DirecTV blasts B.C. judge

His court ruling ignores crime of satellite piracy, company says

By Robert Brehl - Toronto Star Business Reporter

DirecTV has blasted a Canadian judge's court decision that, the company says, ignores the fast-growing black-market industry of satellite TV piracy in Canada.

Steve Cox, DirecTV's senior vice-president for business affairs and chief legal counsel, called some of the judge's comments ``quite stunning.''

``We strongly believe a crime was committed in both Canada and the United States,'' Cox said.

Last week, in a hard-hitting decision, the British Columbia provincial court judge ordered the Royal Canadian Mounted Police to return all seized equipment from 15 satellite dealers.

Judge Wallace Craig accused the Mounties of being ``duped'' by DirecTV and called the search and seizure ``elephantine.''

No criminal charges have been laid.

Craig was particularly miffed that a security officer representing DirecTV was present at several of the searches, reporting minute-by-minute RCMP activities by cellular phone back to the United States.

Cox and DirecTV's chief of security, Larry Rissler, called The Star from their Los Angeles headquarters yesterday to set the record straight, the two said.

``Far from duping the RCMP,'' Rissler said, ``we didn't reach out to them. They came to us for some technical assistance on how these cards operate.''

The cards are hacked ``smart'' cards that, when placed in a DirecTV set-top box, allow the viewer to pull in signals without paying.

Since June, the RCMP has raided dozens of satellite dealers from coast to coast and seized many items, including what the Mounties believe to be pirate cards.

Rissler said ``it's common practice'' in the United States for high-tech firms such as DirecTV to help police and be present when they execute search warrants.

``We don't direct the search. We simply respond to questions'' on whether various high-tech items would be included under terms of the search-warrant order, he said.

Cox said Canadian satellite dealers are trying to paint a picture that the pirate cards are a ``victimless crime'' confined to Canada.

``It is anything but,'' he said, adding the pirate cards are flooding south across the border.

``It is a direct assault at our core market, the United States.''

He said he didn't know how many pirate cards are now circulating. They sell for about $500 in Canada.

Critics have said that since DirecTV does not legally operate in Canada, or pay Canadian taxes, the company should have no say in RCMP investigations.

DirecTV now has more than 2 million paying customers in North America, making the company's broadcasts the fastest-selling consumer product ever launched. Customers use a small dish to pick up signals.

No Canadian satellite service is available, although several are licenced and have been promised for several years.

With no Canadian product, the U.S. hardware has become a hot seller in Canada, with estimates of more than 200,000 dishes now in the country.

The so-called ``gray market'' refers to Canadians who pay DirecTV for the programming using an American billing address.

The ``black market'' refers to the pirate cards.

Cox warned anyone with a pirate card, or thinking of buying one, that DirecTV will make life difficult with a continuing program of ``electronic counter-measures.''

The measures involve beaming down satellite signals that temporarily knock out pirate cards.

And DirecTV is in the midst of a ``card swap,'' or mailing out new cards to all paying customers, Cox said.

Once the new cards are all in the field, a changeover will render the hacked cards useless, he said.

The new cards have not yet been hacked, Cox said, adding he is aware hackers will obviously try.

The point is, he said, a pirate card ``is going to be a bad investment.''

So, what about ``gray market'' customers who are paying for the programming?

The Canadian government has threatened them, too, saying the programming is not licensed by Ottawa. And DirecTV insists it turns off any Canadians the company finds out about.

``It is our policy not to knowingly provide service to Canadians,'' Cox said.

DirecTV does routine sweeps of its system to identify Canadians and pulls the plug, he said.

Canadians who paying by credit card may send a clue to DirecTV. The Visa or MasterCard number identifies a holder as a customer of a Canadian bank.

``But that's not necessarily a slam dunk that the system is located in Canada,'' Rissler said, adding many Canadians have second homes in the United States or have a DirecTV system aboard a recreational vehicle.

He declined to reveal how many paying Canadians have been turned off.

A conservative estimate is that the average Canadian spends about $40 a month on gray-market programming.

Contents copyright © 1996, The Toronto Star.
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by Terence Corcoran

The Globe and Mail

November 23, 1996

CBC Radio recently promoted its availability on the Internet--live transmission of its radio broadcasts to anyone who visits CBC Radio's Web site from anywhere in the world. Great idea. People in, say, Los Angeles or Budapest can use an Internet connection to pick up Morningside or As it Happens or whatever, as broadcast over one of the corporation's radio stations in Canada.

The CBC's attempt to plug into the wired world is admirable, but the nationalist irony would be apparent to anyone bewildered by Ottawa's concerted assault on the rights of Canadians to make their own broadcast choices. For instance, how come a U.S. citizen in Chicago can instantly dial up the federal government's CBC Radio, which has no broadcast licence in the United States, while Canadians are being threatened with jail terms by the same government if they have televisions tuned to pick up HBO via satellite?

One of Ottawa's telecom bureaucrats could grind out a 50-page legal brief explaining that under Canada's elaborate telecom laws, the CBC act, the CRTC, Cancon rules, distribution rights, international satellite law, licences, cable regulations, blah, blah, which make HBO an illegal commodity here and CBC Radio legal there. All of which might even be true, but utterly beside the point.

At the core of the business, the CBC's internet service and HBO's satellite availability are identical. Both are consequences of the technological revolution sweeping the telecom industry, an upheaval that effectively renders 99 per cent of Ottawa's telecom and broadcast regime irrelevant. More important, the main regulatory framework of Canada's broadcast industry--the Soviet-style content rules and the system of broadcast licences that protect industry participants--is rapidly becoming unenforceable.

The fact that more than 200,000 Canadians now own satellite dishes and millions more have Internet access is only the beginning of the erosion of the Canadian system, forced by the rise of consumer sovereignty and viewer freedom. The message from individual Canadians in the market is: We will watch what we want to watch, not what Ottawa tells us we can watch.

But Ottawa clings to the fictions and delusions of its control system, claiming the power to tell Canadians that they can only watch and listen to material approved by bureaucrats and regulators and politicians. In television, the approved list of programming is what consumers receive today over their cable system. In theory, these are the only programming choices, and anyone who tries to distribute anything else, via satellite or cable or the Internet, is breaking the law.

Absurdly, Ottawa intends to regulate every new transmission technology--whether it's a telephone line or satellite or wireless--with the same rules, forcing every technology and service to carry only programs approved by government. Thus the government wants to force a satellite service lineup to mirror the cable service lineup, an approach that defies all market logic.

Consumer choice will remain limited, therefore, until Ottawa recognizes that its control system is collapsing and that the Canadian content rules that are the main pillar of the system are doomed.

The roster of academic, legal and business specialists who have attacked the current system as an unworkable fraud grows every month. "Cancon, as Canadian content policy and regulation is know, has hitherto been exactly that: a con game for Canadians," wrote McGill Professor Richard Schultz last month in Policy Options magazine. He called on Ottawa to begin a massive withdrawal from telecom regulation.

William Stanbury, a competition law expert at the University of British Columbia, wrote in the same magazine that "Canadian content requirements for television and radio broadcasting have become intolerable. They restrict the choices of listeners/viewers and raise the price of cable TV services." Mr. Stanbury said the entire system should be scrapped immediately.

There will soon be no choice for the government and the industries. Consumers now make the choices. It is only a matter of time before Canadians will be able to use the Internet to dial up HBO and hundreds of other video services--films, programs, information-- and bypass the protectionist barriers. CNN's news Web site is available via the Internet, polluting the minds of Canadians with news and information unfiltered by officially approved Canadian content providers selected by the CRTC, and without forcing consumers to pay for a matching Canadian news service. Nothing short of a police state can close the border to satellite signals, and even that wouldn't work.

The structure of the industry--from broadcast licences to spectrum allocation to content rules--was set up around business and economic models that assumed monopoly and gave participants command and control powers: Here are the programs we will allow you to watch. Those days are over. As the technology changes, it's the consumers who, through the market, will tell the government and the monopolists what they want to watch.

In the weeks to come, we'll look at what Ottawa will need to do to get out of the way and let consumers and markets take over.