Hard News by Russell Brown

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Hard News: Ambition

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  • Kumara Republic,

    I am reminded of the Ma Bell carve-up in America in the early 80s, which was outright amputation, compared to the surgery Telecom is undergoing (and BT underwent).

    The southernmost capital … • Since Nov 2006 • 5446 posts Report Reply

  • Richard Llewellyn,

    I think the core concern is that the PPP structure may not be an optimal form of procurement.

    I don't have any idealogical preference/resistance for PPP, however if infrastructure is required, and public sector is unable/unwilling to adequately fund it, then engaging with the private sector to some degree is presumably the only option left.

    As we all know, NZ - particularly Auckland - is in massive infrastructure deficit. It seems apparent - thankfully- that the argument has moved well beyond the 'we won't work with the private sector' to 'how best can we work with the private sector or capital markets to deliver the best outcome'. It sounds promising.

    Mt Albert • Since Nov 2006 • 399 posts Report Reply

  • Craig Ranapia,

    That's a childish comment. Of course he's borrowing ideas.

    And if X. has worked somewhere else, and it can actually be meaningfully applied to New Zealand why shouldn't you? In most areas of life, there are enough difficulties without having to re-invent the wheel every morning.

    British experience suggests that when things go wrong with PPP's, they can go badly wrong.

    I think it's fair comment to say that British experience suggests you can turn anything into a giant mound of custard if you try hard enough. This is a really interesting discussion because, like most people I just pick up the phone and expect it to work, and get rather tetchy when it doesn't. How it actually happens is a delightful mystery by and large, but it seems that there are going to be a lot of very delicate and highly contentious decisions that need to be made.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Rob Hosking,

    I think the core concern is that the PPP structure may not be an optimal form of procurement. Generally the private sector partner wants to be paid, and won't participate if it won't be.

    There's an element of that, sure. But one of the issues is, firstly, that if you go the PPP route you could get something built earlier, even if you have to pay a bit more. Because you get the greater efficiencies by getting it earlier, its worth it.

    Secondly you get the "deeper capital markets" which Cullen, Dalziel, Hodgson, Cunliffe et all have been banging on about for years. If we're putting money into the Cullen Fund and KiwiSaver, it has to be invested somewhere to get a return. And long term infrastructure projects are a very good investment. If the money - some of it - isn't invested in NZ infrastructure projects, it'll go into offshore ones.

    One of the big issues with PPPs is who owns the risk. This is where projects in the UK and Australia have come to grief: if it doesn't pay off there's a tussle between the govt and the private provider over who gets burned, and by how much.

    And, as I said earlier, there's a difficulty in NZ with economies of scale, especially outside Auckland. Getting away from IT for a minute: about 10 years ago some people got very excited about using PPPs to fund the Transmission Gully route. Treasury - which liked PPPs at the time (they're less keen now) did some work on it and came back saying it would only work if the toll was set at $18 a trip. (This is 1998 money, btw).

    South Roseneath • Since Nov 2006 • 830 posts Report Reply

  • Russell Brown,

    I think the core concern is that the PPP structure may not be an optimal form of procurement. Generally the private sector partner wants to be paid, and won't participate if it won't be. British experience suggests that when things go wrong with PPP's, they can go badly wrong.

    Because it can be hard to do something about it when they do go wrong. That's one of the conclusions of last year's Treasury paper on PPPs. You're locking yourself into one provider for 30 years -- and if it goes titsup, you still have to bail it out.

    They're a great buzzword, but the evidence that their benefits over conventional procurement outweigh their drawbacks isn't compelling.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Neil Smart,

    It's not cabinets that are wrong here - far from it - it's the lack of consultation and the protectionist approach to the roll out. The areas that really need cabinets are further afield (not central Auckland) yet they're getting nothing

    For once we agree Paul. But complaining about Telecom is not going to make them or the problem go away. Look how Vodafone reacts when someone suggests sharing their GSM network. That is why the private sector should not control infrastructure but be only allowed to lease space in or on it.

    Regulating monopolistic industries is a tricky business

    You bet your sweet life one only has to look at the airport companies to see where the risk of monopolistic behaviour lies. If the government cedes control of infrastructure to the private sector the NZ public will lose.

    Look at the queue of private investors clamouring for a slice of Auckland airport.

    Since Nov 2006 • 71 posts Report Reply

  • Russell Brown,

    Before I go make dinner, John Armstrong is quite good on the other part of today's post -- the Key video:

    What we get is the standard National Party attempt to dress up its leader as a sensitive human being, family man and all-round nice guy. But Key is in no need of such a makeover.

    He already sells himself on that front with ease. What is missing from the DVD is something meaty that shows a leader with a depth of insight, intelligence and ideas.

    Key is not short of those qualities. But they are not revealed by having him parroting that he is "ambitious for New Zealand", how the country is "missing the boat" and how National can do things better. Every politician is ambitious for New Zealand and thinks things can be done better.

    The question is "how". But there are no answers here.

    He's right. And I was conscious of the distinction between the intellectually impressive Cunliffe speech (DPF described it as "superb" in the radio interview we did) and the vacuous presentation of Key. It's depressing to ponder that the video might actually be more effective.

    (Before Craig gets up in arms, allow me to reiterate that Pete Hodgson, the senior minister on the day, was incoherent, and people did notice.)

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Neil Smart,

    I am reminded of the Ma Bell carve-up in America in the early 80s, which was outright amputation, compared to the surgery Telecom is undergoing (and BT underwent).

    The USA is the best example of how not to deregulate a telecommunications network. Decades later they have still not recovered. As an example, look what a mess their local exchange network is in and how quickly they have (not) rolled out a mobile network.

    Big telcos have their uses when you want to a national plan or a service that can be accessed uniformly and ubiquitously.

    When you keep carriers public, they are risk averse: so new technology can be slow to market and there is little price competition. I understand the problem (I think) but not the answer.

    We do not want a look alike electricity reform but better management of the carriers. Peter Troughton may have been partly right in his measurement of “ratio of circuit ends per employee” as a ratio to measure productivity. You might also use “capital expenditure per circuit end”. You need an accountant or economist to answer that and I am neither.

    Since Nov 2006 • 71 posts Report Reply

  • Paul Williams,

    He's right. And I was conscious of the distinction between the intellectually impressive Cunliffe speech (DPF described it as "superb" in the radio interview we did) and the vacuous presentation of Key. It's depressing to ponder that the video might actually be more effective.

    What Key did was rip-off Rudd's initial advertising strategy. Almost immediately after taking over from Beazley, Rudd ran an ad on TV giving some background and emphasising his modest upbringing and relative youth. Importantly, Rudd then went on to articulate some clear policies even if they were not what you'd call radical.

    Key's attempt to copy Rudd's strategy is lame and unimaginative. Key's plan is to be only not-Helen. He will be the alternative, rather than there being a policy alternative.

    And before anyone starts talking about the me-too campaign of federal Labor, it was a bit, there was at least some significant points of difference e.g. Kyoto, Broadband and Workchoices. The substance of each of these points of policy differentiation in fact revealed the changes were as dramatic as the accompanying statements however Key's not even gone this far!

    Sydney • Since Nov 2006 • 2273 posts Report Reply

  • Craig Ranapia,

    (Before Craig gets up in arms, allow me to reiterate that Pete Hodgson, the senior minister on the day, was incoherent, and people did notice.)

    Not at all. If Cunliffe knows his shit well enough to stand up before an audience of industry insiders and the geekerati without making a fool of himself, big ups. It's called competence, and should be encouraged wherever it may be. :)

    As for "vacuity", I thought both Clark and Brash deserved a (figurative) kicking for letting Paul Holmes anywhere near their homes before the last election. They were both painfully and visibly uncomfortable, and it was humiliating for everyone involved except Holmes, who I think had the part of his brain that control shame removed at birth.

    Yeah, I found that Key thing curiously charmless, but I tend to approach politics as something rather different from cruising a dating website and it wasn't aimed at a roomful of policy nerds. And to be fair, Russell, I also think Clark's done some really air-head things when trying to present herself as 'just folks' - remember when she went to the league, and was generally (and deservedly) laughed at. I just wish they wouldn't bother, because it always ends up looking fake, insincere and patronising.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Craig Ranapia,

    And what's the score so far:

    Folks who are already convinced John Key is the anti-Christ are unmoved.

    Folks who are already convinced John Key is the Second Coming, ditto.

    How its going to play with the peasants who aren't politically obsessive blog-reading policy nerds? Don't know, and care even less.

    Me? I've still got half the season three box of Battlestar Galactica to get though, and if this thing hasn't been recut to include Jamie Bamber stark ballocks naked and reciting National's tax policy I can wait for another go round.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • WH,

    As we all know, NZ - particularly Auckland - is in massive infrastructure deficit. It seems apparent - thankfully- that the argument has moved well beyond the 'we won't work with the private sector' to 'how best can we work with the private sector or capital markets to deliver the best outcome'. It sounds promising.

    If a PPP is the least expensive and most efficient solution to a particular policy problem, so be it. Opposition to PPP's should not be grounded in ideology. That said, the contractual and commercial risks that particular PPP's generate need to be well understood, if only to ensure that the public's money is being well spent.

    Since Nov 2006 • 797 posts Report Reply

  • Rob Hosking,

    The Key DVD reminded me of UK Labour leader Neil Kinnock, who did a video with a similar approach in the run up to their 1987 election.

    Similarly low-policy-content. That's not what they're for.

    South Roseneath • Since Nov 2006 • 830 posts Report Reply

  • Kracklite,

    I've still got half the season three box of Battlestar Galactica to get though...

    Sorry, no luck, but the courtroom drama's pretty good at the end. If it's any consolation, I hear Baltar continues to get his end off in season four and you might see some of that, probably with lots of sociopathic self-justification, but not tax policy.

    The Library of Babel • Since Nov 2007 • 982 posts Report Reply

  • Craig Ranapia,

    I hear Baltar continues to get his end off in season four

    Well, Gaius Baltar's truly freaky exercise in damage control (and nothing is more damaging than being on trial for your life) is about all the 'person of the people' flummery I can handle at the moment. Key and Clark really need to hire Ron Moore to write their material - once the WGA strike is over, that is - because his dialogue is so much better.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • Kracklite,

    Ron Moore['s] dialogue is so much better.

    You are sooo right there. Bob Dylan's isn't bad either (you'll see what I mean). Interestingly, the brilliant "Butterfingers!" was improv.

    Now if it was Roslin v Baltar, I'd be interested.

    The Library of Babel • Since Nov 2007 • 982 posts Report Reply

  • Sara Noble,

    Post Protestant Propriety

    Prestigious Private Prep-school

    Prissy Potential Prime Minister

    Auckland • Since Nov 2007 • 127 posts Report Reply

  • Insolent Prick,

    Insolent, the last thing we want is more privatisation. We've already established that, where key infrastructure is concerned, leaving it to the private sector is a recipe for getting shafted - Telecom, AIAL, electrickery... all private, all gouging the users.

    What an amusing claim. AIAL is mostly publicly-owned. The vast majority of energy assets are publicly owned--about 75% of generation, most of the retailers, all of the transmission network, and a big chunk of the lines companies. Auckland City ratepayers have seen the publicly-owned water company gouging users. Meanwhile, road users are gouged by lack of transport choices, for the very reason that they are forced to pay the costs of using existing roads without competitive pricing pressures.

    Russell, I'm not actually saying that telco infrastructure isn't economic. What I dispute is the assumption that the Government has to direct investment into telcos to make them economic. If they are economic investment vehicles, then capital will flow to them. It's a nonsense to claim that markets can't price long-term returns. They can, and they do.

    I agree that kiwisaver and Cullen funds will create a pool of capital, some of which may end up in economically viable telco infrastructure. But there's a big difference between the capital markets directing cash to long-term investments, and some politician in Wellington dreaming up Think Big pipe-dreams.

    Auckland • Since Nov 2006 • 15 posts Report Reply

  • BenWilson,

    I'm kind of in agreement with IP about the wisdom of making political usage of Kiwisaver funds. They should be entities entirely independent of political interference, unless they are being shockingly mismanaged.

    It would make very little difference to me how Kiwisaver came by it's profits on my investment UNLESS they blew it on some stupid politically motivated dream. Then I'd be righteously pissed off. And I think investing huge amounts of capital into broadband could be in that category - the return is not certain at all. I'd like having the broadband, sure, but I'd be real bitter on the fact that that investment was not earning me any money for my retirement, like it was meant to, like I signed up for when I started putting into it.

    If the government is going to invest in broadband it shouldn't be dominated by the profit-on-the-broadband-itself motive. That should basically pay for itself. It's a good to society as a whole. In that respect I strongly think it would pay off for society, but it won't be in profits to funds.

    Fortunately I don't think it's likely either. Kiwisaver doesn't seem to work that way.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Rich of Observationz,

    I'm not that impressed with the options for Kiwisaver funds. They seem to be quite high cost.

    I actually think they should open the Cullen Fund up to Kiwisaver investors, using Kiwibank or others as the retailer.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Kyle Matthews,

    I actually think they should open the Cullen Fund up to Kiwisaver investors, using Kiwibank or others as the retailer.

    I'll concur with that. It does seem strange to have a big NZ investment fund, which I understand is doing pretty well in terms of financial return, and not have that as one of the options on the list.

    Since Nov 2006 • 6243 posts Report Reply

  • BenWilson,

    Re: Broadband speeds, I have to say that my #1 concern for the last 5 years has not been the actual speed at all. If you pay enough you can get speed. What is really slack is data caps and charges. Particularly on data that is local in the first place. That still seems like the biggest ripoff that I face regularly.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Paul Brislen,

    For once we agree Paul. But complaining about Telecom is not going to make them or the problem go away. Look how Vodafone reacts when someone suggests sharing their GSM network. That is why the private sector should not control infrastructure but be only allowed to lease space in or on it.

    I think we've reacted really well to the suggestion we "share" the GSM network actually. Co-location and roaming is happening - what we're objecting to is being told we have to wear all the costs of allowing someone else to build stuff on the network when we'd already reached commercial agreements on this kind of sharing with the parties concerned. Why regulate something that's not broken?

    Cheers

    Paul Brislen
    Vodafone External Communications Manager

    Auckland • Since Nov 2006 • 200 posts Report Reply

  • Ben Austin,

    I can see why the government would want to be a little more proactive.

    We've had years of a duopoly mobile market, teased by the promise of Econet or the potential of network sharing (TelstraClear) without any genuine change. Speaking of which, anyone know when TelstraClear transition over to Telecom?

    London • Since Nov 2006 • 1027 posts Report Reply

  • Stephen Judd,

    Anybody notice that the company that bought Telecom's directory business are outsourcing 018 to the Philipines? And did you know they've already put the price up to 50 cents?

    I'd love to invest in those guys. They have a genuine monopoly and unrestricted pricing power (up to whatever sum you'd pay if you really needed a number). That's what I call a franchise.

    How did we let an important if small service like directory escape like this? (Yes that was a rhetorical question, I understand the process quite well).

    Wellington • Since Nov 2006 • 3122 posts Report Reply

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