A new deal between the BPI and the UK's major internet providers attempts to discourage users from illegal file sharing

A significant new deal between broadband internet providers and the music and film industries has been announced, in a move to counter the financial losses caused by illegal downloading.

The deal involves an agreement by the ISPs (Internet Service Providers) to send letters to prolific downloaders warning them of the illegality of their actions. Six major providers have signed up to the MOU ('Memorandum Of Understanding') – BT, Virgin, Orange, Tiscali, BSkyB and Carphone Warehouse.

The BPI (British Phonographic Industry) and the Motion Picture association of America have signed the agreement on behalf of the music and movie industries. Geoff Taylor, chief executive of the BPI, said: "All of the major ISPs in the UK now recognise they have a responsibility to deal with illegal file sharers on their networks."

However, there is no clear indication of how forceful the internet companies will be obliged to get with their customers. The music industry wants a "three-strikes-and-you're-out" arrangement whereby illegal downloaders will have their internet access cut off if they persist after being warned.

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But the web companies have not promised this, and it is known that the government is not in favour of such a move. The deal only commits the broadband companies to "working towards a significant reduction" in the illegal sharing of music.

The new deal is being seen by observers as a last-ditch attempt by the internet providers to avoid government legislation, which is being demanded by the music and film industries. The internet companies are aware that if a voluntary code doesn't work, they could be hit with a compulsory levy that would compensate the content companies – much like the charge that was added to the cost of blank cassette tapes.