Dish Network 2009 Annual Report Download - page 32

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22
Furthermore, weak equity markets could make it difficult for us to raise equity financing without incurring
substantial dilution to our existing shareholders. In addition, weak economic conditions may limit our ability to
generate sufficient internal cash to fund these investments, capital expenditures, acquisitions and other strategic
transactions. As a result, these conditions make it difficult for us to accurately forecast and plan future business
activities because we may not have access to funding sources necessary for us to pursue organic and strategic
business development opportunities.
A portion of our investment portfolio is invested in securities that have experienced limited or no liquidity and
may not be immediately accessible to support our financing needs.
A portion of our investment portfolio is invested in auction rate securities, mortgage backed securities, and strategic
investments and as a result a portion of our portfolio has restricted liquidity. Liquidity in the markets for these
investments has been adversely impacted and these market conditions have adversely affected our liquidity. If the
credit ratings of these securities deteriorate or the lack of liquidity in the marketplace becomes prolonged, we may
be required to record impairment charges. Moreover, the significant volatility of domestic and global financial
markets has greatly affected the volatility and value of our marketable investment securities. To the extent we
require access to funds, we may need to sell these securities under unfavorable market conditions, record further
impairment charges and fall short of our financing needs.
AT&T’s termination of its distribution agreement with us may increase churn.
Our distribution relationship with AT&T was a substantial contributor to our gross and net subscriber additions in
prior years, accounting for approximately 17% of our gross subscriber additions for the year ended December 31,
2008. This distribution relationship ended January 31, 2009. Consequently, beginning with the second quarter
2009, AT&T no longer contributed to our gross subscriber additions. In addition, nearly one million of our current
subscribers were acquired through our distribution relationship with AT&T and subscribers acquired through this
channel have historically churned at a higher rate than our overall subscriber base. Although AT&T is not permitted
to target these subscribers for transition to another pay-TV service and we and AT&T are required to maintain
bundled billing and cooperative customer service for these subscribers, these subscribers may continue to churn at
higher than historical rates following termination of the AT&T distribution relationship.
As technology changes, and to remain competitive, we may have to upgrade or replace subscriber equipment and
make substantial investments in our infrastructure.
Our competitive position depends in part on our ability to offer new subscribers and upgrade existing subscribers
with more advanced equipment, such as receivers with DVR and HD technology and by otherwise making
additional infrastructure investments, such as those related to our information technology and call centers.
Furthermore, the increase in demand for HD programming requires investments in additional satellite capacity. We
may not be able to pass on to our subscribers the entire cost of these upgrades and infrastructure investments.
We rely on EchoStar to design and develop all of our new set-top boxes and certain related components, and to
provide transponder capacity, digital broadcast operations and other services for us. Our business would be
adversely affected if EchoStar ceases to provide these services to us and we are unable to obtain suitable
replacement services from third parties.
EchoStar is our sole supplier of digital set-top boxes and digital broadcast operations. In addition, EchoStar is a key
supplier of other satellite services to us. Because our digital set-top box purchases are made and digital broadcast
operations are received pursuant to contracts that generally expire on January 1, 2011, EchoStar will have no
obligation to supply digital set-top boxes or digital broadcast operations to us after that date, however, we have the
right to renew this agreement for an additional year. Equipment, transponder leasing and digital broadcast operation
costs may increase beyond our current expectations. We may be unable to renew agreements for digital set-top
boxes or digital broadcast operations with EchoStar on acceptable terms or at all. EchoStar’s inability to develop
and produce, or our inability to obtain, equipment with the latest technology, or our inability to obtain transponder
capacity and digital broadcast operations and other services from third parties, could affect our subscriber
acquisition and churn and cause related revenue to decline.