The Toronto Star
Thursday, June 26, 1997
page B1, B3

DirecTV serving gray market

by Robert Brehl,

Despite promising to turn off Canadian "gray market" dishes, American satellite giant DirecTV is knowingly dealing with customers it suspects are Canadian.

Also this week, DirecTV launched one of its biggest anti-piracy campaigns intended to thwart customers who use computer-hacked access cards that allow them to get programming without paying.

There are an estimated 300,000 DirecTV dishes in Canada; most are gray market and some are black market.

Gray market refers to paying, through a U.S. mailing address, for DirecTV programming that is not authorized in Canada. Black market refers to buying hacked cards for about $500 that tap into the programming for free.

The two are related. In a bid to reduce piracy, DirecTV has been issuing new access cards to its 3 million North American customers.

The Star obtained the shipping bill for a card sent to a mailing address on Pine Ave. in Niagara Falls, N.Y.

It clearly states: "Poss. Canada Accnt." -- short for Possible Canada Account. Sources indicate there are many more examples of DirecTV sending new cards to customers it suspects are Canadian.

DirecTV officials could not be reached yesterday.

In the past, DirecTV -- which is owned by U.S. automotive titan General Motors -- has said that when it finds out a customer is Canadian, it disconnects service.

Many observers, including several Canadian judges, have been skeptical, because many customers are paying the DirecTV bills with Visa or Mastercard credit cards issued by Canadian banks.

The highest-ranking judge so far to rule on the contentious issue last month said: "DirecTV Inc. does participate in a thinly veiled scheme to circumvent the laws of Canada."

Canadian customers make up about 10 per cent of DirecTV's base and the company has fewer costs, such as distribution and marketing, in Canada.

"Let's face it, DirecTV has little incentive to do anything about the gray market", one Canadian broadcaster said. "It's found money for them. Why would they voluntarily cut it off?"

But a Canadian satellite company official is giving DirecTV the benefit of the doubt and figures the company will investigate these possible gray market customers after issuing cards.

"DirecTV is on the public record saying they will co-operate in ensuring their service is not gray-marketed in Canada", said Chris Frank, vice-president of ExpressVu Inc., a licenced Canadian direct-to-home company planning to launch a service this year.

He said discussions are under way to come up with a gray market solution.

Meanwhile, DirecTV and its security arm unleashed a new type of electronic counter-measure Monday to knock out black market pirate cards and force customers to insert their new access cards and discard the old ones.

Such counter-measures involve signals beamed down from the satellite to change the coding on the smart cards that plug into the front of the set-top receiver box. The move is akin to changing the numbers on a combination lock.

But this latest move also knocked out some Canadian gray market boxes, too.

In essence, once source said, DirecTV turned off thousands of set-top boxes that should have by now inserted the new access card mailed out to them.

Since many of the new cards could be sitting in U.S. mailboxes used by gray market accounts, they have not yet been put into their Canadian receivers.

Copyright © 1997 by The Toronto Star. All Rights Reserved. Reprinted with permission.