Workers Online
Workers Online
Workers Online
  Issue No 32 Official Organ of LaborNet 24 September 1999  

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Trades Hall

Michael Gadiel on the Deal Formerly Known as Vizard


The latest detail of the bundled computer deal not only confirm our worst fears - but raises a few more besides.

Steve Vizard himself has pulled out (at least his active involvement) but Chris Clarke and a range of Industry Superannuation funds have taken up the Virtual Communities proposal. But at Workers Online we can't help but think of it as the Vizard deal.

The ACTU has released the details of the contract that unions and other community organisations would be asked to sign with Virtual Communities. The flaws with the whole Virtual Communities concept are threefold:

Firstly - in five years time everyone will have regular access to the Internet, regardless of whether the union movement supports this deal or not. Why? Because e-commerce providers and ISPs want to expand their market - currently they are limited to people with computers. They'll expand their market by cross subsidising computer prices to ensure that people can access the web.

This is analogous to the mobile phone carriers who subsidise to up-front cost of a mobile phone to gain the on-going contract for network access and usage. Already there are deals in Australia for free Internet access and overseas ISPs (Internet Service Providers) are giving away computers to lock in their market share.

If this is the case, then why must the union movement take up the responsibility for ensuring wider computer ownership, when those that primarily benefit - the ISPs and e-commerce providers - will ensure this anyway? This deal is based on the mistaken presumption that there is some social justice objective served by selling low cost computers to our members.

Secondly - there is no organising focus in this deal. In fact the contract requires unions to ensure that delegates "work actively to maximise the take-up". Time and energy of union delegates, that ought to be spent organising will be spent selling a computer deal. This package could be seen as a benefit of membership, but nobody to going to join a union for a cheap computer deal, they'll join a union to protect their industrial interests. This deal will divert union time and resources away from the main challenge, as set down in the ACTU's "Unions at Work" - organising and recruitment.

Thirdly - this deal interferes with unions' online relationships with their members. The deal proposes to create a Virtual Communities portal which, is a third party, trying to make a profit by selling products. But the Internet doesn't work this way. Unions need to focus on building a direct relationship with their members online, a relationship of trust, where a member knows that any product or service offered through the union website is supported by the union. They also know that unions are non-profit; any money made through commercial activities to put back into the organisation to improve member benefits. This deal gives no reassurance because unions don't have any right of veto over the companies endorsed to members through the Virtual Communities portal.

In addition the structural flaws in the proposal there are many unattractive elements in the detail of the contract:

  • The aims of the contract talk about unions selling computers and achieving a rapid take-up of the computer deal amongst members - no mention of recruitment. In addition, the aims specify the realisation of "the success of Virtual" by floating the company on the stock exchange. The contract itself seem to be geared around this short term objective.

  • The Virtual portal will offer a range of products and services through its portal, the union website will be integrated into this portal. Virtual will be required to consult with unions on the range of services offered, through a steering committee consisting of two Virtual representatives and two from the ACTU. Unions are required to have regard to "...the commercial objectives of Virtual" and "Virtual must have regard to the values and objectives of the trade union movement". Unions have no right of veto over the companies purchasing space on the Virtual Communities portal.

  • If unions already offer third party services online, then the contract obliges them put this service onto the Virtual Communities Portal, subject to existing contractual obligations. If unions wish to offer any new third party services they must first attempt to negotiate the arrangement through Virtual, if these discussions are unsuccessful then the union may still offer the service - but not through their website.

  • Virtual Communities would require unions to actively promote the package - this would involve allowing them to sent direct mail to union members, at Virtual's expense. In addition unions would be required to seek employer support for the package, including the provision of payroll deductions.

  • The contract specifies that unions must endeavour to ensure that union delegates "work actively to maximise the take-up of the initial offer...and any further Virtual Products". In addition Virtual would be able to refer to the product as "endorsed by the union" in marketing the bundled package to the union's members.

  • Unions are prohibited from promoting the existence of the union web site on the Virtual Communities portal. It is not clear whether or not this would prohibit the union from promoting their web site at all - if it was integrated into the Portal.

  • Unions may directly invest in the company Virtual Communities, however the minimum investment is to be $500,000 and union ownership of the company is capped at 5%. Given the overall size of the venture this would make it impossible for more than one union to invest the minimum amount and remain within the equity cap.

  • The opportunity for unions to gain a share in the equity of the company proportionate to the number of computers sold is still featured in the contract, although the union share is limited to a maximum of 20% of the remaining equity pool after the investors have received a guaranteed 15% pa. (compound) return of their investment. However to get the 19.5%, according to the table in the contract, unions would have to sell 1.2 million computers, one for every three union members in Australia.

  • For example, assume that the direct investors put in 16 million at the start and the company was floated two years later and was valued at 100 million on the stock exchange, union members had purchased a total of 300,000 computers (200,000 directly through unions and another 100,000 as a result of the advertising campaign - for which a lower sliding scale is offered). The guaranteed investor return would be $21.16 million leaving a remaining equity pool of $78.84 million. According to the sliding scale in the contract, the union movement's share would be 1% for the 100,000 indirect sales and 4.5% for the 200,000 direct sales therefore a total of 5.5% of $78.84 million, which is $3.54 million. Each union would then receive a percentage share of this figure proportionate to their contribution to the total sales. This would result in a very low return for any union - considering the risk and resources involved.

  • The contract provides that if unions choose to take up to above share option then the five year term of the contract is automatically deemed to be renewed for a further five years - a total of ten years!

  • Virtual Communities guarantee to put 35% of "Net Revenue" into further marketing of the bundled package to union members and improving union websites. However this obligation expires after the float - beyond this point in time there is no further onus upon Virtual to improve union websites or to market the package to union members. Furthermore in the definition section of the contract, they circuitously define "Net Revenue" as "profit" excluding tax with considerable scope given to the directors of the company to retain funds.

In short all responsible unionists should be concerned about what this deal represents. It is a misguided attempt to trade union loyalty for a commodity which the market will shortly deliver anyway - that is computers and Internet access. This deal is the result of industrial age thinking projected into the information age - an obsession with the tangibles when the real value lies in the relationships, the loyalty of members and the network. Worse still it will devalue these important assets. It should not go ahead.


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*   Tell us what you think of the ACTU/Virtual Deal?

*    ACTU Pushes On With Privatised Portal

*   View entire issue - print all of the articles!

*   Issue 32 contents

In this issue
Features
*  Interview: His Daily Fix
Graham Richardson talks of his transition from national politics to talkback radio and his ongoing jobs as a fixer.
*
*  Politics: Requiem to the Third Way
The swing to Labor in Victoria shows clearly that once again Australian voters have rejected economic rationalism. The result, and the reasons for it, should worry John Howard.
*
*  International: A Common Struggle for Freedom
It may not get the headlines, but Western Sahara has some chilling similarities with East Timor.
*
*  Unions: Woolscour Workers say No to Peter Reith
Workers at Canobolas Wooltopping - a woolscour plant near Orange, in central west New South Wales, have just sent a message to Workplace Relations Minister Peter Reith: thanks, but no thanks.
*
*  Legal: Outlawed Acts of Consicence
The recent boycotts in support of East Timorese indepndence highlights the extremism of Reith's second wave.
*
*  History: Was Manning Clark A True Believer
A Canberra history conference shines the spotlight on Australia's most famous historian.
*
*  Review: Paranoid Echoes
The calls to examine the Australian�Soviet documents in the Moscow Literary archives have grown in volume over the past year.
*
*  Labour Review: What's New at the Information Centre
The latest issue of Labour Review - a resource for officals and students.
*
*  Satire: Kennett Boosts Chances: Two More Independents Dead
Caretaker Premier Jeff Kennett today admitted that voters perceived him as arrogant and out of touch, but insisted that they were wrong.
*

News
»  Public Servants Seek Leave For Timor
*
»  Goodbye Green Bans - Dumped by the Wave
*
»  Government Rules Nobble Public Sector
*
»  ACTU Pushes On With Privatised Portal
*
»  Powerful New Years Eve Deal for TransGrid
*
»  Banks Grill Staff on New Fees
*
»  Off the Rails - Workers Gagged
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»  Staff Frustration Boils Over at Sydney Water
*
»  Kennett Nose-Dive: Botsman Picks It
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»  Academics Fail Non-Union Deal
*
»  Nike in Indonesia: Military Employed to Intimidate Workers
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»  The Laugh�s On Barry
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Columns
»  Guest Report
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»  Sport
*
»  Trades Hall
*
»  Piers Watch
*

Letters to the editor
»  Freeloader Push on Track
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»  It's Worse in Detroit
*
»  Working Class Aesthetics
*
»  WorkCover Inspectors: Shaw Replies
*

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