NZ Gov't Shift May Spell Trouble for Telecom

New Zealand's IT Minister Maurice Williamson's "road to Damascus" conversion may spell trouble for Telecom New Zealand in the coming months, says economist and commentator Brian Easton.

At a recent press conference Williamson said, "For someone like me, who has always been a great advocate of the free market, this is like swearing in church, but the government needs to get more involved."

Easton points to the ongoing wrangle over Telecom's monopoly position in the market as a classic example of an area that will feel more intervention in the future. "I suspect at this stage the current Internet crisis is being driven by the fear that Telecom is misusing its monopoly position again," he said.

He says Telecom had been required, as a state-owned enterprise, to operate two distinct branches. "If I say lines and electricity you'll know what I mean," he added.

Dividing Telecom into two divisions, splitting control of the backbone off from the rest of the business, was an attempt to regulate its monopoly powers, but as soon as it was privatized those two functions were combined again.

"(Former Prime Minister) Geoffrey Palmer told me that when he chaired the cabinet committee on privatizing Telecom he didn't receive a single paper about the regulatory implications," he said.

But Easton believes Williamson's conversion is only the tip of the iceberg. He believes the entire National party is swaying towards a more interventionist, hands-on approach.

"One reason for this is that we've objectively failed in that we only have a modest growth rate," says Easton. Compared with countries like Australia or Ireland, the New Zealand economy has performed poorly in the global marketplace. "There has also been a shift in policy making since the arrival of coalition government. One has to be seen to be more responsive to what is actually going on," Easton said.

He points to Williamson's recent announcement that roading reforms will be delayed indefinitely as indicative of this. "Shipley was saying the same thing about water and Bradford about electricity," he said.

Easton isn't sure how the government will translate its new stance into practice, but he says whatever the outcome of the election the next government will be more interventionist regardless of whether it is led by Labor or by National.

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