Exclusive Regulators are considering creating loopholes in the implementation of the Digital Economy Act to allow small, mobile and Wi-Fi ISPs to avoid its copyright enforcement regime.

A suggested threshold system would take into account an ISP's size and the costs of compliance before imposing the Act's provisions against unlawful filesharing.

The new law allows ISPs who are not considered large carriers of copyright infringing material to be exempted, and gives Ofcom scope to define the considerations.

A threshold would mean dozens of small fixed-line ISPs would be likely to avoid sending warning letters to customers on behalf of rights holders, as the extra staff required would represent a large cost to them.

Many smaller outfits would also need to purchase new equipment if, as is widely expected, after a year the written warnings have not significantly cut copyright infringement by filesharers and ISPs are required to apply technical measures. These are likely to include restricting the bandwidth or protocols available to those repeatedly accused of unlawful filesharing.

Similarly, mobile broadband providers would find retrieving customer details to send a warning letter request for music or film industry monitoring teams an expensive task. They typically serve all their internet users from a tiny pool of shared IP addresses and are not set up to easily discover who was responsible for a connection to a BitTorrent swarm at a particular time.

Claims by digital rights activists during the Act's passage through Parliament that public Wi-Fi hotspots will be closed down could also be undermined by the threshold. Since users typically use them for short periods, Wi-Fi ISPs are unlikely to be considered a major source of copyright infringement.

Ofcom is considering the system during a series of hastily-convened meetings with major ISPs and rights holder organisations after the Digital Economy Act became law on 9 April. The communications regulator is tasked with completing or approving a Code of Practice within eight months, including three months waiting for approval from the European Commission.

The discussions raise the possibility that only the largest consumer ISPs, who dominate the market, would be affected. Between them, BT, TalkTalk, Virgin Media, Sky, Orange and O2 provide more than 95 per cent of the home broadband connections and filesharing that rights holders plan to target.

Smaller ISPs have not been invited to the meetings, which has prompted some consternation, but also hope that this is a sign that regulators plan to exclude them from the most controversial parts of the Digital Economy Act.

Sources who have been to the meetings say a threshold has not yet been set, but there is seemingly no desire from the music and film industries to impose the Act on small ISPs.

An Ofcom spokeswoman denied smaller ISPs had been excluded from discussions, which she said were ongoing.

"We need to consider a number of different options before setting out some formal proposals in our consultation – nothing is decided before then," she said, declining to comment on where a threshold for compliance with the Act could be set. ®