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Get extensions going in Firefox, redux

edit@zdnet.com.au (Chris Duckett) — Tue, 24 Nov 2009 16:35:01 +1100

Previously on Null Pointer we looked at getting extensions working in Firefox betas. And that was fine until the fine folks at Firefox changed their minds.

This bug shows that Firefox now implements a per-application extension checking system. It's a little more fiddlier than before, but such is the life of a bleeding edge user. So once again we go back to the about:config page in Firefox and add the following variable:

Name	Value	Type
extensions.checkCompatibility.3.6b	false	boolean

Explanation for the variable's syntax is found at comment #18 of the bug.

On the previous blog post there was a comment that checkUpdateSecurity was not needed. I'd like to say that it is not needed, since removing security online is equivalent to dropping your pants and then attempting to get through airport customs, but when I re-enabled security, Greasemonkey refused to work.

I chose to re-enable security via a notification button in the add-ons window in Firefox, and that button changed extensions.checkCompatibility.3.6b from a boolean to a string — making the extensions stop working again.

The offending add-on notification that likes to reset variable types.

There is no nice graphical interface for changing a variable's type or to delete a variable. The answer is to go into your profile and update the user.js file.

To change the variable's type I had to find the line: user_pref("extensions.checkCompatibility.3.6b", "false"); and remove the quotes from around false.

And it is business as usual for Firefox functionality.

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How reliable is IP telephony?

edit@zdnet.com.au (Renai LeMay) — Mon, 23 Nov 2009 16:04:01 +1100

Those with long memories will remember a period a few years back when corporate IP telephony was not exactly what you would call ... mature.

(Credit: Avaya)

The scenario would always play out the same way. With your normal analog desk phone, you would place a call to speak to someone in another organisation, normally one in the financial sector with more money to throw around on the latest technology than sense.

As your contact answered their phone, you would hear a weird kind of hissing, crackling or popping noise, maybe accompanied by strange delays in between the time they spoke into the mouthpiece and when the sound reached their ear.

"ARE YOU USING VOIP BY ANY CHANCE?" you would ask loudly into your end of the connection.

"YES, THEY JUST ROLLED IT OUT LAST WEEK, HOW DID YOU KNOW?" they would yell back.

What had happened, of course, is that your contact's IT department had rolled out a new corporate IP telephony system, but without really testing the network connection and quality of service required to support it in the back end.

I can't say how often this happened to me, but it happened often enough, and I'm sure it has happened to most people at some point.

The thing is, however, that over the past several years it has stopped happening. Now, I never have problems making calls using IP telephony, whether it be to organisations like Westpac that I know employ the technology, or even from my consumer-grade home VoIP connection (I'm an iiNet customer).

There could be several things behind this fact.

Firstly, organisations could simply be throwing massive network resources behind their IP telephony connections to guarantee they never, ever have problems that would be noticeable by upper management.

Or, secondly, that quality of service and other technology at the heart of IP telephony solutions has become very mature over the past few years.

What's your IP telephony experience been like?

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Forget the NBN, 100Mbps is already here

edit@zdnet.com.au (David Braue) — Mon, 23 Nov 2009 11:00:01 +1100

It's amazing what telcos can do when they put their heads to it. Telstra, TransACT and Optus announced last week that they would switch on 100Mbps internet services — making ADSL customers green with envy and, one might suspect, Stephen Conroy green with worry.

The NBN isn't the only way Australians can get 100Mbps services, the telco giant has proved; it is now up to the government to match and exceed Telstra's example.

With actual, purchasable 100Mbps consumer services out there in the real world, Australia's broadband market will change dramatically — not in terms of what most speeds people are actually getting, but in terms of what everybody else's services are compared to. Bet your booties that all three companies, which have first-mover advantage thanks to their turbo-charged fibre and hybrid fibre-coaxial networks, will be working to raise the bar as high as they can.

Let the services begin, as they say in the classics. What services? The long-elusive triple play — telephony, television and data — is a good place to start. They may be a footnote to its ongoing political intrigues, but Telstra has been steadily building its credentials as a triple-play provider: increasingly flexible Foxtel packages now reach mobiles, smartphones (including, recently, the iPhone), and even allow viewing of video via the web.

It's all part of a strategy to add more flexibility to shift its video interests online — not only because it sounds cool, but because a data-based video stream allows Telstra to look beyond the edges of its own network and onto the eventual NBN.

For now, however, Telstra's 100Mbps customers are limited to its own HFC network, which makes these initial services as much about expectation-setting as anything else. But there is a bigger game afoot here as Telstra proves a very big point with the government.

The proven ability to deliver 100Mbps services to large numbers of customers is a big step for Telstra — like when your little brother says he can eat more worms than you, and then does. In delivering real 100Mbps services like it said it would, Telstra has shifted the onus onto a government that now faces even more pressure to deliver the NBN as designed.

If problems derail the NBN, or if it cannot deliver the same experience Telstra's cable network can, Telstra will score no small amount of philosophical bragging rights. Ditto TransACT, which has long provided some pretty excellent triple-play services to residents of a few select pockets of the ACT; its content offerings already well established, the addition of 100Mbps is not so confrontational as evolutionary.

Even Optus — which will be third to the market with 100Mbps but still has good reach with its HFC network — isn't going to be sitting around waiting for the NBN.

So, while Telstra's HFC network is still limited to the same 2.5 million households or so that it has always serviced, its head-start in building customer loyalty should not be underestimated. Telstra has several years to set customer expectations for 100Mbps internet in Melbourne, potentially becoming the favoured provider — and developing strategies to counter the eventual introduction of the NBN.

Even as the government continues to back the NBN's ponderous roll-out, Telstra, Optus and TransACT will use their lead time to tweak pricing, charging a premium for their 100Mbps services today to recover their capital investments — and build up a data-based infrastructure that's ready to be switched onto the NBN at a word. Telstra's new T-Box is another extension of this, combining PVR capabilities with access to Telstra's increasingly data-based content library over any network capable of carrying it.

Little wonder Conroy is so eager to wrest control of the HFC network from Telstra: if Telstra plays its cards right, it can build up a strong 100Mbps following and create the same kind of inertia that for high-speed broadband that it has long enjoyed on the copper local loop. This, in turn, will diminish the NBN's natural market and create new forms of competition for Conroy's biggest project.

Pricing, marketing and bundling will of course be critical for the success of these new services. But by living up to its promise to bring 100Mbps services before year's end, Telstra has scored a direct hit on the government. The NBN isn't the only way Australians can get 100Mbps services, the telco giant has proved; it is now up to the government to match and exceed Telstra's example. From 1 December, every day the NBN is not operating, is another tiny win for Telstra.

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IT: Govt's cost-cutting bitch

edit@zdnet.com.au (Suzanne Tindal) — Fri, 20 Nov 2009 12:01:01 +1100

The government needs to stop looking at IT as a necessary evil or the place to remove costs when the Treasurer comes calling.

The Pappas report on Defence released this week had a line that caught my eye. "Facilities and other operating costs have a diverse set of drivers that range from construction costs, which have increased above underlying inflation, to computer service costs, which have grown below underlying inflation."

I think that we have an 'IT equals cheaper' mentality in Australia that often hampers our ability to see all of its opportunities.

Of course, construction was simply allowed to grow, while IT service costs are simply expected to shrink, I thought to myself.

It started cogs turning in my brain. When do government IT costs get to grow really? When something's so broke that money has to be thrown at it, or if someone thinks that there are savings to be made — for instance in shared services. Looking at specific examples: Tcard was begun because Sydney's payment system is stone age — and of course because everyone's doing it (see former post "Just like lemmings"), while Defence certainly seems to be spending its $940 million on IT more to save than for extra functionality it will reap.

I think that we have an "IT equals cheaper" mentality in Australia that often hampers our ability to see all of its opportunities. The only examples I can think of that go against that trend are the Government 2.0 taskforce and the National Broadband Network. Generally, IT is the first place to cut and the last place to spend.

Think about the stimulus that Rudd so lovingly doled out to save the Australian economy. Why, oh why, do we need so many school halls? Why not, as IBM pointed out a while ago, use more of the money to add in technical capability? Smart infrastructure, not dumb.

Or, to go in a completely different direction, why not add lots more money to the government's Innovation Investment Fund? $20 million at a time (from a total of $200 million) is doled out to form new venture capital funds which invest in start-ups. Industry puts in funds like for like. Yesterday, a new one called Yuuwa was formed in Western Australia which, with industry funding, would have $40 million to spend on life sciences and information technology start-ups.

Imagine if we had spent even $1 billion of the $42 billion in stimulus money on new capital for start-ups. An Australian Silicon Valley could have suddenly blossomed, almost overnight. And the money would be fostering the future knowledge economy, not the construction industry.

IT isn't just good for a cost-cutting quickie. It's worth spending on — long-term marriage material with the possibility of very lucrative offspring.

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Can complaints on mobile content be cut?

edit@zdnet.com.au (Phil Dobbie) — Thu, 19 Nov 2009 13:34:01 +1100

The Mobile Premium Service Industry has a poor track record. There were 15,653 complaints to the Telecommunications Industry Ombudsman last year. It's a scourge according to Alan Asher from the Australian Communications Consumer Action Network.

On 1 July this year the new Mobile Premium Services Code was introduced. It sounds like it's had a good impact, but is it enough?

As you'll hear on today's Twisted Wire, there's wide recognition that some shonky operators do exist, but there are also the problems of conveying detailed terms and conditions to a customer on a small screen device.

With the ACMA now breathing down the industry's neck, moves are finally being made to bring the problem under control. In particular, Telstra and Optus have outsourced the monitoring of services and will, hopefully, cut-off suppliers that repeatedly break the new code.

It sounds like it's too late, though, to stop more regulation from ACMA. Its consideration of enforced default call barring is just one of several likely new regulatory measures to be faced by the industry next year.

In today's program you'll hear from:

Alan Asher, chief executive of ACCAN, the recently formed Australian Communications Consumer Action Network
Matt Costello, co-founder of content aggregator 5th Finger
Ann Hurley, CEO of the Communications Alliance
Vince Humphries, manager of ACMA's Education & Telephone Content section
Colin Matthews, CEO at compliance monitoring firm WMC Global
Gary Smith, general manager regulatory compliance at Optus

What else needs to be done to reduce the complaints about premium mobile content? Add your thoughts in the Talkback section at the end of this post.

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NZ farmers: Bleating about broadband

edit@zdnet.com.au (Darren Greenwood) — Wed, 18 Nov 2009 14:25:01 +1100

Darren Greenwood
(Credit: Darren Greenwood)

As we know, farmers are such bleaters. They bleat as much as the four-legged woolly things in their paddocks. If it's not the weather, it's the strength of the dollar! Nothing is ever right. Likewise with rural broadband.

The Telecom Users Association of New Zealand has just staged its Rural Symposium on Broadband. Various representatives of the rural sector turned up, plus many from the ICT sector. ICT Minister Steven Joyce attended and received a right roasting.

Donald Aubrey, the vice president and telecommunications spokesperson for Federated Farmers, warned the New Zealand Government wasn't doing enough to help provide rural broadband. Aubrey told the minister bluntly, he could be the "architect of regression" if he wasn't careful.

The farming leader argued agriculture is the "true engine room" of the New Zealand economy, generating 64 per cent of the country's export receipts. Thus, the rural sector is demanding its broadband to be brought up to speed with the urban areas.

He added that the government's own broadband initiatives may not be needed so much in the city where it could "crowd out" the private sector, by making private sector schemes non-viable! Aubrey confirmed with me this afternoon that he was unconvinced that government grants to rural areas would bring the farmlands up to speed and more money was needed.

The event had seen much networking from telcos to electricity lines companies, and it was "moving situation" with the minister, so policies might change, he added.

I guess we have quite an issue here, something Australia also needs to consider for its own AU$43 billion NBN program. Now I have seen calls for it to be made "free", but any student of economics will tell you, "there is no such thing as a free lunch". Everything has to be paid somehow and there is never enough money to go round.

So governments like anyone else must prioritise, but are current priorities the right ones?

It might be argued that the cities and towns can fund their own broadband. The market can provide for the offices, the shops, the factories and the warehouses. As for suburbia, well that's where the voters lie, and they will want broadband for their shopping, the downloading of games and music, etc, etc. The market might provide here, but the voters seemingly want government, ie, the taxpayer, to pay. But is this "public good" a justifiable use of such spending?

And then we have the rural sector. Usually happy to shun government, but they want their subsidy too.

Put simply and bluntly: town vs. country, people vs. profit. But without the profits, how can we fund the people?

They argue they are the backbone of the economy, and will pay much in tax, an extra NZ$600 million this year, says the New Zealand dairy sector, thanks to higher prices for milk solids. Better broadband will also pay off as shown by the Livestock Improvement Corporation saying its online applications have boosted productivity by 15 per cent or NZ$1.1 billion a year.

So this issue of priorities is what governments and broadband providers face with their initiatives.

So what came out of the summit?

Richard Kay, IT Solutions manager for rural supplies business PGG Wrightson told me today that poor broadband creates challenges for his customers and sales reps across the country. Kay thought the response to the minister was "not as blunt as it could have been", saying more than a billion dollars might be needed to be spent on fibre, as well as wireless and analog frequency provision. But the country needs to avoid a "wild west" of too many differing suppliers and systems.

Nonetheless, "everybody is on the same page", the government has made "good steps but is not running fast enough".

Ernie Newman, CEO of TUANZ, who organised the symposium offers his reflections:

The government is right with its concepts and start, but there was a strong feeling the government must shift the balance to the rural areas where the economic returns are greater, rather than focus on population numbers, he told me. Already many companies produce innovative and cost broadband solutions in rural areas, which will benefit from extra support.

Newman added he was unsure if the minister might change his policy to reflect such economic demands. "The issue is these are the areas where New Zealand productivity comes from," he says.

So that, it seems, is the dilemma. Put simply and bluntly: town vs. country, people vs. profit. But without the profits, how can we fund the people?

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Has the internet killed suppression?

edit@zdnet.com.au (Darren Greenwood) — Wed, 18 Nov 2009 12:56:02 +1100

Darren Greenwood
(Credit: Darren Greenwood)

Do you ever get the urge to be naughty, especially if you are never found out? Do you ever fancy committing a crime and not have to worry about having your name splashed all over the papers?

Well, if you are part of an elite group, New Zealand is the place for you. You could be a celebrity that likes to indulge in drugs. You could be a senior politician involved in a million-dollar-plus fraud case. Or, as we saw last week, you could be a 30-something musician who likes to thrust the heads of teenage girls into your unmentionables!

I have covered courts in England, Scotland and New Zealand and I am amazed at the name suppression orders given out to protect the guilty here.

The courts argue that such well-known individuals would suffer extra punishment for being well known. Lawyers for the certain 30-something musician argued last week that if people knew it was he that misbehaved with a young girl in a Wellington street, they might not buy his records anymore.

Were they taking the P? Or, were they on the money with these comments? But as several bloggers discussed after the verdict, is such name suppression pointless in an online era? David Farrar at Kiwiblog asked his readers not to say who the musician was, but to post if they did know and which city they live in. His experiment showed many did know, and a few commentors posted the odd hint to educate the rest.

Indeed, with such details given in newspaper coverage, like the date of the offence and that it happened after the Auckland-based singer performed in Wellington, it was easy to work out who he was, especially when even the TV coverage with his features blurred showed he was such a shortie!

Thus, chat rooms, blogs, social media sites, etc, discussed the matter, with comments also appearing on the website of a certain 30-something musician from Auckland, though it seems they have been removed.

However, other 30-something musicians might feel smeared. Such suppression orders might cast doubt on the character of others with similar descriptions. Surely naming and shaming is part of the punishment, and as public figures, they might be expected to set an example and behave themselves.

Of course, there may well be cases for suppression orders to be made, say releasing details that might prejudice a case as we see here. Or even here.

But look what happens if you break them. This week, a website publisher was arrested for publishing details of police terror raids on his website. It seems Vince Siemer is well known to the courts already.

Well, what fortuitous timing for Internet New Zealand, the Law Commission and the Ministry of Justice to announce a seminar on suppression orders, contempt of court and the internet for 3 December.

With so many of us blogging, using Facebook, Twitter and the like, we have become publishers too, so this is something that might interest and affect us all!

InternetNZ spokesperson Jordan Carter says the legal issues caused by internet publishing are well known and significant. They include the undermining (deliberately or otherwise) of suppression orders, the lack of jurisdiction over internet material hosted outside New Zealand, and public discussion of crimes and trials potentially being a contempt of court.

He added later:

"The seminar should prove a useful input into the review of the law of contempt currently being undertaken by the Law Commission, consideration of the desirability of initiatives such as a central register of suppression orders, and also any wider review of contempt law that the government undertakes."

Now, back to our 30-something musician. Perhaps he should have outed himself and taken the rap. We still know who he is, but now we also see him as a short yellow-belly for hiding behind such legal niceties!

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One big happy family

edit@zdnet.com.au (Christine Lee) — Wed, 18 Nov 2009 12:44:01 +1100

(Credit: Christine Lee/ZDNet.com.au)

Stephen was confident he could keep both of his new pets on a short leash at the one time.

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Microsoft playing nicely with open source

edit@zdnet.com.au (Chris Duckett) — Tue, 17 Nov 2009 12:49:02 +1100

Before the Microsoft-centric developer world goes completely gaga at the company's Professional Developer Conference in the coming days, it's worth noting a couple of open source milestones that may have slipped under the radar.

Microsoft announced today that it is open-sourcing the .NET Micro Framework under an Apache 2.0 licence.

Peter Galli, a Microsoft open source community manager, said in the announcement that "Including the source code for almost all of the product also ensures that developers now also get access to the Base Class Libraries that were implemented for .NET Micro Framework and the CLR code itself."

Being an Apache licence means that, ironically, anyone can pick up the .NET Micro Framework and re-licence it under a proprietary licence. But not all the parts of the framework are being opened; the TCP/IP stack was made by a third party, EBSNet, and separate arrangements would need to be made with EBSNet for that source code.

Citing the use of the cryptography libraries beyond .NET Micro, Microsoft will not be releasing those libraries. "Customers who need to have access to the code in the cryptography functions will find that these libraries can be replaced," Microsoft program manager Colin Miller said.

Keep in mind that this isn't Microsoft opening up the holy of holies; the Micro Framework behaves in a different manner to the standard .NET Framework and has less capability than its .NET brethren due to the need for it to work on embedded devices.

If you are thinking of getting involved in the .NET Micro community, I'd give the website a little more time to bake.

But wait, there's more
Over the weekend, Microsoft also made its Windows 7 USB/DVD Download Tool available under the GPLv2. That's the same licence that Redmond has called "viral" for the longest time — and it's that same GPLv2 that made Microsoft release the code.

It began a couple of weeks ago when this blog post appeared and noted that some GPLed code seemed to be within the tool. The Redmond giant then pulled the tool from the Microsoft store and conducted an investigation of the claims. The claims turned out to be true — a contractor had included the library and Microsoft had failed to pick this up during code review.

To its credit, rather than damning the tool to program hell, Microsoft released the tool's source code under the GPLv2 licence.

While it is clear that this is not an action that Redmond wants to see repeated and is adjusting its code auditing procedures to pick this up in future, it shows a level of maturity in engaging with open source licences. They made a mistake, a licence violation, and were big enough to accept it and play nicely with the rules.

Would the Microsoft of 2002 accept its indiscretions and move on? I don't think so.

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2009 funding drought rolls on

edit@zdnet.com.au (Brad Howarth) — Mon, 16 Nov 2009 13:52:01 +1100

For Australian start-ups looking for venture capital, 2009 was a very bad year. 2010 may be no better.

With the local venture pool running dry, the limited partners that are their source of funding (most often Australia's massive superannuation funds) are unlikely to be in any hurry to replenish them. And there is a further danger that those limited partners who are keen on venture capital may start shifting their investments into offshore venture capitals (VC).

None of this is good news to any local start-up not yet ready to source funds from offshore sources.

The recent annual report by Australian Private Equity & Venture Capital Association Limited (AVCAL) painted a fairly bleak picture. The 2009 AVCAL Yearbook showed that in the 2009 financial year venture firms raised only $263 million — down 19 per cent on the previous year, and an outright appalling result.

While $180 million was invested into 103 companies — a 26 per cent increase over the previous year in the number of companies that received money — the average investment size fell from $2 million to $1 million, as VCs focused on propping up existing investments.

The decline was undoubtedly the product of the global financial crisis, as the superannuation funds were hammered by their members for massive losses and fled from anything that involved risk. But the counterpoint of risk is reward — without taking risks now, these same funds won't be reaping rewards in the future.

Will the Australian venture capital industry bounce back?

According to Sydney-based VC Innovation Capital's Michael Quinn, even with a recovering economy, it's going to be hard for VCs to raise capital. Super funds already face calls on their cash from redemptions due to early retirement, members wanting more conservative investments, and being forced to make investments in existing mainstream asset classes to protect existing investments.

"Some [funds] are probably considering reducing allocation to alternative assets in general as they have been hit by losses in infrastructure, private equity and so on," Quinn says. "2010 will be better than 2009 but I suspect it will not be an easy year."

Quinn says another problem facing local VCs is that they are likely to be competing for funds with American VC firms.

"US VCs who two years ago would not return a phone call to an Australian super fund, all of a sudden are looking for investors due to their domestic limited partners retreating," Quinn says. "There is a temptation for the super funds to be attracted to investing in these US funds despite the fact their existing (US) investors are now not prepared to do so."

Does that mean money destined for Aussie start-ups will now fund their American competitors? Not everyone agrees, including Larry Marshall, an Australian ex-pat working with the Australian-US VC Southern Cross Venture Partners.

"In the US the number of funds are decreasing and it is reverting back to old school venture capital with smaller funds [that are] more hands on," he says. "The banker and private equity types in VC are getting out."

That said, Marshall believes there are only three VC firms in Australia that actually have dollars to invest today — slim pickings for companies seeking money or any superannuation funds wanting to invest it. Australian companies are getting better at raising foreign capital, such as ThreatMetrix and EvoStor, but not all companies are ready or sufficiently skilled to do this.

One of the VCs that still has money is Starfish Ventures. Investment principal Michael Panaccio has a more upbeat view, fuelled in part by economic inevitability.

"As the economy continues to strengthen, superannuation fund portfolios will get back to their previous size and then be able to consider further investments in alternatives," Panaccio says.

The cycle should take 12 to 18 months to get back on track.

Other models are also emerging, as groups such as IPitch, Sydney Angels and Capital Angels seek to organise angel investors. Melbourne-based Map Venture Partners has also raised funds on behalf of two companies by creating a syndicate from high net worth individuals, and partner Marco Marcou plans to do more of these raisings next year.

"A typical raising is $2 to $3 million, and is there to expand something that we feel is definitely worth a go," Marcou says. "What we're trying to do is create a portfolio of these investments, around six to eight, and because we have a three-year average period before we see some sort of exit."

These efforts will still leave many start-ups wondering where their funds will come from. Quinn says not to expect the government to step in and make early-stage investing more attractive however, as Canberra has been hammering the industry through policies such as its taxation of options (although he says the new R&D tax rebate does make life easier for some start-ups).

"The government support of the sector is insignificant compared with the expenditure on the much rorted roof insulation program, support of last century's car industry or other high profile spending initiatives, and this would not be encouraging investors," Quinn says.

The upshot is that the remaining Australian VCs such as Innovation will continue to slow their spending in the hope that the capital market will eventually improve. Except there is no guarantee of when that will happen.

"It is a shame, as activating a few inexpensive policy levers would make a big difference," he says.

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Love me, tender

edit@zdnet.com.au (Suzanne Tindal) — Mon, 16 Nov 2009 10:31:01 +1100

Considering how expensive and drawn-out tender processes can be to solve problems that might be very immediate, it's little wonder that Victoria Police's IT department tried to work the tender exemptions system.

After all, it isn't the only agency asking for exemptions so it doesn't have to go to tender.

In the 2008/2009 year there were 729 procurement process approvals (not all IT) which went through the Victorian Government Procurement Board. Of those, only 265 were tenders — or only around 36 per cent. The board approved 51 exemptions from tendering, and 84 exemptions from tendering and taking three quotes: together around 19 per cent. The remaining approvals were made up by variations where agencies needed to change the amount, duration or service levels of their contract.

The previous year's statistics didn't look any better. 2007/2008 saw 37 per cent of one-off purchases go to tender, 24 per cent exempt from tendering (or tendering and taking three quotes) and 39 per cent become variations on older contracts.

With just around 20 per cent of the money for one-off purchases passing through the board not reaching tender, it seems Victoria Police was just going with the flow by taking its fair share of non-process.

The rules for the Victorian Procurement Board say that in order to get an exemption there needs to be: a matter of "extreme urgency" including matters of public health, security or safety; a case where goods need to be compatible with existing information technology platforms; or no reasonable or alternative or substitute to buy.

This could cover quite a few tenders. And does, as the statistics show. Despite CIOs vehemently telling me how amazed they are that such behaviour could go on, I'm sure that lots of other departments are getting away with wholesale contract variations and buying products or services without a tender on spurious grounds. The difference is that they cover their tracks with paper. They have reasons.

The problem with Victoria Police was that its documentation didn't allow its actions to stand up under scrutiny. And the more people scratched at the surface the more it stank. The wining and dining tactics of the vendors were certainly laid out in such bright light it hurt.

But it took multiple reviews for the ugly truth to come out. Something not likely to happen often. Something the government can't afford to have happen often, because if everyone obeyed the tendering rules 100 per cent, the overheads would probably take such a hike that finance staff would be screaming.

It's a case of pragmatism versus idealism, a daily battle where no one can win.

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Can not-so-smart meters help the NBN?

edit@zdnet.com.au (David Braue) — Fri, 13 Nov 2009 11:36:01 +1100

Stephen Conroy's choice to front up to the recent launch of Smart Grid, Smart City initiative — a commercial-grade "smart grid" that manages energy more efficiently than current distributor-centric systems — was a curious one.

But there he was, standing with Resources Minister Martin Ferguson and Environment Minister Peter Garrett not for a rousing rendition of Blue Sky Mine, but to spruik the NBN's role in supporting the $100m utility network.

After Garrett called smart grids an "energy internet", Conroy said the NBN will "enable a whole range of efficiency and productivity gains across the economy ... this smart grid project is an important start point as we move to ensure Australia gains maximum value from our broadband investments".

Government bodies have been linking the smart grid and the NBN for years, trying to build up the network's next-generation cachet and its role as a facilitator in all kinds of industries. What a pity that Conroy couldn't have seen the damning report from the Victorian auditor-general, which has closely examined Victoria's nation-leading smart-grid roll-out and found it wanting in many ways.

(Smart meter image by EVB Energy Ltd, CC2.0)

The smart grid in Victoria, where a host of companies are planning to push interactive "smart meters" out to 680,000 households by 2013 — seems to be yet another case of wishful thinking and head-in-the-clouds policy-making. And while that's not always a bad thing, in this case it doesn't seem to be helping. The auditor-general slammed the state's recent smart meter technical trials as poorly managed, badly scoped and improperly monitored — and questioned why some $6 million was spent testing technology that's still too immature for general deployment.

That can hardly bode well for Smart Grid, Smart City, which was meant to be yet another touchstone in Conroy's never-ending quest to talk up the NBN's prospects. Yet with high temperatures buffeting Victoria and much of Australia over the past weeks, smart meters and smart grids are on the minds of power authorities — and home owners are justifiably wondering just how much they're going to be socked for all these political playthings. Remember free citywide Wi-Fi? Remember Conroy's web filter? Heck, remember Petrol Watch?

Smart meters and smart grids are on the minds of power authorities — and home owners are justifiably wondering just how much they're going to be socked.

Home owners, after all, will directly or indirectly wear the costs of installing the smart meters, which are supposed to reduce the often ridiculous charges that electricity distributors pay generators during demand peaks. For their trouble — and for the expense of a taxpayer-funded NBN connection — consumers will get higher bills and a chance to reduce them back to current levels by washing their dishes or clothes in the middle of the night rather than the hours people are normally awake.

Industry authorities talk dreamily about the day when they can control everybody's appliances over the NBN, powering air conditioners and other devices on a rotating basis to normalise input costs and better match demand and supply curves. They've even created a Smart Networks Committee within the Energy Networks Association (ENA), which has actively engaged itself in the government's NBN legislative review (PDF).

The NBN's role in this smart grid paradigm is mainly to provide two-way communications to every household in Australia — making it relevant more for its ubiquity than its massive capacity. Yet given the auditor-general's conclusion that the Victorian roll-out isn't even commercially viable, one wonders whether the smart grid can evolve from being a vague conceptual goal to an actual revenue generator. Where is the money in shuttling tiny packets of smart meter data back and forth?

Harry Kestin, energy industry business manager with location systems specialist ESRI Australia (which supplies geolocation services to help utilities track smart meters and other physical assets), believes smart grids offer potential but said Victoria's approach has been half-baked from the beginning.

One wonders whether the smart grid can evolve from being a vague conceptual goal to an actual revenue generator. Where is the money in shuttling tiny packets of smart meter data back and forth?

"There are massive implications for the use of these meters, both in terms of governance and how information is provided between the various regulatory bodies," he explained. "The business case is ultimately going to have a much broader scope than Victoria's: for example, one part of the smart grid is to enable distributed generation, so consumers can generate electricity and feed that back into the grid."

"But the Victorian version is a relatively cut-down version of that," he added. "The roll-out in Victoria is a simplified version, and the other states are waiting for Victoria to pilot it and make the major mistakes."

And here they are: the dismal report card from the auditor-general casts serious doubts on the approach currently being taken. This, in turn, does not bode well for visions of the power company automatically turning on and off dishwashers, washing machines, and air conditioners from afar.

At the very least, the kind of NBN-attached smart meter network so many people envision is impossible without appliances that can communicate over a wide-area network. In a country where nearly half of households still haven't shelled out $50 for a digital set-top box, can we honestly support a business case built on the theory that consumers will shell out for brand new, globally connected appliances that don't even exist yet?

The whole idea is fanciful: smart meters, as we all realise, are nothing more than a way of boosting utility company profits by getting consumers to pay more for the energy they're using. Or, as the report concluded, "in order for consumers to benefit from the cost savings, the distributors will need to pass on the savings through to retailers who will need to pass on the savings subsequently to consumers."

Fat chance — especially when there's going to be an NBN to pay for.

Can smart meters ever actually benefit the customer? And can they really be expected to cost-justify the NBN, even in small part?

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Can the Telco Reform Act be win-win?

edit@zdnet.com.au (Phil Dobbie) — Thu, 12 Nov 2009 13:19:01 +1100

In the second of our two programs looking at the Senate Inquiry into the Telecommunications Legislation Amendment Bill, we hear from shareholders, bureaucrats and industry groups.

If you take out some of the repetitive elements (which we have), there are a lot of interesting questions raised by these inquiries: will the new law do anything to Telstra's share price? Will the government's behaviour create sovereign risk and scare off foreign investment in other sectors? Should more time be given to negotiations between Telstra and the government?

On this week's program you'll hear from witnesses at the Inquiry in Melbourne (13 October) and Canberra (14 October):

Ross Barker, managing director of the Australian Foundation Investment Company
Anton Tagliaferro, investment director, Investors Mutual Ltd
David Forman, executive director, Competitive Carriers' Coalition
Rosemary Sinclair, managing director, Australian Telecommunications Users Group
Peter Harris, secretary, Department of Broadband, Communications & the Digital Economy
Pip Spence, first assistant secretary, Department of Broadband, Communications & the Digital Economy

Read the inquiry report, submissions and transcripts from the public hearing here.

A transcript of this week's edition of Twisted Wire can be found on page two.

Dobbie: Hello, I'm Phil Dobbie. Today on Twisted Wire, our final senate select committee, this week again looking at the Telecommunications Legislation Amendment Bill. We hear from shareholders whinging that it's going to reduce the value of their investments.

Ross Barker: As far as I am aware, it is unprecedented that a particular company has been targeted in this particular way...

Dobbie: As well as cut back on industry investment.

Anton Tagliaferro: The Bill is heavily focused on increasing competition in the short term, but it will stifle investment in the industry over the long term.

Dobbie: We'll hear from others who say it has to happen because we're so far behind the rest of the developed world.

Allan Asher: OECD surveys time after time show that we are towards the top end of the price charts — appalling levels of customer service that are getting worse.

Dobbie: So we should just get on with it shouldn't we?

David Forman: Arguments to delay this Bill, in the view of the CCC, simply do not wash.

Dobbie: After all that's what everyone wants isn't it — even Telstra.

Peter Harris: "Should this go on over a long period, with the continuation of uncertainty?" They would say: "No we want certainty". That would be my guess.

Dobbie: But what about the universal services obligation?

Senator Ian MacDonald: Who is going to be obligated? Is it going to be NBN Co?

Dobbie: On today's Twisted Wire we try and simplify the arguments.

Rosemary Sinclair: On my desk I have one squidgy toy up here which I call the NBN world.

Dobbie: And ask, is the government right to push ahead with this legislation, or are there other options? That's today on Twisted Wire.

And I promise you this is the last time we wade through a senate hearing on Twisted Wire — at least for this year. But for today, more on that Senate Inquiry into the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009. They've already reported, of course, and said generally they think it's a jolly good idea and the government should get on with it — and that's even with Nick Minchin sitting on the committee — I suspect it might not have been a unanimous decision.

Last week for half an hour we heard from the folks at Telstra and Optus, who strangely had differing opinions about whether the idea of splitting up Telstra was a good thing or a bad thing — who'd have thought it — the industry is clearly not united on the idea.

So what about the shareholders? Well there's Ross Baker — he is the managing director of the Australian Foundation Investment Company — a listed entity with significant investments in Telstra shares.

Ross Barker: As far as the proposed legislation is concerned, we feel troubled, as a shareholder, that it is being crafted to deliver a particular outcome — namely, that Telstra chooses to deliver its traffic into the proposed NBN and if it does not do that then penalties apply.

Dobbie: He's not convinced it will add to competition, but it will, he says, add to cost for Telstra in money and management time.

Barker: As far as some of the penalties — the divestiture of the hybrid fibre-coaxial cable and the Foxtel holdings are concerned, the shareholders have borne the risks of the development of these activities and are now being asked to give them up just at the time that they are starting to reap rewards from that investment.

Dobbie: And he says the approach of forcing Telstra to split raises the question of sovereign risk.

Barker: As far as I am aware, it is unprecedented that a particular company has been targeted in this particular way, and we think that will raise questions in the minds of investors both domestic and international: if the government can do this for one company, what other things can they do?

Dobbie: It could scare off future foreign investment in Australia in other sectors in other words. So he's not a big fan of the changes it's fair to say.

Barker: We probably did not expect that the changes would be as draconian as they appear.

Dobbie: Although having not read any of the submissions to the inquiry, perhaps he hasn't really waded into the debate about the competitive regime.

Barker: I didn't read the submissions no.

Dobbie: Perhaps instead he was listening to Sol Trujillo — he's a big fan of Sol — even though the share price slid noticeably under his reign.

Barker: We actually welcomed the approach that he had, but we were very troubled when it developed into open warfare between the government and the company. That did unsettle us, as it unsettled our shareholders.

Dobbie: It's open to debate, of course, what impact the proposed changes have had on Telstra's share price. Some argue that it was all factored in and that the removal of uncertainty might actually improve things — but that is akin to saying that dying from a fatal disease is actually preferable to wondering whether you will die and face eternal damnation. I'll take life, thank you. Second door on the left.

Next came Investors Mutual Limited — an Aussie equities specialist that manage funds totalling more than $3 billion. Their investment director, Anton Tagliaferro, says the Bill is not good for Australia in the long term.

Anton Tagliaferro: The Bill is heavily focused on increasing competition in the short term, but it will stifle investment in the industry over the long term.

Dobbie: He says the Bill is only to enable the government to build its NBN, something which shouldn't be left to the government.

Tagliaferro: The Australian telecommunications sector is acknowledged as being one of the world's most technologically advanced and competitive in the world. As a result, consumers have a great number of choices and price points to choose from. There is no need to dramatically change the telecommunications landscape in this country.

Dobbie: The Australian telecommunications sector is acknowledged as one of the most competitive in the world. I wonder who acknowledged that? On another point he argues that a vertically integrated company can respond to consumer demand and invest accordingly.

Tagliaferro: Vertically integrated companies are the ones that invest heavily in their respective industries. This inevitably results in relatively high market share versus competitors. Merely using Telstra's market share as a guide to dominance is totally misleading, as this totally ignores the fact that Telstra has invested multiples of what other players in the industry have invested.

Dobbie: Although who is going to invest if they can be trounced on by a dominant player.

Tagliaferro: The new Bill will lead to over-regulation and it will distort free market forces.

Dobbie: Which is fine, but I wonder if Telstra would have been able to grow to its size if telecommunications had started as a free market. The market was distorted from the start, I reckon.

By the way, this company advocating a free market, has shares in Telstra but not in any other telecommunications company. Curious if they believe there's free and open competition. Wouldn't they be hedging their bets just a little bit?

Tagliaferro: We have looked at SingTel before, but it is also going into emerging markets and setting up mobile networks in places like Indonesia, India etc. It is, in our view, a pretty high risk.

Dobbie: But they bought a lot of Telstra shares obviously seeing them as less risky — till the new government came along!

Finally in day one of this two-day public inquiry came Allan Asher, chief executive of the Australian Communications Consumer Action Network. The what? It's a new body, apparently, formed in July. He says until now, when it comes to communications, consumers have had a pretty lousy deal.

Allan Asher: OECD surveys time after time show that we are towards the top end of the price charts — appalling levels of customer service that are getting worse, slow access and old technology that predominates much longer than it ought to. Indeed, we have seen sleepy regulators who too often hear the views of industry and too rarely hear the views of consumers.

Dobbie: Perhaps because they were asleep, or the consumer couldn't get through! Mr Asher's new organisation, funded largely via the government right now, wants to see the new legislation passed, but not rushed through. And he'd like more consumer protection included in it because right now, the free market just isn't doing it for the poor telecommunications user.

Asher: Sadly, we have got a rather sleepy market where we do not see the level of rivalry and competition that has driven customer service up and prices down. If you look at the data, there just is no other explanation for the continuing decline in customer service and customer satisfaction.

Dobbie: And regulation is needed he says, and will probably always will be.

Asher: The sober reality is that, in the absolute economics of these networks, it seems as though that sort of backbone competition at an infrastructure level is just unattainable in a sustained way. That is also proving to be the case, even in much denser economies than Australia's. The model we have of a wholesale-only provider makes me nervous because it raises all sorts of issues about risk of regulatory failure. But I am also, sadly, satisfied that the economics is such that you do need to have a backbone carrier of that sort who is not also operating at a lower vertical level.

Dobbie: So he's supporting the legislation for that reason — because, even though many believed past regulation would make the industry competitive, it just hasn't worked. Something else that Mr Asher would like to see is a universal services obligation that is suited for the digital age. Now that sounds like a big job in itself. More of that later.

So what about the competitive carriers coalition, whose membership rules are very simple — you're not Telstra. I'm going to go out on a limb here and say that they believe splitting Telstra into two is a good thing.

David Forman: This is a problem of market power and is a problem that cannot continue to go unaddressed.

Dobbie: That's David Forman, executive director of the Competitive Carriers Coalition.

Forman: Arguments to delay this Bill, in the view of the CCC, simply do not wash.

Dobbie: He's the husband of senator Kate Lundy by the way — one of the members of the standing committee.

Forman: Delaying the passage to see if Telstra chooses to negotiate some voluntary separation agreement with the government needs to be weighed against the certainty that every day that action is delayed is another day that Australian consumers suffer high prices and poorer services compared to the rest of the developed world.

Dobbie: That was his basic argument — the legislation should happen and it should happen now. No delays. But by the time it's finished, with all these new systems in place — won't the NBN already be in place — I mean, let's look at the BT experience in the UK.

Forman: The BT example would suggest that it should be fully operational within three years, and elements of it could be operational within a very short time, within months.

Dobbie: That, he says, is for a functional separation — which is the road Telstra will be forced down if the legislation is passed. They can avoid that by volunteering the more rigorous structural separation, which will surely take longer.

Forman: If you were to seek to structurally separate by creating a separate company and simply transferring assets into it, disposing of the assets that way, or if you were to dispose of the assets in a trade sale, then it could be done very much more quickly. We have examples of that too. I point to what has happened in Singapore, where SingTel was voluntarily structurally separated because of the creation by that government of an NBN.

Dobbie: So, sell the assets to the NBN and have done with it all — that's basically what they're saying. Big risk for a company though isn't it — to run a network then sell it to someone else to run and to be wholly dependent on them. It's not an approach you'll take lightly.

Then there's the question of universal service obligation — how will that work...

Forman: I cannot pretend to have read that part of the Bill in detail but if you are asking how it will apply in terms of...

Senator Ian MacDonald: Who is going to be obligated? Is it going to be NBN Co?

Forman: NBN Co is not referred to in this Bill and the universal service obligation as to the post- NBN world is something that we cannot speculate on in relation to this Bill. This Bill, as we read it, stands alone and apart from NBN. Universal service obligation is clearly something that needs to be reformed under any event as you move to different technologies. However, this Bill speaks to some aspects of the USO and my understanding is that it strengthens some aspects of the USO. Under this Bill a functionally separated Telstra remains a single entity and it continues to be the universal service provider. So there is effectively no change to the obligation.

Dobbie: This area's a bit messy isn't it. Presumably if Telstra sells all its assets to the NBN, tomorrow, then they have to pass the universal services obligation over with them. It's difficult to maintain the USO if you don't own and operate the network.

Forman: Again, this is not related to this Bill. I am happy to speculate on our views on the future of the USO and the questions that need to be asked around the future of the USO, but they stand apart from this Bill. Our view on the future of the USO is that if you have a new universal network — that is, 100 per cent of Australians have a right of access to a network — then that changes the underlying dynamic of the USO.

Dobbie: But surely Telstra's obligation to meet the USO means it can't sell its assets, unless its USO obligations are lifted — which is not covered in this legislation.

Forman: The circumstances under which Telstra voluntarily structurally separates will presumably be required to describe how they intend to deal with the USO, and then the government separately will need to make its decisions about the future of the USO. There is a process that is described in the Bill as to how Telstra may achieve a voluntary structural separation. In relation to what is in the Bill, though, Telstra is not structurally separated. It is functionally separated and that has no bearing on their obligations to provide the USO.

Dobbie: So if I'm putting this all together in the right way — Telstra can choose to structurally separate, and if they do, then a new piece of legislation will need to be passed to remove their USO obligations. In the meantime this new legislation will keep the USO obligations with Telstra, whilst encouraging them to split up and ideally sell off their assets, although this other new legislation would be required before they can do that.

I've said before that this could be bad times for telecommunications lawyers — now I'm beginning to think this is the dawning of a new age for them.

Moving on, perhaps off at a tangent to the main discussion, David Forman also had a few words to say about competition in the bush — as we know there isn't any in many places, it's Telstra or nothing. Not ideal perhaps.

Forman: Telstra was given about $120 million of public funds to build the CDMA network in regional areas because they said it was not profitable or commercial to build it. Those funds came with requirements that wholesale services were provided. Telstra switched off that network, took the towers and the other investment in infrastructure that had been paid for by the public, put their own equipment on it and they then had no obligation. Telstra said, "This is now the Next G network not the CDMA network. We now have no obligation to provide a wholesale service" and so an entire network, the Orange network, which had been built by competitors was shut down because a service that is called roaming was no longer available. Telstra said, "Bad luck. We're just not providing it anymore".

Dobbie: There clearly needs to be more accountable ways of managing public money — but a separation of some form, which encourages Telstra to work with competitors, would certainly benefit regional Australia.

And if the competitive carriers coalition was to choose one or the other — the split up of Telstra or the government build of the NBN, which would they choose?

Yep, you guessed right.

Forman: I will take this legislation and let the NBN sort itself out over the course of the next eight years.

Dobbie: Which is what's happening in the UK, for example. Some might say not as quickly as it might — but they'd be wrong — at least they've started over there. We've still got more talking, more legislation — there's a lot to be said for an incremental approach to these things I reckon.

Forman: I think that the experience in the UK suggests that that functional separation leads to greater competitive investment and greater investment in response by the incumbent. Would that ever lead to a fibre-to- the-premises network? I think that is a pretty big bet. Commercial telcos on their own cannot capture all of the externalities that governments look at when they think about that kind of investment.

Dobbie: Although the government has said they expect the NBN to provide a commercial return — if that is the case, surely it would be a sound investment for a separated Telstra wholesale division.

Rosemary Sinclair presented next to the inquiry. Rosemary is the managing director of the Australian Telecommunications Users Group.

Rosemary Sinclair: Central to the way we think services are best delivered is our commitment to competition having a core role wherever possible. We think competition delivers choice, price, service, quality and innovation.

Dobbie: And they want that competition to come from a voluntary separation made by Telstra itself. Good luck!

Sinclair: We think a win-win for the government and Telstra will also be a win for end users. But we do not see any reason for those discussions to be the cause of any delay to this legislation. We would like to see this legislation passed as quickly as possible. We think that it in fact contains the incentives that have caused the discussions that have happened so far to get underway, and that without those incentives there is no likelihood of a good outcome on that issue of structural separation. Should those discussions not get to the point of effective, sustainable structural separation then we would support the functional separation model outlined in the Bill.

Dobbie: In other words, I think, she's saying Telstra won't reach a voluntary outcome without a noose hanging over its neck.

And on the question of whether we need both, a separated Telstra and a government funded NBN — it's all to do with which squidgy toy you're looking at...

Sinclair: On my desk I have one squidgy toy up here which I call the NBN world and I have another squidgy toy down here which I call the current world, and I am always very careful to work out which world I am in when I am answering questions and writing submissions. Occasionally I go over here and I say, "OK, we have finally, finally decided that the fixed network, whether it is a copper network or a fibre network, is an enduring bottleneck and it needs to be treated in the same way." So, having got that philosophical point, I then go back here, and say, "How close can we get in the current legislation and now the new legislation relating to the existing network and take the principles and philosophies from that and try to embed them here so that we actually start to create an industry with a culture and a way of working that is preparing it for this world and, as well — importantly, from my point of view — get much better outcomes for end users from the fixed network world that we have got?"

Dobbie: And she gets all that from a couple of squidgy toys, wow! Now back to Britain we haven't looked at the UK experience for minutes now. Is a functionally separated BT investing and would a separated Telstra do the same?

Sinclair: BT did quite a bit of thinking about their own level of investment. Once they had worked through their own business case for extending fibre out to nodes then they made very significant investments in the last couple of years. So I think it has been good for investment. I think it has also been good for innovation. When you are in that market, you get a sense of a whole range of different products and services, pricing packages and innovations that are really important to customers. They are further ahead than we are on IPTV, for example, and those sorts of new services because they are not all worrying about the regulatory environment. That is set. It is well understood. It is clear. People can get on with investing and innovating.

Dobbie: Investment here, of course, is being slowed, not just by Telstra but by anyone, because of the uncertainty around the future.

Finally, the men from the Department. The bureaucrats from the Department of Broadband, Communications and the Digital Economy, who, just in case we hadn't figured it out yet explained that this new Bill was to...

Peter Harris: ..transform Australia's telecommunications industry in the interests of all Australians.

Dobbie: That's Peter Harris, secretary from the Department of Broadband, Communications and the Digital Economy who, as a bureaucrat cannot, of course, offer any opinions of his own.

Harris: It is the government's view that Telstra's high level of integration has hindered the development of effective competition in the sector and has contributed to Australia continually lagging behind other developed countries on the availability, price and quality of telecommunications services. This view is shared by as diverse a set of committees as the World Economic Forum, commentating in the last week on economic performance around the world, and the OECD, with the latter stating in its 2008 economic survey that Telstra's dominance of all platforms makes it difficult to establish effective competition between the various types of infrastructure.

Dobbie: And the timing for the separation, here's the department's Pip Spence.

Pip Spence: Within three months of the Bill coming into effect, the minister would have to issue the determination on the requirements for functional separation. There is then a three-month period in which Telstra could lodge a functional separation undertaking. The minister can give an extension to that time frame if either a structural separation undertaking has been lodged or he is satisfied that work is underway in preparing a structural separation undertaking.

Dobbie: But there's no date as to when the separation, in whichever form, must be implemented. Plenty of opportunity for stalling and obfuscation then, although the absolute end date for completion is 2018 — when the NBN is expected to be completed. Hardly a transitional measure then is it?

Harris: The undertaking may take quite a few years to roll out, as it were, as the NBN will take quite a few years to roll out, but the idea is to have some form, to the extent it can be created through a diverse set of processes such as these, of alignment. But alignment will depend entirely on what is brought forward now by Telstra in response to the legislation.

Dobbie: Right. I love bureaucrat-speak. I find it substantially reduces the innate requirement to state things in a simplified manner when a more elongated device exists to portray the same communication message in a way that will ensure most people have, by the time you've finished speaking, notwithstanding the variation in people's attention span, by and large, stopped listening or indeed caring about anything you have to say, or convey. Now what was the question again?

So let's try for some quick answers. Has the department done any modelling to figure out how much the separation will cost Telstra?

Harris: No, I do not think that is the case.

Spence: No, we have not.

Dobbie: Phew, that was easy wasn't it? So, given that Telstra are now talking to the government, wouldn't it be wise to hold back the legislative process until those discussions are finished — which Telstra has said would be the end of this year.

Harris: No, I do not in the sense that traditionally with the negotiation both parties set out their high ground positions. That is what we are doing and Telstra is doing it, too. We are doing it quite transparently really, more transparently than you often see in a negotiation like this. We each have our high ground positions but we are attempting to come to a meeting and that is why passage of legislation, I think, is quite important.

Dobbie: Isn't he saying the legislation is the threat? Or am I putting words in his mouth. And if the threat exists, is the actual passage of the Bill absolutely necessary?

Harris: I think I did mention earlier that I think all parties would agree that, this now being out, it needs to be resolved and should not hang for a long period...

MacDonald: Well, all parties do not agree. Telstra obviously do not.

Harris: I think if you put the explicit question to them, "Should this go on over a long period, with the continuation of uncertainty?" They would say: "No. We want certainty." That would be my guess. I do not want to verbal them, but the idea is that is what is behind timing. In terms of answering your question, that is what is behind timing.

Dobbie: And so the legislation is being pushed through with haste. Those opposed to the legislation have argued three points. That it will discourage investment, cost Telstra a lot of money and reduce their shareholder value. On the latter point the committee concluded there was no evidence to suggest that shareholders will be hit unduly and, in any case, it is not the government's responsibility to protect the interests of the shareholders of one company over the shareholders of another.

We'll see. In my mind, this is the biggest legislation for the industry, possibly of a lifetime. And it does seem rushed? From the initial announcement to the anticipated passing of the legislation is just a few months — it sounds like a world record for something with such far reaching consequences.

If it's got Telstra talking, that's a good thing. I did a piece on negotiation for my BTalk podcast this week with Helena Cornelius from the Conflict resolution centre and she says, on any conflict, you need to find a win-win outcome.

Helena Cornelius: What you're actually seeking to do is have a cooperative relationship. It isn't always easy. Particularly if you're dealing with someone who is giving you a hard time, but your intent is, where it is possible to be cooperative and to find a solution that will work for both of you, that's where you're heading.

Dobbie: So that's what's needed in this debate — and what a great bit of cross promotion that is, by the way. You can hear the rest of that interview over on BNET.com. But this proposed new legislation doesn't sound totally like a win-win outcome as far as Telstra is concerned. And I'm by no means a Telstra supporter. But to my mind, it does seem like they're being roughed up a bit more than might be necessary. It seems just one step short of negotiating by sending David Thodey off to one of those countries where they use those interrogation processes are not strictly legal in the west.

Why the rush to pass the legislation before Christmas?

And that's our coverage of the senate inquiry into telecommunications reform. It seems likely it will pass through parliament — but you never know in politics do you. It'll make for a big year of change in the telco arena.

Next week, no senate hearings — you might be pleased to hear. But I will be back for another episode of Twisted Wire. I'll see you then. For ZDNet I'm Phil Dobbie.

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Has New Zealand's smiling assassin delivered?

edit@zdnet.com.au (Darren Greenwood) — Tue, 10 Nov 2009 12:37:01 +1100

Darren Greenwood
(Credit: Darren Greenwood)

A year ago last weekend was the Fall of Helengrad. The Red Dragon was slayed and soon sent packing to New York where she now works for the United Nations.

A happy, smiling man, dubbed the "smiling assassin", is now in charge, loved by the masses, with poll ratings like those enjoyed by Chairman Rudd at his best.

But while John Key bestrides New Zealand like a colossus, as Helen Clark did in her day, how have Key and his government performed on delivering and managing communications and information technology?

While even his own ministers might wonder what he actually does, and people might say Key's biggest achievement was appearing on Letterman, a YouTube hit, our PM is certainly delivering on broadband.

His trusty sidekick Steven Joyce, a businessman from the radio industry, is heading the charge, with a NZ$1.5 billion initiative Key developed in opposition, a policy Key preferred to keep rather than the abandoned tax cuts that formed the centrepiece of his election campaign.

Now, the mainstream media has been positively reviewing the performance of Key and his ministers, including that of ICT Minister Steven Joyce, rating Joyce among the best, especially for a newcomer.

I gulp when I hear Andrew Bolt say Kevin Rudd and Stephen Conroy didn't prepare a business plan for your AU$43 billion NBN and that it lacks cost-benefit analysis.

There again, I've lived in Australia. I know you have cash to spare. It pays more to be China's quarry than it does to be its farm. And your dollar goes so much further than our Pacific Peso. We are just your poor Kiwi cousins.

However, it appears the New Zealand Government has done its reports and prepared its business case on our own broadband, unless, of course, our media forgot to ask. But the days of leaving it to the private sector are over, as Key and Joyce take a pragmatic "whatever works" line. Joyce admits there will be government involvement, with it ready to step in should private operators not jump on board.

While there might be the odd delay, such pragmatism is blunting any opposition. Indeed, every announcement on the broadband program seems to be widely welcomed, with just the odd complaints from telcos and the opposition Labour Party.

People might say Key's biggest achievement was appearing on Letterman, a YouTube hit, [but] our PM is certainly delivering on broadband.

But the telcos are keen to work with government, not many listen to New Zealand Labour nowadays, and technology is not an issue with a great political divide. It is something the country seems united on.

I recall the National-aligned David Farrar of Kiwiblog giving much praise to Labour and its IT Minister David Cunliffe on policy such as Labour's unbundling of Telecom New Zealand. Now, Joyce has announced his targets, how his roll-outs will work, along with the man who will head the Crown Fibre Investment company which will deliver the broadband package.

There will, of course, be more changes and developments along the way, such as the consideration of analog TV spectrum announced last week. I am sure there will be additions to the $300 million rural broadband policy to satisfy the wishes of farmers and that of TUANZ.

Like I say, we are China's farm and those cockies in the wopwops actually run multimillion-dollar businesses. The dairy company Fonterra is our biggest exporter and the price of milk solids is of major economic significance!

Just last month I was in the rural Central Hawkes Bay and one IT reseller was telling me how these agribusinesses need broadband to run their financials, plan their stocking, etc, etc, and how government must do more.

Of course, there are limitations to what government can do. There are fears government activity can undermine what the private sector can do, as outlined by TelstraClear opposing broadband plans by the Christchurch City Council. But New Zealand under Key and Joyce seem to date to be successfully negotiating this tightrope, branded "Labour-lite" by some and accused of having "a secret right-wing privatisation agenda" by others.

Elsewhere, on the tech scene, we have seen plans to abandon the Telecom Service Obligation, a $70 million levy to help Telecom NZ supply telephony services to rural areas, replacing it with a more open system to subsidise a greater number of suppliers to the rural sector.

We also saw, after a concerted campaign by bloggers and others, National dropping the controversial Section 92A Copyright Act, developed by Labour, though some new Bill is being considered.

But perhaps the most significant technological policy of the past year stems from Steven Joyce's other role as transport inister. From 1 November, he banned the use of handheld mobile phones in cars! Not only something to impact on how Kiwis do business but something sure to dent telco incomes as this blogger noted!

Joyce did it to public and industry acclaim, amazing considering an interventionist Labour government had abandoned similar policies as "Nanny State". Now, what was that about National being Labour-lite!!!

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The long-awaited separation of Telstra

edit@zdnet.com.au (Christine Lee) — Mon, 09 Nov 2009 16:28:02 +1100

(Credit: Christine Lee/ZDNet.com.au)

"The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil former monopolists. Blessed is he who shepherds the weak through the valley of Telstra, for he is truly his brother's keeper and the finder of lost DSLAMs.

And I will strike down upon thee with great vengeance and furious anger, those who attempt to poison and destroy my legislation. And you will know my name is Conroy when I lay my vengeance upon thee!" — Stephen 25:17

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Has Particls disintegrated?

edit@zdnet.com.au (Brad Howarth) — Mon, 09 Nov 2009 10:49:01 +1100

Brisbane-born start-up Particls promised a better way of organising information from the web. Now, however, it appears to have given up the battle, with both the Particls website and that of its parent company Faraday Media disappearing from the web.

Particls was one of the bright stars of the early days of Australia's Web 2.0 movement ... [but] there is only so long you can last on a good idea alone

The company was started in January 2006 by Chris Saad and Ashley Angell to develop an RSS feed organiser. It launched a personalised news and alerts service back in May 2007 to positive reviews, and earlier this year released an application called Particls Fountain that allowed users to follow topics on Twitter by keyword.

Both services were free to use — which may have something to do with the company's current status. The Particls Twitter identity is still active, but the link through to its blog site is broken.

Saad moved to San Francisco earlier and joined the American company JS Kit, which is developing an online commenting system called Echo. Saad is also a co-founder of the DataPortability project and co-authored the Attention Profiling Mark-Up Language for presenting a machine-readable presentations of a users' interests. He is currently working as JS Kit's vice president of product strategy and community.

The other co-founder, Ashley Angell, is believed to be working for one of Particls' investors, Brisbane-based entrepreneur Stephen Kelly, on his company Peepel. That company has developed an online office application featuring mapping, word processing, file management and other applications (more information here). Efforts to contact Angell and Kelly were not responded to.

According to DataPortability's other co-founder, San Francisco-based Australian Elias Bizannes, that project is going from strength to strength.

"We are basically creating a Creative Commons for your data — so imagine viewing a website and never having to read a terms-of-service or end user licence agreement again because you know what you can do with your data," Bizannes says. "Mozilla suggested to us we make it like a browser thing that lights up with the status of the site and I've got some connections in the Valley who are interested to adopt it once we are ready."

"There's a lot of work to do as it's a complex problem, but it's going to be interesting to see where this takes us."

Particls was one of the bright stars of the early days of Australia's Web 2.0 movement, promoting a vision of making it easier to manage the growing volumes of information that are out on the web.

But like any other company that fails to find a sustainable business model, there is only so long you can last on a good idea alone.

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Google open-sources JavaScript tools

edit@zdnet.com.au (Chris Duckett) — Mon, 09 Nov 2009 10:34:01 +1100

Google announced overnight the release and open-sourcing of a trio of tools designed to help JavaScript developers.

Dubbed Closure Tools, the search giant is continuing its push of JavaScript with a tool set including a JavaScript optimiser called Closure Compiler, a JavaScript library called Closure Library, and a templating system for JavaScript and Java entitled Closure Templates.

"The compiler removes dead code, then rewrites and minimises what's left so that it will run fast on browsers' JavaScript engines. The compiler also checks syntax, variable references, and types, and warns about other common JavaScript pitfalls," said the Closure Tools team in a blog post. "These checks and optimisations help you write apps that are less buggy and easier to maintain."

Closure Compiler results after optimising JQuery (click to here enlarge)
(Credit: Google)

The compiler is available via the command line, a RESTful API, or as a textbox on the Closure Inspector. Asking the compiler to optimise the popular JQuery library results in a 58 per cent reduction in file size but it comes with compilation warnings; making the compiler only remove whitespace gives a 40 per cent reduction with no compilation warnings — although it is outputting only compiler warnings and not errors, I don't promote blind faith in the output of this compiler without some testing first at this point in time.

It also seems that Google has fallen into the homophone hole again. Closure originated in computer science as a programming concept, with Lisp users already having the Lisp dialect called Clojure and Clozure as the common lisp implementation.

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The key Topik is always money

edit@zdnet.com.au (Brad Howarth) — Fri, 06 Nov 2009 17:37:01 +1100

One of the big problems of the internet is that is practically impossible to keep up-to-date on preferred topics. You can limit your sources, but this can mean missing a lot of valuable data.

Google and other search engines help, and tag clouds and other social tools can make it easier to follow other people's recommendations, but wouldn't life be easier if someone was out there on the web scouting for the stuff that you really wanted to see?

Topikality is trying to fill that role. The brainchild of entrepreneurs Phillip Scott and Richard Heycock, Topikality is designed to learn what a user is interested in, and then scour the internet for matching articles that are delivered to the user on a regular basis.

Scott says the key difference is that Topikality presents what you have told it you are interested in, rather than just showing what is popular.

"It looks at everything to do with the articles you are reading, not just specific words — so phrases, words and the context of those words and phrases," he says.

Rather than searching the entire internet, Topikality is restricted to specific sources such as media outlets, blogs, governments and well-regarded organisations. Users can also nominate additional sources.

The value is in the artificial intelligence techniques used — in this case machine learning — which means that the more the system is used, the better it becomes at delivering the right information.

Search tends to be a once-off activity and does not record whether you were satisfied with the result, and hence the search engine does not learn your preferences.

"Once you've done a little training on the system, it delivers results to you ever day," Scott says. "So the net result and return for you increases over time."

Hence if you want to keep up to date on topics such as treatments for specific diseases, it can over time narrow down your interests.

Commentary

There is a lot to like about Topikality. The service, which has entered a public beta, has a clean interface, and the technology appears to do what it is supposed to in terms of dragging back information that you might be interested in.

The company was founded in December 2007 and has been in development ever since. While the technology is not patented, Scott says the sheer hard work and complexity behind Topikality is a series barrier for competitors.

Heycock has a background in mathematics, while Scott has been the co-founder and CEO of Australian customer management company, Prosper Business Solutions, which sold to a US company in 2006.

But it looks like a good idea in search of a business model, and faces two significant hurdles.

Firstly, the founders are uncertain as to how they will make money out of it.

The company is not currently charging for the public beta service, but may look at subscription models for corporate users. The so-called free-mium model is a very difficult one to translate into dollars however, and will require Topikality to find a lot of extra functionality to make it worth companies paying money for it. Just ask the folk at Twitter about that one.

Scott also wants Topikality wants to sell the software as an appliance to companies with large information repositories, and is currently in an unpaid trial with a large media services company that processes hundreds of thousands of documents each day, and has another lined up. The other opportunity is in enterprise search, for information retrieving from the web or intranets.

But herein lies Topikality's other major hurdle. It is playing in a competitive market, against competitors including Google, and there is a good chance that its service can become quickly commoditised (another Aussie company, Isys, has had stored search for years). And with limited sales and marketing resources it will be difficult for the company to make its voice heard amongst the noise.

Scott says he isn't worried about the competition.

"If everyone in the IT industry worried about those things nothing would ever get developed," Scott says. "This is something worthwhile that's worth having a crack at. Who knows that the potential might be and where it will end up."

So while the opportunity is potentially big, until Topikality can batten down a reliable business model, its chances of being a boom company are slim. Thankfully the company is funded by its founders and has a very low burn rate, but at this point the question mark over its potential to generate revenue is a big issue.

Does it address customer pain? TICK
Does the technology work? TICK
Is the business model robust? CROSS
Does the company have sufficient resources to compete? CROSS
Is it under threat from competitive pressure? CROSS

bootstrappr opinion: BUST

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Do we need the legislative blackmail?

edit@zdnet.com.au (Phil Dobbie) — Thu, 05 Nov 2009 12:39:01 +1100

The Senate Standing Committee Inquiry into the Telecommunications Legislation Amendment has already come out and said that it thinks the proposed changes to the structure of the industry are a good thing.

Despite Senator Nick Minchin's claim that it's all legislative blackmail, the report concluded that "while further examination of issues raised above is warranted, the committee believes that the passage of the Bill should not be delayed".

So hang on, why the rush? As you'll hear in today's Twisted Wire, which eavesdrops on the committee's public hearing in Melbourne last month, Telstra says it is close to having an IT system capable of providing an equivalent service to its wholesale customers as it does to its own retail division.

There's also the question as to why, if we separate Telstra, do we need public investment into the NBN? Wouldn't a structurally (or functionally) separated Telstra invest more in infrastructure and manage the build themselves? I ask if it isn't all a bit "arse about"?

You'll hear from the witnesses at the public inquiry held in Melbourne on 13 October:

Geoff Booth, group managing director, NBN Engagement, Telstra
Tony Warren, executive director, Regulatory Affairs, Telstra
Andrew Sheridan, general manager, Interconnect and Economic Regulation, Optus
David Havyatt, manager, Regulatory and Corporate Affairs, Unwired
Matt Healy, national executive, Regulatory & Government, Macquarie Telecom
John Horan, general manager, Legal and Regulatory, Primus Telecom
Dale Clapperton, legal counsel, Pipe Networks

Be sure to let us have your thoughts too, in the Talkback section at the end of this post.

You can also read the transcript of the full day's hearing (PDF) or read the Senate inquiry report on the Bill.

See transcript here.

Phil Dobbie (ZDNET): This week on Twisted Wire, we hear how Telstra is talking to the government about a way forward without the proposed legislative change.

Geoff Booth (Telstra): ... these negotiations commenced before this Bill was introduced.

Dobbie: They say issues with wholesaler customers are often exaggerated:

Dr Tony Warren (Telstra): We do not believe it is anywhere near as bad as people make out.

Dobbie: But Optus, naturally, like it — and they like repeated quotes from Senator Conroy — they like him, too.

Andrew Sheridan (Optus): ... so that the wrongs of the past 12 years can be addressed.

Dobbie: We'll also hear from Pipe Networks, Unwired, Macquarie Telecom and Primus Telecom, as we hear the arguments for and against the proposed telecommunications reform. That's all today on Twisted Wire.

While the senate inquiry into the NBN has been going on for some time, and is yet to produce its report, the Senate Standing Committee on the Telecommunications Legislation Amendment Bill 2009 — that contentious one that will threaten Telstra with a functional separation, divesting itself of its share of Foxtel and denying access to 4G spectrum — yes, that one — this inquiry has been relatively quick.

It was called for by the senate on 17 September, submissions were in by the 7th of last month, they held a couple of public inquiries and the report was produced on 26 October. This week and next, we'll hear the views from those public inquiries, today from Melbourne on 13 October and from Canberra on the 14th.

By now you'll know that the report recommended that the Bill be passed. The committee said it will be to the benefit of providers and consumers and, while further examination of some of the issues raised is warranted, they say that shouldn't hold back the passing of the legislation.

First up in Melbourne, the case for the negative from (who else?) Telstra. Well, actually probably no one else, or very few, in the Telco sector — but a lot of shareholders probably support their views. Although, to be fair, Telstra do say that, although they oppose the passage of the Bill in its current form, they're looking for a win-win outcome in all this, but the win for Telstra has to be an acceptable outcome for their shareholders, of course. And Telstra is talking to the government, but:

Booth: Given the commercial sensitivity of these discussions it would not be useful for us to comment on the details of those discussions at this point. What we can say, however, is that these negotiations commenced before this Bill was introduced. We strongly believe that the way to realise a mutually acceptable outcome on the National Broadband Network is via commercial negotiations and not via legislation.

Dobbie: They're going to have to get a bend on then if they want to stop the new legislation being passed, which is why Telstra want to see the passing of the Bill deferred. That was Geoff Booth, by the way, who used to run Telstra Countrywide at one stage, but today he is Telstra's Group MD for NBN Engagement. There's another job the NBN has created already! And as for that legislation, it will ...

Booth: ... impede the achievement of the National Broadband Network vision; it will reduce competition, especially in the mobile and media markets; it will harm consumers, particularly those in rural and regional Australia; it will not necessarily result in industry reform; it will provide the ACCC with expanded powers unparalleled in any other industry; and it could destroy value for the 1.4 million shareholders who have purchased Telstra shares from the government over the past 12 years.

Dobbie: But then there are these secret discussions, positive ones we're told, that are looking at how Telstra can be involved in the NBN, and achieve the government's vision without resorting to all this legislative change. One of the issues Telstra raises is if they are forced to functionally separate and then buy access from the NBN, that's a massive two-stage migration process.

Booth: The time taken to implement functional separation would create at least a double migration for customers from the current Telstra legacy systems to the functionally separated legacy systems; indeed, if Telstra were then to buy from a National Broadband Network it would require a third set of IT changes. So this multiple migration does significantly add to the risk of customer service and billing programs with millions of customers involved. It really magnifies the potential for some chaos.

Dobbie: Can't fault the logic of that one, can you? And he says having people working on the separation would take the focus away from developing new systems to access the NBN. Plus, of course, separation doesn't come cheap. In Britain, BT put the cost at around $300 million or so. Telstra reckon it will be closer to around $1 billion. Why the difference? Well Telstra say, over and above the system changes at the wholesale level, there's all the retail products that need to change as well to meet the new wholesale structure — something that other retailers have had to live with — moulding their products according to Telstra's wholesale offerings.

Warren: The billion dollars that we have put in there we think is a serious estimate having spoken at length with both BT, Telecom New Zealand and, to some extent, Telecom Italia as well.

Dobbie: Telstra's Dr Tony Warren, executive director of Regulatory Affairs — who has something to say on the hotly debated topic of equivalence — asks does a wholesale customer get the same prices and services and access as Telstra retail? Well, of course they do — there may have been issues, but ...

Warren: We do not believe it is anywhere near as bad as people make out and so it therefore in no way justifies the massive cost of the solution.

Dobbie: He says they have just been through a massive IT transformation and their new systems are ...

Warren: ... absolutely customer agnostic and are completely blind.

Dobbie: These new systems, costing hundreds of millions of dollars, will be available very soon and should fix up the issues they say. And as for fixing up disputes, that's simple — don't leave it with the lawyers, get an engineer.

Booth: We basically suggested in our previous submission that you could sit such a person within the ACCC as a specialist adviser, but essentially what we are saying is that you need an engineer to deal with some of these problems rather than trying to have economists and lawyers (much as I am sure we would all agree that they are fantastic at these things). You really do sometimes need specialists to sit down and say: "That's rubbish; this is rubbish. Why don't you try this?"

Dobbie: Now that makes sense — but just going back a moment, if Telstra can provide equivalence with their new IT systems, why will it cost a billion dollars extra if they are separated — hasn't the work already been done?

Booth: Just to be clear, functional separation BT-style would require retro-fitting of the systems. The BT-style model is "chop it up and duplicate it". We are saying that with our new systems much of the manual processes, if not all, have been taken out and equivalence has been hard-wired in there, not because of functional or operational separation or accounting separation. As you know, under the standard access obligations under part 11C we have to have that equivalence. That has been there from the very beginning of the regime.

Dobbie: Although many would say, it's not been totally adhered to — hence the call for this new legislation. And if the new law is passed, how long will Telstra have to split itself apart? Quite some time is the answer.

Booth: The legislation as it currently stands means that, three months from royal assent, the minister must give a direction to ACCC on what any minister would expect from functional separation. We then have three months to put an undertaking in, and then the ACCC has to assess that. As to the timing of how long we would have to implement separation, that really depends upon what we put in our undertaking and what is acceptable to the ACCC. You can see from our submission that the experience from overseas is that how long it will take really depends on the flavour of separation imposed upon us.

Dobbie: So it could be years before the changes are even started, let alone implemented. By which time the NBN might well exist, or at least only be a couple of years away. In the meantime it defocuses a lot of time and effort from Telstra, providing no long-term benefit to its shareholders — or anyone really. And as for those two threats hanging over Telstra's heads with this new legislation: are they in the public interest?

Warren: We believe that taking us out of the upgrade path, the 4G market, would basically reduce competition in that market, particularly for rural and regional consumers, for whom we are the only network. Secondly, in the Foxtel space, clearly if we were forced to divest Foxtel it is most likely that a media player would acquire that, and we have not seen a good argument for how a greater concentration of media can be in the consumer interest.

Dobbie: All interesting points from the Big T. Next came the not-quite-as-big Big O. Andrew Sheridan is the general manager, Interconnect and Economic Regulation at Optus — so there! They love the proposed changes — that's why he toadied up to the panel.

Sheridan: I would, thanks. Firstly, thank you for the opportunity to appear before the committee today.

Dobbie: And they seem to think it will do the trick.

Sheridan: It addresses problems that exist in the market today and impact all users of telecommunications services. It is important therefore that the reforms are enacted in full and quickly, so that the wrongs of the past 12 years can be addressed.

Dobbie: Of course it's only wrongs from the past 12 years of telecommunications — if you had an affair, or said something awful to your mother — this law does nothing for that. But as for fixing up the telco industry, well Optus would say that wouldn't they? Being a Pom he was inevitably asked about the UK experience with the split of BT which he says has been ...

Sheridan: ... an undoubted success. I will just draw your attention to some comments from Ofcom, which very recently undertook one of its annual assessments of the undertakings that were given by BT, saying that the separation arrangements in the UK had led to "greater choice and take-up of services, choice of suppliers, products and packages and increased value for money" for customers.

Dobbie: Not a view that Telstra follows, although they seem to be at odds even with BT over that one. Andrew Sheridan says that the changes need to be enacted quickly because right now, we're paying too much for our telecommunications services. As far as the OECD is concerned ...

Sheridan: We are the fifth-most expensive country for both small and home office and small and medium-sized enterprises for fixed-line voice prices.

Dobbie: But is a break-up necessary when the government is already putting $43 billion into building another, competing network? As Senator Nick Minchin puts it ...

Senator Minchin: Why go through all the hassle of breaking up Telstra?

Dobbie: Well?

Sheridan: Whether the National Broadband Network happens or not, the need for reform of the existing market structure is quite clear. The full implementation and roll-out of the National Broadband Network is some way off. I think there has been talk of an eight-year period. I do not think consumers should have to wait for eight years to benefit from some fairly standard rights that they should have today — that is, to have a choice of provider and access to affordable services.

Dobbie: But isn't there a bit of self interest here — the proposed Bill could deprive Telstra of access to mobile spectrum that could be bought instead by — oh, yes, Optus! Isn't that less competition and how is that good for the customer?

Sheridan: In terms of the broad package, the government has very clearly articulated what its primary objective is, which is to achieve improved equivalence of access through the separation of Telstra's fixed-line network and retail business. That is clearly the primary objective, and it has done that to deliver outcomes — as I keep talking about — for the 22 million Australians.

Dobbie: Actually 23 million — that's a million Optus don't know about.

Sheridan: Putting forward that vision has given Telstra some options. If Telstra buys into that vision, then it will be able to access spectrum, it will be able to keep hold of its HFC cable network and it will be able to keep its investment in Foxtel. But, if it decides that it does not want to embrace that vision, then it effectively has a choice: does it want to retain its dominant position in the fixed-line market? If that is the case, then the government is basically saying: "Because of your dominance in this market, we think we need to take something away from you in some of the other markets", the key one there being the wireless market. We do not want a carrier taking a dominant position in every single platform. From my perspective, that is the underlying rationale.

Dobbie: Although as Nick Minchin is quick to point out:

Minchin: It does not have a dominant position in mobile, does it? It is less than 50 per cent.

Dobbie: And this?

Minchin: So you think it is reasonable for the parliament to sign up to legislative blackmail?

Sheridan: They are not the words that I would use to describe this, but Optus is certainly supportive of the whole package of reforms.

Dobbie: Although Andrew Sheridan is quick to point out the approach of threatening to remove the ability to compete on spectrum auctions was not something Optus had put forward to the government — they had asked that Telstra be forced to divest itself of its stake in Foxtel. The wireless spectrum was all just an added bonus for them, really! And as for threatening Telstra to rid itself of its share of Foxtel, is that just another piece of corporate blackmail?

Sheridan: In many jurisdictions HFC cable and pay TV operations have been used essentially as a means to bring competition to the incumbent operator, particularly in the provision of voice and broadband services. Clearly, if you enable the incumbent telco to take a dominant position in that market then you are not going to get infrastructure-based competition, and that is exactly what we have seen in the Australian context. If you look at other jurisdictions such as the US, incumbent telcos face strong competition from cable operators. There are examples of that around Europe as well, where cable companies offer very strong competition to incumbent telcos through voice and broadband services.

Dobbie: Of course Optus had a go at their own pay TV infrastructure — they just didn't do it very well. So what about the need for Telstra to provide equivalent services to its wholesale customers to those it provides its own retail division. Interestingly, Telstra had argued that they already provided that, and could do even better soon, but the man from Optus says no.

Sheridan: We are strongly of the view that we do not get equivalence of access. Perhaps the best example of that is an issue that we raised with Telstra three years ago when were activating customer lines in an apartment building. We felt that we were not being given equivalent treatment because we were required to send out a Telstra technician and an Optus technician and it took eight to 10 days to provision the line. And the customer has to be home during that period — so it is very inconvenient. But Telstra Retail could do it remotely, and that would have taken a day. So we raised this issue with Telstra, and they said, "We don't have to provide equivalence because we are taking a different service."

Dobbie: A different service that Telstra retail clearly has access to. It gets very messy, doesn't it, when you start looking at all the operational support and management systems. Just how much should Telstra be providing for what is considered an equivalent service? It's part of the mess that has seen Optus spend $200 million or so in legal fees over recent years. Speaking of money, what about the cost to Telstra have splitting itself functionally ...

Sheridan: We have some problems with Telstra's claim that it would cost Telstra over $1 billion when BT — which is a company at least twice the size of Telstra in terms of revenue and three times the size in terms of its workforce — only spent $153 million. And I do not understand why it would be in BT's interests to under-cook this figure in its financial statements.

Dobbie: Unwired's David Havyatt as always had some interesting observations including:

David Havyatt (Unwired): Telstra still represents 90 per cent of the profit pool of this industry and only represents 70 per cent of the investment, which actually means it has been under-investing. That is an indication of the market power that exists in this industry. Only if there is market power in a firm can you afford to survive in an industry by not investing; only people with market power can withhold investments.

Dobbie: And he refers to Telstra's claim in its submission to the inquiry that it can provide transparency and equivalence without being split up.

Havyatt: I do not know how you can reconcile those two views: that you can get equivalency and transparency in a wholesale structure with a vertically integrated firm, yet the vertically integrated firm has a lower cost structure and a greater ability to innovate than any other firm in the market. Quite frankly, if the first statement is true, that vertical integration reduces costs and facilitates innovation, then we should not attempt to have a competitive telco regime.

Dobbie: Yes, let's just call it Telecom, renationalise it and I'll pay 50 cents a minute to call my mum over in England. And a final point from Mr Havyatt:

Havyatt: Finally, on competition: Telstra continues to identify the number of new carrier licences and ongoing price reductions as indicators of a vibrant, competitive marketplace, completely ignoring the figures included in the explanatory memorandum which show the extraordinarily high figures for the HHI, the Herfindahl-Hirschman Index, for this industry. That is a standard measure of concentration in industry that shows this industry is basically as concentrated as a dysfunctional duopoly. So we have got those characteristics that have been ignored.

Dobbie: So he's a fan of the Bill then. Strange how all Telstra's competitors seem to love it. Like Matt Healy from Macquarie Telecom.

Matt Healy (Macquarie Telecom): It is clear that Australian consumers are not well served by the level of competition in our sector, and the primary constraint in relation to that competition is Telstra's market power.

Dobbie: Yep, I think that's a point we keep hearing. He says at each stage of the sale of Telstra there were opportunities for reform but they were held back to see how competition unfolded.

Healy: There have been many regulatory reviews but in each instance when a decision was to be made we have really gone for the light-handed option of tweaking around the edges of competition.

Dobbie: But this new Bill — this is the real deal.

Healy: Here we have it well set out in a coherent and coordinated manner. We urge the Senate to take this forward.

Dobbie: Pleeease. Well, it looks like they might get their way. John Horan from Primus was another voice at the hearing saying reform was needed because Telstra really has no incentive to provide services to other carriers. Every wholesale customer is a retail opportunity lost, I guess.

John Horan (Primus): We continually face price and non-price discrimination. Telstra grudgingly says, we'll carry your services; the High Court has told us we have to, but things just do not get delivered to customers when they should and they arrive battered and broken.

Dobbie: A bit like shopping on eBay really. And thank god John Horan said it because no one has so far this week. The proposed regulatory reforms will deliver a ...

Horan: ... a level playing field.

Dobbie: And he says that the whole industry, including Telstra will grow under the new scenario. Really, Telstra too? We'll see on that one. He says it'll come from innovative services — David Havyatt says most of the innovation so far has not come from Telstra.

Havyatt: Firstly, ADSL2+, the higher-speed ADSL, first introduced to the marketplace by the people who were accessing Telstra's copper network, not by Telstra; and, secondly, the 3G mobile network. The first 3G mobile network in Australia came, in fact, from Hutchison, not from Telstra. Telstra, in its submission, tries to claim that innovation is an important thing driven by vertical integration, yet the two biggest innovations in recent times came from non-Telstra firms.

Dobbie: So would it have been different with the split of Telstra? Matt Healy says yes, it would. And it would get over that issue where Telstra retail has a service that is not available to wholesale customers because it has not been "productised" for wholesale.

Healy: We do not think that the incentive to fail to meet wholesale customers' needs will prevail in a structurally separated and effectively functionally separated market in Australia.

Dobbie: But there is an option — David Havyatt says Telstra can separate, voluntarily, without divesting itself of any of its assets. It's all in the timing.

Havyatt: Telstra agrees to let NBN Co use its ducts, wires, poles and exchanges for building the NBN — and have to spend thriftily. At the same time Telstra gives an undertaking to NBN Co that as it builds the NBN Telstra it will migrate its customers onto the NBN. At the end point of the NBN being built, Telstra would be structurally separated within the meaning of the act and would never have actually divested itself of a single asset. So, Telstra can structurally separate without any of this fear mongering of its need to break itself up etcetera. In fact, the greater risk for Telstra and its shareholders is to decide that it does not want to pursue that route and decides it wants to fight.

Dobbie: That means ultimately, of course, one network which all end users ultimately end up on. No room for infrastructure competition here, says David Havyatt:

Havyatt: It is as economically inefficient to have duplication on fixed-line networks as it would be to have duplication of electricity distribution networks, especially when you move to the point of an all-fibre network that can perfectly perform the functions of both telephony and pay TV.

Dobbie: And he says the only reason Telstra argue for the opposite is because they don't like the idea of not controlling the access network. He thinks they're control freaks, in other words! Of course when Telstra has been found to be anti-competitive, the ACCC is after them flapping a copy of the Trade Practises Act in their face. Telstra has every incentive to move slowly on any arbitration — the "negotiate-arbitrate" model is slow and allows for delays. It needs to be fixed says Pipe Networks' Dale Clapperton, but the new legislation might actually make things worse.

Dale Clapperton (Pipe Networks): Virtually all of Telstra's competitive carriers have a contractual framework with Telstra called a CRA, customer relationship agreement, under which they obtain access to eligible facilities and declared services. At the moment it is very difficult to negotiate substantive amendments to the CRA with Telstra. Telstra has a significant advantage in bargaining power over the competitive carriers. Because there is no alternative source for many of these services, the only real constraint on that is that the competitive carriers go through the currently broken negotiate-arbitrate process resulting in a more reasonable outcome on the terms that they have agreed to under protest. Under the new regime as it is currently drafted the terms of a negotiated agreement between the parties, and I use the term "negotiated" loosely — remembering that we are dealing here with Telstra who have no incentive to negotiate better terms, especially in relation to aspects such as pricing — will trump any access determinations or rules of conduct that the ACCC might make.

Dobbie: Which does sound like a step backwards for everyone except Telstra. And, of course, you can change the Telco legislation or make changes to the Trade Practises Act — but when you have a vertically integrated Telco, you'll always have difficulty proving anti-competitive conduct — and you'll always have suspicion. Here's Macquarie's Matt Healy again.

Healy: The most recent example that hopefully illustrates the sort of conduct that we have to deal with but also illustrates the opportunity, if we restructure the market, to remove that kind of conduct concerns the Deakin Exchange in Canberra. That Telstra exchange is in a building that a third party owns, so Telstra obviously has a lease with that third party to use the basement as a telephone exchange. That lease had lapsed and indeed the building owner had decided to redevelop. We, as an access seeker who has equipment in that exchange and have customers that we service from that exchange, were given weeks of notice that we needed to be out of there and we were not offered any real comparable service to move to on the shutting down of that exchange. You could just imagine that, for the weeks that we and other access seekers were given notice of when we needed to be out, how do you think that would stack up against the actual lease terms in terms of how long Telstra knew that it would be able to be in that exchange, and what sort of changes it needed to make to its investments to move to another operation and set it up so that it could transition all its customers onto another exchange? We got weeks but we suspect they probably got years. They certainly had a lease that allowed them to run to a certain point and they would have been given notification by the landlord that they were repossessing it in order to redevelop the building. All of that notice would have been absorbed within the integrated Telstra and made its way through to the retail arm so that it could deal with its customers to migrate them to the other building that would replace the Deakin Exchange.

Dobbie: And every telecommunications company has their own examples — we could talk about case studies for hours, maybe years — and not be any nearer proving the accusations as true or otherwise. Imagine, if Telstra did split, and all these allegations disappeared — what would their lawyers do? I still think they are the ones at most risk from this proposed legislation. Let's just have a moment's sympathetic pause for telecommunications lawyers.

Very sad. So, is the new legislation essential to the delivery of the NBN. Pipe networks won't say, Primus says it's more to do with the short term and David Havyatt from Unwired says there is the issue about whether, without it, Telstra would frustrate the progress of the NBN. Senator Birmingham raised the very real question of what if the Bill isn't passed — couldn't Telstra ramp up its investment only in the most profitable areas. If the NBN is built, isn't that fair enough. For example, competing ISPs obviously place their DSLAMs where they'll make the most money. And another great question from Senator Birmingham — if Telstra is separated, wouldn't they invest in infrastructure and would you, in fact, need the NBN? David Havyatt.

Havyatt: The chance for answering that hypothetical question was passed by Telstra in December 2007 when they chose not to bid for NBN version 1.0. They chose not to bid for NBN version 1.0 at the time on the basis that they could not get any guarantees from the government about structural separation notwithstanding the fact that the government had been clear from the day it announced the NBN process that the intention was that that network would be a structurally separated, wholesale-only network. So the short answer is that Telstra had the chance to go down that route and said no.

Dobbie: Although that was the politics of a vertically integrated telco. Split them up and see what happens. As Senator Birmingham points out:

Seantor Birmingham: Perhaps the government went about it in the wrong order. Regulatory reform before throwing out different NBN models might have been a more sensible approach.

Dobbie: Yes. Has it all been done a bit arse about? Maybe a separated Telstra could have done it cheaper — at one stage they were saying they could do it all for $5 billion, although that was, of course fibre to the node, and not for regional Australia. But it would be interesting to see if Telstra had been separated, for example, before Sol Trujillo got here, would its wholesale and network services arm have been investing in an open access fibre network without the need for government money — or perhaps a bit of government money for those hard to reach places. Why, if the restructuring of the industry will cure all known ills, does the government need to step in with public money for the NBN? And is there a risk that by rushing through the Bill, with such far reaching consequences, there's a chance that all the detail hasn't been thought through? Surely not!

Leave us your comments on ZDNet alongside this week's podcast. Next week more of the same, with disgruntled shareholders, the newly founded Australian Communications Consumer Action Network, the Competitive Carriers Coalition, ATUG and the folks in the suits from the Department of Broadband, Communications and the Digital Economy.

Join me for that — and for my daily podcasts on BNET too — for ZDNet.com.au. I'm Phil Dobbie — thanks for sitting through another Senate hearing — you did well. I'll see you next week.

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Give Tax a break for a Change

edit@zdnet.com.au (Suzanne Tindal) — Tue, 03 Nov 2009 09:32:01 +1100

Considering the circumstances the Australian Taxation Office's (ATO) Change Program has been operating in over the last few years, it really hasn't been going too badly.

Yes, there have been budget run-overs to the extent that the new Change Program spend is expected to be around double the planned costs from 2004. Yes, it should have been finished in 2008 not 2011. But the office has also had to deal with the government changing the taxation rules every single year, which has had the agency bouncing on its toes trying to keep up-to-date — with quite legitimate funding increases to pay for it.

Of course, there were also budget increases where there were no direct lines to the legislation costs, which is easy to criticise. Yet to really be able to stick it to the agency for these increases, there needs to be some horrendous error on its part which occasioned the budget inflation. I can't see what that is.

Some might suspect a bad relationship with key program partner Accenture for the increases. However, Second Commissioner of Taxation David Butler said that the relationship was positive and responsibilities were clear when they needed to be.

Others might say it was the fault of bad governance. But I don't get the feeling there's a lack of oversight on the project. The Change Program's steering committee was scheduled to meet today and will meet again later this month, all to make sure the next release — set to be the income tax upgrade, the big one — won't go ahead unless the office is ready for it.

David Butler
(Credit: ATO)

The agency is also very aware that everything it is doing on the Business Activity Statements release might be changed by the government's response to the Ken Henry review and not rushing the design so as to try and minimise what it has to do twice.

I'd say the problem causing the delays and cost hikes is more likely the scope of what the office has been doing and the myriad of other jobs it has on its plate, as mentioned in the ATO's annual report for 2007-2008:

Post-budget assessments indicate that we will continue to experience considerable pressure on the delivery of our information technology systems in 2008/2009. This reflects our significant work program, including implementing the government's tax policy changes, our own internal business process improvement program (the Change Program) and our contribution to whole-of-government improvement initiatives... Software developers face similar pressures to update products that support taxpayers and their agents to meet their obligations or to access benefits.

If the Australian Taxation Office has been guilty of anything, it's been a surfeit of optimism. Certainly when it set its original timetable and costing it was "ambitious" as the audit office said in its recently released review of the program.

Yet the auditors seemed to find it a tough ask to find things to criticise about the program, only releasing four fairly general recommendations, most of which, if you listen to the ATO, were either already implemented or weren't really applicable. The audit office has also admitted that although delayed, benefits had been realised from the part of the Change Program which has been done.

Maybe, as the audit office says, the ATO does need to count its costs more carefully and make sure the lines are clearly drawn where Accenture is concerned. But my opinion is that the ATO's transgressions are fairly minor and that, despite the costs, the Change Program will have been worth it.

The ATO employed 22,429 people at 30 June 2009. It had an operating expenditure of $3 billion. It collected $264.5 billion in net cash, provided over $17 billion in transfers and payments, and collected around $41 billion in GST for state and territory governments.

All this was being put at risk by out-of-date IT systems. An excerpt from the audit report said:

By 2000 it was clear to the Tax Office its ICT systems were unsustainable. It was taking too long to respond to government policy initiatives, the community was getting less efficient service and Tax Office staff were finding reduced capability in the Information Technology (IT) platform. In addition, the Tax Office had been aware for some time of inefficiencies in the ICT systems on which the administration of Australia's taxation and superannuation systems depended.

If the ATO's tax systems fall in a legacy heap, the whole country will stumble. Yes, the project being late will cost us money and delay benefits. But, considering that it doesn't seem the ATO has been guilty of gross incompetence, how much would it have cost Australia's tax system if it had done nothing?

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