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Wednesday, 6 April 2011

UK gov threatened with EU court action over ISPs bearing cost of copyright clampdown

EXCLUSIVE: The government tried to justify its attempt to force ISPs to shoulder 25% of the cost of running the UK's digital copyright clampdown in a letter to the European Commission dated 18th January.

But the European Commission responded three weeks later largely rejecting the justification of the charge, described as a "stealth tax" today by Dominique Lazanski, technology analyst for the Tax Payer's Alliance.

Documents slightlyrightofcentre.com obtained yesterday under European public access rules outline the EC position in a letter dated 8th February.  The correspondence gives the UK government a second chance to respond, but also takes the opportunity to remind our authorities:
"Where appropriate, these exchanges can be followed by infringement proceedings."
The UK government is also reminded of its obligations under a pilot system to streamline the handling of EC complaints and queries, to which the UK is a signatory:
"... a response is required within ten weeks."
The emergence of the document throws doubt on whether this major hurdle really was cleared by 21st March, when Telegraph.co.uk reported a spokesman from Department of Culture, Media and Sport as saying "EU" approval had been obtained:
"He said the Government had not realised it needed EU approval for the Act’s cost-sharing arrangements, which will put 75 per cent of the burden on copyright holders and 25 per cent on broadband providers. It has now obtained that approval, however."
(my bold)
The EC position seems pretty rugged.  I obtained a document outlining the EC's initial objections earlier this year. Essentially, in order to foster cross-border competition in the telecoms sector, the administrative charges that national governments can impose on ISPs are strictly limited under the Authorisation Directive.

From these documents we now know the UK government in January attempted to draw a distinction between the cost to ISPs under the Digital Economy Act and other strictly-defined administrative charges allowable under the Authorisation Directive:
"The UK authorities basically argue in their reply that the charge imposed by the Order on the ISPs relates to activities in the area of copyright, which are distinct from the activities covered by Article 12 of the Authorisation Directive.

Consequently, since these activities pursue a general interest objective and are, therefore, not subject to the regulatory framework under the terms of Article 1(3) of the Framework Directive then also the charge proposed in the Order is not considered to be subject to Article 12 of the Authorisation Directive"
The EC disagrees with this distinction, arguing:
"As it is imposed on the ISPs in their capacity as authorised providers of electronic communications services and networks under the general authorisation scheme, the charge provided under the “Online Infringement of Copyright (Initial Obligation) (Sharing of Costs) Order 2011” is likely to be subject to the provisions of the Authorisation Directive. It is not clear to us how it could be justified by any general interest objective in the meaning of Article 1(3) of the Framework Directive. "
(my bold)
The last portion of this statement is strongly-worded.  I asked a spokesperson yesterday at the Department for Culture, Media and Sport for comment on whether further exchanges with the EC had taken place since 8th Feb but at the time of writing they had not got back to me.  I'll update this post if anything significant comes in.

UPDATE 7/4: The DCMS returned my call yesterday afternoon and explained:
"The comments raised by the European Commission in their letter dated 8th February was a request for clarification.

"The request for clarification is separate from the process whereby legislation is lodged with the EU for a period of three months in order to satisfy the requirements of the Technical Standards Directive

"The three-month period passed without formal objections being raised, therefore it was correct to say on the 21st March that clearance from the EU had been obtained"
I pressed the spokesperson on why the Costs Order was laid before parliament on 17th January (see below under "Complete Shambles"), and got no response.  The spokesperson revealed that the DCMS had already responded to the request for clarification.

I asked if the DCMS would be releasing a copy of the response, and I was invited to submit a Freedom of Information Request. I explained to the spokesperson that I'd like to see the correspondence sooner rather than later, and that government departments had a knack of delaying FOI requests, to which the spokesperson responded:
"We deal with all Freedom of Information Requests in full accordance with all relevant legislation."
Let's see then.  I submitted a request 7th April via whatdotheyknow.com - can be viewed here.

Stealth Tax

The question over whether ISPs should pay a share of the costs in enforcing copyright protection measures is in many respects a separate and distinct battle to general worries over the Digital Economy Act.

Many, including the Tax Payer's Alliance, see the charge as nothing more than a "stealth tax".  Their technology analyst Dominique Lazanski spoke to me earlier:
"It's a stealth tax on ISPs for implementing government policy and government regulations.

Additionally, it detracts from ISP investment, as they have to spend money on implementing this as opposed to investing in next generation technology."
Expanding on Dominique's last point around investment, it's also worth noting that the government's own analysis up to 40,000 poorer families may be priced off the net if ISPs pass-on the cost of these measures to consumers.

"Complete Shambles" of parliamentary process

Several sources close to parliament have described the process of the Costs Order using exactly the same phrase: "a complete shambles".  This consensus emerged as several people privately questioned me on why the order had been laid before parliament on the 17th January, the day before the UK first responded to the EC's concerns, and 3 weeks prior to receiving the Commission's response.

I'm aware that the progress of the Costs Order through parliament has been delayed.  This is a new development, in addition to the delays reported yesterday by Josh Halliday at the Guardian on a separate piece of DE Act legislation known as the Initial Obligations Code.

I hope to get a more technical analysis of the legal issues in due course.  Barrister Francis Davey already has an excellent summary on his blog,   If you need a copy of the document for reporting or non-commercial purposes drop me an email to editorial@slightlyrightofcentre.com - link-backs to this blog always appreciated!



  1. Hi,
    this is very interesting. Thanks for blogging about it.
    is the EC letter dating 8 February available on-line anywhere?

    Many thanks
    Luca Schiavoni

  2. Hi Luca, if you email me via the link at the bottom of the article.


  3. Thanks,

    e-mailed you just now.


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