Are satellite TV hackers a tool in a global conspiracy? 2002 article

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Are satellite TV hackers a tool in a global conspiracy?
By Bob Sullivan MSNBC May 30, 2002

It’s just a thin slice of plastic that’s stuck into your satellite TV set-top box when you first bring it home. To viewers, the card is the key that unlocks pay-TV. To corporations, smart cards are much more — 80 million of them currently unlock one of the world’s most influential and lucrative industries. But now, the plastic cards are at the center of a global conspiracy theory — a cutthroat corporate battle, some say, to control the world’s living rooms through deception, cheating, and intimidation.

THE STORY COMES COMPLETE with alleged corporate-sponsored hacking, a $1 billion lawsuit, mysterious cash payoffs shipped in hollowed-out VCRs, and even a suspicious death.

The cloak-and-dagger world of pay-TV piracy is a fountain of rumor and innuendo that befits a Michael Crichton book or a James Bond movie. But it was all just that — a dramatic story line — until March, when a French firm filed a lawsuit that shined a harsh public light on this secretive world. Public filings in the case have, for the first time, pierced its veil of secrecy, linking real-world programmers, executives and companies to the murky nicknames and alter egos of piracy.

EYE ON MURDOCH SMART CARD MAKER

And at least at the moment, the controversy swirls around a small British company owned by one of the world’s most powerful media magnates.

That company, NDS, makes smart cards which unlock 28 million of the world’s satellite set-top boxes. Owned by News Corp. and its flamboyant owner Rupert Murdoch, NDS now finds itself on the receiving end of a $1.1 billion lawsuit filed in March by French rival Canal Plus Technologies. Canal Plus comes with its own heavyweights attached — Vivendi Universal, and its now embattled CEO Jean-Marie Messier.

The Canal Plus lawsuit claims NDS paid hackers to break the code in Canal Plus smart cards, then gave the information away on the Internet, all to undermine Canal Plus business. It’s probably the largest computer hacking lawsuit ever, and one of the biggest accusations of corporate espionage.

An NDS motion to dismiss the case was heard by a federal court in San Francisco Thursday, although the judge did not immediately issue a ruling — that could come in the coming days or weeks. Meanwhile, depositions are set to begin next month. With Canal Plus lawyers vowing to wage a very public court battle, the next few weeks will likely raise the curtain on a 5-year drama, unraveling a complicated world where the interests of small time TV-pirates and moguls bent on dominating the world’s media have at times overlapped rather neatly.

1997: MURDOCH AND ECHOSTAR

Back in 1997, Murdoch’s News Corp. was in negotiations to acquire EchoStar Communications Corp., operator of the DISH Network in the U.S. EchoStar would be a perfect puzzle piece for Murdoch, whose powerful portfolio of TV firms was missing a distribution channel in the lucrative U.S. market. EchoStar was a distant second to DirecTV in the U.S. market, but a rising star that appeared to have staying power.

The deal stalled, however, and a dispute over smart cards was part of the problem, says one source familiar with the talks. News Corp.’s NDS had only one real competitor in the global smart card market — a Swiss company named Kudelski Group which makes cards under the “Nagra” name. Nagra cards protected EchoStar systems, but News Corp. expected EchoStar to switch to NDS after any deal. NDS already had DirecTV under contract, so a pact with EchoStar would give the firm a stranglehold on smart cards across the U.S. But EchoStar resisted, according to a source, insisting that it keep the option to use Nagra cards after the deal.

Not long after, the deal was scrapped, in part because EchoStar CEO Charles Ergen insisted on staying with whatever the best security technology happened to be, the source said. EchoStar later sued for breach of contract and settled out of court.

1998: HACKER FOUND DEAD

The following year, in 1998, NDS went looking for more smart card expertise and contacted brilliant German hacker Boris Floricic. Known as “Tron” in the computer underground, Floricic was the author of a well-regarded research paper about reverse engineering smart card technology.

A few weeks later, in October of 1998, Floricic was found dead, hanging from a tree in a Berlin park. The death was ruled a suicide by authorities — a ruling many hackers reject.

There has never been any assertion that NDS was somehow involved in the death. But the fact that Floricic’s father found a letter from NDS in his son’s belongings indicated the company’s willingness to consult the computer underground for security expertise. The incident also shocked the hacker community, which wondered if computer curiosity could now have deadly consequences.

1999: DIRECTV DEAL SET TO EXPIRE

Nagra cards and security issues continued to nag NDS the next year, as the firm’s most important contract — with DirecTV — came up for renewal. NDS was planning an initial public offering to raise $150 million later in the year, so a renewal of its pact with DirecTV was critical. The only real NDS competitor: the Swiss firm, and Nagra cards.

It’s at this critical moment that the story heads underground. At the height of the DirecTV-NDS renegotiations, a now-infamous computer file named Secarom.zip appeared on a pirate Web site DR7.com on March 26, 1999.

Secarom.zip was the master key to European satellite provider Canal Plus, a slice of code that allowed pirates to create fake smart cards that foiled the security measures built into those systems. At the time, Canal Plus was chief rival to BskyB, Murdoch’s European satellite broadcast system. In no time, a cottage industry for Canal Plus pirate cards formed and at one point, nearly three million of four millions users in Italy were pirates, according to Canal Plus. In its lawsuit, Canal Plus alleged NDS was ultimately behind the hacking of its system, and the cottage industry that formed later, costing Canal Plus over $1 billion in lost business.

According to the lawsuit, an NDS lab in Israel cracked the Canal Plus cards, which Canal Plus had developed in-house. Then, the company made sure the crack was published on the Internet in a place where pirates were sure to find it. NDS denies Canal Plus’ the claims.

MORE HACKING ALLEGATIONS?

But there were other accusations flying around in the hacker community, too.

Around the same time the code to Canal Plus’ smart cards appeared on the DR7.com Web site, so did the a master key to pirating EchoStar television and their Nagra smart cards, according to a former administrator of the site. In fact, the code was published by the same cast of characters who released the Canal Plus code, suggesting a link between the two acts of piracy. If, as Canal Plus suggests, NDS was behind the Canal Plus card piracy, it was behind the EchoStar piracy too, the administrator says.

E-mails to the administrator of the current DR7.com Web site went unreturned.

At any rate, with the secret codes to both NDS and Nagra smart now public, the playing field in the smart card business was level. By August of 1999, NDS had a new four-year contract with DirecTV. However, the contract contained an important escape clause — that DirecTV could develop its own in-house smart card technology and dump NDS at any time.

NDS declined to comment on the accusation that it was somehow connected to the EchoStar hack. NDS spokesperson Margot Field said the company “does not respond to rumors or supposition.”