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The burgeoning popularity of music site Spotify could throw a lifeline to internet service providers by seeing off the threat of making them responsible for illegal download as well as killing off moves to make them pay taxes to music companies to compensate them for their losses.

Last week details emerged of Lord Carter’s forthcoming study of the telecommunications sector Digital Britain, in which it has reportedly been mooted that broadband companies could be forced to pay a levy to music companies which have been badly hit by rampant peer to peer file sharing. According to authorities in the entertainment industry, the sector could lose up to £1 billion over the next five years unless a silver bullet for the problem can be discovered.

However, Spotify could potentially be the solution to illegal filesharing. This is because by offering a huge range of music for on-demand streaming for free, with just a few minutes of advertisements, it acts as a strong disincentive to download songs illegally. And with the service’s popularity burgeoning since its launch and the resulting publicity for it on high-profile music sites, such as Pitchfork, the Lipster and Popjustice, Spotify could already be impacting on the number of illegal downloads. Torrentfreak.com reports that invitations to the site are currently being traded on file sharing sites in great numbers.

Wendy Roby, editor of new music site the Lipster, welcomed the service and noted the potential it has to cut piracy. She said: “If Spotify became an alternative way of trying out new music, you’d hope that would have some effect on downloads. As it stands, it’s a brilliant and lightweight desktop radio where you and your friends can Be The DJ."

More pertinently for internet service providers (ISPs), if Spotify does bring about a change in consumer habits it could see off the risk of the tax payable to music companies. This would be of huge benefit to the sector which might otherwise be forced to raise their monthly broadband charges. Higher monthly rates in turn could hit demand and prove a real blow at a time when broadband providers are already struggling with a plateauing home broadband market.

The development of a new model for enjoying and accessing music online is also set to help ISPs by relieving the strain on available bandwidth. This is because when using Spotify songs are cached on the client computer to prevent wasting bandwidth by streaming the same songs over and over. Meanwhile, a further benefit of the service is if piracy is impacted as a result, Spofity could also kill off moves being to make broadband providers responsible for monitoring use of their network and policing illegal downloaders.

Chinks of hope that broadband providers will not suffer in future as a result of illegal filesharing follows Virgin Media being forced to scrap plans for a legal peer-to-peer music sharing service. This development was deemed by broadband experts as indicative of the problems that providers are facing in curbing piracy and working with record companies to find a solution.

Under the terms of Virgin Music Unlimited’s offer, Virgin Media broadband customers would have been permitted to share music and keep tracks, with a percentage of the subscription fee going to the record companies. According to a report from the Register the service was abandoned when Sony and Universal had second thoughts and insisted that the option to upload and download tracks was removed.

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