The French word for taxation

For those who are not so immersed in public economics, it is safe to say that most people agree Goverment (big G) should be as small and efficient as possible, subject to meeting the needs of its electorate. When it interferes with an otherwise unencumbered market, it should be for specific reasons: information asymmetry, externalities, etc. – poor price signalling, generally.

Along the way, Government should institute, as agent for the economy as a whole (now and future), policies that secure sustainable, stable long-run economic growth (increasing technological change, increasing labour productivity, increasing Efficiency with respect to the use of finite resources, etc.).

All of which serves to make this article in the International Herald Tribune very amusing:

Sarkozy proposes taxing new technology to finance the old

In a move that could profoundly reshape the media landscape in France, President Nicolas Sarkozy on Tuesday proposed banning commercials from public television and making up for some of the lost revenue with a first-of-its-kind tax on the Internet and mobile phones.

A government tax on Internet connections would be virtually without precedent and could be politically controversial, given that public policy experts say that Internet access drives a country’s economic growth and productivity.

…

In France, competition for Internet customers is intense, resulting in prices that are well below those of elsewhere, and an “infinitesimal” tax would presumably not discourage potential subscribers. The French pay an average of 37 percent less than the OECD average, or $36.70 a month as of October, compared to $49.36 for all 30 countries belonging to the group.

The share of residents with fast Internet connections in France is also slightly higher than elsewhere – 22.5 subscribers per 100 inhabitants, compared to 18.8 for the OECD as a whole.

But policy experts mostly advise making the Internet cheaper and not weighing down its growth with extra charges. The U.S. Congress last year extended a federal moratorium on Internet taxes for the next seven years.

While it is far from widespread, there are a few other examples of government levies on new technologies or communications to help older ones. In Europe, many countries tax blank storage media like CDs and devote that money to support music. Turkey and South Korea have also used telecommunications taxes to raise money for other industries.

Sarkozy’s proposal was part of a dense salvo of measures fired off in a New Year’s speech aimed at redirecting the focus from his Hollywood-style love affair with the Italian singer Carla Bruni to his vision for France.

In the 45-minute speech, Sarkozy declared the death of the 35-hour week, suggested that large companies may have to double or triple the part of their profit they are obliged to share with employees and vowed to replace gross domestic product with a more holistic indicator of economic welfare that he has commissioned from two Nobel laureates in economics, Amarthya Sen and Joseph Stiglitz. He also said that he would put a state bank in charge of defending French industry against sovereign wealth funds and other financial predators.

They had it at the title, really. Taxing new technologies – that are popular – in order to bolster old technologies – that are not – is not a great way to go about things. It’s a good way to raise money: demand for internet access is going to be fairly inelastic, at least for the people using it. Getting that ratio reversed would make a lot more sense, though, and a tax won’t contribute at all to Middle France’s willingness to embark on new technology.

The tax on blank media is also a poor comparison: blank CDs are almost guaranteed to be used to copy protected music/film. The internet? Not so much. I don’t like that sort of equivalency (and I’m welcome to start my own newspaper, I know).

The two things that are most interesting, yet received the least attention in the article, are this apparent “GDP plus” measure of well-being and welfare, which will be very interesting to observe, as well as the plan to set up a defense against predatory behaviour by Sovereign Wealth Funds. The latter is a little paranoid, I think, but then France is fairly high on the list of xenophobic economies.

The dream of wireless networks bathing U.S. cities in free and pervasive internet access has come to an end.

So says Wired magazine (or its news desk, at any rate):

It’s a harsh dose of reality that juxtaposes the giddy enthusiasm for ubiquitous Wi-Fi that cities like San Francisco, Philadelphia, Houston and many others displayed only a few years ago. In part, that enthusiasm was based on a handful of assumptions. The first was that advertising could support citywide connectivity, enabling the services to be free or low-cost. Many proponents also argued that residents would actually want to use the free networks. Both assumptions were mistaken.

Esme Vos, an intellectual-property lawyer who tracks various national municipal projects on her site, MuniWireless, notes a pronounced downturn in muni Wi-Fi projects and attributes that trend to telecoms finally realizing they have no clear path toward profit with the agreements they currently have in place.

When companies like MetroFi and Earthlink started bidding for contracts in 2004, they often agreed to some spectacularly generous terms. For instance, many telecoms acquiesced to footing the entire bill for network build-out, maintenance and upgrades. They would also frequently agree to pay the cities to lease public property, such as light poles, which would hold Wi-Fi transmitters. Earthlink’s canceled San Francisco contract contained many of these terms.

Then, there was the issue of radio transmitters needed to broadcast the signal. With a range of just 100 or 200 feet at most, Wi-Fi networks simply don’t provide adequate access — especially for people in buildings or other enclosed areas. As a result, most networks deployed in the past several years have required between 20 and 100 percent more access points than budgeted, according to journalist Glenn Fleishman.

Lack of demand was the final nail in the coffin. Although cities and telecoms expected 10-25 percent of an area’s population to sign up for muni Wi-Fi, what they got, in many cases, was closer to 1 or 2 percent, Fleishman reports.

Well, shit. I always like the idea (if there’s a Romantic Economics, I subscribe to it. I really do. ‘Giddy enthusiasm’ wouldn’t be far off my response to the Romantic notion of blanket, ether-like, WiFi). I, too, do not think this is the end of the idea, though, or any sort of proof that Big Government attitudes towards municipal WiFi are doomed.

Hendricks isn’t ready to give up on the general public just yet, and says the public Wi-Fi story is far from over. “Lets just say things work in waves,” he said. “You see this a lot, especially in the Silicon Valley. The first time around, projects don’t go so well. Then you try again.”

In fact, Hendricks characterizes the recent downturn in muni Wi-Fi projects simply as “the end of the first beginning.”

The second beginning, he says, may already be underway with the IEEE’s work on 802.11s, a yet-to-be-ratified amendment to the Wi-Fi standard that defines how wireless devices can interconnect to create decentralized, ad-hoc networks, or “mesh networks.”

Mesh-networking systems are designed to be self-configuring, allowing wireless nodes to find one another and create links automatically or with very little user intervention. Recent reports from market-analysis company In-Stat show that the Wi-Fi mesh-networking equipment market had more than 100 percent growth in 2006, and will have more than 90 percent growth in 2007.

Hendricks says technologies like WiMax, which offers longer range and higher bandwidth than Wi-Fi, may also prove to be a particularly appealing model for cities. Companies like Sprint and Clearwire have already stated they will begin investing billions of dollars for major WiMax build-outs in metropolitan areas like New York in the coming year.

“Cities are saying: Wait a minute, if these guys are doing all the work, why should we lift a finger?” Hendricks said.

And if the larger, more ambitious municipal networks prove infeasible? Well, growing evidence shows smaller, localized networks may be the answer.

“More localized Wi-Fi is one option – for example, deploying in areas where there are a lot of tourists, foot traffic, business people,” says Vos.

If you’re like me, though, you prefer the Ian Fleming version:

He’s right, you know: disaster didn’t stymie Louis Pasteur.

The latter point (not the Chitty Chitty Bang Bang one: before that) does make sense. I don’t know what sort of difference serving laptops vs. PCs makes to the distributional debate, but municipal WiFi seems more sensible as applied to parks, or areas of congregation, rather than trying to hammer signals into buildings. There is, still, a part of my that would like see an Apollo Project mentality put into this, partly because success would likely bring with it several technological advances, in terms of networking (although mesh networks may be that, already), and because there seem to me still many urban areas that could benefit.

This is another part of my soft paternalism, though: the idea that families all over, say, Queens and the Bronx, aren’t using the internet for the sort of information-gathering purposes that I think they should. How offensive that is depends upon your assumptions of my motives. Opinions differ.

It also ignores something basic: if these households can’t afford, or don’t ‘get’ the importance of, the internet, why am I assuming they’ll have laptops or PCs in the first place? Getting ‘the internet’ is, I’m learning, surprisingly expensive here. In a low-income household I can understand it not being on the list of necessities, but the real barrier to accessing the internet isn’t the Verizon account, it’s having the machinery itself. While I have this evidence-based understanding prejudice in favour of Information as some sort of a merit good, I can’t seriously extend that to household computers, themselves (schools, yes). There are limits.

I also have the benefit of teaching students who parents pay around USD40,000 per year – I don’t really need to worry what they can and cannot afford. I can rage all day against newspapers and tell them that 30 minutes on the internet will give them a month’s worth of the information that gits like Brian Williams or Anderson Cooper ever could. It makes my arguments, not to mention my expectations, lazy.

In this respect, it makes sense for municipalities to bow out of the idea of blasting however-many residential blocks with wireless signals. Let businesses, small networks and municpal parks be covered, let networks and access points ‘swarm’, as it were, to nearer some critical mass, and then see how it goes.

Development, Interrupted or: At Least Africa Won’t Have An Internet Porn Problem

Via NEWSgrist and the Robert Goldwater Library, from the New York Times.

Attempts to bring affordable high-speed Internet service to the masses have made little headway on the continent. Less than 4 percent of Africa’s population is connected to the Web; most subscribers are in North African countries and the republic of South Africa.

A lack of infrastructure is the biggest problem. In many countries, communications networks were destroyed during years of civil conflict, and continuing political instability deters governments or companies from investing in new systems. E-mail messages and phone calls sent from some African countries have to be routed through Britain, or even the United States, increasing expenses and delivery times. About 75 percent of African Internet traffic is routed this way and costs African countries billions of extra dollars each year that they would not incur if their infrastructure was up to speed.

…

Africa’s only connection to the network of computers and fiber optic cables that are the Internet’s backbone is a $600 million undersea cable running from Portugal down the west coast of Africa. Built in 2002, the cable was supposed to provide cheaper and faster Web access, but so far that has not happened.

…

Rwandan officials were especially interested in wiring primary and secondary schools, seeing information technology as crucial to modernizing the country’s rural economy. Some 90 percent of the country’s eight million people work in agriculture.

But as of mid-July, only one-third of the 300 schools covered in Terracom’s contract had high-speed Internet service. All 300 were supposed to have been connected by 2006.

Over all, less than 1 percent of the population is connected to the Internet.

It is hard, from the story (and from, I imagine, the actual circumstances) to figure out exactly the problem. The company, Terracom, is based in Boston and, after its original sales pitch and monopoly-win, bought out the national Telco, Rwandanet. Meaning Rwand’s monopoly telecommunications provider is in Boston, in the hands of a guy who’d never set foot in Rwanda before, and has only been there a few times a year since.

The owner Greg Wyler is criticised for delivering very little of his internet promises, while signing up as many people to mobile telephony as he can, and while complaining that the bandwidth problem is the bandwith problem – there are only so many satellites to go around, satellites offer much less bandwidth and one company cannot hook Africa up to FTTN networks on its own.

To some extent that’s fair, however he’d have generated a lot more interest by governments if his operation were more serious. After being busted a while ago, trying to offload Terracom shares to a regional provider, in contravention of the contract he’d signed with the Rwandan government, Terracom has a new Chief Executive, who’s worked in Africa a lot and is in Rwanda full-time (apparently, service has improved).

The New York Times manages to stitch together the solution:

Prices remain high because the national telecommunications linked to the cable maintain a monopoly over access, squeezing out potential competitors. And plans for a fiber optic cable along the East African coast have stalled over similar access issues. Most countries in Eastern Africa, like Rwanda, depend on slower satellite technology for Internet service.

…

Internet rates have been lowered, from about $1,000 a month when Terracom arrived in 2003, but most people still can’t afford it. The average Rwandan makes about $220 a year, and a fixed-line Internet hookup costs about $90 a month. Basic wireless Internet is about $63 a month. Those rich enough to pay the fees complain about poor service.

…

Terracom is moving ahead with plans to give Rwanda the most advanced Internet infrastructure in Africa. A nationwide wireless connection should begin operating near year-end, he said, about the time a nonprofit group, One Laptop Per Child, based in Boston, is to introduce a $100 laptop in the country.

And Terracom is continuing to lay fiber optic cables to connect Rwanda to several other African countries, eliminating a need for phone calls and Internet traffic to be routed via European or American networks.

The government, meanwhile, is moving forward with its own plans to build a fiber optic network. It also has granted Internet service licenses to South African companies and plans to issue several more. “We think we are going to have a healthier market pretty soon,” said Nkubito Bakuramutsa, director general of the Rwanda Information Technology Authority. “We have learned from past experience.”

Mr. Bakuramutsa said he hopes to bring the price of Internet service down to about $10 a month.

I realise I wrote only on Friday about natural monopolies, but in this instance it won’t operate quite the same – or it will, but the monopoly will be state-owned. In order to generate the seriousness of the priority, several competitors will need to be in place. Mostly, I would say, that is because, at the moment, it is people complaining about not having internet access (or electricity), but not all that many, and not commercial enterprises. Once more companies are competing, driving prices down and generating critical mass for the demand, the Rwandan government will become very serious about those plans for the fibre-optic network, and should ultimately follow the path of, say, Botswana, famous for establishing security and attracting foreign investment, and generally doing well (all things being relative).

At the same time, and leaving the grounded-economics, the effects on information, media, evidence-based medicine and, ultimately, the rights of women and children, land and resources conservation and democracy itself would easily surpass anything we’ll ever achieve smashing the birthplace of civilisation to blood pieces.

Then, who knows. Some stable public ownership or corrupt fire-sale privatisation to cronies. It would probably depend upon the state of the continent, as a whole (who figured on Zimbabwe going to shit so quickly?). Given how far behind they are, though, it is worth the effort of African countries to lay their networks now, before they become another generation of technology behind.

Africa remains the least connected region in the world, and the digital gap between it and the developed world is widening rapidly. “Unless you can offer Internet access that is the same as the rest of the world, Africa can’t be part of the global economy or academic environment,” said Lawrence H. Landweber, professor emeritus of computer science at the University of Wisconsin in Madison, who was also part of an early effort to bring the Web to Africa in the mid-1990s. “The benefits of the Internet age will bypass the continent.”

Here’s the New York Times graphic on internet usage:

And another on world internet traffic using the top 5 protocols, by McAffee’s HackerWatch:

There’s also a great interactive map here. Internet penetration in Niger is apparely 0.2% of the population (it’s 68% in the US, Canada, Australia).

On metropolitan broadband, and Telstra reminding us not to forget our place

After all that heat generated on broadband telecommunications in Australia, the issue seemed to lose its air after the Optus-Elders partnership won the rural/regional part of the fibre-wiring of the country.

This leaves the metropolitan network which, given the propensity of Australians to live in urban areas, one would think was of more political importance. At the moment, though, it seems the debate has weakened to its bare minimum: Telstra and Optus trading barbs on the pages of the newspaper.

On the 19th, independent consultant (apparently – I didn’t see any evidence of it in the article that he wrote) Kevin Morgan wrote in the Age:

Telstra the only choice for broadband

Communications Minister Helen Coonan has asked her expert group on broadband to consider a very difficult question.

Should taxpayers pay a couple of hundred million dollars in compensation to Telstra’s competitors so that the national phone company can build its high-speed broadband fibre network (FTTN) or should taxpayers pay $20 billion-plus so someone other than Telstra can build the network and maintain the illusion of competition.

Apparently, he suffers some of the confusion of Bill Clinton (M. Morgan: “is” is a present subjunctive belonging, in your case, between the noun “Telstra” and the definite article “the”). Sorry, that was snotty. Newspapers are annoying.

Nowhere in the article does Morgan explain why we would owe Telstra AUD20bn if they don’t get to keep their monopoly. He mentions their investment, and that of their shareholders, in Teltra’s copper network. Which doesn’t help, particularly, explain why they get AUD20bn for not winning a public tender. His argument seems based upon the fact that, should the Australian government push fibre-optic broadband, Telstra’s copper network becomes obsolete. Which is pretty-well true. Explain to me, again, why we should compensate Telstra for that?

At the very least, he conflates a massive compensation claim with a massive compensation payout. His attempt to put it in terms political (a thinly-veiled, and weak, threat) does not do much for me, either.

Should the group effectively recommend that Telstra proceed with FTTN, voters would be entitled to ask why the Government has delayed Telstra’s plans for two years and in the unlikely event it finds in favour of a G9-type proposal, the electorate will scarcely be impressed with a massive compensation payout to Telstra.

Again: if the electorate will scarcely be impressed with said payout, there probably will not be one. So…

In fact it appears to be more of the same from Telstra, the self-presuming monopoly that objects in principle to the government doing anything about that. Which is fine – telecommunications, with its massive infrastructure, is a natural monopoly. But not a royal one, for all that Tesltra can act like it. They appear to be smarting, still, from the government’s opting for a competitive tender rather than an in-house deal with Telstra, to give them the FTTN network and retention of their monopoly. Said tender is apparently attracting overseas interest, as well.

Returning to Morgan’s point about the electorate demanding to know why the government has taken so damn long. I’ve commented previously that the Howard government has in fact done nothing at all, for a long time, and then made decisions very quickly, according to electioneering expedience. As to the time taken, Morgan might look instead at Telstra’s relationship with, engagement with and treatment of the ACCC. Their walking-away from the ACCC late last year did not help the timeliness of establishing a FTTN network.

Ravi Bhatia, chief executive of Primus Telecommunications, sometime-partner with Optus, responded to Morgan’s article on the pages of the Age also. His perspective:

The so-called broadband debate is also not about its speed in metropolitan areas. To most in the industry, the fundamental concern is one large recalcitrant industry player wanting to decimate competition and increase broadband prices by 300 to 500 per cent, thereby transferring $2.5 billion to $3 billion annually to its profits from the wallets of Australian consumers. Such an outcome is unacceptable to the industry, the regulators, the Government and consumers.

For the rest of it he contradicts most of what Morgan said concerning the technicalities of the network (specifically, how Telstra could be the only provider). As a non-technician, I didn’t really follow much of it, except to understand that the two sides disagree. I do agree with his characterisation of the “so-called debate”, however.

Politically, this does not help the Howard government. They will be hard pressed to get anything firm, or even useful, ‘out’ before the election. In the meantime their relationship with the monopoly that they privatised becomes ever more acrimonious. All households need to know is that they still have an out-dated network, and no credibly promise that the replacement will be any more affordable. At least they don’t have the net neutrality debate on top of everything else.

Howard finally gets on the broadband wagon

The government is announcing/has announced partners Optus and Elders have won funding for establishing broadband access – Broadband for everyone ‘by June 2009’.

Federal Communications Minister Helen Coonan says 99 per cent of Australians will have access to fast affordable broadband internet by June 2009.

Senator Coonan announced Opel, a joint venture between Optus and Elders, had been awarded $958 million from the Broadband Connect Infrastructure Program to build a wireless internet network in regional Australia.

In addition, Opel will contribute $900 million of its own funds to the network.

First, that name is the work of just plain laziness. But, second, did the Treasurer not recently go nuts on Labor for saying they’d spend money on this? This involves AUD958m? Go figure.

Note the ‘regional’ bit. In fact, the SMH reports,

Senator Coonan also confirmed an expert taskforce of eight people would be set up to assess rival proposals for a fibre-optic network in the major cities.

Wayne Swan, Labor’s shadow minister for the Treasury, referred to Howard’s portending creation of a ‘digital underclass’ – i.e. one version of high-speed internet access for the bush, one for the cities. I find the fact that we’ll likely have different companies doing each a particularly bad sign, also.

Oddly, it seems not everyone even knew about the public money on offer:

Opposition communications spokesman Stephen Conroy said yesterday he had asked the auditor-general, Ian McPhee, to investigate the tender process for the Broadband Connect program.

He said not all parties involved in the tender process were aware that they could apply for more than $600 million in funding.

“Given the limited period allowed for the preparation of bids in the Broadband Connect tender, this delay in providing equal information to all participants significantly disadvantaged some bidders,” he said.

I must confess, I’m kind of glad those companies missed out – I’d prefer a little more initiative on the part of the providers of rural/regional FTTN networks.

Interestingly (I mean, over and above Howard’s electioneering approach to something as critical for Australia’s long-term economic growth and international competitiveness), Telstra is not only missing out on the regional/rural market, but facing heavy-enough involvement by the ACCC if they do emerge with the urban end of the government’s broadband concessions.

It is understood an ACCC official will be included on the panel. There will also be officials from Treasury, the Department of Communications, Information, Technology and the Arts and the Department of Prime Minister and Cabinet.

New Zealand isn’t happy about it, either.