KIM JACOBS
October 7th, 2009 at 12:02 pm

Our Prime Minister’s $45billion national broadband initiative is a guaranteed copper bottomed financial disaster for Australia – but that does not mean it will not happen because not happening is tantamount to confessing it was a bad idea.

Divide the enormous cost by Australians families, take out those that have trouble meeting their existing car payments let alone the repayments on another electronic gadget, and you are left with a bill of over $12,000 per family (plus interest of probably another $12,000) – all to enable downloading of Hollywood movies into lounge rooms at a speed nearly as fast as television does for free. And of course like every computer anyone’s ever bought, will probably be superseded in a year, or two at most, by something twice as fast for a fraction of the cost.

What to do, fess up to a mistake or spin it under the carpet? Better still force Telstra’s cheaper otherwise competing network into a separate entity and force that entity into a national broadband monopoly. In one stroke it both hides the cost and eliminates any price competition which would otherwise expose the farce. The whole cost will be hidden in a new telephone tax. It will not matter whose phone company you select you will still have on charged to you whatever the New-Telstra Monopoly needs to repay with interest a government imposed $45billion burden.

It can be done – something similar has been done before.

In South Australia they had the government run State Bank disaster, $3.5bn 20 years ago – for a while the largest commercial loss the world had ever seen – It worked out at about $7,500 an SA family using the above arithmetic, and that was 20 years ago. Far more than $12,000 today. No-one noticed the cost. Because everyone suffered, relativities remained unchanged and the payback passed unnoticed. So much so that Rudd can now write magazine articles claiming socialising banks so they are government controlled is the way to go to prevent banking crises – and be taken seriously.

Another example. When private enterprise pointed out there was no money to be made in government promised supersonic flight, Concorde ought to have stopped there. Instead British and French “working families”, who never used it, were forced into second class hospitals, schools and universities so politicians could for 20 years pump billions into financing a commercial white elephant rather than back down on a foolish idea designed only to save wealthy people a few seconds. The Americans could afford it but were too smart to built one with public money. Boeing etc, knowing it was not commercially feasible without the public trough never attempted it. The prime ministers “initiative” has all the same hallmarks. Just like Concorde, he claims spending vast amounts of our money on an “initiative” Telstra and all others have already rejected as unprofitable, will be profitable.

The NBN should be called “Conroy’s Concorde”.

But learning from Concorde’s politicians, our politicians first remove competition to the NBN so the result cannot be benchmarked for failure.

Telstra has to be forced into participating. And no-one else in the whole of the world could be attracted in. You can bet the government tried. That is how financially successful the experts think it’s likely to be. That’s why a monopoly is needed.

Telstra already has a Sydney Melbourne broadband cable faster than the Prime Ministers “initiative”. They stopped there because that’s the only economically justifiable section in Australia. Unlike Concorde, those needing a profit to survive know when to stop.

Another downside was the reduction in Telstra’s market capitalisation by $1.75 billion, reducing every Australian’s (except parliamentarians and public servants fixed) superannuation.

The government will stick Australian working families with a $45billion plus $1.75 billion plus probably as much again in interest, just to save face.

Profitably the government’s future fund sold its Telstra shares just before the announcement – 1/2billion more than just after the announcement, and no ASIC comment/investigation is planned.

Telstra staff will never complain. They had a fantastic existence before competition started. You might remember how, when still a monopoly Telstra built into staff awards the job security, promotions and wage increases staff would have got had Telstra stuck with mechanical exchanges rather than switch to computerised exchanges and laid them off. When they eventually laid them off they gave them $1/2m each 10 years ago (plus full defined benefits super) to go away.

I know highly qualified Telstra electrical engineers who are looking forward to re-nationalisation. From their perspective it used to be wonderful operating in a monopoly. Prior to privatisation they all travelled business class and themselves booked into whichever room in whichever 5 star hotel they wanted to conference on solving esoteric electrical problems with unlimited budgets – rather than buy a half price off the shelf solution from Ericson or Siemens, and they never even bothered patenting their solutions. They tell me they spent $300m-$500m (no-one knows how much because the task had no budget) on solving remote area microwave linking of phones, a world first. Ericsons took their ideas for free and profitably sold the Telstra solution all through Africa for $200,000 a time, because Telstra not Ericsons had paid for the R&D and Telstra never bothered to patent it. Telstra senior engineers now all travel economy and stay in whatever room that the hotel Telstra accountants picked, wants to put them in. They say working for old Telstra was more fun and less stressful than university – nobody worried about anything and there was unlimited money for anything from wage increases to international travel to the very latest whizz-bang premises or esoteric seldom used equipment.

The customer experience will return to awful – but slowly so no-one notices. I can recall trying to get a telephone installed in a suburban office in 1978 and being told by monopoly Telstra it was just not possible because they had run out of lines for that area and had no exchange upgrade plans on at the moment (3kms from the centre of the city). Customers were a nuisance. Selling phone lines just led to more customers and more customers caused more problems for Telstra staff – if they needed more money it was easier to increase the price of calls rather than sell more phones.

At about the same time I used to get clients to buy Microbee computers with a dial up modem and a printer for $2,500, including all software. Using Dialog, and OTC, clients could send and receive telexes worldwide for pennies using WordStar word processing on the microbee.

The Telstra alternate was $30,000, could only be bought from Telstra with a compulsory annual multi-thousand dollar service contract. Monopoly Telstra even regulated the size of the desk and the distance from the wall where the machine was located. It was also done on punched tape so any spelling etc mistakes could not be corrected. You had to say something like “disregard the 32nd sentence and substitute the following: ” in your telex message.

People stopped buying the 3rd rate Telstra offering – or wanting Telstra techs involved, in droves. Instead of competing Telstra just had the minister ban the Microbee offering by prohibiting OTC from carrying the Microbee computerised signal to Dialog.

Another example. The then Minister in charge of Telstra came to Adelaide to be photographed next to the first multi-million dollar electronic exchange. Like all computers in those days it was housed in the dark in a filtered environment in floor to ceiling steel cases. Nothing to see, let alone photograph the minister next to. It had to be that way because in those days all computer equipment was extremely sensitive to light and dust. The ministers media staff overruled the Telstra engineers and had the cases all opened. They installed TV lighting which flashed all the eproms, erased all the settings and put the exchange out of commission for months. Telstra engineers thought it was funny but never complained. Monopoly Telstra had no profitability budget so no-one cared or complained, and nobody, not in the know, ever knew.

Current directors (whether of Telstra or the bigger insurance company shareholders) will not complain, they will all get Orders of Australia etc and qangos board positions if they co-operate quietly, or be constantly pilloried and frozen out of all government contact until they are eventually sacked, like Sol, if they kick up a fuss.

It will all be put to shareholders as a wonderful pro shareholder/pro Australia solution – but I doubt it will be.

[Reply]

SouthWind95
October 22nd, 2009 at 9:08 pm

One is ‘Blink’ by Gladwell. ,

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