Committee inquiry into IT pricing: a rather muddled piece of work.

When the House of Representatives Infrastructure and Communications Committee released a report last week on IT pricing in Australia, Committee Chair Labor MP Nick Champion was quoted as saying, “The committee found that big IT companies and copyright holders charge Australians, on average, an extra 50 per cent, a practice consumers call the ‘Australia Tax’.” He went on to announce a range of recommendations.

I serve on this committee – but I have a somewhat different perspective from the Labor majority. I want to explain why, highlighting three points. First, I want to explain the political background to the inquiry – and to the Committee’s decision making. Second, I want to point out that the Committee’s fact-finding process was rather less thorough than Mr Champion’s statement might imply.  Third, I have some real concerns with some of the Committee’s recommendations.

The political background to this inquiry is in a campaign run by then Labor backbencher Ed Husic, who took up high software prices as a cause which he wanted to pursue. He got a bit of media on the issue and persuaded Broadband Minister Conroy that this parliamentary committee (on which he served at the time) should be authorised to have an inquiry into the issue. 

Recently Husic left the committee (after being appointed a Parliamentary Secretary.) The Committee’s report was finalised by a reasonably new Committee chair (Nick Champion) and Committee staff with little expertise in the relevant policy – resulting in a muddled and poorly argued report.

The rules of such Committees are that the party in government appoints the chair, and has a majority.  It is possible to write a minority report – but in this case the chair offered me and my Coalition colleagues a period of only two days in which to do so, once the Committee finalised its report. For my part, the fact that we did not do so reflects the unreasonable time frame – not an endorsement of the Committee’s views.

As for the Committee’s fact-finding process, Mr Champion states that the Committee found that big IT companies and copyright holders charge Australians, on average, an extra 50 per cent. Taken at face value, this would appear to be a comparison of Australian prices to those in the rest of the world; in fact I think he was referring to prices in the US only.

Whether this is actually true or not, the Committee is in no position to assess.  It did not commission or conduct any methodologically rigorous survey of IT prices in Australia - let alone in the US or the rest of the world.

The statement is presumably based on a submission to the Committee by the respected consumer organisation CHOICE, which summarised its work as follows:

CHOICE has examined the prices of music downloads (iTunes), PC games, software, Wii console games and computer hardware in Australia and the US. This research has identified price differences of approximately 50%. All products were affected by price differences to various degrees.

CHOICE’s submission described a thorough piece of work which surveyed the Australian and US prices of selected software and hardware products. That being said, in my view some questions could legitimately be asked about CHOICE’s methodology,  such as whether the items which CHOICE tested were a representative sample, and whether the approach of taking a simple average of the price differences across the various items is a valid way of reaching a general conclusion.

Mr Champion has adopted as a statement of fact, generally true of IT pricing, the findings of one particular survey. In my view, this does not give the Committee sufficient basis for claiming that it found a general 50 per cent price differential between Australian and overseas IT prices.

Thirdly, let me indicate where I stand on the Committee’s recommendations. Like every other consumer, I dislike being charged more for the same product that others can buy more cheaply – and I agree that a more competitive market is the best way to prevent this.

The prices charged in other countries have become much more visible to Australians thanks to the internet – and that is a very good thing. Indeed the price comparisons across countries done by CHOICE would have been almost impossible without the internet.  Certainly I think consumers are perfectly entitled to do everything they lawfully can to get a product at the cheapest price possible. 

However, some of the Committee’s thinking in my view is very muddled, and I disagree with it.  In particular, the Committee recommended that government should advise Australian consumers on how they could circumvent geoblocking mechanisms. This is a very odd idea which amounts to recommending that the government should advise people on how to break the law.

Geoblocking mechanisms are a well-established approach used by copyright owners to protect their property.  For example, if the rights to a song or movie or other piece of content are licensed by the copyright owner for use in one jurisdiction but not another, then geoblocking is used so that the content cannot be accessed online in the jurisdiction where the copyright owner has not licensed its use.  To ‘circumvent an ‘access control technological protection measure’ (which includes geoblocking mechanisms) is a breach of the Copyright Act. 

In summary, I do not think this report is a very good one. It does a bit of useful work in highlighting to consumers some of the price differences between prices in Australia and the US – although the notion that there is a standard 50 per cent ‘tax’ on all products and services is an overstatement and simplification of the position. Some of its policy recommendations however in my view do not make very good sense.