From: brendan@otc.otca.oz (Brendan Jones)
Newsgroups: aus.followup,aus.politics
Subject: Re: Cream skimming considered beneficial
Date: 18 Dec 92 03:46:43 GMT
Distribution: aus

in article <summer.724630279@murillo>, summer@mullian.ee.mu.OZ.AU (Mark Summerfield) says:
>>[ re the idea of a natural monopoly on connections to the network]
> Optus are duplicating the infrastructure upon which a natural monopoly
> operates.

I think this ignores the changing economics of telecommunications networks.

I think it is quite easy to show that today, the economic advantages of
duplicating trunk networks in a competitive environment is often greater than
the capital outlay over the long term.

This is possible as bit-hauling costs drop, usage increases, and money is more
effectively invested in productive entities through competitive pressures.
Maybe ten years ago the economics would have been quite different.

> This has happened for *political* reasons.  I don't believe the government
> was capable of distinguishing between network infrastructure and services,
> let alone formulating a policy which recognised the distinction.

I don't believe you understand how policies are formulated in Government.  The
Minister is a figurehead to some degree.  The *real* work is done by others.

In this case, the incumbents (OTC and Telecom), the regulator (Austel), the
department (DOTAC) and industry representatives, including manufacturers and
users' lobby groups such as ATUG, participated in the formulation of the
deregulated telecommunications policy.

Austel knows everything about the differences between infrastructure and
services.  Telecom reminded them often enough.

> [re the mobile market]
> Remember, though, that Telecom *created* this market in Australia, and that
> as a result we are the third highest per capita users of mobile phones in
> the world!

And also one of the later adopters.  The first cellular network was switched
on in Chicago in October 1983.  Mobilenet was launched in Sydney in January
1987.  What would have happened if there was competitive pressure?

Also, I'm not sure about your claim about penetration.  We are high in
comparison to countries like the UK and Japan, but fare poorly against the US
and Scandinavia.  We are up there, though.
 
> Do you suppose the government considered *all* these issues

They would be been reminded of each one of them abundantly by all the lobby
groups invovled.

> I still believe the government sold out the people of Australia when it
> decided that "telecommunications reform = lots of telecoms in competetion."
> There was no real consideration of the issues in detail.

I think you believe wrongly.  The policy formulation was an extremely involved
and drawn out process.

Although I didn't like the fact that OTC was merged with Telecom, I believe 
now that it was the better way to go, and that overall the policy framework
adopted will prove to be one of the most sensible, productive and intelligent
telecoms deregulations in the world, especially when you compare it with the
US, UK and NZ.

> In my opinion, they got it wrong, and we're all going to have to live with
> the consequences.

We'll have to agree to diagree.

> Hopefully they won't be as bad as the U.S. network nightmare experience.

Believe me, they're in a class of their own :-)
 
> You're wrong about the exchange connection remaining a monopoly.  There's 
> no guarantee that this will remain the case.  In the current situation it 
> is simply not in Optus' interests to provide exchange connections -- which
> is one point of the whole "cream skimmer" argument.
 
I understand Optus is intending to provide dial tone competition sometime in
1994.  How it will do this I do not know.

One thing I'm sure I will get agreement on is the prospect of a Coalition
government selling off AOTC in its first term to attempt to plug Fightback!'s
numerous holes.  Certainly in the current economic climate and the drugged
state of the stock market, such a float would be disastrous.

Not only is there serious doubt about the stock market's ability to absorb a
float the size of 5% of Australia's GDP, there is also serious doubt that such
a rushed sale would return anything like AOTC's true value.

Also, it is extremely unlikely that it would be able to be purchased purely 
by Australian investors.  If every single man, woman and child in the country
bought an equal share, they'd each need $1200.

One particularly nice thing about the deregulated telecommunications
environment in Australia is that we have a 100% Australian owned carrier that
has a real chance to become a global player.

That would most likely evaporate in any forseeable float if it became just
another multinational pawn.

-- 
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