BuddeBlog

This week I chaired the first day of the Australian Financial Review’s Telecoms Summit. Enclosed is my openings address.

A warm welcome to everyone, and, in particular, to The Honorable Minister for Communications, Helen Coonan. Please allow me to also add my congratulations on your re-election as our Minister.

I also would like to extend this welcome to Theresa Gattung, our leading female telco executive from across the Tasman.

As I have said on many occasions, we are fortunate and honoured to work in what is probably the most exciting industry in the world. We don’t produce weapons of mass destruction or anything like that – telecommunications offers huge benefits to our economy, and to society in general.

This makes it so much easier to be passionate about our industry. And it is because of that passion that I take on the role, not only of commentator and analyst, but also of a facilitator – to make things happen.

Most of you will be aware of my activities in the broadbanding of local communities around the country – getting the utilities to play a more central role in infrastructure competition, consolidation roundtables between the various players, as well as forging cooperative models between the various subgroups in our industry.

Given this deep involvement in the industry, I dare to say that the most challenging issue that telecommunications is facing at the moment is that of preparing for the privatisation of Telstra. Like most people in the industry I take a neutral position regarding the privatisation itself. However, I am firmly of the view that we must have the right environment if Australia is to profit from the enormous benefits telecoms has to offer.

I also know, Minister, that you have clearly earmarked this as a key issue within your portfolio.

Telecoms in Australia is a sizeable industry, worth around $40 billion – and several hundred billion dollars more if you take into account e-commerce, business productivity gains and innovations leading to activities in other sectors, such as, for example, education and healthcare.

I agree that this government has done a good job of running our economy – we are one of the few global success stories. Our Treasurer has once more called attention to the importance of ongoing economic reform, and I fully support his call, as I am sure do most of the people in the industry. However, we are at a loss to understand why he doggedly refuses to extend these reforms to the telecoms sector.

If one company receives 90% of all the profits generated within an industry, then I would think that such an industry would be right at the top of the government’s reform list.

So, it is here that we need your assistance, Minister. I know that you are very much up-to-date with the issues in our industry and we need to find ingenious ways to produce the regulatory outcome that safeguards competition against this 800-pound gorilla, which might soon turn into a 1000-pound gorilla – the incumbent has indicated its interest in printed and electronic media, so that would further increase its dominance.

Please, tell us what we can do to assist you in convincing your colleagues in Cabinet that we need a better regime – one that:
guarantees well-funded strategies for regional infrastructure;
guarantees that we get broadband at prices and speeds on a par with our trading partners; and
provides the ACCC with the necessary power (like that of Ofcom in the UK) to structurally separate Telstra if it continues to find the company too dominant to handle, even after privatisation.

Now, let’s go to the other groups represented here by the delegates of this conference ….

We have 3 to 6 months to work together with the Minister to find solutions to the problems we have in the market. And there are quite a few:
after nine months we still have no outcome on Telstra’s anti-competitive behaviour in the broadband market;
after four years of negotiation we still don’t have an economically viable ULL regime – an essential component of economically viable triple-play business models; and
we are still at the bottom of the list of broadband penetration – as an example, penetration in Canada is five times higher than ours, and one-third of the price.

Surely these matters cry out for resolution. They can’t be solved by a few well-intentioned handouts which fail to address the fundamental issues.

Once the government gets serious about privatisation we can forget about any reforms and we might as well all take a 3-year regulatory holiday. So now is the time for us, through our Minister, to urge the Treasurer and Prime Minister to take these issues seriously, and to discuss with us the economic reforms that are so desperately needed in our industry.

Telecoms touches every single person in this country. I believe that, by working together, we will be able to find solutions that will allow us to create a healthier industry – one where true competition is possible, where innovation is given a chance.

Economists, including those closely linked to the government, have indicated the importance of broadband. True broadband (not the kiddie stuff we currently have access to) is conservatively estimated to be able to deliver an 11% productivity gain to our economy.

However, without your assistance, Minister, true broadband will only be drip-fed to us by a monopoly that has more interest in avoiding risks and delaying investment – a monopoly that is completely focused on its shareholders. We are alarmed by the sheer lobbying power, the PR machine and the army of lawyers that the incumbent has at its disposal. None of us – not even the regulator – are any match for this. And an unshackled incumbent will be even more inclined to play the delaying and frustrating games that it has made into a fine art over the last decade – at least some of which border on anti-competitive behaviour.

We desperately need your support to properly address these issues.

Please accept our sincere invitation to discuss this with us. The Australian people, which you as our Minister represent, deserve better.

Paul Budde

PS The Minister unfortunately did send her apologies and in her place The Honorable Federal Member for Lindsay Mrs Jackie Kelly presented a paper on the Minister’s behalf.

See also:
Australia – Government Policies – Economic Reform in Telecoms Sector (Free Report)

Theme – Are we ready for the Telstra privatisation?
My Roundtable on Wednesday 24th November will further explore all of the above, with the central theme: ‘Are we ready for privatisation?’.

As usual, I will take a neutral stance on the advisability or otherwise of privatisation – instead the Roundtable is aimed at crystallising some of the issues that will arise after the fact, if the privatisation of Telstra does take place.

Firstly, privatisation need not necessarily mean disaster. BT in the UK is also fully privatised and, like Telstra, has been dragging its feet on broadband. Yet the British Government (Prime Minister Blair himself) successfully ‘persuaded’ BT to lift its game and the country now has close to six million broadband users. Furthermore, the regulator, OfCom, is now working on a report that could lead to the structural separation of BT.

These are clear examples that privatisation need not necessarily mean giving the incumbent a completely free ride. The question for Australia is whether our regulator, the ACCC, has sufficient power to replicate the example of Ofcom, should it feel this is necessary to prevent anti-competitive behaviour and safeguard competition in the telco market.

The other hot issue continues to be the situation in regional and rural Australia. A privatised Telstra will find it difficult to come up with the $5 billion investment necessary to upgrade the telecoms network in regional Australia to allow for the provision of true broadband services. The federal government is not going to look after this investment, so what will this mean for regional and rural Australia? Obviously state and local governments will have to take a leadership role here.

Alternatively, Telstra has already indicated it wants an FTTH monopoly – again, what will this mean for innovation and competition?

As well as this, the Media Inquiry, which will most probably be reopened, will take into account the pay TV industry, and it will be interesting to see what Telstra’s reaction is to that. Is it voluntarily going to divest its Foxtel share? And what is the government is going to do?

Of course, it is extremely dangerous to talk about politics, let alone American politics, yet, as they have such an impact on global affairs, it is sometimes difficult to avoid doing so.

Yes, I am disappointed. I would have loved to see some change. I prefer global cooperation to selective bilateral cooperation. A change in politics would have made it easier to do a ‘backflip’ and look at more comprehensively global ways of solving some of the very serious problems we are facing.

Let’s hope that the Bush government will now do something about the enormous division they have created in their own country, and the even wider gap that has developed between the USA and the rest of the world.

The same also applies to telecoms.

The USA has gone against international trends and strengthened the powers of its incumbents by providing them with a regulatory holiday from competition in the fibre-to-the-home (FttH) market. The rest of the world is looking at very different solutions – strengthening the regulators and even looking at structurally separating the large incumbents. The new government in the USA will almost certainly continue along its chosen path, which will mean tougher times for companies who are competing with the incumbents. And this behaviour could also encourage incumbents in other parts of the world to take a regulatory holiday. The Australian incumbent, Telstra, has already asked for a similar favour, and PCCW, the incumbent in Hong Kong, has been granted some new concessions.

With the heavily politicised FCC no longer being seen as a champion of competition, telco competitors around the world are losing a very important ally.

Furthermore, the FCC has stepped away from international agreements, and this, for example, has led to American companies (with the blessing of the FCC) offering discounted telecoms services in countries where such services are illegal. While one can mount an argument about the anti-competitive nature of these national regulations, the countries involved find it hard to accept that their laws are not supported by FCC.

It was interesting to see that an out-of-court agreement was reached between AT&T and the Cambodian government on one such issue. This was seen as a victory for Cambodia, but it is really not acceptable for the USA to constantly interfere in the regulatory affairs of other countries. They frequently write reports on changes they would like to see in Europe, Asia Pacific etc – even threatening sanctions if these countries don’t make their national markets more open to American companies. Broadcasting and mobile termination rates is one of their favourite topics. And, at the same time, we see the FCC favouring its own incumbents, as in the case of FttH.

On the media side we are now also more likely to see further ownership concentration in favour of the moguls who are already awfully rich and dominant. I am always wary about changes that appear to be aimed solely at achieving more profit for these people. How much more do they want? They will never be satisfied, and, bit by bit, diversity and national interest will fly out the window.

I was shocked to hear that it is now possible to sponsor the top news articles on TV. No matter what guarantees are given, I can only see that this will give advertisers the ability to manipulate the selection of news items, and also the way they are edited, however subtle this might be. Is this something we really want? I don’t think so – yet it is going to happen, whether we like it or not.

There are probably quite a few people who, like me, are shocked by the US election result, but it is no use standing still. We need to move forward. We all have the same goal, regardless of our political perspective – creating a better environment for everyone.

Paul Budde

See also:
Global – Industry – Regulatory – Analysis of the Liberalisation Processes
Global – Industry – Regulatory – Privatisation, Structural Separation
Global – Industry – Regulatory – Global Broadband Policies
Global – Analysis – Industry – Status of telco restructuring in 2004

The Internet has proved to be an enormous success, and is continuing to grow at astounding rates. Not only has it allowed for vastly improved communication and data transfer, it is opening up the flow of ideas, slowly removing the monopoly of public opinion previously held by governments and, in some countries, the free press. However, it has not been welcomed in some countries where the control of public opinion is more important than the economic and other benefits that the Internet brings. There is a concerted effort by a group of these countries to force the governance of the Internet into the auspices of the United Nations, thereby slowing, or even halting, its progress through the bureaucracy and political infighting that the UN is famous for. At the same time, concerted government and industry effort is required to ensure that the global community at large benefits from this truly global development.

Meanwhile, the uses for, and the speed of the Internet are increasing. VoIP is overcoming its difficulties and is poised to take a large market share away from the incumbent telcos. Data centres, MASPs and other forms of computer outsourcing are growing. Much of this outsourcing is being done in developing countries where the resulting surge in skilled employment and revenue is much needed.

Naturally, in parallel with the growth of the Internet, crime and malicious acts have grown rapidly. Virus attacks continue to plague the industry, with their delivery becoming more subtle. As is unwanted spam that is doubling each year. Chat rooms are being shut down because of their history of facilitating assaults on children. Cyber fraud is increasing but still represents a small proportion of the total. Internet technology is developing faster than its security measures.

Despite its rapid growth, the demand for the Internet still exceeds its capacity, with incumbent telcos dragging the chain on the development of broadband to protect their existing investments, and governments looking for ways to enforce it.

Report contains:
Internet, e-mail, permission based marketing, Spam, Cybercrime, IP telephony (VoIP), websites, web hosting, search engines, videostreaming; webcasting, multicasting, highspeed services; online music, online gaming.
Global market and industry overviews and analyses
Trends and Developments
Business Strategies
User statistics
Revenues and forecasts
ISP Markets
Industry issues and regulatory
128 pages, 92 tables and exhibits

Special price US$99.00, excluding 10% GST. (Australian & New Zealand residents please order directly from the office. Email Louise)

It is patently obvious to any observer that Alan Jones is promoting Telstra.

Since the 2UE advertising deal was struck with Telstra, Alan Jones has not uttered one single critical word about Telstra – in contrast to the preceding period, when he sometimes had been very critical. As a matter of fact, I have personally been involved in some of his interviews, in which he was very critical of Telstra indeed.

The Telstra bias in his program is obvious to all…. except apparently to our regulator, the ABA, which sees no evil, hears no evil and speaks no evil, just like those three famous monkeys.

When the ABC Media Watch program exposed the ABA, they also mentioned critical documents from within the ABA. These, however, mysteriously disappeared to make room for the more official ‘see no evil’ report.

The ABA was quick to issue a statement that the ABC was quoting from an unofficial ABA paper written by a junior ABA person, who obviously didn’t have a clue what they were talking about – and they had since produced a new report, which was supported by The Board.

Sorry guys, the junior person was spot-on, while the rest of you don’t want to see the reality.

Money talks, and people like Alan Jones are more powerful than most politicians – and certainly more powerful than bureaucrats. Many people who belong to the regulatory body hope for a life after the ABA, and it is good to have friends in the media industry. While I am not accusing anybody here, it is obvious that this is a very intimidating industry, in which tempting opportunities can arise when you are mates with those in control.

In looking at the Alan Jones whitewash, I can’t help but refer to a totally different ABA decision in the late 1990s, where the then Chairman of the ABA, Peter Webb, suggested that the government create a digital TV monopoly for the free-to-air broadcasters, and, on top of that, give away billions of dollars worth of free spectrum.

To everybody’s surprise the government accepted this proposal.

I have always considered the ABA to be an independent body; however, in my view, these two issues clearly demonstrate a bias in favour of the vested interests.

This article was written before the ABC’s interview with Professor David Flint, the controversial chairman of the ABA and protégé of the Australian government and John Law’s acquisitions re Alan Jones ‘Godlike’ position in the Australian media. I can only repeat: ‘the plot thickens’. Looking back to some of the ABA’s history I can only say I am not surprised!

Paul Budde

See also:
Australia – Broadcasting – Advertising Market – 2002
Australia – Digital TV – Analysis – Policies and Regulations
Australia – Radio – Overview and Statistics
Australia – Radio – Regulatory Overview

The EWON (Energy & Water Ombudsman of NSW) Annual Report 2003-2004 shows complaints from utility customers continue to rise. In the 2003-2004 financial year EWON handled 8,568 cases involving electricity, gas and water customers– an increase of 37% from the previous year.

The majority of complaints related to electricity (73%) and at least a quarter of these related to disconnection of electricity supply. As with previous years, billing and credit issues were the main area of customer complaints across all utilities.

At least 30% of cases involved people on income support, in particular pensions or benefits, highlighting that affordability of essential services is a significant issue for many low income customers.

The positive news is that energy companies have begun to develop assistance programs for their customers in difficult financial circumstances. These programs remove customers from the debt recovery cycle, and instead, offer carefully negotiated and realistic payment arrangements that customers can manage.

While the number of disconnections per year has fluctuated since 1998 when EWON was established, it still remains high. For many customers who are already facing financial and personal hardships, disconnection can often be the "last straw".

There are increasing pressures on utilities and customers, particularly in relation to issues of supply, sustainability and pricing. Ensuring that essential services stay within reach of all customers is a challenge for the whole community.

Australia – BPL and PLC – Critical Assessments
Australia – Multi-Utilities Markets
Australia – Powerline Broadband and PLC – Developments
Australia – UtiliTel
Australia – Utilities – Major Players
Technology – Infrastructure – Last Mile 9 – Broadband over Power Lines (BPL)