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Smacking down online piracy – does New Zealand know best?

We know online piracy exists; we know governments want to stop it – but what are the options? Richard Freudenstein, CEO of Australia’s largest pay-TV provider Foxtel, has joined the chorus of entertainment…

Silver bullets are elusive when it comes to curbing illegal downloads. aquella manera

We know online piracy exists; we know governments want to stop it – but what are the options?

Richard Freudenstein, CEO of Australia’s largest pay-TV provider Foxtel, has joined the chorus of entertainment industry bodies to call on the government and internet service providers (ISPs) to clamp down on online piracy.

During his speech to the 2013 ASTRA conference last week, Freudenstein demanded that a new anti-piracy enforcement regime be delivered before the National Broadband Network (NBN) is rolled out “because with super-fast broadband the floodgates could really open”.

Freudenstein’s belief that Foxtel’s business model would be under threat from the NBN is scarily similar to the recent wailing and teeth gnashing of the music industry: the faster internet speeds the NBN will bring will lead to dramatic increases in the illegal downloading of TV shows.

Peak music industry bodies claimed the NBN would be a “disaster” for copyright infringement in a recent report.

So, what’s to be done?

Kiwi solution: the one we nearly had to have

In Australia, talks have been held in recent years between content owners and ISPs, with the aim of agreeing on a “graduated” copyright warning and enforcement system - that is, a system in which users who breach copyright are sent a series of warning notifications.

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Repeat offenders under this type of system risk punishments such as bandwidth reduction and possible temporary account suspension.

Talks were again held by former attorney-general Robert McClelland during 2011/12, but fell apart after the major ISP iiNet withdrew from the talks, citing concerns that the entertainment industry was only attempting to force ISPs to act as the police to enforce a broken system - one which fails to meet the demands of consumers.

Freudenstein named New Zealand in his speech among a number of nations who have a co-operative enforcement systems between ISPs and content owners.

So what does New Zealand’s co-operative system look like? And could it work here in Australia?

Three strikes

New Zealand operates under a three-strikes system. Introduced in 2011, the requirements of the Copyright (Infringing File Sharing) Amendment Act oblige ISPs to issue infringement notices to internet account holders when content owners (rights holders) allege file-sharing activity by the end users of that ISP.

The scheme is structured as “guilty until proven innocent”. A rights holder’s allegation is considered to be sufficient evidence of infringement, unless the account holder can disprove the claim.

No matter who carried out the infringing behaviour, account holders are held solely responsible for infringements. Issues relating to children using their parents accounts, neighbours stealing Wi-Fi, and small businesses providing internet hotspots have been raised by media and in blogs.

The “strikes” are as follows:

1) The first infringement notice issued by an ISP to an account holder is called a detection notice. That notice must spell out the details of alleged infringement, warn the account holder of the consequences of continued infringing behaviour (such as file-sharing), and explain how the notice may be challenged.

The infringement notices must be sent to the account holder by the same method in which bills are delivered (i.e. online or in posted paper form).

2) If the file-sharing activity continues beyond 28 days from the date of the detection notice, the ISP is then obliged to issue a warning notice. The requirements of this notice are similar to the detection notice, and it must also make reference to earlier notice, and warn of the consequences of continued file-sharing.

3) An enforcement notice is then issued where rights holders allege file-sharing activity has continued beyond a further 28 days. Once the enforcement notice has been issued, the rights holder is provided with a copy of the enforcement notice, but that notice must not contain the name or contact details of the account holder.

The rights holder is then entitled to have the matter heard before the New Zealand Copyright Tribunal.

Silver bullets

Simple answer? New Zealand’s three strikes system has not been the cash cow some may have expected, and not the silver bullet for stopping illegal downloading either.

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Despite the legislative amendments that brought the scheme to life in 2011, the first case was not brought to the Copyright Tribunal until the end of January 2013. Only five file-sharing cases have been heard by the Copyright Tribunal to date, and all bear similar features:

  • The applicant, the Recording Industry Association of New Zealand (RIANZ), has claimed thousands from each account holder, that amount being the price of purchasing the music legally multiplied by an estimated 90 possible uploads, in addition to deterrent amounts and reimbursement of fees incurred. In one matter, RIANZ claimed a whopping NZ$3,931.55.

  • In each case the Copyright Tribunal awarded the price of purchasing the music legally without any multiplier to account for uploads.

The highest award under this head of damages was NZ$7.17, which was arrived at by using the iTunes rates of NZ$2.39 per song, multiplied by three infringing songs.

This has occurred in three cases: here, here and here.

  • The claims for reimbursement of fees paid to the ISPs were in each case reduced in accordance with legislation to contributions of NZ$50, representing approximately two-thirds of the claimed amount. Reimbursement of the NZ$200 tribunal fee was upheld in each case.

  • The deterrent fee was considered by the tribunal according to the culpability of each account holder. The tribunal varied between awarding nothing at all and NZ$180 per song.

With the largest amount awarded to RIANZ falling short of NZ$800 - after ISP and tribunal fees are removed that amount falls to around NZ$525 - it is easy to see that the recording industry might feel a little short-changed.

Indeed, in the most recent case, involving infringements that were alleged to have occurred while the account holder was serving in Afghanistan, the tribunal awarded just NZ$255.97.

This resulted in a loss to RIANZ of at least NZ$20 once the ISP and tribunal fees are deducted.

Given the time and effort RIANZ must go to in order to enforce its claims - and the limited resources of tribunals - the tiny returns from their enforcement action make it hard to imagine this system being viable in New Zealand, let alone worth setting up in Australia.

Richard Freudenstein, is this really what you want?

Join the conversation

10 Comments sorted by

  1. Rory Cunningham

    Test Analyst

    iiNet are too right about industries trying to enforce a broken system. The claim that NBN will open the floodgates is also laughable since ADSL2 is sufficient to download TV shows at a very nice speed, even with my 8mbps I have no issues.
    Just more dinosaurs wanting to keep things the way they are despite the benefits

  2. Les McNamara


    The way the NZ "3 strikes" system is described in this article is a little misleading. File sharing doesn't need to have "continued for a further 28 days". There needs only to be a single infringement that occurs between 28 days and 9 months after each notice for the process to proceed to the next "strike". If there is no single infringement for 9 months, presumably the score is reset to zero strikes.

    It's also worth highlighting that all of the infringement notices have been issued for music downloads, not TV or movies. Motion picture industry representatives haven't sought to have infringement notices issued because of the cost of the fee payable to ISPs to issue each notice. I don't see any comfort in this for Richard Freudenstein at all.

    1. Karl Schaffarczyk

      Law Honours Candidate at University of Canberra

      In reply to Les McNamara

      All fair points. You are correct about the need for just one infringement to be detected between 28 days and 9 months after the previous notice to move to the next "strike". Yes, if it is 9 months after the last strike, the process resets.

      And yes, should we ever get a system like this, it is difficult to see exactly why someone like Richard Freudenstein would be happy with it.

    2. Les McNamara


      In reply to Karl Schaffarczyk

      Thanks Karl. I can't help but think of the little Dutch boy with his finger in the Dyke. It's hard to imagine that plugging a few holes here and there will ever make any difference. Consumers are getting new and better ways of recording sounds and pictures, higher data limits and bandwidth and cheaper physical and cloud storage. Developments in technology for data creation and sharing won't stall because some mums and dads were fined $50 after their 12 year old downloaded a hard drive full of music…

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  3. Richard Hockey

    logged in via Facebook

    They seem to be only going after the low hanging fruit. In at least 2 of the cases there was no response from the account holder at all. Is the ISP required to determine that the account holder actually received the infringement notices?

  4. william hollingsworth

    student flinders university

    What is the problem? Surely ISP,s can pay royalties to whoever claims them just as radio stations do for music played.
    Also can we as educated adults please not use the term "free download". I pay a substantial fee each month for my internet use so anything I hear or see is definitely not free.

  5. Nicholas Sheppard
    Nicholas Sheppard is a Friend of The Conversation.

    Computer Scientist & Teacher

    The purpose of imposing penalties on misbehaviour isn't so much to raise money by extracting the penalties, but to deter people from misbehaving in the first place. I think the important question here is: does graduated response legislation increase compliance with copyright law at a reasonable cost? If so, copyright owners can make their money from sales, as is the intention of copyright law.

    France has had a graduated response regime for a few years now, administered by an agency known as "HADOPI…

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  6. Michael Shand

    Software Tester

    Making music and distributing it over the internet doesnt cost anything like it used to, you can get high quality multitrack recording system for $500

    So if a company wants to spend millions of dollars making a record - good for them, they just wasted $999,500.

    Even top notch recording studio for a week, 7 days would be about $7,000, plus mastering maybe $10,000 for the top of the range stuff.

    All up for the very best quality you are talking about maybe $20,000

    So why are people in the music industry still spending millions of dollars to record and distribute music?

    Because they are dinosaurs, their business model doesnt work anymore and instead of adapting they are crying about theft

    Cry babies, screw em, steal music, its just art for you ears and the only ones getting hurt are rich and privilaged middle men

  7. Ray Hughes

    IT Worker

    What indeed is to be done?
    Perhaps Mr Freudenstein can sit Foxtel's board and CEO down and calmly explain to them what this "Internet" thing is all about and what opportunities they are missing out on by largely ignoring it. During the past two decades internet usage and speeds have been growing steadily, with new business opportunities opening up constantly.
    But not so far as these copyright owners are concerned. For two decades their main response has been to lobby for increasingly higher penalties…

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