Archive for March 24th, 2011

Bringing It

Interesting times at the Irish Times, as one of its columnists admits to lying to a tribunal, or, as she describes it, putting it into context, ‘denying it when first asked about it’. Before we judge too harshly, let us remember that the cock crowed thrice for St. Peter, and look what he went on to achieve.

Let me ignore most of the article to zoom in on one of the ostensibly truthier parts, and we note in passing that a theme of commentary from people working for institutions owned or part owned by O’Brien in the last couple of days has been the role of faceless civil servants, who, they suggest, may be the real villains here.

At the time Esat Telecom was trying to bring competition into the fixed line market. It had the backing of the European Commission but no support whatsoever from the civil servants at the department, who were busy protecting Telecom Éireann’s patch.

This account of events presents Esat Telecom as agents of progress and freedom, teaming up with the enlightened cosmopolitan callacticians in Brussels against the recalcitrant and insular monopolists of the permanent government. Now if I was going to write a maxima mea culpa, this is not really the line I would take, but that is by the by.

What I want to focus on here is the precise intention attributed to Esat Telecom: it was ‘trying to bring competition into the fixed line market’. As though -saints of this parish- there was nothing in it for them!

There is a rather excellent, condensed account of telecommunications liberalisation in Digicel (St Lucia) Ltd & Ors v Cable & Wireless Plc & Ors [2010] EWHC 774 (Ch) (15 April 2010), which, lord help me, I read last night.

The last decade of the 20th century saw vast changes in the global telecommunications industry. Across the world, numerous state-owned telecommunications operators were privatised. A wave of pro-competitive and deregulatory telecommunications policies swept the globe. Competition was perceived to be beneficial as a spur to technological innovation, as leading to reduced prices and leading to growth in the economies of countries with advanced telecommunications. The process of opening up the market to competition was called “liberalisation”.

Liberalisation led to certain identified consequences. In liberalised markets, the penetration of mobile telephony grew very quickly. As predicted, this led to a growth in the economy of the relevant country. New entrants into the market benefitted significantly. Incumbents also benefitted. First, an incumbent with a fixed network sold its services to the new entrant into the mobile market. Secondly, an incumbent with a mobile network benefitted from the expansion of the entire mobile market.

So we can see quite clearly that opening up the market to competition meant new entrants would benefit significantly. And thus there was every reason for Esat to ‘bring competition into the fixed line market’ – because they would make a killing by owning a share of the market.

This is no doubt painfully obvious to all of you and I am sorry to labour the point. However, there is a certain take-home lesson from Carey’s presentation of Esat’s activities as social altruism: whenever you read someone in the papers (say, the Irish Independent) or hear someone on the radio (say, Newstalk or Today FM) proclaim that such and such a market needs to be opened up for competition or such and such a public asset needs to be sold off, make sure you know what those words mean. They mean: we want a piece of the action.

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March 2011