Thursday, January 27, 2005


Outlaw products

It seems companies are keen on globalization when it allows them to sell to many markets, but disdainful of global markets when it undercuts tidy profits gained in protected markets. The same companies that lobbied for zero tariffs on information technology are now throwing up non-tariff barriers to prevent consumers from shopping around for the best deal.

One common tactic is to suddenly stop marking dual voltage products. Apple is guilty here. Introducing regional coding restrictions is the tactic Hollywood use on DVDs and Nintendo now uses on game cartridges. Now HP is introducing "regional coding" on it's ink cartridges to prevent one from using a Japanese "region" ink cartridge in European "region" printer.

The Wall Street Journal (17 January 2005), which wrote on the topic, noted: "ironically, tweaking products for different regions can increase manufacturers costs. " It is cheaper to have one design that works everywhere, even where it provides more flexibility, like dual voltage appliances. But do manufacturers care about lower costs? They only care how to increase their margins.

As someone who has moved several continents, and who travels frequently, I find these practices contemptible, the equivalent of censorship.

I had a personal experience of such restraint of trade today, when I picked up a new Uniden telephone for the den. The phone is as basic as is sold these days, not even cordless. But on the packaging was an ominous warning telling me I must only use the phone in the country I bought it. I know from experience that what is know as "plain old telephone service" (POTS) is very standard, and I was curious what was so special about this phone that prevented it from ever traveling to, say, Australia.

One the phone, I found a green sticker, noting the phone has a "Telepermit". I understand permits to drive a car, or use a hunting rifle, and for other dangerous activities, but I wasn't aware one needed a permit to use a phone. I decided to check out what was going on. It turns out that the Telepermit scheme is designed, administered, perhaps enforced by de facto telco monopoly in New Zealand, which also is in the business of selling phones. Not to worry, their site assures me it is in "everyone's best interest" to support the Telepermit scheme, though why is not clear. The official reason is to "maintain" and "improve" the standards of service.

Curiously, one can't get equipment one imports oneself, for one's own personal use, certified -- the Scheme makes it too expensive. Consumers are advised that the cheapest alternative to the buy equipment in New Zealand that has been already designated as acceptable by the Telepermit scheme. Don't be fooled thinking that just because an overseas model looks identical, has an identical model number, acts identical, it would be identical to a Telepermited one. It isn't -- it would be cheaper.

The scheme also warns that it will not convert overseas mobile handsets by loading local software --- in the interest of preventing fraud. Desperate customers, returning from overseas, or perhaps immigrating to New Zealand, are told they must buy a new mobile, they can't use their old one. There is a security code that the mobile manufacturer supplies the network operator, and only the original network operator can change that code. The network operators rationalize this practice because they say they have subsidized the cost of the phone, can don't want the customer jumping to another network. While is true that networks do subsidize some phones, it is equally true that many mobiles bought today are not subsidized. When one buys a phone, one owns it outright. One isn't leasing it, or buying a license to use it. If phone networks wanted to keep customers on their network, they could lease phones -- but then they'd need to service them too, something they don't want to bother with. So instead, consumers are left with products they are responsible for paying for and maintaining, but that they don't really control. It's like being infected with a computer virus.

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