The DirecTV Group (DTV)

Competition

        We face substantial competition in the MVPD industry and from emerging digital media distribution providers. Our competition includes companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, telcos, wireless companies and companies that are developing new technologies. Many of our competitors have access to substantially greater financial and marketing resources. We believe our brand, the quality and variety of video, audio and interactive programming, quality of picture, access to service, availability of HD and DVR services, customer service and price are the key elements for attaining and retaining subscribers. According to the National Cable & Telecommunications Association's 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable. Our over 17.6 million subscribers represent approximately 18% of MVPD subscribers at December 31, 2008.

•

Cable Television.  We encounter substantial competition in the MVPD industry from cable television companies. Most cable television operators have a large, established customer base, and many have significant investments in companies that provide programming content. Approximately 97 million households subscribe to an MVPD service and approximately 66% of MVPD subscribers receive their programming from a cable operator. In addition, most cable providers have completed network upgrades that allow for enhanced service offerings such as digital cable, HD channels, broadband Internet access and telephony services. Cable companies bundle these services, offering discounts and providing one bill to the consumer.



•

Telephone Companies.  Several telcos have upgraded a significant portion of their infrastructure by replacing their older copper wire telephone lines with high-speed fiber optic lines. These fiber lines provide the telcos with significantly greater capacity enabling them to offer new and enhanced services, such as Internet access at much greater speeds and video. For example, Verizon announced that at the end of 2008, it had the capability to serve 12 million homes with fiber optic lines with the goal of having the capability to serve 18 million homes by the end of 2010. In addition, AT&T has begun deploying fiber optic lines to neighborhoods and expects to have the capability to serve approximately 30 million of its customers by 2010. As of year end 2008, Verizon had approximately 2 million video subscribers and AT&T had approximately 1 million subscribers. Similar to the cable companies, the telcos expect to offer their customers multiple services at a discount on one bill.



•

Other Direct Broadcast Satellite and Direct-To-Home Satellite System Operators.  We also compete with Dish Network Corporation, which had nearly 14 million subscribers at the end of 2008, representing approximately 14% of MVPD subscribers. Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite frequencies or foreign-licensed frequencies that have the ability of covering the United States.



•

Small and Rural Telephone Companies.  Other telephone companies are also finding ways to deliver video programming services over their wireline facilities. For example, DISH Network has agreements with Embarq, CenturyTel, Windstream, TDS, and Frontier to bundle their individual DSL and telephony services with DISH Network's video service.



•

Video via the Internet.  With the large increase in the number of consumers with broadband service, a significant amount of video content has become available on the Internet for users to download and view on their personal computers, televisions and other devices. For example, in October 2008, Apple® announced that all four of the major networks are offering primetime programs in high-definition on the online iTunes® Store and that over 200 million TV episodes

10

THE DIRECTV GROUP, INC.

had been sold from the iTunes Store. Also in March 2008, Hulu launched its online video service website to the public. Hulu provides free movies and TV shows from over 130 content providers including Fox, NBC Universal, MGM, Sony Pictures and Warner Brothers. This content can be accessed on demand through its website and those of its partners—AOL, Comcast, MSN, MySpace and Yahoo. In addition, several companies, such as Netflix, Blockbuster and Amazon.com, have begun selling and renting movies via Internet download. There are also several similar initiatives by companies such as Intel and Microsoft to make it easier to view Internet-based video on television and personal computer screens.

•

VHF/UHF Broadcasters.  Most areas of the United States can receive traditional terrestrial VHF/UHF television broadcasts of between three and ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide local, network and syndicated programming typically free of charge. The FCC has allocated additional digital spectrum to licensed broadcasters.

Competition

        We face substantial competition in the MVPD industry and from emerging digital media distribution providers. Our competition includes companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, telcos, wireless companies and companies that are developing new technologies. Many of our competitors have access to substantially greater financial and marketing resources. We believe our brand, the quality and variety of video, audio and interactive programming, quality of picture, access to service, availability of HD and DVR services, customer service and price are the key elements for attaining and retaining subscribers. According to the National Cable & Telecommunications Association's 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable. Our over 17.6 million subscribers represent approximately 18% of MVPD subscribers at December 31, 2008.

•

Cable Television.  We encounter substantial competition in the MVPD industry from cable television companies. Most cable television operators have a large, established customer base, and many have significant investments in companies that provide programming content. Approximately 97 million households subscribe to an MVPD service and approximately 66% of MVPD subscribers receive their programming from a cable operator. In addition, most cable providers have completed network upgrades that allow for enhanced service offerings such as digital cable, HD channels, broadband Internet access and telephony services. Cable companies bundle these services, offering discounts and providing one bill to the consumer.



•

Telephone Companies.  Several telcos have upgraded a significant portion of their infrastructure by replacing their older copper wire telephone lines with high-speed fiber optic lines. These fiber lines provide the telcos with significantly greater capacity enabling them to offer new and enhanced services, such as Internet access at much greater speeds and video. For example, Verizon announced that at the end of 2008, it had the capability to serve 12 million homes with fiber optic lines with the goal of having the capability to serve 18 million homes by the end of 2010. In addition, AT&T has begun deploying fiber optic lines to neighborhoods and expects to have the capability to serve approximately 30 million of its customers by 2010. As of year end 2008, Verizon had approximately 2 million video subscribers and AT&T had approximately 1 million subscribers. Similar to the cable companies, the telcos expect to offer their customers multiple services at a discount on one bill.



•

Other Direct Broadcast Satellite and Direct-To-Home Satellite System Operators.  We also compete with Dish Network Corporation, which had nearly 14 million subscribers at the end of 2008, representing approximately 14% of MVPD subscribers. Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite frequencies or foreign-licensed frequencies that have the ability of covering the United States.



•

Small and Rural Telephone Companies.  Other telephone companies are also finding ways to deliver video programming services over their wireline facilities. For example, DISH Network has agreements with Embarq, CenturyTel, Windstream, TDS, and Frontier to bundle their individual DSL and telephony services with DISH Network's video service.



•

Video via the Internet.  With the large increase in the number of consumers with broadband service, a significant amount of video content has become available on the Internet for users to download and view on their personal computers, televisions and other devices. For example, in October 2008, Apple® announced that all four of the major networks are offering primetime programs in high-definition on the online iTunes® Store and that over 200 million TV episodes

10

THE DIRECTV GROUP, INC.

had been sold from the iTunes Store. Also in March 2008, Hulu launched its online video service website to the public. Hulu provides free movies and TV shows from over 130 content providers including Fox, NBC Universal, MGM, Sony Pictures and Warner Brothers. This content can be accessed on demand through its website and those of its partners—AOL, Comcast, MSN, MySpace and Yahoo. In addition, several companies, such as Netflix, Blockbuster and Amazon.com, have begun selling and renting movies via Internet download. There are also several similar initiatives by companies such as Intel and Microsoft to make it easier to view Internet-based video on television and personal computer screens.

•

VHF/UHF Broadcasters.  Most areas of the United States can receive traditional terrestrial VHF/UHF television broadcasts of between three and ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide local, network and syndicated programming typically free of charge. The FCC has allocated additional digital spectrum to licensed broadcasters.

Competition

        We face substantial competition in the MVPD industry and from emerging digital media distribution providers. Our competition includes
companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, telcos, wireless companies and companies
that are developing new
technologies. Many of our competitors have access to substantially greater financial and marketing resources. We believe our brand, the quality and variety of video, audio and interactive programming,
quality of picture, access to service, availability of HD and DVR services, customer service and price are the key elements for attaining and retaining subscribers. According to the National
Cable & Telecommunications Association's 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable. Our over 17.6 million subscribers represent
approximately 18% of MVPD subscribers at December 31, 2008.

•

Cable Television.  We encounter substantial competition in
the MVPD industry from cable television companies. Most cable television operators have a large, established customer base, and many have significant investments in companies that provide programming
content. Approximately 97 million households subscribe to an MVPD service and approximately 66% of MVPD subscribers receive their programming from a cable operator. In addition, most cable
providers have completed network upgrades that allow for enhanced service offerings such as digital cable, HD channels, broadband Internet access and telephony services. Cable companies bundle these
services, offering discounts and providing one bill to the consumer.




•

Telephone Companies.  Several telcos have upgraded a
significant portion of their infrastructure by replacing their older copper wire telephone lines with high-speed fiber optic lines. These fiber lines provide the telcos with significantly
greater capacity enabling them to offer new and enhanced services, such as Internet access at much greater speeds and video. For example, Verizon announced that at the end of 2008, it had the
capability to serve 12 million homes with fiber optic lines with the goal of having the capability to serve 18 million homes by the end of 2010. In addition, AT&T has begun deploying
fiber optic lines to neighborhoods and expects to have the capability to serve approximately 30 million of its customers by 2010. As of year end 2008, Verizon had approximately 2 million
video subscribers and AT&T had approximately 1 million subscribers. Similar to the cable companies, the telcos expect to offer their customers multiple services at a discount on one bill.




•

Other Direct Broadcast Satellite and Direct-To-Home Satellite System
Operators.  We also compete with Dish Network Corporation, which had nearly 14 million subscribers at the end of 2008,
representing approximately 14% of MVPD subscribers. Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite
frequencies or foreign-licensed frequencies that have the ability of covering the United States.




•

Small and Rural Telephone Companies.  Other telephone
companies are also finding ways to deliver video programming services over their wireline facilities. For example, DISH Network has agreements with Embarq, CenturyTel, Windstream, TDS, and Frontier to
bundle their individual DSL and telephony services with DISH Network's video service.




•

Video via the Internet.  With the large increase in the
number of consumers with broadband service, a significant amount of video content has become available on the Internet for users to download and view on their personal computers, televisions and other
devices. For example, in October 2008, Apple® announced that all four of the major networks are offering primetime programs in high-definition on the online iTunes®
Store and that over 200 million TV episodes

10

THE DIRECTV GROUP, INC.

had
been sold from the iTunes Store. Also in March 2008, Hulu launched its online video service website to the public. Hulu provides free movies and TV shows from over 130 content providers including
Fox, NBC Universal, MGM, Sony Pictures and Warner Brothers. This content can be accessed on demand through its website and those of its partners—AOL, Comcast, MSN, MySpace and Yahoo. In
addition, several companies, such as Netflix, Blockbuster and Amazon.com, have begun selling and renting movies via Internet download. There are also several similar initiatives by companies such as
Intel and Microsoft to make it easier to view Internet-based video on television and personal computer screens.










•

VHF/UHF Broadcasters.  Most areas of the United States can
receive traditional terrestrial VHF/UHF television broadcasts of between three and ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide
local, network and syndicated programming typically free of charge. The FCC has allocated additional digital spectrum to licensed broadcasters.

Competition

        We face substantial competition in the MVPD industry and from emerging digital media distribution providers. Our competition includes
companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, telcos, wireless companies and companies
that are developing new
technologies. Many of our competitors have access to substantially greater financial and marketing resources. We believe our brand, the quality and variety of video, audio and interactive programming,
quality of picture, access to service, availability of HD and DVR services, customer service and price are the key elements for attaining and retaining subscribers. According to the National
Cable & Telecommunications Association's 2008 Industry Overview, 96% of the 128.6 million U.S. housing units are passed by cable. Our over 17.6 million subscribers represent
approximately 18% of MVPD subscribers at December 31, 2008.

•

Cable Television.  We encounter substantial competition in
the MVPD industry from cable television companies. Most cable television operators have a large, established customer base, and many have significant investments in companies that provide programming
content. Approximately 97 million households subscribe to an MVPD service and approximately 66% of MVPD subscribers receive their programming from a cable operator. In addition, most cable
providers have completed network upgrades that allow for enhanced service offerings such as digital cable, HD channels, broadband Internet access and telephony services. Cable companies bundle these
services, offering discounts and providing one bill to the consumer.




•

Telephone Companies.  Several telcos have upgraded a
significant portion of their infrastructure by replacing their older copper wire telephone lines with high-speed fiber optic lines. These fiber lines provide the telcos with significantly
greater capacity enabling them to offer new and enhanced services, such as Internet access at much greater speeds and video. For example, Verizon announced that at the end of 2008, it had the
capability to serve 12 million homes with fiber optic lines with the goal of having the capability to serve 18 million homes by the end of 2010. In addition, AT&T has begun deploying
fiber optic lines to neighborhoods and expects to have the capability to serve approximately 30 million of its customers by 2010. As of year end 2008, Verizon had approximately 2 million
video subscribers and AT&T had approximately 1 million subscribers. Similar to the cable companies, the telcos expect to offer their customers multiple services at a discount on one bill.




•

Other Direct Broadcast Satellite and Direct-To-Home Satellite System
Operators.  We also compete with Dish Network Corporation, which had nearly 14 million subscribers at the end of 2008,
representing approximately 14% of MVPD subscribers. Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite
frequencies or foreign-licensed frequencies that have the ability of covering the United States.




•

Small and Rural Telephone Companies.  Other telephone
companies are also finding ways to deliver video programming services over their wireline facilities. For example, DISH Network has agreements with Embarq, CenturyTel, Windstream, TDS, and Frontier to
bundle their individual DSL and telephony services with DISH Network's video service.




•

Video via the Internet.  With the large increase in the
number of consumers with broadband service, a significant amount of video content has become available on the Internet for users to download and view on their personal computers, televisions and other
devices. For example, in October 2008, Apple® announced that all four of the major networks are offering primetime programs in high-definition on the online iTunes®
Store and that over 200 million TV episodes

10

THE DIRECTV GROUP, INC.

had
been sold from the iTunes Store. Also in March 2008, Hulu launched its online video service website to the public. Hulu provides free movies and TV shows from over 130 content providers including
Fox, NBC Universal, MGM, Sony Pictures and Warner Brothers. This content can be accessed on demand through its website and those of its partners—AOL, Comcast, MSN, MySpace and Yahoo. In
addition, several companies, such as Netflix, Blockbuster and Amazon.com, have begun selling and renting movies via Internet download. There are also several similar initiatives by companies such as
Intel and Microsoft to make it easier to view Internet-based video on television and personal computer screens.










•

VHF/UHF Broadcasters.  Most areas of the United States can
receive traditional terrestrial VHF/UHF television broadcasts of between three and ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide
local, network and syndicated programming typically free of charge. The FCC has allocated additional digital spectrum to licensed broadcasters.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets, we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete primarily on the basis of programming selection, price, technology and quality.

        In most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms, and have established large subscriber bases and widespread brand recognition. They have typically offered analog services for lower monthly fees and with lower upfront installation and connection fees than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and telephony services, and in some markets the major cable operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and telephony services. In most cases, they discount the value of their programming services in order to sell broadband and telephony services, which can adversely affect the attractiveness of our offers to subscribers.

        In addition to competition from cable services, we face increasing competition from other providers of DTH services. Telefonica, the Spanish telephone company, launched DTH services in Peru, Chile and Brazil in 2006, Colombia in 2007 and Venezuela in 2008. Telmex owns a DTH service in Chile and has stated its intention to launch in other countries, including in Brazil, through its affiliate Embratel. Brasil Telecom/Oi, the fixed line incumbent in Brazil, expects to launch a DTH service in early 2009. These competitors have significant resources and have proven their ability to grow their businesses rapidly. They typically seek to focus on offering lower-cost, limited services packages in support of their telephony and broadband offerings, which can increase our churn and put pressure on our margins. Also, the existence of multiple DTH operators in a single market dilutes our ability to market our DTH service as an alternative to cable, traditionally our principal competition. In addition, EchoStar Corp. announced in November 2008 it had formed a joint venture with media company MVS Comunicaciones to offer a satellite television service in Mexico. The new offering will use an existing MVS service, which at the time of the announcement had more than 570,000 customers. EchoStar sells set-top boxes and provides satellite television services to Dish Network in the United States. Echostar also announced that basic service will include 25 Spanish and English language channels for a monthly fee of 139 pesos or a little over $10 at foreign exchange rates at year end 2008.

14

THE DIRECTV GROUP, INC.

        In a number of markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced services, including video programming. These and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, telephony and video services. However, to date only a very small number of such upgrades and build outs have been actively pursued on other than a test basis.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets, we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete primarily on the basis of programming selection, price, technology and quality.

        In most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms, and have established large subscriber bases and widespread brand recognition. They have typically offered analog services for lower monthly fees and with lower upfront installation and connection fees than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and telephony services, and in some markets the major cable operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and telephony services. In most cases, they discount the value of their programming services in order to sell broadband and telephony services, which can adversely affect the attractiveness of our offers to subscribers.

        In addition to competition from cable services, we face increasing competition from other providers of DTH services. Telefonica, the Spanish telephone company, launched DTH services in Peru, Chile and Brazil in 2006, Colombia in 2007 and Venezuela in 2008. Telmex owns a DTH service in Chile and has stated its intention to launch in other countries, including in Brazil, through its affiliate Embratel. Brasil Telecom/Oi, the fixed line incumbent in Brazil, expects to launch a DTH service in early 2009. These competitors have significant resources and have proven their ability to grow their businesses rapidly. They typically seek to focus on offering lower-cost, limited services packages in support of their telephony and broadband offerings, which can increase our churn and put pressure on our margins. Also, the existence of multiple DTH operators in a single market dilutes our ability to market our DTH service as an alternative to cable, traditionally our principal competition. In addition, EchoStar Corp. announced in November 2008 it had formed a joint venture with media company MVS Comunicaciones to offer a satellite television service in Mexico. The new offering will use an existing MVS service, which at the time of the announcement had more than 570,000 customers. EchoStar sells set-top boxes and provides satellite television services to Dish Network in the United States. Echostar also announced that basic service will include 25 Spanish and English language channels for a monthly fee of 139 pesos or a little over $10 at foreign exchange rates at year end 2008.

14

THE DIRECTV GROUP, INC.

        In a number of markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced services, including video programming. These and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, telephony and video services. However, to date only a very small number of such upgrades and build outs have been actively pursued on other than a test basis.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets,
we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave
systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete
primarily on the basis of programming selection, price, technology and quality.

        In
most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms,
and have established large subscriber bases and widespread brand recognition. They have typically offered analog services for lower monthly fees and with lower upfront installation and connection fees
than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and telephony services, and in some markets the major cable
operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and telephony services. In most cases, they discount the value of their programming
services in order to sell broadband and telephony services, which can adversely affect the attractiveness of our offers to subscribers.

        In
addition to competition from cable services, we face increasing competition from other providers of DTH services. Telefonica, the Spanish telephone company, launched DTH services in
Peru, Chile and Brazil in 2006, Colombia in 2007 and Venezuela in 2008. Telmex owns a DTH service in Chile and has stated its intention to launch in other countries, including in Brazil, through its
affiliate Embratel. Brasil Telecom/Oi, the fixed line incumbent in Brazil, expects to launch a DTH service in early 2009. These competitors have significant resources and have proven their ability to
grow their businesses rapidly. They typically seek to focus on offering lower-cost, limited services packages in support of their telephony and broadband offerings, which can increase our
churn and put pressure on our margins. Also, the existence of multiple DTH operators in a single market dilutes our ability to market our DTH service as an alternative to cable, traditionally our
principal competition. In addition, EchoStar Corp. announced in November 2008 it had formed a joint venture with media company MVS Comunicaciones to offer a satellite television service in Mexico. The
new offering will use an existing MVS service, which at the time of the announcement had more than 570,000 customers. EchoStar sells set-top boxes and provides satellite television
services to Dish Network in the United States. Echostar also announced that basic service will include 25 Spanish and English language channels for a monthly fee of 139 pesos or a little over $10 at
foreign exchange rates at year end 2008.

14

NAME="page_de77301_1_15">

THE DIRECTV GROUP, INC.

        In a number of markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced
services, including video programming. These and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, telephony and video
services. However, to date only a very small number of such upgrades and build outs have been actively pursued on other than a test basis.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets,
we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave
systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete
primarily on the basis of programming selection, price, technology and quality.

        In
most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms,
and have established large subscriber bases and widespread brand recognition. They have typically offered analog services for lower monthly fees and with lower upfront installation and connection fees
than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and telephony services, and in some markets the major cable
operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and telephony services. In most cases, they discount the value of their programming
services in order to sell broadband and telephony services, which can adversely affect the attractiveness of our offers to subscribers.

        In
addition to competition from cable services, we face increasing competition from other providers of DTH services. Telefonica, the Spanish telephone company, launched DTH services in
Peru, Chile and Brazil in 2006, Colombia in 2007 and Venezuela in 2008. Telmex owns a DTH service in Chile and has stated its intention to launch in other countries, including in Brazil, through its
affiliate Embratel. Brasil Telecom/Oi, the fixed line incumbent in Brazil, expects to launch a DTH service in early 2009. These competitors have significant resources and have proven their ability to
grow their businesses rapidly. They typically seek to focus on offering lower-cost, limited services packages in support of their telephony and broadband offerings, which can increase our
churn and put pressure on our margins. Also, the existence of multiple DTH operators in a single market dilutes our ability to market our DTH service as an alternative to cable, traditionally our
principal competition. In addition, EchoStar Corp. announced in November 2008 it had formed a joint venture with media company MVS Comunicaciones to offer a satellite television service in Mexico. The
new offering will use an existing MVS service, which at the time of the announcement had more than 570,000 customers. EchoStar sells set-top boxes and provides satellite television
services to Dish Network in the United States. Echostar also announced that basic service will include 25 Spanish and English language channels for a monthly fee of 139 pesos or a little over $10 at
foreign exchange rates at year end 2008.

14

NAME="page_de77301_1_15">

THE DIRECTV GROUP, INC.

        In a number of markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced
services, including video programming. These and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, telephony and video
services. However, to date only a very small number of such upgrades and build outs have been actively pursued on other than a test basis.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets, we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete primarily on the basis of programming selection, price, technology and quality.

        In most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms, and have established large subscriber bases and widespread brand recognition. They have typically been able to offer analog services for lower monthly fees and with lower upfront installation and connection fees than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and voice services, and in some markets the major cable operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and voice services. In most cases, they discount the value of their programming services in order to sell broadband and voice services, which can adversely affect the attractiveness of our offers to subscribers.

        In addition to competition from cable services, Telefonica, the Spanish telephone company, launched DTH services in Peru, Chile and Brazil in 2006, and Colombia in 2007. To date it has offered DTH programming services only to users of voice telephony and broadband services provided by Telefonica's affiliates in Latin America. Telefonica has entered these markets by offering packages of a limited number of programming services available to subscribers at prices that are lower than what we were offering. We have implemented new programming packages that we consider to be competitive with those offered by Telefonica. However, it is not certain at this time how Telefonica's entrance into these markets will affect our business.

        In a number of the markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced services, including video programming, and these and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, voice and video services. However, to date only a very small number of such upgrades and buildouts have been actively pursued on other than a test basis.

13

THE DIRECTV GROUP, INC.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets, we compete primarily with
other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave systems, traditional over the air
broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete primarily on the basis of
programming selection, price, technology and quality.

        In
most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms,
and have established large subscriber bases and widespread brand recognition. They have typically been able to offer analog services for lower monthly fees and with lower upfront installation and
connection fees than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and voice services, and in some markets the
major cable operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and voice services. In most cases, they discount the value of their
programming services in order to sell broadband and voice services, which can adversely affect the attractiveness of our offers to subscribers.

        In
addition to competition from cable services, Telefonica, the Spanish telephone company, launched DTH services in Peru, Chile and Brazil in 2006, and Colombia in 2007. To date it has
offered DTH programming services only to users of voice telephony and broadband services provided by Telefonica's affiliates in Latin America. Telefonica has entered these markets by offering packages
of a limited number of programming services available to subscribers at prices that are lower than what we were offering. We have implemented new programming packages that we consider to be
competitive with those offered by Telefonica. However, it is not certain at this time how Telefonica's entrance into these markets will affect our business.

        In
a number of the markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced services, including
video programming, and these and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, voice and video services. However, to date
only a very small number of such upgrades and buildouts have been actively pursued on other than a test basis.

13

THE DIRECTV GROUP, INC.

Competition

        The pay television and other emerging broadband video and data markets in Latin America are highly competitive. In each of our markets, we compete primarily with other providers of pay television, who distribute their programming by satellite, cable, terrestrial microwave systems, traditional over the air broadcasting or the Internet. In addition, in certain markets we face significant competition from illegal and informal sector pay television operations. We compete primarily on the basis of programming selection, price, technology and quality.

        In most of the markets in which we operate, cable television is our principal competition. Cable services have been in commercial operation longer than other pay television platforms, and have established large subscriber bases and widespread brand recognition. They have typically been able to offer analog services for lower monthly fees and with lower upfront installation and connection fees than we do. In addition, the cable operators with which we compete are in various stages of upgrading their networks to provide broadband and voice services, and in some markets the major cable operators are competing with us based principally on their offer of a "triple play" bundle of video, broadband and voice services. In some cases, they discount the value of their programming services in order to sell broadband and voice services, which can adversely affect the attractiveness of our offers to subscribers.

        In addition to competition from cable services, in 2006, Telefonica, the Spanish telephone company, launched DTH services in Peru, Chile and Brazil and has announced plans to launch in Colombia in 2007. To date it has offered DTH programming services only to users of voice telephony and broadband services provided by Telefonica's affiliates in Latin America. Telefonica has entered these markets by offering packages of a limited number of programming services available to subscribers at prices that are lower than what we were offering. We have implemented new programming packages that we consider to be competitive with those offered by Telefonica. However, it is not certain at this time how Telefonica's entrance into these markets will affect our business.

        In a number of the markets, existing wireline telephony operators have announced their intention to upgrade their infrastructure in order to provide new and enhanced services, including video programming, and these and other companies have announced plans to build wireless broadband networks that will also be capable of delivering broadband, voice and video services. However, we are not aware of any such upgrades or buildouts that are being actively pursued other than on a test basis.

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Competition

        DIRECTV U.S.' industry is highly concentrated and DIRECTV U.S. faces substantial competition. Its competition includes companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, other DTH companies, RBOCs, wireless companies and companies that are developing new technologies. Many of DIRECTV U.S.' competitors have access to substantially greater financial and marketing resources. DIRECTV U.S. believes that the quality and variety of video, audio and interactive programming, quality of picture, access to service, availability of a broadband Internet service, customer service and price are the key elements for gaining and maintaining market share.

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Cable Television.    DIRECTV U.S. encounters substantial competition in the MVPD industry from cable television companies. Most cable television operators have a large, established customer base, and many have significant investments in companies that provide programming content. According to the National Cable & Telecommunications Association's Mid-Year 2005 Industry Overview, 108 million of the 110 million U.S. television households, or 99%, are passed by cable. Of the 110 million U.S. television households, approximately 73 million, or 67%, are currently subscribers to cable. In addition, most cable providers have completed network upgrades that allow for enhanced service offerings such as digital cable, HD local channels, broadband Internet access and telephony services. Cable companies bundle these services with their basic services, offering discounts and providing one bill to the consumer. For example, Cablevision currently offers its new customers a bundled package that includes video, broadband internet access and telephony services for $90 per month for the first 12 months of service.



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Other Direct Broadcast Satellite and Direct-To-Home Satellite System Operators.    DIRECTV U.S.' primary DBS competitor is EchoStar Communications Corporation, or EchoStar, which had just over 12 million subscribers at the end of 2005. Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite frequencies or foreign-licensed frequencies that have the ability of covering the United States. SES Americom, Inc., or SES, for example, is the licensee of U.S. frequencies that can be used to offer DTH service, and has petitioned the FCC for a declaratory ruling to allow it to provide DBS service using frequencies assigned to it by the Government of Gibraltar and the United Kingdom.

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Regional Bell Operating Companies.    Several RBOCs have started to upgrade their infrastructure by replacing their older copper wire telephone lines with high-speed fiber optic lines. These fiber lines provide the RBOCs with significantly greater capacity enabling them to offer new and enhanced services, such as Internet access at much greater speeds and video. For example, AT&T Inc., formerly known as SBC Communications Inc., announced plans and has begun to deploy fiber optic lines to neighborhoods serving approximately 18 million of its customers by 2008, and Verizon announced a target to upgrade to fiber optic lines for six million customer homes by the end of 2006 with the long-term goal of upgrading 18 million homes. Similar to the cable companies, the RBOCs expect to offer their customers multiple services at a discount on one bill. AT&T recently agreed to acquire BellSouth Corporation, which could affect our marketing relationship with BellSouth.



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Video via the Internet.    With the large increase in the number of consumers with broadband service, a significant amount of video content has become available on the Internet for users to download and view on their personal computers and other devices. For example, Google Inc. has launched an online video service offering a wide variety of both free and pay-per-view content, and Starz Entertainment Group LLC, a provider of movie services to MVPD providers, launched an Internet-based movie subscription service that will offer users unlimited access to more than 850 movies and other programs for $9.99 a month. In addition, there are several initiatives by companies such as Intel and Microsoft to make it easier to view Internet-based video on television and personal computer screens.



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Terrestrial Wired and Wireless Providers.    Broadband services providers, wireless systems, portable handheld devices and satellite master antenna television systems currently offer or could offer in the future MVPD and program distribution technologies in competition with DIRECTV U.S. For example, in 2005, Apple Computer Inc., or Apple, introduced a service where customers can download various ABC and NBC television shows the day after they air on television to Apple's portable iPod® device for $1.99.



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VHF/UHF Broadcasters.    Most areas of the United States can receive traditional terrestrial VHF/UHF television broadcasts of between three and ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide local, network and syndicated programming typically free of charge. The FCC has allocated additional digital spectrum to licensed broadcasters. At least during a transition period, each existing television station will be able to retain its present analog frequencies and also transmit programming on a digital channel that may permit multiple programming services per channel.

Competition

DIRECTV U.S.’ industry is highly concentrated and DIRECTV U.S. faces substantial competition. Its competition includes companies that offer video, audio, interactive programming, telephony, data and other entertainment services, including cable television, wireless companies, DTH companies, RBOCs and companies that are developing new technologies. Many of DIRECTV U.S.’ competitors have access to substantially greater financial and marketing resources than it has. DIRECTV U.S. believes that the quality and variety of video, audio and interactive programming, quality of picture, access to service, availability of a broadband Internet service, customer service and price are the key elements for gaining and maintaining market share.

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THE DIRECTV GROUP, INC.

Other domestic and foreign satellite operators also have proposed to offer DTH satellite service to U.S. customers using U.S.-licensed satellite frequencies or foreign-licensed frequencies that have the ability of covering the United States. SES Americom, Inc., or SES, for example, is the licensee of U.S. frequencies that can be used to offer DTH service, and has petitioned the FCC for a declaratory ruling to allow it to provide DBS service using frequencies assigned to it by the Government of Gibraltar and the United Kingdom.