DIRECTV 2005 Annual Report Download - page 36

THE DIRECTV GROUP, INC.
last five years is estimated to be 5% but may be higher. Any significant delays or failures in successfully
launching and deploying our satellites could materially adversely affect our ability to generate revenues.
While we have traditionally purchased insurance covering the launch and, in limited cases, operation of
our satellites, such policies typically cover the loss of the satellite itself and not the business
interruption or other associated direct and indirect costs. DIRECTV U.S. does not currently expect to
purchase in-orbit insurance for any of its satellites scheduled for launch in 2006 and 2007.
In-orbit risks include malfunctions, commonly referred to as anomalies, and collisions with
meteoroids, other spacecraft or other space debris. Anomalies occur as a result of various factors, such
as satellite manufacturing errors, problems with the power systems or control systems of the satellites
and general failures resulting from operating satellites in the harsh space environment. We work closely
with our satellite manufacturers to determine and eliminate the potential causes of anomalies in new
satellites and provide for redundancies of critical components in the satellites as well as having backup
satellite capacity. However, we cannot assure you that we will not experience anomalies in the future,
nor can we assure you that our backup satellite capacity will be sufficient for our business purposes.
Any single anomaly or series of anomalies could materially adversely affect our operations and
revenues and our relationships with our subscribers, as well as our ability to attract new subscribers for
our services. Anomalies may also reduce the expected useful life of a satellite, thereby creating
additional expenses due to the need to provide replacement or backup satellites and potentially
reducing revenues if service is interrupted. Finally, the occurrence of anomalies may materially
adversely affect our ability to insure our satellites at commercially reasonable premiums, if at all. While
some anomalies are currently covered by existing insurance policies, others are not now covered or may
not be covered in the future.
Our ability to earn revenue also depends on the usefulness of our satellites. Each satellite has a
limited useful life. A number of factors affect the useful life of a satellite, including, among other
things:
• the design;
• the quality of its construction;
• the durability of its component parts;
• the launch vehicle’s insertion of the satellite into orbit;
• any required movement, temporary or permanent, of the satellite;
• the ability to continue to maintain proper orbit and control over the satellite’s functions; and
• the remaining on-board fuel following orbit insertion.
Generally, the minimum design life of the satellites in our fleet is between 12 and 15 years. The
actual useful lives of the satellites may be shorter, in some cases significantly. Our operating results
could be adversely affected if the useful life of any of our satellites were significantly shorter than
12 years from the date of launch.
In the event of a failure or loss of any of our satellites, we may relocate another satellite and use
it as a replacement for the failed or lost satellite. In the event of a complete satellite failure, our
services provided via that satellite could be unavailable for several days or longer while backup in-orbit
satellites are repositioned and services are moved. We are not insured for any resultant lost revenues.
The use of backup satellite capacity for our programming may require us to discontinue some
programming services due to potentially reduced capacity on the backup satellite. Any relocation of our
satellites would require prior FCC approval and, among other things, a demonstration to the FCC that
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