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How SBC (AT&T) Pillaged South Africa's Economy
Kifoth writes "For 8 years, SBC and Telekom Malaysia controlled South Africa's only telecommunications company, Telkom. Telkom had a government granted monopoly in order for it to connect the large parts of South Africa that had been neglected under apartheid. Instead of helping, SBC abused their position and raised Telkom's prices to be among the highest in the world. The billions they made here ultimately went to fund their AT&T merger. From the article: 'SBC, described as "congenitally litigious", is said to have played a major role in the failure of South Africa's telecoms policy to develop a competitive telephone service. Under SBC's control Telkom not only failed to meet its roll-out obligations but behaved "as a tax on industry and a drag on economic growth."'"
How South Africa's Government Pillaged South Africa's Economy
Root of the problem: "as a privatised, state-backed monopoly without a forceful regulator...."
When are governments going to learn? If you are going to privatize, you have to OPEN up the market rather than create a quasi-governmental monopoly. This reeks of mercantilism, which is a pre-capitalistic notion that it is better for a government to protect its industries than open the market to trade and/or competition.
Mercantilism always has bizarre and harmful unintended consequences.
You should blame the politicians who voted to allow the monopoly deal in the first place. Do you believe for one second that they did not know what they were doing?
As much as I hate government interferance in business, if you're going to have a government granted monopoly you should have government set prices.
Liberal economic policies help in a lot of things, but utilities are one of the cases where it's an infrastructure investment that still is most efficiently done cooperatively, particularly since you have to deal with public rights-of-way and all that. Services on top of the infrastructure should be liberalized, of course.
We really do need to get people to think beyond left and right more these days and more on what works best for the particular situation.
Yeah, totally.
You're right, of course.
CLEARLY, those who actually executed the bribes are not at fault in this case, even if it was illegal.
P.S. Blaming big business for acting big business is like blaming a rattlesnake for biting you. They're doing exactly what's expected of them, and you're a fool if you think they are supposed to care more about you than their shareholders, and maybe employees. That's why you elect a government and give them the power to enforce oversight in your best interests.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
The trouble is that it's very hard to do that with telephone service. There are a lot of installation costs when the cables are put in the ground and the returns aren't very large.
The problem here is that an inexperienced government got taken advantage of by SBC. SBC has a history of buying their way into a monopoly then abusing that position to no end. In several cases they have even gotten the local governments to ban VOIP and then blocking those ports at the isp leave.
Because this is a discussion about AT&T and South Africa. The poster used this as an example of "capitalism gone awry" which it is not. It would be closer to fascism than capitalism. A central authority made a decision for the entire country, leaving one player in place to implement a system. Nowhere does this remotely look like capitalism.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
Nope, state interference in markets in action. This story is an object lesson in why governments shouldn't keep competitors from entering a market.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
You are aware that there are positions between libertarian free markets and completely state-controlled economies, right?
Of course he is. But look at the comments so far, The usual Slashdot mixture of sardonic humor, cynicism and sarcasm. People are resigned to watching this run all the way, hoping perhaps that it will burn out in some spectacular crash that we can all sit back and watch the fireworks. I've lost count of how many articles I've read this week alone with the theme that capitalism is heading for catasprophe. Greed and ignorance have lead us down a road that is difficult to pull back from. How do you reclaim the sensible middle ground when the legal and electoral systems are a bought and paid for part of the whole corrupt system? As time goes by I've swung from away from being conservative, not towards the left but towards self empowerment. I used to work in the media industry but now I see no option than to wholeheartedly support "piracy". Economies are being destroyed everywhere by what is essentially a tax on liberty, on free movement, free association and communication. The war on travel vis TSA and the war on communication with warrentless wiretaps conducted by megacorps in league with government are part of the same thing. Those who still believe it has anything to do with security are idiots, it's about control and money. If they could tax us for breathing they would do so in a moment. We have to defeat these sociopaths, legally, illegally, one way or another. There is short window of history available where we still have one power, the power to take this technology away from them. Aren't there enough mobile phones in existence that they could be hacked and turned into an open mesh network? Free communications for everyone? That would be an interesting start.
However, most of these companies were also involved in making military stuff that propped up the apartheid regime. Likely they were "punished", to the detrament of all.
Engineering is the art of compromise.
In a place like South Africa, only a government regulated monopoly would be interested in providing telecom to a lot of very poor people with very poor credit rating. Free market companies would just walk away from that because it makes no business sense.
Engineering is the art of compromise.
What do you expect would happen when the government jails anyone who tries to compete? Yes, it is the government's fault.
So a company that had to build a bunch of new infrastructure to places likely to have a low volume of subscribers to subsidize said infrastructure has high prices. How is this surprising exactly?
That said, I have no doubt there was some ripping off done; I've never experienced an honest telco. But giving them a monopoly was just begging for gouging.
Sometimes at night I imagine the darkness is filled with horrible things with too many teeth, like Julia Roberts.
It's capitalism at its best. Remember, Laissez-faire Manchester type capitalism is just one flavour of capitalism. And by far not the most frequent one.
One defining characteristic of capitalism is accumulation of capital/maximizing the profit. A monopoly is a very good way to do so. (Does Microsoft ring a bell?)
This particular monopoly was a government-granted monopoly but monopolies also develop under free-market conditions. Did you never wonder why capitalism needs all this laws and regulation to protect the *free* market? I guess it's not because companies like competitors and want them to stay.
Finally, this monopoly was granted to ensure Telkom a profit for building infrastructure in remote areas. Public services are a typical problem of capitalistic economies since they tend to be unattractive for companies.
And with the monopoly granted Telkom did what a capitalistic company has to do, it maximized its profit by raising the prices.
All I can see is capitalism at its very best. Not very pretty but nothing surprising.
"Hannibal's plans never work right. They just work." Amy/A-Team
OK, on one hand, monopolies almost always abuse their power. Some actually run OK and are good for a society (public utilities like electric and gas are good examples.) I'm actually a proponent of the old-style Bell system for local phone access -- you deal with a single company who sets all the standards and keeps the network running well. The trade-off, of course, is innovation. Or so people claim.
The other side of the coin is also prevalent in telecom and other industries -- companies with a psycho executive board that has no concept of the time beyond next quarter. Too often, we hear stories of executives laying off a percentage of the workforce just to make the numbers that year. Or outsourcing things like IT or customer service because some MBA told them that these aren't "core competencies.' Try getting broadband service out of the telecom companies if you live out in the middle of nowhere, for example...it's not easy. No profit-oriented company wants to support it. This was part of the reason the phone monopoly existed, and why you still pay universal service fees on common-carrier service.
So, monopoly = bad. Unchecked competition = bad. Now what?? I would argue that #2 is better in a perfect world as long as we can reduce the focus on short-term gains. However, now that absolutely everyone is counting on the stock market/casino for their retirement, I can't see that happening. Because of that, #1 is still sometimes the best choice in our imperfect, corrupt world.
They're doing exactly what's expected of them, and you're a fool if you think they are supposed to care more about you than their shareholders, and maybe employees.
You're a fool if you think unethical behaviour is somehow okay simply because they make money from it. I and many others expect them to act ethically.
They are "supposed" to do (whatever that means) whatever is in my and everybody else's best interests. Personally I want to live in a ethical society and will do everything in my power to penalize and control unethical companies. Most people think likewise.
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Monopolies = Industrial feudalism
All I can see is capitalism at its very best. Not very pretty but nothing surprising.
I'm hoping that last bit was ironic, as I completely agree with you otherwise.
I'm an energetic entrepreneur and a big fan of capitalism when it involves small and medium-sized businesses. Competition keeps everybody sharp and mostly honest. And I think it will work even better as the internet becomes more pervasive, as the internet helps reduce the information asymmetries that can lead to consumer exploitation.
Large companies, though -- especially ones large enough to be dominant in a market -- are often a parasitic scourge. Having both dealt with them extensively and worked inside them some, my belief is that they don't really practice what I'd call capitalism. Instead, they behave like medieval feudal kingdoms. Internally they're rigidly hierarchical and frequently wasteful, and externally they're often soulless monsters that crush the weak and toady to the strong. Well, that or they get fat and lazy.
In short, I'm a big fan of open markets and open competition, both in ideas and in goods -- just as long as it is truly open and power is distributed widely. Of course, SBC/AT&T knows fuck-all about that model, which is why we broke them up in the first place.
Actually, since you mention Adam Smith, the funny thing is that this is a case where he wouldn't have advised laissez-faire capitalism in the first place. In fact, the only change there to make it fully Adam Smith compliant would have been to make it a public institution, or I suppose regulate it to the point of being effectively one.
The funny thing about Adam Smith is that he may well be the most mis-understood and mis-quoted author. People seem to assume him to be the shining beacon of laissez-faire market-solves-all-by-itself proponent, especially when they themselves subscribe to that kind of a view.
He actually proposed a _lot_ of government involvement in infrastructure. Ok, so what he said is public works and institutions (remember the institutions part too), with emphasis on public works that would facilitate commerce in general. He sees it as the government's duty to provide and maintain good road, bridges, navigable canals, harbours, etc, in other words: infrastructure.
That's actually a lot of taxation and public spending to maintain that, with Britain's economy at the time when Adam Smith wrote that.
(It's funny how so many of those discussing why the industrial revolution in Britain miss the factor that their canal network was a precursor to railroads that served the same purpose: getting raw materials from here to there in large quantities and cheaply.)
At any rate, blimey, telephone is infrastructure.
If I'm allowed to go into an OT detour into his public institutions views too, he also was for public schooling (above and beyond what any country does nowadays, as it would involve a school in every parish), public health (to "prevent leprosy or any other loathsome and offensive disease"), and generally wasn't too much for a lean and cheap government the way I see it, since he has nothing against expense for "supporting the Dignity of the Sovereign". He also didn't seem too bothered by government co-ownership in some (heavily-regulated) corporations, either.
So basically, it's funny to see him quoted as some beacon of ol' school conservative laissez-faire, either by the proponents or detractors of it, when really that's not what he proposed at all.
To get back to his invisible hand, basically all he says there is what we nowadays call supply and demand. If there's a demand for product X and a profit to be made in fulfilling that demand, someone will start making more of it. You don't need the crown to tell someone to start producing X, someone will start it anyway, "led by an invisible hand." He's not horribly wrong, either: as long as the market has a certain structure, we already know that it works.
The only problem is that the ideal(istic) capitalist free market is not the perversion it tends to become when left unregulated. The assumption that the free market solves everything is based on a structure where there are many producers for each good, the different brands of goods are perfectly interchangeable (e.g., you could drop an AMD CPU into your Intel mobo if you don't like Intel any more, or could switch between Windows and BSD or Solaris without noticing any difference in what you can do with that computer), the buyers are perfectly informed, etc.
That was the only kind of market you could possibly get in the 18'th century, but nowadays it's possible to subvert it massively. And the incentive is there too. That ideal market is a commodity market, and there's not much money to be gained in it. As they say, the only way to make a small fortune in the commodity market is to start with a big fortune. The big money is in making your product non-interchangeable (e.g., by making other stuff work with only your brand of it, see: Microsoft), keeping the number of competitors low (e.g., by raising artificial trade barriers), and keeping the public as uninformed or even mis-informed as possible (e.g., marketing, PR and FUD.) So that's what the perverted direction the market tends to take by itself: if it's more profitable to do that, the succ
A polar bear is a cartesian bear after a coordinate transform.
Try doing that in Canada and actually *attracting* business. 3559294 square miles, cold, snow, etc. Have fun! There's a reason Canada has so many efficient, well-regulated Crown corporations. You have to INVEST in infrastructure like telecoms, broadband, roads etc. through public ownership, FIRST, to attract business. Even the Conservative gov't of Ontario knew this when they created Ontario Hydro, a publicly owned corporation. BTW, Canada never had an Enron debacle. Oh the joys of neo-liberalism, huh?
"The trouble is that it's very hard to do that with telephone service."
No it isnt. It's no different than roads, sewage or other pieces of infrastructure.
You simply have the state own them, let contractors bid for the construction, then make the infrastructure available (for a fee, a tax, or neither) to those who need the infrastructure. In the case of phones you simply let various phone companies sell their services over the infrastructure (and you can charge them over time for the expense of building it. Or not, depending on your socioeconomic goals with the expanded infrastructure).
The tricky part appears to be resisting ideas to expand the states involvement beyond simply owning the actual infrastructure. While the economic activity of 'owning infrastructure' doesnt lend itself to competition, building it, servicing it and selling services utilizing the infrastructure certainly do.