Month: August 2007

Cracking Coonan’s Filter And Other Tech Wrecks

For the second time in recent months, Communications Minister Helen Coonan has found herself in the awkward position of trying to defend the merits of specific technologies.

Coonan argued that the government had anticipated that the porn filter announced by the Prime Minister last week would be cracked, eventually but must have been shocked by how quickly it was. On Friday, a year ten student found a workaround in thirty minutes, and defeated the subsequent update in forty more. Nevertheless, the government stands by the software it chose.

Similarly, when the Minister announced that the Optus-Elders consortium had won nearly a billion dollars to provide regional broadband, she was forced to defend the WiMAX technology against a barrage of criticism.

WiMAX is a high-quality technology but its reputation has suffered from some outrageous claims by its proponents. Early WiMAX advocates breathlessly claimed ranges of up to 70 kilometres. The government claims a range of 25 kilometres – even this is hopelessly optimistic.

Real life experience suggests that the technology has a much more modest range of 5-10 kilometres, in good conditions. And only on spectrum that the Optus-Elders network doesn’t currently have access to.

This new role – the government as tech expert – is becoming more and more prominent. Consumers are now quick to learn whether specific technologies or services meet the government’s seal of approval.

For instance, Telstra’s Next G service is, apparently, not satisfactory – Helen Coonan has received “hundreds of complaints”.

The Minister has also determined that a recent Telstra upgrade of its Hybrid Fibre Coaxial cable network is better than fibre-to-the-node technology, which will be news for those in the industry who have spent the last two years debating the appropriate regulatory framework to encourage firms to invest in fiberoptic broadband network.

Sometimes these statements are mere rhetoric flourishes, indicative only of a government struggling to navigate the complex interactions between politics and high-technology. But many in the industry are frustrated with the Communications Minister’s self-appointed role as technology propagandist and critic.

The government, when pressed, insists that it remains strictly “technology neutral” when it writes public policy. Unfortunately, the reality is much different.

In the course of the long-running dispute with Telstra, the government has largely abandoned allowing the market to decide the most suitable technologies. Instead, it has readopted the characteristic winner picking strategies which have long discredited national industry policies.

Splitting Telstra Is Not The Right Move

Last week, the US Federal Communications Commission abandoned its decade-long experiment with forced access sharing. Under this process the four so-called “baby bell” phone companies were required to open their phone lines to competing broadband retailers, rather like Telstra’s ADSL must be opened to its rivals.

As the former chief executive of US West, the baby bell that served the US Midwest, Sol Trujillo is intimately aware of the harmful effects that forced access policies have on telecommunications services. In the name of competition, access requirements also disingenuously known as unbundling make an entire industry subservient to regulators, rather than the market and consumers.

Telstra’s last attempt to change prices for high-speed internet, involving the introduction of the entry level $30 per month price early last year, was subject to vigorous action by the Australian Competition and Consumer Commission and Telstra’s retail rivals seeking to have the price increased.

This was punishing the customer to preserve the competitors and was just as odious as the policies that US regulators have unanimously decided are harmful to true telecommunications competition.

Telstra’s decision last year to lower the cost of home broadband should have been welcomed around the country. Instead, a pricing arrangement which resulted in a massive surge in ADSL uptake was greeted with threats of a multimillion-dollar fine and a brutal series of condemnations in the press.

Telstra’s basic broadband pricing has not changed in 1 1/2 years, probably as the result of lessons learnt from last year’s ugly fight. Such stagnant pricing in such a dynamic sector is not the sign of healthy competition.

The most harmful effect of forced access regulation is on infrastructure. The telecommunications market does not have the same stability as electricity or water; the steady progression of new communication technologies requires significant infrastructure investments to meet consumer demands.

It is clear that allowing competitors to leech off Telstra’s copper wire network at a nominal rate that ensures their profitability, means that there are poor incentives to invest in newer, more advanced infrastructure.

To argue that the capital required to build such a network is so large that no company would possibly do so is fallacious. One need only look at the sudden explosion in aviation competition with the advent of Virgin Airlines to recognise this fact.

In telecommunications we can be confident that this will emerge in the US now that price shackling has been abandoned. Not only do the existing regulations dissuade young competitors from developing new services, but they give Telstra a significant disincentive to upgrade lines. This point was made clear in a Senate committee earlier this year in a discussion on comparable broadband speed.

Telstra’s reluctance to roll out fibre optic cable to the home a technology which will rocket broadband speeds to among the best in the world is based not upon a lack of desire to do so, but a fear that the ACCC will force the company to open its lines at a rate which could make the roll-out a poor investment.

This is the regulatory environment Trujillo faced in the US, and this is the one he faces in Australia right now. However the recent developments here have not followed the positive developments in the America.

While recent Australian debate has focused on the National’s rent-seeking demands for future-proofing, it is the operational separation of Telstra into a wholesale and retail division which threatens to be the legacy of the coalition’s compromise.

If it goes through as planned, separation will lock in the regressive forced access regulation. Telstra Wholesale will be no more than a province of the ACCC empire controlled not by consumer demand but by an ACCC managed cartel of parasitic competitors trying to suck concessions from the one provider of significant communications capital that the country has.

The timing of the US decision is fortuitous for the federal government and those who will draw up the new arrangements for the final sale of Telstra.

We can look to the US, and their momentous decision to end this regulatory arrangement, for ideas on how to progress.

Broadband Projects An Embarrassing, Expensive Failure

Perhaps John Howard is right – State Governments are stupid. When NSW Premier Morris Iemma announced its ambitious program to blanket Sydney with WiFi coverage, providing it for free to consumers, he explicitly referred to a San Franciscan project as one to emulate.

But it is becoming increasingly apparent that the Californian project is imploding. US internet provider EarthLink may pull out of San Francisco’s municipal WiFi project. Australian governments should take note – local politicians are not always the best investors in communications technology.

After the ACCC had torpedoed Telstra’s proposal to build a Fibre-to-the-node network late last year — but before the major federal parties had announced their intentions to simply pay for the high-speed networks themselves — State governments one by one proposed their own solutions to the broadband controversy.

Leading the charge, Peter Beattie proposed that a private firm finance, build and operate a fibre-to-the-home network in Brisbane, but this was little more than a wishful press release.

Other states drew on overseas broadband proposals. Western Australia’s $1 billion fibre proposal was modelled on Alberta’s SuperNet. By all accounts, the Canadian network has been a relative success, but both SuperNet and the WA plan focus on building network backbone to essential services rather than piping internet direct to consumers.

Certainly, there are a wide range of international comparisons to call upon. Particularly in the United States, local governments are taking it upon themselves to get into the broadband business, with or without private support. But the experience has been rocky.

Local WiFi projects are often underutilised, underperforming, and expensive. Local councils may assume that free broadband would be popular, but one citywide project in Orlando, Florida was shut down in 2005 when the city realised that only 27 people were using the service per day.

Uptake rates have been more positive in other cities, but are in the range of one to two percent of the population, comparing poorly with the forecasted demand of between 15 and 30 percent.

The most high-profile network – and one which Iemma praised when announcing the Sydney plan – has also been the biggest debacle. San Francisco’s joint venture with EarthLink and Google is no closer to deployment than when it was announced in 2005. Indeed, the project’s failure was abundantly clear at the time when the NSW government was examining it.

The Google-EarthLink plan has been derailed by political theatre and contractual disputes. And even if EarthLink doesn’t pull out, the network speeds offered will be a paltry 300kbps – a speed which has been widely derided in Australia as ‘fraudband’. Contrast this with the 60 mbps nationwide fibre-to-the-home network that Verizon is investing in at a cost of US$18 billion.

It is tempting for politicians to offer things to their constituents for free, especially something as popular as broadband. But local government broadband projects are proving to be an embarrassing, expensive failure.

The Value Of Secrets To Pollies And Journos

In 1870, the editor of the Chicago Times got his job description down nicely: “It is a newspaper’s duty to print the news, and raise hell.”

So it is hard to sympathise with Peter Costello’s claims that his now famous dinner was off the record. After all, the demand for salacious gossip about senior politicians is almost infinite. And for journalists, the market for information is highly competitive.

When these combine, it must be tough for journalists to resist disclosing juicy political confessions. The potential personal benefit for the reporter and commercial benefit for their employer is enormous. And nobody wants to be the one who sat on a big story while their competitor makes their reputations disclosing it.

Such briefings with seemingly sympathetic journalists are common enough when tilling the ground for political change. By going public with the details of the dinner, some may claim that damage has been done to the sacred reporter-politician relationship. And the journalists involved will struggle to get invited to dinner with the next aspirational treasurer.

However, whatever country club mentality remains in the relationship between these two opposed professions is bound to erode away over the course of the next few years.

The news media has been highly competitive since the invention of the daily newspaper nearly three hundred years ago. But the even greater competition brought about from recent technological change has exponentially increased the value of a scoop.

Outlets like Crikey explicitly market themselves as purveyors of inside gossip and rumours – when Crikey readers are offered “the inside track”, it is in contrast to what is seen as an overly conservative traditional press corp.

In the United States, bloggers who self-identify as online journalists are routinely granted the legitimacy of press passes and interviews. With none of the institutional and reputational support that comes with a masthead, these writers can only sell themselves on original content. For this reason, some US bloggers are becoming formidably competitive at sourcing news, often shining their dead-tree counterparts.

If on the internet, nobody knows you’re a dog, then in the real world, nobody knows you’re on the internet. In the era of widespread social-networking, people don’t even need a blog to break news. We shouldn’t be surprised if in the coming years some stories are broken in the status updates of Facebook profiles.

Politicians can hardly expect secrets to be kept when there is so much value from disclosure.

Laws Against Concentrated Media Ownership Hurt, Rather Than Help

The Australian reports today that the Australian Competition and Consumer Commission has begun its inquiry into Fairfax’s acquisition of Southern Cross Broadcasting’s TV and radio assets.

The ACCC has been given a greater role in the regulatory adjudication of media mergers after Helen Coonan’s partial deregulation of ownership law in September last year.

For consumers, these reforms should have been welcome. Laws against concentrated media ownership hurt, rather than help, the cause of media diversity.

Media ownership laws rely on a crude, and possibly erroneous, model of the relationship between ownership and content diversity. Their premise is simple: concentration of ownership is a proxy for concentration of content.

But a growing body of empirical evidence suggests that this link is not as well established as the critics of media deregulation might assume.

Perhaps counter-intuitively, concentration of ownership can increase media diversity. A reduction of the number of owners in a newspaper market often leads to an increase in product differentiation. Firms in these situations find it is more profitable to lure consumers with new products than by trying to ape established ones.

Another classic example here is subscription television, where a single firm offers consumers dozens of highly diverse channels. But the diversity available on pay TV indicates a source of the dull homogeneity of much of Australia’s television – the protectionist management of the broadcasting spectrum. If we are serious about encouraging media diversity we should be at the very least liberalising the number of television licences.

Across the media sector, firms are searching for new business models. The announcement that PBL Media would be taken over by a private equity firm indicated just how aware ‘old media’ firms are of their new competition and their audience’s changing media consumption patterns.

In this context, media concentration and consolidation might more usefully be seen as a ‘circle the wagons’ strategy by firms in traditional markets. As audiences fragment, many firms feel that they have to expand their empires just to keep up.

This may not end up being a successful strategy. In the United States, a wave of consolidations a few years ago has been followed by widespread break-ups and divestitures.

But in such a competitive environment, these firms need to be allowed to experiment with business structures as much as possible. Applying economy-wide rather than sector-specific competition law to the industry is a step in the right direction.

Che Chic: You’ve Ignored The Horrors, Now Buy The T-Shirt

Forty years since his death, Che Guevara is selling strong. But his continuing iconic status tells us less about Guevara and more about the irreverence and unpredictability of culture in a capitalist society.

There is hardly a more recognisable symbol of revolutionary chic. Guevara’s image is plastered on T-shirts, backpacks and posters. One online store sells clocks with his iconic portrait to emphasise just how anti-establishment wall-mountable clocks can be.

Che Guevara is the Ralph Lauren polo shirt of the anti-capitalist set. But Guevara doesn’t really represent what the university students who proudly display his image think he does. Guevara was a Marxist guerilla who made a specialty of executing his opponents and prisoners without trial. He pioneered techniques of psychological torture. And he directed “suicide squads” that were sent into battles with no hope of victory.

He also founded Cuba’s concentration camp system, extolled the virtues of class hatred, and persecuted homosexuals.

Even when he wasn’t waging war against civilians, he was still a disaster. After the Cuban revolution, Guevara took a government position as Cuba’s central economic planner, and promptly drove the economy into the ground. Michael Moore and Oliver Stone may flatter the achievements of Fidel Castro, but much of the blame for the poverty of Cuban socialism must be laid at Guevara’s feet.

For this reason, it would be easy to chalk up the modern admiration of Guevara to dormant totalitarian fantasies in the left. But there is already too much self-righteous indignation in politics. Just because someone has a poster of Guevara on their wall, doesn’t immediately imply that they want to send homosexuals to a prison camp and execute those who are not doctrinaire Marxists.

For most people, Guevara is simply a vague symbol of rebelliousness. The modern cult of Guevara loves the rebel, but ignores his cause.

Nevertheless, even that anti-establishment credibility is being seriously devalued. Advertising executives appropriate his image to make their brands seem edgy.

It’s hard to imagine anyone more embedded in the establishment than Prince Harry, yet the third in line to the English throne has paraded around in a Che Guevara T-shirt.

The iconic Guevara has been devalued nearly to the point of meaninglessness. What remains is little more than a striking piece of graphic design with strong colours.

This is hardly surprising. Popular culture has a wonderful habit of appropriating meaningful symbols, processing them into accessible packages, making jokes about them and finally selling them for a profit. The modern cultural economy has a voracious appetite for icons to ridicule and market.

Popular culture turns dictatorship and violence into irony and kitsch.

And Guevara’s portrait is not the only morally ambiguous icon being appropriated for popular consumption.

The popularity of Soviet propaganda posters is undiminished by an awareness of the brutal oppression of Soviet communism. Same too for Chinese communism — posters of Chairman Mao are widely available even as the tragedy of the Cultural Revolution is revealed to the West.

Even Nazism can be the brunt of cultural ridicule. In 1940, Charlie Chaplin’s The Great Dictator mocked the effete airs of Adolf Hitler, without diminishing Chaplin’s serious contempt for the Third Reich. Earlier this year, the German comedy Mein Fuehrer: The Truly Truest Truth about Adolf Hitler was a box-office hit.

But Nazi kitsch has not been so comfortably embraced by popular culture — perhaps a testament to our continued inability to fully comprehend the horror of the Holocaust.

Similarly, not every use of the Guevara icon is ironic or in jest. Those who display it in deliberate solidarity with the Argentinian guerilla fighter are either ignorant or morally bankrupt. Guevara was nowhere near the quasi-Jesus figure portrayed in the 2004 film The Motorcycle Diaries.

For many of the people who suffered from his attempts at Marxist revolution, a Guevara T-shirt is the moral equivalent of a Stalin T-shirt.

But capitalist culture doesn’t obey moral judgements. Ironically, Che Guevara’s longevity as a cultural symbol has been thanks to the very economic system he sought to destroy.

Monitoring Porn: Not Government’s Responsibility

Prime Minister John Howard used last night’s webcast to Christian groups across the country to announce a $190 million “crackdown” on pornography, terrorists and child sex predators online.

When politicians equate pornography with terrorism and child abuse, you know they aren’t approaching the matter soberly. The “think of the children” mindset is a powerful drug.

Pornography is consensual and legal. Terrorism and child abuse are reprehensible violent crimes. From a public policy perspective they require two distinct approaches.

Terrorism and child abuse require strong police action – trying to compel internet chat room to “detect” child predators is a remarkably feeble defence against child abuse. Chat room operators lack the expertise and resources to detect possible future illegal activity. It is, after all, the role of government to protect people from harm, not the role of private companies.

Anti-terrorism should also be the focus of law enforcement, not communications regulators and ISPs.

The government has been telegraphing this announcement for some time.

After hearing that a school child had been suspended for downloading pornography onto his 3G phone, Communications Minister Helen Coonan last year condemned the technology as “pipelines for perversion”. Unsurprisingly, yesterday’s Telstra results show a dramatic increase in 3G phone sales.

But until today, the Liberal Party had been much more sensible about online pornography than the Labor Party. In the 2004 election, the relatively measured approach adopted by the Coalition contrasted well with Mark Latham’s ambitious and misguided SafetyOnline filtering program.

Now ISPs are going to be compelled to offer consumers a “family friendly” broadband package, which will filter out sites that do not meet the approval of the Australian Communications and Media Authority. Such ISP-level filtering will be powerless against pornography distribution over peer-to-peer networks, chat sites or even email. Teenagers eager to get their hands on some porn will not be at all deterred.

For this reason, parents have to bear the primary responsibility for monitoring their children’s online activity. They already have a remarkable array of tools to do so. Many internet service providers already offer their customers free or subsidised content filters as part of their broadband package.

Terrorism and child abuse are the responsibility of governments, but monitoring the exposure of children to pornography should be the responsibility of parents and guardians.

It appears that online content regulation is another example of the general jettisoning of good public policy that has characterised the government’s last twelve months.

Is Aunty’s Strength A Net Gain?

The ABC has turned 75 and still occupies a central place in Australia’s political status quo. But getting to its 100th birthday may be tougher.

The ABC has to come to terms with the dramatic technological changes sweeping across the media landscape, changes that are slowly eroding the rationale for public broadcasting.

Unfortunately, many of Aunty’s recent attempts to shoehorn itself into the internet age have been embarrassingly awkward. The ABC has eagerly jumped at fads rather than focused on its strengths.

It has been convinced by a stream of hyperbolic and ridiculous media reports that the virtual world Second Life is the inevitable future of the internet. Second Life is essentially a glorified chat room with a focus on sex and gambling, but the public broadcaster has gullibly embraced it.

Unsurprisingly, in May the ABC’s Second Life headquarters, ABC Island, was reduced to a bombed, cratered mess by the pranksters who roam the online world.

A recent attempt to duplicate the success of the video-sharing site YouTube was also unsuccessful. The website that accompanied the screening of The Great Global Warming Swindle asked viewers to upload their own videos critiquing or commenting on the documentary. But by the time the forum was shut down, only two people had done so.

Building virtual islands and user-generated video sites are hardly central planks in the ABC’s charter. They are also a pretty questionable use of taxpayers’ money; the world doesn’t lack for YouTube clones or chat rooms. However, the ABC’s website is a relative success and understanding why can provide a template for future online activity.

The discussion forums that accompany many of its radio and television programs are popular and cost effective. The network produces a huge volume of content every day and provides much of it online as podcasts and streaming video, instantly multiplying its value for taxpayers.

Indeed, shifting material online is a far more vital task for the ABC than producing yet another mini-series based on a significant moment for the labour movement. Considering the central role the ABC has played in Australia’s history, digitising as much of its archive as possible would be a more valuable education resource.

A debate rages within the ABC as to whether to charge for access to online content. Being asked to pay for ABC programming twice, the first time through the tax system, is hard to stomach. But, more important, the worst thing for a media company is not for consumers to enjoy its content without paying but to not enjoy it at all. The media landscape is characterised by an abundance of material. In a crowded, highly competitive market, few companies can afford to deliberately exclude their consumers.

This abundance also presents a problem for the ABC. Public broadcasting is premised on scarcity. The limited space on the broadcasting spectrum, so the argument goes, means that commercial broadcasters will not be able to provide high-quality or important programming. Public broadcasting steps in to fill that gap.

But with the widespread availability of the internet, quality journalism has never been more plentiful. Quality opinion and editorial is produced by millions of amateurs and professionals, on and offline. Quality drama is available at the click of a mouse from anywhere in the world.

If anything, media consumers suffer from an overload of information and entertainment. In such an environment, it is hard to justify spending vast sums on public broadcasting. The ABC may need to look towards another programming and funding model if it is survive to meet its next big milestone, in 2032.

A useful model to consider is provided by C-SPAN, the US cable TV network dedicated to 24-hour coverage of congressional debate, campaign trail footage, speeches and book forums. C-SPAN is self-consciously focused on objectivity, even going so far as avoiding political commentary.

One of the most important roles the ABC has is broadcasting parliamentary proceedings, and the C-SPAN model would allow it to continue and expand on this valuable programming.

C-SPAN, however, is a good example of how the free market can provide quality public affairs broadcasting in the absence of government subsidy. The network is a privately run, not-for-profit company. An ABC strictly adhering to the C-SPAN model may not have to rely on tax dollars for financial support. Alternative models, such as accepting advertising or even full privatisation, have been well discussed by critics of the ABC. But probably sooner than it expects, Aunty is going to have to provide an answer to a simple question: what role should public broadcasting have in an age of media abundance?