The Government, through Communications Minister Michael Lee, says there will be competition in both services delivery and in the means of delivering them.
There had obviously been some confusion about earlier government statements about preferential treatment for the new carriers. The Government’s position was that the owner of a new cable network would be able to restrict access to their networks by other operators for five years to enable them to get up and running.
Until Lee’s statement this week, the Government had been silent on how many carriers would be permitted in one area.
Lee’s statement prompted Optus to say that unless the Government gives it a monopoly it will now dump is $5 billion plan and buy space on the Telecom network.
Lee’s reaction to that has been to tough it out and reassert his total-competition policy. He said a competitive and open pay-TV system was the best for Australia.
“”Some have argued that with Australia’s scarce capital resources, the Government should intervene to prevent any investment which duplicates cable roll-out,” he said. But he saw no merit in anybody drawing lines on maps to give monopolies to carriers who would then extract monopoly rents from viewers.
Lee is right to the extent that he is suspicious of monopolies and that there is no sense in replacing a public monopoly with a series of private ones. However, his blind faith that the market will sort everything out to the benefit of consumers is misguided _ especially in communications policy and especially in Australia.
It is a senseless duplication to have (ital) two (end ital) $5 billion networks of fibre optic or coaxial cable when one cable will deliver 65 channels _ enough for even the most addicted television or communications buff.
It is nonsense to have two competing road systems or two defence forces. There comes a time when the undoubted benefits of competition are outweighed by the inefficiencies of duplication, and cabling households is one example.
Lee cited the benefits of competition in the telephone industry to support his contention. True, consumers are much better off. The $200 million “”wasted” on advertising and duplication of serving capital has been more than made up with about $1 billion in increased efficiency. However, no-one suggested that the network of telephone lines (worth several billion dollars) be duplicated. That would have wiped out all the efficiency gains several times over. The same holds true for fibre-cable networks, indeed more so because fibre-cable is more expensive than the copper-wire telephone network.
Lee’s argument is also based on two false premises. He assumes that the network infrastructure providers are private and that they should also be allowed to be providers of program services.
However, once you allow the carrier to also be a program-service provide you create a vertical monopoly (even if there are other players). For example, someone who owns wheatfields, flour mills, the bakery and the bread shop has a vertical monopoly. Vertical monopolies give an uncompetitive advantage to owners to the detriment of consumers, as the Trade Practices Commission has pointed out with numerous examples.
Lee’s policy (or more correctly, the Government’s policy) is to permit vertical monopolies. Surely, replacing horizontal monopolies with vertical monopolies is equally fruitless as replacing public monopolies with private ones.
Optus might be behaving like a spoilt brat threatening to take the bat and ball home, but at least it has drawn attention to the fact that the rules of the game are suspect; the umpires are really not up to it and that the spectators are being cheated.
Optus is right to point out the folly of allowing infrastructure duplication on such a large scale, and has done the nation a favour in highlighting the weakness of Government policy. But its solution of granting Optus a monopoly is no solution. It is just self-serving.
Instead, the Government should (but inevitably won’t given the big media interests at stake) seek a public-interest solution.
That would be for the Government to create an independent authority with a majority government shareholding to set up the cable infrastructure for pay TV and other communications into the home.
That authority could then ensure vigorous competition between providers of programs and services through the network _ much as there is vigorous competition between transport companies using a publicly funded and maintained road system. (Only certified economic rationalists suggests competing road systems would be an efficient use of national resources.)
More importantly, that authority could reserve some cut-rate space for minority, non-profit groups and for programs of cultural importance to Australia. It could also ensure regional Australia get service.
Such an authority would also be able to insist on content standards that the Australian Broadcasting Authority appears unable to police through a licensing system that should have an important difference from the present set-up. Licences should be for a shorter period than the normal period of a government’s term of office. That way the government might have the courage to control the media licensees instead of the other way around.
We need a policy mix of regulation and competition in communications, not a mania for discredited “”rationalism”.