Energy regulator warns of power blackouts and renationalisation
Robin Pagnamenta - The Times
Britain’s energy regulator yesterday warned of power blackouts and spiralling consumer prices and raised the prospect of partial renationalisation of the industry.
In a damning report, Ofgem says Britain’s power industry is in a dire state and in desperate need of investment. The regulator raised the prospect of direct government intervention that would wind back the clock on 20 years of deregulation.
Alistair Buchanan, Ofgem’s chief executive, said: “We do not advocate change lightly, but all the facts point to the need for reforms now ... Leaving the present system unchanged is not an option.” In remarks akin to proposals by Ed Miliband, the Energy Secretary, in an interview with The Times on Monday, Mr Buchanan said that there was “reasonable doubt” over the security of Britain’s energy supplies before 2015 and set out proposals to unlock an estimated £200 billion of investment needed to solve a looming energy crunch. “Acting earlier will also help keep costs as low as possible for consumers and business,” he said.
Mr Buchanan claimed that the crisis had been compounded by an “unholy trinity” of factors — including the impact of the recession on energy industry investment, Britain’s growing reliance on imported gas as North Sea supplies are depleted and the closure of nine ageing coal-fired and oil-fired power stations by 2015 in order to meet new EU pollution laws, a move that will at a stroke scrap almost a third of UK generating capacity.
However, Ofgem’s Project Discovery report, which has thrust energy policy centre stage weeks before an expected general election, immediately provoked a storm of criticism.
Lord Lawson of Blaby, the Conservative former Energy Secretary, an architect of energy market deregulation in the 1980s, rejected Ofgem’s analysis and accused it of being subject to political interference. He said: “It’s not the free market that has failed but political opposition to nuclear, coal and other forms of carbon power ... Ofgem just feels it has to trim its sails to the prevailing political wind.”
Dieter Helm, Professor of Energy Policy at Oxford University, said the findings exposed a failure by Ofgem to tackle deep problems in the energy market that had been clear for many years. “Ofgem has very limited credibility,” he said. “This is a quite remarkable entry into policy by a regulator.”
Ofgem’s proposals range from placing new requirements on Britain’s Big Six energy companies to generate more electricity from wind or nuclear power to more drastic steps such as creating a centralised national “energy buyer” that would coordinate investment through a single company, probably with state support. Another proposal is to set a floor on the price that power plant operators must pay for their CO2 emissions — to funnel investment into cleaner alternative fuels.
All these proposals would involve greater central control or government intervention and having a centralised buyer would involve an element of industry renationalisation.
Greg Clark, the Shadow Energy Secretary, said it was a “sign of desperation” that Ofgem, whose chief role is to execute government policy, was having to urge the Government to adopt a policy for energy security. He said: “This is a devastating verdict on Labour’s 13 years of neglect of Britain’s energy security.”
Mr Miliband rejected the concerns and agreed with Ofgem’s conclusions. He said: “For the longer term, Britain will need a more interventionist energy policy. The scale and upfront nature of the low-carbon investment needed is likely to require significant reform of our market arrangements.”
On Space Weather and personal nuclear power
On nuclear energy - the solution that dare not speak its name
Carbon trade phish scam disrupts exchanges
Complex fraud lies behind emissions permissions attack
John Leyden - The Register
Phishing fraudsters have extended their net beyond harvesting e-banking credentials via a scam that resulted in the theft of 250,000 carbon permits worth over €3m.
The outbreak of fraud resulted in the suspension of trading in several EU registries on 2 February. The crooks are thought to have created fake emission registries, promoted via spam emails, before using identity details submitted on these sites to trade rights to blow-off greenhouse gases on the legitimate sites.
Six unnamed German firms were among the victims of the scam, a new form of corporate identity theft. Illegal transactions have also happened in the Czech Republic. German police have begun investigating the fraud. The EU Commission may also become involved, the BBC reports.
Meanwhile the United Nations' Framework on Climate Change (UNFCCC) is working with national registries to boost the security of registries and to help develop policies to frustrate similar attacks in future. Short term measures reportedly include warning users and resetting passwords.
Emissions trading continued via the European Emissions Exchange but exchanges in Belgium, Denmark, Hungary, Italy, Greece, Romania, Bulgaria, Spain and Germany were badly affected. Registries in Austria, the Netherlands and Norway were temporarily suspended but began trading again after minimal disruption.
"We have to be careful not to blow this out of proportion," EU environment spokeswoman Barbara Helfferich told EUobserver. "This happens to banks, Visa, Mastercard about once or twice a month. And this is the same sort of thing.
"It's not something intrinsic to the ETS (Emissions Trading Scheme). This could happen to anyone," she added.
Net security firm McAfee adds that a phishing attack targeting the Danish quota-market occurred in 12 January, leading to its temporary suspension, prior to a much wider attack two weeks later around the turn of the month.
McAfee analyst Francois Paget suggested that "[the] people behind these attacks cannot be simple hackers", but are instead "likely [to be] in the pay of rogue states that reject rules-based international trade".
A graphic from McAfee suggests that cordon permits were raided via a network of corrupt brokers and intermediaries via a scheme akin to VAT carousel fraud, where crooks collect the tax on easy to trade goods such as mobile phones before disappearing before a tax bill becomes due.
McAfee's explanation is the best stab we've seen at explaining how fraudsters laundered stolen carbon permits which, unlike credit card details or even webmail accounts, are not the sort of thing you are likely to be able to sell in underground hacking forums. Use of carbon permit "money mules" and cash transfers via Western Union also seems a bit unlikely
Microcredit used to get out of debt
Microcredit is sometimes used to pay off debts rather than set up a business.
Liselore Havermans, who is carrying out a six-month study in India for the DHAN foundation, has visited shanty towns in the city of Madurai to study microcredit. She has discovered that families there had an average 190 euros in microcredit debts, which is two or three times their monthly income.
The shanty town residents often use microcredit to pay for day-to-day necessities or to pay for jewels or a wedding.
Ms Havermans does not think microcredit, which is intended to help people out of poverty by providing small loans to start up a business, should not be scrapped because of her findings. She says if families are able to get out of debt using microcredit then it is progress. Most people in her study had also leant money from friends, shop owners and informal money lenders.
The Next Step for Microfinance: Taking Deposits
Nobel Peace Prize goes to microcredit founder
Hedge fund manager is banned and fined by FSA
James Moore - The Independent
A millionaire hedge fund manager was yesterday thrown out of the City for massaging his performance figures.
Simon Treacher, an emerging markets specialist who helped run a £900m fund for BlueBay Asset Management, was also fined £140,000 for his transgressions, which at one point inflated the value of his fund by $11.8m.
But the Financial Services Authority's ban, which leaves his career in ruins, stands as by far the biggest penalty, depriving him of the huge earnings commonplace among Mayfair's hedge fund community.
Mr Treacher admitted concocting a "cut and paste" scheme to artificially boost the value of his fund. He altered seven documents used in support of the month-end valuation for specific assets by printing legitimate broker quotes valuing them, but carefully cutting out and pasting different figures on to the relevant valuation lines, copying the altered document, and then submitting the altered copied version as the original quote.
The total valuation errors in July, August and September 2008 amounted to $27m as a result of the scheme.
The FSA said Mr Treacher's actions resulted in investors being financially disadvantaged by approximately $650,000 for which BlueBay has fully compensated them.
The watchdog further said that after being alerted to the issues by BlueBay, Mr Treacher "then provided misleading information to the FSA about his conduct during its investigation".
The FSA made no criticism of BlueBay and Mr Treacher – who ultimately settled the case early and will not appeal – no longer works at the firm.
Margaret Cole, FSA director of enforcement and financial crime, said: "Our actions in banning Simon Treacher and imposing a significant fine will send a powerful message of deterrence to others who might be tempted to behave in this way. His conduct, both in mis-marking the funds and his dealings with us as the regulator, lacked integrity. Treacher's actions undermined BlueBay's independent valuation process and disadvantaged investors in the affected funds."
Sharks who swallowed up HBOS one piece at a time
Meet man who saw the crash coming – for biggest-ever Wall St pay-day
Greece crisis: There but for the grace of God goes Britain
Should markets pass the same verdict on Britain as on Greece, the results would be almost identical - and just as disastrous, says Edmund Conway.
It was one of those moments that can only happen in a place like Davos. There I was last week, having a coffee and minding my own business, when from a nearby table I heard a desperate voice. I assumed it belonged to a beleaguered bank executive, or a stricken hedge fund manager. “We are doing everything we can,” he said, “but the markets don’t care.”
I looked up and realised the voice belonged to the Greek prime minister. His arms crossed defensively, George Papandreou was now listening as one of the world’s top economists told him he thought his best bet was to seek an emergency bail-out from the International Monetary Fund.
Greece is indeed buried deep in the financial mire. At first gradually, and then with alarming speed, the country has lost credibility with investors to such a degree that it is now having to offer an interest rate of 7 per cent to persuade them to buy its debt, compared with 4.5 per cent a few months ago.
Some, including Papandreou, characterise this as a speculative move aimed at splitting up the euro; others see it as a statement of economic disgust at a country whose public finances, always bad, have now dipped into no-hope territory.
There is some truth to both theories, but, more important, at least for both Gordon Brown and David Cameron, there is a broader lesson: the only thing that matters more than knowing what to do about the deficit is persuading the markets that you know what you’re doing about the deficit. Because there but for the grace of God goes Britain. There is no knowing how and when investors will lose their faith in a government, but when it’s gone, there isn’t much you can do to get it back.
Greece, in other words, is the fiscal Petri dish that reveals in gory detail what could happen in the UK if this Government – or the next – fails to maintain the confidence of investors. It is not merely that those interest rates are already inflicting an awful toll on borrowers in Athens and beyond. It is that they are sending the national government towards a full-blown debt spiral, in which the cost of its annual interest bill becomes so unmanageable that it can hardly afford to supply its citizens with basic services.
I have pointed out before that countries, like individuals, occasionally reach the point where they have borrowed so much that their debt simply becomes impossible to whittle away. Greece, the markets seem to think, has now passed that point. And an IMF bail-out would only layer new debt on top of the old. In the end, the only solution is to find some way to slash spending and raise taxes without a) sparking riots or revolution and b) critically damaging the economy.
Should markets pass the same verdict on Britain as on Greece, the results would be almost identical. In its Green Budget yesterday, the Institute for Fiscal Studies, with the help of Barclays Bank, attempted to map out what would happen if the Government failed to achieve the necessary cuts in its budget in the coming years. The verdict: a “very large, and fast-acting” impact on interest rates, pushing them even higher than Greek rates today.
Still, we are not there yet. And there are four reasons to be cautiously optimistic about Britain’s chances. The first is that much of the population is already reconciled to some form of austerity. Both main parties want to cut the deficit sharply, and although the Tories talk a little tougher, in economic terms there is actually not that much clear water between their proposals and those already laid out by the Treasury.
Second, the UK started the crisis with national debt below 40 per cent of gross domestic product, compared with Greece, whose national debt was already close to the 100 per cent of GDP – near the tipping point for a debt spiral. Third, it is a little-appreciated quirk of the British market that, rather like a homeowner on a long fixed-rate mortgage, the Government has to roll over its debt far less regularly than other countries, so is significantly insulated from a Greek-style crisis.
And fourth, unlike Greece, Britain has its own currency, which affords it more leeway to adjust.
But as Greece has shown, a credibility collapse can take place even when you least expect it. Despite George Osborne’s pledge earlier this week to safeguard Britain’s credit rating, some still reckon there is an 80 per cent chance of the UK losing its coveted triple-A status – something that could trigger an investor panic.
So both main political parties should, as a matter of course, prepare detailed emergency plans saying what overnight cuts they would impose in the event of a similar crisis.
However, avoiding such a credibility collapse will not spare Britain from having to drag itself through an economic transformation with the same end: to reduce debt and to live within its means. For some countries, the financial crisis was painful because people suddenly started spending less. For Britain, it uncovered the fact that the nation had duped itself into believing it was more prosperous than it really was. We mistook a debt bubble and the proceeds of financial engineering for sustained and lasting growth. Time to get real.
Greece in turmoil: riots and politics
Threat to valuers as lenders blame them for losses
Rebecca O’Connor - The Times
Bradford & Bingley, the taxpayer-owned mortgage lender, is threatening surveyors with legal action for over-valuing properties during the housing boom.
The Times has learnt that the bank, whose mortgage book is now run by UKFI, the company that manages the Government’s stakes in banks, is one of a number of buy-to-let and sub-prime lenders behind a mass mail-out of letters to surveyors. GE Money and GMAC-RFC, which were among the biggest lenders of buy-to-let and sub-prime deals before the market crashed in 2007, have also been sending out letters to surveyors after selling homes that they had repossessed for far less than the original valuation.
The solicitors’ letters state that the lender has made a loss on the sale of the property at a lower price than the original value and state that this could be a result of a negligence, informing the firm that it is under investigation.
The practice, which The Times first revealed in October, has already forced Allied Surveyors, one of the UK’s biggest independent surveying firms, out of business as a result of 36 professional negligence claims.
The Royal Institution of Chartered Surveyors, which represents 100,000 surveyors, has accused lenders of putting valuers businesses at risk without any evidence that their valuation was inaccurate. Valuers must inform their PI insurer of the claim and may not be able to afford future premiums if the insurer brands them high-risk.
Property prices fell by an average of 22 per cent before the trough in April last year, although new-build apartments fell in value by up to 50 per cent. A wave of arrears and repossessions — almost 90,000 since mid- 2007, according to the Council of Mortgage Lenders — has left lenders facing potentially significant losses.
Bradford & Bingley, GE Money and GMAC were among a group of lenders that were involved in securitisation — the buying and selling of loanbooks between lenders — a practice that was blamed for the sub-prime crisis.
A spokesman for Bradford & Bingley said: “We from time to time discover cases where we feel there is evidence of valuers’ negligence.”
A spokesman for GE Money said that it was “standard practice” when “there is a significant deviation between the valuation and the sale price”. GMAC declined to comment.
Inside the home valuation scam
Time seeks closure on the worst deal in history
The media group is desperate to consign its disastrous merger with AOL to history – a boost in profits in its first results since the split suggests it has
Stephen Foley - The Independent
It takes a while to get over a bad marriage, but Time Warner appears to be healing. The historic media conglomerate had to endure an unhappy anniversary last month, 10 years since its spectacularly ill-fated decision to merge with internet start-up AOL. Everyone else in the media took the opportunity to reprint the ugly wedding photo of Time Warner boss Jerry Levin and AOL's Steve Case embracing for the cameras. Mr Levin came out of retirement to make a full-throated apology for "the worst deal of the century, apparently". But now that milestone has been passed, investors are refocusing on what Time Warner is today. And that, it turns out, is profitable.
The company, which resisted rebel shareholder calls to break itself up for most of the last decade, enters this one as a leaner machine with some of the best-recognised brands in media. There's Time and Warner Brothers, of course; the former an august news magazine that hopes to capitalise on its heritage in a new media age, and the latter one of the most powerful film and TV producers in Hollywood. Harry Potter, Sherlock Holmes, and Batman are all producing reliable bankers, and the studio is up for Oscars with Invictus.
But there is even more below the surface of this $33bn behemoth. Its stable of cable channels brought in $4.02bn of operating profits last year, with revenues not just from advertising, but also from subscription fees paid by cable TV providers. Those channels include CNN, the news provider, and HBO, the pioneering drama channel that was home to The Wire and The Sopranos. The steady revenues from cable subscriptions have been a godsend during the recession, as advertisers have wobbled.
In publishing, the company owns the gossip rag People and Sports Illustrated, and on the internet it has Hollywood's TMZ.com, which broke the story of Michael Jackson's death.
Content, as content providers are keen on saying, is king. Time Warner has now hived off its Time Warner Cable subsidiary, which ran the wires piping TV into millions of homes in the US North-east. AOL, too, was quietly spun off in the dying days of 2009, so its problems of declining subscribers and lacklustre websites will no longer drag on Time Warner proper. "This is enabling us to focus all our resources on creating and distributing the highest quality and most popular content," said Mr Levin's successor, Jeff Bewkes, yesterday.
It is an unsurprising direction for Mr Bewkes to have taken the company, given that he emerged from HBO, one of the most respected producers of content in the media industry. It is the channel that gave the world Sex and the City and now Big Love, and it has 40 million subscribers across the US, paying a premium for its content on top of the cost of basic cable.
Rupert Murdoch, whose News Corp is an arch-rival of Time Warner, declared this week that "content is not only king, it is emperor of all things electronic", and he has led a charge to wring more money out of individuals and companies that use media content. He is planning to charge for online news and recently won higher fees from Time Warner Cable for piping News Corp's Fox channels into homes.
Mr Bewkes was a little sniffy yesterday about the hopes raised by Mr Murdoch's victory in negotiations with Time Warner Cable, his company's old subsidiary. You've got to look at where they start from, he said. Fox and the other media companies that have been winning higher fees were traditionally not premium channels; cable – and increasingly telecoms firms moving into TV – already pay handsomely for HBO and CNN.
Mr Murdoch was able to do some crowing on Tuesday, after Twentieth Century Fox's Avatar wiped the floor with all the other box office hits coming out of Warner Brothers. Fox News is also way ahead of CNN in the ratings. Mr Bewkes declined to engage in all-out war over cable news, since CNN has dialled back on attempts to compete with shock-jock style programming and is concentrating instead on its independent news mission. "Versus what some of our, quote, cable news competitors, try to do... we are interested in building a strong band for the long term," he said.
After posting a loss of $13.4bn in 2008, a year scarred by writedowns in magazines and in the spun-off businesses, Time Warner posted a 2009 profit of $2.47bn and promised mid-teens percentage earnings growth this year, with advertising growth resuming and subscriber numbers stabilising.
Only the magazine arm, where profits fell 42 per cent last year, is a weak spot. The company says it has cut costs in that business. And a version of how Sports Illustrated might look on a tablet computer has been doing the rounds on the internet, signalling one potential future. Without the distraction of AOL, 10 years on, Time Warner is looking to the future.
Back to black: AOL struggles into profit
AOL's maiden results as a newly independent company showed the group had swung from a $1.9bn loss in the last quarter of 2008 to a profit of $1.4m a year later, but was still haemorrhaging subscibers.
Revenues at the dial-up internet group slid from 17 per cent to $809.7m year on year, after a fall in advertising and subscribers. Its chairman and chief executive Tim Armstrong said the company had made "significant progress in support of the long-term vision we see in the future of AOL, but today's results continue to reflect the need for our focus and execution on the work required in the turnaround of the company".
Between last October and December the number of domestic subscribers plunged 27 per cent to 4.9 million, while advertising revenues fell 8 per cent to $471.6m. The group added that ad revenues were further hit in its international display markets with weakness in the UK, Germany and France.
The profits were favourable in comparison with the end of 2008 because the company had taken a $2.2bn non-cash goodwill impairment charge during the quarter in 2008.
AOL, which is behind Google, Microsoft and Yahoo! in the search market, is slashing costs in a plan to cut $150m out of the business this year. This is part of the strategy to refocus the business on content.
It kicked off a redundancy programme in the US last month, and is cutting back on its international business. It plans to shut offices in Finland, Germany, Spain and Sweden, and is holding talks over the future of its French operations. Michael Steckler, the managing director of AOL UK, has left, and it is still unclear how many British employees will be affected.
Will Yahoo feel the love?
EMI needs £100m to meet covenants
Jonathan Russell - Telegraph
The ownership of heavily indebted recorded music business EMI is set to be decided imminently after it was revealed it needed a £100m cash injection in order to meet its banking covenants.
The group's owner, Guy Hands' private equity business Terra Firma, is understood to be waiting on the terms of a new financing deal from bankers Citigroup before deciding whether to ask investors for the extra money.
Mr Hands bought EMI for £4bn in a highly leveraged deal in August 2007 shortly before the debt markets collapsed. Terra Firma has since written down the value of equity in the company by 90pc.
The changes in values is expected to lead to EMI breaching its banking covenants when these are tested later this year. Mr Hands is understood to be considering whether it is worth injecting more money into the company or leave it to breach its covenants, effectively passing the problem over to Citigroup.
The dilemma is the latest twist in a tale that has already seen Terra Firma put together a rescue deal last year that involved injecting £1bn of new equity into EMI in return for Citigroup writing off the same amount of debt. The proposal was later rejected by Citigroup.
Relations between Terra Firma and Citigroup have soured in recent months. At the end of last year Terra Firma filed a lawsuit in New York claiming Citigroup artificially inflated the price of EMI. The £1.5bn suit alleges Citigroup lied over the involvement of rival bidders to drive up the price.
The suit singled out top Citi banker David Wormsley for criticism, alleging that he misled the private equity firm into believing there were other bidders for EMI, thus forcing it to overpay for the business.
Citigroup strenuously denies this claim.
EMI rocks with free music service.
'Outrageous': AIG to pay $100m in bonuses to London-based unit
that pushed insurer to brink of collapse
Daily Mail
Bailed-out insurance giant AIG last night risked another wave of public disgust at the financial industry by awarding 'outrageous' bonuses worth more than £62million to executives in London and the U.S.
The payouts were sent out to staff in the same department - the financial products division - that was blamed for almost driving one of the world's largest firms out of business during the credit crunch in 2008.
American taxpayers funded a £113billion bail out of AIG after the company was deemed 'too big to fail'.
As President Barack Obama tries to cut his country's £1trillion budget deficit, Treasury Secretary Timothy Geithner said the award of the bonuses represented an 'outrageous failure of policy'.
Government attempts to block the award of the bonuses failed because the money was promised under contracts signed before the financial meltdown.
Mr Geithner was facing calls to resign last night despite his claims that a new fee on banks proposed in the President's budget could recoup the payments.
'AIG has taxpayers over a barrel. The Obama administration has been outmanoeuvred,' claimed Senator Charles Grassley.
The bonuses were paid a month early as part of a deal with the U.S. Treasury in which most employees still working in the financial products division agreed to take up to 20 per cent less than they were owed.
About 200 active and former AIG employees will receive the early payments. But tens of millions of pounds more will be paid out in March to former employees who did not agree to the concessions.
Andrew Goodstadt, a lawyer representing AIG workers, said his clients have a legal right to the money under contract. But he said they are willing to accept less 'to buy peace'.
The insurance giant's financial products division was based in London and dealt with credit default swap transactions that were at the heart of the global financial meltdown.
The insurer chose London as the home for this division because it regarded regulation by Britain's Financial Services Authority as less intrusive than that in New York.
But following the fallout from the credit crunch, the financial products division has shrunk by about half over the past year. It has closed its Tokyo and Hong Kong offices and is planning to shut down its London operation later this year.
The Serious Fraud Office launched an inquiry into the conduct of the London branch last February.
Mr Obama's spokesman said last night: 'The President is frustrated and angry that Wall Street continues to have the sense that excessive compensation should reward some of the excessive risk-taking that we have seen over the last couple of years.'
Piracy case to shake up global fight
Bronwyn Herbert and Tim Leslie - ABC News
A Federal Court ruling in favour of internet service provider iiNet could have international ramifications for the fight against illegal content.
The Australian film and television industry today lost its case against iiNet, whose customers downloaded pirated movies and TV programs.
In a landmark judgement, Justice Dennis Cowdroy ruled the internet service provider (ISP) was not liable for the downloading habits of its customers.
RMIT University's general counsel John Lambrick says today's ruling will see ISPs breathing a sigh of relief.
"It was held that there was no question there had been some unauthorised use by some of the account holders and they were in breach of copyright," he said.
"But Justice Cowdroy maintained that just because they were in breach of copyright, that didn't mean that for the purposes of the Copyright Act iiNet authorised the breach."
A group of over 30 film and TV companies launched the action against iiNet, maintaining the ISP had breached its user agreement by allowing members to use BitTorrent software to download content illegally.
But the court ruled while iiNet involvement was necessary for the copyright to be breached, it was the use of BitTorrent software that enabled the breach.
"You can breach copyright in two ways. One is by directly breaching it, which the users did; and secondly you can authorise a breach of copyright, which you can sometimes do by putting people in a position where they can breach copyright," Mr Lambrick said.
"Now what Australian Federation Against Copyright Theft (AFACT) had argued was that by providing its internet service, iiNet was putting its account holders in a position whereby they could breach copyright directly themselves.
"Justice Cowdroy found it wasn't the ISP's system that was responsible for the breach of copyright. It was actually the BitTorrent system which was the means by which copyright was breached."
Double blow
In a further blow for content producers, Justice Cowdroy went on to rule that even if iiNet was to be found guilty of the breach, safe harbour provisions meant the ISP could not be sued for damages.
"Safe harbour provisions are contained in the Copyright Act, and in essence they provide that even if an ISP is found to have authorised a breach of copyright by its users, an ISP won't be liable for damages if it complies with the conditions of the safe harbour provisions," Mr Lambrick said.
"And the broad thrust of those safe harbour provisions is that the ISP must have a policy of terminating the accounts of repeat infringers and reasonably implementing that policy.
"Justice Cowdroy went on to find iiNet did in fact have a policy of terminating the accounts of repeat infringers, so even if it was found to have comprised a breach of copyright it wouldn't have been liable for damages."
He says the case has the potential to set major precedents in who is responsible for illegal downloads, as Australia's laws in the area reflect that of the US and European Union.
"The reason being that this is one of the very few cases involving an ISP who's been sued by a content owner that has actually gone to court, and so it does create a significant international precedent," he said.
"Or at least it will create international interest mainly because the US and the European Union have legislation similar to our safe harbour provisions which were based on the US Digital Millennium Copyright Act."
'Thousands of infringements'
AFACT spokesman Neil Gane says "tens of thousands of infringements" occurred across the iiNet website.
"Evidence was provided to iiNet; evidence that CEO Michael Malone of iiNet described as compelling evidence," he said.
"We were hopeful that iiNet would comply with our terms and conditions which clearly stipulate that their users cannot use their accounts for illegal means."
Mr Gane says the film industry cannot compete with illegal downloads.
"It's very difficult for the movie industries to compete with a free alternative which is perpetrated by theft," he said.
Meanwhile, iiNet's chief executive officer Michael Malone says the company is delighted with the court decision.
"Particularly that we were found not to have authorised, so that I guess was the most important point," he said.
"We've always said all the way along that we didn't condone copyright in any way. Copyright violations don't benefit iiNet at all.
"We'd much prefer to be working with the studios now to try and find some way to be able to make this material legitimately available to customers.
"We think that's the best way to be able to tackle piracy on the internet."
'Significant backlash'
Mr Lambrick says while the content providers are likely to appeal, their chances of getting a positive ruling are minimal. But he expects a huge backlash against the ruling.
He says it is likely they will lobby the Federal Government to change the Copyright Act and place more responsibility with ISPs in cracking down on illegal downloads.
"I actually expect that there will be significant backlash and significant lobbying on the part of the content owners who are actually a very powerful lobby group... and they're more powerful than the ISPs," he said.
"I expect you'll see some Government intervention which will require ISPs to carry some of the burden that they're not otherwise required to carry... as part of the decision.
"They will appeal, I expect, to the full court of the Federal Court and argue that Justice Cowdroy's decision was wrong in law. But I expect at the same time they will be lobbying the Federal Government to amend the Copyright Act."
Mr Gane says there needs to be sector-wide reform and Government legislation could be part of the solution.
"We are confident that the Government will certainly not support a policy outcome which allows for copyright infringement to continue unabated on the internet," he said.
But Mr Lambrick maintains irrelevant of the reasoning behind the decision, a favourable ruling was needed for ISPs to avoid severely impacting the industry.
"Regardless of the reasoning behind the decision is was probably an appropriate outcome on policy grounds," he said.
"Because when you think about it, a judgement against iiNet would have resulted in many, many content owners bombarding ISPs with claims of breach.
"It would have had a very adverse effect on their business models, because compliance costs would be very, very significant. So it would seriously have impacted up on the internet industry"
AFACT says it is still reviewing the judgement but has not ruled out appealing against the decision.
Fed papers reveal further details of AIG bailout?
Airbus, Boeing See Demand Slump Till 2012 on Slowdown
Chan Sue Ling and Wendy Leung - Businessweek
Airbus SAS and Boeing Co., the world’s two biggest planemakers, expect a demand slump to continue for at least two more years as airlines pare growth following a record drop in air travel.
“The market will stay slow for new orders until 2012,” Airbus Chief Operating Officer John Leahy said in a Bloomberg TV interview at the Singapore Air Show yesterday. The European Aeronautic Defence & Space Co. unit expects to win between 250 and 300 orders this year, he said. That would be a third straight decline from the record 1,458 achieved in 2007.
Carriers have slowed expansion plans and cut capacity after global international air travel plunged 3.5 percent last year, the most since World War II. The industry will likely take three years to rebound from the decline, according to the International Air Transport Association.
“It’s been a tough road,” said Boeing’s commercial aircraft marketing head Randy Tinseth. “Things are better, but they can still improve a great deal more.”
Carriers including Singapore Airlines Ltd. and Cathay Pacific Airways Ltd. have said that bookings are picking up from last year’s low. Still, the Singapore-based carrier said this week it may be too early to call an end to the slump because of continued “uncertainties” about the global economy.
“No one has any real confidence,” said Jay Ryu, an analyst at Mirae Asset Securities Co. in Hong Kong.
China Competition
The expected rebound in aircraft orders may also coincide with new competition for Boeing and Airbus in China, the world’s fastest-growing air-travel market. State-controlled Commercial Aircraft Corp. of China’s 168-seat C919, the nation’s first narrow-body aircraft, is due to make its maiden flight in 2012 and to then enter service two years later.
“It’s going to take them some years before they finalize their product, and after that, you have to gain credibility,” said EADS Vice President Christian Duhain. “That’s not easy.”
China Southern Airlines Co. and Air China Ltd., two of the nation’s big three carriers, both said this week that they will support the domestic planemaker. The carriers operate at least 550 Boeing and Airbus planes between them, and Airbus expects the country to account for about a third of industrywide Asia- Pacific plane orders over the next 20 years.
Bombardier Inc.’s C-Series, which will carry as many as 149 passengers, is also due to make its maiden flight in 2012, with deliveries scheduled to start a year later. The Canadian planemaker anticipates slow growth in demand this year and next before a surge in 2012.
“When the airline industry really recovers in 2012, that’s when you will see large number of orders come in,” said Gary Scott, president of the company’s commercial-aircraft unit.
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