At today's InternetNZ seminar on the Copyright (Infringing File Sharing Amendment) Bill, I asked the MED representative Peter Bartlett what the government's stance on notice fees was, specifically whether the notice fees payable by copyright holders (under proposed s 122R) would be set a level that would enable ISPs to recover the costs associated for the new regime. I cannot recall his response verbatim but he indicated that it was government's view that there would not be full cost recovery and pointed me to the Cabinet Paper (PDF) for the details.

Here's the relevant section.

"39    I recommend that ISPs meet their own costs in collecting, maintaining and processing data to meet their obligations under this process. However, I recommend that right holders should pay a fee (notice fee), set by regulation, to the relevant ISP for every notice sent by the ISP, to cover the ISP’s administration cost for issuing notices."

This makes it quite clear it is the government's view that the large capital costs required of ISPs, to implement the system development to meet their obligations under the new provisions, should fall on the ISPs. 

Given there are approximately 37 ISPs  and that the implementation cost for a large ISP has been estimated at $500K+ one can see that the total implementation cost across NZ will be significant.

Update: I'm aware that I am somewhat late to this realisation.  David Farrar and Pat Pilcher raised the issue in Feburary.