National was warned not to give the main ultrafast broadband contracts to Chorus. All it would do would restore and strengthen the monopoly that had kept prices too high ever since Telecom was privatised (and which David Cunliffe did such good work to break up).
Of course, National ignored that. And now, once again, National finds itself in a corner, about to bailout out a large corporate that is using its market power to threaten its political agenda.
Chorus is crying that it will go bankrupt if the Commerce Commission’s decision that its wholesale copper broadband prices have to drop by 23% is allowed to stand. And it’s very quick to say that will throw National’s ultrafast broadband plan in to chaos.
Effectively, what they’re saying is that they promised to build the fibre network too cheaply to fund the build from the contract itself and they need it to be cross-subsidised by being allowed to over-charge for copper.
National was warned that Chorus was doing this at the time. They were warned that Chorus was offering artificially low prices for the fibre build so it that would corner the bulk of the contracts, which would then allow Chorus to act inefficiently, maximise its profits, and lean on the Government at a later date to get more money. That’s what happens when you create private monopolies.
I don’t believe that Chorus will go bankrupt if it has to drop its copper prices. It made a $171 million profit last year.
No, what we’re seeing here is the intersection of a failed privatisation (Telecom) that created a private monopoly (Chorus) and the inept National Government which has once again backed itself into a corner dealing with a major corporation and now seems almost eager to hand over some public cash.
It’s Warner Bros. It’s the SkyCity deal. It’s South Canterbury Finance. It’s AMI. It’s Rio Tinto. It’s the cut-price the institutions forced for the asset sales. It’s Solid Energy. This Chorus mess is the same old story of National reaching into your pocket to hand money to some corporate that has the power to threaten its political agenda, at the same time as saying there’s no money for the stuff that really matters to Kiwis.
Again and again, National have screwed up their dealings with corporates, and we’ve paid the price.