The second section of the bill, titled "Dissemination of terrorist publications," is more problematic. It makes it a crime to disseminate terrorist publications "with the intention of directly or indirectly encouraging or inducing the commission, preparation or instigation of acts of terrorism, or of providing information with a view to its use in the commission or preparation of such acts" (or with recklessness to the possibility of such an effect). The definition of "dissemination of terrorist publications" is extremely broad, and includes those who "provide a service to others that enables them to obtain, read, listen to, or look at such a publication, or to acquire it by means of a gift, sale, or loan" and anyone who "transmits the content of such a publication electronically" or "has such a publication in possession with a view to its becoming the subject of conduct" falling within any of the preceding sections (including transmission).
This means that mere possession of such material isn't a crime, but possession with intent to transmit (e.g., hosting or having it in a location shared via P2P) is a crime, as is the transmission itself (if done with intent or recklessness).
The proposed statute provides that someone accused of this crime has an affirmative defense by showing that the material does not express their views and did not have their endorsement and that it was "clear, in all circumstances of the conduct" that those two conditions were met--except in the case of a notification from a constable in section 3 (which applies sections 1 and 2 to "Internet activity").
This notification provision is similar in many respects to the Digital Millennium Copyright Act (DMCA) in the United States--if a constable provides notification to a "relevant person" that he is hosting "terrorist publications," that person has two working days to take down the material, or else it is then deemed to have endorsed the publication (unless they have a "reasonable excuse" for their failure to take it down). Unlike the DMCA, there is no counter-notice provision.
The section about Internet activity doesn't define how the constable determines who to notify, or who is responsible for material located downstream of an ISP. If providers are responsible for anything downstream, then this could force an upstream provider to blackhole a server IP that provides many websites to many customers because of illicit content provided by one person. It's also not clear whether a provider could be held responsible for material that it transmits but does not host--in which case this would force ISPs operating in the UK into acting as managed content filtering service providers for the UK government any time a constable designates online material as a "terrorist publication."
The offense carries a maximum prison sentence of seven years.