Distorting telecommunication costs

Distorting telecommunication costs

Summary: Who picks up the bill when change occurs? Whether it’s governments building networks like the NBN in Australia, an FCC tax on international traffic into the US, or a charge against content providers from European service providers; all have unintended consequences.

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This week, Twisted Wire looks at how governments and industry bodies are distorting the way telecommunications networks are paid for. While the intent might be good — to provide better services to the public — the consequences could be substantial.

Internode founder Simon Hackett said that the FCC's proposed 15.7 percent tax on traffic into the US would simply encourage network providers to store more content outside their country.

He also said that Stephen Conroy's suggestion, that the government could build its own international link to the US, was a solution looking for a problem. The senator, Hackett reckons, has picked on one of the most competitive elements of the delivery chain. The consequence will be unnecessary costs being passed to the taxpayer.

As for European carriers wanting to charge content providers to support network investment, Hackett agreed that there is a need to balance the cost responsibility, but doesn't think the approach will work. We discussed how this, too, could have unintended consequences.

Then there's the suggestion by Maha Krishnapillai, GM for Telecom Products at Australia Post, that post offices will begin delivering mobile and NBN products. On the face of it, the idea is a good one — a new player means more competition, right? Stephen King, professor of economics at Monash University, doesn't agree. It means that the government would be selling at a wholesale and retail level, he said, which could recreate the vertical integration issues we faced in the past with Telstra.

It's another example of how government involvement can potentially distort competition, and the cost structures of the industry.

After you've listened to the podcast, tell us what you think. Leave a comment below, or call the Twisted Wire feedback line — +61 2 9304 5198 — if you want your views to be heard in next week's program.

Topics: Telcos, Government AU, Australia

About

Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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