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Government Burning MoneyAnd yes ladies and gentlemen, we’ve got one! A genuine newspaper article with the correct view about government stupidity and market wisdom. One! Can we get two? Do we hear two? Cammon' members of the MSM (mainstream media), you won't let go so much common sense for the ludicrous price of one article! Will you?

A couple of days back, the The New Zealand Herald published the article titled "Govt move on fibre has left us the poorer" where they correctly, accurately, incredibly! describe what happens when government apparatchiks mess with the markets. A brief story:

  • Chorus is an NZ telecom company.
  • It was planning to go fiberoptic, one house at the time and as market demands.
  • The government decided that fiberoptic was necessary now.
  • The government issued contracts and subsidies for it to happen now.
  • Chorus got most of them.
  • Once fibre was in… there were insufficient people interested in it.
  • Thus, Chorus raised the price of copper to make fibre more attractive.
  • Price which was contested with The Commerce Commission which lower it by about 25%.
  • Which was contested by Chorus and after "only" three years of deliberation, the commission agreed to a price shave of only about 8% (give or take).

But even when Newzealand now "enjoys" one of the most expensive prices of copper connectivity in the world, people are still not interested in fiber!

And now, in a show of solidarity between the workers of the world…errr… the Libertarians "out there" we shall let the article speak for itself. Read on:

"Strange and costly things can happen to an economy when a government decides its wisdom is better than the signals of a market."

"We will be paying close to a fibre price for copper and, according to Saarinen, copper is not too bad."

"New Zealanders still seem content with copper. The fibre investment has so far attracted only 5 per cent of broadband connections."

"Perversely, the country is more likely to stick with copper now… Selling access to the coppernetwork is a much bigger business for Chorus than fibre, one that will become more lucrative now."

And this final Editorial jewel:

"If the Government had never interfered, Chorus might have upgraded its network to fibre as needed, or it might have renewed its copper. Either way, it would be a decision based on the company's assessment of its customers' needs and willingness to pay. Instead, the Government decided we needed fibre - and now we are going to get copper at fibre's cost. That is how excess costs are locked into vital infrastructure, and the economy becomes poorer."

Oh, yes, did we mention that this article is the Editorial no less!!!

We told you so and we continue to tell you so. The markets, in contraposition to what deprecated and finally! discredited communist say, it truly is the will of the people. To ignore it, should be done at their own peril. Not ours. Problem is, "theirs" happens to become "our" because we, the suckers … err… the people… end up paying for "their" mistakes through "our" pockets.

The Editorial in this case is 100% right, correct and accurate. Newzealanders and now just a little bit more screwed than what they were before because there is no going back. The money is gone! The contracts have been signed! The infrastructure is half-there. Infrastructure that will stay with Newzealand for decades to come. A product seeking customers, customers that may never come (or at least very late). Meanwhile, you, the Newzealand taxpayer will have to keep paying for the maintenance costs.

And why do we say that fiber will be adopted late, very late in NZ? Consider these facts:

  • 97.3% of people has access to ADSL (fast access)
  • 91% of people has access to ADSL2+ (faster access)
  • 62.4% of people has access to VDSL2 (very fast access)

It reaches a point at which faster access is pointless. Yes, the biggest hog on the net are videos, but even videos can't be consumed that fast as to demand fiber speeds now. And, as if this would not be enough, there is new tech in progress which will allow copper lines to transmit with a speed about 1/10th of fibre. No change in infrastructure required. So, yes. NZ's don't need no stinking fibre!

Look, this is not complicated. Chorus is a monopoly. No questions about it. But it knew that there was not market appetite for fibre, which would essentially destroy their capital. They were right and the NZ government was not. It did destroy a great deal of capital, just not theirs, NZ's capital! People. Taxpayers. They are paying the costs of rolling out fibre. Decades ahead of what may never be necessary.

And do you think that this is a mistake? An exception?

Think again. Take a look at what happened in UK with their electrical grid (We Don't Need No Stinking Competition). Notice the coincidences? Well… they are not. This is classic stupidity of politicians at work.

Ahhhh. But you are not convinced. You do believe in "government action", "for the greater good". Fair enough. We've got a question for you. What action does an army of government apparatchiks support? Because they are certainly not supporting us or you, the actual taxpayers!

Note: please see the Glossary if you are unfamiliar with certain words.

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