For some cable operators, cable theft is the big white elephant in the living room; even though they know its there, they refuse to acknowledge it.
Stan McGinnis takes the theft of cable services personally.
McGinnis is the founder, president and CEO of Denver-based Secure Signals International. He’s spent the past 20 years helping stamp out cable theft with his array of services and applications. Some of his better-known customers include Cox Communications, Comcast and Time Warner Cable.
How big of a problem is the theft of cable services by consumers? The NCTA‘s last survey in 2004 said the theft of basic cable service went down by 50 percent in the four year from its previous survey. The NCTA’s study said that the theft for expanded analog service in 2004 was 4.65 percent, which was down from the previous survey’s 11.5 percent. Over the same time frame, theft of premium services went from 9.5 percent in 200 to 2.15 in 2004.
While the move to digital cable has helped cut down on theft, McGinnis said it’s still an under-reported problem. The NCTA’s last survey pegged the amount of the unrealized revenue the cable industry loses to illegal copying, or outright piracy, at $4.76 billion a year. McGinnis estimated the actual figure is closer to $15 billion a year today.
"I’ve been in this for over 20 years, and its gone up every year," McGinnis said. "The cable industry has been trying to promote digital as the fix for piracy, and frankly, other than pay-per-view services it has been a fix, but then a lot of the people who were committing piracy moved over to DBS.
"In the real world, it’s like chasing down a bubble in a water bed; you push down in one place, and it goes somewhere else. A month and half ago, a Nagravision digital box was broken into in Europe, so telling the cable industry that digital is the end to all piracy just isn’t true. When the digital market is big enough, the pirates will drill down into it engineering-wise." To catch a thief SSI offers three services and has a few more applications in the works. The company has a no-cost recovery program for cable TV and satellite theft that McGinnis said has recovered more than $300 million in piracy-related theft and more than 500,000 illegal devices. McGinnis helps a cable company find a resolution by going through civil rather than criminal court, but fines up to $10,000 can hit a cable thief SSI helps mediate a resolution between the offenders and the cable company that averages a settlement of $4,000 – a portion of which goes to SSI – but how McGinnis reaches these accords is also important to cable operators.
"We spoke softly, and he (McGinnis) carried a big stick, which was civil court," said Chip Carstensen, Buckeye Cable‘s president. "He built relationships with judges, and if they (the pirates) ignored us, then he would take them to court on our behalf and win a judgment that was enforceable.
"He’s very customer-service orientated, and so are we. We would try to work with them (the pirates) first and say, ‘If you like the service so much, why don’t you pay for it?’ We didn’t want to create a negative perception, and neither did he. About 99.5 percent of the people in these situations became paying customers."
With McGinnis by his side, Carstensen said Buckeye trained every one of its 600 employees about the problem of theft of services and enlisted their help in combating it.
SSI also provided an automated audit system to help Buckeye keep up with cable that is being connected and disconnected during tap audits, especially in apartments. Carstensen estimated that his company saved more than $2 million in recovered set-top boxes alone since Buckeye started using SSI in 2003. Theft is more than services and equipment "Cable operators don’t like to admit it, but this stuff goes on all of the time," Carstensen said. "These are two-way systems that use fiber and coax and are very technical. When you get thieves on there that aren’t using the proper filters and connectors, their signals get in the system and mess everyone else’s up. The cost of theft is more than the theft of services and equipment. How do you account for the cost of a node getting knocked out because there were 25 illegals on it?"
According to McGinnis, SSI is in beta testing with a product that will stop pay-per-view thefts. Currently, a cable thief can buy a device that connects to a set-top box. The device allows the thief to order pay-per-view services, but when the cable company tries to "ping" the box to find out what services have been ordered a filter blocks it. A cable operator may think it’s a nonresponding box, but by the time the box shuts down because it has reached its stacking limit the box can be returned as defective to the cable operator, where it could sit on a shelf for some time before it’s examined.
"Most of the time, I think these boxes don’t hit their stacking limit and don’t get shut off," McGinnis said. "But even when they do, you have a customer service rep trying to get someone to pay for movies that may no longer even be in the pay-per-view system. The customers just say, ‘Fine, I’m going to Dish Network,’ and the customer service rep gives them a free pass."
The new system is in conjunction with an unnamed billing company that is already being used by a large number of cable operators, McGinnis said. The new software checks when a pay-per-view service is ordered to see whether it has made it to the billing system and compares it to a list of nonresponder set-top boxes; if it hasn’t, "that’s a slam dunk in my world," McGinnis said.
As for set-top boxes with new separable security via CableCards, McGinnis said it’s only a matter of time before the "spy vs. spy" cable thieves start replicating the CableCards.
"I’m already presuming that someone has already gotten one of those test cards today, and if not today, they’ll get one when the cards are deployed. Then they’ll become a platinum cable customer in order to get all of the services before sending the card up to Canada to be cloned," McGinnis said. "From there, they’ll just need to ship the cards instead of the set-top boxes, so they’ll save on shipping costs." – Mike Robuck