U.K.'s Digital Economy Act Becomes Law: What It Means for BBC, ITV and Beyond

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From debate about retrans fees and increased sentencing options for copyright infringements online to anti-pornography measures and making the U.K. the "most digital nation."

Britain's Digital Economy Act 2017 became law Monday, replacing a law that had been in place since 2010.

Its provisions affect the way U.K. public broadcaster BBC, commercial TV giant ITV, cable operator Virgin Media, pay TV powerhouse Sky, websites and others do business. 

Here is THR's look at some of the key elements of the act and the changes it will bring to Britain. 

Ofcom regulating the BBC

U.K. communications regulator Ofcom has been in the news with its review of 21st Century Fox's bid to buy full control of pay TV giant Sky. But its duties go well beyond reviewing deals, and the Digital Economy Act formally adds to them.

A key section of the act has officially extended Ofcom's powers "to regulate the activities of the BBC to enable it to fulfill the role" detailed in its latest royal charter. It has taken on full external oversight of the U.K. public broadcaster, which had previously been regulated by the BBC Trust, for the first time.

"The government has decided that a new BBC unitary board will govern and run the BBC, and ultimately be responsible for editorial and management decisions," Ofcom wrote in 2016 explaining the new set-up. "Ofcom will become the new external regulator of the BBC. Our job will be to hold the BBC to account."

Retransmission consent fees?

The Digital Economy Act includes a section that ITV has said could pave the way for U.S.-style retransmission consent fees.

Section 73 of Britain's Copyright Designs and Patents Act of 1988 said that cable TV operators, such as Virgin Media, could air public service broadcast channels without any payment. The new law repeals that.

But don't expect an overnight change here. "We look forward to negotiating with platforms for the full value of our channels, and we do believe they have a lot of value," ITV executive chairman Peter Bazalgette said in explaining what to expect on a recent earnings conference call. 

What about satellite TV provider Sky, which isn't affected by the rule? "Section 73 only applies to cable," said Bazalgette. "But we have our general pay deals with both Sky and Virgin coming up for renewal. So we'll be talking to [them] about that [in] the new deals going forward."

Virgin Media and Sky have long highlighted, though, that the government has also supported the current state of affairs of "zero net fees," meaning that no formal retransmission fees are expected to be introduced given that the spectrum allocation, programming guide prominence and advertising revenue that public service broadcasters receive amount to value. 

Pay TV firms have also said that the U.S. and U.K. markets are different and that regulation in Britain would need to change for retrans payments. They have said proponents of retrans fees want to enjoy the benefits of their public service broadcaster status and also make pay TV firms and their subscribers pay to receive free-to-view channels.

Asked to explain ITV's plans further, Bazalgette recently said: "I think the whole discussion will be subject to a lot of to and fro – it will be a proper commercial conversation where both sides will be negotiating. And Virgin will start from a position that they don't want to pay, and we'll start from a position that one of the things that's most valued and probably the most valued thing on not just the Virgin platform, but all of the pay platforms, is paid [public service broadcasters'] content. If that content is not available on those channels, would you subscribe to it? And I think that's a really important point that they need to accept, which I'm sure they do. At the moment, we have deals with Sky and Virgin for all of our content. The only bit they don't pay for is the thing that's most valued by the viewers, which is the main channel."

Concluded Bazalgette: "It will just be a normal commercial debate. It might take a bit of time, but it's great that we can do have that conversation, which historically we've not been able to."

Increased sentencing options for copyright law infringements online

One key goal of the Digital Economy Act is to "increase the sentencing options for people who infringe [on] copyright laws online, bringing sentences into line with the current penalties available for 'physical infringement.'"

The maximum prison sentence for people found guilty of infringement has increased from two years to 10, plus the definitions have lowered the threshold for sanctioning.

Previously, to be a criminal offense, infringement had to happen in the course of a business, with the infringer knowing or having reason to believe that they are infringing copyright.

That has now been replaced with lines that the accused knows or has reason to believe that they are infringing copyright in the work and either intends to make a gain for themselves or another person, or knows or has reason to believe that their behavior would cause loss to the owner of the copyrighted material or expose the owner to a risk of loss.

Protecting kids from pornography 

Among new measures in the act is one to "protect children from online pornography by requiring age verification for access to all pornographic sites and applications."

The goal is to have age verification controls in place by April 2018. The plan is to require porn sites to get from users details from a credit card, which in Britain cannot be legally issued to people younger than 18.

"We are taking the next step to put in place the legal requirement for websites with adult content to ensure it is safely behind an age verification control," said Matt Hancock, minister of state for digital and culture in Britain's Department for Culture, Media and Sport. "All this means that while we can enjoy the freedom of the web, the U.K. will have the most robust internet child protection measures of any country in the world."

But there has been a backlash from privacy and free speech groups. "Age verification could lead to porn companies building databases of the U.K.'s porn habits, which could be vulnerable to Ashley Madison-style hacks," Jim Killock, the executive director of the Open Rights Group, told The Guardian. "The government has repeatedly refused to ensure that there is a legal duty for age verification providers to protect the privacy of web users. There is also nothing to ensure a free and fair market for age verification."

"Most digital nation"

The Act also wants to make the U.K. "the most digital nation in the world."  

Among other measures, it calls for a new broadband Universal Service Obligation, ensuring people the right to request access to 10Mbps broadband. 

The government is also targeting better coverage in rural areas through greater investment and a faster rollout of mobile and broadband infrastructure.

"The Digital Economy Act is about building a strong, safe and connected economy," said Hancock. "It will secure better support for consumers, better protection for children on the internet, and underpin a radical transformation of government services."