Being a Kiwi, and a Vector shareholder [tiny one because of the absurd rules for selling the shares originally] and because of the absurd "privatisation" of electricity reticulation around cities 15 years ago [or so], and a shareholder in zenbu.net.nz which provides Wi-Fi around NZ and a shareholder in roamad.com which has now been sold to xiocom.com and a shareholder in Qualcomm which provides ASICs and technology to Telecom and Vodafone mobile networks in NZ and a paid up card-carrying member of libertarianz.org.nz and act.org.nz I have got quite a lot to say about all this fibre to the home business.
When Zenbu was setting up to start Wi-Fi around New Zealand, we asked Vector how much they would charge to connect us to their fibre around Auckland. I forget the price, but it was not just absurdly expensive, but ridiculously absurdly orders of magnitude too expensive.
A few days ago we had discussions with velocitynetworks.co.nz which is fibre around Hamilton. They also want too much money, but not much too much and might even eventually agree with what Zenbu thinks is reasonable. Zenbu charges 10c per megabyte and will split the revenue half each with Velocity. They want 70:30 for them but guess who has to handle the customer connection enquiries and where the actual costs would lie.
From what I have seen so far, the problem is not a shortage of fibre, but a willingness to sell it for what the market will bear. Zenbu will instead surround the fibre with Wi-Fi using ADSL backhaul from swarms of small businesses who actually want to provide service.
Zenbu is the most competitive [meaning cheapest] and best Wi-Fi network available in New Zealand. There are a few price plans with some companies in which if people use all their data allowance, the megabyte price is cheaper, but most people just want a connection available for checking email and goofing around in cyberspace a bit while they travel with no time constraints on using their megabyte allowance. So it's not as though there are better options for the fibre merchants to use.
Spending another $billion or two on fibre around the country will have a similar result. It's a great-sounding idea to have fibre everywhere, but "build it and they will come" is not quite enough to ensure success.
Vector also supplies electricity [the main business = delivering electricity for various suppliers to the home]. The government has the Commerce Commission which is supposed to ensure a competitive market place. They don't do that. They put the kibosh on Vector electricity carriage charges so Vector stopped investing because the returns allowed to Vector were absurdly low. It would be better to just put money in the bank. Vector, if allowed to invest and make big profits, could build all the fibre around the whole country and cover the place in satellites too if they thought there was a profit to be made. Vector might or might not do a good job of running the business. Judging by Zenbu's contacts with them they would not, because they are good at charging a lot of money to captive customers but not good at running business.
Any idiot can charge captive customers a lot of money until leakage or technology change finally puts an end to it.
Unfortunately, the Commerce Commission doesn't fix any problem, but just adds to the cost burden on citizens. Neither will the government taxing citizens a lot of money to build fibre networks achieve anything if it's handed over to dopey monopolists to run. It's pretty certain that the government or somebody in control of the fibre will want to charge too much.
New Zealand does not have a competitive market place or free enterprise culture. Bludger mentality is pandemic now, with people living on government payments somewhere around 70% of the population I guess. Government is the only game in town.
While government runs "Knowledge Wave" and "Innovation" jamborees in swanky surroundings at huge expense, Zenbu creators work away over a hot computer in rat sheds, filling out tax forms, building permits, and complying with all sorts of government kleptocratic edicts and doing some actual cyberspace Knowledge Wave work when possible. The best thing the government could do is get out of the way.
We "so-called" Libertarians aren't worried about monopolies. Heck, even the government fibre monopoly can only get in the way to a certain extent. We can get around them via ADSL. We [Zenbu shareholders] did try to buy spectrum a decade ago to build a third cyberphone network but the government spectrum monopoly wouldn't sell us the spectrum which they sold a year later for half what we had offered them [sold it to an incumbent - we had decided not to proceed by then and the incumbent bought it at auction at a low price and in any event would have outbid us just to keep a competitor out of business].
The only real monopoly is government enabled monopoly. Telecom for decades had a monopoly being the official government supplier and competition with them was illegal. By the time Telecom was privatized they had a huge monopoly which took decades to erode. Governments have tinkered around it forcing Telecom to give up some of the original government monopoly.
If an electricity or fibre supplier is too greedy with their charges, people can avoid buying houses in the area where they supply. People can even move country, which is what 25% of New Zealand's population has done. That's how Kiwis avoid the government monopoly. It's impossible to run a monopoly. People always find a way around it when the pressure is enough.
All transactions are transient monopolies. Even if there are two sellers standing side by side right there, and it's just a matter of choosing one from identical twins offering identical things, we are not really in a Buridan's Ass situation en.wikipedia.org where both transactions are identical. We are facing one seller, since they are the last one we have looked at so to face the other seller, we have to make an effort, which has a cost. So the two transactions, superficially identical, are in fact each running a monopoly, albeit extremely ephemeral.
It's only when companies have lots of money and are making loads of profits that governments decide "Oh heck, look, a nasty monopoly" and make a lunge for the profits themselves. Via taxation, by far the largest beneficiary of monopolies are the government recipients of the loot - they tax the profits, and the inflated salaries of all the people working in the so-called monopolies.
What we Libertarians like is the worst monopoly and only real monopoly, the government, out of the way. There has never yet been a non-government monopoly which has really been a problem. IBM was the terror of the people at one time, but look what happened to them. Microsoft was supposed to be a monopolist monster but by the time the useless government people lumbered into gear to nab some of the loot, Microsoft was already well past their peak and was on the way down. Neelie Kroes thinks she's doing great work attack the Intel "monopoly" and raiding their coffers. I feel sorry for Intel. Here comes Snapdragon armed with Android and Motoblur to raid Intel far more seriously than Neelie can do.
Gobi is now on the loose in New Zealand. If Telecom and Vodafone and 2degrees are too greedy, Zenbu and others are waiting nearby. Government fibre might even make an appearance.
Kordia, another government department, has bought RoamAD metropolitan Wi-Fi network technology and has got various Wi-Fi areas around NZ. kordiametrowifi.com They have actually done a reasonable job, but I'm sure their costs are so high that it's uneconomic.
CafeNET, cafenet.co.nz another government department run by citylink.co.nz also tried to set up a Wi-Fi network and got well underway, but their costs and prices are too high so they ran out of expansionary steam.
i-Sites at Auckland airport zenbu.co.nz had Zenbu installed but aucklandairport.co.nz the government department [now partly privatized and listed on the stock market] told them to take out Zenbu because the terms of the i-Site lease precluded selling other than what was permitted in the manner permitted. That was to protect their existing Wi-Fi monopoly which is $10 an hour. That's too expensive to just check email before a flight [for most people]. People with Zenbu accounts could check their email for 5c or so.
i-Sites are mostly government operations too but the people running government departments sometimes try to do the right thing. It's not compulsory to be hopeless if working for governments, it's just difficult to avoid it; by the time the compliance matters are dealt with, it's nearly home time anyway. Heck, some of my best friends are government employees, so I'm not prejudiced.
Next time I move house, cheap fibre will be top of the list to define places to consider. It might even be not in New Zealand.
That'll do for now.
So, yes, fibre would be good, but there's already quite a bit of it around. Building it is the easy part. Selling it is the hard part though that's easy too if the right people are doing it.
<Another issue for total welfare (not just consumer welfare but acknowledging that cost of bandwidth and FTTH availability is an essential facility for post-industrial knowledge enterprises), even for global competitiveness is that bandwidth is an essential input-factor for next-generation, knowledge work. ERgo, it's in the interest of public policy to "keep the pipes open" and to foster competitively neutral FTTH networks. >
That reads like something out of a government "Knowledge Wave" jamboree, but it's still true. The government already owns enough fibre in New Zealand to enable that. They just need to do it. Phone Zenbu and say, "Okay, we have decided you can sell Wi-Fi from our great big fancy fibre pipes". Their problem with Zenbu is that it's too cheap. Being government monopolists, they want to charge BIG HEAPS of money.
Right now, there is a Backpackers Conference on: nzherald.co.nz It is being run by AUT with the Prime Minister speaking too. aut.ac.nz While they talk, Zenbu will be out here making the Interactive Traveler a reality. They have a couple of hundred Zenbu leaflets so people can buy it if they want to be part of mobile cyberspace for travelers.
Mqurice
PS: I don't really know what "producer's rents" and "rent seeking behaviour" mean but rent seems like a swear word meaning producers are bad people if they try to make big profits. The producer rent to worry about is the government "rent". |
