SAN FRANCISCO (09/11/2000) - Next week, the U.S. Federal Communications Commission is expected to hand down its first decision aimed at preventing the Napsterization of the movie business.

The Commission's action, which so far has escaped widespread attention, is the result of a push by the movie industry to prevent people from swapping digital copies of movies shown on TV - or worse, pirating them to the masses. At issue: In the future, should consumers be able to tape TV shows as easily as they do today?

The Motion Picture Association of America argues that they shouldn't, putting the trade group afoul of free-speech advocates, as well as the companies that will make the next generation of digital TV sets and VCRs.

The MPAA, essentially, is scared silly that digital copies of movies now shown on HBO or NBC will be copied and reproduced endlessly at perfect quality. Imagine Mission: Impossible showing up in your e-mail.

The MPAA is, in effect, trying to stay one step ahead of potential copyright pirates by preventing consumers from making perfect digital copies of movie studios' material. If the industry doesn't succeed, it fears that it will end up in a situation like the music industry, fighting Napster and its spawn for generations.

The way the trade group wants to prevent this is by installing an additional scrambler in all digital equipment, from digital TVs and set-top boxes to VCR-type devices like TiVo (TIVO) and ReplayTV. The new protection would put a security filter on that signal before it can travel further to a recording device. Presumably, if you want to tape an episode of Friends on your TiVo, the filter will allow you to do so. But if you try to tape a pay-per-view movie you've ordered, you'll get static instead.

The FCC could mandate this Thursday by adopting a licensing agreement developed by CableLabs in Colorado, the research arm of the cable business that has taken the lead in developing security software. The new agreement would likely affect the design of all subsequent electronics equipment.

What's unclear is what will happen if the MPAA gets turned down. Industry officials have threatened under their breath that if they don't get their way, they simply won't make their movies available to TV networks that might be vulnerable to digital taping. But that seems like a hollow threat, given the fact that a good chunk of a studio's revenue comes from pay-per-view and cable runs of their films.

Lined up against the movie business is the consumer-electronics industry, which argues that the whole thing is unconstitutional. Why should the movie industry be able to decide what people can tape and when? Opponents say this issue was decided 16 years ago when the Supreme Court ruled that Sony (SNE) was not infringing on any copyrights with its Betamax video recorders. A digital recorder is no different in form or function, and a digital signal is no different than an analog one.

"Our fear is that what CableLabs is pushing for would allow the entertainment industry to have ultimate control over consumer access," says Jeff Joseph, VP of communications for the Consumer Electronics Association. "It could deny consumers their customary and usual access to recording programs as they do on a VCR."

David Simon, who runs a site called RecordTV and has himself been chased by the MPAA, says that it doesn't really matter what protections the industry puts in place because anything could be easily circumvented. Simon's site made recordings of TV shows available on the Internet, and he is now fighting in court for designation of his service as a VCR. "If you can watch it, you can record it," he says. "If I show it on my screen, all you have to do is capture that screen. It's as good as original quality."

The only way to make the content absolutely secure, Simon says, is to lock it up completely so nobody can watch it - which is akin to the studios taking their toys and going home.

And that, in fact, is what the cable industry is worried about, which is why it decided to side with the MPAA in the fight. "The content providers have said, 'If you don't have the means of protecting our products, we're not going to give them to you,' " says Neal Goldberg, general counsel of the National Cable Television Association.

(Beth Pinsker writes for Inside.com.)