | #55

    James, how do you that “The massive increases in navigation charges are clearly much larger than what would have been the case if the airports had remained in Government hands.”

    Can you show that airports in government hands did not have massive increases?

    “The fact that may Government bodies are often so indifferent to the needs of the public they are meant to serve is indicative of the fact they are usually made to run according to a private enterprise business model, rather than as public services.”

    Government bodies are indifferent to the needs of the public because they are run according to a private business model, which would depend upon satisfied customers?

  56. milano803
    June 14th, 2006 at 12:49 | #56

    sorry, I hit post before I was ready.

    Government bodies are indifferent to the needs of the public because they are run according to a private business model, which would depend upon satisfied customers?

    Isn’t it rather that government bodies are indifferent to the needs of the public because they are NOT run on a model that requires satisfied customers for success, which would be the private enterprise model?

  57. June 14th, 2006 at 14:17 | #57

    milano803,

    If we were to follow your argument to its logical conclusion there would be very little rural economic activity at all. We have already gone a long way into the vicious cycle caused by cutbacks to government services (e.g. rail), which, in turn, has caused job losses, and made local enterprise less viable, this has led to further service cutback driven by the economic ‘rationalists’ in Canberra and in the state capitals and by the private banks. This, in turn, has made even more rural businesses unviable.

    As shown by Mike H, above the privatisation of the airports has further fed into the vicious cycle. The rural air services are not able to pay the exorbitant charges, which are necessary to satiate the enormous appetites of the Macquarie bank and its CEOs, so rural communities miss out on services.

    I am not arguing that urban residents should give unlimited subsidies to rural communities (although the Australian economy is now so dysfunctional and distorted it is not clear who is subsidising whom), but the unnecessary costs, that have been imposed on the whole community, rural and urban alike, through privatisation, should not have been brought into the picture in the first place. If it had not been done we would have been far more able to accommodate the needs of rural communities.

  58. StephenL
    June 14th, 2006 at 14:40 | #58

    Although I am sympathetic to renationalization in many cases, it does seem to me that the arguement about airport prices is not the best ones. Airtravel is massively underpriced because the environmental effects are not costed. The best thing to do would be to put a tax on passenger miles (sounds so much better than passenger kilometres) and use this to fund remediation programs and alternative infrastructure. However, no Australian government was going to have the guts to do that in the next decade or two.

    Consequently, letting Maquarie Airports rack the costs up astronomically at least goes half-way – it provides a disincentive to fly, even if the money just goes to buying fourth houses for the senior management at Macquarie.

  59. June 14th, 2006 at 15:05 | #59

    StephenL,

    Of course we need to question the desirabality of air travel on the massive scale that occurs today, given that the petroleum, upon which it depends will be priced beyond the reach of ordinary people within a matter of a few years, and will be completely exhausted by around 2035.

    However, I don’t see how handing across the control of our airports to the likes of the Macquarie bank will significantly help. Whilst they are making huge profits at our expense, they obviously won’t raise charges so high as to cause many people to no longer fly.

    If there is any money to be made from discouraging air travel (and I would strongly doubt that that was the Government’s motivation for privatising the airports), it should go into the hands of our Governments so that it can be put to use for the benefit of the community, rather than for the purchase of extra houses for senior Macquarie Bank executives.

  60. vox populi
    June 14th, 2006 at 15:55 | #60

    Can anyone guarantee that a privately-owned telco will invest sufficiently in rural areas (even if it is unprofitable) without government subsidies or high levels of government regulation? Surely this is reason enough for continued public ownership, at least of basic infrastructure?

  61. Terje
    June 14th, 2006 at 20:33 | #61

    “To all readers, please bear in mind that you’re getting this blog free of charge. If you don’t think the service is adequate, I’m happy to give you a full refund.�

    That must explain why we get paid so badly for all the brilliant content we provide.

  62. Tom Davies
    June 14th, 2006 at 22:12 | #62

    Vox, privately owned telcos won’t invest in unprofitable rural services. But that doesn’t mean that we need to have a government owned telco. We just need to put out to tender the provision of what our political system decides are ‘sufficient’ services and award the contract to the telco which asks for the lowest subsidy.

    Providing rural services is a very poor argument for telco nationalisation.

  63. milano803
    June 15th, 2006 at 02:17 | #63

    James, rural business is unviable because there aren’t enough people living in rural areas to make it viable. It makes no sense to construct and run airports where there isn’t enough business. I’ll ask again, do you want to pay for airports in areas where the planes fly out empty because there aren’t enough passengers?

    “As shown by Mike H, above the privatisation of the airports has further fed into the vicious cycle.”

    He hasn’t really shown that.

    “rural communities miss out on services.”

    rural communities miss out on all kinds of services, not just airports. That’s a function of living in a rural area.

    “the unnecessary costs, that have been imposed on the whole community, rural and urban alike, through privatisation, should not have been brought into the picture in the first place.”

    what unnecessary costs?

  64. Hal9000
    June 15th, 2006 at 09:17 | #64

    I’d like to nominate CSL, formerly the Commonwealth Serum Laboratories. Since privatisation virtually all antivenine work has ceased in this the world capital of poisonous beasties, as the number of doses required would not justify the expenditure. It also seems silly on basic precautionary risk management principles not to have a government-owned drug and vaccine manufacturer beholden to the Australian people rather than foreign shareholders in this age of pandemic global diseases.

  65. June 15th, 2006 at 10:47 | #65

    Hal9000,

    Excellent idea! In fact I would take the idea much, much further.

    The decision by the previous Federal Labor Government, with the full support of the Liberal and National Party opposition, to privatise the CSL would count as one of their most stupid and short-sighted decisions.

    It is plainly idiotic that the profit motive and arcane patent laws are allowed to interfere in the provision of life saving drugs and serums.

    As you have shown, in the case of the CSL, the private sector business requirements has caused the cessation of vital anti-venine work.

    An even more striking example is the efforts by drug companies to charge high prices for anti-HIV drugs, effectively placing them beyond the means of millions of people in the third world.

    The drug companies argument essentially amounts to saying that if they hadn’t withheld the drugs from those people, effectively causing, perhaps, millions of needless deaths, they would not have got an adequate return on their investment.

    This is precisely why medical research should be done by Government funded bodies on behalf of all of us and not by corporations who, with few exceptions, put their own bottom lines ahead of the public interest.

    Once the knowledge of how to cure life-threatening illness has been obtained, then the profit motive would not be an impediment to making the drug as widely available as possible to all who need it.

    I would advocate that every Government in the world set up their own drug companies and hire anyone now working for private companies who, for adequate remuneration, would be prepared to work for the common good of humankind rather than for profit alone. I think they would have very little difficulty in attracting sufficient staff.

    Whatever knowledge was obtained would be freely shared amongst these bodies and, indeed, to anyone who wants to put this knowledge to good use.

    If the existing drug companies aren’t able to compete, then that would be too bad. They could be bought out by our governments.

    milano803, you ask, “what unnecessary costs”?

    How many more times do I have to spell it out? The bloated salaries of The Macquarie bank executives and of many of the Macquarie Bank’s employees and the returns to the Macquarie Bank’s investors.

    None of these people have skills which are necessary for the proper functioning of our airports. They could work perfectly well without them.

    On top of that the costs, ultimately to be met by the traveling public, include all the necessary red tape entailed in privatising the airports in the first place and the additional red tape entailed in regulating the privatised airports, even though the extent of regulation is obviously inadequate.

  66. Ernestine Gross
    June 15th, 2006 at 11:30 | #66

    Tom Davis,

    “Vox, privately owned telcos won’t invest in unprofitable rural services. But that doesn’t mean that we need to have a government owned telco. We just need to put out to tender the provision of what our political system decides are ’sufficient’ services and award the contract to the telco which asks for the lowest subsidy.

    Providing rural services is a very poor argument for telco nationalisation.”

    I am not convinced it is as easy as that.

    1. There are good theoretical arguments (auction theory) and good empirical examples of the relevancy of auction theory to counter your suggestion that selling a project to the lowest bidder is the best solution.

    2. The project in question is a tax payer funded subsidy. ‘Privatising’ subsidies would mean that the agent (the government) who has the power to raise revenue (taxes) to pay for the subsidies cannot be held accountable because the money is passed on to an enterprise who is accountable to its shareholders. This would mean that the government acts as an agent for at most a sub-set of its constituency, which might be empty (foreign ownership). The response to this confusion is to have regulatory bodies. This response to the confusion is the source of ‘red-tape’ about which ‘everybody’ complains.

    3. The justification for privatising tends to be the argument that private enterprise is more efficient. I have yet to find one empirical study which identifies the source of the alleged efficiency.

    4. The papers by JQ, referenced on this site, deal specifically with telecommunication.

    5. I have not studied the telecommunication industry in detail but I’d like to provide another example of ‘natural monopoly’ (a major argument in JQ’s submission) from the Water and Sewerage industry in NSW. To ensure water supply, the government would have to duplicate the services provided by private providers (recognised in the IPART paper). To the extent that telecommunication is an essential service in rural Australia (ostensibly telecommunication and mobile phones become more important with the distance between people) the same argument applies.

    6. Current account and BoP. While ‘privatisation’ is often associated with ‘private investment’ and ‘private investment’ in turn is associated with ‘private savings’, this mental model does not fit reality very well. ‘Private investment’ is at least partially financed by borrowing from all over the world. A government guaranteed subsidy potentially increases the borrowing capacity (reduction in the variance of revenue). This has implication for the composition of the Balance of Payments [BoP] (exchange rates and hence export and imports and interest payments).

    7. Skills. It is known that multinational corporations carry out R&D primarily in the home country or in ‘large markets’. To the best of my knowledge, Telstra used to provide a training ground for Australian telecommunication engineers and technicians. I’d be surprised if all Australian telecommunication engineers want to work as glorified sales staff.

    8. The term ‘externality’ tends to be used to refer to ‘negative externalities’ (eg pollution). But this is only a habit. Any activity which has positive side-benefits (extends the consumption possibility set of at least one member of society without reducing that of anybody else) provides ‘positive externalities’. Providing a training ground for R&D and on the job training in skills is an example.

    In general, the physical realities of a country and the distribution of its population and the preferences of the population cannot be ignored. It may well be that the arrangements in the EC and in the USA suit the physical circumstances and the preferences of people in these regions. It does not mean that therefore ‘they’ are more ‘efficient’.

  67. Lindsay
    June 15th, 2006 at 22:06 | #67

    Ernestine Gross

    “Telstra used to provide a training ground for Australian telecommunication engineers and technicians.”

    Actually that is not quite true Telstra have not trained any one (beyond 3 to 5 day courses in the specific installation of individual devices.)

    The last intake of Apprentice technicians in Queensland (a whole 20 – 30 of them) was some where in the late 1980s. I can not remember the exact year but it was before 1990 but after 1985.

    The year that I started there were 270 trainees (as we were called then) and that was about the average anual intake for a number of years. Over time the numbers declined as newer technologies reduced the staffing need. (As an example, in my second year field training I was attached to a suburban Telephone Exchange with a staff of approximately 20, working shifts from 7:00 am to 11:00 pm. This staffing level was necessary to keep the mechanical swhitching system functioning. Today I doubt if there would be that many on the staff that looks after ALL the Telephone Exchanges between Noosa and Coolangatta)

    As you can see the youngest that any seriously trained Telecommunications Technician could be (assuming 19 years old at start of training) is 36 but the majority of us are 50 plus.
    The recently appointed CEO of Telstra cited skills shortages as being one of the major problems confronting the company. This is only to be expected after some 15 years of staff shedding and some 20 years of nil training.

  68. milano803
    June 15th, 2006 at 23:38 | #68

    “How many more times do I have to spell it out? The bloated salaries of The Macquarie bank executives and of many of the Macquarie Bank’s employees and the returns to the Macquarie Bank’s investors.”

    You seem a tad obsessed with Macquarie Bank, which isn’t the subject here.

    “On top of that the costs, ultimately to be met by the traveling public, include all the necessary red tape entailed in privatising the airports in the first place and the additional red tape entailed in regulating the privatised airports, even though the extent of regulation is obviously inadequate.”

    can you list a few of these costs and red tapes associated with running a privatized airport that doesn’t also occur with a nationalized one?

  69. SJ
    June 16th, 2006 at 00:22 | #69

    milano803 Says:

    You seem a tad obsessed with Macquarie Bank, which isn’t the subject here.

    Well, yeah, and you seem to be some guy from the US who has no ability nor right to judge what is or is not relevant to the discussion.

    Please go away.

  70. June 16th, 2006 at 01:58 | #70

    milano803,

    Of course the Macquarie Bank is the subject here! They are now the owners of Sydney Airport and they are now gouging every possible dollar from the traveling public so they can pay their CEO’s their obscene salaries and maximise the return on the investment of Macquarie Bank shareholders.

    You asked “what unnecessary costs?” and I have told you.

    It was stupid for this Government to have sold the Sydney Airport. If they had retained ownership it would only be necessary for the Sydney Airport to charge the travelling public enough to meet its operating costs.

    The additional red tape is the necessary regulation of Sydney Airport (and I am assuming that their is some regulation of the Sydney Airport by the Government). This is an additional cost that always must be met by the taxpayer when an entity is privatised. If the entity was government owned then one layer of red tape need not exist. The entity would simply be directly accountable to our Parliament.

    Ernestine Gross and Lindsay, this article in the Herald Sun, entitled “Telstra hangs up on training: Labor”, may be of interest. It shows that Telstra has not employed a single subsidised apprentice since 2000. Another example of how a privatised utility can appear to be more profitable and efficient by shifting costs, previously incurred by it when it was run as a public service, onto the broader community.

  71. Hal9000
    June 16th, 2006 at 11:22 | #71

    “can you list a few of these costs and red tapes associated with running a privatized airport that doesn’t also occur with a nationalized one?”

    Vastly increased landing fees, parking fees, entirely new fees like the additional $2 (plus waiting time at the new boom gate) to catch a cab from the airport rank, parking invigillators who behave like they get a commission on tickets issued etc.

    The Brisbane airport cost over $800 million to build at 1988 prices and sold in the mid-90s for less than half that at mid-90s prices. And now the travelling public, the one that paid for it in the first place, has to pay extra to keep the new owner’s profits up there in the stratosphere with the aircraft. There has been no service improvement, just higher charges for the same service.

    Meanwhile the new owners are able to make use of the former Commonwealth Government exemption from town planning regulations to put in a new shopping mall in competition with the town-plan compliant one up the road. Fill yer boots!

  72. milano803
    June 16th, 2006 at 11:45 | #72

    “Vastly increased landing fees, parking fees, entirely new fees like the additional $2 (plus waiting time at the new boom gate) to catch a cab from the airport rank, parking invigillators who behave like they get a commission on tickets issued etc.”

    all of these things have increased at all airports over the years. No matter who owns them. What I was asking about is what fees have increased as a result of privatization that HAVE NOT also increased at airports in general.

  73. June 16th, 2006 at 12:31 | #73

    milano803,

    I would be most surprised if any Government airport in the world is fleecing its customers to the same extent that the customers of the Brisbane and Sydney airports are being fleeced.

    If that is the case, then, at least, in a democracy, where the managers of Government owned airports are ultimately accountable to the public, it is possible to change that.

    On the other hand if control of these once publicly owned and operated facilities, built at public expense, is handed across to unelected corporations, only accountable to their own shareholders, it would be very much harder to change.

    It is the common experience of myself and everyone else on this forum that costs have risen astronomically since privatisation. What else has changed since then that would require the charges for all these services to have been raised so excessively?

    If you are so adamant that Government owned airports are gouging the travelling public to the same extent that privatised airports are then, perhaps, you would care to substantiate your claims. If you can’t provide examples, then please at least explain why you think that you believe that they would given that they have no need to make such excessive profits and pay such bloated salaries as are paid to the CEOs of the privatised airports?

    Otherwise, please stop wasting everybody’s time.

    HAL9000, thank you for your very helpful post. Could you please tell me which government we have to thank for having sold the Brisbane Airport at less than half of what it cost to build? Was it the Howard Government, or the previous Federal Labor Government of Paul Keating? Or was it done by a Labor or National Party Queensland State Government?

    Isn’t it wonderful to have been so well served by our elected political representatives?

  74. milano803
    June 16th, 2006 at 12:47 | #74

    “I would be most surprised if any Government airport in the world is fleecing its customers to the same extent that the customers of the Brisbane and Sydney airports are being fleeced.”

    But what I said was “all of these things (landing fees, parking fees, etc)have increased at all airports over the years. No matter who owns them.” And they have. Landing and parking fees go up every year at airports all over the world.

    “If that is the case, then, at least, in a democracy, where the managers of Government owned airports are ultimately accountable to the public, it is possible to change that.”

    Airport managers of government owned airports are elected positions?

  75. June 16th, 2006 at 15:56 | #75

    Proponents of Telstra privatisation I have three words: Horizontal Fiscal Equalisation

    Since Federation, Australian Governments have adhered to the principle of Horizontal Fiscal Equalisation whereby government finances are distributed in such a way that no matter where any Australian lives they have, more or less, equal access to services.

  76. Hal9000
    June 16th, 2006 at 16:29 | #76

    Brisbane Airport was sold in 1997 by the Howard Government. I must concede an error in my earlier post, which was according to my faulty understanding. The purchase price was in fact $1.4 billion, which was pretty much what its construction cost was worth in 1997 dollars. Oops – mea culpa. The rest of the post about new and higher fees and lower convenience for the travelling public stands, however.

  77. June 17th, 2006 at 01:44 | #77

    Hal9000,

    Thanks for answering my question. I must admit that the sale completely escaped my attention at the time, but I wasn’t following politics then as closesly as I have been in more recent years.

    Of course it was preferable that the Government at least got back what it paid to build the Brisbane Airport, but we both agree that it is largely beside the point, anyway.

    In fact, in Sydney, it was thought, at the time, that the Macquarie bank had paid far too much for Sydney Airport, so, for a while, in a sense, the Australian Taxpayer appeared to have done well from the deal.

    However, in the longer term, in both the cases of the Sydney and Brisbane airports the public will have lost far more than the short term windfalls ganied by the Government from the sales due to the anti-social effects of the private owner’s price gouging as described by Mike H and others.

  78. Ernestine Gross
    June 17th, 2006 at 12:09 | #78

    Lindsay,

    Thank you for your description of the history of Telstra apprentice technicians in Queensland. Apologies for the delay in acknowledgement.

    I fully agree with you that technological changes can affect the number of technicians required. A time series of numbers of apprenticeships per se is therefore not sufficient to draw big conclusions. But, it seems Telstra has cut apprenticeships for technicians much more than called for by technological changes and the current CEO is not happy about the consequences. For the purpose at hand, I’ll call this ‘excessive reductions in apprenticeships’

    The period you identify with the onset of the excessive reduction in apprenticeships corresponds with the onset of ‘micro-economic reform’. This is interesting because it matches observations I’ve made in other infrastructure industries (transport, water and sewerage, health).

    You mention 3-5 day training courses for installation of specific devices. This is interesting too. Isn’t there a difference in the outcome of these courses between people who take a short training course after having had an apprenticeship and years of experience and those who get short training courses only?

  79. Lindsay
    June 17th, 2006 at 23:33 | #79

    Ernestine

    “You mention 3-5 day training courses for installation of specific devices. This is interesting too. Isn’t there a difference in the outcome of these courses between people who take a short training course after having had an apprenticeship and years of experience and those who get short training courses only?”

    The current method of training is categorised as “competency based training”. This form of training basically teaches the procedure without any of the underlying principles and theories that underpin the principle.

    Certainly as a refresher to a serious training regime, such as an apprenticeship, to update ones skills on new technologies and/or devices. However there has been virtually no training in the telecommunications field since the mid 80s.
    In some respect it is worth a little review of the history of the “trade” . Under the Post Master General’s department, and subsequently, Telecom Australia the trade existed only within those two organisations. With only a few exceptions no-one other than an employee of the organisation, and then only carrying out authorised work could legally even take the screws of the cover of a socket.
    There was no “trade” as such other than that recognised by the organisation. This does not mean poor training however, quite the contrary, I did a 5 year traineeship to be qualified as a Telecommunications Technician. This traineeship consisted of a 60/40 mix (60% theory 40% practical). Only a couple of years after I qualified, a new classification of Technical Tradesman wasintroduced that replaced the Technician. This training was an apprenticeship and lasted 4 years insted of 5 and was a 40/60 mix rather than 60/40.
    With de-regulation (1987?) it was realised that there were no “qualifications” that could be used to define who would be authorised to work in the industry outside of Telecom so a licensing regime was introduced. This regime was overseen by the newly created Australian Telecommunications Authority (AUSTEL) and consisted of an examination to gain an AUSTEL license. This examination was heavily weighted in favour of Electricians as it was realised that they were most likely to be able to perform the tasks, it was so weighted, in fact, that it was extremely difficult for a technician to gain a licence. Over one third of the original AUSTEL examination related to MEN earthing systems. A term I had never heard of and had no idea what it even meant. It is extremely important in electrical installations but totally irrelevant to telephony.

    I’m going to have to stop here, I am only about half way through where I thought I would be going with this post and unsure of any size restrictions. If you are interested I will continue.

  80. June 18th, 2006 at 00:33 | #80

    Lindsay, thanks. Please continue.

  81. Ernestine Gross
    June 18th, 2006 at 11:24 | #81

    Lindsay, thank you very much for the history. It is interesting. Please do continue.

  82. Lindsay
    June 18th, 2006 at 23:31 | #82

    James and Ernestine,
    Thank you for your encouragement,

    These original AUSTEL Examinations had no training courses or textbooks, they were specifically designed to license a large number of people quickly. It could be said that the training followed the Exam.

    Now about here is where a small digression should be made to examine the effects of de-regulation. The major change revolved around defining the demarkation point where the responsibility of the carrier (Telcom /Telstra) ended. This demarkation point, described at its simplest, is basically the place where the underground cable is terminated on a customer’s property and is defined in the act as the Network Termination Point (NTP). The provision of service to that point is the responsibility of the carrier, and may be provided however and by whoever the carrier deems appropriate. On the carrier side of the NTP is the Telephone Exhhanges and distribution cabling including the pillars, cabinets and RIMS that you may notice on the footpaths from time to time. Beyond the NTP is the domain of the licensed cabler and includes any cabling within the building, telephone points, Telephone systems and any device that may be connected to a telephone line. It is this side of the NTP that requires a licensed person to perform the task using materials and devices that have been explicitly approved by the regulating authority. In the very early days of deregulation there really was few other than Telecom Technicians who could do the job, but all of a sudden these persons were unable to legally perform these tasks because they were not licensed. This is where the first of the “modern training courses” came about. Courses specifically designed to teach sufficient to pass the Austel Examination. In addition to licensed persons, the materials also needed to be approved. Some of the equipment had already been approved by Telecom and these were “grandfathered” accross but much of the equipment was not approved and there are some devices even now that are not approved for use on customer’s premises. These devices are predominantly related to underground cabling and is basically simply an ecconomic situation. As an example some manufacturer suceeds in securing a contract with Telstra to supply underground joints. Because the joints are being used by Telstra on the network side of the NTP there is no need for the devices to be approved by the regulator. A situation arises where I as a private contractor am called to repair some damaged underground cabling between two buildings on the same property. It may be such that it would be advantageous for me to use one of these devices but they are not approved. The supplier would probably sell 100,000 of theses devuces to Telstra for every 1 that might be used by a private contractor. As far as I am aware the cost for a device to be approved as approximately $24,000.00. Half of that cost is for laboratory testing to ensure that it does not cause any radio or electrical interference; that it will not do anything that could cause damage to the telephone network; and that it is not a safety hazard to the user. The other half of that cost is the fee due to the regulator for the approval.
    Notice however that the testing does not include any test as to how well the device works, or even if it does. That falls under the category of “caveat emptor”.

    I’m sorry but it is getting late and this is getting long again.
    More tomorrow night if interested.

    Lindsay

  83. Ernestine Gross
    June 19th, 2006 at 13:12 | #83

    Still interested, Lindsay.

  84. June 19th, 2006 at 13:57 | #84

    Thanks again, Lindsay. Please continue further.

    BTW, the article, entitled “Telstra employee tells of cutbacks and penny pinching” from the abovementioned web site of “Citizens Against Selling Telstra” just may be of interest to you, although it is a little dated by now.

  85. Terje (say TAY-A)
    June 19th, 2006 at 16:57 | #85

    The current method of training is categorised as “competency based training�. This form of training basically teaches the procedure without any of the underlying principles and theories that underpin the principle.

    This concept was doing the rounds at Optus before I left in 1997. The result in my view was terrible. People with no underlying understanding of technology were trying to make decisions based on paint by numbers task guides. It was mostly unworkable and in practice they leaned heavily on anybody in their vacinity that happened to have an underlying understanding of principles. This caused those of us with an understanding of underlying principles to pack our bags and leave. It caused some terrible outcomes for customers.

    In essence I don’t think the mentality was limited to Telstra but is probably one of those management fashions that does the rounds. I also don’t think it has much to do with privatisation, economic rationalism or microeconomic reform. Although if somebody can identify any linkage I am happy to listen to theories.

  86. Lindsay
    June 19th, 2006 at 19:57 | #86

    Terje

    “In essence I don’t think the mentality was limited to Telstra but is probably one of those management fashions that does the rounds. I also don’t think it has much to do with privatisation, economic rationalism or microeconomic reform. Although if somebody can identify any linkage I am happy to listen to theories.”

    Competency Based Training is the standard method of trade training and is the method used in all TAFE courses as far as I know.
    I was taught this method of assessment ant training when I had to get my cert III in trainingand assessment to become a registered assessor with TITAB (Telecommunications Industry Training Advisory Board). My instructor at that time was a pastrycook instructor. The training and assessment methods are supposed to be common

  87. Lindsay
    June 19th, 2006 at 19:58 | #87

    more history later

  88. Ernestine Gross
    June 19th, 2006 at 19:59 | #88

    Terje says: “In essence I don’t think the mentality [competency based training] was limited to Telstra but is probably one of those management fashions that does the rounds. I also don’t think it has much to do with privatisation, economic rationalism or microeconomic reform. Although if somebody can identify any linkage I am happy to listen to theories.”

    I don’t have a theory to offer, but I can offer the following on policy:

    ‘Competency based training’ is an integral part of ‘Australian Vocasional Education and Training (VET) policy.

    Links to ‘economic rationalism’ (bottom line criteria), ‘microeconomic reform’ (competition, productivity, flexibility) can be detected by reading through the various components of VET as outlined on:

    http://www.ncver.edu.au/statistics/aag/aus2000/natpol.htm

    Specifically: “The aim of competency-based training is to ensure that vocational education and training programmes better meet the needs of industry and Australia’s enterprises.” Source: above web-site.

    The astute reader of the web-site may notice that some time during the development period of VET, the term ‘enterprise’ was substituted for ‘industry’. This of course creates a problem when one public enterprise constitutes ‘the industry’ for many years (eg telephony) but then is to be split up to create a ‘competitive market’ (for what?) and the sub-units of the former industry demand different ‘competencies’ and don’t want to pay a cent above the narrow set of skills they need – or management thinks they need (now).

    As you said, Terje, the result is, in your view, “terrible”. And, “It caused some terrible outcomes for customers.”

    And, who are the customers? The students who take competency based training? Many would think this is the case. Private providers charge and business is used to calling those who pay, ‘customers’. And the people who pay for the services of the former customers? Yes.

    So, if competency based training is a ‘management fashion’, then ‘privatisation’, ‘microeconomic reform’, and ‘economic rationalism’ are related fashions.

    Terje, maybe you should have a serious talk to the ACC and other industry bodies who had significant imput in VET.

  89. Ernestine Gross
    June 19th, 2006 at 20:02 | #89

    Linsay, I look forward to your later post.

  90. Terje
    June 19th, 2006 at 20:49 | #90

    Ernestine,

    I can accept that privatisation, microeconomic reform etc may be fashions (for better or for worse) however I fail to see the linkage between these fashions and the compentency based training schemes that seemed to be so badly managed when I encountered them (although you seem to find it vivid). When I say that the outcome was bad for customers I mean that Optus served some customers badly because employees were making decisions without understanding how things work. For instance they would cause significant delay to service installations by allocating equipment to a new service even though it should have been clear (to anybody that understood the systems) that the allocated equipment was not fit for the purpose (ie different version, incompatible protocol set etc). There were multiple such examples that caused daily grief. The solution (in my view) was to have people who understood the implications of their decisions and the inter-relationship between network components. The managment solution at that time was to try and design better process rules which might have worked except that those allocated to create such rules became progressively less competent over time as first principle understanding was lost from within the team due to a lack of first principles training (ie a downhill snowball).

    I should add that during this time I did a short 2 day course on “competency based training” at UTS and I found the principles presented did contain a lot of merit. In particular the distinction drawn between reliable assessment of skill and the valid assessment of skills. Unfortunately this proved to be another case in which on the ground deployment seemed to be out of touch with basic principles. All sorts of reliable measures were put in place to manage staff development with little thought to the validity of such measures.

    As I see it both public and private institutions can be badly run and can become captive to foolish managment fashions. I don’t see how private ownership is supposed to suffer from this any more than public ownership although I do accept that privatisation like any transitional process is prone to being very disruptive to an organisation.

    Regards,
    Terje.

  91. steve munn
    June 19th, 2006 at 21:05 | #91

    The privatisation of public transport in Victoria has been an utter disaster.

    The standard of service has failed to improve yet the public subsidy is now much greater than in was under state ownership.

  92. Lindsay
    June 19th, 2006 at 22:32 | #92

    I probably should have done this in the beginning and saved a lot of time.
    I am attaching a short history of the training procedures that I developed as an introduction to a triaining course

    “Since the late 1980s, the Telecommunications Industry in Australia has been subject to a number of significant changes. From the monopoly of the Postmaster General’s Department and Telecom Australia to the fragmented industry of today where there are a large number of suppliers of equipment and services
    The first step towards the introduction of competition in the telecommunications industry came about through the Telecommunications Act 1989. This Act allowed for the supply, installation, maintenance, and operation of all equipment beyond the network boundary of a carrier to be open to competition. The Act also provided for Austel to licence people working in the cabling industry.
    In July 1997 the Act was revised and Australian Communication Authority (ACA) was established via the merger between the former Austel and the Spectrum Management Agency. The ACA was responsible for regulating telecommunications (including cabling) and radiocommunications in Australia.
    Between July 1997 and 3 October 2000, the ACA continued to licence cablers for customer premises cabling work and these licences remained current until their expiry date. During 1999 and 2000 the ACA developed an alternative model to licencing called Cabling Provider Rules (CPRs) to replace the individual cabler licencing system. CPRs are based on an industry – run registration scheme. According to the ACA, CPRs were developed to simplify and reduce the regulatory burden for cabling providers, remover barriers to entry, streamline cabler training arrangements and promote industry self-regulation. CPRs commenced on 3 October 2000 with existing licences remaining valid until expiry.
    Under these new rules those working in the security, fire and data industries (previously exempt under the licencing system) were required to register”

    During the period 1990 to 1997 I was involved in a small way in the formation of the TITIB (Telecommunications Industry Training Advisory Board). The TITAB developed a training package and procedures to incorporate a Telecommunications stream within the Electrical Apprenticeship Scheme. Although not perfect (my feeling is because of the strong influence of the electrical trades in the formation of the package) it did provide the possibility of some serious training based upon an apprenticeship. The intention was for a number of specific modules be incorporated into the 2nd, 3rd and 4th years for those who wished to be involved in the industry and receive some recognisable qualifications. Part of this package included “Workplace Assessors� to assess the practical aspects of the requirements as well as to provide for Recognition of Prior Learning (RPL). I am one of those assessors.
    This training package commenced with the first of the 2nd year apprentices in 1994 with them expecting to qualify in December 1997.
    As you can see from the dates the new Telecommunications Act came out some 5 months before these apprentices qualified. I can still clearly remember the stunned unbelief of those at the Brisbane meeting when the ACA representative outlined the proposed new training requirements.
    The TITAB has still continued to develop and improve on that original concept which is presented as a Certificate II or Certificate III. Because there is no “trade� as such, these courses carry little weight in the industry for they are not a requirement. The simplest method is to employ a kid as a general “gofer� for 6 months and then send him to a 4 – 5 day course to cover the legislative aspects. Providing he can obtain a mark of “competent� he is then entitled to apply for registration as a cabler.

  93. Lindsay
    June 19th, 2006 at 22:35 | #93

    Terje,

    “The solution (in my view) was to have people who understood the implications of their decisions and the inter-relationship between network components.”

    The big problem is that there are so few of us left and we are getting old and tired

  94. June 20th, 2006 at 15:01 | #94

    Terje,

    Your last post seems, to me, to be an exercise in hair-splitting to avoid confronting what should be obvious to all: that the corporatisation and subsequent privatisation of government owned utilities have caused a massive loss of skills in the Australian workforce as a consequence of the managers of these businesses having shifted the costs of training onto the wider community.

    Any government, with our best interests at heart, would acknowledge that these policies have been abysmal failures for the public interest. It would abandon its plans to fully privatise Telstra and would act, without delay, to change Telstra and other utilities so that they are run as public services once again.

  95. Terje
    June 21st, 2006 at 23:57 | #95

    James,

    Actually I think the original nationalisation of Telecommunications was the problem. We had a thriving competetive market in telephony for a short period at the begining of the 1900s before the federal government stepped in and criminalised private sector involvement. This history and the pioneering effort of the private sector is too widely ignored (perhaps because the earlier telegraph was mostly government sponsored and operated).

    The problem with privatisation in Telecommunications was the unwillingness of the political players involved to consider any form of split within Telstra. The ALP (who introduced competition in the way of Optus) in fact sought consolidation with OTC merging with Telstra and Aussat being forced into bed with Optus. Logically there was no reason why OTC had to be bundled with Telstra, no reason Aussat had to be bundled with Optus (except that it was not making money) and little reason why Telstra business units like mobile could not have been split from the main business.

    In terms of deskilling being an artifact of privatisation it would be interesting to explore this theory in terms of the experience in other nations and in other areas of privatisation. For instance was the privatisation of the Commonwealth bank or Qantas accompanied by such a phenomena. Or did the railway operators of Japan (now arguably the best in the world) dumb down when they were privatised in the 1980s.

    In other words, show me the pattern.

    Regards,
    Terje.

  96. June 22nd, 2006 at 12:31 | #96

    Terje, the ‘pattern’ is obvious and glaring. It is the massive skills shortage in this country, which is widely acknowledged to have been caused by the government’s penny-pinching in regards to TAFE and our Universities and corporatisation and privatisation.

    The economic ‘rationalist’ ideologues that drove the spate of corporatisations in recent decades ‘forgot’ that the wider community benefitted from the training provided by these utilities run as public services. Many private employers were able to employ skilled workers who had obtained their training at the expense of the wider community through taxes or charges for the services provided by the utilities.

    It should have been obvious to our policy makers that to continue with this policy was in the public interest, but wasn’t.

    To tell us that that, somehow, these problems would have been avoided if only they had properly structurally separated Telstra and Optus is stretching credibility.

    The obvious reason why training has been virtually eliminated is that the cost of training was largely borne by the utility, whilst the benefit was gained by the whole community. When the community owned the utility and the the utility’s charter included serving the wider community, that was no great problem.

    Corporatisation simply means that these entities were only concerned with their own ‘profitability’. Even if decisions made by these corporations inflicted economic and social harm on the broader community, that was not longer a concern to them. Hence, the decision by the corporatised Telstra to close its training schools, in the late 1980′s (I think – do you remember the date, Lindsay?).

    Privatisation only made an already bad situation even worse as Lindsay has pointed out, earlier.

    As for Japanese Railways, I can’t comment except to say, firstly, that it is only one possible exception, secondly that, about a year or so ago, there was an accident with a large number of fatalities, which I heard was caused by cut-backs, and, thirdly, that the example of Enron shows show that organisations with serious defects can easliy create a facade which give the appearance of been well run.

    The privatisation of rail in the UK has been an unmitigated disaster, as has Kennet’s privatisation of public trasport in Victoria as Steve Munn has pointed out in this thread and as Ilan has pointed out in an earlier thread.

    Any politician who continues to foist policies of privatisation on the public, after this sorry record, belongs behind bars, rather than in Government.

  97. Terje
    June 22nd, 2006 at 22:50 | #97

    The obvious reason why training has been virtually eliminated is that the cost of training was largely borne by the utility, whilst the benefit was gained by the whole community. When the community owned the utility and the the utility’s charter included serving the wider community, that was no great problem.

    I doubt that the utility was necessarily thinking with such nobility. More likely its monopoly status meant that any technical training had little utility elsewhere so that the people it trained were in effect bonded.

    In any case examples such as the following lead me to suspect that the issue was only ever transitional.

    http://www.optus.com.au/portal/site/aboutoptus/menuitem.813c6f701cee5a14f0419f108c8ac7a0/?vgnextoid=fbedabadc0a54010VgnVCM10000029a67c0aRCRD&vgnextchannel=3d6aabadc0a54010VgnVCM10000029a67c0aRCRD&vgnextfmt=default

    As for the UK rail privatisation the reasons for failure relate to regulation and structure. They limitations in cross ownership between rail service operators, track owners and rolling stock were so constructed in such a way that innovation or quality improvements were probably never achievable. Had they done things the Japanese way they would have no doubt been very successful.

    Regards,
    Terje.

  98. SJ
    June 22nd, 2006 at 23:23 | #98

    Terje Says:

    [The] limitations in cross ownership between rail service operators, track owners and rolling stock were so constructed in such a way that innovation or quality improvements were probably never achievable.

    Think about this for a moment, Terje. Why were the cross ownership limits put in place? To encourage competition and prevent the creation of a private monopoly.

    The trouble is, in some industries competition has already been proven (early last century) not to work. Competition renders some capital intensive industries unprofitable. Either the whole industry fails, or it all falls into the hands of a single player. This is what led to the creation of either regulated private monopolies (in the US) or public monopolies (here).

    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. This belief is demonstrably false.

    Your belief that eliminating regulation would provide the good outcomes we’re currently not seeing is also false. It just leads to a different kind of bad outcome.

  99. SJ
    June 22nd, 2006 at 23:35 | #99

    P.S.

    Terje, I just read through the natural monopoly entry at Wikipedia. It’s reasonably balanced, take a look.

  100. June 23rd, 2006 at 00:35 | #100

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

    I might go in on the weekend and change it.

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