TECHNOLOGY SPECTATOR: IT price inquiry ultimatum

A strong Australian dollar should lower the price of overseas purchases. So why does IT equipment remain so highly priced?

Technology Spectator

There's been a lot of talk about the way the rising Aussie dollar is ratcheting up the pressure on currency sensitive industries, like manufacturing. This sector in particular has been forced to grit its teeth while bearing the brunt of a double barrelled whammy: drying export sales combined with tough competition from cheaper imported product.

In Chifley – the electorate I represent in Western Sydney – manufacturing keeps nearly 10,000 people in jobs. So the upward movement in our dollar isn't always greeted cheerfully. 

Having said that, you'd expect a stronger dollar would deliver lower prices if you're buying goods from overseas. But does it?

After the pain inflicted on some sectors by a soaring currency is there a brighter, lighter side to the dollar? Well, if you're a consumer of IT products, it seems not.

For local consumers and businesses, solutions to Sudoku puzzles materialise quicker than the answer to a straight-forward question: why does the same IT gear cost way more in Australia than overseas? In some cases it costs between 60 to 80 per cent more.   

The question takes on an added edge when you throw into the mix the issue of downloads – where low handling costs, no shipping, low or negligible taxes and duties should combine to lighten the cost.

Apparently not.

I've been raising this matter in federal parliament since March last year. Since then, I’ve noticed two things.

First, whenever I’ve raised the matter consumers and businesses have reacted, telling me this was an issue that grated with them. Small to medium businesses also stunned me with the prices they were being forced to pay relative to overseas.

Second, the more I spoke, the less I heard back – from major IT vendors, that is. Jaded consumers and IT journalists told me to get used to the silent treatment. "This is just the way they do business,” was a regular refrain. 

An inexplicable silence

For a sector whose lifeblood is the world wide web – one of humanity's more liberating technologies, that's opened minds and doors across the globe – that seems to be an inexplicable contradiction. 

They might be dealing with new technology, but it seems like the "wow" factor tied to new IT products is camouflaging an "old world" business behaviour. That behaviour is what economists call "price discrimination" - basically, charging different prices for the same product in different markets because that's what consumers will bear.                                                                                                  

Worst of all, sections of the IT sector haven’t been able to truly account for the inflated costs. They’ve listed a range of usual suspects – primarily the ‘higher cost’ of doing business in Australia – but last year the Productivity Commission called those claims out for what they are: not plausible.

The apparently higher prices, combined with an inability to get answers for the reasons behind them, thankfully led to Communications Minister Stephen Conroy setting up the terms of reference for a parliamentary inquiry into the issue.  

Challenging perceptions

The inquiry falls within the responsibility of the House of Representatives Standing Committee on Infrastructure and Communications, chaired by Nick Champion MP (SA, ALP).  What’s been great about the Committee is that it has challenged the widespread public perception that federal parliament is only a place for partisan division – on this occasion, all parties within this Committee have been interested in cooperatively pursuing the policy issues at the heart of the inquiry.

What’s also been pleasing has been the reaction of the public to the inquiry: enthusiastic, actively working to ensure a range of viewpoints are put forward – with more submissions still coming in.

At its basic level the inquiry is providing consumers with a powerful platform to help send a message to major IT vendors that they’re not prepared to tolerate price differences that can’t be justified. But the inquiry is also helping cast light on some other policy avenues that are worth exploring, examining areas within competition law and international trade agreements.

The first public hearings of the inquiry were held last week and it was a welcome sign to see a variety of organisations respect the process of answering the public’s questions by attending and putting forward important contributions.

I’d say two "totemic” submissions are helping bookend the parameters of this inquiry: one from the Australian Information Industry Association and the other by consumer advocates, CHOICE.

While the industry’s viewpoints and concerns are neatly captured in the AIIA’s submission, CHOICE has ably responded on behalf of consumers, drawing on prices they have gathered for over 200 product examples. The CHOICE submission also gives some contrasting positions in response to long held industry claims about what drives the sector’s pricing approaches.

Hitting a brick wall

However, I take the view the inquiry process is being hampered to some degree by some of the AIIA’s major members: Adobe, Apple and Microsoft, just to name a few. 

While at the inquiry the AIIA worked hard to represent its member’s viewpoints. But, whenever we sought more detailed information at the hearing we hit a brickwall – that required us to direct specific questions to companies not prepared to front the Committee.

This is a serious issue that does need to be pursued.  It’s not good enough for these major IT firms to extract the best they can from the Australian market, while ignoring plausible, legitimate consumer questions.

There’s a lot at stake here. A Sensis e-Business Report released in the last 48 hours explains why.

According to Sensis, says small and medium enterprises are likely to invest significantly on information technology, at a rate greater than the last year.  

SMEs will focus more on software but overall will probably spend an average of $11,300 for hardware and software this year. This represents an $1,800 lift relative to the year before. 

But this is where your view on IT price discrimination should sharpen: Sensis reckons small businesses will invest an average of $7,800 on new IT gear – but medium businesses will probably fork out $81,800.

If the evidence before the Committee is borne out and it becomes clear we are paying between 60 to 80 per cent more for hardware and software in this country – and taking into account the Sensis figures for IT spend by SMEs – then could potentially be artificially inflating prices within our economy. Ultimately, someone bears this cost. Doesn’t take much to guess who.

I’ve got a simple request for those who want to trot out the well worn line that the cause of IT price differences has something to do with the cost of business here.

That simple request is this: are you prepared to consider the notion that the pricing approach of some of the big players in the IT sector might just be adding to those costs?

Ed Husic is that federal member for Chifley in NSW.

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