The UK's biggest ISPs will have to collect personal details of Internet users who download copyrighted material from P2P networks from early next year, under proposals today from media watchdog Ofcom.
Ofcom said downloaders should then be sent warning letters and, if they get three letters within a year, they'll be sued.
The code of practice will apply to ISPs with over 400,000 customers, which means it will only apply to: BT, TalkTalk, Virgin Media, Sky, Orange, O2 and the Post Office. Combined, these companies control 96 per cent of the market. They fear that customers - particularly savvy file-sharers - will simply move to smaller operators.
In a statement, BT said: “Our initial reaction is that Ofcom’s proposal to limit the obligations to just seven fixed operators and exclude mobile operators and fixed ISPs with less than 400k subscribers is concerning.
"The UK currently boasts a highly competitive broadband market and we believe that such a move has serious potential to distort the market."
Ofcom said it will review the use of P2P networks to download copyrighted material on a quarterly basis, and may extend the code to smaller ISPs and mobile phone companies if it sees BT's fears materialising.
But the proposals have also miffed web watchers. Jim Killock, executive director of the Open Rights Group said: "This is another extremely rushed process, forced by the Digital Economy Act's absurd timetables. There are huge unanswered questions, not least whether innocent people will have to pay to appeal.
"Government needs to draw a clear line between the notifications and potential disconnection regimes. Otherwise, Ofcom can't tell people what these accusations mean, which is absurd.
"Both Jeremy Hunt, the Culture Secretary, and the Liberal Democrats recognised the likely flaws of the Act during the debates. It is Mandelson's Act and they should not feel obliged to do his dirty work."
Ofcom is consulting on the draft code until 30 July and hopes to have it rubber stamped and with European Commission approval by 8 January 2011.