As we made clear in our industrial strategy Building Britain's Future: New Industry, New Jobs – we believe Britain needs an active industrial policy if we are to maximise the benefits from the digital revolution. Doing nothing or leaving everything to the market would leave Britain behind. We need a clear and effective approach which is consistent, ensures full access, provides regulatory certainty, smarter public procurement and shows a readiness to intervene where necessary.

The Digital Britain Report does this. It offers a strategic view of the sector, backed by a programme of action:

•      to complement and assist the private sector in delivering the effective modern communications infrastructure we need, built on new digital technologies;

•      to enable Britain to be a global centre for the creative industries in the digital age, delivering an ever wider range of quality content, including public service content, within a clear and fair legal framework;

•      to ensure that people have the capabilities and skills to flourish in the digital economy, and that all can participate in digital society; and

•      for government to continue to modernise and improve its service to the taxpayer through digital procurement and the digital delivery of public services.

The proposals in this report will enhance Britain's strengths in a crucial sector and harness new technologies to provide a fairer and more prosperous Britain for all.

We would like to thank all those who have worked so hard to produce this report. We are particularly grateful for the vision and leadership of Stephen Carter, whose experience and knowledge have been invaluable in producing this report.

Rt Hon Lord Mandelson Rt Hon Ben Bradshaw MP

 

 

Introduction

On 26 August 1768, when Captain James Cook set sail for Australia, it took 2 years and 320 days before he returned to describe what he found there.

Yesterday, on 15 June 2009, 20 hours of new content were posted on YouTube every minute, 494 exabytes of information were transferred seamlessly across the globe, over 2.6 billion mobile minutes were exchanged across Europe, and millions of enquiries were made using a Google algorithm.

The Digital World is a reality in all of our lives. In this report we underscore the importance of understanding, appreciating and planning for this reality and we seek to achieve the following:

1. An analysis of the levels of digital participation, skills and access needed for the digital future, with a plan for increasing participation, and more coherent public structures to deal with it.

2. An analysis of our communications infrastructure capabilities, an identification of the gaps and recommendations on how to fill them.

3. A statement of ambition for the future growth of our creative industries, proposals for a legal and regulatory framework for intellectual property in a digital world, proposals on skills and a recognition of the need for investment support and innovation.

4. A restatement of the need for specific market intervention in the UK content market, and what that will demand of the BBC and its role in Digital Britain. What that means for the future of the C4 Corporation. An analysis of the importance of other forms of independent and suitably funded news, and what clarification and changes are needed to the existing framework.

5. An analysis of the skills, research and training markets, and what supply side issues need addressing for a fully functioning digital economy.

6. A framework for digital security and digital safety at international and national levels and recognition that in a world of high speed connectivity we need a digital framework not an analogue one.

7. A review of what all of this means for the Government and how digital governance in the information age demands new structures, new safeguards, and new data management, access and transparency rules.

The level of engagement with this programme has been impressive, both in its scale and quality.

The compilation of this Report also coincided with a severe global downturn in the media and communication industries. Submissions from numerous industry participants and other stakeholders were influenced by a cyclical contraction in advertising spending, newspaper circulation, volatile audience ratings and technology price erosion. That volatility has been compounded by a structural change in communication habits as we all gravitate to new digital devices, multi-media platforms and different forms of content.

Short term economic pressures have exposed areas of policy and regulation that need to be addressed, however, Digital Britain primarily seeks to position the UK as a long-term leader in communications, creating an industrial framework that will fully harness Digital Technology. The UK's digital dividend will transform the way business operates, enhance the delivery of public services, stimulate communications infrastructure ready for next-generation distribution and preserve Britain's status as a global hub for media and entertainment. Most importantly of all this approach seeks to maximise the digital opportunities for all of us, as citizens, where access to 21st Century technologies will be a key competitive advantage for generations to come.

These are therefore exciting prospects for further growth and success.

This is a sector where we have internationally recognised strengths and, if the right decisions are taken now, Britain can continue to be at the forefront of the digital revolution.

In the private sector, whilst we need to invest and build our next generation communications infrastructure, the money and the value in these markets is clearly moving from infrastructure to service and applications development. And whilst we need the wireless and fixed access networks of tomorrow, we must also ensure we have the necessary network security, network resilience, and network disaster recovery programmes.

If, as expected, the volume of digital content will increase 10x to 100x over the next 3 to 5 years then we are on the verge of a 'big bang' in the communications industry that will provide the UK with enormous economic and industrial opportunities.

For the public sector, these capabilities and trends are an integral part of the financial solution for the public finances. An ambitious and clear programme of The Digital Switchover of Public Services, to primarily electronic and online delivery, will unlock significant cost savings, whilst at the same time serving to increase levels of satisfaction. As a matter of urgency we need to develop a comprehensive model, accounting for the cost of deployment, as well as the revenues and savings that will result from the infrastructure that is being deployed.

This report is the result of the invaluable contributions of a number of people.

I am deeply grateful to The Digital Britain Steering Board, to the many people outside Government who have given their time and their experience, often voluntarily, for the constructive engagement of the industry regulator, Ofcom, and for the welcome and open manner in which countries around the world have shared their expertise and experience.

I would also like to record my particular thanks to Dominic Morris, David Mahoney, Sam Sharps, Nick French, the Policy Teams in both my departments, the expert advisers and my Private Office team, who have helped deliver this project over the last year.

Finally, for the support of officials and ministerial colleagues in DCMS and BIS and most importantly for the political leadership of the Prime Minister, whose recognition of the importance of this sector and the need for a coherent strategy are what has made this work possible.

Lord Carter CBE

Chapter 1

Executive Summary

'Only a Digital Britain can unlock the imagination and creativity that will secure for us and our children the highly skilled jobs of the future. Only a Digital Britain will secure the wonders of an information revolution that could transform every part of our lives. Only a Digital Britain will enable us to demonstrate the vision and dynamism that we have to shape the future.'

Rt Hon. Gordon Brown MP, Prime Minister

AMBITION: TO SECURE THE UK'S POSITION AS ONE OF THE WORLD'S LEADING DIGITAL KNOWLEDGE ECONOMIES

 

 

1 The communications sector underpins everything we do as an economy and society, to a degree few could have imagined even a quarter of a century ago. Electronic systems and new technology have transformed core elements of UK industry, our media and our public services.

2 In the City, digital technologies are vital to the billions of transactions carried out each day by the stock exchange and financial institutions. For the designers, researchers and engineers in our advanced industries, computer generation and simulation and reliable large-scale file transfer are essential tools of the trade as they are now for any knowledge-based company. In the high street, stock ordering, inventory control and the cash tills are all completely dependent on electronic communications.

3 As consumers, some 90% of our high street purchases are transacted by plastic which depends on wired and wireless communications to work. That is in addition to the £50bn of consumer purchases and sales through e-commerce that takes place wholly online.

4 In transport, the phasing of street traffic lights, the operation of railway signals and points and the wireless systems that allow aircraft to take off and land safely all need communications; as does the national energy grid that heats, powers and lights our homes and businesses. In the public sector, our universities, schools and libraries increasingly rely on electronic content and the richness of the Internet. Our National Health Service has one of the largest data and communications systems in Europe.

5 For individuals a quiet revolution has delivered seamless connectivity almost everywhere. That revolution ranges from personal pocket libraries of music, audiovisual content and increasingly electronic literature on a scale inconceivable ten years ago; inexpensive broadband which allows efficient and family-friendly working patterns in the knowledge sector of the economy – and broadband at increasing speeds – the next generation of which, already available to nearly half Britain's homes, allows us to send or receive 200 mp3 music files in five minutes, an entire Star Wars DVD in 3 minutes and the total digitised works of Charles Dickens in less than 10 minutes.^[1] [1] It has given us access to a wide range of social networks, allowing us to share experiences and swap and create content. The digital revolution has also led to a huge expansion in the creation and availability of professional content. Today, the typical British consumer spends nearly half of their waking hours engaged in one form or another with the products and services of the communications sector.

6 The UK is already a digitally enabled and to a significant degree digitally dependent economy and society. The Digital Britain Report aims to be a guide-path for how Britain can sustain its position as a leading digital economy and society.

7 A sector that underpins so much of our collective and individual lives is a significant industry in its own right. Its precise scale is evolving continually. The pace of change, the blurring of boundaries between what national statisticians classified as separate activities and the creation of whole new areas of activity make measurement problematic. But on current definitions the Digital Britain sectors account for nearly £1 in every £10 that the whole economy produces each year.

8 Digital Britain is a leading exemplar of the new model of Industrial Activism set out in April's ‘Building Britain's Future: New Industry, New Jobs'. It is one of the major growth sectors on which our economy increasingly depends. It is a sector in which we have many relative strengths. Key themes from Building Britain's Future – modern infrastructure, upgraded skills capabilities, converting research and innovation into market-beating products and services, and smarter more joined-up Government – are all themes that feature through The Digital Britain Report.

9 Industrial Activism is at the centre of The Digital Britain Report. It is about the considered application of Government resources and policy-making across the areas where public policy and the market meet. There are many activities within the sector where public policy and the market do not impinge on one another: the market is working well and without any wider social policy consequences. Although the Digital Britain Report does not address them all, many are, nonetheless, significant creators of added value and consumer satisfaction. The simple position is that these sectors are working well and do not need commentary, intervention or unnecessary interference.

10 We published the Interim Digital Britain Report at the end of January. That set out a view of the sector and an agenda for Industrial Activism in the large number of areas where the markets meet public policy. We identified five objectives:

i. Modernising and upgrading our wired, wireless and broadcasting infrastructure to sustain Britain's position as a leading digital economy;

ii. Providing a favourable climate for investment and innovation in digital content, applications and services;

iii. Securing a range of high quality public service content, particularly in news;

iv. Developing the nation's digital skills at all levels; and

v. Securing universal access to broadband, increasing its take-up and using broadband to deliver more public services more effectively and more efficiently.

11 The aim of publishing an Interim Report was to test whether the programme we had outlined was correct and sufficiently comprehensive, and to gauge the level of support for our focus on this sector. The Interim Report drew a substantial and substantive response from a very wide range of stakeholders, from the general public to global corporations. We received more than 250 formal written responses. Those responses have been supplemented by online engagement through the Digital Britain Forum and other social networking/blog sites, structured engagements in each of the Nations and the Digital Britain Summit at the British Library on 17 April. There have also been in total more than 500 bilateral engagements between stakeholders and Ministers or the core Digital Britain Team.

Digital Britain Unconferences The Digital Britain Unconferences were a set of UK-wide, volunteer-organised events quickly set up following the Digital Britain Summit on 17 April 2009. Their aim was to produce a representative 'people's response' and gather a set of positive, realistic contributions for the report. In the week after the Summit, and with a nod from the Digital Britain team that they were listening, a website was launched with these simple instructions: 'Anyone can attend or hold an event and associate it with Digital Britain Unconferences, you'll just need to summarise your discussions and hold it by 13th May 2009! Yes, time is very tight.' By the 13th May, twelve unconferences had taken place from Glasgow in the North to Truro in the South West. All attendees were encouraged to read the Interim Report and the level of engagement and serious thinking across each event was exemplary. The events included a virtual discussion focusing on rural issues related to Digital Britain and a family unconference held in Tutbury, Derbyshire, as well as large events of more than 50 people in London and Manchester. Such a speedy reaction was made possible by the free social media tools such as Yahoo Groups, Twitter, Wikis, blogs and instant messaging. Few phone calls were made by the organizers. The process demonstrates what is possible for Digital Britain when these tools are combined with channelling existing loosely connected networks and motivations.

 

 

12 The responses to the Interim Report provided a wide range of commentary and new ideas. Many argued that there needed to be an even broader focus on the sector than we had applied in the Interim Report. The responses were also clear that we needed to give more explicit recognition of the transformational power of the Internet and the impact of its cheap scalability and interactive nature on how, as a society and economy, we think and organise ourselves.

13 There was widespread agreement with our analysis of the importance of Digital Britain for the wider economy and society and support for industrial activism in this key sector. But there were also warnings that an excessive focus on the sector could chill operational negotiations and decisions while the participants in the market wait to see whether and how new Government proposals might affect their position. Recognition of that concern has informed the timetable we have adopted in moving from Interim to Final Report: long enough to have a strategic overview of the sector but swift enough that any chilling effect on market activity is minimised.

14 Developments around the globe over recent months show that the focus on the digital communications sector is by no means confined to Britain. The Internet is a global phenomenon. As the Internet expands and touches more people, many from emerging markets, challenges are emerging in governance, jurisdiction and security. Our challenge is to enable the management of this transition in a way that sustains the Internet founders' ambitions of freedom, entrepreneurialism and innovation.

15 The global scale of the digital communications sector is aptly illustrated by the ranking of the sector among global brands: six of the top 10 global brands by value this year are in the digital sector, one Chinese, one British and four American. That scale and importance is reflected in the focus that governments are giving to it: Australia is creating a entirely new nation-wide high-speed communications network. Other countries around the Pacific Rim from Japan and Korea to Singapore and New Zealand are all adopting next generation networks. High speed broadband and smart-grid technology formed an important part of the USA administration's recent stimulus programme. Elsewhere in Europe, Germany, Finland and France have all adopted national broadband or wider digital strategies.

16 We are at an inflection point in technology, in capability and in demand. Those countries and governments that strategically push forward their digital communications sector will gain substantial and long-lasting competitive advantage. We have sought in The Digital Britain Report to set out a breadth of analysis and proposals for action that will enable the UK to keep pace with and exceed international developments in this sector.

17 We have set out above the importance and centrality of digital communications to our economy and our lives. Throughout this Report we provide ‘pen portraits' of the way in which different sections of society are affected. But if we are to realise the potential that Digital Britain has to offer, both for economic and social reasons, we need to ensure that all who want to participate in Digital Britain are enabled and have the capabilities to do so.

18 We are at a tipping point in relation to the online world. It is moving from conferring advantage on those who are in it to conferring active disadvantage on those who are without, whether in children's homework access to keep up with their peers, to offers and discounts, lower utility bills, access to information and access to public services. Despite that increasing disadvantage there are several obstacles facing those that are off-line: availability, affordability, capability and relevance.

19 Affordability is addressed in part through the roll-out of the Government's £300m Home Access scheme for low income families. In part the market will increasingly address this issue through the wide availability of new lower cost devices, new schemes for recycling PCs to low-income households or new pre-pay mobile broadband.

20 Capability and relevance are addressed through three routes: firstly, the recommendations of Baroness Morris's independent report on ICT user skills for adults; secondly, the Digital Inclusion Programme: we are pleased to announce the appointment of Martha Lane Fox as the new Champion for Digital Inclusion. Thirdly, the Ofcom-led strategic review of media literacy and, to implement that, the emerging Consortium of Stakeholders, both public and private sector, willing to contribute financially and in kind towards greater digital participation. The Digital Britain Report brings these strands together, with additional funding for demand-side measures, in a National Plan for Digital Participation which combines an improved offer to increase motivation to get online, with social networking and outreach, and with skills training. The National Plan will be delivered through tailored local and community-based programmes which build on existing networks. These will draw on the lessons learned in the, to date successful, Digital Television Switchover programme.

21 Availability of broadband has two components: the right network today and the right network tomorrow. To ensure all can access and benefit from the network of today, we confirm our intention to deliver the Universal Service Broadband Commitment at 2Mbps by 2012. This can be delivered through upgrades to the existing copper and wireless networks. We also propose public support for the network of tomorrow so that consumers in the Final Third who will not be reached by the market can enjoy next generation broadband. This will be a longer project which involves what amounts to installing a new network.

22 The Universal Service Commitment and the Next Generation Final Third project are separate projects and need to be addressed in turn.

23 Firstly, the Universal Service Commitment. More than one in 10 households today cannot enjoy a 2Mbps connection. We will correct this by providing universal service by 2012. As such, the UK's Commitment leads Europe. It has a measure of future-proofing so that, as the market deploys next-generation broadband, we do not immediately face another problem of exclusion. The USC is also a necessary step if we are to move towards digital switchover in the delivery of more and more of our public services.

24 The Universal Service Commitment will be delivered by a mix of technologies: DSL, fibre to the street cabinet, wireless and possibly satellite infill. It will be funded from £200m from direct public funding,^[2] [2] enhanced by five other sources: commercial gain through tender contract and design, contributions in kind from private partners, contributions from other public sector organisations in the nations and regions who benefit from the increased connectivity, the consumer directly for in-home upgrading, and the value of wider coverage obligations on mobile operators arising from the wider mobile spectrum package. The Commitment will be delivered through the Network Design and Procurement Group, with a CEO appointed in the Autumn. We will also discuss with the BBC Trust the structure which gives them appropriate visibility in the delivery process of the use being made of the Digital Switchover Help Scheme underspend, which will be realised in full by 2012.

25 The UK's overall electronic communications infrastructure – for mobile and fixed broadband and voice, for corporate communications, for digital TV and sound radio – compares favourably with any in the world. But the first strains are beginning to show: under-investment in backhaul networks – the so-called middle mile – in fixed networks is becoming increasingly apparent. In mobile, the very success of broadband will increasingly lead to congestion in the existing spectrum. Other countries are investing heavily in upgrading their networks to take advantage of technology change. Like our energy and transport infrastructures small variations in performance can have major ripple effects and major costs to the wider economy.

26 Secondly, the Next Generation Final Third project. Next generation broadband networks offer not just conventional high definition video entertainment and games (which because of this country's successful satellite platform are less significant drivers here than in some other markets) but also more revolutionary applications. These will include tele-presence, allowing for much more flexible working patterns, e-healthcare in the home and for small businesses the increasing benefits of access to cloud computing which substantially cuts costs and allows much more rapid product and service innovation. Next-generation broadband will enable innovation and economic benefits we cannot today predict. First generation broadband provided a boost to GDP of some 0.5%-1.0% a year.

27 In recent months the UK has seen an energetic, market-led roll-out of next generation fixed broadband. By this Summer speeds of 50Mbps and above will be available to all households covered by the Virgin Media Ltd's national cable network: some 50% of UK homes. Following decisions by the regulator, Ofcom, which have enhanced regulatory certainty, BT Group plc has been encouraged by the first year capital allowances measures in Budget 2009 and the need to respond competitively to accelerate their plans for the mix of fibre to the cabinet and fibre to the home. BT's enhanced network will cover the first 1,000,000 homes in their network. The £100m Yorkshire Digital Region programme approved in Budget 2009 will also provide a useful regional test-bed for next generation digital networks.

28 The Government believes that the case is made for the desirability of such next generation networks being available to the large majority of the UK population. It is also persuaded that the economics of network deployment, whether fixed or next-generation mobile, mean that true superfast broadband will be concentrated in the first two thirds of the market in the next decade, leaving the ‘final third' served only with current generation broadband. This would be undesirable. Equally, any subsidy scheme has to be carefully targeted to avoid distorting competition or subsidising activities which commercial operators would otherwise undertake.

29 Unlike all other utilities or, indeed media services, telecommunications prices have fallen significantly in real terms over a period of years. Today the UK retail telecommunications market is among the most competitive in Europe. Consumers enjoy either the lowest or among the lowest prices, depending on their usage patterns of any major European market. The cost-based basket of wholesale prices for today's copper-network has fallen by £8 per line per year in real terms since 2005. Over the same period the retail price for combined voice and broadband has fallen by around £90 per annum in real terms.

30 The Government believes the fairest and most efficient means of ensuring that the overwhelming majority of the country has access to next generation broadband is to share some of that saving and create an independent Next Generation Fund, based on a supplement of 50 pence per month on all fixed copper lines. The Fund will be available on a tender basis to any operator to deliver and will provide a part subsidy for the deployment of next generation broadband to the ‘final third' of homes and small businesses, bringing the cost of the initial deployment to the same level that operators face in the commercially economic parts of the market.

31 In our wireless infrastructure, Digital Britain sets out three objectives: firstly, a rapid transition to next generation high-speed mobile broadband; secondly, progress towards universal coverage in 3G and Next Generation Mobile, reliable coverage throughout the rail network and mobile coverage on the London Underground; thirdly, maintaining a highly competitive mobile market.

32 Progress towards next generation mobile networks and greater coverage had been stymied by the differing circumstances and incentives of the existing mobile operators. To address these, the Interim Digital Britain Report proposed a Spectrum Modernisation Programme. The Government appointed an Independent Spectrum Broker to facilitate a solution. His independent report was published in May. The Government accepts the essentials of his report, namely:

•      timely clearance of the 800MHz spectrum band being released by television's Digital Switchover;

•      its combination with most of the so-called 3G expansion band in a single auction of 10MHz-width blocks of spectrum; and

•      the timely liberalisation of existing 2G mobile spectrum in the hands of the existing operators, coupled with caps on the amounts of spectrum that existing operators can acquire and coverage requirements on the 800MHz licences, since that spectrum is particularly well suited to rural coverage.

33 But in certain key areas, notably the size and structures of the cap mechanisms that best promote competition, the Government has come to different conclusions. The Government has also laid out a process of Guiding Technical Arbitration on the 2G liberalisation.

34 The aim of these proposals is to ensure that each of the five existing operators and potential new entrants can bid with a realistic opportunity of acquiring sufficient spectrum to build out a next generation mobile network capable of broadband speeds of 50Mbps in the main urban and suburban markets going down to perhaps 4-5Mbps in the more rural areas. At the same time, we aim to ensure that consumers can enjoy broadly the same degree of intense competition in the market in next generation mobile from which they have benefited to date.

35 The Government proposes to make the existing operators' 3G licences indefinite rather than term licences (though AIP will be payable to reflect the economic value of the licence) in order to provide certainty for investment and an incentive towards greater roll-out towards universality. Before 2012/13 this is likely to provide in-building speeds of perhaps 1Mbps but could be boosted by an external aerial to make a meaningful contribution towards the wider Universal Service Commitment. The Government and Ofcom are open to practical proposals from the operators on network sharing, particularly to achieve near-universality.

36 While some details remain to be verified before the Summer, the Government will make a final decision on whether to direct Ofcom (if so, we intend to consult in September on the form of a Direction to Ofcom, to give the regulator the greatest possible legal certainty to effect these proposals).

37 The centrality of our communications infrastructure to our economy and society has grown since the Communications Act 2003 was drawn up. We have also moved from a relatively stable era of copper networks and early deployment of 3G to an accelerating picture of investment in multiple types of next generation networks. To that end the Government believes that Ofcom's duties should be modernised in two ways. Firstly, Ofcom should have an explicit general duty to encourage investment as a means of furthering the interests of consumers, alongside its duty to promote competition where appropriate. We also propose to give Ofcom a duty, which is the communications equivalent of the letter from the Governor of the Bank of England, to alert the Government to any significant deficiencies in the coverage, capability and resilience of the UK's communications infrastructure and to report every two years on the state of that infrastructure.

38 One other aspect of our national infrastructure – that of sound radio – requires a clear direction from Government. The diverse and flexible nature of the medium places it at the forefront of device and platform convergence. It has many routes to digital, piggy-backing on other platforms – the Internet, mobile phones, digital broadcast television, satellite and cable. But as a medium it is more than just another stream of audio. Its appeal to the listener is that it is portable, intimate, and ambient as a medium. Those aspects cannot easily be delivered unless radio has its own dedicated digital medium – DAB – for which 9 million sets already exist in homes and cars.

39 The Government accepts that analysis and proposes, with the industry, the supply chain and consumers the process of Digital Upgrade so that all our national broadcast radio stations are DAB-only from the end of 2015. To that end, the Government is looking to the BBC to extend national DAB coverage so that it is at least comparable to FM radio coverage; and to the supply chain to deliver a range of DAB radios at the key sub-£20 price point that makes swap-out economic. The Government will also work with the automotive industry, and with the Commission and other key member states in Europe (one of whom has already indicated its intention to prohibit analogue-only radios in vehicles from 2013) on the five point plan set out in this Digital Britain Report to enable the majority of the vehicle parc to be converted to digital before 2015 and with low-cost converters for the remainder.

40 The Interim Digital Britain Report set out criteria that should be met to determine the timing of Digital Upgrade. The Government will look to Ofcom to monitor progress towards those criteria on an annual basis but believes that the clarity of a date will itself accelerate progress towards the criteria. The Government will also conduct a full cost benefit analysis of Digital Upgrade in radio including analysis of whether there is a case for assistance to specific groups, as there has been with Digital TV Switchover.

41 Digital Upgrade could also lead to the flowering of community-based ultra-local radio services bringing together the smaller of the local commercial stations with the growing community radio sector on FM radio. The Government accepts the case for some liberalisation for the community radio sector. By the time of Digital Upgrade, FM as a nationwide mainstream-quality medium would be coming towards requiring its own analogue rebuild: the infrastructure is 30 years old in places and beginning to degrade. A £200m nationwide rebuild is impractical for a small sector which is anyway migrating to digital. But much smaller care and maintenance capital expenditure could sustain the infrastructure for the community and ultra-local tier of radio for many years to come.

42 In our creative content industries Britain has for many years punched above its weight globally. One in 10 of the top album sales in the US market are by British artists. One third of television format sales around the world originate with British production companies. The creative heart of many global CGI, advertising, games, publishing, design or other creative knowledge-economy businesses beats in Britain rather than anywhere else. The transition to digital is however overturning old business models much faster than new ones come into their place.

43 The increasingly easy and perfect digital replicability of content makes it harder to monetise creative rights. The growth of Internet aggregators has been good for advertisers, who find new cheap and direct routes to those they need to reach. It is also good for consumers, providing them with free search, email, storage, mapping, what's-on information services, access to social networks, to create and enjoy user-generated content and multiple other applications. But what aggregators do not do in any quantity however is fund the creation of long-form professional content. The unintended consequence is that a significant part of the paid-for advertising revenues that used to fund long-form content locally now funds different sorts of services and applications for consumers or are repatriated to the global Internet aggregators in the form of returns to the shareholders behind these transformational business models.

44 These changes have good features and inadvertent bad features. But they are facts of the digital age. It is how we deal with them collectively that will determine how well many of our creative industries make the transition to the fully digital world.

45 In relation to rights, the Government believes piracy of intellectual property for profit is theft and will be pursued as such through the criminal law. The civil infringement of taking someone else's intellectual property or passing it on to others through file-sharing without any compensating payment is, in plain English, wrong. However, the Government also believes, and the evidence suggests, that most people, given a reasonable choice would much prefer not to do wrong or break the law. The objective of the Government's policy is therefore three-fold. Firstly, to provide a framework that encourages the growth of legal markets for downloading that are inexpensive, convenient and easily accessible for consumers.

46 Secondly, through encouraging suitable information and education initiatives, to ensure that consumers are fully aware of what is and is not lawful. And thirdly we aim to provide for a graduated response by rights-holders and ISPs so that they can use the civil law to the full to deter the hard core of users who wilfully continue unlawful activity. The Government intends to provide initially for Ofcom to have a duty to secure a significant reduction in unlawful file sharing by imposing two specific obligations: notification of unlawful activity and, for repeat-infringers, a court-based process of identity release and civil action. The Government is also providing for intermediate technical measures by ISPs, such as bandwidth reduction or protocol blocking, if the two main obligations have been reasonably tried but, against expectations, shown not to have worked within a reasonable but also reasonably brisk period.