Dish Network 2012 Annual Report Download - page 19

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We may be required to make substantial additional investments to maintain competitive programming offerings.
We believe that the availability and extent of HD programming and other value-added services such as access to
video via smartphones and tablets continues to be a significant factor in consumers’ choice among pay-TV
providers. Other pay-TV providers may have more successfully marketed and promoted their HD programming
packages and value-added services and may also be better equipped and have greater resources to increase their HD
offerings and value-added services to respond to increasing consumer demand. In addition, even though it remains a
small portion of the market, consumer demand for 3D televisions and programming, as well as higher resolution
programming, will likely increase in the future. We may be required to make substantial additional investments in
infrastructure to respond to competitive pressure to deliver enhanced programming, and other value-added services
there can be no assurance that we will be able to compete effectively with offerings from other pay-TV providers.
Any failure or inadequacy of our information technology infrastructure could harm our business.
The capacity, reliability and security of our information technology hardware and software infrastructure (including
our billing systems) are important to the operation of our current business, which would suffer in the event of system
failures. Likewise, our ability to expand and update our information technology infrastructure in response to our
growth and changing needs is important to the continued implementation of our new service offering initiatives.
Our inability to expand or upgrade our technology infrastructure could have adverse consequences, which could
include the delayed implementation of new service offerings, service or billing interruptions, and the diversion of
development resources. For example, during 2011, we implemented new interactive voice response and in-home
appointment scheduling systems. We also implemented a new billing system as well as new sales and customer care
systems in the first quarter 2012. We are relying on third parties for developing key components of these systems
and ongoing service after their implementation. Third parties may experience errors or disruptions that could
adversely impact us and over which we may have limited control. Interruption and/or failure of any of these new
systems could disrupt our operations and damage our reputation thus adversely impacting our ability to provide our
services, retain our current subscribers and attract new subscribers.
In addition, although we take protective measures and endeavor to modify them as circumstances warrant, our
information technology hardware and software infrastructure may be vulnerable to unauthorized access, misuse,
computer viruses or other malicious code and other events that could have a security impact. If one or more of such
events occur, this potentially could jeopardize our customer and other information processed and stored in, and
transmitted through, our information technology hardware and software infrastructure, or otherwise cause
interruptions or malfunctions in our operations, which could result in significant losses or reputational damage. We
may be required to expend significant additional resources to modify our protective measures or to investigate and
remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses.
We currently depend on EchoStar and its subsidiaries, to design, develop and manufacture all of our new set-top
boxes and certain related components, and to provide transponder capacity, digital broadcast operations and
other services to us. Our business would be adversely affected if EchoStar ceases to provide these products and
services to us and we are unable to obtain suitable replacement products and 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 transponder capacity and related services to us. We purchase digital set-top boxes from EchoStar
pursuant to a contract that expires on December 31, 2014. EchoStar provides digital broadcast operations to us
pursuant to a contract that expires on December 31, 2016. EchoStar has no obligation to supply digital set-top boxes
or digital broadcast operations to us after these dates. We may be unable to renew agreements for digital set-top
boxes or digital broadcast operations with EchoStar on acceptable terms or at all. Equipment, transponder leasing
and digital broadcast operation costs may increase beyond our current expectations. 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.
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Furthermore, due to the lack of compatibility of our infrastructure with the set-top boxes of a provider other than
EchoStar, any transition to a new supplier of set-top boxes could take a significant period of time to complete, cause
us to incur significant costs and negatively affect our gross new subscriber activations and subscriber churn. For
example, the proprietary nature of the Sling technology and certain other technology used in EchoStar’s set-top
boxes may significantly limit our ability to obtain set-top boxes with the same or similar features from any other
provider of set-top boxes.
If we were to switch to another provider of set-top boxes, we may have to implement additional infrastructure to
support the set-top boxes purchased from such new provider, which could significantly increase our costs. In
addition, differences in, among other things, the user interface between set-top boxes provided by EchoStar and
those of any other provider could cause subscriber confusion, which could increase our costs and have a material
adverse effect on our gross new subscriber activations and subscriber churn. Furthermore, switching to a new
provider of set-top boxes may cause a reduction in our supply of set-top boxes and thus delay our ability to ship set-
top boxes, which could have a material adverse effect on our gross new subscriber activations and subscriber churn
rate.
We operate in an extremely competitive environment and our success may depend in part on our timely
introduction and implementation of, and effective investment in, new competitive products and services, the
failure of which could negatively impact our business.
Our operating results are dependent to a significant extent upon our ability to continue to introduce new products
and services and to upgrade existing products and services on a timely basis, and to reduce costs of our existing
products and services. We may not be able to successfully identify new product or service opportunities or develop
and market these opportunities in a timely or cost-effective manner. The research and development of new,
technologically advanced products is a complex and uncertain process requiring high levels of innovation and
investment. The success of new product and service development depends on many factors, including among
others, the following:
x difficulties and delays in the development, production, timely completion, testing and marketing
of products and services;
x the cost of the products and services;
x proper identification of customer need and customer acceptance of products and services;
x the development of, approval of and compliance with industry standards;
x the significant amount of resources we must devote to the development of new technologies; and
x the ability to differentiate our products and services and compete with other companies in the
same markets.
If our products and services, including without limitation, our Hopper set-top box, are not competitive or do not
work properly, our business could suffer and our financial performance could be negatively impacted. If the quality
of our products and services do not meet our customers’ expectations or our products are found to be defective, then
our sales and revenues, and ultimately our reputation, could be negatively impacted.
Technology in our industry changes rapidly and our inability to offer new subscribers and upgrade existing
subscribers with more advanced equipment could cause our products and services to become obsolete.
Technology in the pay-TV industry changes rapidly as new technologies are developed, which could cause our
products and services to become obsolete. We and our suppliers may not be able to keep pace with technological
developments. If the new technologies on which we intend to focus our research and development investments fail
to achieve acceptance in the marketplace, our competitive position could be negatively impacted causing a reduction
in our revenues and earnings. We may also be at a competitive disadvantage in developing and introducing complex
new products and services because of the substantial costs we may incur in making these products or services
available across our installed base of approximately 14 million subscribers. For example, our competitors could use
proprietary technologies that are perceived by the market as being superior. Further, after we have incurred
substantial costs, one or more of the products or services under our development, or under development by one or
more of our strategic partners, could become obsolete prior to it being widely adopted.