Australian consumers – including businesses — are getting all the disadvantages of a telecommunications monopoly and none of the advantages.
Developments over the past fortnight show how successive governments have made an utter hash of telecommunication policy – through ideology, the Dublin syndrome, political opportunism and a failure to have a clear industry policy with national goals.
The main advantage of a monopoly is that it prevents wasteful duplication. You only have to have one margarine factory; one road network; one defence force or one telecommunications network. The other advantage is that the community gets a service that it otherwise might not get: defence, roads, rural post services and so on.
But monopolies get complacent and bureaucratic and can abuse their position by over-charging. Often those disadvantages outweigh the advantage of no duplication.
Wise governments make good judgments about which services and industries should have monopoly status, for how long and under what terms. You cannot say that of recent Australian Governments.
This week Optus announced it would spend $800 million on its third-generation mobile network to cover rural and regional areas. Much of the money will be a duplication of Telstra’s third-generation network. What a waste.
A smart government with an eye to the national interest and the national economy would have done with the mobile network what it did decades ago with the copper wire network: hand it to a monopoly. We would have had one really good 100-per-cent-coverage mobile network, the monopoly owner of which could have leased access to many telecommunications companies.
A condition of the monopoly would have been that the owner could not also be a carrier company.
At least Optus will share its expanded network with Vodafone, as it does with its urban 3G network. The fact that Vodafone shares with Optus shows it would be possible to have a single infrastructure with no duplication and many competing carriers.
But no, since the 1980s governments have been telling us “public ownership always bad; competition always good”.
Last week Telstra announced it would challenge in the High Court the legislation that regulates the way it is required to grant access to its fixed-line network to competitors. Many have seen it as a delaying tactic. They have accused Telstra of being a spoilt brat, retaliating over not being given its way over the fibre-to-the-node broadband network.
Present law gives the Australian Competition and Consumer Commission the power to set the price for access to the network. It set $3.20 a month. Telstra has been charging $9. Telstra is to argue that forcing it to give access to competitors at what it says is below cost amounts to an acquisition of property from its 1.6 million shareholders other than on “just terms”. That, it argues, would offend the Constitution.
It is a long bow. The High Court gives a wide meaning to “property” which might well include hand over right to access at low rates. But Telstra has several stumbling blocks. One is that the Commonwealth is not “acquiring” the property. Another is that much of the value of the property only exists in the first place because the Commonwealth has legislated a monopoly for Telstra. So what the Commonwealth gives, the Commonwealth can take away. Thirdly, because the regulation is part of competition law the so-called “acquisition” might fall in a public-policy category of property transfer, like tax, which is not an unjust acquisition.
Whatever the result, Telstra stands to win because it can continue with its high charges in the meantime and because it creates uncertainty which upsets its competitors’ business plans.
Telstra was similarly miffed over the ACCC’s refusal to give it high access charges over its proposed broadband network, so Telstra took its bat and ball and went home. As a result consumers and business have to put up with high-cost, low-speed broadband.
But we should not be pointing the finger at Telstra. It is now just another private company doing what private companies do: gouge as much profit as possible.
No; the finger should be pointed at the Government for transmogrifying Telstra from a utility company with an eye for the public good to a rapacious profiteer using every artful tactic in the book.
There was nothing wrong with privastising Telstra, but not the way the Government did it. It should have cut it in two and certainly privatised its carrier arm. The infrastructure part could have stayed public or been wholly or partially privatised.
Having Telstra own the infrastructure at the same time as competing with other carriers on that infrastructure could never work satisfactorily.
But at every new turn – broadband, mobile, wireless, internet service provision (and, indeed, television) – we ran across the Dublin syndrome. The story goes that when someone hopelessly lost in Ireland asked the way to Dublin the answer came back: “If I was going to Dublin I would not start from here.”
At any time since the mid-1980s, to get a policy to deliver the best in telecommunications you would have preferred to be starting from somewhere else. But that is no excuse for not trying.
Even now it is not too late. It is well within Commonwealth power to enact competition laws that prohibit such vertical monopolies. Telstra could still be split. That would provide an even playing field for all carriers.
More importantly, the incentive for the company that held the infrastructure would be to provide the highest possible speed capacity telephony, internet and mobile services to the greatest number of people and geographic area.