Dish Network 2006 Annual Report Download - page 32

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In addition, DirecTV’s satellite receivers are sold in a significantly greater number of consumer electronics stores
than ours. As a result of this and other factors, our services are less well known to consumers than those of
DirecTV. Due to this relative lack of consumer awareness and other factors, we are at a competitive marketing
disadvantage compared to DirecTV. DirecTV also offers exclusive programming, and may have access to discounts
on programming, not available to us. DirecTV plans to launch two new satellites in 2007 in order to offer local and
national channel programming in HD to most of the U.S. population. Although we have launched our own HD
initiatives, if DirecTV fully implements these plans, they may have an additional competitive advantage.
New entrants in the subscription satellite services business would have a competitive advantage over us in deploying
some new products and technologies because of the substantial costs we may be required to incur to make new
products or technologies available across our installed base of over 13 million subscribers.
Most areas of the United States can receive between three and 10 free over the air broadcast channels, including
local content most consumers consider important. The FCC has allocated additional digital spectrum to these
broadcasters, which can be used to transmit multiple additional programming channels. Our business could be
adversely affected by increased program offerings by traditional broadcasters.
New technologies could also have an adverse effect on the demand for our DBS services. For example, we face an
increasingly significant competitive threat from the build-out of advanced fiber optic networks. Verizon
Communications, Inc. (“Verizon”) and AT&T have begun deployment of fiber-optic networks that will allow them
to offer video services bundled with traditional phone and high speed Internet directly to millions of homes. In
addition, telephone companies and other entities are implementing and supporting digital video compression over
existing telephone lines which may allow them to offer video services without having to build a new infrastructure.
We also expect to face increasing competition from content and other providers who distribute video services
directly to consumers over the Internet.
With the large increase in the number of consumers with broadband service, a significant amount of video content
has become available on the Internet for users to download and view on their personal computers and other devices.
In addition, there are several initiatives by companies to make it easier to view Internet-based video on television
and personal computer screens. We also could face competition from content and other providers who distribute
video services directly to consumers via digital air waves.
Mergers, joint ventures, and alliances among franchise, wireless or private cable television operators, telephone
companies and others also may result in providers capable of offering television services in competition with us.
Although we believe we currently offer consumers a compelling amount of HD programming content, other multi-
channel video providers may be better equipped to increase their HD offerings to respond to increasing consumer
demand for this content. For example, cable companies are able to offer local network channels in HD in more
markets than we can, and DirecTV has announced that it will soon be able to offer over 150 channels of HD
programming by satellite. We could be further disadvantaged to the extent a significant number of local
broadcasters begin offering local channels in HD. We may be required to make substantial additional investments in
infrastructure to respond to competitive pressure to deliver additional HD programming, and there can be no
assurance that we will be able to effectively compete with HD program offerings from other video providers.
Increased subscriber turnover could harm our financial performance.
Our future subscriber churn may be negatively impacted by a number of factors, including but not limited to, an
increase in competition from existing competitors and new entrants offering more compelling promotions, as well as
new advanced products and services. Competitor bundling of video services with 2-way high speed Internet access
and telephone services may also contribute more significantly to churn over time. There can be no assurance that
these and other factors will not contribute to relatively higher churn than we have experienced historically.
Additionally, certain of our promotions allow consumers with relatively lower credit scores to become subscribers
and these subscribers typically churn at a higher rate. However, these subscribers are also acquired at a lower cost
resulting in a smaller economic loss upon disconnect.