All Party Parliamentary Group on the Digital Economy ‘Creative Industries, Consumers and the Digital Economy Act’

Tues 30 November Westminster Hall, The Jubilee Room

Mike O’Connor CBE, Chief Executive, Consumer Focus
I have been asked to speak on what Consumer Focus would like to see happen with the Digital Economy Act in 2011. I can tell you what we would like the internet to look like in the near future: We would like to see universal service in broadband, so that all consumers right across the UK can have access to the internet, regardless of whether they live the countryside or big cities, or whether they are rich or poor. We would like to see the UK roll out next generation broadband so that consumers and businesses have access to the kind of internet our European neighbours have, and better. Public services will be increasingly provided online and we want those services to be designed for users, not bureaucrats. We want the internet to be a competitive and innovative market place, in which new and changing consumer demand is met by legal services. We would like to see a neutral network that allows meaningful competition between networks, applications, service and content providers. We would like to see an internet where all consumers have a connection of the speed and reliability advertised to them, that enables them to:     send and receive content of their choice use services and run and access applications and services of their choice

I would like to see creators, independent labels and filmmakers, big and small, being able to sell their music and films to consumers online. That is why we would like to see an internet where any network or traffic management by internet service providers is undertaken in a transparent manner and does not stifle innovation and competition. Traffic management is necessary but it must be transparent and in the wider interest. We don’t want to see a two tier internet, we want a one tier internet, a level playing field that allows businesses, entrepreneurs and consumers to flourish and innovate with minimal start-up costs. Now there is still something scary about the internet for some people and one of the biggest barriers to e-commerce is that not all consumers trust ‘the internet’ enough to pay online. We would like the internet to remain as exciting, surprising and innovative as it is today, but less scary.

Therefore:   We would like to see an internet where consumers’ right to privacy is protected and their personal data is not used without their consent   We would like to see an internet where children and young people continue to be early adopters and innovators, and where they are protected from intrusive marketing The internet has the potential to empower consumers and provide the backbone to the UK economy. We want the internet to achieve its potential. Now, the question is whether the Digital Economy Act, particularly the provisions on online copyright infringement, helps us achieve the kind of internet and digital economy we want to see in the future? Does the Act help us to achieve economic growth through access, innovation and consumer protection? As far as Consumer Focus is concerned, the answer is no. Our concerns about the impact of the Act on the universal provision of broadband and consumer rights, such as the right to privacy and presumption of innocence, are well known. But above all, the online copyright infringement provisions are a sledgehammer to crack a nut. It would implement a highly costly regulatory regime which is not designed to deal with the problem and will have a chilling effect on innovation. The problem is that some consumers are using unlicensed service to access music, films and software. The solution to that problem is to get them to use legal and licensed services. The threat of punishment alone is not sufficient to make this happen. We need a reform of copyright licensing, so that online retailers can obtain licences to sell copyrighted content within months, not years. We need more compelling online and digital services, especially with regards to film. We need the music industry to raise awareness of the services already available. According to the music industries own figures, nearly 50 per cent of online consumers are totally unaware of last.fm, and nearly 70 per cent are unaware of we7. These are innovative streaming services, run by UK start-ups who are eager to meet consumer demand. We need to get to a situation where young fans, when they want to listen to a new song, first think of last.fm and we7, not The Pirate Bay. I am really not sure how we got here. I joined Consumer Focus shortly before the last election, and I get the sense that the Digital Economy Act is based on fear. Fear that the internet will destroy creativity and innovation. I don’t believe it does. But without doubt – the internet threatens old business models and it threatens those who are too slow to adapt. And it threatens outdated copyright law, unless we make it fit for the digital age. This year copyright law became 300 years old. It was established in response to the printing press revolutionising the way in which creative content and information is distributed and accessed. The purpose of copyright was to encourage learning and the spread of information by

providing creators and investors with an income. In short, copyright law was about innovation. It was established to harness the power of technology for the benefit of consumers, investors and creators. I believe that this is what copyright law and licensing should do today. I see the Copyright Review as an opportunity to create a legal framework for innovation and make copyright law relevant to consumers so that it becomes something they are willing to support and respect. Currently 73 per cent of consumers are never quite sure what is and what is not legal under current copyright law. Do we really expect consumers to respect a law that makes it illegal for them to back-up their digital music collection, or format-shift their CDs onto their iPod or mobile phone? 91 per cent of consumers think it should be legal for them to format-shift their own CDs. ‘Ah yes, but we would never sue consumers for format-shifting’ says the music industry – so why not change the law then? There are adequate laws already to stop large scale commercial copyright infringement. Let’s tell consumers what they can and can not do with the copyrighted content they have purchased. Let’s allow UK based start-ups to innovate and meet consumer demand. The economic evidence that format-shifting causes any kind of economic damage to rightsholders simply does not exist. In fact existing economic literature on the subject suggests that fair use rights benefit copyright owners as well as consumers. Copyright owner’s economic interests are not an obstacle to creating internet based business models – how can it not be in a copyright owners’ interest to meet consumer demand? Napster, the first peer-to-peer filesharing network to exchange music MP3s, came online in 1999, the first legal UK online music services came online in 2004. Why did it take four years for the music industry to respond? Because the music industry was stuck in the 1990s and we have an analogue copyright licensing system. Let’s make no mistake, the digital economy is demand driven, and we need a copyright licensing system that is fit for the digital age. We need a copyright licensing system that allows copyright owners and online retailers to respond to consumer demand quickly. Supporters of the Digital Economy Act have said that it is needed, because legal services cannot outcompete unlicensed services, that consumers would not use legal services as long as unlicensed services are available. Well, since 2004 legal music downloads have grown year on year and 2010 has been a record year for legal downloads. Why? Because the music industry has come a long way since 2004, because legal services are starting to become better than unlicensed services. But unlicensed services still have a major advantage over legal music services – they don’t have to battle a thorn bush of a copyright licensing system before they can offer consumers what they want, the way they want it. Copyright licensing is currently a barrier to innovation, let’s make it an enabler of new business models. So far, the law has not kept pace with the way today’s consumers are using new technology to buy, watch and listen to music and movies.

In 2011 the Copyright Review announced by David Cameron will give us the opportunity to update copyright law and licensing. I want us to take that opportunity. Digital technologies and the internet are on a par with the printing press in the way they fundamentally changes the way in which creative content and information is distributed and accessed. And I am confident that in 2011 we can reform copyright law and licensing so that it harnesses the power of digital technologies and continues to fulfil its purpose in what will be the online Century. With the judicial review of the Digital Economy Act, it may be that it is never implemented. I am aware that those who support the Act must feel that this is a massive blow. But I think 2011 will be an opportunity for consumers, investors and creators to come together and establish a copyright system fit for the digital age.

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