Press Backgrounder

SUBMISSION
IN RESPONSE TO THE EUROPEAN COMMISSION
PUBLIC CONSULTATION ON THE DIRECTIVE ON
THE PROTECTION OF CONDITIONAL ACCESS SERVICES

Introduction

Since 1997, more than 30 European key players from the television, telecommunication, hardware and software sector have been working together under the umbrella of AEPOC (European Association for the Protection of Encrypted Works and Services) in order to put anti-piracy on the agenda both at European and at national level.

The Member Companies of AEPOC are:
ADD Europe, Atmel, Boxer TV-Access, BSkyB, Canal+, Comvenient, Conax, Cyfra+, Digiturk, Eutelsat, General Satellite, Humax, Infineon Technologies, Irdeto, Liberty Global, Mediaset, Motorola, Nagravision, NDS, NTV-Plus, Opentech, Pace, Philips, Poverkhnost, Premiere, Sagem, Showtime Arabia, Sky Italia, Sogecable, TV Cabo Portugal, and Viaccess - France Telecom.
AEPOC has been following closely, since its initial steps, the process of approval of the Conditional Access Directive (98/84/EC) and has encouraged the implementation of such legislation at national level.

In 2003, the first report on the status of implementation and on the functioning of the Conditional Access Directive was very well received by AEPOC as a first step in the right direction.
Today AEPOC, after having contributed to the study performed by KEA Consulting in cooperation with CERNA, would like now to take this opportunity to express its position not only with regard to some aspects of the study, but also more generally with regard to the encompassing perspective of the problem as shown by the experiences collected worldwide by its Members in more that 10 years of activity specifically devoted to Conditional Access issues.

AEPOC members intend to show that in those 10 years Internet has dramatically changed also the scenario of Conditional Access Piracy and that Conditional Access protection has served and is still serving not as an obstacle but as an important feature for the development of new audiovisual services.

Background

At the European level, the problem of safeguarding conditional access works and systems was raised for the first time by the Council of Europe in 1991. It issued a Recommendation of the Committee of Ministers to Member States (No. R(91)14) on the Protection of Encrypted TV Services, that was later complemented by Recommendation No. R(95)1 on Measures against Sound and Audiovisual Piracy.

Since then, much progress has been made in terms of awareness of the seriousness of these forms of piracy and of the damage they cause.

This paper was followed by an intense debate in several Members States (in some cases as in France, which was the first European Country adopting a specific anti-piracy legislation for conditional access violations, resulting in national legislation for the protection of the Pay Television business which was in an intense phase of development thanks to digital satellite transmissions).

With the release in October 1998 of its Green Paper on Combating Piracy in the Single Market, the European Commission took an important step toward far-ranging Community initiatives against piracy and counterfeiting in the EU. The main aims of the Green Paper, which launched a general consultation on this subject matter, were to assess the impact of piracy, to review legislation and examine the need for action.

More than 50 representatives of interested sectors hit by piracy coming from all the Member States took part in the hearing in March 1999 held in Munich to discuss issues such as the use of technical devices for security and authentication, sanctions as well as administrative co-operation between authorities.

The Directive 98/84/EC was perfectly in line with the expectation of the whole audiovisual sector which was unanimously asking for appropriate European legislation in order not only to protect the new and growing business of Pay-Media, but also to avoid collateral damages to other neighbouring sectors (such as theatres or video rentals) which could also be affected by piracy committed against other operators such as pay-televisions.

AEPOC and its members have been following all these steps, and they have also been considerably active in following the implementation of such directive in the Members States, not only by encouraging its adoption but also by cooperating with the European Commission in signalling the particular problems of each Country.

General Remarks

Immediately after the approval of the Conditional Access Directive (CAD), AEPOC considered that it was a positive step, but still insufficient with regard to three key points:

I. Legal protection specifically governing the use of conditional-access devices for reasons that are not just for the protection of direct remuneration.

The definition of "conditional access services" or of "protected services" as provided for in the CAD is too narrow.

AEPOC stresses that by virtue of this article, such a service seems to be protected only if it serves a remuneration purpose, without taking into account that nowadays, de facto, other reasons lead to the use of such services as well (for instance to restrict broadcast to a certain national area or language zone or to a specific audience, narrow-casting, to obtain a higher revenue due to better targeting, copyright protection, protection of minors, privacy and data protection or marketing strategies).

Legitimacy of such exclusion has been a vexed question as it collides with new technologic development. AEPOC has remarked many times that, all in all, free services do not differ from services provided for remuneration purposes with regard to the technical aspects.

AEPOC also highlighted that, on the basis of an extensive interpretation, it is possible to include into the wording "remuneration" even the indirect ways of remuneration, such as advertising, copyright fees, broadcasting fees, commissions, brokerages and others. In these cases, the final purpose is indeed to achieve an economic gain.

AEPOC's position in this regard is that conditional access services, both provided in return for remuneration or free of charge, are worthy of protection as they generate consistent economic value, which has significant impact on several fields, from the general economic growth to the employment market, from the consumers' choice to the entire media Internal Market, the competition within this market and the non-European markets, to the audiovisual sector.

II. The punishment of the personal use and possession of illegal decoding devices

Article 4 of the CAD stipulates that Member States shall prohibit in their territory the manufacture, importation, distribution, sale, rental or possession of illicit devices for commercial purposes. As far as private possession is concerned, it refers to the national provisions of each Member State (see recital 21 above) which is left completely free on this point.

As a result, Member States have a mere option and not a duty to lay down provisions prohibiting the personal possession of such devices.
Obviously such freedom has created disparities of treatment within Member States as well as obstacles to the free movement of services and goods within the Internal Market.

AEPOC supports the creation of a harmonised European framework prohibiting and sanctioning personal use and possession of illicit software and devices.

III. The definition of "illicit device" is insufficient and must be updated.

The narrow definition of "illicit device", as provided for in Art. 2 lett.e), leaves out equipment or software which is not specifically "designed or adapted" to give access without authorisation leaves open the question, what are the requirements for a device to be qualified as "designed or adapted" to the mentioned purpose.

So this definition does not seem to be sufficiently clear. At the final end it must be made clear by a new wording of the text of the Directive that it is not required for an illicit device to be "ready-to-use".

The "main purpose" of the manufacturer or of the importer must be sufficient for making a device illicit.

Today the Directive covers "to less" devices, thereby hampering as a side effect the market of set-top-boxes within the European Union , where in today's piracy situation significant amounts of set-top-boxes are sold which are obviously "designed by intention" piracy-friendly thereby displacing set-top-boxes of reputable manufacturers producing piracy-protected set-top-boxes. We do not want to hide our experience that - although there is serious evidence - it is not possible to pursuit manufactures, located outside the EU, of such set-top-boxes with an accompanying piracy-enabling software. And even worse, it is not possible to stop the import and distribution of such set-top-boxes inside the EU.

Of course AEPOC understands how difficult it might be to provide evidence of such an intent, but certainly a bell should ring when a business model is not sustainable without an illicit use of some devices, when prices at distributor or consumer level are unreasonably high in comparison to the expected legitimate use of them or when there are other indications for a coherence between a manufacturer of a set-top-box and a fitting piracy software.
Moreover, in relation to on-line services based on a conditional access system, the use of software is not usually required, the user simply being required to type in a password.

The question is whether the concept of "illicit device" includes the use of a password where not allowed. A password, indeed, is neither equipment nor software, but mere information needed by the equipment or software to allow access.

Therefore, a clarification of this concept would satisfy even the need for a possible exclusion of such services from the application area of the Directive itself.

Mentioning those concepts into an updated version of the CAD could act certainly not only as a moral dissuasion vis-a-vis some hardware manufacturers and/or importers acting in a borderline situation, but could also be very useful in order to reinforce jurisprudence already achieved in some Countries about the "main expected use" of certain devices.

Finally, this could encourage or enforce manufacturers to improve the level of security enabled in their devices in order to avoid any possible misuse and manipulation of them.

The First Commission Report on the Conditional Access protection in the Internal Market.

The Report published in 2003 was considered by us as a first step in the right direction, in particular because it highlighted the following:

1. Electronic Piracy must be stamped out to protect Europe's competitiveness.
2. The knowledge-based economy of the 21st Century is expected to rely more on electronic pay-services.
3. The EU and its Member States cannot allow economic and social development to be severely hindered by piracy.

Cooperation between private and public sector was encouraged and it was also declared essential to establish a coherent pan-European legal framework against the piracy of electronic pay services, in particular by the rapid ratification of the 2001 Council of Europe Convention N° 178 on the legal protection of conditional access services.

The Report also identified several issues for further reflection. In particular, AEPOC considered particularly important the need for a clear European enforcement framework applicable to all kinds of piracy and counterfeiting, and a way to combat more effectively the distribution of keys and illicit devices via the internet and satellite, since most Member States have agreed to criminalise such internet distribution under a separate Council of Europe Convention (N° 185) on Cybercrime.

The situation today

After more than 20 years since the birth of the first pay television in Europe, the sector of conditional access services is an important economic reality not only providing employment and paying national taxes, but also supporting technological progress and rewarding investments in creative works.

For this reason, more than before, it is necessary to confirm the essential milestones for the solidity of such important cultural and financial sector. In particular we consider it is essential:

1. To view Conditional Access not as an option, or simply a secondary revenue-making tool, but as a milestone for the solidity and development not only of the audiovisual sector but also of any present and future media (based or not based on payment for the service).
2. To maintain specific legislation with regard to Conditional Access, as Conditional Access protection is covering a much larger spectrum of possible illicit behaviours other than Copyright infringements. For such reason AEPOC rejects any merger between the two areas of legislation.
3. To follow up the conclusions and the guidelines drawn by the Report of 2003, in particular with regard to the need to increase the attention of public bodies to such a problem and to establish an encompassing strategy in order to achieve the cooperation of all the actors involved.
4. To carefully consider the cyber-criminal attitude of Conditional Access violations in order to appropriately counteract against organisations involved in such illegal and very profitable business.

Remarks and considerations about the Study performed by KEA Consulting

Even before the publication of the Study, AEPOC - through a letter sent by President Grenier to Commissioner McCreevy - had already expressed its dissatisfaction with regard to the methodology adopted in the preparation of the analysis on the Status of the CAD.
The following remarks intend to provide a more complete view of AEPOC with regard to the conclusions reached by the Study performed by KEA Consulting and released in December 2007.

Remark n.1

As a very first point, it is not insignificant - and AEPOC intends to clearly express its dissatisfaction - that the Study starts identifying some specific aspects of the sector and of the business models used by legitimate operators, considering these as "piracy incentives".

The "incentive" behind Piracy, as with any other theft both of material and immaterial goods, is the desire to steal someone else's property and certainly not the fact that the legitimate owners of copyrighted works (or any other protected and valuable content) intend to develop their economic exploitation commercial strategies.
Therefore, if locking the door of our car is not an "incentive" to thieves, we do not understand why the study should start its analysis mentioning what it calls the "numerous piracy incentives" allegedly present along the distribution chain.

Not only, the business models of pay-media are not the cause but the consequence of already existing, established and accepted commercial rules (e.g. the "windowing" system for the cinematographic movies).

As per the above, AEPOC preliminarily considers misleading the fact that from the first pages of the Study performed by KEA, the attention is focused not on the problem of piracy but on the alleged responsibility of the operators in having created business models offering "incentives" to piracy.

Remark n. 2

The Study makes a comparison between the American and the European scenario, and concludes such part of its analysis by saying that the Conditional Access Directive is aiming unsuccessfully to facilitate cross-border exchanges of audiovisual contents.

Frankly speaking, we have been following the preparatory studies of the Directive and discussed it since 1996 with its first Rapporteur, Georgios Anastassopoulos MEP, and we never found this secondary target of the CAD in the intentions either of the European Commission or of the European Parliament.

The CAD was, in fact, conceived simply to provide harmonised protection to the promising and fast-growing sector of Pay-Media.

All the general cultural and policy issues were radically (and very appropriately) kept out of any discussion.

Of course, we have always considered Cultural Diversity as one of the pillars not only of European Society but also of the EU Institutions' activities and targets, but this debate looks not very related to the present analysis which we are all performing, in order to support the Second Commission Report on the Status and Functioning of the Conditional Access Directive.
Moreover, if we try to follow the assumptions made in the KEA Study, we are compelled to show that such a view is not supported by the facts.

In its early days, after the Second World War, European television was terrestrial, analogue, and funded by public money.

At that time, Public Broadcasters were the only operators, and only after several years did Commercial Television start its development.

Pay-TV arrived much later, adding subscription fees to the revenues coming from the advertising.

Satellites not only allowed people to receive, in real-time, sounds, images and voices from anywhere in the world but also gave a new dimension to television broadcasting.
Initially television was mainly a nation-based reality; thanks to satellite we saw a rapid evolution to a cross border environment: live coverage for news, coordinated advertising campaigns, worldwide trends and social phenomena.

But after this evolution, a real revolution took place: digital direct-to-home satellite transmissions.

It had several important advantages due to the better efficiency of the transmission spectrum: less costs for broadcasters, multiplication of channels, change in the way television was financed. A strong support was given by satellite to the growth and development of pay television subscriber bases across all European Countries.

Moreover, thanks to pay-per-view offers, we can say that it is certainly very fair to be billed only for content actually seen and not just according to fixed monthly subscription fees as was the case in the past.

It gave a great opportunity to people to access a large amount of content, even niche content, which suits their varied interests. This means having the opportunity to be free to decide what to see, where to see it and when.
Indeed we should not forget that satellite broadcasting was introduced some 20 years ago into an already developed audiovisual system, which was already well organised and structured with regard to copyright and the private and public obligations of broadcasters.

For this reason it was necessary to adopt measures in order to make satellite transmissions compatible with the existing scenario.

This was necessary, not only because of country-based copyright segmentation, but also because of other cross border problems, existing even within the European Union, of a not completely harmonised legal framework for television.

Minors' protection rules, advertising shares and programming quotas are only a few of the issues having a different regulation in different countries.

Conditional access was the solution, not the problem.
Thanks to conditional access all the potential of satellite broadcasting can be used with 'esprit de finesse'.

Conditional access made possible reaching targeted audiences without prejudice to the stability of the whole audiovisual system and that is why it must be properly protected.

Today, Digital Terrestrial Television and Internet based audiovisual services such as WebTV and IPTV, are offering terrific opportunities but posing the same (and also new) kind of problems.

Once again Conditional Access, and its effective legal protection, is the perfect technical tool to solve problems and by-pass obstacles to the development and growth of new market scenarios.

Remark n. 3

If words still have a meaning, when the Study calls "Moral Hazard" the supposedly psychological attitude of the Pay-Media Operators, it is reasonable to think that such a sector must have a hidden agenda and shadow targets.

AEPOC refutes this and in particular considers completely inaccurate the following statement made in the executive summary of the Study: "The existence of moral hazard may imply that certain forms of piracy are encouraged because they help the roll-out of new delivery systems".

Such theory appears from time to time in the fora where teenagers and wanna-be-hackers are usually exercising their imagination. AEPOC and its Members consider quite surprising to see such "gossip" in an official Study performed by so highly qualified a firm as KEA.

Remark n. 4

AEPOC shall refuse the questions (reported in the following chapter) related to the Grey Market and challenges the statement made in the Study about the "grey market tolerance" performed by the operators.

Collecting and putting together the concepts of "incentives to piracy", "moral hazard" and "grey market tolerance", the Study seems to have a pre-draft theory based on the prejudice that the Conditional Access Directive is not following general interests but is a piece of legislation offered to the Pay-Media operators as an anti-competitive tool.

AEPOC has exactly the opposite view.

We would also like to emphasise the fact that in some cases operators are offering cross border services for cultural and linguistic reasons.

Such activities are based on a strategic decision and they are more often focused on specific audiences established in a neighbouring Country.

Remark n. 5

AEPOC would like to express appreciation for the very complete and deep legal analysis performed by KEA and reported in Chapter III of the Study.

We agree in particular with the following conclusions:

• Conditional Access Providers should be formally granted the possibility to have legal standing in Court Cases.
• The private use of any device or software capable of circumventing any Conditional Access System should be considered illegal and subject to punishment (such provision will, in fact, perfectly match with the need to find proper legal instruments in order to fight the emerging problems of card-sharing and live peer-to-peer streaming).
• Not only the Use, but also the mere Possession of such above-mentioned devices or software should be considered illegal.

In other words, AEPOC is very satisfied about the results of the Legal Analysis performed by the KEA Study, as it confirms the need of setting a Full Prosecution Package to be easily enhanced by the Law Enforcement Agencies.

Remark n. 6

AEPOC agrees only partially with the Study when it says that the CAD was intended to address Internal Market Issues, but its implementation and monitoring have been carried out without any tangible trans-national dimension. The problem was certainly not with the Legislation, but with the still insufficient enforcement and knowledge of it among not only Police Forces but also Public Prosecution Offices.
Cross Border Cooperation is a key tool in the present, and it will be much more in the future, fight against Conditional Access Piracy.
AEPOC endorses and is ready to support the Study suggestion about the setting up of an Expert Working Group on the model existing in the framework of other directives such as the E-Commerce or the Television without Frontiers Directive.

A Final Remark

As mentioned in the first part of this paragraph, after having had some concerns about the forthcoming Study performed by KEA, AEPOC sent a very alarmed letter to European Commissioner McCreevy in order to highlight its views and to challenge some of the expected conclusions.
Commissioner McCreevy very kindly granted the maximum attention to the AEPOC position and invited AEPOC to wait for the official publication of the Study and the following (now present) Open Consultation.

Now, after having carefully read and considered the Study, AEPOC would like to make it clear that it was never the intention of its management or of its Members to undermine the value or the quality of the work performed by KEA Consulting, and that some parts of the Study have been very useful to increase the level of knowledge about this very specialist and atypical industrial sector.
In addition, AEPOC agrees with many important conclusions reached by the Study.

But, some controversial points remain in our view very alarming and misleading.

We do not see how it is possible to put in same basket the issue of national fragmentation of copyright, information and advertising, and the problem of pirate devices, internet frauds and cybercrime.

The first questions are related to the general worldwide Media System and derive from international agreements, often exceeding the competence of the European Commission.

The matter of piracy is one of the many internet-related crimes skyrocketing in the recent years.

The link between these two major issues is only incidentally present in the Pay-Media sector.

AEPOC thinks that considering this coincidence in a cause-effect perspective would certainly lead to wrong conclusions.

On one side we have legitimate companies (operating in competition between them and with new operators adopting already existing and new delivery infrastructures) asking for adequate legal protection.

On the other side we have criminal organisations - and only sometimes private individuals - trying to make illegal money by parasitically exploiting the investments and the assets created by other subjects.

The Conditional Access Directive is the primary tool to attack such criminal organisations in order to protect the legal market, and AEPOC asks to confirm its value and to increase its strength.

As per the above, we do not see any reasons for the following statements made in the Study:

• "The protection of technical systems should be the consequence of the protection of content and not the opposite.
  As its stands, the CAD seems imbalanced in favour of providers of technical systems.
  The European Commission should redress this situation".
  
  And
• "The EU Copyright Directive as well as the Enforcement Directive, the proposed Criminal Sanctions Directive and the Draft WIPO Broadcasting Treaty appear more suited to rule fair economic relations in content distributions systems.
  In particular they affirm the economic value of IP goods and explicitly condemn all forms of circumvention of effective technological measures at every stage and for any purpose".
  
  And again even more blatantly:
• "The CAD has been conceived as an internalisation tool for expanding digital service market. Its evaluation through this study brings an opportunity to re-think the externalities and the harmonisation of the European Media Markets.
  Media Markets will not be harmonised through technology because, conversely to telecoms, their value is directly related to content. IP is then the key internalisation tool of positive media externalities.
  A possible review of the CAD provides an opportunity to discuss the adequacy of the existing corpus of EU regulations in addressing the problems brought by new digital platforms to Europe's media market".

AEPOC considers the above proposals to reshape the European Audiovisual Scenario starting from a review of the CAD not only dramatically difficult, complex and ambitious but also inappropriate and completely out of the scope of the forthcoming Commission Report.

Answers to the questions in the questionnaire released by the European Commission

Issue 1 - the "grey market" in cross-border services

Directive 98/84/EC was adopted after the adoption of the "cable and satellite" directive (93/83/EC), which sought to facilitate cross?border TV broadcasting by coordinating copyright rules for satellite broadcasting and cable retransmission. Its legal basis is the principle of free circulation of services in the EU's single market and its goal is to protect conditional?access systems so that the services using them can develop across national borders within the EU.

Despite this basis in EU law, the EU broadcasting market has remained fragmented.

In nearly all cases, pay-TV channels are broadcast exclusively within the country in which they are based. Broadcasters have continued to only buy rights to broadcast in their own country, mainly because they see no commercial interest in broadcasting beyond their national boundaries.

The European Commission receives many complaints from EU consumers who are interested in receiving fee-based services from EU countries other than the one in which they are resident, but are not legally able to do so. They often obtain subscriptions using fictitious addresses (those of family members or friends) or use new technologies¹ enabling them to use an existing subscription at home while they are on the move abroad.
This cross?border market is called the "grey market", since it infringes the territorial restrictions in contracts between rights holders and audiovisual broadcasters. However, this market is considered of marginal importance and is tolerated by both broadcasters and rights holders.

Nevertheless, for DG Internal Market and Services, this market represents the main justification for conserving the directive, given the legal basis underpinning it (articles 47§2, 55 and 95 of the EC Treaty - formerly articles 57§2, 66 and 100A). The grey market is the only part of this sector that has a cross?border dimension and which is thus a full part of the single market. Hence our interest in exploring possible new legal solutions.

QUESTION 1.1. Why do you think EU consumers would want to receive fee-based audiovisual services (whether news, entertainment, cultural or sports programmes) from EU countries other than the one in which they are resident? If this is merely to cater for when they are on business travel or holiday abroad, should the directive be retained?

As explained before, AEPOC considers the Grey Market issue not related to the Conditional Access Directive and therefore is not in the position to answer such question.

QUESTION 1.2: Do you have any figures or estimates for the size of the cross?border conditional?access market and the grey market?

Ut supra.

QUESTION 1.3: In your opinion, how much of an obstacle do the following represent to the purchase of rights to broadcast events beyond national boundaries:
- no demand from broadcasters, who do not want to cultivate audiences abroad?
- rights holders are reluctant to sell broadcasting rights that go beyond national boundaries, e.g. for a same?language audience spanning more than one country?
- lack of access or effective conditional?access broadcasting networks in the other countries?
- other fee-based broadcasters refuse to include services aimed at multicultural audiences in their range of conditional?access programmes?
- lack of data on the markets created by people moving around the EU to live and work in different countries?
- different media laws (pluralism, right to information, cultural promotion, sports promotions, etc)? (give details)
- national differences in broadcasting outlets?
- other reasons? (give details)

Ut supra.

QUESTION 1.4: What do you think could be done to increase the supply of cross?border programmes?

Ut supra.

Issue 2 - how effectively is the directive being implemented nationally?

The impact of the directive in the EU depends mainly on how it has been implemented by national authorities, including the penalties put in place and the use - or not - of the available legal remedies by interested parties and public authorities.

The impact assessment mentioned above suggests that the remedies possible under the directive for protecting conditional-access services are sometimes not used to prosecute infringements, operators preferring other laws such as competition or copyright law. These alternative types of action are seen as more effective or enabling higher penalties to be imposed.

The impact assessment also shows that some EU countries have, as the directive provides, introduced penalties for the possession of illegal decoding equipment. How effective are these national measures in curbing piracy, including that which has a cross?border dimension?

QUESTION 2.1: Do you know of any factors undermining the effectiveness of the protection measures introduced by the directive? If so, what are they? (procedural difficulties, operators not having the right to use the measures, difficulty of providing proof, lack of know?how by the authorities, etc.)

Many important steps have been taken since the approval of the Conditional Access Directive and its implementation into the EU Member States.

In the very early days of anti-decoder-piracy it was very difficult to achieve proper attention from any Public Body at national and international level.

Thanks to the approval of the Directive in 1998 and to the intense work of lobbying performed by many subjects (among them undoubtedly AEPOC and its Members) in all the EU Countries, the scenario has positively evolved.

In several Countries specific Police Units have been established, training courses have been put in place, private-public cooperation has moved its first steps.
But the situation is still not satisfactory.

Without doubt, some procedural difficulties and in particular the difficulty of providing proof have in some cases undermined the effectiveness of the measures taken.

The Police Forces, who are granted important powers for the collection of evidences, should receive specific training in order to identify the relevant technical aspects of the investigation performed.
It happens quite frequently that useless details are diligently collected whilst important elements are simply forgotten.

Investigations should be driven to the target to build a solid case and not to seize the biggest volume of, very often, useless neutral materials.

QUESTION 2.2: What (if any) difficulties are there in using the directive to bring successful convictions against new forms of piracy (blank cards, multiposting, changing security codes, etc.)?

In this sector, the technological development of piracy is dramatically fast.
When the directive was approved, in 1998, Internet was barely a reality at consumer level.
As a result there are presently several new problems and piracy attacks which did not yet exist at the time of the Directive's approval and therefore they are not taken in consideration in it.

In particular the phenomenon of "card-sharing" and "control-word sharing" has started to create problems to the operator with the penetration not only of broadband but with the flat-free commercial offers by the telecom operators.
In addition, today most decoders used for illegal purposes become pirate devices after having been installed in the consumer's house. It is quite simple, following the suggestions given by websites and sometimes directly by retailers, to download software enabling circumvention features and unauthorised access to encrypted services.

Since those websites are de facto facilitating piracy, they should be banned and all consumers having downloaded illegal software should be identified.

It is also reasonable to suppose that manufacturers, importers and retailers of decoders capable, if properly manipulated, to become pirate devices, are supporting such websites.

Such illegal chain should be broken by specific legislation on Internet based pirate activities.

QUESTION 2.3: What type of (if any) penalties have been adopted in the EU country/countries where you operate?

AEPOC represents companies operating in several Countries in the EU and worldwide. To the extent of the present Commission Report Process we rely on the Legal Analysis Chapter of the KEA Study.

QUESTION 2.4: Are they sufficient to discourage such illegal activity?

The answer to this question is: no.
However, the CAD has proven to be an important tool to tackle piracy, and its implementation by MSs has proven to give results. Indeed, in the absence of the measures so far adopted, conditional access piracy would be dramatically higher.
AEPOC strongly supports the establishment of lump sum penalties in order to have a harmonised European legal framework at least with regard to the economic part of pirates' prosecution.

QUESTION 2.5: If not, why not and what would be a suitable level of penalties?

The AEPOC position on this point is very basic and clear: we do not think it is important to have a pre-determined level of penalties.

Of course the general level of penalties should be at least equivalent to the ones foreseen for other similar kind of crimes, as theft and frauds.
We know very well how difficult it is to set a Europe-wide level of penalties for any crime. The problems of the IPRED2 approval process are a clear signal for this.
The efforts of the European Commission must be targeted at the creation of a completely harmonised and really pan-European set of legislative tools and cooperation rules.

Of course, we consider it essential to avoid any possible safe harbour for pirates, at least in the EU territories. Unfortunately, safe harbours could still exist also in the presence of a full implementation of the Directive if such legislation in place is not properly enforced.

Therefore we consider information about the laws and effective enforcement of the already existing penalties the best and most effective deterrence tool.

QUESTION 2.6: Does piracy also originate from countries outside the EU?

The answer to this question is: yes.

Not only are servers enabling circumvention software and other forms of piracy often extra-EU, but also most of the devices used and specifically engineered to make piracy possible are imported from Countries from the Far East.
AEPOC is planning to launch diplomatic initiatives in particular vis-à-vis China and Dubai (which is the major hub for the trade of such materials) to sensitise local operators and public authorities. AEPOC is therefore asking a strong political support from the European Commission in such an effort.

QUESTION 2.7: Would it be useful for the Commission to try to extend the geographical scope of protection offered by the directive by starting bilateral negotiations with any such countries?

This matches exactly with the answer to point 2.6.

Yes, this would be dramatically positive.

QUESTION 2.8: In countries where private use of pirate decoders is criminalised, (e.g. Belgium, UK, Italy, Poland and Spain), is this enough to curb piracy? (give concrete facts to show how)

It is certainly very superficial to split the world in Countries where private use is criminalised and Countries where it is not. Any result from a similar inaccurate perspective will lead to weak and, probably, wrong results.

We can unquestionably give the example of Italy.
This Country has the highest rate in Copyright piracy and the lowest rate in Conditional Access Piracy.
The pirate CDs and DVDs market is skyrocketing, and the pay-tv sector is almost piracy-free, with the exclusion of the general problem of internet-base content and control-word sharing environment.
But, it would be wrong also to say that in Italy the pirate smart-cards business is not relevant today due to the fact that private use is criminalised.

The reasons behind the status of Conditional Access Piracy in a specific area or Country are more complex and linked to many factors (legal technologies in field, specific shape of the market, number and kind of competitors, general attitude of the consumers, level of attention by Public Bodies, etc.).

In any case, it is certainly nonsense to consider illegal a device when offered in a shop and transform by law the same device in something legal a minute after, as a consumer enters the shop and buys it …

QUESTION 2.9: Has legal action been taken against private individuals? (give details/examples)

AEPOC policy imposes not to comment on specific cases.

QUESTION 2.10: Has the absence of conditional?access protection in some EU countries created barriers to a single EU market in fee?based audiovisual services?

Not only the absence of Conditional Access Protection but also the scarce enforcement of existing laws has created barriers and obstacles to the birth and success of fee-based audiovisual services.
When investors have to decide if any new business is interesting and potentially profitable, one of the first obligatory diligence exercises which they are required to perform is the risk assessment on possible attacks to the business to be established.
A non-reliable legal scenario and insufficient protection by the Public Bodies in case of frauds is certainly very detrimental in any rating concerning the market of the fee-based audiovisual services.

AEPOC is aware that legislation alone would not solve the piracy issue, but the CAD is an essential part of weaponry in fighting piracy.
This is proven by the fact that the CAD has played, and will continue to play, a vital role in the EU's negotiations with candidate countries.

As the Commission noted at p. 13 of its first Implementation Report, as protection increases within the EU, so piracy tends increasingly to shift to countries bordering the EU.

Yet today, with the CAD implemented as part of the acquis communautaire, the picture is more optimistic in the 12 Member States which have joined the EU since 2004.

While we do not claim that the piracy threat has been eradicated in any EU market, it is clear that market operators do now have the confidence to offer pay-TV services to consumers in these territories.

As the EU's enlargement will continue to export the acquis to countries where piracy has historically been a problem, the importance of having the CAD as part of the acquis will grow.

QUESTION 2.11: How useful would cooperation between the authorities in different countries be in resolving these problems?

Cooperation between the competent Authorities in the different Countries in not only useful but more and more necessary.

QUESTION 2.12. Do either the authorities or the police in some EU countries not have sufficient know?how about combating piracy? Is there a need for them to share more information on problems they encounter and the best solutions they have found? If yes, how could this best be done?

In this field, all the operators are investing millions of Euro in order to have sufficient know how in order to properly combat piracy. And this is not always sufficient.

Being a step ahead of pirates is the most difficult task, and all the operators are available to provide police forces with courses and updates in order to transfer their highly skilled anti-piracy know-how to the Public Bodies officially entitled to fight illegal activities.

As stated in the answer to question 2.5, AEPOC stresses that the creation by the Commission of a completely harmonised and really pan-European set of legislative tools and cooperation rules is of fundamental importance for fostering cross-border enforcement actions by MSs more effective. In addition to this, AEPOC and its members are ready to cooperate by putting in place any form of cooperation at national and international level.

Issue 3 - new services covered by the directive

Technological change since the early 1990s has been extremely rapid, undermining the former broadcast domination of radio and television. The internet now offers a wide range of TV and radio channels and new on?demand, conditional-access services accessible across Europe. What is more, television via mobile phones will in future allow us to watch content whenever and wherever we like. The conditional?access directive was designed to be technology?neutral, so that as well as TV, it could cover radio broadcasting and other forms of electronic information provision. The protection created initially for pay TV should now also benefit these new services and products, all of which can also be accessed across national boundaries.

QUESTION 3.1: Do you know of any cases where the directive's conditional?access rules have been applied to new services, such as video on demand, internet TV (IPTV) or mobile television? If yes, give details.

Any new service, independently from the means of transmission, is protected by the Directive. This is, in fact, a technology-neutral legal tool.

So far AEPOC has not received reports of such cases, but certainly in case of attacks to these new services, the experience and the jurisprudence already achieved in the traditional pay-media field could be applied here with positive protection results.

QUESTION 3.2: Can the protection offered by the directive be useful for these new services? How?

Ut supra.

QUESTION 3.3: Do you know of any new types of service other than those mentioned above that might benefit from protection under the directive and which are not, in your opinion, currently covered by it? If yes, give details.

Ut supra.

QUESTION 3.4: Why do internet service providers, telecoms operators and other digital service providers rarely use the protection offered by the directive?

Ut supra.

Issue 4 - has the directive increased copyright protection?

The conditional?access directive protects broadcast content and is thus part of the legislative arsenal protecting content covered by copyright. Conditional?access systems are sometimes also used to enforce compliance with territorial restrictions laid down in contracts between rights holders and service providers.
However, as it stands, the directive benefits broadcasters only. Rights holders who do not directly broadcast their own content cannot themselves use it to combat copyright infringements caused by broadcasting piracy or even by broadcasters failing to comply with territorial restrictions in contracts.
Similarly, organisers of sports events who have sold exclusive broadcasting rights cannot use the directive to prevent the broadcast of those events from being pirated.

QUESTION 4.1: Is this inability to use the directive a handicap for rights holders, given the other sources of protection available, in particular current copyright laws?

AEPOC does not consider that rightsholders are "handicapped" through their inability to use the Directive. It is important to recall that the Directive is intended to provide legal protection to those directly involved in the provision of services protected by conditional access and related devices. Rightsholders are not directly involved in these areas and, hence, have no locus for taking action against pirates under CAD.

Rightsholders do, of course, benefit indirectly from action taken under CAD in that they are able to take action under copyright legislation and civil law to recover damages. This action is made simpler if a successful case has been brought under CAD. AEPOC notes that there are other third parties who may also be affected by piracy who no doubt would wish to argue that the use of CAD should be extended to them also.

Thus, those directly affected by the use of illicit devices, etc, should remain able to use CAD.

QUESTION 4.2: Given the specific protection offered by copyright law, is there any point in extending the protection offered by the directive to rights holders?

No. The protection afforded by copyright law is appropriate and reflects the direct and legitimate interests of rightsholders. It is inconsistent with the principles of better regulation to add another layer of legislation for those who have no direct interest in the services and devices covered by CAD.

QUESTION 4.3: Should organisers of sports events be able to use the directive directly to prevent piracy concerning the broadcast of the event?

No. Ut supra.

Issue 5 - digital rights management (DRM) systems

DRM systems are designed to control the use of digital content. To do so, they use technical protection measures: either data encryption to restrict access to authorised users only, or marking content to prevent copying. Such methods seem to be covered by the directive's definition of "conditional access": "any technical measure and/or arrangement whereby access to the protected service in an intelligible form is made conditional upon prior individual authorisation."

Use of DRM systems is controversial. Although they are recognised as valuable for protecting the interests of rights holders, consumer associations have criticised the limits they place on the use of the content once the user has purchased it.

QUESTION 5.1: How, if at all, can the protection offered by the directive be useful for DRM systems?

It is not possible to provide an answer to this general question: it depends on case to case.

DRM systems offer a very wide range of functionalities.

We could certainly say that Conditional Access is the core functionality of any DRM systems (access or not access to content).
Certainly some of them could be covered by the protection granted by the CAD, but not all of them.

Any attack on protection systems should be protected independently from the academic discussion about the nature of the software or hardware used.

QUESTION 5.2: If the protection offered by the directive was recognised as covering DRM, would it be necessary to amend the directive, and how?

Ut supra.

A more detailed recognition and analysis of all the DRMs presently in the market should be made in order to properly answer this question.

Issue 6 - use of conditional access for purposes other than revenue?protection

The directive protects services that use conditional?access systems to ensure users pay to receive content. These systems can also be used for other purposes, e.g. ensuring compliance with contractual obligations (such as territorial restrictions for broadcasting rights), commercial and promotional strategies and protecting minors from adult?oriented content.

An assessment financed by the Commission in 2000² identified these different uses of the technology and concluded it was too early to evaluate how the market would develop. Seven years after that conclusion:

QUESTION 6.1: Do you use conditional?access systems for purposes other than protecting either direct or indirect revenue for services provided, and if so, what are they?

Territorial restrictions (due not only to copyright but also to several legislative and regulatory obligations) were and still are one of the main reasons imposing the adoption of conditional access features for broadcasting.

Conditional Access Systems are more and more important for hundreds of new business-to-business audiovisual services.

Telemedicine, remote control appliances, education, professional updating, security, are only a few of the many sectors where a big development has started and is rapidly growing.

QUESTION 6.2: Could the protection offered by the directive be useful for conditional-access services that are not designed to guarantee payment for a service provided?

Definitely yes.

Protecting Conditional Access signals is essential also for other even more important reasons.

Broadcasters use extensively conditional access systems to secure the transport of their programs from the headend to a local hub from where they (or other companies duly authorised) distribute such programs to consumers by cable or DTT to their target audiences.

In addition, and also more importantly, when unfortunately terrible news break out, the images are sent from the place where they took place to the news agencies or directly to the broadcasters.
In case those images are sent via mobile phone or via e-mail (of course at a lower quality level) they arrive on the journalists' desk before broadcasting.
When the images are sent (at a higher quality standard) via satellite, in the absence of Conditional Access, they could be intercepted and relaunched - maybe instrumentalised - by anybody.

Of course here it is not a matter of controlling free access to information - this is granted by the professionalism of the journalists and by the pluralism of information - but to avoid dangerous effects and chain reaction after a crisis situation.

Once again, AEPOC highlights the importance of Conditional Access protection for the most extensive, safe and beneficial use of any telecommunication infrastructure.

FINAL QUESTION: Would you like to mention any other issues related to the assessment or from your own experience which you think are relevant to the directive?

AEPOC discussed and approved the present submission in the occasion of its Board of Directors' meeting, held in Rome on March 27, 2008, on the opening day of SatExpo Europe 2008.

All the seminars and presentations held during such an international conference of professionals, have offered the crystal clear evidence of what we have highlighted above.

Any Space and Advanced Communication initiative needs flexibility and efficiency: access control offers the possibility to create new business and social opportunities, but needs adequate protection.
Hence the pivotal role of the Conditional Access Directive which is one of the main pillars for the development of the whole audiovisual and telecommunication sector.

Jean Grenier
AEPOC President

Rome, 27 March 2008

1. E.g. Slingbox.
2. Study on the use of conditional access systems for reasons other than the protection of remuneration, to examine the legal and the economic implications within the Internal Market and the need of introducing specific legal protection: http://www.ivir.nl/publications/other/ca-report.html