Wednesday, December 08, 2010

A public utility that people have to be compelled to use?

Typical Leftist authoritarianism

Even the NBN's backers concede it won't pay dividends if people aren't 'directed' to use it.

Julia Gillard reckons Fred Hilmer would be proud of what Labor is doing in splitting up Telstra and committing $50 billion or so of taxpayers' money to build a government-owned broadband monopoly. This was finally completing the competition agenda Hilmer set out for Labor in the early 1990s.

"Two decades later, the NBN and structural separation gives us the chance to bring the Hilmer principles to bear on the telecommunications industry," she says. Broadband Minister Stephen Conroy adds that separating Telstra's retail arm from the wholesale network is "the holy grail of microeconomic reform" in the telco sector.

Except Hilmer, the former management consultant and media company chief executive who is now University of NSW vice-chancellor, doesn't agree with any of this. He doesn't think Telstra is a natural monopoly that needs to be separated into a government infrastructure utility and a private retail arm.

He doesn't think a wholesale broadband monopoly should be restricting competition from other infrastructure providers, junking existing infrastructure and mandating fibre technology. And he doubts the much-hyped benefits of superfast broadband.

Hilmer yesterday said the poor result of Labor's 2008 tender for telco companies to build a broadband network was revealing. "Does that mean the market has failed, or does that mean the market has spoken and no one's listening?" he told The Australian.

Labor's stated reason against putting the NBN through a cost-benefit analysis - that the benefits are unimaginable - is an "impossible argument". "When do we get the best judgment in cases of uncertainty?" he asks. "We don't get it by one source of wisdom. We get it from multiple judgments over time."

Hilmer urges the "logical incrementalism" he says developed IBM's original 360 mainframe computer in the 1960s. Instead, Labor was going for a risky Australian "big hit" he likened to the US trying to put a man on the moon. To justify its big hit, Labor needs to inflate the benefits. The hype began on the NBN's day one, when Kevin Rudd said information and communications technology "drives 78 per cent of productivity gains in services businesses and 85 per cent in manufacturing".

Rudd's claim is punctured along with other broadband hype by London-based telco analyst Robert Kenny and US-based Charles Kenny in their paper "Superfast: Is it really worth a subsidy?"

The numbers Rudd spruiked were really 59-78 per cent of productivity gains for services and 65-85 per cent for manufacturing. And the driving technology was not just IT-related but all technology, from biotech and nanotech to new materials and containerisation.

Now Gillard quotes the United Nations Broadband Commission's suggestion in September that "for every 10 per cent increase in broadband penetration we can expect an average of 1.3 per cent additional growth in national GDP". This claim traces back to a World Bank study of all communications technology stretching back to 1980, well before broadband. And a moment's thought suggests the claimed growth stimulus is implausibly large.

In the past decade, Australia's broadband penetration has increased from zero to about 25 per cent, which on these estimates should be accounting for just about all our economic growth by now. Yet this decade of broadband rollout has coincided with an alarming fall in productivity growth.

There's good reason for the finding that broadband is associated with higher economic growth, as the World Bank study itself cautions. The causation at least partly runs the other way: the demand for telco services increases as people become wealthier through economic growth. Much of this is for consumption, such as video and porn, rather than enhancing business productivity. And Gillard's UN report is full of calls for "infrastructure-based competition" and private investment that doesn't discriminate against particular technologies, as the NBN monopoly does.

The NBN's business case merely claims it won't lose taxpayers' money, even if it won't deliver a proper commercial return. The 24-hour news cycle can't tell this from a cost-benefit analysis of whether it is worth the money.

Yet Productivity Commission chairman Gary Banks, the Organisation for Economic Co-operation and Development, the Business Council and now Reserve Bank Governor Glenn Stevens all urge putting the NBN through proper cost-benefit scrutiny. Hilmer doesn't even think we should have got to the point of arguing for a cost-benefit analysis of a government network monopoly.

A key issue is whether broadband delivers increasing or decreasing returns. This is the third internet upgrade to telco infrastructure after the 1990s dial-up technology of email, e-commerce and online news and the always-on DSL technology of the 2000s that facilitated YouTube and Skype. The Kenny brothers suggest the biggest benefits, even if they're yet to be fully realised, come from the initial internet connection. Stepping up to much faster connection may produce smaller gains, just as another third-generation technology - supersonic aircraft - was grounded with the Concorde in 2003.

While possibly delivering less, this next upgrade will cost much more. Previous upgrades required modest investments at both ends of the existing copper network. This one involves rushing out a new fibre network into every home and premises in the land.

Conroy says the NBN will "transform service delivery in key areas such as health and education and energy efficiency applications".

Yet tele-medicine is mainly about connecting hospitals and doctors, not patients' homes. Existing broadband videophone technology already can partly take the place of nurse home visits. The abysmal returns on trying to replace manual medical record with e-health suggest the costs are bigger than the technologists assume.

Broadbanding our schools doesn't require putting fibre into every home. Lectures already can be downloaded by students over existing broadband. And, for the young, broadband is more about social networking than education, which in turn is more about good teachers. Smart electricity grids don't need very fast broadband and have already been rolled out in Italy without it.

The critique has pinched a nerve among NBN proponents. IT consultant Paul Budde agrees that a fibre-to-the-home network for smart electricity grids is ridiculous. And international experience does not back the superfast broadband hype.

But Australia would be different if we reallocated money toward the NBN's digital economy. "Active government policies are then needed to direct the other sectors to start using the digital infrastructure for these services," Budde explains. Otherwise, "such a network can indeed become a white elephant".

Without even more taxpayers' money, Labor's NBN will become like the sacred but burdensome bleached pachyderms Thai kings presented to their subjects. Labor's subjects must be "directed" to use the government's monopoly network. And it's all in the name of competition. Just ask Hilmer.


Santa fired from Victorian pre-school so not to offend religious groups

THERE'S no holly in the halls, and Santa has been sacked. Christmas is out at a Victorian kindergarten, which is tiptoeing around any mention of the religious holiday.

Santa and his sleigh don't get a look in at Montessori Marvels Preschool in Greenvale which is striving to be everything to everybody. Children celebrate with an end-of-year party rather than a Christmas party and will part for the holidays wishing each other "Happy New Year".

Premier Ted Baillieu has warned Victorians not to let political correctness ruin Christmas with some schools and community groups imposing yuletide bans in recent years.

But the centre is not budging, saying it is abiding by Montessori's philosophy to be inclusive of all religious and cultural groups. "We are just trying to take an open approach to the holiday season," said spokeswoman Marlene Guclu, herself a Christian. "We run a non-denominational, non-religious program."

One parent is upset by what she said was effectively a Christmas ban. The woman, called Anna, rang up radio station 3AW to complain about a kinder in Greenvale, which she did not name. "My son is getting really frustrated because I'm singing one song, and he's singing the other," she said. "They sing carols but they change the words. "It doesn't have to be about religion."

But Ms Guclu said Christmas could still be discussed one on one with children. "We want all families to feel welcome, of all nationalities," she said.

Ethnic Communities Council of Victoria chairman Sam Afra said it could be a positive move if they were seeking to include all faiths in celebrating the festive season.

"If they are trying to do the right thing for everyone, we don't want to take that out of context," he said. "Different people coming around the table now saying maybe we should look at interfaith. I would like to encourage more debate, and to be more mature about our debate, where we are more understanding and respect each other."


Government secrecy in Labor-run South Australia

THE public is being refused information from state government departments which falsely argue its release is not in the "public interest", the State Ombudsman has revealed.

Ombudsman Richard Bingham has warned it is rare for government agencies to correctly apply the Freedom of Information Act provision which requires that they show release of documents would be "contrary" to the public interest.

Mr Bingham told The Advertiser it was "fair comment" to say that agencies were using narrow definitions of what they thought was in the public interest, rather than well explained legitimate concerns.

"There is a need for people to be much more specific in addressing the (negative) consequences of the release of the information," he said. "It is a common misunderstanding and my office is involved in the training of FoI officers and we hammer it in that context."

The Freedom of Information Act 1991 contains numerous references to documents which can be kept secret in the public interest, but the onus is on the government agency to prove that the release would be "contrary" to the public interest.

In his 2009-10 annual report Mr Bingham cited numerous examples of where agencies had failed to meet the public interest test. The office of the Minister for Health, John Hill, had tried to refuse access to the identity of donors who supported the Labor Party's fundraising arm SA Progressive Business. "The apparent public interest in there being transparency in political fundraising, as reflected in the media and associated public comments was relevant in this regard," Mr Bingham stated in reversing the decision.

Adelaide City Council was also criticised for its refusal to release a list of possible heritage places, based on the opinion of a councillor with expertise in the area. The Department of Children's Services was also criticised for its refusal to release an independent evaluation of the Rose Park Primary School Family Unit.


Qld. Public Works Minister Robert Schwarten slams 'high-paid' bureaucrats for Health payroll bungle

There's no doubt that Schwarto is right on this one

FIERY frontbencher Robert Schwarten has launched an extraordinary attack on "high-paid" bureaucrats who originally commissioned the disastrous Health payroll system.

The veteran minister yesterday told The Courier-Mail that all the evidence showed that the bureaucrats who signed the Government up to the contract were to blame for its failure.

Mr Schwarten also struck out at faceless Labor MPs who have engaged in a whispering campaign questioning why he and Health Minister Paul Lucas were not sacked over the scandal. "Anybody who has suggested that hasn't had the guts to say it to my face," he said. "I assume it is either mischief or made up."

Mr Schwarten's comment will further fuel the finger-pointing and soul-searching that the Government has been unsuccessfully trying to avoid over the payroll fiasco, which has been branded the worst failure of public administration in the state's history.

Much of the focus has centred on the public works and health departments of Mr Schwarten and Mr Lucas. However, internal documents show that Treasury was the department that originally approved the contract to build the health payroll system in December 2007. The unit tasked with its introduction was transferred to Mr Schwarten's responsibility last year.

The $60 million system failed spectacularly, leaving hundreds of workers with little or no pay as it was unable to cope with the vast array of wage types in the public health system.

A report by Queensland's Auditor-General blamed a "failure of governance" for the issues.

About $210 million will now be spent on staff to ensure Queensland Health workers continue to get paid and a new system that will take until 2012 to complete.

While Premier Anna Bligh has labelled the Government's performance "manifestly inadequate", Mr Schwarten said he would freely quit if any evidence emerged that showed he had failed in his duties. "There is not one piece of paper anywhere that says I was responsible for the scope of the contract or anything whatsoever to do with setting up the whole system," he said.

Mr Schwarten said the contract was signed before either he or Mr Lucas were responsible for their current portfolios. "It was a lack of scope and it was misunderstood at the time and (Mr) Lucas and I have been trying to fix it since."


School building program rip-offs revealed by auditor

Peter Achterstraat tells it like it is

The NSW government accepted building contracts for school programs under the Building the Education Revolution that were inflated and did not meet the preferences of local communities, an audit has found.

The federal government's major program for schools has come under renewed criticism for its high costs in a report released today by the NSW Auditor-General, Peter Achterstraat.

A detailed study of spending at 1270 primary schools found the government accepted building contracts that were $188 million higher than their own costings, according to the report.
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"Irrespective of time constraints, the Department [of Education] should not approve estimated construction costs that are substantially higher than the department's own assessments," Mr Achterstraat said.

"They should investigate significant variances, negotiate with the managing contractors and set the estimated costs based on their own assessment, not the managing contractor's assessment."

Mr Achterstraat said he examined nine schools closely, and found eight had costs between 2 and 40 per cent higher than an independent surveyor's estimate.

Of a further 68 schools surveyed, just 40 per cent thought the project was value for money, he said.

"The department strictly adhered to the Australian government's guidelines and their own standards, which meant some schools got a library when they wanted a hall," Mr Achterstraat said.


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