Wednesday, 5 March 2014

Wrong, wrong, wrong, wrong, wrong

Let me preface what I'm going to say next, by pointing out that I keep this blog non-partisan and non-political, that I'm only interested in the intellectual substance of economics and public policy, and that I couldn't care less about the inanity of political point-scoring.

I do want to comment, though, on the substance of some potential telco policy ideas that were apparently leaked from Clare Curran's office. As I say, I don't care in the least who penned them, who leaked them, or how or why, and I'd have the same reaction to them no matter who wrote them.

According to the NBR's coverage, "In very broad terms, the [leaked] document hints at more regulation, stating: Platform infrastructure competition is wasteful and anti-competitive. It needs to be open access, regulated for maximum competition and run as a single platform monopoly" (bold lettering in the NBR original).

This is as wrong as any infrastructural policy could possibly be. If you rewrote it as its complete opposite - "Platform infrastructure competition drives efficiencies and is strongly pro-competitive" - you'd be on the right track.

The only reason that we have even half-way acceptable airline services is because Jetstar now, and Ansett before, rolled out their own infrastructure platforms to compete with Air New Zealand.

The only reason we have even half-way acceptable mobile phone services is because Vodafone first, and 2degrees later, rolled out their own infrastructure platforms to compete with Telecom.

The only reason we have even half-way acceptable stuff to watch on our televisions is because Sky TV ran out its own infrastructure platform to compete with the "free to air" channels.

Or put it the other way.

A major reason why airports, for example, are attracting regulatory attention is precisely because they have not faced infrastructural competition. The first best answer, if Auckland or Wellington airports are ripping us off, is to encourage or allow a second Auckland airport (Whenuapai?) or a second Wellington airport (Paraparaumu?) to keep the incumbents honest. Consumers (passengers and airlines) get better choice, and the incumbents have to keep their costs and charges under control.

And finally: the amount of competition that can occur between rivals sharing the same infrastructure is self-evidently minor compared to the amount of competition that occurs between rivals deploying their own assets.

Wrong analysis, wrong diagnosis, wrong response.

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