Can anti-piracy become too expensive?

In the mid-eighties I visited a cable company in Conneticut. He was there to solve some communications problems they had with their addressing system. At the customer service desk, a person came over and asked if he could return his set-top box. He said he was moving and didn't need it anymore. When he put the device on the counter, I noticed a square hole of about three centimeters. The representative asked him what had happened and the customer argued that he did not know, that he had surely fallen off the TV. The representative accepted the explanation and closed the account, as requested by the customer. Later, checking the box, I found out what I suspected, someone had modified it to activate all the encoded channels.

It may sound ridiculous today, but that was pretty long ago. Anti-piracy measures today are much safer and, at the same time, much more expensive. Perhaps we could have built the cases in reinforced titanium so that it would be more difficult to open them. But this would have made the boxes too expensive. Security against sign theft can range from very cheap and unsafe to being very expensive and secure. So the question is can anti-piracy become too expensive for my business? Obviously, the answer is yes.

The most expensive part of a cable or wireless broadband operation is related to the CPE (Customer Premise Equipment) equipment, or what refers to the set-top boxes (STBs) to receive and interpret the channels. Every customer who wants to receive encoded video channels, needs an STB to be able to watch them on their TV. Video encoding is the most basic way to ensure that services are received by customers. On a scale of priorities, video services are the first source of revenue, followed by audio and data services and finally, interactive services. All of these services must be protected in some way. Coding is the main method.

The cost of offering a service, for the system operator, can vary between 30 and 50% of the subscriber's monthly bill. This money is what is transferred to the original program providers and producers. The money left is what amortizes the operator's operations, including maintenance, repairs and replacement of equipment, and employees' wages. As I mentioned before, the biggest cost is that of CPE equipment. It can take an operator between 3 and 10 years to pay off a loan contracted to acquire this equipment. So many factors have to be considered when deciding the type of CPE equipment to buy. Once the CPE team is determined, the header equipment or the coding equipment is considered.

Types of piracy

It costs much more a safer team than another that is not. The question is which one to choose? This basically depends on the level of hacking or signal theft you estimate to have. Most of the signal theft, and the one that does the most damage, is in illegal connections. This occurs when someone connects to the cable system without the company knowing. In the case of wireless systems, a receiving antenna or dish is installed to receive the signal without authorization. Illegal connections allow you to watch basic signals and channels that although sometimes called free, are paid for by the cable operator.

A second level of piracy is the decoding of encoded and secured signals. This method is much more complex and more expensive. Such a pirate has to create a device or modify an STB to decode the signal. The thief can even pay for the free signal just to receive the basic signal and then install the illegal device with which he decodes the premium channels. It is important to understand that this is a "more expensive" type of hacking for the criminal.

The more difficult the decoding of a service, the more expensive it will be for the pirate to steal it.

At a certain point it will be more expensive to steal signals than to pay for them legally. Here we are considering only what we call "commercial pirates." Those who develop methods and devices to steal signals and resell them looking for profitability. There are also the "curious pirates" where very creative but poorly guided engineers fall who create devices to steal signals but only to see if they are able to do so. If these two come together, the operator cable has a big problem.

"Home pirates" are people who illegally connect to a system to have a free service. These are seen by commercial pirates as their biggest market.

To find a balance between the security of services sold to subscribers and the level of investment in security equipment, the following points can be considered:

To. Percentage of services sold:

1. Basic service
   
2. Premium TV channels
   
3. Adult channels
   
4. Interactive services or pay to view
   
5. Internet access or other data service.
   

B. Estimated exposure to piracy.

C. Bandwidth availability.

D. Security costs.

In the case of services sold, basic channels are the main target of pirates. The best protection is to encrypt all channels. This would require subscribers to have an STB on each TV. A typical system can have 30% of households with a second TV. This means that a greater number of STBs would be needed but with a lower level of encoding.

I list adult channels separately because they require different coding in such a way that it involves total concealment. One concern regarding these channels is that young children may perceive images they shouldn't see even when they're encoded. As with adult channels, interactive and pay-per-view services typically make up a smaller percentage of the subscriber base. This makes it difficult to justify securing all these channels with very expensive equipment being that the system will recover only a small number of illegal subscribers.

The best approach to this problem is to have multiple security scales. For starters, all channels must have a basic level of coding. Basic service channels are coded with less expensive methods. Adult channels and PPVs must have a "concealment" scheme. This is more expensive but does not require too much equipment. These teams must also be able to decode basic services.

Figure A shows that the average cost of a system can be $4.5 million versus $7.5 million for a system that uses the same type of equipment for each subscriber. It is possible to use less expensive equipment and obtain an overall price reduction using the standard method, but the possibility of offering advanced services without being exposed to a higher incidence of piracy would be sacrificed.

Finally, the issue of digital equipment must be considered. The main purpose of digital compression systems is to provide a greater number of channels, mainly in wireless systems. Digital compression is the future of broadband networks. However, today there is a serious problem: the price. If all channels arrive in digital format, not only each subscriber but each of the televisions that receive these channels must have a digital STB. In a differentiated system, where both digital and analog channels are offered, an operator can reduce the number of digital STBs required by offering them to a small number of paying subscribers for this service.

The differentiated system model is currently found in many cable companies. They use equipment and security levels that fit the services provided and the subscribers who pay for them. For a company just starting out, it's vitally important to control upfront equipment expenses. Service differentiation and coding methods can save enormous amounts of money by not having to deliver a very expensive SBT to each subscriber. As the subscriber base grows, new services can be offered. When new services require better encoding, new SBTs should be able to decode basic services. This model allows system operators to reach a point of profitability in a faster way than in a completely secure system with "the latest" in equipment.

In conclusion, a decoder sealed in a titanium box, with upgradeable firmware, 100 Mb of memory and a 100 Gb hard drive to record video programs, cable modem included and software for browsing the Internet, is probably the most desirable. You'll be lucky if you get 5% of the subscriber base to pay for this service. We all know that equipment prices are going down, but why wait if one can be generating revenue today?