Dish Network 1997 Annual Report Download - page 6

4
quality difference between a digital and analog signal. The DISH Network also offers multichannel premium services
for separate purchase, at prices which vary depending upon the number and selection of services purchased. The DISH
Network also offers ten channels of pay-per-view programming.
Local Strategy. As described previously, EchoStar believes that in order for the DISH Network to be a true,
fully-competitive alternative to cable television service, it must, among other things, develop a method to seamlessly
provide local broadcast network channels to consumers. Consequently, in January 1998, EchoStar commenced satellite
delivery of local network affiliates to certain of the largest markets in the Eastern and Central time zones. By the end
of the first quarter of 1998, EchoStar expects to be retransmitting the Network Affiliates’ signals from New York City,
Washington D.C., Atlanta, Boston, Chicago, Dallas, and up to potentially five additional markets, to “ unserved
households” (as defined by applicable laws and regulations) in the local areas from which those channels originate.
See “– Government Regulation.” EchoStar presently expects that by the end of 1998 it may allocate up to one-third of
its total authorized DBS satellite capacity to implement its Local Strategy in 20 of the largest television markets in the
continental United States. An additional 18-inch satellite dish may be necessary to receive EchoStar’s Network
Affiliates programming. Thus, EchoStar’s ability to successfully implement its Local Strategy is dependent upon
consumer acceptance of the installation of a second satellite dish in order to receive local programming. EchoStar’s
Network Affiliates programming package is available for purchase by DISH Network subscribers in unserved
households in the applicable local markets, and subject to existing regulations, for $4.99 per month. Several influential
interest groups, including the NAB, have expressed opposition to certain aspects of EchoStar’s Local Strategy. To the
extent that these interest groups are successful in their lobbying efforts, EchoStar’s ability to fully execute its Local
Strategy may be adversely affected.
EchoStar Receiver Systems. DISH Network programming is available to consumers in the continental U.S.
who purchase or lease an EchoStar Receiver System. A typical EchoStar Receiver System includes an 18-inch satellite
dish, an EchoStar digital satellite receiver (which processes and descrambles signals for television viewing), a
user-friendly remote control, and related components. EchoStar Receiver Systems are available in a variety of models.
Subscribers can receive local broadcast signals, either through a standard television antenna (a traditional rooftop or
set-top antenna), by subscribing to basic cable or, in certain areas of the United States, directly from the DISH
Network. EchoStar Receiver Systems are available in a variety of models. The standard EchoStar Receiver System
incorporates infrared remote control technology, an on-screen program guide, and the ability to switch between DISH
Network and local programming signals using the remote control. In addition to the on-screen program guide and local
programming access features of the standard model, the mid-level model features UHF remote control technology
(which allows subscribers to control their EchoStar Receiver System from up to 150 feet away through walls), and a
high-speed data port. EchoStar’s premium model includes UHF remote control technology, a high-speed data port,
enhanced on-screen program guide capabilities (including local program information and seamless integration of local
and satellite channels), and on-screen caller identification capability.
While EchoStar Receiver Systems are internally designed and engineered, EchoStar does not manufacture
EchoStar Receiver Systems directly. Rather, EchoStar has contracted for the manufacture of EchoStar Receiver
Systems with a high-volume contract electronics manufacturer. SCI Systems, Inc. (“ SCI”) currently is EchoStar’s only
manufacturer of EchoStar Receiver Systems. During February 1998, EchoStar executed two separate agreements for
the manufacture of digital set-top boxes in accordance with EchoStar’s specifications. Phillips Electronics of North
America Corporation (“ Phillips”) and VTech Communications Ltd. (“ VTech” ) are expected to begin the
manufacture of EchoStar’s digital set-top boxes during the second half of 1998. There can be no assurance that either
or both of Phillips or VTech will be able to successfully manufacture and deliver digital set-top boxes during 1998, or
at all. JVC Company of America (“ JVC” ) also manufactures limited quantities of other consumer electronics products
that incorporate EchoStar Receiver Systems. EchoStar is negotiating with additional brand-name consumer electronics
manufacturers to produce receivers for use with the DISH Network. No assurance can be provided regarding the
ultimate success of such negotiations.
Installation. Currently, a majority of EchoStar Receiver System installations are performed either by third-
parties or are self-installed by consumers. A wholly-owned subsidiary of EchoStar offers installation services from its
18 offices located throughout the continental U.S. EchoStar intends to begin marketing these services more
aggressively during 1998 and, while there can be no assurance, anticipates that demand for its installation services may
increase as demand for its DISH Network service grows.