Ok. We told ya so.

A day after announcing a potential deficit of $39.8 million, finance minister Loyola "Rain Man" Sullivan admits the province's current account budget will likely be in the black come the spring.

Don't say Bond Papers didn't cast doubts about Sullivan's little announcement here and here.

In the meantime, ponder as well the complete collapse of provincial government communications.

First, there was the anti-Aliant tirades by Danny Williams trying to defend the GRAP fibre fiasco.

Now we have a finance minister talking about puny deficitt and then at the same time saying that in six months the whole deficit will probably be gone.

Rather than planning legislation to outlaw government budget deficits, Sullivan should consider passing a law requiring finance ministers to be straight with the people of the province about how he is managing their money.

Oh wait. There's already accountability and transparency legislation.

Perhaps we should start calling Sullivan "Mr. Bumble".

After all, both seem to think the law is a ass.

Isn't it ironic?

Which company sponsored Danny Williams' speech to the Empire Club in Toronto last year in which the Premier celebrated his triumph over the federal government?

Would the same company do it again knowing that with Danny Williams and all things cable...this time, it's personal.

Heck, what am I saying?

With Danny, it's always personal.

The guy who took his lunch money in Grade Three is likely in for a s**t-knocking any day now. Teams have been out searching for the guy for years.

Those British snobs who looked down on him at Oxford as being just another knobby little colonial who got into the school on a rich man's favour, rather than his ability?

One day, buddy. One day. You mark my words. When you least expect it.

Nigel. Nigel you little limey f**k.

He knows where live.

Watch your back, buddy.

'Til the cows come home.

Make The Troubles look like a celebration.

Oh yeah.

Not quite we told ya so...

but close.

The current account deficit morphed from $90 million [a high mentioned by CBC's Here and Now on Thursday] down to $60 million and was officially announced at:

$39.8 million.

Bond Papers called the whole mid-year update an effort in political demand management.

We still predict the provincial government will be in the black on current and capital account by year-end.

After all, by the same standard Loyola Sullivan used in Thursday announcement, he finished up last year with a surplus of $524 million.

Find someone else who has consistently reported that, Sullivan included.

Spy detained

Canadian authorities arrested a man in Montreal yesterday using the identity Paul William Hampel and detained him under a security certificate.

Hampel was using a time-honoured espionage technique of planting agents under the identities of real people. Hampel will likely turn out to be the name of someone who is approximately the same age general description as the individual under arrest. The real Hampel likely died as a child. In espionage jargon, Hampel would be described as an "illegal".

Illegals were a favourite technique of the Komitet Gosudarstvennoi Bezopasnosti [KGB; Committee for State Security] and its successor, the Sluzhba Vneshney Razvedki [SVR; Foreign Intelligence Service]. Sometimes, the illegals try to enter a country legally after being caught.

During the Cold War, KGB sometimes used St. John's as a port to insert illegals.

Despair for civilization itself

Ponder the fate of society as the glorious language of Shakespeare is translated for a modern generation...here.

Separated at birth

Shawn Skinner [left], parliamentary secretary to Premier Danny Williams and vice-chairman of the House of Assembly's Public Accounts Committee needs a lesson in parliamentary procudre.

Less than 24 hours after Premier Williams said he would welcome a review of the GRAP fibreoptics deal by the PAC and the Auditor General, Skinner and the three other government members on the committee voted down a motion by the Liberals on the committee to do just that.

Skinner's explanation is that the Liberals added the public hearings at the last minute.

As vocm.com put it: "Skinner says that's not the way things work...".

Well, it's not the way if Skinner hopes to turn his current position into a cabinet seat.

If the government members, who make up the PAC majority, had simply amended the motion, the whole thing would have carried on consistent with the Premier's stated commitment. The entire affair would have proceeded according to what Skinner says is the route: AG report first and then hearings if necessary.

Instead, Skinner led his fellow Tories into handing the opposition a gift richer than their wildest dreams: the Premier's assistant in the legislature doing exactly opposite to what the Premier himself said publicly he would welcome.

Only Homer Simpson could have killed his own career with greater aplomb.

Monge

The French naval vessel Monge [left] is in port in St. John's.

The large white vessel with its array of antennae has attracted public attention, but there seems to be some confusion over what the ship does.

The Monge is a missile-instrumentation vessel.

It is used to collect data on missile test launches related to the development of France's nuclear force de dissuasion.

Own goal!

At the end of his usual guest stint on CBC ratio's Radio Noon, Carl Wells teased Premier Danny Williams' appearance on Here and Now on Tuesday talking about the fibreoptic deal controversy.

That plus a little analysis of Williams' usual media behaviour suggested that the controversy was something Williams felt was so serious he had to make an effort to head to the studios he doesn't usually visit personally.

Little could anyone expect that Williams' defense of the highly controversial deal would not only repeat the same hollow rationales but also add a few new wrinkles to the story.

Williams' appearance - both on NTV and CBC - was a bit of an own goal. That's the phrase security forces in Northern Ireland used to use during The Troubles to describe a plan that backfired. Like the IRA bombmaker who liked to store nitrogen-based fertilizer on the concrete floor of his garage and shift it around with a metal shovel.

They never did find the bomber.

or the shovel.

or most of the garage, for that matter.

Now Williams didn't blow himself to smithereens, but he failed to demolish the criticisms of the deal.

The fundamental problems in the government's justification of the deal are well known by now.

They include:

1. A failure to explain the reason why public money is invested in the project.

2. A failure to explain - in any detail - the value to the provincial government of acquiring fibreoptic cables. The provincial government is supposed to have a telecom strategy that will, among other things, see government's purchasing power as the largest telecom customer in the province to lower the cost of government-related telecom to the taxpayer.

3. The contradictions between versions of the story at different times.

4. Questions about the relationship between Danny and the proponents of the deal.


What the Premier did was:

1. Continue the vague benefit claims with words like "tremendous" but nothing in the way of concrete examples. Saying that third parties like Memorial University were spending between 10 and 100 times more than if they were located on the mainland doesn't give specific examples. Newfoundlanders and Labradorians are used to paying more for goods and services because, after all, they live on an island with a population of 500,000 people. Paying more ain't a surprise.

2. Refer vaguely to potential government savings - considering health care, educational and other services - that "could be" as much as $500 million over time.

Again with the vagueness. If the business plan accompanying the deal gave examples, government would use them. Concrete examples are the easiest way to persuade people
of a position: do this and this specific good thing will result.

Savings that "could be" $500 million over an unspecified time period, could also be monumental losses over the same time frame or a shorter one.

Danny's vagueness suggests that there is fact was no business plan, nor was there a detailed cost/benefit analysis.

After all, if a $15 million investment would reduce government telecom costs by a measurable amount each year for 10 years and would produce a measurable drop in research bandwidth, they could use those numbers. It's how businesses make decisions. It's called return on investment. Spend $100 bucks and save $10 bucks a year for 10 years. Spend $100 bucks and boost sales by $1000 bucks. Either one makes sense and even the most dense Rain Man in radio land can see the sense in simple numbers explained simply.

Williams' vagueness reinforces the facetious suggestion this deal was done on the golf course and that rest has been an exercise in finding excuses and rationalizations. There was no business plan. There is no case. Danny is making it up as he goes along.

It's hard to come to any other conclusion.

3. Continued contradictions and lame arguments. Williams now claims credit for rejecting the proposal the first time out of concerns about perceptions. Later he said the thing is "squeaky clean". These two thoughts can live in the same space and they remain one of the basic contradictions in the entire story.

If the deal smelled a bit at the outset, it was not rendered less stinky by waiting.

The whole thing remains clouded by suspicion especially when the Premier tells the NTV audience that Dean Macdonald and Ken Marshall "worked for me before". That little piece of half-truth has already been demolished but that the Premier keeps going back to such a weak position suggests he simply doesn't have a stronger one.

As if that wasn't enough, though Danny Williams compared this deal to a recent investment with Cooke Aquaculture adding that the whole controversy in the fibre deal seems to be a case of "attacking our own".

That's even lamer than some of the other positions.

For starters, the provincial government dropped $10 million into the Cooke project against the private sector investment of $135 million - about 7.5%. The GRAP deal involves government spending 28% on one portion of the project and dropping provincial cash in another phase of the same overall project.

Then there's the difference between the Cooke enterprise and the proponents of the recent deal. The one involving proportionately more government cash involves the Premier's former business partners and two people he appointed to the board of the provincial hydro corporation.
And if you are still paying attention, Cooke Aquaculture is a New Brunswick-based, family-owned operation. Rogers and MTS Allstream are just like Aliant: big companies with deep pockets, headquartered far, far west of Port aux Basques. [Revised: persona headquarters is in St. John's.]

Need we go on?

From a public relations perspective, announcing a deal like this should be very simple. You simply walk through the decision-making rationale, in summary. Here's the situation; these are the issues. Here's the decision. We had a problem with one aspect; here's how we tackled it according to our values of openness and transparency.

That should form a logical sequence. Since the argument persuaded the organization to take this or that action, a summary version of the same thing should persuade others.

When someone uses vague language, contradictory arguments and irrelevant side issues, people don't find that inherently persuasive. In fact, they start to look on the whole exercise a bit like the guy moving fertilizer around on a concrete floor with a metal shovel.

It might not have blown up in his face this time, but odds are good there will be a big bang sometime very soon.

Rather than support the endeavour, people are more apt to move to a safe distance. They can still see the show to come, but not be harmed by it themselves.

Demand management

CBC television's David Cochrane gave some highlights of what he believes will be in finance minister Loyola "Rain Man" Sullivan's financial update due on Thursday.

Halfway through its fiscal year, the provincial government apparently expects a deficit - presumably on current account - of about $60 million. The shortfall is apparently due to the production shutdown at Terra Nova being longer than planned. The floating production and storage offloading ship (FPSO) was due to be out of service for three months; that turned into six months.
[Left: Finance minister Loyola Sullivan grimaces during last November's mid-year financial update. Photo: Greg Locke.]

Cochrane noted that there is a possibility this projection will disappear since the provincial budget was based on assumption that oil prices would run at an average of US $55 per barrel. It is current trading at US$56 but has been considerably higher than that for most of the year.

The most striking thing about Cochrane's figure is that it is low. A $60 million shortfall is nothing for the Newfoundland and Labrador government. It is nothing in the context of a budget that calls for spending $5.3 billion. That's a 1% variance.

Whoopee ding.

The figure is also low when one considers the problems and setbacks in the economy:

- Terra Nova: In June, Sullivan predicted the anticipated downtime would cost the province $200 million in deferred revenue. It isn't really a loss since the oil that would have been pumped in June will be pumped later at whatever the price is at the time.

- Stephenville: The budget obviously took into account the loss of jobs and business taxes resulting from the closure.

- No Hebron. The provincial budget was decided around the time the negotiations were in their last stages. There doesn't appear to have been any allowance for Hebron but the financial picture would have been considerably rosier if Hebron was underway.

- Fishery fiasco: The fishery is in the slings. Exports are down and Fishery Products International's processing facilities are not working, or certainly aren't working at capacity. That means there is a measurable difference in government revenue from people collecting employment insurance who ordinarily would collecting a paycheque.

Cochrane attributed the small deficit to oil and that's the surest thing anyone can say. The provincial government is raking in so much money from oil exports that it really doesn't need to blink over a mere $60.

[Right: Provincial budget officials rework spending and revenue projections for the FY 2006 during a recent lunch meeting in the West Block cafeteria. Calculations later showed the deficit would be about $100.]

To be frank, though, given Sullivan's horrendous record of budget predictions this $60 million could be a surplus 10 times larger than his projected shortfall.

Sullivan projected a $6 million surplus when he tabled the budget last spring. The year before he wound up with a surplus $76.2 million in Fiscal Year 2005 having predicted a deficit of $492 million.

But wait, that really isn't what happened either.

The so-called cash statement released in August, showed the government's performance in handling its annual operating budget: the current and capital spending. That figure is the one to notice since it reflects the actual annual performance of government itself.

The numbers Sullivan usually bandies around are accrual numbers and contain all manner of debts and theoretical liabilities. The "cash" statements, usually released in November as part of the audited public accounts were released in August during the poll-goosing period since they purported showed the provincial government had a modest surplus of sixty-odd million more than projected.

But even that wasn't a straightforward statement of the cash performance. Sullivan's Budget 2006 showed that capital and current accounts were in deficit by about $62 million.

By August, the revised figures showed the provincial government finished FY 2005 (year end 31 March 2006) with a surplus of...wait for it...

$524 million.

That's right and it's there in black and white on page three. Now Sullivan doesn't call it a surplus; instead it's a cash "contribution".

But it's there.

Those variations are matched by every single budget Sullivan has introduced. He has predicted horrendous deficits in some years and wound up in surplus by almost the same amount.

However, 2005 was a record year, even for Sullivan. Incidentally, the current account was in surplus by over $700 million. By the time he accounted for a deficit in the capital account spending, the thing came down to half a billion dollars.

At no point has Sullivan indicated whether that was just a paper surplus, i.e. money budgeted but not spent or if it was real, as in cash he had sitting in the bank to roll over into the current fiscal year.

Fundamentally, Loyola Sullivan's track record as finance minister has been spotty when it comes to predictions. It's also bordering on the deceptive in the way he has switched from talking about "cash" accounts and accrual accounts. He talks about "cash" when he wants good news to goose a poll, for example and even then he very carefully chooses his words - "$60 million more than expected" versus $524 million - so people have a hard time seeing what actually occurred.

But at other times, Sullivan trots out a deficit - on an accrual basis - when he wants to tamp down expectations. Far from being genuinely transparent and accountable, Sullivan engages in the same verbal gymnastics of some of his predecessors, tossing out figures in mesmerising detail to suit his political purposes.

These days Sullivan has to tamp down expectations. Pharmacists are clamouring for more money. Bridges need to be replaced, roads paved and ferries built. If people knew exactly what the financial state of the province was, they might actually expect cabinet to spend some money.

If all that wasn't bad enough, the cabinet has been taking a hammering in its ethical standards with announcement of public money for a private sector cable deal.

And so, despite having announced budget consultations well in advance, Sullivan suddenly postponed them for an "update" and, as one might sometimes expect a leaked set of figures to reporter.

The political goal of the leak and Sullivan's Thursday statement is two-fold.

First, Sullivan wants to shut down demands for spending. It's that simple.

Second, he wants people to start focusing on possible budget cuts, he wants them to keep feeling the province's finances are shaky, so they will stop thinking about the cable controversy. In political circles, that's called wagging the dog or changing the channel.

Fundamentally, though, Sullivan knows that his prediction of a deficit - accompanied with his usual dour delivery - is just a diversion to suit a transitory purpose.

Sullivan knows the true financial picture isn't anything as bad as he says it is.

Sullivan knows his own abysmal record of fiscal accountability better than anyone else.

Lawyers critical of Toews appointments changes

The Canadian Bar Association is criticising federal justice minister Vic Toews planned changes to the panels that nominate federally-appointed judges in Canada.

The Justice Minister proposes to increase his at-large appointments from three to four and disallow the judge'’s vote -— potentially giving the at-large appointees the majority of votes on the committee. This perception would undermine the independence of the committee and the credibility of the appointment process.

"The CBA believes that the decisions of these committees should continue to be reached by consensus," said [CBA president J. Duncan] MacCarthy. "But if a vote is required, these changes would potentially 'stack the deck' in favour of the Minister's at-large appointees. These changes could give the at-large appointments virtual veto power."

It's good to be da king

Premier Danny Williams with Alice Panikian, Miss Universe Canada 2006 at the Canadian Idol finale, September 14th.

He's back

And it must be serious.

Premier Danny Williams is back in the province for the first time since early November when his innovation minister announced that the provincial government was buying fibreoptic cables as part of a new broadband initiative.

Williams has been out of the province, at an undisclosed location. Chatter on the street is that it was a trip to Florida where he has been known to spend considerable amounts of time. That's really beside the point.

The Premier is on damage control for the GRAP fibre deal.

He's doing media interviews.

Unlike his usual habit of giving a one-on-one to NTV (biggest TV audience in the province) and calling talk radio (biggest radio audience) and handling everyone else in a scrum, the Premier is heading to CBC studios for a sit-down there as well.

That means the story is serious.

CBC television has a relatively small share of the market and that seems to have influenced his past decisions. In this case, Williams is willing to give CBC the time and it will be interesting to see the questions and his responses.

Someone will have to remind us of the last time Danny Williams traveled to CBC television studios for a sit-down interview; my memory isn't that good.

Whenever a Premier changes his behaviour, it's a good idea to take notice.

Something's up and it must be serious for him.

Et maintenant, Lysiane

Yet more on the idea of "nation", again from Andrew Coyne, but this time featuring large chunks of Lysiane Gagnon's recent Globe column.

Oil rig security gains national attention

Possible national security threats to offshore oil installations is prompting the federal natural resources department to legislation governing the offshore, according to the Ottawa Citizen. The changes would give greater say in offshore physical security to the two joint federal-provincial regulatory boards.

Bond Papers reported in April 2006 on the offshore security issue. At the time, the commander of Canadian Forces in the Atlantic region said DND was making the security issue a top priority. A former chief of strategic planning for the Canadian Security Intelligence Service (CSIS) also described the offshore rigs as a potentially "high value target" for terrorists. Attacking the rigs could cause severe environmental harm and disrupt local economies.

While the military has already conducted several exercises related to offshore oil rigs and possible attack scenarios (See April's Bond Papers), the threat to the rigs is considered low according to the Ottawa Citizen.

The Titan missile scare in 2005 highlighted chronic, serious shortcomings in the provincial government's ability to deal with national security issues generally. Premier Danny Williams public comments on the matter made it plain that provincial officials could not make even the most rudimentary assessments of security threats and it became apparent that relations between the federal and provincial governments at the highest level did not routinely address security issues.

Even today, no provincial government officials in Newfoundland and Labrador hold federal security clearances. A provincial government team sent to Dartmouth for meetings with Government Canada and American officials was excluded from a briefing on the Titan launch because they did not hold recognized security clearances.

It appears that few if any of the officials and board members at the offshore regulatory authorities in Atlantic Canada have experience dealing with defence-related issues. Newly appointed CNLOPB chairman and chief executive officer Max Ruelokke is a former army reserve engineer officer. Ruelokke's experience would give him contacts within National Defence and a familiarity with DND and its overall operations that would prove important in an actual emergency.

However, the changes described by the Citizen would not give the offshore boards any responsibility for directing security operations. The story says:

[t]he amendments being considered would allow the agencies to issue security-related orders to rig operators and conduct security audits, said Felix Kwamena, director of Natural Resources Canada's critical energy-infrastructure protection division.

For its part, the Canadian Association of Petroleum Producers is emphasizing a single point of contact on physical security matters. This would a sensible approach since too many layers of authority can hamper effective response in emergencies. One of the issues that emerged from the Titan missile fiasco was a question about jurisdiction.

_____________________________________

Disclosure: The author is a former army reserve public affairs officer, with an academic and work background in defence, security and intelligence.

Public money for private sector: good or bad

Atlantic Business Magazine has a new online feature, a question and answer focused on a new topic each week.

Simon Lono is the guest columnist this week under the headline: "Simon Lono to Atlantic governments: Stop gambling with the public purse."

As Lono puts it:

Every government thinks it's smarter and better able to judge economic winners than any government that preceded it even while history shows that's nothing but unwarranted political hubris and questionable public administration.

There's a link at the end to post a comment. ABM will review the comments and post some of them with Lono's reply.

Check it out.

The math is simple

PR = reputation.

Reputation = credibility.

Credibility = honesty.

Honesty = consistency.

Get it?

Obviously a whole bunch of really important people don't.

Read on:

1. If security of consumer telecom service was an issue...why would you string cable on poles in Newfoundland? Persona chief operating officer and former Cable Atlantic exec Paul Hatcher told the Telegram on Saturday that the land portion of the GRAP deal is carried along Newfoundland Power poles.

Ice and sleet storms that interrupt telephone and power service are a common feature of life in eastern Newfoundland. Persona and Rogers customers - including the provincial government - can expect the odd problem with getting signal, that is unless Persona, Rogers and the Manitoba telephone company buy back-up service from Aliant.

Aliant's cables are buried underground.

2. Does the government have equity or fibre? Finance minister Loyola "Rainman" Sullivan described the province's $15 million expenditure as gaining "equity", as in ownership of an interest in the telecom project. Innovation minister Trevor Taylor said we are buying fibre.

Which is it?

There is a difference even if business minister Kevin O'Brien - yes, the business minister - doesn't know what it is without a briefing note.

3. And while we are at it... Why would Trevor Taylor tell NTV's Issues and Answers that the provincial government is buying fibre but could sell it to recover the investment?

Surely, the provincial government has done a comprehensive examination of how its own telecom cost are going to drop as a result of buying fibre strung along poles on the island portion of the province.

Surely, it has a business plan.

4. There was no RFP but there was talk of one. Early on someone asked why no request for proposals had been issued on this project. Innovation minister Trevor Taylor insisted there had not been one because it was an unsolicited proposal.

But on NTV's Issues and Answers confirmed that the provincial government had looked at seeking proposals. Cabinet decided not to issue an RFP since there was only one company likely to respond that hadn't - namely Aliant - and the cost of the process would be $1.0 million.

Ok.

So now we learn more details that lead us to doubt earlier answers. So much for early disclosure instilling confidence.

But then logically, we must also wonder:

5. Would the RFP have been about providing a cheap sub-sea link or would it have been to provide the provincial government with its own fibre?

Persona's Paul Hatcher already said the provincial money was needed to build the connection to Nova Scotia.

6. Since Aliant has surplus capacity in its system, why didn't cabinet think it was a good idea to encourage competition for its business? After all, the provincial government justified its expenditure of $15 million on the grounds that increased competition will lower costs.

It doesn't help credibility if you contradict your own explanations in the process of providing explanations.

7. $1.0 million is hardly a hefty price-tag when the provincial government is the largest telecom customer in the province. The Tories know this since they proposed in their Blue Book to use government purchasing power to drive down telecom cost. So rather than spend $1.0 million to ensure the $15 million was indeed the lowest cost, government decided to shave off the tiny amount and instead just drop the $15 million anyway.

So much for sound fiscal management in a government run by a Great Negotiator (patent pending).

8. There are two deals here. One is the stand-alone Persona landline, already underway and scheduled to be completed very soon. The other is the sea connection involving a group of cable companies.

Which one has the provincial government's cables in it? Since the deal was announced in relation to the sub-sea cable, presumably government's telecom is running on that one.

Presumably not.

Presumably.

9. Did anybody consider the impact of taking the provincial government's telecom service out of the marketplace?

One of the big issues in the Blue Print is using government's purchasing power to lower its own telecom costs. By purchasing its own dedicated fibreoptic capacity, the provincial government is effectively going into the telecom business for itself. More importantly, it is actually leaving the commercial telecom industry - suddenly - which will have a dramatic drop in business as a result.

Drops in business aren't good for consumer prices since the few customers remaining have to pay for all the surplus capacity that is being added to the telecom system.

That is, unless the provincial government is going to either subsidize the telecom companies - like it did with the paper companies recently - or overspend on telecom by keeping an outside telecom provider it doesn't really need.

Of course, that means the cost of this deal is a lot more than $15 million.

A lot.

At least for you and me, the people who are supposed to benefit from the deal.

10. Pull the other one...

Trevor Taylor needs to understand that no one - and I mean no one - believes that the the Dean/Ken/Danny/Paul relationship is one that happened six years ago, and by implication ended back then, as Taylor tried to tell the audience for Issues and Answers.

Even the Pitcher Plants know that Ken Marshall and Dean Macdonald have established and ongoing relationships with a whole bunch of people in government, today.

Especially the Premier.

Denying the obvious suggests you have no respect for your audience's intelligence, don't understand what is the core ethical issue and well...that you aren't telling the truth.

11. If cabinet was worried at least twice about alleged appearances of conflicts of interest over a deal involving the provincial government buying fibreoptic cables...

- why would such a beneficial idea have aroused any suspicions? After all, by one version of Trevor Taylor's story the provincial government is supposed to be piggybacking on a project for its own purposes, not meeting the needs - wink, wink, Paul Hatcher - of rich private telecom companies.

- what changed? The Bell Aliant fire didn't materially alter the project. It seems as though cabinet thought by fanning some of the smoke from the fire, they could sneak a project by everyone that otherwise they had no confidence in.

That really doesn't look good.

Heck, the whole thing doesn't look good.

And the provincial government can only blame itself.

For want of a telephone call

For the want of a nail, the shoe was lost; for the want of a shoe the horse was lost; and for the want of a horse the rider was lost, being overtaken and slain by the enemy, all for the want of care about a horseshoe nail.

- Benjamin Franklin

For if the trumpet give an uncertain sound, who shall prepare himself to the battle?

- 1 Corinthians 14:8

_________________________________________________

Consider the irony.

Four telecom companies in Newfoundland and Labrador - Persona Communications, Bell Aliant (TSX: BA.UN-T), Rogers (TSX: RCI), and MTS Allstream (TSX: MBT) - are embroiled in a controversy involving a government deal that will likely affect their corporate bottom lines and all because the companies involved neglected two words:

Public relations.

Here's how.

Public relations is about connecting a company with the public interest. It is about gaining and maintaining public support by developing awareness, information, attitudes and behaviour.

Public relations these days is very much about an organization's reputation: attitudes over time.

And time is the key element.

Public relations professionals will you that in order to gain and maintain support, people have to know. The only way they know if you tell them.

None of the companies involved told what needed to be told in a timely way. The companies involved with government in laying new fibre-optic cables across the province waited until the end of the process - once the deal was done with the provincial government - to tell people that a deal was even in the works.

Naturally, public interest was peaked. Spending public money gets their attention anyway. And when two of the three companies behind the deal are headed by individuals with a long-standing business and personal relationship with the Premier, they are bound to wonder what's up.

The information the companies and the provincial government gave initially was limited and confusing. One company spokesperson - Paul Hatcher of Persona - described an $82 million project already underway with no mention of the federal and provincial government money involved. The government announcement added up to only $52 million.

Public comments by business and political leaders in the wake of a fire at Bell Aliant's St. John's headquarters seemed to smooth the ground for the government announcement. But, a week later, as the full scope of the project slowly seeped in the public domain, questions mounted. A week after the announcement, news stories spread across the country alleging that the public money actually came as a result of a deal among buddies rather than something that was actually in the wider public interest. [For a telecom industry/business view, see here.]

The controversy will likely be fueled in the second week by bumbling comments by the finance and business ministers as well as contradictory comments by innovation minister Trevor Taylor and Persona's chief operating officer Paul Hatcher, another Cable Atlantic alumnus.

In an interview with NTV's Issues and Answers, Taylor played up the government's purchase of fibre-optic strands for $15 million. Hatcher told the Telegram that the provincial government cash was needed to fund the expensive portion of the project, namely the sub-sea connection into Nova Scotia.

As the Telegram story put it:

More than a year ago, the consortium pitched the undersea cable to the province - they had $37 million and asked the province to make up the shortfall.

To make matters worse, while concerns about public safety were raised by the Premier himself as the deal was being approved, Taylor said this weekend that province-wide 911 service is being examined. The cost and technical feasibility of expanding broadband to Labrador will also be studied with no commitments being made at this point.

Underneath the whole controversy are allegations of unfair dealings of a government with companies headed by individuals who hold appointments to the province's hydroelectric corporation, both of whom are the Premier's former business partners.

As easy as it is to decry suspicion of politics and politicians, Trevor Taylor gave credence to this aspect of the affair by confirming that the proposal had been reviewed by cabinet at least twice in the past year and rejected on both occasions out of concern of a perceived conflict of interest. Ordinary residents of the province can hardly be faulted for wondering why a single incident suddenly erased the concerns if the politicians were worried about real or perceived conflict of interest twice before. If the deal was good now, it was good then.

To a public relations professional, that sort of suspicion - even if based on appearance rather than fact - is the most damaging. Releasing information when the proposal was first made would ensure awareness and accurate information. Tackling head-on the questions about conflict of interest at the outset would have sent reassuring messages about government and corporate sensitivity to ethics questions. Early and complete disclosure instills confidence.

For Bell Aliant's part, the issue is more one of opportunity lost. The company simply has missed every chance to deal frankly with its telecom service to the province. Its competitors have relentlessly pointed to the supposedly exorbitant cost of leasing space on Aliant's fibre-optic cables. They have pointed to increased service to the public. Aliant has been silent on the existing surplus capacity in the system and the likelihood that consumer prices will drop anyway as a result of deregulation of the nation's telecom industry.

This deal has put Bell Aliant is in a hard competitive spot anyway. It will hardly lose anything by speaking more forthrightly about how this project will affect them and their customers. On the face of it, would speaking publicly about the controversial deal make it less likely that Aliant can get the government account back or that it can win any other telecom contracts?

Bell Aliant can deal authoritatively with technical issues. The company can speak frankly about its service, costs and long-term telecom issues. By speaking openly and frankly, the company will give its consumers the chance to see - if they don't already - a company that is interested in more than the customer's bank account.

But look at it this way, as well: if early and complete disclosure instills confidence, then silence is taken as consent. Every negative comment made by Aliant's competitors about Aliant's costs and service is left unchallenged. To the ordinary consumer, that looks like an admission of guilt or fault.

To be sure, each of the companies involved has first-rate marketers handling corporate advertising. The bigger companies - like Rogers and Aliant - have competent public relations professionals on the payroll. Persona uses a well-connected and creative advertising firm in St. John's. Nothing said here is a slight to them and their competence.

What seems to be missing in this controversy is an understanding in the corporate headshed that there is more to public relations than issuing a happy-faced news release supporting the latest marketing venture. If the in-house team of general public relations practitioners lacks the specialized skills - and they are specialized - to handle a controversial government relations and media relations issue, then there are plenty of practitioners who can lend a hand.

If all you have is a marketer, understand that advertising is built on image. PR handles your reputation and a competent PR professional will make sure that your media appearances are considerably more successful than Dean Macdonald's recent foray to the local open line shows or a short-lived trip into another corporation's boardroom. [See here, here and here.]

The business landscape in Newfoundland and Labrador is littered with the carcasses of good projects that have foundered for want of some straightforward public relations support. The failures affect the bottom line, either in lost opportunities, unrecovered expenditures, or added expenses from delays. For publicly traded companies, the impact on share price - even if marginal - is still an impact that could be avoided. For all, the impact on their reputation is easy to figure out.

It might be difficult sometimes for managers to see the return on a public relations investment. But ask Fishery Products International, the Hebron consortium, IOC, INCO, Fortis and its Belize dam and now the Telecom Four about the cost of not investing in building awareness, understanding, of influencing attitudes and behaviour.

Few projects are lost irretrievably. Even if the public relations efforts were left out or botched, there is always a chance to sort out the mess.

All it takes is a phone call.

Coyne on Dion and the nation issue

Commended for your reading enjoyment and intellectual stimulation, Andrew Coyne as he delivers his usual insights into:

1. Stephane Dion as a political leader; and,

2. Michael Ignatieff on the question of Quebec as a nation.

The net of gross fallacy

Newfoundland nationalists are a funny lot.

They thrive largely on myth and fantasy, not the least example of which is the complete nonsense that Newfoundland and Labrador has been losing out on a multi-billion boondoggle in the fees collected by NavCanada for aircraft using Canadian airspace.

There's a replay of the argument in the Sunday Telegram [not available online but reprinted below], in the form of an opinion piece by David Fox. Living now in Halifax, Fox is retired and has been championing the cause of having the provincial government collect some sort of air space usage tax.

Fox calls it his:

"air-space revenue theory" being a "rightful revenue stream" for the province...

While obviously wants to believe this idea is still open for discussion by the provincial government, let's recall that it has already been examined recently as two years ago [if memory serves]. The conclusion, in a rough paraphrase, is that the entire argument is foolish.

Oddly enough, the Telly printed Fox's submission but neglected to note they had carried a story on the provincial assessment. The two side-by-side would have been amusing especially since Fox notes the number of times he has raised the issue (gross) but neglects to point out the one time where a factual assessment shot his entire argument out of the sky (net).

Let's dispose of this nonsense as quickly as possible.

Firstly, there is no constitutional basis for the provincial government to levy any form of tax on aviation. The entire matter is the jurisdiction of the federal government, as established in the Terms of Union.

Secondly, there is no cash windfall nor is there any debt, as Fox argues. The fees charged are used to provide air navigation services. That operation is currently carried on by NavCanada, a non-for-profit corporation. Even if by some miracle, someone could manage to get control of aviation handed to the provincial legislature, the money collected would and could only go to sustain air traffic control and related services. There is no boondoggle waiting be had.

While Fox may be right that 57 years worth of fees adds up to billions, he is talking about gross revenues. What he needs to look at is net, namely what's left after the costs of providing air navigation services are taken into account. As we can see from this 1999 story, the net is pretty small. Considering that it reflects the net from all air activity in Canada - not just over Newfoundland and Labrador - there really isn't any cash here to be had even if we could figure out how to get it.

In other words, the net of Fox's gross fallacy is naught.

'nuff said.
_____________________________
Reprint begins:

Province losing revenue in air-space fees

Most of us are aware "timing" in politics is all-important if one wishes to get an important item approved by government that is in the best interest of the party pushing it.

Such is the case with creating a provincial royalty fee protocol for air-space users applicable to all aircraft users (both commercial and military) flying over 500,000 square kilometres of Newfoundland and Labrador land area to a height of 90 kilometres.

To date, this provincial air-space resource (legally defined the same as land ownership), is now being used by private, national and international airline companies along with all world military aircraft users, headquartered and administered outside the province. And the province, in return, is getting absolutely nothing for this in terms of a royalty which should be collected if there were an existing agreement with Ottawa.

This situation has been ongoing since 1949. To date, no proposed fee protocol has been discussed, let alone signed off between Ottawa and our provincial government which, if it were approved by both governments, would have given the province its rightful compensation.

To put it in a more fundamental and financial perspective, after some 57 years following Confederation to October (at least by my calculations), the province has lost about $8.532 billion (including interest on the unpaid yearly balance owed), with Transport Canada owing some $6.373 billion from 1949 to 1996 and NavCan owing about $2.158 billion from 1997 to October.

Losing millions annually

Included in these lost revenues are the revenue and interest contributions by the national and international commercial airline users at about $6.315 billion and all the national and international military aircraft users at about $2.216 billion due to all parties daily 1,000-plus aircraft overflights through our provincial skies.

Such losses since 1949 (by my calculations) now add up to an average annual air-space revenue loss to the province of about $147,104,000 per year to October.

Every time you see an aircraft, you can easily figure the province is losing about $0.40 per air kilometre traveled.

Since going public with my idea of an "air-space revenue theory" being a "rightful revenue stream" for the province, as outlined in my paper submitted to the royal commission in December 2002 and followed up with my letters in your newspaper in January 2004 and February 2005, you can bet there are folks in Transport Canada, the Department of National Defence and NavCan Ottawa and elsewhere who have already digested and calculated, with sombre thought, I might add, the "dollar consequences" of this subject, just in case this air-space fee charge idea is in fact proven constitutionally correct and in the favour of the province. Regardless of what is now written in the already signed- off Terms of Union document of 1949, we know nothing today is "written in stone."

I only hope the premier and his intergovernmental committee will present this idea to Ottawa for approval and not let our neighbours from Quebec from the Party Quebecois beat Newfoundland to the punch with this same fee.

David J. Fox
Halifax, N.S.

Rule changes could make telecom deal unnecessary

The commission regulating Canada's telecommunications industry is reviewing current rules with an eye to leveling the playing field between the big and smaller players.

Because smaller companies such as Manitoba Telecom Services Inc. are allowed to piggyback on existing Bell and Telus lines and equipment, the Canadian Radio-television and Telecommunications Commission regulates how much the big companies must provide them with help, and at what price.

MTS is one of the partners in a consortium laying new fibreoptic lines in Newfoundland and Labrador. The project is being promoted on the grounds that the companies with smaller shares of the Newfoundland and Labrador marketplace can lower prices and compete more successfully with Bell Aliant if they were not required to pay Bell Aliant for use of infrastructure laid by the major telecom company in the mid 1990s.

Deregulating the telecom industry could mean that the provincial government's contribution of $15 million towards the project is unnecessary.

More to follow.