Dish Network 1997 Annual Report Download - page 11

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9
market or regulatory developments might have on the video programming distribution industry generally or EchoStar
specifically.
Cable Television. Cable television service is currently available to the vast majority of U.S. television
households. The U.S. cable television industry currently serves over 65 million subscribers, representing
approximately 67% of U.S. television households. As an established provider of subscription television services, cable
television is a formidable competitor in the overall market for television households. Cable television systems
generally offer 30 to 80 analog channels of video programming. Cable television operators currently have an
advantage relative to EchoStar with regard to the provision of local programming as well as the provision of service to
multiple television sets within the same household. Many cable television operators are in the process of upgrading
their distribution systems to expand their existing capacity. This expanded capacity is expected to be used to provide
digital product offerings similar to those offered by DBS providers, as well as for interactive and other new services.
Many of the largest cable systems in the U.S. have announced plans to offer high-speed Internet access
services. In some cases, certain cable systems have actually commenced provision of such services. To the extent that
cable system operators are successful in deploying new services, such as high-speed Internet access, cable television
subscribers may become increasingly reluctant to switch to an alternate provider of subscription television services.
TCI Satellite Entertainment, Inc. (“TSAT”) has announced that it intends to provide digital programming to
TSAT and other cable system operators from Tempo Satellite, Inc.’s (“ Tempo”) DBS satellite launched in March 1997.
Tempo’s DBS satellite would allow TSAT to provide at least 65 digital video channels to cable subscribers. Those
subscribers could maintain current cable programming service, including local programming. Through the use of a
digital set-top receiver system, a household subscribing to cable programming and Tempo’s DBS digital programming
could simultaneously view digital video programming on one television and different cable programming on any
number of other televisions. Currently, DISH Network subscribers must purchase multiple EchoStar Receiver Systems
in order to view different programming on different televisions simultaneously. TSAT’s complementary DBS service
could make cable a stronger competitor to the DISH Network. As indicated below, the 11 full-CONUS frequencies
assigned to Tempo are the subject of an application for FCC consent to assignment to PrimeStar.
Other DBS and Home Satellite Operators. In addition to EchoStar, several other companies have DBS
authorizations and are positioned to compete with EchoStar for home satellite subscribers.
DirecTv, Inc. (“ DirecTv”) has 27 frequency channel assignments at the 101° WL full-CONUS orbital slot.
U.S. Satellite Broadcasting Corporation (“ USSB” ) owns and operates five transponders on DirecTv’s first satellite and
offers a programming service separate from, and complementary to, DirecTv’s service. DirecTv and USSB together
offer approximately 175 channels of combined DBS video programming. EchoStar currently offers a nationwide
service of approximately 120 channels of digital video programming. DirecTv currently has exclusive distribution
rights for out-of-market National Football League telecasts. While EchoStar intends to offer similar services in the
future, its current inability to provide such programming places it at a competitive disadvantage. As of December 31,
1997 DirecTv had approximately 3.3 million subscribers, approximately one-half of whom also subscribe to USSB
programming. DirecTv recently filed an application with the FCC to construct, launch and operate six additional DBS
satellites. DirecTv requested three orbital slots for these satellites at 96.5° WL, 101° WL, and 105.5° WL. Some of
those satellites would operate on frequencies that are not currently allocated domestically for this use; DirecTv has
requested an FCC rulemaking to secure such allocations. If permitted to operate additional DBS satellites at these
locations, the additional channels DirecTv could provide would significantly improve its competitive position
compared to EchoStar.
In addition to its DBS service, DirecTv has plans to complement its current DBS service offerings by leasing
certain Ku-band frequencies at the 95° WL orbital location from a third party. If DirecTv successfully implements this
business plan, it is expected that DirecTv’s subscribers could utilize one 30 to 36 inch satellite dish to receive both the
DBS programming currently offered from its 101° WL orbital location and the fixed satellite service (“ FSS”) which
may be offered from 95° WL. DirecTv’s programming service is expected to include up to 120 channels, including a
variety of special interest programming, foreign language programming and other niche services. If DirecTv is able to
successfully expand its service offerings through a combination of DBS and FSS programming, its competitive position
relative to EchoStar may be enhanced.