A Dog's Breakfast that Government Built
This week Google announced it was joining Skype in offering free phone calls using the internet. Users of Gmail can now call regular phone lines in the US and Canada directly from their inbox using a headset. Google will provide the porting onto the phone network. It’s an interesting development in what is a dog’s breakfast of a market.
The main cause of this dog’s breakfast status seems to me to be the constant regulatory interference. Australia isn’t any different from the other western economies in playing regulatory games in the Telco market. But the massive geographies involved here, together with a low population density has magnified the political nose-poking-in.
It was always going to cost a small fortune to put any phone 800 miles outside the nearest city, anywhere on the planet. A monthly $35 line rental left an enormous bill for someone to pay and good old Mr Tax Payer got the short end of the stick from the beginning. Saddling the tax payer with an uneconomic phone network was the first major regulatory decision that shaped todays phone market.
The second was the romantic binge successive governments with privatising the phone network in selling off Telstra. When governments run a business there are always unintended consequences. One of the inevitable problems that arises is that business becomes subject to a government level of information transparency. As it is “owned by the people”, and MPs being “representatives of the people”, opposition political parties have a field day gathering all sorts of poor performance and other sorts of scandalous data and using it to embarrass the government of the day.
So the key benefit to government of privatization is a fertile source of government attacks is removed. MPs have no rights to private company data and whistle blowers get sacked in the private sector.
When we put these two large influences on the table we get Telstra today. A network that was built for political purposes coupled with a bargain priced asset sold off below cost for political goals.
The Game Changes
In strut Google and Skype with free phone calls over the internet. In a simple open market it’s a dagger at the heart of Telcos and right now performance is the biggest problem holding back a tidal wave that would destroy their traditional business model. But technical limitations are solved sooner or later, so the sword is in place.
Having been conceived in political interference, what will slow this train wreck for Telco’s is that same political interference. Endless battles loom over who should pay to maintain that 800 mile cable to the middle of nowhere. Over who should have access to cable pits. Over who should get tax payer handouts to build the NBN on whatever forms it appears. Over who should pay.
If Google and partners get any kind of a clear run at delivering free calls in Australia they will rip the guts out the dogs breakfast that government built. My fear is somehow Mr Tax Payer will be in the gun, writing cheques to all and sundry to fill the whim of a political goal set by some bozo who won’t be in parliament next election.
Gee, does anyone think it’s accidental timing Telstra launching their mega-gigabyte plans as an ISP?
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