Dish Network 2000 Annual Report Download - page 6

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While Ka-band spot beam technology is currently in its infancy, and the technology might not develop to
the point where it is viable, we believe that spot beam Ka-band satellites could become a cost effective way to offer
consumers high speed two way broadband access in the future. Penetration would probably be highest in rural and
other areas where high speed DSL and cable modem service is not available. Thus, Ka-band technology might play
an important role in spanning the digital divide. We believe the service might also be successfully offered in urban
and suburban areas as well.
In an effort to continue to position ourselves to exploit this potential opportunity, during November 2000,
one of our wholly owned subsidiaries purchased a 49.9% interest in VisionStar, Inc. VisionStar holds an FCC
license, and is constructing a Ka-band satellite, to launch into the 113 W.L. orbital slot. Together with VisionStar
we have requested FCC approval to acquire control over VisionStar by increasing our ownership of VisionStar to
90%, for a total purchase price of approximately $2.8 million. Two companies have filed oppositions to our FCC
application alleging that VisionStar has not met its FCC mandated schedule for construction of its satellite, that our
transaction with VisionStar constitutes prohibited trafficking in bare licenses, and that our transaction with
VisionStar constitutes a premature transfer of control of the license, among other things. There can be no assurance
that the FCC will not revoke VisionStar’s license, rendering our investment worthless. The FCC could also deny
our application to acquire control over VisionStar, or take other action that will be unfavorable to us.
We have provided loans to VisionStar totaling less than $10 million to date for the construction of their
satellite and expect to provide additional funding to VisionStar in the future. We are not obligated to finance the full
remaining cost to construct and launch the VisionStar satellite, but VisionStar’s FCC license currently requires
construction of the satellite to be completed by April 30, 2002 or the license could be revoked. We currently expect
to continue to fund loans and equity contributions for construction of the satellite in the near term from cash on
hand, and expect that we may spend approximately $79.5 million during 2001 for that purpose subject to, among
other things, FCC action. In the future we may fund construction, launch and insurance of the satellite through cash
from operations, public or private debt or equity financing, joint ventures with others, or from other sources.
EchoStar Receiver Systems. EchoStar receiver systems include a small satellite dish, a digital satellite
receiver that descrambles signals for television viewing, a remote control, and other related components. We offer a
number of set-top box models. Our standard system comes with an infrared remote control, an on-screen program
guide, and the ability to switch between DISH Network and off-air local programming using the remote control.
Our mid-level model has all of the basic features but also includes a UHF remote control that allows subscribers to
control their EchoStar receiver system from up to 150 feet away through walls, and a high-speed data port. Our
premium model includes additional features such as on-screen caller identification capability, event timers to
automatically tune into or record selected programming and one-touch VCR recording. We also offer a variety of
specialized receiver systems such as HDTV receiver systems, receiver systems that include a VCR player and
receivers capable of receiving Internet TV services. In addition, we offer a low cost ‘bare bones’ receiver designed
as a secondary unit for multiple television locations. DISH Network reception equipment is incompatible with
competitors’ systems in the United States.
Although we internally design and engineer our receiver systems, we do not manufacture these systems.
Rather, we outsource the manufacturing process to high-volume contract electronics manufacturers. SCI
Technology, Inc. manufactures the majority of our receiver systems. Two other companies account for the
manufacture of the balance of our receiver systems.
Installation. While many consumers have the skills necessary to install our equipment in their homes, we
believe that most installations are best performed by professionals, and that on time, quality installations are
important to our success. Consequently, we are continuing to expand our installation business, conducted through
our DISH Network Service Corporation subsidiary. In addition to expanding our internal installation capability, we
are also integrating business partners as external installation providers. Our external installation business partners
are held to DISH Network Service Corporation service standards to attempt to ensure each DISH Network customer
receives the same quality installation and service. Our offices and external business partners will be strategically
located throughout the continental United States, in order to enable us to provide service to a greater number of
DISH Network customers throughout the country. Although there can be no assurance, we believe the continued
expansion of our installation business will decrease wait time on service calls and new installations and help us to
better accommodate anticipated subscriber growth.