Sky, Spark, TVNZ, MediaWorks take action against CallPlus, other 'global mode' ISPs

Latest: Why are Sky, Spark, TVNZ & MediaWorks going after CallPlus' global mode now? A theory

Spark (owner of Lightbox), MediaWorks, Sky TV and TVNZ say they are taking action against internet and technology companies selling and promoting services that enable access to offshore TV and movie services usually blocked to New Zealanders.

Acting together, the four New Zealand competitors have sent Slingshot, Orcon, un-named "other ISPs" and Bypass Network Services (the Auckland-based company that created the global mode technology used by Slingshot and Orcon) to cease operation of global mode and other similar services in New Zealand.

Orcon almost immediately reacted by emailing its customers to tell them it had defaulted its Global Mode service to New Zealand (the CallPlus-owned ISP recently introduced a switcher, which allows its customers to toggle between global and New Zealand modes). The ISP billed the move as a measure to make the recently launched Netflix NZ easier to access, rather than a reaction to legal pressure. The message also includes instructions on how to opt back in to Global Mode.

Mark Callander, CEO of the Call Plus Group that owns Orcon, Slingshot and Flip, says yet to see any cease-and-desist notice.

"Once we have seen the letter and reviewed it, we will be in a position to make a statement.  As we’ve said before, we’re confident that Global Mode is perfectly legal," Mr Callander says.

"The Big Boy incumbents have made these threats in the past so we’re not expecting anything particularly exciting.  They’re just trying to bully the smaller guys to prevent NZ catching up with the rest of the world.  There are many other services in the market today that do exactly the same thing and have done for years, for example Unblock-Us, but for some reason attacking the innovators in NZ is their preferred approach. We will respond to them, media, and the New Zealand public once we’ve reviewed any letter that we receive.​"

In a joint statement, Lightbox, MediaWorks, Sky and TVNZ say they believe companies who set out to profit by marketing and providing access to content they haven’t paid for are operating outside the law and in breach of copyright.

“We pay considerable amounts of money for content rights, particularly exclusive content rights. These rights are being knowingly and illegally impinged, which is a significant issue that may ultimately need to be resolved in court in order to provide future clarity for all parties involved.

“This is not about taking action against consumers; this is a business to business issue and is about creating a fair playing field.”

The launch of Netflix NZ in March definitely changed the landscape. Netflix US requires a US credit card to join (although there are ways around it); with the advent of Netflix US, you can join the service with an NZ credit card, then change countries using your ISP's global mode, or various readily available bits of software.

A-list law firms see case for global mode
Slingshot took legal advice from Lowndes Jordan principal Rick Shera before it launched Global Mode and before it made it open to all customers. Mr Shera likens accessing Netflix from New Zealand to parallel importing and says Global Mode is in accordance with the Fair Trading Act, Copyright Act and other laws. Chapman Tripp partner Justin Graham leans in the same direction.*

This afternoon, Mr Shera said he was not authorised by his client to make immediate comment.

Tipoff
NBR was tipped off about the pending action by TVNZ, MediaWorks, Spark’s Lightbox and Sky earlier this week but queries to TVNZ and MediaWorks went unanswered before today’s joint statement.

CallPlus Group CEO Mark Callander was none the wiser about the imminent arrival of a cease and desist letter when NBR spoke to him on Tuesday.

Local production companies approached
Meanwhile, NBR understands Spark’s Lightbox, MediaWorks, Sky and TVNZ have been approaching local screen production companies and pressuring them to join the action against the ISPs.

It’s unclear at this stage whether the approach has been greeted with enthusiasm by New Zealand content creators, however.

In the first instance, TVNZ and MediaWorks in particular have alienated local producers by insisting on taking the digital rights for programmes they broadcast for free, producers claim.

In the second, many don’t think the action has merit.

As one Kiwi producer tells NBR, “It's a pathetic legal case. What they need to do is what the music industry does – readjust the monetary system and continue on, because the bottom line is, you stop Slingshot’s Global Mode or these other services and everyone will just go and get TunnelBear or DonkeyArse or any of a hundred more of these things.

“Honestly, it’s like trying to put out a bushfire in Australia with a can of Coke – it’s just ridiculous.”

In an interview shortly before the launch of Netflix NZ, Netflix chief product officer Neil Hunt told NBR there was nothing his company could do, on a technical level, to block VPNs and other software tools used by people to beat geo-blocks. He noted the service's terms and conditions forbid geoblock busting.

Who are the other ISPs?
As to the identity of the “other ISPs” sent cease and desist requests, a TVNZ spokeswoman has clarified they are “a group of smaller operators who we are still in the process of communicating with.”

The only other ISP of any scale to offer a global mode is Singapore-owned MyRepublic (whose boss tells NBR he has not received a cease-and-desist notice, as of late Thursday).

While a global mode is handy, especially for less technical people, it is far from the only way to access a geo-blocked service. Free and low cost software and web browser add-ons are readily available to achieve the same result. CallPlus boss Mr Callander's reference to one popular tool, Unblock-us, hits that his company will soon raise the question of whether Spark will crack down on its own customers who are using software to mask their country of origin, or the makers of those tools themselves.

CallPlus originally positioned Global Mode as a useful feature for households who had an overseas guest who happened to have, say, a Netflix US account. It later opened it up to all-comers.

Sky TV has previously attacked CallPlus, refusing (along with TVNZ and MediaWorks) to run Slingshot ads referencing Global Mode.

It has, however, offered a little carrot for online viewers along with the stick, boosting its recently launched Neon streaming video service by saying it will offer episodes of the new series of Game of Thrones the same day they screen in the US and on Sky's satellite service.

Emphasises importance of Copyright Act review
InternetNZ chief executive Jordan Carter says that the open Internet challenges business models in many industries — including those of local broadcasters who choose to buy and onsell content available in other places.

This afternoon's developments emphasise the important of shows the importance of the pending Copyright Act review, he says.

"A fundamental feature of the open Internet is that it crosses borders. That's what consumers are now used to. That's how it should be.

"It is ironic that our twenty-one-year-old copyright law guarantees anyone can import content on DVDs. Yet now there is a threat of legal action against ISPs who provide digital means to access the same content.

"Moves like this won't decrease piracy. New Zealand Internet users are still paying for content accessed via these services, many of them go off-shore to get content that local providers either don't have or don't provide on-demand.

"Consumers still have the choice to go with Sky, Spark and others' online services. Efforts to undermine competition like this aren't innovation: they are just trying to reduce our choices," Mr Carter says.

The government says the Copyright Act review is on hold until Transpacific Partnership (TPP) discussions are complete.

ckeall@nbr.co.nz  ngrant@nbr.co.nz

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* The Chapman Tripp comments were made a couple of years ago, in relation to a global mode offered by short-lived ISP Fyx, but the principles remain the same (Fyx was shutdown shortly after its parent company was bought by Australia's Vocus. Vocus said it wan't to focus on the wholesale and corporate market, which it did).