8.Property and Equipment and Intangible Assets

Property and Equipment

Property and equipment consisted of the following:


	Depreciable			As of
	Life			December 31,		December 31,
	(In Years)			2016		2015
				(In thousands)
Equipment leased to customers	2	-	5	$	3,104,669	$	3,549,701
EchoStar XV			15		277,658		277,658
EchoStar XVIII			15		411,255		—
D1		N/A			55,000		55,000
T1			15		401,721		401,721
Satellites acquired under capital lease agreements	10	-	15		499,819		499,819
Furniture, fixtures, equipment and other	1	-	10		805,526		775,834
Buildings and improvements	1	-	40		93,605		86,928
Land			—		5,205		5,504
Construction in progress			—		68,187		382,464
Total property and equipment					5,722,645		6,034,629
Accumulated depreciation					(3,165,263)		(3,110,449)
Property and equipment, net				$	2,557,382	$	2,924,180

Construction in progress consisted of the following:


	As of
	December 31,		December 31,
	2016		2015
	(In thousands)
EchoStar XVIII, including capitalized interest	$	—	$	346,417
Other		68,187		36,047
Total construction in progress	$	68,187	$	382,464

Our EchoStar XVIII satellite was launched on June 18, 2016 and became operational as an in-orbit spare at the 61.5 degree orbital location during the third quarter 2016, at which time it was reclassified from Construction in progress to Satellites within “Property and equipment, net” on our Consolidated Balance Sheets.

Depreciation and amortization expense consisted of the following:


	For the Years Ended December 31,
	2016		2015		2014
	(In thousands)
Equipment leased to customers	$	768,283	$	824,799	$	854,759
Satellites		96,965		87,827		95,766
Buildings, furniture, fixtures, equipment and other		87,898		87,422		127,411
Total depreciation and amortization	$	953,146	$	1,000,048	$	1,077,936

Cost of sales and operating expense categories included in our accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) do not include depreciation expense related to satellites or equipment leased to customers.

Satellites

Pay-TV Satellites. We currently utilize 13 satellites in geostationary orbit approximately 22,300 miles above the equator, two of which we own and depreciate over their estimated useful life. We currently utilize certain capacity on nine satellites that we lease from EchoStar, which are accounted for as operating leases. We also lease two satellites from third parties, which are accounted for as capital leases and are depreciated over the shorter of the economic life or the term of the satellite agreement.

As of December 31, 2016, our pay-TV satellite fleet consisted of the following:


			Estimated
			Useful Life
		Degree	(Years)/Lease
	Launch	Orbital	Termination
Satellites	Date	Location	Date
Owned:
EchoStar XV	July 2010	61.5	15
EchoStar XVIII	June 2016	61.5	15

Leased from EchoStar (1):
EchoStar VII (2)	February 2002	119	June 2018
EchoStar IX	August 2003	121	Month to month
EchoStar X (2)	February 2006	110	February 2021
EchoStar XI (2)	July 2008	110	September 2021
EchoStar XII (2)	July 2003	61.5	September 2017
EchoStar XIV (2)	March 2010	119	February 2023
EchoStar XVI (3)	November 2012	61.5	January 2018
Nimiq 5	September 2009	72.7	September 2019
QuetzSat-1	September 2011	77	November 2021

Leased from Other Third Party:
Anik F3	April 2007	118.7	April 2022
Ciel II	December 2008	129	January 2019

(1)

See Note 18 for further information on our Related Party Transactions with EchoStar.

(2)

We generally have the option to renew each lease on a year-to-year basis through the end of the useful life of the respective satellite.

(3)

We have the option to renew this lease for an additional five-year period. If we exercise our five-year renewal option, we have the option to renew this lease for an additional five years.

AWS-4 Satellites. On March 2, 2012, the FCC approved the transfer of 40 MHz of wireless spectrum licenses held by DBSD North America, Inc. (“DBSD North America”) and TerreStar Networks, Inc. (“TerreStar”) to us. On March 9, 2012, we completed the acquisitions of 100% of the equity of reorganized DBSD North America and substantially all of the assets of TerreStar, pursuant to which we acquired, among other things, certain satellite assets and 40 MHz of spectrum licenses held by DBSD North America (the “DBSD Transaction”) and TerreStar (the “TerreStar Transaction”), which licenses the FCC modified in March 2013 to add AWS-4 authority (“AWS-4”). See Note 14 for further information. As a result of the DBSD Transaction and the TerreStar Transaction, we acquired three AWS-4 satellites, including two in-orbit satellites (D1 and T1) and one satellite under construction (T2).

During the fourth quarter 2014, EchoStar purchased our rights to the T2 satellite for $55 million. See Note 18 for further information.


		Degree	Estimated
	Launch	Orbital	Useful Life
Satellites	Date	Location	(Years)
Owned:
T1	July 2009	111.1	15
D1	April 2008	92.85	N/A

GAAP requires that a long-lived asset be reviewed for impairment when circumstances indicate that the carrying amount of the asset might not be recoverable. As of December 31, 2016 and 2015, it was determined that the T1 satellite met this criteria and therefore in the fourth quarter 2016 and 2015, we tested the T1 satellite for impairment.

We concluded that the T1 satellite’s fair value exceeded its carrying amount and no impairment was necessary for either year. As of December 31, 2016, we do not believe any triggering event has occurred which would indicate impairment for the D1 satellite. As of December 31, 2015, it was determined that the D1 satellite met this criteria and therefore in the fourth quarter 2015 we tested the D1 satellite and related ground equipment for impairment. We concluded that the carrying amount of the D1 satellite and related ground equipment exceeded their fair value determined under the cost approach. To arrive at fair value utilizing the cost approach, a replacement cost for the satellite was determined, which was then reduced for, among other things, depreciation and obsolescence. As a result of this assessment, we wrote down the net book value of the D1 satellite from $150 million to $55 million and the net book value of the related ground equipment from $28 million to zero and recorded an impairment charge of $123 million in “Impairment of long-lived assets” on our Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2015. The estimates used in our fair value analysis are considered Level 3 in the fair value hierarchy. As of December 31, 2016, the net book value for T1 and D1 was $272 million and $55 million, respectively.

Satellite Anomalies

Operation of our DISH branded pay-TV service requires that we have adequate satellite transmission capacity for the programming that we offer. While we generally have had in-orbit satellite capacity sufficient to transmit our existing channels and some backup capacity to recover the transmission of certain critical programming, our backup capacity is limited.

In the event of a failure or loss of any of our owned or leased satellites, we may need to acquire or lease additional satellite capacity or relocate one of our other owned or leased satellites and use it as a replacement for the failed or lost satellite. Such a failure could result in a prolonged loss of critical programming or a significant delay in our plans to expand programming as necessary to remain competitive and thus may have a material adverse effect on our business, financial condition and results of operations.

In the past, certain of our owned and leased satellites have experienced anomalies, some of which have had a significant adverse impact on their remaining useful life and/or commercial operation. There can be no assurance that future anomalies will not impact the remaining useful life and/or commercial operation of any of the owned and leased satellites in our fleet. See Note 2 “Impairment of Long-Lived Assets” for further information on evaluation of impairment. There can be no assurance that we can recover critical transmission capacity in the event one or more of our owned or leased in-orbit satellites were to fail. We generally do not carry commercial launch or in-orbit insurance on any of the satellites that we use, other than certain satellites leased from third parties, and therefore, we will bear the risk associated with any uninsured launch or in-orbit satellite failures. In light of current favorable market conditions, in January 2016, we procured commercial launch and in-orbit insurance (for a period of one year following launch) for the EchoStar XVIII satellite, which was launched on June 18, 2016.

Intangible Assets

As of December 31, 2016 and 2015, our identifiable intangibles subject to amortization consisted of the following:


	As of
	December 31, 2016				December 31, 2015
	Intangible		Accumulated		Intangible		Accumulated
	Assets		Amortization		Assets		Amortization
		(In thousands)
Technology-based	$	9,773	$	(994)	$	14,510	$	(6,297)
Trademarks		22,499		(6,271)		16,257		(2,512)
Contract-based		8,650		(8,650)		8,650		(8,650)
Customer relationships		2,900		(2,900)		2,900		(2,900)
Total	$	43,822	$	(18,815)	$	42,317	$	(20,359)

These identifiable intangibles are included in “Other noncurrent assets, net” on our Consolidated Balance Sheets. Amortization of these intangible assets is recorded on a straight line basis over an average finite useful life primarily ranging from approximately five to 20 years. Amortization was $6 million, $9 million and $6 million for the years ended December 31, 2016, 2015 and 2014 respectively.

Estimated future amortization of our identifiable intangible assets as of December 31, 2016 is as follows (in thousands):


For the Years Ended December 31,
2017	$	5,082
2018		5,082
2019		4,950
2020		3,742
2021		1,214
Thereafter		4,937
Total	$	25,007

Goodwill

The excess of our investments in consolidated subsidiaries over net tangible and identifiable intangible asset value at the time of the investment is recorded as goodwill and is not subject to amortization but is subject to impairment testing annually or whenever indicators of impairment arise. As of December 31, 2016 and 2015, our goodwill was $120 million, which relates to our wireless segment. In conducting our annual impairment test for 2016, we performed a qualitative assessment, which considered several factors, including, among others, macroeconomic conditions, industry and market conditions, and relevant company specific events and perception of the market. In contemplating all factors in their totality, we determined that the fair value of our wireless segment, which consists of a single reporting unit, was in excess of the carrying amount.

FCC Authorizations

As of December 31, 2016 and 2015, our FCC Authorizations consisted of the following:


	As of December 31,
	2016		2015
		(In thousands)
DBS Licenses	$	611,794	$	611,794
700 MHz Licenses		711,871		711,871
MVDDS Licenses		24,000		24,000
AWS-4 Licenses		1,949,000		1,949,000
H-Block Licenses		1,671,506		1,671,506
AWS-3 Licenses		9,890,389		9,890,389
Capitalized Interest (1)		1,640,173		809,044
Total	$	16,498,733	$	15,667,604

(1)

The change in capitalized interest as of December 31, 2016 resulted primarily from capitalized interest related to the AWS-3 Licenses, on which we began capitalizing interest as of October 27, 2015. See Note 2 for further information.

Other

During the third quarter 2016, we made a refundable payment to a third party in connection with a potential asset purchase. This amount is recorded in “Other current assets” on our Consolidated Balance Sheets.