Dish Network 2013 Annual Report Download - page 71

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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While we have made improvements in responding to and dealing with customer service issues, we continue to focus
on the prevention of these issues, which is critical to our business, financial condition and results of operations. We
implemented a new billing system as well as new sales and customer care systems in the first quarter 2012. To
improve our operational performance, we continue to make significant investments in staffing, training, information
systems, and other initiatives, primarily in our call center and in-home service operations. These investments are
intended to help combat inefficiencies introduced by the increasing complexity of our business, improve customer
satisfaction, reduce churn, increase productivity, and allow us to scale better over the long run. We cannot,
however, be certain that our spending will ultimately be successful in improving our operational performance.
We have been deploying receivers that utilize 8PSK modulation technology and receivers that utilize MPEG-4
compression technology for several years. These technologies, when fully deployed, will allow more programming
channels to be carried over our existing satellites. Many of our customers today, however, do not have receivers that
use MPEG-4 compression and a smaller but still significant number of our customers do not have receivers that use
8PSK modulation. We may choose to invest significant capital to accelerate the conversion of customers to MPEG-
4 and/or 8PSK to realize the bandwidth benefits sooner. In addition, given that all of our HD content is broadcast in
MPEG-4, any growth in HD penetration will naturally accelerate our transition to these newer technologies and may
increase our subscriber acquisition and retention costs. All new receivers that we purchase from EchoStar have
MPEG-4 technology. Although we continue to refurbish and redeploy certain MPEG-2 receivers, as a result of our
HD initiatives and current promotions, we currently activate most new customers with higher priced MPEG-4
technology. This limits our ability to redeploy MPEG-2 receivers and, to the extent that our promotions are
successful, will accelerate the transition to MPEG-4 technology, resulting in an adverse effect on our acquisition
costs per new subscriber activation.
From time to time, we change equipment for certain subscribers to make more efficient use of transponder capacity
in support of HD and other initiatives. We believe that the benefit from the increase in available transponder
capacity outweighs the short-term cost of these equipment changes.
To maintain and enhance our competitiveness over the long term, we introduced the Hopper® set-top box during
first quarter 2012, which a consumer can use, at his or her option, to view recorded programming in HD in multiple
rooms. During the first quarter 2013, we introduced the Hopper set-top box with Sling, which promotes a suite of
integrated features and functionality designed to maximize the convenience and ease of watching TV anytime and
anywhere, which we refer to as DISH Anywhere™ that includes, among other things, online access and Slingbox
“placeshifting” technology. In addition, the Hopper with Sling has several innovative features that a consumer can
use, at his or her option, to watch and record television programming through certain tablet computers and combines
program-discovery tools, social media engagement and remote-control capabilities through the use of certain tablet
computers and smart phones. We recently introduced the Super JoeyTM receiver. A consumer can use, at his or her
option, the Super Joey combined with the Hopper to record up to eight shows at the same time. There can be no
assurance that these integrated features and functionality will positively affect our results of operations or our gross
new Pay-TV subscriber activations.
On May 22, 2013, we launched a promotion whereby qualifying new Pay-TV subscribers may choose either an
Apple® iPad® 2 or programming credits when they lease a Hopper with Sling set-top box and subscribe to America’s
Top 120, DishLATINO Plus or a higher programming package and commit to a two-year contract (the “iPad
promotion”).
During the second quarter 2012, the four major broadcast television networks filed lawsuits against us alleging,
among other things, that the PrimeTime Anytime™ and AutoHop™ features of the Hopper set-top box infringe their
copyrights. Additionally, Fox has alleged, among other things, that the Sling and Hopper Transfers™ features of
our Hopper set-top box infringe its copyrights. In the event a court ultimately determines that we infringe the
asserted copyrights, we may be subject to, among other things, an injunction that could require us to materially
modify or cease to offer these features. See Note 16 in the Notes to the Consolidated Financial Statements in Item
15 of this Annual Report on Form 10-K for further information.