XT failures highlight problems with belief in “market forces”

February 26, 2010

I may be wrong but . . . . I think I have the answer to the problems caused by Telecom’s XT mobile network failures. Telecom should be privatised by the government and run by business people rather than public servants. After all, private enterprise always does a better job than governments, right?

Woops, sorry, forgot, this was already done, back two decades ago. Phew, problem solved!

Weak attempt at satire over!

I know there are lots of very funny jokes out there about XT. Telecom is clearly suffering as a result. (Which means that many of us who aren’t even customers will suffer because our savings may be directly or indirectly invested in Telecom, whose share price is bound to suffer.) But that’s the free market at work, right?

(For readers not familiar with New Zealand’s telecommunications industry, the main player Telecom has been having dire problems with its new (< 1 year old) mobile platform, infuriating its customers who have been losing service for up to days sometimes.)

I’m not a user of the XT network. In fact, I rarely use my cellphone, and try not to rely on it any more than I did on smoke signals back before mobiles were invented. But I am aware that many people, particularly businesses, are so dependent on their mobile phones to operate daily and to make their living, that these outages can be quite damaging. A few tens or hundreds of dollars of compensation means nothing for some people if they lost a million-dollar business deal because they missed a vital call. The stakes can be extremely high.

So I find myself reflecting on how we react to such failures of basic, vital infrastructures. And some of these reflections come back to the wisdom of placing our lives in the hands of private businesses, and the old arguments about private vs public ownership and management of infrastructure.

It is ironic that many of the people who are (a) badly affected and (b) staunch supporters of government keeping out of business, are the loudest in now calling for the government to call Telecom to account, and even to legislate or regulate to ensure that Telecom’s networks remain effective. Today’s news talked about demands for new laws to be enacted to ensure the 111 emergency service works even when the networks are down. As if punishing Telecom will make the problems go away any faster.

Time for a reality check!

1. Government laws and regulations don’t make phone networks work. People like technicians and engineers do. Whether employed by the public service or a private business, they do the same work.

2. Advocating privatisation of all goods and services until they go wrong and affect us, and then demanding government to fix the problems, is just childish. I have never been impressed by the argument that private businesses will always do a better job of running a commercial operation than public services can. I’m close to 100% confident that this has been shown by the electricity sector “reforms” in New Zealand since the mid-90s, and I’m leaning this way on the telecoms industry as well.

3. If you believe that market forces alone should be used to provide your needs efficiently and reliably, then take the consequences on the chin when things go wrong.

4. If a privately supplied commodity (like cheese) goes wrong, then market forces usually do work to get redress and then to punish the supplier. But this XT episode shows us that if vital infrastructure supplied by private companies goes wrong, market forces are pretty ineffective. You can’t just go changing providers every time something goes wrong. It ain’t that simple.

I may be wrong but . . . . key infrastructures on which civilised society relies should, in my opinion, be controlled by democratic governments, and leave less important goods and services to the private sector.

But I know it’s too late for things like power and telecommunications. Those horses have well bolted by now.

So all I can say is – if the free market structure is the way you wanted it, don’t grizzle when those market forces you believed in so passionately turn out to be rather less effective than expected.

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Posted by David Armstrong

Budget must address the huge problem of property booms

February 15, 2010

I’m no great shakes when it comes to understanding micro-economics and fiscal stuff. (Macro-economics for that matter too.) But several people have asked me what I’ve thought of the New Zealand government’s recent pre-budget announcement, particularly in relation to tax. So here goes.

I may be a bit strange, but I tend to look at budgets more in terms of fairness to all and what will make the citizenry better able to face the future, not so much in terms of how much better or worse off I will be. My long-term thinking is that the fairer and more sustainable the way our representatives collect and spend tax money, the happier most people will be and therefore the more pleasant and positive-thinking the community I live in will also be. If this happens, I win in the end even if my financial wealth status is down a bit.

Which it will be, in all probability. Being “older” and dependent on superannuation plus releasing money I saved over the years, my tax bracket is so low now (it wasn’t once, mind) that I doubt I’ll get much of a boost from any tax cuts. But it appears I will still be paying extra GST that will be compensated for only in the component of my income that comes from NZ Super.

However, although I do sympathise with people who are really struggling and simply cannot tighten the belts any further, I see the GST rise as being pretty minor in proportion to the general money coursing around the economy these days. I’m more concerned about the fairness of tax rules for those who are comfortably off, and how these may affect the ability of our economy to settle at a more sustainable state than it was in during the last property bubble.

Meaning what? Meaning that for years I, like quite a few others, have been particularly concerned at how the tax loopholes in favour of property investment (over savings or investing in something that actually benefits the country) have skewed our way of life so much that we are now collectively in so much debt. And I’m now equally concerned that the people who indulged in property trading (“climbing the property ladder”) and renting out in order to get fast tax-free capital gains, and use ludicrously unreal depreciation rules to get rich quickly, at the expense of people doing productive work who were/are being priced out of owning a house.

If any of these unfair and unequal uses of tax rules are actually implemented come budget time, to anywhere near a reasonably fair system, then certainly there will be lots of people hurt as a result – both property investors and people forced to rent. And house values will probably drop again.

But I think that that’s something we have to face as part of a move to an ultimately more sustainable and fair system. A one-off hit for a few years. In recent decades (particularly the last), property investors have in the main done very well indeed, thank you very much, at the expense of the rest of us. All tax changes hurt some people and sectors and please others. Until now tax rules have operated to please investors and hurt people trying simply to own a home. It seems this is about to change, and I’m glad of it.

I’ve always been comfortable with GST as a tax mechanism, as it forced tax dodgers to actually contribute to paying for the public goods and services they use. It’s not perfect – GST does constitute a much higher proportion of the disposable income of poorer people than the very rich – but it’s better than PAYE and Company tax mechanisms alone (spoken as someone who until the mid-80s paid PAYE with no ability to dodge it).

GST percentage changes are for most people only marginal changes. But the tax dodges allowed and encouraged through property investment have been having an absolutely huge impact on our economy through the recent property boom, so much so that when the property bubble looked like popping (though it looks like it only deflated a bit), the result was a huge wave of fear and insecurity through the rest of the economy. So if we don’t take action to address this, by changing property tax rules, then I believe it is inevitable that we will soon re-live the recent past, to our greater detriment in the medium-term future.

I would much rather see property prices hold for as long as they can, or even drop quite a bit, and reach a sustainable equilibrium that’s fair to all, than to see everything go back to property boom days. I’ll support any taxes that will make this the number 1 priority – even if it means that some now-well-off property investors take a big hit.

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Posted by David Armstrong

My very own outsourced Call Centre experience

October 14, 2009

Most of us by now have a tale to tell about an irritating experience with a faceless “customer service” representative of a big corporation talking from some outsourced call centre in an Asian country. I’ve had a few relatively minor ones – until last week when I experienced a beauty, “good” enough to share on this blog.

I guess I should have backed off when my first inquiry of this computer manufacturer showed the operator didn’t know what GST was. But I shrugged it off and continued.

I won’t name names, but it was all to do with purchasing a new desktop computer. Until now I’d always bought from a local supplier, knowing there was someone to go back to if there were any problems. This time I was seduced by an advertisement that came in the post from one of the world’s leading PC makers which sells only (in New Zealand anyway) through an online shop. If you think you know which corporation I’m talking about, you’re probably right – rhymes with Hell.

The advertisement, and the company’s New Zealand website, showed nowhere whether the price included GST so I phoned the 0800 number to check. It took three customer service operators before I got the answer I needed, though part of the trouble may have been the inevitable difficulty on both sides in understanding our use of English.

The eventual answer was what I’d hoped for, so I went ahead with placing an order. The website was well constructed and user friendly and it took little effort to configure the machine with the required number of gigabytes, size of screen, storage, etc. The final step was to check out, which I did through successful entry of my debit card details.

Then the fun began, though initially without any real hint of trouble ahead.

Normally when buying online I get a printout of the final confirmation page, but my printer wasn’t connected, and the website told me that details of my order would be emailed to me. I completed the process – or at least I thought I did!

I waited for the promised email. An hour. A day. Two days. Nothing. OK, not a problem, I’ll phone the 0800 and find out what happened and what to do.

The first thing their Customer Support department wanted to know was my order number.

I don’t have one; I never received the email telling me what my number is.

We cannot track your order without an order number. Do you have a customer number?

No, I didn’t receive the email so cannot provide you with one.

Then you must complete the order.

How do I do that?

Enter the website and complete the order.

(I’ll break this dialogue for a theatrical aside to remind us that many of these questions and answers (and the ones to come later in this article) were spoken several times as neither of us could understand all the words spoken and the line was scratchy. My wife was amazed at how calmly I kept on saying with great deliberateness “I’m sorry, I cannot understand what you are saying. Please speak more slowly.”)

But how can I pick up the order so far so I can complete it?

Use the order number.

But …… etc. This little Catch-22 circle was spun out with three operators, after each said they would pass me on to a supervisor. Finally one asked me my name and email address, and soon said he had found my aborted order in the logs and gave me the associated customer number.

So what do I need to do to complete the order?

Just go into the website and place the order.

From scratch? What happens if my first order is processed?

That will not be a problem.

So I went back into the website, configured my new PC (and fortuitously got a better deal on the monitor for just a few extra dollars), and did the debit card thing. This time the order details came through on the promised email, and I thought it was all over bar the wait for the product, the arrival of which was promised within an acceptable 10 days.

Two days later I was checking my bank account online and …. ‘ello ‘ello ‘ello, what have we here? Two debit withdrawals, both for amounts around $2200 but not identical. I checked with my bank and they confirmed they were both executed by the computer maker, and that the bank could do nothing about it – I needed to sort it out with my supplier. They had charged me for both computer orders!! Lucky I happened to have enough cash in there to cover it without going into overdraft.

Back onto the 0800 number, and the start of a conversation (well actually somewhere between 8 and 12 conversations) that took a perspirational 45 minutes to complete.

Order number please?

Well, my problem is that you have charged me and deducted money for two PCs but I only ordered one. I want a refund on the first one for which the order was not processed.

Could you provide the order number for your purchase?

That was done.

Do you want a refund for this machine?

No, the refund is for the machine that I initially ordered but the order did not complete so I did it again. Someone in your workplace there told me to do that.

What was the order number?

I never received one because the email never arrived. I talked with one of your people and they gave me a customer number and told me to place the order again.

OK, what is your customer number?

Fortunately I’d written it down, so told her. That cannot be your customer number – that’s for Australian customers and you’re in New Zealand, right?

Steam starts to build up in the space between my ears. Hopefully you get the basic picture; I won’t repeat this to-and-fro for as many times as it happened – with about 8 to 12 operators (I wasn’t counting at the time). Each time it was getting too far from their working script and testing tempers, or if neither of us could understand each other’s accent, the operator said I would be transferred to someone else. A few times I was told specifically that I would be transferred to the “Refunds” department, but in most cases it was “One moment please sir, I’ll transfer you to someone who can help you.”

As it went on, it became apparent to this increasingly cynical soul that all these operators were in a big room with dozens, perhaps hundreds of colleagues each being paid to clear up issues as soon as possible. Complex issues take too long, and mine required too much off-script thought so they just shoved me onto the next colleague in the answering queue. This tactic became obvious because after every single transfer I heard the standard Customer Service introduction and had to start from scratch yet again.

You want to cancel your order number xxxxxx and obtain a refund?

Not that one; the other order that was never completed. You’ve withdrawn money from my bank account for two PCs but I only wanted one. I want to cancel the order for $2235.16.

The amount you have been charged for your order is $2247.58. Do you want to cancel that order and be refunded?

No, that machine I want. I was charged for that plus the other order that was never completed.

What was that order number sir?

You will be pleased to know that in the end – after about 45 minutes – I was placed with someone who (a) spoke reasonable English and (b) took a few more seconds to listen to me and check through the logic and sequence of the transaction logs. He quickly spotted the problem and initiated the process which, a few nerve-wracking hours later, resulted in an email confirming the cancellation of my initial order and the in-writing promise of a full refund.

Which happened a few days later.

Soon after, I took possession of a fine Dell computer that’s been humming ever since. So … no damage in the end, but perhaps I aged a few extra months in the process.

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Posted by David Armstrong

Kiwibank must be allowed to grow organically

July 22, 2009

I may be wrong but . . . . I get a feeling that Big Business is making another push to get Kiwibank gobbled up into the game playing and greed of the more-market business world. And that possibility disappoints and concerns me.

Last Saturday (July 17th) the Christchurch Press newspaper published a feature report on Kiwibank in the Businessday pages, written by Roeland van den Bergh. As we’re all aware, Kiwibank was set up at the start of this decade, and in the eyes of ordinary, supportive Kiwis it had two clear primary purposes, as summarised by van den Bergh: to “look after ordinary New Zealanders and keep profits onshore”.

Through the 1990s large numbers of people were becoming unhappy at the growing fees being charged by the four main banks, all Australian owned, along with increasing profits remitted to their Australian shareholders. So . . . despite complaints from the ideologues and big players of the business world, Kiwibank was set up and initially funded by the government to provide a viable nationwide, New Zealand-owned alternative. And it has done surprisingly well, putting some pressure on the big four and reminding us of the days when banking meant financial services for ordinary people rather than speculating on world markets to foster greed and maximise profits for remote shareholders.

Kiwibank, we’ve been told, has grown steadily to the point where its market share is edging up toward the space long occupied by the big four, especially among domestic customers. Apparently it’s been working mainly on the business model that I always thought (in my naivety?) is or should be the basic operation of banks – borrowing from people with excess money (paying interest for the privilege) and lending re-packaged money to suitable people who needed it (charging interest for the service).

As van den Bergh wrote, referring also to the other main locally-owned bank TSB, “both banks fund their lending almost entirely from domestic retail deposits, while the big banks have been hamstrung by their need to borrow on international money markets, which have been frozen”.

That confirmed for me something that has bothered since last year’s financial crash – why was it such a huge problem that nervous banks were not lending to each other, causing the system to grind to a halt? Shouldn’t banks just be borrowing from savers (people and businesses) and lending to borrowers (other people and businesses)? Why do they need to spend so much effort borrowing off and lending to each other? (Apart, that is, from extracting fees for every transaction.)

Back to Kiwibank. So far so good with the Press article. Then I became uneasy as I read that as Kiwibank “grows its balance sheet beyond $10b it will have to increasingly diversify its funding to include international wholesale lending to maintain its growth.” (my italics).

Here we see again the Big Business ethic that growth is imperative. Apparently it’s not enough to just do what you do well or better, to grow organically by getting more and more customers to use and appreciate your core services. And according to the growth imperative if the growth rate is not being maintained, then it’s not enough to operate on a plateau.

Why does Kiwibank need to keep growing in size and reach, even when it may mean that its whole raison d’etre is imperilled? Ah yes, of course . . . it’s because the people pulling the strings – the government – are aligned with the business world. They’re not satisfied with providing a service that can pay for itself, grow organically, and offer the bonus of an optional, modest dividend. Forget about serving customers and retaining income within NZ, just make money for the government and its business friends!

As van den Bergh wrote, “The Government has discussed expanding Kiwibank amid calls for it to beef up the State-owned bank to help push interest rates lower.” OK, beef it up and take advantage of the bank’s ability to affect domestic interest rates, but don’t get into the same silly corporate money games with overseas markets that have caused so much grief recently to the private banking industry and society as a whole.

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Posted by David Armstrong