Dish Network 2011 Annual Report Download - page 157

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-63
QuetzSat-1 Lease Agreement. During 2008, EchoStar entered into a ten-year satellite service agreement with SES
Latin America S.A. ("SES"), which provides, among other things, for the provision by SES to EchoStar of service
on 32 DBS transponders on the QuetzSat-1 satellite. During 2008, EchoStar also entered into a transponder service
agreement ("QuetzSat-1 Transponder Agreement") with us pursuant to which we will receive service from EchoStar
on 24 of the DBS transponders. The QuetzSat-1 Transponder Agreement will be accounted for as an operating
lease. QuetzSat-1 was launched on September 29, 2011 and was placed into service during the fourth quarter 2011
at the 67.1 degree orbital location while we and EchoStar explore alternative uses for the QuetzSat-1 satellite. In
the interim, EchoStar is providing us with alternate capacity at the 77 degree orbital location.
Under the terms of the QuetzSat-1 Transponder Agreement, we will make certain monthly payments to EchoStar
commencing when the QuetzSat-1 satellite is placed into service at the 77 degree orbital location and continuing
through the remainder of the service term. Unless earlier terminated under the terms and conditions of the
QuetzSat-1 Transponder Agreement, the initial service term will expire in November 2021. Upon expiration of the
initial term, we have the option to renew the QuetzSat-1 Transponder Agreement on a year-to-year basis through the
end of life of the QuetzSat-1 satellite. Upon an in-orbit failure or end of life of the QuetzSat-1 satellite, and in
certain other circumstances, we have certain rights to receive service from EchoStar on a replacement satellite.
There can be no assurance that any options to renew the QuetzSat-1 Transponder Agreement will be exercised or
that we will exercise our option to receive service on a replacement satellite.
TT&C Agreement. In connection with the Spin-off, we entered into a telemetry, tracking and control (“TT&C”)
agreement pursuant to which we received TT&C services from EchoStar for a period ending on January 1, 2012
(the “Prior TT&C Agreement”). The fees for services provided under the Prior TT&C Agreement were calculated
at cost plus a fixed margin. We were able to terminate the Prior TT&C Agreement for any reason upon 60 days
notice.
On January 1, 2012, we entered into a TT&C agreement pursuant to which we will continue to receive TT&C
services from EchoStar for a period ending on December 31, 2016 (the “2012 TT&C Agreement”). The material
terms of the 2012 TT&C Agreement are substantially the same as the material terms of the Prior TT&C Agreement,
except that the fees for services provided under the 2012 TT&C Agreement are calculated at either: (i) a fixed fee;
or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided.
“Cost of sales – subscriber promotion subsidies – EchoStar”
Receiver Agreement. EchoStar is currently our sole supplier of set-top box receivers. The table below indicates the
dollar value of set-top boxes and other equipment that we purchased from EchoStar as well as the amount of
purchases that are included in “Cost of sales – subscriber promotion subsidies – EchoStar” on our Consolidated
Statements of Operations and Comprehensive Income (Loss). The remaining amount is included in “Inventory” and
“Property and equipment, net” on our Consolidated Balance Sheets.
Purchases from EchoStar 2011 2010 2009
Set-top boxes and other equipment.................................................. 1,158,293$ 1,470,173$ 1,174,763$
Set-top boxes and other equipment included in “Cost
of sales – subscriber promotion subsidies – EchoStar”................ 249,440$ 175,777$ 188,793$
For the Years Ended December 31,
(In thousands)