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Defeating the pirates: the impact of technology on pay-TV piracy: Pay-TV piracy is getting worse, according to the latest industry figures.

The good news is that evolving IPTV technologies could make set-top boxes harder to crack. The bad news is that piracy is also going high-tech, and shifts in viewing habits are creating new potential vulnerabilities

Sometimes, if you want to get something done, you have to do it yourself. Take CASBAA (the Cable and Satellite Broadcasting Association of Asia), which has taken steps in the last few years to tackle the growing problem of pay-TV piracy in all its forms. In late September, it took the fight against piracy straight to the pirates--at least in the Philippines, where revenue losses from piracy were up 16% as of June 2005 compared to the same period a year ago, and there are just as many illegal pay-TV subscribers as legal ones.

In Mindanao and Metro Manila, CASBAA and the country's National Bureau of Investigation instigated raids on cable companies that had been carrying channels such as CNN International, Cartoon Network, Discovery Channel, ESPN, HBO and MTV without paying for them. Utilizing intelligence that CASBAA had gathered on the operators after several months of surveillance, NBI operatives confiscated equipment in Cotabato City and Butuan that was being used for unauthorized pay-TV signal use and distribution.

Declaring the raids a success, CASBAA chief Simon Twiston Davies promised it would be the first of many. The message was simple: the pay-TV industry was mad as hell and wasn't going to take it anymore.

"This is the first of a series of high-impact actions the industry is taking to highlight the seriousness of cable signal theft in the Philippines, especially for legitimate, law-abiding Filipino cable and satellite TV operators," Twiston Davies said in a statement at the time.

From an intellectual-property perspective, it's a decent start, but it's one step in a dauntingly long journey. The latest figures from CASBAA and CLSA Asia-Pacific Markets, which released their annual pay-TV piracy report in late October, indicate that the piracy problem is growing worse--at least on a regional basis. For the period covered under the latest report (from July 2004 to June 2005), Asia's pay-TV market lost over $1 billion to various forms of piracy, up 11% from the previous year.

The good news is that some markets like Malaysia and Singapore have actually reduced piracy losses in the past year. The bad news is that those gains are being more than offset by growing estimated losses in other markets, particularly ones like Vietnam where pay-TV is only really just starting to take off.

A daunting road, indeed. And the remedies vary, depending on the type of piracy involved. For example, piracy losses in Asia could be cut in half if India completely reformed and restructured its national cable TV industry. Revenue losses there (which typically occur in India's unique last-mile gray market where subscriber fees are collected in cash on the doorstep) amounted to $670 million this year--two-thirds the regional total.

Interestingly, one thing working in favor of the pay-TV sector--at least as far as piracy categories like illegal access via cloned set-top box (STB) cards--is the evolution of technology and the transition from traditional analog cable TV and satellite services to IP-based TV over broadband and digital TV. Armed with conditional access and DRM technologies, the new generation of pay-TV players may just have the technological edge to keep unauthorized subscribers off their networks


PCCW 1, pirates 0

CASBAA's Twiston Davies cites Hong Kong as a flagship example of this, thanks to PCCW's NOW Broadband TV service.

"In Hong Kong, the number of unauthorized users has remained relatively flat [at around 90,000], while the number of legitimate subscribers has more than doubled," he says. The point: no one is selling pirated NOW STBs because the pirates who sell illegal decoders haven't worked out how to crack it.

"We think that this makes Hong Kong a case study on how to beat pay-TV piracy," Twiston Davies says.

It's also a case study on the paramount importance of content security for any new player hoping to get into the pay-TV business, says Paul Berriman, head of strategic market development for PCCW.

"We knew we had to have a robust security design not just because of the losses we might face ourselves, but because it was the only way we could convince the channel operators to do business with us," Berriman says.

When NOW first started several years ago, Berriman recalls, the operator found itself having to explain to channel operators that streaming channels over IP on a DSL access link was not the same thing as streaming video over the public Internet, and that signing on with a broadband operator wouldn't result in their programming turning up on P2P networks like BitTorrent.

Berriman also credits NOW's recent deals to secure exclusive access to big-name channel brands like ESPN, HBO and Cinemax to the fact that its network is more secure than its chief competitor, i-Cable.

Consequently, NOW utilizes a combination of security techniques, including network-based conditional access, end-to-end encryption and analog copyright protection in the STB after the signal has been encrypted.