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Why need for piracy-free digital transformation is pressing

Nabil Ahmed and Muhammad Shafiullah | November 10, 2020 00:00:00

Bangladesh has made great strides towards becoming a digital economy in the past few decades. Still, software piracy and intellectual property theft remain a vexing problem. Unlike the past when access was limited by the availability of physical media (e.g. CDs, DVDs, floppy disks, etc.), today most software products and digital media are available online within just a few clicks-and yet most users in Bangladesh do not want to secure legitimate copies. This piracy problem is exacerbated when one considers that most Bangladeshis are reluctant to test out the numerous freely-available alternatives. The cause of ubiquity of piracy and its potential mitigation may be gleaned by a brief examination of our national context. Firstly, the average Bangladeshi is not particularly wealthy by international standards. Buoyed by investments, social reforms and favourable policies, Bangladesh's rising per capita GDP is still quite low compared with that of the Western and East Asian nations (e.g. in 2019, Bangladesh's per capita GDP was $1,855 vs. Canada's $46,195 and China's $10,262). Furthermore, the per capita figure does not adequately reflect income inequalities such as disproportionate wealth holdings, urban-focused job opportunities and skewed salary structures. As expected, families with lower income will limit their expenditure to essentials such as house rent, utilities, food, children's education, transportation, and health care. This explains why a fresh university graduate drawing a monthly salary of only Tk 15,000 would be hard-pressed to spend some Tk 5,088 on a video game or Tk 848 to rent a movie off Amazon Prime. They are much more likely to satisfy their entertainment needs via illegal file-sharing (such as Bit-torrent) or pirated DVDs from the local shop.

Even if Bangladeshis could afford to buy legitimate software and digital media, the value for money is becoming a major concern. A recent study by Capiche.com conducted on the price of 100 popular business software revealed an inflation rate of 5.0 per year or 63 per cent over 10 years. This increase can be somewhat illustrated by the shift from one-time purchase to subscriptions and 'Software As A Service' (SaaS) models. For example, in 2010, a lifetime licence for the popular image editing software Adobe Photoshop was $699. If used for a minimum of five years (considering obsolescence), the monthly cost would come down to $11.65. In contrast, today a monthly licence for Photoshop is $20.99 (80 per cent growth in nominal price). Similar trends can be observed for Adobe Premiere Pro (50 per cent), Adobe Illustrator (110 per cent), Microsoft Office Personal (194 per cent), Autodesk 3ds Max (208 per cent) etc. While the newer versions certainly offer more features and improved performance, their soaring prices put them beyond the means of ordinary Bangladeshi end-users. Legitimate software purchases are further impeded by the Bangladesh Bank's strict controls over foreign exchange transactions. Certain purchases are deemed eligible (e.g. apps, software, e-books, subscriptions, etc.) whilst others are strictly prohibited (e.g. forex trading, foreign stocks, lottery tickets, crypto-currency, etc.). Unfortunately, this creates an opportunity for online storefronts selling a myriad of legitimate digital goods to be erroneously flagged. So, a bank or governmental body needs to have more granular knowledge of in-app purchases; Downloadable Content (DLC), season passes, currencies, experience (XP) boosters, loot boxes, skins, and cosmetic items, etc.

Customers seeking an international credit card can endorse foreign currency against their passport. However, doing so may not be possible for the majority of Bangladeshis given a paltry banking penetration of around 31 per cent of the adult population. A further limitation is imposed by banks' extensive and time-consuming vetting process and list of required documents (e.g. NID, passport, e-TIN, utility bill showing address, bank statement, employment ID card, authorised pay slip, etc.). Worldwide, services such as PayPal, Neteller, and Skrill act as payment intermediaries. They allow users to register their credit/debit cards to make frictionless (one-click) purchases at partner merchants. Unfortunately, this utility is absent to Bangladeshi customers who can only receive remittance through these services. And yet, browsing online one can find a slew of tutorials on how to open a PayPal in Bangladesh by forging street addresses, using virtual cards etc. Surely, with robust formal regulations, domestic PayPal operations would be preferable and would be able to contribute to government revenues. Local Mobile Financial Service (MFS) providers such as bKash, Rocket, Nagad, etc. do offer online payment mechanisms (e.g. via USSD code, App and Payment Gateways, etc.). However, they are limited to domestic transactions as they lack forex trading licences. Considering, the nearly 92.9 million registered MFS users, this may be a very good avenue for extending foreign transactions.

Users who are unable to pay for software or subscriptions by themselves can rely on Facebook-based intermediaries). Such pages can be quite helpful as they offer relatively cheap access to popular services such as Netflix, Amazon Prime, Audible, Google Drive, etc. For example, Spotify normally costs $9.99 per month (Tk 847), yet it is being offered for as low as $1.17 (Tk 99). The trick lies with leveraging multi-user logins and family plans to satisfy numerous customers using a single account. This practice creates an untaxed, shadow economy, violates geo-fencing-i.e., restriction of service availability based on user's geographic location-such policies stymie service providers from getting accurate customer analytics. The actual number of unique users is grossly underreported and may poorly reflect upon Bangladesh's market viability. Another payment avenue, online store cards, can be fraught with price gouging. For example, it is not uncommon to find $25 PlayStation Gift Cards being sold for Tk 2,599 or more (an 18.74 per cent mark up at prevailing exchange rates). Bangladeshi users would also be more inclined to buy original content if online stores offered regional pricing in line with the purchasing power of the local populace-i.e. at Purchasing Power Parity (PPP) exchange rates, like the oft-cited Big Mac Index. Grand Theft Auto V (GTA V) also enjoys international repute and is available on the gaming platform Steam at a range of localised prices (e.g. $19.99 in Bangladesh, $30.84 in Singapore, $45 in Japan, etc.).

Yet, premium software price, unavailability, payment friction, as well as the risk of using pirated software, fail to address Bangladeshi's absolute and universal disdain for freely-available-and often open source software. The free apps mentioned in the Table 1 closely match the feature set of their pricey competitors and should be more than adequate for the average consumer. Despite this, why do we vehemently hold on to our cracked versions of Windows, Office, and Photoshop? It may boil down to decades' long familiarity with the particular software and unwillingness to relearn new programmes-a phenomenon economists dub vendor lock-in.

The insistence on piracy may also be a case of entitlement: "If everyone pirates, so why shouldn't I?" In Bangladesh, kids play games on emulators, educational institutions photocopy entire textbooks, firms use unlicenced Enterprise Resource Planning (ERP) software, fast moving consumer goods (FMCG) producers clone their rivals' packaging, shops sell 'burned discs' or preload thousands of songs onto a user's jail broken iPhone. This rampant state of piracy has, understandably, led to many popular services restricting their availability in Bangladesh (geo-fencing). Also, despite considerable efforts by the government (e.g. Hi-tech ICT parks, tax benefits, One-stop Service Act, etc.) larger tech giants such as Facebook, Amazon, Google and Microsoft remain conspicuously absent. Even domestic firms have shifted their primary focus on lucrative foreign contracts, leaving a stagnant local market full of pirated content and shoddy clones.

Piracy of online content-intellectual property, software, creative works such as movies, songs, performances, etc.-represents a severe hurdle for realising Prime Minister Sheikh Hasina's vision of a Digital Bangladesh. Firstly, global players are unwilling to enter the Bangladeshi marketplace due to theft of intellectual properties and the threat of making large losses-a problem borne by undercounting users and undervaluing the market size. This limits the availability of legitimate products and services to Bangladeshi consumers, and the cycle starts again. Secondly, pirated software applications are seldom updated as they usually prevent the particular app from accessing the internet. This not only deprives the Bangladeshi user from latest features and customer support, but also puts them at a considerable security risk of hacking, data breaches, phishing, malware hijacking, etc. Thirdly, piracy puts a substantial burden on the country's internet backbone as illegal distribution protocols and services can be bandwidth-draining. Fourthly, Bangladesh, as a developing and emerging economy, would be expected to incur sizable costs arising due to vendor lock-in in the not-so-distant future-due to stronger enforcement of intellectual property and copyright laws. It is no surprise other developing and emerging economies-such as China, India, Turkey, etc.-have ongoing programmes aimed at indigenously developing free and open source alternatives to premium and often closed source software. Fifthly, there have been reports of swindling and theft when Bangladeshi users have attempted to implement creative ways of circumventing geo-fenced services-such as Spotify.

Now that we have identified the scope of the problem, how can we hope to tackle such a complex, multi-faceted issue? One possible avenue is government intervention at various levels. Recent initiatives such as shifting the tangled, overhead cables underground as well as fining adulterated medicine, expired foodstuff, jaywalking, etc. have been a welcome change for the people of Dhaka. If the government puts in similar effort in raiding local shops to rein in the pirated media, its proliferation could be thwarted substantially. Next, the government could require local internet service providers to monitor users accessing protocols and services-such as BitTorrent and piracy web-portals-known for distributing materials in violation of intellectual property laws. Following established practices in Europe and the US, suspected users would then be given a warning message to refrain from such activities in the future. While customers could utilise Virtual Private Networks (VPN) to mask their activities, a good proportion would be scared straight by an official communication bearing their name, IP address, website visited, download time, etc. Going forward, the audits of various corporate entities, financial institutions, NGOs, industries etc should also investigate whether licenced operating systems, ERP software and other business applications are being used. Authorities must also carry out comprehensive research into the activities of so-called payment intermediaries (e.g. store card resellers, proxy purchasers, Facebook Ad Managers, etc.) in order to bring them under the formal economic umbrella (i.e. Value Added Tax, Maximum Suggested Retail Price) and prevent customers from being swindled.

Thankfully, many users are expected gravitate towards legitimate sources due to the conveniences offered and their own improved standard of living over time-regular updates and patches, customer support, safe handling of private information, and protection from malware. One needs to only look at Netflix Bangladesh, which has garnered more than 200,000 subscribers since its launch in January 2016. In addition, Bangladeshis have downloaded around 141 Terabytes of data from Steam in a typical week-that is a whopping 20,000+ Gigabytes per day. Clearly, there is a growing demand for digital media and entertainment, thanks to rising incomes and proliferating access to smartphones, computers, and the Internet. To facilitate this demand, the government must take steps to reduce online payment friction. This could take the form of simplifying credit card vetting process, allowing outward PayPal transactions or developing local alternatives. Further, now that MFS providers' scope for allowable activities has expanded to include loan products, they may be allowed to explore international transactions on a limited basis. Finally, in addition to these sweeping and strict changes, Bangladeshis need to change their mindsets. Educational institutions should endeavour to teach students about the software supply chain and how their "I'm not hurting anybody" attitude towards piracy does indeed impact millions of programmers, designers, analysts, quality assurance testers, etc. It would also be of great help to students if they are trained to use open source alternatives in their formative years.

Finally, local software development firms can be encouraged through various public and private investments to develop quality applications for the Bangladeshi market with adequate valuation and protection of intellectual properties. Initiatives such as the Bangabandhu Innovation Grant, High Profile ICT Scholar Fellowship, and Special Grants will allow startups to acquire the necessary human resources, expertise, and IT resources to begin development on a larger scale. Such IT startups can try to produce new and innovative software, or deliver cheaper clones of established market leaders. One very positive development has been local studios' recent focus on video game development, virtual reality, and architectural visualisation. They may also foster strategic partnerships with international/multinational vendors to become the importers/resellers of regionally-priced applications-including GTA V, Norton, Kaspersky, Avast, etc. Piracy like any other societal ills is unlikely to disappear overnight. A long, hard fought battle is needed for a meaningful change. And this change will be arduous, particularly for the economically disadvantaged, who may genuinely depend upon piracy for their educational, entertainment, and business needs. But in a land where any restaurant is free to call itself 'Hajir Biriyani', perhaps the time for change is imminent.

Mr. Nabil Ahmed is a finance industry professional and artist. He can be reached at [email protected]

Dr. Muhammad Shafiullah is an Assistant Professor of Economics at the University of Nottingham Malaysia. He can be reached at Muhammad.

[email protected]

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