Telecom: bastard offspring of the market

The story of Telecom is the story of New Zealand.

I’m not just talking about events of the past month but the tale of the company and the country since Telecom was privatised in 1990. Telecom is struggling for the same reason our national economy is struggling. Market values have replaced the values of service and citizenship.

It might seem strange to people under 35 that the government ever ran a telecommunications network. But it did, and it did so competently. The service wasn’t flashy but it was brilliant compared to what Telecom has offered. Accountability came through elected ministers who knew service breakdown meant their heads were on the block.

20 years ago the failures of the past month would have seen politicians grilled mercilessly on radio and TV. Not now. Who knows the name of the minister responsible for telecommunications? The government has been all but invisible and we are left with the bereft figure of an unelected Scotsman apologising repeatedly to the public for the multiple failures of a major communications network and the collapse of the 111 emergency call system.

Democratic accountability through the rights of citizenship has been replaced by the rights of consumers in the marketplace. If we don’t like the service we can change providers. Except for 111…

Telecom’s present troubles go back to its inception and the running of the company for shareholders rather than phone users.

Writing in 2004 economist Bill Rosenberg summed up the main issues:

Telecom’s overseas owners have failed to live up to the promise of making new technology available to New Zealanders… They have sacked thousands of employees and have extracted billions from New Zealand in profits and capital, while over-charging for services (such as broadband networking to the home) …using every possible means to keep out the competitors who would not have been necessary had it been providing a decent service. From 1995 to 2004 it paid out more than its net earnings in dividends (reported earnings of NZ$6,464 million and dividends paid out of NZ$6,698 million), for most of that time, its capital expenditure barely covering reported depreciation. It was running down its assets.

The same problem continues today.

The company has worked hard to keep out competition and New Zealanders were slow to get new technological developments and when they arrived they were expensive. Former Board member Rod Deane explained in a biography how the company employed over 90 lawyers. Don’t think these bods were there to keep the phones running. They were there to fight any attempts at government regulation and to thereby maintain what until recently has been a private monopoly.

It’s also worth remembering the revealing words of former Telecom CEO Theresa Gattung who admitted deliberately deceiving Telecom customers while speaking to a meeting of financial analysts in early 2006:

“Think about pricing. What has every telco in the world done in the past? It’s used confusion as its chief marketing tool. And that’s fine,” she said. “You could argue that that’s how all of us keep calling prices up and get those revenues, high-margin businesses, keep them going for a lot longer than would have been the case.

But at some level, whether they consciously articulate it or not, customers know that’s what the game has been. They know we’re not being straight up.”

Knowing you’ve been screwed by Telecom is a familiar feeling for New Zealanders.

Just last year the company forced its maintenance employees to become dependent contractors. These workers now pay for their own tools and vans and must rely totally on calls from Telecom to attend maintenance callouts. The workers are now on much lower incomes while the company is absolved from the provisions of the Employment Relations Act such as providing sick leave and annual leave. Meanwhile the Telecom CEO is the highest paid person in the country – $7 million last year.

The national economy has suffered the same hollowing out as Telecom. The private sector has cannibalised the profitable parts of the economy and left us heavily in debt. Workers are on low wages, facing higher taxes and lower levels of government-provided services while the country searches for capital for investment.

If Telecom was still publicly owned we’d have politicians baying for blood and the likes of Rodney Hide squealing like a stuck pig and demanding accountability.

The disgruntled workers at the Philippines call centre who texted “f**k you” to New Zealand Telecom customers a couple of weeks back missed their target. They should have been communicating with the hapless Scotsman and our free market cheerleaders in Wellington.

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