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If you've used TEMPGEnc 3.0 Express for any length of time you'll know that you don't have to be connected to the internet to use it.
I've been using it for a month now and after the initial on-line license verification after installation, I've always disconnected my cable connection and turned off all background processes (including firewall) while coding from .avi to MPEG-2 and have yet to see any attempted access to the internet by TEMPGEnc 3.0 Express.
This version is a great improvement over ver. 2.5 in terms of user-friendliness and speed... great for editing those huge captured .avi files before ever coding to MPEG-2.:)
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