Digital Economy Bill [HL] - continued          House of Lords

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Clause 7: Initial obligations code by OFCOM in the absence of an approved code

58.     Clause 7 inserts new section 124D in the 2003 Act. The new section provides for the making by OFCOM of a code regulating the initial obligations if there is no industry code. The government hopes industry can devise a satisfactory code which OFCOM approves. However, if that does not happen, OFCOM must develop a code themselves for adoption by order. It is possible that stakeholders may be able to reach agreement on parts of the code, which OFCOM can then consider, and, if appropriate, include as part of OFCOM’s code. Again, the consent of the Secretary of State would be required for the making of the code.

Clause 8: Contents of the initial obligations code

59.     Clause 8 inserts new section 124E in the 2003 Act. This sets out what the code underpinning the initial obligations (whether an industry code or OFCOM’s own code) must contain. The reason for including the underpinning material in a code, rather than directly in the 2003 Act, is that it is likely to be detailed and to have to be adapted and refined over time.

60.     The code must set out the process by which the initial obligations will operate and the procedures that copyright owners and ISPs must follow in relation to them. It must set out the criteria, evidence and standards of evidence required in a CIR and the required format and content of a notification letter sent to a subscriber. It must set out the enforcement procedures that OFCOM or a body set up by OFCOM to administer the code may employ in the event of a failure to comply with the code. And it must also specify the rights of subscribers to challenge actions under the legislation by the ISPs and copyright owners.

Clause 9: Progress reports

61.     Clause 9 inserts new section 124F in the 2003 Act. Section 124F places an obligation on OFCOM to prepare full reports (every 12 months) and interim reports (every 3 months) about the infringement of copyright by subscribers to internet access services. Each report must be sent to the Secretary of State as soon as practicable after the end of the period for which is prepared.

62.     These reports will help the Secretary of State to monitor trends in online copyright infringement and to ascertain the effectiveness of the obligations on ISPs. As part of the reports OFCOM will, for the first time, be required to produce assessments of the level of online infringement of copyright. The reports will also take account of various factors which might affect the level of online copyright infringement, such as the steps taken by copyright owners to enable subscribers to obtain lawful access to copyright works, and the extent to which copyright owners are making CIRs and following up with legal action against subscribers. They are intended to be a source of information that the Secretary of State can draw on when taking decisions about whether to impose additional obligations on ISPs.

Clause 10: Obligations to limit internet access: assessment and preparation

63.     New section 124G of the 2003 Act, inserted by clause 10, confers a power on the Secretary of State to direct OFCOM to assess whether ISPs should be obliged to take technical measures against certain subscribers, or direct OFCOM to take steps to prepare for technical obligations. In particular, OFCOM may be required to carry out a consultation or assess the likely efficacy of different kinds of technical measure, and to report back to the Secretary of State. Technology used for the purposes of online infringement of copyright is changing fast and it is not possible at this stage to know which technical measures would be effective.

64.     The government’s aim is for the initial obligations in new sections 124A and 124B to significantly reduce online infringement of copyright. However, in case the initial obligations prove not as effective as expected, new section 124H gives the Secretary of State the power to introduce further obligations, should that prove appropriate.

65.     OFCOM would be required to set out supporting provision in a technical obligations code under section 124I (which is inserted by clause 12).

Clause 11: Obligations to limit internet access

66.     New section 124H of the 2003 Act is inserted by clause 11 and gives the Secretary of State power to order ISPs to impose technical measures on internet access service subscribers meeting certain criteria.

67.     The government envisages that the criteria for taking a technical measure against a particular subscriber would be the same as the criteria used to determine whether the subscriber’s alleged infringements are included in a copyright infringement list under the initial obligations. So a technical measure would be applied if a subscriber had been linked to a number of CIRs sufficient to place them on a serious infringers list.

Clause 12: Code by OFCOM about obligations to limit internet access

68.     If the Secretary of State makes an order under section 124H requiring ISPs to take technical measures against subscribers, OFCOM will be under an obligation to adopt (by order) a code underpinning the technical obligations. This is provided for in new section 124I of the 2003 Act, inserted by clause 12.

69.     Section 124I sets out the procedure for the making by OFCOM of the code on technical obligations. It also provides that the Secretary of State’s approval of the code is required before it can be made.

Clause 13: Contents of code about obligations to limit internet access

70.     Clause 13 inserts new section 124J in the 2003 Act. Section 124J sets out a list of matters which are to be included in the technical obligations code. Thus the code must, for example, include provision in relation to enforcement. The code would have to provide subscribers with a right to challenge the imposition of a technical measure. Also, under the code, if there was a legal challenge by a subscriber, the taking of the measure could be postponed until the person hearing the challenge or (on appeal) the First- tier Tribunal had resolved the appeal.

71.     The code could provide for OFCOM to set up bodies in charge of administering the code and hearing appeals from subscribers.

72.     The government envisages that the code would also set out the process by which a technical measure would be taken, and the information that would have to be sent to a subscriber facing such a measure. It would also address how any costs might be apportioned, and set out the dispute mechanism in the event of disagreement between an ISP and a copyright owner.

Clause 14: Enforcement of obligations

73.     Clause 14 inserts new section 124K in the 2003 Act. Section 124K sets out the penalties which may be imposed on an ISP for the contravention of their initial obligations or obligations to impose technical measures, or of the obligation to provide assistance to OFCOM under section 124G.

74.     The maximum penalty is specified as the sum of £250,000. However, the Secretary of State has a power to increase this amount by order. The order would be subject to the affirmative resolution Parliamentary procedure.

Clause 15: Sharing of costs

75.     The initial obligations and any later technical obligations will give rise to costs. These will include the cost to ISPs of processing copyright infringement reports and issuing subscriber notifications, the costs to ISPs associated with the imposition of any technical measures, OFCOM’s costs in approving or preparing the codes, the cost of enforcing them, and the funding of any subscriber appeals to an independent appeals body or the First-tier Tribunal.

76.     New section 124L of the 2003 Act, inserted by clause 15, confers a power on the Secretary of State to specify by order provision which must be included in the codes and which sets out how costs are to be apportioned between copyright owners and ISPs. The costs are those incurred under the copyright infringement provisions. The purpose of the section is to help ensure that the parties carry out their obligations in an efficient and effective manner and that both ISPs and copyright owners have economic incentives to take action to reduce online infringement of copyright through commercial agreements.

77.     The government believes that most of the costs of subscriber appeals to an independent person determining appeals or the First-tier Tribunal should be funded by industry, so that a subscriber does not face significant costs in making an appeal.

Clause 17: Power to amend copyright provisions

78.     Clause 17 inserts a new section 302A into the Copyright Designs and Patents Act 1988 (“the 1988 Act”). It enables the Secretary of State to make provision by order to amend Part 1 or Part 7 of the 1988 Act for the purpose of preventing or reducing on-line copyright infringement. The power may only be exercised if it appears to the Secretary of State appropriate to do so having regard to technological developments that have occurred or are likely to occur.

79.     In addition to the problems caused by services such as unlawful peer-to-peer (P2P) file-sharing and other many-to-many infringements which are dealt with by other provisions of the Bill, cyber lockers (on-line data repositories) and similar services have also been identified as areas where damaging online copyright infringements are already occurring and where the problem could grow rapidly. The government’s concern is that in a rapidly moving technological environment a response that is more flexible than relying on new primary legislation is required in order to meet technological evolution.

80.     The power may be exercised to:

  • Confer, modify or remove a power, right or duty; and

  • Require a person to pay fees.

81.     The order made under this provision is to be:

  • Made by statutory instrument;

  • Subject to approval by resolution of each House of Parliament; and

  • Subject to the requirement that it is made after consultation of persons likely to be affected by the order or their representatives, as the Secretary of State thinks fit.

82.     The use of the power is restricted by the requirement for prior consultation and by the affirmative resolution procedure, which requires Parliament’s approval for any order before it may be made. It is also limited so as not to allow the Secretary of State to create or modify any criminal offence. Illustrative examples of the possible ways in which this power could be used include: adapting the legal process (including for example section 97A of the 1988 Act) to allow rights holders to take more effective action more quickly against websites hosting or sharing material in breach of copyright; creating a fast track process; or imposing a duty on a body to report on the prevalence of new or emerging types of online infringement.

Topic 3: Powers in relation to internet domain names


83.     The Bill gives powers to the Secretary of State to intervene in the operation of domain name registries. Such registries allocate internet domain names to end users. Internet domain names (such as ) underpin the addressing system for the internet.

84.     The Bill confers powers exercisable in circumstances where there has been misuse of domain names, or the use of unfair practices by registries, registrars and end-users of domain names, or where registries have failed adequately to deal with complaints. The powers are only exercisable where those failures have adversely affected or are likely adversely to affect (a) the reputation or availability of electronic communications services or networks in the UK and/or (b) the interests of consumers or members of the public in the UK. The provisions only affect registries which take the form of companies formed and registered under the Companies Act 2006 or limited liability partnerships.

85.     The powers allow the Secretary of State to appoint a manager of a registry or to apply to court to intervene in relation to a registry’s constitution in order to secure that the registry remedies specified serious failures (and any consequences of them).

Clause 18: Powers in relation to internet domain registries

86.     This clause amends the Communications Act 2003 (“the 2003 Act”) by inserting a new section 124N. The section applies where the Secretary of State wishes to use the new powers set out in clauses 19 and 20 and is satisfied that there has been a serious failure of a registry because:

  • The registry itself, its end-users (that is, owners of or applicants for domain names) or registrars (that is, agents of end-users) have been engaging in practices prescribed in regulations made by the Secretary of State which are unfair or which involve the misuse of internet domain names; or

  • The registry’s arrangements for dealing with complaints in connection with domain names do not comply with requirements prescribed in regulations made by the Secretary of State.

87.     Possible examples of unfair practices would be cyber-squatting (that is, registering domain names which are of economic value to other people and then charging those people high prices to buy them or use them for their own purposes); drop-catching (that is, waiting until the expiry date for an existing registered domain name, snatching it and then charging the previous owner to buy it back); or pressure sales tactics.

88.     Possible examples of the misuse of internet domain names would be registering intentionally misleading domain names, perhaps using them for phishing (a form of internet fraud); distributing malware or spyware, which are computer viruses; spamming; intentionally misleading the public into believing there is a connection between the domain name owner and other organisations (or that another organisation owns or authorises the use of the domain name).

89.     The section provides that such a failure will be serious where it has adversely affected or is likely adversely to affect the reputation or availability of electronic communications networks or services provided in the UK, or the interests of consumers or the public in the UK.

90.     Where the section applies, the Secretary of State must notify the registry specifying the failure and a period within which the registry may make representations to the Secretary of State. In practice, the Secretary of State may (if he considers it appropriate in the circumstances) require OFCOM to prepare a report on the allocation, registration and/or misuse of internet domain names by UK-based registries under section 134C (inserted by clause 2(1)) before exercising his powers.

91.     New section 124N defines internet domain registry and other terms used in these provisions.

Clause 19: Appointment of manager of internet domain registry

92.     This clause amends the 2003 Act by inserting new sections 124O and 124P. If the Secretary of State has served a notice under new section 124N, the period allowed for making representations has expired and the Secretary of State is satisfied that the registry has not taken appropriate steps to remedy the failure or its consequences, the Secretary of State may appoint a manager in respect of the property and affairs of the registry to secure that appropriate steps are taken to remedy the failure or the consequences of the failure.

93.     New clause 124P makes provision about the powers and functions of the manager so appointed. In particular, the Secretary of State may provide for the manager to take over any or all specified functions of the directors in order to ensure that the registry remedies the failure or the consequences of it, and may also prevent the registry’s directors from carrying out those functions (subsection (2)). The Secretary of State may also provide for the remuneration of the manager, which may be payable by the registry itself (subsection (3)). In order to ensure that this power does not affect the rights of third parties or the insolvency process, section 124O(4) provides that the appointment does not affect the rights of any third party to appoint a receiver or manager, or the rights of any receiver or manager appointed by a third party. For similar reasons, section 124O(6) provides that if certain office holders under insolvency legislation are appointed in respect of the registry, the Secretary of State must discharge the order appointing a manager. The Secretary of State must also keep the order under review and discharge it if appropriate, for example if the registry has remedied the failure (section 124O(5)).

94.     Section 124P(5) to (7) allow the Secretary of State to seek directions from a court in connection with the manager’s functions. This might be done in order to counter obstruction of the manager by a registry or its officers, since disobeying the court’s directions would amount to contempt.

95.     Section 124P(8) applies all the provisions to limited liability partnerships as if the references to a director were to a member of the limited liability partnership.

96.     Subsection (2) of clause 19 inserts a reference to an order under section 124O into section 192(1)(d) of the 2003 Act. The effect of this is that the registry has a right of appeal on both the facts and the law to the Competition Appeal Tribunal (and thence to the Court of Appeal on a point of law) in respect of a decision to appoint a manager.

Clause 20: Application to court to alter constitution of internet domain registry

97.     This clause amends the 2003 Act by inserting a new section 124Q. This gives the Secretary of State the power to apply to the court for an order to alter the constitution of a registry and to limit the registry’s ability to amend its constitution itself without the leave of the court. The provision only applies where the Secretary of State has served a notice under new section 124N, the period allowed for making representations has expired and the Secretary of State is satisfied that the registry has not taken the appropriate steps to remedy the failure or its consequences. The court may only make an order if the court considers it is appropriate in order to secure that the registry remedies the failure specified in the section 124N notification and any consequences of that failure. Section 124Q(5) provides that, in the case of a company, the constitution means the articles of association, and in the case of a limited liability partnership, it means the limited liability partnership agreement (as defined). The Secretary of State may exercise his power under this section to apply to court to alter the constitution and the power under new section 124O to appoint a manager concurrently (if he considers it appropriate).

Topic 4: Channel 4 Television Corporation


98.     C4C’s existing primary functions currently relate only to the Channel 4 television channel. Taking into account the growth of digital media, the Bill introduces provisions that extend the functions of C4C in relation to media content. The Bill achieves this by introducing new C4C functions via a new section 198A of the Communications Act 2003 (“the 2003 Act”).

Clause 21: Functions of C4C in relation to media content

99.     This clause will require C4C to participate in the making of a broad range of high-quality content that appeals to the tastes and interests of a culturally diverse society, and broadcast or distribute such content on a range of different delivery platforms. This content must include news and current affairs, content for older children and young adults and feature films. C4C will also be required to participate in the making of high quality films. To “participate” in this way includes investing in or otherwise procuring content. For the avoidance of doubt, these new duties on C4C to make content do not disapply the condition in Channel 4’s regulatory regime, referred to in section 295 of the 2003 Act, requiring C4C not to be involved, except to such extent as OFCOM may allow, in the making of programmes to be broadcast on Channel 4.

100.     The clause also makes provision as to the wider aims C4C must pursue in performing their duties, drawing on the core public purposes that C4C identified in their March 2008 report Next on 4 4. C4C must support new talent and innovation, support and stimulate well-informed debate, promote alternative views and perspectives and help to inspire change in people’s lives.

101.     The clause also requires C4C, in the performance of their duties, to have regard to the desirability of:

  • Working with cultural organisations;

  • Encouraging innovation in methods of content delivery; and

  • Promoting access to and awareness of services provided in digital form.

Clause 22: Monitoring and enforcing C4C’s media content duties

102.     This clause contains provision for monitoring and enforcing the delivery of C4C’s new functions, through new sections 198B, 198C and 198D of the 2003 Act. This complements, and is in part modelled on, the existing accountability framework for the delivery of the public service remit of the Channel 4 licensed public service television channel, under section 266 of the 2003 Act.

103.     New section 198B requires C4C to prepare, every year, a statement of media content policy, setting out how C4C propose to discharge their functions in the coming year. The statement must also report on their performance against the proposals contained in the previous year’s statement.

104.     In preparing this statement, C4C will be obliged to have regard to guidance issued by OFCOM and also to consult OFCOM. It will be open to C4C to produce the statement of media content policy either as a separate document or as part of a single document in combination with the statement of programme policy which it is required to provide in relation to the Channel 4 service.

105.     OFCOM will be required to keep their guidance under review and revise it as they think fit.

106.     New section 198C gives OFCOM a new obligation to review and report on the performance of C4C’s new duties, which may well include the making and broadcasting of programmes on television, at the same time as their reviews of the fulfilment of the public service remit under section 264 of the 2003 Act.

107.     New section 198D introduces enforcement powers for OFCOM in relation to the fulfilment by C4C of their new functions. It creates a new power of direction for OFCOM in the event that C4C fail to perform their new duties under new section 198A or to prepare or publish a statement of media content policy. The new section gives OFCOM the power to direct C4C to revise their latest statement of media content policy, to take such steps to remedy the failure as OFCOM may prescribe in the direction, or both. OFCOM must include in any direction a reasonable timetable for complying with it and state the factors OFCOM will take into account in determining whether or not a failure has been remedied. OFCOM must consult C4C before issuing such a direction. By virtue of sections 41(1) and (6) of the Broadcasting Act 1990, OFCOM have the power to impose a financial penalty on C4C for a failure to comply with a direction given by OFCOM under section 198D.

108.     This clause introduces, by means of a new section 271A of the 2003 Act, an additional power for OFCOM exercisable in the event that C4C fail to comply with a direction relating to a failure to perform one or more duties under section 198A. OFCOM must be satisfied that C4C are still failing to perform the relevant duty or duties and, if OFCOM are satisfied that it is reasonable and proportionate to the seriousness of the failure, they have the power to vary the licence under which the Channel 4 television service is licensed. OFCOM may vary the licence by making or adding such conditions to the licence as they consider appropriate to remedy C4C’s failure to perform the relevant new duties under section 198A. If, subsequently, OFCOM conclude that any of the new conditions are no longer required, they may vary the licence again, from such time as they determine. OFCOM must consult C4C before exercising the power to make or add conditions to the Channel 4 licence.

Topic 5: Independent television services


109.     In the Digital Britain: Final Report, the government accepted OFCOM’s analysis that the value of the existing commercially-owned public service broadcasting Channel 3 licences will decline further between now and the completion of digital switchover and that the regulatory obligations attached to the licences will therefore require further review over the period. Clauses 23 to 29 make amendments to provisions contained in the Broadcasting Act 1990 (“the 1990 Act”) and the Communications Act 2003 (“the 2003 Act”) in order to introduce additional flexibility into the licence processes for the commercially funded public service television broadcasters.

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Prepared: 20 November 2009