World Zone Pricing

June 20, 2005

Cory Doctorow is releasing his new novel under a creative commons license.

As with my first and second novels, I've posted the entire text of this book online under a Creative Commons license that allows the unlimited, noncommercial redistribution of the text. You can send it around, paste it into a chat, beam it to a friend's PDA, or print out a chapter to hand out in the university common room. Like Woody Guthrie said, "Publish it. Write it. Sing it. Swing to it. Yodel it. We wrote it, that's all we wanted to do."

I immediately assumed he was releasing it under the standard Creative Commons license, like that recent documentary about BBS culture, but not so. He's releasing it under the Developing Nations License. If you live in a medium/low income country, the book is in the public domain. Otherwise, you pay. That reminded me of last year's blgo entry about software pricing. Microsoft charges US customers $299 for a copy of Microsoft Office, and Thai customers $38.

Isn't this the same pricing strategy that drug companies get clobbered for? Drugs cost more in the US, so the US ends up subsidizing a big part of the R&D bill. That's why seniors take buses to Mexico or Canada to buy their drugs; they don't want to be charged US rates. It's also known as "zone pricing" in the oil industry:

Such price variations may seem odd, but they are not unique to Anaheim. On any given day, in any major U.S. city, a single brand of gasoline will sell for a wide range of prices even when the cost to make and deliver the fuel is the same.

The primary culprit is zone pricing, a secret and pervasive oil company strategy to boost profits by charging dealers different amounts for fuel based on traffic volume, station amenities, nearby household incomes, the strength of competitors and other factors.

It's a controversial strategy, but the courts have thus far deemed it legal, and the Federal Trade Commission recently said the effect on consumers was ambiguous because some customers got hurt by higher prices while others benefited from lower ones.

Granted, the life preserving qualities of drugs makes zone pricing a little more questionable in that case. Nobody's going to die if they can't fill up their Hummer H2 with premium. Or afford a copy of Microsoft Train Simulator 2006.

Giving developing countries a break is clearly a good thing. But I wonder if these zone pricing strategies will continue to work in an era of increasing global communication. Why not buy drugs online from Canada? Or check a website to see where the cheapest gas is in your area? Any system that expressly prohibits goods from moving from zone to zone-- like DVD region coding-- doesn't work so well.