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Govt thwarts film industry lobbyists by keeping copyright infringement notice fee at $25

The government is set to keep the fee for an infringement notice under the new file sharing law at $25. Commerce Minister Craig Foss proposes no change to the controvesial fee in a briefing paper to cabinet, made public this afteroon.

NZFACT - representing the major Hollywood studios - had wanted the fee dropped to "pennies". (The fee is charged by an ISP to recoup the cost, or part of the cost, of investigating an alleged offence, then sending a warning notice to the customer concerned.)

The Recording Industry Association of NZ (Rianz), representing multinational and local music labels, submitted the fee needed to be dropped to $2 or less for it to send a serious number of infringement notices.

While Rianz has sent a substantial number of copyright infringement notices to ISPs (who in turn pass them on to a customer suspected of piracy), the number has been in the region of dozens to low hundreds each month (see table end of article) rather than the 5000 or so some in the industry had envisaged.

NZFACT has issued no infringement notices on behalf of movie studios, major ISPs tell NBR.

The review of the $25 fee began on the six month anniversary of the Copyright (Infringing File Sharing) Amendment Act (2011), which came into force in November last year. It was carried out by the Ministry of Business, Innovation and Employment (MBIE), the super ministry that includes the old Ministry of Economic Development (MED).

Telecom, the largest retail ISP, had submitted the cost of an infringement notice should be raised to $104 to reflect the true cost of processing notice. TelstraClear wanted the fee raised to $32.64 to reflect costs. Vodafone wanted it kept at $25, and said economies of scale would kick in if infringement notice volume increased.

The Telecommunications Users Association (Tuanz) also submitted it should be kept at $25.

In his briefing to cabinet, the Commerce Minister says:

I consider there is currently no case for either increasing or decreasing the fee. The current $25 fee is set at an appropriate level because:

• There has been a significant reduction in the volume of illegal file sharing in the first six months of the regime being in force. This suggests that the level of the fee has not initially prevented the regime from having the desired outcome; and 

• While the fee does not allow full cost recovery by IPAPs [internet service providers], it does allow recovery of an appropriate proportion of their costs, and at a level which appears to be consistent with similar regimes overseas. Lowering the fee at this time would impose an inappropriate level of costs on IPAPs.

Rianz submitted a study that said there had been an 18% drop in online music piracy since the act came into force last November. However, it said rates were still too high.

NZFACT submitted that there were 110,000 movie download infringements in August 2011, but that the rate had since plateaued to 40,000 to 60,000 per month.

The briefing paper notes that online download volumes fluctuate around the timing of major releases. 

It also notes that several submitters mentioned a study by Waikato University that found many downloaders had simply switched tactics, moving from peer-to-peer services to those that allowed them to mask their identiy.

Mr Foss also says because the Copyright Tribunal has yet to hear a claim, "the full deterrent impact of the regime is not certain."

On Friday, Rianz lodged three claims with the Tribunal, relating to alleged offending by three separate Telecom customers. Each faces a penalty of up to $15,000. The Tribunal has yet to set a time to hear the claims.

The Copyright Tribunal hearings follow a series of notices sent under the file sharing act's so-called three-strikes warning system.

The briefing paper reveals the number of notices sent by four of the five largest ISPs:

Telecom: 1238
Vodafone: 417
TelstraClear: 398
Orcon: 115

InternetNZ supports the fee staying at $25. Policy lead Susan Chalmers told NBR not all ISPs have received notice requests from Rianz. "So it would be premature to adjust the fee before the actual financial impact on these businesses can be evaluated. MBIE and the Minister have rightfully acknowledged this."

Telecom submitted that the $25 fee covers only 24% of its costs for processing an infringement notice.

Ms Chalmers said larger ISPs had been able to absorb the cost of sending out notices - at least so far.

"If the fee were lowered, they would likely feel greater pressure to pass these costs on to their customers. By deciding to keep the $25 fee, the government has taken a step in the right direction for this reason and others."

One of InternetNZ's main concerns is the cost of the regime to ISPs, and the attendant risk that such cost to be passed onto the ordinary account holder, regardless of whether that person infringes copyright, Ms Chalmers said. (NBR has its own concerns with the act, and the first three claims; read more here.)

RAW DATA: Commerce Minister Craig Foss' briefing paper to cabinet (PDF)

More by Chris Keall

Comments and questions

Is the high fee supposed to ensure that copyright owners don't chase spurious cases of infringement?

#1 - The fee isn't high. It costs the ISPs more than that to process the claims.
In effect, they're passing the cost onto their customers, rather than being able to bill RIANZ/Sony for the 'service'

Agreed - Even at the current rate I am certain the true cost is a mega amount more in real cost to an ISP and further puts the ISP into a point of conflict with a customer deemed guilty until proven innocent. This whole issue is a mess and no wonder Kim Dotcom is now so popular.

The ISPs should invoice Sony etc separately for "professional services in connection with..."

NZFACT - representing the major Hollywood studios - had wanted the fee dropped to "pennies".
The Recording Industry Association of NZ (Rianz), submitted the fee needed to be dropped to $2.
This new file sharing law has the stink of American litigators all over it.
Innocent until proven guilty, thats law founded on justice, not money...

ISP's should just charge the $25 fee plus a little extra, say $75 waiver deposit in case it is spurious charge/claim by copyright 'holders' ... they can recoup the total $75 extra it costs them by then returning the $75 but charging a $50 admin. fee for handling the deposit waiver. ... done, get their full costs back.

Meanwhile, there is good evidence that illegal down-loaders in NZ have done the logical thing, they moved into the cloud .... and disappeared with a poof.

Now what about that cyber-bullying meddling from the next Einstein politician that wants to make themselves look like an idiot by legislating the Intertubes?

It costs Telecom 4 x $25 to process a claim so they'll have to pass it on to the consumer. Somewhere some American's are saying "nice of those hayseed Kiwis to subsidise our record-profit-making-global-media-company".

The various recording industry bodies have put forward their estimates of how much piracy costs. Arguing for the 'Skynet' legislation, they claimed piracy cost New Zealand $70M per annum for movies alone.

The numbers above suggest around 2170 notices have been issued, at $25 a pop, about $54,000 in notice fees.

Now if piracy has dropped 18%, as they claim, then presumably the cost of piracy has been reduced by $12.6 million.

That is a staggeringly good return on investment for the industry, at the expense of ISPs who had to bear the costs of setting up a regime to punish their customers. They should easily be able to afford to issue more notices.

Unless they have been lying to the public about the cost of piracy, but whose fault is that now?

Not a clue the bunch of you #1-7.

For a full list of legal services available to consumers in New Zealand, have a look at this site!

Hmm, says "not a clue" and then posts link that has zero relevence to the arguements presented above.

Does all that irony hurt when it hits you?

$2??? Keep it at least at $25.

ISPs and Telcos are not given a subsidy by RIANZ to increase their staffing levels to be able to handle these investigations. So basically this $25 covers:

- administration of the to-ing and fro-ing between the ISP and RIANZ
- root-cause-analysis on the core network to find the owner of the infringing IP address at the time of the alleged infringement
- creation of a default "strike" template letter/email that will be sent to infringers, which needs to be checked by lawyers to make sure there's nothing out-of-line PLUS checked by branding/marketing staff to make sure the language is not going to encourage the customer to just leave said ISP

Hate to tell you RIANZ, but I'd estimate that at more like $150 or $200 worth of tangible cost to the ISP. You're getting a hell of a lot of bang for your 25 bucks!

why does it cost so much when all the info is presumably in some database.
vba macro anyone? buy one off peopleperhour for $15 to do the whole job or something..