How UFB and Chorus could tarnish government reputation

Vodafone is not part of the Coalition for Fair Internet Pricing. Yet Vodafone’s submission to the Ministry of Business Innovation and Employment on its review of the Telecommunications Act could come from the same song sheet.

As Chris Keall reports for the NBR, Vodafone even mentions copper tax and corporate welfare.

It’s the latest in a chain of events after the government sided with Chorus against its own competition watchdog. A chain of events which questions the National Party’s reputation as a strong, stable manager of the nation and the economy. And a chain of events which undermines the party’s belief in free markets.

The government’s commitment to market competition looked wobbly last December when Prime Minister John Key said his government might act to overturn what he described as a ‘problematic’ Commerce Commission decision on copper pricing.

Highlighting weak leadership

Ever since December, every act of the UFB-Chorus-Commerce Commission opera has made the government look more interventionist, weaker and less competent. Older commentators have made comparisons with the Muldoon era.

There’s more background in Are Chorus and UFB now a political football here’s a quick version.

Government partly wrote the the 2011 Telecommunications Act to smooth the path for Chorus to build most of the new fibre network. At that time, it distanced itself from day-to-day dealings by handing the job to an independent body, the Commerce Commission.

Chorus, or the company’s shareholders, didn’t like how the Commerce Commission did precisely the job it was asked to do. So someone, somewhere went over the Commerce Commission’s head, appealed directly to the top-level of government.

Self-inflicted wounds

It’s now a mess. A political mess and it is one entirely of the government’s own doing. Economic libertarians to the right of the government aren’t happy. Those to the left aren’t happy.

In effect the Prime Minister blinked. Whatever else can be said, he now looks weak. Every other predator in the jungle will now be circling. The next time the government looks for a public private partnership, potential bidders will factor this weakness into their planning.

Soon a conga line of business interests will dance to Beehive wanting similar ‘favours’.

A grumpy nation over network pricing

Aside from looking weak and undermining its credibility as a safe pair of hands or competent economic managers, key attributes when trying to woo centre right voters, there was another miscalculation.

Many other businesses and organisations lose if Chorus wins. Some of them joined the Coalition for Fair Internet Pricing. It’s a broad-based campaign that, significantly, brings together free market advocates with consumer groups, key industry companies and even a trade union.

The Coalition for Fair Internet looks representative of New Zealand as whole. On paper at least it looks as if the entire nation is grumpy about UFB and Chorus.

Bad timing

All of this couldn’t possibly happen at a worse time for the government because the new leader of the opposition, David Cunliffe is the man responsible for earlier telecommunications deregulation. Today’s lower prices and better services are a direct result of his time as communications minister.

If you think a squabble over how a nation’s fibre network is paid for can’t change the way people vote, take a closer look at recent telecommunications history in Australia. In that country the Labor government’s high-handed, we-know-best attitude towards building a fibre network almost lost it the 2010 Federal Election. It featured as an example of bad government throughout the last three years and was one of the policy issues determining the recent 2013 election.