Dish Network 2013 Annual Report Download - page 94

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
84
84
On September 9, 2013, we filed a letter with the FCC in support of a voluntary industry solution to resolve certain
interoperability issues affecting the lower 700 MHz spectrum band (the “Interoperability Solution”). On October
29, 2013, the FCC issued an order approving the Interoperability Solution (the “Interoperability Solution Order”),
which requires us to reduce power emissions on our 700 MHz licenses. As part of the Interoperability Solution
Order, the FCC, among other things, approved our request to modify the 700 MHz Interim Build-Out Requirement
so that by March 2017 (rather than the previous deadline of June 2013), we must provide signal coverage and offer
service to at least 40% of our total E Block population (the “Modified 700 MHz Interim Build-Out Requirement”).
The FCC also approved our request to modify the 700 MHz Final Build-Out Requirement so that by March 2021
(rather than the previous deadline of June 2019), we must provide signal coverage and offer service to at least 70%
of the population in each of our E Block license areas (the “Modified 700 MHz Final Build-Out Requirement”).
These requirements replaced the previous build-out requirements associated with our 700 MHz licenses. While the
modifications to our 700 MHz licenses would provide us additional time to complete the build-out requirements, the
reduction in power emissions could have an adverse impact on our ability to fully utilize our 700 MHz licenses. If
we fail to meet the Modified 700 MHz Interim Build-Out Requirement, the Modified 700 MHz Final Build-Out
Requirement may be accelerated by one year, from March 2021 to March 2020, and we could face the reduction of
license area(s). If we fail to meet the Modified 700 MHz Final Build-Out Requirement, our authorization may
terminate for the geographic portion of each license in which we are not providing service.
We will need to make significant additional investments or partner with others to, among other things, finance the
commercialization and build-out requirements of these licenses and our integration efforts, including compliance
with regulations applicable to the acquired licenses. Depending on the nature and scope of such commercialization,
build-out, and integration efforts, any such investment or partnership could vary significantly. There can be no
assurance that we will be able to develop and implement a business model that will realize a return on these
spectrum licenses or that we will be able to profitably deploy the assets represented by these spectrum licenses,
which may affect the carrying value of these assets and our future financial condition or results of operations.
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make
estimates, judgments and assumptions that affect amounts reported therein. Management bases its estimates,
judgments and assumptions on historical experience and on various other factors that are believed to be reasonable
under the circumstances. Actual results may differ from previously estimated amounts, and such differences may be
material to the Consolidated Financial Statements. Estimates and assumptions are reviewed periodically, and the
effects of revisions are reflected prospectively in the period they occur. The following represent what we believe are
the critical accounting policies that may involve a high degree of estimation, judgment and complexity. For a summary
of our significant accounting policies, including those discussed below, see Note 2 in the Notes to our Consolidated
Financial Statements in Item 15 of this Annual Report on Form 10-K.
x Capitalized premise equipment. Since we retain ownership of certain equipment provided pursuant to our
subscriber equipment lease programs for Pay-TV and Broadband subscribers, we capitalize and depreciate
equipment costs that would otherwise be expensed at the time of sale. Such capitalized costs are depreciated
over the estimated useful life of the equipment, which is based on, among other things, management’s
judgment of the risk of technological obsolescence. Because of the inherent difficulty of making this estimate,
the estimated useful life of capitalized equipment may change based on, among other things, historical
experience and changes in technology as well as our response to competitive conditions. Changes in
estimated useful life may impact “Depreciation and amortization” on our Consolidated Statements of
Operations and Comprehensive Income (Loss). For example, if we had decreased the estimated useful life of
our capitalized subscriber equipment by one year, annual 2013 depreciation expense would have increased by
approximately $98 million.
x Accounting for investments in private and publicly-traded securities. We hold debt and equity interests in
companies, some of which are publicly traded and have highly volatile prices. We record an investment
impairment charge in “Other, net” within “Other Income (Expense)” on our Consolidated Statements of
Operations and Comprehensive Income (Loss) when we believe an investment has experienced a decline in
value that is judged to be other-than-temporary. We monitor our investments for impairment by considering
current factors including economic environment, market conditions and the operational performance and other