Proposals to tackle illegal downloaders divide retailers

Last week Secretary of State for Business Lord Mandelson revealed plans to clamp down on illegal downloaders. His department would assume powers that were previously the domain of communications regulator Ofcom.

Under the proposals, the Government would direct Ofcom to force internet service providers (ISPs) to step in and issue customers with an initial written warning ordering them to stop illegal file sharing or face penalties, including suspension of their internet connections.

Entertainment retailer HMV, which has watched sales of music CDs plummet in the wake of illegal file sharing, supports the change.

HMV chief executive Simon Fox said he “feels strongly” about the matter. He said: “HMV welcomes the Government’s statement on illegal P2P file sharing, which recognises the important role that ISPs can play in addressing this critical issue.

“In our view, the Government’s position strikes a reasonable and fair balance in, on the one hand, acknowledging the changing needs and aspirations of the consumer in what is an evolving technological landscape, while, on the other, it demonstrates its full commitment towards the creative industries and an understanding of the need to protect and support the role they play in our nation’s cultural and economic well-being.”

But Carphone Warehouse founder Charles Dunstone has expressed anger at the proposals. He said: “We are going to fight as hard as we can. Our fundamental duty is to protect the rights of our subscribers.”

Oriel Securities Ben Hunt said in a note last week that digital distribution continues to threaten HMV’s DVD sales. He said the “outlook for physical music sales continues to be worrying” as consumers increasingly favour digital formats.

Previously the Government had proposed that Ofcom would handle monitoring of illegal file sharing. But Whitehall believes that the earliest any measures could come into force with this approach is 2012.

The Government deems this too late “given the pressure put on the creative industries by piracy”.

Minister for Digital Britain Stephen Timms revealed the proposals. He said: “Technology and consumer behaviour is fast-changing and it’s important that Ofcom has the flexibility to respond quickly.”

➤ HMV was due to update on trading after Retail Week went to press.