Dish Network 2007 Annual Report Download - page 11

Table of Contents
Components of a DBS System
Overview . In order to provide programming services to DISH Network subscribers, we have entered into agreements with video, audio and
data programmers who generally make their programming content available to our digital broadcast operations centers via commercial
satellites or fiber optic networks. We monitor those signals for quality, and can add promotional messages, public service programming,
advertising, and other information. Equipment at our digital broadcast operations centers then digitizes, compresses, encrypts and combines the
signal with other necessary data, such as conditional access information. We then “uplink” or transmit the signals to one or more of our
satellites and broadcast directly to DISH Network subscribers.
In order to receive DISH Network programming, a subscriber needs:
EchoStar Receiver Systems
.
EchoStar receiver systems include a small satellite dish, a digital satellite receiver that decrypts and decompresses
signals for television viewing, a remote control and other related components. We offer a number of receiver models. Our standard system
comes with an infrared universal remote control, an on-screen interactive program guide and V-chip type technology for parental control. Our
advanced models include a hard disk drive enabling additional features such as digital video recording of up to 300 hours of programming.
Certain of our standard and premium systems allow independent satellite TV viewing on two separate televisions and include UHF universal
remotes, allowing control through walls when the satellite receiver and TV are not located in the same room. We also offer a variety of
specialized products including HD receivers. Receivers communicate with our authorization center through telephone lines to, among other
things, report the purchase of pay-per-view movies and other events. During 2007, we expect to begin offering DVRs capable of storing up to
500 hours of programming, with the flexibility to further increase storage capacity by attaching external hard drives.
Although we internally design and engineer our receiver systems, we out-source manufacturing to high-volume contract electronics
manufacturers. We depend on a few manufacturers, and in some cases a single manufacturer, for the production of our receivers and many
components of the EchoStar receiver systems that we provide to subscribers. Although there can be no assurance, we do not believe that the
loss of any single manufacturer would materially impact our business. Sanmina-SCI Corporation and Jabil Circuit, Inc. currently manufacture
the majority of our receivers. DISH Network reception equipment is incompatible with our competitors’ systems.
Conditional Access System . Conditional access technology allows us to encrypt our programming so only those who pay can receive it. We
use microchips embedded in credit card-sized access cards, called “smart cards,” or in security chips in the satellite receiver, together referred
to as “security access devices,” to limit access to authorized programming content. When a consumer orders a particular channel, we send a
message by satellite that instructs the security access devices to permit decryption of the programming for viewing by that consumer. The
receiver then decompresses the programming and sends it to the consumer’s television. We own 50% of NagraStar L.L.C., a joint venture that
provides us with security access devices. Nagra USA, a subsidiary of the Kudelski Group, owns the other 50% of NagraStar. NagraStar
purchases these security access devices from NagraCard SA, a Swiss company which is also a subsidiary of the Kudelski Group. These security
access devices, certain aspects of which we can upgrade over the air or replace periodically, are a key element in preserving the security of our
conditional access system.
Increases in theft of our signal, or our competitors’ signals, could cause subscriber churn to increase in future periods. Our signal encryption
has been compromised by theft of service and could be further compromised in the future. We continue to respond to compromises of our
encryption system with security measures intended to make signal theft of our programming more difficult. During 2005, we completed the
replacement of our smart cards. While the smart card replacement did not fully secure our system, we continue to implement software patches
and other security measures to help protect our service. There can be no assurance that our security measures will be effective in reducing theft
of our programming signals. If we are required to replace existing smart cards, the cost could exceed $100.0 million.
4
•
a satellite antenna, which people sometimes refer to as a
“
dish,
”
and related components;
•
a satellite
“
receiver
”
or
“
set
-
top box,
”
and
•
a television.