Internet Service Providers Report

Executive Summary

A survey of Canadian Internet Service Providers (ISPs) was conducted to assess the economic cost of the voluntary "notice and notice" (NN) approach to dealing with copyright infringement notices from rights holders. The eight large ISPs (having greater than 100,000 subscribers) and 48 of the estimated 472 small ISPs were surveyed and their current practices and costs documented. While this sample only includes 12% of all ISPs, it represents more than 80% of the subscribers of the ISP industry in Canada.

The majority of large ISPs (75%) and small ISPs (58%) are following the voluntary NN practice. The number of copyright infringement notices received by ISPs is growing over time and is related to the number of "high-speed" Internet subscribers (i.e., DSL or Cable subscribers). However, there is considerable variance in the number of notices received per subscriber per month. On average, large ISPs receive more notices per subscriber than do small ISPs. Within large ISPs, some ISPs receive 13 times as many notices per subscriber as other ISPs, and the range for small ISPs is even larger. Thus, the burden of following the NN regime varies considerably across ISPs.

The financial costs to ISPs of following the NN approach varied considerably across ISP size. For the average large ISP the cost of processing a notice is $11.73, whereas for the average small ISP the cost is $32.73. The fixed costs of notice processing were very difficult for respondents to assess, though larger firms were more likely to have engaged in either systems development or integration to partially automate or support notice processing. The observed differences in costs suggest that there are significant economies of scale in notice processing; the cost of processing a notice is lower for ISPs receiving a high volume of notices than it is for ISPs receiving only a small number of notices.

The vast majority of copyright infringement notices are sent either by US studios (representing movies, music, and television content) or software publishers, or by agents operating on their behalf. Less than 2% of notices could be attributed to Canadian copyright holders.