A report from the management consultancy firm Booz and Company says that the losses to the telecoms industry from a 3  strikes / graduated response measures, would be much higher than any potential gains to the music industry.

The report, entitled Digital Confidence, securing the next wave of digital growth, carries out a calculation for a hypothetical  scenario of terminating internet access to persistent filesharers in the UK (I stress it is a hypothetical scenario, because the UK government has not said it has plans to implement the 3rd strike - termination of access). 

The report says:

"One aspect often overlooked in public discussions on the merits of “three strikes” is the damage to the overall digital economy as the result of disconnecting significant numbers of users from the Internet. Implications of “three strikes” would need to be understood more holistically. A high-level sensitivity calculation, for the

UK as an example, estimates “three strikes” to result in the disconnection of 500,000 users and a revenue loss of €180 million for the network operators . In comparison, the music industry assesses an upside of only €33 million in revenue—this total revenue loss of about €150 million is likely to be only a minor share of the downside for other stakeholders, for example, through the reduction of e-Commerce volume. In addition to the fact that users would be disconnected from digital life, the potential economic damage caused across the digital economy value chain makes “three strikes” a challenging concept in terms of finding a proportional remedy to combat piracy."

Booz and Company go on to make an obvious comment that is so obvious it has been overlooked - that cutting people off the Internet also cuts off potential business for ecommerce sites, and therefore other stakeholders in the digital economy will lose out as well. It occurred to me, that the losers may well be the musicians themselves, who will lost concert ticket sales - everyone books online these days - and there is some evidence that file-sharing has the effect of boosting, or at least acting as a promotional tool for, concert attendance. 

I should also point out that the report  does not deal exclusively with 3 strikes, it is an overview and analysis of a range of issues affecting the digital economy, and is of wider interest. I have chosen to highlight this one point because of the relevance to the Telecoms Package debate. 

The report was funded by the Internet company, Liberty Global.  

You can download the report here. Recommended reading: pp64-71

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