The alternate title for this rant is “A bad idea whose time has come again”: Italy toys with the idea of a nationalized broadband carrier.
Reuters reported that “The far-right League and its coalition partner, the anti-establishment 5-Star Movement, want to create a company that combines the networks of former monopoly Telecom Italia and smaller, state-controlled Open Fiber to help Italy catch up with the broadband services of European rivals.”
There are a number of reasons (not all of them bad) for the continuing nostalgia for state-owned carriers.
As far-right League lawmaker, Alessandro Morelli was quoted saying, private investors were welcome “but infrastructure of strategic importance must be in the hands of the state”. He explicitly drew the connection to state lender, CPD’s, control of gas and electrical networks. The entity already controls Open Fiber and has a 5% stake in Telecom Italia.
We tried this once and it didn’t work
The sixth and final not-so-good reason this kind of idea comes up time and again is that human beings have short memories.
Telecom networks were considered essential services at the beginning of the last century. So were electrical grids. Governments – and those that they served – did not want foreign influence over a strategic resource. Most countries apart from the US and Eastern Canada perhaps, started state-owned telecom companies. In some cases, they were not companies at all but part of the Ministry of Communications. In other cases, there had been private companies but either they wobbled and were nationalized to maintain service continuity or they were expropriated because “infrastructure of strategic importance must be in the hands of the state”.
In the US and Eastern Canada, Rate Base / Rate-of-Return regulation allowed investor-owned telecom companies to have monopolies but without the thought-to-be-inevitable price gouging. Furthermore, these companies were happy to follow government orders to build in non-economic areas because Rate Base / Rate-of-Return regulation guaranteed the investment was paid for through an implicit subsidy from low-cost areas to high-cost areas.
And so voice telecom networks were broadly deployed in many countries (at least the urban parts) just as the technocrats and / or voters wanted it to be.
Except this did not bring happiness.
By the 1980s the Anglo-Saxon countries were fed up with monopolies – whether state-owned or investor-owned – and by the 1990s the rest of the world agreed. The profit-motive and multiple players meant lower prices, newer technology and overall better service. The winners were customers.
As a result, there are few remaining monopolies although most of them are still government owned. In Latin America, Costa Rica, Cuba, Uruguay and Venezuela would stand out for still having government-owned monopolies, at least for fixed telecom services like broadband.
The biggest losers were the unions, to a lesser extent non-unionized employees and, in many countries, corrupt politicians. Unions and politicians are no doubt behind some recent attempts to return to what should be a by-now discredited business model.
But mostly, I think, the bad old days have been largely forgotten.
Voters want a more ‘forgiving’ public utility that would find it politically nearly impossible to disconnect essential services for non-payment and which dutifully follows national policy directives to invest in shiny toys.
They naively assume that the service quality they enjoy under market-disciplined operators (who consider customer service to be a competitive imperative) would continue under a bureaucratic model (which considers customer service to be a cost to be minimized).
And, maybe, most of those thinking state-owned broadband companies are a great idea are younger than, say, forty and never had to get phone service under that model or wait days / weeks / months for repairs. (When I arrived in Bogotá twenty years ago, most homes had two telephones because the unionized, municipal phone company could take up to six months to repair a line and there were only one million mobile lines in a country of 40 million people.)
You go back, Jack, and do it again.
Title Reference: Steely Dan (again!) from Do It Again, off their 1972 debut album Can’t Buy a Thrill. The song got to number 6 in the US and Canada which made it their second-highest charted single.
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