In New Zealand, a legal battle looms over streaming TV

Several ISPs in the country received a letter last week claiming they're violating New Zealand copyright law by allowing their subscribers to view streaming video content that would normally be geo-blocked, or restricted based on where they live, as revealed by their IP address.

Two ISPs are bowing out of the fight, saying they disagree with the claim but that a court battle would be too expensive. A third, however, plans to continue offering its service, creating the potential for an interesting legal battle.

The law firm has given the ISPs a deadline of Wednesday to stop their geo-blocking. It declined to comment Tuesday on what action it might take after that, including whether it will take the ISPs to court.

Geo-unblocking is "a gray area," said Nicolas Suzor, a senior lecturer in the law school at Queensland University of Technology in Brisbane.

It'd be hard to find a consumer, at least outside the U.S., who hasn't had trouble opening a link to a video on Hulu or YouTube due to restrictions on where the content can be viewed.

To get around the restrictions, some people subscribe to a VPN (virtual private network) service, which can overcome the barrier by making it appear that their device is located in a country where the content is authorized for viewing.

New Zealand, one of the lowest populated English-speaking countries, as well as Australia, have often been on the short end of the stick when it comes to streaming video, compared to markets such as the U.S. and the U.K.

The thirst for content in New Zealand did not go unnoticed, and two years ago a company called Bypass Network Services created a service for ISPs that allows their customers to view streaming content on a large range of overseas websites, such as the BBC, Hulu and others, without needing a VPN.

The service, called Global Mode, is quite different from a VPN. The company's software is integrated into an ISP's DNS (Domain Name Service), which translates a domain name into an IP address that can be called into a browser.

When someone in New Zealand navigates to Hulu.com, Global Mode resolves the DNS request to make it appear to Hulu that the person is actually in the U.S.

Since Global Mode runs in an ISP's network, there's no fiddly VPN setup; users simply navigate to an overseas content provider, and it works. There's no software to download. Instead, Bypass built a network level switch that allows ISPs to use Global Mode at scale for all of their subscribers, an engineering feat that co-founder Matthew Jackson said has taken more than 30,000 hours.

Jackson said Bypass took legal advice before launching the service and believes it does not violate copyright law. ISPs see value in being able to sell the extra service, or offer it for free to stand out in a low-margin, highly competitive business.

But it hasn't sat well with content providers. The letter sent to ISPs last week, from the law firm Buddle Finlay, argues that skirting geoblocks violates the distribution rights of its media clients for the New Zealand market. It was sent to smaller ISPs, since the largest ones -- Vodafone and Spark, which hold at least 70 percent of the local market -- do not offer geo-unblocking.

The firm wrote the letter on behalf of Sky Network Television, Television New Zealand, Lightbox New Zealand and MediaWorks TV.

At least two ISPs, Lightwire and Unlimited Internet, have indicated they will stop offering their unblocking services, although Andrew Johnson, managing director of Lightwire, said Tuesday that his company hasn't made a final decision.

But another company plans to fight. Callplus, which owns the ISPs Slingshot, Orcon and Flip, said in statement last week that it believes that "Global Mode is completely legal."

"The traditional TV model is changing," the company said. "These companies need to change with it. Trying to restrict what you do online is old school non-Internet thinking and shows just how out of touch they are."

Media companies have butted heads with new technologies before, and critics say they should change how they price and license content for the Internet age. But parsing out viewing rights country by country allows them to maximize profits. If people in New Zealand watch content from the U.S. over the Internet, there's less incentive for a media outlet in New Zealand to purchase rights to a show.

Copyright law in New Zealand and Australia doesn't specifically ban the use of VPNs or unblocking services to watch overseas content. But it's a complex area of law, and content providers could argue in court that geoblocking is a legitimate way to protect their content.

Neighboring Australia has seen fierce debate over geoblocking, said Matthew Rimmer, an associate professor at the Australian National University's College of Law.

Circumventing geoblocks is generally considered legal in the country, he said, but it hasn't been tested in court. The situation in New Zealand "will be of universal interest, because I don't think there's really been much in terms of test cases," Rimmer said.

That's if the case goes to court. Litigating copyright cases can be so costly that even those who think they have meritorious arguments sometimes pull out, Suzor noted.

"Lots of people end up caving," he said.

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