everything, everywhere
So, it’s not going to be T-Orange after all, then. T-Mobile and Orange have resisted the temptation of the obvious and have decided to run in a completely different direction, calling their joint venture everything, everywhere – perhaps a slightly hyperbolic name for a mobile company, even if it is the largest one in the UK, and one which appears something of a mouthful in comparison to the available competition (it has more syllables than the three other network operators put together).
Its ‘vision’ includes a single ‘super-network’ giving ‘unsurpassed coverage and capacity’ for customers (though 3 might take issue with this bit), and at a lesser impact on the environment. Few details are as yet available other than that the company will seek to combine both the Orange and T-Mobile networks and, by cutting out duplication, reduce the number of stations and sites that the company uses (which currently stand at some 27,000). Nevertheless, how this network looks, and operates, is a vitally important consideration not least given the terms on which the JV was approved (i.e. the guarantees given to 3; and the sale of spectrum). The company has, however, confirmed that all four of the companies served by the network (including both 3 and Virgin Mobile) will run on a common infrastructure.
The new company claims a customer base of more than 30 million people – ‘over half of the UK adult population’ (I can’t recall the companies trumpeting this sort of statistic while the regulators were looking at the proposed JV: funny, that!) and its press release helpfully breaks these down into pre-paid and contract mobile customers and Orange’s fixed network (the management of which was outsourced last month to BT) – so would seem to incorporate the potential for some double-counting.
The merged company will have 16,500 employees – 2,500 fewer than they had when the JV was announced seven months ago – and is, according to the same report, seeking savings of some £3.5bn by 2014 in shared infrastructure, technology and in the savings resulting from job cuts.
Not everything, everywhere for everyone, then.
PPF index shows a slight slip
The Pensions Protection Fund published the PPF7800 Index today for the end of April, showing the state of health of the 7,400 pension schemes under its supervision.
The Index is currently showing a small net deficit, of £2.2bn, reversing March’s small surplus (£0.3bn). Given the growing turmoil in currency markets during April associated with the financial and economic situation in Greece and other small EU countries, something which was only capped this week with the agreement between EU finance ministers, a drop of the Index back into negative territory is not surprising but the small-scale nature of the drop was a surprise, and a particularly welcome one.
Some 69% of schemes were in deficit this month, more or less the same as the 68.5% in March, which seems to support the view that the picture is, essentially, little changed. Evidently, this remains an uncomfortable proportion of schemes in deficit, even if the overall net balance of assets and liabilities lends the view that the average scheme is not all that much in deficit. The total assets of these schemes reached £913bn, a drop of 0.2% over the month and an increase of 18.2% since April 2009; total liabilities stood at £915bn, a small increase on the month but a drop on the £961bn recorded in April 2009.
During April, the value of both assets and liabilities deteriorated, the latter by more than the former (hence the drop of the net figure into negative territory). Over the year as a whole, rising stock markets have added 16.4% to pension scheme assets, while rising bond yields have added only marginally to liabilities.
So, overall the picture continues to be encouraging, although the change in the actuarial assumptions underpinning the calculation of the Index in October last year continues to affect the figures. Caution remains necessary – pension schemes are far from out of the woods just yet.
Monti report proposes more centralised regulation
In an announcement somewhat overshadowed by EU finance ministers’ agreement on a €500bn package for member states with solvency problems and to provide support to the euro as a currency, as well as in the UK by the will they-won’t they tea dance going on in Whitehall as I write, former European Commissioner Mario Monti has presented a report to current EU President, Jose Manual Barroso, on a new strategy and direction for the EU’s single market.
Monti was commissioned to write the report back in October 2009, and its aim is to motivate a renewed political determination around the concepts of the EU’s single market and to provide a fresh impetus for the principles which underpin it. What seems to be high up in the Commission’s thinking is the need to assess the state of play in the single market in time for the 20th anniversary of its establishment, in 1992, while the context is also clearly rooted in fears for the direction and commercial success of the EU associated with any retreat into economic nationalism arising from national-level responses to the economic and financial crisis. The report will be the basis for a Commission initiative to relaunch the Single Market as a key strategic objective and, following internal discussion, the Commission will emerge with a ‘balanced, broad and fair’ vision of what the single market should look like in the future some time in July.
This is a hugely significant report and the timing of the announcement of the publication could not be worse (though this is unlikely to inhibit a serious discussion in time of the report’s focus). The thrust of the Monti report is that a system of national regulators sees to it that the EU ‘falls short of its commercial promise‘ in the communications and e-commerce areas, and that the response should be for the EU to have stronger powers over national regulators. Some of the conclusions – for example on an EU-wide spectrum licencing regime – look somewhat behind the play given the round of advanced spectrum auctions which have been concluded in the Netherlands and in the Nordic countries, and are currently well underway in Germany. But what looks inescapable is Monti’s views on the need for a revision of regulation in the communications sector so as to create an EU-wide market for electronic and communications and to drive the growth of Europe’s digital economy.
Given the recent conclusion (in 2009) to the last round of revision of telecoms regulation at EU level, the sigh of ‘here we go again’ is equally inescapable. Nevertheless, this is a report that will need serious consideration, both in terms of its political significance as well as in terms of the impact of the measures that it proposes will have on workers in the sector.
Election 2010: use your vote
Will Straw at Left Foot Forward has a fair review of the campaign. And his conclusion is impossible to ignore:
One thing is abundantly clear: whatever you do today, vote.
Not turning out to vote means that the votes of extremists count double. Committed extremists are certain to vote – don’t give them your vote too.
And from a trade union perspective, to add a section missing from Will’s round-up, honourable mentions to the Green Party manifesto (pp. 9-11) – but, of the major parties, only one is likely to have included this in their manifesto:
Modern trade unions are an important part of our society and economy, providing protection and advice for employees, and working for equality and greater fairness in the workplace. We welcome their positive role in encouraging partnership and productivity.
Net traffic predicts hung parliament
Perhaps Alex Salmond should look away now, but traffic to the official internet sites of the three main political parties looks eerily reminiscent both of the share of the vote going to each party, as recorded by recent opinion polls, but is also reflective of recent polling trends – up Labour, down Lib Dems.
Coming soon to you, i.e. in about five years time: Can’t be bothered to vote? Can’t drag yourself down to the polling station? Then let ‘apathy app’, our new app designed to assess your likely voting habits based on your surfing record, put a postal ‘x’ in that box for you…
Britain’s Digital Future II
I’ve now had a chance to listen to The Guardian‘s Tech Weekly podcast I blogged about last week. Unlike some of the comments on the podcast page, which mostly seem to reflect continuing disappointment over the copyright and file sharing aspects of the Digital Economy Act, I thought this was an interesting and reasonably open discussion on the policies of the three main parties towards Digital Britain, underpinned by some thoughtful and articulate comments on the issues and the policies.
The bits on broadband, specifically on how to fund broadband access in rural areas, occur from the 39.17-minute mark and wrap up around 48.50. I learned the following:
– an acknowledgment from Jeremy Hunt, shadow secretary for culture, media and sport, that the market won’t provide for all and that an element of subsidy would be necessary to extend broadband to rural areas. This is not new by itself, but the Tories’ vehicle for this, i.e. using the £200m surplus in the digital switchover portion of the BBC licence fee, was, according to Hunt, supported by the BBC on the grounds that the hungriest consumers of bandwidth were iPlayer users and that the BBC wanted to extend access to iPlayer further. This BBC support for the use in this way of the digital switchover surplus was news to me.
– Stephen Timms, minister for Digital Britain, argued that the switchover money would not be available until 2013 and that doing nothing until then was simply not good enough, while making progress in rural areas demanded investment of £150m per year (i.e. the sums being spoken as being raised by the landline duty). At the same time, conceding the switchover surplus for rural broadband would leave little left for the universal service commitment. Hunt’s reply was that he would rather use the sums which Labour had spoken of to subsidise regional news programmes from ITV for rural broadband instead. So, here we have a Tory spokesman unsympathetic to the notion of the need to subsidise independent sources of regional news – while I also remain unconvinced that the Tories in office would do much towards a universal broadband service at all: having a policy for rural broadband is not the same thing as ensuring that all households in the UK can get access to a minimum broadband service.
– Hunt commented that next generation investment could cost £29bn [apparently, for fibre to the premises solutions right across the UK] and that this was not something that one company [BT] could afford on its own. He lamented the failure of the Digital Economy Act to do more about encouraging other private sector operators to step forward and said that he wanted ‘Virgin Media to do more; Sky to do more; Carphone Warehouse to use our pilons, telegraph poles, ducts and sewers’ as a way of stimulating a lot more investment in fibre. Of course, there’s nothing to stop any other operator from building out a fibre network and then connecting that with the networks of others to extend coverage. (Except, of course, the need for investment finance and then the obligation to offer that network on a wholesale basis, just like BT has to do. That ‘our’ is an interesting and revealing word, too!)
– Hunt’s reference to Virgin Media having a fibre network which reaches the major towns and cities, and half UK households, whereas BT was the only operator which had the infrastructure to reach rural areas, and that it was ‘madness’ to wait for BT to make that investment as it simply could not afford to do it, seems to me symptomatic of a Tory desire to see BT only as a provider of last resort – that competition will provide in the major areas and that, where it doesn’t, BT will have to provide. So, other operators would be allowed to cherry pick the best areas for their investment, i.e. those which offer the best returns, while leaving to BT alone the prospect of investing in low return areas (and then having to do so on a wholesale basis). I’m extremely unconvinced that this is a sensible, rational approach to getting fibre rolled out across the UK: it leaves far too little in terms of returns for the operator relied upon to undertake the most costly investments (and the only one with sufficient scale to generate the necessary finance). In a situation in which the costs of fibre investment have already been identified as too high for one operator to deal with, it seems completely contrary then to ask that same operator to fund all the unattractive, low return investments. The UK deserves much better joined-up thinking than that.
– ‘Anyone who laid fibre would have an obligation to wholesale the fibre they laid to anyone who wants it’. I’m quoting here because I was quite astounded by what I heard and replayed several times to make sure I got it right. This goes well beyond BT, for which wholesaling obligations as regards fibre investment will inevitably be mandated by Ofcom, while that ‘anyone’ seems on the face of it to encompass, for example, Virgin Media, as well as any other operator which currently does not have SMP (significant market power – only BT and Kingston Communications currently have SMP). On the other hand, it might be argued that there is a strong whiff of ‘in future’ to the quote and, bearing in mind that Virgin Media is expecting to have completed its delivery of superfast broadband right across its network by next year, it may well on this basis be held not to have been caught by the need to respond to such wholesale obligations.
By the way, the programme ended with a comment on the impact on fibre investment of valuation office decisions. This has been well summarised by Computer Weekly and is based on a court case brought by Vtesse, and lost, earlier this year. It had been Tory policy to ‘realign’ business rates charged on fibre networks, although this seemed to lead to a bit of a spat with the Valuation Office Agency and this policy seemed eventually not to make it into the Tories’ Technology Manifesto. Making the cost of fibre essentially cheaper is likely to have some impact on investment decisions since it will increase returns: but, where that investment wouldn’t otherwise be made at all – i.e. in the rural areas – it’s unlikely to have any impact.
[5 May edit: Today’s The Guardian has a summary of all the manifesto commitments to technology, broadband and digital issues.]
May Day 2010
Greetings on labour’s day of remembrance, solidarity, celebration and re-dedication.
Here’s three things that remind me of why May Day remains important to the international labour movement, and of what solidarity means in the new decade of the 21st century if it is to be more than just a slogan:
1. At home: the last weekend of campaigning before the general election and the next big effort to ensure the BNP doesn’t gain a seat in parliament on Thursday. Of course, HOPE not hate is actively campaigning in key target areas and its organisers still need your support. Solidarity means uniting against the fascists.
2. Internationally: the draft text of the EU’s Free Trade Agreement with Colombia has been dissected by the TUC. Solidarity means freedom of association, and free from the fear of death squads for standing up for the rights of ordinary people – yet the proposed FTA brushes this under the carpet.
3. In Europe: At the European Trade Union Confederation, John Monks’s May Day message was based on the need to stand shoulder to shoulder with Greek workers to demand social justice and that the EU act decisively to stabilise the situation. Building the European project demands strength, not vacillation; perspective, not short-termism. Solidarity means having the dream and the vision for a brighter, alternative future – and the courage to express what that is when the practical situation demands it.
A May Day worth celebrating: and achievements to be won to demonstrate in practice what solidarity means.
[6 May edit: the TUC has reported events from May Day celebrations around the world here.]
IASB puts up new Exposure Draft on pensions accounting
The International Accounting Standards Board has put up a new Exposure Draft proposing amendments to the accounting regime for defined benefit pension schemes.
The Exposure Draft is, essentially, the accounting profession’s way of publicly consulting on changes to the accounting standards which govern financial reporting regimes. Like everything else, accountancy is governed by global standards which seek to harmonise how accountants report company accounts; unfortunately, IAS19, which governs how defined benefit pension schemes are accounted for, is subject to the same short-termist approach as the rest of the corporate world, implying that it is inimical to the long-term nature of defined benefit pension schemes. Both it and its predecessor in the UK (FRS17) have been blamed, at least partly fairly, for contributing to the rush to close DB schemes.
The IASB has already been through a lengthy consultation process on its preliminary views on refining how defined benefit schemes are financially accounted for; this new consultation runs until early September this year. The Draft is available for public comment and the IASB aims to finalise its plans by mid-2011, with a view to the new standard becoming effective in 2012 or 2013.
The new Exposure Draft seeks to ‘improve’ (in the context, a word full of dread!) pension scheme accounting by requiring companies:
– to account immediately for all estimated changes in the cost of providing pension benefits and all changes in the value of plan assets
– to use a new presentation approach that would clearly distinguish between different components of the cost of these benefits
– to disclose clearer information about the risks arising from defined benefit plans.
Some of this inevitably needs decoding. According to KPMG, what this means in practice is that companies will henceforth have to stop booking a ‘profit’ in their accounts equivalent to the gap between expected investment returns and the interest cost paid on pensions liabilities. This ‘pensions credit’ is, essentially, a way of recording a paper profit from the pension scheme where schemes’ investment returns are higher – as they usually are, where schemes are investing in equities – than the AA corporate bond yield used to discount liabilities. The introduction of the amendments to IAS19, which will require the assessment of investment returns to be based on the same yield on AA corporate bonds, thus effectively ending the credit, will, clearly, lead to greater transparency in accounts – and, at the same time, to a further reduction in the attractiveness of running DB pension schemes.
KPMG’s press release quotes that this will ‘cost’ UK businesses £10bn in lost earnings, with the largest schemes facing a ‘loss’ of £50m per annum, while the ubiquitous John Ralfe believes that this will ‘cost’ BT £750m (turning a £500m ‘profit’ from the scheme on the existing basis into a £250m ‘loss’ under the new one). Ralfe has a long-standing antipathy to schemes investing in equities – as this blog has previously observed. In terms of the actual cost in individual cases, much would seem to depend on how much schemes have invested in equities – though (perhaps to disappoint Ralfe) this is unlikely to result in schemes adopting more cautious investment profiles in the interim.
Will it make much difference? Yes, clearly, to those schemes which remain open to future accrual (the BTPS among them): changes in accounting rules which take money away from the profit and loss account – however much such money was paper only, and regardless of whether pension schemes should have been used in this way to boost earnings – will have an impact on ordinary workers since that ‘profit’ will have to be found from elsewhere so as to retain the level of earnings. Whether it will lead to more schemes being closed, given the numbers of schemes which have already come crashing down and the weight of other arguments against running DB provision which already exist, is a moot point.
Certainly, however, it – together with the requirement for further ‘clarity’ on the risks associated with defined benefit provision – can’t help; I’m almost of the view that it’s the latter that is the most damaging feature of all this: regardless of the ‘losses’ which need to be made up, having to write (or read) even more stuff in company accounts about just how much risk is posed by running a defined benefit scheme may well end up wearing down even the most resilient of corporate defenders of DB provision.
Clearly, these remain tough, and worrying, times for DB schemes, and most of all for the members of them.
A greener wireless industry
Telecoms companies have united in another green initiative, this time with the aim of achieving a 50% reduction in the energy consumption of so-called 4th generation (or LTE) mobile wireless communication networks, and with the aim of commercialising its work by the end of 2012. The Earth (Energy Aware Radio and neTwork tecHnologies) project is based on research into ways of saving energy in mobile networks, network components and radio interfaces with the aim of laying the foundations for a new generation of energy-efficient communications equipment.
Other than that, the company press release is really rather dense (which may well account for the distinct lack of interest amongst the UK press, even on what seems to be a slow news day). Indeed, the initiative seems to have got underway some three months ago and only now has a press release been put together about it. Alcatel-Lucent and Ericsson are the lead names on the initiative (as indeed the former was on a previously announced green initiative, which I blogged about here) but it also encompasses 13 other partners, including research institutes and universities, and the European standards organisation, ETSI, alongside the telecoms partners.
LTE (Long-Term Evolution) is the name for the next generation of mobile, with a wide range of frequencies deployed to allow users to watch high-definition video and receive much faster downloads on their mobile devices. An auction encompassing LTE-appropriate spectrum has just been concluded in the Netherlands, while similar is currently underway in Germany. Plans in the UK, intended to have been facilitated by Kip Meek’s independent brokerage and accepted by the government, have been derailed both by operator objections and by the loss of key chunks of the Digital Economy Bill, but may return to the agenda after the general election.
So, the new initiative is timely and very welcome – even if the EARTH programme, if not its aims, suffers from an inevitable imprecision as well as the equally inevitable strong dose of corporate puff. Similar to the last initiative, however, my gripe remains the relative lack of UK involvement. The University of Surrey is one of the consortium partners, but UK involvement seems otherwise to be minimal. Leadership on these sorts of initiatives is up for grabs and it would be a shame were the technical expertise in energy efficiency generated by such initiatives to flow largely elsewhere.
The ‘Google tax’ and net neutrality
It is being reported that Vodafone is to ask the European Union to take action so as to ‘facilitate bilateral agreements between telecom operators and online content providers like Google’ – essentially, to allow network operators to charge content providers, such as Google, YouTube and, probably, the BBC’s iPlayer, additional fees in relation to the network demands placed by the users of such services.
Operators would rather charge content providers than consumers, but it would seem that some network operators have started to realise that the ‘all you can eat’ model – under which bandwidth comes at a flat rate (except, perhaps, for usage caps on really high users) – is not a viable economic model in a scenario of the rapid growth in bandwidth consumption we are experiencing. More and more for less and less is never a particular sound economic model. Clearly, in such a situation of heavy retail competition, essentially preventing operators from starting to raise prices, or to alter pricing structures in accordance with consumers’ capacity usage, operators need to look for alternative sources of revenue – and content providers represent it. (How we’ve got into this mess in the first place is a different blog post altogether.)
Were they to succeed, then this is likely to lead to a further commercialisation of the internet, in terms of how the content that you read, or view, is paid for (though, to be fair, such a commercialisation is proceeding apace anyway via new advertising models), with network operators essentially wanting their own slice of this action.
On the face of it, the reference to the need for EU action looks a little odd – there is nothing to stop operators coming to such bilateral agreements amongst themselves and, in a free market, that’s probably the more preferable response (where, of course, content providers are prepared to play ball, which they may well not be).
The other difficulty, of course, is the reference to the principle of net neutrality, according to which network operators should carry net traffic on an open, non-discriminatory basis. (Roger Darlington reviews the issues of net neutrality very well in his monthly column for Connected, the magazine of the Connect Sector of Prospect, which you can also read online here.) Starting to charge content providers for network quality, or levels of consumption (as measured by capacity usage), starts to affect how the net operates since content providers, under the commercial pressures of such agreements, are likely to want to see ‘their’ traffic prioritised by those with whom they have reached such agreements. Indeed, such prioritisation is likely to be included within any such agreements on charging. The upshot will be changes to how the net operates, and is experienced, some of which may well be invisible to the naked eye – a problem for those supporting a liberal internet and likely to lead to such principles being heavily compromised.
The original source for this post reports that Vodafone is making its push via a shortly-to-be-finalised submission to an EU consultation on net neutrality. This is a bit strange, since the last I saw from the EU on this issue was this (part of last year’s EU telecoms package) which, in Annexe 2, does talk of the importance of preserving ‘the open and neutral character of the net’ and seeking to enshrine net neutrality as a policy objective for member states. I can’t find a reference to an open consultation on this on the appropriate pages of the EU portal, although we know from Ofcom’s annual plan for 2010/2011 that some activity will be taking place (A1.77) – while Roger’s piece also refers to a UK discussion and consultation on net neutrality taking place ‘later this year’ (and, evidently, within the context of EU action).
Such confusion aside, it is clear that operators (the original source cites also Telefonica) are starting to gird their loins for an attack on net neutrality so as to allow them to seek to charge content providers for access (in this context, Project Canvas takes on a new light since it would seem to allow project partners to side-step any such charges). Equally, the EU looks set against such a model, so it could be quite a battle. Consumers will end up paying the price somewhere, although whether that’s a cash-based or a principles-based price (or both) is an interesting question.
Orange refused Swiss merger
Swiss competition regulators have refused permission for Orange, the smallest of three operators in Switzerland, to merge with Sunrise, the Danish-owned second largest operator, on the grounds that the proposal would undermine market dynamics and damage consumer interests.
The merged entity, for which proposals had been developed last November, would have had a market share of 38%, compared to the 62% held by Swisscom, the former monopoly operator. However, the view of the Swiss authorities was that the merged operator: ‘would have been in a collective dominant position which risked eliminating effective competition.’ Uppermost in the authorities’ mind was that it would be more advantageous in a two-company market for both to collude over pricing levels.
An appeal, which must be lodged within 30 days, is thought likely [registration required; limited viewing time]. In the meantime, a knock-on effect of the decision has been to delay a planned flotation of TDC [registration required; limited viewing time], the Danish parent of Sunrise, which is currently owned by a consortium of five well-known private equity groups (Blackstone Group; Permira; Kohlberg, Kravis, Roberts & Co; Providence; and Apax Partners). Part of the Swiss merger would have meant France Telecom, Orange’s parent, handing over €1.5bn in cash to TDC in return for a 75% share in the merged operation – without which, on the face of it, the private equity groups concerned have been unable to realise sufficient gains prior to their exit from the Danish market.
Clearly, the Swiss mobile communications market is different to the UK one and Switzerland is outside the EU, so it’s not particularly interesting to examine the reasons for the approval of a merger in one market compared to a decision to reject a merger creating a still-small entity in another. At the same time, however, and taking these two recent situations together, it is interesting that the rationale for merger approval or rejection in neo-liberal societies seems, on the face of it, not to be so much the desire to create, or achieve, conditions of high competition but to minimise the point at which there is a potential for pricing collusion.
It’s also an interesting reflection on the role of private equity groups, and their ability to extract high rewards from relatively quiet situations (the Swiss mobile market is 9m consumers) – as well as a comment on the involvement of private equity groups in telecoms companies. If the €1.5bn was as crucial as that to their exit from the Danish market, and sufficient to postpone it when its arrival has been blocked, then it is likely that the efficiency gains sparking their involvement in TDC have not been sufficient to make their involvement in Denmark worthwhile. At least – not yet; which may in turn spark a note of further warning to Danish trade union colleagues.
It would have been even more interesting had Deutsche Telekom, in which Blackstone has a stake, had been involved in the Swiss market.
Young Fast Optoelectronics
One of LabourStart’s current campaigns concerns workers at Young Fast Optoelectronics, a Taiwanese manufacturer of touch panel screens whose customers include Samsung, LG, HTC (which supplies phones to Vodafone in the UK) and Google. Following a concerted union organising drive at the factory in the face of poor working conditions, which led to the establishment of the union in December 2009, management at the plant has sacked five union officers and more than ten active union members.
LabourStart is organising an e-mail campaign in support of the union and the sacked workers, and calling for the improvement of working conditions at the plant, which you can join either from the LabourStart homepage, or else directly here.
It’s a telecoms industry plant, and these workers need to know that they’re not alone. Please do what you can to support them.
Love it
The BBC is reporting that Unilever, the makers of Marmite, is initiating legal action against the BNP to force the racist party to remove a jar of Marmite which apparently features in its election broadcast (further, and funnier, from Reuters and from Harry’s Place).
It would be nice to think that Unilever subscribes, even in a small way, to the ‘not in my name’ philosophy of HOPE not hate; I can’t say that it doesn’t – and anything which ties up the BNP in the threat of legal action, or distracts or otherwise helps to sap it, has to be good news.