8 March 31 ­ April 1, 2012 The Weekend Australian Financial Review www.afr.com News Pay TV piracy

From ‘big problem’ to ‘fixable’ Porter changes view on severity Austar Key points Angus Grigg @ John Porter and Kim Williams lobbied to make pay TV piracy a specific criminal offence. Austar chief executive John Porter conceded on Friday piracy in the @ On Friday, Mr Porter said such pay TV industry was a major issue piracy was ‘not an endemic and may have cost his company long­term problem’. up to $17 million in some years. “Yeah, look, it is a big number,” Cottle as a threat to any NDS he told the Weekend Financial systems but without disturbing his Review. “I acknowledge that piracy other hacking activities (as much was a significant problem but as possible),” Ms Gutman wrote. there is always a fix.” “We do not want Cottle in jail Mr Porter’s comments come until he has a successor for the after The Australian Financial Irdeto hack.” Review published a series of Austar was one of Irdeto’s main articles during the week detailing clients in Australia. Mr Porter how a News Corp subsidiary, NDS, would not comment on the email promoted a global wave of pay TV except to say: “Avigail what’s­her­ piracy in the late 1990s. name was maybe a little too Austar and its smartcard excitable.” provider, Irdeto, were two of NDS’s He also argued that it was in main targets. “nobody’s interest” to have the On Friday, Austar shareholders Irdeto platform hacked, as it had voted in favour of a takeover by also provided services to Foxtel’s Foxtel, cementing its dominance satellite customers. of the local pay TV industry. It should be noted, however, Despite leaked emails showing a John Porter says that pay TV piracy may have cost Austar as much as $17 million in some years. Photo Rob Homer that, at this time, NDS was looking concerted campaign against to secure all of Foxtel’s smartcard Iredeto in Australia, Mr Porter said “keeps me awake at night” and And in the early years of the many of which can be read at business. NDS’s actions were, at most, “undermined the sustainability of previous decade, it was considered afr.com. It also came at a time when “overly aggressive competitive our businesses”. rampant. In one email, the Asia­Pacific News Ltd, which owns 25 per cent behaviour”. He said piracy was Both men lobbied hard to It was during this period that a head of Operational Security, of Foxtel, was trying to force “not an endemic long­term change federal government laws secretive unit within NDS, known Avigail Gutman, said she didn’t Telstra to sell or reduce its half­ problem”. that saw “pay TV piracy” become a as Operational Security was want a Sydney hacker, David share in the pay TV company. But as recently as 2010, he was specific criminal offence. promoting piracy against News Cottle, arrested until he’d Any reduction in profit as a labelling piracy a “big problem”. In Piracy in the pay TV industry is Corp’s commercial rivals, completed the Irdeto hack. result of hacking would have 2003, Kim Williams, who now runs estimated to have cost as much as according to 14,400 emails “The objective of any current reduced the value of Telstra’s News Ltd in Australia, said it $50 million a year. obtained by the Financial Review, action would be to eliminate stake. ACMA eyes pay TV piracy claims Merger goes

From page 1 PBS’s Frontline in the US ran a Operational Security chief Reuven have Rolf Deubel, a South African forward to appoint the chief executive of the segment titled Murdoch’s Scandal, Hasak, when he denied that NDS hacker who introduced piracy to pay TV broadcaster. exploring the British telephone provided a scheme to provide a Australia, arrested in Bangkok. AndrewWhite “As Sentaor [Stephen] Conroy hacking scandal. pirate device to an Australian However, in an email exchange observed, if anyone has any Tweeting on Friday morning, Mr hacker, David Cottle, in November with the European head of NDS Austar United Communications information which they believe to Murdoch wrote: “Proof you can’t 1999, was correct. Emails show that Operational Security, Ray Adams, shareholders have approved the $1.9 be about criminal conduct in trust anything in Australian Fairfax Mr Cottle had the device and was Ms Gutman suggests releasing Mr billion takeover by metropolitan pay Australia, they should refer it to the papers, unless you are just another being urged to use it by November Deubell so that he can spread a TV provider Foxtel with votes of 91 Australian Federal Police for crazy.” 22, 1999. hack of the rival Seca cards. Ms per cent or more in favour. investigation,” ACMA chairman Mr Peled wrote in his letter that Mr Peled, in his letter, denies Gutman makes it clear this was not The two companies are now Chris Chapman said on Friday. NDS was a leader in the fight NDS ever had any relationship with to assist Irdeto. awaiting approval from the The regulator’s statement comes against piracy and had assisted law Mr Cottle, whom the Financial Mr Peled criticises the Financial Australian Competition and after The Australian Financial enforcement agencies around the Review alleges was encouraged by Review for reporting email Consumer Commission, which this Review reported that NDS, a world to bring pirates to justice. those working for NDS to hack into exchanges between two senior NDS week again deferred its decision. subsidiary of News Corp, had run a “We demand that you smartcards from a rival provider, executives who oversaw a US It is considering undertakings global dirty tricks campaign immediately retract your allegations “and no evidence suggests lawsuit against Italian from the two companies and their targeting its competitors. to the contrary,” he wrote. otherwise”. However, an email from whistleblower and hacker Jan shareholders about the availability of The Financial Review also Mr Peled’s letter said the Saggiori. content for competing television revealed, using an archive of 14,400 Financial Review had Mr Saggiori’s No response was made to services. emails between NDS personnel, misrepresented NDS’s fight against questions whether NDS and News Austar chief executive John Porter that a secretive unit within NDS had piracy and its efforts to protect settlement Corp executives believed in 2000 told shareholders in Sydney that a budget account to provide “a clients’ investments, and that they had a legitimate case to allegations of hacking by the NDS contingency sum for police mischaracterised NDS emails to document bring against Mr Saggiori, a hacker business owned by Foxtel informants” to “pay them for suggest that NDS encouraged piracy who was providing critical evidence shareholder News Corp were not assistance given to us in our work”. of competitor systems. specifically against NDS to rival Canal Plus. relevant to the merger and would not News Corp subsidiary NDS has The Financial Review has been In internal emails, NDS figure in ACCC deliberations. demanded that the Financial putting detailed questions about excludes any executives repeatedly stated that Mr Porter said the Austar regional Review immediately retract NDS operations to NDS and Mr they had no case against Mr pay TV service was unlikely to switch allegations that it had promoted Peled, and to News Corporation and admission of guilt. Saggiori, that he was joined to the its encryption services to NDS if it is and facilitated piracy in the pay TV spokesmen since August last year, suit merely to pressure him and his allowed to merge with its larger industry. and more recently to News Corp’s Avigail Gutman, Asia­Pacific chief parents and to discredit him with metropolitan rival Foxtel. In a letter to Financial Review chief operating officer, Chase Carey. for NDS Operational Security, Canal Plus. He said there was no reason for a editor­in­chief Michael Stutchbury In a two­sentence response last shows that while she was In his letter to the Financial merged group to switch the dated March 29, NDS Group August to serious allegations raised persuading rival security company Review, Mr Peled claims that “Jan encryption for the Austar service executive chairman Abe Peled said in an Italian court, NDS told the Irdeto not to have Mr Cottle Saggiori eventually admitted his from Irdeto to the NDS service used a series of articles this past week Financial Review: “We are surprised arrested, NDS had an ulterior role in that plot” which was the by Foxtel. The two groups already revealing a global trail of dirty tricks by your questions.” motive: “We do not want Cottle in basis of the lawsuit against share a large amount of targeting competitors by NDS’s In response to a further six emails jail until he has a successor for the Canadian pirates. programming but Mr Porter said Operational Security unit contained of nearly 3000 words in the past Irdeto hack,” Ms Gutman wrote. In fact, Mr Saggiori’s settlement running dual encryption systems “gross mischaracterisations of the fortnight, NDS replied with two In February 2000, Ms Gutman document, co­signed by News had “worked well’’ for the business. evidence”. two­paragraph responses stating arranged to supply Mr Cottle with deputy general counsel Genie He said it would be an expensive News Corp chairman Rupert that NDS had been cleared in all more than 20 blank cards to assist Gavenchak, specifically excludes process to switch over and noted Murdoch on Friday resumed his court proceedings. Each reply was him in pirating Austar and Foxtel any admission of guilt: “Nothing that NDS was no longer owned by defence of the company on social accompanied by the same January Satellite. contained herein shall be deemed News, which is a 25 per cent media site Twitter following the 2012 press release. Mr Peled cites as an example of an admission by the Defendant of shareholder in Foxtel, alongside piracy allegations aired by the No response was made to NDS’s commitment to fighting any breach or violation of any state James Packer’s Consolidated Media Financial Review and the BBC’s detailed questions about whether piracy an NDS­Irdeto joint or federal laws of the United States (25 per cent) and Telstra (50 per Panorama program. Separately, testimony in the Echostar case by operation in September 1999 to of America.” cent). FDA 008