Reports state 6 million people download files illegally each year in the U.K. Music and film companies claim the downloads cost them millions of pounds in lost revenue.
While government officials said the plan is in an early stage and that they are still working on final proposals, the BBC reported this week that there is a draft consultation suggesting Internet service providers would be required to take action against customers who access and share pirated material.
The Department for Culture, Media and Sport said early drafts of the document had been circulated among stakeholders. The document apparently was leaked to press agencies.
"The content and proposals for the strategy have been significantly developed since then, and a comprehensive plan to bolster the U.K.'s creative industries will be published shortly," the agency said. "We will not comment on the content of the leaked document."
The draft proposes a three-strikes approach. An email warning would be sent after the first instance, Internet suspension would occur after the second, and contract termination would follow the third.
A similar law was proposed in France in November 2007.
Some of the U.K.'s biggest Internet providers, such as BT, Virgin and Tiscali, have been in talks with the entertainment industry about introducing a voluntary scheme for policing pirate activity, but no agreement has been reached, the BBC reported. So far, they have failed to resolve how disputed allegations would be arbitrated.
James Bates, the media director at Deloitte, said technology advances better allow Internet providers to monitor what content is being downloaded, and the proposed action against illegal downloaders could help in more quickly identifying content pirates and lead to quicker prosecutions.
Officials from the Internet Service Providers Association, however, told the BBC data-protection laws would prevent Internet providers from examining the content bring sent over their networks.
"ISPs are no more able to inspect and filter every single packet passing across their network than the post office is able to open every envelope," the association said.
The BPI, the trade body that represents the U.K. record industry, said Internet providers had "done little or nothing to address illegal downloading via their networks."
"This is the No. 1 issue for the creative industries in the digital age, and the government's willingness to tackle it should be applauded," BPI Chief Executive Geoff Taylor told the BBC.