news Federal Labor MP Ed Husic has warned technology vendors hiking prices for the Australian market that criticism and examination of their pricing strategies would not cease, despite the fact that they had so far been largely unresponsive on the issue.

Since the start of this year, Husic has been attempting to get answers from technology giants about why they feel it’s appropriate to rise prices significantly above those found in America — leading to the so-called tech tax — for Australians. The MP has raised the issue with the vendors themselves, in the House of Representatives several times and directly with senior figures such as David Bradbury, Parliamentary Secretary to the Treasurer.

Treasurer and Deputy Prime Minister Wayne Swan indicated in late October that the Government is keenly awaiting a report from the Productivity Commission which will detail the extent to which price hikes on imported technology goods and services are hurting Australian consumers, as part of the Commission’s overall report into the retail sector.

However, in a new speech in Parliament last night (the full text of which is available online), Husic expressed his disappointment at the lack of response from the technology sector to the Productivity Commission’s enquirt in general. “I understand from inquiries I made today that the Productivity Commission has submitted its overall review into the Economic Structure and Performance of the Australian Retail Industry – which the IT pricing discrimination issue will form a part of,” he said.

“When I scanned the submissions listed on the Productivity Commission website, something else became glaringly obvious: Not a single one of the major vendors took the opportunity to make a submission to the Commission. It’s staggering that with all the interest in this matter, the vendors and companies like Adobe, Apple, Lenovo or Microsoft didn’t take the chance to comment.”
Husic said he suspected the vendors believed they could “ride out this sustained public focus”.

However, he maintained the issue would continue to be in the spotlight, quoting a consumer who made a submission to the Productivity Commission’s review: “I believe these enforced price differentials, especially for online downloads, are baseless and exploitative of the average Australian consumer, who will not complain about the price for the sake of convenience and minimal hassle,” he said.

Adobe and Microsoft have stated that much Australian pricing for their products was actually set by the local distribution channel, and that the issue is a broader one that applies not only to the technology sector.

One new avenue for Husic in criticising the vendors may be through the Federal Government’s own IT procurement practices, which are largely carried out through departmental chief information officers and their IT departments, as well as centrally through the Australian Government Information Management Office.

Husic said he intended to follow up within the Government to see what measures were in place to ensure it was getting value for money and that the “inflated prices” that were affecting consumers were not being felt by the public sector.

“Frankly, I think that we need to ensure that there is value for money for government, for consumers and for small business,” he said. “If they think they can ride this out, I would beg to differ and urge them actually to be a lot more transparent in the way that they approach this issue.”

Image credit: Alpha, Creative Commons

news Federal Treasurer and Deputy Prime Minister Wayne Swan has indicated the Government is keenly awaiting a report from the Productivity Commission which will detail the extent to which price hikes on imported technology goods and services are hurting Australian consumers.

In late September, Labor MP Ed Husic revealed Parliamentary Secretary to the Treasurer, David Bradbury, had raised the issue with the Productivity Commission following the publication of its draft report into the Australian retail industry. The move came after Husic had escalated the issue in Federal Parliament several times.

In the latest of his regular economic notes, published yesterday, Swan revealed his own interest in the issue and revealed the Productivity Commission would shortly hand down a report exploring it.

“While the [consumer pricing index] data showed that Australian prices for computing-related equipment declined in the quarter, we’re still paying more for some products than consumers in countries like the United States,” Swan wrote.

“That’s why the Government has asked the Productivity Commission to review the extent of IT price discrimination in Australia. The Government expects to receive this report next month which will be one small step on the road to providing a better deal for consumers of IT-related products. The Productivity Commission would welcome the views of consumers and businesses via retail@pc.gov.au.”

Husic, the member for Chifley first raised the IT price hike issue in Parliament in late March with respect to Apple’s local prices. The MP linked the debate to the issue of online retailing, noting that many consumers knew that the instant they got on the internet, they could easily see the price differentials that existed between products bought in Australia and those purchased overseas.

However, in follow-up speeches, Husic also noted he was concerned about the issue of what he described as “glaring price differentials” with respect to other “culprits”, naming Lenovo, which slugged Australians with a $560 markup on its ThinkPad X1 laptop when it was released locally in May, Microsoft, which heavily marked up its Office 365 product in Australia when it launched several months ago, and Adobe, which has regularly marked up its Creative Suite products substantially upon launch in Australia, describing some of the prices as “incredible”.

Adobe and Microsoft have stated that much Australian pricing for their products was actually set by the local distribution channel.

In its initial report on Australia’s retail sector, the Productivity Commission sharply criticised international manufacturers for marking up their prices for the Australian market, particularly singling out iconic technology giant Apple in its examination of how so-called “regional price discrimination” affects local consumers.

In its report, the Commission said it was aware of the “longstanding practice” by which some international product suppliers set regional prices which effectively treated consumers in one region as “willing, or able, to tolerate significantly higher prices than those in other countries”. Some suppliers, the Commisison said, had attempted to defend such price hikes by attributing them to the cost of supplying “a remote and relatively small market like Australia”.

However, it added, “these arguments in most cases were not persuasive, especially in the case of downloaded music, software and videos, for example, where the costs of delivery to the customer are practically zero and uniform around the world”.

opinion/analysis
When Husic first raised this issue in Parliament earlier this year, I had doubts that it would get anywhere. Although the MP is passionate about the matter and has influence within his party, I knew he was a first-term MP and I wasn’t sure how far that influence would get him.

However, it appears that the Member for Chifley’s patient and ongoing work in this area is beginning to pay dividends. With Swan now commenting directly on the IT price hike issue, it is now squarely part of the national agenda, and I expect it to continue to be so until more multinationals follow Apple’s recent lead and start harmonising pricing across their international divisions. The issue of IT price hikes in Australia has been a long-running one. But I think ground is starting to be made here.

One further thing: This isn’t the only technology issue which Husic has begun engaging on recently. He’s also started to comment on the National Broadband Network and participate more strongly in parliamentary telecommunications committees. It is now clear that Husic’s interest in the technology sector is multi-faceted and not limited to pricing. Furthermore, in his political messages over the past few months can be witnessed a great deal of subtlety. He is not one to often wield the sledgehammer, although he can — normally he appears to prefer the scalpel.

To sum up: What we are witnessing here is the birth of a strong new federal political voice on technology matters in general.

And that can only be a good thing. Labor has lacked this kind of voice over the past six months, with Communications Minister Stephen Conroy having backed down a bit from the public eye as the NBN rollout gained pace and Senator Kate Lundy having virtually ignored the sector in general, apart from her acknowledged interest in the ephemeral area that is ‘Government 2.0′.

One is reminded of Conroy and Lundy’s entrances to the Senate back in 1996. At the time, both displayed a level of energy and enthusiasm for the technology portfolio which was praiseworthy. And both went on to achieve pretty substantial outcomes in that portfolio down the track. One wonders whether the capable Husic will have achieved similar, if we look ten years into the future.

Like other politicians who have been outspoken on technology matters — Malcolm Turnbull and Paul Fletcher come to mind, on the Coalition’s side of the fence — one wonders whether Australia’s technology sector will eventually be addressing Husic with that most august of honorifics: “Yes, Minister.”

Image credit: Office of the Prime Minister

news Federal Government agencies including the Treasury and the Productivity Commission are further discussing the issue of Australian price hikes by companies including technology suppliers, Labor MP Ed Husic revealed in Parliament last night.

Over the past few months, Husic has stepped up his campaign on price hikes by technology suppliers importing goods into Australia, singling out companies such as Apple, Adobe, Lenovo and Microsoft with respect to the issue and raising it with other parliamentary colleagues. The issue was also highlighted by the Productivity Commission in its recent draft report into the nation’s retail sector.

Speaking in Parliament last night, Husic took the issue further, noting he had discussed the issue with the Parliamentary Secretary to the Treasurer, David Bradbury (the full text of a letter sent by Husic to Bradbury is available online).

“He advises that Treasury officials have met with the Productivity Commission to discuss issues relating to price discrimination,” said Husic. “The Commission is now further examining this issue as it prepares to bring down the final draft of its review into the economic structure and performance of the Australian retail industry and, most importantly, the Commission will welcome further submissions from the public on the impact of IT price discrimination on them, which can be emailed to retail@pc.gov.au”.

Husic urged technology suppliers — who, he said had been “notoriously slow or reluctant to deal with this issue transparently or publicly — to make a submission to the Productivity Commission as well. “These firms need to explain why they charge Australian consumers and businesses in a way that they would never dream of doing in their home markets,” the Labor MP said.

Husic added that since he had started raising the issue in public, a number of Australians had come forward with more information about their experiences with the price hikes.

Adobe and Microsoft have stated that much Australian pricing for their products was actually set by the local distribution channel. However, Husic said he had been contacted by a channel representative to provide the other side of the story. “The big tech companies tend to blame retailers or distributors, but I actually got an email from an IT sales and repair business in Sydney,” said Husic.

The email from the Sydney business stated:

“I agree with you about Australian companies charging more than the parent companies in overseas locations for the same goods. This is a constant gripe. We are constantly getting told by customers what their buy prices are for the same goods purchased overseas.”

“We are constantly sending this information thru to the sales managers and product managers say, say Canon and HP here in Australia — bugger all response — or some waffle about company confidential and trade practices act.”

Husic said the channel representative was scared to speak up on the issue, because they believed their company would be placed at a disadvantage from suppliers who would play favourites on the issue. “If this is true, it is an exceptionally serious claim,” he said.

In another example, Husic said he had been contacted by local post-production audiovisual company Famous By Tuesday which had been charged $12,000 more for buying Autodesk’s Smoke editing system through Digistor Australia, compared with prices in the US. “When [Famous By Tuesday staffer David Barrett] got the bill he was stunned to see that the package did not cost $25,000; it cost $37,000. This was a $12,000 difference at a time when the Australian dollar was valued at US94c — simply breathtaking,” said Husic.

Husic noted he would be continuing his campaign on the issue. “This is the fourth time I have raised this matter,” he said. “I think Australian consumers are shouldering an unfair pricing burden. And the tech company justification for this practice has either been non-existent or flaky.”

Microsoft has responded to parliamentary pressure 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.

The comments from the company follow a speech made by Labor MP Ed Husic in Federal Parliament last week about price markups on a number of technology goods and services sold in Australia by multinational companies like Apple, Microsoft, Adobe and Lenovo.

Husic specifically mentioned Microsoft as one of the “culprits” in the issue, drawing attention to the company’s pricing on its Office 365 software as a service platform. “Microsoft’s flagship cloud productivity suite costs 76 percent more here than in the US,” he said. When Microsoft released Office 365 in Australia in late June this year, it didn’t respond to a request for comment on the pricing issue.

In a statement issued today — a week after Husic’s comments — Microsoft said that it wasn’t responsible for setting local prices.

“While Microsoft provides guidance on recommended retail pricing, the company itself does not set the final ‘to-the-customer’ price,” it said. “The market, in the form of its channel and value-added partners who deliver those products to customers, ultimately determines retail pricing.”

“There are many factors that impact pricing decisions, including, but not limited to, channels or partner specifics, the size of the market, taxes, government regulations and costs. It is difficult to make a straight pricing comparison between countries given that the conditions vary between markets. In Australia, we also go to market with partners who add significant value to our local customers, such as localised customer service and support.”

Husic’s comments came several months after he first raised the issue of markups on technology goods and services sold in Australia back in March, at the time primarily discussing products sold by iconic technology giant Apple. After the MP’s second speech on the issue last week, Apple Australia managing director Tony King has finally agreed to meet with Husic on the issue.

Microsoft noted it was happy to do the same. “We respect Australia’s parliamentary process and we are always happy to have a dialogue with any Member of Parliament to discuss any views and concerns that they have,” the company’s statement said. Adobe has responded to the issue by noting that the problem was also seen in other industries such as the automobile sector, and listing similar complex pricing issues as Microsoft.

While many of Microsoft’s products are sold through channel partners, the company does also sell a number of products and services directly. For example, the company maintains an online Australian store where customers can directly buy software such as Microsoft Office and Windows. In addition, the company sells services such as access to its Microsoft Developer Network platform, and also subscriptions to its Xbox Live platform, for example. And price differences exist in these areas as well.

Following Husic’s comments, it has emerged that Microsoft is currently charging Australian developers about 83 percent more than their US counterparts to access MSDN services, for example. The company has yet to comment specifically on the MSDN pricing issue.

Image credit: Microsoft

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, it has emerged in the wake of parliamentary criticism of the company over price differences between the countries.

MSDN is the platform through which Microsoft manages its relationship with external developers and testers — including hardware developers who use its software to run their devices, software developers who develop third-party software for Microsoft operating systems, and others who engage with the broad ecosystem surrounding the company.

To provide developer access to its software, Microsoft offers an annual subscription service, which allows external organisations access to various resources such as software repositories, technical support, online learning and education and even hosted platforms such as its Windows Azure cloud computing system. It is extremely common for large organisations, as well as software development houses and even individual developers, to maintain MSDN subscriptions as a normal cost of doing business.

None of the included benefits available through the various MSDN subscription plans appear to require dedicated onshore Australian assets. However, according to global pricing lists publicly available online, Microsoft appears to be charging Australians a standard 83 percent more to access the MSDN featureset.

For example, the top of the line MSDN subscription, ‘Visual Studio Ultimate with MSDN’, is listed as costing US developers US$11,899 per year (AU$11,343), whereas Australians pay AU$20,775 — a markup of 83.1 percent.

It’s a similar case with the ‘Premium’ version, which costs US developers US$5,469 (AU$5,214) but Australians AU$9,530, and the ‘Professional’ version, which costs US developers US$1,199 (AU$1,143) but Australians AU$2,084. In all cases – even ranging down to basic access to Microsoft’s operating systems — the MSDN markup is around 82 or 83 percent.

A representative of Microsoft’s public relations agency was not immediately able to comment on the issue.

The issue of MSDN pricing was raised by a number of Delimiter readers following comments made by Labor MP Ed Husic in Federal Parliament last week about price markups on a number of technology goods and services sold in Australia by multinational companies like Apple, Microsoft, Adobe and Lenovo.

Husic specifically mentioned Microsoft as one of the “culprits” in the issue, drawing attention to the company’s pricing on its Office 365 software as a service platform. “Microsoft’s flagship cloud productivity suite costs 76 percent more here than in the US,” he said. When Microsoft released Office 365 in Australia in late June this year, it didn’t respond to a request for comment on the pricing issue, and it has similarly not responded in the past week to Husic’s comments.

“Our prices vary by region and are determined based on a variety of market specific factors including, but not limited to exchange rate, local taxes, duties, local market conditions and retailer pricing decisions,” a Microsoft spokesperson told ZDNet.com.au in late 2009, upon the occasion of releasing Windows 7, with similar markups, in late 2009.

opinion/analysis
Microsoft’s a great company, with some great products. I’m personally a staunch Windows 7 desktop user, and I use a host of other Microsoft products — Office 2007 (although I’m thinking of migrating to Office 365), its Xbox 360 console (including Xbox Live) and more. And I’m a big fan of what the company has done recently with its Internet Explorer 9 browser and Windows Phone 7 platforms.

In the corporate sphere, there is no doubt Microsoft is as dominant a player as you get in Australia. The company’s whole stack — right from Windows Server, to SQL Server, Lync, Active Directory, Office, Exchange, Azure and so on — is used extensively and is only getting more popular.

That’s why it’s so hard to understand why the company keeps on gouging Australians when it comes to pricing. Every time the company releases a new product or service, Australians know they are going to pay anything between 30 percent and 90 percent more for the exact same offering. Frankly, when much of what Microsoft produces is software, and much of its support is provided from locations such as India, there are few excuses for this kind of markup.

It could be that this is just a case of a lack of competition. Unfortunately, in many of the areas in which Microsoft plays in, competition is wilting right now before its unified product stack and ubiquitous ecosystem. If there was more competition for Microsoft’s products, the price may have to come down. Of course, that presupposes that the competition didn’t slap the exact same markup on its Australian prices that Microsoft does ;)

Image credit: Microsoft

news Global software giant Adobe has responded to criticism in Federal Parliament of markups on its products in Australia by stating 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.

Last night in Parliament, Labor MP Ed Husic widened his earlier complaint about price markups on Apple products in Australia to include other vendors, specifically calling out companies like Adobe, Microsoft and Lenovo and raising the possibility that an enquiry could be held into the matter by the Australian Competition and Consumer Commission.

Despite the relative parity of the US and Australian currencies, Adobe currently charges significantly more for its products in Australia than it does in its home country of the US. For example, its Australian store currently lists the Master Collection version of its Creative Suite 5.5 software for AU$3908.25, while the same software in the US costs US$2,599 (AU$2,469) — a difference of more than $1,300 for the exact same software download.

Speaking in an interview this morning, senior director of APAC marketing at Adobe, Mark Phibbs, declined to comment on whether Adobe would welcome an investigation by the ACCC into software pricing, although he did note that Adobe would “obviously cooperate” with such an initiative.

However, the executive said the issue was one which wasn’t solely facing the IT industry. “I don’t think it’s an issue unique to the software industry — I think it’s an overall issue across the economy,” he said. “Look at cars in Australia — they’re far more expensive than elsewhere in the world … I don’t think you can single out one industry and do an investigation there.”

The executive added that there were a number of issues specifically related to the Australian market as a whole which impacted on pricing. For example, he noted that Australia didn’t have a large and dominant online retailer such as Amazon.com in the US, which competed strongly with existing retail channels and helped change thinking around price. If there was such an online giant in Australia, it would likely “change the market” locally, Phibbs said.

The lack of such a strong online player may have the potential to allow local retailers to charge prices which stronger competition would obviate in markets such as the US.

Phibbs pointed out that 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.

“We don’t want to undercut the entire channel in Australia,” the executive said, noting that if price parity in Adobe’s online store existed between Australia and the US, it would destroy the company’s local channel market. “The fact is, the channel is not as efficient in Australia as it is in the US,” he said.

Asked what potential there was for Adobe to avoid selling through the channel and provide a more equal price direct to consumers, Phibbs said there was “some scope” for that, but stated also that many consumers wanted more of a complete package than could be bought through Adobe’s own store, which only sells its own software.

As for the channel itself, Phibbs said Adobe couldn’t dictate to its channel partners what prices they charged, with margins on products sold through retailers varying around the world.

The issue of price markups has come to the fore over the past year especially, with the Australian dollar reaching parity with the US. Phibbs acknowledged this but said pricing was “a complex topic”, and Adobe wouldn’t want to change its prices multiple times during the lifecycle of a product — as it would get confusing. Prices could therefore lag currency fluctuations, he said.

In general, the company sets its prices based on a number of different factors, such as the cost of doing business and research into customers. “Our view is that we deliver mission-critical software — prices appropriately for the value that’s delivered,” he said.

opinion/analysis
Phibbs is right — the issue is a wider one for Australian industry — and I’ve heard complaints about other imported products, ranging from bicycles to clothes to a heap of other things. In addition, he’s right in that a more competitive retail market in Australia would solve some of these problems.

However, the argument he’s making is an attempt to divert attention from the real issue here. The fact remains that today, customers are paying up to $1,300 more for some Adobe products if they choose to buy them from Adobe in Australia, compared to if they buy them in the US. That difference may be smaller if they buy Adobe software from one of its channel partners. But it will still exist, and Adobe has a prime role in shaping it.

As a leader in the software industry and a significant online retailer in its own right, Adobe would generate a lot of goodwill from its customers by harmonising prices across different regions, and updating them maybe once every couple of months to take into account currency fluctuations. Apple appears to have started down this path with its own store.

It is possible, of course, to argue that Adobe doesn’t need that goodwill. With a virtual monopoly on the market for creative design software … right now, unless a regulator like the ACCC intervenes, Adobe can virtually do as it likes with regard to pricing. There’s simply not that much to stop it.

Image credit: Adobe

thread of the day Over on the Delimiter forum, I’ve created a thread where people can post the examples of the worst pricing markups they’ve seen on technology goods or services imported into Australia. My personal bugbears right now are Lenovo (specifically, the X1) and Adobe, but I’ve also heard stories about incredible markups on cameras and other consumer electronics. As a gamer, the gaming issue also gets my goat — particularly on Microsoft Xbox Live.

So let’s hear — what’s the worst you’ve paid — and where?

news Federal Labor MP Ed Husic has widened his complaint about price markups on Apple products in Australia to include other vendors such as Adobe, Microsoft and Lenovo, raising the possibility that an enquiry could be held into the matter by the Australian Competition and Consumer Commission.

The member for Chifley first raised the matter in Parliament in late March, noting he would write to Apple Australia managing director Tony King on the matter. The MP linked the debate to the issue of online retailing, noting that many consumers knew that the instant they got on the internet, they could easily see the price differentials that existed between products bought in Australia and those purchased overseas. However, in a follow-up speech last night (Hansard PDF), Husic noted Apple had not responded.

“Amazingly, at the time, I was quietly warned by IT journalists and consumers not to expect a response,” he said. “Chase them up I did; my office followed them up a number of times. They promised that by 16 July, Apple Australia’s managing director Tony King would personally respond to the concerns raised in March once he returned from leave.”

In the meantime, Husic noted, Apple had started reducing the prices it charged Australians for buying apps through its iTunes store, bringing the nation more into line with US pricing — a move he congratulated them for at the time.

“Yet only a week later, it became clear that Apple was not going to move on the issue,” the MP added. “Tech website Delimiter reported that Apple was set to hit consumers again. Its new MacBook Air was estimated to cost up to $300 more than US consumers would have to pay, and the new Apple Thunderbolt display would cost up to $270 more.”

“July 16 came and went. Apple refused to respond, and I am staggered by their behaviour; they’ve snubbed consumer, media and parliamentary interest in this matter.” Apple has repeatedly been invited by Delimiter to respond to Husic’s comments, and the broader issue of pricing, but has not done so.

Husic also noted he was concerned about the issue of what he described as “glaring price differentials” with respect to other “culprits”, naming Lenovo, which slugged Australians with a $560 markup on its ThinkPad X1 laptop when it was released locally in May, Microsoft, which heavily marked up its Office 365 product in Australia when it launched several months ago, and Adobe, which has regularly marked up its Creative Suite products substantially upon launch in Australia, describing some of the prices as “incredible”.

The three vendors have this morning been invited to comment on the matter of their Australian pricing, and on whether they would welcome an enquiry into the matter.

Video game retailers were also mentioned by Husic, with the MP stating that Australians paid “up to 60 percent more” for the same games than residents in the United States.

The MP also highlighted comments recently made by the Productivity Commission in its recent draft report into the retail sector. Like Husic, the Commission singled out Apple, as well as a number of other suppliers, for their higher Australian pricing, noting that arguments for marking up products for sale in Australia because of different market conditions were “not persuasive”, especially when it came to downloaded music, software and videos — where the distribution cost was negligible.

Husic last night said Australians should not be “fleeced for the sake of Silicon Valley’s bottom line”. “These companies would simply not do this to consumers in their home countries. Why do it in ours?” he asked. The MP said he had raised the matter within the Federal Government, and believed the Productivity Commission’s views on the matter were compelling.

“If IT companies are not prepared to be transparent about their pricing decisions, then perhaps it is time for our pricing watchdog, the ACCC, to take up the case for long-suffering consumers and carry out a formal inquiry into why these prices differ so wildly,” said Husic.

opinion/analysis
There’s no doubt that Husic’s comments here have a great deal of legitimacy. The term “Australian technology tax”, which has come into popular use over the past year or so, reflects a growing sentiment within the nation’s technology community that there is sparse justification for charging Australians more than our US cousins for the exact same technology goods.

The issue is particularly contentious, as Husic noted, when you consider prices around software, music and video content, which is usually downloaded from the exact same sources online but often slapped with a markup for Australians. It’s common practice for online outlets such as the iTunes store, Valve’s Steam gaming platform, Microsoft’s Xbox Live platform, Adobe’s web site and others to charge Australians more for the exact same content from the exact same server.

It’s possible, of course, to argue that Husic is just one MP who’s got a bee in his bonnet about this particular issue — and he’s a fairly new MP, having been elected last year during the 2010 Federal Election. However, the politician is, after all, part of Labor, who currently holds power, and he personally has a deep history within the Australian union movement which suggests he is not without influence within this side of politics.

Industry observers may remember Husic as the former national president of the Communications, Electrical and Plumbing Union, one of Telstra’s main unions. In this role Husic was no stranger to taking on the big technology companies.

In addition, there is no doubt that this issue will simply not go away. Over the past few years, although the trend of globalisation has continued to mean increasingly uniform delivery of products and services internationally, pricing has not followed suit outside the US, leading to a deep-held frustration about the issue in countries such as Australia.

With the possible exception of Labor’s Internet filter project, I would argue that this issue is one of the issues that Australia’s technology community is most angry about at the moment — and that anger will not dissipate until vendors start implementing more just pricing structures locally.

Among others, I’m tired of hearing stories from readers who have flown to the US, taken a few days’ vacation and picked up a few copies of needed Adobe software, then flown back and still come out ahead compared with what they would have spent if they had bought the same software in Australia. This should not be possible … and yet right now, it certainly is.

Image credit: Keith Syvinski, royalty free

opinion In November 2007, when then-Opposition Leader Kevin Rudd promised every Australian student between years 9 to 12 would receive a laptop if he took power, courtesy of a new billion-dollar Federal Government grant, the iPad was little more than a twinkle in Steve Job’s eagle eye.

Although the existence of the mythical Apple tablet had long been rumoured, debated and agonised over by millions of Cupertino-watchers located around the world, it would take several more years before Jobs would eventually take to the stage and reveal his “magical” tablet to the world.

Of course, with the benefit of hindsight, it should have been impossible to miss the signs that Apple was once again planning to revolutionise the consumer electronics market. The increasingly commoditisation of components used to create the iPad had already been made clear by the explosion in netbooks, which had seen manufacturers take existing pricey laptops and downsize them into a cheaper and more portable form factor for lighter use.

And the release of the iPhone some twelve months previously (although not in Australia) had already starkly demonstrated that mobile phones could be so much more than devices for placing calls. The iPhone, in fact, was never principally a telephone. It has always primarily been used as a mini data tablet, of a similar type to the tricorders so loved by Star Trek enthusiasts. And we’ve even had them before. HP’s appropriately named iPaq is a notable example, but many will remember Apple’s previous tablet, the Newton, which was loved by many but died a slow death in the late 1990′s. The iPhone was merely the new Newton, with a mobile phone chip attached.

When you take all of these factors into consideration, the birth of the iPad was inevitable.

However, in late 2007, it was, of course, impossible to know all this. Netbook fervour was in full swing following the release of the ASUS Eee PC, and everyone — just everyone — had to have a netbook for more relaxed days when they didn’t need to carry around a full-featured laptop and were away from their desk.

And Kevin Rudd’s Labor election team bought into the incredible levels of marketing hype in as big a way as it could.

For the first time, policy advisors reasoned, it would be possible to fully unleash the potential of technology in education through universal access to critical tools — at a price which goverments could afford. A meagre billion dollars — pocket change for a big-spending Labor Federal Government — would put this new class of laptops in the hands of every senior student in Australia.
What a glorious dream!

As an election policy, Labor’s Digital Education Revolution was a gift from the gods. Coupled with the National Broadband Network initiative, it allowed the party to appear forward-thinking, visionary. Terms like “investing in the future” were being thrown around with aplomb and you could almost feel a better, more connected future arriving on our doorstep.

However, as it turns out, the netbook revolution was a furphy, a false alarm; the consumer electronics equivalent of a boy frantically crying “wolf” and creating mass panic. The real revolution, when it came several years later with the iPad, crept up on us. Tablets, not netbooks, are now the order of the day for a second or third computing screen for Australians — and they may soon become the primary computer that many of us every day.

The problem with netbooks, as the Sydney Morning Herald chronicles in a landmark article by seasoned technology journalist David Braue (a regular Delimiter contributor) yesterday, is that they are just too damn slow.

“Like thousands of other year 10 students, Luca Vignando has had his NSW government-supplied netbook, provided under Labor’s Digital Education Revolution (DER) funding … Microsoft Word and OneNote work OK, but Vignando says bundled multimedia applications like Adobe Photoshop, Dreamweaver and video-editing tool Premier Elements run at a crawl. Students needing to do more than basic text editing often give up and seek out faster computers elsewhere.”

The difficulty with netbooks, as the entire IT industry is now aware, was precisely their chief selling point. By compromising on power and speed, the price can come down. But when you need that power and speed … you had better have a more powerful laptop on hand, or a desktop PC.

The Sydney Morning Herald article mentions the incredible fact that the NSW Department of Education and Training is installing the latest version 5 of Adobe’s weighty Creative Suite set of tools on its Lenovo machines. To any IT professional this will seem incredible. Those who’ve been around the tracks for a while know that every time Adobe releases a new version of CS, the software gets fatter, heavier, and will often require a new PC to run — just like new versions of Windows (well, except for Windows 7, which is a dream).

To think that you would even bother to try running CS5 on a netbook with a 1.66GHz Intel Atom CPU, a mere 2GB of RAM and a 10″ screen is nothing more than a bad joke. Even my 2010-era MacBook Pro — with an Intel Core 2 Duo processor and 4GB of RAM — has problems with Adobe’s latest suite. And this machine is a far cry from being a netbook.

The iPad paradigm, of course, changes all of this. Apple’s tablet never attempted to be a desktop PC. Steve Jobs and his crack team of stylists and engineers clothed in black skivvies created a much more limited device which changed the way we think about interacting with technology – rather than attempting to port the ageing desktop metaphor into a new form factor.

What really killed the netbook, however, was the fact that that form factor is now extending itself from its limited basis into almost every area of use which PCs have called home for decades. As we learn more about tablet computing, we are using it more. And education is right at the forefront of that revolution.

Early trials of the iPad in educational institutions such as Melbourne residential college Trinity over the past year in Australia have starkly demonstrated the value of tablets in learning. A natural fit — as is taking place at the University of Adelaide — is to port textbooks to the device — but content creation tools such as Photoshop are also available, and the ability to discover, share and annotate information, so critical in the educational context, is also incredible.

The flock of Android tablets is a little behind the eight-ball at the moment, but I’m sure Mountain View’s brood will eventually catch up.

Now you can’t really blame the Rudd camp for picking the wrong horse, in a race where the iPad hadn’t even yet entered the paddock. And you have to give Labor a great deal of credit for being willing to invest so heavily in technology for students in the first place. We’re sure the implementation of netbooks for Australian senior students has had a hugely positive effect in many ways on their education.

However, let’s not kid ourselves that this was the right decision. Had the politicians waited several years and spent its money on tablets instead, Australia’s education system would have been the envy of the entire world. The dream of universal access to the total sum of human knowledge through one handheld device; the ability to communicate that knowledge to others in a natural way, and the ability to interact with it and learn its power — that is what the iPad offers students and teachers.

What netbooks offer them, primarily, is a cage; a solid operating platform bastardised into a form factor which is somewhere between a tablet and a full-fledged desktop PC. Netbooks are not intuitive, they’re not powerful enough for the uses which they have been set, and they’re ultimately doomed. If you really want a netbook, add a Bluetooth keyboard to an iPad, as I did over the weekend. You probably will find you start using your laptop less and less.

Of course, the caveat to all of this is pretty obvious.

There is simply no way that we can anticipate whether we will be looking back at articles such as this one in 2-3 years and noting how naive they were, for believing that iPads and other tablets would represent much of the future of computing. If Steve Jobs’ team could destroy the netbook with one single product launch in only a year of sales, there is no reason to suggest that something even bigger isn’t just around the corner. That has always been the quandary for technologists — at which stage in an unfolding revolution do you jump on the hype train?

But we’re betting the iPad will stay around longer than most people would think.

Image credit: cjc0327, Creative Commons

Australia’s Productivity Commission has sharply criticised international manufacturers for marking up their prices for the Australian market in the draft of its landmark report into the retail sector, particularly singling out iconic technology giant Apple in its examination of how so-called “regional price discrimination” affects local consumers.

In its report released last week, the Commission said it was aware of the “longstanding practice” by which some international product suppliers set regional prices which effectively treated consumers in one region as “willing, or able, to tolerate significantly higher prices than those in other countries”. The comments were first reported by ZDNet.com.au.

Some suppliers, the Commisison said, had attempted to defend such price hikes by attributing them to the cost of supplying “a remote and relatively small market like Australia”.

However, it added, “these arguments in most cases are not persuasive, especially in the case of downloaded music, software and videos, for example, where the costs of delivery to the customer are practically zero and uniform around the world”.

The Commission particularly singled out Apple in its analysis, noting that price differences on the cost of applications, video and music downloaded from the company’s iTunes music store was “a common example raised as reflecting international price discrimination against Australian consumers”.

“For Apple, strong brand loyalty from consumers which drives higher demand for their products and a lack of competitive rivals in Australia has helped sustain the price discrimination,” the Commission noted, recognising that consumers were finding workarounds such as other music and video streaming sites, or using fake American billing addresses to buy content from Apple’s US store.

The news comes as debate over Apple’s prices has recently been raised in the Federal Parliament by Labor MP Ed Husic, who criticised Cupertino and other technology companies in late March for hiking prices in Australia. At the time, Husic noted he would write to the managing director of Apple Australia seeking answers on the matter, although it is unclear as to whether Apple has yet responded.

Since that time, however, Apple has taken several steps to bring more uniform pricing to Australians; with some App Store prices becoming very similar across jurisdictions after an update in July.

In addition, although prices on Apple’s new Mac line-up released in late July still displayed some price differences between the US and Australia, a number of commentators flagged the markup as being less proportionally than in the past.

Apple wasn’t the only technology vendor to be singled out in the Productivity Commission’s report.

The agency gave a number of examples, for instance, where products manufactured by companies like Canon, Sony (including games for the PlayStation console) and more were seen to cost more when bought in Australia. Typically the products could be bought for less through online retailers than through shopfront retailers, although the cost was also usually higher when bought from Australian online retailers than when bought from international players.

In one example, the L.A. Noire video game cost as little as AU$48.98 when purchased from one international retailer, but as much as $104.99 in Australia — despite the fact that the game was actually developed in Australia.

“It is widely and frustratingly understood by adult gamers in Australia; we are grossly discriminated against when it comes to retail prices on video games (as well as other retail products),” wrote one video gamer in the Productivity Commission’s report.

“My personal level of frustration grew even further as the Australian dollar reached parity with the United States dollar and prices here only climbed. Still we are being told to pay more than double in retail stores.”

Retail giant Harvey Norman also came under attack, with the Productivity Commission quoting an article which stated the same LG refrigerator had cost AU$2,500 at a Harvey Norman store — but under US$1,500 through Amazon to consumers in the US.

Compared with some other technology suppliers, Apple’s markups are not as steep as they could be, however. For example, PC manufacturer Lenovo was forced to mount a spirited defence of its Australian pricing in mid May this year, despite launching its flagship new ThinkPad X1 laptop in Sydney for $560 more than the same hardware will cost in the US.

Microsoft also regularly marks up prices for the Australian market, but perhaps the worst known culprit is Adobe.

In Australia, Adobe launched its Creative Suite 5 Master Collection in April 2010 for AU$4,344 for the full edition, and AU$1,503 for the upgrade edition. In the US, the same software cost US$2,599 (at that time, AU$2,816.45) for the full edition — more than AU$1,500 less. The upgrade edition cost US$899 (at that time, AU$974.22) — more than AU$500 less.

Shades of grey
However, the picture may not be as black and white as it appeared.

The Productivity Commission’s report also noted that Australian retailers suffered higher costs than some of their international peers — such as higher wages, higher rent and more. Some of the price rises may also be taking place at the distributor layer rather than the retailer layer — with retailers being forced in some cases to pass the costs on to the consumer.

In April last year, after it released its CS5 Suite, Adobe raised the cost of doing business in Australia as a key factor in how it set its prices.

In late April this year, after the video game Portal suffered price hikes for the Australian market, Ron Curry, the chief executive of the Interactive Games & Entertainment Association, which represents a number of large and small games manufacturers locally, raised other issues to help explain local prices, such as the cost of shipping boxed copies of video games to remote retail outlets across Australia.

With large amounts of mandatory annual leave allocations, public holidays (such as the Easter long weekend just passed), superannuation, high levels of taxation, occupational health and safety insurance and more — local regulations also ensured it was “very expensive” to run a company locally, according to Curry.

Lastly, Curry pointed out that much of the time, wholesale prices were set in the US and the UK and then imposed on Australia. If the value of the Australian dollar appreciated, Curry said, international distributors may up their price as well, to maintain their own margin on sales — with Australian retailers being caught in the middle.

“Some Australian retailer submissions highlighted the wholesaler or distributor prices which put pressure on their cost of goods, and as a result, their sales prices to consumers,” the Productivity Commission noted in its report.

The Commission is taking written submissions to help shape its final retail report until the 2nd of September. The draft report is available online in full.

Image credit: 惟①刻¾, Creative Commons