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4.1 Anti-competitive behaviour and the operation of overseas companies
outside of Australian tax laws by large media companies and organisations
that effectively "pirate" Australian online consumers and the potential
revenues from the new economy, taking them offshore, are the greatest
threats to Australia's new media and information economy.
4.2 Using the Australian book selling industry (for which our company
builds online ecommerce sites) as an example, it is clear that the local
Australian book selling industry is potentially heading for collapse.
This collapse is underway in the US at the present time, initially with
the closure of many smaller stores, as large heavily financed companies
such as Amazon online bookstore take their market. In Australia, companies
such as Amazon "cherry pick" the best of the Australian online market
and take trade away from local Australian businesses while escaping our
taxation system entirely. With a potential GST on the way this becomes
a significant problem which must be overcome by addressing this issue
through legislation.
4.3 The same offshore "pirating" occurs for CDs, newspapers and magazines
and other related goods and services offered globally online, and the
same basically applies to all companies offering goods or services that
can be offered online from another country.
4.4 The offshore pirating of Australian consumers online by large US companies
operating free of Australian legislation and taxation regime is particularly
damaging to the prospects of small to medium media players. This "pirating"
causes damage to Australian industry and its international competitiveness
by:
a) discouraging proprietors away from upgrading their IT systems. For
example the main bookstore database used in Australia, Bookscan, is an
obsolete MS DOS system made in the early 80's that would best be in a
museum, not operating as a fundamental part of Australia's IT industry;
b) discouraging proprietors from investing the significant amounts required
to set up and operate a full ecommerce site;
c) widening the competitive gap between smaller and large media companies
in favour of those with the financial strength to compete with large overseas
companies; and
d) the loss of the valuable online "brand" establishment to large overseas
companies who, using the reticence of the Australian industry to go online,
can be first to market in the race for the new consumer.
4.5 We recommend that the Commission examine ways in which government
policy and government legislation can reduce the anti-competitive threat
posed to Australian industry through the loss of customers and revenue
to overseas companies outside of the Australian taxation system.
4.6 Of lesser but nonetheless significant importance is local anti-competitive
behaviour by large media companies and organisations, including Telstra,
the ABC, the CMC's and universities, which is compromising the viability
of smaller media players vital to the success of the Australian media
and information economy.
4.7 Larger companies, able to skirt the provisions of the TPA because
of an outmoded and nominal separation of industry sectors and non-specific
legislation, are unconscionably and non- competitively using their market
and financial strength to dominate the broadcasting, media and communications
industries. This is weakening and rendering unprofitable many smaller
players who often were previously industry leaders, not simply because
of their size, but because of their innovation in production. This weakening
causes many companies to fail, as many have already done, for the wrong
reasons.
4.8 For example, the use of loss leader strategies by:
4.8.1 Telstra which is able to offer media services such as hosting, interconnect
and related services at prices far below that of smaller companies. Our
company has lost several contracts to Telstra who offered some clients
free hosting and sponsorship as part of the deal;
4.8.2 Spike, then Australia's largest web company, then in collusion with
the ISP Microplex, used a loss leader strategy to dominate the cultural
sector. Our company was in negotiation with both the Art Gallery of NSW
and the Museum of Contemporary Art in Sydney, two of Australia's most
significant website clients, to provide culturally-oriented websites when
Spike offered to do the site for free and took the contract; and
4.8.3 universities and the CMC's are the next most anti-competitive institutions,
using government funding they receive to undercut proper market pricing
mechanisms for the supply of goods and services. They have been forced
into a cost-recovery situation for each department and consequently departments
of computing, design and communications, using university equipment, premises
and cheap student (work experience) labour, can offer prices below the
true market price for goods and services.
4.9 We therefore recommend that provisions of the TPA be tightened to
prevent anti-competitive behaviour by large Australian media and communications
companies and organisations that weakens smaller companies and impedes
their ability to be genuinely competitive in the Australian and international
marketplaces.
4.10 We would also argue that many of the economic and cultural issues
are in fact closely related and dependent upon one another, but their
close relationship has been disguised and distorted by existing players
opposed to a genuinely more open and flexible regulatory regime. Such
a regime would bring a genuine competitive environment to Australia's
media and information industries.
4.11 As is reflected in the Objectives of the BSA and the Issues Paper
for this Inquiry, the intent is to take into account the need to balance
"the social, cultural and economic dimensions of the public interest"
to achieve the best result of this Inquiry for Australians. In order that
this balance be maintained we recommend that the Inquiry recognise the
close relations between the public interest and the economic and cultural
regulation of the industry as a whole.
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