Difference between revisions of "Plat du jour"

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(Created page with "Dear Ms Plibersek, Mr Turnbull <br><br> I am addressing this letter to you rather than the leaders of your respective parties because I do not have any confidence in Messrs Ab...")
 
 
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Dear Ms Plibersek, Mr Turnbull
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'''Re: Mobile telephony vs rural water supply'''
 
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I am addressing this letter to you rather than the leaders of your respective parties because I do not have any confidence in Messrs Abbott or Shorten as leaders of a western, liberal democracy. Of course, by writing directly to you, I do not mean to question your loyalty to them. My impression is only that my concerns and views are an anathema to Mr Abbott, and given they may not be supported by recent polling data from marginal seats, will not interest Mr Shorten. I share very few of Mr Abbott’s values, and Mr Shorten seems to have very few values to share.
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Response to http://www.wateraid.org/news/blogs/2016/october/why-can-people-get-access-to-mobile-phones-and-not-safe-water
 
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My concern is that the Government is attempting to dismantle the fundamental institutions that our democracy is based on. Specifically, I am concerned that
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Anambra State in Nigeria, where there are no public water services of any kind (last time I checked) provides an interesting case study.
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* Our Prime Minister can suggest that the Government should achieve its aims “by hook or by crook”, when discussing allegations that civil servants and defence personnel <i>broke our own laws</i>
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* Our Government can attempt to pass laws which allow a Minister to simultaneously act as prosecution, defence, judge and jury for crimes that Australian citizens are accused of overseas
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Water services are provided by borehole and tanker, by entrepreneurs / private operators, often under contract with town councils. The private sector does not appear to be interested in laying piped networks, although it is clearly a more efficient way of delivering water than by tanker. Why do you think this is the case?
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* That our Prime Minister – the Prime Minister of Westminster-style, liberal, parliamentary democracy – can actually say (and presumably think) that the “problem” with prosecuting <i>alleged</i> criminals in the judicial system is that “they might get off”
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* That our Government passes laws to stop Australian citizens discussing with other Australian citizens what is done with our taxes, and more seriously, to jail Australians who disclose breaches of the law committed by our Government.
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I’d propose some things which are striking about this “natural experiment” in rural (and urban) water provision
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* That our Government thinks it needs to cover our ears when some crackpot speaks out against Western values on the ABC, but simultaneously seeks to establish the right to publically vilify and humiliate people on the basis of race. The consistent principle here is not free speech, or western values; it’s agreeing with the Government’s views.  
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1. It’s low capex / low fixed cost, high opex / high variable cost<br>
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2. What capex there is can be moved (apart from the borehole casing). Pumps, gensets and trucks are all mobile assets.<br>
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3. It’s a profitable business which attracts investment and makes full cost recovery (plus profits)<br>
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4. It’s competitive and delivers a good service for customers (who all have the number of a tanker driver)<br>
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5. It’s economically inefficient and has few economies of scale, customers all need water tanks etc.<br>
 
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Of course, you know the context of these developments: Boat people, foreign fighters, detention centres and racial discrimination. There is one common thread: <b>the threat from out-groups</b>.
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Here is an idea:
 
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Imagine a different context. Mr Turnbull, imagine what your political opponents could do with these laws. Imagine that instead of enforcing these laws, you were subject to them.
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Mobile telephony has high capex / fixed costs, but note that assets are mobile. You can actually disassemble and move towers (albeit at a cost). The expensive (I assume) parts of the kit (generators, transmitters, etc) are also mobile.
 
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Imagine what gagging laws and politically run television do to transparency and disclosure. What a political discourse controlled by the ruling party means. What acceptance of public racial vilification and humiliation means for a multi-ethnic society – imagine that it was you, or if that is too hard - your children, who were being racially vilified. Imagine how ordinary people will behave when they see that their leaders – their government – holds both the law and the judiciary in contempt.
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Perhaps the inhibiting factor in piped water supply is the pipe? The device which offers considerable economies of scale and productivity gains also massively increases the risk for the operator, because her “capital” is buried and uneconomical to remove (and liquidate). So piped water supplies are very vulnerable to expropriation / political predation.
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Because of this, private investors simply don’t build them, despite the high returns to scale.  
 
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“By hook or by crook”, and pretty soon our democracy becomes hooked on crooks.
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Another potential reason is that mobile assets offer better security for financing. However I can’t imagine many formal financing institutions are involved with these suppliers, and informal finance could probably be mobilised for pipes if there were demand for it. I suspect supply of finance / security is not the problem here.
 
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Both of you know this, of course. However perhaps you imagine that there is no political mileage to be made in fighting the liberal case?
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Of course, public investors can (and do) build piped networks – but public institutions suffer from principal-agent and patronage problems which (usually) defeat them.  
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Pitting the in-group against out-groups clearly offers political rewards. But what about the costs? Are you working towards the sort of society you want to live in? Or are you simply fighting for power, at the price of slowly undermining the unique legitimacy that a liberal democracy has?
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Saying that we should “focus on service quality” misses the point that these institutions cannot focus on service because they do not employ people based on their ability to deliver services, they employ people based on who they are (patronage). They do not attempt to resolve principal-agent problems because service delivery is not their raison d’être – patronage is.
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Everyone in the sector knows this – but because it’s not something that outsiders can fix we like to focus on (i.e. invent) “problems” we can fix. This keeps us employed, after all (speaking of principal-agent problems…).
 
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Our values and institutions are the only thing we really have. They are collective myths – there is no such thing as a human right (just ask George Brandis – he doesn’t believe in them either). It’s something we made up. But it’s a great and powerful idea. All of our wealth and our time to devote to our families, interests, passions, all of these life-enriching things, we owe to our invention of the concept of an individual endowed with certain rights.
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I don’t think this is about the weight of water, capacity, training, lack of finance, logistics, supply chains etc. None of those things stop coca cola (or mobile telephony), or the many profitable water operators of Anambra State and elsewhere.
 
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Over the past two thousand years, we have slowly built up an array of institutions and values based on the novel, and absurd, idea that individuals are worth something. That we are not the property of our rulers, our elders, our families, parents or husbands, as we once used to be. A liberal democracy backs <i>individuals</i> against the natural groups that lay claim to them. By the same measure, a liberal democracy starts to talk in terms of groups at its peril.
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It’s about a public institution (government or a CBO) actually being able to deliver a service itself, or allowing a private operator to invest in pipes without the threat of expropriation (what you refer to as an “enabling environment”). Neither of these problems – which would allow effective public or private provision – can be solved by outsiders.
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We are all, of course, members of groups by default – our families, clans, ethnicities, religious affiliations. These institutions all pre-date the modern state, and are ever-present rivals to it.
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Our ability to live together, in a modern state, in peace, depends on this concept called the individual. You don’t need to travel very far outside of the West to get a glimpse of what life is like without our weird ideas about individuals. Lots of aspects of illiberal societies are wonderful, and fuel a sense of nostalgia among people like Mr Abbott. But there is a reason westerners have spent the last 800 years fighting for the idea of the individual, why the industrial revolution happened in the West, and why refugees come to the West instead of leave it. It’s not because the concept of the individual is some sort of moral decadence or weakness. Quite the opposite: it’s our only asset.
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So, given we can’t seem to leave this problem alone, what could we do to help?
 
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When you embark on a political strategy that is based on groups, and in seeing people above all as members of a group, you start to unravel the myth. You start tugging at the curtain, like Toto did.
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Have you (or has anyone for that matter) ever tried funding the risky part of the investment (the pipes) for existing private water suppliers? Just pay for some pipes for an existing borehole guy (in South East Nigeria, say) and see what happens. It might be that repairing / replacing the pipes doesn’t happen because of the long payback time / risk of expropriation.  
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But then we would at least know what we are up against – a question of property rights and political predation. Community work could then be focused on defending property rights rather than (say) workshops on O&M or book-keeping. There are millions of small businesses with electro-mechanical assets in Africa that run perfectly well without ever having attended an O&M or book-keeping workshop… To give one example, a miller I met in Nigeria explained his O&M (and return on investment) cost model: “One third of revenues for the machine, one third for the owner, and one third for me”.
 
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As you know, some Western countries have renounced liberalism in the past. Instead of receiving refugees, we manufactured them in their tens of millions.
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It doesn’t really need to be more complicated than that, and so I don’t think “capacity” is the problem here, but “capacity” is what we outsiders bring and so we are keen to make it the problem.
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So… when I am arguing for the right of the would-be dual national terrorist or ISIS psychopath to a trial, or for a crackpot to speak on the ABC, or for transparency and access to information about how we treat the individuals who seek refuge here, I am arguing not in favour of any of these “groups” as the Government would have it. I am arguing that we should not renounce those liberal ideas that are our only real assets. When I am arguing that we keep Clause 18C of the racial discrimination act, it is because humiliating and vilifying on the basis of racial groups denies the existence of individuals and blinds us to them.
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Liberal ideas are constantly under siege from pre modern-state institutions, and their respective moralities. Of course we can renounce them – and as elected officials you will always be under pressure to renounce them for some chimera of security or wealth. I know that <i>you</i> know it’s a terrible idea.
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Please take the time to say so. Please remind people that we’ll never get anything in exchange for our liberal values except misery. Our way of life depends on our liberal values. When your voters understand this, they will understand that we can’t give one up to protect the other. They are the same thing.
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'''Specific responses'''
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'''Water is heavier than airtime...'''<br>
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''One cubic metre of water weighs one tonne; one cubic metre of electromagnetic radiation passing through the air as a mobile phone signal weighs nothing''
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True. But water is not heavier than coca cola and yet coca cola has better coverage than piped water (as does bottled water, beer, etc). Delivering a cubic meter of coca cola costs a LOT more than delivering 1m³ of piped water... so this is not about weight. Weight is irrelevant to the more successful delivery of mobile services as well. It's about value to customers and investment risk faced by the supplier.
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''Unlike a mobile signal, which a transmitter can generate anywhere, water operators cannot simply produce water from scratch.''
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Mobile signals are not “generated from scratch” they are generated from electricity, which in turn needs heavy diesel or power cables, solar panels, etc. These items aren’t produced “from scratch” either.
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''Often water is not where people need it, so must be transported''
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Water is always (reasonably) close to where people need it, because if there was no water, there would be no people.
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'''3G doesn't need pipes'''
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''Anyone within a 32km radius of a mobile phone base station can access mobile services with nothing more than a handset.''
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Again, handsets are not free. Why are people prepared to pay for a handset but not a water pipe? Are pipes much more expensive? (coming back to cost) or is it something else (ownership, control, trust etc.)?
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'''Mobile coverage can be managed centrally'''
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''Mobile service management and maintenance is highly centralised around base stations and national-level data exchanges.''
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Mobile base stations are decentralised by their nature. So are water supply systems. Management of both can be centralised (Western Australia has one water authority which manages an area the size of western europe). That is a “highly centralised management and maintenance structure” – just the same as the mobile phone companies which cover the same area with all of their highly dencentralised base stations (but highly centralised management). There is no intrinsic difference here – rural water can also be managed centrally.
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'''The service provider has full control over access to mobile'''
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''Service control is in the hands of the mobile provider, who can be confident they will not lose their market share because people are drifting to their own makeshift mobile service options.''
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Of course they won’t. They’ll just change mobile service. Mobile service providers do not have full control over access to mobile – they face competition from other providers.
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''Water users, however, have the option to dig their own wells or collect water from rivers and lakes. Where piped water supplies cost money, but water from hand pumps and wells is free, people generally opt for the latter, which makes revenue collection more difficult for piped scheme operators''
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Digging water from a well or collecting it from a river or lake is not “free” – it costs time, which has a value. If people valued their time at nothing, informal markets for water would not exist (water carters etc). Water providers face “competition”, just like mobile providers, but from a wider range of sources. Neither water providers nor mobile providers have a good which is “substitutable”. But if anything, demand for water (from all sources) will be much less elastic than demand for mobile telephony because of its essential nature.
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'''Asset management and greater potential for competition'''
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''When mobile operators started out, they all built their own base stations. Some had coverage in certain areas, others didn’t. Now they are increasingly pooling their assets by selling base stations to third party companies who take on their management. These companies rent space on the base stations to different networks, allowing them all to reach a wider area. This stimulates competition between providers, which drives down prices for users.''
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The economics of mobile telephony is similar to water supply – essentially both businesses are about high fixed per customer “connected”, low variable costs for serving them water or airtime. Both are natural (technical) monopolies. Leasing assets and using third party operators / maintenance crews can be (and is) done in the water sector. Competition between asset management service providers is used by water utility monopolies to drive down prices.
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'''Attractive investment opportunities'''
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''Mobile markets are relatively new territory, providing exciting investment opportunities for fund managers.
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Rural water, however, is not a new business area, nor has it been an attractive investment opportunity.''
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These are not causes for why rural water supply is less successful, they are consequences. Why is mobile telephony a better investment?
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'''Bad for business'''
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''No mobile operator would construct a base station and hand it over to a remote rural community to manage without a fairly sophisticated ongoing service support mechanism.''
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Do any operators hand over their base stations to communities to manage at all? Would that sentence be more accurate without the words “without a fairly sophisticated ongoing service support mechanism”?
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It feels like “handing over to a community” is a sine qua non for rural water supply. However the idea never even crosses the mind of mobile telephony operators – why not mention that instead of alluding to the idea that they do hand over to communities “but provide sophisticated ongoing support services”. They don’t. It’s like saying Santa Clause would never fly without Rudolph. We’ll no, he wouldn’t.
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''No mobile operator would continue implementing a repeatedly failing model of service provision without revising it. ''
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True – only an institution which did not depend on customer revenues could (and therefore, would) do that (such as an NGO or Government). See “handing over to a community” above.
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''urgently need to become the focus for those involved in providing services,''
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So providing a better service needs to be the focus… Why is it not the focus?

Latest revision as of 11:31, 13 October 2016

Re: Mobile telephony vs rural water supply

Response to http://www.wateraid.org/news/blogs/2016/october/why-can-people-get-access-to-mobile-phones-and-not-safe-water

Anambra State in Nigeria, where there are no public water services of any kind (last time I checked) provides an interesting case study.

Water services are provided by borehole and tanker, by entrepreneurs / private operators, often under contract with town councils. The private sector does not appear to be interested in laying piped networks, although it is clearly a more efficient way of delivering water than by tanker. Why do you think this is the case?

I’d propose some things which are striking about this “natural experiment” in rural (and urban) water provision

1. It’s low capex / low fixed cost, high opex / high variable cost
2. What capex there is can be moved (apart from the borehole casing). Pumps, gensets and trucks are all mobile assets.
3. It’s a profitable business which attracts investment and makes full cost recovery (plus profits)
4. It’s competitive and delivers a good service for customers (who all have the number of a tanker driver)
5. It’s economically inefficient and has few economies of scale, customers all need water tanks etc.

Here is an idea:

Mobile telephony has high capex / fixed costs, but note that assets are mobile. You can actually disassemble and move towers (albeit at a cost). The expensive (I assume) parts of the kit (generators, transmitters, etc) are also mobile.

Perhaps the inhibiting factor in piped water supply is the pipe? The device which offers considerable economies of scale and productivity gains also massively increases the risk for the operator, because her “capital” is buried and uneconomical to remove (and liquidate). So piped water supplies are very vulnerable to expropriation / political predation. Because of this, private investors simply don’t build them, despite the high returns to scale.

Another potential reason is that mobile assets offer better security for financing. However I can’t imagine many formal financing institutions are involved with these suppliers, and informal finance could probably be mobilised for pipes if there were demand for it. I suspect supply of finance / security is not the problem here.

Of course, public investors can (and do) build piped networks – but public institutions suffer from principal-agent and patronage problems which (usually) defeat them. Saying that we should “focus on service quality” misses the point that these institutions cannot focus on service because they do not employ people based on their ability to deliver services, they employ people based on who they are (patronage). They do not attempt to resolve principal-agent problems because service delivery is not their raison d’être – patronage is. Everyone in the sector knows this – but because it’s not something that outsiders can fix we like to focus on (i.e. invent) “problems” we can fix. This keeps us employed, after all (speaking of principal-agent problems…).

I don’t think this is about the weight of water, capacity, training, lack of finance, logistics, supply chains etc. None of those things stop coca cola (or mobile telephony), or the many profitable water operators of Anambra State and elsewhere.

It’s about a public institution (government or a CBO) actually being able to deliver a service itself, or allowing a private operator to invest in pipes without the threat of expropriation (what you refer to as an “enabling environment”). Neither of these problems – which would allow effective public or private provision – can be solved by outsiders.

So, given we can’t seem to leave this problem alone, what could we do to help?

Have you (or has anyone for that matter) ever tried funding the risky part of the investment (the pipes) for existing private water suppliers? Just pay for some pipes for an existing borehole guy (in South East Nigeria, say) and see what happens. It might be that repairing / replacing the pipes doesn’t happen because of the long payback time / risk of expropriation. But then we would at least know what we are up against – a question of property rights and political predation. Community work could then be focused on defending property rights rather than (say) workshops on O&M or book-keeping. There are millions of small businesses with electro-mechanical assets in Africa that run perfectly well without ever having attended an O&M or book-keeping workshop… To give one example, a miller I met in Nigeria explained his O&M (and return on investment) cost model: “One third of revenues for the machine, one third for the owner, and one third for me”.

It doesn’t really need to be more complicated than that, and so I don’t think “capacity” is the problem here, but “capacity” is what we outsiders bring and so we are keen to make it the problem.



Specific responses

Water is heavier than airtime...
One cubic metre of water weighs one tonne; one cubic metre of electromagnetic radiation passing through the air as a mobile phone signal weighs nothing
True. But water is not heavier than coca cola and yet coca cola has better coverage than piped water (as does bottled water, beer, etc). Delivering a cubic meter of coca cola costs a LOT more than delivering 1m³ of piped water... so this is not about weight. Weight is irrelevant to the more successful delivery of mobile services as well. It's about value to customers and investment risk faced by the supplier.

Unlike a mobile signal, which a transmitter can generate anywhere, water operators cannot simply produce water from scratch.
Mobile signals are not “generated from scratch” they are generated from electricity, which in turn needs heavy diesel or power cables, solar panels, etc. These items aren’t produced “from scratch” either.

Often water is not where people need it, so must be transported
Water is always (reasonably) close to where people need it, because if there was no water, there would be no people.

3G doesn't need pipes
Anyone within a 32km radius of a mobile phone base station can access mobile services with nothing more than a handset.
Again, handsets are not free. Why are people prepared to pay for a handset but not a water pipe? Are pipes much more expensive? (coming back to cost) or is it something else (ownership, control, trust etc.)?

Mobile coverage can be managed centrally
Mobile service management and maintenance is highly centralised around base stations and national-level data exchanges.
Mobile base stations are decentralised by their nature. So are water supply systems. Management of both can be centralised (Western Australia has one water authority which manages an area the size of western europe). That is a “highly centralised management and maintenance structure” – just the same as the mobile phone companies which cover the same area with all of their highly dencentralised base stations (but highly centralised management). There is no intrinsic difference here – rural water can also be managed centrally.

The service provider has full control over access to mobile
Service control is in the hands of the mobile provider, who can be confident they will not lose their market share because people are drifting to their own makeshift mobile service options.
Of course they won’t. They’ll just change mobile service. Mobile service providers do not have full control over access to mobile – they face competition from other providers.

Water users, however, have the option to dig their own wells or collect water from rivers and lakes. Where piped water supplies cost money, but water from hand pumps and wells is free, people generally opt for the latter, which makes revenue collection more difficult for piped scheme operators
Digging water from a well or collecting it from a river or lake is not “free” – it costs time, which has a value. If people valued their time at nothing, informal markets for water would not exist (water carters etc). Water providers face “competition”, just like mobile providers, but from a wider range of sources. Neither water providers nor mobile providers have a good which is “substitutable”. But if anything, demand for water (from all sources) will be much less elastic than demand for mobile telephony because of its essential nature.

Asset management and greater potential for competition
When mobile operators started out, they all built their own base stations. Some had coverage in certain areas, others didn’t. Now they are increasingly pooling their assets by selling base stations to third party companies who take on their management. These companies rent space on the base stations to different networks, allowing them all to reach a wider area. This stimulates competition between providers, which drives down prices for users.
The economics of mobile telephony is similar to water supply – essentially both businesses are about high fixed per customer “connected”, low variable costs for serving them water or airtime. Both are natural (technical) monopolies. Leasing assets and using third party operators / maintenance crews can be (and is) done in the water sector. Competition between asset management service providers is used by water utility monopolies to drive down prices.

Attractive investment opportunities
Mobile markets are relatively new territory, providing exciting investment opportunities for fund managers. Rural water, however, is not a new business area, nor has it been an attractive investment opportunity.
These are not causes for why rural water supply is less successful, they are consequences. Why is mobile telephony a better investment?

Bad for business
No mobile operator would construct a base station and hand it over to a remote rural community to manage without a fairly sophisticated ongoing service support mechanism.
Do any operators hand over their base stations to communities to manage at all? Would that sentence be more accurate without the words “without a fairly sophisticated ongoing service support mechanism”? It feels like “handing over to a community” is a sine qua non for rural water supply. However the idea never even crosses the mind of mobile telephony operators – why not mention that instead of alluding to the idea that they do hand over to communities “but provide sophisticated ongoing support services”. They don’t. It’s like saying Santa Clause would never fly without Rudolph. We’ll no, he wouldn’t.

No mobile operator would continue implementing a repeatedly failing model of service provision without revising it.
True – only an institution which did not depend on customer revenues could (and therefore, would) do that (such as an NGO or Government). See “handing over to a community” above.

urgently need to become the focus for those involved in providing services,
So providing a better service needs to be the focus… Why is it not the focus?

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