June 22, 2024

The mountain of shit theory

Uriel Fanelli's blog in English


The awakened ones

It's nice to read in the Italian newspapers that Draghi and Letta have woken up and decided to "self-nominate" for the position of president of the European Commission, and they have their usual Martian recipes to propose. And I say the usual Martian recipes, because I mean those recipes that seem to come from people who have never been on this planet. And to do so, they take the wrong world as an example, that is, the Telco world.

The first bullshit I hear is that since in the USA (home of absolute good, evidently) there are few telcos, then it is wrong that Europe has so many.

First I would like to point out that if we talk about technological progress in the telco world, the USA does not lead. Their champions, like Juniper and Cisco, are the giants of Legacy, and if we talk about disaggregated networks and network evolution for telcos, the giants who innovate are Nokia, Ericsson, NTT, and the Chinese.

If you want the US situation in the telco sector, go for it. But you don't want technological evolution: you want stagnation and life of income in an oligopoly regime. Starlink sales would not be so high in the US if they had similar access to Europe. BUT when you have 640K/s because you go on old cables literally made of iron (you know the ones with the crows on them?) then even the satellite is ok.

They are probably looking at 5G coverage, which however in the USA is given in terms of population. So if we go to the cities (which in the USA develop high up, therefore high kilometric densities) everything is fine, I wouldn't recommend a small town in the corn belt. In short, it is a fantastic network for tourists . For the citizen, a little less.

It seems to me that the EU, and the EU candidates, when they talk about networks have a strange and bizarre myopia that prevents them from seeing Scandinavia. When Sony and Microsoft destroyed Nokia and Ericsson the first time, the EU was discussing French cheeses. Today, when the new EU champions want to revive the industry, no one is talking about how to help Nokia and Ericsson, who have relaunched themselves by moving from cell phones to the internet itself. Are they too blonde?

However, don't worry, this type of technological champions are only born in countries with very high university education, so there is no danger of having a Nokia or Ericsson making network devices for you in Italy.

But let's admit that the fragmentation of telcos – once praised as proof of the "podere tremento der mergado" is bad. Until now it had been said that thanks to the end of monopolies, Italians paid less and Europeans paid lower tariffs. Funny that now we want an “American” situation with an oligopoly imposing tariffs.

But let's also assume that it can be done. What needs to be removed from the balls?

  • There are absurd local laws, according to which a telco to exist in a European country must have its headquarters and a joint-stock company listed locally. If not completely, at least for a percentage that varies from country to country.
  • there is the department of Marchioness Verstager von Vogon, which kills any merger between companies, in the name of the fact that a situation like the American one reduces user choice. Lufthansa/Ita, Siemens/Alstom, and others, are the proof.
  • there are local governments, and I am referring to the French, who have imperial aims over other EU countries, and finance – through state-owned banks – takeover and raiding operations on companies in foreign countries. I didn't say Vivendi. You thought so.
  • there are local governments that nationalize a telco – i.e. its infrastructure – just to prevent it from ending up in the hands of a foreign government, even at the cost of bringing in US funds – see Telecom Italia.

Getting rid of this situation isn't easy.

First of all, getting rid of local laws requires the consent of 27 governments. But the little ones are afraid of the big ones: if we remove this rule, obviously Deutsche Telekom will take over Austria and Switzerland, Czechoslovakia, Slovenia, Belgium and Holland. The Franks are afraid of this and will say no. As they are doing for Lufthansa/Ita.


Second point.

Getting the Marchesa, or rather the mentality she represents, out of your way is even more difficult. In itself, Marquise Verstager von Vogon is a human being, subject to the laws of physics. But the mentality it advocates is much more difficult to eliminate. She comes from a relatively small country, like Denmark, which is afraid of big countries, and therefore does everything to prevent big things from happening. Even large companies. We cannot forget that Bombardier Aerospace has a production site in Denmark, when we think that the marriage between Alstom and Siemens was blocked to create more competition in the world of trains.

This mentality means that small countries, with their small commissioners, (small in the political sense) do everything to block the birth of any large body. This is because, among other things, there is no single European stock exchange, and they know full well that a large European company will list itself (on the continent) in Paris, Frankfurt or perhaps Milan, but not on the highly flammable Danish stock exchange. (we could argue about the Lego monopoly, but never mind).

Third point: imperial aims.

Prevent the French from thinking that France today is a country that cannot have imperial aims, and that it should stop using public money to fund industry through parastatal banks (the Fiat affair speaks for itself) in a context where and 'Forbidden, it's impossible. Nothing convinces the mediocre that he is not great.

As for government interference with local telcos, it's a waste of time.

BUT let's also suppose that we manage to go from 27 telcos to three, a situation which in the USA is causing serious problems and is highly criticized, but it seems to be the desired one, because yes.

Would this produce innovation? I would say no. A telco is made up of CEOs and shareholders. Telcos do not grow very much in terms of share value (apart from sporadic and temporary cases) and are attractive due to dividends. Which are, let's face it, not the richest on the market. But if you're a fund, they can be attractive.

If we merge Europe's telcos into just three entities today, we get a huge amount of duplication in terms of infrastructure and governance, and a huge amount of future “synergies”. The result, taking today's mentality, is that the CEO will be able to pay dividends for at least ten years, just by doing "efficiency" and "consolidation". And ten years is not too long as you think: just unifying the OSS and the BSS costs at least, at a guess, a year or two of "projects". If we then move on to unify the Central Offices, considered a migration (even of cables), this is also a very long process. And obviously, there would then be staff cuts.

What would happen? It would happen that if we unified them, the telcos would not have so much push to carry out network evolution, but would limit themselves to living on consolidation, at least for 5-10 years. Through the opex savings linked to the various consolidations they could easily pay – constantly, at least for 10 years – dividends to shareholders and make them happy.

To achieve this consolidation BUT ALSO (like Veltroni) a push for innovation, the EU would need to exercise powerful control over the governance of telcos, pushing them in the right direction. But the EU has no golden share. There is no European golden share. So? You would simply get to sit the new supertelcos on consolidation deals, enough to ensure shareholder appreciation. Point.

It means that every year the CEO announces the layoff of 10,000 people, the closure of N duplicate plants, and with that money saved he pays us a dividend. The rest doesn't matter to the typical telco shareholder (whether pension or shareholder fund).

Where is the doctrinal error in all this? I could say the hypocrisy of not understanding that if you have been part of the problem, you cannot offer yourself as the solution. But there is an ideological side to all this talk, which is the catastrophic idea that the market can solve political and geopolitical problems.

The push to make these unifications (which Letta suggests in almost the entire industrial sector, including the military) would be to solve a political problem – stopping industrial decline – and a geopolitical one, that is, surviving the competition of continental industrial blocs.

the market can't even solve the market's problems – or there wouldn't be a financial crisis every 5-10 years – and they want it to ALSO solve the political and geopolitical problems. Seriously?

It's typical of 80s politicians. The market solves everything, they said. Bring the market to China and China will become a liberal democracy, they said. Bring the market to Russia and Russia will become a liberal democracy, they said. Focus the EU on the sole purpose of becoming a single market and it will become a nation with a liberal democracy, they said.

We know that things don't work like that because we paid for it ourselves (how many financial crises do you count in your lifetime? I was alive – okay, I was still pissing myself – when Bretton Woods happened, so I'm counting a lot of them, starting Monday 'black Fridays', black Fridays, the subprime crisis, the credit crunch, the debit crunch, the new economy bubble, etc.), and yet the solution is "more market" or "a more robust market?".

Haven't you yet understood that the market is run by pompous, completely irresponsible fascist drug addicts, too egotistical to perceive the concept of "common good"?

Every time there is a political problem in Europe, since the 80s, I have always heard "let's put a market in its place, and the market will do governance better than us.

Today we are regretting the large state-owned companies. Everyone, inside us. In Italy you are talking about a new IRI, and about nationalizing telephone networks. Ditto in Germany, and all of Europe misses the good times, when governments managed things, and debt was lower. (The debts exploded in the great bursts of privatization sought in the early 1990s by the EU and its single market ideologues.)

Now what do we see? We see men and politicians from the 80s explaining to us that if we want to solve problems of industrial policy and geopolitics, we need more market.

What if much more state was needed instead?

Uriel Fanelli

The blog is visible from Fediverso by following:

@ uriel @keinpfusch.net


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