DIRECTV 2003 Annual Report Download - page 12

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THE DIRECTV GROUP, INC.
DIRECTV U.S. sets the installation and service standards, performs quality control, manages inventory
and monitors the overall service network performance. In addition, DIRECTV U.S. and its retailers also
utilize employer-based or contract installation providers, which perform approximately 80% of all new
professional customer installations.
•Customer Service Centers. DIRECTV U.S. currently uses ten customer service centers employing
approximately 7,200 customer service representatives, or CSRs. Nine of these customer service centers,
employing approximately 6,000 CSRs, are operated by Convergys Customer Management Group, Inc.,
West Telemarketing Corporation and Precision Response Corporation. In addition, DIRECTV U.S.
owns a customer service center in Boise, Idaho that employs approximately 1,200 CSRs. Potential and
existing subscribers can call a single telephone number 24 hours a day, seven days a week to request
assistance for hardware, programming, installation and technical support. DIRECTV U.S. continues to
increase the functionality of telephone-based and web-based self-care features in order to better manage
customer service costs and improve service levels.
The National Rural Telecommunications Cooperative
As of December 31, 2003, 1.5 million of the approximately 12.2 million subscribers received DIRECTV
services from the members and affiliates of the NRTC. Pursuant to an agreement entered into in 1992 between a
predecessor of DIRECTV, Inc., a wholly-owned subsidiary of DIRECTV Holdings LLC, and the NRTC, the
NRTC has the exclusive right to distribute DIRECTV services transmitted from 27 of the 32 frequencies located
at 101 WL to customers located primarily in rural areas of the U.S. As part of a settlement reached in January
2004 regarding certain disputes arising from the agreement, the NRTC and DIRECTV U.S. agreed that the term
of the agreement will continue until the later of the useful life of the initial direct-to-home satellite, DIRECTV 1,
or June 30, 2008. In addition, the NRTC and DIRECTV U.S. agreed to enter into a new agreement on the same
terms that will run from the expiration of the prior agreement to June 30, 2011. See Item 3. Legal Proceedings for
further information. The NRTC separately contracted with its members and affiliates to provide them with rights
to market and sell these services. The NRTC pays DIRECTV U.S. a fee on the revenues from these services,
which are branded using the DIRECTV name pursuant to a trademark license agreement between DIRECTV
U.S. and the NRTC. NRTC “territories” comprise approximately ten million of the approximately 107 million
U.S. television households.
DIRECTV U.S. has also separately contracted with the NRTC and with Pegasus Satellite Television Inc., or
Pegasus, the NRTC’s largest affiliate whose territory covers approximately eight million of the ten million
NRTC households. The agreements with the NRTC and Pegasus permit each of them to market and sell services,
including premium services, that DIRECTV U.S. transmits from the other five frequencies located at the 101 WL
orbital slot, as well as frequencies located at the 110 WL and 119 WL orbital slots. For these separately
contracted services, the NRTC and Pegasus pay DIRECTV U.S. a percentage of subscriber revenues generated.
As of December 31, 2003, approximately 1.2 million of the 1.5 million NRTC subscribers were customers of
Pegasus. See Item 3. Legal Proceedings for further information.
Key Strengths
DIRECTV U.S.’ business is characterized by the following key strengths:
•Large Subscriber Base. DIRECTV U.S. is the largest DBS provider and the second largest MVPD
provider in the U.S., in each case based on the number of subscribers. DIRECTV U.S. believes that its
large subscriber base provides it with more opportunities to obtain programming on favorable terms and
secure unique and exclusive programming.
•Leading Brand Name. Results from a study commissioned by DIRECTV U.S. in 2004 indicated that
over 83% of consumers in the U.S. are aware of the DIRECTV service. DIRECTV U.S. believes the
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