The All Party Parliamentary Communications Group (apComms) also urged the government to postpone making policy about illegal downloading until the EU has finished negotiating its telecoms package.
apComms' report, entitled "Can we keep our hands off the net?", deals with a wide range of internet issues including online privacy, the regulation of behavioural advertising and the way in which child sexual abuse websites are tackled.
Among those who gave evidence to the committee were Richard Mollett, director of Public Affairs at the British Phonographic Industry and James Blessing and Emma Ashcroft of the Internet Service Providers Association.
The government recently proposed suspending the internet accounts of illegal downloaders after copyright owners criticised earlier legislative proposals to squeeze their bandwidth as inadequate.
But the apComms committee concluded that disconnecting end users is not in the "slightest bit" consistent with policies that attempt to promote eGovernment.
Its report also claims that much of the problem with illegal sharing of copyrighted material has been caused by the rights holders, and the music industry in particular, being far too slow in getting its act together and making popular legal alternatives available.
