Dish Network 1998 Annual Report Download - page 3

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PART I
Item 1. BUSINESS
GENERAL
Our common stock is publicly traded on the Nasdaq National Market. We conduct substantially all of our
operations through our subsidiaries. We operate three business units:
• The DISH Network – our direct broadcast satellite, or DBS, subscription television service in the
United States. As of December 31, 1998, we had approximately 1.9 million DISH Network
subscribers.
• EchoStar Technologies Corporation – our engineering division, which is principally responsible for the
design of digital set-top boxes, or satellite receivers, necessary for consumers to receive DISH
Network programming, and set-top boxes sold to international direct-to-home satellite operators. We
also provide uplink center design, construction oversight and other project integration services for
international direct-to-home ventures.
• Satellite Services – our division that provides video, audio and data services to business television
customers and other satellite users.
Recent Developments
Agreement with News Corporation Limited and MCI Telecommunications Corporation/WorldCom
On November 30, 1998, we announced an agreement with MCI, News Corporation and its American Sky
Broadcasting, LLC subsidiary, pursuant to which we would acquire or receive:
• the rights to 28 frequencies at the 110° West Longitude orbital location from which we could transmit
programming to the entire continental United States;
• two DBS satellites constructed by Space Systems/Loral, delivered in-orbit, and currently expected to be
launched in 1999;
• a recently-constructed digital broadcast operations center located in Gilbert, Arizona;
• a worldwide license agreement to manufacture and distribute set-top boxes internationally using News
Data System, Limited’s encryption/decoding technology;
• a commitment by an affiliated entity of News Corporation to purchase from ETC a minimum of
500,000 set-top boxes; and
• a three-year, no fee retransmission consent agreement for DISH Network to rebroadcast FOX Network
owned-and-operated local station signals to their respective markets.
We will not incur any costs associated with the construction, launch or insurance (including launch insurance
and one year of in-orbit insurance) of the two DBS satellites. We and MCI also agreed that MCI will have the non-
exclusive right to bundle DISH Network service with MCI’s telephony service offerings on mutually agreeable terms.
In addition, we agreed to carry the FOX News Channel on the DISH Network. We received standard program launch
support payments in exchange for carrying the programming. Throughout this document, we refer to the above
transaction as the “110 acquisition”.
Subject to FCC approval, if we combine the capacity of the two newly acquired satellites with our four current
satellites, we expect that DISH Network will have the capacity to provide more than 500 channels of programming,
Internet and high-speed data services and high definition television nationwide to a subscriber’s single 18-inch satellite
dish. We also believe that this transaction would position us to offer a one-dish solution for satellite-delivered local
programming to major markets across the country. Since we plan to use many of those channels for local
programming, no particular consumer could subscribe to all 500 channels, but all of those channels would be capable
of being received from a single dish. We also expect to be able to begin small dish service to Alaska, Hawaii, Puerto
Rico and the United States territories in the Caribbean. However, we expect to expend over $100 million, and