Dish Network 2014 Annual Report Download - page 89

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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Northstar Wireless and SNR Wireless have made the final payments to the FCC for the AWS-3 licenses, our total
non-controlling equity and debt investments in these entities and their parent companies, respectively, will be
approximately $9.778 billion. We have funded and will fund these investments from existing cash and marketable
investment securities. Such funding has included and will include $899 million in total equity and debt investments
in the Northstar Entities and SNR Entities during the fourth quarter 2014, cash and marketable investment securities
as of December 31, 2014, cash generated from operations during 2015, and a $400 million refund from the FCC to
one of our wholly-owned subsidiaries related to the AWS-3 Auction. Under the applicable accounting guidance in
ASC 810, Northstar Spectrum and SNR Holdco are considered variable interest entities and, based on the
characteristics of the structure of these entities and in accordance with the applicable accounting guidance, we have
consolidated these entities into our financial statements beginning in the fourth quarter 2014. See Note 2 in the Notes
to our Consolidated Financial Statements in this Annual Report on Form 10-K for further discussion.
In the event that the FCC grants the Northstar Licenses and the SNR Licenses, we may need to make significant
additional loans to the Northstar Entities and the SNR Entities, or they may need to partner with others, so that the
Northstar Entities and the SNR Entities may commercialize, build-out and integrate the Northstar Licenses and the
SNR Licenses, and comply with regulations applicable to the Northstar Licenses and the SNR Licenses. Depending
upon the nature and scope of such commercialization, build-out, integration efforts, and regulatory compliance, any
such loans or partnerships could vary significantly. There can be no assurance that we will be able to obtain a
profitable return on our non-controlling investments in the Northstar Entities and the SNR Entities.
See Note 16 “Commitments and Contingencies – Wireless Spectrum” in the Notes to our Consolidated Financial
Statements in this Annual Report on Form 10-K for further discussion.
Satellite Insurance
We generally do not carry commercial insurance for any of the in-orbit satellites that we use, other than certain
satellites leased from third parties. We generally do not use commercial insurance to mitigate the potential financial
impact of launch or in-orbit failures because we believe that the cost of insurance premiums is uneconomical relative
to the risk of such failures. We lease substantially all of our satellite capacity from third parties, including the vast
majority of our transponder capacity from EchoStar, and we do not carry commercial insurance on any of the
satellites that we lease from them. While we generally have had in-orbit satellite capacity sufficient to transmit our
existing channels and some backup capacity to recover the transmission of certain critical programming, our backup
capacity is limited. In the event of a failure or loss of any of our satellites, we may need to acquire or lease
additional satellite capacity or relocate one of our other satellites and use it as a replacement for the failed or lost
satellite.
Purchase Obligations
Our 2015 purchase obligations primarily consist of binding purchase orders for receiver systems and related
equipment, broadband equipment, digital broadcast operations, engineering services, and products and services
related to the operation of our DISH branded pay-TV service. Our purchase obligations also include certain fixed
contractual commitments to purchase programming content. Our purchase obligations can fluctuate significantly
from period to period due to, among other things, management’s control of inventory levels, and can materially
impact our future operating asset and liability balances, and our future working capital requirements.
Programming Contracts
In the normal course of business, we enter into contracts to purchase programming content in which our payment
obligations are generally contingent on the number of subscribers to whom we provide the respective content.
These programming commitments are not included in the “Contractual obligations and off-balance sheet
arrangements” table above. The terms of our contracts typically range from one to ten years with annual rate
increases. Our programming expenses will continue to increase to the extent we are successful growing our subscriber
base. In addition, our margins may face further downward pressure from price increases and the renewal of long
term programming contracts on less favorable pricing terms.