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Net Deals with Venezuela Pirates Stirs Debate

Caracas, Venezuela -- Programmers that sell to
Venezuela's flourishing number of illegal, unlicensed cable operators are raising
concerns in the country's licensed pay TV sector.

Nearly 100 unlicensed, mainly provincial mom-and-pop
companies have sprung up this year alone, according to Johnny Arrioja, a spokesman at the
state communications regulator, the National Telecommunications Commission. But instead of
taking the general piracy route of stealing satellite-program signals, many are actually
paying for them. And contracts are being signed with both local and international
programmers, according to Evelyn González, executive director of the Venezuelan Chamber
of Subscription Television (Cavetesu). Although there are some exceptions, "Everyone
is doing it," she said.

The issue is causing rancor among licensed cable operators,
which believe that this practice only encourages the illegal sector. "It isn't
right ... We've worked hard to get the industry out of the disarray that it was in a
few years ago, while investing in a truly high-quality product for our customers. We seem
to be slipping backwards," said Ahmad Khamsi, president of the country's top
cable operator, SuperCable.

SuperCable has been actively fighting piracy in Venezuela
over the past 18 months with the Venezuelan government; U.S. studio trade group the Motion
Picture Producers Association; the Venezuelan unit of Galaxy Latin America's DirecTv;
and programmer HBO Olé. HBO Olé is one of a small number of programmers that refuse to
work with the unlicensed sector, González said.

MTV Networks Latin America also counts itself in that
category. "We only work with legal systems, which are obliged to show us their
government papers," said Rita Herring, the programmer's senior director of
affiliate sales and marketing.

But those that do sell to the unlicensed sector don't
see this as a black-and-white issue. Among them is Andy Terentjev, vice president of
affiliate sales for women's network Gems Television. In the past, it was not his
policy to sell to what he described as the "informals" -- a designation that
refers to the attempts of some pirates to become legal. But part of his rationale in
selling to the unlicensed operators is the expectation that those systems will be acquired
by larger, licensed systems as the Venezuelan industry continues a consolidation trend.

He is nevertheless sensitive to the situation, offering
short-term contracts to unlicensed companies, to be terminated when he wants, and not in
areas that would offend his formal-sector clients.

Government officials strongly denied industry criticism
that the government is dragging its feet in closing down illegal operators. It does not
want to be overzealous in this respect, as many unlicensed operators are in the process of
becoming legal. "Procedures take time. Many [operators] are in the process of
complying with the licensing requirements," Arrioja said.

Jo Dallas contributed to this story.