Is bashing Telecom good for New Zealand?

I interviewed Victoria University economist Bronwyn Howell for Communications Day. CommsDay is a subscription only email newsletter, so I can’t link to the original.

Howell, a principal researcher at the New Zealand Institute for the Study of Competition and Regulation (ISCR), warns the latest regulatory moves forcing Telecom to continue servicing unprofitable rural customers while removing the subsidy for this service, could, ultimately, bankrupt the company.

This is the latest move by government to reign-in a business which is widely viewed as a rapacious, monopolistic multinational.

Bashing Telecom is popular

Both Labour and National have found bashing Telecom is politically popular.

Now, I’m not saying Telecom is blameless. The company has stepped over the line on occasion.

Yet, Yet, continually bashing Telecom is not good for New Zealand.

And it most definitely isn’t good for the public.

Telecom has local owners, including us

Most people think of Telecom as being owned by American multinationals. While the company does have some international shareholders, the reality is New Zealanders own most of Telecom – mainly through institutions.

Telecom features heavily in our superannuation portfolios. In effect, the company, which was once owned collectively by New Zealanders through the government is now largely owned collectively by New Zealanders through our savings.

So when the government bashes Telecom, it look as if it is acting to support consumers. In many cases it is supporting consumers. Yet at the same time it is hurting investors.

In other words, we might get cheaper phone services, but we will be poorer in our old age.

What’s more, when the government bashes Telecom, the winners are usually the company’s rivals. These, by and large, are overseas-owned multinationals. So, in effect, money moves from our superannuation savings accounts in to other people’s superannuation accounts.