Dish Network 2009 Annual Report Download - page 143

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-53
“Satellite and transmission expenses – EchoStar”
Broadcast Agreement. In connection with the Spin-off, we entered into a broadcast agreement pursuant to
which EchoStar provides us broadcast services, including teleport services such as transmission and
downlinking, channel origination, and channel management services. The term of this agreement expires on
January 1, 2011. We have the right, but not the obligation, to extend the broadcast agreement for one
additional year. We may terminate channel origination services and channel management services for any
reason and without any liability upon sixty days written notice to EchoStar. If we terminate teleport services
for a reason other than EchoStar’s breach, we are obligated to pay EchoStar the aggregate amount of the
remainder of the expected cost of providing the teleport services. The fees for the services to be provided under
the broadcast agreement are cost plus a fixed margin, which vary depending on the nature of the products and
services provided.
Satellite Capacity Leased from EchoStar. In connection with the Spin-off and subsequent to the Spin-off, we
entered into certain satellite capacity agreements pursuant to which we lease certain satellite capacity on certain
satellites owned or leased by EchoStar. The fees for the services provided under these satellite capacity
agreements depend, among other things, upon the orbital location of the applicable satellite and the frequency
on which the applicable satellite provides services. The term of each of the leases is set forth below:
EchoStar III, VI, VIII, and XII. We lease certain satellite capacity from EchoStar on EchoStar III, VI,
VIII, and XII. The leases generally terminate upon the earlier of: (i) the end of the life or the
replacement of the satellite (unless we determine to renew on a year-to-year basis); (ii) the date the
satellite fails; (iii) the date the transponder on which service is being provided fails; or (iv) a certain
date, which depends upon, among other things, the estimated useful life of the satellite, whether the
replacement satellite fails at launch or in orbit prior to being placed in service, and the exercise of
certain renewal options. We generally have the option to renew each lease on a year-to-year basis
through the end of the respective satellite’s life. There can be no assurance that any options to renew
such agreements will be exercised.
EchoStar XVI. We will lease certain satellite capacity from EchoStar on EchoStar XVI after its service
commencement date and this lease generally terminates upon the earlier of: (i) the end-of-life or
replacement of the satellite; (ii) the date the satellite fails; (iii) the date the transponder(s) on which
service is being provided under the agreement fails; or (iv) ten years following the actual service
commencement date. Upon expiration of the initial term, we have the option to renew on a year-to-
year basis through the end-of-life of the satellite. There can be no assurance that any options to renew
this agreement will be exercised.
EchoStar XV Launch Service. On December 21, 2009, EchoStar assigned the rights under one of its launch
contracts to us for $103 million. We recorded the launch contract at a net book value of $89 million and
recorded the $14 million difference between EchoStar’s carrying value and our purchase price as a capital
transaction with EchoStar. We expect to use this launch contract for EchoStar XV, which is scheduled to
launch in late 2010.
Nimiq 5 Agreement. During September 2009, EchoStar entered into a fifteen-year satellite service agreement
with Telesat Canada (“Telesat”) to receive service on all 32 DBS transponders on the Nimiq 5 satellite at the
72.7 degree orbital location (the “Telesat Transponder Agreement”). During September 2009, EchoStar also
entered into a satellite service agreement (the “DISH Telesat Agreement”) with us, pursuant to which we will
receive service from EchoStar on all of the DBS transponders covered by the Telesat Transponder Agreement.
We have also guaranteed certain obligations of EchoStar under the Telesat Transponder Agreement. See
discussions under “Guarantees” in Note 10.