DIRECTV 2006 Annual Report Download - page 19

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THE DIRECTV GROUP, INC.
from nine companies whom we have agreements with to service both new and existing
customers.
Infrastructure
Satellites. We currently have a fleet of ten geosynchronous satellites, including nine owned
satellites and one leased satellite. We have eight Ku-Band satellites at the following orbital locations:
101WL (four), 110WL (one), 119WL (one), 72.5WL (one), and 95WL (one-leased). We also
have Ka-Band satellites at our 99WL (one) and 103WL (one) orbital locations. The 72.5WL
orbital location is used pursuant to an arrangement with Telesat Canada. As a part of the arrangement
with Telesat, we have transferred two satellites, both of which are nearing the end of their useful lives
and which we previously used as in-orbit spares, to orbital locations controlled by Telesat, for use by
Telesat for its own services broadcast into Canada.
Satellites Under Construction. We currently have three satellites under construction. We plan to
launch DIRECTV 10 in mid 2007 and DIRECTV 11 in early 2008. These two satellites will provide us
with increased capability for local and national HD channels, as well as capacity for new interactive and
enhanced services and standard-definition programming. Once launched, these satellites will operate
from the Ka-Band orbital locations. The third satellite, DIRECTV 12, will serve as a ground spare.
Satellite Risk Management. We use launch and in-orbit insurance to mitigate the potential financial
impact of satellite fleet launch and in-orbit failures unless the premium costs are considered to be
uneconomical relative to the risk of satellite failure. The insurance generally does not compensate for
business interruption or loss of future revenues or subscribers. We rely on in-orbit spare satellites and
excess transponder capacity at key orbital slots to mitigate the impact of satellite failure on our ability
to provide service. However, programming continuity cannot be assured in all instances or in the event
of multiple satellite losses.
Launch insurance typically covers the time frame from ignition of the launch vehicle through
separation of the satellite from the launch vehicle. In the past, we have launched satellites without
insurance. We have purchased launch insurance for DIRECTV 10 and DIRECTV 11. We do not
currently expect to purchase in-orbit insurance for these satellites. As of December 31, 2006, the net
book value of in-orbit satellites was $1,335.7 million, of which $947.6 million was uninsured.
Digital Broadcast Centers. To gather programming content, ensure its digital quality, and transmit
content to our satellites, we have built two digital broadcast centers, located in Castle Rock, Colorado
and Los Angeles, California. These facilities provide the majority of our national and local standard-
definition and HD programming. We have also built four uplink facilities which are used to provide
local channels. One additional uplink centers is being built so that we may continue to expand local
HD programming. Our broadcast centers receive programming from content providers via satellite,
fiber optic cable and/or special tape. Most satellite-delivered programming is then digitized, encoded
and transmitted to our satellites. We designed each broadcast center and uplink facility with redundant
systems to minimize service interruptions.
Installation Network. DIRECTV HOME SERVICESthird party installation and service network
performs installation, upgrades and other service call work for us. For the year ended December 31,
2006, these HSPs performed approximately 90% of all in-home visits with over 16,000 technicians from
nine outsourced companies around the United States. In addition, we and our retailers also utilize
employer-based or contract installation providers, which perform the remainder of all new professional
subscriber installations. We set the quality of installation and service standards, perform quality control,
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