DIRECTV 2009 Annual Report Download - page 41

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• 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 16 years. The
actual useful lives of the satellites may be shorter or longer, 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
the replacement satellite would not cause additional interference compared to the failed or lost
satellite. Such FCC approval may not be obtained. We believe we have or will have in 2010, in-orbit
satellite capacity to expeditiously recover transmission of most DIRECTV U.S. programming in the
event one of our in-orbit satellites fails. However, programming continuity cannot be assured in the
event of multiple satellite losses. DTVLA leases its satellites and may not have a readily available
replacement in the event of a failure or loss of any of its satellites. Because we currently have no
back-up capacity in place for DTVLA, programming continuity in the countries in which DTVLA
operates cannot be assured in the event of a single satellite loss.
The cost of commercial insurance coverage on our satellites or the loss of a satellite that is not
insured could materially adversely affect our earnings.
We use in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet
in-orbit and launch failures unless the premium costs are considered uneconomic relative to the risk of
satellite failure. When insurance is obtained, it generally covers all or a portion of the unamortized
book value of covered satellites. Although the insurance 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 that a satellite failure may have on our ability to
provide service.
The price, terms and availability of insurance fluctuate significantly. Launch and in-orbit policies
on satellites may not continue to be available on commercially reasonable terms or at all. In addition to
higher premiums, insurance policies may provide for higher deductibles, shorter coverage periods and
satellite health-related policy exclusions.
Any launch vehicle failure, or loss or destruction of any of our satellites, even if insured, could
have a material adverse effect on our financial condition and results of operations, our ability to
comply with FCC regulatory obligations and our ability to fund the construction or acquisition of
replacement satellites in a timely fashion, or at all.
At December 31, 2009, the net book value of in-orbit satellites was $1,984 million, none of which
was insured.
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