Big telcos such as Telecom, Vodafone - and especially TelstraClear - are shuddering at new rules forcing them to clamp down on illegal downloads of movies, TV shows and music from their networks.

But while telcos and copyright owners are still negotiating a Code of Practice for handling Section 92a of the Copyright Act - which forces internet service providers to act on allegations from copyright owners and shut down accounts - some ISPs are already doing it.

Paul Clarkin of WorldXChange, which has 20,000 customers, says the company is using a system in some ways more draconian than Section 92a. The code may make the new rule easier to administer, he says.

"We took the commercial risk of terminating customers but there is nothing to stop those customers taking a swing at us. But most of my customers are residential - you just would not do it to a commercial player."

Clarkin said that big copyright-owning companies such as Sony BMG closely monitor sites used to pirate music. "They give you an IP address that comes to us - we search with that address and date."

Clarkin says what most people say - the Copyright Act is "piss poor" with the extra costs laid at the door of telcos who were deemed to have deep pockets.

COSTLY CALL

A broadband customer of WorldXChange's Xnet said his internet connection was shut down last year and he had no idea why. "I phoned them up and the technician told me they had received notification of someone from my ISP downloading material that infringed copyright.

"They said that they'd reinstate my internet, but that if they got one more it would be cut off permanently - two strikes, you are out."

The Xnet customer says he stuck with the ISP and hasn't been accused of another breach.

Clarkin says it is three strikes before customers are switched off.

TelstraClear announced on Wednesday it would not be ratifying a code of practice that will administer Section 92a of the Copyright Act.

Telecom, Vodafone and other smaller ISPs including WorldXChange are going ahead with the code which affects every company that supplies internet to its staff, not just ISPs.

WorldXChange is small enough to easily check allegations of copyright breaches - and it does not act against commercial ventures. But as it stands, telcos could end up spending hundreds of thousands of dollars maintaining records of their customers' movements online.