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)