DISH Network Corp (DISH) 2003 Q3 法說會逐字稿

Good afternoon, my name is Cody. I will be your conference facilitator today. At this time, I'd like to welcome everyone to the EchoStar third quarter 2003 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. McDonnell, you may begin your conference.

Thank you, operator and thanks, everyone for joining us. This is Michael McDonnell. I'm the Chief Financial Officer here at EchoStar. I'm joined today by Charlie Ergen, our President and CEO, Jason Kiser, our Treasurer, and David Moskowitz, our Senior Vice President and General Counsel. I'm going to give you a quick recap of the financial performance for the quarter, then I'll turn it over to Charlie for his comments, and then we'll open it up for some Q&A at the end. But, before we get started, as most of you know, we need to do our Safe Harbor disclosures, and so, for that, I will turn it over to David.

Thanks, Mike. Good morning, everyone and thanks for joining us. As you know, we do invite media to participate in a listen-only mode on this call, so we ask that the media not identify participants and their firms in your reports. We do not allow audiotaping of the conference call and we ask that you respect that. All statements we make during this call that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by the forward-looking statements.

Now, I'm not going to go through a list of all the factors that could cause our actual results to differ from our historical results or forward-looking statements. I'd ask you take a look at the front of our 10Q for a list of these factors. In addition, we may face other risks described from time to time in other reports we file with the SEC. All cautionary statements that we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and shoud not place undue reliance on any forward-looking statements that we make.

Please also note that, during this call, we will refer to non-GAAP liquidity measures -- the non-GAAP liquidity measure called free cash flow. Please refer to our 10Q for a reconciliation of free cash flow to net cash flows from operating activities. I'd also note, for those of you who may be interested in EBITDA that our 10Q contains a reconciliation of EBITDA to net income. With that out of the way, I will turn it back over to Michael.

Thanks, David. Let's go ahead and take a look at the quarter, and we'll start with the total company. Total revenue for the quarter was approximately $1.45 billion, an increase of 3% over last quarter, and 19% higher than the same period a year ago. Subscriber growth was the primary driver of this revenue increase. Operating income was $160 million, a decrease of $63 million over last quarter, and $65 million higher than the same period a year ago. Net income for the quarter was $35 million, a decrease of $94 million over last quarter, and $203 million higher than the same period a year ago.

Basic EPS was 7 cents, compared to 27 cents last quarter and a loss of 35 cents the same period a year ago. Operating income, net income, and basic EPS for this quarter all include approximately $25 million of charges associated with the partial redemption of our 9 1/8% senior notes, which occurred during the quarter. Operating income, net income, and basic EPS for last quarter all included the benefit of a reduction in subscriber acquisition costs of approximately $34 million, which is primarily related to the receipt of a reimbursement payment for previously sold set-top box equipment as part of a litigation settlement.

The third quarter EPS impact of the $25 million of charges associated with the partial redemption of our 9 1/8 senior notes, was approximately 5 cents per share. Free cash flow, which we define as net cash flows from operating activities, less purchases of property and equipment, was $134 million during the quarter. This represents a $17 million decrease over last quarter, and a $149 million improvement over the same period a year ago. Free cash flow for the quarter was positively impacted by a $30 million prepayment received for services to be provided to third parties, which will be offset by expenditures in future periods.

Free cash flow for the quarter was reduced by approximately $25 million in payments associated with the partial redemption of our 9 1/8 senior notes. Free cash flow for the second quarter was positively impacted by the $34 million reimbursement payment that I mentioned previously, and was reduced by a $50 million satellite deposit paid to SES Americom. It is important to remember that quarterly free cash flow is subject to fluctuations in capital expenditures, asset and liability balances, debt retirements, and other factors that are discussed in our quarterly report on form 10Q.

Now let's take a look at some of the DISH Network metrics. During the third quarter, we added approximately 285,000 net new subscribers. That puts us at approximately 9.085million DISH Network subscribers, as of September 30, 2003. Churn for the quarter was 1.72%. Average revenue per subscriber was approximately $50.79 per month during the quarter. This represents a decrease from last quarter of 81 cents, and an improvement of $1.75 over the same period a year ago. The decrease in ARPU from last quarter is primarily attributable to increased participation in promotions which offer free or discounted programming.

Our cost of acquiring subscribers during the quarter averaged approximately $466 per gross addition. Including capitalized digital home plan equipment, net of recoveries, that figure becomes $500. The figure increased by $59 per addition from last quarter. Per subscriber acquisition costs for the second quarter were reduced by approximately $49 as a result of the litigation settlement.

Turning to the balance sheet, at the end of the quarter we had cash and marketable securities of approximately $3.2 billion, which includes $127 million of cash reserved for satellite insurance. We also had approximately $5.6 billion of debt as of September 30, 2003, which includes $2.5 billion of convertible securities. On a straight debt-per-sub basis, we ended the quarter at roughly $620 per subscriber. On a net debt basis, that drops to $285 per sub. It is important to note that these cash, debt and debt-per-sub figures do not include the effects of the partial redemptions of our 9 1/8 senior notes -- I'm sorry, these debt and debt-per-sub figures do include the effects of the partial redemption of our 9 1/8senior notes, and our issuance of a 3 percent convertible note to SEC, both of which occurred during the quarter.

However, these figures do not include the effects of the issuance and sale of $2.5 billion in senior notes which closed on October 2, or the effects of the repurchase of $1 billion in convertible notes which closed on October 20. Cash Cap Ex during the quarter were $84 million, with $31 million going to capitalized digital home plan equipment and the remainder for satellites and general corporate purposes. With that, I will turn it over to Charlie.

Thank you, Mike. I mean, obviously, from a quarter perspective, I think it's disappointing to me that we didn't perform at the capacity that we're capable of. I think the marketplace was clearly there to have done better, at least on the subscriber, on the gross additions and net subscriber acquisitions. The rest of our metrics were pretty much in line with where we've been. We always have opportunity to improve those, but the key factor from my perspective is that, as management team, we didn't take advantage of a pretty robust market for satellite. It continues to be pretty good. Satellite still continues to -- to be very positive in terms of net additions against a cable industry that is seeing little or no growth or even negative growth in terms of video customers. So, we historically have always been a majority of that business. We certainly weren't in this quarter, and that's really nothing more than we didn't execute as a company the way I would expect and the way that I think we should be able to do.

Obviously, we take a good hard look at that and realize we can -- there are things we can do better and we have some work to do as a company and as a management team. That's on -- on ARPU, you always would like to be a little bit better, but that's a little misleading because of some the free programming offers that we're doing. That tends to -- to depress the actual ARPU -- that underlying ARPU, and I think that that is actually a bit more positive than you see from the numbers when you realize that we're giving away three months free programming, and realize that starts rolling off the ARPU starts. That will show up in ARPU in future -- future quarters. I think we made a lot -- a big step forward in restructuring our balance sheet. And we took advantage of the marketplace to -- to put some more securities out there, and we purchased some securities that we think will, overall, reduce our cost to capital long-term, and put us in n a very strong position financially, no matter what interest rates and what the economy do. We think interest rates will firm up and we think the economy is firming up and we like our position there in terms of -- in terms of our balance sheet and, of course that should pay long-term dividends for us as a company.

We're disappointed that we were not able to acquire Loral, we spent a fair amount of time, we were serious about that in terms of that side of the business. We were disappointed that we weren't able, in bankruptcy court, to have a successful bid. But the core business is good and we have a little bit of work to do internally and, you know, we expect that we will do that. So, with that, I will take questions. Operator , can we have the first question, please.

At this time, I would like to remind everyone, to ask a question, please press star, then the number one, on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from Marc Nabi with Merrill Lynch.

Hey, everyone, how you doing?

Good.

A couple of questions. One, Charlie, as it relates to the ARPU, I just wanted to get a sense from you, what would have ARPU have been, had you stripped out those three free months of programming? And maybe if you could just -- in the past, you discussed it from a total SAC standpoint, if you include that free promotion, what would have the SAC kind of looked like? Number one.

Number two, maybe could you discuss the share -- the authorization of a share buyback of up to $1 billion? How exactly do you plan on buying back the stock? You know, when can the plan occur? I think it's a 24-hour window after -- after it's been announced and after the earnings have been announced? And just, number three relates to set-top boxes. I'd love to hear, you know, your customer base a year ago, how many set-top boxes they had on the average number of customers per -- average set-top box per customer? And what you're seeing today both on an overall average basis and on incremental subscriber basis, as well.

Okay. That's a lot of questions. Wow. Free programming, ARPU, if we had not done free programming, ARPU would have been higher. You can run your own calculations. We gave away three free months of America's Top 100 plus HBO at $49.99. So we're giving it away, just realizing that not all of the customers would have been purchasing HBO in that scenario.

The key to that, Marc, is what percentage of people actually keep that package after the promotion is over. And if you run the mathematical model on that, there is a certain sensitivity now that says that's a smart promotion if you get X percent of people to maintain the package. We don't have enough since we started this in June and we only have reallyabout 4 weeks of data on that particular promotion and we extended the promotion before we had any data justbased on gut feel. We won't really know probably until, you know, June of next year, you know, how well that promotion ultimately worked and whether that was a net positive or a net negative, but, you know, we will obviously, you know, we look at that and monitor that.

I think that -- I think that you're correct in the sense, I think you can look at free programming and you could -- you could -- you can indirectly just add it toSAC, which means our SAC is higher than-- means ARPU would be higher and it means SAC would be higher. And then the question is, do you get a return on the investment? And again, we think that -- that going in, you know, we believe that we will get a return on that investment and that total promotion will be positive, but, you know, we don't know until we get the results. So, you just have to run your own numbers and -- and look at that.

The buy-back of shares, we do whatever the SEC and NASDAQ rules are on that. We just have permission from our board of directors. We may or may not buy back shares. Obviously, we have to give the market notice, which we've done, if we're to do that. It's something that we would look at depending where we saw the relative value of the stock versus where we believe it is. And we want to be prepared to take advantage of that. If the marketplace is -- if the stock is in a position that we think that's the best use of our money.

Now, realize, that with excess cash, you know, we look at -- at debt repurchase -- the first thing we look at is acquisition or investment in other companies. Obviously we failed with Loral. We will continue to look at other things we can use with our money. That's our first choice to use our capital. Then we would look at things like debt repurchase, because we kind of can figure out that reduces our cost to capital and improves our balance sheet. And then we also would look at -- at equity repurchase, and then finally we'd look at dividends.

So, all of those things are things we'll look at,and we just haven't been able to find a better use of our capital at this point than things like debt repurchase. And, obviously, we bought back our converts, I think, in the fourth quarter that will hit in the fourth quarter. But we bought back a billion dollars of our 4 7/8 converts, which took 22 million shares off of conversion. So, you know, that's kind of our strategy there. That hasn't changed since last quarter. And as far as set-top boxes, the average customer today has a few more set -- you know has, on average, more set-top boxes than they did this time last year. That's a continuing trend, I think, for our industry, that as we go out there. Customers, when you go 100% digital, require, whether it be cable or satellite, they require a digital set to box for each TV set they want to watch an individual channel. And as we become more aggressive as an industry, that increases your SAC but also gives you a little bit better customer and maybe a little bit better ARPU customer if you can hook up at all the TV sets in the household.

So, you know, that trend has been on a steady increase from seven years ago that the -- every year, the average number of set-top boxes goes up a little bit in people's homes and that trend hasn't abated yet. I think that, you know, probably the marketplace today is pretty much three set-top boxes for free. That covers about 90 -- 95% of American homes. If you can watch individual -- you know, I'vegot seven people in my household and about eight TV sets and we're never watching more than three individual channels at a time on three different TV sets. So, that covers most people, and I think that that will probably mature. The number of set-top boxes will probably mature over the next year or two.

And Charlie, just one thing, as a follow-up, the promotion you have for the three set-top boxes, are the majority of your incremental subscribers taking that plan as opposed to just other plans?

No. I think the majority are -- I think two set-top boxes covers the majority of people. There's some people who take one, there's some people take three. Every once in a while somebody will pay for a fourth receiver, but the majority is nowhere close to three.

Okay. Thank you.

Your next question comes from Robert Peck of Bear Stearns.

Just a little more color. I see you were disappointed on how you executed. Can you talk about why maybe EchoStar stumbled a little bit on execution? It looks like DirecTV is announcingthey're crossing through 12 million subs. Is there anything different? Is there something you can change to skew more toward your desire? So, a little bit more color. And was there a shortage on supply of set-tops at all that maybe hell you back?

I don't think we executed on a number of levels, but I think your primary disappointment was on our new -- our new set-top boxes, our new equipment. We anticipated being out pretty early in the third quarter with -- with our new high definition television receivers and our new integrated -- where we have multiple receivers in one box product. And our SuperDISH products, which would allow us to put up more local channels. We failed on all three of those counts. It's been a long time since I've -- I can't remember a time when we've not executed on new product at that level. Although those were -- those are -- those are pretty tough products to -- to engineer and, you know, they are state-of-the-art by far over what cable, and, in some cases, the rest of the satellite industry has. So, you know, we obviously bit off a bit more than we can chew.

As a result of that, we weren't able to really be -- we weren't a factor in the high definition television market, and obviously the selling season for high definition television is September, probably September and November/December, kind of the big months, and we have missed, for the most part, that this year. SuperDISH is just now rolling out and -- which is allowing to us start to do more local markets, but again, we're halfway through the fourth quarter before we're able to do that. So that was a big disappointment. And it was also disappointing because, you know, I wasn't on top of the business and was surprised by the fact that we were this late.

I think that, obviously, you should be able to predict these things and it happens from time to time and when it does, you know, as a management team you have to react to it and do something different. We were slow in reacting to the fact that we're going to have our new product introduction delayed.

And as a result, weren't able to take advantage of a pretty robust market out there in the marketplace. That's the biggest thing. And, you know, there are other things that we're not -- you know, we're probably not as focused on on a strategy on -- on a couple of things that I'd like to see and -- and, you know, we've gotten to be a bit bigger company and things we used to do and things we used to do in five minutes take five hours. And I don't think there's a real excuse for that. Just because we're a bigger company doesn't mean we can't execute a little faster, and -- but people get comfortable and, you know, we -- we still, you know, are really doing -- if you look at the total picture, we still have the premiere video company in this business, but people get a bit complacent when that happens and it's always -- it's always, you always suffer if you don't continue to -- to take some chances and you don't continue to really strive for excellence.

Talking about HD a bit, you made a comment a little bit on a thread you think you could see some room? And maybe what your plans were with Loral, should you had been successful in acquiring it, were you going use some of the capacity for into local HD? And sort of what are EchoStar's plans going forward for HD content?

The -- I think from an HD perspective, you know, as an industry, we have, you know, one -- we have some positives, because we can do national programming much more efficiently than traditional broadcasters or the cable industry. We have a negative in the sense that it's not economical for us to -- to do, at this poin, the -- the HDTV channel on a local-to-local basis, because it takes up about five times as much spectrum as a normal digital signal. We don't even have all the local markets done, you know, that are analog today, much less try to have five times as much capacity for digital HDTV.

So, I think we've got some interesting opportunities there and I think that -- that clearly we hope Congress will take a look at the fact that we have a technology that can put up an HDTV signal for every square inch of the United States, and that broadcasters have been slow in doing the same thing on a terrestrial basis, and that the satellite home viewer legislation that will -- that will be in play next year should take a look at the difference between analog and digital, and make some allowances for the fact that, if a broadcaster doesn't deliver a digital signal through the air, that we can do it through satellite. So, I think we have opportunities there, but we have a potential disadvantage vis-a-vis cable there. Somewhat counterbalanced by the fact that we have a huge advantage on a national scale. What's the second part of the question?

On Voom, do you sort of see a threat from Voom?

Voom? Possibly. I think -- you know, I don't know -- I don't think there's much that Voom can do that we can't do. And I think it's, you know, remains to be seen, you know, what the demand for their -- for their strategy is going to be but to the extent that they're successful and that they have thought of something that maybe we've discounted or didn't think -- you know, didn't think was worth pursuing, that they prove us wrong. And, obviously, we have opportunity to recalculate that and change our position. You know, our bet is that there's not -- there's not, at least for our company, that much demand for what they're trying to do in that format. But for them it may make a lot of sense, and we will just have to watch it and see.

I certainly think that to the degree they're successful it will be good for our industry and the rising tide will lift all the ships in this industry and, you know, we'll just have to wait and see. We haven't heard a lot from our customers about it yet. It's not really moved up to scale for us to -- you know, for us to have a big focus on it yet, but we keep watching it.

Last thing and I will let somebody else go. With most people expecting the DirecTV or the Hughes-Murdoch merger to close, are you doing anything to prepare at all for it? Or do you expect to be more targeted than, say, cable, from Hughes?

Well, I mean -- I think that we -- we really have to run our company the best that we can run it, and we have to be cognizant of all the external events. And you, you know, every once in a while you glance up at the scoreboard. But we're basically, to use a golf analogy, we're playing the course and doing the best we can. If we do that, good things will happen for our company. And I think we have -- I think the biggest challenge for us has always been cable television. We've built an infrastructure that is low-cost. We've now repositioned our balance sheet to be very, very lowly leveraged, and have a lot of flexibility in terms of how we allocate our capital. So, I think we're -- I think we're prepared for good times or bad times in a way that most people are not.

And -- you know, our -- our entire infrastructure is digital. We don't have any analog plant equipment to write off on our balance sheet. We're not highly leveraged. You know, I think, you know, we're -- we're seeing signs that -- that broadband, at least in the cities, is going to become more of a commodity, which means that we're not, you know, that that becomes less of a threat to us. So.. We look at -- at digital video recording where we think we have a big advantage, it's our technology, it's our own actual property.

We think, you know, while we've suffered some in engineering in terms of getting some of our new products out, we've done a great job with that particular technology. And, you know that continues -- that will pay dividends for us in the future and because that's a revolutionary new thing and we've got a good product. So, you know, all in all, I think we're well prepared for -- for just -- just about anything that happens. And -- but we do need fine tuning. The CEO needs to do a better job, and the CEO didn't do a very good job this quarter. And, you know, I take that personally, and I come to work everyday trying to do a better job.

Thanks, Charlie.

Your next question comes from Ben Swinburne with Morgan Stanley.

Charlie, when you look at your programming costs structure over the next couple of years, I mean typically programming costs are up anywhere from 7, 8% a year on a per-sub basis, ARPU has trailed that, similar with the cable industry. Are you happy with that kind of programming cost growth versus your pricing growth? Do you feel you can renegotiate contracts going forward or potentially drop channels from lineups? How do you tackle that question?

Well, clearly, you're not -- the marketplace is not allowing to us raise our price 7 or 8% a year. So, clearly it's unacceptable to have programming price increases that are averaging -- actually averaging about 9%, you know, as an industry. That's unacceptable and something's going to have to give on that. I think it's more likely in our case we will drop channels. I think that-- we may lose some customers as a result of that, but, you know, we have -- we have people whose ratings are going down who want to raise their price 7, 8, 9%.

We don't think that's a very good economic model for our customers. We think our customers, when we communicate with them, understand that. And they're not happy about rising prices either. And, at some pain, the pain of raising the prices to customers is greater than dropping a channel and for some -- for some potential programmers that may be an issue for us. We -- we believe that because we're adding more -- or have been, for the last couple of years, more net new subscribers in the entire pay television industry combined, the third quarter not withstanding, that we should be a primary customer for our programming partners and that we should get a fair rate from them. And, you know, we think -- we think that we have historically been very successful at negotiating those things, not in the press, but through, you know, cost benefit analysis to both our programming partner and us, and hopefully we will continue to be able to do that. But if all programmers were to take a hardline about cost increases beyond the scope of inflation and -- and, you know, particularly if their ratings are going down, then that would be a difficult situation for us and probably other people in the industry.

If somebody's ratings are going up and they have a great new channel and ratings are going up, I think they'd command a better price than we're paying today. So, you know, and we hopefully-- our relationship historically, we can overcome what typically is tough negotiations because it is a zero-sum gain. Every penny they get from us is a penny out of our pocket and our customer's pocket and a penny for them. It's always tough.

Great, thanks a lot.

Your next question comes from Tom Watts with SG Cowen.

Hi, Charlie. I was just clarifying on the -- you mentioned that you, on the three products that were delays on, you mentioned you wouldn't have any HD for the holiday selling season, any HD receivers, is that correct?

I said that I think we would have some limited quantities of HD this holiday season. You missed September, that's not the holiday season, but it is a big part of it. We clearly missed all of September and I think for the most part we're going to miss -- miss the holiday season because even if you get the product out in the next three weeks, you know, really get out on the shelf and in time for somebody to make the decision.

So, you get a little bit of it, but I don't think we're going to get too much bang there. I think we're leaving some business on the table obviously there, because there's probably 100,000 people a month buying HDTV sets and most of them want programming. So, some of those people turn to cable, some turn to DVD, some turn to offer antennas and some turn to satellite. We haven't gotten our fair share of those folks.

And a different question on broadband, could you have a commercial launch of our broadband service by year-end '04? And, as we look at that, what sort of SAC costs do you see in that business?

I think technically we could have a launch by the end of next year. Whether we choose to do that I think is subject to interpretation, because we want to do it one time and do it one time right. We're still investigating the standards that we think makes sense long-term for the industry, at least for our company. And, you know, we probably make those decisions between now and the end of the year and we'll see how fast we can actually execute. But typically it requires, you know, a fair amount of fabrication of new chips and that typically takes a year or so.

I would think that broadband is not a 2004 product for us. It's probably a 2005 product and probably more realistically, the major impact in 2006. And realize our strategy is not necessarily go after -- going into -- we don't necessarily see us as a very competitive product to what the phone companies do with DSL and what cable does. We think it's more of a rural product for us, similar to the way we started with big dishes and video in rural America. The SAC on broadband should -- should be equivalent to kind of what you have SAC in video assuming that you're, you know, you should have a higher margin on broadband, because, while your product is free, obviously, where you pay for programming today. And when you combine the two together, if you put broadband and video together, your SAC should be less than the sum of those two parts. So, there should be some synergy and efficiencies there.

And will you have a single dish that you can receive both, do you expect?

I believe that we will have both a single dish to receive video or broadband or two dishes depending on the customer. I think some customers may just want to buy broadband from us and some customers who, because of look angles or capacity constraints or so forth may choose two dishes instead of one, because you can have a very small video dish and the broadband dish will be bigger. Some customers will want one dish a little bit bigger that will do both. You know, I think we'll have all three of those things and we will be prepared from a hardware perspective to do that.

And will you primarily use the Echo 9 capactiy? And if, for some reason, the Wild Blue Satellite became available, is that something you could utilize in your plans?

Well, we won't use Echo 9. That's really a -- a very limited payload in terms of how many subscribers we can put on that. That's where we're setting our standard and so forth. My real dream is that the satellite industry would actually have a -- have more of a standard, whether it be, you know, Voom and DirecTV and DISH Network, what you really want is a broadband standard, very similar to how cable has kind of a doxis broadband standard for cable. I think that's where you get the true efficiencies. And yeah, we will have a lot of competition against each other, but it will definitely bring the cost and efficiencies down.

Absent that, I have no doubt that, as a company ,we're very capable of picking something that we think will be a standard and there will be low costs long-term, and we can compete in the broadband satellite world. But, you know, obviously, we'll have to see what the new -- if there's a new management structure at DirecTV, we'll have to see what their thoughts are on -- on some standardization, something that the, you know, obviously, the current regime hasn't -- regime has not been very interested in. Thanks very much.

Your next question comes from Jeff Wlodarczak with Wachovia Securities.

Haven't heard that pronunciation before. Charlie, can you provide more color? You kind of touched on it on the competitive environment, specifically DirecTV. What are you seeing different from them in the third quarter relative to past history? And also, can you comment on charter? They had the two free month promotion just in September, as well?

Well, I think the -- the DirecTV management team has hit their stride. I mean, obviously they didn't really take -- take over until a littleover a year ago.

It takes -- it takes about a year sometimes to hit your stride and I think their current management is doing a very -- from a competitive perspective, doing an outstanding job and they've hit their stride. And I think, you know, I can only speak for myself, I haven't done a very good job in -- I haven't done a very good job in making sure that we stay as focused as we should. So, you know, I don't know what else you can say about that other than -- you know, are -- what are they doing different? They really aren't doing anything different. You know, maybe they're a little simpler. Maybe we got a little complicated.

They were probably smart enough not to try to introduce some new products this year, and we kind of stumbled a little bit. I do think that on the margin there was another factor, which was in -- you talked about charter, but there was -- because we have been relatively dominant in the TV business, most people are going after us directly. Most of the advertising you see is against DISH Network, not actually after DISH TV. When charter goes out and gets more aggressive, that's going to hurt our industry short-term. When they target you more than the other guys, it hurts you a little bit more.

The second thing that happened probably in the third quarter that -- that shouldn't have been totally unexpected but -- but -- but the NFL season ticket was more of a dominant force this year. Two years ago we -- you know, we kept our customers because of the merger, and so they expected the merger would happen and we would have NFL Sunday Ticket. The NFL didn't have much of an impact on us. Last year it didn't have an impact because it was the last year of the contract and no customers knew who was going to have it this season. But this season, our current customers and any new customer knew that DirecTV has it exclusively for the next five years, and so a customer who thought they might -- who two years ago might have bought DISH Network or last year might have, this year had a pretty clear choice if they wanted footbal,l that DirecTV was a better choice. And secondariliy we had some customers who stuck with us the last two years thinking we were going to have the NFL Sunday ticket, because they liked the rest of our service, you know, actually threw in the towel and switched to DirecTV.

And -- and primarily in September, when the season started, they actually switched, which affected churn and affected, obviously, our net additions. I don't know that was that was hugely material, but it was on the margin another factor when you dig into our numbers. I think the NFL will probably continue to have a -- be a factor a little bit next year as -- you know, maybe even the year after that as a result of that, and then, as you get toward the last couple of years of the contract, it's prely clear it doesn't have much of an impact because nobody knows who's going to have it in seasons going forward. So, we weren't as prepared for that this year as we should have been.

Okay. Can you provide the latest seasonability on SBT, that agreement? Are we on track for the first quarter? And remind me, who's paying the Cap Ex associated with sort of the establishment of the billing systems, et cetera?

We still are on track for the first quarter, and again when I say first quarter, is that January 31 or March 31? Obviously, I don't know the dates that we're going to roll that out, but the teams are meeting and making progress. That is a very difficult integration, so, you know, obviously we will keep monitoring that and hopefully will execute better than we did on some of our new products this year. The Cap Ex is primarily paid by SBC for doing that. It's possible that if we don't execute well, that we may also spend money on that Cap Ex to do that.

In other words, there's a limit to what they're spending, and so it's possible that we will end up contributing to that if we don't execute well. And it is a hard project, but it's too early to tell whether we'll dig into our pocket for that. Or dig -- we will probably dig into our pocket. I don't know if we'll dig into our pocket in a material way.

Okay, thanks.

Your next question comes from have Vijay Jayant with Lehman Brothers.

Hi, Charlie, in terms of the ruling that you've got to stay on, have you been disconnecting any distant signal customers over the last -- I think you did some in the second quarter. Were there any in the third?

We -- we actually every month, you know, run a report to make sure we're in compliance with the law. So, there's a -- always a situation every month where we're disconnecting some customers, because of where we find incidences where perhaps they haven't given us the right address or perhaps where the -- things have changed, the -the specs have changed because of new towers or new DNA rulings. But it was not material in the third quarter. I would think that you'd probably start in the third quarter with new products, and our lack of execution there, probably NFL Season Ticket, was maybe in a minor way an affecting factor. And that's about it. The market was good. We just didn't step up.

And you've paid about $370 million year to date on interest expense based on your cash and the free cash flow. You know, we have interest expense being reduced by about $100 million going forward and declining. Any potential for using bank debt? And refinancing even the public debt that you have?

You know, we're not -- we're looking at bank debt and we're, quite frankly, not as knowledgeable about bank debt as we are about high yield. So we're learning, and we're talking to a number of banks, and we think there is some opportunities there. One of the problems is, bank debt limits some of your flexibility, and, you know, strategically we still want to -- want to maintain a fair amount of flexibility today. But we're very comfortable with where we are balance sheet-wise today and obviously, over the next 12 months we'll look for ways to -- to make that even better. You mentioned cash flow, yeah, we will save a little -- obviously save some interest next year on cash flow. Realize that our cash flow -- our free cash flow has been very good this year for the first three quarters. It's a little bit overstated in the third quarter in the sense that Cap Ex still is going to -- hasn't come up to the $300 million guidance we've told you about.

We've got a lot of Cap Ex in the fourth quarter. Because we didn't have the new products we didn't -- the inventory buildup that we thought we'd have in the third quarter would be in the fourth quarter, because you have to make a transition. We've got to bring new products in and will take a hit from a free cash flow perspective on working capital as well as Cap Ex. And then finally we will take a hit to working -- to free cash flow as we have repurchased our 4 7/8 converge, which had about $28 million of premium to -- to repurchase. And then, obviously, from time to time, if we see the opportunity repurchase some of the other debt instruments out there, there will be premiums associated with that that will have free cash flow. So, you know, we're -- while I'm disappointed in our execution, I'm very pleased on our free cash flow performance this year and -- but just to highlight that the fourth quarter, that there's obviously trends out there that will -- that will not be productive -- will not be positive in the fourth quarter short-term, but are positive long-term, because, as you say, if we can reduce debt and reduce interest expense, that helps us in free cash flow in future years and obviously we're long-term investors here, so we think that's prudent to do.

And, finally, one final question, Charlie, what are are the chances of you and Rupert Murdoch really forming in any sort of joint venture in the shared spectrum, creative....given the history you both have. Is there any chance that in that?

There is more chance -- we haven't been successful with DirecTV in doing those kind of things. And so I'd say the chances are greater with News Corp than they would be -- with News Corps in a management position than they would be with DirecTV because we just never were successful from day one with DirecTV. Before we started our service we tried to share spectrums, so, or share things we thought made sense. Maybe they will have, you know, I think that you always like to compete with real smart people and News Corp is smart as they come, andso, there may be opportunities there on certain things. Certainly whether it be legislation, whether it be -- I don't think either one of us is for state income taxes, for example. Whether it be on sharing back all feeds of local channels, which don't benefit one company. Whether it be standardizing, something like broadband or HDTV, those are working together on the piracy front.

I think those are all things that smart people will take a look at and decide whether they can, in fact, achieve some of those things. Obviously, we've had to go a bit of a different direction with capacity and have made some significant investments to make sure that we will have the capacity we need to compete against cable, irregardless of whether we can share technology or spectrum with the satellite providers. But -- but -- so, we're prepared either way but I can guarantee at least from my perspective, if somebody said, hey, we can save you $100 and you're no worse off than your competitor, maybe, you know, and your competitor can save $100 and they're -- and it's equal, you know, or if, you know, I am going to do it. And, in fact, I will do it if I save $100 and they save $200. I will still do it. Because I am $100 better off. So, you know, obviously when and if News Corp finalizes their merger then that's something I hope we'd have a chance to talk about with them. I gave up a long time ago with DirecTV.

Thank you.

Your next question comes from Douglas Shapiro with Banc of America.

Yeah, hi, Charlie. I wondered if you could tell us what proportion of your gross ads in the quarter came on on promotional pricing programs, and then also if you could just talk about what your attitude is about the promotions going forward? I think last year you had a -- a promotion that was giving away three free months at one point. I thought you said at the time you didn't think it had gone as well as it could have. I'm curious about what you think about the kinds of promotions going forward?

The majority of our new additions come under one -- one form of promotion or another. I don't -- I don't like giving away free programming at all. First of all, it's our core product ,and second, I don't think that -- that when people get something for free, they fully appreciate it. And I think that -- that historically it hasn't worked very well for us. This promotion is a little bit different and a little bit different in that we actually give something away free, but in a higher package than something somebody would normally buy from us.

So, there actually is an economic model that this promotion makesa hell of a lot more sense than what we've done in the past, and I don't have enough data yet to tell me if it was a good decision or a bad decision.

I don't believe we would have extended the promotion into the fourth quarter had we had our product introduced on time. So I think because we failed on our strategy of new product introduction, we were left without -- without strategic advantages that we thought we going to have and so we had to be more aggressive on the programming side and the program on the limited data we had at the time looked pretty good. So, you know, time will tell next year if this -- you know, what our ARPU is this time next year will have an indication on whether it was a successful promotion or not. We expect that ARPU -- you know, we do expect that at least early signs are that the promotion, you know, makes -- makes some sense, where, in the past, free programming has not in my opinion.

I want to know if I can ask another quick question on a different tack, just a capacity question. I think that between Echo 7 and Echo 8 you have 50 spot beams in aggregate. I guess "A," I don't know if that's right. And "B," I was just curious, if you areusing any additional high-power capacity today for local markets, local channels? Or if all of the additional local signals are expected to be at 121? And then, I guess as part of that, if you can also -- where Echo 10 is intended to go?

Okay. Let's see. We do use all the spot beams for local. We do have a few cities that are national where we don't use spots. I mean, I can think in particular of New York, L.A., Chicago, Dallas, Atlanta, there's a handful that are in national beams and customers can buy if they're legally qualified, on a wide area to buy those on a national basis. We do probably have some efficiency gains if we were to take those and put those on spots, or some of those on spots, which we could do.

As far as additional local cities, all of those -- vast majority of those, all but maybe one or two, will come from the 105 degree location, which is a satellite we're leasing from SES Americacom. That's where those are coming from and they work on the superDISH. The 121 location is primarily international channels on superDISH. So, it's a little bit different animal. And echo 10 will probably go at the 110 or 119 slot depending on the health of our other satellites at the time that we that we launch it. So, it is to provide incremental capacity and backup to our satellites at either the 110 or 119 location.

Okay. And then I'm sorry, last one, on Echo, in superDISH, is the cable seeing 110, 119, 105 and 121? Or only either 105 and 121?

SuperDISH -- you technically can do anything, right, but from a practical point of view, it is either 110, 105 or 119. Or 121, 110, 119.

Okay. Thank you.

We don't have a lot of international customers in Missoula, Montana, so we don't really have a big need -- there's not -- I don't know if we'd get a handful of customers who would want to see 121, 119 and 105. And if they did, we'd probably put two dishes in for them.

Thanks.

Your next question comes from Tuna Sarmovy (sp) with Standard and Poor.

Hi, thank you very much. Some of my questions have been answered. I wanted to ask about satellite insurance? I know you have $1.27 million cash reserve on that but I'm just wondering, I mean like how do you -- how do you figure out the number that you accrue in each period? And what are your plans, if any, to get some kind of, you know, permanent, you know, resolution to this issue? I know you mentioned in the 10Q that the amount would be insufficient to replace -- or for new construction, should there be a complete loss. I'm wondering, you know, what are the contingency plans on this?

Today we don't believe that the insurance market is a very good investment from a satellite insurance perspective. Number 1, it doesn't insure you against your 9 million customers, right? So, all it does is insure you against a hardware failure in our space which then has to be replaced. So, we believe that the proper insurance plan is to make sure we have enough satellites under construction in outer space to take -- to take care of -- of any potential problems and, you know, that's -- and -- and you -- if you allocate -- if you allocate what you would pay to the insurers we think on -- on the margin, right --

Right.

On the margin that -- again, we're not omniscient and could be wrong on this, but we believe in the margin it's most prudent for us today to take the money we'd normally pay to the insurance community, given the rates that we think are too high, and all the exclusions that they would have, right? And we think it's more prudent to take the money and build additional satellites, which is what we have done. So, Echo 10, in fact, is a big insurance policy for our other nine satellites, potentially.

And which brings me to the next question -- on your satellite, you know,obligations. I think you have estimated approximately $460 million through 2007.

Okay.

I'm just wondering, you know, what is the -- I mean what are the factors that go into -- what are the key assumptions that go into, you know, these estimates? I mean what are the longer term plans for, you know, for -- for a new satellite, you know, beyond, you know, Echo 10? And I'm just wondering, you know, what is -- what are the key parameters here that might affect the actual, you know, realization of business estimates?

Well, that's a pretty complicated question. I think -- I mean obviously we've entered into with SES America, you know, at least for -- for capacity, and that's reflected in that number. Additionally, we think that, you know, echo 10 from a replacement new technology insurance perspective makes sense for us.

We still have broadband that we think makes sense for us to invest in, in terms of new satellite capacity, and from time to time will probably have additional capacity needed to replace our DVS capacity and we have some SFS capabilities. So, that's all reflected in the numbers in terms of -- in term of the fact that as a company while we don't have to replace our cable in the ground, right, and our Cap Ex per customer is a fraction of what cable is, we do have -- we do have to calculate some Cap Ex per customer every year for replacement of our infrastructure both in -- in outer space and on the ground and we're trying to, I think, our 10Q gives you a feel for the kind of commitment we're going to continue to make there.

Okay. All right. And separately, another question was actually on the DISH Network update. But I wanted to get a sense of what your contingency plans are, you know, should the court come up with, you know, a favorable ruling, I think it's coming up in February -- you had estimated like approximately 10% of the, you know, subscriber base, you know, at risk. I'm not sure what your outlook for this is and what contingency plans you have in place, you know, for -- for this -- for example, are you -- accelerating your local into local, you know, launches, just to be able to, you know, get back some of these, you know, subscribers?

Okay. Well, I mean I think first of all, I think the hearing is scheduled for late February and I don't expect a ruling in February. The ruling could take many months after that. This is a court of appeals. We think we have strong issues, we're pleased that the court of appeals agreed to hear our case and we think that some -- from the negative rulings in Miami, we think we can get reversed and are hopeful to get reversed. We don't think we have a lot of downside, you know, from Miami on the other side, although, you know, broadcasters may have a different opinion about that.

Clearly the broadcasters, if they continue to -- if they continue to ask for the death penalty against distant local signals and, in fact, they wereto ultimately prevail on that, real that the appeal court ruled that way, it would go back to another judge for another hearing on that, it would take time for that and we would have exposure from our customer base to get the signals. Where we don't have local-local, it would put the customers at risk. We think that that, obviously, would be a bit, you know, in -- unlikely ruling were to take place and we were to lose on appeal, then we would have the kind of risk we've disclosed in the past, lessened somewhat by additional local markets we have put in the meantime, which, obviously, from May of last year until, you know, May of next year, might be another 30 -- 30 or 40 markets. So... And hat's probably going to cover about 85% of the U.S. population. So --

All right.

So, that -- that risk would be reduced. But, again, I think from a practical point of view, against incredible odds, you know, we -- we believe that we're correct in Miami and that ultimately the way -- and the judge said the way we do it today is correct ,and we think that -- that perhaps on the margin, some of these things that the broadcasters are trying to win on technicalities could be -- we think that the Federal Home Computer Act next year have technical fixes that are needed, and perhaps we can use that as a basis to make some of the technical fixes that we think are unfair to satellite consumers, you know, for cable consumers, for example.

You know, I have to see how that shakes out, but I think while there's risk there, that risk is probably a fair amount less than -- than last year or -- or early in the year. And , of course the obvious real answer is I don't know -- it's kind of like the Hatfields and the McCoys. I'm not sure what we're fighting about anymore with these guys. You know, we always like a good fight and if people like to fight, it gives us something to do here. And it's always entertaining for us, so we're always willing to do it, but we're not exactly sure why we're fighting.

Okay. And finally, can you please update us on the status of your international channel, you know, rollout?

Well, we continue to add some international channels. I think I saw on TV last night we just added a Russian channel and a Middle Eastern channel and continue to add international channels. Again, I wouldn't say it's a material part of our business, but it's a niche we've done pretty well in and it's worth pursuing for us. And, obviously, we have some additional capacity to launch more international channels at this point.

Thank you very much, Charlie.

Your next question comes from Mr. Tom Eagan with Oppenheimer and Company.

Thank you. Two questions. First is about SACs prospects for Q4. While you may not have offering the free receivers in Q4 like you did in Q3, you're obviously going to have some customers taking those -- those -- those new services that you're talking about. Would you expect SAC to be above the levels in Q3? And I will wait for an answer before going to my next question.

I don't know that we predict SAC. It's been pretty consistent for us. There was a $59 difference in SAC, there's really only $10 difference this quarter because we had a one-time gain of $49 in SAC last quarter. So, it's been pretty consistent, running below industry average by a fair percentage point. I mean a fair amount. If it means we can have higher churn and get the same economic return.

While I'm disappointed about doing some things efficiently, SAC is one thing that we've been a little bit more efficient on than most. But again, I will just repeat, we manage our company for free cash flow and there's an awful lot of variables that affect that, whether it be churn or SAC or ARPU and I know you guys want to run all kinds of models to kind of get to a number, but -- but the way we manage the business is for free cash flow because that's what long-term will be of value to us.

There will be some investors who agree with that and -- and hopefully there will be long-term investors in EchoStar. There will be some people will think that's probably not mathematical or economically correct and you ought to look at things likeSAC and that really tells you, some kind of a value of a company. But, but we don't get, you know, we're not going to do a lot of guidance stuff on that because what we really focus on is the bottom line and obviously, for example, you know, what we do today will affect churn six or nine months ago from now.

So, you can't even look at churn on a quarterly basis and really make any kind of indifference, at least in my opinion, make a real calculated indifference on what's going on because it has effect of what you did. If you have poor discipline in the marketplace today, I can get a lot of subs tomorrow with poor discipline, but it's going to hurt me nine months from now. So, you know, we really focus on -- on -- on free cash flow, you know, at the end of the year, do we have more money than we started with? That's really what we focus on.

And, you know, I think we're -- we're -- we gave you guidance that we'd get at least a dollar more this year and I think we're within that envelope that -- to finish the year with at least a dollar more than last year in free cash flow, and for me, that's, you know, a successful year. I mean maybe not a dollar, hopfeully a little more than a dollar for a successful year, but anytime we can keep the cash flow going up. In a marketplace where our competitors are not free cash flow positive, highly leveraged, facing increasing pressure on broadband, digital subscribers are maturing, then I feel pretty good.

All right. Charlie, and in terms of -- in terms of high def, it seems to me that it would really help satellites for consumers to be able to get the local channels by a terrestrial means, but the broadcasters don't seem to be transmitting in full power. So, for example, if you're too far away from a tower, then you won't be able to get it. How can you persuade the broadcasters to increase the power of what they're transmitting on their towers?

I don't think we can persuade them, but I think the way they will be persuaded is if -- if Congress passes, if the Federal Home Computer Act just takes a look and says we have a wide area for analog, which we have today, and a different wide area for digital, which if a broadcaster chooses not to make the investment to transmit his signal, for whatever reason, then in fact when he doesn't do that and a customer can't receive it with an antenna, satellite should have the opportunity do it for him. Right? And if that was passed tomorrow, there'd be an awful lot of broadcasters to go out and build very powerful transmitters as not to lose their customers. As long as the Congress and the FCC gives the broadcasters a few ride and let's them hoard and stockpile spectrum, you know, very, very valuable spectrum, worth hundreds and hundred of billions of dollars, they're not going to do it.

Right.

We plan to make that case, you know, to Congress. Whether it will be successful or not, I don't know.

Right.

But, obviously, to the extent that nobody builds broadcast towers terrestrially, you know, our industry is going to suffer. So, there's obviously, you know, we would encourage broadcastors build those towers and get their signal out there as widely as they can and all of our HD products, you know, do, in fact, have a terrestrial tuner in them that will accept that signal. Then, the customer gets the HDTV for free, which is, you know, a great bonus. So, you know, that -- that is part of something we're going to have to monitor and look at and -- and see whether we have an industry consensus on what we should be doing, and whether we can -- you know, whether broadcasters, in some manner, will have an incentive to go ahead and build out towers.

Thank you.

Your next question comes from Craig Moffit with Sanford and Bernstein.

Good morning. Quick question about PVRs and churn. You -- you passed a million PVR subscribers, that puts you up around 11 plus percent of your base. If I were to apply the numbers that we hear from Roxanne and -- and the folks over at DirecTV that say you get churn rates of substantially under 1%, maybe half of 1%, then that would say that you're getting close to 2% churn on the rest of your customers? Is that a -- is that a function of -- of a lot of those customers opting for the NFL that you described before? Or is there something else going on that is -- is -- is changing churn rates? Or are you not seeing the same kind of benefits from PVRs?

We don't see as good of results as you just verbalized. The reason is we've had -- [ INDISCERNIBLE ] -- for about four years now, had a part in the marketplace. What happens is the new products -- if you look at churn against the new product, obviously the churn rate is low. And as you continue to feed the market for DVRs, you know, and as that business increases, churn as a percentage is understated against that base and you have to mature before you really see the total effect to churn number one. And number two, because it's a mechanical part, it obviously has more service calls and expons that. So, those two factors tend to make your churn a little higher than the numbers you said.

Having said all that, clearly we think digital video recording will change the way people watch TV. We think satellite is in a better position than cable to introduce the technology, and, in particular, our company. And we think that it does -- we think that it does lower your churn in a material fashion or it will over time, and that we can make a good economic investment in that technology. But again, how you do that and how aggressive you are and all of those things, you have to -- you know, we're trying a lot of different things and, you know, we haven't made final decisions on how we will do that.

Charlie, a quick follow-up question, as well. When I look at your local -- new local market launches, you know, you're -- you're either reaching into big markets where DirecTV has been for a while or a bunch of green field markets that by definition have to be a little bit smaller based, what's left? Is there a big difference in economic return between entering a market where DirecTV has a mature presence, versus one where you're entering the market and you're the first -- you're the first one in to offer locals?

In general, in general I would say that when you go into a new market we're on offense. When we go into a market where they already are, we're on defense. But both of those are both potentially models that make sense. About you if you look at new subscribers, you know, we're not going to get new subscribers entering any market where DirecTV already has local. We're not going to get a lot of new subscribers. If we're the first ones in there, we will get new subscribers. That's -- on the other hand, our churn will go down, right, our highest churn markets would typically be, all things being equal, would be a situation where cable has local, DirecTV has local and we do not. So that makes sense for us.

Thank you.

Operator, we'll take one more call.

Your final question is from Rob Sanderson of American Technology and Research.

Hi, thanks. A couple of questions here. Just to stay on the local market scene for a bit, you know, just going back to, I guess, the March and June quarters, or sort of the June and September quarters, you launched quite a number of local market early in the year and didn't do so much during the summer. You know, is this -- do you see impact from that on subscriber and ARPU here? And what do with see going forward with the large number of new local markets announced in recent weeks?

Well, we didn't-- I don't think we launched -- we only launched two local markets in the third quarter so I -- I believe the local launches had no impact on the third did quarter, whereas they might have, maybe a little bit, in the last part of this quarter and obviously in the next quarter. Having said that, the market was robust and we just didn't take advantage of it. So, local, you know, local markets are not local markets, you know, the -- the marketplace is out there for satellite companies and -- and, you know, we do okay but I'm a perfectionist and we certainly had capacity to do better and certainly shot ourselves in the foot by not executing a few things.

Way I'm looking at it, there are only two market launches, you know, you tend to see a subscriber pickup after. Is that -- you spent a lot of time articulating why new product delays may have hurt you a little bit here, but maybe the local market launches are another reason for relative weakness this quarter?

We failed to take advantage of the opportunity, let's put it that way. Obviously -- obviously we expected to have more markets in the August timeframe and those have been pushed into the November timeframe. So, that's -- that's is lack of execution on our part. The satellite was running, so, that -- that certainly was part of how we didn't execute. But it did -- it -- there's going to be a day where we don't launch any market and exec our business to continue to grow.

Okay.

So, I don't think that's a -- that's a great excuse for us.

Okay. You're not one to usually make excuses much. Second, on programming costs and just sort of a general state of, you know, growing contention in the negotiations across the industry, you know, this has to favor the large and the growing. And if I look across the cable, you know, universe and on a national basis, still pretty fragmented in the second and third tier markets.

You know, I'd say given the, you know, your cost structure in the fixed cost nature of those businesses, I think maybe the second and third tier might even be a bigger opportunity than some of the top tier cities. I mean is this the way you look at it? Or am I sort of missing something there? Or sort of how would you characterize that?

We look at -- we look at -- we look at the fact of 100 million homes in the United States and not all homes are equal. Which means we make a better return on some homes than on others. So, we try to -- we try to -- to be smart about that. Sometimes we've been smart. Sometimes we haven't been smart. But, you know, I think -- I think we can do better at that.

But I mean obviously -- obviously if there's a place out there in the city where there's no cable at all, that's probably a pretty good market for us. There's a -- there's a market out there that has a cable company and overbuilder and we don't have local, that's probably not such a good market for us. So, we have to market and promote according to where we see opportunity. And, you know, historically we've done a good job of that.

I guess where I'm coming from is on a go-forward basis, you know, just given the fact that, you know, a small, rural cable operator probably doesn't have nearly the leverage that you do going forward and just gives you an ability po price pretty atragtively.

I think, unfortunately, I mean this is -- I mean unfortunately I think that the way the programming industry works, it's -- it's -- it's not to the advantage of a little guy, and we're fortunate that we've gotten big enough, I think we're the -- we're the fourth largest video provider today and the fastest growing. You know, I think that we will hold our own in programming negotiations and obviously Comcast is the one that because of scale will be the -- you know, we will be the one that kind of really sets the standard for the industry, certainly will be us.

But, you know, obviously if you're -- if you're a second or third tier kind of video provider you're going to have your work cut out for you. I mean, you know, the world is going to be a -- the consolidation is going to continue within the video universe and I don't think if News Corp comes into the business, that's not going to make life easier for the cable companies. So... I think they're all going to be distribution arms of, you know, Fox network and all their channels. So, you know, it's kind of like an affiliate, like in Denver, we have a Fox affiliate here and, you know, it's kind of like one of the cable companies is going to be a Fox affiliate subsidy.

All right. Very good. Thanks.

We don't have to become a Fox affiliate, I am hoping! [ Laughter ]

Are there any closing remarks for today's conference call, sir?

I think that's it. We will be back, I don't know, what's the new law now? March 15. We'll probably be back in the first half of March. We will be back in March with year-end results. Thanks for taking the time with us today.

This concludes today's conference call. At this time, you may disconnect.