The flag was supposed to be about indiscriminate online distribution. TiVo is trying to provide a device that allows 10 people within a personal network to copy TiVo-ed shows onto their PCs. It's perfectly secure. It's just not quite constrained enough for the studios.
And Hollywood is asking [pdf] the FCC to make sure that this TiVo functionality never reaches consumers.
This desperate quest for control, using the FCC as an apparently willing tool, will end its first stage next week. The rumor is that Real and MSN have already caved in to the studios. Only TiVo is still fighting.
The flag proceeding has convinced me that FCC is capable of almost anything. That's why it seems important to let FCC know just how hard making rules about IP-enabled services will be.