Friday, September 10, 2010

Please Replace The Handset And Try Again

There can be little doubt that history will judge the Thatcher privatisations badly. On the one hand, there is the unavoidable conclusion that her dream of a shareholding society was an utter failure, twinned with the exquisite irony that someone whose foreign policy was so coloured by a war about stopping the Germans conquering Britain should have worked so hard to sell it to them instead.

Equally, while history will reflect that most of the services involved could and probably should have been privatised (it's really only water and the railways in which competition was fundamentally impossible) even those that could were let down by the appalling way they were sold off. Pretty much every privatised industry carried a fundamental flaw in its structure that has subsequently seen the government ride in to rescue, well, the companies profits as much as anything.

But what's struck me most as I think about it is that in hindsight, the most damaging privatisation was the one that should have been the easiest to justify and to enact. Indeed, the financial impact of the way the sale of British Telecom was botched, while impossible to compute, may well be more staggering than anyone could imagine.

It was my new mobile phone that got me thinking about this. For while we must accept that no-one in the early 80's could have foreseen the ubiquity of mobile phones, wi-fi and indeed the combination of the two, it's easy enough to see how the way the whole industry has turned out affects our use of these devices. In Wales particularly, where rural broadband and broadband for business are at the forefront of the debate on the economy, it's worth reflecting that we did not end up here by accident.

For starters, we should note that if anyone was responsible for the competitive telephony market of today, it certainly wasn't BT. While they dragged their feet on even the simplest competitive use of their wires, it was left to the cable companies and then to the mobile operators to offer better and cheaper services. Admittedly, once the behemoth had stirred it caught up with Virgin Media and Sky in the all-in-one package stakes, but all that amounts to is the replacement of one exercise of monolithic power with another.

The legacy of that process, however, is infrastructural chaos. For as BT catch up with the idea of domestic fibre optic cabling, the result will be two parallel cable systems. On top of that, you have five different mobile phone networks with their own independent mast systems. The Tower of Babel would be too easy a metaphor...

What really strikes me, however, as a particular geek in this direction, is how reminiscent all this is of the railways. In the privatised era, the only successful competition occurred in places where there was duplication of lines. Reaching back further, one of the few redeeming features of Beeching was the way he removed many of those duplicated lines which were themselves relics of earlier slapdash competition.

So how about the truly heretical thought; what if the telephone system had been privatised the way the railways were? A phone infrastructure company coming into existence in the mid-80's would have faced pretty much none of the conditions that made Railtrack's position untenable from day one, namely a decaying infrastructure that was safety-critical, impervious to meaningful technical improvement and only able to be repaired in situ rather than replaced.

By contrast, the putative TelWires would be faced with an immediate opportunity to entirely replace its network with a new and technologically superior system. Service provision over the new fibre optic network would have offered a starting point for competition, quickly bringing the cable service into direct price competition with the existing wires. At that stage, the wires themselves could have been phased out, giving TelWires an asset portfolio to sell to fund further investments; you'd have to imagine the mobile phone masts would be popular targets, particularly once Virgin Mobile established their network-sharing model.

The historical effects of all that would have been innumerable. Imagine how different the development of dotcoms would have been if everyone in the UK had been on cable by the end of the century instead of dial-up. Imagine how many fewer rows about siting of mobile phone masts there could have been if the provision was integrated...

As for today, public wi-fi could be a nationwide rather than an urban project, as TelWires would take responsibility for providing the wireless transmitters for it as well. Admittedly this would have allowed the iPad to achieve hive mind consciousness by now...

The continuing tragedy, however, is that all this is true in nearly equal measure of the rest of the privatisations too. In particular, capital investment is generally proving impossible, whether thanks to inadequate incentives (electricity), lack of competition (water) or easy fleecing of captive customers and cowering governments (rail).

It is of course far too late to put right the damage that's already been done. But we do need to recognise that trying to change things isn't some form of thoughtcrime against the market; you can't be interfering with the free market if the market isn't free and you (or at any rate HMG corporately) are responsible for the structure of it anyway. Either way, all these infrastructural elements are going to be crucial to the future of our environment and our economy and we have a duty to ensure that we get them right.

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