Downloadable and online prices reflect Australian costs

Price differentials between ICT product purchased in Australia and similar product bought overseas reflect, among other factors, the different operating environments of countries and also the more robust consumer protection given to consumers in Australia.

Suzanne Campbell, Chief Executive of the Australian Information Industry Association, the peak national body representing suppliers and providers of a wide range of information, technology and communications (ICT) products and services, said it was not useful to try to directly compare prices in one country with those in another.

"Costs associated with product and service sales in Australia include GST, customs duty and regulatory requirements such as consumer guarantees which impose strict warranty requirements on suppliers and which add to business costs," Ms Campbell said.

"Buyers in Australia have a much higher level of protection than consumers in many other markets and this protection has associated costs."

Ms Campbell said price comparisons across most categories of consumer goods clearly showed price disparities were not technology-industry-specific.

"To give an indication of the range of price variation globally, the latest Big Mac Index compiled by the Economist magazine shows a difference of 426% between the lowest price of $1.89 in India versus $8.06 in Switzerland," she said.

"Spot comparisons are not useful as prices differ from one country to another and across channels for many reasons. "

Ms Campbell said there were a range of vendor for downloadable goods costs that often were not initially obvious to consumers.

"Goods are not priced to reflect only the cost of producing and distributing them. Goods which are downloaded still have research and development, product development, advertising, marketing, and support costs," Ms Campbell said.

"The online store is not an automated process without any staff. Staff are still required to build, manage, and maintain the backend systems - so local labour costs are relevant.

"Often these people are more highly skilled and are therefore paid more than retail staff in bricks and mortar stores.

"There are costs involved in advertising and marketing services locally. Regardless of the distribution method of the product – the costs of providing support services remain and need to be accounted for.

"An additional cost associated with downloadable goods specially games relates to content developed by third parties with their own rights, licensing, wholesale and distribution models."

Ms Campbell went on to say that the ICT industry was not homogenous and that IT hardware, software and professional services business models, cost models and pricing mode varied significantly across markets and geographical boundaries.

"Costs models reflect the specifics of each business model but in any event the cost of a good is only a small fraction of the investment the company has made in developing a product or service," Ms Campbell said.

"The price also reflects the investment by the company in developing its underlying intellectual property.

"In addition, the channel through which the product is sold affects its price.

"AIIA members report they sell up to 100% of their goods via channels. This might include volume licensing to third parties, through retailers like Harvey Norman as fully packaged product, through bundling by original equipment manufacturer or through online services.

"The variety of channels used introduces significant product differentiation and pricing tension between the different channels and also direct sales (where they occur) in both setting the recommended retail prices and discounting from the recommended retail prices."

Ms Campbell said taking into account all these factors, prices for some IT products inAustralia may be incrementally more expensive than some overseas markets, it consumers and regulators need to understand and appreciate Australia's higher operating cost environment.

"Notwithstanding these added cost pressure, there is a realisation that some issues need to be addressed," Ms Campbell said.

"As the Australian market now faces a truly globalised trading environment it will need to adjust.