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DIGITAL ECONOMY BILL [HL]
EXPLANATORY NOTES
INTRODUCTION
1. These Explanatory Notes relate to the Digital Economy Bill [HL] as introduced in the House of Lords on 19th November 2009. They have been prepared by the Department for Culture, Media and Sport and the Department for Business, Innovation and Skills in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.
2. The Notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.
BACKGROUND
3. The communications sector is one of the three largest economic sectors in the UK economy, accounting for around 8% of GDP. In recent times, this sector has undergone significant changes, shaped by the development and use of digital technologies by industry and consumers.
4. It was against this background that Digital Britain, the government’s investigation into this sector, was launched in autumn 2008. The government published the Digital Britain White Paper, entitled Digital Britain: Final Report (Cm 7650) in June 2009. The White Paper made a number of recommendations. The Digital Economy Bill takes forward those that require legislation.
STRUCTURE OF THE BILL
5. The Bill comprises 49 clauses and three Schedules and covers eleven topics.
6. Topic 1 is the general duties of the Office of Communications (“OFCOM”). Clauses 1 to 3 impose a new general duty on the communications regulator, OFCOM, to have particular regard, when performing their functions, to the need to:
- Promote investment in electronic communications networks;
- Promote investment in content that contributes to the fulfilment of specified public service objectives; and
- Make sure the investment is efficient, wherever possible.
7. Clauses 1 to 3 also impose a new duty on OFCOM to provide to the Secretary of State a report on the UK communications infrastructure every two years, and to report on media content.
8. Topic 2 is online infringement of copyright. Clauses 4 to 17 impose on internet service providers obligations aimed at the reduction of online infringement of copyright. OFCOM is responsible for the specification of the procedural and enforcement aspects of these obligations through the approval or adoption of legally binding codes of practice. Clause 17 gives power to the Secretary of State to make provision by order to amend Part 1 or Part 7 of the Copyright Designs and Patents Act 1988 for the purpose of preventing or reducing on-line copyright infringement.
9. Topic 3 is powers in relation to internet domain registries. Clauses 18 to 20 provide that, where the Secretary of State has serious concerns about the operation of a register of internet domain names, the Secretary of State may take steps, or ask the court to take steps, relating to the management or constitution of the body operating the register.
10. Topic 4 is the Channel Four Television Corporation (“C4C”). Clauses 21 and 22 extend C4C’s functions.
11. Topic 5 is independent television services. Clauses 23 to 29 update the statutory framework for the Channel 3 and Channel 5 licences to introduce more flexibility and to remove the requirement for Channel 3 licence holders to produce and broadcast Gaelic language programmes. Clause 28 confers a new power on OFCOM to appoint persons to provide regional and local news for Channel 3 areas, or parts of such areas.
12. Topic 6 is independent radio services. Clauses 30 to 36 introduce changes to the licensing regime for independent radio services to facilitate the change to digital services.
13. Topic 7 is regulation of television and radio services. Clause 37 provides for the Secretary of State to alter the conditions of public service provision that OFCOM must include in Channel 3 and 5 licences, with the option to change the conditions back at a later date.
14. Topic 8 is access to electromagnetic spectrum. Clauses 38 and 39 enable the reallocation of spectrum currently used by mobile network operators.
15. Topic 9 is video recordings. Clauses 40 and 41 and Schedule 1 implement changes to video games classification as recommended in Safer Children in a Digital World: Byron Review 1, extending the range of video games that are subject to requirements to be age-rated and supplied only in accordance with the rating.
16. Topic 10 is copyright and performers’ property rights: licensing and penalties. Clauses 42 and 43 and Schedule 2 amend the law on copyright licensing by:
- Giving the Secretary of State power to make provision by statutory instrument for the regulation of copyright licensing to enable (a) the regulation of collecting societies, (b) the conferral of extended powers on collecting societies to grant licences over works of non-members, and (c) to make other provision for the granting of licences in respect of orphan works; and
- Increasing penalties for some forms of copyright infringement.
17. Topic 11 is public lending right. Clause 44 amends the Public Lending Right Act 1979 and the Copyright, Designs and Patents Act 1988 to allow inclusion of non-print formats (audio-books and e-books) in the public lending right payment regime.
TERRITORIAL EXTENT AND APPLICATION
18. The Bill extends to all of the United Kingdom.
19. Video games classification and public lending right are transferred matters in Northern Ireland. The Northern Ireland Assembly’s consent to the provisions on those topics is being sought.
20. There is no effect on the Welsh Ministers or the National Assembly for Wales and no other particular effect on Wales.
21. This Bill does not contain any provisions falling within the terms of the Sewel Convention. Because the Sewel Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought for them.
COMMENTARY ON CLAUSES
Topic 1: General duties of OFCOM
Background
22. Section 3(1) of the Communications Act 2003 (“the 2003 Act”) provides that the principal duty of OFCOM, when exercising their functions, is to further the interests of citizens in relation to communications matters and to further the interests of consumers in relevant markets, where appropriate by promoting competition. Relevant markets are those for any of the services, facilities, apparatus or directories in relation to which OFCOM have functions.
Clause 1: General duties of OFCOM
23. This clause amends section 3 of the 2003 Act. It inserts a new subsection (1A) which provides that when performing their duties under subsection (1) OFCOM must have particular regard, in all cases, to the need to:
- Promote appropriate levels of investment in electronic communications networks; and
- Promote appropriate levels of investment in public service media content, which fulfils the public service objectives specified in paragraphs (b) to (j) of section 264(6) of the 2003 Act. Examples of public service media content include content that reflects, supports and stimulates cultural activity in the United Kingdom, and content that facilitates fair and well-informed debates on news and current affairs.
24. Paragraph (c) of new subsection (1A) requires that OFCOM must have particular regard to the need for the investment to be efficient, wherever possible. It recognises that it may sometimes be necessary for OFCOM to promote investment that is not efficient. For example, investment in public service content may not always be efficient as this content serves a public policy as well as an economic objective.
Clause 2 : OFCOM reports on infrastructure, internet domain names etc.
25. This clause inserts three new sections into the 2003 Act which will require OFCOM to report to the Secretary of State on the state of the UK’s communications infrastructure and services.
26. New section 134A requires OFCOM to produce an initial report in the first year after the provision comes into force, followed by subsequent reports at two-yearly intervals. It also requires that should OFCOM become aware of a marked change with a significant impact on business or the public, in any of the reporting areas, and which they consider should be brought to the attention of the Secretary of State, they should write a further report.
27. New section 134B sets out the subject matter to be covered by the reports. The initial report and the biennial reports will consist of a survey of:
- The different types of electronic communications network and service in the UK;
- Geographic and population coverage of those networks and services;
- Downtime, and measures in place to maintain or improve availability;
- A comparison between UK networks and services and equivalent networks and services provided in a range of other countries.
28. Additionally, in relation to UK networks, the reports will cover infrastructure sharing (for example, where two or more mobile operators pool their network of masts and both offer services across them), capacity (the amount of data that networks and parts of networks are able to carry and the rate at which they can carry it) and wholesale arrangements (the extent to which one operator can buy capacity on another operator’s network and then sell it on to retail customers). In relation to services, they will also cover the use of the electromagnetic spectrum.
29. The clause also inserts a new section 134C into the 2003 Act which requires OFCOM to report on matters specified by the Secretary of State relating to internet domain names when requested to do so. These matters might include the management and distribution of internet domain names by registries and the misuse of domain names or the use of unfair practices by registries, end-users of domain names or their agents (known as registrars).
30. The reporting duty would, for example, enable the Secretary of State to ask OFCOM to report on the activities of internet domain registries based in the UK (and their registrars and end-users) in circumstances where the Secretary of State believes that the operation of those registries (or the activities of their registrars or end users) could adversely affect, or has already adversely affected, the reputation or operation of the UK’s internet economy and/or the interests of consumers or the public in the UK.
31. In addition, the clause amends section 135 of the 2003 Act to enable OFCOM to use their existing information gathering powers to require communications providers and others to supply the information which they will need to write their reports. Those powers are subject to the restrictions in section 137 on the imposition of information requirements, which means, in particular, that a demand for information must be proportionate to the use for which the information is to be put. Penalties for contravention of the information requirements may be imposed under section 139.
Clause 3: OFCOM reports on media content
32. Section 264 of the 2003 Act requires OFCOM to report at least every five years on the fulfilment of the public service remit for television by public service broadcasters, namely the BBC, Channel 4, S4C and providers of Channel 3 and Channel 5. The public service remit involves the provision of a balanced diversity of high quality content, which meets the needs and interests of different audiences in the United Kingdom. Paragraphs (b) to (j) of section 264(6) of the 2003 Act provide detailed public service objectives underpinning this remit. According to these objectives, examples of public service media content would include content that reflects, supports and stimulates cultural activity in the United Kingdom, and content that facilitates fair and well informed debates on news and current affairs.
33. This clause extends the scope of OFCOM’s reviewing and reporting obligations beyond television. Under new section 264A, OFCOM will be required to consider the wider delivery of public service media content on other platforms, such as the internet and on-demand programme services, and review the extent to which such content contributes towards the fulfilment of the public service objectives defined in section 264(6)(b) to (j).
Topic 2: Online infringement of copyright
Background
34. The Bill includes provision concerned with online infringement of copyright. This is particularly, but not exclusively, in response to infringement of copyright in the fields of music, film and games. The provision inserts new sections 124A to 124M in the Communications Act 2003 (“the 2003 Act”), which impose obligations on internet service providers (“ISPs”) to:
- Notify their subscribers if the internet protocol (“IP”) addresses associated with them are reported by copyright owners as being used to infringe copyright; and
- Keep track of the number of reports about each subscriber, and compile, on an anonymous basis, a list of some or all of those who are reported on. After obtaining a court order to obtain personal details, copyright owners will be able to take action against those included in the list.
35. The obligations will be underpinned by a code approved by OFCOM or, if no industry code is put forward for approval, made by OFCOM. The code will set out in detail how the obligations must be met.
36. In case the initial obligations prove insufficient to reduce significantly the level of online infringement of copyright, the provisions also grant the Secretary of State a power to impose further obligations (“technical obligations”) on ISPs. These would be imposed on the basis of reports from OFCOM or any other relevant considerations, and would require ISPs to take measures to limit internet access to certain subscribers. The intention is that technical measures would be used against serious repeat infringers only. Technical measures would be likely to include bandwidth capping or shaping that would make it difficult for subscribers to continue file-sharing, but other measures may also be considered. If appropriate, temporary suspension of broadband connections could be considered.
37. OFCOM would be subject to an obligation to prepare a code setting out the procedural mechanisms to give effect to the technical obligations of ISPs. The technical measures were described more fully in the consultation document issued on 16th June 2009, as supplemented by the government statement published on 25th August 2009 2.
38. To safeguard the interests of consumers, the provisions also require appeals processes to be set up as part of the underpinning codes. These would include the right to appeal decisions of ISPs to impose technical measures. The appeal would be to a person independent of OFCOM, with a further right of appeal to the First-tier Tribunal.
39. The provisions also set out how the costs of operating such a system may be shared. Funding from cost apportionment would enable an underpinning code to be developed by interested parties. To illustrate how the provisions might work in practice, possible processes of notification and court action are outlined below:
- Copyright owners identify cases of infringement and send details including IP addresses to ISPs;
- The ISPs verify that the evidence received meets the required standard, and link the infringement to subscriber accounts;
- The ISPs send letters to subscribers identified as apparently infringing copyright. They keep track of how often each subscriber is identified;
- If asked to do so by a relevant copyright owner, ISPs supply a serious infringers list showing, for each subscriber who has been identified repeatedly by the copyright owner, which of the copyright owner’s reports relate to that subscriber. The list does not reveal any subscriber’s identity;
- Copyright owners use the serious infringers list as the basis for a large scale “Norwich Pharmacal” 3 court order to obtain the names and addresses of some or all of those on the list. At no point are individuals’ names or addresses passed from the ISP to a copyright owner without a court order;
- Copyright owners send “final warning” letters direct to infringers asking them to stop online copyright infringement and giving them a clear warning of likely court action if the warning is ignored; and
- Copyright owners take court action against those who ignore the final warning.
40. OFCOM will be under a duty to report regularly to the Secretary of State on the efficacy of the initial obligations in reducing the level of online copyright infringement. Taking those reports or any other relevant factors into account, the Secretary of State may direct OFCOM to assess whether, and if so which, technical measures against particular subscribers may be appropriate, and to report back to the Secretary of State. The Secretary of State may, on the basis of this report or any other consideration, make an order imposing on ISPs “technical obligations” to take measures against subscribers who meet certain criteria. The measures would be to limit the subscribers’ internet access.
41. If the Secretary of State imposed technical obligations on ISPs, OFCOM would be required to make a code for the purpose of regulating the technical obligations, or to revise the existing code to take account of them. The new or revised code would need to comply with requirements relating to enforcement. For example, it would have to include rights for a subscriber to appeal against a technical measure that an ISP had taken or proposed to take, and would need to comply with requirements as to the reimbursement of costs.
42. The intention is that copyright owners would be held to the same standards of evidence of copyright infringement as for the initial obligations, and that the procedure for reporting infringement of copyright would be the same as well.
43. Clause 17 gives power to the Secretary of State to make provision by order to amend Part 1 or Part 7 of the Copyright Designs and Patents Act 1988 for the purpose of preventing or reducing on-line copyright infringement.
Clause 4: Obligation to notify subscribers of reported infringements
44. The section of the 2003 Act that is inserted by this clause (section 124A) sets out an obligation for ISPs to notify subscribers of copyright infringement reports (“CIRs”) received about them from copyright owners. It describes what CIRs and notifications to subscribers must contain, the procedures that copyright owners must comply with when making CIRs, and the procedures that ISPs must follow when sending subscriber notifications.
45. Copyright owners are currently able to go on-line, look for material to which they hold the copyright and identify unauthorised sources for that material. They can then seek to download a copy of that material and in doing so capture information about the source including the IP address along with a date and time stamp. However, at present they do not have the ability to match this information to the broadband subscriber to whom that IP address was allocated at that precise time. This information is only held by the subscriber’s ISP. Therefore, the copyright owner relies on the ISP’s ability to match the IP address to the name and address of the subscriber concerned.
46. However, the ISP is unable to pass this information on to the copyright owner without a court order. To do so would breach data protection and privacy law. To help ensure that the subscriber is made aware that their account appears to have been used to breach copyright, section 124A imposes an initial obligation on the ISP, in relevant cases, to notify the subscriber if the ISP receives a CIR from a copyright owner.
47. The notification from the ISP must inform the subscriber that the account appears to have been used to infringe copyright, and it must provide evidence of the apparent infringement, direct the consumer towards legal sources of content, and provide other advice. The code may require the notification to include other material as well, such as a statement that information about the apparent infringement may be kept and disclosed to the copyright owner in certain circumstances. Further apparent infringements using the subscriber’s account may result in additional notifications.
Clause 5: Obligation to provide infringement lists to copyright owners
48. ISPs will have to keep a record of the number of CIRs linked to each subscriber along with a record of which copyright owner sent the report. Under section 124B of the 2003 Act, inserted by clause 5, an ISP may be required to provide a copyright owner with relevant parts of those records on request (“copyright infringement lists”), but in an anonymised form so as to ensure compliance with data protection legislation. The intention is for the code to set out a threshold number of CIRs, for example 50, which means that a subscriber will be considered a serious repeat infringer whose alleged infringements must be covered by any copyright infringement lists that the ISP provides to the relevant copyright owner.
49. A copyright infringement report represents a single breach of copyright at a moment in time. At present, a copyright owner has no way of knowing whether the subscriber behind that CIR habitually infringes copyright online or whether the CIR represents a curious individual trying file-sharing for the first and only time. Because of this, the high costs involved in legal action deter copyright owners from enforcing their rights. By allowing copyright owners to target only the most serious repeat infringers, copyright infringement lists provided by ISPs are intended to make legal action a more attractive and effective tool for copyright owners to use in respect of their copyright.
50. The lists would be made available to copyright owners on request in an anonymised form. For example, while a list might (for example) identify subscriber 936 as being linked to the most CIRs, it would not include any personal information about subscriber 936. In order to get this personal data, the copyright owner would need a court order. However, the list would allow the copyright owner to identify subscriber 936 as someone against whom legal action may be appropriate.
Clause 6: Approval of code about the initial obligations
51. The obligations provided for in new sections 124A and 124B would not have effect until there was a complementary code in force that had been approved or made by OFCOM.
52. Clause 6 inserts new section 124C in the 2003 Act. This section sets out the requirements for OFCOM’s approval of a code regulating matters in connection with the initial obligations. The process by which infringements are detected, the standard of evidence that the copyright owner must meet before an ISP must send a notification letter, the format of CIRs, and the routes of appeal for consumers are all issues of detail that section 124C would require the code to deal with. The government hopes that all stakeholders (ISPs, copyright owners and consumers) will contribute to the development of an industry code. Other criteria that an approved industry code may specify include setting in advance the number of CIRs the ISPs will be expected to process in a given period (say, six months).
53. Without these criteria, there would be no obligation for copyright owners to provide infringement information in a standard format and no protection for ISPs in the event that copyright owners set extremely high levels of expected CIRs.
54. The government also envisages that any approved code would also set out the time a copyright owner has to submit a CIR (so that a CIR must relate to a recent infringement) and the time the ISP has to act on the CIR and send a notification to the subscriber (for example, 5 working days).
55. The government’s intention is for the obligations to fall on all ISPs except those who are demonstrated to have a very low level of online infringement. This is on the basis that it would be disproportionate (in cost terms) to require an ISP to incur significant costs to counter a problem that does not exist to any significant degree on its network. The proposal is therefore for the code to set out qualifying threshold criteria, based on the number of CIRs an ISP receives in a set period of time. The government anticipates that most small and medium (“SME”) ISPs and, possibly, the mobile networks would fall under the threshold. However, this exemption would not be a one-off exercise and the qualifying period would be a rolling one (for example, “x” number of CIRs received in a rolling 3 month period). ISPs would need to ensure online infringement of copyright remained at a low level or else face the prospect of passing the qualifying threshold. Once in scope, ISPs would have to comply with the obligations and to continue to do so even if the number of CIRs later fell below the threshold.
56. In order to ensure that the code covered all the necessary areas and to a sufficient standard, OFCOM’s approval would be needed before it could come into force and the Secretary of State would need to consent to the approval.
57. Before approving a code, OFCOM would be expected to carry out consultation. Under sections 124C and 124E (which is inserted by clause 8), OFCOM would also need to satisfy themselves that the code was objectively justifiable, proportionate and transparent.
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