It's significant for a senior Ofcom figure to admit such a time frame for implementation - over three years since the Digital Economy Act was passed. And there are still factors outside Ofcom's control.
Behind the admission lies a dysfunctional team in Ofcom and a government suffering from a heavy dose of loss psychology.
UK taxpayers have already invested £2,036,000 in the form of a loan from BIS to Ofcom to work on the implementation of the UK's 3-strikes law. My own investigation showed this is expected to rise to £5.9m.
This money can only be recouped by implementing the notification provisions of the Act, but there's no certainty it will ever be recovered. The copyright owners then pay for each copyright infringement notification sent, a portion of which goes to repay Ofcom's set up costs.
Many rookie investors fall into the trap of holding onto falling shares hoping they'll recover and make a profit one day. So-called loss psychology makes people afraid to admit they're on a losing streak, preventing them from getting out ASAP to limit their loss. Instead they hold and hope for a spectacular recovery.
In a similar way, the UK government is holding on to bad legislation, spending stacks of cash implementing a complex scheme that will probably prove ineffective in its aims and perhaps never recover the vast implementation costs, as copyright owners won't use the scheme if it costs more than other initiatives to combat piracy.
The maths doesn't stack up for rights holders. Experience from a similar scheme now operational in France showed only 1 in every 38 copyright infringement reports paid for was actually sent on to the account holder, mainly due to rules preventing account holders receiving multiple warnings in any one month.
Similar rules will exist in the UK's version. If Ofcom set the cost of a notification reasonably low, say £20, copyright owners will still pay on average £760 for each warning letter sent out by an ISP if a ratio of 38:1 applies in the UK. 3 warnings are required for "disconnection" (or, as the government prefers to call it, "technical measures"), total cost to rights holders: £2,280.
Okay, copyright owners may get smart and avoid duplicates. They may only send single warnings to culprits seen to commit multiple infringements. But herein lies another problem. If less reports are submitted by rights holders, Ofcom will have to increase the cost per notification significantly if it is to recoup the £5.9m set up costs (and repay the £2,036,000 BIS loan).
Lets take the figures from France. 18 million reports. Ofcom could recoup costs in a year charging a levy of only 33p (there's a few other costs behind the £20 fee I assumed, such as the ISP's data processing costs and a second levy to fund an appeals body).
If rights holders act intelligently, volumes will drop to 1/38th and the levy will have to increase to around £12.80. Still not bad, £33.50 to send a warning letter. 3 warnings for a "disconnection": cost to rights holders: £100.
But this is the sweet spot. A best case scenario. A far more likely scenario will follow the rules of herd mentality. The scheme will either be used by the major studios, or not. There will be 18 million reports submitted, or 18,000 (mainly from independent production companies).
If notifications are as low as 18,000 per year it will take over 26 years to recoup the £5.9m set up costs if with a levy of £12.50. Other options include increasing the levy, but that surely will make the scheme even less attractive to rights holders. I certainly wouldn't expect to see a £100 levy on each notification in order to repay the public purse in, say, 3 years.
Potential for further delays, trouble inside Ofcom
Two pieces of legislation still need to be passed by both houses of Parliament. One - a Costs Sharing Order governing how the cost of the letter-writing, "disconnection" and appeals process is split between ISPs and rights holders - is held up in Brussels until 9th November (all "technical regulations" affecting telecoms providers need to be notified to the EC). It could be delayed further if a member state objects.
The second, known as the Initial Obligations Code - a far more complex order regulating how the whole process will operate - is yet to be sent to Brussels, meaning parliament can't enact it until 21st January 2012 at the earliest (the notification period is at least 3 months).
- And that's assuming Ofcom send the legislation to Brussels today, which is most unlikely, a
UPDATE 21/10: An Ofcom press officer has contacted me, disputing the fact that Campbell Cowie offered any apology for the late release of the code. I asked them for clarification
Sources familiar with the situation inside Ofcom paint a picture of a highly dysfunctional team under Cowie. One source tells me pretty much his entire workforce moved heaven and earth to be pulled off the Digital Economy Act, leaving the important legislation in the hands of a chap called Le Patourel; who I'm told was one of a very few number of willing volunteers.
(I'm also told the senior civil servant dealing with the Digital Economy Act in the Department for Culture, Media and Sport was this summer moved to deal with issues arising from the phone hacking scandal, leaving the legislation there in the hands of her deputy..)
The so-called Cost Sharing Order is controversial as it introduced an up-front fee of £20 for those wanting to appeal an allegation of copyright infringement. £20 doesn't sound too bad until you consider the allegation is merely that - an unproven allegation.
There's no presumption of innocence: 3 uncontested allegations in 3 separate months and your internet access can be cut (albeit for a limited, as yet undefined period) or restricted in some way, and it's this which gets me most riled about the legislation.
Precisely because there's no presumption of innocence makes the appeals process so important, and we're yet to find out how this is going to work. What we know from the primary legislation ( Section 13(6)(b) of the Act) says that internet account holders who do not take "reasonable steps to prevent other persons infringing copyright" (i.e. closing-down all open WiFi) will not be able to appeal any accusations of copyright infringement made against them.
The issue of shared internet access has angered libraries, universities and other public bodies; but the same issues apply to hotels, internet cafes and other spaces offering open WiFi.
We also know the Government has pressed Ofcom to make the appeals process harder by removing some catch-all grounds for appeal that hadn't yet been foreseen, sending the Initial Obligations Code back to the drafting board and increasing the possibility the code will need to be revised as technology evolves.
I've also been told Ofcom has held meetings with companies hoping to cash in on the Digital Economy Act by offering "copyright infringement detection and notification services". I believe accuracy of such services was discussed, but since there's been no official word from Ofcom I'll have to pen a Freedom of Information Act request to find out.
Not that I expect such a request to be granted lightly. Ofcom boss Ed Richards indicated last week he wasn't such a big fan of transparency when I questioned him on the subject last week, instead arguing the public interest wasn't always met "handing out minutes and other scraps of paper".