08/10/2009 - 00:00

The more the merrier when service counts

08/10/2009 - 00:00


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Monopolies are everywhere, and we tolerate them despite their often-poor delivery.

The more the merrier when service counts

MONOPOLIES annoy us because they don't allow us the choice of seeking an alternative if we can't get what we want or need.

Chances are we will get annoyed. Monopolies tend to get fat and lazy because they aren't subject to competition, and they can price gouge more easily because it is difficult to compare costs with other providers.

I was reminded of all this last week on my regular jaunt to Rottnest, a place where monopolies abound due, in part, to the state-controlled nature of the resort and restrictions placed on development there.

Rottnest is one of my favourite places and a real asset to Perth, and nearby regional areas. For those who understand its quaint booking procedures - they are a bit like the AFL annual draft process - it's a unique opportunity to share a stress-free period with like-minded friends and families.

In some ways, Rottnest during the school holidays is a microcosm of Perth. Various groups end up returning to the same places with the same friends. For instance, the South Perth Primary School families of a certain era prefer Geordie Bay, while the parents of children at St Benedicts in Applecross like to congregate at Bathurst. There are tonnes of other examples. It is just like suburbs writ small; at least that's been my experience.

This shrinkage of community is feasible at that level for the duration of a week or so.

But at a commercial level it is far harder to recreate Perth's retail scene on an island Petri dish that, at capacity, swells to the size of moderate city suburb.

Hence we have the monopolies that exist on the supply side that are a counter balance to the island's many attractions.

Of course, it's not as bad as it was. Thankfully.

For instance, delivery services for goods such as groceries and alcohol have created competition for the island's retailers. In those fields, standards have clearly improved.

Ironically, this year, the greatest reports of disappointment regarding the island's facilities were from two of those that have just been recently refurbished - the Dome and the pub. Given the effort in redeveloping these buildings, it is clear the owners are trying to make them more attractive to the public.

Yet, new premises can hardly make up for a lack of service standards. I can only hope that what I, or those I spoke to, encountered could simply be described as teething troubles.

Given Perth is hardly known for its rich tradition of customer service, it always surprises me to find things could be that much worse at a place like Rotto. Then again, when you encounter poor service in Perth, or any big city, you simply take your business elsewhere.

At Rottnest, when you want a beer by the waterfront, your choices are limited to one.

Perhaps Rottnest really is a microcosm of the state? Just like the north-west has struggled to get people at that service end of the economy, so too does a not-too remote place like an island off the metropolitan coast.

If this is the case, perhaps Rottnest could be a test case for finding ways of improving service in remote locations. There can't be many better places to try to experiment.

Too little too late?

THE subject of monopolies at Rottnest was really just to paint a background for my real subject, that of Telstra.

Three weeks ago, Broadband, Communications and the Digital Economy Minister, Senator Stephen Conroy, unveiled a plan to coerce Telstra into structurally separating its retail and infrastructure.

This is something I've long supported. Despite Telstra saying it wasn't possible, the federal government has decided it is.

It is a shame it has taken so long for this to occur because it will undoubtedly be more expensive, more disruptive and, potentially, too late.

I have sympathy for shareholders, being one myself, but in many ways Telstra's monopoly has done it no favours. The share price has hardly been an extraordinary performer and management has spent too much time at war with the government rather than getting on with business.

Unpicking the infrastructure will be all the more cumbersome in an organisation that has gone out of its way to prove that it couldn't be done.

There is also the risk that it is just too late. The privatised monopoly has already held back competition for more than a decade, something I feel has been damaging for the economy.

Now we are at a dawn of a new age in communications, which may make the advantages of separation redundant anyway. Who really cares about copper? Perhaps the nation would be better off with a mixture of competing infrastructure rather than putting all our eggs into the fibre network basket?

Should Senator Conroy go ahead with his threat to enforce separation it will be a challenge to make that work for everyone. First, he will need to compensate Telstra's shareholders, who would have had every right to believe integration was part of the privatisation deal.

Secondly, there's the issue of trading one monopoly for another. Even independent of the retailers the stand-alone infrastructure is still a monopoly.

That is why breaking up Telstra and creating a National Broadband Network of fibre is very risky.

The assumption that this is the best technology and by making it nationwide there are economies of scale is fraught with danger.

A better way would be, if it is possible, to break down existing infrastructure into regional monopolies, which have to compete for the universal service obligation (government subsidy in regional areas) as well as independent customers of that area. Failure to deliver would result in competition moving in, either to take over the government requirement, or win the customers.

I don't doubt that this would be difficult. America has many regional carriers, which gives those of us who visit a real headache. But, ultimately, competition will drive the most efficient adoption of technology in any given area and create more tension in the customers' favour than any single entity ever could.


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