DIRECTV 2008 Annual Report Download - page 27

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, these satellites do not have a
backup, although we recently completed negotiations for the construction and launch of a backup
satellite that would serve Brazil and Mexico. We anticipate that this satellite will be available for
operations no later than mid-2010.
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 offered 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 telephony 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
telephony services. In most cases, they discount the value of their programming services in order to sell
broadband and telephony services, which can adversely affect the attractiveness of our offers to
subscribers.
In addition to competition from cable services, we face increasing competition from other
providers of DTH services. Telefonica, the Spanish telephone company, launched DTH services in Peru,
Chile and Brazil in 2006, Colombia in 2007 and Venezuela in 2008. Telmex owns a DTH service in
Chile and has stated its intention to launch in other countries, including in Brazil, through its affiliate
Embratel. Brasil Telecom/Oi, the fixed line incumbent in Brazil, expects to launch a DTH service in
early 2009. These competitors have significant resources and have proven their ability to grow their
businesses rapidly. They typically seek to focus on offering lower-cost, limited services packages in
support of their telephony and broadband offerings, which can increase our churn and put pressure on
our margins. Also, the existence of multiple DTH operators in a single market dilutes our ability to
market our DTH service as an alternative to cable, traditionally our principal competition. In addition,
EchoStar Corp. announced in November 2008 it had formed a joint venture with media company MVS
Comunicaciones to offer a satellite television service in Mexico. The new offering will use an existing
MVS service, which at the time of the announcement had more than 570,000 customers. EchoStar sells
set-top boxes and provides satellite television services to Dish Network in the United States. Echostar
also announced that basic service will include 25 Spanish and English language channels for a monthly
fee of 139 pesos or a little over $10 at foreign exchange rates at year end 2008.
14