Rogers 2005 Annual Report Download - page 44

40 ROGERS 2005 ANNUAL REPORT . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AD D I TI O NS TO C AB L E P P& E
The nature of the cable television business is such that the construction, rebuild and expansion of a cable system is
highly capital-intensive. Cable categorizes its additions to PP&E according to a standardized set of reporting categories
that were developed and agreed upon by the U.S. cable television industry and which facilitate comparisons of additions
to PP&E between different cable companies. Under these industry definitions, core cable additions to PP&E are classified
into the following five categories:
• Customer premises equipment (“CPE”), which includes the equipment for digital set-top terminals and Internet and
cable telephony modems and the associated installation costs;
• Scaleable infrastructure, which includes non-CPE costs to meet business growth and to provide service enhancements,
including many of the costs to date of Cable’s voice-over-cable telephony initiative;
• Line extensions, which includes network costs to enter new service areas;
• Upgrade and rebuild, which includes the costs to modify or replace existing co-axial cable and fibre optic network
electronics; and
• Support capital, which includes the costs associated with the purchase, replacement or enhancement of non-network
assets.
(In millions of dollars)
Years ended December 31, 2 0 0 5 2 0 0 4 % Chg
Customer premises equipment $ 268.4 $ 204.0 31.6
Scaleable infrastructure 202.3 188.0 7.6
Line extensions 75.4 53.7 40.3
Upgrade and rebuild 2.8 40.8 (93.1)
Support capital 112.7 87.1 29.4
Additions to Core Cable PP&E 661.6 573.6 15.3
Additions to Rogers Video stores PP&E 14.6 14.3 2.3
Additions to Rogers Cable PP&E $ 676.2 $ 587.9 15.0
The 15% year-over-year increase in additions to PP&E was attributable to an increase in spending across most categories
of PP&E. Spending on customer premises equipment increased by $64.4 million or 31.6% due to 344,000 net additions
in Cable’s digital terminals in 2005, and an increase of higher priced PVR and HDTV terminals. With the launch of the
voice-over-cable telephony service, Cable has also added cable telephony modems to its asset base. Spending on scale-
able infrastructure increased $14.3 million or 7.6% due to investments made in Cable’s IP, transport and digital networks
while spending on line extensions increased $21.7 million due to the incremental investment made in the commercial
Internet base. The $25.6 million or 29.4% increase in support capital spending includes additional investments to Cable’s
IT infrastructure. Spending on upgrade and rebuild decreased by $38.0 million in 2005 due to completion of the major
activities related to Cable’s 860 MHz rebuild in 2004.
Total PP&E spending on the cable telephony initiative totalled $113.5 million in 2005, with the cumulative spending on
cable telephony since 2004 being $219.5 million.
T E L E C O M
Telecom’s Business
Telecom is a national, full-service, facilities-based telecommunications alternative to the traditional telephone compa-
nies, known as incumbent local exchange carriers (“ILECs”). Telecom offers local telephone, long distance and Internet
access services to residential customers targeting Canada’s largest metropolitan areas. Telecom also offers local and long
distance telephone, enhanced voice and data services, and Internet Protocol (“IP”) access and application solutions to
Canadian businesses and governments of all sizes, as well as making most of these offerings available on a wholesale
basis to other telecommunications providers.