Universal Music Group, Warner Music Group Corp., EMI Group and Sony Music Entertainment have gained leverage through court and government actions to pressure ISPs into warning customers not to steal music — in some cases with a threat to cut service. Crowded networks are helping to soften U.S. and European access providers resistance to working with record companies.

Irish phone company Eircom, in a settlement with music labels, said last month it will unplug customers who ignore illegal-download warnings. A law being drafted in France would do the same, while Britain may require ISPs to pass information on offenders to rights holders. The four largest U.S. labels have struck preliminary accords to work more closely with ISPs.

“There has been an international push by the rights holders to pursue a similar strategy across the world,” said Danny OBrien, international outreach coordinator for the San Francisco-based Electronic Frontier Foundation, which advocates expanded digital rights for consumers. “The end goal is the same: co-opt Internet service providers as copyright cops.”

Millions spent suing alleged pirates have earned the music industry negative press while failing to stop the practice. Today, 95 percent of music downloads are illegal, according to Londons International Federation of the Phonographic Industry.

Piracy Costs

Piracy in the U.K. cost 180 million pounds ($265 million) last year, according to Jupiter Research. U.S. record companies 2007 losses were $5.3 billion, according to the Institute of Policy Innovation in Lewisville, Texas.

Thats fed a decline in the industry. New York-based Warner Music, the only publicly traded music company, has fallen 93 percent from a May 2006 high. Universal Music, the largest record company, is owned by Paris-based Vivendi SA, EMI is privately held and Sony Music is owned by Japans Sony Corp.

“The network service provider is the logical place for us to go to protect our business,” Michael Nash, Warner Musics executive vice president for digital, said in an interview.

Some artists have embraced the anarchy of the Web. Radiohead released the album “In Rainbows” on the Internet and allowed fans to pay what they wanted. Wilco, in a dispute with Warners Reprise Records, released “Yankee Hotel Foxtrot” for free, and Nine Inch Nails singer Trent Reznor, without a label, offered fans options to purchase his 36-track instrumental album, from giving some songs away to charging $300 for a limited edition.

In a three-month test, U.K. Internet providers agreed to send warning letters to users caught sharing files illegally. Denmarks largest provider, TDC, blocked access last month to The Pirate Bay, a repository of free music, films and books.

Breakthrough

“One of the biggest breakthroughs recently is that ISPs are concerned about usage of their bandwidth,” Kennedy said. “File- sharing is huge traffic.”

The Recording Industry Association of America, the Washington-based trade group, warned ISPs in May 2008 it may push for laws addressing piracy. That added urgency to “years of conversations,” RIAA Chairman Mitch Bainwol said in an interview.

AT&T Inc., the largest U.S. telephone company, and the biggest cable network, Comcast Corp., are among those cooperating, CNET.com reported on Jan. 28, citing unidentified people with knowledge of the matter.

AT&T, based in Dallas, and Philadelphia-based Comcast declined to comment. Verizon Communications Inc. isnt participating, spokesman David Fish said.

Music Monitors

Eircom settled the February 2008 lawsuit to avoid the threat that record labels would monitor its network.

“We will not install monitoring equipment on our network and no customer information will be handed over to record companies,” spokesman Paul Bradley said.

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