Dish Network 2014 Annual Report Download - page 181

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-75
service level, and, beginning January 1, 2014, certain volume subscription thresholds. The Distribution Agreement
also provides that dishNET Satellite Broadband has the right, but not the obligation, to purchase certain broadband
equipment from HNS to support the sale of the Service. The Distribution Agreement initially had a term of five
years with automatic renewal for successive one year terms unless either party gives written notice of its intent not
to renew to the other party at least 180 days before the expiration of the then-current term. As part of the Satellite
and Tracking Stock Transaction, on February 20, 2014, dishNET Satellite Broadband and HNS amended the
Distribution Agreement which, among other things, extended the initial term of the Distribution Agreement through
March 1, 2024. Upon expiration or termination of the Distribution Agreement, the parties will continue to provide
the Service to the then-current dishNET subscribers pursuant to the terms and conditions of the Distribution
Agreement. During the years ended December 31, 2014, 2013 and 2012, we paid $70 million, $32 million and $1
million, respectively, for these services from HNS, included in “Subscriber-related expenses” on the Consolidated
Statements of Operations and Comprehensive Income (Loss).
For the years ended December 31, 2014, 2013 and 2012, we purchased broadband equipment from HNS of $24
million, $59 million and $24 million, respectively. These amounts are initially included in “Inventory” and are
subsequently capitalized as “Property and equipment, net” on our Consolidated Balance Sheets or expensed as
“Subscriber acquisition costs” on our Consolidated Statements of Operations and Comprehensive Income (Loss)
when the equipment is deployed. In addition, we purchase certain broadband equipment from EchoStar under the
2012 Receiver Agreement, as previously discussed. In addition, see above for further information regarding the
Distribution Agreement.
Voom Settlement Agreement. On October 21, 2012, we entered into the Voom Settlement Agreement with Voom
and Cablevision, and for certain limited purposes, MSG Holdings, L.P., The Madison Square Garden Company and
EchoStar. The Voom Settlement Agreement resolved the litigation between the parties relating to the Voom
programming services. EchoStar was a party to the Voom Settlement Agreement solely for the purposes of
executing a mutual release of claims with Voom, Cablevision, MSG Holdings, L.P. and The Madison Square
Garden Company relating to the Voom programming services.
Radio Access Network Agreement. On November 29, 2012, we entered into an agreement with HNS pursuant to
which HNS will construct for us a ground-based satellite radio access network (“RAN”) for a fixed fee. The
completion of the RAN under this agreement was expected to occur on or before November 29, 2014. This
agreement was terminated during the fourth quarter 2014. At that time, we had incurred $18 million for these
services.
Amended and Restated T2 Development Agreement. On August 29, 2013, we and EchoStar entered into a
development agreement (the “T2 Development Agreement”) with respect to the T2 satellite, by which EchoStar
reimburses us for amounts we pay pursuant to an authorization to proceed (the “T2 ATP”) with SS/L related to the
T2 satellite construction contract. In exchange, we granted EchoStar a right of first refusal and right of first offer to
purchase our rights in T2 during the term of the T2 Development Agreement. In addition, under certain
circumstances EchoStar had a right to receive a portion of the sale proceeds in the event T2 is sold to a third-party
during or following the term of the T2 Development Agreement. Unless sooner terminated in accordance with its
terms, the term of the T2 Development Agreement expired on the later of: (i) December 31, 2013, or (ii) the date on
which the T2 ATP expires.
During the fourth quarter 2013, we and EchoStar amended and restated the T2 Development Agreement (the
“Amended and Restated T2 Development Agreement”), which superseded and replaced the T2 Development
Agreement. Under the Amended and Restated T2 Development Agreement, EchoStar reimbursed us for amounts
we paid pursuant to the T2 ATP with SS/L. During the years ended December 31, 2014 and 2013, we received
payments from EchoStar of approximately $13 million and $35 million, respectively, under the Amended and
Restated T2 Development Agreement to reimburse us for amounts paid to SS/L. In exchange, we granted EchoStar
the right and option to purchase our rights in the T2 satellite for the sum of $55 million, exercisable at any time
between January 1, 2014 and (i) the expiration or earlier termination of the Amended and Restated T2 Development
Agreement or (ii) December 19, 2014, whichever occurs sooner. Unless sooner terminated in accordance with its
terms, the term of the Amended and Restated T2 Development Agreement expires on the later of: (a) December 19,
2014; or (b) the date on which the T2 ATP expires. During the fourth quarter 2014, EchoStar purchased our rights