Kiwi internet providers "incurred significant set up costs" to comply with New Zealand's three-strikes regime, a new cabinet paper has revealed.
Under the amended Copyright Act, which came into effect last year, rights holders could pay a processing fee to send notices to alleged copyright infringers via their internet service providers.
Figures from the industry organisation Telecommunications Carriers Forum (TCF) show that ISPs Vodafone, Telecom, TelstraClear, Orcon and Callplus spent $NZ919,000 ($A717,100) between them to implement a three-strikes notice system.
The paper was released by New Zealand's commerce minister, Craig Foss, to support a Government decision to keep the rights holders' processing fee at $NZ25 ($A19.40).
Rights holders have called for that fee to be lowered to a few cents.
But the current fee did not cover Internet providers' costs of processing notices, Foss said. Telecom, which processed the most notices -- 1238 -- recouped less than a quarter of its costs through the rights holder fee.
The providers' expenses were largely down to staff costs, according to the paper, as they processed infringement notices manually for the first six months.
Despite no provider covering their costs with the current processing fee, Foss said it allowed for an appropriate proportion of recovery.
There are further concerns that costs could increase for providers, if they participate in Copyright Tribunal processes and hearings which can take place after a customer has been provided with a third, final enforcement notice.
Three Telecom customers will face the Copyright Tribunal for downloading music, and could be be made to pay compensation to rights holders of up to $NZ15,000 ($A11,700) each.
A spokesperson for the telco said it would ensure the customers involved understood their situation and help them connect with independent organisations. She would not reveal Telecom's costs.
According to the cabinet paper, there has been a "significant reduction in the amount of illegal file sharing that has occurred in New Zealand" thanks to the new law, but also an improvement in the online market for content.