Who'll pay for the Digital Economy Act?

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Using the Act, rights holders can request a broadband provider to send a warning letter to a subscriber they believe has illegally downloaded copyrighted material, usually films or music from filesharing sites. The rights holders collect and pass the IP addresses of the suspected file sharers onto the ISP.

Anyone warned repeatedly about their activity could potentially have their internet connection throttled by their provider or even disconnected.

The DEA has proved controversial with ISPs who argued that the DEA was incompatible with EU law and that it was also a disproportionate response to the illegal infringement of copyright.

One of the main bugbears from the ISPs however, was that some of the costs of its implementation would fall upon them.

What's the cost?

Ofcom estimates that its own costs for implementing the DEA could hit £6m.

These costs relate to the regulator's initial investigation into the problem of file sharing, as well as the anticipated cost of establishing an appeals body for people who think they have been wrongly accused of illegal activity.

The costs for ISPs and, potentially, individuals will be many millions more.

Who's paying?

Ofcom, whose budget has been slashed by around 20% in the Government's budget cuts, hopes to gradually make this money back from rights holders and ISPs, something which has ruffled a few fibre optics.

ISPs, Ofcom and rights holders

There are two main, and somewhat interlinked, areas of cost proving to be controversial.

First, there are the costs associated with setting up the letter writing system and, second, there's the issue of paying for the appeals body for people who claimed to have been wrongly accused.

The cost of the latter was initially to fall, in part, upon ISPs.

After taking the Government to court over the issue, ISPs are now no longer required to fund the appeals body, that's up to Ofcom, but, partly as a result of that decision, they will still have to shoulder some of the cost of the warning letter system.

The Department of Business, Innovation and Skills indicated that the cost of dishing out warning letters to suspected illegal downloaders will be shared between rights holders and ISPs.

The Government's plans show that the majority of the costs of tracking and warning illegal downloaders will fall to rights holders who will have to stump up 75% of the cost.

The remaining 25% will be funded by broadband providers, an incredibly unpopular move which providers say will lead to consumers having to pay more for their broadband connections.

Consumers

Consumers will bear the cost of the Act in two ways: higher prices passed on by ISPs and, potentially, charges for illegal downloads.

In February 2011, the House of Lords' Merits of Statutory Instruments Committee, set up to assess the practical implications of legislation, asked whether the costs broadband providers would have to bear would increase prices.

The Government answered: "...there may be an effect on broadband take up should ISPs pass on the full cost of the process. This is regrettable, but needs to be balanced against the wider benefit to the UK's digital economy."

In other words, the price increase is anticipated to be high enough to drive those on the lowest incomes out of the broadband market altogether or, at the very least, increase the financial pressure on households considerably.

The Government has said that it doesn't intend for broadband subscribers to be charged if they wish to appeal against a notification of illegal downloading letter.

That said, charging a fee in future was not completely ruled out, citing the possibility of "large numbers of unnecessary appeals".

Given that a "large number of unnecessary appeals" seems to be a highly likely occurrence and the current financial state of the Government's balance sheet, a fee-based appeal system may well be established. Watch this space.