The Axe the Copper Tax campaign grinds on ominously for the Government. What is especially ominous is that on the pages of the New Zealand Herald and the National Business Review and amongst the ranks of some of the Government’s most loyal supporters there is informed comment that threatens to embarrass the Government deeply.
As Chris Barton has pointed out in an excellent article in the Herald the Axe the Copper Tax campaign has drawn an interesting dividing line. On the side of the angels are normally staunch right wingers such as Matthew Hooton and David Farrar ready to take the fight to John Key and National. Perhaps Hooton should comment on the honesty of some of Key’s comments on the issue. Because there are something distinctly disturbing comments that he has made about the issue.
For instance Key previously said two things the veracity of which has been challenged. Firstly he said that there is a chance Chorus will go broke if the Commerce Commission decision about the cost of copper is allowed to stand and secondly he said that the Commerce Commission misunderstood the law. These comments have already been discussed but as time goes by and more detail becomes apparent you have to wonder why Hooton has not been stirred into a lather and questioned the accuracy of what the Prime Minister has said.
Key was reported as saying to TVNZ last month “[b]asically if the Commerce Commission ruling stands there’s a chance Chorus will go broke, in which case the Ultra Fast Broadband (UFB) won’t be rolled out”. Barton is right to point out that if this was a risk there should have been a notification by Chorus to the Stock Exchange and no such notification has occurred. And when David Farrar doubts that this will happen this you think that it should be checked out a bit more carefully. Farrar has blogged:
But the reality is that Chorus would not go bust under the draft determination. They do not say they will. The market analysts do not say they will. Yes the draft determination will adversely impact their profitability and dividends, and that is bad for Chorus shareholders like myself. But that is one of the risks of investing in regulated monopolies.
Even Ross Patterson, former Telecommunications commissioner and current adviser to Chorus has said about the claim “[i]t doesn’t tally with Chorus …” and “Chorus has never said that.”
The claim presumes that Chorus’s problems relate only to the Commerce Commission draft determination. This totally ignores that Chorus has admitted that it underestimated the costs of the UFB roll out by $300 million. Deutsche bank thought it was more like $500 million. Either figure suggests that Chorus’s under estimate of the roll out cost is more of a threat to the company’s finances than the Commerce Commission decision.
Patterson also cast doubt on Key’s other statement that the Commerce Commission was “interpreting the law incorrectly” and that the Government was “going away to have a look at that.” Key should discuss this with Amy Adams. Because in her speech introducing the Telecommunications Act discussion document she said:
“Let me make it quite clear that this process is not about whether the Commerce Commission was ‘right’ or ‘wrong’ in its determinations … [t]he Commission quite rightly followed the prescribed process mandated under the Act and came up with the positions they did.”
Key did not resile from his position when questioned on this issue in Parliament.
The latest area of possible inaccuracy is Key’s response to the Covec Report which he described as being fundamentally flawed. The coalition Vodafone has had Covec’s findings reviewed with another firm of consultants, Network Strategies. Its conclusion is that the Covec Report was “flawed” in that while the approach it adopted was sound, it had underestimated the potential benefits for Chorus. The $600 million estimate of benefit for Chorus was considered to be conservative.
The critics of the Copper Tax are not hairy armed trade unionists demanding the end of the capitalist system. They are large Telcos, prominent members of the National Party, and hardened pro free market IT veterans who understand the IT system and just want something that is as cheap as possible and as fast as possible. They support free markets and a level playing field.
Key should be very afraid. He is risking his reputation on increasing costs to ordinary Kiwis so that a large corporate can profit. A more classic example of crony capitalism would be hard to imagine.
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