Once a concern mostly for the pay-per-view industry, cable piracy could be a major problem for the industry's potentially lucrative digital business-including the Internet and other interactive services-if operators don't act today, according to executives at the Broadband & Internet Security Task Force.
The task force, formerly the Anti-Theft Task Force, has changed its name and its focus beyond the crippling theft of analog service, and it is working with both operators and federal law-enforcement agencies to stop theft of future digital services, Task Force president Donovan Gordon said.
"The industry has a false sense of security [with digital technology], but it doesn't grasp the breadth of cable's theft of service," Gordon said. "As digital is rolled out, the analog business will still be out there and operators will still lose money."
The National Cable Television Association estimated that cable theft costs in excess of $5 billion annually. In the PPV business, the effect of theft of service is staggering: Showtime Event Television estimated that for every one household that buys a PPV event, another one is stealing it.
The mentality among consumers that steal cable in an analog environment could carry over to digital if the industry doesn't put a stop to signal theft today, said Gordon, who is also SET's senior vice president of sales and affiliate marketing.
"The honest, paying analog subscribers will still be the honest, buying digital sub, but if you're stealing analog, there's no incentive to move up to digital services," Gordon said. "If the industry wants to increase digital services, then it needs to secure the analog signal."
Even with the increased security of digital technology, Gordon said, the technology can be compromised. A point of concern for operators is the upcoming July 1 deadline, by which operators have to make available point-of-deployment modules to consumers who wish to purchase their digital set-top boxes from retail outlets.
Gordon said the industry is ill prepared to deal with the new rules, which were instituted as part of the Telecommunications Act of 1996, opening itself up to potential theft of service.
"Beginning July 1, consumers can buy their own digital boxes. But very few operators have ordered the security modules that would allow them to provide service to the consumer," Gordon said. "If they can't get the cards from the operators, then ultimately, they will get it from a [signal pirate]. As a subscriber, it will be difficult to know the real card from the cloned card."
Another potential theft problem could be realized in the cable-modem business, where illegal modem boxes are already popping up for sale on Internet sites and in magazines.
"Several cable operators have already found sales of illegal cable modems on the Internet," Gordon said. "The industry has to make a concerted effort to fight such pirates if they are to maximize revenue from its new businesses."
Gordon also said there are potential legal issues regarding the industry's Internet service that require more stringent security measures.
"There are legal concerns about providing electronic-commerce to businesses and the prospects of hackers invading the businesses we serve," he added.
The task force is working with operators, the NCTA and the Federal Bureau of Investigation to help fight cable theft. The group is also in discussions with several accounting firms in an effort to do a cost-benefit analysis regarding cable theft.