Month: December 2008

Ignore Meaningless Public Health Studies? I’ll Drink To That

Before you dig into your next serve of glistening Christmas ham, rich gravy and potatoes drenched in baked fat, and before you chug another glass of frustratingly warm rose, pause for a moment and think. What impact will your actions have on the nation’s aggregate productivity statistics? Could your second portion of brandy-smothered pudding be that final straw that pushes Australia’s OECD ranking below New Zealand’s?

These are the big questions the Government would like us to ask over the Christmas break. The Federal Government’s Preventative Health Taskforce – one of the higher-profile inquiries of the few dozen announced this year – wants to make individual overindulgence everybody’s problem.

According to the taskforce, obesity costs Australia $58.2billion a year, which makes you wonder why we don’t just keep all our money in an oatmeal tin where obesity can’t find it. This is a huge amount. The taskforce claims that the cost of alcohol abuse is a bit more modest – $15 billion – but that’s still a lot.

We are used to reading enormous numbers like that every day in the press. But for the most part, they consist of so many assumptions piled upon yet more assumptions that they are worthless.

One study last year claimed that Australia loses $2billion in productivity to email spam every year. The consultancy that published the study imagines that every millisecond Australians spend deleting spam emails is a millisecond that they aren’t extracting money from consumers. But, in reality, most employees find deleting spam a welcome distraction from refreshing Facebook.

So when the taskforce and the Government tell us that alcohol and obesity cost us the better part of $100 billion, what does that actually mean? Not that much.

It would be fair enough if the cost was limited to the direct cost of alcohol and obesity to the government. With a public health care system, taxpayers bear some of the costs of hospitalisation but, in defence of fat people and drunkards, they pay taxes too.

Anyway, the idea that we need to stop people overindulging because taxpayers pick up the tab has always seemed more like an argument against public health than an argument for banning junk food. Is a public health system incompatible with individuals making their own choices about what to eat?

These arguments are frequently overblown – in the case of drinking, the direct costs to the taxpayer are exceeded by the taxes on alcohol. Public health activists argue that obesity and alcohol are ripping dollars out of the Australian economy – as if we could figure out how much an overweight 50-year-old bank manager could have earned if he ate only salads. If we were all teetotal triathletes with doctorates in pure mathematics, the country’s productivity stats would be awesome.

Some of the other “costs” are even less grounded in reality. To derive the $15billion cost of alcohol, the taskforce adds up things like the cost of policing, property damage, insurance administration, and the lost productivity of those prisoners who may be locked up for crimes committed after drinking a six-pack. They even count the cost of lost household labour, as if instead of relaxing with a glass of wine in the evening everybody should be vacuuming the lounge room.

We can all imagine better choices other people could make. Yes, if the intern hadn’t been out till 5am, there wouldn’t have been that typo in the annual report. And perhaps instead of going to Friday after-work drinks we could all be inventing stuff. But that doesn’t mean we should blame alcohol for the intern’s lack of dedication or our lack of time machines.

There are costs incurred by every choice we make. If there weren’t costs, they wouldn’t be called “choices”, they’d just be “things we do”. But multiplying ridiculous assumptions in order to arrive at the largest possible number only obscures the real question at hand: is your fondness for cake anyone else’s business?

In a savvy political move, the taskforce plans to report back in the new year. No sane government would want to be caught nagging us during our cherished festival of gluttony and inebriation.

So every time you sip your Christmas coldie, a statistician updates a spreadsheet. But don’t worry too much about it – you’re having more fun than he is.

Radical Reform Needed To Clear Up The Telco Mess

Telstra’s exclusion from the bidding process for a national broadband network reinforces how much of a fiasco Australian telecommunications policy really is.

The Labor Party’s high-profile promise that it would have in place by November 2008 a fibre-optic network was supposed to outflank the regulatory stagnation that had developed since Telstra first announced its plans to build such a network in late 2004.

Communications Minister Stephen Conroy clearly had no idea how difficult and entrenched the regulatory problems were.

The latest decision sets a terrible precedent for a minister with an already poor reputation. The Government is claiming the Telstra proposal was rejected because the company had not included a detailed plan to involve small and medium enterprises in the network’s construction. The first striking thing about this requirement is just how extraordinarily micro-managing it is. Does the Government want the fibre-to-the-node or not? Surely voters don’t care whether their broadband network is built by big companies, little companies or robots subcontracted by aliens.

Nevertheless, it is hard to avoid the impression – and certainly this is Telstra’s view – that being excluded over this odd requirement is nothing more than a convenient excuse to kick Australia’s biggest telco out of the running. After 11 years of forced access regulation, there is a lot of bad blood between Telstra, the industry, the regulators and, of course, the Government.

This decision signals a government willing to make decisions based on animosity rather than neutrality. Big Australian companies will be quickly learning how important their Canberra lobbyists are under the Rudd Government: with a resurgent industry policy, an emissions trading scheme with more exceptions than consistencies, and a steady program of commercial bail-outs, it has been a long time since having the ear of a minister has been so important.

The Government can’t claim to be concerned about the influence of lobbyists in the halls of Parliament while making it impossible for companies to do business without them. The problem facing Australia’s communications industry is deceptively simple. The original regulatory approach was to try to inject some competition after the industry’s partial deregulation. And so Telstra was forced to allow its competition to access the copper wire network, and at a price set by the ACCC.

Yes, Australia has seen an explosion of small telcos. If competition is a synonym for hundreds of companies selling pretty much the same product, then regulators can declare victory. But the more important point of the forced access model was to encourage companies – after they had a comfortable foothold in the industry – to build their own networks. That has not happened. Instead, Telstra’s competitors have invested more and more of their own resources into the ageing copper-wire network.

And when the idea that we need a new network comes along, it creates a perfect storm. Telstra isn’t sure how the access regime will be applied to a whole new network on which it wears all the financial risk. Telstra’s competitors are disgruntled because suddenly all their expensive equipment will become obsolete, and mortified by the prospect of being unable to compete with a flashy new network. The Government doesn’t like copping public criticism from a company that used to be its political stress ball, and the regulators would prefer it if they could issue orders unchallenged, as they could before.

With stakeholders at each other’s throats, the industry is unable to build the network. But this is no market failure by any definition of the phrase; it is a failure of the Government’s regulatory policies, which discourage investment in infrastructure.

It must be easy for politicians to imagine that a government could magically fix problems by throwing money at them. But yesterday’s exclusion of Telstra from the broadband tender indicates that the Labor Party might find our regulatory mess a trifle more complex to deal with.

The forced access framework has, ironically enough, cemented Telstra even further into the centre of the telecommunications industry. It will take radical reform to fix the telco mess. Governments are going to have to step back from micro-managing the telecommunications sector. Market forces need to determine the shape of such a quickly developing industry, not regulators.