The purchase has not yet gone through, Ardian are saying they cannot continue without changes to the agreement, I believe this is due to some requirements by the anti-monopoly authorities [0].
Míla is the company being sold, it was spun out of the national monopoly a long time ago to provide base layer services to all operators equally but was initially (and still mostly, I'm hazy on the details) owned by the old monopoly. The old monopoly has also been privatized a long time ago but has significant competition.
I agree selling the infrastructure part to PE is almost 100% guaranteed to give bad results for the nation. It's like people never stopped to look at what the typical PE playbook is. But I guess it's harder to stop when everything is privatized already and in the hands of very many shareholders, each of them acting in their own short-term best interest.
I think it's okay to lease out or let private entities operate that kind of infrastructure under supervision but to sell off your national communications infrastructure, in particular to a foreign entity is absolute insanity for national security reasons alone, costs aside.
I can't think of a time that this has been good for the population, even if you include "lower taxes" (because, honestly, that doesn't seem to happen).
I think it can be difficult to prove cases where it has been "good" because the counterfactual case is not there to compare with.
You can find situations where the government has implemented something fairly poorly, but that isn't often evidence to say "the private sector could have done this so much better!"
But on the other hand, you might find situations where there has been an enormous amount of advance/innovation driven by the private sector, but that isn't evidence to say "the same thing would have occurred with government ownership!"
This happened in Mexico around the 90s (IIRC) in a deal that was heavily criticized within the country. The guy who acquired it later became the richest man in México (also worldwide for a few years). So yeah, these are lucrative deals.
It probably should not have been done (why ever sell an asset like that) but it didn't go terribly in New Zealand.
The sale stipulated that the government would regulate the wholesale price of copper and that the copper lines, and later the exchanges, could be accessed by competing telcos.
Years later the government, no longer owner of any copper lines, set up a fibre network. The fibre network is owned 50% by central government and 50% by private or local government owned corporations and its pricing is highly regulated.
87% of the population can now get a 4000/4000mbs connection for 117 USD/month.
NZ is a great success story. Compared to Australia who privatised Telecom copper (now called Telstra), who let the copper rot and were also forced to allow access which caused 3rd party retailers and consumers large problems with poor access.
Then the government announced a full fibre to the home network which started being built. Just before the large upwards curve in rollout, the government changed, and bought the rotting copper infrastructure back off Telstra (plus some cable) at astronomical prices.
So now we have slow, expensive internet and the taxpayer has spent more than it would have cost to rollout the fibre, and it’s years later.
There are many fibre companies, each with a monopoly in a geographic area. For the largest Chorus the government own non-voting shares and gave them a loan, and for the others I believe the government had a 50% stake originally. That all might have changes over the years.
We did this in Australia years ago. The result was well... were 61 billion in so far creating a new national broadband network because the privatised company has a monopoly and had no incentive to upgrade anything.
My understanding is there were 3 big failings in this for Australia.
1) Selling Telstra. The whole issue never would have happened if the govt still owned. Thanks Mr Howard
2) Forcing local Labor requirement in the tender. This was Labor union movement trying to spread money with the roll-out but made Testra drop out as until this they were always guaranteed to win. Thanks Mr Rudd
3) The 'we dont need fibre well use mixed technology'. That's were it truly became a waste of money and potential. Thanks Abbott & Turnbull.
Such a failure for Australia. And as someone now using Starlink, so glad Musk came along and saved us bad internet people.
Erf bad luck people of Iceland. Remember folks cost + shareholder profit will never be less than cost alone. Privatisation will never make things cheaper.
In my experience, it's not true that both state and private players require the same amount of OpEx to run a concern. Usually state run organisations run projects at costs well in excess of what is actually required. Therefore, it is possible to privatize, realize a profit, and lower prices.
I was tangentially involved with the privatization of a copper mine in South America. Within just a few years of it being sold off to private buyers, it was consistently profitable for the first time, extraction was up ~350%, and costs were down 40%. This was the Cerro Verde mine in Peru.
Meanwhile come to aus where we have sold out energy infrastructure and our Comms infrastructure to private enterprises. All prices have done is go up, service quality has either stagnated or declined. The examples of private industry doing it better with a better result for the society around them rather than just we made heaps big profits is actually slim af pickings. Private industry has way more examples of jacking prices and screwing people over than it does of doing good.
Aren’t competitors in a small land network by definition wasted equipment Capex if they’re actually completing. And if they’re not actually competing it is a waste by balkanization.
The problem with this approach is that these are entities which were entirely paid for by the population. Tax dollars built the company, and further taxes plus operating fees were paid by the population to keep it running. Unless the business was able to sell services to foreign states (like how electricity is often exported), then the entity exists solely on the backs of the population.
A sell off is rarely going to result in more than what the population has already paid towards the business. It turns into a short-sighted budget booster while depriving the population of the unique advantages of state-held entities, such as not needing to turn a profit, having to answer to elected representatives, the power to change the management, or hold priorities that solely benefit the population (such as performing costly upgrades for economic or national security purpose).
When looking at utilities there are few avenues that the new owner can take to improve profit other than cost-cutting exercises and increasing fees. Neither of these weren't possible beforehand, but an entity that needs to make profit to justify the purchase price will find ways of generating that profit.
This is usually where the problems start - it's the assumption that a private profit driven entity possesses unique market knowledge, efficiencies and access to larger scales of economies that weren't available to prior company management. In most situations these benefits are overstated and don't render any real benefit to the population, instead the business usually increases costs at an outpaced rate (hello inflation) due to having a state granted monopoly and this levies the entire population with a higher cost of doing business for the long term.
Yes. Brazil privatized it almost all of its national telco infra in the mid-90's.
We went from being a country where you'd wait years to get a landline installed to one of ubiquitous internet and cellphone coverage in a very short time-frame. Prices have gone down consistently and the companies are continuously investing in improving the infrastructure.
The important thing about Brazilian privatization was that there was forced competition. Every major metro region had two have at least two different buyers and they had to compete. This led to ~8 big groups bidding for different regions in the whole country.
Nowadays the restrictions on the regions were lifted and some consolidation came up, but overall the whole country still has every region with at least 3-4 different companies competing for the market.
The CEO that is being interviewed there was in the panama papers. He bought the house he lives in from the wife of one of the people who was jailed after the financial crysis.
The people who were jailed didn't really receive much time at all and the whole thing has been misunderstood abroad.
Honestly the country is no longer independent, the biggest joke is that our ruling political party, the independence party, is anything but...
But these things are just the slow march to making it clear who rules us. Can't wait to see the identity company (also private) being sold in a similar way.
I am doing an uprising (except the icelandic word 'uppreisn' also has the added meaning of 'dignity') - what does that entail? Well I believe that coercion is not a good foundation for anything supposedly legitimate. I want a more persuasive foundation and I guess that starts with making guix a useful OS for non-technical users via my "datalisp" project... I guess I should stop dragging my feet and make the website (datalisp.is) since I am opening this discussion.
Whatever. The key idea is; we need to be able to trust our operating system, for that to happen we need a way to receive automatic updates without having a central source of truth, this is the oracle problem in disguise. The solution is to keep track of probabilistic estimates of [contextual] trust and basically do science (we haven't got a better way to do physics so I don't see how we are expecting anything better from "AI") to assess legitimacy...
You can see my thing at sr.ht/~ilmu and if you are Icelandic; uppreisn.is (note that this thing is lost in google translation).
I've decided I would rather die than earn money doing things I don't believe in and that almost happened recently so everything is a bit scattered. However I have a meetup starting next month and then there will be steady progress on datalisp.
Edit for some clarifications, the sale discussed is blocked right now by the 'competition control' agency but I don't think they have enough grounds and the agencies that do are clearly corrupt.
My parents talk about how getting a new telephone in the UK went from a month-long process to next day once it was privatized and there was profit to be made.
> Has privatizing public infrastructure EVER gone well?
There has been a huge amount of privatisation of infrastructure in New Zealand over the years, and it is hard to find good examples of consumer harm (unlike the harmful examples for private electricity networks in California or Texas).
The only real problem appears to be that the public keep buying things back or propping up private enterprise (giving billions to Toll for an uneconomic rail network, or bailing out our national air carrier Air NZ).
One counter-example could be our airports which are part private enterprise, and man they gouge consumers with their monopolies. Although I think Wellington and Christchurch airports are private-public partnerships with local government.
New Zealand is similar to Oregon in area and population, to give you an idea of how big our problems could get.
Has privatizing public infrastructure EVER gone well?
Of course. It's impossible to make the case that US telephone customers were better off under Ma Bell than we were after deregulation, for instance. If only we could've kept Bell Labs alive!
Also, consider the medium you're using at this very moment.
I think the problem with the reverse (private -> public) is that it usually happens after the company has been mismanaged for so long it’s ready to go bankrupt.
No idea where Sunnyale is or what their population count is, but Iceland has 4 major ISPs and a bunch of smaller ones too. Competition's already proven.
For infrastructure, especially in smaller markets, it seems like a public monopoly would be the most cost efficient - even if you contracted out periodic private operational and upgrade contracts.
Imho anything that is a natural monopoly (where it makes zero sense to build two of them), that requires a regulator to stop citizens being taken to the cleaners, should be owned by the state. Even if run “inefficiently” (you can find examples of both, this is not clear), it is typically better for the people.
Yeah it makes sense to build 4 car factories and compete on quality/cost/safety which benefits the consumer. But having 2 electricity distribution networks, water pipes, sewerage, is simply a waste. Even privatising the land titles registration office is dumb as it is a natural monopoly and would require regulation to stop the $50 title change from becoming $50,000.
> Telecoms isn’t the winner‑take‑all game it used to be. Now it is much more about experimenting and collaborating; having Míla as the owner of the 5G network is going to help that process.
When I hear "private equity", I think "strip it to the bone to profit off an existing captive customer base without making additional investment", I don't think "experimenting and collaborating".
Infrastructure is a natural monopoly [1]. The cost to enter the market is unfavourable, and the incumbent has all the margins.
Privatizing it is always a bad move for the citizens, and a good move for the private company.
At worst, countries should keep one publicly owned company that owns the infrastructure and rents it to others, and also keeps the playing field leveled with low prices for the customers (this is the case in some countries but not all..).
If it is anything like the UK, it's a simple cycle of:
- Under-fund the public service because it "costs too much" (ignore the value it generates for the public).
- Service performs poorly when underfunded, so you can manufacture consent to sell it, argue that private ownership will be more efficient.
- Sell it, creating short-term income you can use to spend on stuff people (and your mates) like (often tax cuts), making your government seem effective. You can also sell it to your mates who then get easy profit milking a natural monopoly for profit, probably kicking some back to you in the form of a cushy "advisor" gig when you retire.
- Inevitably end up making the unprofitable parts of it public again when the private providers simply stop doing it, or go under trying to. You then have these expensive bits of public service with no income-generating bits to offset them you can point to and say public services are inefficient. Private profits, public losses.
- Hey look, public services cost too much! We should under-fund some other ones...
It's probably a good idea. Or, if they can't run deficits (many US states have this) and asset sales don't count as revenue you'd probably be in a similar situation.
A majority of the telecom infrastructure in New Zealand is privately owned, and the service there is generally very good and not especially expensive.
This level of service was established by government giving interest free loans to private companies to build the fiber infrastructure (with one company getting about 70% of it). So you might want to revise your use of the word “always”.
In short; since privatization in the 90s, the spending in R&D went to 1% (median in other countries is 7%). Rising costs, and lagging on implementing DSL in 00s. OECD list it among the most expensive countries to own a landline, and cellphone. Then, lagging in DSL+, and then, lagging in Fibre. Bottom of the OECD list.
This is for a country that in the 50s, 60s, and 70s had an amazing copper infrastructure, and a computer and technology univerisity sector even.
A majority of the infrastructure is owned by one company, with some smaller companies servicing regional areas. There is no local competition in regards to infrastructure. No matter where you live, there will only be one fiber provider available for your address.
Using only that article as a resource (lazy, sorry), it seems that the telco infrastructure improved because of competition. It doesn't really seem to be a private/public issue, but that multiple companies got into the action.
All of Iceland's infrastructure was sold off in one huge chunk, forming a private monopoly. This may become a decent test case for whether government-operation or private-operation makes a difference. (In contrast to the wiki article, which suggests that competition is the thing that matters.) Like the grandparent comment, I expect very little from the private operation of Iceland's telco infrastructure, but I'd love to be surprised.
If you want a preview you can look at what has happened in Iceland since 2005 when the privatization happened. It will probably continue to be the same with different private owners of the monopoly.
> A majority of the telecom infrastructure in New Zealand is privately owned, and the service there is generally very good and not especially expensive.
It used to be quite expensive. This only changed thanks to the ruling[1] that the conduct of charging monopoly price was anti competitive.
I only care about price and quality of service. I don’t have any ideological axe to grind about where the profits go. When I was in NZ, their privately owned telco infrastructure serviced my needs very much to my satisfaction.
The outcome for citizens is the same as in soviet style communism, except in communism the state enterprises were supposed to serve the commons. In this case they don't even have to pretend to.
This is overly simplistic. And pieces are just flat wrong.
How are you defining infrastructure? Why is there an assumption it's good for the company buying it? There is virtually always a bidding competition, these assets don't go for cheap.
Not quite, there are two basic strategies either make a high but profitable bid to try and win or make a low bid on the off chance nobody does the first strategy.
In practice there are dozens of players bidding on infrastructure assets globally. The assets tend to be easy to model, easy to finance and hence finance types (like all the PEs, pension funds etc) love them.
No one bidding on these assets is giggling about how much money they are going to make. They are thinking "we are bidding a lot here, these returns don't look so hot, how can we justify this??" and then praying their projections aren't off on the downside. At least, in the first world. There does appear to have been some shady dealings in Russia, Mexico etc in the 90's.
I would add China and several countries to that list of shady dealings and far more recently than the 90’s.
Beyond that you can find plenty of exceptions in first world countries of underbidding paying off, though mostly at the local scale. For a specific example look at US high speed internet a little closer and you can find taxpayers getting screwed.
A specific example of a massive underbid would be the 99 year lease on Chicago’s skyway. Which was $1.8 billion for a 99 year lease which was not just profitable every year, but after 10 years they sold the remaining 89 year lease for 2.8 billion.
The debt was all priced above 5%. So the leverage didn't help. And the thing lost money almost every year, mostly because the 08/09 recession crushed traffic.
The Chicago Skyway wasn't a big money maker for the winners. I doubt the people of Chicago are upset the owner made a low single digit return.
FWIW, most of these things look different once you start bidding or even considering bidding on them. The competition is fierce. It's hard to make money buying obviously good, simple to understand assets.
We could dive into the risk and finances such refinancing in a year to pull out 370m etc, but I will point out:
> The competition is fierce
“Burke, chairman of the city council's finance committee, described the 99-year lease of the Chicago Skyway, a 7.8-mile toll road, to a private operator for the stunning sum of $1.8 billion - almost $1 billion more than the next-highest bid.”
That’s hardly stiff competition that’s twice the second highest bid and it was still profitable in the short term even with a recession.
Doesn't your linked article explicitly say overbidding is going on?
But yep funnily enough the second highest bid would have generated a half decent return. The winners overbid because it was competitive, and they didn't feel smart when they found out how much higher they'd bid.
It's worth asking anyone who spent time bidding on these things. No one will tell you it's easy money or that there is underbidding going on.
I was mostly bringing it up in reference to different bidding strategies. They could have had extremely safe double digit returns and still out bid the competition by 50%.
What! I refuse to believe every American premises isn't wired for fibre. Since we've paid for it so many times. And required it in many lucrative exclusivity contracts.
In the 1800's the US government paid for the building of its transcontinental railroad by offering cash plus land for every mile of completed laid railway track, with competition for completed miles coming from the other side of the country. That worked incredibly well. If you can find a good documentary on it, it is a fascinating story. There was an unbelievably intensive effort to get that project complete in the quickest possible time, including blasting tunnels through the Rocky Mountains - nothing stopped those companies from delivering the completed tracks.
You'd have fibre to the home if the government paid by the home tested to have symmetric gigabit, with competition between telco's to complete the available homes.
Instead, governments pay for things other than the outcome.
No surprise they don't get the outcome.
Pay close attention to the attempts to build semiconductor manufacturing in the USA. This will fail for the same reason - the government is paying big money, but for the wrong things. It should be paying the big money when the first production quality wafers are delivered in real products. There's a big fail coming up there because they don't heed the lesson of the railway.
> Pay close attention to the attempts to build semiconductor manufacturing in the USA. This will fail for the same reason - the government is paying big money, but for the wrong things. It should be paying the big money when the first production quality wafers are delivered in real products. There's a big fail coming up there because they don't heed the lesson of the railway.
And even today the largest private landowner in California is Catellus Development Corporation, which was one of the companies spun off from the railroads. They were given way more land than necessary to build the tracks.
No. Telus was formed from the privatization of Alberta Government Telephones. MTS was previously a crown corp for telecom in Manitoba but was later privatized and then bought by Bell. Saskatchewan still has their telecom crown corp SaskTel, although there has been rumblings of privatizing it.
Fair enough, I see I am off about Telus, and I presume Sasktel.
Still, I seldom get the complaints. Our industry is private, but heavily regulated.
Yes, there are bumps over the years, and the CRTC at times is not optimal, but the whole "must lease last mile" thing is part of that regulation.
A mix of public control, and private industry can work well. To speak to that, Bell, Rogers constantly squrim and writhe, under their forced requirement to lease to competitors.
They hate it, which to me means it can't be all bad.
They're very good at managing that image, it's true. It's hard to believe that we're in an equitable spot as consumers with reports showing the big three are among the most profitable telcos in the world.
That's not even starting in on the obvious price coordination that highlights the dearth of competition in the sector.
Thankfully that matter was resolved back in 2018 when Bill 40 was repealed. Saskatchewan has plenty of evidence from other provinces what happens when natural monopolies are privatized.
In Ontario there was the Dryden Municipal Telephone System and the Thunder Bay Telephone Company (now Tbaytel). DMTS was sold but Tbaytel remains owned by the City of Thunder Bay and provides service to various parts of Northwestern Ontario.
And Terra Nova Tel which provided phone service in parts of Newfoundland was built on the legacy of the former Dominion of Newfoundland Department of Posts and Telephones by Canadian National while the latter was still a federal crown corporation.
Here in New Zealand all of the telecom companies are private and the fibre/copper networks are owned by companies that are separate from the retailers. Something like 90% of the population has access to at least 1Gbps speeds.
It only fails in the US because of corruption and NIMBYism. These telecoms buy off the local city council and prevent new development of any lines. Then local residents complain about the hassle of digging trenches, having utility trucks on the block, etc.
When you ban this sort of bullshit permitting process it goes extremely well. Sometimes local authority has to be sacrificed for the long term benefit that residents don't see.
Yeah, I'm not convinced. New York has been ardent about trying to get internet providers to do their damn job and it just simply doesn't seem to work. The companies make out like bandits and routinely flout deadlines and requirements.
It just keeps going. I could provide dozens of links here. I just don't think you can make enough laws to get these companies to do the dirty work of wiring up unprofitable connections, and to stop lying about internet speeds.
Oh I don't mean big buildout contracts - those are bound to be failures. It's like the government paying Lockheed to develop the F-35.
I mean if you relax zoning regulations and permitting processes significantly, then private enterprise will get external funding and build it out. You can already get 5G home internet in a lot of areas from Verizon or TMo for way cheaper than the wired companies and it's just as fast in both bandwidth and latency. If we had a mmWave node on every block then the buildout problem gets solved pretty quickly.
> dirty work of wiring up unprofitable connections
It doesn't need to be wired to the home. See: Webpass. The problem is that NIMBYs will block ugly antennas sticking out from every building so you get mired in environmental reviews, neighborhood comments, etc. and nothing gets built.
If running a dozen competing redundant versions of every utility to all homes is your idea of a productive use of resources I'm not really sure what to tell you.
https://www.visir.is/g/20222288293d/hluta-brefa-verd-simans-...