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`10-K 1 a2218344z10-k.htm 10-K
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`EXHIBITS, FINANCIAL STATEMENT SCHEDULES
`TABLE OF CONTENTS 3
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`Table of Contents
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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`Form 10-K
`
`(Mark
`One)
`(cid:58)
`
`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
`OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013
`
`OR
`
`(cid:134)
`
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
`TO
`.
`ACT OF 1934 FOR THE TRANSITION PERIOD FROM
`
`Commission file number: 001-33807
`
`EchoStar Corporation
`(Exact name of registrant as specified in its charter)
`
`Nevada
`(State or Other Jurisdiction of Incorporation or
`Organization)
`
`100 Inverness Terrace East, Englewood, Colorado
`(Address of Principal Executive Offices)
`
`26-1232727
`(I.R.S. Employer Identification No.)
`
`80112-5308
`(Zip Code)
`
`Registrant's telephone number, including area code: (303) 706-4000
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`Class A common stock, $0.001 par value
`
`Name of each exchange on which registered
`The NASDAQ Stock Market LLC
`
`Securities registered pursuant to Section 12(g) of the Act:
`
`None
`
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
`Yes (cid:58) No (cid:134)
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
`Yes (cid:134) No (cid:58)
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`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
`Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
`file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:58) No (cid:134)
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
`Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
`during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
`Yes (cid:58) No (cid:134)
`
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
`not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
`statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:134)
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
`smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"
`in Rule 12b-2 of the Exchange Act.
`
`Large accelerated filer (cid:58)
`
`Accelerated filer (cid:134)
`
`Non-accelerated filer (cid:134)
`(Do not check if a smaller
`reporting company)
`
`Smaller reporting company (cid:134)
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
`Yes (cid:134) No (cid:58)
`
`As of June 28, 2013, the aggregate market value of Class A common stock held by non-affiliates of the registrant was
`$1.63 billion based upon the closing price of the Class A common stock as reported on the Nasdaq Global Select Market as of
`the close of business on that date.
`
`As of February 13, 2014, the registrant's outstanding common stock consisted of 42,855,812 shares of Class A common stock
`and 47,687,039 shares of Class B common stock, each $0.001 par value.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`The following documents are incorporated into this Form 10-K by reference:
`
`Portions of the registrant's definitive Proxy Statement to be filed in connection with its 2014 Annual Meeting of Shareholders
`are incorporated by reference in Part III.
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`Table of Contents
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`TABLE OF CONTENTS
`
`Disclosure Regarding Forward Looking Statements
`
`Business
`Item 1.
`Item 1A. Risk Factors
`Item 1B. Unresolved Staff Comments
`Item 2.
`Properties
`Item 3.
`Legal Proceedings
`Item 4.
`Mine Safety Disclosures
`
`PART I
`
`PART II
`
`Item 5.
`
`Item 6.
`Item 7.
`
`Market for Registrant's Common Equity, Related Stockholder Matters
`and Issuer Purchases of Equity Securities
`Selected Financial Data
`Management's Discussion and Analysis of Financial Condition and
`Results of Operations
`Item 7A. Quantitative and Qualitative Disclosures about Market Risk
`Item 8.
`Financial Statements and Supplementary Data
`Item 9.
`Changes in and Disagreements with Accountants on Accounting and
`Financial Disclosure
`Item 9A. Controls and Procedures
`Item 9B. Other Information
`
`Item 10.
`Item 11.
`Item 12.
`
`Item 13.
`
`Item 14.
`
`Item 15.
`
`PART III
`
`Directors, Executive Officers and Corporate Governance
`Executive Compensation
`Security Ownership of Certain Beneficial Owners and Management and
`Related Stockholder Matters
`Certain Relationships and Related Transactions, and Director
`Independence
`Principal Accounting Fees and Services
`
`PART IV
`
`Exhibits, Financial Statement Schedules
`Signatures
`Index to Consolidated Financial Statements
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`38
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`45
`45
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`47
`77
`79
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`79
`80
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`82
`82
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`82
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`82
`82
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`83
`90
`F-1
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`DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
`
`We make "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 throughout
`this report. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we
`"believe," "intend," "plan," "estimate," "project," "expect" or "anticipate" and other similar statements), you must remember
`that such statements are based on our current beliefs, expectations, estimates, and assumptions and that our expectations,
`estimates and assumptions may not be achieved, even though we believe they are reasonable. We do not guarantee that any
`future transactions or events described herein will happen as described or that they will happen at all. You should read this
`report completely and with the understanding that actual future results may be materially different from those expressed in, or
`implied, or projected by the forward-looking statements and information. Whether actual events or results will conform to our
`expectations and predictions is subject to a number of risks and uncertainties, many of which are difficult to predict and
`generally beyond our control.
`
`For further discussion of these risks and uncertainties, see Item 1A. Risk Factors of this Annual Report on Form 10-K. The
`risks and uncertainties include, but are not limited to, the following:
`
`General Risks Affecting Our Business
`
`•
`
`•
`
`•
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`•
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`•
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`•
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`•
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`•
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`•
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`•
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`We currently derive a significant portion of our revenue from our primary customer, DISH Network
`Corporation ("DISH Network"). The loss of, or a significant reduction in, orders from, or a decrease in selling
`prices of digital set-top boxes, transponder leasing, provision of digital broadcast services, broadband
`equipment and services and/or other products or services to DISH Network would significantly reduce our
`revenue and adversely impact our results of operations.
`
`We could face decreased demand and increased pricing pressure to our products and services due to
`competition.
`
`The average selling price and gross margins of our digital set-top boxes have been decreasing and may decrease
`even further, which could negatively impact our financial position and results of operations.
`
`If significant numbers of television viewers are unwilling to pay for pay-TV services that utilize digital set-top
`boxes, we may not be able to sustain our current revenue level.
`
`We may have unused satellite capacity in our EchoStar Satellite Services segment, and our results of operations
`may be materially adversely affected if we are not able to lease this capacity to third parties, including DISH
`Network.
`
`The failure to adequately anticipate the need for satellite capacity or the inability to obtain satellite capacity for
`our Hughes segment could harm our results of operations.
`
`We are dependent upon third-party providers for components, manufacturing, installation services, and
`customer support services, and our results of operations may be materially adversely affected if any of these
`third-party providers fail to appropriately deliver the contracted goods or services.
`
`Our foreign operations expose us to regulatory risks and restrictions not present in our domestic operations.
`
`We may experience significant financial losses on our existing investments.
`
`We may pursue acquisitions and other strategic transactions to complement or expand our business, which may
`not be successful and we may lose a portion or all of our investment in these acquisitions and transactions.
`
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`•
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`•
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`•
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`We may not be able to generate cash to meet our debt service needs or fund our operations.
`
`Covenants in Hughes Satellite Systems Corporation's ("HSS") indentures restrict its business in many ways.
`
`We rely on key personnel and the loss of their services may negatively affect our businesses.
`
`Risks Related to Our Satellites
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`Our owned and leased satellites in orbit are subject to significant operational and environmental risks that could
`limit our ability to utilize these satellites.
`
`Our satellites have minimum design lives ranging from 12 to 15 years, but could fail or suffer reduced capacity
`before then.
`
`Our satellites under construction are subject to risks related to construction and launch that could limit our
`ability to utilize these satellites.
`
`We generally do not have commercial insurance coverage on the satellites we use and could face significant
`impairment charges if one of our uninsured satellites fails.
`
`Our use of certain satellites is often dependent on satellite coordination agreements, which may be difficult to
`obtain.
`
`Our dependence on outside contractors could result in delays related to the design, manufacture and launch of
`our new satellites, which could in turn adversely affect our operating results.
`
`Risks Related to Our Products and Technology
`
`•
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`•
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`•
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`•
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`•
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`If we are unable to properly respond to technological changes, our business could be significantly harmed.
`
`Our future growth depends on growing demand for advanced technologies.
`
`Our business depends on certain intellectual property rights and on not infringing the intellectual property rights
`of others. The loss of our intellectual property rights or our infringement of the intellectual property rights of
`others could have a significant adverse impact on our business.
`
`We are party to various lawsuits which, if adversely decided, could have a significant adverse impact on our
`business, particularly lawsuits regarding intellectual property.
`
`If the encryption and related security technology used in our digital set-top boxes is compromised, sales of our
`digital set-top boxes may decline.
`
`We rely on network and information systems and other technologies and a disruption, cyber-attack, failure or
`destruction of such networks, systems or technologies may disrupt or harm our business.
`
`If our products contain defects, we could be subject to significant costs to correct such defects and our product
`and network service contracts could be delayed or cancelled, which could adversely affect our revenue.
`
`Risks Related to the Regulation of Our Business
`
`•
`
`Our business is subject to risks of adverse government regulation.
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`•
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`•
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`Our business depends on regulatory authorizations issued by the Federal Communications Commission
`("FCC") and state and foreign regulators, that can expire, be revoked or modified, and applications for licenses
`and other authorizations that may not be granted.
`
`Our ability to sell our digital set-top boxes to certain operators depends on our ability to obtain licenses to use
`the conditional access systems utilized by these operators.
`
`We may face difficulties in accurately assessing and collecting contributions towards the Universal Service
`Fund.
`
`Other Risks
`
`•
`
`•
`
`•
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`•
`
`We are controlled by one principal stockholder who is our Chairman.
`
`We have potential conflicts of interest with DISH Network due to our common ownership and management.
`
`It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders,
`because of our capital structure.
`
`We may face other risks described from time to time in periodic and current reports we file with the Securities
`and Exchange Commission ("SEC").
`
`All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they
`appear. Investors should consider the risks and uncertainties described herein and should not place undue reliance on any
`forward-looking statements. We assume no responsibility for updating forward-looking information contained or incorporated
`by reference herein or in other reports we file with the SEC.
`
`In this report, the words "EchoStar," the "Company," "we," "our" and "us" refer to EchoStar Corporation and its subsidiaries,
`unless the context otherwise requires. "DISH Network" refers to DISH Network Corporation and its subsidiaries, unless the
`context otherwise requires.
`
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`Item 1. BUSINESS
`
`OVERVIEW
`
`PART I
`
`EchoStar Corporation (together with its subsidiaries is referred to as "EchoStar," the "Company," "we," "us" and/or "our") is a
`holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada. In 2008, DISH
`Network Corporation and its subsidiaries ("DISH Network") completed its distribution to us of its digital set-top box business
`and certain infrastructure and other assets, including certain of their satellites, uplink and satellite transmission assets, real
`estate, and other assets and related liabilities to us (the "Spin-off"). Since the Spin-off, EchoStar and DISH Network have
`operated as separate publicly-traded companies, and as of December 31, 2013, neither entity has any ownership interest in the
`other (See Note 20 of this report for a discussion of our subsequent events). However, a substantial majority of the voting
`power of the shares of both companies is beneficially owned by Charles W. Ergen, our Chairman, and by certain trusts
`established by Mr. Ergen for the benefit of his family. Our Class A common stock is publicly traded on the Nasdaq Global
`Select Market ("Nasdaq") under the symbol "SATS." We are a global provider of satellite operations, video delivery solutions,
`digital set-top boxes, and broadband satellite technologies and services for home and office, delivering innovative network
`technologies, managed services, and solutions for enterprises and governments.
`
`We currently operate in three business segments.
`
`•
`
`•
`
`•
`
`EchoStar Technologies—which designs, develops and distributes digital set-top boxes and related products
`and technology, primarily for satellite TV service providers, telecommunication companies and international
`cable companies. Our EchoStar Technologies segment also provides digital broadcast operations, including
`satellite uplinking/downlinking, transmission services, signal processing, conditional access management, and
`other services, primarily to DISH Network. In addition, we provide our Slingboxes directly to consumers via
`retail outlets and online.
`
`Hughes—which provides satellite broadband internet access to North American consumers and broadband
`network services and equipment to domestic and international enterprise markets. The Hughes segment also
`provides managed services to large enterprises and solutions to customers for mobile satellite systems.
`
`EchoStar Satellite Services—which uses certain of our owned and leased in-orbit satellites and related licenses
`to lease capacity on a full-time and occasional-use basis primarily to DISH Network and secondarily to Dish
`Mexico, S. de R.L. de C.V. ("Dish Mexico"), a joint venture that we entered into in 2008, as well as United
`States ("U.S.") government service providers, state agencies, internet service providers, broadcast news
`organizations, programmers, and private enterprise customers.
`
`Our operations also include real estate and other activities that have not been assigned to our operating segments, costs
`incurred in business development activities, expenses of various corporate departments, and our centralized treasury activities,
`including income from our investment portfolio and interest expense on our debt.
`
`BUSINESS STRATEGIES
`
`Capitalize on demand for broadband services. We intend to capitalize on the demand for satellite-delivered broadband
`services and enterprise solutions by utilizing, among other things, our industry expertise, technology leadership, satellite
`capacity, and high-quality, reliable service to continue growth in consumer subscribers and the enterprise market.
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`Expand satellite capacity and related infrastructure. Our expertise in the identification, acquisition and development of
`satellite spectrum rights and satellite operations, together with existing or acquired infrastructure will provide opportunities to
`cross sell services, bundle satellite broadband and video services, and explore opportunities in new markets. We believe
`market opportunities exist that will facilitate the acquisition or leasing of satellite capacity which will enable us to provide
`services to a broader customer base, including providers of pay-TV services, satellite-delivered broadband, corporate
`communications, and government services.
`
`Exploit international opportunities. We believe that direct-to-home ("DTH") satellite and broadband services are
`particularly well-suited for countries without extensive telecommunications and cable infrastructure. We intend to selectively
`pursue partnerships, joint ventures and strategic acquisition opportunities that allow us to capitalize on our extensive
`experience in delivering end-to-end broadband and pay-TV consumer services.
`
`Expand our set-top box and customer premise equipment sales. With our extensive experience in designing, developing,
`manufacturing and distributing digital set-top boxes and related products, we believe we can leverage the broader adoption of
`advanced technologies such as whole home DVR, placeshifting for TVAnywhere, hybrid internet offerings and other in-home
`solutions to create opportunities for us. Therefore, we continue to explore opportunities, including partnerships, joint ventures
`and strategic acquisitions, to expand our existing markets or enter new markets. In addition, we intend to seek opportunities to
`license our technology to other original equipment manufacturers or pay-TV providers.
`
`Develop improved technologies. The engineering capabilities of our combined business units provides us with the
`opportunity to develop and deploy cutting edge technologies, license our technologies to others, and maintain a leading
`technological position in the industries in which we are active.
`
`BUSINESS SEGMENTS
`
`ECHOSTAR TECHNOLOGIES SEGMENT
`
`Our Products
`
`Digital Set-Top Boxes. Our EchoStar Technologies segment offers a wide range of digital set-top boxes that allow
`consumers to watch and control their television programming and contain a variety of other capabilities and functionality. Our
`current digital set-top boxes include:
`
`•
`
`•
`
`High-definition ("HD") digital set-top boxes. These devices allow consumers who subscribe to television
`services from multi-channel video distributors to access the enhanced picture quality and sound of high-
`definition content, in addition to the standard-definition ("SD") functionality of our SD digital set-top boxes.
`
`SD digital set-top boxes. These devices allow consumers who subscribe to television service from multi-
`channel video distributors to access encrypted digital video and audio content.
`
`Certain models of our HD digital set-top boxes and SD digital set-top boxes also contain certain of the following advanced
`capabilities and functionalities:
`
`•
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`•
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`Interactive Applications. Include an on-screen program guide, pay-per-view offerings, video content/meta-data
`enhancing user applications, social media, games, and shopping.
`
`Digital Video Recorder ("DVR"). Enables subscribers to pause, stop, reverse, fast forward, record, and replay
`digital television content using a built-in and/or external hard drive capable of storing content. Our whole-home
`HD DVR receiver provides subscribers a variety of features that a consumer can use, at his or her option, to
`control, and/or record programming.
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`Broadband Internet Connectivity. Provides internet protocol television ("IPTV") functionality, which supports
`on-demand services that allow consumers to download television programming, movies, music, applications,
`and other content.
`
`Slingbox "placeshifting" technology. Allows a customer, at his or her option, to watch and control their digital
`television content anywhere in the world via a broadband internet connection.
`
`In addition to digital set-top boxes, we also design and develop related products such as satellite dishes and remote controls.
`
`Digital Broadcast Operations. We operate a number of digital broadcast centers in the U.S. Our principal digital broadcast
`centers are located in Cheyenne, Wyoming and Gilbert, Arizona. We also have multiple regional and micro digital broadcast
`centers that allow us to maximize the use of the spot beam capabilities of our satellites and our customers' satellites.
`Programming and other data are received at these centers by fiber optic cable or satellite. The data is then processed,
`compressed, and encrypted and then uplinked to our satellites and our customers' satellites for transmission to end-users.
`
`Our Customers
`
`Historically, the primary customer of our EchoStar Technologies segment has been DISH Network. DISH Network accounted
`for 90.1%, 76.9% and 79.4% of our total EchoStar Technologies segment revenue for the years ended December 31, 2013,
`2012 and 2011, respectively. Bell TV, a DTH satellite service provider in Canada, accounted for 4.5%, 13.4% and 12.3% of
`our total EchoStar Technologies segment revenue for the years ended December 31, 2013, 2012 and 2011, respectively. We
`also currently sell our digital set-top boxes to other international DTH satellite and cable providers, including Dish Mexico.
`
`We expect DISH Network will continue to be the primary customer and the key revenue contributor for our EchoStar
`Technologies segment. Effective January 1, 2012, we entered into a receiver agreement, expiring on December 31, 2014, with
`DISH Network pursuant to which DISH Network has the right, but not the obligation, to purchase digital set-top boxes, related
`accessories, and other equipment from us either: (i) at cost (decreasing as we reduce costs and increasing as our costs increase)
`plus a dollar mark-up which will depend upon the cost of the product subject to a collar on our mark-up; or (ii) at cost plus a
`fixed margin, which will depend on the nature of the equipment purchased. Under the receiver agreement, our margins will be
`increased if we are able to reduce the costs of our digital set-top boxes and our margins will be reduced if these costs increase.
`
`A majority of our EchoStar Technologies segment's international revenue during each of the years ended December 31, 2013,
`2012 and 2011 was attributable to sales of digital set-top boxes to Bell TV. In 2012, we amended our Pricing Agreement with
`Bell TV, which extended our exclusivity rights until December 31, 2013. Among other things, the Pricing Agreement, as
`amended, entitles us to be Bell TV's exclusive provider of digital set-top boxes, subject to certain limited exceptions, and
`provides fixed pricing over the term of the agreement as well as providing future engineering development for enhanced Bell
`TV service offerings. In January 2014, we amended the Pricing Agreement, which extended our exclusivity rights under the
`Pricing Agreement until February 28, 2014.
`
`Our Competition
`
`The set-top box industry is highly competitive, and market leadership changes frequently as a result of new products, designs
`and pricing. As we seek to grow our revenue and market share in the digital set-top box industry, we face substantial
`competition. Many of our primary competitors, such as Arris Group, Inc. ("Arris"), Cisco Systems, Inc. ("Cisco"), Pace Micro
`Technology Plc. ("PACE"), Samsung, and Technicolor S.A. ("Technicolor"), have established longstanding relationships with
`their customers. In addition, a number of rapidly growing companies have recently entered the market with set-top box
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`offerings similar to our existing satellite set-top box products. The entry of these new competitors may result in increased
`pricing pressure in the market. We may also face competition from international developers of digital set-top box systems that
`may be able to develop and manufacture products and services at costs that are substantially lower than ours. Furthermore, we
`depend heavily on our ability to successfully bring advanced technologies, including internet delivery of video content and our
`Slingbox placeshifting technology, to market to keep pace with our competitors.
`
`Our use of proprietary technology, together with our in-house engineering expertise, enables us to innovate and bring new
`features and enhancements quickly to our primary customers. In addition, our end-to-end video solution allows us to provide a
`more cost-effective solution for a pay-TV operator who may have to negotiate hardware, middleware and a conditional access
`system separately. We have a long-standing relationship with DISH Network and provide to them technologically advanced
`set-top boxes, including advanced hybrid satellite and internet protocol over-the-top delivery solutions, Slingbox placeshifting
`technology, and whole-home DVR functionality.
`
`Our Manufacturers
`
`Although we design, engineer and distribute digital set-top boxes and related products, we are not directly engaged in the
`manufacturing process. Rather, we outsource the manufacturing of our digital set-top boxes and related products to third
`parties who manufacture our products according to specifications supplied by us. We depend on a few manufacturers, and in
`some cases a single manufacturer, for the production of digital set-top boxes and related products. Although there can be no
`assurance, we do not believe that the loss of any single manufacturer would materially impact our business. Sanmina-SCI
`Corporation, Shanghai DD&TT Electronic Enterprise Co., LTD and Jabil Circuit, Inc. currently manufacture the majority of
`our digital set-top boxes and accessories.
`
`HUGHES SEGMENT
`
`Our Products and Services
`
`Our Hughes segment uses its two owned satellites, SPACEWAY 3 and EchoStar XVII, and additional satellite capacity
`acquired from multiple third-party providers, to provide satellite broadband internet access to North American consumers,
`which we refer to as the consumer market, and broadband network services and equipment to domestic and international
`enterprise markets. Our Hughes segment also provides managed services to large enterprises and solutions to customers for
`mobile satellite systems. We incorporate advances in technology to reduce costs and to increase the functionality and
`reliability of our products and services. Through the usage of advanced spectrally efficient modulation and coding
`methodologies, proprietary software web acceleration and compression techniques, we continue to improve the efficiency of
`our networks. We invest in technologies to enhance our system and network management capabilities, specifically our
`managed services for enterprises. We also continue to invest in next generation technologies that can be applied to our future
`products and services. Beginning in October 2012, we introduced HughesNet Gen4 broadband internet services to our
`customers in North America on EchoStar XVII, which was launched in July 2012. In October 2012, we entered into a
`distribution agreement (the "Distribution Agreement") with dishNET Satellite Broadband L.L.C. ("dishNET"), a wholly-
`owned subsidiary of DISH Network, pursuant to which dishNET has the right, but not the obligation, to market, sell and
`distribute the Hughes satellite internet service (the "Hughes service") under the dishNET brand. See Note 19 in the Notes to
`Consolidated Financial Statements in Item 15 of this report for further discussion of our related party transactions with DISH
`Network.
`
`Our Customers
`
`Our Hughes segment delivers broadband internet service to North American consumers. It also provides satellite, network
`products and services and managed network services and equipment to
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`enterprises and broadband service providers worldwide. In addition, our Hughes segment provides satellite ground segment
`systems and terminals to mobile system operators.
`
`As of December 31, 2013 and 2012, our Hughes segment had approximately 860,000 and 636,000 broadband subscribers,
`respectively, of which 635,000 and 588,000 were residential retail subscribers, respectively. These broadband subscribers
`include customers that subscribe to our HughesNet broadband services, through retail, wholesale and small/medium enterprise
`service channels.
`
`As of December 31, 2013 and 2012, our Hughes segment had approximately $1.15 billion and $1.06 billion, respectively, of
`contracted revenue backlog. We define Hughes revenue backlog as our expected future revenue under customer contracts that
`are non-cancelable, excluding agreements with customers in our consumer market. Of the total contracted revenue backlog as
`of December 31, 2013, we expect to recognize approximately $383.1 million of revenue in 2014.
`
`Our Competition
`
`The network communications industry is highly competitive. As a global provider of data network products and services, our
`Hughes segment competes with a large number of telecommunications service providers. This increasingly competitive
`environment has put pressure on prices and margins. To compete effectively, we emphasize, among other things, our network
`quality, our customization capability, our offering of networks as a turnkey managed service, our position as a single point of
`contact for products and services and our competitive prices.
`
`In our consumer market, we compete against traditional telecommunications and wireless carriers, as well as digital subscriber
`line ("DSL") and cable internet service providers offering competitive services in many communities we seek to serve. Cost,
`speed and accessibility are key determining factors in the election of a service provider by the consumer. Our primary satellite
`competitor in our North American consumer market is ViaSat Communications, Inc. ("ViaSat Communications"), which is
`owned by ViaSat, Inc. ("ViaSat"). In addition, we face competition against establish