Who’s afraid of the monster NBN monopoly?
Are monopolies bad? Of course they are! Monopolies are not interested in competition and represent the ultimate market failure.
We should all know that monopolists will do their utmost to raise prices and stop new competitors. That’s why we all need to be fearful of the monster NBN monopoly.
Yes, Senator Stephen Conroy is a passionate advocate of the NBN and we all know that Malcolm Turnbull keeps the good Senator on his toes regarding the NBN and the monster monopoly that it’s fast turning into.
But before anyone gets too excited and thinks that the NBN is simply a political issue, it’s important to think through what the NBN really means from a financial, economic and consumer perspective.
The first thing to note is that Conroy and NBN Co have gone out of their way to knock out any potential NBN competitors for the provision of fixed broadband services at the wholesale level.
Telstra will hand over its copper network for lots of taxpayer money and Optus will do the same for its cable network. Both were clearly potential competitors to the NBN for the wholesale provision of fixed broadband services.
Here the funny thing is that both Telstra and Optus will be getting lots money for infrastructure that could still have been very effectively used against NBN Co to drive down the price of fixed broadband services.
Telstra would have certainly been a very effective competitor to NBN Co at the lower broadband speeds as not everyone wants or needs the higher and generally more expensive NBN speeds. And Optus would have been an effective competitive to NBN Co at the higher speeds as the Optus cable network is certainly capable of very fast fixed broadband speeds.
So, the only reason to give Telstra and Optus lots of money is to knock them off as competitors. Surely that’s anti-competitive? Well, yes, but we are told by Conroy and the ACCC that we shouldn’t be worried because consumers will “benefit overall.” Sounds strangle doesn’t it? How can less or no competition at the wholesale level for fixed broadband services “benefit” consumers?
Well, the argument goes that since the Federal Government believes that the NBN benefits consumers, Conroy is entitled to do everything he can to ensure that the NBN is not undermined by existing or potential competitors seeking to cherry pick high value customers from the NBN, especially those in the city areas.
Quite simply, according to the NBN supporters, any cherry picking by NBN competitors would mean that while the cherry picked customers could get a better price than they could through the NBN, those customers are needed by the NBN if it is to have any chance of recouping its construction costs and then possibly making a profit.
So the NBN is to be protected from competition by getting the green light by Conroy and the ACCC to buy out its potential wholesale fixed broadband competitors. Yes, that’s right. The NBN is to be protected from competition and will become a monopoly at the wholesale level for fixed broadband services.
Where have all the free market fundamentalists gone and why aren’t they attacking the monster NBN monopoly? Of course, we have the Liberal Party pointing out the flaws in Conroy’s vision for the NBN, but what about all those free market theorists out there who are ideologically opposed to any government intervention in their beloved “free” markets?
In fact, you would expect all the free market theorists in the Federal bureaucracy to be giving advice to the Federal Government that promoting government monopolies is bad because monopolies don’t produce the types of consumer gains that competition does.
You would also be expecting all the economic and legal consulting firms that are always quick to attack any government intervention to be attacking the NBN. Where have they all gone?
Could it be that the economic and legal consulting firms are distracted by the considerable consulting work that the NBN may require during its existence? Surely, the possibility of making lots of money from consulting services to the NBN wouldn’t reduce a consulting firm’s love of free market theory? Could it be that we are facing the first real danger of a monopoly and that is the fear that any criticism of the monopoly will lead to some form of retribution?
We all hear stories of suppliers afraid to speak out against Coles and Woolworth for fear of being sent on a “holiday” or delisted from supermarket shelves. And that’s a duopoly where at least you can try to play one of the supermarket chains off against the other?
You won’t have that opportunity against a NBN monopoly. What if an internet provider or consulting firm gets on the wrong side of the NBN? That may go part of the way to explaining why there may be some legitimate fears out there in relation to the NBN Co spreading its tentacles in the same way that Coles and Woolworths have done.
Getting into NBN Co’s bad books may be a worry, but getting into the Federal Government’s bad books may be much worse as they tend to have long memories. Critics of Governments tend to get overlooked for consultancies or appointments to regulatory bodies.
So there’s no shortage of “yes” people lining up for consultancies or government appointments. Of course, independent thinkers do get appointed to regulatory positions, but governments usually don’t like `independent thinkers’ as they might have a mind of their own and may not be shy to express their views on what’s best for consumers.
The point is very simple. The NBN Co will have lots of market power and we know that Australia’s weak competition laws are difficult to enforce against the supermarket giants, major banks and oil companies. We know that despite the ACCC’s Chairman Rod Sims looking closely at allegations of unconscionable conduct by the supermarket giants towards suppliers, Sims is finding it tough to take any of those matters to court. It’s clear that our weak competition and consumers laws are currently no match for the market power of our growing number of oligopolists, duopolists and monopolists.
And what about when the NBN is eventually sold off to private interests. As much as a government monopoly may be bad, a private monopoly can be a nightmare. Remember when the Federal Government owned the major airports. Yes, we heard complaints about the level of service and charges, but what happened when the major airports were privatised? You guessed it. Airport charges went up and service levels fell. And, yes, the level of complaints went up. Now we are hearing renewed calls to regulate the major airports.
With all the historical problems with monopolists you have to wonder why we are creating a monster NBN monopoly that may end up in private hands. And, that’s the real point of any debate on the NBN. What happens when a future government wants to privatise the NBN? What will stop Telstra from acquiring the NBN Co when it’s finally put on the market?
In the meantime, we urgently need a small Independent agency to oversee all aspects of the NBN on a daily basis. And we need to put an independent thinker in charge of the agency who will keep the NBN Co and the Federal Government honest at all times on behalf of taxpayers and consumers.
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