The industry's anti-piracy bodies have bemoaned the Digital Britain report for failing to go far enough to protect intellectual property and the software industry.
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Lord Carter, minister for communications, unveiled the Digital Britain report yesterday with recommendations for ISPs to warn then block serial sharers of illegal applications.
ISPs will have to notify online pirates and provide their identities to content owners to allow them to take persistent offenders to court as well as taking "technical measures" to limit damage caused by pirates, such as blocking internet addresses and restricting bandwidth to suspected offenders.
John Lovelock, chief executive at the Federation Against Software Theft IiS, said that the government should have put more pressure on ISPs to crack down on users breaking the law.
He said that the process of writing letters to users threatening withdrawing a service would not have the impact on the hard core illegally sharing files.
"It is like locksmiths handing out leaflets to suspected burglars. They are too frightened of upsetting customers," he said.
"The government should tell ISPs to invoke their own terms and conditions where they can get rid of users that use their services for illegal activity," he added.
Lovelock added that it cost around £10,000 to take someone to court and it was just not realistic to expect the industry to pay for that process when the chances of success were not guaranteed.
The Business Software Alliance (BSA) said that the focus of the report had been too much on games and videos and the failure to cover the software industry in more depth had been a "missed opportunity".
"The widespread use of unlicensed software is costing the economy dearly. More than one in four pieces of software is used illegally in the UK, which amounts to £1.49 billion of losses in 2008 - the highest level ever," said Sarah Coombes, senior director for legal affairs at the BSA.
"The report could have made significant inroads in the battle to stamp out what is a widespread practice with damaging consequences for the economy by proposing innovative ways to encourage software licence compliance by corporations," she added.