DIRECTV 2011 Annual Report Download - page 47

DIRECTV
useful life of any of our satellites were significantly shorter than 12 years from the DIRECTV U.S. depends on the Communications Act for access to cable-
date of launch. affiliated programming and changes impacting that access could materially
adversely affect us.
In the event of a failure or loss of any of DIRECTV U.S.’ satellites,
DIRECTV U.S. may relocate another satellite and use it as a replacement for the DIRECTV U.S. purchases a substantial percentage of programming from
failed or lost satellite. In the event of a complete satellite failure, DIRECTV U.S.’ programmers that are affiliated with cable system operators, including key RSNs.
services provided via that satellite could be unavailable for several days or longer Currently, under certain provisions of the Communications Act governing access to
while backup in-orbit satellites are repositioned and services are moved. DIRECTV programming, cable-affiliated programmers generally must sell and deliver their
U.S. is not insured for any resultant lost revenues. The use of backup satellite programming services to all MVPDs on non-discriminatory terms and conditions.
capacity for DIRECTV U.S. programming may require DIRECTV U.S. to The Communications Act and the FCC rules also prohibit certain types of
discontinue some programming services due to potentially reduced capacity on the exclusive programming contracts involving programming from cable-affiliated
backup satellite. Relocation of a DIRECTV U.S. satellite may not require prior programmers.
FCC approval if, among other things, the replacement satellite would operate Any change in the Communications Act or the FCC’s rules that would permit
within the authorized or coordinated parameters of the failed or lost satellite. If that programmers that are affiliated with cable system operators to refuse to provide
is not the case, prior FCC approval would be required. Such FCC approval may such programming or to impose discriminatory terms or conditions could materially
not be obtained. DIRECTV U.S. believes we have in-orbit satellite capacity to adversely affect our ability to acquire programming on a cost-effective basis, or at
expeditiously recover transmission of most of our programming in the event one of all. For example, the Communications Act prohibitions on certain cable industry
our in-orbit satellites fails. However, programming continuity cannot be assured in exclusive contracting practices with cable-affiliated programmers will expire in
the event of multiple satellite losses. October 2012. Unless the FCC acts to extend those prohibitions, we may be
DIRECTV Latin America provides its services in PanAmericana and Brazil denied access to such programming.
using leased transponders on two satellites. Sky Mexico provides its services from In addition, certain cable providers have in the past denied us and other
leased transponders on a separate satellite. Backup satellite capacity is available to MVPDs access to a limited number of channels created by programmers with
serve Sky Brazil and Sky Mexico. In the event of a failure of a satellite used to which the cable providers are affiliated. In other cases, such programmers have
provide services to Sky Brazil or Sky Mexico, we believe DIRECTV Latin America denied MVPDs high definition feeds of such programming. The cable providers
has sufficient in orbit back-up capacity to recover transmission of most of its have asserted that they are not required by the Communications Act to provide
programming distributed in those markets. However, in PanAmericana, DIRECTV such programming (or resolution) due to the manner in which that programming is
Latin America has no designated back up satellite capacity for the region and, distributed. The FCC adopted rules to close this loophole. However, they require
therefore, programming continuity cannot be assured in the event of a satellite loss. an evidentiary showing by an MVPD seeking access to such programming, and
cable operators have vigorously contested such showings proffered by other
The loss of a satellite that is not insured could materially adversely affect our complainants. If we were not able to make the required evidentiary showing, we
earnings. could be precluded from obtaining such programming, which in turn could
Any launch vehicle failure, or loss or destruction of any of our satellites, even materially adversely affect our ability to compete in regions serviced by those cable
if insured, could have a material adverse effect on our financial condition and providers.
results of operations, our ability to comply with FCC regulatory obligations and DIRECTV U.S. itself is subject to similar restrictions with respect to certain
our ability to fund the construction or acquisition of replacement satellites in a programmers affiliated with us. The FCC imposed a number of conditions on its
timely fashion, or at all. At December 31, 2011, the net book value of in-orbit approval of Liberty Media’s acquisition of News Corporation’s interest in DIRECTV
satellites was $1,913 million, none of which was insured. which continue to apply. Those conditions require DIRECTV U.S. to offer
national and regional programming services it controls to all MVPDs on
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