Geo-Blocking: Are You Paying Too Much For Software?

What’s the last thing you bought online? It may have been a book, a computer, a piece of software or even a song track. The point is, you’ve shopped online before. Have you ever noticed that Australians seem to always be paying more than the rest of the world? Even digital goods such as tracks on iTunes are invariably around one and a half times  the price on the Australian store as they are on the US store.

Last year, CHOICE submitted an inquiry on digital product pricing that is still raging. It found that when compared to US consumers, Australian consumers were paying:

• 34% more for software
• 52% more for iTunes music
• 88% more for Wii games
• 41% more for computer hardware.

A number of IT corporations– most notably Apple, Microsoft and Adobe– where forced to appear before a federal parliamentary inquiry after months of investigation spent identifying the reasons behind these inflated prices. This level of public scrutiny even saw Adobe lower the prices of its creative cloud suite of products by roughly 20%. This was seen as a small victory for consumers, but there is some scepticism about it being a short-term tactic to appease the inquiry.

Well, a report published this week saw the House Committee on Infrastructure and Communications suggesting the government should educate consumers on how to bypass “geo-blocking”– a technology that allows overseas based companies to prevent certain countries from accessing content on their websites.

Geo-blocking uses your IP address to figure out where in the world you are, which lets web masters decide what you will see, if anything. This technology is actually fairly easy to bypass by using a Virtual Private Network (VPN) or a Proxy, but this poses an ethical dilemma of sorts. Business have a right to choose what countries they operate in, and to set prices at their own discretion.

Higher prices being imposed on certain countries could stem from a number of factors, most commonly overheads, taxes and tariffs– it is however important to remember that cost is not the only determinant of price. For services like iTunes, prices will often be determined by what the market is willing to bear.

The recommendations made by the IT Pricing inquiry’s chair, Nick Champion, included:

1. Clarifying the extent to which consumers may legally “circumvent technological protection measures”
2. Providing information on the tools and techniques through which consumers can bypass these protection measures
3. As a last resort, actually preventing companies from supplying goods and services should they resort to geo-blocking

The repercussions of point #3 could go as far as preventing large multinational companies from imposing higher prices in Australia than overseas. This could have some wide ranging implications on the highly competitive information technology industry.

We’ve covered some of the ways geo-blocking can be circumvented. One thing to consider is the effects that these tactics can have on product and service warranties, and whether they are in breach of terms and conditions set out by the vendor– it is often set out in clauses that breaches of T&C’s can result in the immediate termination of accounts, which could result in expensive data loss. There are other ways to more effectively maximise the ROI of software investments, such as using virtualisation to host expensive software licenses.

What do you think about information technology pricing? Are companies justified in adhering to the status quo when it comes to pricing and distribution?