Government's inconsistent insistence on market forces

Remember the Kiwi Share?

Almost 20 years ago I was the Policy and Communications Manager at TUANZ - the Telecommunications User Association of New Zealand - and became part of a campaign that ran for a few years, and eventually forced the Government to legislate and establish regulatory controls to direct the behaviour of players in the telecommunications market. This was in the teeth of an ideological insistence that the market knew best and should be left to its own devices in allocating resources and making investment decisions.

Telecom advocated for this stridently with enormous resource at hand, and the threat that if it was regulated the NZ share index would be affected (Telecom shares making a big proportion) and that international investors would desert us.

The Kiwi Share was incorporated into the privatisation of Telecom because it was widely understood that the public interest in the telecommunications network was the fact you could pick up a phone anywhere, and dial anyone else who had a phone. Thus the network was one network. It wasn't a cluster of separate networks. Though that was thought a possibility when Bellsouth came along with NZ's first major "cellular" phone network.

To cut to the chase the economic idea was that innovation was a good thing and new entrants should be encouraged to come to New Zealand and establish competing phone services, and eat into the enormous monopoly profits that Telecom was earning from its monopoly network. For years Telecom recorded annual profits of close to a $1 billion, and used every trick in the book to resist regulatory change. TUANZ was part of the industry and user  group campaign to impose regulation. And it was all pretty much based on the idea behind the kiwi share. People with a phone should be able to call anyone else with a phone - irrespective of the network they are connected to.

But without some sort of regulation new entrants could only compete in little pockets of Wellington or Auckland. Peanuts. And paying to interconnect with Telecom was extortionate.

The idea of regulating interconnection fees became obvious. So was the idea of number-portability - that you could take your phone number with you if you wanted to change provider. And so the mixed economy for telecommunications - a mix of private and public goods and rights (don't forget the rights) was established. All this is accepted today, and the basis for competition between cell phone providers. But it wasn't always so.

What happened in telecommunications 20 years ago is happening today in urban redevelopment. Ideological forces are at work to further deregulate urban development - ignoring what could be called the Kiwi Share in a local community. That is a mix of amenities and social networks that make up a local neighbourhood. Something that markets have never been good at making, but they are quite good at disrupting and breaking.

Governments need to understand and respect the Kiwi Share in communities when planning more rockstar economic interventions into New Zealand's existing urban fabric. It isn't all for sale because communities are not for sale, and they will certainly resist a pure market force approach.

Don't forget the Kiwi Share. It's fair.