No change to copyright notice fee

"Not too big - not too small - just right". That was the message last month from lawmakers. They were considering the level of fee payable under New Zealand's three notice regime that came into force September 2011. The regime is aimed at deterring file sharing that infringes copyright.

Under the new regime rights owners send prescribed notices to Internet Protocol Address Providers (IPAPs). Each IPAP is then required to validate the notice and send up to three infringement notices to the infringing account holder. An IPAP is allowed to charge a rights owner up to NZ$25 for processing a rights owner notice.

Back in March this year the Ministry of Economic Development (now Ministry of Business, Innovation and Employment) issued a Fee Review discussion document. MED was particularly seeking submissions from Internet Protocol Address Providers (IPAPs) and rights holders. The list of submissions is now public. There are some good quality submissions from IPAPs and rights holders.

The case for status quo

The decision to keep the fee the same came as no surprise. The majority of IPAPs submitted that the maximum fee they are allowed to charge be raised. Rights holders submitted that the maximum fee they have to pay be lowered.

The reasoning set out in the Cabinet Economic Growth and Infrastructure Committee paper is interesting. IPAPs say that they are processing notices from rights owners manually due to "low and varying volumes of rights owner notices". They could reduce the per notice cost to their businesses by automating the process. However, with current volumes they say it is unreasonable to invest in any level of automation.

Rights owners on the other hand say they would send more notices if the fee was lower. Lowering the fee would result in a higher volume of notices being processed under the regime. This in turn would mean that IPAPs would invest in automation. But then IPAPs would be paying the bulk of costs of operating the regime.

The Committee felt that rights owners bear the majority of the responsibility for enforcement of their rights, so they should bear a good proportion of the cost.

The submissions also highlighted some interesting aspects of the new regime.

It wasn't me

As of 26 April 2012 the Recording Industry Association of New Zealand (RIANZ) had sent 2,766 rights holder notices, which is 395 per month. Sixty of those notices had been challenged within the prescribed timeframes. Out of those 60 challenges filed in time, RIANZ accepted two of them and declined 58.

The most common reasons set out in the 60 challenges by account holders were (in order):

1. it was not me
2. it was not me, but probably was another household member/flatmate/guest
3. it was not me, it was likely someone else as my wireless internet connection did not have a password
4. it was not me, it was likely someone else as we provide internet access to the public as part of a business

RIANZ points out in its submission that none of these excuses hold water. The responsibility lies with the account holder to ensure that his/her internet connection is properly served and not used for unauthorised purposes.

The two successful challenges involved an account holder or account holders that had been proactive in indentifying where the infringement came from and had taken measures to stop future infringement.

Changing behaviours

There appears to have been a reduction in the amount of illegal file sharing that has occurred in New Zealand since implementation of the new regime.

The New Zealand Federation Against Copyright Theft (NZFACT) refers in its submission to a study of the volume of traffic measured from within the core network of an unidentified New Zealand ISP from residential DSL users. The study found a reduction in levels of P2P, Newsgroups and Encrypted traffic. The study also found an increase in levels of Remote, Tunnelling (eg VPN) and Files traffic. Both findings coincided with the September 2011 commencement date of the new notice regime.

RIANZ points to a noticeable decline in P2P usage in September 2011, when the media coverage of the new law was at its highest. This effect has been maintained. RIANZ sees a risk that the initial gains will be eroded as the organisation is unable to send enough notices to maintain a long-term effect.

NZFACT estimates that there were about 110,000 infringing downloads of major US movies in August 2011. From September 2011 the number of infringing downloads dropped to between 40,000 and 60,000 per month.

What now

From here it is anticipated that MBIE officials will continue to monitor the operation of the regime. If notice volumes rise significantly (ie if NZFACT starts sending notices) then IPAPs may be able to implement more efficient systems and therefore there may be scope to review the fee again.

Furthermore if we see a rise in infringing activity there may also be scope for review. We have yet to see the new Copyright Tribunal issue a decision. It will be interesting to see if that would set a deterrent precedent.

Also on the horizon is the implementation of New Zealand's Ultra-Fast Broadband Initiative. Will it increase the level of infringing activity? Or will it expand the offering of legal digital content which may in turn contribute to a decline in illegal file sharing?

Photo courtesy of author 401K under Creative Commons licence.