Mobile connections: the threats behind the impressive stats

Interesting news that connected devices in the world now number higher than the population of the planet – the source of which appears to be somewhere around here.

Self-evidently, this is not the same as saying that everyone in the world has a phone – the number of westerners with a multiplicity of devices, providing density figures much in excess of 100%, provides enough of an expanding market to account for by the majority of connected people. Nevertheless, there is an interesting, if obvious, comment to make on the state of international development and solidarity when the number of people without access to safe, clean water and basic sanitation still lies in the billions while those in developed countries have access to not just one, but two, three, four or more connected devices.

Apart from that, it is the growth in mobile which has been so impressive – around 2001, as the chart in this article shows very well, the number of mobile connections globally was around the same as the number of fixed line ones (despite a history of just ten years at that point), but, in the ten years since then, the phenomenal growth rate has seen the number of mobile connections reach a figure around five times that of fixed ones. Indeed, by 2015, there are predictions that the number of connected devices will be twice that of the world’s population as near as 2015, while Ericsson has been predicting 50bn connections by 2020 for at least the last two years.

Impressive growth rates, for sure (if indeed achievable), but, as I argued below, growth as a goal is problematic and, in this context, I also note that Juniper Research has also this week produced another of its warnings that mobile costs may well exceed revenues within four years. Additionally, Nokia is also reporting difficulties arising not least from lower device selling prices as network operators start to drive prices down – a factor which will become more apparent should the France Telecom-Deutsche Telekom procurement link-up be successful – while other handset makers are also feeling the pinch. Counteracting the problems facing mobile companies, at a time of a need for the inevitable increased expansion of investment to deal with the implications for network capacity of such a high number of mobile connections, to say nothing of financially struggling countries looking to spectrum auctions as a source of cheap state finance (which themselves carry evident dangers), is a question that will heavily occupy not only mobile operators and their workers, but also regulators and policy-makers, over the next few years.

Copper and fibre: the price relationship

An interesting report has been published on the relationship between the pricing of telecoms services over both old-style copper wiring and new-fangled, so-called next generation (glass)fibre.

Written for ETNO – the European Telecommunications Network Operators’ Association – the report was published initially last month by Plum Consulting, but I’ve seen it as a result of a news item concerning an ETNO workshop held this week and intended to raise awareness of the impact of the pricing of copper-based services on the case for investment in next generation networks.

Copper pricing, which refers to the bit that we pay for our residential telecoms services either to BT or, where the line is BT-owned but leased to another, to that retail provider, is a topical issue not least because Ofcom has recently launched a new consultation on the prices that Openreach – BT’s provider of wholesale network services – can charge its own customers (which then sell retail services to us). So, the timing of the workshop and the publication is highly important in the UK context.

Plum Consulting makes several points in its document, among them that the running of copper and fibre networks in parallel during the period of transition from old to new will present serious challenges as regards pricing – not least that falling copper prices may well discourage investment in next generation fibre since there would be less incentive for customers voluntarily to migrate to (more expensive) fibre. This would act in turn to reduce retail price levels for high-speed broadband, thus jeopardising the investment case. The prospect of fibre investment being treated in the same way as copper – by being subject to continuing price reductions – is also likely to provide room for second thoughts among investors.

In some ways, this might well be a ‘Well, they would say that, wouldn’t they?’ scenario given the nature of the commissioning body, but Plum Consulting is right to point out that adoption of, and investment in, next generation fibre is not a given and that the policy framework must seek to ensure that incentives to operators are correctly aligned with the public policy goals for high-speed broadband. This means, not least, that copper prices should be maintained at levels which support efficient migration to next generation fibre, thus assisting operators with investment cases, and that – inevitably – fibre pricing must ensure cost recovery and deal with the long-term nature of investment and the uncertainty of demand. The latter is uncontroversial – but the former ought to provide some considerable food for thought for Ofcom, and other regulators across Europe.

Ofcom becomes Off-com

Ofcom today confirmed plans for a 28%+ cut in its budget over the next four years – with the vast bulk being front-loaded: 22.5% of that cut will come in 2011/2012, with a cut of £27m, taking the overall budget to £116m.

We need to see Ofcom’s forthcoming Annual Plan – due out ‘shortly’ – to see what this means in practice (although the confirmation of the dimensions of the cut seem to indicate that this draft is likely to be substantially unchanged), but (on the back of the experience of year-on-year budget cuts) Ofcom believes it can nevertheless maintain its ‘capability and effectiveness’ in delivering ‘effective and targeted regulation’ and, as if to prove ‘business as usual’, it chose today to launch a new consultation on Openreach’s wholesale pricing. Though this tells us little other than that the regulator is on-message.

Ofcom is already in the process of finalising cuts to 170 jobs – 19.5% of its workforce as at 31 March 2010 (see Table 6) – and it’s difficult to believe that this will not have an impact on regulation in the sector. Cuts to Ofcom’s governance structure and the closure of its Consumer Panel have already been made, while I note that those employees remaining in the companies defined benefit pension plans are faced with the loss of future accrual on top of a two-year pay freeze. We are also likely to see the loss of Ofcom’s role in encouraging digital participation and rationalisation of its research programme.

Time will tell. The earlier removal from last year’s Digital Economy Act of a greater role for Ofcom in promoting investment in the industry is already a critical loss since this would have counter-balanced the existing statutory duty to promote competition which is proving problematic to the shape and direction of the industry. The impact of a smaller – perhaps more focused – regulator on the dynamism of the industry is yet to be seen, as will be its ability to compel the government to see through its ambitious plans for the communications industry (about which this blog has previously been critical – see, for instance, here). The signs are clearly not hopeful – but the ideological gap between what I’ve just said about the role of the regulator in driving the industry forward and the practical reality of the government’s market-driven approach is immense.

Google to delete Street View data – but what future for other UK authorities?

Google has been required by the UK’s Information and Commission Officer to delete the personal data which has been ‘accidentally collected’ by its Street View cars ‘as soon as possible’. Some versions of this story (including the earlier version of this BBC online report) report that this deletion process could take ‘up to nine months‘, although other versions report that the nine-month period refers to the period within which there will be an ICO audit into Google’s internal privacy structure.

Nine months is – quite evidently – far too long a time period for Google to delete this – apparently innocently collected and absolutely unwanted – data: but that’s not my point here. An open ICO investigation into Google’s ‘internal privacy structure’ is surely a report worth reading, but it’s the quotes in the BBC story that worry me; and I don’t just mean the apparent weakness of UK law in this area based as it is on there having to be ‘substantial damage or distress to individuals’.

The ICO has conducted only a basic investigation (in its own view, if it had spent more time searching, it ‘would have found more’). The ICO reported initially that there had been ‘no significant breach’ of the law had occurred, before changing this (to remove the negative) once the Canadian data commission had conducted its investigation. Not only has it has based its decision ‘on the findings of other data authorities’, but it is apparently only able to investigate companies that have actually given it permission to do so.

This is – indeed – a shocking state of affairs. I’m all for international co-operation on these things and – aside of the different legal frameworks that apply – there’s nothing wrong with one data commission taking a lead on investigations and reporting findings that are internationally persuasive. Well done to the Canadian, and the German, authorities in this regard: a welcome sign of the benefits of internationalisation.

But is this not a desperately depressing admission of defeat from an organisation with no power and absolutely starved of sufficient resources to do the job it is supposed to do? And that’s before planned UK government cuts start to hit. If the currently constituted ICO is unable to mount a proper investigation into organisations that it suspects of breaches of the law, what future for other UK governmental organisations charged with responsibility for implementing the law once the cuts really start to bite? The Health and Safety Commission, for example – will it, in the future, be reliant on Canadian bodies to carry out research into substances which may cause damage to workers’ health? And how many other UK authorities will be forced to adopt the view that ‘It is not a good use of the… authority to duplicate more in-depth enquiries’, thus giving themselves a back seat, secondary role in investigations? And what happens to effective regulation in this country when the bodies charged with such tasks are profoundly reliant on others as a result of having insufficient resources to do the job themselves?

Take a glimpse into the future as revealed by the cuts planned by this coalition government – second class, mean and ultimately ineffectual. And fear for the regulatory outcomes.

Viva comradeship

Here’s to ‘Los 33’ on their safe evacuation from the mine, and to all the hands, engineers, scientists, paramedics and officials involved in accomplishing the rescue so smoothly and with such excellent organisation.

The scenes over the last 24 hours at the mine have been intensely emotional and euphoric, and sharing in that joy has been a global experience – one of the wonders of the internet is its ability to bring everyone closer together and that has clearly been a major aspect to these amazing events. Congratulations to the BBC too, whose live reporting on the BBC website has been sensitively and engagingly handled (even if the demands of 24-hour live TV commentary have presented their own, er, challenges. Less is definitely more when it comes to commentators’ and interviewers’ verbose, repetitious and occasionally mystifying, western-oriented, inanities and concerns.)

And now, with everyone out, it’s time to look at the lessons. A number stand out:

– the miners have survived so long (including 17 days at the start when no-one knew if they were alive or not), and have emerged from the mine with such strength and assurance, and good health, because they have stood together. The BBC website carried the story of a journalist who has been working with miners and who had advised them to pick one word around which to make a speech. The word they chose: ‘comradeship‘ (linked to Google’s cached version as the BBC has overwritten updated the page). They have formed a society underground; under the command of the extraordinary figure of the shift foreman Luis Urzua, they have been disciplined and resourceful; they have been organised; they have shown an incredible amount of solidarity. They’ve had Elvis singalongs and religious services to strengthen morale; and secured water and delivered food and medical services to each other. They have had a daily routine of eight hours for work; eight hours for rest; and eight hours for their own instruction. All this has made them resilient enough to survive the ordeal. Mining is that sort of occupation: your own survival underground depends on those you work with and miners therefore tend naturally to recognise the values of solidarity better than others (though not all of ‘los 33’ are indeed actually miners). They don’t need to learn the lesson that people really are stronger together: but people in increasingly self-regarding, individualistic societies do need to learn (or re-learn) it.

– mining really does ‘have to modernise’ (in the words of Mario Gomes, the eldest of the rescued miners). Stories abound of the desperation of the miners at that mine, willing to accept a higher wage premium to compensate for its poor safety record so as to improve prospects for their families (including Franklin Lobos) or else, in the case of Victor Zamora and Raul Bustos, to start again following the Chilean earthquake earlier this year. And it does indeed make no sense that the safety record of Chilean mines fluctuates inversely to the price of copper: it gets better when the price falls, since only the large, more or less multinationals are left in the marketplace. (That’s not intended to be an argument that working conditions are good in multinationals, or that the Chilean mining industry now needs to be handed over to the multinationals, though I fear that some softening up in this direction is already happening).

Firstly, this is a case for better regulation – a case which Chile’s mining minister and President both appeared to accept yesterday – but it’s remarkable that we appear to need this sort of event to remind us of the value of regulation. It’s also a case that we need to place better value on the minerals that people risk their lives to mine. Human life is cheap: and it’s cheapened still further by an economic approach whose only interest is driving prices downwards in the search for greater profits. As consumers, we have an immense role to play in acquainting ourselves better with the components of the things we buy, and the human cost that goes with our desire to buy them ever more cheaply. And a responsibility to do so, too, which we need to remember once the media circus has all packed up and gone home from Campo Esperanza.

¡Chi-chi-chi-le-le-le, los mineros de Chile! ¡Viva los mineros!

Not less, but smarter regulation

A quick welcome to ToUChstone’s reporting of yesterday’s debate hosted by the TUC and the British Chambers of Commerce on ‘Is Deregulation Dead?’, and to the ToUChstone pamphlet from earlier this year on ‘The Red Tape Delusion‘. You can view videos of the four opening speeches by the panellists here.

I’ve only caught up with Brendan Barber’s comments so far, but his point that it was Labour’s partial re-regulation of the labour market which ensured that this recession has not had the deleterious impact on unemployment that this country experienced in the 80s and 90s recessions is one that stands repeating in many forums other than this one. Regulation has a clear and vital role to play in boosting job security, in ensuring that unions are engaged in building higher performance workplaces and in underpinning the active labour market programmes which are critical to the increase in employment rates which will deliver growth and prosperity afresh. Barber believes that ultimately, a more intelligent, nuanced approach to labour market regulation, based on an approach to policy driven by evidence rather than ideology, is one that ought to see the commencement of the administration of the last rites to the cult of deregulation.

Amen to that.

On regulation and the invisible hand

A very interesting article has appeared on Transitions Online over the last few days looking at the role of western banks in lending to central and eastern Europe in the run up to the financial crash – which has ended up hitting several countries in the region (chiefly Hungary, Romania and Latvia) particularly hard.

The article points out a couple of interesting things:

– that the net cumulative capital inflows into central and eastern Europe between 2003 and 2007 were, according to the IMF, three times greater than those flowing into Asia before the 1997 crisis there. Annualised capital inflows were running at 15% of GDP and, in Bulgaria, doubled in this period to reach a cumulative total of 192% of GDP

– most lending was to consumers, in the form of mortgages, rather than corporate lending which could have stimulated economic growth and employment. Some part of the corporate lending that did exist was for property developments (which may well have been targeted at (far) western Europeans)

– the consumer boom thus generated sucked in imports, which destabilised the structures of central and east European economies

– and, crucially, the debt offered was denominated in foreign currencies, leaving domestic borrowers absolutely exposed not only on the grounds of the global downturn and to the credit crunch, but also as a result of the ultimately destabilising impact which the nature of these loans had on local economies.

Consequently, average growth between 2003 and 2008 was higher in countries that did not have an economic boom before the crash – i.e. that the foreign bank-led lending boom actually made these countries poorer than they would have been with a more moderate lending policy.

Clearly, Someone Must Be To Blame For All This. The author resists apportioning blame – while giving space to the views of a board member of an Austrian bank within the Raiffeisen group to the effect that regulators and politicians must take a share of the blame.

I disagree.

What is ultimately to blame is unfettered free markets (thank you, Adam Smith). Where there’s demand in a capitalist economy, organisations will fill it – that’s the nature of the beast and it’s exactly what a free market would predict would happen. To a very major extent, banks can’t be blamed for fulfilling the role expected of them. They can’t help it – the natural trend of capitalism is towards supply, in the sure knowledge that a market correction will take place where over-supply takes place. It’s not the fault of politicians, who have other concerns, nor of regulators – it’s not their role, either. And neither is is the role of market-based organisations to be concerned with the impact of the activities.

What is to be done about it, is the key question. Regulation exists to fetter monopoly organisational powers created in this post-modern privatised world in the interests of liberalisation and removing the role of the state. It exists to protect consumers against the abuse of power by organisations that, in other times, would be a state monopoly. It’s not actually there to protect consumers against the red-blooded teeth and claws of capitalism in full flight – but it is clearly a very easy target when things go wrong. A failure of regulation is monopoly profits – not people (or organisations) suffering as a result of capitalism doing its thing. It’s not the job of regulation to stop private sector banks from lending so much money, and in the wrong areas of the economy – not in this system, anyway.

If we want a different future, one based on a more dirigiste approach, in which individual banks offering micro-solutions can be controlled in favour of macro- level interests, and forms of lending both directed appropriately and not over-concentrated beyond a country’s economic capability, it’s not regulation we want – and, I would suggest, neither is it a capitalist free market.