GlobalMode has provided one way for Kiwi TV viewers to access the US version of Netflix.

The future Australian owner of internet provider CallPlus, M2, is not saying whether it had a hand in CallPlus' decision to cave-in to television companies' demands and axe its Global Mode service.

CallPlus and Bypass Network Services surprised internet advocates on Wednesday when CallPlus confirmed they would bow to legal threats and withdraw Global Mode in New Zealand on September 1.

Global Mode, which was developed by Auckland firm Bypass, is used by tens of thousands of CallPlus customers to access overseas online television services, such as the United States version of Netflix, that are supposed to be blocked in New Zealand for copyright reasons.

The axing of the free service brings to an end legal action brought against CallPlus and Bypass by Sky Television, Television New Zealand, Mediaworks and Spark subsidiary Lightbox.

M2 announced in April that it would buy CallPlus for $250 million and is due to complete the formalities on Tuesday. Chief executive Geoff Horth would not comment on whether it had asked CallPlus to settle the Global Mode dispute, saying it was not in a position to make any comment on the legal settlement.

Global Mode has been a battlefield in a wider war between businesses such as Sky TV and TVNZ which make their money by making and distributing copyrighted material and parts of the internet industry that say they are taking the side of consumers by helping make content more available.

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InternetNZ said it was "deeply disappointed" that Global Mode would be withdrawn. Jordan Carter, chief executive of the non-profit society, said Global Mode was a "great example of internet-based innovation that challenged traditional content distribution models".

It was not clear the service was illegal and its removal would leave New Zealanders with fewer options to pay for content, he said.

CallPlus, which owns the Slingshot, Orcon and Flip internet brands, and Bypass have previously maintained Global Mode was entirely legal.

Broadband users can still circumvent blocks on overseas television services by using overseas intermediaries, such as UnoTelly and Unblock-US, that charge about $5 a month to disguise the location of customers' computers.

Nicholas Lin, the chief executive of Toronto-based UnoTelly, said last year that just under 1 per cent of its customers were Kiwis and estimated between 20,000 and 30,000 New Zealanders were using services such as its own to subscribe to the US version of Netflix.

But the defeat of Global Mode is a major victory for Sky Television, TVNZ, Mediaworks and Spark subsidiary Lightbox because it threatened to normalise such workarounds.

They claimed Global Mode was illegal and undermined the value of exclusive New Zealand rights they had bought to show television programmes and films.

That was because it provided a "backdoor" for broadband users to access those same shows from overseas television companies which had not paid for the New Zealand rights.

The settlement means the legality of services such as Global Mode that are designed to circumvent "geo-blocking" may now never be tested in court.

The legality of those services has been described as a "grey area" by some experts and Sky TV spokeswoman Kirsty Way had acknowledged the Global Mode action was a test case. But Canterbury University law professor Ursula Cheer had warned in April that she believed Global Mode was on a "sticky wicket".

Lightbox chief executive Kym Niblock said it would "like to have a position where it was resolved further" but was comfortable with the outcome.

Carter said InternetNZ had been keen to see the matter go before the courts "to provide users and the industry with clarity".

A statement issued on behalf of the television companies said the removal of Global Mode was part of a settlement that would see the legal action dropped.

"Further details of the settlement are confidential and will be the subject of a formal court order," the statement said.