Cablevision 2011 Annual Report Download - page 72

(66)
Technical and operating expenses (excluding depreciation and amortization shown below) for 2010
increased $134,460 (6%) as compared to 2009. The net increase is attributable to the following:
Increase in programming costs (including costs of on-demand services) due primarily to rate
increases (see discussion of MSG networks below), new program offerings and programming
costs for the newly acquired Bresnan Cable system operations ($5,662), partially offset by lower
subscribers to certain tiers of service .................................................................................................. $ 88,206
Nonrecurring settlement of a contractual fee matter related to years prior to 2009 recorded in the
second quarter of 2010 ........................................................................................................................ (23,000)
Increase in field operations and network related costs primarily due to lower capitalizable
activities, general cost increases, costs associated with the operation of the newly acquired
Bresnan Cable system ($5,003), and growth in RGUs ....................................................................... 31,417
Nonrecurring contract termination charge related to the newly acquired Bresnan Cable system .......... 14,375
Increase in franchise fees due to increase in video revenues and higher rates in certain regions .......... 8,239
Impact of accrual reversals in 2009 due to legislative changes which clarified the applicability of
certain VoIP fees ................................................................................................................................. 18,976
Lower termination rates, partially offset by higher interconnection costs due to the favorable
resolution of certain disputed costs in 2009 (termination and interconnection costs are net of
related intra-segment eliminations) ..................................................................................................... (3,532)
Intra-segment eliminations .................................................................................................................... (221)
$134,460
Technical and operating expenses consist primarily of programming costs and direct costs associated with
providing and maintaining services to our customers. These costs typically rise as the number of RGUs
grow and also due to general inflationary cost increases for employees, contractors, programming rates
and other various expenses. Costs of field operations also increase as the portion of our expenses that we
are able to capitalize decreases due to lower new customer installations and lower new service upgrades.
Network related costs also fluctuate as capitalizable network upgrade and enhancement activity changes.
Franchise fees are payable to the state governments and local municipalities where we operate and are
based on a percentage of certain categories of revenue, primarily video revenue which vary by state and
municipality. These costs change in relation to changes in such categories of revenues or rate changes.
We expect that our technical and operating expenses will continue to increase in the future. However, as
a percentage of revenues, we expect these costs to remain relatively constant.
Effective January 1, 2010, a new long-term affiliation agreement was entered into between Cablevision
and the MSG networks, which are owned by Madison Square Garden. This new long-term affiliation
agreement resulted in incremental programming costs to the Company of approximately $29,000 for the
year ended December 31, 2010, as compared to the amount of programming costs recognized by the
Company pursuant to the Company's arrangement with Madison Square Garden in 2009. This new
affiliation agreement provides for the carriage of the MSG Network and MSG Plus program services on
the Company's cable television systems in the tri-state area. This agreement has a term of 10 years,
obligates the Company to carry the MSG networks program services on its cable television systems and
provides for the payment by the Company to the MSG networks of a per subscriber license fee, which fee
is increased each year during the term of the agreement.