September 14, 2010 | Florian Leppla

Tens of thousands could be priced out of broadband after Government announcement on file sharing code

Up to £500m will be taken out of the UK economy according to the Government's announcement today about the cost sharing for the letter writing regime following the Digital Economy Act. The BIS cost order confirms the 75/25 split of costs between rightholders and ISPs.

ISPs will of course pass on these costs to their customers. According to the Government's own estimates that means that up to 96,000 individuals will not be able to afford an internet connection anymore.1

Less well off families already face big cuts in benefits and struggle to make ends meet. On top of that they might lose their main access to communication and education through the internet as a result of rising broadband costs. That runs contrary to the government's plans to increase the number of people with internet access.

Up to £500m will be taken out of the economy and wasted into a bureaucratic scheme that is unlikely to bring the public any benefits. This is ludicrous given that we are in a recession.

Rightsholders would be better off investing that money into setting up new online content services.

The music industry increased its profits by 4.7 percent in the recession year 2008 and according to their own figures online revenue rose by an impressive 73 percent in 2009. That proves that the whole letter writing regimes is completely unnecessary. Perhaps the industry can solve its problems without expensive and damaging schemes like this. 

ISPs are also likely to invest less in infrastructure if they have to pay a total of £120m2 to set up the scheme including means of identifying subscribers and processing letters to subscribers accused of copyright infringement. So we might well end up with a more expensive and technically worse internet service.

The case against the Act is growing. Hard evidence of economic harm is accumulating. We have every chance of getting the worst parts of the Act repealed. We have to keep up the pressure on Government and Parliament.

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1 According to the impact assessment on the Digital Economy Act costs to ISPs could lead to 10,000 - 40,000 UK households being priced out of broadband. (Digital Economy Bill – Impact Assessments package (First Edition), pg.76). That means that up to 96,000 individuals might not be able to afford broadband as the average household size in the UK was 2.4 in 2003.  

2 As detailed in Government's own impact assessment of the Digital Economy Act, pg55,78.


Comments (1)

  1. Grubastuba:
    Sep 16, 2010 at 02:08 PM

    Dear Mr Vaizey,

    Although you are not my MP I felt the need to write to you in your position of Minister in the Coalition Government. I read with some interest this morning the BBC news report regarding your thoughts about "protecting our creative industries". As someone who believes the Digital Economy Act was a hastily rushed through piece of legislation that should at the very least be revisited now the election is over and at best be stricken from the statute books I was shocked to hear that neither seems to be occuring and the Government is now starting to introduce systems to try and make it a functional piece of legislation.

    In the published comments of yours on the BBC news website you state that you expect the result of the DE Act to benefit the creative economy to the value of some £200 million, would you be able to quantify that statement? Surely to be able to give it a figure you have to know exactly how much is lost? without knowing definitively how many sales would have been made if an illegal version not been available how can you state £200 million? You also say that stopping people sharing digital content is at the heart of protecting our creative industries and due to sharing these industries have suffered significant losses, would you be able to quantify those statements? Once again as there is no ability to definitively say how much is lost surely you cannot say that illegal downloads are at the heart of the problem?

    Reading numerous industry reports seems to indicate that both the Film and Music Industries are actually doing quite well. More films are being made than ever before and more money is being taken at the box office, a few parts of the Music industry may be struggling but in general terms the rest of the industry is making more money than before the DE Act came into force.

    The PRS for Music Economic Insight report issue 15 ( highlighted music revenues up 4.7% from 2007 to 2008 and issue 20 ( states that the combined music industries growth from 2008 to 2009 was 5%, yet in issue 15 they said file sharing would lead to economic uncertainty in investment. That report also highlights that although physical sales are down revenue from events based entertainment is up and the authors believe that shows a shift in how people wish to consume entertainment.

    The UK Film Council Statistical Yearbook 2010 ( Review of the 2009 year has some very interesting figures, for example 2009 shows the 2nd highest cinema visits since 1971 and the box office revenue grew to a record £944 million.

    This data straight from the industries themselves seems to be at odds with what parts of those industries and parts of the Government are telling the public. Why the government has taken upon itself to prop up parts of those industries that are either failing as the horse and carriage did when the automobile was invented or failing due to not adapting to a changing market is beyond me.