Australians Digital Economy Request For Comments Q.23

Recently, the Australian Government asked for comments in an
RFC titled Digital Economy Future Directions Consultation Paper.

We responded to 30 of the 32 questions – here is our
response to Question 23

Q.23  Should the
existing copyright safe harbour scheme for carriage service providers be

Setting the Scene.

The safe harbour scheme provides legal incentives
for ‘carriage service providers’ to co-operate with copyright owners to
unauthorised infringement of copyright material. The scheme
applies to four categories of offending online activity. Broadly, these include
providing facilities or services for transmitting, caching, storing at the
direction of the user, and referring users to an online location using
If a carriage service provider
complies with the conditions of the scheme, the remedies that can be awarded
against it for the infringing activities of its customers are limited (i.e. no
monetary damages and a restriction on court orders). The conditions to be
satisfied differ for each online activity. For some, there is a condition that
the carriage service provider takedown infringing material.

The current Australian version of the Safe Harbour legislation requires ISP’s to terminate the accounts of repeat
offenders when notified by a duly authorised representative of the copyright

Whilst the notion of stopping a copyright infringement is
reasonable, one has to look first at whether a copyright has in fact been infringed,
and second at the economic impact of the concept.

People have been sharing content with each other ever since
books were first printed, through loaning them to each other. Prior to the
invention of the digital recorder and the CD, people were recording radio shows
and LP’s onto cassettes and then copying favourite pieces of music from one
cassette to another to share with a friend.

While it is important that there is a strong copyright law,
it is just as important to ensure that it is used to pursue real criminals and
not used to criminalize real people.

The economic impact of
unconstrained legal actions by content companies is a key issue.

According to the content companies
they have been negatively impacted by file sharing. However, the statistics
that are now coming to light and which will be the subject of a report to be
released by this author tell a different story.

Briefly, the data that is emerging
indicate that P2P file sharing tends to help propagate information about
content that leads to that content being purchased by consumers. Declining top
line revenue numbers belie the fact that gross margins have increased through
legitimate digital distribution by companies such as iTunes. The very public
argument that negatively attacks P2P obfuscates the true nature of the way that
content companies’ business models operate and enables shrinkage numbers and
costs to be misconstrued thus ensuring that there is the ability to point
elsewhere when bemoaning failure to develop strong individual pieces of

In addition to this there is the
matter of ISP economics

According to all available (conservative)
estimates between 21% and 32% of all internet users in
Australia engage in file

commercial interest surveys like the Whirpool Internet Survey Series covering
2003-2007 show that 57.7% of Australians either file share or are about too. (
Respectively  54.4% and 3.3%with
an average compound 5.62% increase per annum.)

In other words, the Safe Harbour scheme as it
currently stands requires ISPs, to initially police and then disconnect up to
32% (and growing) of their income stream with no compensation payable by the
copyright owners for having to do so.

If service providers are expected
to terminate approximately 32% of their user base of the accounts of repeat
offenders as required under section s16AH(1) item 1 condition 1 to satisfy the
Australian Governments desire to retain cordial relations with the United
States – then a compensation arrangement needs to be reached for:

1.         The increasing workload
on ISP’s for the policing of users’ online habits through issuing infringement
notices, examining log files to identify the user, contacting the user and
issuing a warning and having to notify the issuer of the infringement notice
that the ISP/CSP[1]
has complied; and;

2.         If the user continues
his activities, a compensation for the lost revenues of the user for the
balance of the user’s contract period.

The cost to the ISP for item 1, is
likely to be the cost of one employee for 20-30 minutes per incident report.

The cost to the ISP for item 2, is
likely to be between several hundred to potentially thousands of dollars.

The numbers.

The ABS collects stats on Australia’s 35 Largest
ISP’s. Each of these ISP’s has in excess of 10,000 users.

Let us for a moment examine the
number of infringement notices that may arrive in a month at an ISP with 10,000
users of whom 3,000 are sharing files.

If the ISP receives one
infringement notice for every-one of those 3000 users in the first month, then
it requires ten full time employees working on nothing else but infringement
notices for the entire month – just to ensure that it is complying with the Act
and to qualify it for exemption from prosecution from the relevant  copyright
industry policing authority.

There is no warranty on the part
of the content industry that their information is accurate – in fact there is
definitive evidence to the contrary.

Further there is no offer of
restitution if the ISP is subsequently sued for damage to business or other
perceived or real damage because of a user’s disconnection. Nor is there any
relief offered by existing Australian case law or legislation.

If the offenders repeat their
activity – and statistics suggest that this would be the case; the ISP is then
required to terminate these same users in month two, and the ISP suddenly
losses 150K per month revenue or 1.8 million per annum.

If this was repeated on a global
basis, the numbers (using the conservative 32%) would be:

1,463,632,361     Total Internet Users

468,362,356        32%

$59.95                 Monthly Spend

$23,394,699,658 Total Loss of Revenue.

This would appear to be more than what the content industry
make – and therefore could lose.

It would appear to me that the
neither the courts[ii]
nor the legislature has grasped the magnitude of the numbers of individuals
whose activities could be classed under the content industries’ suggested guidelines as


According to
P2P is increasing In Germany – it is nearly 74% of the total internet usage.

If everyone is doing it – are the moral majority in fact Pirates?

The Question
of Definition

There is some discrepancy about
the word “piracy” that is bandied about so freely by the copyright industries
and increasingly by legislators as a direct result of the rhetoric from
industry lobbyists.

File sharing should not be
classified as an act of piracy.

The Online edition of the Oxford
Dictionary defines a Pirate as:


1 a person who
attacks and robs ships at sea.

2 before another noun denoting a text, film, recording, etc.
that has been reproduced and used for profit without permission: pirate videos.

3 before another noun denoting an organization that is
broadcasting without official authorization: a pirate radio station.

Note, with regard to content,
“profit” is a key ingredient in parsing the word as an epithet. There is no 4th
entry for non-profit oriented copying of copyrighted content. 

Searching Wikipedia, for “piracy”
results in;

This article
is about maritime piracy. For the term referred to as copyright infringement or other uses of
“piracy” or “pirate”, see pirate (disambiguation).

Copying CD’s and selling them is
clearly a crime. Promoting content by telling someone about it and giving it to
them to listen to or to view is an age old practice that used to be called word
of mouth marketing.

The process of Government is to
create laws to keep the population safe.

The question is then what is the
definition of safe.

When the majority of the
population consider that something is right and just, is it not time for the
Government to rethink its policies and how it applies the letter of the law?

In a recent presentation to an
industry body we included the following data:image

When the mothers of Sydney are
downloading old versions of Hi-5 for their children’s education/entertainment,
it is time to consider re-thinking the term “The Moral Majority.”

As an exercise in moral
determination of music, movie and game downloading – I challenge every
politician, every advisor and reader of this document whose children were born
between 1980 and 1995 to ask their children candidly if they think it should be
legal to download music via the internet for free.

I feel sure without hearing the
response that it will unanimously be ”yes”

And, just in case that the desire
to please the parent is stronger than the desire to tell the truth, a second
question could then be posed. “Out of curiosity – do your friends do it?”

The current action vis AFACTS – vs
– IInet, one of Australia’s Internet Pioneers, is because IInet, couldn’t
afford the continuing resources of complying with a legislative instrument that
provides no recourse for the recovery of costs.

Under Australian Trade Practices,
if a customer of the Newspaper advertises a misleading and deceptive
advertisement, the Newspaper cannot be sued.

This is fair and reasonable. But
the same rule should be applied to all CSP’s/ISP’s.

In Conclusion:  The Scheme
should be expanded to include all carriage service providers, and it should
include the ability that all CSP’s can bill the issuer of the take-down notice
for the time spent in responding to his “safe-harbour”  legislation enabled

It is my opinion that the
legislation should open the doors to chargeback billing by the Carriage Service
Providers and let the courts work out how serious the copyright industry is.

By definition, universities are
exempted from being classified as CSP’s. Recognition of this should be made in
any amendments to the Bill since universities have always been the basis of a
nation’s economic future and, mindful of  Mr. Ross Jones’
(Commissioner, Australian Competition & Consumer Commission)

or if it fosters successive innovations
(incremental or “
leap-frog”) by requiring access to the
intellectual property of the initial innovator

Consideration should be given to
extending the umbrella of Safe Harbour to all Australian education facilities,
and allowing for the originator of the take-down notice to be billed for a fair
and reasonable cost of compliance by the CSP/ISP.

[1] CSP –
Carriage Service Provider

Charbonneau . 2006 – Protecting the Messenger for Carriage Service Providers


Definition of a Pirate – Oxford Online Dictionary

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