Dish Network 2015 Annual Report Download - page 52

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Accounting principles generally accepted in the United States (“GAAP”) requires that a long-lived asset be reviewed for
impairment when circumstances indicate that the carrying amount of the asset might not be recoverable. It was
determined that the T1 and D1 satellites met this criteria and therefore in the fourth quarter 2015 we tested the T1
satellite and D1 satellite and related ground equipment for impairment. We have concluded that the T1 satellite’s fair
value exceeded its carrying amount and no impairment was necessary. In addition, we have concluded that the carrying
amount of the D1 satellite and related ground equipment exceeded their fair value determined under the cost approach.
To arrive at fair value utilizing the cost approach, a replacement cost for the satellite was determined, which was then
reduced for, among other things, depreciation and obsolescence. As a result of this assessment, we wrote down the net
book value of the D1 satellite from $150 million to $55 million and the net book value of the related ground equipment
from $28 million to zero and recorded an impairment charge of $123 million in “Impairment of long-lived assets” on our
Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2015. As of
December 31, 2015, the net book value for T1 and D1 was $299 million and $55 million, respectively.
We face certain risks related to our non-controlling investments in the Northstar Entities and the SNR Entities, which
may have a material adverse effect on our business, results of operations and financial condition.
In addition to the risks described in “Item 1A. Risk Factors - We have made substantial investments to acquire certain
wireless spectrum licenses and other related assets. In addition, we have made substantial non-controlling investments
in the Northstar Entities and the SNR Entities related to AWS-3 wireless spectrum licenses” in this Annual Report on
Form 10-K, we face certain other risks related to our non-controlling investments in the Northstar Entities and the SNR
Entities, including, among others, the risks described below. Any of the following risks, among others, may have a
material adverse effect on our business, results of operations and financial condition.
On October 27, 2015, the FCC granted the Northstar Licenses to Northstar Wireless and the SNR Licenses to SNR
Wireless, respectively. We do not own or control the Northstar Licenses or the SNR Licenses nor do we control the
Northstar Entities or the SNR Entities. We do not have a right to require Northstar Manager or SNR Management to sell
their respective ownership interests in Northstar Spectrum and SNR Holdco to us. Northstar Manager, as the sole
manager of Northstar Spectrum, and SNR Management, as the sole manager of SNR Holdco, will have the exclusive
right and power to manage, operate and control Northstar Spectrum and SNR Holdco, respectively, subject to certain
limited protective provisions for the benefit of American II and American III, respectively. Northstar Manager and SNR
Management will have the ability, but not the obligation, to require Northstar Spectrum and SNR Holdco, respectively,
to purchase Northstar Manager’s and SNR Management’s ownership interests in those respective entities after the fifth
anniversary of the grant date of the Northstar Licenses and the SNR Licenses (and in certain circumstances prior to the
fifth anniversary of the grant date of the Northstar Licenses and the SNR Licenses). Thus, we cannot be certain that the
Northstar Licenses or the SNR Licenses will be developed in a manner fully consistent with our current or future
business plans.
Each of Northstar Wireless and SNR Wireless applied to receive bidding credits of 25% as designated entities under
applicable FCC rules. The FCC implemented rules and policies governing the designated entity program that are
intended to ensure that qualifying designated entities are not controlled by operators or investors that do not meet certain
qualification tests. Qualification is also subject to challenge in qui tam lawsuits filed by private parties alleging that
participants have defrauded the government in which the person bringing the suit may share in any recovery by the
government. Furthermore, litigation surrounding designated entity structures, increased regulatory scrutiny or third party
or government lawsuits with respect to our non-controlling investments in the Northstar Entities and the SNR Entities
could result in fines, and in certain cases, license revocation and/or criminal penalties, which could have a material
adverse effect on our business, financial condition or results of operations.
On August 18, 2015, the FCC released the Order in which the FCC determined, among other things, that DISH Network
has a controlling interest in, and is an affiliate of, Northstar Wireless and SNR Wireless, and therefore DISH Network’s
revenues should be attributed to them, which in turn makes Northstar Wireless and SNR Wireless ineligible to receive
the Bidding Credit Amounts
(approximately $1.961 billion for Northstar Wireless and $1.370 billion for SNR
Wireless). Each of Northstar Wireless and SNR Wireless has filed a notice of appeal and petition for review of the Order
with the United States Court of Appeals for the District of Columbia, challenging, among other things, the FCC’s