B-CAS, the Great Non-Tariff Barrier

There are many pay-TVs that adopt the CAS (conditional access system) that encrypts broadcasting signals and decrypts them with STB (set-top boxes). But it is only Japanese broadcasters that mandate B-CAS (Broadcasting Satellite CAS) for every audience of terrestrial free broadcasting.

Why? They insist that it is necessary for copy protection called copy-once, which allows consumers to copy the content only once. However, in fact, the MPEG-2 signals are copied to decode them, so it is actually copy-never, outraged an Intel executive.

Technically B-CAS has nothing to do with copy protection. Copy-once is only a flag in the signal that is not encrypted. In fact Friio, a Taiwan STB, ignores copy-once flag and enables copying indefinitely. So B-CAS does nothing but blocking foreign companies and generating monopoly profit for B-CAS KK, a private company that "certificates" TV sets.

B-CAS is a great non-tariff barrier (NTB) because foreign companies should be certificated by B-CAS KK with no legal ground. The procedure of certification is very complex and ambiguous: it took five years for a Japanese company, Pixela, to get the authorization to make capture boards using B-CAS.

As a result, no foreign companies sell digital TVs in Japan, where more than 8 million digital TVs are sold per year. Samsung, the largest TV maker in the world, exited from Japan because they couldn't get the certification. Vizio, the American top TV manufacturer, LG, Phillips, and other large foreign makers can't get the certification. Dell and HP sell PCs with DTV tuner with OEM from Japanese companies. Microsoft has been applying certification for more than two years.

In the 1980's, the US Trade Representative demanded Japanese government to open the market. But recently the USTR has little attention to Japanese market. As a result, DTVs are so expensive and inconvenient that Japanese consumers are reluctant to buy them. In 2007, the sales of DVD recorder dropped 40% from 2006.

However, according to Japanese Radio Law, Japanese TV stations must stop analog broadcasting in VHF band until July 2011. As it is estimated that there are more than 80 million analog TVs in Japan now, there would remain at least 50 million TVs in July 2011. Even the FCC had to put off the deadline of the "blackout" in 2006.

So B-CAS is not only NTB that violates WTO free trade agreements, but the barrier for the digital transition. If the analog broadcasting couldn't be stopped, the plan to open the VHF band to new entrants such as Qualcomm, as I wrote in my blog entry, would be stalled. Japanese government should clear the roadblock as soon as possible.

Update: The Cabinet Secretariat released the Action Plan for the Digital Transition on Friday (in Japanese). B-CAS is one of the biggest obstacles for the transition.