Digital Economy Act: Built on Sand


One of the many frustrating aspects of the recent debate on the Digital Economy Bill was the constant repetition of two major inaccuracies. The first, that unauthorised file sharing is theft, argues an appalling level of legal literacy among our elected representatives. Such file sharing is actually the infringement of a time-limited, government-granted monopoly, which is very different from stealing your bicycle (for a handy illustration of the difference, don't miss this.)

The other error concerns the scale of losses suffered by the recording industries as a result of such unauthorised sharing. All sorts of figures were bandied around as if they were well established and widely accepted. But nothing could be further from the truth.

For example, just under a year ago, huge figures were being widely quoted about UK activity:

Industry reports suggest that at least seven million British citizens have downloaded unauthorised content, many on a regular basis, and many also without ethical consideration. Estimates as to the overall lost revenues if we include all creative industries whose products can be copied digitally, or counterfeited, reach £10 billion (IP Rights, 2004), conservatively, as our figure is from 2004, and a loss of 4,000 jobs. This is in the context of the “Creative Industries” providing around 8% of British GDP.

As I pointed out at the time, these numbers were riddled with unexamined assumptions. Someone else who found them fishy was Ben Goldacre, who also ripped them apart royally.

Many such apocalyptic figures portending the end of all creativity as we know it come from the US, but hitherto with little independent examination of their trustworthiness. Until now, that is, thanks to the United States Government Accountability Office (GAO) report “Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods” [.pdf]. The comments on individual estimates are at best doubtful, and at worst damning:

Three widely cited U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies. Generally, the illicit nature of counterfeiting and piracy makes estimating the economic impact of IP infringements extremely difficult, so assumptions must be used to offset the lack of data. Efforts to estimate losses involve assumptions such as the rate at which consumers would substitute counterfeit for legitimate products, which can have enormous impacts on the resulting estimates. Because of the significant differences in types of counterfeited and pirated goods and industries involved, no single method can be used to develop estimates. Each method has limitations, and most experts observed that it is difficult, if not impossible, to quantify the economy-wide impacts.

Now, the fact that it's difficult to estimate the economic effect of unauthorised filesharing wouldn't be a problem in itself – many complex areas are hard to estimate accurately. What is worrying – outrageous, indeed – is the fact that major legislation has been driven through in several countries, including the UK, justified in part by unsubstantiated or downright erroneous studies of the kind panned by the US GAO.

Bad statistics are not the basis for good law, and this latest analysis from the US is just one more reason why the extraordinarily ill-thought out Digital Economy Act needs to be repealed in its entirety, and the entire process of drawing up legislation that will truly stimulate the UK's digital economy started afresh.

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