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Obviously jailtime comes with downsides, namely, the support infrastructure. But it's the mark on their criminal record that's the most important and effective deterrent here.
So, if you gave convicted filesharers fines (with or without specific community service designed to pay it back), and put the conviction on their criminal record, it would accomplish the same as jailtime as far as their future was concerned: A black mark they'd have to spend years overcoming.
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