Dish Network 2010 Annual Report Download - page 10

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3
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cards, called “smart cards,” or security chips in our receiver systems to control access to authorized programming
content (“Security Access Devices”).
Our signal encryption has been compromised in the past and may be compromised in the future even though we
continue to respond with significant investment in security measures, such as Security Access Device replacement
programs and updates in security software, that are intended to make signal theft more difficult. It has been our
prior experience that security measures may only be effective for short periods of time or not at all and that we
remain susceptible to additional signal theft. During 2009, we completed the replacement of our Security Access
Devices and re-secured our system. We expect additional future replacements of these devices will be necessary to
keep our system secure. We cannot ensure that we will be successful in reducing or controlling theft of our
programming content and we may incur additional costs in the future if our system’s security is compromised.
Distribution Channels
While we offer receiver systems and programming through direct sales channels, a majority of our new subscriber
acquisitions are generated through independent third parties such as small satellite retailers, direct marketing groups,
local and regional consumer electronics stores, nationwide retailers, and telecommunications companies. In general,
we pay these independent third parties a mix of upfront and monthly incentives to solicit orders for our services. In
addition, we partner with telecommunications companies to bundle DISH Network programming with broadband
and voice services on a single bill.
Competition
As of December 31, 2010, our 14.133 million subscribers represent approximately 15% of pay-TV subscribers in the
United States. We face substantial competition from established pay-TV providers and increasing competition from
companies providing/facilitating the delivery of video content via the Internet to computers, televisions, and mobile
devices.
• Other Direct Broadcast Satellite Operators. We compete directly with the DirecTV Group, Inc., or
DirecTV, the largest satellite TV provider in the U.S. which had over 19.2 million subscribers at the end of
2010, representing approximately 20% of pay-TV subscribers.
• Cable Television Companies. We encounter substantial competition in the pay-TV industry from numerous
cable television companies that operate via franchise licenses across the U.S. According to the National
Cable & Telecommunications Association’s 2009 Industry Overview, 98% of the 130 million U.S. housing
units are passed by cable. More than 95 million households subscribe to a pay-TV service and
approximately 63% of pay-TV subscribers receive their programming from a cable operator. Cable
companies are typically able to bundle their video services with broadband Internet access and voice
services and many have significant investments in companies that provide programming content.
• Telecommunications Companies. Large telecommunications companies have upgraded older copper wire
lines with fiber optic lines in their larger markets. These fiber optic lines provide high capacity bandwidth,
enabling telecommunications companies to offer video content that can be bundled with their broadband
Internet access and voice services. In particular, AT&T and Verizon have built fiber-optic based networks
to provide video services in substantial portions of their service areas.
• Internet Delivered Video. We face competition from content providers who distribute video directly to
consumers over the Internet. Programming offered over the Internet has become more prevalent as the
speed and quality of broadband networks have improved. Significant changes in consumer behavior with
regard to the means by which they obtain video entertainment and information in response to this emerging
digital media competition could materially adversely affect our business, results of operations and financial
condition or otherwise disrupt our business.
• Wireless Mobile Video. We also expect to face increasing competition from wireless telecommunications
providers who offer mobile video offerings. We expect mobile video offerings will likely become more
prevalent in the marketplace as wireless telecommunications providers implement the fourth generation of
wireless communications.