The netco debate

I spotted this on Rod Drury’s blog. A really good synopsis of the politicking going on about the network seperation (netco) proposal by Telecom.  Rod’s statement  here would be the crux of the matter.


           I'm a bit puzzled by David C’s approach here.”


My read on this is that the threat of operational separation has been used by the government to ensure Telecom plays the governments game and they therefore win the political points.  Telecom has called the governments bluff here and Labour are stalling for time to think up an appropriate response.

Another thing i’ve noticed is that this government in particular are really reluctant to make decisions. Decisions polarise the population (that is some of them won’t like you and hence vote for you), decisions have consequences, decisions have a long term impact. All things that this government don’t like (given they way the love pointing fingers rather than doing anything about it, just look at Cunliffes bit in the Rod post). This leads to investment.

I also think that by putting investment fairly and squarely in the public arena (which seems to be the actual problem with our future network) the labour government feels slightly exposed.

Mr Cullen is about announce a massive surplus, which indicates that the government isn’t investing our tax back into our creaking infrastructures.  The problem the government has (despite its best efforts to point the finger for the out of control interest rate at home owners) the reality is that central government spending has played a large part in fuelling interest rates.

The other factor I think that is critical here is that up until this moment the government has had an ‘out’ on the much debated OECD broadband penetration and productivity reports. That out has of course been Telecom. This of course ignores tax reform, exporter incentives, a decent savings scheme, education reform and creating an environment where its easy to run your company or live for that matter.  By putting the network back into public hands the government becomes accountable. Hmmm, more tough decisions to make, ops can’t do that. Can’t actually do anything.

In fact that statement is truer than I originally meant it to be. By its complete mismanagement of the wider inter related issues with the economy, the government has painted itself into a corner because now, when we need spending the most,  they can’t as it is tip the manufacturing sector over and the rest of the economy with it.

State Owned Networks

Sorry to keep banging on about Rod Drury, but his last two posts have been in my humble opinion bang on.  

 As i’ve stated before it is naive to expect a publicly listed company to fund a nations core infrastructure. Isn’t that what governments are for? (As an aside, how many of the detractors of Telecom’s broadband services are shareholders? Interesting dichotomy there).

Rod’s argument that robust connectivity to the rest of the world is essential to our survival as a nation is fundamentally correct. Despite the work of people like Rod, Pete Jackson and a lot of others, our economy is still fundamentally primary sector based. That is, the same as just about every other 3rd world country in the world. (if you don’t believe me check out Statistics NZ. Of the top 9 export categories, ALL of them are primary products… nice. ( I mean what other country in the world has adverts in prime time TV to become a dairy farmer!!! Hello!)

 So how to transit further up the food chain, well you start moving into service industries. Ops, well because we are physically isolated from the rest of the world, that means creating things instead of provide traditional services. Creating things that add value to primary products or are unique, like gee i dunno, software?

 Which gets us nicely back to topic, how can we when we are so physically isolated compete? Well we do have a bunch of smart people, entrepreneurship seems to be in the water and luckily enough for us there's this trend call SaaS coming which means we could actually deliver services all around the world from home. Nice, sounds great. All of this is being done, but Rods point is that if we want to explode this, ie exponentially grow our services the links we have and the economic metrixs used by a publicly listed company to decide on whether or not to invest in more fibre aren’t going to cut it. They would actually inhibit this expansion (some would argue they already are).

 Fast links to the rest of the world alone won’t do it in my opinion but it will help. Culturally we need to think global (don’t start a business thinking it’s a NZ entity), we need to think tertiary sector, we might need more than the pittance of innovation funding we currently get. A decent savings culture that would free up funds for VC would also help. But it is a good start.

 I also agree with Rod (and know this better than most) that it would actually do the incumbent providers good to loose the network. It might be the catalyst they need to change as a company. Either that or they will be superseded by someone who could adapt (see the innovators dilemma to see how this works) , either way progress will be made.