Satellite : Dish goes after signal pirates

[rajub4u]

Dish goes after signal pirates Dish Network Corp. is going after satellite TV pirates and retail fraud to stem a problem that has grown since early 2007.
The country's second-largest satellite TV provider has terminated relationships with at least 23 retailers across the country since September. The Douglas County-based Dish says it believes those resellers engaged in fraud and misrepresented customer accounts.
Separately, Dish announced recently that a North Carolina cable TV operator was sentenced to 14 months in federal prison for pirating Dish signals.
CEO Charlie Ergen also has made a point of saying the company is cracking down on people who allegedly are trafficking devices that enable people to watch Dish channels for free.
"I think we're being more vocal about our efforts," said Jeff Blum, a Dish vice president and associate general counsel. "We want others to know there are consequences if you steal our signal or engage in fraud."
The spate of activity comes at a particularly critical juncture: Dish recently reported a net subscriber loss for only the second time in its history as a public company. Ergen cited signal piracy and fraud as factors in a high customer churn rate, along with the weakening economy.
Craig Moffett, a telecommunications analyst with Sanford C. Bernstein in New York, noted that Dish historically has been aggressive in going after piracy and fraud.
"The satellite industry has been plagued by piracy from way back in the old C-Band days," Moffett said, "and nobody has done more to combat the problem than Charlie Ergen."
C-Band refers to a low-power frequency used in the early days. Many Americans received TV signals for free by installing huge microwave dishes in their yards.
Rival DirecTV has launched aggressive attacks of its own against signal piracy, most notably in 2003 when it sued thousands of individuals across the country. Some defendants claimed they were wrongly accused.
Dish encrypts or electronically scrambles its signals using proprietary technology developed by a vendor.
The security information is programmed onto a subscriber's set-top box smart card. The smart card has information about the subscriber and descrambles or provides access to the programming the subscriber has ordered.
Dish periodically has had to issue new smart cards to try to stay ahead of hackers and is sending out a new round of cards as another prong in its counterattack.
Dish declined to disclose how much money it thinks it loses because of piracy and retailer fraud or how much it will cost to issue new smart cards. But the consensus among experts is that it's a costly problem.
"By some estimates, the number of Americans stealing satellite service is into the millions," Moffett said. "There is a virtual underground economy of pirate Web sites, hackers, smart card thieves, set-top box makers and resellers."
Ergen told analysts in a conference call this week that the current wave of piracy became a substantial financial problem around the spring of 2007.
"Piracy tends to grow," he said. "So if not stopped, it tends to grow a little bit each quarter."
The North Carolina case was particularly egregious.
Glenn White, who ran Wagram Cable in Wagram, N.C., admitted he intercepted at least 17 Dish Network channels and rebroadcasted them to all 242 of his cable TV customers between May 2005 and July 2006. He was scheduled to surrender to the U.S. marshal's office this month.
Several lawsuits filed in California federal courts during the past year or so may indicate a larger, more sophisticated problem. There, Dish alleges certain companies and individuals have trafficked illegally hacked codes, software and devices that enable users to watch Dish channels for free.
"We've sued the largest (free to air) distributors" of such alleged illegal technology, as part of Dish's effort to "make it as hard as possible for pirates to steal our signal," Blum said.
Just last month, a federal judge in California issued a permanent injunction against NDS Group from intercepting or decoding Dish's signals without authorization. The injunction stemmed from a 5-year-old case alleging that NDS, part of Rupert Murdoch's News Corp., had hacked Dish's signals at a time that Murdoch owned rival DirecTV. John Malone's Liberty Media now controls DirecTV.
Blum said Dish's crackdown on retailers isn't atypical, but it's being publicized more. Dish, he said, has about 15,000 retailers across the country that legitimately distribute its products and services, and the company wants to make sure retailers know it won't tolerate improper sales tactics.
It's unclear whether Dish's current efforts to crack down on piracy and fraud will have a material effect on its business. But Ergen told analysts he believes the company is doing a better job of going after piracy and fraud and "that will pay dividends for us next year."
Dish started sending out new set-top box smart cards in August, first among subscribers in high-piracy pockets, as part of a program that will take about a year.
Moffett predicted the company will enjoy just temporary relief.
"The satellite operators and the pirates are engaged in a high stakes arms race," Moffett said. "Every time Dish Network swaps out its smart cards, the pirates are beaten back and flushed out. But only for a while. It's just a matter of time before they've retooled their hacks and they're back online."
Ergen and Blum said the new smart cards will re-secure the company's signal, but they acknowledged fighting piracy is an ongoing battle.
Ergen said Dish was slow responding to the problem that emerged in early 2007 but won't make that mistake again.
"We should have always assumed that the pirates will beat us," Ergen said. "And we should always have a next-generation system ready to go."


Satellite-TV piracy
* What it is: When someone receives satellite TV signals without paying for them.
* How a satellite-TV provider tries to prevent it: Scrambles the signals through encryption. Subscribers get set-top boxes with smart cards that are programmed to give the subscribers access to the channels they ordered.
* How piracy occurs: A variety of ways, including hacking into the encryption security system or creating software that reprograms the smart cards.
* How much piracy costs the industry: Uncertain, but estimates have ranged in the hundreds of millions of dollars a year.
* How piracy is combated: Satellite-TV companies such as Dish and DirecTV sue alleged pirates and issue new smart cards. In one recent example, a North Carolina cable-TV operator was sentenced to 14 months in federal prison for pirating 17 Dish Network channels and rebroadcasting them to his 242 cable customers.


Broken relationships
Dish Network has terminated relationships with at least 23 retailers across the country since September.
The company hasn't disclosed specific details but in general said it believes the retailers engaged in fraud and misrepresented new customer account information.
In one recent example, a California retailer was sentenced to 33 months in federal prison for falsifying new customer accounts and collecting more than $2 million of commissions and equipment from Dish Network.

[deerpoacher02]

Who's a Pirate? lol