Dish Network 2001 Annual Report Download - page 41

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customer service center and other expenses primarily resulted from increased personnel and telephone expenses to
support the growth of the DISH Network and from operating expenses related to the expansion of our installation and
service business. Customer service center and other expenses totaled 8% of subscription television services revenue
during the year ended December 31, 2001, as compared to 11% during the same period in 2000. The decrease in this
expense to revenue ratio primarily resulted from the on-going construction and start-up costs of our fifth customer
service center in Virginia and our sixth customer service center in West Virginia during 2000, as well as increased
operating efficiencies during 2001. While there can be no assurance, we expect these expenses in total, and as a
percentage of subscription television services revenue, to remain near current levels during 2002. These expenses and
percentages could temporarily increase in the future as additional infrastructure is added to meet future growth. We
continue to work to automate simple telephone responses, and intend to increase Internet-based customer assistance
in the future, in order to better manage customer service costs.
Satellite and transmission expenses include expenses associated with the operation of our digital broadcast
centers, contracted satellite telemetry, tracking and control services, and commercial satellite launch and in-orbit
insurance premiums. Satellite and transmission expenses totaled $40 million during the year ended December 31,
2001, a $4 million decrease compared to the same period in 2000. Satellite and transmission expenses totaled 1% and
2% of subscription television services revenue during the year ended December 31, 2001 and 2000, respectively. We
expect satellite and transmission expenses in total and as a percentage of subscription television services revenue to
increase in the future as additional satellites or digital broadcast centers are placed in service and to the extent we
successfully obtain commercial launch and in-orbit insurance.
Cost of sales – DTH equipment and Integration Services. Cost of sales - DTH equipment and integration
services totaled $188 million during the year ended December 31, 2001, a decrease of $7 million compared to the same
period in 2000. Cost of sales - DTH equipment and integration services principally includes costs associated with
digital set-top boxes and related components sold to international DTH operators and DBS accessories. The decrease
in cost of sales - DTH equipment and integration services principally resulted from a decrease in sales of digital set-top
boxes to our two primary international DTH customers. Cost of sales - DTH equipment and integration services
represented 69% and 75% of DTH equipment revenue, during the year ended December 31, 2001 and 2000,
respectively. The decrease in this expense to revenue ratio primarily resulted from an increase in sales of higher-
margin DBS accessories during 2001.
Marketing Expenses. Generally, under most promotions, we subsidize the cost and installation of EchoStar
receiver systems in order to attract new DISH Network subscribers. Marketing expenses totaled $1.084 billion during
the year ended December 31, 2001 compared to $1.159 billion for the same period in 2000. This decrease primarily
resulted from a decrease in Subscriber promotion subsidies – cost of sales as a result of higher penetration of our
Digital Home Plan promotion, pursuant to which certain equipment costs are capitalized, as discussed below. This
decrease was partially offset by an increase in subscriber promotion subsidies - other due to increases in installation
subsidies for multiple receivers under the Digital Home Plan promotion and an increase in advertising expense related
to our 2001 marketing promotions, primarily our I Like 9 promotion. Subscriber promotion subsidies – cost of sales
includes the cost related to EchoStar receiver systems distributed to retailers and other distributors of our equipment.
Subscriber promotion subsidies - other includes net costs related to our free installation promotion and other
promotional incentives. Advertising and other expenses totaled $147 million and $139 million during the year ended
December 31, 2001 and 2000, respectively.
During the year ended December 31, 2001, our marketing promotions included our DISH Network One-
Rate Plan, Bounty Programs, Free Now, I Like 9, free installation program, and Digital Home Plan, which are
described below.
DISH Network One-Rate Plan, Bounty Programs, Free Now Promotion and I Like 9. Under the DISH
Network One-Rate Plan, consumers were eligible to receive a rebate of up to $199 on the purchase of certain EchoStar
receiver systems. To be eligible for this rebate, we required a one-year commitment to our America’s Top 150
programming or our America’s Top 100 CD programming package plus one premium movie package (or equivalent
additional programming). This promotion expired on January 31, 2001.