Viaccess CEO Jean-Pierre Coustel is in a belligerent mood. The French conditional access (CA) vendor has had a tough few months that culminated in one of its leading customers, satellite Nordic pay-TV operator Viasat, owned by Modern Times Group (MTG), awarding a contract for a new CA system to rival NDS [NYSE: NNDS]. It was a bitter blow for Viaccess.

MTG’s COO at the time, Anders Nilsson, told Interspace (see issue 756) in November that the operator was “extremely unhappy” with its CA system (provided by Viaccess). The deal with NDS was announced on March 31 this year.

Coustel told Interspace that the relationship between MTG and Viaccess may not be dead. “We have things going on with [Viasat]. Our conversations with them are of a different tone than what has been seen in the press. Of course, what has happened is bad news for us. I am aware that in their situation, if they move completely to NDS and leave Viaccess aside, it is something that will [be difficult]for them. You just don’t do things snapping your fingers.”

While NDS is on a roll having won CA contracts with Viasat and Foxtel in Australia, Coustel believes his company compares well with NDS despite recent events. “Everyone has failed to observe that among the European CA providers, the one which lasted the longest is Viaccess. We started with our PC2.3 card in March 1996 with ABSat in France. We were hacked at the end of December 2000. That is almost a five-year period. The longest after us is NDS Europe, which started in November 1998, and we will never know whether they would have been able to reach the five-year mark because they have replaced their cards. BSkyB is replacing over 6 million cards, which [according to] our estimates would cost GBP60 million [$95.9 million] to do. There is for sure some good, serious reason for doing that.”

The operator’s current PC2.4 card has not been hacked so far, and Coustel is confident in the performance of its new smart cards. “The PC2.4 card was launched a quarter [first quarter 2001] after the hack of PC2.3. The PC2.5 will be launched in June of this year. PC2.4 is deployed with 27 customers worldwide and has not been hacked and Viasat knows that. The others know that too. We are also launching the development of PC2.6 so soon I hope Viaccess will have three different cards, which will be in advance of the hackers.”

Coustel added: “We are also bringing in a new service option – we are committed to providing replacement cards for free to the customer if the original ones have been hacked.”

The tension between Viaccess and NDS seems all too clear. “I have an idea why we are the ones with our head in the vice, but that is part of the game. [NDS] has better guns than Viaccess has. It is just a matter of size and culture,” Coustel said.

Consolidation

The CA market has been fraught with tension over recent months; only last year Canal+ Technologies and NDS were involved in a particularly vicious dispute. There are a number of players in the market and, with contracts for CA systems becoming more scarce, competition has been intense. There are too many players in the market. Coustel believes there will be consolidation soon. “There has to be some form of consolidation. In terms of the players out there, a player like Conax is surely too small. Cryptoworks also seems to have some problems with their ability to cope with the challenges of the future. Beta Research was for sale last year and Viaccess was invited to make an offer alongside others. I am afraid Beta Research will disappear quite soon.”

World of IP

There is more to Viaccess than just CA. It is part of the France Telecom Group and it is trying to become a key player in content protection over IP. “The industry initially didn’t think CA would be important, as opposed to broadcasting because of the connection between the server and the consumer. But, with pressure from the movie industry, the distributors are bound to secure and protect their content. For example, you could buy a movie on an one-to-one basis over DSL. But, you need to make sure the content acquired by the consumer cannot be replicated. You need a content protection system. Viaccess will provide those content protection features for France Telecom on its ADSL plant for TV distribution.”

The IP business area is one where Viaccess believes it can make an impact. Its first customer in this area was Virgin France, since acquired by Lagardere from the Virgin Group in the UK. It is an online music service. “They are really very courageous because they [are aware of] all the customers who know about Kazaa and the like. They have faith that business models will change, which will give control back to the rights holders, rather than the peer-to-peer free universe. They started something with Viaccess last year. It was our first operations in the area of content protection outside the marketplace of TV distribution,” Coustel said.

TV Still The Key

While making an impact in the IP universe is critical for Viaccess, providing CA for TV operators will remain the key to its success. Despite tough operating conditions, Coustel believes there is still plenty of room for growth. “At the end of 2002, there were 80 million households worldwide, which were equipped with a digital TV platform, either satellite or cable distribution. Eighty per cent of those were for pay-TV operations. Those figures will develop into something like 200 to 250 million in the next five years. You will still have this 80 per cent multiple in terms of those who have pay-TV. We see the CA business and perspectives develop in accordance with these growth rates,” Coustel said.

Contact: Jean-Pierre Coustel, CEO, Viaccess: [email protected]