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Cooperative structure option for the NBN 

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Guest blog by Stewart Fist

Cooperative structure option for the NBN 

The value of the full-fibre NBN being a “common good” –  should be seen the same as roadways.  But like toll-ways, governments and corporations can still find ways to export these facilities either for profit, or for stoking up their budgets.

However there often appears to be a misunderstanding about the nature of ownership of common-good facilities/infrastructure.

In the past we have always assumed that the basic telephone services should be owned by a government entity, and operated on a break-even basis under Ministerial control.

Then the Libertarians in the Liberal party won an internal party battle to sell off Telstra and make it into a for-profit corporation, owned by share-holders.  This was part of the ‘privatise everything’ ideology of the time.

Then the NBN needed to be sloughed off from Telstra, because it was seen as a essential common good for the future. The extraordinary high costs of rolling out fibre needed to be borne by government and funded through taxation.

Telstra then hit the jackpot in the fact that the NBN needed to use Telstra’s ducts to run their fibre (surprise, surprise !!). This windfall profit for the privatised entity justified PM John Howard’s sale of the third tranche (T3) of Telstra, after having promised that government ownership of the corporation would never drop below 50%.

The problems are now being compounded by the fact that wireless systems have exceeded everyone’s expectations for data carrying, which threatens the viability and therefore some of the potential income value of all that fibre.

Everyone now knows that it has been a massive mistake in flogging Telstra in the first place, but how do they resolve their problems?   No Liberal government will ever admit it made a mistake and offer to buy it back.  And the shareholders are unlikely to want to sell cheaply while they rake in $1 billion a year for hire of their ducts.

In my view, allowing it to be sold to a share-holder owned, for-profit Telstra to run is potentially disastrous.  It is an essential monopoly – and therefore needs to be owned in a way that stops any efforts at exploitation.  Governments and corporations will always find a way.  We can see the lack of influence that governments can exert over Telstra just by looking at the multi-million dollars the company has been paying their CEO each year.

There is a third-alternative which needs to be explored – quite possibly by the new Labor Government after the next elections.

This is the possibility of running the NBN as a very large cooperative.

Cooperatives operate as non-profit common-good organisations, and they can exist in competition to the competitive profit-making corporations. In fact, cooperatives (as mutual insurance companies and building-society ‘banks’) were once the moderating forces that kept the insurance companies and commercial banks in line until the 1990s.  They were wiped out very deliberately because they had exploitable value under the lax cooperative laws of the day.

The value of selecting a Cooperative structure for the NBN is that, with upgraded legislation, future governments (of either flavour) could decide to flog it off as a profit-maker when they have a budget deficit they don’t want to admit, and therefore need to stoke up their income.  As a cooperative, the ownership resides totally with the owner-users; the benefits are in the services a cooperative provides, not in share values and profits. This is a very equalitarian structure — each member of a cooperative (large or small) carries the same weight when it comes to deciding on the management direction, executive salaries and bonus payments.

Cooperatives today are a sadly neglected corporate structure which fit perfectly with the NBN’s common-good requirements. However the rules for running them are badly out of date and unnecessarily restrictive. Cooperative law badly needs an upgrade, but economists have recently begun to explore them afresh as a viable alternative for infrastructure and monopoly/essential services.

The legislation controlling cooperatives needs a radical overhaul, and the range of potential structures should be expanded to give them the same commercial capabilities as for-profit corporations.   Ideally, a Labor government would create a junior ministry for Cooperatives and Public Benevolent Institutes (PBIs) with the idea of encouraging them to develop.

Stewart Fist