Although it appears that a ‘three strikes’ penalty against illegal file sharers has been ruled out, a blanket ‘tax’ on all internet users may be the Government’s answer to the problem.

In the Digital Britain interim report released yesterday, Lord Carter proposed the creation of a 'Rights Agency' to deal with the problem of people illegally copying and sharing music and films over the internet.

The report said the agency would need a “modest and proportionate contribution” and this will probably have to come from internet service providers (ISPs) and the music and film industry. There are concerns however these costs will be passed on to consumers by ISPs.

Andrew Ferguson of Thinkbroadband told Computeractive that this was unfair to the majority of internet users and could actually exacerbate the problem of illegal file sharing.

"While the Digital Britain Report falls short of calling it a tax, if providers are required to pay a levy per broadband customer this simply amounts to a tax over and above the VAT consumers already pay for their broadband. Some people pay only £5 a month for their broadband, so a levy of even just £12 a year would be a significant rise in the price.

“A levy on all connections is likely to see those already participating in illegal file sharing to see the levy as justifying their actions, and people may actually eschew the various legal sources of material."

Although the threat of a three strikes rule - which would see people who persistently download copyright material illegally lose their internet connection - they could still face legal action from the rights holders.

The report says that ISPs would have to collect information on repeat offenders and pass these on to the rights holders; a court order however would still be required.

“Our response to the consultation on peer-to-peer file sharing sets out our intention to legislate, requiring ISPs to notify alleged infringers of rights (subject to reasonable levels of proof from rights- holders) that their conduct is unlawful.

"We also intend to require ISPs to collect anonymised information on serious repeat infringers (derived from their notification activities), to be made available to rights-holders together with personal details on receipt of a court order. We intend to consult on this approach shortly, setting out our proposals in detail.”