6.Property and Equipment and Intangible Assets

Property and Equipment

Property and equipment consisted of the following:

	Depreciable
	Life	As of December 31,
	(In Years)	2014			2013
		(In thousands)
Equipment leased to customers	2-5	$	3,524,211		$	3,496,994
EchoStar I (1)	12	—			201,607
EchoStar VII (1)	15	—			177,000
EchoStar X (1)	15	—			177,192
EchoStar XI (1)	15	—			200,198
EchoStar XIV (1)	15	—			316,541
EchoStar XV	15	277,658			277,658
Satellites acquired under capital lease agreements	10-15	499,819			499,819
Furniture, fixtures, equipment and other	1-10	656,273			600,439
Buildings and improvements	1-40	84,129			80,439
Land	-	5,504			5,504
Construction in progress	-	18,355			39,043
Total property and equipment		5,065,949			6,072,434
Accumulated depreciation (1)		(2,628,945		)	(3,093,111		)
Property and equipment, net		$	2,437,004		$	2,979,323

(1)

Property and equipment and accumulated depreciation decreased $1.073 billion and $633 million, respectively, as a result of the Satellite and Tracking Stock Transaction. See Note 4 and Note 15 for further discussion.

Construction in progress consisted of the following:

	As of December 31,
	2014		2013
	(In thousands)
Computer hardware projects	$	1,399	$	20,216
Software projects	16,353		15,017
Other	603		3,810
Construction in progress	$	18,355	$	39,043

Depreciation and amortization expense consisted of the following:

	For the Years Ended December 31,
	2014		2013		2012
	(In thousands)
Equipment leased to customers	$	810,945	$	739,266	$	649,394
Satellites (1)	68,984		108,682		123,431
Buildings, furniture, fixtures, equipment and other	76,172		58,039		58,081
148 degree orbital location (2)	—		—		67,776
Total depreciation and amortization	$	956,101	$	905,987	$	898,682

(1)

Depreciation and amortization expense decreased $40 million in 2014 as a result of the Satellite and Tracking Stock Transaction. See Note 4 and Note 15 for further discussion.

(2)

On May 31, 2012, the International Bureau of the FCC announced the termination of our license for use of the 148 degree orbital location. We had not had a satellite positioned at the 148 degree orbital location since the retirement of EchoStar V in August 2009. Our license for use of the 148 degree orbital location had a $68 million carrying value. This amount was recorded as “Depreciation and amortization” expense on our Consolidated Statements of Operations and Comprehensive Income (Loss) in 2012 due to the termination of this license by the FCC.

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.

We did not record any capitalized interest during the years ended December 31, 2014, 2013 or 2012.

Satellites

DBS Satellites. As of December 31, 2014, we utilized 14 satellites in geostationary orbit approximately 22,300 miles above the equator, one of which we own and depreciate over its useful life. As of December 31, 2014, we utilized certain capacity on 11 satellites that we lease from EchoStar, which were accounted for as operating leases. As of December 31, 2014, we also leased two satellites from third parties, which were accounted for as capital leases and were depreciated over the shorter of the economic life or the term of the satellite agreement.

			Estimated
			Useful Life
			(Years)/
		Degree	Lease
	Launch	Orbital	Termination
Satellites	Date	Location	Date
Owned:
EchoStar XV (1)	July 2010	45	15

Under Construction:
EchoStar XVIII (2)	2015	110	15

Leased from EchoStar (1):
EchoStar I (3)(4)	December 1995	77	November 2015
EchoStar VII (3)(4)	February 2002	119	June 2016
EchoStar VIII	August 2002	77	Month to month
EchoStar IX	August 2003	121	Month to month
EchoStar X (3)(4)	February 2006	110	February 2021
EchoStar XI (3)(4)	July 2008	110	September 2021
EchoStar XII (3)	July 2003	61.5	September 2017
EchoStar XIV (3)(4)	March 2010	119	February 2023
EchoStar XVI (5)	November 2012	61.5	January 2017
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 15 for further discussion of our Related Party Transactions with EchoStar.

(2)

EchoStar XVIII is expected to launch during the fourth quarter 2015.

(3)

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

(4)

On February 20, 2014, we entered into the Satellite and Tracking Stock Transaction with EchoStar pursuant to which, among other things, we transferred these satellites to EchoStar and lease back all available capacity on these satellites. See Note 4 and Note 15 for further discussion.

(5)

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

Satellites Under Construction

EchoStar XVIII. On September 7, 2012, DISH Network entered into a contract with Space Systems/Loral, Inc. (“SS/L”) for the construction of EchoStar XVIII, a DBS satellite with spot beam technology designed for, among other things, HD programming. During October 2013, DISH Network entered into an agreement with ArianeSpace S.A. for launch services for this satellite, which is expected to be launched during the fourth quarter 2015.

Satellite Anomalies

Operation of our DISH branded pay-TV service requires that we have adequate satellite transmission capacity for the programming we offer. Moreover, current competitive conditions require that we continue to expand our offering of new programming. 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 discussion of 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 insurance for any of the owned or leased in-orbit satellites that we use, other than certain satellites leased from third parties, and therefore, we will bear the risk associated with any uninsured in-orbit satellite failures.

Intangible Assets

FCC Authorizations

As of December 31, 2014 and 2013, our FCC Authorizations consisted of the following:

	As of December 31,
	2014		2013
	(In thousands)
DBS Licenses	$	611,794	$	611,794
MVDDS Licenses (1)	24,000		24,000
Total	$	635,794	$	635,794

(1)

We have multichannel video distribution and data service (“MVDDS”) licenses in 82 out of 214 geographical license areas, including Los Angeles, New York City, Chicago and several other major metropolitan areas. By August 2014, we were required to meet certain FCC build-out requirements related to our MVDDS licenses, and we are subject to certain FCC service rules applicable to these licenses. In January 2015, the FCC granted our application to extend the build-out requirements related to our MVDDS licenses. We now have until 2019 to provide “substantial service” on our MVDDS licenses, and the licenses expire in 2024. Our MVDDS licenses may be terminated, however, if we do not provide substantial service in accordance with the new build-out requirements.