The Australian Federation Against Copyright Theft (AFACT), which represents movie studios, is calling on local ISPs to follow the example of British operators in issuing warning letters. The letters will offer alternative legitimate content sources and are one of three possible actions by the ISPs. Speed reduction and browser lockdown would be applied to repeat offenders, who would be left with only email and voice-over-IP access.

The federation's executive director, Adrianne Pecotic, says recent technological advances make it possible for the organisation to monitor file-sharing traffic and accurately determine users' IP addresses and whether the content being downloaded is illegal. It would be possible, for example, to tell if a copy of The Dark Knight was pirated or authorised by filmmakers who are among those using BitTorrent Entertainment Network for legal distribution. The model could easily be applied to music. Ms Pecotic wants to supply offending IP addresses to their respective ISPs and have them co-operate in the fight against copyright infringement by contacting subscribers.

But the Internet Industry Association, which represents ISPs, says the proposal is asking them to become law enforcers. Executive director Peter Coroneos says it is akin to holding Australia Post liable for what people send in the mail. "The ISPs have made a counter proposal, that they are prepared to support streamlining the process to allow the copyright holders access to subscriber details so they can take legal action," he says. "But ISPs stop short of taking action themselves.

"AFACT claims to have the IP addresses, but it's alleged. Even then the ISP can't say who at the address did the downloading. The due legal process must be followed in our legal system. The existing usage terms and conditions talk about illegal activity and not alleged illegal activity. People are presumed innocent until found guilty by a legally constituted court." Mr Coroneos says the technology is not accurate and recent attempts to warn US users caused erroneous notices to be sent to "teenagers and dead grandmothers". Ms Pecotic says movie piracy cost the local industry $230million in 2005. Increased broadband penetration since then would have meant even higher losses over the past 18 months. The losses stem from a decrease in film and television program distribution profits and the consequent decline in financial backing from investors.

According to the federation, a confidential US trial by two ISPs and 100 universities showed nine out of 10 students who received warning letters stopped their illegal behaviour. "They never did it again. It's a very effective way of educating users," Ms Pecotic says.

An Optus spokesperson says the company takes illegal file-sharing seriously and is watching developments overseas, but referred inquiries to the IIA. Telstra and iiNet did not return calls. The federation is also working with other industry bodies to educate children in schools about the illegality and dangers of file-sharing, which include leaving the computer open to unauthorised access and identity fraud.

Parents should teach their children not to steal copyrighted work online, just as they teach them not to steal from stores, Ms Pecotic says. But Mr Coroneos says the matter must be resolved by due legal process. "I'm not sure people would be comfortable in living in a society where their internet connection can be terminated without (the allegation) being tested in court."

For 37-year-old online user Tim, who did not want his last name revealed, the lure of file-sharing is not as attractive as it once was because much of the content he enjoys can now be bought legally online. But, he says, if film-makers delay the internet release of films to protect their deals with TV stations, they have only themselves to blame. "The frustration for consumers is when there's something good that people are talking about in the rest of the world like Flight of the Conchords that was available elsewhere six months before (here). By the time (commercial TV) shows it, half of the audience has probably already seen it on download. The networks have to learn that if they don't show this stuff they'll just lose out to the pirates. "People go for illegal choices because there is no legal way to download this stuff."

Ms Pecotic says there is no doubt there is appetite for content, "but movie makers can't compete with theft".