Advertisement

Any market that delivers compound annual revenue growth of 28 percent over nine years has to be labeled a runaway hit. Beginning in the 1980s, one of the categories that achieved that lofty level of performance was a sort of sideline specialization to the mainstream cable industry: stealing signals.

In 1984 the damage done by signal theft in the U.S. amounted to $500 million – the National Cable Television Association’s estimate of potential revenue lost to unauthorized reception. Two years later the total swelled to around $1 billion a year. By 1993 estimates of annual losses reached $4.7 billion, enough to get serious attention across the industry.

Combatting signal theft was like waging war. Air cover was provided by NCTA’s Office of Signal Theft, a title worthy ofStewart Schley, columnist a Monty Python skit. Serious-minded press releases and toll-free numbers that encouraged honest citizens to turn in their neighbors, anonymity guaranteed, were designed to build public awareness of the crime. And crime it was: the Cable Communications Policy Act of 1984 established that “No person shall intercept or receive or assist in intercepting or receiving any communications service offered over a cable system, unless specifically authorized to do so by a cable operator or as may otherwise be specifically authorized by law.” Penalties included fines up to $1,000 and up to six months in jail, although these were mostly for show; few people did hard time for stealing HBO.

The PR efforts coincided with ongoing monitoring and the delivery of cease-and desist letters to “black box” shops that sold illegal cable receivers, usually via mail-order advertisements that sought to skirt trouble by declaring their offers “void where prohibited.”

On the ground, local cable companies performed the tedious work of dispatching crews to check for rigged taps and connected cables where there shouldn’t be any, house by house and apartment by apartment. A 1984 Los Angeles Times article described the daily travails of an auditor for CVI Cablevision, part of a four-person team that scaled utility poles and peered into vaults to uncover and disable unauthorized connections, or better, to convince malfeasants to sign up legitimately. “It's been a calm day,” the auditor told a ride-along journalist. On other occasions, he said, “I've had people threaten to shoot me.”

In truth, nobody knew the exact toll caused by signal theft. The NCTA’s early rolled up estimates came from generalized reports that suggested anywhere from 3 to 15 percent of the total number of users connected to a cable system received service without paying. In 2000, an NCTA survey pinned the average theft level at 11.5 percent for basic cable service, and at 9.5 percent for premium channels. That amounted to nearly $6 billion in uncollected revenue.

But four years later, the numbers had declined substantially. An audit conducted for NCTA by the research firm Frank N. Magid Associates found the incidence of theft had plunged to 4.65 percent, equal to $4.76 billion in lost revenue. Technology, more so than public relations and legal remedies, had begun to save the day. The transition to digital video armed cable operators

with improved tools to control unauthorized reception. Encrypting signals allowed operators to control service authorization for tiered and premium services – and more recently for all video channels – remotely, sharply reducing the incidence of theft. It was still possible to jerry-rig an illegal drop to your home, but without a digital converter and authorization from a headend controller, the would-be larceny was pointless.

“Signal theft” still proliferates, but in different and equally sinister ways. Netflix CEO Reed Hastings warned recently of the ominous threat posed by Popcorn Time, an online service that neatly organizes and neatly displays sources for illegal video content. The Motion Picture Association of America estimates movie piracy over the Internet amounts to billions of dollars – it’s hard to identify an exact amount – in losses. And a new variation on the theme has emerged lately in the form of password-sharing – letting someone else use legitimate video subscription credentials without paying. A March 2015 report by The Diffusion Group estimated around 20 percent of subscribers to online video services like HBO Go and Hulu Plus pass out their passwords.

Like stealing cable signals in the 1980s, password-sharing is often seen by those who do it as a benign practice that’s relatively harmless. And so far, industry participants have done little to curtail it. That may have to change as online video services proliferate and become more vital to the industry’s economics. Who knows? Maybe the “Office of Password Sanctity” isn’t far away.

Advertisement
Advertisement