Secret ‘piracy report’ at the centre of Quebecor’s piracy lawsuit against Bell

MONTREAL—Quebecor Media Inc. is citing a secret, internal “piracy report” produced at Bell Canada Enterprises Inc. to justify legal arguments that Bell deliberately ignored piracy on its satellite TV system in an effort to increase its market share and ramp up the presence of Bell satellite equipment among consumers. The piracy report, officially titled “Report on Counter-Piracy,” was produced internally at Bell on Jan. 13, 2003, court documents say, and is playing a lead role in a $300-million lawsuit that Quebecor has launched against the company for what it says is a negligent approach to fighting satellite TV piracy. Due to a confidentiality agreement between lawyers for Bell and Quebecor, the piracy report is not public but is referred to in related documents that The Wire Report obtained from the Quebec Superior Court. “This excessive signal theft was made possible by the wrongful conduct of Bell XpressVu , which turned a blind eye to the black market piracy of its system with the apparent goal of flooding the market with its digital satellite equipment to eventually have ownership of a large part of the market or to prevent its competitors from increasing or maintaining their own ...” Quebecor says in documents filed for the lawsuit. In September, court hearings began on four related civil actions that Quebecor subsidiaries Videotron Ltée. and Groupe TVA Inc. have launched against Bell. Among those court actions, Quebecor is seeking damages of $248 million in future lost subscribers between March 2005 and December 2015 and $41 million in losses related to subscriptions between September 2002 and February 2005, court documents show. The lawsuit alleges wrongdoing on the part of Bell in grey and black market satellite piracy; cable spitting (the splitting of TV signals to receive them at more than one home); and “account stacking” (using active satellite TV equipment at multiple locations under a single customer account). Black market piracy involves tampering with television reception equipment or software to receive unauthorized access to satellite broadcast signals. Grey market piracy refers to the sale of American satellite TV receivers (or decoding equipment) to Canadians so that they can receive U.S. satellite signals. In court documents, Bell writes that it established a special piracy task force in 2002 to “study and report to upper management on grey and back market piracy” and to gauge the problem and provide strategic recommendations for piracy fighting. The company's piracy report that followed “clearly indicates that its conclusions are based on estimates and extrapolations rather than on rigorous factual data,” Bell says. The report's findings “represent approximations based on limited testing that was done at a particular moment in time … was never meant to be a scientific or statistical document,” Bell says in a response to Quebecor's court claims. Bell says it proceeded to take significant anti-piracy measures following the creation of its anti-piracy task force. Those measures included legal action against people engaged in piracy, programs to encourage pirates to becomes subscribers, a “zero-tolerance policy” approach, a public education campaign, investigations and collaboration with law enforcement authorities, and major smart card swaps on its equipment. “Plaintiffs ('Videotron') argue wrongly and without foundation that a communications company should be held to a standard of impregnable security—something that is simply impossible to achieve—as opposed to a standard of reasonable conduct in the circumstances prevailing at the time,” Bell writes. Among the court evidence is a slide presentation that Tim McGee, then-president of Bell ExpressVu, delivered to the BCE Inc. board in 2003. The presentation said that 400,000 to 600,000 Canadians were illegally watching U.S. satellite programming at the time, which was having a more-than $400 million “per annum revenue impact.” The presentation also estimated that 450,000 people in Canada were “stealing satellite” with an estimated per annum revenue impact of $100 million to $200 million. That figure included instances of “hacking” or unauthorized decryption; “hybrid theft” (in which some is paid for and some is not); “total theft”; and account stacking, the presentation slides said. McGee's presentation described hybrid piracy as involving the theft of services through the use of two smart cards. One card is obtained through a paid subscription for minimal Bell TV services and a second card is used to steal supplementary services such as movies or specialty channels, the presentation said. The presentation slides added that cable signal theft is easier than satellite piracy. Free cable services could be obtained through a “hot disconnect,” which occurs when a customer moves but the company does not shut down the service, the slides said. McGee's presentation added that homeowners can also run their own wires and “piggy back” on an external cable pole. Cable filters can also be removed from the home, allowing users to obtain supplementary channels, the slides said. An estimated 700,000 to 800,000 people in Canada were stealing analog cable at the time, having a per annum revenue impact of more than $400 million, the presentation said. Quebecor has also filed with the court a transcript of a conversation between André Demers, former manager of network quality at Vidéotron, and a Bell ExpressVu customer service agent identified as “Jules.” The transcript appears to show evidence of account stacking, as Demers, who does not identify himself as a Videotron employee, requests two set-top boxes. He tells the sales agent that one set-top box is for his main residence and the other one will be for his cottage. The Bell agent initially tells Demers that only one set-top box can be issued, but after Demers says he does not want to share one set-top box between both residences, the Bell sales agent says he can have two. Both set-top boxes can be activated from one account, and one of them can be taken to the cottage, the sales agent says. In court documents, Bell argues that Quebecor, a competing company that also offers wireless, broadcast distribution and broadcast services in Quebec, initially drafted its lawsuit claim “in such a way as to allow Videotron free rein in conducting a widespread investigation into Bell TV's confidential, competitively sensitive and proprietary business records.” Bell wrote that Videotron based its original motion on the proceedings on an expert research report that Bell says was “based on hypotheses, assumptions and extrapolations and not on a rigorous analysis of relevant facts.” Bell says the expert report and motion for proceedings allowed Videotron to justify a lengthy legal process involving examinations and the production of documents. “In fact, over a period of five years, Videotron gained access through roughly 900 undertakings to core elements of Bell TV's competitively sensitive and confidential business strategy, conditional access system technology (i.e. the platform that allows Bell TV to transmit programming to its customers, contractual relationships, market analysis, counter-piracy initiatives and internal corporate structure,” Bell writes. But when it came time to proceed with filings for proof and hearing, the expert report “and any references to it, were entirely withdrawn,” Bell says. Asked to respond to that allegation Wednesday, Quebecor declined, saying the matter is in court. The Wire Report viewed the court files Monday at the Quebec Superior Court in Montreal, where each party has filed more than 150 exhibits. Several exhibits, closed to public scrutiny due to the confidentiality agreement, were not viewed by The Wire Report. The court hearings are in the evidence phase and legal arguments are expected to begin in January. news@thewirereport.ca

Secret ‘piracy report’ at the centre of Quebecor’s piracy lawsuit against Bell

Broadcast | November 10, 2011

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