The piracy problem that has severely damaged the music industry is increasingly threatening to do the same to the movie and television business, with peer-to-peer (P2P) networks emerging as the principal means for the illicit distribution of copyrighted content.

Movies, TV programmes and video games, as well as computer software and music, are easily available for free via P2P networks to those prepared to put up with long download times, the risk of computer viruses and of being caught and prosecuted.

Internet Service Providers (ISPs) are increasingly in the front line of tackling P2P piracy. Blocking users from engaging in any P2P activity is technically possible for an ISP to do, but many legitimate services are based on P2P architecture, including online video providers Joost and Vuze, the BBC's iPlayer "catch-up" service and Zattoo, which delivers live TV channels over the internet. The issue has come to a head in the USA where the Federal Communications Commission recently issued a public enforcement order against cable operator Comcast for using surveillance tools in its network to monitor consumer behaviour and block access to P2P sites.

Governments, pressured by rights holders, are making moves too. The UK's Department of Business, Enterprise and Regulatory Reform (BERR) has told ISPs and rights holders to reach a voluntary agreement or face compulsion. The European Parliament is also taking up the issue and several tough amendments to the telecommunications directive – to be debated in the last week of September – address P2P file-sharing. Measures proposed include enabling ISPs to vary "quality of service" for certain content, which allows the lowering of access speeds to P2P networks and the forced introduction of software (which opponents consider to amount to "spyware") in personal computers to detect copyright infringements.

Irish MEP Kathy Sinnott, a critic of the amendments, said that they "seek to move Europe closer to the Chinese internet model where usage is monitored and where an individual goes online can be curtailed."

What users think
Much illicit P2P activity is carried out by young internet users who have grown up with a wealth of pirated content freely available to them via the internet.

A poll carried out in May showed that 75 per cent of Swedes aged 18 to 20 agreed with the statement "I think it is OK to download files from the Net, even if it is illegal".

Tough penalties for illegally downloading material might not be an effective deterrent. A survey of US university students showed that 64 percent download music regularly through P2P networks and other unauthorised sources. While only seven percent were "extremely concerned" about being punished for illegal downloading, 43 percent were "not concerned".

Three strikes
Rights holders are pressuring ISPs to police the P2P world on their behalf, with some backing the "graduated response" (or "three strikes and you're out") model where offenders get two warning letters from their ISP and a third offence results in loss of service. UK music rights body the BPI wants ISPs to adopt this model and the six largest – including BT, Virgin Media and BSkyB – have agreed at least to tackle repeat infringers with warning letters.

While "three strikes and you're out" might have a nice ring to it, it is debatable whether it could work.

ISPs might be happy to issue warning letters, but would they be prepared to cut off potentially large numbers of customers?

Virgin Media chief executive Neil Berkett recently told industry newsletter (New Media Market) that the company would "never do anything to our customers as a result of rights breaches unless we have a regulatory or a legal framework to fall back on. There is no legal [or] regulatory framework to disconnect our customers." Outside legislation and regulation, content owners attack the illegal downloaders by deploying new technology – such as digital watermarking and digital rights management (DRM) – to protect their copyrighted material. Micosoft's Vista operating system, with its integrated DRM system, has made illegal downloading more difficult. While this won't deter the professional pirate – the system was allegedly hacked on the day of Vista's release – it certainly deters many ordinary users.

There are alternative approaches that seek to compensate for the effect of piracy on rights holders' incomes.

UK company Playlouder is close to a deal with a top ISP under which the ISP would pay record companies for songs illegally downloaded by its customers. The Playlouder technology uses "deep packet inspection" to identify songs downloaded over the ISP's network and enable rights holders to be paid.

Compete
Another approach is through commerce. Apple's iTunes has shown that a business can be made by providing legitimate musical and video content at low cost.

Providing material for free – advertising supported or, in the case of the iPlayer, funded by the television licence fee – may be an effective way to beat the pirates at their own game. Hulu, the News Corp. and NBC Universal joint venture, offers premium programmes in this way via its own site and through partners including MSN and Yahoo. Others offering legitimate material from leading content providers include Veoh and video search-engine Blinkx. The "pay what you want" model, pioneered by Radiohead with their latest album, In Rainbows – might also prove an innovative way forward for online video providers. Downloaders pay whatever they feel like paying, including nothing.

This approach is also used by the recently launched indie-band website Aralie, which says that the model is "the most practical way to circumvent music piracy." But to the generation that has grown up using BitTorrent, eMule and Gnutella every day, both free and the pay-what-you-want model might not be enough to pull them away from familiar P2P services. Research by P2P monitoring firm Big Champagne and the UK's MCPS-PRS royalty-collection agency said that 2.3 million people downloaded the Radiohead album from P2P sites – many more than from the official site.

Any solution to the P2P problem is likely to involve a mixture of legal action, self-regulation by ISPs and the creation of commercial models that make pirate services less attractive. The hard reality for rights holders is that illegitimate P2P downloading is here to stay and that action to counter it is largely about damage limitation.