Monday, 11 November 2013

What to do with Chorus?

Is anyone else surprised by the Chorus nationalisation speculation? The first mention came on Tuesday when the PM refused to exclude it as an option for solving the tricky problem of how to give Chorus shareholders more money. A few days later the DomPost was complaining that Telecom should never have been privatised and perhaps we should nationalise Chorus.

Its easy to agree with the DomPost that the privatisation of Telecom was stupid because ideology dictated that there would be no regulation of the resulting profit-driven vertically integrated natural monopolist.  But I would take some convincing that a buy-back makes sense at this point. Three things make me prefer using effective regulation in this case.

  1. Governments often do badly on these big deals, whether buying or selling. There is no transparency, a huge amount of value on the table in one deal, and I just don't have much confidence that "we" would come out the other end feeling good about the price.   
  2. A nationalised Chorus would still be difficult to handle. The agency problems that regulation aims to tackle wouldn't go away. So we'd still need something like a regulator if we wanted to keep such a firm from running off the rails.
  3. We have a decent regulatory model already built. Now that Chorus is vertically split from the rest of Telecom, we could use the same style of building block regulation that has been developed (at great cost) for the energy networks over the last few years. 
So while I can certainly understand the DomPost's frustration, the idea of the government sitting down with Chorus to negotiate a buy-back scares the crap out of me.

1 comment:

  1. The Dompost that the privatisation of Telecom was imbecilic on the grounds that belief system metal casting managed that there might be no regulation of the ensuing benefit driven vertically incorporated characteristic monopolist.