Digital Economy Act – Consumers to Foot the Bill for Enforcement

There’s plenty of things wrong with the Digital Economy Act. One of the major flaws is that ISPs would have to pay for the cost of enforcing the Digital Economy Act – including letter writing campaigns. The cost, warns consumer groups, would then be passed on to consumers.

Note: This is an article I wrote that was published elsewhere first. It has been republished here for archival purposes

How does this sound for a deal. As a consumer, you’ll have your ISP raise your subscription fees so they can pay to enforce a three strikes law and letter writing campaigns to stop copyright infringement. If you are accused of copyright infringement, you have to pay court fees to defend yourself if you contest the accusations. Doesn’t sound attractive? Consumer groups would agree that it doesn’t.

According to the Digital Economy Bill — Impact Assessments package (First Edition)(DOC, 3.8mb), enforcement doesn’t come cheap.

Quotes from pages 74 – 76:

Evidence from the earlier consultation indicates that the costs of notification (identification of the infringer, postal costs, development of the letter, staff time and training) are in the region of between £3-10 per letter.

Results from the Digital Entertainment Survey (2008) indicate that 70% of unlawful P2P file-sharers would stop downloading digital products if they received a call or letter from their Internet Service Provider. The policy objective is to achieve this reduction within 2 years. Assuming that this objective is achieved by sending one letter to the 6.5 million illegal downloaders in the UK during one year, we estimate a range of one-off costs for the ISP industry between £20 and £65 million.

That is just one letter. What happens if multiple letters are involved?

Compliance cost figures are very sensitive to the underlying assumptions. If only 50% instead of 70% of infringers stopped, annual costs of compliance would increase from a range of £6-20 million to a range of £10-30 million. If instead of one letter a year right holders required two letters a year to be sent to serious infringers, the costs would double.

So where will the additional money come from to pay for all of this? Consumers:

Under the assumption that ISPs fully pass down to consumers the annual increase in costs, we expect broadband retail prices to increase between 0.2% and 0.6%. Studies on the price elasticity of demand have shown that demand for broadband is not very sensitive to price increases. Nonetheless, we estimate that this cost would have a relatively small but permanent effect of reducing demand for broadband connection between 10,000- 40,000. This would represent additional revenue lost by the ISP industry between £2 and £9 million per annum.

So even people who just use the internet for e-mail will pay for all of this. We’re not talking about fictional guesswork numbers dreamt up by the copyright industry, we’re talking real numbers this time directly associated with an industry that has completely and utterly failed to adopt a new business model fit for surviving todays era of the internet. Nothing more, nothing less. The added cost will disconnect users who never even heard of p2p simply because the price is too high to keep a subscription.

“New laws to crack down on online copyright infringement are already unfairly weighted against consumers,” Robert Hammond, Head of Post and Digital Communications for Consumer Focus, said, “yet customers are also likely to be expected to foot the bill for enforcing them. The last government admitted that any extra cost for broadband may price thousands of vulnerable consumers out of the market at a time when the internet is becoming vitally important for people to access vital services and get the best deals.”

“The consequences of this horrendous legislation are being felt barely weeks after it became law. The idea of having to pay before accessing justice is extraordinary,” Jim Killock, Executive Director of the Open rights Group says, “like something out of Dickens. The government must absolutely guarantee everyone’s right to a hearing, and that means not placing payment barriers in front of the innocent.”

“It should be copyright holders,” Hammond added, “who stand to make hundreds of millions of pounds from these laws, who pick up the tab for enforcing the new laws. If people want to contest the accusations made against them, copyright owners should also pay the cost.”

Exactly. If an industry wants someone to play copyright cop, then it should be added to the industry’s cost of doing business. It shouldn’t expect other industry’s, and, consequently, every consumer in that industry, to pay for the failings of an outdated business model. It’s all bad economics based on the voodoo math of one download means one lost sale. An entire industry shouldn’t suffer the consequences of another industry’s funny math. It’s just absurd.

Drew Wilson on Twitter: @icecube85 and Google+.

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