Monopoly by any other name

Teleglobe is the latest example of industrial hubris masquerading as progress

The Straight Goods Cyber Forum
with Larry Solway

Commentary:

  When Enron imploded, the American Secretary of the Treasury cited the collapse as an example of how well the capitalist system worked. The system rewards success and punishes failure. Some consultation!
  At the heart of the revolution in neo-free enterprise are the twin swords: deregulation and globalization. Deregulation means that its everyone for himself supported by the utter folly that competition breeds better products and lower prices.
  Globalization is nothing more than an egregious attempt to make multi-national expansionsm and cut-throast competition look like Motherhood.

What we have is laissez faire capitalism posing as the saviour of humankind

  What we have now is an entire system at risk. What we have is laissez faire capitalism posing as the saviour of humankind. Governments buy into it while at the same time they abdicate their responsibilities and more and more (as the Secretary of the Treasury proclaimed) they step aside and let the marketplace solve our problems.
  Enough dogma.
  We have our own economic tragedies. We have Nortel, once called Northern Electric, once the research arm of Bell Canada.
  Ma Bell, the stalwart among stalwarts, the leader, the saviour of thousands of elderly widows who know they will not lose money and they will always receive dividends. Sleep on.
  That may have been. Until we embarked on the suicide path of "convergence", which for the uninformed, is how companies in communications justify swallowing enormous chunks of the competition. We used to call it "vertical integration". Before that we called it "monopoly building".
  Canada and America both had in place government agencies that oversaw the creation of companies that were so large they shut out opposition. We had the Competition Board. The Americans have The Sherman Anti-Trust Act. Both have turned to ashes. Both governments are complicit in the destruction of the very free competition they pretend to endorse. An interesting sidebar: the European community still believes in regulation. Jack Welch was beside himself when the Germans vetoed the "convergence" of GE and Honeywell.
  The entire notion of controlling every aspect of your industry is as old as history. As recently as the Lower Kingdom in Egypt, many centuries B.C.E. (not Bell Canada Enterprises), the reigning Pharaoh ran a fully integrated, convergent enterprise to build pyramids. He controlled the labour force. He controlled the architects and designers. And of course, he owned the stone quarries. He did not have to open up a design competition. He owned the competition. He did not have to call for tenders from quarries. He owned the stone.
  Fast forward a few thousand years. The man who invented (he claimed) the assembly line also created an integrated industrial monster on the Rouge River in Detroit. Henry Ford would not be held for ransom by steel companies who saw quick profits as he put America on wheels. He made his own steel. He ran his own transport. I believe he even generated his own power. The tires came from his bosom crony at Firestone. (Fords and Firestones have married each other for years.)
  The Japanese went Ford one better. They created an industrial oligarchy system using "keiritsus". A manufacturing company would either own all its suppliers, or negotiate exclusive sweetheart deals with them. There was no bidding, no tendering, and no competition. It worked - for a while. It worked as long as the world hungered for better imported goods at lower prices.

BCE Teleglobe today is an example, not of progress, but of industrial hubris; the expectation that your company is immortal, bulletproof, and always successful

  At the same time as the Japanese were running blatant combines, the West was developing its own buccaneer tactics: the conglomerate. The only difference of course was that the conglomerate was an often mindless agglomeration of disparate companies having little or nothing to do with each other. Much like Canadian Tire buying Mark's Work Warehouse (but that's another story).
  Scroll up to today and the pitiful sight of Jean Monty, wheeler-dealer extraordinaire, yesterday's hero, stepping down from the chairmanship of BCE because his dream of glory exceeded his ability to predict the future. In all fairness, Monty had no idea that the telecommunications and high tech business was grossly overextended. Teleglobe was to be his masterstroke, giving good old Ma Bell a choke-hold in international fibre optics long distance communication. But it dried up. Teleglobe today is an example, not of progress, but of industrial hubris; the expectation that your company is immortal, bulletproof, and always successful.
  Convergence has been a grotesque weapon for industry. In spite of regulations about competition, companies have swallowed each other like piranhas in a feeding frenzy. From stodgy old Bell, which became BCE which became the parent holding company created to allow Bell to make acquisitions. And acquire they did. Bell now includes the Globe and Mail and CTV. Is the G&M a better newspaper for it? Is CTV defining the best in Canadian television?
  Look at what our neighbours have done. From dozens of strong, vibrant, competing communications companies they have shrunk to a precious few. The biggest gulp was the one in which AOL (with no real assets except goodwill) took over Time Warner, which itself was a company of multiple parts from Time Magazine to the ABC network.
  In Canada companies demand the right to amalgamate with their own competition. Global has a debt load that should frighten every bank in the country. It now controls all the Southam Papers including the National Post.
  When licenses for new stations come up it will always be the usual suspects lining up at the trough. CHUM is there looking for more. Rogers, already swimming in an ocean of low-grade debt, saves itself by borrowing more to buy more.
  We have swallowed it whole. Were it not for the recession (which may not be over) we would not have been awaked to the folly of mad and unbridled growth.
  Teleglobe is just a symptom. Monty did what John Roth did: bought companies whose only virtue was an idea. They put them on their books as an asset. When that asset started to dissolve, so did the companies. Teleglobe is no better nor worse than any other.
  The sweet irony is that only a few months before September 11 President Bush was proclaiming that people should invest their retirement funds in the stock market because the interest paid in safe securities was too low. In Canada there was an outcry that the Canada Pension Plan should put its money where the action is. Some action!
  Next year all will be forgotten. There will be a new generation of hopefuls. There will be more companies trying to grow without doing anything but buying other companies and giving themselves "convergence", which has become a synonym for "cost-efficiency".
  Look out again!

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