Protect your investment: Make sure your reception equipment and programming services are legal.

Protect yourselves: Don't break the law!

• Digital direct-to-home (DTH) satellite broadcasting signals are scrambled, and viewers need a decoder to watch them.
• Signals are encoded because distributors rely on subscription revenues to operate their businesses.
• A "grey market" has sprung up to provide Canadian viewers with unauthorized satellite access to programming originating in the United States, often via U.S. addresses or accounts.
• To decode scrambled signals and programming without payment is an offence. Some viewers obtain illegal access cards and decoders on the black market.

Distribution rights are sold by territory. A Canadian distributor who has purchased those rights suffers financial loss if a U.S. signal is illegally decoded in Canada. Likewise, the subscriber base for Canadian DTH distribution undertakings is significantly diminished if Canadians subscribe to unauthorized American DTH services. Canada's Radiocommunication Act contains provisions to protect the rights of these Canadian broadcasting service providers. There are penalties for breaking the law which include fines and, in some cases, jail terms.

Under Canadian law, viewers may not use decoding equipment to watch programming purchased from anyone but the lawful distributor -- a person who has the lawful right in Canada to transmit an encoded signal and to authorize its decoding.

"Grey market" reception occurs when a decoder that is authorized to decode a signal in a programming service's legitimate market territory (the United States) is used to decode the signals in another territory (Canada).

Sometimes, Canadian dealers might offer to set up subscriptions with U.S. satellite service providers. Viewers--who might believe, or be told, that such subscriptions are legitimate--may be asked to provide a U.S. address, or have one provided for them. This is a sure tip-off that the service is not legal.

American DTH service providers do not have the lawful right in Canada to authorize the decoding of their programming.

Retailers who distribute "grey market" programming are aiding and abetting consumers to decode DTH signals that are not authorized for distribution in Canada and thereby putting themselves at legal risk.

Dealers should know that it is illegal to import, manufacture or sell equipment used to decode signals provided by someone other than the lawful distributor.

Computer pirates create illegal decoding equipment for sale to consumers. Illegally modified decoders, and pirate access cards, enable viewers to watch programming without paying lawful distributors. Retailers cannot legally sell such equipment, and everyone involved -- pirate, retailer and purchaser -- could be charged with a criminal offence.

Consumers who use questionable methods to obtain signals to which they are not entitled are on shaky ground: financially, technically and legally. The equipment used to illegally decode U.S. signals is expensive--yet it comes with no guarantee that it can do the job, or can continue to do the job, for which it was purchased.

Broadcasters are continually upgrading their scrambling technologies, so illegal and expensive decoders can become obsolete in an instant. At any moment, American service providers could cut off their signals to viewers in territories where they do not hold programming distribution rights. And fly-by-night Canadian operators could quickly fold their businesses and disappear--again, leaving consumers holding the bag.

Needless to say, those operating in the black or grey markets do not offer guarantees with their merchandise or services. Consumers who think they are getting a deal by using such equipment or services have no protection at all.

• The types of programming offered by a service could provide a clue to its legitimacy. If there are very few or no Canadian services, or if American services such as HBO, Disney or ESPN are included, the grey market might be involved.
• If you are asked to provide a U.S. address, or if your retailer offers to provide you with one, chances are that the retailer is operating in the grey market.
• If you're offered equipment or access cards that let you decode programming without paying any subscription fees, watch out - - it's probably from the black market.

Dealers and distributors should be aware of the law.

• It is an offence to import, manufacture, modify or sell equipment intended to be used for illegal decoding.
• With respect to the distribution of "grey market" programming, persons who help consumers to decode DTH signals that are not authorized for distribution in Canada are putting themselves at legal risk.

The law provides for both criminal prosecution and civil action by private parties whose financial interests are affected by illegal decoding.

Industry Canada has responsibility for the Radiocommunication Act. For more information, please contact your Industry Canada District Office. You will find the number in the Government of Canada pages of the telephone directory.

This page is intended to provide a quick reference to the applications of the Radiocommunication Act to direct-to-home satellite broadcasting. Those seeking further assistance should refer to the full text of the Act, contact Industry Canada, or seek legal advice.

By Harvey Enchin and Geoffrey Rowan

The Globe and Mail

November 14, 1996

Hundreds of thousands of Canadians using satellite-receiving equipment to obtain U.S. television services may be breaking the law and could face criminal charges, Industry Canada warns.

In a brochure issued yesterday on direct-to-home satellite TV, the government has made it clear for the first time that it considers the so-called grey market to be illegal.

Industry watchers estimate that as many as 200,000 Canadians are receiving grey market TV services.

On the grey market, television services are purchased outside the territory for which they are authorized for distribution. For example, a Canadian can only buy Home Box Office on the grey market because it is not authorized for distribution in Canada by the Canadian Radio-television and Telecommunications Commission. Canadian rights to HBO programming may be held by others, such as The Movie Network or SuperChannel, which have paid to broadcast this programming to their subscribers.

"Canada's Radiocommunication Act contains provisions to protect the rights of these Canadian broadcasting service providers," the brochure says. "There are penalties for breaking the law, which include fines and, in some cases, jail terms."

The Canadian broadcasting industry has lobbied heavily to shut down the grey market. It has filed lawsuits to stop retailers from distributing the small satellite dishes and digital systems that enable Canadian consumers to pull in the TV services. But in the face of obvious demand, and with a Canadian alternative perhaps still years away from the market, the government has, until now, maintained a relatively low profile.

The publication of the brochure follows last week's call by Industry Minister John Manley for applications for a direct broadcast satellite to provide the infrastructure for Canadian DTH services when they are launched.

The CRTC has licensed three DTH operators but none has been able to launch a service.

"Anything that contributes to greater public education on the subject is, I think, a welcome step on the government's part," said Lisa de Wilde, president of TMN Networks Inc., which operates The Movie Network. "The point is to do as much as we can now before a Canadian service launches to make sure there is a market the Canadian service can occupy."

TMN was part of a group, which also included Allarcom Pay Television Ltd., The Family Channel and ExpressVu Inc., a Canadian licensed DTH service, that launched a legal action against satellite equipment retailers.

The government brochure gives the group more ammunition to wage its court battle.

"Retailers who distribute grey market programming are aiding and abetting consumers to decode DTH signals that are not authorized for distribution in Canada and thereby putting themselves at legal risk," the brochure says.

"Under Canadian law, viewers may not use decoding equipment to watch programming purchased from anyone but the lawful distributor--a person who has the lawful right in Canada to transmit an encoded signal and to authorize its decoding," the brochure continues.

"Sometimes, Canadian dealers might offer to set up subscriptions with U.S. satellite service providers. Viewers--who might believe, or be told, that such subscriptions are legitimate--may be asked to provide a U.S. address, or have one provided for them. This is a sure tip-off that the service is not legal."

The brochure also says the black market, where equipment is modified to receive signals without payments to distributors, is a criminal offence for everyone involved--retailers, users and those modifying the equipment.

Entitled Direct-To-Home Satellite TV--Facts You Should Know, it will be distributed to dealers, retailers and importers and distributors of U.S. DTH equipment, the government said in a news release. It is also available at Industry Canada offices and on the Internet (http://strategis.ic.gc.ca/OCA/).

Ironically, the government's stern words about the legal status of the grey market come weeks after a New Brunswick court ruled that a search and seizure of satellite equipment by the RCMP earlier this year was a violation of the Charter of Rights and Freedoms. The case was dismissed and the judgment obliged the RCMP to return the confiscated equipment to the retailer.