DIRECTV 2006 Annual Report Download - page 39

THE DIRECTV GROUP, INC.
The ability to maintain FCC licenses and other regulatory approvals is critical to our business.
If we do not obtain all requisite U.S. regulatory approvals for the construction, launch and
operation of any of our existing or future satellites for the use of frequencies at the orbital locations
planned for these satellites or for the provision of service, or the licenses obtained impose operational
restrictions on us, our ability to generate revenue and profits could be materially adversely affected. In
addition, under certain circumstances, existing licenses are subject to revocation or modification and
upon expiration, renewal may not be granted. If existing licenses are not renewed, or are revoked or
materially modified, our ability to generate revenue could be materially adversely affected.
In certain cases, satellite system operators are obligated by governmental regulation and
procedures of the ITU to coordinate the operation of their systems with other users of the radio
spectrum in order to avoid causing interference to those other users. Coordination may require a
satellite system operator to reduce power, avoid operating on certain frequencies, relocate its satellite
to another orbital location and/or otherwise modify planned or existing operations. For example, the
FCC has conditionally granted Spectrum Five authority to provide DBS service using frequencies
assigned to it by the Government of the Netherlands from an orbital slot located halfway between slots
at which we currently operate. Other operators have filed similar requests. We believe this closer
proximity, if permitted, significantly increases the risk of interference which could adversely affect the
quality of service provided to our subscribers. We may not be able to successfully coordinate our
satellites to the extent we are required to do so, and any modifications we make in the course of
coordination, or any inability to successfully coordinate, may materially adversely affect our ability to
generate revenue. In addition, the FCC is currently conducting a rulemaking proceeding to consider,
among other things, the adoption of operating parameters under which such ‘‘tweener’’ systems would
be automatically deemed coordinated.
Other regulatory risks include, among others:
• the relocation of satellites to different orbital locations if the FCC determines that relocation is
in the public interest;
• the denial by the FCC of an application to replace an existing satellite with a new satellite or to
operate a satellite beyond the term of its current authorization;
• the loss of authorizations to operate satellites on certain frequencies at certain locations if we do
not construct, launch and operate satellites into those locations by certain dates; and
• the authorization by the United States or foreign governments of the use of frequencies by third
party satellite or terrestrial facilities that have the potential to interfere with communication to
or from our satellites, which could interfere with our contractual obligations or services to
subscribers or other business operations.
All of our FCC satellite authorizations are subject to conditions imposed by the FCC in addition
to the FCC’s general authority to modify, cancel or revoke those authorizations. Use of FCC licenses
and conditional authorizations are often subject to conditions, including technical requirements and
implementation deadlines. Failure to comply with such requirements, or comply in a timely manner,
could lead to the loss of authorizations and could have a material adverse effect on our ability to
generate revenue. For example, loss of an authorization could potentially reduce the amount of
programming and other services available to our subscribers. The materiality of such a loss of
authorization would vary based upon, among other things, the orbital location at which the frequencies
may be used.
28