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Enterprise IT, Featured, News - Written by Renai LeMay on Sunday, April 29, 2012 11:21 - 37 Comments
IT’S ON: Govt sets up IT price hike inquiry
news Price-hiking technology vendors are set to be hauled before Australia’s Parliament to justify their local markups, with Communications Minister Stephen Conroy confirming the Government will hold an official parliamentary inquiry into the issue, following a long-running campaign by Federal Labor MP Ed Husic.
Husic (pictured right) has been raising the issue in Parliament and publicly since the beginning of 2011 (he was elected in the 2010 Federal Election), in an attempt to get answers from technology giants such as Adobe, Microsoft, Apple and others as to why they felt it was appropriate to price products significantly higher in Australia (even after taking into consideration factors such as exchange rates and shipping) than the United States.
Just last week, for example, global software giant Adobe continued a long-running tradition of extensively marking up its prices for the Australian market, revealing that locals would pay up to $1,400 more for the exact same software when they buy the new version 6 of its Creative Suite platform compared to residents of the United States.
In late March, after achieving some initial success in raising the issue with David Bradbury, Parliamentary Secretary to the Treasurer, and the Treasurer himself, Wayne Swan, Husic revealed he would write to Communications Minister Stephen Conroy (who is generally seen as having responsibility for the technology portfolio in Australia), asking for a parliamentary inquiry into the matter. In a letter to Husic on 10 April seen by Delimiter, Conroy responded.
“I agree that Australian businesses and households should have access to IT software and hardware that is priced fairly relative to other jurisdictions,” he wrote. “I also agree there is evidence to suggest that the innovative use of technology is not always matched with innovative new business models, in the case of products and services distributed online. The global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets.
“In light of your letter, I will consider possible terms of reference for the House of Representatives Standing Committee on Infrastructure and Communications to inquire into the pricing of software and other relevant IT-related material.”
Top-ranking executives from major companies are often invited to appear before such parliamentary inquiries into their sectors. In this case, it is likely that high-profile companies such as Adobe, Microsoft, Apple, Lenovo and so on, would be invited to attend, due to their existing position in the line of fire, as well as companies retailing video games for the local market, which has also been an area of focus for the criticism, and other companies ranging from top-end camera manufacturers to business software vendors.
In his earlier communications with Conroy, Husic had written that such an inquiry held by the parliamentary committee mentioned by Conroy could:
- Determine whether a difference in pricing existed, as well as determining the extent of the difference
- Examine why households and small businesses have to suffer the increased prices
- Set out the impact of the price hikes on Australian businesses, households and even Government (“bearing in mind that $2 billion is spent on IT procurement by Government”)
- Examine what might be done within the law to deal with this issue, which Husic said IT companies had failed to respond to.
The parliamentary inquiry may also be given a little more bite through the interest which the competition regulator, the Australian Competition and Consumer Commission (ACCC) has in the outcomes. In parliament last week fronting a committee on the NBN, ACCC commissioner Ed Willett was asked by Husic whether the regulator would consider pursuing the matter, “given that consumers rightly feel that they have been unfairly slugged for the prices that they are paying, particularly, as I mentioned before, on software”.
“Over time, information technology will mean it will be harder and harder for particular service providers to maintain higher prices for products in Australia compared to overseas,” Willett responded. “I think that model that we have seen in the past in a number of services has been exacerbated by the value of the dollar, and that has made those comparisons even more stark. I think those sort of practices will be harder and harder to sustain.”
“But certainly the Commission will be pretty keen to ensure that those sort of differences are not supported by contraventions of the Act.”
Technology vendors such as Adobe and Microsoft have in the past offered a number of reasons for why prices were set differently in Australia compared with their home country of the US. In August last year, Microsoft responded to Husic’s comments about Australian markups on its products by stating that it doesn’t set final prices to local customers — and stating that it was difficult to make direct pricing comparisons between countries, given differing local conditions in each jurisdiction.
Microsoft is charging Australian software developers about 83 percent more than their US counterparts to access subscription services associated with its Microsoft Developer Network (MSDN) platform, and also charges higher prices for software products and cloud computing offerings.
Adobe stated the issue wasn’t one for the technology industry alone — claiming it was a wider problem affecting other areas such as the automotive sector as well. At the time, the company said the majority of Adobe’s software in Australia was sold through channel partners — and so the prices listed on its online store may not reflect competitive pricing in the market. In fact, the price through its own online store would reflect a price towards the upper end of the range which its channel partners were charging. The company didn’t want to undercut its channel partners in Australia.
PC manufacturer Lenovo has also attempted to defend of its Australian pricing, despite in 2011 launching its flagship new ThinkPad X1 laptop in Sydney for $560 more than the same hardware will cost in the United States. Apple also commonly charges more for its products in Australia, although the company has made some moves towards international price harmonisation over the past year.
The issue has also come to the attention of the NSW Government, with NSW Fair Trading Minister and Liberal MP Anthony Roberts adding his voice to the debate about price markups on technology goods sold in Australia in October 2011, claiming iconic technology giant Apple was “price gouging” the Australian public when it comes to digital goods such as films, music and software.
In 2012, it’s common to be extremely cynical about politicians, but I think we have to re-think this approach when it comes to Labor MP Ed Husic.
Despite being a backbencher who only entered parliament in the 2010 Federal Election, Husic has proven extremely successful already at representing the views of his electorate (I note his efforts regarding the National Broadband Network) as well as the wider community. In his ongoing campaign to highlight technology product price hikes in Australia, Husic has tapped into an undercurrent of dissatisfaction on the issue on the part of the Australian community. And now his tireless efforts have paid off, with the creation of a dedicated parliamentary inquiry to look into the matter.
In some ways, Husic reminds me of that other relatively new parliamentarian interested in the technology sector — Greens Senator Scott Ludlam. Their personal styles and political affiliations are obviously markedly different, but like Ludlam, Husic has been successful at using the structures and relationships set up in Australia’s Parliament to his advantage. The Committee system, the openness of ministers to discussing issues within the Government, the Government’s relationship with regulators, the importance of comment on the Parliamentary floor (even late at night) in getting issues on the record; Husic has worked all of these tools to his advantage to a remarkable outcome.
I don’t know, at this stage, whether the inquiry will have any impact on actual prices of technology prices in Australia. However, what I do know is that it will certainly do much to highlight the issue to the broader community, and make powerful corporations accountable to their customers. And that can only be a great thing. You can bet that there will be a bevy of journalists listening in as Husic and others question the likes of Microsoft, Apple, and Adobe on Australian IT price hikes.
So for now, let’s recognise that Australia’s political process, even for the often-low profile technology sector, sometimes isn’t broken. Sometimes, when individuals such as Husic show determination and passion, it can work and achieve real outcomes. In all processes, there is a time for cynicism. But for now, with relation to the issue of IT price hikes in Australia, there is an appetite and determination for positive change. It will be fascinating to see where it takes us.
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