Dish Network 2007 Annual Report Download - page 18

Table of Contents
capacity we expect to acquire. In addition, there can be no assurance that we can successfully develop the business opportunities we currently
plan to pursue with this additional capacity. Future costs associated with this additional capacity will negatively impact our margins if we do
not have sufficient growth in subscribers or in demand for new programming or services to generate revenue to offset the costs of this increased
capacity.
Competition for our Dish Network Business
We compete in the subscription television service industry against other DBS television providers, cable television and other system operators
offering video, audio and data programming and entertainment services. Many of these competitors have substantially greater financial,
marketing and other resources than we have. Our earnings and other operating metrics could be materially and adversely affected if we are
unable to compete successfully with these and other new providers of multi-channel video programming services.
Cable Television .
Cable television operators have a large, established customer base, and many cable operators have significant investments in
programming. Cable television operators continue to leverage their incumbency advantages relative to satellite operators by, among other
things, bundling their video service with 2-way high speed Internet access and telephone services. Cable television operators with analog
systems are also able to provide service to multiple television sets within the same household at a lesser incremental cost to the consumer, and
they are able to provide local and other programming in a larger number of geographic areas. As a result of these and other factors, we may not
be able to continue to expand our subscriber base or compete effectively against cable television operators.
Some digital cable platforms currently offer a video on demand (“VOD”) service that enables subscribers to choose from a library of
programming selections for viewing at their convenience. We are continuing to develop our own VOD service experience through automatic
video downloads to hard drives in certain of our satellite receivers, the inclusion of broadband connectivity components in certain of our
satellite receivers, and other technologies. There can be no assurance that our VOD service will successfully compare with offerings from other
video providers.
DBS and Other Direct
-to-Home System Operators . News Corporation owns a 38.5% controlling interest in the DirecTV Group, Inc.
(“DirecTV”). In December 2006, Liberty Media Corporation (“Liberty”) agreed to exchange its 16.3% stake in News Corporation for News
Corporation’s stake in DirecTV, together with regional sports networks in Denver, Pittsburg and Seattle. The deal is expected to be completed
during the second half of 2007. News Corporation and Liberty each have ownership interests in diverse world-wide programming content and
other related businesses. These assets provide competitive advantages to DirecTV with respect to the acquisition of programming, content and
other business opportunities valuable to our industry.
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.
VHF/UHF Broadcasters . 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 and Competitors
. 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
11