Inquiry into IT pricing could be a win for consumers, say analysts

The Federal Government is going ahead with its inquiry into the pricing of information technology products, with analysts saying the investigation will be a win for consumers as Canberra starts putting pressure on companies to distribute software at a fairer price.

The head of the inquiry has also warned that small businesses may be losing some of their “international competitiveness” by being forced to pay higher prices for tech services.

While Communications Minister Stephen Conroy and federal MP Ed Husic, the chief proponent of the inquiry, confirmed an inquiry would go ahead last month, the government yesterday released terms of reference for the investigation and called for public submissions.

Telsyte senior research manager Sam Yip says consumers will be the big winners from any inquiry that goes ahead.

“The winner at the end of all this will be the consumer if they see lower prices,” he told SmartCompany this morning.

“Once upon a time when these companies were at their infancy, they were able to charge higher prices. But it’s very opportunistic pricing…and it should change.”

The House Standing Committee on Infrastructure and Communications released the terms of reference for the inquiry yesterday, saying it will aim to report on whether there is a difference in prices between IT hardware and software products between retail outlets here and in other countries.

This includes computer games, eBooks, music and videos.

The inquiry will then establish what those differences are, determine why they exist, and then see what impact those differences are having on the market. And, if possible, see what actions could be taken to address the problem.

The committee put out a call for public submissions, which will be accepted until July 6.

Nick Champion, chair of the committee, said in a press release there had been a growing interest in these price differences. He said it even drew the attention of the Productivity Commission in its report on the retail sector.

“It should also be recognised that through the course of last year’s Productivity Commission investigation into the retail sector, very few IT vendors took the opportunity to provide some guidance or explanation about their approach to pricing within the Australian market.”

Yip says many tech companies have taken an “opportunistic” view, given the lowered Australian dollar and the ability to use Australia’s remote location as an excuse for higher prices. But in the case of digitally-distributed content, he says, these arguments lose their legitimacy.

“I think it’s opportunistic, and Australians have always been paying the higher price for a while now. They’ve kept riding the wave.”

“It’s very interesting the government has taken this step…these software companies have been trying to ride out this wave for as long as they can.”

Price differences in the Australian market have grown more noticeable as ecommerce has become more popular. Consumers are now paying vastly different prices for hardware and software, in many cases hundreds of dollars.

While analysts say this may be justifiable in some cases for hardware, due to higher labour costs, many say these price differentials cannot be accounted for when it comes to digitally distributed content.

The Productivity Commission even said in its report the reasons given for price differences when it comes to digitally distributed software are “not persuasive”.

Australian users on iTunes pay more for songs, movies and apps than their American counterparts, while businesses wanting to pay for digitally distributed copies of Windows and other Microsoft products pay hundreds more.