Wednesday, December 4, 2013

Of the Government, Chorus and What is That Capitalism Thing Again?

Knowing that my audience is predominantly American (I have around 10 times as many hits from America for every whoever is next - China or New Zealand) I'm finding it a little difficult to justify talking about New Zealand politics. But sod it... this kind of bears some talking about. It's going to be a little longer than I'd usually make a post like this because i'm going to add a whole lot of background information.

The National Party (our center right party. It's worth noting that our center is far more to the left than the American center. That isn't to say that they aren't a pack of self serving prats hiding behind capitalism) got into power on a great big promise of a telecommunications overhaul. There were a few other issues there but this was their big campaign promise. To spend $1.5 billion on UFB (Ultra Fast Broadband. Essentially fibre to the door). Absolutely essential

The government, now lead by the National Party (we're looking at around.... 2009?), ordered the split of Telecom. Telecom was New Zealand's ONLY telecommunications provider (they've now got competition but they're all stuck with Telecom's infrastructure). It became privatised in 1990. Since then they have been a right pack of bastards. It's that same old capitalism mantra:- extract money, provide little. Basically, what has always been essential infrastructure has been little more than a cash cow. So while the shareholders have been enjoying quarterly (now semi-annually) dividends, the infrastructure hasn't been being updated. Basically leading to this situation. But I digress. The split was with the infrastructure. It was to be a separate company called Chorus.

It turns out that this split was VERY timely (No. It's most likely not a coincidence). As Telecom, they most likely wouldn't have gotten the lions share of the contracts to roll out fibre across the country. As Chorus, this is exactly what happened. Chorus bid for and won a whole bunch of contracts.

The Commerce Commission, New Zealand's competition enforcement and regulatory agency, was required to review UCLL (Unbundled Copper Local Loop) pricing to reflect pricing Internationally. Their findings had that pricing needed to drop by around $10 per line (23% or so) per month. This is pricing that Chorus is obliged to provide.

The National Government are stepping in on the basis that if Chorus are made to lower their prices their business could go under leaving a whole lot of work on the UFB project undone. Basically legislative change in order to keep pricing for the consumer up and save the company.

Now you're probably wondering about the regulatory pricing thing.  It is infrastructure that was paid for by New Zealand people, and then privatised (To much criticism. Given it's monopoly status at the time the company was sold for a song) and still enjoys a monopoly in terms of telecommunications infrastructure. it's of national concern and dictates pricing for EVERYONE else - so even if you go with a different provider, they're still subject to this pricing meaning that it sets an absolute minimum.

The bit that really bothers me though is that this highlights one of the many problems with capitalism. If it's a good business, the market decides, the business survives. If the business is a bad one though, the business fails. Think about the recession. Terms like "Too Big To Fail" came out. People, through their taxes, are paying to keep these big businesses alive. It's no longer survival of the fittest but rather, survival of those the government sees value in. We're left with the bill.

You can't have it two ways. Either capitalism works and we trust in the market, or it doesn't work. Taking government intervention into account, it doesn't seem to be working... We're not trusting to the market. In fact, we have this great big dirty perversion of what capitalism is which is probably best summed up with a quote by Robert A. Heinlein:
“There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to the public interest. This strange doctrine is not supported by statute not common law. Neither individuals not corporations have any right to come into court and ask that the clock of history be stopped, or turned back.”
There's a discussion to be had here about employment. If a big company fails then a lot of people become unemployed. Sure... valid point. But isn't that what capitalism is about anyway? You don't have people doing useless things. It may sound callus but this is the only way the shorter working week works. Because it would be insane to arbitrarily hire people to do what has nowadays been termed "bullshit" jobs. People would be hired for far fewer hours to do useful work. They'd feel like they'd actually accomplished something rather than being there "just for the money" and would have a hell of a lot more time to do the things that are important to them.

But that aside.... Make up your damn minds. Either we're capitalists and trust in the market to decide which businesses survive and which don't OR we don't trust in the market in which case we'd have to decide to try something else.

Why should I care about Chrous' profits? Have they ever spared my income a thought?

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