Telecom’s profits first, NZ second

Written By: - Date published: 12:07 pm, August 20th, 2009 - 37 comments
Categories: telecommunications, wages, workers' rights - Tags: ,

You’ve heard about the Telecom dispute. But while a lot of the focus has been on what it means for the lines engineers involved, an equally important issue is what it means for the future of our country’s infrastructure.

Because basically, this whole dispute is a sympton of Telecom’s attempts to increase its profits at the cost of network maintenance.

It works like this. Telecom used to have two big contractors, Downer EDI and Transfield Services, and they managed Telecom’s lines engineers as paid staff with full employment rights. Now Telecom has introduced a third contractor, Visionstream, to take over Auckland and Northland.

Visionstream’s been brought in because they can drive down costs for Telecom. The way they do this is to attack the wages and job security of its worforce by making them redundant, stripping them of their employment status and trying to force them to buy their jobs back as dependent contractors.

The independent analysis on this is clear – the lines engineers would take an income hit of 50-65%, they’d have no guaranteed hours and they’d have to shoulder huge business risks. And all that’s after shelling out up to $60,000 to buy back their own van and tools.

To keep up, the other contractors are having to cut labour costs too. Downer EDI is trying to force its workers onto piece rates while Transfield is doing it the old fashioned way – they’ve just made 154 staff redundant. Obviously these workers were still needed to maintain the network a month ago, the only thing that’s changed is the terms of Telecom’s contract.

The pattern here is a single-minded drive from Telecom to increase its short-term profit at the expense of its workforce and the maintenance of our vital telecommunications infrastructure.

The end result, if it succeeds, will be to force hundreds of skilled engineers to leave for Australia where the Rudd Government’s massive broadband investment policy is creating plnety of new, well-paid jobs. Those that stay here will be forced to work longer hours and quality will be put at risk as workers paid on piece rates have to get through as many jobs as possible.

At a time when the Government is meant to be rolling out its own broadband investment plan, the last thing we need is a diminshed and overstretched workforce. On the immediate level the blame is Telecom’s – they’re the ones calling the shots and they’re the ones with the power to fix it.

Fundamentally though, this is what we get for privatising vital infrastructure. Telecom’s interests are not necessarily same as New Zealand’s interests, and since they own the network what they can do what they want. They’re effectively asset stripping, running down the workforce and, with it, the network, at the same time as we want to be upgrading it.

Telecom needs to get its act together and think of the consequences of its penny-pinching. And if they won’t learn themselves, hopefully its unionised workforce and New Zealand consumers will teach them a sharp lesson.

We need to learn the lesson: privatisation doesn’t work.

37 comments on “Telecom’s profits first, NZ second”

  1. infused 1

    You have to realise they are shooting themselves in the foot. The copper wire isn’t going to matter in 5yrs. VOIP is taking off. With naked dsl slowing coming in, who gives a shit what Telecom do?

    I understand what you’re saying in regards to the workers but I think you’re trying to argue two different things here to make your first argument sound better.

    • Ianmac 1.1

      What is VOIP?

    • Ianmac 1.2

      Infused: What is VOIP? Fibre optic? Wireless?

    • Draco T Bastard 1.3

      With naked dsl slowing coming in, who gives a shit what Telecom do?

      Naked DSL is still provisioned over Telecoms network which is being run down by Telecom.

      • bill brown 1.3.1

        And what does it run over, physically, magic fairy dust fumes?

        infused is confused as always

    • lprent 1.4

      infused: What are you waffling about?

      What is the physical hardware that the naked DSL runs RELIABLY runs over? Copper or fibre, and that is what we need the techs for.

      Wireless is a technology that has a great record on hype and a pitiful record on delivery (ie it is bloody slow). Doesn’t look to me to be getting any better in a hurry. Fine if you want slow data links and frequent disruptions.

      Besides who uses voice anyway? Txt or data is far more efficient. I’ve had various forms of VOIP for a long time, and I’m still using voice of any kind less and less. Too bloody intrusive into my work day, and I dislike the telephone tag game.

      What we need the techs for is the data. Data is a hell of a lot faster and more reliable over cables. This fibre rollout is supposably for raw data, It isn’t required for 64 kilobit streams required for voice.

    • Falafulu Fisi 1.5

      Infused, I agree with you that I respect what Telecom is doing with what is theirs as long they don’t violate my rights (not my rights to what is theirs).

      Marty G said…
      But while a lot of the focus has been on what it means for the lines engineers involved, an equally important issue is what it means for the future of our country’s infrastructure.

      I didn’t know that I (as a taxpayer) part-own the Telecom communication infrastructures according to Marty G. Telecom infrastructures is own by its shareholders and not me & other NZ taxpayers.

  2. Ianmac 2

    Maybe the Transfield technicians could organise a group plan to negotiate a transfer to Australia. If all else fails of course. 154 as a group would have power both as a concerted threat or as a real option. Funny how we don’t notice them until they are not there. Good luck chaps.

  3. ghostwhowalks 3

    I thought most of the skilled lines maintenance staff went to Aussie years ago. The current staff seem to be all temporary permits/ short term migrants- before they too head to Aussie

    • Rex Widerstrom 3.1

      Well if they did they’re not working for Telstra, who played the same “Surprise! You’re now all independent contractors! Isn’t it great?!” game with their workers long ago.

      Which is why you can wait a week for a fault to be fixed if it requires a callout – and that’s in a metro area. If you’re in the country, forget it… driving to the nearest town and posting a letter will get your message there faster.

      And (not that it’s relevant to this particularly) seems to have further downgraded it’s “helpline” so that not only is it answered in some part of India but it now appears to be conducted over a piece of wet string. I gave up when the trying-to-be-helpful Indian lady was shouting “I am shouting at you now because we cannot hear each other…”

      Just the kind of consumer confidence-building that draws customers away from competitors…

      While Telecom and Telstra are fixated with one side of the ledger, are they paying any attention to the other side?

      • Maynard J 3.1.1

        “While Telecom and Telstra are fixated with one side of the ledger, are they paying any attention to the other side?”

        No, Rex, because it is a monopoly and they do not have to!

  4. Draco T Bastard 4

    People forget that it took nearly two decades and a work force of up to 17,000 just to get the digital exchanges in. Most of that had been done by the time the first Rogernomics redundancies had started and Telecom was sold in 1990/1991. Since then the network has essentially stagnated due to underinvestment.

    in 1985 Telecom (Then the Post Office C&M branch) made a profit of $272m all of which was invested back in the network.
    in 1987 Telecom made a profit of $300m all of which was invested back in the network.
    in 2002 Telecom made a profit close to $1b of which $150m was put back into the network

    Just think of what our telecommunications would be if all of the profit had been put back into the network instead of going to the capitalists. There’s no way you’re going to get any competition either (except in a few select places) as it just costs too much and, as more of the needed infrastructure is put in place, the less profit to be made.

    I’m still amazed that the 4th and 5th Labour government didn’t see it. I’m sure the 4th and 5th National government did/does.

    Telecom needs to get its act together and think of the consequences of its penny-pinching.

    Telecom really don’t care. When the network is bad enough the government will have to pay to fix it up the same as what happened with rail so they’ll make an even bigger profit. Their present actions just make them more money at our expense.

    We need to learn the lesson: privatisation doesn’t work.

    What needs to happen is that all the telecommunications in NZ be brought back into public ownership. Considering the profits that it has had since deregulation I don’t think it needs to be bought back.

    • RedLogix 4.1

      Excellent comment Draco. Not a lot of people seem to understand the difference between a privately sector monopoly (or oligopy which more common) and the same enterprise in public ownership.

      In fact Keen’s most recent post includes a fascinating series of Powerpoints for his latest course in Behavioural Economics. In the second lecture he completely demolishes the so called ‘deadweight loss’ of monopolies, conclusively proving that in fact competitive markets are no more efficient than monopolies, and may well produce less total welfare. Radical stuff, and I thoroughly enjoyed working my way through them.

      The real problem with monopolies is not that they lack competition, but that when privately owned they lack accountability.

      • Draco T Bastard 4.1.1

        This one?

        In the second lecture he completely demolishes the so called ‘deadweight loss’ of monopolies, conclusively proving that in fact competitive markets are no more efficient than monopolies, and may well produce less total welfare.

        My nephew is a builder. In Auckland that means labour only contracts which basically means that every builder in Auckland is in competition with every other builder. These labour only contracts are rather interesting because the builders not only have to supply themselves (labour) they also have to supply:

        Drills (2 or 3)
        Nail gun
        Drop saw
        Spirit levels (2 or 3)
        Hammer
        and whatever other tools are needed to put up a building.

        Now, if the firm was supplying all that you wouldn’t see enough to supply every single builder one (or more) of each item but you would see enough supplied to ensure that the job could get done with minimum waiting while also keeping the tools in near continuous use (maximum productivity) so I’m going to go on the assumption that competition not only may cost more but does as a matter of fact cost more and that may be up to several times more.

        Applied to telecommunications true competition (multiple networks) costs far more than anyone is willing to pay and profit decreases as more networks are added. A single network with multiple service providers (LLU) which is what we have now is an illusion of competition. The monopoly network provider (Telecom) is still creaming it with super profits and under investment.

        The real problem with monopolies is not that they lack competition, but that when privately owned they lack accountability.

        Bingo and exactly what we’ve been seeing since the sale (give away) of Telecom.

        • RedLogix 4.1.1.1

          Draco.

          Yes, they should be read in order, but the second one really struck a chord with me. I’d be interested to know what you think sometime.

      • Paul Walker 4.1.2

        Keen does no such thing. As I have noted before you can see both Anti-dismal and TVHE blogs for discussions, in both posting and comments, of the problems with Keens approach. You can also see also Auld, M.C., 2002. “Debunking Debunking Economics’. Working Paper, University of Calgary. Available at http://jerry.ss.ucalgary.ca/debunk.pdf.

  5. vidiot 5

    Those buffoons that were in power in 1990 who sold Telecom must be ruing that decision now. Wow, funny some of them are still on the benches of parliament today.

    @infused: Naked DSL still requires copper to your door, if that link is broken you are up creek without paddle.

  6. Doesn’t matter if your to the left or right, everybody knows what a disgusting company Telecom is, and no amount of having ads with cute little animals or kids with speech impediments can change that.

  7. “We need to learn the lesson: privatisation doesn’t work.”

    Amen to that.

    Does anyone know how much $ Telecom takes out of the country each year?

  8. Putting aside “confuseds” dazed comment.
    What can be practically done to force Telecom to change this?
    On a local front up here in ther Bay of Islands there are telecom engineers/ techs who are facing complete financial ruin. They are effectively being sacked because to take the deal would be stupid.
    It is far worse for the rural staff as the distances required to move from job to job will see them earnign less than the minimum wage.
    This is not a left and right issue. It has been going on for nearly twenty years through different governments. They basically destroyed GDC and anybody who tools up for a multiyear contract undertaking work for Telecom better make sure that their payback and required profit is achieved the day before the contract ends, because these contracts always go to the lowest bidder.

    • IrishBill 8.1

      As I see it the simple answer is resist. There’s bugger all people in NZ (or indeed the world) who can do this kind of work and Telecom are alienating those who can. I figure if these guys can work together to hold out and refuse to buy into this they are going to have a hell of a lot of negotiating power very suddenly once there’s nobody around to make the phones and internet go.

  9. The Voice of Reason 9

    Great comments people. I understand there is going to be some sort of ‘Day of Action’ next week and if you want to put your money where your mouth is you could help out by going here:

    http://epmu.org.nz/telecom-donate/

    Dunno ’bout you, but I reckon a Nationalise Telecom platform would be a vote winner for any party keen to win the next election.

  10. I was surprised that Labour did not move to nationalise telecom last term. That may have been their game plan if they had won another term. They certainly did a fantastic job of driving down the share price.
    I would have supported a renationalisation if only to stop the screeching about Telecom by people who consider all private property to be theft.

    Rather than flushing a billion or so into a fibre network I would support this government moving to buying Telecom back at a fair market price. Creating jobs in tech rather than some early industrial age backward leap like failways.

    Saving these jobs in a form where an adult with skills can earn a fair income should be a priority for all of us. Irrespective of the colours we wear.
    I am already trying to help a couple of local techies personally. Decent men who take pride in their work and who are being crapped on by 20 odd years of failed government policy in an area where we have to be at the forefront of technology and innovation. Our isolation from the rest of the world demands it.

    • IrishBill 10.1

      The last labour govt would never have had the guts to do that Barnsley But it needs to be done. I’m a little concerned about your recent shift to the left though mate.

      • Draco T Bastard 10.1.1

        From reading Red Alert they still haven’t got the guts to say that it needs to be done. They’re still looking to competition to improve things.

  11. @IB. Don’t get too comcerned. My opinions are framed by issues not ideology. This one is a shocker, a genuine abuse by a malignant employer.
    Prior to quitting the rat rtace in 2005 I spent 15 years working in Telecommunications. I have worked with and for them all. From Telecom to Ericsson and callPlus and TelstraClear. Telecom have been working towards moving all the risk to the the techs for at least that long.
    It is right up their with the way Toll has come in and squashed competing tranport companies because of their massive cash windfall and sweetheart access deal to freight yards.
    Toll have bought up companies all over the country, dumped lots of staff and raised freight prices. So they have stripped costs and are effectively creating monopoly profits to send home to Australia.
    You guys need to look at what Toll have done with the money Cullen gave them.
    It has cost at least 10 jobs in Kerikeri already.

  12. Walter K. Jones 12

    I don’t understand your suggestion that they have to come up with “…$60,000 to buy back their own van and tools.”

    These vans and tools are owned by their employer and provided to their staff to use. So it’s NOT ‘…their own…’

    This is nothing new. Instead, those who are clever and have initiative, will see this as an opportunity to open up and run their own businesses, with a substantial cornerstone customer and the opportunity to serve others. There is no shortage of demand for Geeks to fix stuff that us mere mortals can’t comprehend.

    See this as the opportunity that it is – a releasing of the shackles that big corporates put on the creativity and initiative of their staff.

    You should be welcoming this opportunity instead of scolding it.

    • Eddie 12.1

      The problem is with your reading. Currently, the workers’ employers supply the equipment. Now, they will be forced to buy that equipment themselves.

    • Draco T Bastard 12.2

      If it did everything you say it does it would be an opportunity. It doesn’t. It does everything the lawyer says it does which is, basically, screw the person who signs the contract, dropping their pay rate and probably forcing them into bankruptcy.

  13. jason 13

    Walter K jones, you’re an idiot. You dont know what you’re talking about.
    I am in the business and have been for 20 odd years. When telethon comes up with a business model it always, only ever benefits them. I have seen the codes so-called enterprising individuals will have to work under and to put it bluntly they are crap.
    You are expousing individuality as an admirable trait but from where I’m reading, it smacks of simple me-me-me mentality.
    Let me educate you, fool. When a person has to work on codes and they are paid per job it stands to reason the more jobs they do the more money they make. To do this they end up creating the faults by pulling fuses. Only fixing the cable pair they have as the fault. Deliberately doing a half-arsed job so as to deteriorate the network further. I know this because I am now only managing to repair the damage done by fly-by-nighters in areas like Taranaki. Now you may think I’m comrade bashing; far from it, the guys are a decent bunch driven to this end by telebomb design. When telethick do whats called in the industry, “front line closures”, it becomes apparent this model was never intended to work. Front line closures are when customers ring in a fault and the receptionists do all they can not to log the fault. They tell all sorts of lies from, “the faults with our main exchange and will be fixed soon, no serviceman needed”, to informing them,”its all fixed now”, when a technician hasn’t even been sent.
    We get people turning up at our worksite just to get someone to come an look at their problem.
    I’m sorry if I have offended you but when I hear the rubbish your’e talking it frankly insults me. Go and talk to people in the industry and get some insight or shut the fuck up!

  14. Ian Howley 14

    Oh poor naive Walter, do you work for any of the Telco’s at the moment? I started in 1979 and all was well until Telecom took over. Do some research on Telecom’s past behaviour then come back and make some comments. You will find that Telecom has an interesting past with other contractors it has kicked to the curb, good luck.

  15. Swampy 15

    This thread is really about cheerleading for the “good guys” (the EPMU) vs the “bady guys” (Telecom, of course, how did you ever guess)?

    Conveniently overlooked:
    1. The political relationship between the EPMU and the Labour Party and resulting ideogical campaign for a party that is seeking traction to win the next election.

    2. The amount of tax that goes into government coffers from the business activity of Telecom which is a tax on their profits and therefore the government is conflicted by the amount of profit Telecom makes.

    3. The way in which the aforesaid Labour Party in Government acted against Telecom in order to lower their market value (Labour should have negotiated to buy back the LL if the objective was so important to them) – typically anti business ideological move.

  16. Swampy 16

    Telecom’s reacted to Labour’s heavy handed interference against its profitability. Hardly surprising to anyone, especially anyone who owns shares in the company, as this is what the shareholders would want.

    You could even argue if you were so minded that the Engineers Union – Labour affiliation is an obvious target.

  17. Swampy 17

    “privatisation doesn’t work.”

    Does anyone still believe we should have a state owned insurance company? THat one disappeared under the radar pretty quickly back in the 80s.

  18. “We need to learn the lesson: privatisation doesn’t work.”

    Marty. Try looking at the evidence. Start with William L. Megginson, “The Financial Economics of Privatization”, New York: Oxford University Press, 2005. You will see that in many cases privatisation works very well.

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