Australian Government Committee Suggests Circumventing Geo-blocking To Combat High Software Prices

from the a-premium-on-ones-and-zeroes dept

Wed, Jul 31st 2013 2:24am — Tim Cushing

Living in Australia means paying more for many things, most specifically software and digital goods. It's common enough that it's known colloquially as the "Australian Tax," an informal system where one country's citizens are asked to pay more -- around 50% more for software from companies like Microsoft and Adobe. This pricing disparity extends to purely digital products, like iTunes downloads and ebooks as well.

In order to prevent Australians from bypassing the high prices by purchasing from another country, software companies have implemented geo-blocking. The normal justifications are in place for utilizing these restrictions in order to maintain the higher prices.

Among the reasons given by company managers to the inquiry to explain price differences were: relative market size, exchange rates, wages, freight charges, local sales taxes, levies, import duties and the need to maintain separate websites and servers for Australian customers.

They also said they were charged higher costs by the entertainment industry for content destined for the Australian market.

While these may all factor into the pricing, Australians have had their doubts for years as to whether these justify such extreme price hikes. And if all of this supports price bumps that double the price of software, you'd think Microsoft, Apple and Adobe would have made more of an effort to attend the parliamentary inquiry into their prices. But this wasn't the case.

Just getting three of the tech industry's heavyweights to the parliamentary inquiry was a feat in itself. Adobe, Apple and Microsoft were all invited to attend the inquiry's earlier public hearings voluntarily. In the end it took a summons to compel the companies to appear. Each had a different reason to explain the pricing disparities.

Adobe said it offered a specialised "bespoke" experience for Australian customers.

Apple blamed local copyright holders for higher prices on its local iTunes store.

Microsoft said its prices were set and customers could vote with their wallets.

Except customers couldn't exactly do that because of geo-blocking.

So, even the companies who feel the price hikes are justified can't agree on their justifications. With nothing further to go on, there's a strong feeling that these companies are happy with the larger profit margin and uninterested in seeing that diminished. Normally, this would have left Australians at an impasse, but this time a government committee took a decidedly pro-consumer stance with its recommendations (following closely with consumer advocate recommendations on IP spoofing from late last year).

"Particularly when it comes to digitally delivered content, the committee concluded that many IT products are more expensive in Australia because of regional pricing strategies implemented by major vendors and copyright holders," said the report by committee chair and Labor MP for Wakefield, Nick Champion.

"While the committee acknowledges that in some cases, geo-blocking is a necessary business practice, it also notes that many IT vendors appear to use geo-blocking as a means to raise prices by restricting consumers' ability to access the global marketplace," the report said.

"The committee considers this form of geo-blocking to be a significant constraint on consumer choice.

The report advised that the Australian government amend the Copyright Act's anti-circumvention provisions to "clarify and secure consumers' rights to circumvent technological protection measures that control geographic market segmentation".

The report also suggests that the government should begin looking at options to educate its citizens on circumventing geoblocking and inform them on how "their rights under Australian Consumer Law may be affected by such actions." Another proposal suggested voiding contracts or terms of service that include geoblocking.

Actually implementing these suggestions would require a rewrite of some areas of Australian copyright laws, which would be no small feat. This may also encourage the affected companies to take more drastic actions to preserve their pricing structures, including the possibility of refusing to provide support to the Australian market. Whether these recommendations will ever go into effect is still doubtful, but at minimum, it forces the issue. Microsoft suggested Australians could vote with their wallets and now it appears the government is moving towards granting permission to its citizens to do exactly that. We'll have to see how these "justified" prices fluctuate in response to Australians "exiting" the market by routing around geo-blocking.

[H/T to velox, who was the first of many to send this news in.]

Http Www Aphref Aph Gov Au House Committee Ic Itpricing Report Fullreport (1) (PDF)Http Www Aphref Aph Gov Au House Committee Ic Itpricing Report Fullreport (1) (Text)

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Filed Under: australia, copyright, digital goods, geo blocking, price discrimination, region locking, software prices

37 Comments

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Anonymous Coward, 31 Jul 2013 @ 2:37am

like stated, the only reason for any type of restriction is to obtain and then maintain far greater profit levels and total control on all goods.if those restrictions were ordered by the Aussie government, hands up those who think companies would cease to trade with Aus? hands up those who think that if that happened, their would be more 'file sharing'? companies would drop prices rather than lose all the sales or risk increases in 'file sharing', even though they have no idea how much of it goes on at the moment. they would want to keep the market, even if profits were reduced, because they would still be making plenty of profit if pricing was reduced to the same level as everywhere else. keeping customers and having a little profit of some sort is better than having no customers and therefore no profit at all!
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Anonymous Coward, 31 Jul 2013 @ 2:50am

'While the committee acknowledges that in some cases, geo-blocking is a necessary business practice...'

Way to undermine everything else they say.

While we acknowledge that an unnecessary practice is a necessary practice...
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Anonymous Coward, 31 Jul 2013 @ 2:58am

Theft
This is theft. Charging more for the same thing when the same software is downloaded from the same server & support is provided by the same global numbers usually based in a third country such as India leads me to believe the price difference is simply because they can get away with it. Well done Oz!
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zem, 31 Jul 2013 @ 3:22am

Re: Theft
we arent a country of pirates for nothing.
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PaulT (profile), 31 Jul 2013 @ 3:50am

Re:
No contradiction. In some cases, geo-blocking can be necessary either for legal compliance of licensing rules. However, neither of those excuses the way it's often being used, which is to leech as much money as possible from a particular country or region for a literally identical product. Yes, taxes and other requirements might require different pricing, but gouging cannot be excused, nor can restricting a free market so that Australians literally have no other choice in the marketplace.
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Lonyo, 31 Jul 2013 @ 3:54am

Re:
I think they mean with regards to the requirements of third parties they license content from.
e.g. iTunes has to geo-block because they license the copyright from a third party, who may only own/have rights to that copyright in some locations.
If they didn't block it, then the copyright holder/licensee elsewhere would not be happy.

The iTunes resale model isn't the same as people like Adobe or MS who sell their own products directly to resellers/consumers, so while for some it's necessary as they don't own the rights, for the underlying rights holders it's not. Except to protect margins/profits.
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Anonymous Coward, 31 Jul 2013 @ 4:10am

DVD region encoding in OZ
Dick Smith's minion seemed to think it was illegal to sell me a region-ignoring DVD player. KMart had no such scruples. (Or minions, for that matter.)
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ethorad (profile), 31 Jul 2013 @ 4:11am

poor excuses!
What a poor list of excuses they are offering:
- relative market size. Australian population = 22m, Alaska and Hawaii each around 1m. Are they being charged much more than Australia? In fact only Texas and California have more people than Australia.
- exchange rates. The 50% comparison is done on USD terms, so there's no exchange rate effect. Maybe a cost of converting currency but between AUD/ASD and on large amounts of money that should be negligible
- wages. What wages? Most of the software/entertainment is created elsewhere so not impacted by Aus wages, and if it was created locally then an Aus wage effect would hit the price wherever it was sold. Plus I doubt Australians are paid 50% more than Americans ...
- freight charges. For downloadable software? Plus for physicals ordered online, that should be covered in the shipping cost not the cost of the item. Also it doesn't cost USD20 to ship an individual game costing USD40 to Australia, much less cost that much when you're shipping a crate of them.
- local sales taxes. Maybe, but sales tax in the US is around 10% say. This would mean sales tax in Aus is around 60%?
- levies. Unclear what this is?
- import duties. I think if there was an import duty of 50% on US entertainment, the MPAA and friends would be screaming blue murder by now.
- maintain separate websites and servers. Really? You don't need to translate anything from the US version. As such it should be much easier to do for Aus than for, say, France where there is a different language. Hell, even the currency has the same name in Aus. For multiplayer games I can see you may want to have local servers to keep ping times down, but that's specialist - plus how about other far flung territories?

Plus Apple's excluse about local copyright holders - how does that impact the price of the same good in US and Aus?

To my mind MS is the most honest one there. Consumers can vote with their wallets by buying elsewhere, for example by buying Apple or Linux machines (the "can't because of geoblocking" is missing the point - you don't vote with your wallet by going to a different branch of the same store, you vote by going to a different store)
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ethorad (profile), 31 Jul 2013 @ 4:14am

Re: Re:
I would argue it's not "legal" compliance (and not really necessary)

It's only a necessary business practice because the business has decided to do such a thing by replicating physical distribution networks online.

As such, not necessary, and not legal. It's an option chosen by the various businesses.
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ethorad (profile), 31 Jul 2013 @ 4:17am

Re: Theft
Charging a different price because you can isn't theft.

A form of price gouging maybe, but not theft.
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PaulT (profile), 31 Jul 2013 @ 4:21am

Re: Re: Re:
Oh generally I agree, but there are situations I can think of where something would be legally necessary. For example, Australia have (had?) some silly censorship rules on videogames that led to many being banned or cut, so those would presumably be regionally restricted under law so that Australians don't get hold of the banned/uncensored version.

Generally speaking, if it's just a business model thing they should join the 21st century, but it's also often beyond the direct control of the actual seller (e.g Apple don't have the choice of licensing music from the US and selling it in Australia - they have to abide by the local licence holder's rules).

It's about time these things were sorted out, but retailers still have to abide by the suppliers' conditions even if they belong somewhere in 1994.
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The bastards will get them in the end, 31 Jul 2013 @ 4:23am

If the Ozzies continue to go along with the TPP and it's Investor State Dispute provision, would merely suggesting circumventing the geo-blocking allow companies to sue the state for any "perceived" loss of earnings?
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Anonymous Coward, 31 Jul 2013 @ 4:24am

No wonder nobody takes you pirates seriously.

Software is more expensive in Australia because the developers need to flip the bits upside down, otherwise the program wouldn't work.

Geez...is this so hard to understand.

/sarcasm
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That's more like it, 31 Jul 2013 @ 4:26am

Re: Re: Theft
Manufacturer a copy of a movie from a torrent isn't theft, a form of infringement maybe, but not theft
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Anonymous Coward, 31 Jul 2013 @ 4:38am

There you have it, darryl.

You live in a den of filthy, immoral pirates and thieves, living a code supported by your government that shuts down and censors dissenters.

Breaks your solar panel heart and dick, doesn't it.
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Vidiot (profile), 31 Jul 2013 @ 4:42am

Re:
And all the process flow documents have to be reversed to accommodate the counter-clockwise flow, just like with their bathtub drains and toilets.
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Anonymous Coward, 31 Jul 2013 @ 4:44am

If you buy Microsoft, Apple or Adobe products...
...you have only yourself to blame. It's not only feasible, it's highly desirable to never run the shoddy, inferior, ridiculously overpriced, highly insecure, and onerously licensed products of these companies.

The energy that's going into whining about their pricing practices should be going into dumping them forever. Kudos to those who were intelligent enough never to get sucked into this rathole in the first place; the rest of you need to get a clue and follow their example.
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Ninja (profile), 31 Jul 2013 @ 5:01am

Microsoft said its prices were set and customers could vote with their wallets.

Sure, that must be why M$ products are among the most pirated. That's your customers retributing your middle finger =)

Be an asshole and your potential customers will act accordingly.
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Ninja (profile), 31 Jul 2013 @ 5:03am

Re: Re:
You! Stop! I was very disturbed when I went to the north hemisphere and say the water drain down the pipe in the opposite direction I'm used to in my country. Too damn creepy!
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LyleD, 31 Jul 2013 @ 5:09am

Re: Re: Re: Re:
Oh generally I agree, but there are situations I can think of where something would be legally necessary. For example, Australia have (had?) some silly censorship rules on videogames that led to many being banned or cut, so those would presumably be regionally restricted under law so that Australians don't get hold of the banned/uncensored version.

Acually no.. Bad example there.. While we did (until very recently) have a max R15 rating on games, there was no geo-blocking of foreign stores which sold the R18 versions.. We could easily get them sent over.. They were illegal in so far as shops couldn't import and sell them here.. They were not illegal to own :)

Which at the end of the day was a bonus anyway as the foreign price always beats the local 'Australia Tax' market price, even after you factor in shipping costs..

Even now with R18's legal to buy, it's still cheaper to self-import
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Bob Dowling (profile), 31 Jul 2013 @ 5:14am

The iTunes excuse
I've not read the entire document but when Apple claimed the copyright holders were responsible for the differential pricing did the panel drill down and ask the copyright holders why? (Even just to validate the story told?)
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LyleD, 31 Jul 2013 @ 5:15am

Think about this in terms of all these bloody Free Trade Agreements we're meant to be a part of..

Why don't any of the agreements actually cover something useful like this.. Ain't this the sort of things they're meant to cover? you know, like free trade between two countries so one doesn't gouge the other??

Idk..
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PaulT (profile), 31 Jul 2013 @ 5:21am

Re: Re: Re: Re: Re:
Ah fair enough, I was just thinking of an example off the top of my head. But presumably what you mentioned applies to physical goods and not digital? Either way, thanks for clarifying.
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Anonymous Coward, 31 Jul 2013 @ 5:45am

Re:
free trade for big sepo companies, crumbs for the governments that sign up, bugger the people. (whoever they are).
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Steve R. (profile), 31 Jul 2013 @ 6:07am

Delivery Charge for a Digitial Book
One of my daughters is in college. While home for the summer she signed-up for an on-line course. Not only did she have to pay an exorbitant price for a digital book, but she had to pay a shipping charge!!!! Like geo-blocking this is absurd.
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Anonymous Coward, 31 Jul 2013 @ 6:09am

Then you will see companies begin using expensive software to detect and block all proxies, VPNs, and anonymizers.

I know this becuase I had to put such software on my web site to lock out one persistent user who would not get them message that he was not welcome on my web site.
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gab4moi (profile), 31 Jul 2013 @ 7:42am

Re:
and then, like the sunrise, the empire strikes back:

http://www.businessspectator.com.au/news/2013/7/31/technology/content-industry-rallies-agai nst-it-price-inquiry-findings

Australian online media companies have labelled the IT price inquiry�s goal of abolishing geoblocking as na�ve, implying that the bipartisan committee tabling the report has failed to understand how the practice impacts the content industry.

�The idea that Australia would unilaterally decide to change the way in which intellectual property rights are managed globally seems quite ridiculous to us,� Foxtel�s director of corporate affairs Bruce Meagher told The Australian Financial Review.

�We think it�s a very naive view that the committee has taken and we�ll certainly be talking to both the government and the opposition to encourage them to take a more sophisticated view of the way these things work,� he said.

nb: Foxtel is the oz version of Murdochs pay tv, co owned with a few of the other big media content duopolists, and desperately railing against any freeing up of geo blocking... for their massively overpriced, late delivered content...

This time they may get a frosty reception from the pollies who are a trifle pissed off at the big tech sector and may feel a visit from Murdochs down under toads should be greeted with the contempt it deserves... or maybe not...
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DannyB (profile), 31 Jul 2013 @ 7:43am

Re: If you buy Microsoft, Apple or Adobe products...
Australia could make it a national priority to favor the use of open source.

This has long term impact on the openness, market competitiveness and lower cost of software.

Simply favor vendors that sell and support software that is open source.

It is like weening yourself off of an addictive drug. Many common software tasks can be performed with open source. New government software projects can be developed with open source.

The encourages the development of local talent in your economy that has the skills and knowledge of major open source software projects.

It lessens dependence upon closed, proprietary solutions, which is the source of the high prices. Simply put: they are the only vendor in town, and they can charge and set whatever terms they want.
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ethorad (profile), 31 Jul 2013 @ 8:01am

Re: Re: Re: Re:
Agree that it might be beyond the control of the end seller (ie Apple in this example), however it's still a business choice by someone (ie the record label). The imposition of geoblocking there is an option, not a necessity.

I take your point on legal restrictions on certain content though - at the risk of invoking Godwin's law, I know various continental Europe countries such as Germany ban Nazi/swastika/Hitler references a lot.
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ethorad (profile), 31 Jul 2013 @ 8:04am

Re: Re: Re: Theft
Iron Man stars Robert Downey Jr

How did I do on non-sequiturs?
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Anonymous Anonymous Coward, 31 Jul 2013 @ 8:20am

FOSS extra charges
It's like, like Ubuntu charging extra for their software in Oz. I bet even their Industrial Grade service packs are more for non US (err non South African) companies.
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G Thompson (profile), 31 Jul 2013 @ 9:04am

Re: DVD region encoding in OZ
That's because CD & DVD region restriction was declared unlawful under the Trade Practices Act.

A multi-region player is quite legal to sell here (has been for nearly a decade now) and also it is highly legal to modify any pre-existing region coded devices (cd/dvd/blu-ray) to play any regions products..

I'm not too sure what Dickies minions were smoking that day but they were idiots
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Steve R. (profile), 31 Jul 2013 @ 9:05am

Re: Re: If you buy Microsoft, Apple or Adobe products...
Considering that many governments and small businesses are financially strapped; they should consider open source software such a LibreOffice. Most employees usually use "basic" programs, such as word processing or a spreadsheet. There is virtually no economic justification to buy an MS Office Suite with a lot of unnecessary features.
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G Thompson (profile), 31 Jul 2013 @ 9:07am

Re:
Nope.. because our Consumer Protection laws counter any such idiotic scheme under a TPP.

And if any company wants to somehow sue the Aust Government I would draw there attention to the failure of the Tobacco companies (who have deeper pockets than most) in suing over the removal of there brandings from ALL tobacco products and tell em to go and "suck on a sav" (A purely aussie expression)
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G Thompson (profile), 31 Jul 2013 @ 9:08am

Re:
��ʞɹɐɯǝɹ ʇɐɥʇ ǝlqɯǝsǝɹ ı
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G Thompson (profile), 31 Jul 2013 @ 9:10am

Re: Re: Re:
and no southern cross in the sky either.... weird summer/winter dates and they're all a bit strange up there due to the "northern lights" ;)
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Ian Waring (profile), 1 Aug 2013 @ 3:12am

Set up an office in the USA...
You're in good shape if you're a multinational, at least with Microsoft. I had one bank that asked about differential pricing between the UK and USA, and at the time, it was circa 30%. Said Bank told the local MS sub that it was going to administer all its corporate licenses out of the USA, so they set the price at SELECT Level D minus 30%.

After a year of trading, the bank asked the same question again. US HSBC asked for their pricing, and the USA pricing was quoted back on Microsofts own systems at SELECT Level D (USA pricing), discounted by 30%.

Microsofts response was to tell LARs that they couldn't buy from each other across continental borders unless you were a LAR in both, so only 1-2 resellers could broker these sort of International deals for multinational clients.

Adobe refuse point blank to license across Continental borders; as an end user, they split the user populations accordingly and discount each continent separately.

As far as Microsofts own internal accounting is concerned, they attribute 20% of the financials they land to the country of order, and 80% to the Microsoft subsidiary where the end users actually reside. Resellers only get rebates where the licenses are present in the geography they are authorised to sell into... hence their margins are extremely small on these deals (routinely less than 1% GM).
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