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Sunday, 16 March 2014

Has Ozouf served 'the Public Interest'?

 Treasury Minister Philip Ozouf 
One of the most curious features of the Ozouf treasury is the 'we must make a return for the Public on their assets'. This sounds almost exactly like the duties of the director of a company who must, 'make a return for the shareholders'.

There is a slight difference though, firstly the shareholders of a company may or may not also be customers of the company, secondly shareholders have voluntarily invested their savings in those shares and may at any time sell those shares (assuming they can find someone to buy them). They would also expect to see some sort of monetary return of that investment coming into their personal bank accounts, not into the bank account of the stockbroker who bought the shares for them.

Another term for a shareholder, is a member.

Members of the Public by contrast are only members of choice, notionally. No one ever asked them if they wanted to join, there is no obvious mechanism for leaving the association other than taking the ubiquitous 'boat in the morning'. Members of the Public often have no choice but to be customers of the 'the Public Service', such custom being enforced with the threat of financial penalty and/or incarceration in prison.

Looking to one specific area of island life, telecoms, I will show that actually the 'return for the public' amounts to little more than a tax on the public.

Once upon a time there was just one monopoly which operated the telecoms infrastructure in Jersey, Jersey Telecoms. It was and is 100% owned by the Public of Jersey with the administration entrusted to a committee of States Members.

It muddled through, breaking even with a small contingency held in reserve. It was more a public service than a profit making venture.

The first step was to corporatise JT, this process meant that the purpose of the company was now no longer to provide a public service to the people of Jersey but to generate a return for its shareholders.

This had the joyous double advantage of allowng the States to appoint directors, on director's salaries to oversee the operation, thus increasing the cost of the telecoms service to the Public. The very people who are the shareholders. Of course any dividends paid to the Public, were not paid to the Public, but to the government's general reserve. The same reserve in which income tax, GST and Impots are all collected and distributed to the various departments. Looks like a tax, right? And since our taxes never went down as result, it looks even more like a tax.

The next development was the introduction of 'competition'. Now normally competition would naturally occur in any market in which there was an opportunity for a new entrant to make a living. Any large company holds a substansial amount of redundancy within it, when compared to a sole trader, which should be sufficient to allow new entrants to enter the market and make a living, forcing down the cost of the service and providing the consumer with value for money.

Instead 'competition' was launched with the birth of the Jersey Competition and Regulatory Authority, a massive quango (quasi-autonomous non-governmental organisation) funded initially directly by the public but also with annual fees paid by the telecoms companies.

Those fees led to increases in the cost of telecoms services.

The principal role of the JCRA is to ensure competition. But the only way to ensure competition is to ensure that all telecoms companies could make sufficient profit not only to fund their operations, but also to fund the JCRA's operations and also generate a profit. They do this by price fixing. All telecoms companies are required to have their charges approved by the JCRA.

You may think that is great, and it does obviously prevent prices from rising too high, but it also prevents prices from falling so low that the least efficient company, which remains Jersey Telecoms to this day, would no longer be able to remain in the market.

Genuine competition is prohibited as the government only allows network to be in place, that one of the telecoms companies also owns the network is a barrier to competition and to fair pricing. Competition would be improved if the network were maintained by one company which dealt only with operators and it was the operators who dealt with the consumers. But as long as the price of the network was set by the government by its quango, the government would in effect set the price of telecoms in Jersey. If they wanted to make a significant return from the investment then there would be nothing to stop them.

Only 'approved' engineers are allowed to work on the network, if the network tendered repairs and engineering to a number of independent engineers rather than to their own staff, then the opportunity for competition in the cost of network maintenance would lower the cost.

So looking at the whole process as one giant leap, Jersey has moved from a telecoms system which was provided as a public service at low cost with low profit to a telecoms market which generates a substansial profit for 'the Public', supports an entire Quango, the JCRA, and allows two non-public owned companies to operate and make a profit sufficient to justify their continuing operation.

Who ultimately pays for all of this? The Public. Perhaps now you understand why your telecoms bills are so much higher than they used to be.

So please explain to me how all this has been in 'the Public Interest'?