EchoStar I, a 7000 class satellite, designed and manufactured by Lockheed Martin Corporation (“Lockheed”), is currently
functioning properly in orbit. However, similar Lockheed Series 7000 class satellites have experienced total in-orbit failures, including our own EchoStar II, discussed below. While no telemetry or other data indicates EchoStar I would be expected to experience a similar failure, Lockheed
has been unable to conclude these and other Series 7000 satellites will not experience similar failures. EchoStar I, which is fully depreciated, can
operate up to 16 transponders at 130 watts per channel. During prior years, the satellite experienced anomalies resulting in the possible loss of
two solar array strings. The anomalies have not impacted commercial operation of the satellite to date. Even if permanent loss of the two solar
array strings is confirmed, the satellite is not expected to be impacted since it is equipped with a total of 104 solar array strings, only
approximately 98 of which are required to assure full power.
EchoStar II. During July 2008, our EchoStar II satellite experienced a failure that rendered the satellite a total loss. EchoStar II had been
operating primarily as a back-up satellite, but had provided local network channel service to Alaska and six other small markets. All
programming and other services previously broadcast from EchoStar II were restored to Echostar I within several hours after the failure. The
$6 million book value of EchoStar II was written-off during the third quarter 2008.
EchoStar V. EchoStar V was originally designed with a minimum 12-year design life. Momentum wheel failures in prior years, together with
relocation of the satellite between orbital locations, resulted in increased fuel consumption, as previously disclosed. In addition, to date, EchoStar
V has experienced anomalies resulting in the loss of 13 solar array strings. These issues have not impacted commercial operation of the satellite.
However, during 2005, as a result of the momentum wheel failures and the increased fuel consumption, we reduced the remaining estimated
useful life of the satellite. As of October 2008, EchoStar V was fully depreciated.
EchoStar VII . During 2006, EchoStar VII experienced an anomaly which resulted in the loss of a receiver. Service was quickly restored
through a spare receiver. These receivers process signals sent from our uplink center for transmission back to earth by the satellite. The design
life of the satellite has not been affected and the anomaly is not expected to result in the loss of other receivers on the satellite. However, there
can be no assurance future anomalies will not cause further receiver losses which could impact the useful life or commercial operation of the
satellite. In the event the spare receiver placed in operation following the 2006 anomaly also fails, there would be no impact to the satellite’s
ability to provide service to CONUS when operating in CONUS mode. However, we would lose one-fifth of the spot beam capacity when
operating in spot beam mode.
EchoStar X . EchoStar X was designed with 49 spot beams which use up to 42 active 140 watt traveling wave tube amplifiers (“TWTAs”) to
provide standard definition and HD local channels and other programming to markets across the United States. During January 2008, the satellite
experienced an anomaly which resulted in the failure of one solar array circuit out of a total of 24 solar array circuits, approximately 22 of which
are required to assure full power for the original minimum 12-year design life of the satellite. The design life of the satellite has not been
affected. However, there can be no assurance future anomalies will not cause further losses, which could impact commercial operation of the
satellite or its useful life.
EchoStar III . EchoStar III was originally designed to operate a maximum of 32 DBS transponders in CONUS at approximately 120 watts per
channel, switchable to 16 transponders operating at over 230 watts per channel, and was equipped with a total of 44 TWTAs to provide
redundancy. As a result of past TWTA failures only 18 transponders are currently available for use. Due to redundancy switching limitations and
specific channel authorizations, we can only operate on 15 of our FCC authorized frequencies at the 61.5 degree location. While we do not
expect a large number of additional TWTAs to fail in any year, and the failures have not reduced the original minimum 12-year design life of the
satellite, it is likely that additional TWTA failures will occur from time to time in the future, and such failures could further impact commercial
operation of the satellite.
EchoStar IV. EchoStar IV was originally designed to operate a maximum of 32 DBS transponders in CONUS at approximately 120 watts per
channel, switchable to 16 transponders operating at over 230 watts per channel. As a result of past TWTA failures, only six transponders are
currently available for use. There can be no assurance that further material degradation, or total loss of use, of EchoStar IV will not occur in the
immediate future.
EchoStar VI. EchoStar VI, which is being used as an in-orbit spare, was originally equipped with 108 solar array strings, approximately 102 of
which are required to assure full power availability for the operational life of the satellite. Prior to 2008, EchoStar VI experienced anomalies
resulting in the loss of 22 solar array strings, reducing the number of functional solar array strings to 86. Although the operational life of the
satellite has not been affected, commercial operability has been reduced. The satellite was designed to operate 32 DBS transponders in CONUS
at approximately 125 watts per channel, switchable to 16 transponders operating at approximately 225 watts per channel. The power reduction
resulting from the solar array failures currently limits us to operation of a maximum of 25 transponders in standard power mode, or 12
transponders in high power mode. The number of transponders to which power can be provided is expected to decline in the future at the rate of
approximately one transponder every three years.
EchoStar VIII . EchoStar VIII was designed to operate 32 DBS transponders in CONUS at approximately 120 watts per channel, switchable to
16 transponders operating at approximately 240 watts per channel. EchoStar VIII also includes spot-beam technology. This satellite has
experienced several anomalies since launch, but none have reduced the operational life. However, there can be no assurance that future
anomalies will not cause further losses which could materially impact its commercial operation, or result in a total loss of the satellite.
EchoStar IX. EchoStar IX was designed to operate 32 FSS transponders in CONUS at approximately 110 watts per channel, along with
transponders that can provide services in the Ka-Band (a “Ka-band payload”). The satellite also includes a C-band payload which is owned by a
third party. Prior to 2008, EchoStar IX experienced anomalies resulting in the loss of three solar array strings and the loss of one of its three
momentum wheels, two of which are utilized during normal operations. A spare wheel was switched in at the time. These anomalies have not
impacted the commercial operation of the satellite.
EchoStar XII. EchoStar XII was designed to operate 13 DBS transponders at 270 watts per channel in CONUS mode, or 22 spot beams using a
combination of 135 and 65 watt TWTAs. We currently operate the satellite in spot beam/CONUS hybrid mode. EchoStar XII has a total of 24
solar array circuits, approximately 22 of which are required to assure full power for the original minimum operational life of the satellite. Prior to
2008, eight solar array circuits on EchoStar XII have experienced anomalous behavior resulting in both temporary and permanent solar array
circuit failures. Although the design life of the satellite has not been affected, these circuit failures have resulted in a reduction in power to the
satellite which will preclude us from using the full complement of transponders on EchoStar XII for the operational life of the satellite.
AMC-14. In connection with the Spin-off, we distributed our AMC-14 satellite lease agreement with SES Americom (“SES”) to EchoStar with
the intent to lease the entire capacity of the satellite from EchoStar. During March 2008, AMC-14 experienced a launch anomaly and failed to
reach its intended orbit. SES subsequently declared the AMC-14 satellite a total loss due to a lack of viable options to reposition the satellite to
its proper geostationary orbit. We did not incur any financial liability as a result of the AMC-14 satellite being declared a total loss.
