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Economically Appropriate Rents for Crown Land with Pre-existing Broadcast Towers A Report on behalf of Broadcast

Economically Appropriate Rents for Crown Land with Pre-existing Broadcast Towers

A Report on behalf of Broadcast Australia

Joshua Gans

The analysis here represents the views of CoRE Research Pty Ltd

(ACN

096 869

760) and

should

Broadcast Australia.

not

be

construed as those of

May 2005

Executive Summary

In its review of rentals for Crown land communications tower sites, IPART is considering rental fee methodologies that (i) apply rents to co-users as well as primary users of sites and (ii) that are adjusted for the ‘strategic’ importance of sites. In so doing, it is proposing rental methodologies that are not purely based on cost. That is, the rents may have a premium attached to them above the value of the next best alternative use of the land.

The idea that rents should be paid by co-users as well as primary users is not justifiable from an economics perspective. First, co-users cannot generate any value from use of the land if the primary user’s tower (and related activities) is not present. Hence, those functions are strict complements and so charging co-users represents a direct rental increase not justified by changes in market conditions. Second, by imposing rents on co-users, the government would fundamentally change the pricing options in this industry. In effect, each co-user would face additional costs in utilising a tower on crown land. This could cause them (a) to reduce their usage of such towers and (b) to substitute their usage to towers not on Crown land. In either case, this would violate the objectives of maximising site use and minimising site proliferation.

Adjustments to rents based on strategic importance – that is, the benefits to users from a particular site – are, in fact, a tax on the industry. Imposition of taxes are usually justified on economic efficiency grounds – correcting a market failure – or distribution grounds – as a non- distortionary means of raising general government revenue. Neither of these grounds holds in this case:

Efficiency: there are no obvious market failures that require a reduction in the usage of telecommunications towers – either generally or by specific users – that would justify a tax that may do just that. Moreover, to the extent that there are environmental concerns, these have nothing to do with the user benefit from a site but from the costs of utilising a site.

Distribution: the investment and utilisation of crown lands for telecommunications sites is unlikely to be inelastic in the long-run. As such, the government runs the risk of significant distortions to economic and commercial behaviour from raising revenue in this manner.

Absent these usual justifications, claims to raise rents on the basis of ‘strategic importance’ appear to amount to ‘hold-up’ by the government. In the classic ‘hold-up’ problem, having invested in sunk assets and, therefore, finding it very costly to switch sites, the land owner has moved to appropriate some of the value from the broadcast industry. In the extreme, user- based charging of rents amounts to the government taking a long-term equity position in that industry without the contribution of productive services. This is exacerbated by the notion that co-user pricing will be, in some sense, managed by the NSW government. This will likely discourage any investment in improvements in Crown land in NSW; regardless of intended use – towers or otherwise. If the government wishes to raise taxes on the citizens of NSW, there are probably more efficient and less distortionary means of doing so.

Finally, given the intention to convert the management of Crown land assets into a Public Trading Enterprise, these proposals appear to violate competitive neutrality. Put simply, very

little Crown land is rented on a basis other than alternative use cost and, moreover, two towers operating adjacent to one another on Crown land could face very different rents.

The basis for charging rents on Crown land should be based solely on its unimproved value in its next best alternative use. This is likely to be similar to commercial rents on adjacent properties (or an independent land valuation) plus an additional amount if there are environmental issues.

Contents

Page

  • 1 Background

2

  • 2 Co-User Charges

3

  • 2.1 The Current Arrangement

3

  • 2.2 Co-User Based Charging

4

  • 2.3 Summary

6

  • 3 ‘Strategic’ Importance

7

  • 3.1 Price Bounds in a Regulatory Setting

7

  • 3.2 Disadvantages of the Upper Bound

9

  • 3.3 Issues in Calculating Opportunity Cost

15

  • 4 Conclusion

.................................................

17

Section 1

Background

1

Background

IPART is currently undertaking a Review of Rental for Crown Land Communication Tower Sites in NSW. The goal of the review is to provide a framework to allow the NSW Government to earn a “fair market- based commercial return” with the related objectives of (i) maximising use of the sites; (ii) minimising proliferation of the sites; and (iii) not adversely impacting on investment in the relevant industries.

Broadcast Australia Ltd – a renter of broadcasting tower sites and an owner and provider of infrastructure on them – has asked me to provide an analysis of two key issues that have arisen in the context of this review.

Co-User Charges: is it economically appropriate for charges or rents to be paid by each co-user of the site as well as the primary user?

‘Strategic’ Importance: is it economically appropriate for rents to be based on the ‘strategic’ importance of sites?

Sections 2 and 3 of this report will outline my analysis of each of these issues. It is found that co-user charges will potentially create significant pricing distortions and a loss of user value, without increasing total rents earned relative to more efficient rental charging. In addition, there appears to be no justification for rental premiums based on ‘strategic’ importance that will either enhance the efficient use of Crown Land or provide a non-distortionary means of raising overall government revenue in NSW. A final section concludes.

Section 2

Co-User Charges

  • 2 Co-User Charges Primary users are parties who contract with the land management agency for access to land to develop it for use in communications and broadcasting. These are also the parties making significant infrastructure investments in a site. Primary users then contract with co-users for various services on the site including installation of equipment, maintenance and use of infrastructure. IPART have argued that if there is to be a “fair sharing of the benefits of site use” then this “implies that the land management agencies are entitled to a share of the fees primary users collect from co-users, after allowing for the cost of developing and maintaining infrastructure used by co-users.”

Below I will challenge the implication of this notion of ‘fair sharing’ on the grounds that it likely leads to adverse impacts on economic efficiency here. For the moment, to examine what ‘fair sharing’ means, let α (< 1) be the share of the benefits that accrues to the NSW Government. Let K be the cost of infrastructure on a site and M the on-going costs of maintenance. Let L be the value of the land in its next best alternative use. 1 Finally, suppose that a site has n users,

indexed by i, who have a value of v i . Let

V = v be the aggregate

i

i

potential user-value from a site. Then, the total (potential) net benefits from the site are:

V K M L

And the ‘fair sharing’ rule implies that the NSW Government would receive α(V K M) + L.

  • 2.1 The Current Arrangement At present, primary users pay a rent, r, to the land management authority and charge co-users prices, p i . For a given user, the price, p i ,

1 Suppose all of these values are amortised, annual costs and benefits.

Section 2

Co-User Charges

must be sufficiently low as to make it worthwhile for them to use the site. That is,

p v

i

i

for each i.

This also implies that

i p

  • i V . It also must be the case that, in

aggregate, total payments must cover site on-going costs. That is,

i p M + r

i

Notice that payments may not cover past development costs as the primary user may have made a ‘mistake’ and over-invested in the site. On the whole, however, it is likely that payments cover development costs as well.

What is important about the current system is that the primary user has an incentive to encourage use by co-users so long as those users have any positive net value from using a site.

  • 2.2 Co-User Based Charging Now suppose that the NSW Government imposes a charge, r i , on each co-user. These charges may be the same for all or differential. In addition, these charges may be imposed directly on co-users or indirectly through primary users.

    • 2.2.1 Direct Charging If they are charged directly, then a co-user, i, will only use a site if

p + r v .

i

i

i

This will

likely

mean

that

the price

charged by the

primary user to the co-user would

have to change. However, if

r i v i , then the co-user will definitely be forced to stop using the site.

Moreover, this could also occur should the primary user choose to maintain their current payments to some co-users.

This situation – of co-users being charged too much to make use worthwhile – is more likely to arise if co-user charges are the same for each co-user. Differential charges may overcome this issue but it will require the Government to step in the shoes of the primary user and negotiate individual co-user fees. This will be an administratively demanding and an informationally intensive activity. It may also require arbitration processes. Finally, even with negotiated rents, the

Section 2

Co-User Charges

Government does not control the price charged for access by the primary user and so distortions may continue to arise.

  • 2.2.2 Indirect Charging

Alternatively, the Government could levy r i on primary users. In this case, co-users will continue to use the site if p v but now the price charged to them will reflect the user-specific cost, r i , as imposed by the Government. If p i was the previous price paid by a co-user, then it

i

i

could easily be the case that

p + r v

i

i

i

or worse that

r v i

i

in which

case the primary user will set a new price that makes it prohibitively expensive for the co-user to continue using the site. This is because now the primary user faces more ‘user-specific’ costs and so may choose to economise on these by not servicing low value users.

To guard against this possibility would require the Government to negotiate user-specific charges with each primary user; again an administratively demanding and information intensive activity likely requiring arbitration.

  • 2.2.3 Annual Rental A final proposal is to not have co-user charges explicitly but to build them into annual rental rates to site owners. This has the potential of avoiding the distortionary issues that come from direct and indirect co-user charging but only if annual rental rents are ultimately independent of the number and type of co-users on a site. Suppose then that a rental level, r, is set based on the historic co- usage of a site. What happens next year? Market conditions change. New uses for communications towers arise. Some users’ values increase while other’s falls. In some cases, some co-users may no longer wish to use a tower. A simple approach would be to base next year’s rental charge on the number and type of co-users then. However, the primary user will recognise this and when considering its charges to co-users will adjust them for the additional costs that might arise as the annual rental adjusts. In the end, this is a less transparent but just as distortionary process as explicit co-user charging. Moreover, the recalculation of annual rentals will likely cause all of the information and administrative costs associated with direct charging. A much better approach would be to enter into long-term rental agreements

with

site

owners.

However,

because of changing

Section 2

Co-User Charges

technologies and market circumstances, the Government will need to take considerable care in looking at current co-users as a measure of future co-user benefits. Thus, this too would be an administratively difficult undertaking with all administrative costs being frontloaded in the present.

2.3

Summary

Any form of co-user charging will likely involve the following costs:

Administration: to collect information and negotiate the appropriate co-user charges or costs would require a very extensive and on-going review by the NSW Government.

Allocative inefficiency: in any case, it is likely to be the case that the resulting pricing is inefficient as it involves making user- specific a cost that is site-specific. User-specific costs will be built – one way or another – into the price co-users pay and will likely lead to some co-user discontinuing their use of the site. This will be a direct reduction in allocative efficiency and will not maximise use of the sites.

In effect, a move to co-user based rentals involves the Government getting involved and micromanaging the primary user’s communication tower businesses. Moreover, it will do this without any efficiency rationale and with the likely creation of dead-weight losses from any monopoly power the Government may have as a land owner of some specific sites.

In the end, to avoid such costs, infrastructure providers will look at other land sites that are not government-owned. Commercial land- owners do not micromanage businesses that pay them rent and the avoidance of the administrative and efficiency costs of co-user based rents will likely be attractive over the long-term.

If the intention is for the Government to increase rental revenues for itself, then this will be more efficiently achieved by doing so than by engaging in co-user charging. The increase in rents may lead to some substitution from Crown Land sites – although this would harm government revenues as well as site use. However, it will avoid the micromanagement and potential usage distortions for businesses that utilise Crown Land.

Section 3

‘Strategic’ Importance

  • 3 ‘Strategic’ Importance IPART have considered that an ‘efficient price’ is one that lies between the following lower- and upper-bounds:

Lower-bound: the value the land management agency could earn for the site in its next best alternative use. This is sometimes referred to the opportunity cost of the site’s use.

Upper-bound: the amount a user or users of a site would be willing-to-pay without switching to their next best alternative.

These two bounds set the range of a price in any commercial negotiation as they determine what share of the commercial profits arising from a site each party will receive. However, it is important to recognise that they are rarely the bounds for efficient pricing in a regulatory setting.

  • 3.1 Price Bounds in a Regulatory Setting Regulators and governments are, usually, concerned with goals other than pure profit. They are usually concerned with efficiency of both the use and development of an asset; such as land.

Utility regulators – such as IPART – have, in the past, recognised that an asset will have maximal use if both consumers and developers have appropriate incentives to make key investments. For instance, to maximise use of a gas distribution network, consumers need to make investments in gas appliances while developers have to make investments in the infrastructure themselves. To ensure these are efficient, it is best that regulated prices are based on costs. For developers, this means that they should not be able to earn excessive returns on their capital investment costs but that they should be able to recover a commercial return on those costs. For consumers, on- going charges should only exceed user-specific costs if there is a need to provide for the recovery of investment costs.

What this means is that with regard to assets such as land, to ensure efficient development and use, regulators have favoured valuing land at current market values or alternatively at some measure of historic

Section 3

‘Strategic’ Importance

cost. 2 IPART too accepted this principle when determining the rents on waterfront tenancies for private use. In that case, IPART used the market value of adjacent land. 3 By setting land values in this way, the appropriate pricing signals are sent to both users and developers so that each internalises costs they generate but otherwise make their decisions on individual grounds. Such pricing generates both allocative and dynamic efficiency leading to greater overall economic welfare.

Specifically, from an economic perspective, a site is appropriately used for communications towers if and only if:

V M L K > 0

Recall that L is the amortised value of the land in its next best alternative use. However, at best, primary users and co-users decisions to use a site for communications will be based on whether

  • V M r K is positive or not. Notice that if r < L, then some site

development for communications towers will go ahead even if V M L K < 0; leading to inefficient over-investment. On the other

hand, if r > L, then some site development will not occur even where

  • V M L K > 0. It is only where r = L, that private decisions to

utilise a site for communications towers will be aligned with the

socially efficient outcome.

In this respect, for regulatory pricing, a cost-based approach is favoured. 4 What this means for the present matter is the following:

In a regulatory setting, the appropriate rental for land should be based on the opportunity costs of the land itself. This is in the absence of any key investments in the land on the part of the NSW Government.

  • 2 See the ACCC decisions with regard to airports – most notably Sydney airport.

  • 3 IPART, Review into Rentals for Waterfront Tenancies on Crown Land in NSW, April

2004.

  • 4 In some circumstances, it is recognised that to ensure that investment costs are recovered in a less distortionary manner some form of differential user-charges are required (e.g., by utilising Ramsey pricing). The idea of Ramsey pricing is to charge users with inelastic demand more than those with elastic demand. This will minimise the reduction in total use higher prices might otherwise generate. Nonetheless, it is safe to say that, while the potential benefits of Ramsey pricing is acknowledged, regulators around Australia have not employed it because the demand-side informational issues have been too substantive.

Section 3

‘Strategic’ Importance

Consequently, the only variation in rentals from site to site across NSW should be based on differences in opportunity cost and not differences in how the land is used.

Premiums placed on rents related to actual use are likely to lead to distortions in investment incentives on the part of both infrastructure providers and users.

Simply put, if IPART intends to be consistent with regulatory pricing principles, then the appropriate basis for rent determinations is the opportunity cost of the land (i.e., IPART’s lower bound).

  • 3.2 Disadvantages of the Upper Bound

IPART considers that the upper bound on rents for Crown Land should be the “value of the site to the user.” In this case, the upper bound on rents would be r u = V M K. Notice that, as V includes the value of the site to all users, this upper bound is potentially very high. For some sites, the entire value of broadcasting to a district rests on that site. In its absence, all commercial revenue (say from advertising) as well as consumer surplus from television and radio broadcasting would be lost. Hence, these would be part of users’ willingness to pay.

In other cases, the upper bound may be lower. This would be the case if users could easily develop adjacent sites and would switch to those sites should rents rise by too much.

IPART acknowledges that truly setting land rents at the upper bound extreme would not amount to a fair use of the benefits. Nonetheless, what IPART does propose to do is to measure, in some way, V M

K and permit the NSW Government to earn some share, α, of that

value. Thus, α(V M K) represents a premium above the cost- based rent discussed in Section 3.1. IPART’s key issue appears to be what the size of this premium will be and the weight placed on V M K.

  • 3.2.1 Measurement Issues Having any premium will involve an additional measurement issue for the Government: how to measure, V, M and K. It is useful to point out the various decisions that would have to be made in this regard:

Section 3

‘Strategic’ Importance

How should K be valued? Capital valuation is one of the more contentious issues in regulatory pricing. The life of the asset has to be considered, economic risk has to be taken into account (especially with uncertain demand and technological developments), appropriate discounting needs to be applied, and a decision needs to be made whether the asset valuation is forward looking or based on historic costs.

How should M be valued? The on-going costs of a site involve management by the primary users. If that user acts to reduce those costs, this will decrease M. However, if the government appropriates a share of the benefits in rents, this means that the reduction in M will be shared by the user and the government. This will diminish the user’s incentives to maintain those costs. Instead, the user only shares in a fraction of any cost increase and so it may be that these incentives translate into lower rents over time for the government as M increases.

How should V be valued? As noted earlier, there are many difficulties associated with calculating user benefits. Here V is not simply the revenue earned by the tower owner but also the value to co-users. This depends upon the value received by co-user customers as well as the costs of co-users. To measure V accurately would require an audit of those businesses. Note that if this is not done, there is a chance, V may be valued too high and a tower may be forced to shut down.

This does not mean that it is impossible to measure the upper bound for the process of determining rents but that IPART will need to consider the alternative methods by which this upper bound might be calculated and weigh amongst them.

  • 3.2.2 Potential for Distortions By placing weight on the upper bound in rent determination, we will effectively have a situation where r > L. As noted earlier, this means that some efficient usage of sites for communications towers will not occur. Distortions can arise in several ways:

If

r

is

based

at

all

on user values or on-going costs, then

primary users will factor in how changes in their business strategy and pricing will impact upon r. As noted earlier, this

Section 3

‘Strategic’ Importance

may give rise to a situation where the primary user does not find it worthwhile to serve some co-users.

For new investment, developers may avoid using Crown Land sites and move to commercial or other ones where rents are lower. This is potentially inefficient if the net value of Crown Land sites was higher or the environmental costs lower.

For existing investment, developers may opt to develop additional sites for users too costly under usage-based rents on Crown Land. This may lead to site proliferation.

For existing investment, developers may have no choice but to accept higher rents as investment costs have been sunk. (I comment on this issue below). In this case, there will be no distortion to existing use but the distortion may come from signals sent to potential developers and investors in infrastructure in NSW.

Put simply, the rent premium is like an additional tax on the use of communications towers in NSW. In economics, taxes are usually justified for two reasons:

Efficiency:

to

mitigate

externalities

and

discourage socially

costly activities.

 

Distribution: to provide a less distortionary way of raising government revenue.

In this matter, neither of these usual taxation rationales appears to apply. First, the express wish of the government is to maximise usage of sites and stop their proliferation. In this respect, imposing a tax will not achieve this outcome and will likely reduce usage and increase proliferation.

Second, in all of the submissions, I have not seen any case made that a tax on communications towers will be non-distortionary. Non- distortionary taxes are usually applied to goods with relatively inelastic demand such as petrol and alcohol. They are rarely applied on inputs to an industry as would be the case here. As I have noted earlier, and is noted in some submissions, changes in usage and investment may well arise as a result of significant increases in rents.

I do not have the information at my disposal to provide a full analysis of the taxation-like impacts of putting a premium on rents for Crown Land for this specific use. However, what is true is that any complete analysis of such a premium would have to include a careful

Section 3

‘Strategic’ Importance

assessment

of

its

rationale –

on

distribution grounds.

either or

both efficiency and

  • 3.2.3 Creates Potential for Hold-Up As noted above, for some sites, even if V M r K < 0, it may be the case that V M r > 0. In this situation, r may include a premium but not deter usage continuing of the existing infrastructure. However, what it would mean is that the infrastructure owner would not end up earning a market-based return on past investment. Put simply, those investment costs are sunk so even if the government rents were to be excessive (from a perspective taken prior to investment) they would not preclude on-going use now. This might suggest that a tax like premium on land rents would not be distortionary. However, it would amount to what economists call, hold-up. Hold-up occurs when future prices do not reflect past investment costs. In commercial matters, this can arise when firms invest without long-term contracts being in place. In later negotiations, sunk costs are not taken into account and those investors are vulnerable to a squeeze from their customers. At the extreme, when investors realise this possibility, they may choose not to invest. If rental charges do not take into account the sunk costs of developers then the potential for hold-up arises. This may easily occur if – as in one option – rents are determined by negotiation with the land management authority. Because past investments are sunk, that authority would have considerable bargaining power with respect to site owners. As such, the rent premium may be high. For those investors, they may not realise the long-term returns from their investments. As noted above, this does not mean they will shut down but it does mean that other investors will look carefully when dealing with the government and, in particular, the land management authority. They will take into account potential vulnerability to hold- up and will change their invest plans accordingly.

The

end

result

may

be

considerable

under-investment

in

infrastructure

or

an

avoidance

of

investments

that

require

Section 3

‘Strategic’ Importance

government dealings. 5 This will erode government revenues as well as resulting in economic inefficiencies in NSW.

It is for this reason that many regulators consciously take into account sunk investment expenditures in regulatory pricing. While to ignore them may bring short-run benefits to consumers, in the long- run, the investment chilling effect of such decisions maybe more worrisome. 6 Similarly, excessive rent premia on land here may lead to adverse long-run consequences.

  • 3.2.4 Effective Government Equity

Some of the options as to how a premium might be recovered amount to the NSW Government taking an equity position in infrastructure providers. For instance, the ‘revenue sharing’ proposal would either have the Government earning a proportion of revenues or alternatively a direct appropriation of part of (V M K). IPART recognise, of course, that this would involve intensive information requirements of the type noted above.

In addition, however, an equity position by the Government will dilute incentives for all users of communications towers and also infrastructure providers to manage their businesses for the maximum surplus. In effect, a revenue sharing scheme is like an additional corporate profits tax on these firms. The effect of this will be a reduction in their incentives to keep costs down and also a potential investment chilling effect.

If the Government wishes to pursue these options then full public ownership of the infrastructure and its management would be a more transparent policy. Alternatively, the Government might purchase shares of these firms if it is of the opinion that these represent good investments for the State. Either way would more explicitly indicate the policy direction embedded in a revenue sharing option.

5 For a review of government hold-up in regulatory matters see Gregory Sidak and Daniel Spulber, Deregulatory Takings and the Regulatory Contract, Cambridge University Press, 1997.

6 For a discussion see Joshua Gans and Stephen King, “Access Holidays: The Panacea for Network Infrastructure Investment,” Agenda, Vol.10, No.2, 2003,

pp.163-178.

Section 3

‘Strategic’ Importance

  • 3.2.5 Potential for Abuse

Permitting a premium on rents based on the value of a site to a renter would also leave open the potential for abuse by government authorities to manipulate that value. For instance, special zoning laws might be used to restrict the land that could be used for telecommunications towers to Crown land. This would, in turn, reduce the options available to tower developers and hence, the ‘strategic value’ placed on using Crown land.

A government might, therefore, consider this as a reason, or part of a reason, to enact special laws that may impact on value and, in turn, rents. In contrast, if rents are based purely on opportunity cost, zoning regulations would not have a direct impact on rents and the potential for abuse would not be an issue.

  • 3.2.6 Violates Competitive Neutrality The final issue with a premium over opportunity cost for rent is that it may potentially violate competitive neutrality. A set of charges is competitively neutral if competitors face the same marginal costs after the charges are imposed. 7 Here, however, the rent premium is proposed to vary from site to

site depending upon its usage and

strategic value. This means that it is conceivable that two competing

towers could face very different charges. This would violate competitive neutrality.

In addition, for some sites, primary users and co-users are exactly the same. If charging is based on the value to each, then it is conceivable that there could be an advantage or disadvantage to users that are vertically integrated; that is, ones that own infrastructure. The problem is that the uncertainty with which a premium might be imposed may generate either outcome. Moreover, as the Government has some market power with respect to some sites – perhaps due to their unique position – this would give rise to further variance in rents not related to the underlying opportunity costs.

7 For a discussion of competitive neutrality see Joshua Gans and Stephen King, “Competitive Neutrality in Access Pricing,” Australian Economic Review, 2005 (forthcoming) or "When are Regulated Access Prices Competitively Neutral? The Case of Telecommunications in Australia,” Australian Business Law Review, Vol.32, No.6, 2004, pp.407-414.

Section 3

‘Strategic’ Importance

  • 3.3 Issues in Calculating Opportunity Cost

In order to send appropriate signals for future investment and to provide for the maximal usage of sites, rentals for Crown Land should be based solely on the opportunity cost of the land. Not only will this be economically efficient but it will also result a less administrative and informational burdens and potentially minimise on-going conflicts requiring arbitration. It is for this reason that most regulators opt for a cost-based approach to pricing. The issues in setting prices here are akin to regulatory pricing situations or tax policy and hence, consistency and economic efficiency favour a cost- based approach.

I note that IPART appeared concerned about adopting their solution for waterfront rentals in this particular case. This appeared to be the case because for some sites there was no market value for land – as adjacent properties were not traded. However, this (1) does not prevent such market values being used when they are available and (2) does not prevent an independent valuation of land assets for the purpose of arriving at an appropriate rent in this case. As a consequence, this lack of information does not appear to be a strong reason why a cost-based approach should not be used.

It should also be noted that a rent based purely on the value of the land in its alternative use would not generate the lowest possible outcome in terms of rents to the NSW Government. In its deliberations on the valuation of land for Sydney Airport, the ACCC commissioned Professor Rohan Pitchford for an assessment of the appropriate land value (i.e., rental income) in that case. 8 In that case, he dismissed a pure market valuation of land and argued that, because Sydney airport was essential, the land value would have to subtract the cost of rebuilding that airport elsewhere (as this is what using the land for some other purpose would require). Thus, he would have rents based on an asset value of L K rather than just L.

It appears to me that rents based on L K (while avoiding potential hold-up problems) may not lead to an efficient outcome for Crown Land for communications towers. This is because an efficient rent would reflect the lost opportunity of building a tower on that land as opposed to elsewhere at the time of building. At that decision point, what was being lost when the tower was built on Crown Land is what

8

See

Rohan

Pitchford,

“Sydney

Airport

Land

Valuation:

An

Assessment,”

Section 3

‘Strategic’ Importance

that land might have been used for. Today, should the tower be moved, what would be lost would be potentially much more given the regional development that has occurred in the intervening time period. As such, a pure land valuation approach would capture the notion of opportunity cost that is relevant for this matter.

Finally, what potentially differs here as opposed to the waterfront case is the potential environmental effects of towers in some locations (e.g., national parks). In those instances, a surcharge to rents based purely on land valuation might be appropriate. This is because the environmental cost was part of the opportunity cost of using the land for that purpose. I note, however, that care in evaluating this would be required as the alternative tower location (not on Crown Land) may give rise to a similar cost. In this case, a surcharge may not give the correct pricing signals to investors.

Section 4

Conclusion

4

Conclusion

In its deliberations on the rent for Crown Land for communications towers, the IPART issues and background papers 9 have considered two clear deviations from efficient regulatory pricing principles.

First, IPART is considering co-user based charges when the cost of the underlying service – that is, access to land – is unrelated to the level of the usage of that land. By effectively converting fixed fees into marginal usage ones, IPART would create a distortion that would likely result in a reduction in usage of sites and potentially in an increase in site proliferation. Moreover, administratively, to avoid significant distortions would require the Government to take an active and on-going role in micromanaging communication towers businesses. This is likely to cause many additional costs.

Second, IPART is considering allowing the NSW Government to recover a premium in its rents over the level that would be given by the land’s value in its next best alternative use. To do so would appear to be allowing a hold-up problem to emerge with respect to investment taking place on Crown Land. Such a premium is akin to a tax on the industry with consequent potential distortions in efficiency, site use and infrastructure development. Moreover, the methods of determining the rent premium involve in-depth examination of the operation of the businesses – both primary and co-user – as well as the potential for Government taking an effective equity position in those businesses. It is a clear departure from the cost-based approaches to pricing regulation that regulators throughout the world engage in. This departure does not appear to be based on economic efficiency – internalising externalities – nor on an identification of a potential non-distortionary taxation source.

It is my belief that a rent based on the valuation of the land in its next best alternative use plus additional surcharges for potential environmental costs (where appropriate, e.g., in national parks) would be a better approach. This would involve pure rent for unimproved land use by primary users (i.e., no co-user charges) as well as a mechanism for rental price review over time based on changes in land valuation. The end result would likely be a more efficient, transparent

9 Dated 27 th September, 2004 and 23 rd February, 2005, respectively.

Section 4

Conclusion

and administratively easy way to manage the relationship between Crown Land users and the NSW Government.

Managing Director

Managing Director Joshua Samuel Gans Addresses Melbourne Business School, 200 Leicester Street Carlton VIC 3053 Citizenship:
Managing Director Joshua Samuel Gans Addresses Melbourne Business School, 200 Leicester Street Carlton VIC 3053 Citizenship:

Joshua Samuel Gans

Managing Director Joshua Samuel Gans Addresses Melbourne Business School, 200 Leicester Street Carlton VIC 3053 Citizenship:

Addresses

Melbourne Business School, 200 Leicester Street Carlton VIC 3053

Citizenship: Australian

Numbers

Phone: (03) 9349 8173 Fax: (03) 9349 8169 Mobile: (0414) 911 161 E-Mail: Joshua.Gans@core-research.com.au

Birthdate: 25 th May, 1968

Education

Stanford University, U.S.A., Doctor of Philosophy (in Economics), 1990 - 1994, Dissertation Title:

Essays on Economic Growth and Change, Advisors: Professors Paul Milgrom, Kenneth J. Arrow and Avner Greif. University of Queensland, Australia, B.Econ (First Class Honours) with majors in Economics and Law, 1986 - 1989.

Positions Held

Professor of Management (Information Economics), Melbourne Business School University of Melbourne (October 2000 to present). Director, Melbourne Business School Ltd. Associate Director, Intellectual Property Research Institute of Australia, (March, 2002 to present) Professorial Fellow, Department of Economics, University of Melbourne (2001 to present) Associate Professor, Melbourne Business School, University of Melbourne (July, 1996 – October 2000). Lecturer, School of Economics, University of New South Wales (September, 1994 - July, 1996).

Honors and Awards

Best Discussant, Annual PhD Conference in Economics and Business, 2002. Fellowship, Jerusalem Summer School in Economic Theory, 1993 Stanford Center for Conflict and Negotiation Fellowship, 1993 Fulbright Postgraduate Scholarship, 1990 Stanford University Graduate Fellowship, 1990 University Medal, University of Queensland, Australia, 1989 Reserve Bank of Australia Cadet Scholarship, Australia, 1988

Teaching Experience

Postgraduate subjects in microeconomics, incentives and contracts, economics of innovation, macroeconomics, advanced game theory, personnel economics (Melbourne Business School and University of New South Wales, AGSM and School of Economics)

Undergraduate subjects in microeconomics, macroeconomics, technological change and development (University of New South Wales) Executive Education in technology strategy (INSEAD) and regulatory economics

Long-term Associations

Consulting

Charles River Associates, Senior Consultant (August 2002 - )

CoRE Research (June, 2001 - )

Australian Competition and Consumer Commission (October, 1999 – June 2000)

The Economist Advocate (February, 1999 – June 2002)

London Economics, Australia (February 1997 - May, 1999)

Projects by Industry

  • 1. Electricity

Economic advice to the ACCC on the partial acquisition of Loy Yang Power by AGL (November – December 2003).

Expert testimony for TXU in appeal at the Victorian Supreme Court over the ORG’s electricity pricing determination (March, 2001).

Report critiquing the form of regulation of Victorian electricity distribution, on behalf of United Energy (September - October, 2000).

Participation in a training program for Macquarie Generation (December, 1999)

1997)

Economic analysis of electricity generating asset in preparation for a bid (March, 1999)

Analysis of a contract for sale of electricity to a smelter project (February, 1999)

Report on NEMMCO pricing principles for the National Retailers Association (September, 1998)

Analysis of gaming the National Electricity Market Rules (February, 1998)

Analysis of proposal for allocation of power purchasing agreements in Queensland (December, 1997)

Analysis of vesting contract arrangements for the Queensland Electricity Reform Unit (December,

Analysis of proposals for electricity transmission pricing in Queensland (September, 1997)

Report on options for electricity industry reform in Western Australia (September, 1997)

The role of greenhouse gas regulation on electricity pool behaviour (July, 1997)

Advisor to Queensland Electricity Reform Unit: review of generator market strategies in the NEM and the implications of contracts (May 1997 - November, 1999).

Bid for Loy Yang: report on the implications of market power for asset values (October-February

1997);

ETSA Generation: report on the regulation of market power (August, 1996);

NSW Electricity: report to ACCC on potential for anti-competitive behaviour (March - April, 1996);

  • 2. Gas

Submission on behalf of Envestra to the Queensland Competition Authority regarding its

determination on regulated prices for Queensland's gas distribution network (March - April, 2001). Analysis of the competitive implications of a gas contract for electricity generation (March, 1998).

Advice on the use of electricity prices in gas supply contracts to generators (May, 1997).

Evaluation of R.J. Rudden report on AGL’s cross subsidies (April, 1997)

Gas transmission pricing: reviewed IPART gas transmission submission on behalf of BHP (October

1996-April 1997); Gas market: report on the market power implications of the proposed Victorian gas market and

examined alternative market arrangements (January-March 1997); ETSA Gas: reports on appropriate pricing of gas in electricity use (April, 1996);

  • 3. Telecommunications

Submission to the ACCC on behalf of Hutchison Telecommunications in respect of its mobile services review (July 2003).

2

Submissions to the ACCC on behalf of AAPT in respect of Telstra’s proposed PSTN undertakings (June 2003).

Advice to Hutchison telecommunications on bundling in Pay TV markets (June 2002)

Advice and analysis to AAPT with regard to its interconnection pricing dispute with Telstra at the Australian Competition Tribunal (April, 2001 – May, 2002).

Report submitted as part of SingTel submission to the ACCC evaluating the competitive implications

of Vodafone’s undertakings with respect to its proposed bid for C&W Optus (February, 2001). Assistance to C7 in determining appropriate access pricing for Foxtel/Telstra’s cable television

infrastructure (December, 2000 – January, 2001). Research report for ACCC on Mobile termination of fixed line calls (December, 1999)

Research report for ACCC on PSTN termination by non-dominant networks (December, 1999)

Expert witness for the Australian Communications Authority/ACCC in a matter against Cable and

Wireless Optus at the Administrative Appeals Tribunal on local number portability (August, 1999) Advice to ACCC on commercial churn matter against Telstra (March, 1999 – January, 2000)

Analysis of criteria for declaration of intercity transmission lines in telecommunications (ACCC);

(March, 1998) Report on contracting arrangements in telecommunications (October, 1997)

Report on local number portability and technology adoption for Telstra (November, 1996)

  • 4. Banking and Financial Services

Submission to the ACCC on behalf of First Data with regard to its acquisition of CashCard (November 2003 – January 2004).

Research report and assistance to the National Australia Bank in assessing the competitive implications and regulatory options for the setting of interchange fees in credit card associations (March, 2000 – March 2001).

Examination of theoretical arguments regarding horizontal mergers in Australian banking industry (March, 1997 and May, 1998)

Analysis, on behalf of Lend Lease, of submission to the ACCC for a joint venture between Lend Lease and National Mutual (November - December, 1997)

Report on access to the electronic payments system for the National Australia Bank (March - July,

1998).

  • 5. Pharmaceuticals

Advise to Mayne Healthcare on wholesale reform under the Pharmaceutical Benefits Scheme (February 2002).

Advice to the National Pharmaceutical Services Association on the changes to the wholesale margin in the Pharmaceutical Benefits Scheme (May 2001 - June 2001).

Advice to Faulding Healthcare on implications of COAG review of the pharmaceutical industry (April, 1999 – June, 1999)

Economic analysis, on behalf of Faulding, of the competition issues surrounding a proposed takeover of AMCAL by Faulding Retail (September, 1998).

Report on merger authorisation for Sigma and QDL(Nov, 1996)

  • 6. Other

Economic advice to Pacific Brands on the proposed acquisition of Joyce by Dunlop Foams (September 2004 – January 2005).

Economic analysis of smash repairs and insurance for Consumer Affairs Victoria (September, 2004).

Analysis of exclusive dealing claim by Peter Stevens Motorcycles against Kawasaki on behalf of Kawasaki (July – October 2004).

Report for the MTAA on shopper docket schemes in petrol retailing (August 2004).

Economic advice to Boral on its proposed acquisition of Adelaide Brighton and litigation against the ACCC (May 2004 – October 2004).

Work for AWBI on the value of the single desk and its performance in wheat marketing (September 2003 – September 2004).

3

Report for Medibank Private on the economic case for a private health insurance rebate (October 2002 – February, 2003).

Submission to Productivity Commission on behalf of Adsteam Marine Ltd on harbour towage regulation (May – June 2002).

Submission to ACCC on behalf of Adsteam Marine Ltd on capital cost calculations in harbour towage pricing (April 2002).

Evaluation of the single desk selling of dairy products on behalf of the Australian Dairy Corporation (September 2001).

Advice to the ACCC on competition issues associated with B2B E-Commerce (August - September,

2001).

Submission to the Victorian Treasury on the role of economic regulation and supply security in the proposed Essential Services Commission, on behalf of the Regulated Businesses Forum (October,

2000).

Submission to the Competition Review of the Wheat Marketing Act on behalf of AWB Limited (March - August, 2000).

Analysis of the Victorian Freight Rail access pricing regime for Freight Australia (July, 2000).

Paper for Inquiry into Intellectual Property on behalf of APRA (November, 1999).

Competitive Analysis of the proposed acquisition of Hymix by Pioneer (December, 1998)

Analysis of access pricing principles for interstate rail (ACCC); (December, 1997)

Assistance to Fairfax on submission to Productivity Commission on broadcast regulation (April,

1999);

Report on supply security in electricity, gas and water (December, 1998)

Analysis of merger between two oil refineries (August, 1998)

Report on the Efficient Allocation of Digital Spectrum for John Fairfax Holdings Ltd (February,

1998)

Report on product standards for electrical appliances in Victoria (March, 1997)

Report on social implications of a merger for the provision of radiology services in Queensland (Jan

1997)

Report on infrastructure access dispute in aluminium mining (November, 1996).

Air NZ: theoretical work on the efficiency of access pricing by airports (March - April, 1996);

Freight Rail Corp (NSW): Access dispute resolution with IPART (October 1996).

Rationale for group negotiations for regional medical practitioners (September, 1996).

Local Government Reform in Tasmania: developing a conceptual framework for the re-organisation of governmental responsibilities among local and state governments (February - May, 1996).

New

South

Wales

Taxation

Authority:

Demand

conditions in swimming pool construction

(December, 1994).

 

Litigation and Witness Statement Preparation

Expert Witness Testimony on behalf of ARA on hazardous waste trade (December 2002 – February

2003).

Expert testimony for TXU in appeal at the Victorian Supreme Court over the ORG’s electricity pricing determination (March, 2001).

Expert witness at Appeal Tribunal for United Energy appealing the Office of the Regulator General’s Determination on prices for electricity distribution in Victoria (October, 2000)

Expert witness at the Administrative Appeals Tribunal for the Australian Communications Authority

1997)

on dispute with Cable and Wireless Optus over local number portability requirements (August, 1999) Advice to ACCC on trade practices matter against Safeway (July, 1998 – August,, 1999)

Advice to ACCC on predatory pricing case against Boral (April, 1998 – February, 2000)

Assistance to Professor Philip Williams in preparation of expert witness statement for Australian

Competition Tribunal consideration of the authorisation of the Australian Performing Rights

Association (January - August, 1998) Report on damages calculation for misleading information case in the building industry (August,

Report on the economic theory of damages for price fixing violations (March, 1997)

Submission of competitive implications of Pay TV mergers in New Zealand (Nov 1996)

4

Books

Publications

Finishing the Job: Real World Policy Solutions in Housing, Health, Education and Transport, Melbourne University Publishing: Melbourne, 2004 (forthcoming).

Publishing Economics: Analyses of the Academic Labour Market in Economics, Edward Elgar: Cheltnam,

2000.

Principles of Economics (with Stephen King, Robin Stonecash and N. Gregory Mankiw), 2 nd Pacific Rim Edition, 2003 (1 st Australasian Edition, Harcourt, Sydney, 2000).

Principles of Macroeconomics (with Robin Stonecash, Stephen King and N. Gregory Mankiw), ), 2 nd Pacific Rim Edition, Thomson, Melbourne, 2003 (1 st Edition, Harcourt-Brace, Sydney, 1999).

Principles of Microeconomics (with Stephen King and N. Gregory Mankiw), 2 nd Pacific Rim Edition, Thomson, Melbourne, 2003 (1 st Edition, Harcourt-Brace, Sydney, 1999).

Journal Articles

International

“Patent Renewal Fees and Self-Funded Patent Offices,” (with Stephen King and Ryan Lampe), Topics in Theoretical Economics, Vol.4, No.1, 2004, Article 6.

“Vertical Integration in the Presence of Upstream Competition,” RAND Journal of Economics, 2004 (forthcoming).

“Markets for Ownership,” RAND Journal of Economics, 2004 (forthcoming).

“Can Vertical Integration by a Monopsonist Harm Consumer Welfare?” (with Catherine de Fontenay), International Journal of Industrial Organization, Vol. 22, No. 6, 2004, pp. 821-834.

“When Does Funding Research by Smaller Firms Bear Fruit? Evidence from the SBIR Program,” (with Scott Stern), Economics of Innovation and New Technology, Vol.12, No.4, 2003, pp.361-384.

“A Technological and Organisational Explanation for the Size Distribution of Firms,” (with John Quiggin) Small Business Economics, Vol.21, No.3, November 2003, pp. 243-256.

“Approaches to Regulating Interchange Fees in Payment Systems,” (with Stephen King) Review of Network Economics, Vol.2, No.2, June 2003, pp.125-145.

“The Product Market and the Market for ‘Ideas’: Commercialization Strategies for Technology Entrepreneurs,” (with Scott Stern), Research Policy, Vol.32, No.2, February, 2003, pp.333-350.

“Organizational Design and Technology Choice under Intrafirm Bargaining,” (with Catherine de Fontenay), American Economic Review, Vol.93, No.1, March 2003, pp.448-455.

“The Neutrality of Interchange Fees in Payment Systems,” (with Stephen King), Topics in Economic Analysis and Policy, Vol.3, No.1, 2003, Article 1.

“When Does Start-Up Innovation Spur the Gale of Creative Destruction?” (with David Hsu and Scott Stern), RAND Journal of Economics, Vol.33, No.4, pp.571-586.

“Exclusionary Contracts and Competition for Large Buyers,” International Journal of Industrial Organization, Vol.20, 2002, pp.1363-1381.

“Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities,” Journal of Regulatory Economics, Vol.20, No.2, 2001, pp.167-189.

“Numbers to the People: Regulation, Ownership and Local Number Portability,” (with Stephen King and Graeme Woodbridge), Information Economics and Policy, 13 (2), June 2001, pp.167-180.

“Using ‘Bill and Keep’ Interconnect Arrangements to Soften Network Competition,” (with Stephen King) Economic Letters, 71 (3), June 2001, pp.413-420.

“Regulating Endogenous Customer Switching Costs,” (with Stephen King), Contributions to Theoretical Economics, Vol 1, Issue 1, 2001, Article 1. “Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices,” (with Stephen King), Information Economics and Policy, Vol.12, No.4, 2000, pp.301-328.

“Incumbency and R&D Incentives: Licensing the Gale of Creative Destruction,” (with Scott Stern), Journal of Economics and Management Strategy, Vol.9, No.4, 2000, pp.485-511.

6

“Network Competition and Consumer Churn,” Information Economics and Policy, Vol.12, No.2, 2000,

pp.97-110.

“First Author Conditions,” (with Maxim Engers, Simon Grant and Stephen King), Journal of Political Economy, Vol. 107, No.4, August 1999, pp.859-883.

“Limited Information, the Possibility of Rational Choice and the Contingent Valuation Method,” International Journal of Social Economics, Vol.26, Nos.1/2/3, 1999, pp.402-414.

“Why Referees Don’t Get Paid (Enough),” (with Maxim Engers), American Economic Review, Vol.88, No.5, December, 1998, pp.1341-1349.

“Industrialization with a Menu of Technologies: Appropriate Technologies and the “Big Push,” Structural Change and Economic Dynamics, Vol.9, No.3, September 1998, pp.63-78.

“Time Lags and Indicative Planning in a Dynamic Model of Industrialisation,” Journal of the Japanese and International Economies, Vol.12, 1998, pp.103-130.

“Fixed Cost Assumptions in Industrialization Theories,” Economic Letters, Vol.56, 1997, pp.111-119. “Measuring Product Diversity,” (with Robert Hill), Economic Letters, Vol.55, No.1, 1997, pp.145-150.

“Urban Productivity and Factor Growth in the Late Nineteenth Century” (with Raphael Bostic and Scott Stern), Journal of Urban Economics, Vol.41, No.1 January 1997, pp.38-55.

“On the Impossibility of Rational Choice Under Incomplete Information,” Journal of Economic Behavior and Organization, Vol.29, No.2, March 1996, pp.287-309.

“Majority Voting With Single-Crossing Preferences,” (with Michael Smart) Journal of Public Economics, 58 (1), February 1996, pp.219-238. “Best Replies and Adaptive Learning,” Mathematical Social Sciences, Vol.30, No.3, 1995, pp.221-234. “Evolutionary Selection of Beliefs,” Economic Letters, Vol.49, No.1, July 1995, pp.13-17.

“How Are The Mighty Fallen: Rejected Classic Articles By Leading Economists,” (with George Shepherd), Journal of Economic Perspectives, Vol.8, No.1, Winter 1994, pp.165-179.

“Time and Economics: Reflections on Hawking,” Methodus, Vol.2, No.2, December 1990, pp. 80-81.

“Knowledge of Growth and the Growth of Knowledge,” Information Economics and Policy, Vol.4, No.3, 1989-90, pp.201-224.

Local

“Taking into Account Extraordinary Circumstances in Regulatory Pricing,” (with Stephen King), Agenda, 2004 (forthcoming).

“Potential Anticompetitive Effects of Bundling,” (with Stephen King) Australian Business Law Review, 2004 (forthcoming).

“Supermarkets and Shopper Dockets: The Australian Experience,” (with Stephen King) Australian Economic Review, 2004 (forthcoming). “Does Australia’s Health Insurance System Really Provide Insurance?” Policy, 2004 (forthcoming).

“When are Regulated Access Prices Competitively Neutral? The Case of Telecommunications in Australia,” (with Stephen King), Australian Business Law Review, 2004 (forthcoming).

“The Decision of the High Court in Rural Press: How the literature on credible threats may have materially facilitated a better decision,” (with Rajat Sood and Philip Williams) Australian Business Law Review (forthcoming, 2004).

“The Housing Lifeline: A Policy for Short-Run Housing Affordability,” (with Stephen King) Agenda, Vol.11, No.2, 2004 (forthcoming).

“Structural and Behavioural Market Power under the Trade Practices Act: An Application to Predatory Pricing,” (with Anthony Niblett and Stephen King) Australian Business Law Review, Vol.32, No.2 April, 2004, pp.83-110.

“The Value of IP Protection in Markets for Ideas,” Australian Intellectual Property Law Bulletin, Vol.16, No.6, 2003, pp.88-90.

“Contestability, Complementary Inputs and Contracting: The Case of Harbour Towage,” (with Stephen King), Australian Economic Review, Vol.36, No.4, December 2003, pp.415-427.

“Access Holidays and the Timing of Infrastructure Investment,” Economic Record, Vol.80, No.248, March 2004, pp.89-100.

“Anti-Insurance: Analysing the Health Insurance System in Australia,” (with Stephen King), Economic Record, Vol.79, No.248, December 2003, pp.473-486.

7

“Access Holidays for Network Investment,” (with Stephen King), Agenda, Vol.10, No.2, 2003,

pp.163-178.

“A Theoretical Analysis of Credit Card Reform in Australia” (with Stephen King), Economic Record Vol.79, No.247, December 2003, pp.462-472.

“Regulating Termination Charges for Telecommunications Networks,” (with Stephen King), Australian Journal of Management, Vol.27, No.1, June 2002, pp.75-86.

“The Economic Consequences of DVD Regional Restrictions,” (with Emily Dunt and Stephen King), Economic Papers, Vol.21, No.1, 2002, pp.32-45.

“The Treatment of Natural Monopolies under the Australian Trade Practices Act: Three Recent Decisions,” (with Frances Hanks and Philip Williams), Australian Business Law Review, Vol.29, No.6, December, 2001, pp.492-507.

“The Role of Interchange Fees in Credit Card Associations: Competitive Analysis and Regulatory Options,” (with Stephen King), Australian Business Law Review, Vol.29., No.2, April 2001,

pp.94-122.

“Benefits and Costs of Copyright: An Economic Perspective - Part 2,” (with Megan Richardson, Frances Hanks and Philip Williams) Australian Intellectual Property Law Bulletin, Vol.13, No.6, 2000, pp.79-92.

“Benefits and Costs of Copyright: An Economic Perspective,” (with Megan Richardson, Frances Hanks and Philip Williams) Australian Intellectual Property Law Bulletin, Vol.13, No.5, 2000,

pp.62-65.

“Options for Electricity Transmission Regulation in Australia,” (with Stephen King), Australian Economic Review, Vol.33, No. 2, June 2000, pp.145-161.

“The Competitive Balance Argument for Mergers,” Australian Economic Review, Vol.33, No.1, March 2000, pp.83-93.

“The Role of Undertakings in Regulatory Decision-Making” (with Teresa Fels and Stephen King), Australian Economic Review, Vol.33, No.1, March 2000, pp.3-16.

“Economic

Issues

Associated

with

Access

to

Electronic

Payments

Systems,”

(with

Richard

Scheelings) Australian Business Law Review, Vol.27, No.5, December 1999, pp.373-390.

“Efficient Investment Pricing Rules and Access Regulation” (with Philip Williams), Australian Business Law Review, Vol.27, No.3, August 1999, pp.267-279.

“Growth in Australian Cities,” (with Rebecca Bradley), Economic Record, Vol.74, No.226, September, 1998, pp.266-278.

“Contracts and Electricity Pool Prices,” (with Danny Price and Kim Woods), Australian Journal of Management, Vol.23, No.1, June, 1998, pp.83-96.

“Driving the Hard Bargain for Australian R&D,” Prometheus, Vol.16, No.1, March, 1998, pp.47-56. “Access Regulation and the Timing of Infrastructure Investment,” (with Philip Williams), Economic Record, Vol.75, No.228, March 1999, pp.39-49. “Does Australia Really Need to Encourage its Innovators to Commercialise In-House?” Policy, Vol.13, No.4, March 1998, pp.36-40. “Of Grand Prix and Circuses,” Australian Economic Review, No.155, 3rd Quarter 1996, pp.299-307. “Comparative Statics Made Simple: An Introduction to Recent Advances,” Australian Economic Papers, June 1996, pp.81-93.

“Inside the Black Box: A Look at the Container,” Prometheus, Vol.13, No.2, December 1995, pp.169-

183.

“Chaos Theory, Nonlinearities and Economics: A Speculative Note,” Economic Papers, Vol.10, No.1, March 1991, pp.40-53.

Book Chapters

“Wireless Communications,” (with Stephen King and Julian Wright) Handbook of Telecommunications Economics, North-Holland, 2004 (forthcoming). “Regulating Interconnection Pricing,” (with Stephen King), Australian Telecommunications Regulation, A. Grant (ed.), UNSW Press: Sydney, 2003. “Innovation and Market Structure in General Equilibrium,” (with Robin Stonecash), in A. Woodland (ed.), International Trade and Economic Theory: Essays in Honor of Murray Kemp, Edward Elgar:

Cheltnam, 2001, pp.181-191.

8

“Engendering Change,” in S. Keen et.al. (eds.), Commerce, Complexity, and Evolution, Cambridge University Press: New York, 2000, Chpt 19, pp.391-414. “A Strategic Theory of In-House Research and Development,” in S. MacDonald and J. Nightingale (eds.), Information and Organization, Elsevier: Amsterdam, 1999, pp.167-182. “A Primer on Access Regulation and Investment” (with Philip Williams), in M. Arblaster and M. Jamison (eds.), Infrastructure Regulation and Market Reform: Principles and Practice, ACCC/PURC:

Melbourne, 1998, pp.150-160. “Industrialisation Policy and the Big Push,” in K.J. Arrow et.al. (eds.) Increasing Returns and Economic Analysis, Macmillan: London, 1998, Chpt 13.

Working Papers

“Options for Housing Policy for Low Income Households,” (with Stephen King), Working Paper, Menzies Research Centre, 2003.

“Assessing Australia’s Innovative Capacity in the 21 st Century,” (with Scott Stern), Working Paper, MBS.

“Extending Market Power through Vertical Integration,” (with Catherine de Fontenay), Working Paper, 99-2, MBS, February 1999

“Incentive Contracts, Optimal Penalties and Enforcement,” Working Paper, No.6, MBS, January

1998.

“The Allocation of Decisions in Organizations,” (with Susan Athey, Scott Schaefer and Scott Stern) Discussion Paper, No.1322, Graduate School of Business, Stanford University, October 1994.

“Monopolistic Competition a la Dixit and Stiglitz (and its Applications),” Working Paper, No.9409, Department of Economics, University of New South Wales, October 1994.

“The Cyclical Responsiveness of Shifts in Employment Over Sectors,” (with Roberto Mazzoleni), Quaderni Dell'Istituteo Di Scienze Economiche e Finanziarie, No.15, Universita Degli Studi Di Cagliari Sacolta Di Scienze Politiche, January 1993, 19pp.

Articles

“Surprising and Nobel rejections,” Australian Financial Review, 25th October, 1995, p.19. “Playing off the States delivers a grand prix,” Australian Financial Review, 7th March, 1996, p.17. “The inventive alternative,” Australian Financial Review, 12th June, 1997, p.19. “Privatisation debate futile,” Australian Financial Review, 14th July, 1997, p.17 “Illegal drugs: the supply side,” Australian Financial Review, 27th August, 1997, p.20. “A paparazzi-free environment,” Australian Financial Review, 8th September, 1997, p.16. “By and buy, Yule regret it,” Australian Financial Review, 26th November, 1997, p.33. “Tracks of your tears -- Choosing CDs” Australian Financial Review, Wednesday 31st December, 1997,

p.9.

“When being first doesn’t pay,” (with Stephen King), Australian Financial Review, Friday 30th January, 1998, p.32. “Libraries and Banks and Cyberspace Challenge,” Issues, Vol.30, September, 1998, p.2. “Does Sony Realise the Game it is Playing,” The Manager, March 1999 (on-line). “The Failure of Language in Anti-trust Debate,” The Manager, April 2000 (on-line). “Stephen King’s Game of Horror,” The Manager, August 2000 (on-line). “Managing Ideas: Commercialization Strategies for Biotechnology,” The ICFAI Journal of Intellectual Property Rights, Vol.II, No.2, May 2003, pp.17-28. “Auction tips takes a hammering,” Herald Sun, 25th August 2003.

“Petrol deals a blow to the average consumer,” (with Stephen King), Australian Financial Review, 20th August 2003.

“Housing lifelines would rescue many,” (with Stephen King) Australian Financial Review, 6th August,

2003.

9

“Internet auctions fairer for all,” Herald Sun, 14th August 2003, p.18. “The Case for Credit Card Reform: A Primer for Students,” Ecodate, July 2003. “Is it Time to take an Access Holiday?” (with Stephen King) The Pipeliner, 2003. “Internet auctions fairer for all,” Herald Sun, 14th August 2003, p.18. “Petrol deals a blow to the average consumer,” (with Stephen King), Australian Financial Review, 20th “A measure of all things innovative,” Australian Financial Review, 17th May, 2004. “Talking in billions,” Campus Review, 19th May, 2004, p.5. “System Blocks Better Health Care,” (with Stephen King) Australian Financial Review, 22nd March 2004. “Does the winner really take it all?” The Age, 21st August, 2004, p.17. “Who are you insuring anyway?” The Age, 28th August, 2004, p.21. “Cost-plus, haggle-minus,” The Age, 4th September, 2004, p.18. “Integration sometimes stacks up,” Australian Financial Review, 6th September, 2004. “Bundled bidding,” The Age, 11th September, 2004.

Book Chapters

“Wireless Communications,” (with Stephen King and Julian Wright) Handbook of Telecommunications Economics, North-Holland, 2004 (forthcoming). “Regulating Interconnection Pricing,” (with Stephen King), Australian Telecommunications Regulation, A. Grant (ed.), UNSW Press: Sydney, 2003. “Innovation and Market Structure in General Equilibrium,” (with Robin Stonecash), in A. Woodland (ed.), International Trade and Economic Theory: Essays in Honor of Murray Kemp, Edward Elgar:

Cheltnam, 2001, pp.181-191. “Engendering Change,” in S. Keen et.al. (eds.), Commerce, Complexity, and Evolution, Cambridge University Press: New York, 2000, Chpt 19, pp.391-414. “A Strategic Theory of In-House Research and Development,” in S. MacDonald and J. Nightingale (eds.), Information and Organization, Elsevier: Amsterdam, 1999, pp.167-182. “A Primer on Access Regulation and Investment” (with Philip Williams), in M. Arblaster and M. Jamison (eds.), Infrastructure Regulation and Market Reform: Principles and Practice, ACCC/PURC:

Melbourne, 1998, pp.150-160. “Industrialisation Policy and the Big Push,” in K.J. Arrow et.al. (eds.) Increasing Returns and Economic Analysis, Macmillan: London, 1998, Chpt 13.

Working Papers

“Options for Housing Policy for Low Income Households,” (with Stephen King), Working Paper, Menzies Research Centre, 2003.

“Assessing Australia’s Innovative Capacity in the 21 st Century,” (with Scott Stern), Working Paper, IPRIA, 2003.

“Extending Market Power through Vertical Integration,” (with Catherine de Fontenay), Working Paper, 99-2, MBS, February 1999

“Incentive Contracts, Optimal Penalties and Enforcement,” Working Paper, No.6, MBS, January

1998.

“The Allocation of Decisions in Organizations,” (with Susan Athey, Scott Schaefer and Scott Stern) Discussion Paper, No.1322, Graduate School of Business, Stanford University, October 1994.

“Monopolistic Competition a la Dixit and Stiglitz (and its Applications),” Working Paper, No.9409, Department of Economics, University of New South Wales, October 1994.

“The Cyclical Responsiveness of Shifts in Employment Over Sectors,” (with Roberto Mazzoleni), Quaderni Dell'Istituteo Di Scienze Economiche e Finanziarie, No.15, Universita Degli Studi Di Cagliari Sacolta Di Scienze Politiche, January 1993, 19pp.

10

Other Professional Activities

Co-Editor, International Journal of Industrial Organization (2005 -) Co-Editor, Journal of Economics and Management Strategy (2003 -) Economics Editor, Australian Journal of Management (1997 - 2003) Board of Editors, Information Economics and Policy (1996 -). Board of Editors, BE Journals of Economic Analysis and Policy (2001 -) Book Review Editor (Microeconomics) for the Economic Record (1996 - 1998) Professional Memberships: Economic Society of Australia, American Economic Association, Econometric Society.

Languages: Intermediate Japanese

Other Professional Activities Co-Editor, International Journal of Industrial Organization (2005 -) Co-Editor, Journal of Economics and

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