Government and the music industry is still hopeful about achieving agreement on contentious New Zealand copyright legislation, even though a leading Internet service provider has effectively vetoed a proposed industry code of conduct.

TelstraClear, the country's third largest ISP, has announced it will not be signing up for a voluntary code of practice being developed by the Telecommunication Carriers Forum to guide its members on how to meet the new law's requirements. The controversial clause in the new legislation compels ISPs to develop policies to terminate the accounts of persistent copyright offenders.

The government has threatened that the legislation would be repealed unless an agreement on a code can be reached between the TCF and rights holders. Because TelstraClear is part of the TCF, a formal code can now no longer be finalized because the organization's constitution requires full agreement of all its members.

However, TCF CEO Ralph Chivers says negotiations with content owners on the existing draft code will continue and music industry organizations such as the Australasian Performing Right Association remain confident that agreement can be reached.

Anthony Healey, director of NZ operations for APRA, says that while it is disappointing that an industry code is no longer viable, it can still be adopted by each individual ISP, which is all that is required under the legislation in any case. "We believe we can still agree a code of practice with more than 70% of New Zealand's ISPs," he adds.

The government has also signaled it is not yet ready to abandon the legislation. Commerce minister Simon Power told Parliament on March 12 that he is not prepared to pre-judge the outcome of the negotiations between the two sides.

"I am advised that the rest of the TCF and rights holders are making real progress on the code of practice and if TelstraClear wanted to be excluded from that arrangement, that is their choice," he says.

TelstraClear - which is owned by Australia's largest telecommunications company Telstra - maintains that the voluntary code is simply an attempt to tidy up poorly drafted legislation. In its submission on the draft code, the telco says that given the widespread concern of both its customers and the wider general public about the legislation, the company believes it would be inappropriate for the TCF to adopt the code.