Friday, December 03, 2010

Watchdog urges Julia Gillard to reject NBN's monopoly plan

A cosy little government monopoly, where bad service and indifference to the public can be guaranteed -- every socialist's dream

THE competition regulator has punched a hole in the business case for the $36bn NBN by urging the government to reject a proposal to extend its monopoly. It is understood the Australian Competition and Consumer Commission has told the government to discard the NBN Co's contentious plan to build only 14 points of interconnection - where retail service providers will hook into the fibre network to deliver broadband services to consumers - in five capital cities and require 200 points to be implemented. The rejection could slash the NBN Co's commercial returns from the services it plans to eventually sell and would curb its market dominance.

NBN Co expects to produce returns that will beat the long-term government bond rate, which is a modest 5.41 per cent - but this was predicated on its strategy of 14 interconnection points.

The heavily edited summary of its business case, released last week, argued that if the government's solution on interconnection points "does not promote the same intensity of retail competition", the company's internal rate of return could be 50 to 80 basis points lower. This would be because of a "slower take-up of broadband and slower introduction of retail services that require higher speeds". The ACCC's advice has been presented to the government and is awaiting delivery to cabinet next week for final consideration.

Critics had complained the NBN Co's plan was wasteful because it bypassed hundreds of millions of dollars worth of existing fibre-optic cable built by companies such as Telstra and Optus. Concerns were also raised that the plan would make the NBN Co too powerful and crowd out competition. "It was crazy of them to want to overbuild parts where there are functioning competitive markets," said one industry source. "It's a win for the industry and it will remind the NBN Co who is in charge here."

The NBN Co has been arguing its plan is the best way to deliver uniform national wholesale pricing. An NBN spokeswoman said last night the body had "said consistently that industry structure is a matter for government and that we will build whatever number of POIs they decide following consideration of the recommendations flowing from the ACCC's public consultation process". Julia Gillard promised a uniform national wholesale price as part of a policy aimed at maintaining the support of independent MPs Rob Oakeshott and Tony Windsor. There are now concerns about how the government will deliver on that promise.

It is understood the advice to government seeks to tackle the issue via other mechanisms, such as subsidies to regional and rural areas funded from the federal budget or an industry levy. The NBN Co's plans had infuriated major telecom companies, which said it would serve only to leave unused assets that could otherwise have been used to lower the costs paid by consumers. The telcos had warned that execution of the strategy would have resulted in compensation claims worth "hundreds of millions" of dollars.

Yesterday, the industry was relieved at suggestions the advice to government supported their position. "People seem to think we support an NBN under any circumstances, " said Optus director of government and corporate affairs Maha Krishnapillai. "There are a whole lot of decisions that make NBN borderline and this is one of them. One of the most important principles has been wholesale-only and maximum competition wherever possible, so it's a good thing we are now moving in that direction."


Queensland Health blocking hospital error reports from Right to Information access

Queensland's own world-class obnoxious bureaucracy

ERRORS in public hospitals are being hidden from Queenslanders under a secret Health Department scheme. The Courier-Mail can reveal Queensland Health chiefs told the department's independent Right to Information decision-makers to block access to so-called clinical incident data detailing health bungles at hospitals across the state. The errors censored can include reports about mix-ups of newborns, patients being wrongly medicated or surgery errors which shed light on the problems in the health system.

The revelations come as the Bligh Government lauds a new era of transparency five years after two commissions of inquiry uncovered a culture of secrecy within Queensland Health. The move by the department's executive management team was triggered late last year by an application by The Courier-Mail for information relating to deaths in emergency departments, which the department blocked.

Queensland Health director-general Mick Reid has defended the plans, insisting they were aimed at protecting the identities of people involved in the incidents after staff claimed they could still be identified despite their personal information being censored. But senior department sources said that was already occurring.

Documents obtained by The Courier-Mail under RTI laws reveal the lengths QH executives went to in order to hide the information, including an elaborate plan to exploit a legal loophole and shift the information into Quality Assurance Committees, the secretive groups where errors are discussed without access by courts or RTI. When the committee option was deemed "futile" and too secretive because patients would not have been able to access their own records, the department's management team proposed asking Premier Anna Bligh to wind back her new RTI laws to hide the data. But this was deemed too politically difficult and documents show the Queensland Health RTI unit agreed to draft a new set of guidelines to block access to similar applications targeting clinical incident data.

In a written statement, Mr Reid refused to answer several questions about the manoeuvring but insisted the options were aimed at protecting patient and staff confidentiality and ensuring incidents were reported. "Clinicians raised concerns that the new Act might cause clinical staff to hold back from reporting clinical incidents, if they felt their anonymity could be compromised," Mr Reid said. However, RTI decision-makers had long been legally obliged to consider privacy issues and censor information that could potentially identify people before releasing the rest of the documents.

Opposition health spokesman Mark McArdle said the public had a right to know what was happening in hospitals. "It worries me data is being withheld which shows how hospitals are performing when RTI officers previously deemed it OK for release," he said.


Bureaucracy that it as obstructive as it is stupid holds back university research

A year ago I was introduced at a blue chip institute, owned by Sydney University, to an eminent professor leading an exciting research project. His team had (almost) isolated the scent molecule in cat fur that is recognised by and affects the behaviour of rodents. He can demonstrate that exposing rats to the critical molecule, in tiny concentrations, causes them to flee from the source, with great reluctance to return, and brief exposure appears to interrupt their prolific breeding cycle. Almost one-third of the Indonesian rice crop is lost to rats and mice each year. For a country trying to feed 240 million people, most of whom eat rice every day, this is a seriously interesting idea.

The professor needed $300,000 to fund three senior scientists and their equipment and materials for a year to take the final step in isolating the active molecule from a dozen alternatives. I offered to raise the money privately but he explained this was not possible, as any private investment had to be sanctioned and brokered by the university's commercialisation arm, Sydnovate. I was informed that his funding rounds take place at fixed intervals – miss one and you have to wait for the next – and that grants of $50,000 are hard to get. It was possible for a private investor to help but there were very strict rules. The last time his team had gone down this path, it took two years to consider the request and a competing university in Europe published the innovation in the interim.

The Commonwealth gave Sydney University $750 million in grants in 2009 – before you get to HECS payments and student fees. About $200 million a year goes to the faculty of medicine for research. Those funds employ a small army of very clever men and women in trying to solve human health-related problems. Sydnovate's sole purpose is to commercialise the good ideas that this army of researchers (and their colleagues in the faculties of engineering, chemistry, etc) create. So what is the royalty return that we taxpayers get for $750 million a year? It's $2.5 million in 2009 out of total university revenue of $1.4 billion – or one-third of 1 per cent. After 160 years of operation, Sydney University makes more money selling beer and hamburgers to students than it does licensing intellectual property.

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Sydnovate employs 26 full-time staff including six lawyers and five PhDs. Like one hand clapping, they are expert at registering patents, hopeless at making money – all protection, no profit. They remind me of the Soviet shoe factory that suffered a failure of the left sole cutter and continued producing thousands of right shoes, knowing their quota in a command economy was measured by the number of shoes produced, rather than the number of pairs. There are partnerships, where industry has come to the university asking for help in a research task, but as far as I can tell, negligible revenue from faculty-created knowledge. Performance reporting is opaque; Sydnovate doesn't produce an annual report. If public company directors practised these levels of transparency with other people's money, they would be struck off.

It's unfair to pick on one institution when the story is repeated so consistently. The University of Queensland gets points for effort in its Uniseed collaboration with Melbourne University and UNSW, which has attracted $15 million in third-party superannuation investment.

That ray of hope is overshadowed by the most recent DEEWR data (2008) suggesting "royalties, trademarks and licences" generate 0.46 per cent of total university operating revenue. By contrast, one US listed therapeutics company, AmGen, has amassed $50 billion in 30 years, improving the prospects of 18 million patients, by commercialising three good ideas.

The cost of running a research-intensive university is rising twice as fast as government willingness to fund it. The most creative idea to fill the hole seems to be more full-fee-paying foreign students. We go through the motions of running commercialisation units but there is little conviction and fewer results – partly because the culture of the education unions is so anti-profit and anti-business. How can our universities credibly teach "entrepreneurship" when their own record on the subject is so bad?

There will always be a place for "pure" research but we must move beyond the infantilism of institutions addicted to the easy money of government grants and foreign students.

The relevant leading body of public institutions – Knowledge Commercialisation Australia (KCA) – appears to see its role as rationalising the failure of its members and organising further and deeper raids on commonwealth and state treasuries.

KCA's message is that Australian universities ought to expect to make much less than 1 per cent of revenue from commercialising ideas because "discoveries that produce financial bonanzas are so rare that policies designed to pursue them would almost always lead to failure".

How inspiring. Recurrent funding to public research institutes should include incentives and penalties. If they prove incapable of giving cartilage to ideas, we should contract the role to others. Researchers must be able to bypass the politburos masquerading as deal-brokers. We could create an annual "Australian Innovation Market", bringing together venture capitalists and the research community, allowing scientists to produce a simple prospectus and pitch deals to recruit capital in a global online IP auction.

Failure to act also involves risk. The rats will keep eating the rice and our best minds will emigrate, fondly recalling Australia as a nice place to retire.


Gillard charts course for workplace disaster

IRRESPONSIBLE union demands threaten to stall our economic growth and cost jobs

IN uncertain times a government should offer voters more than just words. Governments should provide a clear plan to steer the economy through uncharted waters. As interest rates rise in Australia and international economic conditions remain uncertain, a government should be able to steer a course through the minefield of treacherous economic conditions.

However, rather than steering a safe course through the minefield, Julia Gillard's re-regulation of the Australian workplace and the rapacious demands of an emboldened union movement threaten to blow a hole in Australia's economic growth and threaten Australian jobs.

There is no question that the removal of the no-disadvantage test by the Howard government in 2005 was a policy and political mistake. Tony Abbott is right to declare Work Choices dead, buried and cremated. There have been mistakes and they should not be repeated, but there were also successes. The reasons for those successes (the commitment to ongoing reform) should not be forgotten.

This is particularly the case as the warning bells of the economic dangers ahead ring out across the country. These include the Prime Minister's closest advisers, including the finance department, who warned the Labor government in the incoming briefing that "a new broad agenda for reform is needed to improve productivity and labour force participation". Ken Henry's Treasury department has also identified "capacity constraints, especially pricing pressures, as the economy presses up against full employment limits".

A recent survey by the Australian Institute of Human Resources belies the claim made by the Prime Minister, as a minister in the Rudd government responsible for the Fair Work Act, that she would make things simpler and fairer.

Respondents to the AHRI survey said of the provisions of the Fair Work Act: "This is an anti-employment provision. It is more prudent for us as the outsourcer to retrench the staff rather than look to negotiate transfer arrangements. Most significant changes are negative; providing unions with default bargaining status gives them a free ride into negotiations without regard to what level they actually understand the workplace and the employees they are negotiating on behalf of.

"This gives rise to template agreements that FWA [is] endorsing, discouraging agreements that are tailored to suit individual workplaces, and therefore gets close to what pattern bargaining actually is."

These warnings (of a return to the bad old days of industry-wide wage claims with the resultant inflationary effects) are not isolated.

Even the Labor Party's token employer representative of choice, Australian Industry Group, has warned its members of increasing claims under the Fair Work Act that impede competitiveness and efficiency, refusal by unions to allow individual flexibility arrangements to be made and rising wage expectations of employees and unions.

"Many employers are uneasy about the laws and ongoing union attempts to stretch its boundaries, while they are also finding compliance very challenging," the AI Group says.

The Prime Minister's workplace laws will put increased pressure on interest rates because the effect of the laws will generate upward pressure on wages from exaggerated union claims pursued across industries. This pressure will increase as agreements from the previous system end and unions engage in campaigns for their replacements.

Recent reports of claims by the communications union for 15 per cent wage rises for workers on the uncosted National Broadband Network rollout and the transport unions for 16 per cent provide further evidence that unions understand Labor can't be trusted with taxpayer money or to manage the economy and the alarm bells get louder.

The Gillard laws are a marked departure from the broad progress of economic reform during the past several decades. The Fair Work Act re-regulates the labour market and takes Australia back beyond the reforms introduced in 1993 by the Keating government.

The Fair Work Act has given unions a new array of weapons and a veto over what happens in any workplace and between any employer and employee whether they have members there or not. These so-called "good faith" bargaining provisions are the most insidious aspect of the new laws.

The effect of these laws on the mining industry, in particular, will be significant. They allow, and arguably have encouraged, unions to make wage claims not based on productivity but on the soaring commodity prices, which will not last. The union movement is sitting back licking its lips at the opportunities for increased membership that this largely non-unionised workforce presents under the Gillard laws.

This will drive increased wage pressures across the economy as unions use their powers to drive their agenda through the agreement-making process.

As interest rates rise and unions continue to push the boundaries of the Fair Work Act, the losers will be Australians who lose their jobs, those who can't even get that chance at a job and the small business operators desperately trying to keep their businesses afloat.

Where is the fairness, Julia? If the PM were serious about "walking the reform road" she would do something about the IR landmine before it's too late. This is a debate we must have. This is a reform road that must be travelled.


NOTE: My QANTAS/Jetstar and Australian police news blog are getting frequent updates

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