Joe Hendren

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Wednesday, March 24, 2010

Rodney Hide attempts to protect Telecom from democracy

This week Act leader Rodney Hide demonstrated how the Regulatory Responsibility Bill and any of its bastard offspring in terms of 'regulatory principles' are really about protecting big capital from democracy.

Hide rode to Telecom's defence, attacking the decision of Communications Minister Steven Joyce to fund the roll-out of high-speed broadband in rural areas by redirecting tens of millions of dollars Telecom received from its rivals under the Telecommunications Services Obligations*. Hide moaned this impaired Telecom's property rights. In order words regulation was going to cost them money.

"Mr Hide, who is also Regulatory Reform Minister, branded the plans a breach of National's own regulations policy and a "sad indictment" on the Government. He released a strongly-worded letter to Telecommunications Minister Steven Joyce that signals one of the biggest fallouts between ACT and National since the parties agreed to govern together."

"I'm very displeased and the reason I'm displeased is not only is it poor law-making, it also sends a signal to any investors into New Zealand that their investment isn't safe, and therefore it makes it tougher to get the sort of infrastructure and the sort of investment we need to grow the economy," he said.

Essentially Rodney is demanding that when government is considering legislation or regulation the squeals of needs of business and property holders should be treated as a special case. Bullshit. Large corporations are currently able to use the same mechanisms available to the rest of us to voice their concerns, such as writing to Ministers and making submissions to select committees. In fact there is already good evidence large business are already able to have a disproportionate voice through these channels, in particular in terms of access to Ministers.

An analyst at the multinational banker J P Morgan, Laurent Horrat went straight for the hyperbole when he declared that Telecom is becoming "a worst case scenario worldwide for the effect of government regulation on an incumbent telco". "I understand the policy objectives, but if you take the list of things Telecom is faced with, there aren't any incumbent telcos facing such an extensive list." Horrant also captured the pure sense of entitlement transnational corporates believe they deserve. "Typically in regulatory discussion between government and incumbent telcos there tends to be a give and take. I can see a lot of the take, I can't see a lot of the give here," said Horrut.

Horrut has a horribly short memory. Telecom has been on the take ever since it was privatised,
  • running down the assets of the company to pay out high dividends to overseas shareholders
  • paying its CEOs ridicious salaries for their efforts to avoid regulation.
  • charging high prices for slow broadband well below international standards.
  • fighting and suppressing competition whenever it had the chance to occur.
  • worldwide there would not be many telco's who 'had it so good' for so long. If Telecom had been regulated earlier there would not be this impression of regulation happening all at once.
For years representatives of the 'markets', of which Horrut is only the modern equivalent, warned any attempt to regulate Telecom in favour of telecommunications users would crash the sharemarket given that Telecom was the largest listed company (it no longer is). This is oddly reminiscent of the claims the US banks were 'too big to fail' - well if that the case then this is an excellent argument for breaking such companies up and introducing regulations to ensure nothing gets 'too big to fail' in the first place. Its also a good argument for keeping key infrastructure in public ownership.

While Hide and his cohorts love to talk about the magic of Adam Smith's 'invisible hand', in reality Smith would have been the first to demand that Telecom's monopolistic outrages be bought to an end, and thats if Smith even accepted Telecom's existence as a 'joint stock' company in the first place.

If superannuation and Kiwisaver funds of New Zealanders happen to hold significant Telecom shares this only means that financial advisors and superannuation trustees need to be held to account for making poor investment decisions. Funnily enough this is a poorly regulated area too. Its not as if they were not warned the Telecom dividend machine was likely to be switched off. In 2007 Christopher Niesche called on Telecom to stop being a company obsessed with holding back the tide of regulation at any cost and become a company seeking growth.

A key reason why a select committee recommended against the Regulatory Responsibility Bill was that it increased the litigation risks associated with adopted the principles of the LAC guidelines and the regulatory impact statement requirements into legislation. The threat of litigation from litigious corporations like Telecom and Infratil, who then might start demanding compensation for government actions in the public interest. One hopes this and Hide's clash with Joyce will demonstrate to National why they should kill the Hide/Douglas Bill when it comes back into the House. Hide admits he is yet to secure National party support for the bill.

Telecom have always attempted to blame the threat of regulation for everything. Is it a co-incidence that Telecom's market friends are screeching about regulation at the same time Telecom's XT network is also screeching to a halt? Are they attempting to create the impression the slump in the share price had nothing to do with Telecom's own incompetence at running a mobile network?

I say call their bluff. Given the extent of Telecom's pillage since privatisation, perhaps a just outcome would be leaving to go it into receivership so the core network could be bought back into public ownership for a song. Regulation of the industry could then happen without Telecom's meddling, and access to the network could be rented out to telecommunications providers on the terms set by the representatives of the people. Ok receivership is a pipe dream - but a fun one. I actually suspect Telecom are overstating the extent of their poverty in any case.

David Cunliffe as communications minister in the previous government did a great thing when he broke the cycle by ignoring Telecom's protests and unbundled the local loop. Cunliffe stood up to Telecom where his Labour predecessors in the portfolio appeared to cower at Telecom's feared wrath. Another part of breaking the cycle is to ignore the protests made on behalf of 'foreign investors' - these are exactly the kind of foreign investors which bled Telecom dry in the 1990s. Real investment is welcome, but rent seeking ideologically driven cowboys are not. One could also ask why Hide, as a government minister is effectively encouraging a capital strike of the speculators.

In the wake of the collapse of the finance institutions in the United States which started the Global Financial Crisis and the examples of multinational corporations in our own backyard attempting to bully governments at the expense of the people, it is time whether it is asked whether corporations really ought to have more influence on government than everyone else.

And to cap it all off this week the Government appointed former Telecom boss Rod Deane to undertake a review of defence spending. Was he Hide's pick, or a payoff for all those donations Deane gave the National party?

* Used to be called the Kiwishare

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