Comcast 2007 Annual Report Download - page 6

Phone Services
We offer an interconnected Voice over Internet Protocol (“VoIP”)
digital phone service that provides unlimited local and domestic
long-distance calling, including features such as voice mail, caller
ID and call waiting. In some areas, we provide a circuit-switched
local phone service, which also provides access to a full array of
calling features and third-party long-distance services. We plan to
phase out our circuit-switched phone service in 2008.
Advertising
As part of our programming license agreements with programming
networks, we often receive an allocation of scheduled advertising
time that we may sell to local, regional and national advertisers.
We also coordinate the advertising sales efforts of other cable
operators in some markets, and in other markets we have formed
and operate advertising interconnects, which establish a physical,
direct link between multiple cable systems and provide for the sale
of regional and national advertising across larger geographic areas
than could be provided by a single cable operator. We are also in
the process of developing technology for interactive advertising.
Regional Sports and News Networks
Our regional sports and news networks include Comcast SportsNet
(Philadelphia), Comcast SportsNet Mid-Atlantic (Baltimore/Wash-
ington), Cable Sports Southeast, CN8—The Comcast Network,
Comcast SportsNet Chicago, MountainWest Sports Network,
Comcast SportsNet West (Sacramento), Comcast SportsNet New
England (Boston), Comcast SportsNet Northwest and Bay Area
SportsNet (San Francisco). These networks earn revenue through
the sale of advertising time and from monthly per subscriber license
fees paid by multichannel video programming distributors
(“MVPDs”).
Other Revenue Sources
We also generate revenues from installation services, commis-
sions from third-party electronic retailing and from other services,
such as providing businesses with data connectivity and net-
worked applications.
Sources of Supply
To offer our video services, we license from programming net-
works the substantial majority of the programming we distribute for
linear channels and their associated video on demand offerings,
and we generally pay a monthly fee for such programming on a
per video subscriber, per channel basis. We attempt to secure
long-term licenses with volume discounts and/or marketing sup-
port and incentives for the programming. We also license individual
programs or packages of programs from programming suppliers
for our video on demand service, generally under shorter-term
agreements.
Our video programming expenses increase due to growth in the
number of our video subscribers, increases in the number of channels
and programs we provide, and increases in license fees. The MVPD
industry has continued to experience an increase in the cost of pro-
gramming, particularly sports programming. We expect our
programming expenses to continue to be our largest single expense
item and to increase in the future.
We license, from a variety of suppliers under multiyear contracts in
which we generally pay a monthly fee on a per subscriber or
fixed-fee basis, software products (such as e-mail) and content
(such as news feeds) that we integrate into our high-speed Inter-
net portal.
We license, from a variety of suppliers under multiyear contracts,
software products (such as voice mail) that we integrate into our
digital phone service. The fees we pay are based on the con-
sumption of the related services.
Customer and Technical Service
We service our subscribers through local, regional and national call
and technical centers. Generally, our call centers provide 24/7
call-answering capability, telemarketing and other services. Our
technical services group performs various tasks, including installa-
tions, transmission and distribution plant maintenance, plant up-
grades, and activities related to customer service.
Technology
Our cable systems employ a network architecture of hybrid fiber
coax that we believe is sufficiently flexible to support our current
and future requirements. This network allows the two-way delivery
of broadband transmissions, which is essential to providing
advanced video services, such as video on demand and DVR, and
high-speed Internet and digital phone services. In order to con-
tinue to take advantage of growing video offerings, as well as
future cross-platform features that will integrate all of our services,
we will need to be more efficient in our use of bandwidth available
in our network. We believe this can be achieved by delivering our
current video services using less bandwidth. To that end, we are
moving certain of our video programming from the analog tier to
the digital tier, which allows us to deliver the same programming
using less bandwidth, and we are using advanced encoding to
deliver HDTV content in a more bandwidth efficient manner with-
out a loss in picture quality. In certain areas, we have begun the
deployment of a technology called switched digital video, which
enables us to stream a channel to a subscriber’s home only when
they request it. All of these measures will free up bandwidth
capacity that can be made available for other uses.
In support of our bundled services strategy, we are developing fea-
tures that operate across two or more of our services. For example,
we are developing an online application that integrates key features
of our video, high-speed Internet and digital phone services.
Comcast 2007 Annual Report on Form 10-K 4