A Dirty Little Secret
The cable industry has been reluctant to acknowledge the magnitude of its signal theft problem, preferring to keep its secret crammed into a back closet.
One little-used but effective means of combating theft,
and bringing it into the light, is interdiction technology.
Signal theft: it's the "dirty little secret" of the U.S. cable TV industry. One that's worth more than $6.5 billion a year in lost revenue.
It's a "dirty little secret," says Ralph Valente, because many cable TV executives like to pretend that theft doesn't exist. Oh, they might admit that there's a bit of hacking into their systems, but wide-scale theft? You've got to be kidding.
But the truth is out there, as Valente well knows. As board secretary of the Broadband and Internet Security Task Force–which compiled data on cable theft for NCTA 2001–he's intimately familiar with the situation.
It's so bad, says Valente, that if you translate theft figures into subscribers, you end up with the equivalent of 11.1 million subs. "To put it another way, if all of the people stealing cable were somehow served by one company, it would be the third-largest MSO in the U.S.," he observes. "In our presentation at NCTA 2001, we referred to it as 'CTI,' or Cable Theft Inc."Why there's so much cheating
So why are 11.1 million people stealing cable TV? One reason is that it's pretty easy to do; particularly in MDUs (multiple dwelling units) like apartments and condos, where sneaky hands can break into the cable TV utility room, and patch their coax into the main feed.
Ed Fonseca, field service technician I,
The second reason is that Americans don't really view stealing cable as theft, says Valente. "In focus group after focus group, we've heard people compare stealing cable to parking in a no-parking zone. It's no big deal to them."
The third problem is that many cable TV companies are sloppy about keeping an eye on their plants. For instance, a new occupant in a home or apartment might find themselves with free service simply because a technician neglected to turn it off.
The fourth problem is contractor dishonesty: with cable TV companies contracting installations out to third parties, there's always the chance for these people to sell pirated signals on their own initiative. "It's a case of the service person saying, 'give me $50, and I'll give you HBO for life'," says Valente.
Finally, there's the weakness of the cable TV industry's analog set-top boxes. Many of these are just too easy to hack into, Valente says. However, he doesn't lay the blame at the suppliers' feet. "When I asked one supplier why he didn't make his boxes harder to crack, he replied, 'because the cable TV industry wants the cheapest boxes possible'."Interdiction: One answer?
Cable TV MSOs can stop piracy dead in its tracks by installing interdiction devices, according to those who use the technology. "Interdict" is defined in Webster's as "a barring of a person or group from the sacraments, Church services, and Christian burial."
The interdiction tap is capable of being placed in an underground enclosure.
A few things make interdiction units attractive to cable TV operators. The first is security: you can place these units outside the home, in locations where nimble-fingered, would-be pirates can't get at them.
Another is addressability: interdiction units each have their own unique address, making it possible to identify and control them remotely from the headend. For MSOs, this means that they can connect people, upgrade their services, and then disconnect them from the office, all without rolling trucks.
Then there's network management: with interdiction units in place, there's no need to scramble premium services. Instead, all channels can be sent in-the-clear, because the actual interdiction only occurs between the network and the customer drop. Some units are also configured to allow telephony and high-speed Internet access, further simplifying network management.Interdiction in action: Real-life stories
The real test of any technology is in the field, and that's where Charter Communications and San Bruno Municipal Cable TV have deployed interdiction units manufactured by Blonder Tongue Laboratories.
To date, Charter Communications in California has only deployed one interdiction system: specifically in Pasadena, Calif. "This is a beta test for us," explains Frank Maldonado, Charter's director of operations. (Charter also has an interdiction-protected system in Chicopee, Mass. which was purchased from Greater Media.)
Beta test it may be, but Charter is quite serious about its target: a 160-unit MDU that "is probably not really upper-class, but definitely higher income than typical apartment buildings," Maldonado says.
When it came to this complex, "we were noticing a really high theft rate; mainly due to people breaking into our locked boxes and connecting their own service," Maldonado notes. "We were also puzzled by its very low penetration rates for both basic and premium. Given the income level of the building, it seemed very odd to us. It just didn't fit the picture."
Apartment house deployment of interdiction.
"We saw our basic subscriber penetration climb from 38 to 93 households," says Maldonado. "Meanwhile, in the first six months of interdiction, we sold 120 PPV events, compared to just 13 during the entire year previous."
Put another way, Charter's penetration rate jumped from 23 percent to 58 percent, and its PPV revenue increased tenfold. As well, the company was able to speed up its disconnects and upgrades at the complex. The result: everybody's happy with the trial, except perhaps those who own now-useless black boxes meant for piracy.
San Bruno Municipal Cable TV serves San Bruno, Calif., which is located 12 miles south of San Francisco. With 79 percent penetration, one would think that Cable Television Director Dave Thomas would have been happy with how things were going, but he wasn't.
"We were using Scientific-Atlanta set-top addressable boxes, and we had some real concerns about them," Thomas explains. "We found out that anybody who read the ads in Popular Mechanics could defeat our systems. To protect our investment, we wanted something that would give us more security."
"But that's not all: we were also looking for something to help us cope with churn," he adds. "We figured that, with remotely-controlled interdiction technology, we could reduce our truck rolls, and improve our customer service."
So San Bruno installed interdiction units throughout its entire system. "Our penetration rate has increased to 80 percent, and our PPV and premium services have climbed substantially," says Thomas. Although he doesn't cite hard numbers like Charter does, Thomas has no doubt that interdiction is paying off for San Bruno. It's not just a matter of improved revenues–with interdiction, the company can now offer same-day connection service, which is something it's never been able to do before.The downsides of interdiction
Of course, no technology is perfect. When it comes to interdiction, there are a few major concerns.
The first is labor: it takes time and manpower to install interdiction units throughout the network. An operator also has to adjust the network to monitor this equipment, and change business processes accordingly.
Another is cost: it's not cheap to buy tens of thousands of the units. Depending on the type of interdiction unit, the price per home averages at about $130. That said, Blonder Tongue Director of Applications and Marketing Emily Nikoo promises that interdiction equipment "will pay for itself within six to 11 months of being installed, given the operational and revenue benefits."
Other issues others have raised include (ironically) theft, because signals are sent in-the-clear before they're jammed by the interdiction units. If a customer was able to tap into the "clear" portion of the network, then the consumer would have access to all channels. Of course, a routine system audit would detect these types of violations.
Finally, there's the march to digital. Interdiction was originally designed to jam analog channels. As digital grows in importance, interdiction becomes more of a niche need. But it will be, arguably, years before analog signals are completely converted to digital.
Given these concerns, Charter's Maldonado is conservative when asked about rolling out interdiction systemwide. From his standpoint, MSOs have to consider this option on a case-by-case basis. In general, interdiction does make sense in high-churn/high-theft environments likes MDUs, Maldonado observes, but not in rural areas, where the combination of density and low-theft rates doesn't justify the expense.
That said, he is pleased with the technology's performance in Pasadena. "Our investment for this particular installation has been well worth it," Maldonado says. "We knew there were people in that building who could easily afford our service, yet weren't paying for it."
With $6.5 billion at stake annually, some observers think that interdiction would be a "must-carry," as far as cable TV is concerned. At 11.1 million, Cable Theft Inc. has a "subscriber base" most MSOs can only dream of, and a potential for growth that Charter's Pasadena beta test soundly proves.