"In last weeks call to investors Charlie Ergen said that only the HD channels would be secured in the 1st qtr of 2009 with the remaining channels being secured in blocks during 2009 and all the channels being secured by the end of the 3rd qtr so they won't see any major change in piracy levels until the 4th qtr.
So we are talking next fall before they can get new cards to all the subs. In the mean time they will secure all of the hd channels and then go to work on securing the international channels next.
He also said there wasn't a piracy problem until spring of 2007... and he then blamed their 'security vendor' for the delay in updating their security however he failed to mention that he owns 50% of the 'security vendor' so that would make it 50% his fault.
Just for the record, this is the fifth year FTA receivers have been getting his channels for free so the 'security problem' happened in the spring five years ago and not last year... it was last year when they finally started doing something about the 'four-year old' problem. I guess we can blame this delay on the 'security vendor' too.
When asked if they had budgeted enough money for mpeg4 boxes Charlie went around and around and never actually answered the question. In last month's Charlie chat he admitted that the decision had been made that each house hold would only get one mpeg4 upgrade receiver for free however it is not exactly clear when this 'upgrade' is to take place.
It looks like most of SD channels will be on the unsecured end of the stream for another six to eight months. It also means that there will be continues attacks of counter measures."
Well first let me clear one thing about card swap - D#N is about 90% complete in their card swap - I estimated around Jan 14th 2009 +/- 20 days - Internationals will be first to roll to N*3 - H#D*Turbo for existing subscribers will be available as of Feb 1st 2009 - All HD boxes will have to be converted to new system - HD box swap that can take 6 to 12 months in my best guestimate
But let me make it clear to everyone that N*3 will roll over as early as this month at least for Satellite 61.5W International and possibly for all 118W as well
I say that based on what I see first hand I pay close attention to technical details And usually I'm right As Jimmy from Middlesex county
Trust me on this one fakeman, you don't know what your talking about. Please read again who is making the statement, this is someone that is more in the know of what is going on at dik than someone who is sparking two cables off his battery and making predictions from it.
Jjgee What yor saying don't make sense "So we are talking next fall before they can get new cards to all the subs"
If yor saying card swap won't be fully complete then yor 110% wrong Cuz they are pretty much near completion
The part yo clearly misunderstood is the HD box replacement that can drag to fall of 2009 That I agree But card swap to all subscribers is almost complete dude
SD subscribers will receive card swap Only HD subscribers will have to upgrade current HD hardware to new HD boxes
The full secure Dik is talking about is something else I won't comment on at this time
Since it is already done for B3V it should be done quickly for DIK as well. Technology is there. Just shipping cards to subscribers remain to be done. The faster they do it the faster they get secured and get new subscribers. Makes sense.
There are 2 different types of security - One is basic card swap and that is almost done - The other is HD box change
Securing HD is meant upgrading hardware to 1080p set boxes which means no FTA company can build hardware to decode 1080p Hardware upgrade like this can take months to complete Where as N*3 cards nealy completed 1080p Set boxes are totally different decoder hardware from FTA decoders
Clearly Jjgee got confused with which one is which
The funny thing is He's telling me to get a clue So I took that as a joke
Great, thank you. Just two questions. First on churn, I was hoping you could give us a little bit more detail about how much of the increase was voluntary versus involuntary? And then I have a follow up. Thanks.
(Churn rate - Definition) For any given period of time, the number of participants who discontinue their use of a service divided by the average number of total participants. Churn rate provides insight into the growth or decline of the subscriber base as well as the average length of participation in the service.
Charlie Ergen
Well, it's a little bit difficult to answer that because we have a dynamic that probably nobody else has but wishes to have, the system that's not secure. So we still have a fair amount of PIRACY out there in the marketplace. So somebody who might be voluntary May just be getting a pirate box. So it's a little bit difficult. I would say the churn is made up of a couple different components. One is our normal churn, normal course of business and that's probably under some pressure from the economy, but it's certainly not as high as our churn numbers.
The second and third parts of churn really are PIRACY and really consumer fraud, kind of stuff where you see we may have -- we had retailers who might have been engaging in fraudulent accounts and so forth and so on. Two things that obviously are part of operations things that we probably didn't do such a good job on and didn't invest in enough those things we are investing in today.
So we are in the process of all new SmartCard encryption systems being sent to our customers. That's a process that goes into next year but we will be able to start turning some customers off that we know are the high PIRACY pockets much sooner than that as we get those programs all converted over and make sure the cards are out.
So while there's a cost of doing that, again it's in operational inefficiency to send out SmartCards. At least we know we are able to resecure our system. And then obviously on the fraud front we are really are terminating and even prosecuting where we find fraud, so those areas we are doing a much better job and that will pay dividends for us next year. Tom Egan - Collins Stewart
So is it fair to think that the number, that the PIRACY securing could increase in 4Q?
Charlie Ergen
It's hard -- I can't predict PIRACY. I don't think we are in a position in the fourth quarter to have an impact on it. I think it will be a first quarter next year before we started having an impact and it will be this time next year before we totally are secure.
Tom Egan - Collins Stewart
Right and then...
Charlie Ergen
And then, that's assuming the next-generation of our system holds of course, which we hope it will.
Bryan Kraft - Banc of America Securities
First just following up on the PIRACY issue. Do you have any kind of estimate, even if it's just a rough range as to what the impact on churn actually has been? And also, when exactly did the PIRACY problems start to become significant for you?
And then my two other questions, one, how are you planning to leverage the Eastern Arc Service that you launched in the fourth quarter into improving customer metrics?
Bryan Kraft - Banc of America Securities - Okay, that's fair.
Bernie Han - There's some other things, but relatively...
Charlie Ergen
That would give you a pretty good indication. The PIRACY probably started in the spring as a material item, probably in the spring of 2007. We've obviously been in a lot of litigation with people that are doing it. But it's probably the spring of 2007. And PIRACY is one of those things where -- and so I can't quantify how it's affecting churn but it's certainly has a negative impact on churn.
And PIRACY tends to grow. So if not stopped it tends to grow a little bit each quarter. So I would say the PIRACY today is quite a bit more than it was in 2007. It's one of those things where it's a significant investment from an operational point of view for us to do it to send out cards and we had to wait until we had a new encryption system to send out. Because first, you have to see how the pirates are beating you and then you have to go design a way to counteract it.
So, I think we are not as diligent as we should have been, which won't happen the next time is. We should have always assumed that the pirates will beat us and somebody else and everybody else in the industry. And we always should have a next-generation ready to go as opposed to have to go out and get the next-generation.
So we really got delayed a year longer than we would have liked to while we designed the next-generation with our encryption vendor. So in the future, even as we finish this roll-out of new encryption, we will have another generation beyond that ready to go. So we won't make that mistake again.
Bryan Kraft - Banc of America Securities And you mentioned that I think you said before in the first quarter all of the new cards will be deployed and you will be ready to shutoff the old encryption. But I think you said a few minutes ago it would be until the third quarter that you get the full benefit of that. I'm trying to understand exactly what you mean there.
Charlie Ergen
Yes. What happens is for example you may be able to do to all your high-definition customers and since that's a smaller subset of your base and you can make sure they can have all new cards and you can shut that data stream off. So that you can secure your High-Definition signal.
As an example. You can do that before you have your whole subscriber base within the card. So sometime next year we will be able to start turning off segments, subsets of our subscriber base and it will be sometime next year before we can turn off the entire base. And I don't know exactly when that will be, because you never know how long it takes to send them out but we think it's sometime in the next year for sure.
