No. 44

STONE the crows! The communications in the American wilderness are better than in the Sydney CBD! And the crows know, having flapped into Yellowstone National Park, a region as exquisite as it is isolated – and it is beautiful beyond belief.

Letters (oh come on, you remember them, handwritten messages, like Tax Office demands but friendlier) from Gardiner Mt are probably carried out by bison.

But everybody here has wifi, including the inns that accommodate crows and it is all but universally available for free. Just as it is in airports and on trains, in parks and in coffee shops (Starbucks now offers unlimited broadband access in all its stores) across the country.[1]

And the nation relies on it. Ipods, Ipads and Iphones, Blackberries and notebook computers are everywhere and in continual use.

I don’t know what they are all doing but it is a racing certainty that while many users are Facebook friending and trivially tweeting, deals are also being done, business information exchanged and cost effective corporate communication occurring at speeds and in places all but unimaginable a decade ago.

The productivity impact is undoubtedly enormous, according to the Harvard Business School’s John Quelch, 190 million Americans spend an average 68 hours a month online and last year the Internet added $190 billion to the US economy. [2]

And competition is always tougher as ever more people demand more bandwith at better prices. In the sort of deal we do not see Walmart has announced its own service, offering unlimited mobile phone calls and texts for $45 a month. It is hard to imagine mobile deals on data not being far behind.[3]

But thanks to a communications system that still resembles something the Postmaster General dreamed up in 1900 we are light years behind. In the US high speed wireless internet access is a basic utility, like electricity. In Australia it is a luxury, thanks to telcos that charge the maximum the market will bear with pricing plans that only an accountant who is keen on Kafka could love and only an engineer with a taste for complexity could admire.

The Crows tried to talk to their telco provider about global wifi roaming for this trip but gave up after a sales staffer explained what it would cost (a bomb) but had no idea how it would work.

And that is the core of our problem. The Crows have no idea about the engineering of the NBN, whether we need fibre to the node or to the phone jack in the roost or whether wifi could be so much cheaper that trading off speed for lower cost satellite access everywhere makes sense. Nor do the crows understand the economic assumptions underpinning the government’s case for the NBN. Unless they are alone this makes a strong case for conducting a cost benefit analysis, as Professor Judith Sloan suggests.[4]

But the issue even bird brains grasp is whether state built services and monopoly or oligopoly service provision makes sense, not so much in terms of construction as in the quality of consumer service that follows.

This is an issue that is too often ignored in debates about public investment in all sorts of infrastructure, as everybody focuses on who should pay for a project and what ROI is acceptable. Which is what is happening now, with suggestions the internet is the twenty-first century equivalent of railways 150 years ago. “Broadband will be to the 21st century what the railways were to the nienteenth – not just an engine of growth, but a civic bond drawing our whole Commonwealth closer together,” the Prime Minister said last week.”[5]

But this is a comparison not an explanation of why the state and whoever it sells the NBN to, will do a good job for users. Certainly all advocates of a strong public sector can point to examples of immense projects that were only built thanks to government, from the Tennessee Valley Authority in the US to the Snowy Mountains scheme here.

However, they always ignore examples of business creating infrastructure projects that provide both public service and private profit – like James Hill’s trans-continental US railway, which runs across the Rockies in the Montana region. It was built without the dubious public subsidies Congress paid to the companies that constructed other lines to the south, and Hill’s route provided an immense public benefit – opening up the US Pacific northwest. As Steve Forbes writes:[6]

His railroad’s service and quality of equipment easily eclipsed those of his subsidised rivals. Hill relentlessly used his expanding railroad to encourage farming and then to open markets for U.S. products in Asia, as he ran lines into our West Coast ports.

It wasn’t just the construction – it was the way the business was run that made it a success.

And so one question we need to address abut the internet is whether entrepreneurs can provide us with a better service using engineering which may not be as lavish as a network built by the public in whole or part. But the equally important other one is whether any industry dominated by a couple of corporations, especially if any of them is publicly underwritten in one way or another will ever put consumers ahead of institutional shareholders, or if unionised, their staffs.

Most people are probably resigned to the quality of the telco they use, but according to the Australian Competition and Consumer Commission, the telecommunications industry consistently leads complaints received.

As ACCC chair Graeme Samuel put it in March:

The range of investigations and actions the ACCC has taken and the types of complaints that we receive concern a number of different types of operators, conduct and telecommunications products and services. This suggests consumer protection issues are becoming more prevalent and persistent throughout the industry. The risk is, if this continues, the industry’s reputation with consumers may be irretrievably damaged. The provision of telecommunications services is so important to society and the Australian economy, consumers should be able to trust their providers, receive high quality customer service and be accurately informed about products and services.[7]

And don’t talk to the crows about Australia’s unique problems of huge spaces and small populations. Montana is absolutely empty but it has an impressive freight railway line and you can get wireless access in the epicenter of nowhere.

Endnotes


[1] Kristena Hansen and Andrea Chang, “Free, unlimited wifi begins at Starbucks” Los Angeles Times, July 2

[2] John Quelch, “Quantifying the economic impact of the internet,” Harvard Business School, Working Knowledge, August 17 2009 @http://hbswk.hbs.edu/pdf/item/6268.pdf recovered on September 20

[3] Associated Press, “Walmart introduces wireless plan under own brand” September 13 2010

[4] Judith Sloan, Testing the Mettle of the NBN is a must for taxpayers, The Australian, September 21

[5] Julia Gillard, “Light on the Hill Address” September 18 @ http://www.alp.org.au/federal-government/news/speech–julia-gillard,—light-on-the-hill-address  recovered  on September 22

[6] Steve Forbes. Rely on entrepreneurs, not bureaucrats,” Forbes December 4, 2009 @www.forbes.com/forbes/2009/1214/opinions-steve-forbes recovered on September 20

[7] Graeme Samuel,”Making phones fair – Australian telecommunications and poor consumer practice” Address to the ATUG annual conference, March 13 2010

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