I-Cable pins its hopes on digital trap for thieves

PUBLISHED : Thursday, 16 January, 2003, 12:00am
UPDATED : Thursday, 16 January, 2003, 12:00am

Hong Kong's i-Cable Communications is playing a cat-and-mouse game with sellers of illegal decoders and unauthorised viewers, one it hopes ultimately to win by digitalising the local market and cracking down on the trade.

Analysts contend, however, that the dominant pay television operator is more likely playing Tom to the illegal merchants Jerry, and will never fully catch up to a trade that by company estimates accounts for some 100,000 viewers, or about 16 per cent of the company's subscriber base.

'They can never totally solve the problem but only reduce its 'injury',' said Edward Fung at Kim Eng Securities.

Police and analysts say the illegal sellers are difficult to trace, legal constraints mean police cannot prosecute unauthorised viewing, and even digitalisation is not an insurmountable hurdle.

The Wharf-controlled company is clearly eager to capture the market segment - some 90 per cent of revenues come from subscriptions - and last week highlighted a joint crackdown on the trade with local police and members of the Office of the Telecommunications Authority (Ofta).

Hong Kong police mounted raids against traders of the unauthorised decoders in Shamshuipo last month.

Police announced they had conducted six raids last year, seized about 1,300 devices and arrested 24 people. After a raid in October, three people were convicted in court on the following day and two were handed prison sentences.

I-Cable said with the enforcement actions, 'the problem of pirated viewing seemed to be not as rampant as it was a year ago'.

Yet its real success so far is questionable: a visit by the South China Morning Post last week to a shop in Shamshuipo discovered at least 10 stalls selling pirated analogue and digital decoders at about HK$220 to HK$280 - cheaper than Cable TV's monthly subscription fee.

I-Cable also pins its hopes for controlling the trade on digitalisation, and has promised to complete the digitalisation of its network by June 2005.

'Digitalisation only means that it will be easier for them to switch to another spectrum to distribute their signal and so make the viewers tired of upgrading their decoders and finally subscribe for the service,' said Florence Cheung at Sun Hung Kai Research. 'It is their only strategy.'

Mr Fung at Kim Eng said that would force decoders to invest money to keep up, but it would not be impossible.

Cheng Shu-kwan, associate professor at Hong Kong University of Science and Technology's Department of Electrical and Electronic Engineering, said TV operators could encrypt the broadcasting signals, just as banks encrypted online transactions. 'But if they are not as secure as online transactions, they can be easily cracked once they can get the key,' he said.

I-Cable is also concerned about the issue of unauthorised viewing. 'It is a serious problem to us and we have seized every chance to express the issue to the government,' it said.

In the SAR, only selling and trading of unauthorised decoders is illegal - the purchase and viewing of programmes using the devices is not.

By contrast, in Canada, unauthorised receiving of broadcasting signals - both satellite and pay-TV - is an offence. Four TV companies last year launched a lawsuit over satellite signal piracy.

In Hong Kong on Monday, Secretary for Commerce and Industry Henry Tang Ying-yen said one of the main tasks for the bureau this year would be to 'amend the Broadcasting Ordinance to tighten control on the supply of unauthorised decoders to deter pirated viewing of licensed subscription television services'.

But a government spokesman said the secretary brought it up only this week and there was no timeline or plan for reviewing the relevant legislation.

How much i-Cable loses to illegal decoders is unclear. Senior external affairs manager Chan So-kuen declined to comment on losses but said subscription fees hit HK$877.42 million over the first half of last year, compared with HK$802.13 million in 2000.

'If the company could combat illegal viewing successfully, three out of 10 people might subscribe to the service,' said Chris Fang at Credit Suisse First Boston.