Second Reading

Part of Digital Economy Bill [HL] – in the House of Lords at 4:10 pm on 2 December 2009.

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Photo of Lord Razzall Lord Razzall Spokesperson for Business, Enterprise and Regulatory Reform 4:10, 2 December 2009

My Lords, in the debate over the past 10 days on the gracious Speech, a number of criticisms were made of the Government's proposals-particularly that they were either blatant electioneering or had no chance of becoming law. However, this Bill is the exception to those criticisms, as from all sides of the House we welcome it and hope that in its appropriately amended form, after it has been subjected to the scrutiny that your Lordships always give, it will get passed through another place and become law before the election. That is the view of my party and, from listening to the remarks of the noble Lord, Lord Fowler, also of the Conservative Opposition.

The Minister was right in using this opportunity to put on record the importance of the creative industries. Statistics are always difficult in this field but, if we take the film industry, radio and television, the music industry, book publishing, computer software and video games, let alone the explosive growth in the mechanisms to deliver the software to people's homes, the creative industry probably represents not far off 10 per cent of British GDP. So when we debate these issues, we are talking not of minority industries but about industries that already represent a significant part of British industry and are likely to be the fastest growing element of British GDP, as public sector expenditure shrinks.

We on these Benches give a gentle welcome to this Bill, which has had a long gestation period. It is very nice to see the noble Lord, Lord Carter of Barnes, in his place for this debate. During his period as-I shall not use the expression of my noble friend Lord McNally-a GOAT, we had several debates in your Lordships' House on the paper that has ultimately resulted in the Bill. The noble Lord, Lord Fowler, made a valid point in asking why it has taken so long to get to this position. He had some implicit and explicit criticism of the Government, which I share. We could apply some element of blame to the creative industries themselves. Although they have pressed for a considerable length of time for a lot of these provisions to be enacted, when they could have reached agreement and made it easier for the Government they have taken some time to do so. Even now, we may find it necessary for Ofcom to impose a code on the online infringement of copyright, because the industry will not be able to come up with its own code to be franked by Ofcom as the Bill requires.

It is particularly unfortunate that the code on the online infringement of copyright to which the Minister referred has not appeared in any form in draft that we could consider when looking at the Bill. I know that colleagues on all sides of the House have significant reservations on the human rights issues in relation to potential infringement. It would be easier for those concerns to be dealt with if we had a draft code to deal with the mechanisms under which penalties would be applied to individuals. We are clearly not going to have that code in draft, so we will have to do the best we can as the Bill proceeds.

I shall deal primarily with the second part of the Bill on the online infringement of copyright. Other issues will be taken up by my noble friends Lady Bonham-Carter of Yarnbury and Lord Clement-Jones. However, we will support the first part of the Bill, under which obligations are imposed on Ofcom to promote appropriate levels of investment in electronic communication networks and also to promote appropriate levels of investment in public service media content. We believe it is the right thing to do.

When we get to Committee, however, we would like to revisit the role of the National Audit Office in the scrutiny of public service content providers for the purposes, as the Bill says, of ensuring efficiency. Those of us with long memories will remember that my noble friend Lord Sharman, right at the beginning of the debate on the BBC's corporate governance, raised the involvement of the National Audit Office as an auditor of the BBC. His proposals were resisted. I sometimes wonder whether the resistance in involving the National Audit Office really goes to the desire of the BBC particularly to prevent the public disclosure of the talent salaries, which is a matter of significant public interest, almost on the same level as bankers' salaries, but we shall see. We will return to that when the Bill comes to Committee.

The major issue, and in our view likely to be one of controversy, is the online infringement of copyright. It is clearly a major problem. Many people suggest that they know the answer to the numbers and it is obviously very difficult to say how much online copyright infringement actually goes on in the UK, but the general suggestion is that about 6.5 million people-if you can have "about" 6.5 million people-in the United Kingdom share copyrighted files regularly. That is about 10 per cent of the UK population. It is generally thought that 95 per cent of music downloads in the UK are illegal, and it is suggested that up to 25 per cent of the world's online television piracy takes place in the United Kingdom. In 2007, an estimated 78 million illegal downloads and streams of films took place in the UK. We may dispute the statistics, although I understand that Mr Bradshaw does not, and we may all take them with a pinch of salt. Nevertheless, I think there will be common ground that this is a major issue. In the impact assessment on the Bill, it is suggested that if a reduction of 55 per cent in illegal downloading took place as a result of the measures to be introduced, there would be an annual revenue increase to the creative industries of about £200 million per annum, so this would be a very significant step.

Which business sectors are affected by these proposals to ban or restrict illegal file-sharing? First, there are obviously the internet service providers and the mobile network operators. Six of the internet service providers represent over 90 per cent of the market, but the mobile network operators are beginning to become more significant. Secondly, we have the creative content industries where there are rights holders-primarily in films, TV, music, video games and software. Then we have some element of the book publishing industry; the introduction of structures such as Kindle obviously gives the opportunity for more significant illegal downloading.

In broad terms, I share the view of the noble Lord, Lord Fowler, in that we support the provisions of this Bill. As always, however, the devil will lie in the detail and from these Benches we shall be applying three principles in looking at these provisions. First, we accept the point that the noble Lord, Lord Fowler, made; to use copyrighted material without the appropriate payment is actually theft, and we have no sympathy for the suggestion coming from certain quarters that all information on the internet should be free, irrespective of the copyright position. Although many 18 year-olds-or even 17 year-olds-would take that position, we do not think that that is the correct position to take.

That leads me onto the next test. Again, I think that the noble Lord, Lord Fowler, mentioned this-it might have been the Minister-but we think that education in this area is very important. There is a whole universe of people out there who genuinely believe that everything on the internet is free. They do not realise that they are in breach of copyright when they download music or a film, so the industry and the Government need to work together to ensure that there is proper education on that. The third and most fundamental point is that penalties must be subject to the principles of natural justice, so that no unfair measures can be taken against an individual and, more particularly, that each individual must, under the process, be seen to be innocent until proved guilty.

Several major points come out of this section of the Bill where I can say, straightaway, that we are unhappy. First, there is Clause 6, which would amend the Communications Act 2003 and would put in a new subsection (5)(b) of its proposed new clause which provides for retrospective penalties to be applied to people or organisations who have been seen to have infringed. We think that that retrospective element is inappropriate for this Bill and it ought to be deleted.

The second issue is that of costs; who is going to pay for these exceptionally expensive measures? The rights holders say that it ought to be the ISPs, and the ISPs say that it ought to be the rights holders. It is not surprising that there is a significant argument about this, because the costs of enforcing and putting into place the measures that this Bill contemplates probably run to somewhere between £50 million and £100 million. We are talking about significant sums of money to implement this.

I am glad that the noble Lord, Lord Carter of Barnes, is in his place, because in his last report he said that the issue of costs would be dealt with in the Bill. Now, I know that he has left Government since he made that statement, but somebody ought to indicate in responding why that is not the case, because how those costs are to be apportioned is clearly a major issue between the ISPs and the rights holders. Unless the Government give some indication of what they think that position should be, my guess is that Ofcom will always have to come up with a solution, rather than a negotiated agreement between the ISPs and the rights holders, which would clearly be preferable.

Thirdly, we welcome the development of the argument that has resulted in the creation of the First-tier Tribunal, but we still see serious issues, both of proof and of costs to the ISPs. We are rather attracted to the proposal for an entity in the middle, which has been suggested by both FACT and the Motion Picture Association. I will not bore your Lordships with how that would work, but I think it is something that we would wish to see seriously considered.

I recognise the general principle that we have to find a mechanism to stamp out this practice. However, it is clear from my remarks and those of the noble Lord, Lord Fowler, that this section of the Bill will need major scrutiny. I will add to his point that we feel that Clause 17, which effectively gives the Government power to alter copyright law by statutory instrument, should be rejected. We will not support that. I do not go as far as the Guardian in suggesting that this would be used, if there were a Tory Government, by their new friend Rupert Murdoch in some way to continue his fight against Google. I do not reject it for that reason; I just think that if we are going to alter copyright law it has to be done by primary legislation, rather than by statutory instrument.

Another glaring omission from the Bill is how to deal with format shifting, rather than file-sharing. Format shifting is the process by which, when you have downloaded music or a film to whatever instrument you downloaded it to, you then move it across to another instrument in your control for your private use. Although today that is technically a breach of copyright, nobody ever attempts to enforce it. We take the view that this is an opportunity to put in the Bill that format shifting does not constitute a breach of copyright if done for personal use.

As I indicated earlier, my noble friends Lord Clement-Jones and Lady Bonham-Carter of Yarnbury will deal with other matters in the Bill in this Second Reading debate. Following the remarks of the noble Lord, Lord Fowler, I regret that the opportunity to deal with the corporate governance and management of the BBC has been lost. It is running out there as a serious issue. The Minister is disagreeing with the structure that his Government put in place originally. We have a number of suggestions as to how the governance of the BBC ought to be improved, and the Bill seems to have been the opportunity to deal with that. Having said that, I look forward to the Committee with eager anticipation.