It’s official: Australia isn’t the “lucky country” in the IT sector. Consumers, government and industry down under are charged typically 50% more for software and hardware compared to their American counterparts.
Why is this the case and, more importantly, what can affected customers do about it?
After a year-long investigation, the House of Representatives Standing Committee on Infrastructure and Communication finally reported on the state of IT pricing in Australia.
Microsoft products are typically 66% more expensive and Adobe products typically 42% more expensive than in the USA. Even hardware is more expensive, with a typical markup of 46% above American prices.
In March this year, the Australian House of Representatives committee took the unusual step of summoning representatives from Apple, Microsoft, and Adobe to explain these huge price differences.
Their explanations were quite weak, to say the least. Apple blamed local copyright holders, and Microsoft said prices were set and consumers could vote with their wallets and search for the best price where ever they could find it.
We have a free trade agreement with the US, established in 2005, which:
represents a landmark in improving Australia’s trade and investment relationship with the world’s largest and richest economy, and most significant merchandise and services exporter and importer. With this in mind, you might think these massive IT price discrepancies must be illegal – but sadly, this is not the case.
The Australia-US Free Trade Agreement does not set prices for goods and services provided by private parties. In addition, Australian law supports price discrimination via the Copyright Act and the Competition and Consumer Act.
There was sufficient consumer outrage that the federal parliament undertook the IT pricing inquiry which has now recommended laws be changed to allow consumers to shop around for the best price anywhere in the world. Two recommendations are:
Recommendation 9: The Committee recommends that the Australian Government consider enacting a ban on geo-blocking as an option of last resort, should persistent market failure exist in spite of the changes to the Competition and Consumer Act and the Copyright Act recommended in this report.
Recommendation 10: That the Australian Government investigate the feasibility of amending the Competition and Consumer Act so that contracts or terms of service which seek to enforce geo-blocking are considered void.
In past years consumers could import goods themselves even if it was technically illegal, but recent advances in technology allow vendors to block both purchase of and operation of products based on the computer’s IP address, which is linked to the country where the computer sits.
Credit card numbers can also be linked back to a country so it is possible to block purchases made by credit card. The ability of vendors to “geo-locate” means they can enforce any pricing structure they want.
Around the geo-block
Is it possible to work around these barriers for Australian purchasers to get the same prices as Americans?
It may be possible but warranties may be voided, and it may be impossible to get software updates and security patches.
Some purchasers try to purchase from retailers rather than the parent company. Many retailers just want to make money and will "forget" about rules such as not selling overseas, or checking the student status of the purchaser.
Another approach is to work through a proxy server. Proxy servers act as intermediaries between computers, and make it look like a computer is in the same country as the proxy server. For example, connecting from Australia to a proxy server in America which will make it look like the user resides in America.
Virtual private networks (VPNs) also reroute a computer’s network internet connection and change its IP address, but they provide an encrypted “tunnel” so anyone checking out your online activities can only see that you have connected to the VPN server and nothing else.
Software purchased from the US can also be run “in the cloud”. Using a cloud provider which looks like a US cloud causes US-bought software to happily think it’s in the US, and run properly.
Why pay at all?
A left-field approach may save a lot of money and is entirely legal: give up on expensive proprietary software and look for alternatives including free open source products.
Consumer pressure can dramatically affect how the big vendors work. Microsoft used to charged high prices for commercial use of its Internet Information Server (IIS) web server. But the free Apache web server was so good that Microsoft had to significantly reduce its price.
If enough of us start using open source products then the big manufacturers such as Microsoft will be forced to be more reasonable with their pricing.
There are some excellent free alternatives for many expensive packages. For example, a full professional Microsoft Office suite will cost you between $500 and $800 dollars. The Open Office package is rated as just as good by many reviewers and is totally free.
Personally, I know several small business owners who use Open Office throughout their enterprises. It has worked very well and saved them tens of thousands of dollars.
There are several good web sites dedicated to listing and evaluating open source software. As a start try Open Source Alternative and Open Source as Alternative.
Even governments are now looking at open source products to reduce costs, and put pressure on the big manufacturers to reduce prices. The UK government has clearly indicated a preference for open source software.
Given the huge savings to be made, other governments may follow this lead – and maybe we should too.