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Lastly, I want to speak about copyright. I should declare my interest as my main activity outside this House is in producing copyrighted material and selling it in book form and very substantially on the internet, so the basic protections that copyright law offers are extremely important to me. However, I think that the Bill has to be careful to ensure that it looks after the proper interests of citizens. We have always allowed citizens leeway under copyright law. You can lend books to friends and, as has been said, you can even copy your music and put it on to different kit. It is well known that newspapers are read by many more people than buy them, and certainly I am happy to borrow them when they are left behind on buses. I think it is entirely reasonable that people have got used to a reasonable level of sharing of copyrighted material between friends and within small communities, so that it does not have to be purchased again for every instance that it is used. The figures produced to show the losses incurred by the creative industries through illegal downloads do not represent those losses, but reflect infringement of copyright. It is not at all certain how many songs or films would actually have been purchased if people had had to pay for them. Many of the people who are downloading in this way are not in a position to pay for more than they do already, so one must be careful about the terminology one uses.

We have to be careful too about the industry cloaking itself in the finery of the small, creative individual. We are not talking about the small, creative individual here, but about powerful, monopolistic industries and giving them power over citizens. We must be careful of that. A principal example is that of the pornography industry, which I have seen mentioned in one briefing but has not been spoken of in any of the speeches today. Pornography is widely used on the internet and is one of the most assiduous industries when it comes

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to pursuing people for supposed non-payment for illegal downloads et cetera. We have to face it that we will be putting a lot of people into the hands of pornographers and their lawyers if we are not careful about the way we draft the Bill.

The recording industry is another major beneficiary of what is being done here. That industry is not exactly known for its kindness to creative people. Many people have created pieces of music and sold them to rapacious recording companies for a couple of hundred quid, only to see those companies go on to make vast sums out of them. The relationship is not equal and, as I have said, we are not dealing here with the benefit to the creative individual, but with the benefit to a powerful and monopolistic industry. We are also being asked to protect football, and presumably the interests of Mr Murdoch when it comes to putting the Times behind a "pay for" wall on the internet. In that context I am delighted to support what the noble Lord, Lord Mandelson, said about the BBC. I am 100 per cent behind his resistance to Mr Murdoch's demands in that regard.

We also need to bear in mind that the problems now facing the industry are, to quite a large extent, of its own creation. The industry has been extremely slow to listen to the demands of its customers, and has had something of an abusive relationship with them, seeking to punish them before thinking of how to serve them better. It has taken a decade for the industry to produce sensible alternatives to illegal file-sharing, and the fact that a generation of people have become used to an illegality comes down to the industry's sluggishness. It is still slow. The football people have complained that there are sites where people can download streaming video of premier division matches. All that the companies offer is an annual contract for several hundred pounds. They do not offer per match deals at a reasonable price. If companies treat their customers in that way, they really should not be surprised that their customers try to get round the system.

The noble Lord, Lord Mandelson, put it quite well when he talked about moving the industry forward and producing better business models. We ought not to be producing legislation that fossilises the creative industry in this unsatisfactory relationship with its customers. We ought to be ensuring that we are producing something that creates a real incentive to move it forward. Little things get complained of, such as the immense sluggishness in rights clearances. I have come across that to some extent. These things have to be dealt with by the industry. Underlying the Bill there should be a real quid pro quo.

I want to see an ISP/customer-friendly system to back us out of our addiction to illegal downloads. The first letter that comes from an ISP to the customers ought to be helpful, friendly and explanatory. It ought to give people the information that they need without making them feel like criminals in the way that the BBC does when it sends out a letter to someone it thinks has not paid the licence fee. It is very important to get the text of that letter right and I hope that we will set in place a system in which the text of the letter is under the control of Ofcom or the Government, and not individual copyright holders or ISPs.

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Secondly, it should be compulsory for copyright holders to go through the mechanism we are putting in place. It is not acceptable that we are putting in place a mechanism for them to deal with per-to-peer file-sharing and for them still to go immediately to lawyers and harass people as the pornography industry does already. The briefing that noble Lords will have seen from Which? describes the consequences well. We should take the opportunity of this Bill to stamp that out.

Thirdly, the appeals system must be good and clearly set out. We should be offering our citizens due process, not something that is summary. Losing one's internet connection in the digital age is a severe disadvantage. Losing it because you happen to be sharing it with other members of your family or, under current British Telecom arrangements, you are letting your neighbours use it, is something that we have to be careful of. I am not at all clear that we have the technology to go beyond the IP address, which comes into my router, to identify which user of perhaps one or two dozen who have access, has done the illegal downloading. We need to be very clear that we do not tip people into losing their internet connection or worse on a technically fallible basis. If I have one last request for my Front Bench, it is please can we vote against Clause 17?

5.05 pm

Baroness Bonham-Carter of Yarnbury: My Lords, at the last minute, I was not able to take part in the debate on the gracious Speech, so I start by saying how sorry I am that the noble Lord, Lord Carter, our DCMS "Goat", has gone to pastures new. Not long ago, I welcomed him to the government Front Bench as a distant cousin as well as a colleague. He will be missed. I am pleased that an even bigger beast is to take his Bill through this House.

I will briefly concentrate on those areas pertaining to public service content in Digital Britain. I am glad that the majority of the Bill, and by far the most complex parts of it, will be dealt with on these Benches by the "noble Tims" who sit in front of me. I declare an interest as an associate of an independent production company.

We on these Benches welcome the Government's commitment to Channel 4. Their recognition of the need to update Channel 4's remit will help to secure its role as the main public service competitor to the BBC. Here I echo the Minister. Competition is an essential element to ensuring a healthy future for the BBC and public service broadcasting.

Currently, Channel 4's remit relates only to linear TV and ignores the growth of digital media. We welcome the Bill extending this remit to new formats and platforms, where the channel is already pioneering public service broadcasting. I recommend its "1066" online game, designed to accompany a history programme of the same name broadcast on its terrestrial channel. This was targeted at 10 to 15 year-olds. We also welcome the new specific obligation placed on Channel 4 to produce content for older children and young adults. The channel already has a strong connection with younger audiences, so this is a sensible fit. I join the

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noble Lord, Lord Fowler, in welcoming a commitment to the making and showing of British films being enshrined in the Bill as part of the channel's role.

I have two caveats about the Channel 4 elements. It is important that these new arrangements do not lead to any diminution of PSB on Channel 4's main, terrestrial channel. An essential component of public service broadcasting is that it engages as wide a spectrum of the population as possible so that different kinds of people with different interests and insights can share with society as a whole. Public service content must not be relegated to digital channels with small, niche audiences. This must not be used as an excuse to not commission public service broadcast programmes for the main channel. In the light of this, should Ofcom not be given new powers to ensure that Channel 4 adheres to its existing PSB obligations on its main, linear channel? While we wholeheartedly welcome what is in the Bill, we worry about what is not. It fails to address the longer term problems of plurality in public service broadcasting.

As many noble Lords have said, the multi-channel landscape of the digital future poses particular challenges to the purely commercial public service broadcasters. We accept the need addressed by the Bill to reduce the regulatory burden on ITV. This new landscape has transformed the economics of commercial PSB and put the provision of regional and local news under particular threat. We agree with the noble Lords, Lord Birt and Lord Fowler, and with the Minister that the BBC must not become a monopoly supplier.

The Bill proposes that the underspend from the licence fee money ring-fenced to help pay for digital switchover's targeted assistance programme will be used to pay for the independently financed news consortia pilots that start next April. How do the Government know how much that underspend is when digital switchover is not completed until 2012? We still have London to go.

Although we were against the BBC money being used to fund a social cost, we support the surplus being used to help to fund commercial public service broadcasting, but there it ends. We are absolutely against top-slicing. Once this money is used, that is it. We believe that top-slicing threatens the independence of the BBC and that condoning raids on the licence fee sets a dangerous precedent, leaving the BBC vulnerable to further funding cuts at the whim of the Government of the day.

For the pilots to work, there must be variety and innovation and they must concentrate on the local as well as the regional. As I understand it, the DCMS-not Ofcom-is running the pilots, so will the functions set out in Clause 28, allowing Ofcom to set criteria and conditions for the provision of this type of new service, apply to the pilots? Surely, for the pilots to be of any benefit, that must be the case. I am pleased to see in the Explanatory Notes that Ofcom may set conditions which encourage the provider to support or promote wider benefits to society in connection with the provision of news. That might include commitments to media skills and training. Is that something which the DCMS intends to encourage? Like the proposals for Channel 4, the Bill is silent about what comes next. How will the

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news consortia be funded in the future? As it stands, it seems that the pilots exist in a strange limbo not unlike contestants on a TV reality show.

I have a couple of questions about the interface with ITV. What quality control will ITV have over the programmes which emerge from the news consortia? After all, they will appear as part of the ITV schedule, and their success or failure will impact on the channel. Given that work previously undertaken by ITV's regional production teams will be taken over by the news consortia, will-I have to use a terrible acronym-TUPE, the transfer of undertakings protection of employment regulations, apply to the affected staff?

I end by picking up on what my noble friend Lord Razzall said about the fact that there is no mention of the BBC in the Bill. Long ago, we on these Benches called for a truly independent regulator of the BBC and argued, at the time that the BBC Trust was established, that that arrangement would only perpetuate the muddle between regulation and governance. Considering that those are the very sentiments expressed very publicly, as the noble Lord, Lord Fowler, and my noble friend Lord Razzall have pointed out, by the most recent Secretary of State for Culture, Media and Sport, does the Minister agree that not addressing the matter of BBC governance in the Bill is a lost opportunity?

5.12 pm

Lord Carter of Barnes: My Lords, as has been mentioned already this afternoon, I have some previous interests that are relevant to the Bill. However, as I am currently languishing in post-ministerial purdah, I do not believe that I have any current interests or conflicts which I need to disclose.

Earlier, in opening the debate, my noble friend the Secretary of State rightly highlighted the importance of the digital economy, the need for adaptation due to changes in technologies, and the increasing industrial importance of being future-ready as a knowledge and service economy. The triple effects of the death of distance, the crescendo of new creativity and the insurgence of the internet have created a new world and there is a clear need for legislative adaptation so that we may adjust to those changes.

For my part, one of the unexpected and possibly unintended consequences of my post-ministerial cooling-off period has been to spend time working abroad and observing in some detail other countries' developments and approach in this area. Whether it is the emerging markets, the ever-more powerful Chinese economy, the vision of the smaller Scandinavian countries, the aggression of the newer European countries or the clear approach of our more significant European partners, all of them have plans for and investments in their digital economies. It is increasingly clear that a digital future is central to industrial and governmental strategies around the world. The explosion of distribution systems, applications and the increasingly borderless nature of the content markets highlights those countries which are either ahead or behind in the digital future.

The debate within our Government was whether, at this stage in the political cycle, a small but perfectly formed Digital Economy Bill could do enough of the heavy lifting to merit inclusion in a final Queen's

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Speech, or whether it would be more coherent to wait until we were at a different point in that cycle and more fulsome legislation could be considered in the round. As the noble Lord, Lord Birt, rightly highlighted, could we go in a year from a consultation document, through a White Paper and a Green Paper, to a Bill, and avoid major mistake, major omission or a significant diminution of quality?

In politics, as in life and business, waiting for the perfect moment is rarely advisable. In my experience, a good decision on Monday is often preferable to a perfect one on Friday. This Bill therefore has a number of merits which I believe will bear the scrutiny of this House. First, it lays down a marker by its very existence, by not being solely a piece of broadcasting legislation, while at the same time seeking to address some if not all of the issues facing our public service broadcasters, but in the context of the modern digital economy.

Secondly, in the critical areas of investment, infrastructure, spectrum liberalisation and the digitalisation and deregulation of sound radio, it provides a framework for innovation, development and investment. Thirdly, in a whole range of detailed areas-from content protection and the value of rights, to video games classification, domain name registration and protection, the future remit of Channel 4, the broader issues of public service content, and the provision of funding, albeit short-term funding, for independent impartial news-it seeks to play catch-up with some of the capabilities of the technologies and the changing nature of consumer preferences.

As to its very existence, I do not think that it is merely a matter of nomenclature that this is a Digital Economy Bill rather than simply a piece of communications or broadcasting legislation. As I have commented before in this place and in others, one of the remarkable features of the 550 pages of the Communications Act 2003 was that the internet was not mentioned at all by name and only once by an oblique reference to an obligation on the regulator to consider the importance of high-speed data services in remote locations.

On the strategic elements of the Bill, and in particular the proposed updating and amending of the regulator's primary duties, I would urge noble Lords not to underestimate the importance of the proposed changes. Regulators are creatures of statute, of their leadership, of their governance structures and of the environment and the context of the times in which they operate. Their independence, their objectivity and their quality is often valued only when it is absent.

Many of us have lived through-some of us in rather too close proximity-the seismic events in the financial services sector, and an interesting question to pose is whether a gentle but firm amendment, ahead of time, to the primary duties of the Financial Services Authority might have produced a different response and emphasis in its approach to its regulatory duties.

In this country we do not have a crisis in the communications sector. In many ways we have enormous strength, significant competition, highly competitive retail pricing and, in the content and applications market, world-class levels of innovation and entrepreneurialism, and a number of globally admired companies. However,

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as I said in my opening comments, the rest of the world is not only catching us up but, in many instances, overtaking us. Two much-discussed elements of the Digital Britain White Paper are not in the Bill, either because legislation is not required, as is the case for the delivery of the universal service commitment, or because it was a tax measure, albeit a hypothecated one, and will therefore be dealt with in a Finance Bill. But perhaps I may make two related comments on these two issues, not least because they are often elided together as the same thing, and sometimes wilfully misunderstood and misreported.

The first proposal in relation to the universal service commitment allows this country to fund, from the underspend in the digital switchover, some hundreds of millions of pounds of public funds to ensure that every community, and possibly even those residents in Hambledon who are not BT employees, has access to a basic level of connectivity and a minimum level of broadband connectivity. The separate but related proposal for a hypothecated levy intended to generate seed-corn public funding that could be made available at an appropriate coupon rate for commercial players is a modest attempt, I would be the first to acknowledge, to bridge the gap that exists in this country today for the need for capital investment in our infrastructure set against the market's ability to fund it. It may help produce a fixed fibre infrastructure that extends further. It may combine in part with some of the liberalisation measures in this Bill relating to the electromagnetic spectrum to allow for the creation of fixed and wireless combined capabilities.

In truth, the technology solution should not concern this House; what matters is our willingness to recognise the importance of the communications sector and the need for investment upgrade in infrastructure. At the same time we need to see that the real future value is in the applications and services that will and can be delivered on such an infrastructure capability. That is the digital economy. As a country we are still broadly willing, with some notable objectors, to spend £142.50 per household per annum, with appropriate exemptions for certain households, in a hypothecated tax called the licence fee to provide us with high quality public service British content and the broadly beneficial multiplier effect that the money has on creating commercial businesses in the content markets.

It seems a credible proposition that we should be more than willing to invest £6 per household per annum, with appropriate exemptions for certain households, to facilitate and accelerate our infrastructure upgrade. For our digital economy it is far from the final answer. It is in truth only the beginning and that is probably a useful summary of this Bill-it is only the beginning, as the noble Lord, Lord Fowler, rightly pointed out. It is the first digital economy Bill. It contains a series of measures and proposals that are tightly drafted, broadly necessary and, in some areas, will have a much greater and profound difference than some have anticipated.

It does unashamedly seek to lay the groundwork for the next Government to return to this sector and look at it more broadly than Parliament has traditionally done through what has often been a broadcasting-only

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telescope. I share the view of the noble Lord, Lord Birt, that there is a machinery of government change that merits further thought and far-reaching work. I share the view of the noble Lord, Lord Fowler, that there is a need for a proper and measured parliamentary debate on the BBC, and that needs to be done in an environment where discussions can be had around structure, reach and governance without the hysteria of attack and defence polluting the debate.

Overall, this is a Bill that I am sure will be improved through discussion and debate in this House, but I would hope that, when that debate is finished, there would be cross-party and cross-Benches support, as it is a Bill that it will be more than helpful for the British economy to have on the statute book.

If I may, and I hope I am not breaking convention, I would like to close by recording my admiration for the Bill team which, despite rather irritating ministerial changes, has produced a focused and well drafted Bill that makes up for its limited clauses in the ground it manages to cover in 49 of them. I look forward to the Committee debate.

5.24 pm

Baroness Howe of Idlicote: My Lords, when the noble Lord, Lord Carter of Barnes, introduced Digital Britaina little while ago we all recognised that things were beginning to happen and there were some very welcome realisations, for example, on the need to move forward with digital radio. Even if it is only a beginning, clearly this Bill is an important one, which will do much to update British communications structure and regulation content. Judging by the speed of change in the industry since the Communications Act 2003 was passed, I believe that it makes sense for the Bill to include powers for the Secretary of State to make regulatory changes through secondary legislation to deal with any potentially challenging new developments that still lie just over the horizon. Similarly sensible is the proposed duty on Ofcom to report to the Government every two years on any developments significantly affecting the UK's communications infrastructure and Ofcom's specific new duty to promote investment in public service media content.

I shall concentrate most of my remarks on the protective measures proposed for creative industries-alas, like many other noble Lords-and on the amendments to the Video Recordings Act. I also want to welcome those parts of the Bill that will help to facilitate opportunities for a wider range of quality PSB content, enabling UK citizens access to these across the increasingly multiple platform that we have now within the communications market.

It is realistic, too, that the Bill includes plans for ITV, which over recent months made its position very clear. The plans will enable ITV to relinquish its public service responsibilities unless they are funded from elsewhere. Equally, on the other side, it is certainly good news-interestingly, warmly welcomed by Channel 4 itself-that the Bill, as a result of the growth of digital media, proposes to update its activities, requiring Channel 4 to be involved with a wide range of quality programmes, including news and current affairs, for different delivery platforms and multiplexes. Channel 4

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has made a considerable success of its public service channels, with news and older children's programmes and, especially, its huge contribution to British film. We shall all look forward to it playing an even more important role in public service broadcasting competition to the BBC and other commercial stations that want to go down that route. However, it remains unclear where the finance for this enhanced role is to come from, although the Minister, in replying, may put us fully in the picture.

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