Cracking the Digital Safe

BY DAVID CONNELL

Old-fashioned cable piracy may not survive on the digital seas. But a new generation of hackers may arise to plunder the industry.

The consequences of cable theft are very real to the MSOs, programmers and local governments who lose money from theft. According to National Cable and Telecommunications Association spokesman Marc Smith, the basic theft rate for cable companies is 11.5% of annual revenue, or $4.01 billion. In today's economic downturn, that's a lot of missed dollars.

The numbers are so high because stealing analog signals is fairly easy. ?Frankly, I'm hopeful the conversion to digital will help,? says Jim Blair, VP-risk management and chief risk executive for AT&T Broadband. ?But I can't assume that digital is the solution. Until a market is 100% digital, why would a pirate get trapped by digital when he can steal analog? [Also] I know there are smart people out there who can compromise the digital boxes.?

MSOs aren't the only ones attempting to eliminate cable piracy. Set-top box manufacturers Scientific-Atlanta and Motorola are coming up with new ways to stop piracy at the set-top, particularly as cable moves into the digital realm.

?Digital is a totally different world,? says Bob Van Orden, VP-strategy and management for the digital subscriber network at S-A. ?In analog, you're tying to manipulate a signal ? scramble it. Technologically that's the best you can do. Digital gives us a much more robust security approach than we've ever been able to implement in cable.?

S-A, Van Orden says, uses a digital encryption method called ?Public Key? to protect the digital signal. The system is similar to those used in banking to protect customer accounts.

Van Orden adds that S-A has learned from the mistakes made by satellite TV operators who rely on ?smart cards? for their primary security against signal theft. Hacked smart cards for DirecTV and DISH Network are now widely available. But the companies can easily ?fry? these compromised smart cards by blasting electronic counter measures (ECMs) through the system to make them unusable. Van Orden noted that these ECMs would be possible for cable companies in the digital world.

The other key set-top box maker, Motorola, is working in several ways to prevent cable theft in the digital world, says Larry Vince, the company's director of systems engineering.

Vince says that the company has thus far shied away from smart cards, opting instead for internal encryption methods. With internal encryption, he adds, ?you can't take it out and fool with it.?

Vince says that Motorola has a division of the company surfing the Web with the express purpose of keeping up with cable pirates and those selling illegal boxes.

?As far as cable security goes, Motorola very actively monitors the different Web sites and news groups to see what's going on there,? he says. ?We're constantly looking to come up with new security and counter measures.?

While they are hopeful digital technology will help cut down on cable piracy and illegal box sales, cable operators are skeptical it will provide a complete answer to the problem.

Cablevision Systems VP-security Henry Hack believes Cablevision's digital service will have a ?nice honeymoon of about a year? before hackers can compromise the company's new digital boxes, which are being provided by Sony.

The Sony boxes, Hack says, rely on smart cards as their encryption method ? the same cards used by direct broadcast satellite providers. He estimates that hackers will need at least one year and probably ?several hundred cards? to compromise the system.

Hack also says there are economic reasons the digital boxes won't be hacked right away.

?Economically, it won't be profitable for pirates until there are at least 1 million digital subscribers [on the system],? he says.

Still, both Hack and Blair believe that the digital boxes will be compromised in the future. Even S-A's Van Orden admits that while digital will make hacking harder, cable operators ?must never say never.?

Anything's got to be harder than stealing analog cable now.

Go to the Internet search engine Google and type in ?cable descramblers? or ?cable boxes? and you can find at least 10,200 sites that will provide you with the necessary equipment to pirate cable.

Sometimes it doesn't always take special equipment to steal cable. One individual in Washington, D.C., simply plugged the coaxial cable into the back of his TV when he moved into an apartment and was able to tune in CNN, TBS and the rest of the channels. He's never gotten a bill. He didn't buy a box, he didn't climb a poll to twist wire, he just plugged in his set and kept his mouth shut.

Whether pirates and cable thieves are organized or relatively innocent, cable companies are attempting to them in a variety of ways. They range from amnesty programs, audits to catch and gently prod unscrupulous customers into paying for full service, and the hardcore prosecution of those selling cable boxes for the purpose of stealing cable.

Because law enforcement doesn't prioritize cable theft, many MSOs have taken it upon themselves to catch and pursue cable thieves. Some have chased down pirates by ?walking the system,? according to Cablevision's Hack.

?We attack illegal hookups by having people on the street auditing the system periodically,? Hack says.

So far this year, Cablevision has cut down 70,000 ?unauthorized connections,? says Hack.

Hack says the company doesn't treat these instances like theft. Instead, he says, the company sends the property owners a warning that they are receiving unauthorized service and an offer to become paying Cablevision subscribers.

He adds that Cablevision will likely convert about 45% of these individuals into paying subscribers.

However, the company is much harder on people who repeatedly and willfully steal cable service, by either reestablishing an illegal hookup or using a black box to steal premium services. If these instances are detected, Cablevision will bring civil suits seeking damages, Hack says.

Cablevision has a special division to go after people who traffic in illegal equipment. The division will attempt to set up ?sting? operations in which they purchase illegal set top boxes and gather evidence against black box purveyors.

In early April, Cablevision was awarded $29 million in damages from various companies that were selling boxes in the New York City area. In addition to seeking damages against those selling the boxes, Hack says the company obtained customer lists in their raids and have brought civil suits against approximately 1,000 people, winning about $2 million.

AT&T Broadband has a similar strategy for stopping cable piracy, according to Blair.

?We go after it customer by customer,? Blair says. ?The way our billing system is set up, we know every paying customer. We put our auditors in the street and try to identify nonpaying customers.?

?We typically have not gone after these people with legal action,? Blair says. ?Our primary concern is turning them back into paying customers.?

If AT&T finds that a customer is using a black box to steal premium programming, it will usually seize the box and attempt to find out where the customer purchased the equipment, Blair says. The MSO will then go after that company in a civil suit, he adds.

?We get a number of those a year,? Blair says.

Comcast, however, has a different approach to cable theft, according to mid-Atlantic spokesman Mitchell Schmale. Prior to conducting audits, the MSO will set up an ?amnesty period? in which nonpaying customers can turn themselves in without legal or financial repercussions. However, those customers are not required to purchase Comcast service once they've turned themselves in.

The MSO ran such an amnesty program in Prince Charles, Anne Arundel, Charles and Calvert Counties in Maryland last December. The program yielded 23,000 unauthorized subscribers, of whom ?a little under half? turned into paying customers, Schmale says.

To run the amnesty program, Comcast set up a toll-free hotline and advertised it in local papers and on its own systems, Schmale says. Following the amnesty program the MSO performed an audit to catch thieves who had not turned themselves in, he adds.

Following the Maryland program, Comcast found several pirates and is in the midst of bringing legal action against them, according to Schmale. There are approximately 75 cases pending in the courts right now, he says, with more to come. Those cases involve people caught selling boxes and ?repeat offenders? who have connected themselves or others to cable without paying.

Both Hack and Blair say they are skeptical of amnesty programs and don't use them to fight piracy and cable theft efforts.

?The broad approach with amnesty programs is not effective,? Blair says. ?You end up spending a lot of time and money on advertising and promotion and you don't get much conversion.?

In New York City, Hack adds, there is little incentive for customers to voluntarily relinquish free cable through an amnesty program: ?In New York, you pretty much have to come at them with the threat of handcuffs.?