new enterprise

The Government's decision to encourage new business activity from SOEs drew a decidedly knee-jerk reaction from ACT leader Rodney Hide, who labeled the move a tragedy. Predictably tax cuts were Rodney's answer. Business NZ claimed that SOEs would muscle in on businesses areas already occupied by the private sector, citing ACC as an example. I'm not convinced that TVNZ and OnTrack are about to pose much competition to the SME's that Business NZ represents - although Paul Henry would do a roaring trade running a dairy. National's response was more measured, with John Key issuing a warning shot about cronyism, and Katherine Rich suggesting offshore activities may be more effective, which may work for NZ Post and the Energy Companies, but not for OnTrack or TVNZ. She misses the point slightly, with overseas expansion being only good for revenue gathering, rather than providing new services that New Zealanders can not access.

This is a good policy provided that new areas meet the stated objective of having

a demonstrated potential to enhance the competitive competencies of other firms and industries.

Which may not go far enough. For this to work, SOEs need to have profit and dividend objectives clarified - the state shouldn't enter into areas that the private sector can provide at a high quality. SOEs now need the flexibility to utilize their profits from some areas to provide new services that run close to breaking even (i.e. unpalatable for private enterprise). As the TVNZ charter has proved, running dual model businesses are tough. If and when SOEs come up with new areas to provide public or business-to-business services, the SOE's board should be obliged to present a new business model that provides a structure to cope with a different style of operation. The government will in term need to accept no/low dividends.

I can't foresee what these companies will come up with, but if done properly they can provide enormous benefit, not only in direct job creating, but in improving the productivity for the NZ business community.

what about wireless?

The debate isn't dying around what services will be on offer once the new telecommunication regulations come into force, thanks mostly to Annette Presley of Slingshot, who is making a lot of noise around her plans, including introducing free calls everywhere. The Herald ponders what the major players will do to offer bundled services for customers, while Computer World warns that the physical space in the cabinets may prove a stumbling block to unbundling. Stuff carries news about CDMA-C, which Telecom could be offering in 3 years. The Stuff article includes the usual hype about people multi-tasking on ultra futuristic mobile devices, surfing the net while watching the latest episode of Lost (They'll still be on that bloody island in 2010, trust me) and talking away at the same time - which is all a load of tosh.

Underlying all this lovely gagetry is the finite pool of money to maintain at least 6 network types, wireless and wired in a small, oddly shaped country. Figure in the fragmented rollout of the networks, with only one able to service the entire nation and most concentrating around urban areas - and we're in trouble. Unanswered is, if Telecom has to provide access to it's local loop, will TelstraClear have to do the same for it's 04 and 03 networks? It would be unfair and against the national interest not to do so.

While regulating fixed line assets seems straightforward, it becomes murky around wireless networks. It would be odd to force Telecom to have a wholesale fixed line arm, but not to do the same for it's mobile arm. Can we afford to have competing wireless networks for both mobile calling and broadband. In the future, the distinction be between the capabilities of the two network types will be zip, both able to carry any type of data at amazing speeds.

Splitting the whole of Telecom's operations into retail and wholesale operations will push the country into a competely different model of network operation. If we are to really open up our telecommunication networks, it is essential that other operators are placed into a similar regulatory split. It was done with some success in the electricity sector. I know that prices haven't moved in the way promised, but consumers now have companies competing for their custom, and there is more transparency in how we are billed for services. Implicit in the structure of the electricity sector is the acknowledgement that investment in alternate networks will not occur. What hasn't occurred is a framework to fund new investment. This can't be allowed to occur in a sector that can change in technology rapidly.

Shifting our telecoms delivery into a single body or several bodies that provide wholesale access to retail operators could be vital in keeping NZ in a position to adapt to new technologies, and is the only way (in fixed line, at least) to ensure that income is invested back into networks. It won't be long until operators decide that the return on investment for new national wireless networks isn't going to be enough. Woosh hasn't yet seen profit from it's investment and faces more costs from new technologies. What happens when it becomes too hard to constantly upgrade a network? National's experiment with the railways could be repeated if wireless networks are left without investment, a risk increased by the cheaper alternative of piggy-backing off the copper network. If any of the small wireless operators go under, there won't be buyers waiting to snap up the investment every time.

Also in the mix is the future of digital broadcast television. Investment into NZ Freeview, if and when it happens, will no doubt be done through BCL, a state owned network operator. Delivery paths for satellite television, can also be used for wireless broadband and home phone connections. Having a set top box that can be used as a hub for other technologies, would allow an operator, such as Slingshot to provide whatever services it wanted to - including on demand television and pay-tv channels, alongside whatever the state digital broadcaster provided.

It'll require serious dollars from the government, but more importantly, it'll require serious balls and a serious vision for communications in New Zealand. I'm not holding my breath.