Dish Network 2000 Annual Report Download - page 41

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expenditures. Capital expenditures under our Digital Dynamite promotion totaled approximately $65.4 million for the
year ended December 31, 2000.
Conditional Access System
The access control system is central to the security network that prevents unauthorized viewing of
programming. Theft of cable and satellite programming has been widely reported and our signal encryption has been
pirated and could be further compromised in the future. If other measures are not successful, it could be necessary to
replace the credit card size card that controls the security of each consumer set top box at a material cost to us.
Intellectual Property
Many entities, including some of our competitors, now have and may in the future obtain patents and other
intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer.
In general, if a court determines that one or more of our products infringes on intellectual property held by others, we
would be required to cease developing or marketing those products, to obtain licenses to develop and market those
products from the holders of the intellectual property, or to redesign those products in such a way as to avoid infringing
the patent claims. Various parties have asserted patent and other intellectual property rights with respect to components
within our direct broadcast satellite system. Certain of these parties have filed suit against us, including Starsight,
Superguide, and IPPV Enterprises, as previously described. We cannot be certain that these persons do not own the
rights they claim, that our products do not infringe on these rights, that we would be able to obtain licenses from these
persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to
redesign our products to avoid infringement.
Obligations and Future Capital Requirements
Semi-annual cash debt service of approximately $94 million related to our 9 1/4% Senior Notes due 2006
(Seven Year Notes) and our 9 3/8% Senior Notes due 2009 (Ten Year Notes), is payable in arrears on February 1 and
August 1 each year. Semi-annual cash debt service requirements of approximately $24 million related to our 4 7/8%
Convertible Subordinated Notes due 2007 is payable in arrears on January 1 and July 1 of each year, commencing
July 1, 2000. Semi-annual cash debt service of approximately $52 million related to our 10 3/8% Senior Notes due
2007 is payable in arrears on April 1 and October 1 of each year, commencing April 1, 2001. There are no scheduled
principal payment or sinking fund requirements prior to maturity of any of these notes.
The indentures related to our 9 1/4% Senior Notes due 2006 (the “Seven Year Notes”) and our 9 3/8% Senior
Notes due 2009 (the “Ten Year Notes”) (collectively, the “Seven and Ten Year Notes Indentures”) contain restrictive
covenants that require us to maintain satellite insurance with respect to at least half of the satellites we own. Insurance
coverage is therefore required for at least three of our six satellites currently in orbit. We have procured normal and
customary launch insurance for EchoStar VI. This launch insurance policy provides for insurance of $225.0 million.
The EchoStar VI launch insurance policy expires in July 2001. We are currently self-insuring EchoStar I, EchoStar II,
EchoStar III, EchoStar IV and EchoStar V. During 2000, to satisfy insurance covenants related to the outstanding
EchoStar DBS senior notes, we reclassified the depreciated cost of two of our satellites from cash and cash equivalents
to cash reserved for satellite insurance on our balance sheet. As of December 31, 2000, cash reserved for satellite
insurance totaled approximately $82 million. The reclassifications will continue until such time, if ever, as the insurers
are again willing to insure our satellites on commercially reasonable terms.
We utilized $91 million of satellite vendor financing for our first four satellites. As of December 31, 2000,
approximately $25 million of that satellite vendor financing remained outstanding. The satellite vendor financing bears
interest at 8 1/4% and is payable in equal monthly installments over five years following launch of the satellite to which
it relates. A portion of the contract price with respect to EchoStar VII is payable over a period of 13 years following
launch with interest at 8%, and a portion of the contract price with respect to EchoStar VIII and EchoStar IX is payable
following launch with interest at 8%. Those in orbit payments are contingent on the continued health of the satellite.