DIRECTV 2007 Annual Report Download - page 22

THE DIRECTV GROUP, INC.
Infrastructure
We provide services in PanAmericana and Brazil from leased transponders on two satellites. In
January 2008, we successfully transferred the broadcast of our Sky Brazil service to leased transponders
on a new satellite, as the prior satellite was nearing the end of its useful life. Sky Mexico provides its
services from leased transponders on a separate satellite. Currently, none of these satellites has a
backup, although we recently completed negotiations for the construction and launch of a backup
satellite that would serve Brazil and Mexico. It is scheduled for launch in 2009.
See Item 1A. ‘‘Risk Factors’’ below for additional information regarding satellite launch and
operational risks.
Our principal digital broadcast centers are located in the United States and Brazil. We also have
several smaller satellite uplink facilities in the region.
Competition
The pay television and other emerging broadband video and data markets in Latin America are
highly competitive. In each of our markets, we compete primarily with other providers of pay television,
who distribute their programming by satellite, cable, terrestrial microwave systems, traditional over the
air broadcasting or the Internet. In addition, in certain markets we face significant competition from
illegal and informal sector pay television operations. We compete primarily on the basis of
programming selection, price, technology and quality.
In most of the markets in which we operate, cable television is our principal competition. Cable
services have been in commercial operation longer than other pay television platforms, and have
established large subscriber bases and widespread brand recognition. They have typically been able to
offer analog services for lower monthly fees and with lower upfront installation and connection fees
than we do. In addition, the cable operators with which we compete are in various stages of upgrading
their networks to provide broadband and voice services, and in some markets the major cable operators
are competing with us based principally on their offer of a ‘‘triple play’’ bundle of video, broadband
and voice services. In most cases, they discount the value of their programming services in order to sell
broadband and voice services, which can adversely affect the attractiveness of our offers to subscribers.
In addition to competition from cable services, Telefonica, the Spanish telephone company,
launched DTH services in Peru, Chile and Brazil in 2006, and Colombia in 2007. To date it has offered
DTH programming services only to users of voice telephony and broadband services provided by
Telefonica’s affiliates in Latin America. Telefonica has entered these markets by offering packages of a
limited number of programming services available to subscribers at prices that are lower than what we
were offering. We have implemented new programming packages that we consider to be competitive
with those offered by Telefonica. However, it is not certain at this time how Telefonica’s entrance into
these markets will affect our business.
In a number of the markets, existing wireline telephony operators have announced their intention
to upgrade their infrastructure in order to provide new and enhanced services, including video
programming, and these and other companies have announced plans to build wireless broadband
networks that will also be capable of delivering broadband, voice and video services. However, to date
only a very small number of such upgrades and buildouts have been actively pursued on other than a
test basis.
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