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  **UNITED STATES SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549****Form 10-K**(Mark One)   þ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**     **FOR THE FISCAL YEARENDED DECEMBER 31, 2006****OR**   o **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934     **FOR THETRANSITION PERIOD FROM                     TO                     .****Commission file number: 333-31929****EchoStar DBS Corporation**(Exact name of registrant as specified in its charter)   **Colorado** **84-1328967**(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)   **9601 South Meridian Boulevard**  **Englewood, Colorado** **80112**(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (303) 723-1000Securities registered pursuant to Section 12(b) of the Act:     NoneSecurities registered pursuant to Section 12(g) of the Act:     NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act.  Yes  o     No  þIndicate by check mark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) of the Act.  Yes  o     No  þIndicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days.  Yes  þ     No  oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendment to this Form 10-K.  oIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer  o     Accelerated filer  o     Non-accelerated filer  þIndicate by check mark whether the registrant is a shell company(as defined by Rule 12b-2 of the Exchange Act).  Yes  o     No  þAs of February 22, 2007, the Registrant’s outstanding common stock consisted of 1,015 sharesof common stock, $0.01 par value.**The Registrant meets the conditions set forth in General Instructions (I)(1)(a) and (b) ofForm 10-K and is therefore filing this Annual report on****Form 10-K****withthe reduced disclosure format.****DOCUMENTS INCORPORATED BY REFERENCE**     The following documents are incorporated into this Form 10-K by reference:     None  
 

 
**TABLE OF CONTENTS**         **PART I**           Disclosure regarding forward-looking statements  i Item 1. Business   1 Item 1A. Risk Factors   2 Item 1B. Unresolved Staff Comments   11 Item 2. Properties   12 Item 3. Legal Proceedings   13 Item 4. Submission of Matters to a Vote of Security Holders   *          **PART II**           Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities  17 Item 6. Selected Financial Data   * Item 7. Management’s Narrative Analysis of Results of Operations   17 Item 7A. Quantitative and Qualitative Disclosures about Market Risk   31 Item 8. Financial Statements and Supplementary Data   32 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   32 Item 9A. Controls and Procedures   32 Item 9B. Other Information   33          **PART III**           Item 10. Directors, Executive Officers and Corporate Governance   * Item 11. Executive Compensation   * Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  * Item 13. Certain Relationships and Related Transactions, and Director Independence   * Item 14. Principal Accountant Fees and Services   *          **PART IV**           Item 15. Exhibits and Financial Statement Schedules   34          Signatures   38   Index to Consolidated Financial Statements   F-1  Certification of CEO Pursuant to Section 302 Certification of CFO Pursuant to Section 302 Certification of CEO Pursuant to Section 906 Certification of CFO Pursuant to Section 906 * This item has been omitted pursuant to the reduced disclosure format as set forth in GeneralInstructions (I) (2) (a) and (c) of Form 10-K.
 

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**DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS**We make “forward-looking statements” within the meaning of the Private Securities Litigation ReformAct of 1995 throughout this report. Whenever you read a statement that is not simply a statementof historical fact (such as when we describe what we “believe,” “intend,” “plan,” “estimate,”“expect” or “anticipate” will occur and other similar statements), you must remember that ourexpectations may not be correct, even though we believe they are reasonable. We do not guaranteethat any future transactions or events described herein will happen as described or that they willhappen at all. You should read this report completely and with the understanding that actualfuture results may be materially different from what we expect. Whether actual events or resultswill conform with our expectations and predictions is subject to a number of risks anduncertainties. For further discussion see *Item 1A. Risk Factors.*The risks and uncertaintiesinclude, but are not limited to, the following: **•** we face intense and increasing competition from satellite and cable television providersas well as new competitors, including telephone companies; our competitors are increasinglyoffering video service bundled with 2-way high speed Internet access and telephone servicesthat consumers may find attractive and which are likely to further increase competition;  **•** as technology changes, and in order to remain competitive, we will have to upgrade orreplace some, or all, subscriber equipment periodically. We will not be able to pass on toour customers the entire cost of these upgrades;  **•** DISH Network subscriber growth may decrease, subscriber turnover may increase andsubscriber acquisition costs may increase; we may have difficulty controlling other costsof continuing to maintain and grow our subscriber base;  **•** satellite programming signals are subject to theft; theft of service will continue andcould increase in the future, causing us to lose subscribers and revenue, and alsoresulting in higher costs to us;  **•** we depend on others to produce programming; programming costs may increase beyond ourcurrent expectations; we may be unable to obtain or renew programming agreements onacceptable terms or at all; existing programming agreements could be subject tocancellation; foreign programming is increasingly offered on other platforms; our inabilityto obtain or renew attractive programming could cause our subscriber additions and relatedrevenue to decline and could cause our subscriber turnover to increase;  **•** we depend on Federal Communications Commission (“FCC”) program access rules (which willexpire this year unless extended by the FCC), and the Telecommunications Act of 1996 asAmended (“Communications Act”) to secure nondiscriminatory access to programming producedby others, neither of which assure that we have fair access to all programming that we needto remain competitive;  **•** the regulations governing our industry may change;  **•** absent reversal of the jury verdict in our Tivo patent infringement case, and if we areunable to successfully implement alternative technology, we will be required to paysubstantial damages as well as materially modify or eliminate certain user-friendly digitalvideo recorder features that we currently offer to consumers, and we could be forced todiscontinue offering digital video recorders to our customers completely, any of whichcould have a significant adverse affect on our business;  **•** if our EchoStar X satellite experienced a significant failure we could lose the abilityto deliver local network channels in many markets; if our EchoStar VIII satelliteexperienced a significant failure, we could lose the ability to provide certain CONUSprogramming;  **•** our satellite launches may be delayed or fail, or our satellites may fail in orbit priorto the end of their scheduled lives causing extended interruptions of some of the channelswe offer;  **•** we currently do not have commercial insurance covering losses incurred from the failureof satellite launches and/or in-orbit satellites we own;  **•** service interruptions arising from technical anomalies on satellites or on-groundcomponents of our direct broadcast satellite (“DBS”) system, or caused by war, terroristactivities or natural disasters, may cause customer cancellations or otherwise harm ourbusiness;  **•** we are heavily dependent on complex information technologies; weaknesses in ourinformation technology systems could have an adverse impact on our business; we may havedifficulty attracting and retaining qualified personnel to maintain our informationtechnology infrastructure;
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 **•** we rely on key personnel including Charles W. Ergen, our chairman and chief executiveofficer, and other executives;  **•** we may be unable to obtain needed retransmission consents, FCC authorizations or exportlicenses, and we may lose our current or future authorizations;  **•** we are party to various lawsuits which, if adversely decided, could have a significantadverse impact on our business;  **•** we may be unable to obtain patent licenses from holders of intellectual property orredesign our products to avoid patent infringement;  **•** sales of digital equipment and related services to international direct-to-home serviceproviders may decrease;  **•** we depend on telecommunications providers, independent retailers and others to solicitorders for DISH Network services. Certain of these providers account for a significantpercentage of our total new subscriber acquisitions. If we are unable to continue ourarrangements with these resellers, we cannot guarantee that we would be able to obtainother sales agents, thus adversely affecting our business;  **•** we are highly leveraged and subject to numerous constraints on our ability to raiseadditional debt;  **•** we may pursue acquisitions, business combinations, strategic partnerships, divestituresand other significant transactions that involve uncertainties; these transactions mayrequire us to raise additional capital, which may not be available on acceptable terms.These transactions, which could become substantial over time, involve a high degree of riskand could expose us to significant financial losses if the underlying ventures are notsuccessful;  **•** weakness in the global or U.S. economy may harm our business generally, and adversepolitical or economic developments may occur in some of our markets;  **•** terrorist attacks, the possibility of war or other hostilities, natural and man-madedisasters, and changes in political and economic conditions as a result of these events maycontinue to affect the U.S. and the global economy and may increase other risks;  **•** EchoStar Communications Corporation (“EchoStar”), our ultimate parent company,periodically evaluates and tests its internal control over financial reporting in order tosatisfy the requirements of Section 404 of the Sarbanes-Oxley Act. This evaluation andtesting of internal control over financial reporting includes our operations. AlthoughEchoStar’s management concluded that its internal control over financial reporting waseffective as of December 31, 2006, if in the future EchoStar is unable to report that itsinternal control over financial reporting is effective (or if EchoStar’s auditors do notagree with EchoStar management’s assessment of the effectiveness of, or are unable toexpress an opinion on, EchoStar’s internal control over financial reporting), investors,customers and business partners could lose confidence in our financial reports, which couldhave a material adverse effect on our business; and  **•** we may face other risks described from time to time in periodic and current reports wefile with the Securities and Exchange Commission (“SEC”).All cautionary statements made herein should be read as being applicable to all forward-lookingstatements wherever they appear. In this connection, investors should consider the risks describedherein and should not place undue reliance on any forward-looking statements.We assume no responsibility for updating forward-looking information contained or incorporated byreference herein or in other reports we file with the SEC.In thisreport, the words “EDBS,” the “Company,” “we,” “our,” and “us,” refer to EchoStar DBSCorporation and its subsidiaries, unless the context otherwise requires. “EchoStar” and “ECC”refer to Echostar Communications Corporation and its subsidiaries.
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**PART I****Item 1. BUSINESS****Brief Description of Business**EchoStar DBS Corporation (“EDBS,” the “Company,” “we,” “us” and/or “our”) is a holding company anda wholly-owned subsidiary of EchoStar Communications Corporation (“EchoStar” or “ECC”), a publiclytraded company listed on the Nasdaq Global Select Market. EDBS was formed under Colorado law in January1996. EchoStar has placed ownership of 11 in-orbit satellites and related FCC licenses into oursubsidiaries. We refer readers of this report to EchoStar’s Annual Report on Form 10-K for theyear ended December 31, 2006.EchoStar started offering subscription television services on the DISH Network in March 1996. Asof December 31, 2006, the DISH Network had approximately 13.105 million subscribers. We currentlyhave 14 owned or leased in-orbit satellites which enable us to offer over 2,500 video and audiochannels to consumers across the United States. Since we use many of these channels for localprogramming, no particular consumer could subscribe to all channels, but all are available usingsmall consumer satellite antennae, or dishes. We believe that the DISH Network offers programmingpackages that have a better “price-to-value” relationship than packages currently offered by mostother subscription television providers. We believe that there continues to be unsatisfied demandfor high quality, reasonably priced television programming services.Substantiallyall of EchoStar’s operations are conducted by our subsidiarieswhich operate two primaryinterrelated business units: **•** *The DISH Networ*k – which provides a direct broadcast satellite (“DBS”) subscriptiontelevision service in the United States; and  **•** *EchoStar Technologies Corporation*(“ETC”) – which designs and develops DBS receivers,antennae and other digital equipment for the DISH Network. We refer to this equipmentcollectively as “EchoStar receiver systems.” ETC also designs, develops and distributessimilar equipment for international satellite service providers andothers.We have deployed substantial resources to develop the “EchoStar DBS System.” The EchoStar DBSSystem consists of our FCC authorized DBS and Fixed Satellite Service (“FSS”) spectrum, our ownedand leased satellites, EchoStar receiver systems, digital broadcast operations centers, customerservice facilities, in-home service and call center operations and certain other assets utilized inour operations. Our principal business strategy is to continue developing our subscriptiontelevision service in the United States to provide consumers with a fully competitive alternativeto others in the multi-channel video programming distribution (“MVPD”) industry.**WHERE YOU CAN FIND MORE INFORMATION**We are subject to the informational requirements of the Exchange Act and accordingly file ourannual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxystatements and other information with the Securities and Exchange Commission (“SEC”). The Publicmay read and copy any materials filed with the SEC at the SEC’sPublic Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further informationon the Public Reference Room. As an electronic filer, our public filings are also maintained onthe SEC’s Internet site that contains reports, proxy and information statements, and otherinformation regarding issuers that file electronically with the SEC. The address of that websiteis http://www.sec.gov.
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**WEBSITE ACCESS**Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K andamendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the ExchangeAct also may be accessed free of charge through our website as soon as reasonably practicable afterwe have electronically filed such material with, or furnished it to, the SEC. The address of thatwebsite is http://www.echostar.com.We have adopted a written code of ethics that applies to all of our directors, officers andemployees, including our principal executive officer and senior financial officers, in accordancewith Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the Securities and ExchangeCommission promulgated thereunder. Our code of ethics is available on our corporate website atwww.echostar.com. In the event that we make changes in, or provide waivers of, theprovisions of this code of ethics that the SEC requires us to disclose, we intend to disclose theseevents on our website.**Item 1A. RISK FACTORS***The risks and uncertainties described below are not the only ones facing us. Additional risks anduncertainties that we are unaware of or that we currently believe to be immaterial also may becomeimportant factors that affect us.**If any of the following events occur, our business, financial condition or results of operationscould be materially and adversely affected.****We compete with other subscription television service providers and traditional broadcasters, whichcould affect our ability to grow and increase our earnings and other operating metrics.***We compete in the subscription television service industry against other DBS television providers,cable television and other system operators offering video, audio and data programming andentertainment services. Many of these competitors have substantially greater financial, marketingand other resources than we have. Our earnings and other operating metrics could be materially andadversely affected if we are unable to compete successfully with these and other new providers ofmulti-channel video programming services.Cable television operators have a large, established customer base, and many cable operators havesignificant investments in programming. Cable television operators continue to leverage theirincumbency advantages relative to satellite operators by, among other things, bundling their videoservice with 2-way high speed Internet access and telephone services. Cable television operatorswith analog systems are also able to provide service to multiple television sets within the samehousehold at a lesser incremental cost to the consumer, and they are able to provide local andother programming in a larger number of geographic areas. As a result of these and other factors,we may not be able to continue to expand our subscriber base or compete effectively against cabletelevision operators.Some digital cable platforms currently offer a VOD service that enables subscribers to choose froma library of programming selections for viewing at their convenience. We are continuing to developour own VOD service experience through automatic video downloads to hard drives in certain of oursatellite receivers, the inclusion of broadband connectivity components in certain of our satellitereceivers, and other technologies. There can be no assurance that our VOD service willsuccessfully compare with offerings from other video providers.News Corporation owns a 38.5% controlling interest in the DirecTV Group, Inc. (“DirecTV”). InDecember 2006, Liberty Media Corporation (“Liberty”) agreed to exchange its 16.3% stake in NewsCorporation for News Corporation’s stake in DirecTV, together with regional sports networks inDenver, Pittsburg and Seattle. The deal is expected to be completed during the second half of2007. News Corporation and Liberty each have ownership interests in diverse world-wide programmingcontent and other related businesses. These assets provide competitive advantages to DirecTV withrespect to the acquisition of programming, content and other business opportunities valuable to ourindustry.
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In addition, DirecTV’s satellite receivers are sold in a significantly greater number of consumerelectronics stores than ours. As a result of this and other factors, our services are less wellknown to consumers than those of DirecTV. Due to this relative lack of consumer awareness andother factors, we are at a competitive marketing disadvantage compared to DirecTV. DirecTV alsooffers exclusive programming, and may have access to discounts on programming, not available to us.DirecTV plans to launch two new satellites in 2007 in order to offer local and national channelprogramming in HD to most of the U.S. population. Although we have launched our own HDinitiatives, if DirecTV fully implements these plans, they may have an additional competitiveadvantage.New entrants in the subscription satellite services business would have a competitive advantageover us in deploying some new products and technologies because of the substantial costs we may berequired to incur to make new products or technologies available across our installed base of over13 million subscribers.Most areas of the United States can receive between three and 10 free over the air broadcastchannels, including local content most consumers consider important. The FCC has allocatedadditional digital spectrum to these broadcasters, which can be used to transmit multipleadditional programming channels. Our business could be adversely affected by increased programofferings by traditional broadcasters.New technologies could also have an adverse effect on the demand for our DBS services. Forexample, we face an increasingly significant competitive threat from the build-out of advancedfiber optic networks. Verizon Communications, Inc. (“Verizon”) and AT&T have begun deployment offiber-optic networks that will allow them to offer video services bundled with traditional phoneand high speed Internet directly to millions of homes. In addition, telephone companies and otherentities are implementing and supporting digital video compression over existing telephone lineswhich may allow them to offer video services without having to build a new infrastructure. We alsoexpect to face increasing competition from content and other providers who distribute videoservices directly to consumers over the Internet.With the large increase in the number of consumers with broadband service, a significant amount ofvideo content has become available on the Internet for users to download and view on their personalcomputers and other devices. In addition, there are several initiatives by companies to make iteasier to view Internet-based video on television and personal computer screens. We also couldface competition from content and other providers who distribute video services directly toconsumers via digital air waves.Mergers, joint ventures, and alliances among franchise, wireless or private cable televisionoperators, telephone companies and others also may result in providers capable of offeringtelevision services in competition with us.Although we believe we currently offer consumers a compelling amount of HD programming content,other multi-channel video providers may be better equipped to increase their HD offerings torespond to increasing consumer demand for this content. For example, cable companies are able tooffer local network channels in HD in more markets than we can, and DirecTV has announced that itwill soon be able to offer over 150 channels of HD programming by satellite. We could be furtherdisadvantaged to the extent a significant number of local broadcasters begin offering localchannels in HD. We may be required to make substantial additional investments in infrastructure torespond to competitive pressure to deliver additional HD programming, and there can be no assurancethat we will be able to effectively compete with HD program offerings from other video providers.***Increased subscriber turnover could harm our financial performance.***Our future subscriber churn may be negatively impacted by a number of factors, including but notlimited to, an increase in competition from existing competitors and new entrants offering morecompelling promotions, as well as new advanced products and services. Competitor bundling of videoservices with 2-way high speed Internet access and telephone services may also contribute moresignificantly to churn over time. There can be no assurance that these and other factors will notcontribute to relatively higher churn than we have experienced historically. Additionally, certainof our promotions allow consumers with relatively lower credit scores to become subscribers andthese subscribers typically churn at a higher rate. However, these subscribers are also acquiredat a lower cost resulting in a smaller economic loss upon disconnect.
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Additionally, as the size of our subscriber base increases, even if our churn percentage remainsconstant or declines, increasing numbers of gross new DISH Network subscribers are required tosustain net subscriber growth.Increases in theft of our signal, or our competitors’ signals, also could cause subscriber churn toincrease in future periods. There can be no assurance that our existing security measures will notbe compromised or that any future security measures we may implement will be effective in reducingtheft of our programming signals.***Increased subscriber acquisition and retention costs could adversely affect our financialperformance.***In addition to leasing receivers, we generally subsidize installation and all or a portion of thecost of EchoStar receiver systems in order to attract new DISH Network subscribers. Our costs toacquire subscribers, and to a lesser extent our subscriber retention costs, can vary significantlyfrom period to period and can cause material variability to our net income (loss) and free cashflow.In addition to new subscriber acquisition costs, we incur costs to retain existing subscribers. Inan effort to reduce subscriber turnover, we offer existing subscribers a variety of options forupgraded and add on equipment. We generally lease receivers and subsidize installation of EchoStarreceiver systems under these subscriber retention programs. We also upgrade or replace subscriberequipment periodically as technology changes. As a consequence, our retention and our capitalexpenditures related to our equipment lease program for existing subscribers will increase, atleast in the short term, to the extent we subsidize the costs of those upgrades and replacements.Our capital expenditures related to subscriber retention programs could also increase in the futureto the extent we increase penetration of our equipment lease program for existing subscribers, ifwe introduce other more aggressive promotions, if we offer existing subscribers more aggressivepromotions for HD receivers or EchoStar receivers with other enhanced technologies, or for otherreasons.Cash necessary to fund retention programs and total subscriber acquisition costs are expected to besatisfied from existing cash and marketable investment securities balances and cash generated fromoperations to the extent available. We may, however, decide to raise additional capital in thefuture to meet these requirements. There can be no assurance that additional financing will beavailable on acceptable terms, or at all, if needed in the future.In addition, any material increase in subscriber acquisition or retention costs from current levelscould have a material adverse effect on our business, financial condition and results ofoperations.***Satellite programming signals have been subject to theft, which could cause us to lose subscribersand revenue.***Increases in theft of our signal, or our competitors’ signals, also could cause subscriber churn toincrease in future periods. We use microchips embedded in credit card-sized access cards, called“smart cards,” or in security chips in our EchoStar receiver systems to control access toauthorized programming content. Our signal encryption has been compromised by theft of service andcould be further compromised in the future. We continue to respond to compromises of ourencryption system with security measures intended to make signal theft of our programming moredifficult. During 2005, we completed the replacement of our smart cards. While the smart cardreplacement did not fully secure our system, we continue to implement software patches and othersecurity measures to help protect our service. There can be no assurance that our securitymeasures will be effective in reducing theft of our programming signals. If we are required toreplace existing smart cards, the cost could exceed $100.0 million.***Our local programming strategy faces uncertainty.***SHVIA generally gives satellite companies a statutory copyright license to retransmit localbroadcast channels by satellite back into the market from which they originated, subject toobtaining the retransmission consent of the local network station. If we fail to reachretransmission consent agreements with broadcasters we cannot carry their signals. This could havean adverse effect on our strategy to compete with cable and other satellite companies which providelocal signals. While we have been able to reach retransmission consent agreements with most localnetwork stations in markets where we currently offer local channels by satellite, roll-out of localchannels in additional cities will require that we obtain additional retransmission agreements. Wecannot be sure that we will
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secure these agreements or that we will secure new agreements upon the expiration of our currentretransmission consent agreements, some of which are short term.***We depend on the Cable Act for access to others’ programming.***We purchase a substantial percentage of our programming from cable-affiliated programmers. TheCable Act’s provisions prohibiting exclusive contracting practices with cable affiliatedprogrammers are currently set to expire in October 2007. If those rules are not extended, manypopular programs may become unavailable to us, causing a loss of customers and adversely affectingour revenues and financial performance. Any change in the Cable Act and the FCC’s rules thatpermit the cable industry or cable-affiliated programmers to discriminate against competingbusinesses, such as ours, in the sale of programming could adversely affect our ability to acquireprogramming at all or to acquire programming on a cost-effective basis. Further, the FCC generallyhas not shown a willingness to enforce the program access rules aggressively. As a result, we maybe limited in our ability to obtain access (or nondiscriminatory access) to programming fromprogrammers that are affiliated with the cable system operators.Affiliates of certain cable providers have denied us access to sports programming they feed totheir cable systems terrestrially, rather than by satellite. To the extent that cable operatorsdeliver additional programming terrestrially in the future, they may assert that this additionalprogramming is also exempt from the program access laws. These restrictions on our access toprogramming could materially and adversely affect our ability to compete in regions serviced bythese cable providers.***We depend on others to produce programming.***We depend on third parties to provide us with programming services. Our programming agreementshave remaining terms ranging from less than one to up to ten years and contain various renewal andcancellation provisions. We may not be able to renew these agreements on favorable terms or atall, and these agreements may be canceled prior to expiration of their original term. If we areunable to renew any of these agreements or the other parties cancel the agreements, we cannotassure you that we would be able to obtain substitute programming, or that such substituteprogramming would be comparable in quality or cost to our existing programming. In addition,programming costs may continue to increase. We may be unable to pass programming costs on to ourcustomers which could have a material adverse effect on our business, financial condition andresults of operations.***We face increasing competition from other distributors of foreign language programming.***We face increasing competition from other distributors of foreign language programming, includingprogramming distributed over the Internet. There can be no assurance that we will continue toexperience growth in subscribers to our foreign-language programming services. In addition, theincreasing availability of foreign language programming from our competitors, which in certaincases has resulted from our inability to renew programming agreements on an exclusive basis or atall, could contribute to an increase in our subscriber churn. Our agreements with distributors offoreign language programming have varying expiration dates, and some agreements are on amonth-to-month basis. There can be no assurance that we will be able to renew these agreements onacceptable terms or at all.***We may not be aware of certain foreign government regulations.***Because regulatory schemes vary by country, we may be subject to regulations in foreign countriesof which we are not presently aware. If that were to be the case, we could be subject to sanctionsby a foreign government that could materially and adversely affect our ability to operate in thatcountry. We cannot assure you that any current regulatory approvals held by us are, or willremain, sufficient in the view of foreign regulatory authorities, or that any additional necessaryapprovals will be granted on a timely basis or at all, in all jurisdictions in which we wish tooperate new satellites, or that applicable restrictions in those jurisdictions will not be undulyburdensome. The failure to obtain the authorizations necessary to operate satellitesinternationally could have a material adverse effect on our ability to generate revenue and ouroverall competitive position.
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We, our customers and companies with which we do business may be required to have authority fromeach country in which we or they provide services or provide our customers use of our satellites.Because regulations in each country are different, we may not be aware if some of our customersand/or companies with which we do business do not hold the requisite licenses and approvals.***We are subject to significant regulatory oversight and changes in applicable regulatoryrequirements could adversely affect our business.***DBS operators are subject to significant government regulation, primarily by the FCC and, to acertain extent, by Congress, other federal agencies and international, state and local authorities.Depending upon the circumstances, noncompliance with legislation or regulations promulgated bythese entities could result in the suspension or revocation of our licenses or registrations, thetermination or loss of contracts or the imposition of contractual damages, civil fines or criminalpenalties any of which could have a material adverse effect on our business, financial conditionand results of operations. You should review the regulatory disclosures under the caption “*Item 1.Business — Government Regulation — FCC Regulation under the Communication Act, OtherCommunications Act Provisions”*in the Annual Report on Form10-K filed by ECC for the year ended December 31, 2006.***During April 2006, a Texas jury concluded that certain of our digital video recorders, or DVRs,infringed a patent held by Tivo. If the verdict is upheld on appeal and we are not able tosuccessfully implement alternative technology, we could be prohibited from distributing DVRs, or berequired to modify or eliminate certain user-friendly DVR features that we currently offer toconsumers.***If the Tivo jury verdict is upheld on appeal, we could be required to pay substantial damages, andif we were not able to successfully implement alternative technology (including the successfuldefense of any challenge that such technology infringes Tivo’s patent), we could also be prohibitedfrom distributing DVRs, or be required to modify or eliminate certain user-friendly DVR featuresthat we currently offer to consumers. In that event we would be at a significant disadvantage toour competitors who could offer this functionality and, while we would attempt to provide thatfunctionality through other manufacturers, the adverse affect on our business could be material.***We currently have no commercial insurance coverage on the satellites we own.***We do not use commercial insurance to mitigate the potential financial impact of in-orbit failuresbecause we believe that the premium costs are uneconomical relative to the risk of satellitefailure. We believe we generally have in-orbit satellite capacity sufficient to recover, in arelatively short time frame, transmission of most of our critical programming in the event one ofour in-orbit satellites fails. We could not, however, recover certain local markets, internationaland other niche programming. Further, programming continuity cannot be assured in the event ofmultiple satellite losses.We currently do not have adequate backup satellite capacity to recover all of the local networkchannels broadcast from our EchoStar X satellite following a complete failure of that satellite.Therefore, our ability to deliver local channels in many markets, as well as our ability to complywith SHVERA requirements without incurring significant additional costs, is dependent on, amongother things, the continued successful commercial operation of EchoStar X.We also depend on EchoStar VIII to provide service to CONUS at least until such time as ourEchoStar XI satellite has commenced commercial operation, which is currently expected during thesecond half of 2008. AMC-14, which is expected to commence commercial operation in early 2008,also has the capability to act as a backup for EchoStar VIII and could be launched to the 110degree orbital location, if necessary. In the event that EchoStar VIII experienced a total orsubstantial failure, we could transmit many, but not all, of those channels from other in-orbitsatellites.***Our satellites are subject to risks related to launch.***Satellite launches are subject to significant risks, including launch failure, incorrect orbitalplacement or improper commercial operation. Certain launch vehicles that may be used by us haveeither unproven track records or have experienced launch failures in the past. The risks of launchdelay and failure are usually greater when the launch
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vehicle does not have a track record of previous successful flights. Launch failures result insignificant delays in the deployment of satellites because of the need both to constructreplacement satellites, which can take more than two years, and to obtain other launchopportunities. Such significant delays could materially and adversely affect our ability togenerate revenues. If we were unable to obtain launch insurance, or obtain launch insurance atrates we deem commercially reasonable, and a significant launch failure were to occur, it couldhave a material adverse effect on our ability to generate revenues and fund future satelliteprocurement and launch opportunities.In addition, the occurrence of future launch failures may materially and adversely affect ourability to insure the launch of our satellites at commercially reasonable premiums, if at all.Please see further discussion under the caption “*We currently have no commercial insurance coverageon our satellites*” above.***Our satellites are subject to significant operational risks.***Satellites are subject to significant operational risks while in orbit. These risks includemalfunctions, commonly referred to as anomalies, that have occurred in our satellites and thesatellites of other operators as a result of various factors, such as satellite manufacturers’errors, problems with the power systems or control systems of the satellites and general failuresresulting from operating satellites in the harsh environment of space.Although we work closely with the satellite manufacturers to determine and eliminate the cause ofanomalies in new satellites and provide for redundancies of many critical components in thesatellites, we may experience anomalies in the future, whether of the types described above orarising from the failure of other systems or components.Any single anomaly or series of anomalies could materially and adversely affect our operations andrevenues and our relationship with current customers, as well as our ability to attract newcustomers for our direct broadcast satellites and other satellite services. In particular, futureanomalies may result in the loss of individual transponders on a satellite, a group of transponderson that satellite or the entire satellite, depending on the nature of the anomaly. Anomalies mayalso reduce the expected useful life of a satellite, thereby reducing the revenue that could begenerated by that satellite, or create additional expenses due to the need to provide replacementor back-up satellites. Finally, the occurrence of anomalies may materially and adversely affectour ability to insure our satellites at commercially reasonable premiums, if at all. You shouldreview the disclosures relating to satellite anomalies set forth under Note 4 in the Notes to theConsolidated Financial Statements in Item 15 of this Annual Report on Form 10-K.Meteoroid events pose a potential threat to all in-orbit satellites. The probability thatmeteoroids will damage those satellites increases significantly when the Earth passes through theparticulate stream left behind by comets. Occasionally, increased solar activity also poses apotential threat to all in-orbit satellites.Some decommissioned spacecraft are in uncontrolled orbits which pass through the geostationary beltat various points, and present hazards to operational spacecraft, including our satellites. We maybe required to perform maneuvers to avoid collisions and these maneuvers may prove unsuccessful orcould reduce the useful life of the satellite through the expenditure of fuel to perform thesemaneuvers. The loss, damage or destruction of any of our satellites as a result of anelectrostatic storm, collision with space debris, malfunction or other event could have a materialadverse effect on our business, financial condition and results of operations.***Our satellites have minimum design lives of 12 years, but could fail or suffer reduced capacitybefore then.***Our ability to earn revenue depends on the usefulness of our satellites. Each satellite has alimited useful life. A number of factors affect the useful lives of the satellites, including,among other things, the quality of their construction, the durability of their component parts, theability to continue to maintain proper orbit and control over the satellite’s functions, theefficiency of the launch vehicle used, and the remaining on-board fuel following orbit insertion.Generally, the minimum design life of each of our satellites is 12 years. We can provide noassurance, however, as to the actual useful lives of the satellites.In the event of a failure or loss of any of our satellites, we may relocate another satellite anduse it as a replacement for the failed or lost satellite, which could have a material adverseeffect on our business, financial condition and
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results of operations. Such a relocation would require FCC approval and, among other things, ashowing to the FCC that the replacement satellite would not cause additional interference comparedto the failed or lost satellite. We cannot be certain that we could obtain such FCC approval. Ifwe choose to use a satellite in this manner, this use could adversely affect our ability to meetthe operation deadlines associated with our authorizations. Failure to meet those deadlines couldresult in the loss of such authorizations, which would have an adverse effect on our ability togenerate revenues.***We have made substantial capital commitments to acquire additional satellite capacity and do nothave firm business plans for some of this capacity; our results of operations could be materiallyadversely affected if we are not able to utilize all of this additional capacity.***We are significantly increasing our satellite capacity as a result of the agreements discussedabove and other satellite service agreements currently under negotiation. While we are currentlyevaluating various opportunities to make profitable use of this capacity (including, but notlimited to, increasing our international programming and other services, expanding our local and HDprogramming, offering fixed satellite service capacity on a wholesale commercial basis (rather thandirect to consumers) and supplying satellite capacity for new international ventures), we do nothave firm plans to utilize all of the additional satellite capacity we expect to acquire. Inaddition, there can be no assurance that we can successfully develop the business opportunities wecurrently plan to pursue with this additional capacity. Future costs associated with thisadditional capacity will negatively impact our margins if we do not have sufficient growth insubscribers or in demand for new programming or services to generate revenue to offset the costs ofthis increased capacity.***Complex technology used in our business could become obsolete.***Our operating results are dependent to a significant extent upon our ability to continue tointroduce new products and services on a timely basis and to reduce costs of our existing productsand services. We may not be able to successfully identify new product or service opportunities ordevelop and market these opportunities in a timely or cost-effective manner. The success of newproduct development depends on many factors, including proper identification of customer need,cost, timely completion and introduction, differentiation from offerings of competitors and marketacceptance.Technology in the subscription television and satellite services industries changes rapidly as newtechnologies are developed, which could cause our services and products to become obsolete. We andour suppliers may not be able to keep pace with technological developments. If the newtechnologies on which we intend to focus our research and development investments fail to achieveacceptance in the marketplace, we could suffer a material adverse effect on our future competitiveposition that could cause a reduction in our revenues and earnings. We may also be at acompetitive disadvantage in developing and introducing complex new products and technologiesbecause of the substantial costs we may incur in making these products or technologies availableacross our installed base of over 13 million subscribers. For example, our competitors could bethe first to obtain proprietary technologies that are perceived by the market as being superior.Further, after we have incurred substantial research and development costs, one or more of thetechnologies under our development, or under development by one or more of our strategic partners,could become obsolete prior to its introduction. In addition, delays in the delivery of componentsor other unforeseen problems in our DBS system or other satellite services may occur that couldmaterially and adversely affect our ability to generate revenue, offer new services and remaincompetitive.Technological innovation is important to our success and depends, to a significant degree, on thework of technically skilled employees. Competition for the services of these types of employees isvigorous. We may not be able to attract and retain these employees. If we are unable to attractand maintain technically skilled employees, our competitive position could be materially andadversely affected.***We rely on key personnel.***We believe that our future success will depend to a significant extent upon the performance ofCharles W. Ergen, our Chairman and Chief Executive Officer and certain other executives. The lossof Mr. Ergen or of certain other key executives could have a material adverse effect on ourbusiness, financial condition and results of operations.
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Although all of our executives have executed agreements limiting their ability to work for orconsult with competitors if they leave us, we do not have employment agreements with any of them.***We are controlled by one principal stockholder.***Charles W. Ergen, EchoStar’s Chairman and Chief Executive Officer, currently beneficially ownsapproximately 49.1% of EchoStar’s total equity securities and possesses approximately 76.8% of thetotal voting power. Thus, Mr. Ergen has the ability to elect a majority of EchoStar’s directorsand to control all other matters requiring the approval of its stockholders. As a result of Mr.Ergen’s voting power, EchoStar is a “controlled company” as defined in the Nasdaq listing rules andis, therefore, not subject to Nasdaq requirements that would otherwise require us to have (i) amajority of independent directors; (ii) a nominating committee composed solely of independentdirectors; (iii) compensation of our executive officers determined by a majority of the independentdirectors or a compensation committee composed solely of independent directors; and (iv) directornominees selected, or recommended for the Board’s selection, either by a majority of theindependent directors or a nominating committee composed solely of independent directors.***Our business depends substantially on FCC licenses that can expire or be revoked or modified andapplications that may not be granted.***If the FCC were to cancel, revoke, suspend or fail to renew any of our licenses or authorizations,it could have a material adverse effect on our financial condition, profitability and cash flows.Specifically, loss of a frequency authorization would reduce the amount of spectrum available tous, potentially reducing the amount of programming and other services available to our subscribers.The materiality of such a loss of authorizations would vary based upon, among other things, thelocation of the frequency used or the availability of replacement spectrum. In addition, Congressoften considers and enacts legislation that could affect us, and FCC proceedings to implement theCommunications Act and enforce its regulations are ongoing. We cannot predict the outcomes ofthese legislative or regulatory proceedings or their effect on our business.***Our business relies on intellectual property, some of which is owned by third parties, and we mayinadvertently infringe their patents and proprietary rights.***Many entities, including some of our competitors, have or may in the future obtain patents andother intellectual property rights that cover or affect products or services related to those thatwe offer. In general, if a court determines that one or more of our products infringes onintellectual property held by others, we may be required to cease developing or marketing thoseproducts, to obtain licenses from the holders of the intellectual property at a material cost, orto redesign those products in such a way as to avoid infringing the patent claims. If thoseintellectual property rights are held by a competitor, we may be unable to obtain the intellectualproperty at any price, which could adversely affect our competitive position. Please see furtherdiscussion under *Item 1. Business — Patents andTrademarks*in the Annual Report on Form 10-K filed by ECC for the year ended December 31, 2006.***We depend on other telecommunications providers, independent retailers and others to solicitorders for DISH network services.***While we offer receiver systems and programming directly, a majority of our new subscriberacquisitions are generated by independent businesses offering our products and services, includingsmall satellite retailers, direct marketing groups, local and regional consumer electronics stores,nationwide retailers, telecommunications providers and others. If we are unable to continue ourarrangements with these resellers, we cannot guarantee that we would be able to obtain other salesagents, thus adversely affecting our business.***Wehave substantial debt outstanding and may incur additional debt.***As of December 31, 2006, our total debt, including the debt of our subsidiaries, was $5.442billion. Our debt levels could have significant consequences, including:
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 **•** making it more difficult to satisfy our obligations;  **•** increasing our vulnerability to general adverse economic conditions, including changes in interest rates;  **•** limiting our ability to obtain additional financing;  **•** requiring us to devote a substantial portion of our available cash and cash flow to makeinterest and principal payments on our debt, thereby reducing the amount of available cashfor other purposes;  **•** limiting our financial and operating flexibility in responding to changing economic andcompetitive conditions; and  **•** placing us at a disadvantage compared to our competitors that have less debt.In addition, we may incur substantial additional debt in the future. The terms of the indenturesrelating to our senior notes permit us to incur additional debt. If new debt is added to ourcurrent debt levels, the risks we now face could intensify.***We may need additional capital, which may not be available, in order to continue growing, toincrease earnings and to make payments on our debt.***Our ability to increase earnings and to make interest and principal payments on our debt willdepend in part on our ability to continue growing our business by maintaining and increasing oursubscriber base. This may require significant additional capital that may not be available to us.Funds necessary to meet subscriber acquisition and retention costs are expected to be satisfiedfrom existing cash and marketable investment securities balances and cash generated from operationsto the extent available. We may, however, decide to raise additional capital in the future to meetthese requirements. There can be no assurance that additional financing will be available onacceptable terms, or at all, if needed in the future.In addition to our DBS business plan, we have contracts to construct, and conditional licenses andpending FCC applications for, a number of FSS Ku-band, Ka-band and extended Ku-band satellites. Wemay need to raise additional capital to construct, launch, and insure satellites and complete thesesystems and other satellites we may in the future apply to operate. We also periodically evaluatevarious strategic initiatives, the pursuit of which also could require us to raise significantadditional capital. There can be no assurance that additional financing will be available onacceptable terms, or at all.We also have substantial satellite-related payment obligations under our various satellite serviceagreements.***We may be unable to manage rapidly expanding operations.***If we are unable to manage our growth effectively, it could have a material adverse effect on ourbusiness, financial condition and results of operations. To manage our growth effectively, wemust, among other things, continue to develop our internal and external sales forces, installationcapability, customer service operations and information systems, and maintain our relationshipswith third party vendors. We also need to continue to expand, train and manage our employee base,and our management personnel must assume even greater levels of responsibility. If we are unableto continue to manage growth effectively, we may experience a decrease in subscriber growth and anincrease in churn, which could have a material adverse effect on our business, financial conditionand results of operations.***We cannot be certain that we will sustain profitability.***Due to the substantial expenditures necessary to complete construction, launch and deployment ofour DBS system and to obtain and service DISH Network customers, we have in the past sustainedsignificant losses. If we do not have sufficient income or other sources of cash, our ability toservice our debt and pay our other obligations could be
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affected.While we had net income of $601.1 million, $1.137 billion and $299.4 million for theyears ended December 31, 2006, 2005 and 2004, respectively, we may not be able to sustain thisprofitability. Improvements in our results of operations will depend largely upon our ability toincrease our customer base while maintaining our price structure, effectively managing our costsand controlling churn. We cannot assure you that we will be effective with regard to thesematters.***We depend on few manufacturers, and in some cases a single manufacturer, for many components ofconsumer premises equipment; we may be adversely affected by product shortages.***We depend on relatively few sources, and in some cases a single source, for many components of theconsumer premises equipment that we provide to subscribers in order to deliver our digitaltelevision services. Product shortages and resulting installation delays could cause us to losepotential future subscribers to our DISH Network service.***We cannot assure you that there will not be deficiencies leading to material weaknesses in ourinternal control over financial reporting.***EchoStar,our ultimate parent company, periodically evaluates and tests its internal control over financial reportingin order to satisfythe requirements of Section 404 of the Sarbanes-Oxley Act. This evaluation and testing of internalcontrol over financial reporting includes ouroperations. Although EchoStar’s management  concluded that its internal control over financialreporting was effective as of December 31, 2006, if in thefuture EchoStar is unable to report that itsinternal control over financial reporting is effective (or ifEchoStar’s auditors do not agree with EchoStar management’sassessment of the effectiveness of, or are unable to express anopinion on, EchoStar’s internal controlover financial reporting), investors, customers and business partners could lose confidence in our financial reports, which could have a material adverse effect on ourbusiness.**Item 1B.UNRESOLVED STAFF COMMENTS**None.
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**Item 2. PROPERTIES**The following table sets forth certain information concerning the principal properties of EchoStar:                   **Approximate**    **Segment(s)** **Square** **Owned or****Description/Use/Location** **Using Property** **Footage** **Leased**Corporate headquarters, Englewood, Colorado All  476,000  OwnedEchoStar Technologies Corporation engineering offices andservice center, Englewood, Colorado ETC  144,000  OwnedEchoStar Technologies Corporation engineering offices,Englewood, Colorado ETC  63,000  OwnedEchoStar Data Networks engineering offices, Atlanta, Georgia ETC  50,000  LeasedDigital broadcast operations center, Cheyenne, Wyoming DISH Network  143,000  OwnedDigital broadcast operations center, Gilbert, Arizona DISH Network  124,000  OwnedRegional digital broadcast operations center, Monee, Illinois DISH Network  45,000  OwnedRegional digital broadcast operations center, New Braunsfels, Texas DISH Network  35,000  OwnedRegional digital broadcast operations center, Quicksberg, Virginia DISH Network  35,000  OwnedRegional digital broadcast operations center, Spokane, Washington DISH Network  35,000  OwnedRegional digital broadcast operations center, Orange, New Jersey DISH Network  8,800  OwnedCustomer call center and data center, Littleton, Colorado DISH Network  202,000  OwnedService center, Spartanburg, South Carolina DISH Network  316,000  LeasedCustomer call center, warehouse and service center, El Paso, Texas DISH Network  171,000  OwnedCustomer call center, McKeesport, Pennsylvania DISH Network  106,000  LeasedCustomer call center, Christiansburg, Virginia DISH Network  103,000  OwnedCustomer call center and general offices, Tulsa, Oklahoma DISH Network  79,000  LeasedCustomer call center and general offices, Pine Brook, New Jersey DISH Network  67,000  LeasedCustomer call center, Alvin, Texas DISH Network  60,000  LeasedCustomer call center, Thornton, Colorado DISH Network  55,000  OwnedCustomer call center, Harlingen, Texas DISH Network  54,000  OwnedCustomer call center, Bluefield, West Virginia DISH Network  50,000  OwnedWarehouse, distribution and service center, Atlanta, Georgia DISH Network  250,000  LeasedWarehouse and distribution center, Denver, Colorado DISH Network  209,000  LeasedWarehouse and distribution center, Sacramento, California DISH Network  82,000  OwnedWarehouse and distribution center, Dallas, Texas DISH Network  80,000  LeasedWarehouse and distribution center, Denver, Colorado DISH Network  44,000  OwnedWarehouse and distribution center, Baltimore, Maryland DISH Network  37,000  LeasedEngineering offices and warehouse, Almelo, The Netherlands All Other  55,000  OwnedEngineering offices, Steeton, England All Other  43,000  OwnedIn addition to the principal properties listed above, we operate several DISH Network servicecenters strategically located in regions throughout the United States.
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**Item 3. LEGAL PROCEEDINGS*****Distant Network Litigation***On October 20, 2006, a District Court in Florida entered a permanent nationwide injunctionprohibiting us from offering distant network channels to consumers effective December 1, 2006.Distant networks are ABC, NBC, CBS and Fox network channels which originate outside the communitywhere the consumer who wants to view them, lives. We have turned off all of our distant networkchannels and are no longer in the distant network business. Termination of these channels resultedin, among other things, a small reduction in average monthly revenue per subscriber and free cashflow, and a temporary increase in subscriber churn. The plaintiffs in that litigation allege thatwe are in violation of the Court’s injunction and have appealed a District Court decision findingthat we are not in violation. We cannot predict with any degree of certainty the outcome of thatappeal.***Superguide***During 2000, Superguide Corp. (“Superguide”) filed suit against us, DirecTV, Thomson and others inthe United States District Court for the Western District of North Carolina, Asheville Division,alleging infringement of United States Patent Nos. 5,038,211 (the ‘211 patent), 5,293,357 (the ‘357patent) and 4,751,578 (the ‘578 patent) which relate to certain electronic program guide functions,including the use of electronic program guides to control VCRs. Superguide sought injunctive anddeclaratory relief and damages in an unspecified amount.On summary judgment, the District Court ruled that none of the asserted patents were infringed byus. These rulings were appealed to the United States Court of Appeals for the Federal Circuit.During 2004, the Federal Circuit affirmed in part and reversed in part the District Court’sfindings and remanded the case back to the District Court for further proceedings. In 2005,SuperGuide indicated that it would no longer pursue infringement allegations with respect to the‘211 and ‘357 patents and those patents have now been dismissed from the suit. The District Courtsubsequently entered judgment of non-infringement in favor of all defendants as to the ‘211 and‘357 patents and ordered briefing on Thomson’s license defense as to the ‘578 patent. DuringDecember 2006, the District Court found that there were disputed issues of fact regarding Thomson’slicense defense, and ordered a trial solely addressed to that issue for March 2007. We alsorequested leave to add a license defense as to the ‘578 patent in view of a new (at the time)license we obtained from a third-party licensed by Superguide. Activity in the case as to us issuspended pending resolution of the Thomson license defense issue.We examined the ‘578 patent and believe that it is not infringed by any of our products orservices. We will continue to vigorously defend this case. In the event that a Court ultimatelydetermines that we infringe any of the patents, we may be subject to substantial damages, which mayinclude treble damages and/or an injunction that could require us to materially modify certainuser-friendly electronic programming guide and related features that we currently offer toconsumers. We cannot predict with any degree of certainty the outcome of the suit or determine theextent of any potential liability or damages.***Broadcast Innovation, L.L.C.***In 2001, Broadcast Innovation, L.L.C. (“Broadcast Innovation”) filed a lawsuit against us, DirecTV,Thomson Consumer Electronics and others in Federal District Court in Denver, Colorado. The suitalleges infringement of United States Patent Nos. 6,076,094 (the ‘094 patent) and 4,992,066 (the‘066 patent). The ‘094 patent relates to certain methods and devices for transmitting andreceiving data along with specific formatting information for the data. The ‘066 patent relates tocertain methods and devices for providing the scrambling circuitry for a pay television system onremovable cards. We examined these patents and believe that they are not infringed by any of ourproducts or services. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leavingus as the only defendant.During 2004, the judge issued an order finding the ‘066 patent invalid. Also in 2004, the Courtruled the ‘094 invalid in a parallel case filed by Broadcast Innovation against Charter andComcast. In 2005, the United States Court of Appeals for the Federal Circuit (“CAFC”) overturnedthis finding of invalidity and remanded the case back to the District Court. During June 2006,Charter filed a reexamination request with the United States Patent and
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Trademark Office. The Court has stayed the case pending reexamination. Our case remains stayedpending resolution of the Charter case.We intend to continue to vigorously defend this case. In the event that a Court ultimatelydetermines that we infringe any of the patents, we may be subject to substantial damages, which mayinclude treble damages and/or an injunction that could require us to materially modify certainuser-friendly features that we currently offer to consumers. We cannot predict with any degree ofcertainty the outcome of the suit or determine the extent of any potential liability or damages.***Tivo Inc.***During April 2006, a Texas jury concluded that certain of our digital video recorders, or DVRs,infringed a patent held by Tivo. The Texas court subsequently issued an injunction prohibiting usfrom offering DVR functionality. A Court of Appeals has stayed that injunction during the pendencyof our appeal.In accordance with Statement of Financial Accounting Standards No. 5, “Accounting forContingencies” (“SFAS 5”), we recorded a total reserve of $94.0 million in “Tivo litigationexpense” on our Condensed Consolidated Statement of Operations to reflect the jury verdict,supplemental damages and pre-judgment interest awarded by the Texas court through September 8,2006. Based on our current analysis of the case, including the appellate record and other factors,we believe it is more likely than not that we will prevail on appeal. Consequently, we are notrecording additional amounts for supplemental damages or interest subsequent to the September 8,2006 judgment date. If the verdict is upheld on appeal, the $94.0 million amount would increase byapproximately $35.0 million through 2007.If the verdict is upheld on appeal and we are not able to successfully implement alternativetechnology (including the successful defense of any challenge that such technology infringes Tivo’spatent), we would owe substantial additional damages and we could also be prohibited fromdistributing DVRs, or be required to modify or eliminate certain user-friendly DVR features that wecurrently offer to consumers. In that event we would be at a significant disadvantage to ourcompetitors who could offer this functionality and, while we would attempt to provide thatfunctionality through other manufacturers, the adverse affect on our business could be material.***Acacia***In June 2004, Acacia Media Technologies (“Acacia”) filed a lawsuit against us in the United StatesDistrict Court for the Northern District of California. The suit also named DirecTV, Comcast,Charter, Cox and a number of smaller cable companies as defendants. Acacia is an intellectualproperty holding company which seeks to license the patent portfolio that it has acquired. Thesuit alleges infringement of United States Patent Nos. 5,132,992 (the ‘992 patent), 5,253,275 (the‘275 patent), 5,550,863 (the ‘863 patent), 6,002,720 (the ‘720 patent) and 6,144,702 (the ‘702patent). The ‘992, ‘863, ‘720 and ‘702 patents have been asserted against us.The patents relate to various systems and methods related to the transmission of digital data. The‘992 and ‘702 patents have also been asserted against several Internet content providers in theUnited States District Court for the Central District of California. During 2004 and 2005, theCourt issued Markman rulings which found that the ‘992 and ‘702 patents were not as broad as Acaciahad contended, and that certain terms in the ‘702 patent were indefinite. During April 2006,EchoStar and other defendants asked the Court to rule that the claims of the ‘702 patent areinvalid and not infringed. That motion is pending. In June and September 2006, the Court heldMarkman hearings on the ‘992, ‘863, ‘720 and ‘275 patents, and issued a ruling during December2006. We believe the decision is generally favorable to us, but we can not predict whether it willresult in dismissal of the case.Acacia’s various patent infringement cases have been consolidated for pre-trial purposes in theUnited States District Court for the Northern District of California. We intend to vigorouslydefend this case. In the event that a Court ultimately determines that we infringe any of thepatents, we may be subject to substantial damages, which may include treble damages and/or aninjunction that could require us to materially modify certain user-friendly features that wecurrently offer to consumers. We cannot predict with any degree of certainty the outcome of thesuit or determine the extent of any potential liability or damages.
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***Forgent***In July 2005, Forgent Networks, Inc. (“Forgent”) filed a lawsuit against us in the United StatesDistrict Court for the Eastern District of Texas. The suit also named DirecTV, Charter, Comcast,Time Warner Cable, Cable One and Cox as defendants. The suit alleges infringement of United StatesPatent No. 6,285,746 (the ‘746 patent).The ‘746 patent discloses a video teleconferencing system which utilizes digital telephone lines.We have examined this patent and do not believe that it is infringed by any of our products orservices. We intend to vigorously defend this case. In the event that a Court ultimatelydetermines that we infringe this patent, we may be subject to substantial damages, which mayinclude treble damages and/or an injunction that could require us to materially modify certainuser-friendly features that we currently offer to consumers. Trial is currently scheduled for May2007 in Tyler, Texas. On October 2, 2006, the Patent and Trademark Office granted our petition forreexamination of the ‘746 patent. On October 27, 2006, the Patent and Trademark Office issued itsinitial office action rejecting all of the claims of the ‘746 patent in light of several prior artreferences. Forgent will have an opportunity to challenge the initial office action. We cannotpredict with any degree of certainty the outcome of the suit or determine the extent of anypotential liability or damages.***Finisar Corporation***Finisar Corporation (“Finisar”) recently obtained a $100.0 million verdict in the United StatesDistrict Court for the Eastern District of Texas against DirecTV for patent infringement. Finisaralleged that DirecTV’s electronic program guide and other elements of its system infringe UnitedStates Patent No. 5,404,505 (the ‘505 patent).On July 10, 2006, we, together with NagraStar LLC, filed a Complaint for Declaratory Judgment inthe United States District Court for the District of Delaware against Finisar that asks the Courtto declare that they and we do not infringe, and have not infringed, any valid claim of the ‘505patent. Trial is not currently scheduled. We intend to vigorously defend our rights in thisaction. In the event that a Court ultimately determines that we infringe this patent, we may besubject to substantial damages, which may include treble damages and/or an injunction that couldrequire us to modify our system architecture. We cannot predict with any degree of certainty theoutcome of the suit or determine the extent of any potential liability or damages.***Trans Video***In August 2006, Trans Video Electronic, Ltd. (“Trans Video”) filed a patent infringement actionagainst us in the United States District Court for the Northern District of California. The suitalleges infringement of United States Patent Nos. 5,903,621 (the ‘621 patent) and 5,991,801 (the‘801 patent). The patents relate to various methods related to the transmission of digital data bysatellite. Trial has been set for July 2008. We intend to vigorously defend this case. In theevent that a Court ultimately determines that we infringe any of the patents, we may be subject tosubstantial damages, which may include treble damages and/or an injunction. We cannot predict withany degree of certainty the outcome of the suit or determine the extent of any potential liabilityor damages.***Retailer Class Actions***During 2000, lawsuits were filed by retailers in Colorado state and federal court attempting tocertify nationwide classes on behalf of certain of our satellite hardware retailers. Theplaintiffs are requesting the Courts declare certain provisions of, and changes to, allegedagreements between us and the retailers invalid and unenforceable, and to award damages for lostincentives and payments, charge backs, and other compensation. We are vigorously defending againstthe suits and have asserted a variety of counterclaims. The federal court action has been stayedduring the pendency of the state court action. We filed a motion for summary judgment on allcounts and against all plaintiffs. The plaintiffs filed a motion for additional time to conductdiscovery to enable them to respond to our motion. The Court granted limited discovery which endedduring 2004. The plaintiffs claimed we did not provide adequate disclosure during the discoveryprocess. The Court agreed, and recently denied our motion for summary judgment as a result. Atrial date has not been set. We cannot predict with any degree of certainty the outcome of thesuit or determine the extent of any potential liability or damages.
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***Enron Commercial Paper Investment***During October 2001, we received approximately $40.0 million from the sale of Enron commercialpaper to a third party broker. That commercial paper was ultimately purchased by Enron. DuringNovember 2003, an action was commenced in the United States Bankruptcy Court for the SouthernDistrict of New York against approximately 100 defendants, including us, who invested in Enron’scommercial paper. The complaint alleges that Enron’s October 2001 purchase of its commercial paperwas a fraudulent conveyance and voidable preference under bankruptcy laws. We dispute theseallegations. We typically invest in commercial paper and notes which are rated in one of the fourhighest rating categories by at least two nationally recognized statistical rating organizations.At the time of our investment in Enron commercial paper, it was considered to be high quality andlow risk. We cannot predict with any degree of certainty the outcome of the suit or determine theextent of any potential liability or damages.***Riyad Alshuaibi***During 2002, Riyad Alshuaibi filed suit against Michael Kelly, one of our executive officers, KellyBroadcasting Systems, Inc. (“KBS”), and EchoStar in the District Court of New Jersey. Plaintiffalleged breach of contract, breach of fiduciary duty, fraud, negligence, and unjust enrichmentresulting in damages in excess of $50.0 million. We denied the allegations of plaintiff’scomplaint. On October 26, 2006, we reached a settlement which did not have a material impact onour results of operations.***Other***In addition to the above actions, we are subject to various other legal proceedings and claimswhich arise in the ordinary course of business. In our opinion, the amount of ultimate liabilitywith respect to any of these actions is unlikely to materially affect our financial position,results of operations or liquidity.
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**PART II****Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER             PURCHASES OF EQUITY SECURITIES*****Market Information.***As of February 22, 2007, all 1,015 issued and outstanding shares of our commonstock were held by EchoStar Orbital Corporation (“EOC”), a direct subsidiary of EchoStar. There is currently no established tradingmarket for our common stock.***Cash Dividend.***During December 2006 and September 2005, we paid  dividends of $400.0 million and$200.0 million to EOC, respectively. On February 15, 2007, EchoStar redeemed all of itsoutstanding 5 3/4% Convertible Subordinated Notes due 2008 at a redemption price of 101.643% of theprincipal amount, or $1.016 billion, plus accrued interest through the redemption date of $14.4million. On February 15, 2007, we paid a dividend of approximately$1.031 billion to EchoStar to fund the payment of this redemption. Payment of any future dividendswill depend upon our earnings and capital requirements, our debt facilities, and other factors theBoard of Directors considers appropriate.  Our ability to declare dividends is affected by covenants inour debt facilities.**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS****EXECUTIVE SUMMARY****Overview**During 2006, we continued to position the DISH Network as the low price leader in the U.S. pay TVindustry, while at the same time offering the highest quality programming, customer service andcustomer choice possible. We subsidize the cost of equipment and installation, and offer otherpromotions, to increase our subscriber base. We also focused on increasing distribution of ourhighly rated DVR and HD equipment, as value ads to drive subscriber growth and retention.As a result, our subscriber base continued to grow. That growth, together with increased averagemonthly revenue per subscriber, resulted in continued revenue growth. Net income and free cashflow also continued to increase.We believe opportunity exists to continue growing our subscriber base. One of our biggestchallenges, and opportunities, is to further improve operating results through better cost controland operating efficiency.**Operational Results and Goals*****Adding new subscribers.***During 2006, we added approximately 3.516 million new subscribers, anincrease of 3.4% from 2005. We intend to continue adding new subscribers by offering compellingvalue-based consumer promotions. These promotions include offers of free or low cost advancedconsumer electronics products, such as receivers with multiple tuners, HD receivers, DVRs, and HDDVRs, as well as programming packages which we believe generally have a better “price-to-value”relationship than packages currently offered by most other subscription television providers.However, there are many reasons we may not be able to maintain our current rate of new subscribergrowth. For example, many of our competitors are better equipped than we are to offer videoservices bundled with broadband and other telecommunications services. Our subscriber growth wouldalso be negatively impacted to the extent our competitors offer more attractive consumerpromotions.***Minimize existing customer churn.***In order to continue to increase our subscriber base we mustminimize our rate of customer turnover, or “churn.” Our average monthly subscriber churn rate forthe year ended December 31, 2006 was approximately 1.64%. We attempt to contain churn by offeringhigh quality customer service, low prices, and advanced products and services not available fromcompetitors. We also require service commitments from subscribers and tailor our promotions towardsubscribers desiring multiple receivers and advanced products such as receivers with multipletuners, DVRs and HD receivers, who tend to remain our customers for longer periods. In
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**addition, we maintain disciplined credit requirements, such as requiring most new subscribers toprovide a valid major credit card and to have an acceptable credit score. We also plan to continueto offer advanced products to existing customers through our lease promotions and to initiate otherprograms to improve our overall subscriber retention. However, there can be no assurance thatthese and other actions we may take to control churn will be successful.***Reduce costs.***We believe that our low cost structure is one of our key competitive advantages andwe continue to work aggressively to retain this position. We are attempting to control costs byimproving the quality of the initial installation of subscriber equipment, improving thereliability of our equipment, providing better subscriber education in the use of our products andservices, and enhancing our training and quality assurance programs for our in-home service andcall center representatives. We believe that further standardization of EchoStar receiver systems,introduction of new installation technology and the migration away from relatively expensive andcomplex subscriber equipment installations may reduce in-home service and customer service calls.In addition, we hope to further reduce our customer service calls by simplifying processes such asbilling and non-technical equipment issues. However, these initiatives may not be sufficient tomaintain or increase our operational efficiencies and we may not be able to continue to grow ouroperations cost effectively.We also attempt to reduce subscriber acquisition and retention costs by lowering the overall costof subsidized equipment we provide to new and existing customers and improving the costeffectiveness of our sales efforts. Our principal method for reducing the cost of subscriberequipment is to lease our receiver systems to new and existing subscribers rather than sellingsystems to them at little or no cost. Leasing enables us to, among other things, reduce our futuresubscriber acquisition costs by redeploying equipment returned by disconnected lease subscribers.We are further reducing the cost of subscriber equipment through our design and deployment ofEchoStar receivers with multiple tuners that allow the subscriber to receive our DISH Networkservices in multiple rooms using a single receiver, thereby reducing the number of EchoStarreceivers we deploy to each subscriber household.However, our overall costs to retain existing subscribers and acquire new subscribers, includingamounts expensed and capitalized, both in the aggregate and on a per subscriber basis, maymaterially increase in the future to the extent that we introduce more aggressive promotions ornewer, more expensive consumer electronics products in response to new promotions and productsoffered by our competitors or for other reasons. In addition, expanded use of new compressiontechnologies, such as MPEG-4 and 8PSK, will inevitably render some portion of our current andfuture EchoStar receivers obsolete, and we will incur additional costs, which may be substantial,to upgrade or replace these receivers. While we may be able to generate increased revenue fromsuch conversions, the deployment of equipment including new technologies will increase the cost ofour consumer equipment, at least in the short term. Our subscriber acquisition and retention costswill increase to the extent we subsidize those costs for new and existing subscribers.**EXPLANATION OF KEY METRICS AND OTHER ITEMS*****Subscriber-related revenue*****.**“Subscriber-related revenue” consists principally of revenue frombasic, movie, local, pay-per-view, and international subscription television services, equipmentrental fees, additional outlet fees from subscribers with multiple receivers, digital videorecorder (“DVR”) fees, advertising sales, fees earned from our DishHOME Protection Plan, equipmentupgrade fees, HD programming and other subscriber revenue. Therefore, not all of the amounts weinclude in “Subscriber-related revenue” are recurring on a monthly basis. “Subscriber-relatedrevenue” also includes revenue from equipment sales, installation and other services related to ouroriginal agreement with AT&T. Revenue from equipment sales to AT&T is deferred and recognized overthe estimated average co-branded subscriber life. Revenue from installation and certain otherservices performed at the request of
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**AT&T is recognized upon completion of the services. All prior period amounts were reclassified toconform to the current period presentation.Development and implementation fees received from AT&T are being recognized in“Subscriber-related revenue” over the next several years. In order to estimate the amountrecognized monthly, we first divide the number of subscribers activated during the month under theAT&T agreement by total estimated subscriber activations during the life of the contract. We thenmultiply this percentage by the total development and implementation fees received from AT&T. Theresulting estimated amount is recognized monthly as revenue over the estimated average subscriberlife.During the fourth quarter 2005, we modified and extended our distribution and sales agencyagreement with AT&T. We believe our overall economic return is similar under both arrangements.However, the impact of subscriber acquisition on many of our line item business metrics wassubstantially different under the original AT&T agreement, compared to most other sales channels(including the revised AT&T agreement).Among other things, our “Subscriber-related revenue” has been impacted in a number of respects.Commencing in the fourth quarter 2005, new subscribers acquired under our revised AT&T agreement donot generate equipment sales, installation or other services revenue from AT&T. However, ourprogramming services revenue is greater for subscribers acquired under the revised AT&T agreement.Deferred equipment sales revenue relating to subscribers acquired through our original AT&Tagreement will continue to have a positive impact on “Subscriber-related revenue” over theestimated average life of those subscribers. Further, development and implementation fees receivedfrom AT&T will continue to be recognized over the estimated average subscriber life of allsubscribers acquired under both the original and revised agreements with AT&T.***Equipment sales*****.**“Equipment sales” include sales of non-DISH Network digital receivers and relatedcomponents to an international DBS service provider and to other international customers.“Equipment sales” also includes unsubsidized sales of DBS accessories to retailers and otherdistributors of our equipment domestically and to DISH Network subscribers. “Equipment sales” doesnot include revenue from sales of equipment to AT&T.Effective the second quarter of 2006, we reclassified certain warranty and service related revenuefrom “Equipment sales” to “Subscriber-related revenue.”***“Other” sales.***“Other” sales consist principally of satellite transmission revenue and C-bandsubscription television service revenue.***Subscriber-related expenses*****.**“Subscriber-related expenses” principally include programmingexpenses, costs incurred in connection with our in-home service and call center operations,overhead costs associated with our installation business, copyright royalties, billing costs,residual commissions paid to our distributors, refurbishment and repair costs related to EchoStarreceiver systems, subscriber retention and other variable subscriber expenses. “Subscriber-relatedexpenses” also include the cost of equipment sales, and expenses related to installation and otherservices from our original agreement with AT&T. Cost of equipment sales to AT&T are deferred andrecognized over the estimated average co-branded subscriber life. Expenses from installation andcertain other services performed at the request of AT&T are recognized as the services areperformed. All prior period amounts were reclassified to conform to current period presentation.Under the revised AT&T agreement, we are including costs from equipment and installations in“Subscriber acquisition costs” or in capital expenditures, rather than in “Subscriber-relatedexpenses.” We are continuing to include in “Subscriber-related expenses” the costs deferred fromequipment sales made to AT&T. These costs are being amortized over the estimated life of thesubscribers acquired under the original AT&T agreement.***Satellite and transmission expenses*****.**“Satellite and transmission expenses” include costsassociated with the operation of our digital broadcast centers, the transmission of local channels,satellite telemetry, tracking and control services, satellite and transponder leases, and otherrelated services.***Cost of sales – equipment.***“Cost of sales – equipment” principally includes costs associated withnon-DISH Network digital receivers and related components sold to an international DBS serviceprovider and to other international customers. “Cost of sales – equipment” also includesunsubsidized sales of DBS accessories to retailers and other
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**distributors of our equipment domestically and to DISH Network subscribers. “Cost of sales –equipment” does not include the costs from sales of equipment to AT&T.Effective the second quarter of 2006, we reclassified certain warranty and service related expensesfrom “Cost of sales – equipment” to “Subscriber-related expenses” and “Depreciation andamortization.” All prior period amounts were reclassified to conform to the current periodpresentation.***Cost of sales – other.***“Cost of sales – other” principally includes programming and other expensesassociated with the C-band subscription television service business of SNG and costs related tosatellite transmission services.***Subscriber acquisition costs*****.**In addition to leasing receivers, we generally subsidizeinstallation and all or a portion of the cost of EchoStar receiver systems in order to attract newDISH Network subscribers. Our “Subscriber acquisition costs” include the cost of EchoStar receiversystems sold to retailers and other distributors of our equipment, the cost of receiver systemssold directly by us to subscribers, net costs related to our promotional incentives, and costsrelated to installation and acquisition advertising. We exclude the value of equipment capitalizedunder our lease program for new subscribers from “Subscriber acquisition costs.”As discussed above, under the revised AT&T agreement, equipment and installation costs previouslyreflected in “Subscriber-related expenses” are being included in “Subscriber acquisition costs” orin capital expenditures.***SAC.***We are not aware of any uniform standards for calculating the “average subscriber acquisitioncosts per new subscriber activation,” or SAC, and we believe presentations of SAC may not becalculated consistently by different companies in the same or similar businesses. We include allnew DISH Network subscribers in our calculation, including DISH Network subscribers added withlittle or no subscriber acquisition costs.Prior to January 1, 2006, we calculated SAC for the period by dividing the amount of our expenseline item “Subscriber acquisition costs” for the period, by our gross new DISH Network subscribersadded during that period. Separately, we then disclosed our “Equivalent SAC” for the period byadding the value of equipment capitalized under our lease program for new subscribers, and otheroffsetting amounts, as described below, to our “Subscriber acquisition cost” expense line itemprior to dividing by our gross new subscriber number. Management believes subscriber acquisitioncost measures are commonly used by those evaluating companies in the multi-channel videoprogramming distribution (“MVPD”) industry. Because our Equivalent SAC includes all of the costsof acquiring subscribers (i.e., subsidized and capitalized equipment), our management focuses onEquivalent SAC as the more comprehensive measure of how much we are spending to acquire newsubscribers. As such, effective January 1, 2006, we began disclosing only “Equivalent SAC,” whichwe now refer to as SAC. SAC is now calculated as “Subscriber acquisition costs,” plus the value ofequipment capitalized under our lease program for new subscribers, divided by gross subscriberadditions. During the first quarter of 2006, we included in our calculation of SAC the benefit ofpayments we received in connection with equipment not returned to us from disconnecting leasesubscribers and returned equipment that is made available for sale rather than being redeployedthrough our lease program, as described in that Form 10-Q. Effective the second quarter of 2006,our revised SAC calculation no longer includes these benefits. Instead, these benefits areseparately disclosed. All prior period SAC calculations have been revised to conform to thecurrent period calculation.***General and administrative expenses*****.**“General and administrative expenses” consists primarily ofemployee-related costs associated with administrative services such as legal, information systems,accounting and finance, including non-cash, stock-based compensation expense related to theadoption of Statement of Financial Accounting Standards No. 123R (As Amended), “Share-BasedPayment” (“SFAS 123R”). It also includes outside professional fees (i.e. legal and accountingservices) and other items associated with facilities and administration.***Interest expense.***“Interest expense” primarily includes interest expense, prepayment premiums andamortization of debt issuance costs associated with our senior debt and convertible subordinateddebt securities (net of capitalized interest) and interest expense associated with our capitallease obligations.***“Other” income (expense).***The main components of “Other” income and expense are unrealized gainsand losses from changes in fair value of non-marketable strategic investments accounted for at fairvalue, equity in earnings
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**and losses of our affiliates, gains and losses realized on the sale of investments, and impairmentof marketable and non-marketable investment securities.***Earnings before interest, taxes, depreciation and amortization (“EBITDA”).***EBITDA is defined as“Net income (loss)” plus “Interest expense” net of “Interest income,” “Taxes” and “Depreciation andamortization.”***DISH Network subscribers.***We include customers obtained through direct sales, and through ourretail networks, including our co-branding relationship with AT&T and other distributionrelationships, in our DISH Network subscriber count. We believe our overall economic return forco-branded and traditional subscribers will be comparable. We also provide DISH Network service tohotels, motels and other commercial accounts. For certain of these commercial accounts, we divideour total revenue for these commercial accounts by an amount approximately equal to the retailprice of our most widely distributed programming package, America’s Top 100 (but taking intoaccount, periodically, price changes and other factors), and include the resulting number, which issubstantially smaller than the actual number of commercial units served, in our DISH Networksubscriber count.During April 2004, we acquired a C-band subscription television service business, the assets ofwhich primarily consist of acquired customer relationships. Although we are converting some ofthese customer relationships from C-band subscription television services to our DISH Network DBSsubscription television service, acquired C-band subscribers are not included in our DISH Networksubscriber count unless they have also subscribed to our DISH Network DBS television service.***Monthly average revenue per subscriber (“ARPU”)*****.**We are not aware of any uniform standards forcalculating ARPU and believe presentations of ARPU may not be calculated consistently by othercompanies in the same or similar businesses. We calculate average monthly revenue per subscriber,or ARPU, by dividing average monthly “Subscriber-related revenues” for the period (total“Subscriber-related revenue” during the period divided by the number of months in the period) byour average DISH Network subscribers for the period. Average DISH Network subscribers arecalculated for the period by adding the average DISH Network subscribers for each month anddividing by the number of months in the period. Average DISH Network subscribers for each monthare calculated by adding the beginning and ending DISH Network subscribers for the month anddividing by two.***Subscriber churn rate/subscriber turnover*****.**We are not aware of any uniform standards forcalculating subscriber churn rate and believe presentations of subscriber churn rates may not becalculated consistently by different companies in the same or similar businesses. We calculatepercentage monthly subscriber churn by dividing the number of DISH Network subscribers whoterminate service during each month by total DISH Network subscribers as of the beginning of thatmonth. We calculate average subscriber churn rate for any period by dividing the number of DISHNetwork subscribers who terminated service during that period by the average number of DISH Networksubscribers subject to churn during the period, and further dividing by the number of months in theperiod. Average DISH Network subscribers subject to churn during the period are calculated byadding the DISH Network subscribers as of the beginning of each month in the period and dividing bythe total number of months in the period.***Free cash flow*****.**We define free cash flow as “Net cash flows from operating activities” less“Purchases of property and equipment,” as shown on our  Consolidated Statements of CashFlows.
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued****RESULTS OF OPERATIONS***Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005.*                   **For the Years Ended**      **December 31,**  **Variance** **Statements of Operations Data** **2006**  **2005**  **Amount**  **%**   (In thousands) **Revenue:**                Subscriber-related revenue $9,375,516  $7,986,381  $1,389,135   17.4 Equipment sales  359,856   364,515   (4,659)  (1.3)Other  77,375   92,273   (14,898)  (16.1)             Total revenue  9,812,747   8,443,169   1,369,578   16.2                               **Costs and Expenses:**                Subscriber-related expenses  4,822,310   4,111,230   711,080   17.3 **% of Subscriber-related revenue**  **51.4****%**  **51.5****%**        Satellite and transmission expenses  144,931   131,559   13,372   10.2 **% of Subscriber-related revenue**  **1.5****%**  **1.6****%**        Cost ofsales-equipment  282,831   272,623   10,208   3.7 **% of Equipment sales**  **78.6****%**  **74.8****%**        Cost ofsales-other  7,215   22,437   (15,222)  (67.8)Subscriber acquisition costs  1,600,912   1,495,200   105,712   7.1 General and administrative  539,630   442,290   97,340   22.0 **% of Total revenue**  **5.5****%**  **5.2****%**        Tivo litigation expense  93,969   —   93,969   NM Depreciation and amortization  1,110,385   800,060   310,325   38.8              Total costs and expenses  8,602,183   7,275,399   1,326,784   18.2                               Operating income (loss)  1,210,564   1,167,770   42,794   3.7                               **Other income (expense):**                Interest income  121,873   34,641   87,232   NM Interest expense, net of amounts capitalized  (389,993)  (305,265)  (84,728)  (27.8)Gain on insurance settlement  —   134,000   (134,000)  (100.0)Other  (7,923)  (1,807)  (6,116)  NM              Total other income (expense)  (276,043)  (138,431)  (137,612)  (99.4)                              Income (loss) before income taxes  934,521   1,029,339   (94,818)  (9.2)Income tax benefit (provision), net  (333,464)  107,274   (440,738)  NM              Net income (loss) $601,057  $1,136,613  $(535,556)  (47.1)                              **Other Data:**                DISH Network subscribers, as of period end (in millions)  13.105   12.040   1.065   8.8 DISH Network subscriber additions, gross (in millions)  3.516   3.397   0.119   3.5 DISH Network subscriber additions, net (in millions)  1.065   1.135   (0.070)  (6.2)Average monthly subscriber churn rate  1.64%  1.65%  (0.01%)  (0.6)Average monthly revenue per subscriber (“ARPU”) $62.47  $58.04  $4.43   7.6 Average subscriber acquisition costs per subscriber (“SAC”) $686  $693  $(7)  (1.0)EBITDA $2,313,026  $2,100,023  $213,003   10.1 
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued*****DISH Network subscribers*****.**As of December 31, 2006, we had approximately 13.105 million DISHNetwork subscribers compared to approximately 12.040 million subscribers at December 31, 2005, anincrease of 8.8%. DISH Network added approximately 3.516 million gross new subscribers for theyear ended December 31, 2006, compared to approximately 3.397 million gross new subscribers during2005, an increase of approximately 119,000. The increase in gross new subscribers resulted inlarge part from increased advertising and the effectiveness of our promotions and products duringthe year. A substantial majority of our gross new subscribers are acquired through our equipmentlease program.DISH Network added approximately 1.065 million net new subscribers for the year ended December 31,2006, compared to approximately 1.135 million net new subscribers during 2005, a decrease of 6.2%.This decrease was primarily a result of subscriber churn on a larger subscriber base. As the sizeof our subscriber base increases, even if our subscriber churn rate remains constant or declines,increasing numbers of gross new DISH Network subscribers are required to sustain net subscribergrowth.Our gross new subscribers, our net new subscriber additions, and our entire subscriber base arenegatively impacted when existing and new competitors offer more attractive alternatives,including, among other things, video services bundled with broadband and other telecommunicationsservices, better priced or more attractive programming packages or more compelling consumerelectronic products and services, including DVRs, VOD services, receivers with multiple tuners, HDprogramming, or HD and standard definition local channels. We also expect to face increasingcompetition from content and other providers who distribute video services directly to consumersover the Internet. In addition, we will be unable to continue to grow our subscriber base atcurrent rates if we cannot control our customer churn.***Subscriber-related revenue.***DISH Network “Subscriber-related revenue” totaled $9.376 billion forthe year ended December 31, 2006, an increase of $1.389 billion or 17.4% compared to 2005. Thisincrease was directly attributable to continued DISH Network subscriber growth and the increase in“ARPU” discussed below.***ARPU***. Monthly average revenue per subscriber was $62.47 during the year ended December 31, 2006versus $58.04 during the same period in 2005. The $4.43 or 7.6% increase in ARPU was primarilyattributable to price increases in February 2006 and 2005 on some of our most popular packages,higher equipment rental fees resulting from increased penetration of our equipment leasingprograms, fees for DVRs, revenue from increased availability of standard and HD local channels bysatellite, fees earned from our DishHOME Protection Plan, and HD programming. This increase waspartially offset by a decrease in revenues from installation and other services related to ouroriginal agreement with AT&T.***Equipment sales.***For the year ended December 31, 2006, “Equipment sales” totaled $359.9 million, adecrease of $4.7 million or 1.3% compared to 2005. This decrease principally resulted from adecline in domestic sales of DBS accessories, partially offset by an increase in sales of non-DISHNetwork digital receivers and related components to international customers.While we currently have certain binding purchase orders from Bell ExpressVu and others throughmid-year 2007, we anticipate that 2007 sales could decline compared to 2006. In addition, theavailability of new compression technology could impact our relationship with Bell ExpressVudepending on its strategy to upgrade customers. There can be no assurance that Bell ExpressVu willcontinue to use our equipment in the future.***Subscriber-related expenses.***“Subscriber-related expenses” totaled $4.822 billion during the yearended December 31, 2006, an increase of $711.1 million or 17.3% compared to 2005. The increase in“Subscriber-related expenses” was primarily attributable to the increase in the number of DISHNetwork subscribers together with an increase in refurbishment and repair costs for returnedEchoStar receiver systems, partially offset by the decline in costs associated with installationand other services related to our original agreement with AT&T. “Subscriber-related expenses”represented 51.4% and 51.5% of “Subscriber-related revenue” for the years ended December31, 2006 and 2005, respectively.In the normal course of business, we enter into various contracts with programmers to providecontent. Our programming contracts generally require us to make payments based on the number ofsubscribers to which the respective content is provided. Consequently, our programming expenseswill continue to increase to the extent we are
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**successful in growing our subscriber base. In addition, because programmers continue to raise theprice of content, our “Subscriber-related expenses” as a percentage of “Subscriber-related revenue”could materially increase absent corresponding price increases in our DISH Network programmingpackages.***Satellite and transmission expenses*****.**“Satellite and transmission expenses” totaled $144.9 millionduring the year ended December 31, 2006, an increase of $13.4 million or 10.2% compared to 2005.This increase primarily resulted from higher operational costs associated with our capital leasesof AMC-15 and AMC-16. These expenses will increase further in the future as we increase the size of our satellite fleet,if we obtain in-orbit satellite insurance, as we increase the number and operations of our digitalbroadcast centers and as additional local markets and otherprogramming services are launched. “Satellite and transmission expenses” totaled 1.5% and 1.6% of“Subscriber-related revenue” during the years ended December 31, 2006 and 2005, respectively.***Cost of sales – equipment.***“Cost of sales – equipment” totaled $282.8 million during the yearended December 31, 2006, an increase of $10.2 million or 3.7% compared to 2005. This increaseprimarily resulted from an increase in charges for defective, slow moving and obsolete inventory.“Cost of sales – equipment” represented 78.6% and 74.8% of “Equipment sales,” during the yearsended December 31, 2006 and 2005, respectively. The increase in the expense to revenue ratioprincipally related to higher charges for defective, slow moving and obsolete inventory in 2006.***Subscriber acquisition costs.***“Subscriber acquisition costs” totaled $1.601 billion for the yearended December 31, 2006, an increase of $105.7 million or 7.1% compared to 2005. The increase in“Subscriber acquisition costs” was primarily attributable to an increase in gross new subscribersand a decline in the number of co-branded subscribers acquired under our original AT&T agreement,for which we did not incur subscriber acquisition costs. This increase was also attributable tohigher installation and acquisition advertising costs, partially offset by a higher number of DISHNetwork subscribers participating in our equipment lease program for new subscribers. Theintroduction of new equipment resulted in a decrease in our cost per installation during 2006compared to 2005; however, as a result of increased volume, our overall installation expenseincreased.***SAC.***SAC was $686 during the year ended December 31, 2006 compared to $693 during 2005, a decreaseof $7, or 1.0%. This decrease was primarily attributable to the equipment redeployment benefits ofour equipment lease programs, discussed below, and lower average equipment and installation costs,partially offset by a decline in the number of co-branded subscribers acquired under our originalAT&T agreement and higher acquisition advertising costs. As previously discussed, the calculationof SAC for prior periods has been revised to conform to the current year presentation.Our principal method for reducing the cost of subscriber equipment, which is included in SAC, is tolease our receiver systems to new subscribers rather than selling systems to them at little or nocost. Upon termination of service, lease subscribers are required to return the leased equipmentto us or be charged for the equipment. Leased equipment that is returned to us which we redeployto new lease customers, results in reduced capital expenditures, and thus reduced SAC.The percentage of our new subscribers choosing to lease rather than purchase equipment continued toincrease for the year ended December 31, 2006 compared to 2005. During the years ended December31, 2006 and 2005, the amount of equipment capitalized under our lease program for new subscriberstotaled $816.5 million and $861.5 million, respectively. This decrease in capital expendituresunder our lease program for new subscribers resulted primarily from lower hardware costs perreceiver, fewer receivers per installation as the number of dual tuner receivers we installcontinues to increase, increased redeployment of equipment returned by disconnecting lease programsubscribers, and a reduction in accessory costs related to the introduction of less costlyinstallation technology and our migration away from relatively expensive and complex subscriberequipment installations. Capital expenditures resulting from our equipment lease program for newsubscribers have been, and we expect will continue to be, partially mitigated by, among otherthings, the redeployment of equipment returned by disconnecting lease program subscribers.However, to remain competitive we will have to upgrade or replace subscriber equipment periodicallyas technology changes, and the associated costs may be substantial. To the extent technologicalchanges render a portion of our existing equipment obsolete, we would be unable to redeploy allreturned equipment and would realize less benefit from the SAC reduction associated withredeployment of that returned lease equipment.
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**As previously discussed, our SAC calculation does not include the benefit of payments we receivedin connection with equipment not returned to us from disconnecting lease subscribers and returnedequipment that is made available for sale rather than being redeployed through our lease program.During the years ended December 31, 2006 and 2005, these amounts totaled $120.5 million and $86.1million, respectively.Our “Subscriber acquisition costs,” both in aggregate and on a per new subscriber activation basis,may materially increase in the future to the extent that we introduce more aggressive promotions ifwe determine that they are necessary to respond to competition, or for other reasons.***General and administrative expenses.***“General and administrative expenses” totaled $539.6 millionduring the year ended December 31, 2006, an increase of $97.3 million or 22.0% compared to 2005.This increase was primarily attributable to increased personnel and related costs to support thegrowth of the DISH Network, including, among other things, non-cash, stock-based compensationexpense recorded related to the adoption of SFAS 123R, outside professional fees and non-incomebased taxes. “General and administrative expenses” represented 5.5% and 5.2% of “Total revenue”during the years ended December 31, 2006 and 2005, respectively. The increase in the ratio ofthose expenses to “Total revenue” was primarily attributable to increased infrastructure expensesto support the growth of the DISH Network, discussed above.***Tivo litigation expense.***We recorded $94.0 million of “Tivo litigation expense” during the yearended December 31, 2006 as a result of the jury verdict in the Tivo lawsuit. Based on our currentanalysis of the case, including the appellate record and other factors, we believe it is morelikely than not that we will prevail on appeal. Consequently, only the expense related to theoriginal judgment has been accrued.***Depreciation and amortization.***“Depreciation and amortization” expense totaled $1.110 billionduring the year ended December 31, 2006, an increase of $310.3 million or 38.8% compared to 2005.The increase in “Depreciation and amortization” expense was primarily attributable to depreciationof equipment leased to subscribers resulting from increased penetration of our equipment leaseprograms, additional depreciation related to satellites placed in service and other depreciableassets placed in service to support the DISH Network.***Interest income.***“Interest income” totaled $121.9 million during the year ended December 31, 2006,an increase of $87.2 million compared to 2005. This increase principally resulted from higher cashand marketable investment securities balances and higher total percentage returns earned on ourcash and marketable investment securities during 2006.***Interest expense, net of amounts capitalized****.*“Interest expense” totaled $390.0 million during theyear ended December 31, 2006, an increase of $84.7 million or 27.8% compared to 2005. Thisincrease primarily resulted from a net increase in interest expense of $65.1 million related to theissuance of additional senior debt during 2006, net of redemptions, and an increase in prepaymentpremiums and write-off of debt issuance costs totaling $28.7 million, related to the redemption ofcertain outstanding senior debt during 2006. This increase was partially offset by an increase incapitalized interest on construction of satellites.***Earnings before interest, taxes, depreciation and amortization*****.**EBITDA was $2.313 billion duringthe year ended December 31, 2006, an increase of $213.0 million or 10.1% compared to 2005. EBITDAfor the year ended December 31, 2005 was favorably impacted by the $134.0 million “Gain oninsurance settlement” and the year ended December 31, 2006 was negatively impacted by the $94.0million “Tivo litigation expense.” Absent these items, our EBITDA for the year ended December 31,2006 would have been $441.0 million or 22.4% higher than EBITDA in 2005. The increase in EBITDA(excluding these items) was primarily attributable to changes in operating revenues and expensesdiscussed above.
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**The following table reconciles EBITDA to the accompanying financial statements:           **For the Years Ended**   **December 31,**   **2006**  **2005**   (In thousands) EBITDA $2,313,026  $2,100,023 Less:        Interest expense, net  268,120   270,624 Income tax provision (benefit), net  333,464   (107,274)Depreciation and amortization  1,110,385   800,060        Net income (loss) $601,057  $1,136,613        EBITDA is not a measure determined in accordance with accounting principles generally accepted inthe United States, or GAAP, and should not be considered a substitute for operating income, netincome or any other measure determined in accordance with GAAP. EBITDA is used as a measurement ofoperating efficiency and overall financial performance and we believe it to be a helpful measurefor those evaluating companies in the multi-channel video programming distribution industry.Conceptually, EBITDA measures the amount of income generated each period that could be used toservice debt, pay taxes and fund capital expenditures. EBITDA should not be considered inisolation or as a substitute for measures of performance prepared in accordance with GAAP.***Income tax benefit (provision), net.***Our income tax provision was $333.5 million during the yearended December 31, 2006 compared to a benefit of $107.3 million during 2005. The income taxbenefit for the year ended December 31, 2005 included credits of $185.2 million and $287.1 millionto our provision for income taxes resulting from the reversal and current year activity,respectively, of our recorded valuation allowance. The year ended December 31, 2006 includes acredit of $6.7 million related to the recognition of state net operating loss carryforwards(“NOLs”) for prior periods. In addition, the year ended December 31, 2006, includes a credit of$4.8 million related to amended state filings. During 2007, we expect our income tax provision toreflect statutory Federal and state tax rates.           **For the Years Ended**   **December31,**   **2006**  **2005**   (In thousands) Adjusted income tax benefit (provision), net $(346,993) $(385,190)Less:        Valuation allowance reversal  —   (185,200)Current year valuation allowance activity  (11,109)  (287,100)Deferred tax asset for filed returns  9,065   (20,164)Prior period adjustments to state NOLs  (6,654)  — Amended state filings  (4,831)  —        Income tax benefit (provision), net $(333,464) $107,274        ***Net income (loss).***Net income was $601.1 million during the year ended December 31, 2006, adecrease of $535.6 million compared to $1.137 billion in 2005. Net income for the year endedDecember 31, 2005 was favorably impacted by the $472.3 million reversal of our recorded valuationallowance for deferred tax assets and the $134.0 million “Gain on insurance settlement.” Netincome for the year ended December 31, 2006 was unfavorably impacted by the Tivo litigation chargediscussed above.
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued***Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004.*                   **For the Years Ended**      **December 31,**  **Variance** **Statements of Operations Data** **2005**  **2004**  **Amount**  **%**   (In thousands) **Revenue:**                Subscriber-related revenue $7,986,381  $6,692,195  $1,294,186   19.3 Equipment sales  364,515   360,927   3,588   1.0 Other  92,273   97,161   (4,888)  (5.0)             Total revenue  8,443,169   7,150,283   1,292,886   18.1                               **Costs and Expenses:**                Subscriber-related expenses  4,111,230   3,631,730   479,500   13.2 **% of Subscriber-related revenue**  **51.5****%**  **54.3****%**        Satellite and transmission expenses  131,559   107,587   23,972   22.3 **% of Subscriber-related revenue**  **1.6****%**  **1.6****%**        Cost ofsales-equipment  272,623   259,736   12,887   5.0 **% of Equipment sales**  **74.8****%**  **72.0****%**        Cost ofsales-other  22,437   30,302   (7,865)  (26.0)Subscriber acquisition costs  1,495,200   1,531,843   (36,643)  (2.4)General and administrative  442,290   381,753   60,537   15.9 **% of Total revenue**  **5.2****%**  **5.3****%**        Depreciation and amortization  800,060   493,358   306,702   62.2              Total costs and expenses  7,275,399   6,436,309   839,090   13.0                               Operating income (loss)  1,167,770   713,974   453,796   63.6                               **Other income (expense):**                Interest income  34,641   30,609   4,032   13.2 Interest expense, net of amounts capitalized  (305,265)  (433,364)  128,099   29.6 Gain on insurance settlement  134,000   —   134,000   NM Other  (1,807)  (741)  (1,066)  NM              Total other income (expense)  (138,431)  (403,496)  265,065   65.7                               Income (loss) before income taxes  1,029,339   310,478   718,861   NM Income tax benefit (provision), net  107,274   (11,065)  118,339   NM              Net income (loss) $1,136,613  $299,413  $837,200   NM                               **Other Data:**                DISH Network subscribers, as of period end (in millions)  12.040   10.905   1.135   10.4 DISH Network subscriber additions, gross (in millions)  3.397   3.441   (0.044)  (1.3)DISH Network subscriber additions, net (in millions)  1.135   1.480   (0.345)  (23.3)Average monthly subscriber churn rate  1.65%  1.62%  0.03%  1.9 Average monthly revenue per subscriber (“ARPU”) $58.04  $55.00  $3.04   5.5 Average subscriber acquisition costs per subscriber (“SAC”) $693  $611  $82   13.4 EBITDA $2,100,023  $1,206,591  $893,432   74.0 
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued*****DISH Network subscribers*****.**As of December 31, 2005, we had approximately 12.040 million DISHNetwork subscribers compared to approximately 10.905 million subscribers at December 31, 2004, anincrease of approximately 10.4%. DISH Network added approximately 3.397 million gross newsubscribers for the year ended December 31, 2005, compared to approximately 3.441 million gross newsubscribers during 2004, a decrease of approximately 44,000 gross new subscribers. The decrease ingross new subscribers resulted primarily from a decline in gross activations under our co-brandingagreement with AT&T, partially offset by an increase in sales through our agency relationships andan increase in our other distribution channels.DISH Network added approximately 1.135 million net new subscribers for the year ended December 31,2005, compared to approximately 1.480 million net new subscribers during 2004, a decrease ofapproximately 23.3%. This decrease was primarily a result of increased subscriber churn on alarger subscriber base, and the result of a decline in gross and net activations under ourco-branding agreement with AT&T. In addition, even if percentage subscriber churn had remainedconstant or had declined, increasing numbers of gross new subscribers are required to sustain netsubscriber growth.***Subscriber-related revenue.***DISH Network “Subscriber-related revenue” totaled $7.986 billion forthe year ended December 31, 2005, an increase of $1.294 billion or 19.3% compared to 2004. Thisincrease was directly attributable to continued DISH Network subscriber growth and the increase in“ARPU” discussed below.***ARPU***. Monthly average revenue per subscriber was $58.04 during the year ended December 31, 2005versus $55.00 during the same period in 2004. The $3.04 or 5.5% increase in monthly averagerevenue per DISH Network subscriber is primarily attributable to price increases in February 2005and 2004 on some of our most popular packages, higher equipment rental fees resulting fromincreased penetration of our equipment leasing programs, availability of local channels bysatellite and fees for DVRs. This increase was also attributable to our relationship with AT&T,including revenues from equipment sales, installation and other services related to that agreement.These improvements in ARPU were partially offset by an increase in our free and discountedprogramming promotions. We provided local channels by satellite in 164 markets as of December 31,2005 compared to 152 markets as of December 31, 2004. We regularly have promotions to acquire newDISH Network subscribers which provide free and/or discounted programming that negatively impactARPU.***Equipment sales.***For the year ended December 31, 2005, “Equipment sales” totaled $364.5 million,an increase of $3.6 million or 1.0% compared to the same period during 2004. This increaseprincipally resulted from an increase in sales of non-DISH Network digital receivers and relatedcomponents to an international DBS service provider, partially offset by decreases in sales of DBSaccessories domestically.***Subscriber-related expenses.***“Subscriber-related expenses” totaled $4.111 billion during the yearended December 31, 2005, an increase of $479.5 million or 13.2% compared to 2004. The increase in“Subscriber-related expenses” was primarily attributable to the increase in the number of DISHNetwork subscribers, which resulted in increased expenses to support the DISH Network.“Subscriber-related expenses” represented 51.5% and 54.3% of “Subscriber-related revenue” duringthe years ended December 31, 2005 and 2004, respectively. The decrease in this expense to revenueratio primarily resulted from the increase in “Subscriber-related revenue” and an increase in thenumber of DISH Network subscribers participating in our lease program for existing subscribers.Since certain subscriber retention costs associated with this program are capitalized rather thanexpensed, our “Subscriber-related expenses” decreased and our capital expenditures increased. Thedecrease in the ratio also resulted from improved efficiencies associated with our installation andin-home service operations. The decrease in this expense to revenue ratio was partially offset byincreases in cost associated with deferred equipment sales, installation and other services relatedto our relationship under our prior agreement with AT&T. The decrease in the ratio was alsopartially offset by $15.7 million more in charges during 2005 compared to 2004 for the replacementof smart cards.***Satellite and transmission expenses*****.**“Satellite and transmission expenses” totaled $131.6 millionduring the year ended December 31, 2005, an increase of $24.0 million or 22.3% compared to 2004.This increase primarily resulted from commencement of service and operational costs associated withthe increasing number of markets in which we offer local broadcast channels by satellite aspreviously discussed, increases in our satellite lease payment obligations for AMC-2, andoperational costs associated with our capital leases of AMC-15 and AMC-16 which commencedcommercial operation in January and February 2005, respectively. “Satellite and transmissionexpenses” totaled 1.6% of “Subscriber-related revenue” during  each of the years ended December31, 2005 and
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**2004. These expenses will increase further in the future as we increase the size of our satellitefleet, if we obtain in-orbit satellite insurance, as we increase the number and operations of ourdigital broadcast centers and as additional local markets and other programming services arelaunched.***Cost of sales – equipment.***“Cost of sales – equipment” totaled $272.6 million during the yearended December 31, 2005, an increase of $12.9 million or 5.0% compared to 2004. This increaserelated primarily to the increase in sales of non-DISH Network digital receivers and relatedcomponents to an international DBS service provider. Charges for slow moving and obsoleteinventory were lower during 2005 compared to 2004. This difference, together with the decrease insales of DBS accessories domestically discussed above, partially offset the amount of the increase.“Cost of sales – equipment” represented 74.8% and 72.0% of “Equipment sales,” during the yearsended December 31, 2005 and 2004, respectively. The increase in the expense to revenue ratioprincipally related to a decline in margins on sales to the international DBS service provider andon sales of DBS accessories domestically. This increase was partially offset by the lower 2005charges for slow moving and obsolete inventory.***Subscriber acquisition costs.***“Subscriber acquisition costs” totaled $1.495 billion for the yearended December 31, 2005, a decrease of $36.6 million or 2.4% compared to 2004. The decrease in“Subscriber acquisition costs” was attributable to a higher number of DISH Network subscribersparticipating in our equipment lease program for new subscribers, partially offset by an increasein the number of non co-branded subscribers acquired and an increase in acquisition advertising.***SAC.***SAC was $693 during the year ended December 31, 2005 compared to $611 during 2004, anincrease of $82, or 13.4 %. This increase was primarily attributable to a decline in the number ofco-branded subscribers acquired under our original AT&T agreement, for which we did not incursubscriber acquisition costs and a greater number of DISH Network subscribers activating higherpriced advanced products, such as receivers with multiple tuners, DVRs and HD receivers.Activation of these more advanced and complex products also resulted in higher installation costsduring 2005 as compared to 2004. The increase in SAC was also attributable to higher costs foracquisition advertising and promotional incentives paid to our independent dealer network.Penetration of our equipment lease program for new subscribers increased during 2005 compared to2004. The value of equipment capitalized under our lease program for new subscribers totaledapproximately $861.5 million and $574.8 million for the year ended December 31, 2005 and 2004,respectively. The increase in leased equipment and related reduction in subsidized equipment salescaused our capital expenditures to increase, while our “Subscriber acquisition costs” declined.As previously discussed, our SAC calculation does not include the benefit of payments we receivedin connection with equipment not returned to us from disconnecting lease subscribers and returnedequipment that is made available for sale rather than being redeployed through our lease program.During the years ended December 31, 2005 and 2004, these amounts totaled $86.1 million and $60.8million, respectively.***General and administrative expenses.***“General and administrative expenses” totaled $442.3 millionduring the year ended December 31, 2005, an increase of $60.5 million or 15.9% compared to 2004.The increase in “General and administrative expenses” was primarily attributable to increasedpersonnel and infrastructure expenses to support the growth of the DISH Network. “General andadministrative expenses” represented 5.2% and 5.3% of“Total revenue” during the yearsended December 31, 2005 and 2004, respectively. The decrease in this expense to revenue ratioresulted primarily from “Total revenue” increasing at a higher rate than our “General andadministrative expenses.”***Depreciation and amortization.***“Depreciation and amortization” expense totaled $800.1 millionduring the year ended December 31, 2005, an increase of $306.7 million or 62.2% compared to 2004.The increase in “Depreciation and amortization” expense was primarily attributable to additionaldepreciation on equipment leased to subscribers resulting from increased penetration of ourequipment lease programs and other depreciable assets placed in service to support the DISHNetwork. Further, depreciation of our AMC-15 and AMC-16 satellites, which commenced commercialoperation during January and February 2005, respectively, contributed to this increase.***Interest expense, net of amounts capitalized.***“Interest expense” totaled $305.3 million during theyear ended December 31, 2005, a decrease of $128.1 million or 29.6% compared to 2004. Thisdecrease primarily resulted from
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued**a decrease in prepayment premiums and write-off of debt issuance costs totaling $134.4 million, anda net reduction in interest expense of $40.2 million related to the redemption, repurchases andrefinancing of our previously outstanding senior debt which occurred during 2004. This decreasewas partially offset by $38.0 million of additional interest expense during 2005 associated withour capital lease obligations for the AMC-15 and AMC-16 satellites.***Gain on insurance settlement.***During March 2005, we settled an insurance claim and related claimsfor accrued interest and bad faith with the insurers of our EchoStar IV satellite for the netamount of $240.0 million. The $134.0 million received in excess of our previously recorded $106.0million receivable related to this insurance claim was recognized as a “Gain on insurancesettlement” during the year ended December 31, 2005.***Earnings before interest, taxes, depreciation and amortization*****.**EBITDA was $2.100 billion duringthe year ended December 31, 2005, an increase of $893.4 million or 74.0% compared to $1.207 billionduring 2004. The increase in EBITDA was primarily attributable to the changes in operatingrevenues and expenses discussed above.The following table reconciles EBITDA to the accompanying financial statements:           **For the Years Ended**   **December 31,**   **2005**  **2004**   (In thousands) EBITDA $2,100,023  $1,206,591 Less:        Interest expense, net  270,624   402,755 Income tax provision (benefit), net  (107,274)  11,065 Depreciation and amortization  800,060   493,358        Net income (loss) $1,136,613  $299,413        EBITDA is not a measure determined in accordance with accounting principles generally accepted inthe United States, or GAAP, and should not be considered a substitute for operating income, netincome or any other measure determined in accordance with GAAP. EBITDA is used as a measurement ofoperating efficiency and overall financial performance and we believe it to be a helpful measurefor those evaluating companies in the multi-channel video programming distribution industry.Conceptually, EBITDA measures the amount of income generated each period that could be used toservice debt, pay taxes and fund capital expenditures. EBITDA should not be considered inisolation or as a substitute for measures of performance prepared in accordance with GAAP.***Income tax benefit (provision), net.***Our income tax benefit was $107.3 million during the yearended December 31, 2005 compared to an income tax provision of $11.1 million during 2004. Thisdecrease was primarily related to credits of $185.2 million and $287.1 million to our provision forincome taxes in 2005 resulting from the reversal and current year activity, respectively, of ourrecorded valuation allowance for those deferred tax assets that we believed were more likely thannot to be realizable.           **For the Years Ended**   **December 31,**   **2005**  **2004**   (In thousands) Adjusted income tax benefit (provision), net $(385,190) $(119,877)Less:        Valuation allowance reversal  (185,200)  — Current year valuation allowance activity  (287,100)  (106,766)Deferred tax asset for filed returns  (20,164)  (20,46)       Income tax benefit (provision), net $107,274  $(11,065)       ***Net income (loss).***“Net income” was $1.137 billion during the year ended December 31, 2005, anincrease of $837.2 million compared to $299.4 million for 2004. The increase was primarilyattributable to the reversal of our recorded valuation allowance for deferred tax assets, higher“Operating income,” the “Gain on insurance settlement” and lower “Interest expense, net of amountscapitalized.”
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**Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS — Continued****Seasonality**Our revenues vary throughout the year. As is typical in the subscription television serviceindustry, the first half of the year generally produces fewer new subscribers than the second halfof the year. Our operating results in any period may be affected by the incurrence of advertisingand promotion expenses that do not necessarily produce commensurate revenues until the impact ofsuch advertising and promotion is realized in future periods.**Inflation**Inflation has not materially affected our operations during the past three years. We believe thatour ability to increase the prices charged for our products and services in future periods willdepend primarily on competitive pressures. We do not have any material backlog of our products.**Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK****Market Risks Associated With Financial Instruments**As of December 31, 2006, our restricted and unrestricted cash, cash equivalents and marketableinvestment securities had a fair value of $2.521 billion which was invested in: (a) cash; (b) debtinstruments of the U.S. Government and its agencies; (c) commercial paper and notes with an overallaverage maturity of less than one year and rated in one of the four highest rating categories by atleast two nationally recognized statistical rating organizations; and (d) instruments with similarrisk characteristics to the commercial paper described above. The primary purpose of theseinvesting activities has been to preserve principal until the cash is required to, among otherthings, fund operations, make strategic investments and expand the business. Consequently, thesize of this portfolio fluctuates significantly as cash is received and used in ourbusiness.Our restricted and unrestricted cash, cash equivalents and marketable investment securities had anaverage annual return for the year ended December 31, 2006 of 5.4%. A hypothetical 10.0% decreasein interest rates would result in a decrease of approximately $12.2 million in annual interestincome. The value of certain of the investments in this portfolio can be impacted by, among otherthings, the risk of adverse changes in securities and economic markets generally, as well as therisks related to the performance of the companies whose commercial paper and other instruments wehold. However, the high quality of these investments (as assessed by independent rating agencies),reduces these risks. The value of these investments can also be impacted by interest ratefluctuations.AtDecember 31, 2006, all of the $2.521 billion was invested in fixed or variable rate instrumentsor money market type accounts. While an increase in interest rates would ordinarily adverselyimpact the fair value of fixed and variable rate investments, we normally hold these investments tomaturity. Consequently, neither interest rate fluctuations nor other market risks typically resultin significant realized gains or losses to this portfolio. A decrease in interest rates has theeffect of reducing our future annual interest income from this portfolio, since funds would bere-invested at lower rates as the instruments mature.We currently classify all marketable investment securities as available-for-sale. We adjust thecarrying value of our available-for-sale securities to fair value and report the related temporaryunrealized gains and losses as a separate component of “Accumulated other comprehensive income(loss)” within “Total stockholder’s equity (deficit),” net of related deferred income tax.Declines in the fair value of a marketable investment security which are estimated to be “otherthan temporary” are recognized in the Consolidated Statements of Operations and ComprehensiveIncome (Loss), thus establishing a new cost basis for such investment. We evaluate our marketableinvestment securities portfolio on a quarterly basis to determine whether declines in the fairvalue of these securities are other than temporary. This quarterly evaluation consists ofreviewing, among other things, the fair value of our marketable investment securities compared tothe carrying amount, the historical volatility of the price of each security and any market andcompany specific factors related to each security. Generally, absent specific factors to thecontrary, declines in the fair value of investments below cost basis for a continuous period ofless than six months are considered to be temporary. Declines in the fair value of investments fora continuous period of six to nine months are evaluated on a case by case basis to determinewhether any company or market-specific factors exist which would indicate that such declines areother than temporary. Declines in the fair value of investments below cost
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basis for a continuous period greater than nine months are considered other than temporary and arerecorded as charges to earnings, absent specific factors to the contrary.During the year ended December 31, 2006, our portfolio generally has experienced and continues toexperience volatility. If the fair value of our marketable investment securities portfolio doesnot remain above cost basis or if we become aware of any market or company specific factors thatindicate that the carrying value of certain of our securities is impaired, we may be required torecord charges to earnings in future periods equal to the amount of the decline in fair value.We also have strategic investments in certain non-marketable equity securities which are includedin “Other noncurrent assets, net” on our ConsolidatedBalance Sheets including equity interests which we generallyreceive in exchange for non-cash consideration. We account for such unconsolidated investmentsunder either the equity method or cost method of accounting. Because these equity securities arenot publicly traded, it is not practical to regularly estimate the fair value of the investments;however, these investments are subject to an evaluation for other than temporary impairment on aquarterly basis. This quarterly evaluation consists of reviewing, among other things, companybusiness plans and current financial statements, if available, for factors that may indicate animpairment of our investment. Such factors may include, but are not limited to, cash flowconcerns, material litigation, violations of debt covenants and changes in business strategy. Thefair value of these equity investments is not estimated unless there are identified changes incircumstances that may indicate an impairment exists and these changes are likely to have asignificant adverse effect on the fair value of the investment. As of December 31, 2006, we had$53.3 million aggregate carrying amount of non-marketable and unconsolidated strategic equityinvestments of accounted for under the cost method. During the year ended December 31, 2006, we did not record any impairment charges with respect to these investments.Our ability to realize value from ourstrategic investments in companies that are not publiclytraded is dependent on the success of their business and their ability to obtain sufficient capitalto execute their business plans. Because private markets are not as liquid as public markets,there is also increased risk that we will not be able to sell these investments, or that when wedesire to sell them we will not be able to obtain fair value for them.As ofDecember 31, 2006, we had $5.037 billion of fixed-rate debt, mortgages and other notespayable, excluding capital lease obligations, with an estimated fair value of approximately $4.988billion using quoted market prices where available. The fair value of our fixed-rate debt andmortgages is affected by fluctuations in interest rates. A hypothetical 10.0% decrease in assumedinterest rates would increase the fair value of our debt by approximately $172.9 million. To theextent interest rates increase, our costs of financing would increase at such time as we arerequired to refinance our debt. As of December 31, 2006, a hypothetical 10.0% increase in assumedinterest rates would increase our annual interest expense by approximately $33.2 million.In general, we have not used derivative financial instruments for hedging or speculative purposes.**Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**Our Consolidated Financial Statements are included in this report beginning on page F-1.**Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**Not applicable.**Item 9A. CONTROLS AND PROCEDURES**Under the supervision and with the participation of our management, including our Chief ExecutiveOfficer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls andprocedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the endof the period covered by this report. Based upon that evaluation, our Chief Executive Officer andChief Financial Officer concluded that our disclosure controls and procedures were effective as ofthe end of the period covered by this report.
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There has been no change in our internal control over financial reporting (as defined in Rule13a-15(f) under the Securities Exchange Act of 1934) during our most recent fiscal quarter that hasmaterially affected, or is reasonably likely to materially affect, our internal control overfinancial reporting.**Item 9B. OTHER INFORMATION**None.
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**PART IV****Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**     (a)   The following documents are filed as part of this report:            (1) *Financial Statements* **Page**               Report of KPMG LLP, Independent Registered Public Accounting Firm F-2      Consolidated Balance Sheets at December 31, 2006 and 2005 F-3      Consolidated Statements of Operations and Comprehensive Income (Loss) for the years endedDecember 31, 2006, 2005 and 2004 F-4      Consolidated Statements of Changes in Stockholder’s Equity (Deficit) for the years endedDecember 31, 2004, 2005 and 2006 F-5      Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 F-6      Notes to Consolidated Financial Statements F-7            (2) *Financial Statement Schedules*                 None. All schedules have been included in the Consolidated Financial Statements orNotes thereto.              (3) *Exhibits*     Exhibit No. Description3.1(a)* Articles of Incorporation of EDBS (incorporated by reference to Exhibit 3.4(a) tothe Company’s Registration Statement on Form S-4, Registration No. 333-31929).   3.1(b)* Certificate of Amendment of the Articles of Incorporation of EchoStar DBSCorporation, dated as of August 25, 2003 (incorporated by reference to Exhibit3.1(b) to the Annual Report on Form 10-K of EDBS for the year ended December 31,2003, Commission File No.333-31929).   3.1(c)* Bylaws of EDBS (incorporated by reference to Exhibit 3.4(b) to the Company’sRegistration Statement on Form S-4, Registration No. 333-31929).   4.1* Indenture, relating to EDBS 5 3/4% Senior Notes due 2008, dated as of October 2,2003, between EDBS and U.S. Bank Trust National Association, as Trustee(incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q ofEchoStar for the quarter ended September 30, 2003, Commission File No.0-26176).   4.2* Indenture, relating to EDBS 6 3/8% Senior Notes due 2011, dated as of October 2,2003, between EDBS and U.S. Bank Trust National Association, as Trustee(incorporated by reference to Exhibit 4.2 to the Quarterly Report on Form 10-Q ofEchoStar for the quarter ended September 30, 2003, Commission File No.0-26176).   4.3* First Supplemental Indenture, relating to the 5 3/4% Senior Notes Due 2008, datedas of December 31, 2003 between EDBS and U.S. Bank Trust National Association, asTrustee (incorporated by reference to Exhibit 4.13 to the Annual Report on Form10-K of EchoStar for the year ended December 31, 2003, Commission FileNo.0-26176).
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   Exhibit No. Description4.4* First Supplemental Indenture, relating to the 6 3/8% Senior Notes Due 2011, datedas of December 31, 2003 between EDBS and U.S. Bank Trust National Association, asTrustee (incorporated by reference to Exhibit 4.14 to the Annual Report on Form10-K of EchoStar for the year ended December 31, 2003, Commission FileNo.0-26176). 4.5* Indenture, relating to the 6 5/8% Senior Notes Due 2014, datedOctober 1, 2004 between EDBS and U.S. Bank Trust NationalAssociation, as Trustee (incorporated by reference to Exhibit 4.1 tothe Current Report on Form 8-K of EchoStar filed October 1, 2004,Commission File No. 0-26176).   4.6* Indenture, relating to the 7 1/8% Senior Notes Due 2016, dated as of February 2,2006 between EDBS and U.S. Bank Trust National Association, as Trustee(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K ofEchoStar filed February 3, 2006, Commission File No.0-26176).   4.7* Indenture, relating to the 7% Senior Notes Due 2013, dated as of October 18, 2006between EDBS and U.S. Bank Trust National Association, as Trustee (incorporatedby reference to Exhibit 4.1 to the Current Report on Form 8-K of EchoStar filedOctober 18, 2006, Commission File No.0-26176).   10.1* Form of Satellite Launch Insurance Declarations (incorporated by reference toExhibit 10.10 to the Registration Statement on Form S-1 of Dish Ltd.,Registration No. 33-81234).   10.2* Manufacturing Agreement, dated as of March 22, 1995, between HTS and SCITechnology, Inc. (incorporated by reference to Exhibit 10.12 to the RegistrationStatement on Form S-1 of Dish Ltd., Commission File No. 33-81234). **   10.3* EchoStar 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.16 tothe Registration Statement on Form S-1 of EchoStar, Registration No. 33-91276).**   10.4* Amended and Restated EchoStar 1999 Stock Incentive Plan (incorporated byreference to Appendix A to EchoStar’s Definitive Proxy Statement on Schedule 14Adated August 24, 2005).**   10.5* 2002 Class B CEO Stock Option Plan (incorporated by reference to Appendix A toEchoStar’s Definitive Proxy Statement on Schedule 14A dated April 9, 2002).**   10.6* Agreement between HTS, ESC and ExpressVu Inc., dated January 8, 1997, as amended(incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K ofEchoStar for the year ended December 31, 1996, as amended, Commission File No.0-26176).   10.7* Agreement to Form NagraStar L.L.C., dated as of June 23, 1998, by and betweenKudelski S.A., EchoStar and ESC (incorporated by reference to Exhibit 10.28 tothe Annual Report on Form 10-K of EchoStar for the year ended December 31, 1998,Commission File No. 0-26176).   10.8* License and OEM Manufacturing Agreement, dated July 1, 2002, between EchoStarSatellite Corporation, EchoStar Technologies Corporation and Thomson multimedia,Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form10-Q of EchoStar for the quarter ended September 30, 2002, Commission File No.0-26176).   10.9* Amendment No. 19 to License and OEM Manufacturing Agreement, dated July 1, 2002,between EchoStar Satellite Corporation, EchoStar Technologies Corporation andThomson multimedia, Inc. (incorporated by reference to Exhibit 10.57 to theAnnual Report on Form 10-K of EchoStar for the year ended December 31, 2002,Commission File No.0-26176).   10.10* Satellite Service Agreement, dated as of March 21, 2003, between SES Americom,Inc., EchoStar Satellite Corporation and EchoStar Communications Corporation(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Qof EchoStar for the quarter ended March 31, 2003, Commission File No.0-26176).   10.11* Amendment No. 1 to Satellite Service Agreement dated March 31, 2003 between SESAmericom Inc. and EchoStar (incorporated by reference to Exhibit 10.1 to theQuarterly Report on Form 10-Q of EchoStar for the quarter ended September 30,2003, Commission File No.0-26176).
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   Exhibit No. Description10.12* Satellite Service Agreement dated as of August 13, 2003 between SES Americom Inc.and EchoStar (incorporated by reference to Exhibit 10.2 to the Quarterly Reporton Form 10-Q of EchoStar for the quarter ended September 30, 2003, CommissionFile No.0-26176).   10.13* Satellite Service Agreement, dated February 19, 2004, between SES Americom, Inc.and EchoStar (incorporated by reference to Exhibit 10.1 to the Quarterly Reporton Form 10-Q of EchoStar for the quarter ended March 31, 2004, CommissionFile  No.0-26176).   10.14* Amendment No. 1 to Satellite Service Agreement, dated March 10, 2004, between SESAmericom, Inc. and EchoStar (incorporated by reference to Exhibit 10.2 to theQuarterly Report on Form 10-Q of EchoStar for the quarter ended March 31, 2004,Commission File No.0-26176).   10.15* Amendment No. 3 to Satellite Service Agreement, dated February 19, 2004, betweenSES Americom, Inc. and EchoStar (incorporated by reference to Exhibit 10.3 to theQuarterly Report on Form 10-Q of EchoStar for the quarter ended March 31, 2004,Commission File No.0-26176).   10.16* Whole RF Channel Service Agreement, dated February 4, 2004, between TelesatCanada and EchoStar (incorporated by reference to Exhibit 10.4 to the QuarterlyReport on Form 10-Q of EchoStar for the quarter ended March 31, 2004, CommissionFile No.0-26176).   10.17* Letter Amendment to Whole RF Channel Service Agreement, dated March 25, 2004,between Telesat Canada and EchoStar (incorporated by reference to Exhibit 10.5 tothe Quarterly Report on Form 10-Q of EchoStar for the quarter ended March 31,2004, Commission File No.0-26176).   10.18* Amendment No. 2 to Satellite Service Agreement, dated April 30, 2004, between SESAmericom, Inc. and EchoStar (incorporated by reference to Exhibit 10.1 to theQuarterly Report on Form 10-Q of EchoStar for the quarter ended June 30, 2004,Commission File No.0-26176).   10.19* Second Amendment to Whole RF Channel Service Agreement, dated May 5, 2004,between Telesat Canada and EchoStar (incorporated by reference to Exhibit 10.2 tothe Quarterly Report on Form 10-Q of EchoStar for the quarter ended June 30,2004, Commission File No.0-26176).   10.20* Third Amendment to Whole RF Channel Service Agreement, dated October 12, 2004,between Telesat Canada and EchoStar (incorporated by reference to Exhibit 10.22to the Annual Report on Form 10-K of EchoStar for the year ended December 31,2004, Commission File No.0-26176).   10.21* Amendment No. 4 to Satellite Service Agreement, dated October 21, 2004, betweenSES Americom, Inc. and EchoStar (incorporated by reference to Exhibit 10.23 tothe Annual Report on Form 10-K of EchoStar for the year ended December 31, 2004,Commission File No.0-26176).   10.22* Amendment No. 3 to Satellite Service Agreement, dated November 19, 2004 betweenSES Americom, Inc. and EchoStar (incorporated by reference to Exhibit 10.24 tothe Annual Report on Form 10-K of EchoStar for the year ended December 31, 2004,Commission File No.0-26176).   10.23* Amendment No. 5 to Satellite Service Agreement, dated November 19, 2004, betweenSES Americom, Inc. and EchoStar (incorporated by reference to Exhibit 10.25 tothe Annual Report on Form 10-K of EchoStar for the year ended December 31, 2004,Commission File No.0-26176).   10.24* Amendment No. 6 to Satellite Service Agreement, dated December 20, 2004, betweenSES Americom, Inc. and EchoStar (incorporated by reference to Exhibit 10.26 tothe Annual Report on Form 10-K of EchoStar for the year ended December 31, 2004,Commission File No.0-26176).   10.25* Description of the 2005 Long-Term Incentive Plan dated January 26, 2005(incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Qof EchoStar for the quarter ended March 31, 2005, Commission File No. 0-26176).**
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   Exhibit No. Description10.26* Description of the 2005 Cash Incentive Plan dated January 22, 2005 (incorporatedby reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of EchoStar forthe quarter ended March 31, 2005, Commission File No. 0-26176).**   10.27* Settlement Agreement and Release effective February 25, 2005 between EchoStarSatellite L.L.C., EchoStar DBS Corporation and the insurance carriers for theEchoStar IV satellite (incorporated by reference to Exhibit 10.3 to the QuarterlyReport on Form 10-Q of EchoStar for the quarter ended March 31, 2005, CommissionFile No. 0-26176).   10.28* Amendment No. 4 to Satellite Service Agreement, dated April 6, 2005, between SESAmericom, Inc. and EchoStar (incorporated by reference to Exhibit 10.1 to theQuarterly Report on Form 10-Q of EchoStar for the quarter ended June 30, 2005,Commission File No. 0-26176).   10.29* Amendment No. 5 to Satellite Service Agreement, dated June 20, 2005, between SESAmericom, Inc. and EchoStar (incorporated by reference to Exhibit 10.2 to theQuarterly Report on Form 10-Q of EchoStar for the quarter ended June 30, 2005,Commission File No. 0-26176).   10.30* Incentive Stock Option Agreement (Form A) (incorporated by reference to Exhibit99.1 to the Current Report on Form 8-K of EchoStar filed July 7, 2005, CommissionFile No.0-26176).**   10.31* Incentive Stock Option Agreement (Form B) (incorporated by reference to Exhibit99.2 to the Current Report on Form 8-K of EchoStar filed July 7, 2005, CommissionFile No.0-26176).**   10.32* Restricted Stock Unit Agreement (Form A) (incorporated by reference to Exhibit99.3 to the Current Report on Form 8-K of EchoStar filed July 7, 2005, CommissionFile No.0-26176).**   10.33* Restricted Stock Unit Agreement (Form B) (incorporated by reference to Exhibit99.4 to the Current Report on Form 8-K of EchoStar filed July 7, 2005, CommissionFile No.0-26176).**   10.34* Incentive Stock Option Agreement (1999 Long-Term Incentive Plan) (incorporated byreference to Exhibit 99.5 to the Current Report on Form 8-K of EchoStar filedJuly 7, 2005, Commission File No.0-26176).**   10.35* Nonqualifying Stock Option Agreement (2005 Long-Term Incentive Plan (incorporatedby reference to Exhibit 99.7 to the Current Report on Form 8-K of EchoStar filedJuly 7, 2005, Commission File No.0-26176).**   10.36* Restricted Stock Unit Agreement (2005 Long-Term Incentive Plan) (incorporated byreference to Exhibit 99.8 to the Current Report on Form 8-K of EchoStar filedJuly 7, 2005, Commission File No.0-26176).**   10.37* Description of the 2006 Cash Incentive Plan (incorporated by reference to Exhibit10.1 to the Quarterly Report on Form 10-Q of EchoStar for the quarter ended March31, 2006, Commission File No.0-26176).   31.1**•** Section 302 Certification by Chairman and Chief Executive Officer.   31.2**•** Section 302 Certification by Executive Vice President and Chief Financial Officer.   32.1**•** Section 906 Certification by Chairman and Chief Executive Officer.   32.2**•** Section 906 Certification by Executive Vice President and Chief Financial Officer. **•** Filed herewith. * Incorporated by reference. ** Constitutes a management contract or compensatory plan or arrangement.
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**SIGNATURES**Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.      ECHOSTAR DBS CORPORATION**