Business Report is running a story about the shareholder agreement between government and SBC that impacted South Africa’s telecommunications environment.
Ann Crotty (from Business Report) writes:
The shareholders’ agreement signed by the government when it sold a 30 percent stake in Telkom to the Thintana Communications consortium placed both companies above South Africa’s laws, according to a US academic journal.
As the story goes, when Telkom was privatised, a shareholder agreement was created that allowed the new partners (notably SBC or “Southernwest Bell Corporation”) to ignore any regulations that contravened their shareholder agreement. Parts of the story also indicate that SBC lawyers may have had a strong hand in writing telecoms legislation itself – not exactly what I would call a disinterested, objective bystander!
Seems like in the heady days of early democracy in South Africa, someone slipped up and let the litigious monster of SBC have more of a say in our country’s telecoms policy than 45 million people or so. I haven’t yet read the underlying academic paper referenced, but if even some of this is true it is an amazing revelation.
Some comments from Slashdot readers:
Well if you set up a monopoly it will be abused, you need very strong regulators to keep anything clean. Doesn’t matter if its a state run monopoly (NHS, BT (before privatisation), British Rail etc) or a granted monopoly.
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?
A company with a “government granted” monopoly abused it. Shocking!
Incidentally, any true monopoly must be government granted. Without the government’s force to keep competition away, it’s merely a really effective competitor in an open market, like Wal-Mart.
A monopoly, whether government owned (e.g. the US Post Office) or government granted (e.g. AT&T and the Baby Bells in the US, before cellphones, cable company phone service, etc.), is not required to innovate and improve to retain customers, like a free-market business is. Because of this they will tend to deliver a lower quality product at a higher price.
This shows why private monopolies and back-room arrangements are bad. Public monopolies (public utilities, private utilities with public reporting requirements, etc.) are not shown to be bad by this case.
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.
Amongst the stormy seas of markets recently (off the back of a credit and liquidity crunch apparently initiated by ongoing and deepening problems with sub-prime loans in the US and the related CDOs), bobs the grey and bloated bodies of a clichéd failure.
Unwavering belief in trends, normal market conditions and trading rules developed out of a less than infinite history of prices have again resulted in burnt fingers and an abundance of flotsam and jetsam on the high seas of international markets. Computer and algorithm-driven “quant funds” have apparently taken a beating in the “unusual” market conditions of late. These systems are usually calibrated to a period of history, to identify profitable trading strategies based on complicated models, multiple factors and supposedly rigorous statistical analysis.
High volatility and correlation across markets took down LTCM (read When Genius Failed 1) before. So-called “programme-trading” or “portfolio insurance” that was blamed (non incontroversially and not fully substantiated) for the 1987 market crash. Portfolio insurance is still alive and well in the form of delta hedging. Turns out the old name had a rather negative taint to it. Don’t get the wrong idea, I’m not against delta-hedging, or any specific trading strategy. I’m just not convinced that the results are all they’re cracked up to be. A system that works well some of the time then fails spectacularly every now and then is not my idea of a good night’s sleep, or a sustainable long-term strategy.
Goldman Sach’s apparently still believes in the system. Then again, they have to say that, don’t they?
The developers of these systems would do well to look at the past from a human and historical view rather than just a limited slice of a time-series. It’s too easy to consider recent history as representative of the future. We all do it, but the trick is to maintain some scepticism and not get carried away by hope, greed and fear.
