You are correct - the set top boxes report back to the mother ship (cable or phone company). The data they capture is more valuable than the ad revenue at this point. And a lot more reliable than Nielsen. And, of course, they are happy to cooperate with the government.
At this point Nielsen boxes are basically dead given that Nielsen now sucks minute -by-minute viewing data from millions of DirecTV and Dish set top boxes:
FNC, for example, can now see which commentators get tuned out and decide whether to re-up their contracts. George Will apparently was REALLY unpopular. I always skip The Kraut and Karl Rove, so if enough people do that, then maybe they’ll get kicked to the curb as well.