Pay-TV Networks to Scramble Signals

The nation’s two biggest pay-TV networks plan to start scrambling their broadcast signals in the next few months, creating a whole new market for descrambling devices in the process.

M/A-Com, the primary manufacturer of the devices, is already counting on significant revenue growth once scrambling is underway by selling decoders to the fast-growing market for home satellite dishes.

Since the inception of pay TV, consumers with backyard Earth stations have been able to receive satellite-beamed programming meant for cable TV viewers without paying a monthly fee to the networks. Such “piracy” is hard to detect and, with the signing of the federal Cable Communications Policy Act last October, it is not even illegal. That law gives owners of home satellite dishes the right to view any unscrambled programming in the airwaves without paying.

The pay networks have never been happy about providing free programming to the estimated 1 million home satellite dish owners in the nation and have threatened for some time to start scrambling their signal, a costly and technically complex prospect. Time Inc.’s Home Box Office subsidiary, the largest U.S. pay network, is turning that threat into reality this spring when it plans to start implementing a $10-million video scrambling system designed by M/A-Com.

Showtime-The Movie Channel, the No. 2 pay network jointly owned by Viacom International, Warner Communications and American Express, is readying a similar M/A-Com system for start-up in the fall.

M/A-Com has designed a decoder for HBO’s 5,500 affiliated cable operators that carries a wholesale price tag of $500. But an even more lucrative market for both M/A-Com and HBO is expected to be the home satellite dish owners.