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ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
represented migrations from the circuit-switched to cable tele-
phony platform. Long-distance revenues were flat year-over-year.
Cable Operations Operating Expenses
Cable Operations sales and marketing expenses increased by
$38 million in 2007, compared to 2006, reflecting the significant
growth in cable telephony service in addition to certain targeted
promotional activities.
The increases in operating, general and administrative costs during
2007 of $112 million, compared to 2006, were primarily driven by
increases in digital cable, Internet and Rogers Home Phone sub-
scriber bases, resulting in higher costs associated with programming
content, customer care, technical service and network operations.
This increase was partially offset by the elimination of CRTC Part II
fees. For further details, see the section entitled “Government
Regulation and Regulatory Developments”.
In January 2004, Cable entered into a multi-year agreement with
Yahoo!toofferCable’shigh-speedInternetaccesssubscribersa
co-brandedbroadbandexperience,whichincluded:Yahoo!’semail
functionality; hosting and storage; security, pop-up blocking and
parental control tools; digital photo tools; online music and game
services; and an array of content in a personalized user environ-
ment. Under this agreement, Cable paid portal fees to Yahoo!
for these services on a per subscriber basis. On October 31, 2007,
CableandYahoo!enteredintoarenegotiatedagreementeffective
January1,2008,underwhichCableandYahoo!willshareadvertis-
ing revenue opportunities leveraging the high-speed Internet access
subscribers,andCablewillnolongerpayportalfeestoYahoo!.
This renegotiated agreement will now expire on December 31,
2011. In connection with the renegotiation of this agreement,
Cablemadeaone-timepaymenttoYahoo!inthefourthquarter
of 2007 of $52 million and Cable’s cost of providing its high-speed
Internet service will be reduced by approximately $25 million per
year over the term of the renegotiated agreement. Rogers’ brand-
ing of its Internet service is being transitioned to “Rogers Hi-Speed
Internet”, while the online portal will continue to be branded as
“RogersYahoo!”.
Core Cable Revenue
The increase in Core Cable revenue in 2007 reflects the impact of
price increases, growth in basic subscribers and the growing pen-
etration of our digital cable products. The price increases on service
offerings that became effective in March 2006 and 2007, contrib-
uted approximately $54 million to Core Cable revenue growth
during 2007. The remaining increase in revenue of approximately
$65 million is primarily related to the growth in digital subscribers.
The digital cable subscriber base
grew by 19% in 2007. Digital pen-
etration now represents 59% of
basic cable households. Strong
demand for HD and PVR digital
set-top box equipment combined
with the success of Cable’s
“Personal TV” and awareness
of the “triple play” marketing
campaign, which offers cable
television, high-speed Internet
and Rogers Home Phone services
in discrete packages, contributed
to the growth in the digital sub-
scriber base of 219,000 in 2007. In
addition, basic cable subscribers
increased by 18,000 in 2007.
Internet (Residential) Revenue
The increase in Internet revenues in 2007 reflects the 13% year-
over-year increase in the number of Internet subscribers in addition
to price increases to our Internet offerings. These price increases,
effective in March 2006 and 2007, contributed to the Internet rev-
enue growth by approximately $16 million in 2007. The remaining
increase in revenue of approxi-
mately $69 million in 2007 was
largely the result of the impact
of the growth in subscribers.
The average monthly revenue
per Internet subscriber increased
year-over-year. This was the result
of the price increases partially
offset by a shift in subscriber mix
to a higher number of subscrib-
ers on lower priced service tiers.
With the high-speed Internet
subscriber base now at approx-
imately 1.5 million, Internet
penetration is 64% of basic cable
households, and 41% of homes
passed by our network.
Rogers Home Phone Revenue
The growth in Rogers Home Phone revenue in 2007 is the result
of the addition of 290,000 Rogers Home Phone voice-over-cable
telephony service lines in 2007. Partially offsetting the increase in
voice-over-cable telephony lines is a decline in the number of circuit-
switched local lines of 37,000 in 2007. Of this amount, 42,000
20072006
1,3531,134913
DIGITAL CABLE
HOUSEHOLDS
(In thousands)
2006
2007
2005
20072006
1,4651,2971,136
CABLE INTERNET
SUBSCRIBERS
(In thousands)
2006
2007
2005
200720062005
65636648
334350391
Cable Telephony Subscribers
Switched Telephon
y
Subscribers
HOME PHONE
SUBSCRIBERS
(In thousands)
20072006
6,1035,4244,752
CABLE RGUs
(In thousands)
2006
2007
2005