Pirate-Hit DirecTV Swaps Cards Again

In an effort to curb illegal theft-of-signal by pirates who use tampered security cards in their set-tops, DirecTV Inc. last week said it started mailing replacement smart cards to its more than 10 million direct-broadcast satellite customers.

The swap-out marks the fourth generation of smart cards since the direct-broadcast satellite service launched in 1994.

DirecTV plans to distribute more than 15 million smart cards over the next six months. It has set up a dedicated on-air channel to instruct customers in how to replace the cards in their receivers.

The company also confirmed it that will take its conditional-access technology in-house, transitioning from initial provider NDS Group plc. DirecTV's engineers were largely responsible for the latest smart-card design, said spokesman Bob Marsocci.

In a statement last week, NDS said DirecTV began the transition to its own technology on April 1. It added that the companies' contract remains in force until August 2003, and that NDS will continue to generate revenue from its DirecTV relationship until that time.

Recent corporate-espionage charges lodged against NDS by Canal Plus S.A. played no role in DirecTV's conditional-access decision, which it had already conveyed to the vendor late last year, said DirecTV executive vice president Dave Baylor.

"It was an accident of timing," Baylor said.

As part of its last contract renewal with NDS two years ago, DirecTV negotiated an option to shift to its own technology, Baylor noted.

"We determined that some things are so key to our business that we wanted the option to provide them ourselves," Baylor said.

Internal control of the conditional-access system would allow DirecTV to start work on new smart-card designs more quickly, if necessary, without the intermediate steps of requesting a change from its vendor and negotiating a fee structure, for example.

Although he declined to give specifics, Baylor said the latest card swap would cost DirecTV "several tens of millions of dollars."

Individual cards cost less than $10 each, but there are also costs stemming from postage, the printing of mailing materials and customer-service support.

"It's not something we do lightly," Baylor said.

Baylor's engineering group enlisted the marketing department's help to design a smart-card mailing that subscribers couldn't ignore, because those who do run the risk of losing access to programming if they don't switch to the new card.

Subscribers with multiple receivers must ensure that the new smart cards go to the specific receivers they're intended for.


The company held focus groups with consumers and employees before tweaking some of the procedures involved in the latest card swap, Baylor said.

Once the smart card is mailed to a customer's home, an on-screen display appears when the DirecTV receiver is turned on, alerting the subscriber to change the card.

Customers then dial an automated hotline to alert DirecTV of the swap.

DirecTV isn't afraid that the heightened publicity surrounding the card swap will tip off would-be pirates. Baylor admitted that the hacker community is already among the most knowledgable about DirecTV's smart-card plans.

Baylor conceded that hackers would attempt to defeat the new smart card as soon as they get the chance. "I think they will be frustrated," he added.

If DirecTV has its way, today's pirates may become tomorrow's customers.

Once DirecTV turns off the old signal for good, consumers who have been watching illegally will lose access to popular programming, including out-of-market sports and pay-per-view movies.

"Hopefully a number of people will come over from the dark side to the light side," Baylor said.