DIRECTV 2011 Annual Report Download - page 48

DIRECTV
non-exclusive and non-discriminatory terms and conditions, and prohibits Satellite programming signals have been stolen and may be stolen, which could
DIRECTV U.S. from entering into exclusive arrangements with affiliated result in lost revenues and would cause us to incur incremental operating costs
programmers or unduly influencing such programmers in their dealings with other that do not result in subscriber acquisition.
MVPDs. The delivery of subscription programming requires the use of conditional
We are subject to significant regulatory oversight and changes in applicable access technology to limit access to programming to only those who are authorized
regulatory requirements could adversely affect our business. You should review the to view it. The conditional access system uses encryption technology to protect the
regulatory disclosures under the caption ‘‘Item 1—Business—Government transmitted signal from unauthorized access. It is illegal to create, sell or otherwise
Regulation—FCC Regulation Under the Communications Act and Related Acts’’ distribute software or devices to circumvent that conditional access technology.
which is incorporated here by reference. However, theft of cable and satellite programming has been widely reported, and
the access cards used in our conditional access system have been, and could be
Changes to and implementation of statutory copyright license requirements compromised in the future.
may negatively affect our ability to deliver local and distant broadcast stations, We have undertaken various initiatives with respect to our conditional access
as well as other aspects of our business. system to further enhance the security of the DIRECTV signal. We provide our
We carry the signals of local and distant broadcast stations pursuant to subscribers with advanced access cards that we believe significantly enhance the
statutory copyright licenses contained in SHVA, and our carriage of these stations is security of our signal. We believe these access cards have not been compromised.
governed by the FCC and Copyright Office implementing regulations. Any changes However, we cannot guarantee that these advanced access cards will prevent future
to such laws or regulations could limit our ability to deliver local or distant theft of our satellite programming signals. There can be no assurance that we will
broadcast signals. More generally, we have limited capacity, and the projected succeed in developing the technology we need to effectively restrict or eliminate
number of markets in which we can deliver local broadcast programming will signal theft. If our current access cards are compromised, our revenue and our
continue to be constrained because of the statutory ‘‘carry-one, carry-all’’ ability to contract for programming could be materially adversely affected. In
requirement and may be reduced depending on the FCC’s interpretation of its addition, our operating costs could increase if we attempt to implement additional
rules, as well as judicial decisions. We may not be able to comply with these must measures to combat signal theft.
carry rules, or compliance may mean that we are not able to use capacity otherwise
for new or additional local or national programming services. In addition, the FCC The ability to maintain FCC licenses and other regulatory approvals is critical
has issued an increasing obligation for carriage of local digital broadcast to our business.
transmissions in HD format. We may be unable to comply with this requirement If we do not obtain all requisite U.S. regulatory approvals for the construction,
in markets where we currently carry such signals without ceasing HD local service launch and operation of any of our existing or future satellites, for the use of
entirely in some markets, and would be precluded from launching additional frequencies at the orbital locations planned for these satellites or for the provision
markets currently planned. of service, or the licenses obtained impose operational restrictions on us, our ability
The FCC has adopted rules requiring us to negotiate in good faith with to generate revenue and profits could be materially adversely affected. In addition,
broadcast stations seeking carriage outside of the mandatory carriage regime under certain circumstances, existing licenses are subject to revocation or
described elsewhere. The rules for ‘‘retransmission consent’’ negotiations require us modification and upon expiration, extension or renewal may not be granted. If
to negotiate in good faith with programming providers. Failure to comply with existing licenses are not extended or renewed, or are revoked or materially modified,
these rules could subject us to administrative sanctions and other penalties. our ability to generate revenue could be materially adversely affected.
Moreover, the FCC is considering changes to these and other rules related to Other U.S. regulatory risks include:
retransmission consent, which could make negotiations more difficult, increase fees • the relocation of satellites to different orbital locations if the FCC
charged for carriage, or result in the increased withholding of broadcast signals. determines that relocation is in the public interest;
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