Friday, August 22, 2014

The Numbers are in. Now we know why Rupert is anti-NBN, pro mobile.

Murdoch famously tweeted that "NBN is ridiculous". His mouthpiece, The Australian, explained that away as:
"In fact, NBN would be great for Foxtel because it would take all those programs into every home."
But he is worried mobile technology has overtaken the need for the NBN.
How can the guy who single-handedly both broke the UK Unions and brought newspaper printing technology into the late 20th Century, be so dense about the possibilities of universal 100Mbps fixed-line services? He gets access to 10M houses, not 2M, for Foxtel, with the ability to offer finely graded services and leave no consumer surplus, plus he rids himself of the drag of an ageing and difficult partner, Telstra. Is his business model "the biggest monopoly I can have" vs "maximising customers, revenue and profits"?

It's a triple win for Murdoch, but he wants "more of the same" instead. Can he remember the 'success' he made of buying the premier Social Media site, MySpace? Murdoch tweeted of the $580 million in shareholder cash destroyed: “screwed up MySpace in every way possible”. He doesn't seem to accept responsibility for the FAIL, nor does he seem to have learned anything from it.

Which suggests only two possibilities:

  • Destroying MySpace was intentional and planned, or
  • the guys' ego is much more important than care-taking after Other People's Money well and learning from mistakes. As the Mythbusters say: "I Reject Your Reality And Substitute My Own!"
Neither possibility is good financial management nor shows an appreciation for the depth of changes wrought by the Internet, both in consumer behaviour and access to them.


There's only two major mobile service providers with strong national coverage: Optus and Telstra. For Murdoch to opine that "mobile is the answer", he can only be meaning he can tie smartphones and tablets to Telstra. Telstra won't be enthused about that - the cost of covering additional premises increases by a square-law: halving cell radius means you need 4 times the number of cells. Infrastructure costs & renting antenna space, along with fixed cabling & backhaul are the major costs with smaller cells, not the radio systems.

Having some internal 2013 Operational figures of News Ltd Australia leaked, means we now know for a fact, versus merely supposing, three things:

  • He's pursuing an anti-NBN agenda to prevent Over-The-Top video distribution affecting Foxtel from the likes of Hulu and Netflix, dependant on reach, volume and reasonable bandwidth,
  • Destroying NBN Co is a defensive move, protecting print operations by slowing collapse, and
  • using Foxtel monopoly profits to subsidise the print operations and maintain influence and market dominance.

For the 2013-14 year, News Corp reported that earnings before interest tax depreciation and amortisation (EBITDA) from Australian newspapers fell by $73 million — ”which by Crikey’s estimate represents roughly an 80% fall on the previous year, nearly wiping out the division’s entire operating income”.
The accounts reveal far more detail than News Corp gave at its fourth-quarter results this month and display how heavily the company has bolstered its newspapers with profits from online real estate giant REA Group and ­pay television joint venture Foxtel.
As well, we might infer from the Australian piece that he's banking on Telstra 

We know the IPA (Institute of Public Affairs) lionises Murdoch and he may well be a major supporter (finances are "secret mens business") and the IPA's "Radical Ideas" agenda has mostly adopted by Abbott and his cohort, including the anti-NBN.

But why didn't Howard support Sol Trujillo's pitch for an NBN? It was amply justified financially and would've created significant employment and new business activity. Any tehcno-illeterate luddite could've seen the possibilities and realised it was "risk free", as we've seen from the NBN Co financial results and ABS Internet survey figures for NBN (50% higher downloads than the norm.)

The T2 float followed T1 in 1999, or by 3-4 years, and we could've expected the final sale, T3 in 2003 (not 2006), when Ziggy Switkowski was CEO and burning money faster than a hollywood star on coke and strippers. Perhaps that's why Howard terminated his employment (CEO's don't just "resign" before the end of their contract if well).