Rodney Hide on Chorus

Rodney Hide has a good article in the NBR about Chorus [paywalled], Matthew Hooton’s corporate wrecking crew and businesses exposed to government meddling.

I was reminded of Professor Ron Johnson when National talked up the Big Idea of the 2008 election: its promise to spend $1.5 billion kick-starting ultra-fast broadband. It showed National having vision, National proving tech savvy and National switched on to the needs of modern business and young voters.

Oh, and National would enlist private enterprise to deliver, so putting distance between Muldoon’s disastrous policies and modern National. The government would simply set the contracts and provide the money. That showed National had learned and could still “Think Big” while valuing private enterprise.

The policy has proved what every free-market thinker feared: a political, economic and technologic cluster bomb. Telcos – and potential telcos – focused on lobbying, not providing service; the policy chilled investment and development as business had to await government decisions; and politics now dominates and dictates telecommunications. 

And that is where Matthew Hooton and his corporate wrecking crew come in. They know that they can spin and mislead and apply political pressure and at the same time wreck a private company for the benefit of the wreckers.

The government now decides the telecommunications to be invested in and which telcos will succeed. Winning a government contract to roll out fibre – or missing out – is the difference between business success and business failure. It’s a disgusting development.

Politics and bureaucracy have as much chance of getting right the fast-paced technology in a tough, international business as a monkey has of typing a sonnet. The government’s own statistics show the result. Telecom was privatised in 1987. Through to 2001 multifactor productivity in the telecommunication sector increased on average at 2.9% a year. That’s pretty good. The customers were in charge and their wants and needs drove investment. Competition was intense and furious.

Then the government determined that telecommunications couldn’t be left to the market. A specialist regulator was established in 2001. The same government then went against the specialist regulator’s recommendations and pinched the copper network from Telecom.

Telecom had to allow its competitors to use its copper network at a price the government set. Chorus was operationally split from Telecom.

This theft was known euphemistically as “unbundling” and the government’s pinching of property rights was justified as promoting competition. That’s right, government boosters declared the massive taking of private property pro-market. Investors took the hit and also the hint. Nothing kills investment faster than government pinching billions from shareholders.

Unbundling was exactly as Rodney says it was…theft via legislation of an asset of a private company. Supposed right-wingers like Hooton and David Farrar danced in glee as Telecom was split part.

Next up was the National government and its $1.5 billion taxpayer top-up. Chorus as a standalone business received close to a billion.

But intervention is now piling up on intervention and the Commerce Commission has ruled a price for copper that has left Chorus gasping. Its ability to deliver the promised ultra-fast broadband is now in doubt.

Failure is not a political option and taxpayers and consumers will no doubt be hit again and again.

Chorus is the patsy in the middle of government bully boys and corporate wreckers.

The effect has been dramatic: New Zealand Initiative’s Bryce  Wilkinson reports that since 2001 multifactor productivity in telecommunications has slumped to 1.7% a year. The net effect of all that regulation, government spending and political busyness has been to halve productivity growth. Light-handed regulation beat heavy-handedness, no question.

The contracting by the government of private enterprise makes for a more cost-effective industry than  the old Post Office ever delivered but government design still ensures a spluttering Trabant.

And that Trabant has has sugar put in the petrol. The share price has slumped and Chorus is now a dog thanks to the joint efforts of the Corporate Wrecking Crew and the Commerce Commission.


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