You'd think the networks owned the airwaves

You'd think our commercial networks owned the airwaves.

When Communications Minister Malcolm Turnbull cut back the ABC and SBS last week he also gave notice of a minor rule change that sent them into convulsions.

Henceforth, the SBS would be able to broadcast up to 10 minutes of advertising each peak hour instead of the usual five.

The networks acted as if he had attacked their right to exist.

"This government was elected as being pro-business," thundered Seven Network chief executive Tim Worner. "It shouldn't be making decisions that harm Australian businesses."

"I am surprised the government is prepared to compete against and inflict damage on Australian commercial broadcasters," wailed Nine's David Gyngell.

What was proposed was "directly at odds with the government's claim that Australia is open for business," said Free TV Australia chair Harold Mitchell.

What was proposed was competition.

Australian television networks don't believe they are like other businesses. Banks have to put up with competitors muscling in on their turf, supermarket chains have had to cede ground to Aldi, carmakers have had to compete or go under, but the spoiled children of Australian industry want to be forever protected from competition on the airwaves as everything changes around them.

The biggest change is that broadcast spectrum has become incredibly valuable for mobile communications. Yet the networks sit on it.

Another is that much less spectrum is needed to broadcast a TV program than before.

Yet the networks sit on it. During the switch to digital in the 1990s, rather than broadcasting what they had before using much less spectrum (the whole point of the exercise) they said they needed more spectrum in order to broadcast in full high definition. That way it couldn't be used by anyone that might want to start a competing network. They produced dodgy-looking research saying Australians didn't want extra channels - they wanted the same channels in high definition.

Prime Minister John Howard bought their line against the recommendations of his advisers.

The Office of Asset Sales labelled it "a de facto further grant of a valuable public asset to existing commercial interests".

His department said there were "better ways of introducing digital television than by granting seven megahertz of spectrum to each of the five free-to-air broadcasters at no cost when a standard definition service of a higher quality than the current service could be provided with around two megahertz".

They were given it on the condition that they could only use it for broadcasting their existing channels in high definition.

When after some years it became apparent that Australians weren't going to switch to digital if all they got was the same channels (invalidating the networks' dodgy looking research) the networks said they could better use the excess spectrum for extra channels themselves.

Each still maintains a token commitment to high definition on one of its channels (it's actually degraded high definition to make way for the extra channels) but no one much notices. Much of the time those channels don't carry high definition content. The spectrum is wasted, but no one else has it. That's how the networks think.

And the minister is on to them.

He has already picked on the easiest target. The poorly watched community channels in Melbourne, Geelong, Sydney, Brisbane Adelaide and Perth will be kicked off their spectrum at the end of 2015. They'll have to use the internet. After the freed-up spectrum is used to test new technologies it'll be made available to the highest bidders, almost certainly mobile phone and data companies.

The next step will be grabbing back spectrum from the ABC and SBS. That's fairly easy - cut their budgets, let them use a new compression technology called MPEG-4 that halves the amount of spectrum they need and tell them they can save on transmission costs and give the other half back.

The commercial networks require more subtle handling. The minister has launched an inquiry - the spectrum review -  to work out how to "maximise the economic and social return from spectrum". Its preferred approach is auctions, with the winning bidders limited to 15 years at a time and the department given the right to take the spectrum off them (with compensation) if it's not fully used.

The treasury describes spectrum as a scarce resource in its submission. It says it should be allocated to the highest value uses.

"To be clear, this includes both commercial and non-commercial applications," it says - making a pointed reference to two of the biggest hogs of spectrum, our armed forces and our police and emergency services.

Defence will, at the very least, have to justify what it needs and hand some back. Police and emergency services might be able to hand back a lot with the proviso that in a real emergency they get it to use it again, with the mobile communications company that has bought it agreeing to degrade its service to give emergency services priority.

And the networks. Turnbull will probably get it off them by being nice. Using new compression technology, they will need only half as much and be able to sell the excess to someone who wants it more. It's far more than they deserve, but at least their spectrum will be better used.

It'd make a nice little earner for whoever buys Channel Ten and a really good earner if the new owner sold the lot and closed the station down.

Mobile communication is increasingly important to us. Network television is not.

In The Age and Sydney Morning Herald

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Australia Post. Why it no longer needs to deliver daily

When I was young the postman came twice a day. You could post a letter in the morning and if you were lucky have it delivered across town by the afternoon.

It was the only way to send messages (apart from telegrams, which were expensive).

Then came the phone (and the increasing usefulness of phones - they weren’t very useful at first when only a few houses were connected). Deliveries were cut back to once a day, and the Saturday service was axed.

The nature of the post changed. Short messages arranging meetings were no longer needed. Longer 'essays' were still the preserve of the post as was the delivery of documents, parcels and bills.

Then came mobile phones and text messages (and with them the gradual disappearance of Doctor Who style telephone boxes). You could send messages from almost anywhere. Even away from home there was no need to send a letter.

At first the arrival of email made little difference to the post. As with the phone it was of limited use when few of us had email addresses. And we couldn't send big documents.

Then email addresses became ubiquitous, as did social media. The much forecast 'digital divide' never happened. Every strata of Australia is now connected, from the elderly to farmers to school children. And the capacity of the system has grown. Almost all of us can send big documents and long letters with ease. We don't need to post them.

Australia Post says back in the 1980s almost all written communication was carried by the post. Today it’s less than 1 per cent...

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And most of it is bills or notices from various levels of government.

Late to the party, businesses are abandoning the post big time. They are using email to send us bills and even ‘junk mail’. Links to websites mean they can get an instant response, or instant payment.

The Coalition has pledged to put virtually all government services and interactions online by 2017. By then there will be scarcely anything left to post.

Mail deliveries are plummeting at the rate of 4 to 5 per cent a year. Twelve years ago Australia Post delivered an average of 2.2 local letters or bills per day to each street address per day. It is now 1.7 and on track to fall to 1.3 by 2016, sliding further beyond that.

When the national broadband network is complete there will be no excuse whatsoever for daily mail deliveries. Australia's really remote locations are already limited to two deliveries per week. That should become the standard for the rest of us, as a precursor to eliminating local deliveries. If the spread of the telephone was responsible for halving the frequency of mail deliveries, the spread of the internet should be responsible for eliminating them.

It would be absurd to have spent $40 billion building a world-class system to instantly deliver messages while hanging on a system poorly replicating it that hardly anyone used.

Delivering mail used to make Australia Post money. It now costs it $150 million per year. The loss is on track to blow out to $1 billion, and then perhaps $2 billion, far exceeding the profits from delivering parcels and making the entire organisation an albatross around the taxpayers necks.

Delivery twice a week is more than adequate for most parcels. If someone wants one sooner, they can try a competitor to Australia Post or pay a premium.

Australia will soon stop paying Holden and Ford to make cars Australians aren't keen to buy.

If we are serious about getting value for our taxpayer dollars we will also stop paying postal workers to make deliveries Australians no longer need.

Australia Post employs 33,000 workers and provides work for another 10,000 contractors. Twice-weekly deliveries would slash the wage bill (and the rubber burnt and the petrol poured into tanks) and give us a chance of making good on our investment in the NBN.

It’s not only a question of money. Right now there are roughly 2 Australians of traditional working age for each Australian who is older or younger. The Intergenerational Report says by 2050 there will be just 1.5.

Australia will need to make good use of every worker it has. Employing someone to do something we no longer need merely because we always have will be a waste of a scarce resource. In most fields the market will handle the transition. Banks are moving us away from tellers, supermarkets invite us to check out our own groceries, and the baker and the milkman no longer call.

But Australia Post is stuck with a government-imposed requirement to deliver mail five days a week to 98 per cent of Australian addresses. Changing it will require a government decision. It’ll mean taking on unions and the National Party.

The Business Council tackles the question obliquely in its submission to the Commission of Audit by saying there’s a case for selling Australia Post. But that's beside the point. The point is that we are asking Australia Post to do things we no longer need. Passing the parcel to a private owner who can take on the unions and lobby for weaker service standards is passing the bucks.

In The Sydney Morning Herald and The Age


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Turnbull saves the NBN from itself

And saves Conroy's legacy

The Coalition has saved Labor’s bacon.

Had it wanted, it could have shut down or sold NBN Co after the election, crystallising a loss on the billions spent so far.

The loss would have moved the billions on to the main part of the budget. It would have weighed down Wayne Swan’s deficit and been tagged as “Conroy’s Folly” or “Labor’s Broadband Black hole”.

While Wayne Swan has been cutting spending everywhere the eye can see to bring the budget closer to surplus, he hasn’t been cutting it on the NBN because it couldn’t be seen.

His predecessor Peter Costello takes the credit.

Annoyed at the budget fiddles of the Hawke and Keating governments that counted as regular income money made from selling parts of Qantas and the Commonwealth Bank, he started calculating a so-called “underlying budget balance” that didn’t include income from from selling financial assets. A variant of it has become the measure of surplus or deficit most widely quoted.

It also excludes from the underlying calculation the money spent acquiring financial assets.

Labor has been able to claim that that’s what it’s doing when it spends on the NBN - acquiring a financial asset.

But it is only able to keep claiming that if NBN Co looks like a financial asset. Always line-ball, its financial projections were pushed right to the edge by the Competition and Consumer Commission last week which made it agree to limit the price increases of its regular products to the consumer price index minus 1.5 per cent, all the way out to 2040. It is to keep reviewing the pricing structure to make sure the cap isn’t being evaded.

"If they invest efficiently, if demand broadly goes up as they expect, they will make their commercial rate of return," Commission chairman Rod Sims said. "If circumstances turn out otherwise, the price caps might bite, and they will not."

As should have been expected during a mining construction boom, NBN Co has been finding it hard to get the workers it needs to run new lines into almost every house in the country.

It’s been looking less and less like a financial asset as each month passes.

The Coalition’s plan removes the need. It’s thrown it a lifeline.

In today's Age

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NBN Shmen-BN - we're connecting to the net as never before

And we're doing it through broadband

The national broadband network may be a decade away, but already 91.2 per cent of Australian businesses are connected to the net. Of those, an impressive 99.1 per cent connect by broadband rather than dial-up.

Even in the agriculture sector, where a lower 88.5 per cent of businesses use the net, 98.3 of them do it via broadband.

The annual Bureau of Statistics survey finds Australia’s smallest businesses the least connected. So-called micro businesses employing four or fewer people have an 89 per cent connection rate (99 per cent via broadband). Mid-sized businesses employing up to 19 people are 93 per cent connected (99.2 per cent via broadband). Big business employing 200 or more are all connected (99.7 per cent by broadband).

Five years earlier when the then Labor opposition was drawing up its plans for the national broadband network only 81 per cent of businesses were connected to the net, although even then 82.5 per cent did it via broadband.

The big change has been in the use of the net...

Five years ago only 30 per cent of Australian businesses had websites. Today it is 42 per cent. Among businesses employing 20 or more people it is 74 per cent. Five years ago only 37 per cent of businesses placed orders via the net. Today it is 51 per cent.

The proportion of businesses capable of receiving orders via the web climbed from 21 to 28 per cent. A record $189 billion of orders were taken by the web during 2010-11, up $46 billion on 2009-10.

The sectors making the most use of the web for taking orders are wholesale trade and manufacturing, where more than 50 per cent of businesses engage in e-commerce. The sectors using the web least for transactions are agriculture and health care and social assistance. But even in those legard sectors e-commerce is far more prominent. Five years ago just 2 per cent of health care and social assistance businesses took orders via the web. Today it is 13 per cent.

The ABS measure of orders taken by the web is conservative, excluding regular orders made via the internet for which the original commitment to purchase was made using other means.

In today's Sydney Morning Herald


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8166.0

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Two Americas - the mobile phone traffic graph

Thank you Boing Boing and thank you AT&T

I would love to see one for Australia.

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Freedom of information - Vodafone style

Vodafone faces compensation payouts to as many as 4 million of its customers after confirming it is investigating a security breach that has put billing and call records on a publicly accessible website protected only by passwords that change monthly.

It also faces the prospect of privacy concerns being added to a lawsuit being prepared by on behalf of 12,500 customers over quality of service issues.

Justice Minister Brendan O’Connor yesterday raised the matter with the office of the Privacy Commissioner which will seek answers from Vodafone today.

Commissioner Timothy Pilgrim has power to launch a so-called "own motion" investigation on behalf of affected customers and direct that compensation be paid to each.

At issue will be whether Vodafone has logged attempts to access its data and knows which of its customers have been affected.

"It appears what has happened is that somebody shared a password"... Vodafone chief executive Nigel Dews told the Herald.

"It appears to be a one-off breach and we have got out internal investigators looking into it right now. We reset our passwords last night and we are resetting them every 24 hours until that investigation is complete."

Vodfaone merged with mobile provider '3' two years ago, but only Vodafone customers were affected by the breach.

The firm would lay criminal charges against anyone who had passed on passwords.

Mr Dews declined to say whether Vodafone kept logs of every access, saying he did not want to hand out information that could help hackers.

Telstra too said it would not disclose the nature of its security measures. It is believed to use the same customer management system as Vodafone although it may be configured differently.

A reporter for the Sun Herald had someone with a laptop and login code demonstrate how easy it was to call to call up her address, drivers licence number, date of birth and details of the time, location and destination of all of her phone calls and messages.

'I was surprised how easily the database could be opened'

Natalie O'Brien

SITTING in a western Sydney business with a laptop and someone who knew a login for Vodafone's customer database, I handed over my mobile number to be punched in - in seconds we could see all my personal details.

For some time I have been told information about telco customers could easily be accessed.

I have heard many stories of how undesirable elements could get the passwords to tap into anyone's phone account and gather confidential details as well as watch all their transactions including who they contact.

But I was surprised at how quickly and easily the customer database could be opened from anywhere by someone unconnected to Vodafone. I could see my full name, address, driver's licence number, date of birth, the pin number to access and change details on my Vodafone account.

My entire call list - everyone I had rung or texted and the time I spent on the phone - was visible.

University of NSW law professor Graham Greenleaf told the Herald if Vodafone did not keep such logs there would be no obvious limit on the number of its customers to whom it could be liable if its conduct was found to breach the Privacy Act.

"Where more than one person is affected they can declare it a representative complaint," he said.

"The Privacy Commissioner can order the payment of compensation. If the firm does not pay, he can take it to court."

Until now no Privacy Commissioner has used that power in the decade they have had jurisdiction over private companies.

"It sends a bad message - that compliance with the Act is optional," he said.

The Privacy Act requires private companies to take reasonable precautions to protect personal data.

"What is reasonable depends on the risks and the nature of the information, but common sense would tell you there is a real question if you are potentially exposing this sort of information to people who can access it not just from Vodafone offices but from remote sites."

Any Vodafone customer is entitled to ask when and to whom the firm has disclosed their information.

"That's just accessing your own record under Privacy Act," he said. The Act also allowed the equivalent of a private class action.

Piper Alderman lawyer Sasha Ivantsoff will this week mail 12,500 Vodafone customers a questionnaire and says he may extend a planned law suit if their responses detail privacy breaches.

"The main issues to date have been dropped calls, no service, voice mail not functioning and data not functioning. We haven't filed anything yet, so we can adjust our claim," he said.

Published in today's SMH and Age


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Let's celebrate. Telstra will be split!

Okay, so we apparently had to get an enormously expensive NBN to do it, but it is long overdue!


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Malcolm Turnbull Shadow Minister for Communications and Broadband

Watch out!


Abbott Shadow Ministry



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Standby for much higher phone and broadband charges - today's agreement:

We will no longer have a fixed-line way of avoiding the NBN

"AGREEMENT BETWEEN NBN CO AND TELSTRA ON THE ROLLOUT OF THE NATIONAL BROADBAND NETWORK

The Australian Government today welcomed the announcement by Telstra and NBN Co that they had entered into a Financial Heads of Agreement.

This agreement paves the way for a faster, cheaper, more efficient rollout of the National Broadband Network, with faster take-up.

This is an important step in the delivery of the single largest nation building infrastructure project in Australian history, which will increase national productivity and help build a stronger economy.

The Agreement between NBN Co and Telstra, worth an expected value of $9 billion, provides for:

. The reuse of suitable Telstra infrastructure, including pits, ducts and backhaul fibre, by NBN Co as it starts to rollout its new network – avoiding unnecessary infrastructure duplication; and

. The progressive migration of customers from Telstra’s copper and pay-TV cable networks to the new wholesale-only fibre network to be built and operated by NBN Co...

The Agreement means that:

. Taxpayers benefit because it reduces the overall cost of building the network and will result in higher take-up rates and revenue for NBN Co.

. A greater proportion of the NBN rollout will be underground, with less overhead cabling.

. Australia’s largest telecommunications company, Telstra, will become a participant in the rollout of the NBN, and is likely to become NBN Co’s largest customer.

Combined with Australian Government public policy reforms, Telstra estimates that the agreement announced today will deliver Telstra a post-tax net present value of approximately $11 billion. The payments by NBN Co to Telstra would be made over a number of years as the rollout progresses.

Through the migration of Telstra customers to the NBN, Australia will benefit significantly from a national wholesale-only broadband network, delivering structural separation of Telstra.

This historic microeconomic reform will ensure Australia finally has a genuinely competitive telecommunications industry which works for all Australian households and businesses, and helps to drive long-term productivity growth in our economy.

The Australian Competition and Consumer Commission will review the competition aspects of this agreement as envisaged in the Telecommunications Competition and Consumer Safeguards Bill, which the Government still hopes to pass to provide greater certainty to industry.

In support of the Agreement, the Australian Government will progress public policy reforms to support the transition to NBN to which Telstra attributes a value of approximately $2 billion.

It will:

. Establish a new entity, USO Co – with Commonwealth funding of $50 million in 2012-13 and 2013-14, increasing to $100 million per annum thereafter. The remaining funding that USO Co requires will be contributed by industry, as it is now with final arrangements subject to industry and stakeholder consultation;

. Provide $100 million to Telstra to assist in the retraining and redeployment of Telstra staff that will be affected by this very significant reform to the structure of the telecommunications industry; and

. Require NBN Co to be the wholesale supplier of last resort for fibre connections in greenfield developments from 1 January 2011.

These important contributions were provided for in the 2010-11 Budget.

USO Co will assume responsibility for most of Telstra’s Universal Service Obligations for the delivery of standard telephone services, payphones and emergency call handling from 1 July 2012.

This will ensure that essential communications services are protected and assist the structural reform of the industry.

Telstra, NBN Co and the Commonwealth agencies will now move to negotiate detailed Definitive Agreements, which is expected to take some months.

When these negotiations are concluded the Definitive Agreements will be put to Telstra’s shareholders and the Government, for final approval.

While today’s announcement is a significant step in the rollout of the NBN, as confirmed by the NBN Implementation Study, this project would still be financially viable even without the participation of Telstra.

The NBN is critical to securing Australia’s international competitiveness. It is central to Australia’s economic future because it will deliver universal superfast broadband to all Australian households and businesses no matter where they live or do business."


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What if they built a high-speed broadband network and nobody signed up?

Well, actually just 200 people.

Telstra's high-speed internet service, which offers speeds of up to 100mbps has only been taken up by about 200 customers since its launch last year, throwing the viability of the NBN into question.

Joshua Gans points to a new study that tries to work out whether people are prepared to pay for the sort of speeds our government is to spend hundreds of billions providing.

Coming from a slow broadband service, consumers would pay $48 per month for a move to something like 100Mbps. But if they already had 2Mbps, they would only pay an extra $3 a month for the extra speed.

Guess what? Many many of us already have 2Mbps.

Why move? Unless pushed. As the government will probably have to do by getting Telstra to disconnect Telstra's copper wires.

It is going to spend hundreds of billions to force us to pay more than we are now for something we don't much want. Right?

Even then we probably won't. We'll go wireless.

Now about the Budget savings both sides say they are looking for...


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Bright idea: Don't privatise the NBN - Kohler

"Communications Minister Stephen Conroy should do more than just remove from the NBN legislation the option for it to be a retailer – he should put in a clause that it will never raise equity or be privatised.

The NBN can, and should, be fully funded by government-guaranteed debt.

Its prices should be regulated to provide a margin over the cost of that funding to pay for management and maintenance, and then that’s it.

And those misty-eyed nostalgics within the government who want to create another PMG or Telecom Australia should be taken aside, arm on their shoulders, and counselled: get over it, the world has moved on, and it wasn’t really better then anyway.

This is an opportunity to build a great public asset that will turn Australia into a hotbed of innovation, but for that to happen the leash on the NBN needs to be very tight – forever.

NBN Co chief Mike Quigley has done the right thing by declaring that he will only provide a very basic bitstream transport service – called Layer 2. The legislation’s main purpose should be to make sure his successors in the future do the same thing.

Raising equity and/or privatising the NBN will set up a demand for growth – equity investors require capital gain as well as dividends..."


The full thing is at at Business Spectator



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This outrage over what Conroy did... it took surprisingly long to build

I was working Sunday February 7 when Conroy made the strange announcement, and frankly felt a bit of outrage might be in order.

The ABC's Mark Scott, whose tweets I follow, actually seemed pleased with the announcement:

Government to rebate commercial free-to-air TV licence fees to promote Australian content.......very significant step. 3:30 PM Feb 7th  from TweetDeck

The Coalition's Communications Spokesman Tony Smith through his spokesman Andrew Cox dictated these supportive words to me over the phone:

"Preserving quality Australian content is important and there is little doubt the cost of delivering that content is higher at present. While we acknowledge support is warranted during transition to digital television, we look forward to considering further details and the government's costings."

No suggestion at the time that it could be inappropriate...

One week later on Sunday February 14, I was working again when news came through about Conroy's skiing meeting with Stokes.

Smith emailed Cox who emailed me:

From: Smith, Tony (MP)
To: Cox, Andrew (T. Smith, MP)
Sent: Sun Feb 14 17:00:02 2010

Senator Conroy has simply not been upfront and open in the last week.

He should release the full costings and all of the detail to justify both the size and the duration of the rebates.

And given his public linkage of the rebates with quality Australian content – he must detail what commitments he has sought and received to achieve this objective.

Again, no outrage at the idea of handing money to the commercial television networks.

Like I said, that took time to build.



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Of all the dodgy explanations... (Stephen Conroy edition)

Communications Minister Stephen Conroy has described as "entirely appropriate" his decision to meet with Channel Seven chief Kerry Stokes at a Colorado ski resort shortly before handing to the networks fee rebates worth one quarter of a billion dollars.

The Minister yesterday confirmed reports that he had met Mr Stokes in Veil, Colorado while on a personal holiday in January "fully paid for by me including all airfares from Australia to Colorado".

While not directly addressing a claim by a spokesman for Mr Stokes that the two had "enjoyed a couple of ski runs" together the Communications Minister said he "met regularly with all senior communication stakeholders".

"All of my conduct with Mr Stokes and his associates, and all other stakeholders in my portfolio, has been entirely appropriate," he added.

Within weeks the Minister announced what amounted to a gift to the commercial networks of $250 million... in the form of a 33 per cent rebate on their licence fees in 2009 and a 50 per cent rebate in 2010.

Although headed "Government to protect Australian content on commercial television" the announcement detailed no requirement for the networks to protect or extend Australian content and merely restated existing rules.
Opposition frontbencher Christopher Pyne called for an explanation.

"The actual visit and the skiing with Kerry Stokes is not nearly as important as exactly what is going on with the communications portfolio," Mr Pyne told the ABC's Insiders.

"He has given the networks $250 million. He hasn't yet said how he arrived at the figure, what exactly the money is to be used for, and what guaranntees he's received from the networks that it will be used for something that will benefit the public."

"Was there a rationale, or did he pull the figures out of his ear?"

A spokesman for the Minister said the rebate was "an interim measure to support current Australian content at a time of structural change".

"Treasury were involved in developing the costings," she said.

Published in today's SMH 

Graphic: Vail Hotel, Colorado


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Well it's quarter of a billion, see. And I'm handing it to Australia's commercial television stations

Christmas has come early to Australia's commercial television channels in the form of a $240 million gift from Communications Minister Steven Conroy.

This year he will give the networks a 33 per cent rebate on their annual licence fees of $287, and next year a 50 per cent rebate.

Although the announcement is headed "Government to protect Australian content on commercial television" the broadcasters will be required to do no more than meet the existing Australian content requirements in return for the rebates.

The Minister said Australian networks faced higher licence fees than those overseas and were facing challenges including the switch to digital television.

"Broadcasters have a unique role in preserving our national culture and the commercial television sector invests hundreds of millions of dollars each year in the production of local content," he said.

"However, they are faced with a converging media environment and switch to digital television, as well as the impact on revenue created by a decline in advertising spend as a result of the global financial crisis"...

"The Government recognises that the commercial broadcasters will require assistance to maintain Australian content production, while investing in a new delivery platform. "

The $240 million in rebates follows long negotiations with the networks and is understood to be an attempt to keep them profitable.

The Nine network is majority foreign owned and the seven network is half foreign owned.

Channel Nine last night wrongly reported the deal as saying it would "guarantee the continued production of series such as Underbelly". In fact it imposes no additional requirements on the networks.

They are already required to meet a range of targets including broadcasting Australian material for 55 per cent of the time between 6 am and midnight.

The Ministers office last night declined to give an assurance that the rebates would not continue beyond 2011.

Australian networks pay around 8 per cent of their revenue in license fees, compared to around 2 per cent in the US, the UK and Canada.

Coalition Communications spokesman Tony Smith yesterday backed Senator Conroy on the rebates.

"Preserving quality Australian content is important and there is little doubt the cost of delivering that content is higher at present," he said. "While we acknowledge support is warranted during transition to digital television, we look forward to considering further details and the government's costings."

Published in today's SMH and Age

Licence Fee Relief Conroy


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The case against Conroy

Gittins and I love what Conroy's done. As Gittins says: "For Telstra to have been given immunity - an eternal licence to rip off Australian phone users - would have been intolerable"

But Ken Davidson argues today that part of Conroy's vision appears to be to force us to pay more by cutting off what we have now.

An extract:

"It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years. It is doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now."

The full thing is below.

Be careful what you wish for. Telstra's competitors - such as Optus, AAPT and Primus, who have led the charge for breaking up Telstra into two companies in order to protect their own arbitrage businesses - may have shot themselves in the foot.

Forget about competition, level playing fields, cheaper, faster telephone and internet services. What is unfolding in the policy announced by Communications Minister Stephen Conroy is a $43 billion protection racket designed to keep Telstra's competitors in business.

The competitors are basically marketing and billing organisations. With the assistance of the Australian Competition and Consumer Commission, they are allowed to tap into the telecommunications network at the telephone exchanges at a price that doesn't reflect the cost of building the network, and then resell the capacity at a price that allows them to undercut Telstra in the profitable major city markets. Telstra, of course, is expected to build and maintain a network that covers the whole country.

This cosy arrangement in the name of competition was threatened by Telstra's announcement in 2005 that it would begin upgrading the network by rolling out fibre to the node at the end of the street as part of the evolutionary upgrading of the network - as has occurred over the past 100 years.

The point was that it would bypass the exchanges and put the arbitragers out of business.

So what? The introduction of automatic exchanges and the change from analog to digital network destroyed more than 40,000 Telstra jobs during the '80s and '90s, which was managed by the former public monopoly without major union disruption.

By comparison, the job destruction as a result of technological change bypassing exchanges and putting the arbitragers out of business would be a flea bite by comparison.

Most of the jobs are in call centres, which are being moved offshore to India and the Philippines in any case.

Fibre to the node is a sensible intermediate step to eventual fibre to the home if it is ever needed.

Big institutions such as hospitals, universities, utilities, big corporations, government departments and even schools already have access to direct fibre connections.

Copper wires, properly maintained, can give speeds up to 50 megabits, which is more than adequate for any need a household might conceivably imagine.

In Devonport and Hobart, where the Tasmanian Government has been experimenting with building fibre to the home at Commonwealth expense, shows nobody wants it while the cheaper copper alternative is available.

The mind boggles. What could a sensible government do with $43 billion to invest over eight years? Think global warming. Think of the infrastructure such as electrification of rail lines, urban public transport, base load renewable energy, conservation and recycling water, which will be needed to reduce our carbon footprint in order to ensure that the world will be a fit place to live for our children and grandchildren.

Meanwhile, Telstra could use its internal cash flows to upgrade the network, supplemented by a multibillion- dollar sell-off of more than a thousand large exchanges, most occupying valuable real estate in the major cities.

Now that would be a win-win situation leading to lower real prices.

What Telstra's competitors hoped was that, by splitting Telstra in two, they would keep their privileged access to the copper network. Not so. As the experience in Tasmania makes blindingly obvious, the only way customers can be induced to take up the fibre-to-the-home option is if the copper network is closed down.

Under the plan, the copper network will become progressively redundant as the NBN network is rolled out. Even with the febrile imaginings of the ACCC as to what constitutes competition, it cannot set a wholesale price for access to the new network that is lower for Telstra's competitors than for Telstra retail.

Without scope for arbitrage, the competitive advantage to Telstra's competitors disappears. Even with the arbitrage handicap, Telstra still holds 70 per cent of the fixed-line market and would be able to drive its competitors out of business, based on a level playing field.

It is bad public policy. Even worse, it is politically disastrous.

It is a blackmail attempt by the Government designed to force Telstra (owned by 1.4 million voters) to divest itself of a copper network, which generates cash flow of around $6 billion a year, and make it worthless within eight years. It is doing this in order to replace it with a system that nobody wants or needs at a cost to households and businesses for access to the telecommunications network 30 to 40 per cent higher than now.

The way this policy was arrived at cannot bear the most superficial examination. When the Opposition stops staring at its navel, it will realise this is Rudd Labor's equivalent of WorkChoices with the same capacity to destroy the Government.

Published in today's SMH and Age

Graphic: From here

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Alston, Beazley and the telecommunications union should hang their heads in shame.

Whatever the Coalition says about this week's long-overdue decision to split Telstra, don't expect it to call for an inquiry.

Here's why.

The Coalition's then Communications Minister Richard Alston (now High Commissioner to London) ordered such an inquiry in December 2002.

Academics and interested parties spent all that year's Christmas season preparing submissions and produced 68 of them by the deadline of January 31. Hearings were to begin on February 7.

Then on February 5, Alston got the committee to cancel the inquiry.

He said the prospect of an inquiry had "achieved its objective by flushing out [Labor's spokesman] Tanner into admitting that his structural separation proposal was a foolish and unworkable concept".

As a result there was "no valid reason for progressing this inquiry".

Rarely has a politician misused the parliament's processes so cynically...

John Quiggin spent Christmas working on one of the 68 submissions. It's here.

He wrote at the time:

Like 60-odd other suckers, I put a submission into the House of Representatives committee inquiring into the structural separation of Telstra. I knew it was an Alston stunt, designed to embarrass Labor, but I thought it might provide a useful forum for public debate. Apparently Alston has now realised this and panicked. Even though he had the numbers on the committee, the evidence showed that his policy was incoherent and unsustainable. So he's ordered the troops to put up the barricades.

Here's the email the committee sent him:

Dear Professor Quiggin

The committee has decided NOT to hold the public hearing scheduled for
tomorrow, 7th February, 2003. It has also decided NOT to hold any of the
scheduled public hearings.

I apologise for any inconvenience.

Just about the only public figure who comes out of this well is Keating. He opposed the creation of the Telstra megalith at the time.

Beazley, and his mates in the telecommunications union insisted that somehow a megalith would be good for us.

The Coalition bought the line.

It is a measure of how far we have travelled that these days the merits of genuine competition are not in dispute.

Alston, Beazley and the telecommunications union that foisted Telstra on us should hang their heads in shame.

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Telstra's war on everything - the comentariat

Michael Sainsbury says the government has called Telstra's bluff:

"Telstra is the natural builder of what is, after all, an extension of its own network. But no, it's not the only company that can build and finance the network."

Ian Verrender forsees an end game:

Telstra's board and management have a duty to maximise shareholder returns. But a company that believes it has the right to impose its will over an elected government is a dangerous phenomenon, one that could lead to dire consequences for Telstra shareholders.

Alan Kohler reckons if the new network goes pear-shaped, great!

"We can keep getting relatively fast, competitive ADSL broadband from a full range of providers as well as wireless broadband from Telstra and Optus. And the government can’t get blamed for not delivering on its silly promise, because it won’t be its fault. It’s all good."

Here's my take:

TELSTRA has declared war on its former owner and has most of the artillery it needs to win.

Revealing yesterday that a government panel had ditched its bid to build the $5 billion new national fibre-to-node broadband network it said that whoever did win the contract would face a competitive assault that could run them out of business.

"We have choices. And we think that they are very viable choices. And we can build faster," said Telstra chief executive Sol Trujillo.

If the government tried to stop the company it once owned overbuilding and out-competing the successful bidder "that would put Australia probably in a unique category with maybe North Korea and Cuba as the only places in the world that restrict competitive builds etcetera"...

"It would be in violation of World Trade Organisation requirements."

Communications Minister Stephen Conroy said the panel had acted on legal advice.

Telstra's bid, delivered just minutes before last month's deadline, ran to only 13-pages and declared that Tcompany wasn't prepared to abide by all of the government's conditions. By contrast the bid from the Optus-led consortium ran to more than 1,000 pages and met the requirements.

Other bids were received from Canada's Axia Netmedia and a Melbourne-based consortium headed by retailer Solomon Lew. The ACT firm Transact and the Tasmanian government submitted local bids.

The expert panel includes the Treasury head Ken Henry and the head of Senator Conroy's department Patricia Scott. It will report in March.

If Senator Conroy accepts its recommendation that a bidder other than Telstra build the network, the winner will apparently have the right to disconnect the wires that go from most Australian homes and business to pillar boxes on the street and then reconnect them there to a optic fibre that bypasses Telstra's network.

Unjust confiscation of Telstra's property? That's what Telstra believes, but it has already argued that case all the way to the High Court and lost. In March all seven judges rejected its argument in part because they believed that when the government sold Telstra it only gave it the right to use the wires and pillar boxes rather than giving them to it outright.

Telstra's form suggests it will fight all the way to the High Court again, and suggests much more. In the mid-1980s it dealt with a threat to its television signal distribution business from the government-owned Aussat by massively expanding and competitively pricing its optic fibre links between cities. The satellite corporation went broke.

In the mid-1990s it dealt with a threat from Optus to wire Australian cities with coaxial cables by putting in its own coaxial cables in the same streets, creating Foxtel to give it something to put on them. Optus Vision bled money then folded.

Telstra told the stock exchange yesterday that from next year it will boost the speed of its Next G mobile broadband network to the point where its faster than than the government's proposed fibre-to-node network. It will boost the speed on its Foxtel cables to make them faster still.

It is used to winning. Even without pillar boxes, it has the resources to do it.

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Our extraordinary love affair with mobile phones

...is getting deeper.

Australia’s love affair with mobile phones has scaled new heights.

According to the Australian Mobile Telecommunications Association a record 10,056,640 mobile phones were shipped to Australian stores in the year to May – the first time annual sales have passed 10 million.

The figure suggests that one in every two Australian has bought a new mobile phone in the past year.

In May alone, new phone shipments approached 800,000 - up 7.5 per cent on the previous May...

CommSec chief equities economist Craig James said that mobile phone sales have hit annual record highs in each of the past four months and are showing no
signs of slowing.

“Australians love tech goods like mobile phones, computers and iPods and there are no signs of mobile phone sales reaching saturation point,” he said.

The Australian launch of Apple’s iPhone next month should boost sales further.

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