Deadlock: Cost still the problem for piracy scheme

Australian internet service providers have once again found themselves at an impasse with global rights holders over who will foot the bill for an agreed scheme to combat online copyright infringement.

More than a year of talks failed in 2012 after the parties were unable to come to agreement on the issue of costs. ISPs refused to pay for a process they said rights holders would financially benefit from, while content owners argued each side should bear its own costs.

The inability to reach consensus late last year prompted the Government to issue a warning to both parties: develop a scheme or have one mandated for you.

ISPs and rights holders were then given just four months to pull together a mutually beneficial proposal.

But despite late last week releasing a draft graduated warning code to combat online copyright infringement, the two sides have once again found themselves in a repeat of the 2012 stalemate.

Who will bear the cost of implementing the code was noticeably absent from the 34-page document.

The latest version of the draft code would see ISPs send up to three notices to fixed-line customers identified by rights holders as having downloaded content without payment.

After a final notice, ISPs would hand rights holders an infringer's contact details to assist with court or tribunal action, while account holders who receive three infringement notices within a year would be able to have the validity of the allegations independently reviewed.

The scheme would be overseen by a copyright information panel and reviewed after 18 months in action.

Rights holders including Foxtel, News Corp, Village Roadshow, and the Australian Recording Industry Association, among others, were involved in the consultation process.

Communications Alliance CEO John Stanton hopes that the two groups' agreement on the initial text of the code signals a new willingness to negotiate on the cost issue as well.

“The main issue is the cost of processing infringement records and matching IP addresses, preparing and sending notices to customers, keeping records, handling front of house phone enquiries, all of those costs,” he told iTnews.

“ISPs have always held the view that reasonable costs should be reimbursed by rights holders, because they will benefit from the economic upswing from a reduction in piracy.”

He said the impasse was not related to apathy on either side - the “desire is strong” to reach consensus, with both parties currently calculating what the costs would look like on a per event basis.

Both are working off the presumption that this infringement notice scheme would be a manual one - building automated systems to process notices in such infant stages of the proposal would leave ISPs in a position where the upfront capital cost may not be recouped, Stanton said.

“Some ISPs in New Zealand spent serious cash on an automated system, and there’s almost no notices going through the systems. They’ll never get that back,” Stanton said.

The New Zealand graduated response scheme only resulted in two cases going to the copyright tribunal in the last year.

It costs content owners NZ$25 per notice. Despite both sides in that debate coming to agreement on this figure, NZ's ISPs still claimed the NZ$25 didn’t actually cover their costs, while rights holders argued it was too high.

Stanton said ISP's tentative estimates in Australia sat upwards of $30 per IP address.

“It depends on some assumptions, like how many calls are generated to front of house as a proportion of notices, how much you’ve got to pay the employee, and how long it takes them to interrogate the various databases,” he said.

“So on our thinking so far, it’s a cost of upwards of $30 per IP address. But that’s not agreed on by rights holders.”

The cost also depends on how aggressive rights holders are in using the scheme - while the industry has previously signalled an intention to sen significant volumes of notices, forecasts are still unclear.

This uncertainty means ISPs will likely use manual processes for at least the first 18 months until they can get some idea of whether an automated system will be worth the initial capital injection, Stanton said.

The most recent estimates of the cost to set up an automated system (calculated in 2011) by a large unnamed ISP put the price at north of $3 million for that business alone, Stanton said.

United in desire to stamp out piracy

Despite the argument over cost, Stanton said ISPs did want to see a reduction in online copyright infringement, and were willing to work with rights holders on the issue.

“If they can do so without losing money, I’m sure many of them would be happy to try and process as many notices as they can,” he said.

“But not if it’s costing them significantly every time they process a notice. If the cost equation is right, they could [also] potentially gear up their capacity over time.”

General manager of Music Rights Australia, Vanessa Hutley, declined to comment on the issue of costs while the process of establishing the code was underway.

"The release of the draft code is an important milestone in achieving [the requirements outlined by the Government in December]," she told iTnews.

"Rights holders are actively engaged in the process and we continue to have those discussions."

Representatives from the Australasian Performing Rights Association (APRA) were unavailable for comment, while Village Roadshow Australia did not respond to request for comment.