The case against Geo-blocking

Posted by on Apr 3, 2014 in News | No Comments

When it comes to the price and choice of goods and services it’s fairly well established that Australia gets the short end of the stick. The advent of digital distribution should have diminished this imbalance by reducing costs and increasing the number of players consumers have access to. Unfortunately companies have used a technique known as Geo-blocking to perpetuate the same conditions that have always been present.

Geo-blocking is the practice of altering (price or otherwise) access to content based on the users Internet Protocol address. In essence, this practice reduces competition and the range of choice to the consumer. Competition produces better outcomes for both the consumer and the economy. This is particularly true when it is apparent that many of the industries that would be most affected are those that currently face little competition due to high barriers to entry. On this basis alone I believe policy settings should discourage Geo-blocking, unfortunately no clear position exists.

The popularity of the content streaming service Netflix provides a quick, easy and recent example of how access through digital distribution can benefit domestic consumers. A recent article in The Australian speculates that Netflix has between 50,000 and 200,000 Australian subscribers[1]. While the initial response to Netflix entering the market was the usual protectionist policy demands, these have, for the most part, fallen off. The most recent response has been for business to adapt and create new products to compete. Foxtel, for example, is launching a new service called “Presto”. Presto is a standalone service from its Pay-Tv arm designed to capture market share from Netflix and a perfect example of how competition provides better outcomes for the consumer.

Abolishing Geo-blocking will improve the quality and choice of the goods and services offered to Australians. Despite this, the direction policy will move in regards to Geo-blocking is at present unknown. Two recent publications demonstrate the opposing directions regarding this issue. The first, a recent report by The House of Representatives Standing Committee on Infrastructure and Communications on IT pricing in Australia produced a series of recommendations aimed at reducing the influence of Geo-blocking. The second, a leaked document from the (Draft) Trans Pacific Partnership free trade agreement show that the Australian government is pursuing or supportive of Geo-blocking.

If Geo-blocking becomes a more permanent policy position it will represent a lost opportunity to introduce competition in many industries that need it. In essence, it is a lost opportunity to establish better economic and consumer outcomes.

 


[1] It should be noted that Netflix is technically Geo-blocked, despite this, it is relatively easy to circumvent and they do accept Australian credit cards.