What The (Pointless) IT Pricing Inquiry Recommended

More than a year after it started accepting public submissions, the federal government's IT pricing inquiry has tabled its recommendations, which range from how the government should spend its own money on IT to whether geoblocking should be made illegal. The short version? The recommendations are weak and pointless and won't make any practical difference.

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Yes, this is something of an "I told you so" moment. Back when the inquiry was in flow, I wrote a lengthy piece noting that the inquiry was essentially pointless because there was no way that any legislation would be introduced to actually dictate the prices that could be charged:

It is not going to recommend that competition law be changed exclusively for technology products to ensure that we get the same prices as the US. It's legally unfeasible, politically difficult to imagine, and impossible to enforce in real terms. It's simply not going to happen.

That has indeed proven to be the case, as we see at the top of the report:

While the Committee recognises that businesses must remain free to set their own prices in a market economy, it has nonetheless made a range of recommendations that are intended to sharpen competition in Australian IT markets. The Committee hopes that these measures will increase downward pressure on IT prices and improve the access of Australian businesses and consumers to cheaper IT products.

The Recommendations

So what did the inquiry recommend? Its final report makes 10 key suggestions. Here they are, stripped of jargon and with some brief comments on how feasible (or otherwise) they might be. They fall into three broad groups: changing and tracking expenditure; ensuring consumers can either parallel import or use geoblocking technologies; and exploring whether the law should be changed to make geoblocking illegal.

Making It Easier To Access Overseas Services

  1. Lift any remaining restrictions on parallel importation to allow consumers to import genuine goods. This isn't an unreasonable idea, but if the experience of the book market is any example, we can expect a protracted industry campaign against it. For physical goods, it's also a horse that has bolted: grey importing anything you want isn't difficult.
  2. Ensure the Copyright Act doesn't block people using geographical circumvention measures. This sounds like an OK idea, though the existence of these concerns hasn't stopped VPN providers from proliferating anyway. There could be unexpected trade-offs too: if it became explicitly legal to use geoblocking avoidance software, I imagine many of the existing local catch-up TV services would lose the majority of their rights. I'm not sure destroying iView is a brilliant outcome.
  3. Run education campaigns to explain to people how to avoid geoblocking Not a bad idea either, but likely (as with the previous points) to encounter resistance. It's telling that even the summary suggests that the education campaign should include telling people how their consumer rights might be affected if they buy offshore. Hardly a ringing endorsement for the global marketplace.

Summary: The underlying challenge here is the one that has always existed: how on earth can the government regulate what happens on offshore sites? If an overseas site decides not to accept an Australian credit card, there's very little locally that we can do about it.

Possible Legislative Changes

  1. Consider the creation of a 'right of resale' for digital goods. This feels fraught for multiple reasons. It's fundamentally irrelevant for subscription services, and it conflicts to some extent with the idea of promoting people buying content overseas.
  2. Consider a law to make geoblocking illegal "as an option of last resort". This if only recommended if the other recommendations have no effect. I tend to think they won't, but we still haven't seen any advice on how this law would be imposed on overseas corporations.
  3. Investigate changing the Competition and Consumer Act so that contracts which enforce geoblocking are considered void. I don't pretend a level of expertise in contract law on the intricacies of this, but I'm not sure how (for instance) these contracts might be squared with existing contractual arrangements for local content providers, which are built entirely on this concept.
  4. Repeal section 51(3) of the Competition and Consumer Act 2010. This section blocks the ACCC from investigating anti-competitive conduct in some areas relating to intellectual property (IP). Everyone involved agrees it would be a good idea to dump it.

Summary: The IP provision aside, these suggestions are all highly qualified and difficult to enact. Not gonna happen.

Government Spending On IT

  1. Ask the Australian Bureau of Statistics (ABS) to monitor expenditure on IT products, both domestically and overseas. This is a nice idea and would give us some useful data, but in the absence of a suggestion how to fund this extra research, it seems unlikely to happen.
  2. Commission a study into how the university sector might be able to negotiate better software contracts. Also a worthy idea, but it's worth pointing out discounts for this sector do already exist. And again, there's no comment on how to fund the study.
  3. Push for the establishment of whole-of-government IT procurement. There's good potential for savings here, but it's a massively complex project

Summary: None of these are terrible ideas, but without funding for them, and with relatively few votes in discussing IT pricing for enterprises, I can't see them going anywhere.

So Where Are We?

Rip-off pricing for Aussies is deeply annoying, and it's no surprise people will do what they can to circumvent it. I can't see any of these suggestions changing the fundamental shopping landscape we live in.

Post-election, it will be interesting to see if any of this is followed up. But I doubt we'll see these ideas in the talking points from either side.

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Comments

    Cancelling the US free trade deal should be on the list of possible actions. That deal screws over Australia on agriculture, and now it is screwing us with IT products. The US have got more to lose than us.

    Last edited 29/07/13 2:25 pm

      Ok, that is a spectacularly bad idea. Our trade deficit was $45B with the US in May. So we get to up the price for the small amount of product we export to them (wheat, wool, coal, iron ore, uranium etc.) and THEY get to up the price on every highly technologically based item (or copyrighted) we import from them.

      On the one hand they can go buy wool, wheat, iron ore etc. elsewhere as they are commodities while we'll have to look for our music, movies, software and technology elsewhere... I guess the Bollywood movie industry has really fired in recent years... and I do like Kraftwerk so my music is all covered (although their publisher is probably owned by a US company... soooo)

        The free trade deal is about the taxes and tarrifs on goods exchanged under the deal.
        If the trade is imbalanced (and a $45B trade deficit is proof of that) then revoking the deal will benefit Australia more than the US - i.e. we'll get lots of extra tariff revenue and won't lose much trade as a result. And now is a good time to have more revenue since we're also in a budget deficit situation. If our trade deficit comes down as a result, that also reduces our risk of a catastropic debt collapse in future.
        Software won't actually go up in price, because they are already charging us as much as we can afford - vendors will be forced to wear most or all of the tarriffs themselves.
        Australians have got to stop living in terror that anything we do will result in a country cutting off all trade with us. If we keep bending over backwards, we'll keep getting screwed.

          No, that isn't what will happen. The small number of exports to the US will fall even further because we only sell commodity products. We'll simply get priced out of the market if we apply taxes and tariffs. So that's bad.

          Then you have to assume that the US provides products that Australian's can do without. Which isn't the case. They provide highly sought after technology and entertainment which they produce almost exclusively.

          So the end result will be a drop in income for our exporters and we'll pay more for US products which will lead to an even greater trade deficit for no benefit at all.

          If Australia produced non-commodity products you'd have an argument. But wheat, wool, iron ore, coal, aluminium, gold, uranium etc. have one main determinant when you're looking to purchase. Price. That's it. You'd simply increase the export price of our commodities and open the door to another supplier from another country.

    The only guaranteed way to stop companies from ripping us Aussies off is to stop paying the marked up local prices, be it retail, online or whatever. Instead, grey import stuff from Amazon, eBay etc. or use a VPN to buy digital goods from different countries like the UK or USA. But since the vast majority of Australian shoppers are blithering idiots who will pay whatever they're told to anyway, things will never change.

    There are even more complex issues to consider. If Australians start buying more of their digital products overseas, then foreign IP holders will have little incentive to maintain local sales/marketing/support divisions meaning job losses. I'm just very surprised that none of the companies have been able to clearly articulate the (high) costs of doing business in Australia in terms of smaller market size, labour costs, and to a lesser extent other secondary costs such as rent, etc.

    Don't get me wrong - the above probably reads as if I'm saying that we deserve the prices that we pay, but it seems that Australians in general (i.e. those other than the techno-philic commentariat that frequents places like Lifehacker, other tech blogs and discussion forums like OCAU and Whirlpool) fail at understanding the value of a high margin digital/information/services economy and place undue emphasis on traditional "physical" low-margin industries such as manufacturing. This is evidenced by the difficulties surrounding the NBN, which by any measure is sound policy that sets up the foundation for our transition from the end of the mining boom to a future as an information economy.

    Yet the nation seems to be welded to the idea that the only possibility for jobs growth remains with manufacturing, mining, retail and that losing those jobs will somehow bring on a financial apocalypse. Well sure, because those same people are simulatneously holding back the country's development - a self-fulfilling prophecy.

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