Ashley, you hit my hot buttons! I got into the water business [as a noisy citizen] in the early 1990s when I suggested to the Auckland City Council that they should install meters and charge what the market would bear for water supplies.
As you say, the cost of meters, their recording, disputes and debt collections, used to be expensive and it was cheaper simply to run pipes and leave people to use what they liked. So that's what we had.
My argument was that meters were no longer expensive. The cost of creating further supplies was very large. By metering and charging according to supply and demand, existing supplies could be stretched, sewage reduced, and a lot of money saved.
Councils and other government people are not interested in ideas from people [despite 'public consultation'] so they of course ignored me as a lunatic pest. Now we have meters, we had a major water shortage and we have a very expensive, polluted, insecure water supply from the Waikato river. We got the worst of all worlds, thanks to our communist local authority ownership of the water supply and ignorance about pricing combined with political problems in democracies.
We were almost reduced to standpipes in the street and buckets like some third world country.
I used to use water prolifically. One night, I left the hose running by mistake. I heard it in the night, realized what it was and decided to turn it off in the morning. Many cubic metres of water went to waste. I had always thought water cost near zero. Everyone wasted water.
We had two [alleged] hundred-year droughts in a row and a major water crisis. Thanks to dramatic savings, we got through without actually running out. Once people had introduced various savings measures, consumption was permanently down about 10% or maybe it was 15%. A Waikato pipeline which was almost started in panic was deferred for almost 10 years. Which saved a lot of money.
If they had introduced meters and charged heaps in dry spells, they'd have got plenty of money which would enable rate cuts and would have cut consumption, deferring the need for new, expensive and lower quality supplies.
Sure enough, there have been arguments over water bills. But we had a decade of NZ$100 million not wasted on a new pipeline and system.
In regard to cellphone services, yes, it's very similar. However, the cost of a meter is near-zero for cellphones. Initially, while the system is empty, charge nothing. Not even a monthly fee. Just charge for the phone. There would be a profit on the sale of the phone.
That would create a huge consumer surplus which would fill the system quickly. The system would need to be designed for a certain market share when at capacity. Initially, there would be low metering costs, since the handsets would show $0 per minute for internal calls. Toll calls and landline calls would be charged.
A competitor charging a flat rate $30 a month, such as Leap, would not find many takers while our free system was charging only for calls to other networks [about $10 a month for local landline calling]. When our system was full, Leap's would still be scratching for customers.
Then, the fun would begin.
We'd increase prices at busy base stations, leaving the system free where base stations are not busy. Then, as demand increases, extra capacity would be built to balance service across the network and to avoid the need to raise prices too much.
Monthly charges would still be lower than the monthly Leap charges, even where people use only the busy base stations. Some people would switch to Leap because they would prefer the fixed monthly charge, even though it would be a higher price, or perhaps they might be extreme users who would save money with the low Leap monthly charge compared with peak user prices they would incur on our network.
Leap would find they were getting very high loads at peak times. Our network would have mostly customers prepared to smooth their calling patterns and defer calls when costs are high. Our network would need only about a third of the capacity of Leap, because our peak demand would be much lower. Since the main cost is the capital cost of the equipment, that would mean our monthly charges would be much lower on average.
We'd have great network effects because we'd attract a much wider range of customers and get a bigger market share. We'd have better quality of service. Lower average prices. Better voice quality. Fewer dropped calls. No busy signals. More profits. More rapid increase in customer numbers. In fact, I find it tough to believe that Leap would get any customers. Some fraudsters would still sign up to Leap and rich people's peak-calling imbecile daughters would like it too, which is not a great market segment to deal with.
It would mean operating for two or three years without revenue other than handsets and toll calls. That's how Globalstar has operated, but they managed to avoid getting customers by keeping prices very high and avoiding a consumer surplus. Which was a very big mistake. They didn't even sell the handsets.
Thanks for providing an opportunity for my water rant!! When Taupo blows up in a few years, that'll be the end of the Waikato water supply so we'll get another big problem. The Kremlin approach to life the universe and everything is not the road to utilitarianism
utilitarianism.com
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