Tag: Crikey

The Winds Of Change Will Not Wait For Rudd’s Broadband

The failure of the National Broadband Network tender to find a sensible and willing private sector company is not surprising. But the failure cannot be blamed on the global financial crisis – the economy may look pretty dismal, but the government’s broadband policy was never very good anyway.

Partly this is because technological change has boxed the government into a corner. Earlier this year, while the NBN expert panel was dithering about looking for a firm to make good on the Labor Party’s election promise of a 12Mbps network, Telstra announced that it was planning to upgrade its already-existent cable network to 100Mbps, without a scrap of government support or subsidy. Even the firm’s mobile Next G service – which right now covers far more of Australian population than any future fixed-line network could hope to – is being upgraded to 42Mbps. And it’s not just Telstra – Optus has been periodically upgrading its cable network to match the speeds of its competitor.

Simply put, it would have been humiliating for Communications Minister Stephen Conroy to trumpet a 12Mbps network while there are superior products in the broadband marketplace.

And these are just the private sector’s plans for the next twelve months. The government intends to roll its network out over eight years – who knows what we will expect from our internet connections in 2018? There’s a very good chance that the new network will be long obsolete by the time it is finished.

While the Prime Minister announced that the network will cost “up to” $43 billion over those eight years, it has only committed to an initial $4.7 billion investment into the project. This cost is, at least on the face of it, a drop in the bucket. Since coming to office, the Rudd Government has increased the size of government by a massive 21%. And the Commonwealth Government’s contingent liabilities have increased ten-fold in the last year. Nevertheless, the new NBN plan opens the door even wider to future financial obligations, especially if the fundraising and rollout doesn’t proceed as smoothly as the government is hoping.

So far no government has been willing to treat the cause of our broadband problem – the long outdated access regulations which compel Telstra to share its network at a regulated cost.Today’s announcement just maintains the fiction that the government can buy its way out of a long-term regulatory mess.

Broadband: Another Telco Monopoly Would Be A Disaster

If the Expert Taskforce into broadband infrastructure was supposed to delay scrutiny of the government’s broadband policy until after the election, then it isn’t working.

The Taskforce was formed to evaluate proposals for broadband infrastructure roll-out, and assess the regulatory or legislative changes that that may require.

Debate over telecommunications regulation hardly needs its fire stoked. But, oddly, the loudest agitator over the last week has been the communications minister herself.

Helen Coonan has spent the last few days apologising for speculating that the taskforce could recommend the structural separation of Telstra.

And yesterday in the Australian Financial Review she raised the possibility that the government could help pay for a proposal that delivered fibre-optic broadband all the way to the home. This too was quickly retracted. The Minister, a spokesman claimed, was speaking “hypothetically”.

Conspicuously, one option which has been not withdrawn is the potential that the winning broadband proposal will be granted a monopoly over broadband infrastructure. Coonan periodically refers to this possibility in her public addresses and it goes unchallenged. But granting an infrastructure monopoly would stifle competition in the telecommunications industry far more than it is already.

While the Taskforce prepares to receive the first broadband proposals, almost any regulatory change is on the table. But the one thing that the taskforce cannot yield on is the most important and controversial – the requirement that any new network be open to access by competitors at a “non-discriminatory” rate. The taskforce’s job is to devise some regulatory conditions under which a firm would both build the fibre network and share it with competitors.

But it is this sort of mandatory access regulation that has drawn the telecommunications sector into its current regulatory quagmire. Access regulation encourages firms to piggyback on existing infrastructure, rather than competitively build infrastructure themselves.

And fibre-to-the-node will hardly be the last broadband infrastructure Australia ever needs. When the next upgrade inevitably appears on the horizon, mandatory access regulation will still be hampering investment.

Coonan let this cat out of the bag when she raised the possibility of government subsidies for a future, higher-speed network – a tacit admission that she does not believe that the telecommunications industry can manage and fund its own investment while the existing regulatory framework remains.

The Taskforce’s requirement that the new network be open for access by competitors merely demonstrates that the government has learnt little from the failures of telecommunications regulation. To appropriate the Minister’s artless phrase – whatever the Taskforce concludes in February next year, telecommunications regulation will still not be “future-proofed”.

The Slippery Slope Towards Internet Censorship Continues

The Australian Government continued down the slippery slope towards internet censorship yesterday by introducing a bill to give the Australian Federal Police the power to nominate terrorism or crime related websites for filtering.

In The Australian Greens Senator Kerry Nettle expressed concerns that the Police Commissioner might use these new powers to call for Greenpeace’s website to be filtered – which really should raise more questions about the activities of Greenpeace than the value of the legislation.

Nevertheless, there is slightly less to this bill than it seems at first glance. The internet industry code currently governing online content already provides for filtering of pornographic and offensive content. But this filtering is voluntary, not mandatory.

At the moment, internet service providers who want to be designated “family friendly” by the Internet Industry Association have to offer their customers one of a range of approved PC or server side commercial filters. And these filters are periodically updated according to an Australian Communications and Media Authority black list. Yesterday’s bill would merely allow the AFP to add terrorism or crime related sites to that black list. But why would aspiring terrorists and criminals willingly install a family friendly filter onto their PC?

A lot rides on how the Internet Industry Association rewrites its codes of practise in the light of the government’s NetAlert scheme. Under NetAlert, all internet service providers will be compelled to offer consumers the choice between an unfiltered internet connection or a server-side filtered one.

Again, terrorists are unlikely to choose a filtered internet connection. The government’s new legislation only really makes sense if the unfiltered product is not going to be truly ‘unfiltered’. That the internet content bill was introduced quietly yesterday morning does not inspire confidence that the government plans to leave our internet connections alone. And it’s worth remembering that the Labor Party has for a long time promised mandatory server side filters if they win government.

Quite aside from the internet censorship issue, this bill highlights a disturbing regulatory trend – governments delegating the policing of the internet to the communications industry. Many of the measures canvassed by the inquiry into social networking sites would do just that. Even outside the high-technology sector, counterterrorism and anti money laundering regulation in the financial sector compels firms to police their own customers.

Particularly in the communications sector, these sorts of regulatory burdens can only add to costs for consumers.

Dealing With That $30,000 Phone Bill… Without Regulation

There is a “mounting dossier” of complaints to communications regulators concerning unexpectedly high mobile phone bills, reports the Australian Financial Review today.

It’s hard to be too sympathetic with somebody who couldn’t figure out they had spent nearly $30,000 in a single month – they must now have an extraordinary library of downloaded ring tones.

But this surge in complaints is partly due to technological convergence. As mobile phones increasingly provide the same sort of internet connection that consumers are used to at home, those consumers expect it to be just as accessibly priced.

Unexpectedly high bills were the subject of a high-profile Australian Communications Authority investigation in 2004. The services the ACA fingered as culprits less than three years ago, MMS and subscription services, are strikingly different from those now. In 2007, it is mobile data and download services on 3G handsets that are at fault.

The industry ombudsman says that complaints over high bills have increased thirty percent over the last year.

Mobile providers need to develop processes to deal with the high account activity that leads to these extraordinarily high bills. Neither the consumer nor the firm is helped by the sudden appearance of a multi-thousand dollar debt.

Firms offering home broadband services have dealt with the unexpectedly high bill problem before. Early plans punished consumers with high ‘excess’ data prices, but now most firms have structured their prices to ‘shape’ data to a lower speed once consumers reach a certain limit.

This is a model that the mobile industry may be able to adopt. Indeed, some major mobile carriers apply hard caps to a range of premium services.

Furthermore, in the United States, the iPhone / AT&T deal offers unlimited data plans, which may indicate that the price of mobile data is trending towards zero. Certainly, in Australia mobile data is now much cheaper than it was when the only technology available was GPRS on a standard GSM phone. And some Blackberry plans offer unlimited email data already.

Horror stories like those in the AFR today tend to encourage regulatory responses. In this case, legislators should be wary of knee-jerk reactions – mandating specific pricing models for high data usage could raise prices for consumers across the board.

Instead, the phenomenon of unexpectedly high mobile bills simply illustrates how the communications industry needs to adjust their business models to changes in technology and consumer demand.

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.

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.

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.

Being creative has never been “un-Australian”

Holden’s blimp over the MCG during the AFL Grand Final might have upset Toyota, the AFL’s official sponsor, but it was hardly “un-Australian” marketing.

Holden saw a captive audience of thousands at the MCG, and took the opportunity to market to them. Since when has it been “un-Australian” to be creative? Holden was simply using public airspace to advertise its product and it broke no laws in doing so.

Cricket Australia are thinking about asking the government for legislation to stop the same thing happening during the Ashes. But is it the role of government to protect advertisers from other advertisers?

Even less is it the role of government to hand over an asset — in this case the rights to airspace — to an advertiser for free.

The solution lies in property rights. If advertisers wanted to stop competitors from flying giant blimps over their events they should pay to buy the airspace.

As it stands, the air has been designated by the government as a public asset, rather than property, and Holden has every right to fly through it. In a truly free-market economy, organisations and individuals would be able to purchase or lease the rights to airspace and utilise it in whatever way they chose.

There already exists a wide range of legislation designed to protect against many forms of ambush marking. The Trade Practices Act protects against ambushing companies engaging in deceptive or misleading conduct, or falsely representing sponsorship deals. Holden did none of these things.

“Ambush marketing” is the market in action. And it’s kind of funny.