Tag Archives: infrastructure

So squeezed they stopped squeaking to each other

22 Feb

Oft-lamented short-term pressures drive the search for ‘asset efficiencies’.   With the benefit of hindsight, the making of unforeseen consequences seems to be rooted in a disregard for fairly obvious but difficult-to-measure policy impacts.

In corporate careers, management brownie points seem often to be awarded for displays of macho discipline encouraged by ‘perverse incentives’. Whatever the motivations, it is surely a matter of good governance that that short-term wreckers are not allowed to destroy values that underpin future sustainability.

Question Marks And Man Showing Confusion Or Unsure

But still it happens. Whatever presentational flavor of austerity or efficiency or asset utilization is used to justify the squeeze, the consequences are inherited by the next generation – or at least the next elected set of policy makers.

Or is that really so?

A recent article in The Economist takes issue with the conventional theories around short-termism.  A McKinsey study had argued that 73% of firms were short-termist and the ‘elite’ 27% actually performed better. However, the Schumpeter columnist begged to differ; questioning the evidence and doubting both the causality and relevance of labelling firms as short-term or long-term actors in our very dynamic market environments.

The Economist writer does, however, point out that many big firms ‘wallow in lucrative stagnation’ where profits are high but investment seems not to be boosted by the currently low cost of capital. Rather than label them short-termist and urging them to invest, the real need is for more rigorous competition policy to target ‘fat’ incumbents and boost new market entrants.

Such competition policy rigour might not be immediately popular amongst the self-regarded leaders but it is evident, in one sector at least, that this strand of policy imagination has already taken root. Hence the Chancellor’s autumn statement to inject funding into new entrants deploying ‘full fibre’ networks and also the recent indications coming from Ofcom of an urgent need to deliver ‘at scale’ the sort of infrastructure required to sustain a post-Brexit economy and enable (beyond 2020) an entirely future-proof collaborative architecture to support 5G Mobile.

So despite the common interpretations of austerity, efficiency, cuts, the general woe around short-term follies, narrowband thinking, or ‘squeezing until the pips squeak’, the more mature lesson seems to have been learned that those who are ‘too big to fail’ probably should.

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Passive Infrastructures – platforms for digital progress

27 Sep

 

stanley-steamerLike some chicken/egg conundrum the emergence of cars and the improvement of roads went hand in hand – each requiring the other to be fit for purpose.   And the evolution continues to this day although investment in the great civil engineering effort of new road building has largely passed.   Much the same was true of railways and energy distribution – evolutions to meet changing needs.

It is odd, then, that those using the ‘passive infrastructure’ for the digital evolution have not followed the same course. Unlike roads, the underlying infrastructure of holes and poles is still largely used to carry the equivalent of Stanley Steamers or Model T’s to convey the information that is now mostly in a digital form more suited to travelling at the speed of light.

This is much like a canal barge operator facing new competition from railways. They would claim that fast travel might be a danger to health or that speed should be curbed. The huge investment needed to pave roads must have been seen as exorbitant – until, that is, folks worked out the real cost to the economy and society of not doing it.

Of course, a complete replacement of copper wires with fibre is expensive but it’s nowhere near as expensive as previously claimed. The cost is probably less than half of early (over-puffed) estimates and still falling as techniques and materials improve. So the time is rapidly approaching when a combination of falling costs and increasing understanding of value eliminates the rationale for Stanley Steamers and Model T communications. Some would say that time has long-since passed. But logic is not driving the debate. At stake here are imagined fears for the shareholders of canal and barge operators Telco’s.

But, of course, those shareholders (investors) are actually sitting pretty. They own the holes and poles and until recently gave not a damn as to how they were used. What they now know, and are increasingly minded to say, is that if their holes and poles are not repurposed then others will build alternatives or find ways to avoid using them. And what they also know, since they hold diversified portfolios, is that all their other investments would be vastly more successful if light-speed connectivity made business flow faster and more reliably at far lower cost. And some would go further – seeing the need for true future-proofing – for who know what next will be coming down (or up) the line?

Unfortunately Shareholder Power is not of much concern to the enterprises in which they have invested. If grumbles grow they can be bought off with a hefty dividend and, in effect, told not to complain. Cash today nearly always trumps potential cash tomorrow. Long-term perspectives are rarely apparent to executive managements in the thick of the wood. Nor is it much concern for a regulator whose job it to manage fair play in this market rather than the long-term interest of the wider economy. It may be obvious to investors that the prime, most sustainable, asset is not the old twisted copper but the holes and poles.   But how can wiser heads prevail? It will not be put to a referendum but a view is emerging that a very different type of ‘structural separation’ may provide an answer without incurring vast overhead cost.

A transfer of the passive assets to new enterprises (part public owned) with a remit to set tariffs for their use would enable local governments and other public sector agencies (or the regulator) to provide proactive direction – incentivizing more efficient use, investing in regeneration and new-build and urging Stanley Steamers off the road. This type of Structural Separation is far more imaginative and likely to be more effective in creating strategies more attuned to our digital futures. It’s a fair bet that the ‘un-separated’ parts of the enterprises might suddenly see virtue in relaxing resistance to, for example, dark fibre.

Already the regulator Ofcom has demanded that hole & pole capacity is made available to alternative operators. Some cities, like Bristol, have the good fortune to own a duct network. In other (more dirigiste/clear-minded) countries the regulator has set a course for the elimination of the copper that clogs those holes and poles. Meanwhile government in the UK has asked, very gently, if our digitally inclined citizens might, perhaps, be allowed have the right to ride on slightly faster Stanley Steamers – leastways in one direction. The idea that Stanley Steamer technology could be stretched a bit more keeps recurring – but, like a cul-de-sac, that extended design is still very much a dead end.

Lots of very clever people will doubtless spend much time and money trying to find the blindingly obvious solution. Yes – the passive Structural Separation will take time and have an overhead cost (not to mention legal fees) – but that is a consequence of poor decisions three decades past. Sure – the complete infrastructure investment (holes and poles and cables) will be a cost for all parties – a fraction of an extra runway, a smaller fraction of HS2, an even smaller fraction of Hinkley Point. The more equitably shared design, however, could be delivered way before any of those projects and is likely to make all of them either a greater success or moderate their need. Deeply ingrained in Telco-talk is a view that ‘a level playing field’ is a large flat area under which they have buried the competition. Taking control of the playground would certainly improve the prospects for the UK’s new premier league of digital players.

Even the national energy demand would tumble if we stopped heating pavements with expensive cabinets full of electronics to push information down copper wires. The transformation could put a spring in the step for the prospects of Foreign Direct Investment (FDI) and we’d no longer hear the immortal words, “That’s another fine mess you’ve gotten me into, Stanley

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Graphic credit:  Steamcar.com