The rise of pay-TV revenues increase throughout Europe has spawned the rise of the pirate satellite smart card industry.

According to Davide Rossi, the Secretary General of AEPOC (the European Association for the Protection of Encrypted Works and Services), this is “now a billion euros” industry. He explained: “We said that one billion euros is spent in Europe to either buy pirate cards, have legitimate cards modified or to buy other apparatus to re-programme, reuse old cards. This figure also includes the acquisition of blank materials in order to enable pirate cards.”

The problem is particularly prevalent in Spain and Italy, and is one that satellite operators around Europe have to continually face. The pay TV business, by its very nature, is a nascent business, and operators simply cannot afford to have large holes in their revenues due to this unwanted phenomenon. Graham Kill, CEO of Irdeto Access Group, said, “Pay TV is coming of age and the protected content in the satellite industry around the world is worth $15 billion (17.4 billion euros) a year in subscription revenue. That clearly wasn’t the case five years ago.”

Rossi said of the problem in Italy, “The two platforms have decided to cooperate, and in particular, Telepiu stopped its commercial relationships with more than 1,000 dealers. [The company] terminated contracts with authorised dealers because [it was] not sure. [The company was] 90 percent convinced that those dealers were selling pirate cards. [The company has] a group of undercover clients to gage the professionalism of the dealer. If the dealer was giving a phone number or saying where [it] could get pirate cards, [it] could not go to the police to make a formal complaint, but it was enough for [it] to terminate the contract.”

The cost involved in a pay TV subscription makes pirate cards a temptation. According to Rossi, pirate cards don’t just appeal to technologically-savvy and early adopters. He said: “The real problem of piracy is when the family man with two children on a Saturday afternoon goes into the shop and he is offered the possibility to buy a legal or illegal card. That is the real mushrooming problem of piracy.”

The increase in piracy has put more pressure on the conditional access (CA) system vendors to make it as difficult as possible for pirates and bring the thriving piracy industry to a halt. CA is the software that aims to prevent the unauthorised viewing of content by encrypting TV signals. The fact that piracy has become such an important issue means CA systems have to be replaced at regular intervals and thus promotes keen competition between the CA vendors such as Viaccess, C+ Technologies, Irdeto Access and NDS.

The challenge is fought on many fronts as the vendors try and protect their business. Andrew Curle, manager of special projects at Irdeto Access, told Interspace that Irdeto has 21 proceedings in process, as well as evidence to launch another 31 cases. He added: “Pirates use the Internet to communicate with each other and then to sell their wares. We have excellent cooperation with ISPs to turn off their vital water supply. We have closed down about 400 sites in the last 10 months and we close them down at a rate of 32-35 a month.”

Catching the pirates has become a serious business. Pirates who get caught face the prospect of losing their homes and cars. It is a risky business for all concerned. Industry co-operation is also a key. Kill added, “We are a catalyst and a proactive party in the market that has initiated for industry parties to come together to get critical mass so we can go and represent ourselves to government in order to change laws, and when they have changed laws, to act in a manner to be able to educate them in how to implement those laws.”

The CA vendors are now deploying a vast security network to track the hackers down. But, they are trying to make the systems more difficult to penetrate. NDS, a British-based CA vendor has very strict controls on its own staff. Beth Erez, vice president of marketing at NDS, told Interspace, “Internally, we have a strict line between those people working on hardware of the card and those who are working on the software of the card. Even within our site, we try to maintain secrets concerning what is being worked on so that there are very few people that have all of the information.” NDS spent around GBP65 million in the financial year to June 2001 on its R&D programme.

Gabi Pirosh, director of product marketing at NDS, added, “We actually customize the system per customer/platform. So, even on the odd occasion there is a hack on one of the platforms, it does not immediately create a hack on the other platforms, which is not that case with other conditional access vendors.”

NDS, on the whole has not had many piracy problems. Its main problem with pirates has been with DirecTV in the U.S. James Healey, a technology equity analyst at Dresdner Kleinwort Wasserstein, told Interspace, “I haven’t come across, outside of DirecTV, NDS having a significant piracy problem.”

CA vendors also aid operators by helping them deploy counter measures. Once a smart card is identified, the CA vendor can analyse how it works, and work out the technical differences between the genuine original smart card and the fake one. It can modify the signal so that the genuine original paying smart card keeps on working and the pirate card becomes ineffective. Francois Carayol, the chairman and CEO of Canal+ Technologies, told Interspace: “In the last quarter of 2001, we have been able to deploy more than on a rate of more one counter measure per month within a European operator, whether in Spain, France, Italy, Poland and UK.”

Canal+ Technologies hopes to further combat the pirates this year by introducing a new system. Its old system, which was designed in the mid 1990s, was pirated in 2000 and 2001. He said of the new system, “We have a principal know-how in terms of micro-processors and security features, but are 2001 and not 1995. In that industry, there is as much difference between a PC Intel chip from 1995 and one from 2002. We are really changing generations of systems.” The redesign of the system presents a lot of challenges ahead for CA vendors. They have to ensure new cards are still fully compatible with the existing set-top box. Canal+ aims to replace all of its smart cards in Europe this year as it implements its new system.

The average shelf life of a system is around four years and Carayol fully expects this system to last longer than its predecessor. He said, “The last system was initially out in 1996 and we were pirated in late 2000 and 2001. So, it took four years. The new system is based on the experience we have been through and I believe is far superior in levels of security, design and its capability of evolving in the future. My guess is that it should last more than the previous one.”

In essence, the war with pirates is being fought on many fronts. Whether it is counter measures or increased surveillance, the CA vendors are doing all they can to maximize revenues for satellite operators. Most pay-TV operators are yet to reach profitability so the importance of deriving revenues from core businesses is essential.

While it may be a billion-dollar industry, Rossi believes the fragmented nature of the pirates makes it difficult to make substantial leeway. He said, “There is not a single organisation managing piracy. We are in front of small organisations that are often cooperating with each other, as well as fighting each other. It is similar to the situation in Afghanistan, where there are so many people, it is difficult to identify who is the head.”

–Mark Holmes