The NOC is capable of performing a range of centralized monitoring functions, including remote diagnosis and fault fixes, surveillance of active parts of the network and can act as an interface of monitoring and service field force activities. The NOC also serves as playout center for the parts of the network that are connected to it by fiber links and facilitates secure content distribution to ish’s subscribers. 100.0% of the ish’s network is expected to be connected to the NOC by July 2005. The NOC is able to offer scalability. It has serviced Baden-Württemberg previously, and could provide similar capabilities to other cable regions in Germany. In addition, it can run high speed Internet and telephony services for a larger subscriber base. It also operates mobile head-ends that can be deployed to back-up faulty reception equipment or line failures anywhere in the region. Since July 2004, the NOC operates its own Nagravision “CAS” (Conditional Access System), a system utilized by television operators across the world and the other major operators in Germany. It manages transactions and ensures that only subscribers of a service can gain access to it. ish is migrating away from using MSG’s services by insourcing those services for its own premium cable television packages and procuring its own smart cards. Supply SLAs with DTAG ish has entered into various long-term agreements with DTAG and certain of its affiliates that are significant to ish’s business. ish estimates that, pursuant to these agreements, it leases cable duct space for part of its cable network as well as the use of fiber optic transmission systems, tower and facility space. In addition, ish purchases some of the electrical power required for the operation of its network through DTAG under such agreements. The various services offered by DTAG are defined under so-called Term Sheets (“Term Sheets”) that are part of the SLAs. Except for the Term Sheet on the offer of use of further cable ducts, the term of the Term Sheets is generally unlimited, but the Term Sheets are subject to certain termination rights and, according to German law, lease agreements are subject to a termination right of either party after a term of 30 years. Furthermore, the framework agreement provides for various termination restrictions for DTAG according to which DTAG is generally not entitled to terminate the services provided under the Term Sheets “co-use of cable ducts,” “fiber optic transmission systems,” and “lease of space for broadband cable technology” except under certain exceptions. The following chart provides an overview of the services covered by the most material Term Sheets: 180
Term Sheet Service Duration Co-use of cable ducts Usage of cable ducts within DTAG’s conduit system for existing broadband cable lines (approximately 12% of its coaxial cable is located in cable ducts leased from DTAG under this Term Sheet; most of the remaining coaxial cable is directly buried underground). Unlimited €36.7 million for the year 2004; the price is fixed until December 31, 2005. Thereafter, the price increases or decreases based on actual proven cost changes by DTAG. 181 Approximate annual cost Termination rights ish can terminate the Term Sheet in whole upon 24 months’ notice to the end of a calendar year. ish can also partially terminate the Term Sheet upon six months’ prior notice in the first year, 12 months’ prior notice in the second year and 24 months’ prior notice in the third year and the following years to the end of a month. DTAG cannot terminate the Term Sheet unless for good cause (wichtiger Grund). In the event DTAG shuts down or otherwise takes a cable duct out of operation, DTAG may terminate the usage right of the respective cable duct with a notice period of 12 months to the end of a month. DTAG shall use reasonable efforts to provide ish with a replacement duct.