By Peter J. Brown

The problem of global satellite signal theft looms large. The parties engaged are everywhere and they are highly sophisticated and eager to make money, lots of money. Satellite signal theft is an activity that can spiral out of control in a very short time. In region after region and especially in Asia, this has happened time and again.

The Internet plays a prominent role by providing substantial momentum to the craft and practice of satellite signal theft. And yet, at the same time, satellite signal theft as a phenomenon predates the Internet. It is encountered in all parts of the world today, even where Internet access is not readily available. Still, the Internet is a powerful tool that allows a robust black market to blossom in both products and expertise. The Internet also enables a quick reboot or other response to electronic countermeasures (ECMs), which are designed by Direct Broadcast Service (DBS) companies in particular, to remotely disable clusters of unauthorized satellite receivers.

The steady growth of the Free-to-Air (FTA) Ku-band market today is also complicating the situation. Consumers use FTA units to access satellite signals from numerous satellites. The absence of encryption or conditional access platforms mimics the earlier and now steadily declining C-band TVRO market in North America. Relatively inexpensive, FTA receivers can be purchased easily and for legitimate reasons.

Many observers, however, have a sense that FTA is much more than a vehicle for free satellite television. The FTA is not a huge factor, not yet anyway, as the number of FTA receivers remains relatively small. This situation, however, warrants careful scrutiny.

Satellite signal theft requires an infrastructure often built around complex transborder transactions. This infrastructure is not easily detected, seldom tracked and rarely subjected to intense pressure by law enforcement. In Europe and in North America, thanks to mounting pressure from industry executives based on fears of widespread and growing undermining of intellectual property rights, this situation is changing. Even so, satellite signal theft and its impact remains huge. Although it is impossible to pinpoint an exact figure in terms of lost satellite sector revenue to programmers, service providers and satellite operators alike cite a reasonable estimate of approximately $2 billion-plus worldwide.

Asia Holds Its Breath

Late last year, the Cable and Satellite Broadcasting Association of Asia (CASBAA) completed the region’s first independent assessment of the financial impact of pay TV piracy. CASBAA represents some 130 Asian-based corporations, which in turn serve more than 3 billion people. According to the data collected by CASBAA for 2003, gross revenue losses exceeded $1.2 billion alone, increasing at a projected rate of 10 percent per year. For the satellite industry, the cost in Asia was conservatively estimated at $873 million for 2003.

CASBAA has documented the fact that countless households in economically developed markets are pulling down signals from low-cost markets such as the Philippines and Thailand. In addition, domestic subscriptions to satellite are frequently actually used to feed illegal cable systems, often with thousands of subscribers. Furthermore, ad penetration is adversely impacted by an undisclosed substituting at a local level of local ads, and non paid regional advertising.

"We are in the process of assessing the losses for 2004, which will [soon] be released. Unfortunately, early indications suggest that piracy is growing at an even quicker pace than predicted," says Simon Twiston Davies, CEO of CASBAA. "It is quite clear from industry experience in the Asia-Pacific region that major organized crime syndicates are becoming deeply involved in this business." Davies is following a worrying trend involving "magic" boxes, which decode multiple encryption systems and card splitters, which exponentially increase illegal distribution to hundreds of points of contact at minimal cost.

At an international DBS conference in Seoul last March, Don Flournoy of Ohio University touched on the challenges facing one of Asia’s major pay TV providers in Thailand. "Its paying subscribers are not growing; rather the numbers are declining. This is due largely to signal theft, and the discounted prices being offered by the illegal operators that rely on (this pay TV operator’s) delivered content," says Flournoy, who serves as director of the Institute for Telecommunications Studies at Ohio University.

"We rely on channel growth, either new entities bringing new programming to the market or existing programmers increasing their program lineup. If, because of piracy of the signals, neither group sees growth, the expansion does not happen," adds Peter Jackson, president of Hong Kong-based Asiasat.

According to Davies, CASBAA adopted a multi pronged approach, using a mix of educational activities that includes meeting with regulators, holding seminars and sponsoring an anti piracy television commercial campaign across the region, among other things. Numerous obstacles exist including inadequate and unspecific legislation, a lack of political will with regard to enforcement, and the vast revenue stream that flows to all the players engaged in signal theft.

"Perhaps the biggest obstacle in dealing with this issue is that of cultural misunderstanding of the nature of intellectual property rights," says Davies. He adds that what can be pulled from the sky with little effort is widely seen to be a "gift from the gods" in some markets such as the Philippines and India.

"Many governments within the region remain ambivalent about the enforcement of pay-TV intellectual property rights," Davies adds. "However, the facts of piracy are beginning to be understood by regulators in markets such as Hong Kong, Thailand, Taiwan, Singapore and Malaysia. Economic realities are helping to drive the development of a better environment." Within the Asian region, Davies describes Japan as a market that is largely free of pay-TV piracy.

Is The CASBAA Initiative Working?

"Yes, but the existing program providers have to meet the needs of the consumers and offer the right programming at a reasonable price. If they do not, the temptation to use illegal signals will increase," says Jackson. "This problem will not be solved only with technology. We must have an extensive public awareness campaign, and the appropriate legislation in place as well."

For Paul Budde, managing director of Australia-based Paul Budde Communication Pty Ltd., it is all a matter of money. "Most satellite operators have upgraded their software versions of the Irdeto or NDS systems, and by doing so they can stay two to three years ahead of the pirates. So every two or three years, these systems need to be seriously upgraded to avoid loss to piracy," says Budde.

Upgrades vary, but on average, they cost several million dollars per system. This is a costly exercise, according to Budde, resulting in some players in regions where they cannot afford the upgrade, and remain open to signal theft. Budde reports that in the Australian DTH market, the problem has died down.

Canada Is Coping

Canadian DTH and DBS companies have grappled with signal theft for almost two decades. Stepped up enforcement is starting to have an impact, but perhaps as many as 750,000 Canadians still watch U.S. DBS programming today, amounting to US$450 million in lost revenue for Canadian DTH and DBS companies.

What tactics are yielding the most success? "Bell ExpressVu has taken a multi-faceted approach to combating signal theft, an issue that is an industry-wide problem that requires cooperation from every level of the Canadian broadcasting industry," says Candice Best, a spokesperson for Bell Canada. "We monitor signal theft techniques and have identified the introduction of programmable set-top boxes. These boxes are within the scope of our multi faceted program. The most common vehicle continues to be illegal smart card related devices."

Canadians were the targets of a widespread public awareness campaign starting last year. The impact of this "Theft is Theft" campaign remains to be seen. Among other things, Bell ExpressVu is implementing an effective inventory control system, establishing best practices for dealers and using ECM’s to remotely shut down unauthorized units.

The Coalition Against Satellite Signal Theft (CASST), comprised of various groups within the Canadian TV broadcasting industry including the Canadian Association of Broadcasters (CAB), Canadian Cable Television Association, Canadian Film and Television Production Association, CBC/Radio-Canada, Bell ExpressVu, DirecTV, Star Choice and Vid�otron Lt�e, support the passage of legislation that aims to increase the penalty provisions regarding fines, statutory damages and import controls under the Radiocommunication Act.

"The theft or piracy of television signals is a critical issue for all players in the Canadian broadcasting system–broadcasters, distributors, producers, actors and writers– all of whom suffer financial losses when signals are stolen," says Pierre Pontbriand, vice-president, communications at CAB.

While the Bill C-2 was not approved by the Canadian Parliament in the last session, according to Pontbriand, CASST will be urging the new government to make this a priority, and to win passage of a similar bill in its upcoming session. "Ultimately, the technology upgrade is the most successful tactic at least until the new technology is hacked. Canadian companies have not been taking direct action against the end users, other than the ECM program. The ECMs have been effective in making it more of a hassle to steal the signal. In addition, the DirecTV signal is now secure so that Canadians who were stealing that signal have had to look elsewhere," says Christopher Bredt, a partner with the Canadian law firm of Borden Ladner Gervais LLP.

Bredt describes both Colorado-based Echostar Communications Corp.’s Dish Network and Bell ExpressVu signals as susceptible to the FTA receivers, which are being widely sold through the Internet. He is not aware of significant theft of Star Choice’s signal.

In The United States Some Breathing Room Exists

Earlier this year, CA-based DirecTV, Inc. completed the largest swap out of DBS conditional access cards in the history of the satellite TV industry. "Our new P4 and D1 cards, to our knowledge, have not been hacked. Nonetheless, we continue to pursue signal thieves through legal action, both through the civil courts, supporting law enforcement in criminal investigations and raids on suspected distributors and manufacturers of illegal signal theft devices," says Bob Marsocci, vice president of communications at DirecTV.

"Consumers who had been using hacked cards to illegally receive [signals] have found that those hacked cards are useless. Our end user initiative has also had a chilling effect on piracy–consumers realize they are no longer immune from legal action as a result of their illegal activity," adds Marsocci.

Chuck Hewitt, former president of the VA-based Satellite Broadcasting and Communications Association (SBCA) and a principal of Atlas Business Development, has monitored satellite signal theft closely for years. He refers to estimates ranging anywhere between 1 million to almost 1.5 million illegal viewers in the United States. In fact, this total may be a bit conservative as some estimates allude to a far greater number.

Years ago, when the C-band TVRO market was the only game in town, the SBCA created the Anti-Piracy Task Force (APTF). According to Hewitt, while this joint industry/government initiative was eventually phased out, it should not be overlooked.

"When piracy was coming to the attention of content providers, the SBCA with programmer leadership joined by most elements of the industry launched the APTF. It was successful in demonstrating to the content providers and others that we were serious about protecting their property, as well as showing that the satellite industry was a legitimate member of the communications industry," says Hewitt. "As we moved from the C-band industry to DBS, APTF became less important. First, both DirecTV and Echostar were controlling their own anti-piracy efforts and secondly, since DBS was about to launch, the pirates started to concentrate on DBS and not on C-band."

The current SBCA president, Richard DalBello, would not comment on what exactly the SBCA is doing or plans to do in this regard, other than to say that in 2005, the SBCA will renew it efforts and strengthen its resources to fight satellite signal theft.

"I was not aware SBCA was going to revisit this issue, but I am certainly in agreement that they do. Piracy is a cancer that negatively impacts all satellite businesses from retailers to the platform providers. While the APTF’s previous goals and objectives may not fit today’s situation, there is a need for all the industry to combat piracy, and for the SBCA to play an important part in coordinating and leading that effort," says Hewitt.

The Battle Is Far From Over

As we said from the start, we cannot accurately pinpoint the global financial impact of satellite signal theft. Satellite signal theft is rampant, and it will take a lot of energy, money and political know-how to fix the problem.

Whereas signal theft in North America may be feeling the heat due to a concerted campaign to stamp it out–or at least make it so unappealing from the standpoint of cost that it gradually evaporates altogether–the rest of the developing world is just getting its act together. Of course, some readers might challenge this portrayal as overly optimistic.

Satellite signal theft by every means possible continues to erode the revenues of the satellite sector as a whole. Will new methods of preventing theft emerge? Perhaps, but even if this happens, this battle is far from over.

Peter J. Brown is Via Satellite’s Senior Multimedia & Homeland Security Editor. He also volunteers as a satellite technology and communications advisor to the Maine Emergency Management Agency.