Dockland strife

So Malta’s General Workers Union, in seeking to obtain recognition from Malta Freeport that it represents the majority of the terminal’s workers, has ordered industrial action, been hit by a demand from the Freeport for damages, and is now threatening to get its sister unions in other countries to boycott CGM CMA (the Freeport operator) and to blockade the port.
It all sounds like someone’s good idea gone bad. Recognition is not a dispute with the employer: it is the result of a mundane headcount run by the Registrar of Unions based upon verified, reported membership lists. If there is any scope for a dispute, it is with the Registrar or, at a stretch, with any other union seeking recognition.
This is the basis for the Freeport’s action against the GWU. It is not an attack on trade unionism: it is defence against misdirected union action.
Unions and collective negotiation are good for employees and good for employers. Yes, there are sometimes disputes – but imagine any HR department having to renegotiate the same contract three, four, five hundred times with each individual employee. Tedious, time wasting, boring – and unlikely to create good will.
From the employee’s point of view, joining in a collective imparts the necessary counterbalance to the employers’ power, putting the negotiations on a reasonably balanced foundation. But when collective power is misdirected it erodes this balance.
Much of the reporting on the issue in Malta has focussed on the economic damage a blockade or extended strike would cause. Yes, it would, but if the dispute were justified then so be it. The end point would be a better, stronger and more equitable situation.
But if the action is in support of a non-dispute, if it is seriously misdirected as in this case, then the damage done is to the whole concept of collective action and organised labour. It is damaging to trade unionism itself – and this is probably much more long-term damage.
And the damage is being done by the union – not by the Freeport, which in one sense is trying to save trade unionism by calling the GWU back from the brink.

What hope democracy?

Indications are that turnout at the upcoming elections to the European Parliament in June are going to set a new record: the highest level of abstention ever. Not good!
The EU is a huge project. It is, in many ways, the prerogative of the states to set its agenda – but not unfettered. There is a strong democratic strand running through it. That is the European Parliament, the only directly elected institution the Union has.
It does have quite a say in the way the Union is run and what sort of regulations it can impose. So far, that is restricted to reviewing the directives proposed by the Commission and Council, and that is already valuable.
The Lisbon Treaty, if of course it is ratified by the Irish, will extend its reach, opening more areas up to the so-called co-decision procedure (the EU has spawned a lot of jargon..) and, crucially, giving the European Parliament the right to initiate proceedings as well.
So to ensure the EU remains solidly democratic and close to the 450 million people in Europe, Parliament needs to be supported. Which means going out to vote.
An abstention may, in certain circumstances, be a positive, constructive choice. Here, it seems to be no more than an abdication from the whole scope of democracy. To put it another way, if you do not vote, you cannot then complain that the EU is not democratic.
With a low turnout, it won’t be. But for one reason only: that is what the masses of eligible voters who chose specifically not to participate have said, clearly, that they do not want democracy.
Can we afford to let governments and bureaucrats decide, uncontrolled and unmonitored, just what sort of a world we live in? No: that’s why we elect representatives to Parliament. So let’s do it!

Back to piracy

The recent series of pirate attacks of the Somali coast have brought the issue to the forefront again. It is not surprising: after months of relative quiet, it is now rare for a day to go by without reports of yet another hijacking attempt, successful or not.
Military patrols of the admittedly pretty large patch of sea the pirates hunt for their victims in had been credited with the lull; unfortunately, this seems to have been misplaced. The weather, it seems, had more to do with it. And this should come as no surprise.
There are some 16 warships patrolling the shipping lanes off Somalia. But note: they come from 10 or more countries, there is only minimal coordination between them, and they are trying to defend against small boats in a vast area. A military solution, clearly, can’t do the trick on its own.
There is another problem here. Piracy is a crime. Dealing with it is police work, not a military operation. This is not a war. And this is not, very definitely, terrorism. Crews may be terrorized, but that’s not the point.
Pirates are after cash. And so far, the way they’ve got it has been through ransom. This has meant that till recently, the modern Somali take on piracy has been a lot more benign than the 17th Century variant.
There have so far been no crew members killed, though some have been injured. Crews being held have reported been treated well – other than finding themselves stuck on a ship a few miles offshore, unable to go anywhere. This makes sense: you do not collect ransom on dead people.
But this seems to be changing; people have now been killed, ironically during rescue operations. The French killed pirates and one hostage when they went in to get the passengers off the yacht Tannit, and the American Navy killed three of the pirates holding the captain of the Maersk Alabama in a lifeboat.
That changes the dynamic, making for a much more dangerous situation. It may be too much to say the pirates have been co-opted into some sort of terrorist conflict, but the risk is now that they will be more violent, more willing to shed blood.

Whither shipping?

I have been told by executives in a number of shipping companies that more and more of the Asia/Europe trade is being routed round the Cape of Good Hope, taking the long route round Africa rather than the shorter Suez route. This is intriguing: it is, in effect, a reversal of all trends since Suez was reopened.
The logic for the shift is impeccable. First, piracy. Somalia has no stable government and few opportunites to earn a living: Somalis have taken to piracy in a big way in response. You can’t be surprised: ransom for a large, high profile ship can run into the millions of dollars.
Now Somalia is strategically placed: on the Horn of Africa, it dominates the approach to the Red Sea and the Suez Canal. The problem becomes clear now: if you avoid the Somali coast, then Suez is out of reach.
With high oil prices, the cost of the longer journey was prohibitive. But then oil – and with it the bunker prices for the fuel ships actually used – collapsed. The longer route now became viable.
Note that some shipping lines, in an effort to keep their ships moving with less cargo to carry, chose to slow their ships down. Longer rotations means the same number of ships carry less freight. This does not apply to the majors, as far as I know. But still.
As an executive of one shipping line told me, one of the reactions to the high cost of fuel was to slow ships down. The trend had been to get freighters (for which read bulk carriers, container vessels, tankers, et cetera) to move faster and faster. But a lot of cargo is not necessarily time sensitive: slow it down, you make considerable savings on fuel and many of the shipping industry’s clients proved willing to wait if it saved them money.
Piracy is now being tackled, with military escorts through a corridor in the straits between Yemen and Somalia and patrols in the western reaches of the Indian Ocean. As events over the past few days have shown, this has not stopped it. Piracy is still a threat, but not as much as it used to be.
The second reason is stranger. I have been told by shipping executives in Malta that the transit rates through the Suez have been raised. This, they say, is driving ships away and onto the long, circumafrican route.
It would, I suppose. There is one problem: I can find no reference to this on the Suez Canal Authority’s website, and have as yet had no answer to an email to them. There is, of course, the statement the Authority made, committing itself to not raising rates this year.
The truth remains that traffic through the canal has dropped, and the main reason for that is not piracy or the price of oil, or even the rates: there is simply less trade to go round!
However this plays out, though, less traffic through the Suez is bad news for Malta. We live on trade, and have leveraged our position – astride the main shipping lanes from Suez to Gibraltar – to establish a tidy transshipment business. But if the main East-West lines start bypassing the Med, that is at risk. And with it, the favourable rates Maltese importers and exporters obtained by piggybacking on this high-volume traffic.

SPVs and Solvency II dominate discussions

The MFSA is preparing to introduce so-called Special Purpose Vehicles (SPVs) and incorporated cell companies (ICCs) to the Malta as risk management tools, Joe Bannister, MFSA Chairman announced in his overview of the Maltese insurance market for the Malta Insurance Rendezvous held on 4 and 5 March 2009.

 

Discussing insurance

Since the first Rendezvous in November 2007, there have been substantial changes in the sector in Malta. There are now three protected cell companies, from the first one, Atlas Insurance PCC which had only just completed its conversion to the innovative structure. What is more, there are now 10 licensed cells in operation. The number of managed insurers has grown substantially, from fewer than 20 to more than 30 now – with more in the process of obtaining their licenses.

But some things have not changed: most of the insurers are direct writers, not pure captives as in other captive insurance jurisdictions. That is, they cover risks for organisations and people who are not their owners or parent.

One other thing had not changed: the new regulatory regime governing an insurer’s capital requirements, Solvency II, continues to command a lot of attention. This represents a risk-based approach to the determination of the capital an insurer needs to cover the risks it has underwritten, modeled on the Basel II capital regime now being applied to banks.

Like Basel II, Solvency II works on three pillars: the core quantitative requirements, a second strand of qualitative requirements related to internal control and management and a third pillar focused on reporting and disclosure.

The system was explained in detail by Dr Marisa Attard, Director of Insurance at the MFSA and Michaela Koller, the Director General at CEA, the organisation representing the European insurance and reinsurance industry. Solvency II is not, however, a carbon copy of Basel II. It does pick up some of the same principles, seeking to accurately value each risk covered and taking into account a variety of organisational and environmental risks that may affect an insurer. This calculation will work through three basic modes: a standardised approach taking the industry average as its baseline, a fully internal model developed for a specific insurer and an intermediate model. This is, again, similar to Basel II, subject to the proviso that risks in insurance are very different to those faced by banks.

The processes Solvency II will demand of insurers are complex and potentially expensive, a point made by the third person speaking during the Solvency II session, Jeanette Rödbro, Executive Manager of ECIROA, representing European captive insurance owners. Part of the solution lies in simplifications that smaller insurers can apply to the core Solvency II requirements; this is one of the issues being negotiated furiously at the moment, according to Ms Koller.The other is the treatment of multinational group reporting.

The framework directive paving the way for Solvency II to be in place by 2013 must be approved by the European Parliament before it stops work for the European Elections. That was just 15 days away – and the price of failure, the real possibility that the entire framework would need review by the new Parliament.

Ms Rödbro pointed out a number of issues captive insurers have with the Solvency II regime. Many of these apply equally to Europe’s smaller insurers, representing some 80% of the market and including Malta’s insurance companies. Organisational changes could be necessary. But the cost of compliance in itself could be steep.

In preparation for Solvency II and to test the various structures and provisions, a series of quantitative impact studies (QIS) have been carried out. The latest was QIS4, and Europe’s insurers have participated strongly, certainly more than Europe’s banks did during the equivalent phase for Basel II. According to Ms Rödbro, completing the QIS4 reporting cost somewhere between €4,000 and €20,000 and took two weeks. A number of Malta’s leading insurers, talking after the

Malcolm Cutts Watson explains the use of SPVs in risk management

presentation, expressed surprise: they had spent much more, despite sharing the cost by jointly securing the services of specialised consultant for the purpose. While wary of the potential costs, they were broadly in favour of the new regime: it has the potential to improve risk management and to better match capital requirements to the actual risks carried. This, in turn should reduce the cost of capital and allow keener pricing of risk and thus of the premiums due. Good for the insurer, but also for the insured.  

 

In the current economic climate, a number of speakers made the case for captive insurance and other so-called alternative risk transfer (ART) tools. And Malcolm Cutts Watson and Dominic Wheatly, both from Willis, illustrated how the SPVs Prof Bannister spoke about in his presentation could, through securitisation, be used to effectively cede insurance based risk to the capital markets and spread more widely.

Back to the water?

So the New York court has eventually decided to ensure that the Golden Gate Yacht Club challenges Alinghi for the 33rd Americas Cup. About time: the place for a yachting trophy is on the water!
Admittedly, the probable format is unlikely to be as interesting as a multi-challenge format. It will be just two boats on the water, and two multihulled monsters at that in just one series. But it will be a test of sailing skill, not of legal wrangling.
What will be interesting is how the remaining challenges will take this. There are some very young ones there – Shosholoza from South Africa, for example. There is also the first British challenge for quite a while.
It would be unfortunate if these teams had to pull out of the following 34th challenge, disheartened by the delay and unable to meet the costs it will inevitably involve.

Going private

There are, we have been told, 14 bids for various parts of Malta Shipyards. None, however, for the whole business. It seems that no-one sees the value of keeping the parts together.

A pity, really: the yacht yard and the superyacht facility both benefit from the availability of full shipyard facilities and skills within the same organisation. But the value remains. Trade will need to continue, and seabourbe trade, the most efficient way to move goods about on a cost per tonne basis as well as the most environmentally friendly mode of transport, will recover.

Remember, even new ships have accidents, and to remain efficient need maintennance. What the Maltese shipyards need to do, under any regime, is market effectively and stay competitive. Price is going to be a big issue!

The shipyards, properly run, should be a goldmine. Let’s hope they fulfil their promise! Oh yes, and that the people with the all-important skills are still around when we need them.

Malta has had ship repair facilities for hundreds of years. Without gojng back to classical times – the Romans had harbours on the island, so presumably they also had the means to build and repair ships. But from the Middle Ages on, there has been a shipyard at more or less the same place in te Grand Harbour.

This makes sense: Malta is a trading nation and has been from time immemorial. Malta’s fabled “strategic position” has worked to its advantage in trade as well as in military terms.

Malta is ideally placed for trade around the Mediterranean. Right there in the center, it is very close to the main east-west shipping lane between Suez and Gibraltar – which means a lot of traffic goes past every day. Remember, the Mediterranean is a major shipping route, with a lot of traffic just transiting en route from Asia to Northern Europe or the States.

Then there is the intra-Mediterranean trade. And there is a lot of it. The easiest way to service any port around the Med is from Malta’s ports – it’s in the middle of a long, relatively narrow sea. It may be a shorter distance from one western Med port to another – but a really long way to the eastern ports. But from Malta, they are all reachable.

All these ships need maintennance, need repairs, even refits. And this is the logic behind Malta Shipyards and whoever takes over once the privatisation process is completed. And mind, the economic crisis does not really affect this.

Yes, ships – especially bulk carriers – are being laid up. Trade is down. But don’t be fooled. It will not stop, not by a long shot.

Getting convergence right

 

The global mobile phone community put on its annual show in February. The Mobile World Congress, held in Barcelona, is an annual opportunity for the businesses involved in the sector to show off their wares, pick up clients and partners and – yes – to put forward their take on the direction the market is headed in.

 

The Alcatel-Lucent stand: demonstrating just what can be done with a fully converged network

During an economic downturn, this becomes critical. For the first time in ten years, sales of new mobile phones have fallen. The ARPU – average revenue per user, the gauge of revenue an operator can expect to make off each customer – is falling as well, as people cut back on mobile telephony and operators cut prices rolling our ever more attractive offers. The steady annual increases which have fed this industry so far can no longer be taken for granted.

 

 

Against this backdrop, the mobile companies are busy plotting their course. This includes not just the big mobile phone makers, the organisations producing the network equipment the services run on and the mobile operators themselves, though these are there in force. It also includes the software developers with the applications that run on the networks, the companies that supply the databases they need and much, much more.

Out of all this, a number of clear strands emerge. In the current economic climate, some of these are obvious. Green telecommunications is one. The logic is simple. First, more energy efficient equipment means less greenhouse gas is generated. But there is another aspect, equally important: greater energy efficiency also means lower operating costs. With pressure on revenues, this takes on added significance.

This effort is a multifaceted one: Alcatel-Lucent, for example, is working on the development of mobile base stations powered from alternative sources of energy. Clearly, this means that there are no emissions and now recurrent energy cost. The main driver, however, was the need for fully stand-alone units to take mobile services to areas far from any electric distribution grid.

Traditionally, base stations in remote areas have been powered by small diesel generators. This is clearly not an ideal situation: diesel supplies need to be regularly topped up, and of course generate a lot of CO₂ along with electricity.

Demand for such alternative, self-sufficient base stations comes from developing countries seeking to extend mobile coverage into difficult areas like desert. But not only: they are also being put to work in countries with a mature infrastructure, as a valuable and practical solution in remote, mountainous areas through which running power lines is an uneconomic exercise.

But Alcatel-Lucent is not just working on these lines. Tim Krause, Chief Marketing Officer told the press during a briefing session on 17 February 2009 that the company has run trials of a new dynamic power save feature with China Mobile: “Circuits that are not in use are switched off, but power up fast when they are needed,” he explained. A simple capability, but one which can deliver 30% saving in power consumption.

In other developments, Alcatel-Lucent’s Bell Labs is also looking at what needs to be done to reduce the power consumption of base stations in other ways. The focus as moved to cooling requirements. Maintaining the equipment at the correct operating temperature takes a lot of power for cooling, especially in hot climates. So any savings here should yield substantial benefits.

By changing the physical design, structure and layout of components Bell Labs believes it can get much more cooling through passive means, just as buildings can be built to reduce the need for heating or cooling systems.

Eco-friendly telecoms may hit the zeitgeist of the moment, and throw in cost savings to operators in a welcome bonus. But the main focus of the World Mobile Forum is solidly on service improvement and the shape of the networks of the future – and on the sort of services that can be created.

On the technology, the buzz is all about LTE (long term evolution) networks, the successor to the 3G networks now deployed across Malta and, indeed, in the rest of the world. Along with LTE, there is also end-to-end IP – and this is, if anything, of much greater interest.

The LTE promise is a vast increase in the bandwidth available on mobile networks. This means that there is so much more that can be done: multimedia, virtual reality, you name it, all this is on display at the stands at the Mobile World Congress. They do grab attention, but looking more closely the real value promise is not these bright and beautiful demo applications. The real value lies in the way they pull together different networks – wireless and cable, say – pull information from one or a number of devices, and then organise delivery to, quite possibly, another device.

In Alcatel-Lucent’s demonstration, the carrier was a live LTE network. And the demo works: the new, 4G network delivers the goods. It delivers lots of bandwidth. Yet even more exciting than this is the use of the IP protocol throughout the network.

What this means is that any device can share information with any other, as long as both are capable of handling IP – the internet protocol. And they can do so on any network, fixed or wireless as long as it can transport IP data. This is a big deal: from the operator’s point of view, IP costs less per unit of data. But from the user’s point of view, it enables a whole range of converged services.

This is the essence of Alcatel-Lucent’s reorganisation, as outlined by the company’s President, EMEA Adolfo Hernandez. It involves the French American organisation concentrating on LTE as its mobile technology of choice, on end-to-end IP networks and on WiMAX as its fixed wireless solution, a replacement for DSL.

The company is discontinuing some of the older technologies, while retaining capability on a number of the more recent legacy systems that are still in widespread use. It also looks to create entry points into the IP network for some of the older systems.

Importantly, it is also proposing a new business model. Currently, the network operators provide the means of transport for data, Mr Hernandez explained. On to of that, application providers deliver services and value. Yet revenues are not distributed evenly throughout the system, he said: the two layers share a very small connection.

To increase that connection and even out the distribution of value, he outlined a new business model that leverages the information within the network to allow applications to deliver more valuable services.

“A website operator only knows when a user visits the site itself; the network operator always knows when a user is online,” he said. And the network operator has, simply through the functioning of the network itself, a lot of information about the subscriber.

In the new business model, a third, enabling layer is introduced between the other two. In this layer, information from the network is extracted and delivered to the application provider, allowing highly personalised services to be delivered – and bringing the network operator back into the value chain.

With one proviso – this use of information may fall fowl of privacy and data protection laws. So, Mr Hernandez explained, the services need to be opt-in, while the way Alcatel-Lucent is exposing this information to third parties does so without identification. That stays with the operator, effectively creating a filter that protects sensitive data from misuse and developing a chain of trust.

Alcatel-Lucent’s demonstration highlighted just these services on its stand, and running it all off an end-to-end LTE network to sow that the promise of that speed is in fact real. The show stopper is a virtual reality demonstration: impressive, it simulates a visit to Paris. But the excitement of this demo is in the way information has been pulled together from different devices, delivered  over both fixed and wireless infrastructure, and then returned, providing navigation to the user, information about the city, and adding the capability to share that, and make purchases.

The LTE provides the bandwidth this needed. The ability to get the many different devices to work together is the result of the use of IP throughout the network.

Virtual reality is not a service Alcatel-Lucent is suggesting is ready for real time use, though its time may come. It was demonstrating how an all-IP network, with enough bandwidth, can be used to provide real, value added services. For example, a user may choose a film to watch while waiting for a taxi – and then has the ability to shift it to a screen in the taxi, and again to the home TV. Photos can be viewed on the home TV screen, transferred via a home IP hub; when a call comes in on the fixed line, all phones registered on this home hub ring.

The network can also be configured to take note of the user’s preferences: but Alcatel’s solution continues to give the user control: what information is to be shared and how has to be set. This allows considerable personalisation: ads will be delivered according to preferences. And of course, the user gets the option to buy and pay for the things he likes – with each of these further developing the profile.

This has been demonstrated for a home environment, but many of the features have considerable application to the SME market, and this is not taking the opportunities to do business over the converged networks.

Many telecoms operators have said they will not be looking to investing in LTE just yet, since their 3G networks still have life left in them. GO is likely to hold back as well, but already operates a network capable of handling IP services throughout, Brian Micallef, the company’s Product Manager – Broadband. His position covers both wired and wireless broadband as a single service.

There is little need to increase the bandwidth while there is still a lot of spare capacity left, he said. And many of the converged services do not require the high bandwidth LTE can provide; those should work on current networks.

But he pointed out one other issue with the adoption of LTE: more spectrum is needed, and the telecoms industry is waiting for it to be freed. Until that happens, Mr Micallef said, investment in LTE is unlikely.