After concerted lobbying from all sides, the Ministry of Economic Development has decided to keep the fee payable by rights owners for issuing infringement notices for illegal file sharing under the Copyright Act 1994 at $25 per notice.
Sections 122A to U of the Copyright Act require internet protocol address providers (IPAPs) to send up to three infringement notices to internet account holders who are alleged to have infringed copyright if the copyright owner requests that notices be sent. The Copyright (Infringing File Sharing) Regulations allow the IPAP to charge the copyright owner a set fee per notice.
When considering if the amount of the fee should be changed from $25, the Cabinet Economic Growth and Infrastructure Committee took into account the need to balance the ability of the IPAPs to recover their costs with the need for it to be cost effective for the copyright owners to protect their rights.
The Committee noted that there has been a significant reduction in the volume of illegal file sharing in the first six months of the regime's introduction. The traffic downloaded using peer to peer (P2P) application has decreased to less than half the volume it had been prior to the legislation coming into force, and the overall number of P2P application users in January 2012 was around half that in January 2011. The Recording Industry Association of New Zealand (RIANZ) submitted that while there has been a decrease, the overall level of P2P traffic remains very high, with over 700,000 people still engaging in P2P on a monthly basis. The fact that there have not yet been any cases where damages have been awarded by the Copyright Tribunal means that the full deterrent effect of the legislation remains unclear.
The majority of IPAPs submitted that the fee charged per notice should be raised (with the exception of Vodafone, which suggested the fee should remain at $25). When calculated on a costs per notice basis, the $25 fee allowed Vodafone and TelstraClear to recover between 76% and 81% of their costs. The costs incurred by Telecom were markedly higher, with a cost per notice to them of $104, meaning that the $25 fee only allowed them to recover 24% of their costs. Total set up costs for the IPAPs to comply with the new regime have amounted to nearly one million dollars.
There remains some difficulty in calculating the costs of sending the notices, and it is likely that if the volume of notices sent were to increase, economies of scale would mean that the costs to the IPAPs per notice would decrease. The volume of notices sent has been significantly lower than was initially expected, largely because New Zealand Federation Against Copyright Theft (NZFact), the major representative for New Zealand and United States film and television rights owners has so far chosen not to use the notice system. NZFact submitted to the Committee that the reason they do not use the system is due to the high fee in sending notices. NZFact have stated that they will not use the notification system unless the cost per notice is reduced to a matter of cents. The Committee was of the view that such a large reduction in the fee was not appropriate as it would impose an unreasonable level of costs on IPAPs, who would likely pass on such costs to their customers.
The Committee has concluded that at the present time the $25 fee is appropriate, as the introduction of the system has had a deterrent effect on copyright infringement, and the amount IPAPs can recover is not an unreasonably small proportion of the costs they incur. The Committee notes that the amount of the fee should continue to be monitored to ensure the regime is still deterring copyright infringement, but have not set a timeframe for when the next review of the fee will occur.
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