Telstra, Telstra, Telstra

Thankfully the government is finally trying to separate the retail and wholesale divisions of Telstra. No doubt shareholders will complain loudly about this, having bought into a company that was somehow able to maintain many of its monopoly privileges after privatisation. However, many of Telstra’s profits came at the expense of consumers. Making Telstra retail compete fairly and on the same terms as other telecommunication companies is good for competition, innovation, customer service and prices. Around the world, countries with well regulated telecommunications markets that promote competition do well in these areas. Countries with big monopolies that have not embraced reform properly do not.

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Whatever happens with the national broadband network, it will always be desirable to split Telstra’s infrastructure-owning wholesale arm from its retrial division. Telstra’s monopoly power has harmed consumers in the telecommunications market for too long.

Allowing a monopoly over essential infrastructure to be privatised was inexplicably poor policy by the Howard Government, which should have known better. This makes me suspect that they had other reasons for selling off Telstra the way they did. Some of the funds raised were used to pay off the net government debt accrued under the previous Labor government. Perhaps Telstra was kept whole to help keep the share price high, and thus cut more of the debt, with the regulatory mess of fixing things up in telecommunications left to the next government.

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Phil Burgess reckons that a forced separation of Telstra’s wholesale and retail divisions is a form of “blackmail” that would “destroy Telstra’s future” and “delay innovation and investment.” There may be some truth in this, but if anything his comments provide further reasons for the government to go ahead with the break up. Telstra’s monopoly power has lasted too long and it must be forced to compete more fairly with other telecommunications companies. Of course this would erode Telstra’s market value and remove the company’s stranglehold over infrastructure and innovation in the industry. Telstra’s profits should be determined by its ability to meet consumers needs efficiently and cheaply, not on its ability to exploit market power.

It is also important to keep this matter somewhat separate from the government’s proposal to build a national broadband network. It will always be good policy to take monopoly ownership of infrastucture off Telstra, regardless of whether the NBN gets built. And if there is a NBN, far better that is is publicly owned and properly regulated than it is controlled by a single private sector company.

Award simplification

The debates over award modernisation are going to be long and protracted. It is inevitable that there will be many losers from award simplification in the short term (as well as many winners, who will be much less vocal). However, in the long run there are widespread benefits from having a system of simpler and nationally consistent awards.

So why is the Rudd Government pushing ahead with award modernisation in a time of economic uncertainty and rising unemployment? Arguably, the Government needs to be a lot tougher and decisive in making economic decisions and standing up to vested interests, but surely it could wait until the recovery is a bit firmer and confidence has fully recovered.

The best strategy would involve phasing in the new awards over time. The Government should announce a (fixed) future date for full implementation—say, 1 July 2010—to provide a period for workers and their employers to adjust.

NSW

The NSW Constitution was amended in 1992 to create fixed terms for governments which would prevent premiers from varying election dates to suit their own political ends. This is all well and good, but we can no longer assume (as some might have then) that voters will hold governments to account for their stuff-ups, or that there will always be sufficient and competent competition available at election time.

Has state government in NSW ever been in such a mess? The Labor government has been going downhill for nearly a decade, with the Coalition not far behind. If we held an election tomorrow and voted in the Opposition, would they really have the vision and courage to change anything? Where are the alternatives?

Surely we can find a better system of government and democracy in NSW. The major parties have failed us catastrophically.