For DBS subs, fix is in: pirates already back in business

Cable World, Feb 12, 2001 by Andy Grossman

"The FIX is here! The FIX for the Black Sunday ECM is official (sic) released to the public," read the report last Tuesday on the Hackhu.com Web site.

The DirecTV pirates were back in business less than two weeks after the DBS company loudly heralded its attack that blew out service to an estimated 100,000 customers who had been pilfering the company's signal. The electronic counterattack (called ECM) fooled hackers, who conceded that their current "H" cards were rendered useless.

If Rupert Murdoch buys DirecTV, there's already one synergy in place: He's the largest shareholder in NDS Group, which does the encryption for the service.

Murdoch might then want to talk to my cabby to ask how he gets DirecTV at home for free -- and how the attack will not discourage him from doing so in the future.

News reports after the ECM strike suggested that the attack could boost the value of DirecTV before its expected sale. Stories last week that suggested Murdoch was close to buying the company put more focus on its net worth. Analysts suggested the attack saved DirecTV $100 million a year in revenue.

As usual, the instant analysis was shortsighted and wrong.

After the ECM strike, I asked my cabby how the DirecTV strike had affected him.

"I'll be back up again in a week," he said, adding that his supplier was working on a fix to circumvent the encryption card and had reported one was imminent.

The news wasn't all good for the hacker. Seemed he had just laid out $600 for his current card, which was now as useful as a bus pass in the Mojave.

His new card would cost $250, and any future change-outs would cost only $50, he said. That gets him everything -- PPV, the NFL, the other sports packages and the full $83 service.

"It's a pain in the neck, but I'll be back up soon," he said.

It's the age-old story, the one that's been told for years in the cable industry.

The NCTA estimates conservatively that operators lose $5 billion a year from piracy and that 9.5% to 11.5% of the pay and basic services, respectively, are hacked. There are no figures as to whether digital cable is more secure, but operators report anecdotally that it is.

Operators are often accused of overlooking analog cable piracy; that's largely because many thieves take a $40 expanded basic service with a box and steal the premium and PPV services. The operator is happy to keep the customer from churning.

While that attitude has waned in recent years among MSOs, the NCTA statistics suggest fighting cable piracy remains an uphill battle. It's like the drug war. The FBI and other authorities can make all the busts they want down in Florida, but as long as there's a demand for cable boxes and chips, the hackers will stay one step ahead.

Why should DBS be any different?

"If someone wants to spend enough money, you can break the code," says DBS consultant Mickey Alpert of Alpert & Associates. "There will always be some type of piracy. The question is: How prevalent it will be, and how aggressive will DBS be in knocking it out?"

It is, Alpert suggests, a cost of doing business, although he insists DBS signals are far less vulnerable than cable to hacking.

He's probably correct, but $100 million is $100 million, and it would be naive to think one electronic attack will discourage the many users who love to engage operators in a cat and mouse game.

In the early 1990s, Time Warner Cable boasted that its "electronic bullet" had destroyed thousands of illegal cable set-top boxes in New York City.

I'd bet a lunch at the Carnegie Deli that many of those pirates were up and running within weeks, just as the DBS crew at Hackhu.com is.

The pirates are indefatigable. They never give up and believe "Life, liberty and the pursuit of happiness" means free pay television.

Some cable operators have had success in hauling pirates into court and slapping thousands of dollars in civil fines on them -- or convincing them to make out-of-court settlements to avoid a trial.

DirecTV spokesman Bob Marsocci vows the company will do what it takes to stop piracy.

"We are considering taking action against the end user," he says, adding that the company has won $55 million in damages on civil theft cases.

The problem is that on the list of social ills, stealing satellite signals is somewhere below crossing against the light and bad parallel parking.

To Murdoch, stealing his DirecTV signals will probably just be a cost of doing business -- like marketing or T&E.