Dish Network 2006 Annual Report Download - page 35

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25
We are subject to significant regulatory oversight and changes in applicable regulatory requirements could
adversely affect our business.
DBS operators are subject to significant government regulation, primarily by the FCC and, to a certain extent, by
Congress, other federal agencies and international, state and local authorities. Depending upon the circumstances,
noncompliance with legislation or regulations promulgated by these entities could result in the suspension or
revocation of our licenses or registrations, the termination or loss of contracts or the imposition of contractual
damages, civil fines or criminal penalties any of which could have a material adverse effect on our business,
financial condition and results of operations. You should review the regulatory disclosures under the caption “Item
1. Business — Government Regulation — FCC Regulation under the Communication Act, Other Communications
Act Provisions” of this Annual Report on Form 10-K.
During April 2006, a Texas jury concluded that certain of our digital video recorders, or DVRs, infringed a patent
held by Tivo. If the verdict is upheld on appeal and we are not able to successfully implement alternative
technology, we could be prohibited from distributing DVRs, or be required to modify or eliminate certain user-
friendly DVR features that we currently offer to consumers.
If the Tivo jury verdict is upheld on appeal, we could be required to pay substantial damages, and if we were not able to
successfully implement alternative technology (including the successful defense of any challenge that such technology
infringes Tivo’s patent), we could also be prohibited from distributing DVRs, or be required to modify or eliminate
certain user-friendly DVR features that we currently offer to consumers. In that event we would be at a significant
disadvantage to our competitors who could offer this functionality and, while we would attempt to provide that
functionality through other manufacturers, the adverse affect on our business could be material.
We currently have no commercial insurance coverage on the satellites we own.
We do not use commercial insurance to mitigate the potential financial impact of in-orbit failures because we
believe that the premium costs are uneconomical relative to the risk of satellite failure. We believe we generally
have in-orbit satellite capacity sufficient to recover, in a relatively short time frame, transmission of most of our
critical programming in the event one of our in-orbit satellites fails. We could not, however, recover certain local
markets, international and other niche programming. Further, programming continuity cannot be assured in the
event of multiple satellite losses.
We currently do not have adequate backup satellite capacity to recover all of the local network channels broadcast
from our EchoStar X satellite following a complete failure of that satellite. Therefore, our ability to deliver local
channels in many markets, as well as our ability to comply with SHVERA requirements without incurring
significant additional costs, is dependent on, among other things, the continued successful commercial operation of
EchoStar X.
We also depend on EchoStar VIII to provide service to CONUS at least until such time as our EchoStar XI satellite has
commenced commercial operation, which is currently expected during the second half of 2008. AMC-14, which is
expected to commence commercial operation in early 2008, also has the capability to act as a backup for EchoStar VIII
and could be launched to the 110 degree orbital location, if necessary. In the event that EchoStar VIII experienced a
total or substantial failure, we could transmit many, but not all, of those channels from other in-orbit satellites.
Our satellites are subject to risks related to launch.
Satellite launches are subject to significant risks, including launch failure, incorrect orbital placement or improper
commercial operation. Certain launch vehicles that may be used by us have either unproven track records or have
experienced launch failures in the past. The risks of launch delay and failure are usually greater when the launch
vehicle does not have a track record of previous successful flights. Launch failures result in significant delays in the
deployment of satellites because of the need both to construct replacement satellites, which can take more than two
years, and to obtain other launch opportunities. Such significant delays could materially and adversely affect our
ability to generate revenues. If we were unable to obtain launch insurance, or obtain launch insurance at rates we