In my last post, I outlined how Australian customers who opted to legally consume a range of digital content were being penalized due to the existence of an ‘Australia Tax.’ However, in addition to paying more than the majority of consumers in foreign, developed countries, Australian consumers are forced to accept a significantly limited product range of both digital products and services.

If you were to ask an average person on the street what ‘geo-blocking’ referred to, I’d wager that the majority of people over the age of 25 would say that it was somehow related to region coding on DVDs.

Region coding is a technological protection measure which prevents a disc from being easily copied or played in a place other than the market in which the disc was sold. In this way, Hollywood is able to work with local retailers to segment global markets, releasing movies to one market at a time, maximizing the effect of promotional campaigns.

Geo-blocking is the extension of this concept online. Website administrators, such as those who manage video-streaming sites such as BBC’s iPlayer, Netflix and Hulu use geo-blocking to limit their audiences to the UK and USA respectively. Geo-blocking extends beyond merely online video-streaming sites, as seen in the example of the region-specific Apple iTunes store, and even entire websites, such as the site of the US-based FX television channel.

So why are you blocked? How does the FX website know that you are not in the United States?

Each computer on the internet has a unique numerical identifier known as an IP (internet protocol) address. Each time your computer makes a request to a server for content, its IP address is sent with that request, so the server knows where to send the requested content. IP addresses are allocated in blocks to internet service providers (ISPs) who in turn allocate them to customers. In this way, either by following a specific IP address, or by looking at a great database of IP addresses held by an ISP, a computer’s geographical location with reasonable accuracy, allowing for specific content to be blocked or enabled.

While that explains, technically, how geo-blocking works, it does not explain why major companies, such as Microsoft, Amazon and Apple, opt to utilize this approach when it comes to their digital content. Part of the explanation is related to the complex web of licensing agreements and content regulations which can differ from country to country – as can be seen in the example of the ABC’s iview. The second explanation behind the practice is similar to the rationale behind region coding on DVDs – geo-blocking enables large digital content companies to charge consumers in a variety of markets different prices, for generally the same content.

Despite the best efforts of these companies however, the active geo-blocking of Australian consumers has not been particularly effective. This can be seen in the example of the American video-streaming service Netflix. A study of the popularity of paid-content media companies in Australia by the website Pocketbook made the startling discovery that despite active geo-blocking, Netflix had a 27% market share of the Australians currently using media subscription or rental services in June of this year – having tripled in size from just 9.88% in January 2013.

While bypassing geoblocking in Australia is clearly technologically possible, it (currently) exists in a legal grey zone in terms of domestic and international law. The individuals who seek to bypass geo-blocked content are those who typically do not want to resort to actual online piracy and torrent sites that financially harm content creators and publishers.

The most common method utilized to bypass geoblocking is the establishment of a Virtual Private Network (VPN), which routes all your internet traffic via a remote location, changing the geographic location of your IP address in the process. As an alternative to this technique, proxy servers can act as an intermediary – obtaining content on your behalf, before passing it to you. For more information on bypassing geo-blocking: see here.

The legal ambiguity associated with bypassing geo-blocking in Australia may soon be a thing of the past however. While the Federal Government’s IT pricing inquiry recommended that the practise of geo-blocking be outlawed, and that Australians should be permitted to sidestep region-coding on DVDs, neither has been acted upon.

Instead, the Government has stepped up their cooperation with local telecommunication companies in an effort to crackdown on internet piracy. Additionally, a leaked draft of the proposed Trans-Pacific Partnership free trade agreement, of which Australia is an applicant country, revealed that on the issues of copyright, patents and intellectual property, a strong emphasis was being placed on upgrading enforcement measures against internet piracy, both internationally and within the domestic spheres of applicant countries.

Politics aside, the issue of geo-blocking is a contentious one. While the example of Netflix’s presence in Australia has shown the method to be of dubious effectiveness, that does not automatically mean that the technique should be abandoned.

There is a growing sense of entitlement in the digital era, especially in Western countries, that is reflected in consumer envy – ‘if someone else has x, why don’t we have it too?’ As no legal remedy exists, these consumers then turn to semi-legal (bypassing geoblocking) and illegal (online piracy) methods to solve this problem.

It is unlikely that Netflix simply wanted to block Australian consumers from legally accessing their services out of spite. They are likely burdened with a complex array of domestic and international regulations, as well as currency issues and conventional limitations on rapid growth. It is due to these reasons, and to reduce their potential legal liability, that many online-only services have sought to restrict their content, at least initially.Presumably having sorted out these issues, Netflix has confirmed that they will officially enter the Australian market sometime in early 2015. Given that Australia is second to the US on a per capita basis in digital consumer revenues – a little reported fact – this move, when combined with their strong non-official growth, points to a positive future for the company Down Under.

Yet, their prior ‘Australian’ experience does prompt us to ask some important questions. In the digital-era, is the traditional ‘national-only’ launch model for online services realistic; and should all digital content services launch expecting global demand and provide a method to legally deliver to these consumers? Or is such an approach simply not feasible at the moment, and as a result, digital media companies should simply accept online piracy in some markets as a ‘stop-gap’ measure?