Following a consultation, the U.K. government has set out how costs are to be shared as part of the Digital Economy Act's measures to tackle online infringement of copyright.

The Act will create a notification system - overseen by telecoms regulator Ofcom - whereby those who download illegally would potentially receive warning letters.

Today (Sept. 14) the Department of Business, Innovation and Skills said the costs resulting from these measures will be divided as follows: 75% for rights holders (labels, publishers) and 25% for Internet Service Providers (ISPs).

Ofcom's Online Copyright Infringement Initial Obligations Code will implement the notifications process in the first half of 2011, the government said.

Following its consultation on sharing costs for notifications, the government also announced that no fee will be charged to consumers who want to appeal a notification. However, the government will monitor the levels of appeals closely and said it "reserves the right to introduce a small fee at a later stage."

The costs sharing decision applies to both the notification and appeals process.

Ofcom's draft code of conduct established the threshold of three warnings to include subscribers on a copyright infringement list, which must be compiled by ISPs. The ISPs must record the number of notifications sent to subscribers and keep an anonymised list of repeat infringers.

Copyright holders can request information from this list and pursue a court order to identify an infringer, if that subscriber has had three notifications in the previous 12 months. Such notifications are triggered by a formal copyright infringement report (CIR) from a rights holder. Rights holders cover the costs of their own detection and subsequent CIRs.

Unlike France's anti-piracy measures, there is not yet a provision to suspend account holder's Internet connection. That could be added at a later date if there is no reduction in the levels of online piracy.

"Protecting our valuable creative industries, which have already suffered significant losses as a result of people sharing digital content without paying for it, is at the heart of these measures," said Minister for Communications Ed Vaizey in a statement.

"The Digital Economy Act serves to reduce online copyright infringement through a fair and robust process and at the same time provides breathing space to develop better business models for consumers who buy music, films and books online. We expect the measures will benefit our creative economy by some £200 million [$257 million] per year and as rights holders are the main beneficiaries of the system, we believe our decision on costs is proportionate to everyone involved."

Ofcom previously said its code will initially only cover the larger fixed-line Internet Service Providers with more than 400,000 subscribers. This affects the seven largest ISPs from the outset: BT, Talk Talk, Virgin Media, Sky, Orange, O2 and the Post Office.

The U.K. was expecting the 75:25 split but had hoped for 50:50 or even no cost burden.

"We continue to believe that ISPs should bear a greater proportion of the costs of communicating with their customers about illegal P2P use on their networks," said a spokesman for U.K. labels body the BPI. "We will work closely with the government and Ofcom to ensure that the costs framework overall is workable and affordable, in particular for small labels, and that the Code can be swiftly implemented."

However, the Internet Service Providers' Assn (ISPA) is not happy with the bill its members face for notification systems.

Nicholas Lansman, ISPA Secretary General, said in a statement: "ISPA has consistently argued for the beneficiary pays principle and is disappointed with today's announcement. Full cost recovery for serious law enforcement cases is an established rule and ISPA sees no reason why it should not be the case here."