DirecTV in the News

Big Fines for DirecTV Pirates

EL SEGUNDO, Calif. (AP) - August 1, 2001 - Citing U.S. federal statutes that make it illegal to possess equipment designed to intercept an encrypted satellite signal, DirecTV's outside counsel, Seattle-based Yarmuth Wilsdon Calfo, recently mailed thousands of letters to suspected pirates warning that they could face statutory damages of up to $10,000 for possessing pirate equipment. Moreover, the letter mentions damages of up to $100,000 for "involvement in modifying devices to illegally gain access to DirecTV's programming" and states that DirecTV might also seek additional compensatory and punitive damages plus attorney's fees.

Obviously, DirecTV is hoping that its aggressive tactics will cause some television thieves to voluntarily pull the plug on their equipment. But in reality the move does little to address the all-too-real problem of satellite television piracy. After all, the lawyerly letter is a fairly transparent scare tactic. The costs of identifying, suing and collecting damages from each of America's estimated 500,000 pirates would far outweigh whatever money DirecTV would be able to collect in damages. Even the dimmest thief could figure that out. And, even if they successfully prosecuted a case or two, it is by no means certain that DirecTV would be able to collect on the $100,000 damages for device modification. Does using a black market smart card really constitute "device modification?" Lawyers live for this sort of semantic hair-splitting.

Still, no one doubts that DirecTV, which is a unit of Hughes Electronics , has a major piracy problem. Almost since the satellite service was launched in 1994, a shadowy hacker underground has grown alongside it, which sells black boxes and doctored smart cards over the Internet to folks who don't want to pay monthly fees. The Carmel Group, a California-based telecommunications research firm, estimates that pirates cost the industry around $900 million a year.

Nearly all of that money comes out of DirecTV's pockets. With nearly ten million subscribers and $5.5 billion in projected 2001 revenue, DirecTV is close to twice the size of its rival, Littleton, Colo.-based EchoStar , with whom it splits the U.S. market. But DirecTV attracts more than its fair share of pirates, partly for technological reasons, but primarily because unlike EchoStar, DirecTV offers access to the full slate of professional football games.

In the past, DirecTV has tried a variety of more conventional approaches to fighting piracy, including cooperating with law enforcement to bust black market distributors and taking various electronic counter measures, or ECMs. In January, DirecTV instructed its satellites to send an ECM known as a "card kill" on Super Bowl Sunday. That event, known in the pirate underground as Black Sunday, probably destroyed tens of thousands of bogus cards. DirecTV sends out such signals about twice a month, but according to The Carmel Group's Sean Badding, intrepid pirates can effectively block ECMs using devices called emulators, or if that fails, reactive a "burned" card using a "card strip box" that connects to a personal computer.