Time Warner Cable 2006 Annual Report Download - page 109

TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
Time Warner Cable Inc. (together with its subsidiaries, “TWC” or the “Company”) is the second-largest cable
operator in the U.S. and is an industry leader in developing and launching innovative video, data and voice services.
As part of the strategy to expand TWC’s cable footprint and improve the clustering of its cable systems, on July 31,
2006, a subsidiary of TWC, Time Warner NY Cable LLC (“TW NY”), and Comcast Corporation (together with its
subsidiaries, “Comcast”) completed their respective acquisitions of assets comprising in the aggregate substantially
all of the cable systems of Adelphia Communications Corporation (“Adelphia”). Immediately prior to the Adelphia
acquisition, TWC and Time Warner Entertainment Company, L.P. (“TWE”) redeemed Comcast’s interests in TWC
and TWE, respectively. In addition, TW NY exchanged certain cable systems with Comcast. In connection with
these transactions, TWC acquired approximately 3.2 million net basic video subscribers, consisting of approx-
imately 4.0 million acquired subscribers and approximately 0.8 million subscribers transferred to Comcast. The
systems transferred to Comcast that TWC owned prior to the Adelphia acquisition have been reflected as
discontinued operations for all periods presented. Refer to Note 5 for further details.
At December 31, 2006, TWC had approximately 13.4 million basic video subscribers in technologically
advanced, well-clustered systems located mainly in five geographic areas — New York state, the Carolinas, Ohio,
southern California and Texas. This subscriber number includes approximately 788,000 managed subscribers
located in the Kansas City, south and west Texas and New Mexico cable systems (the “Kansas City Pool”) that were
consolidated on January 1, 2007, upon the distribution of the assets of Texas and Kansas City Cable Partners, L.P.
(“TKCCP”), an equity method investee at December 31, 2006, to its partners, TWC and Comcast. Refer to Note 5
for further details. As of December 31, 2006, TWC was the largest cable operator in a number of large cities,
including New York City and Los Angeles.
Time Warner Inc. (“Time Warner”) currently holds an 84.0% economic interest in TWC (representing a 90.6%
voting interest). The financial results of TWC’s operations are consolidated by Time Warner.
TWC principally offers three products — video, high-speed data and voice, which have been primarily
targeted to residential customers. Video is TWC’s largest product in terms of revenues generated. TWC continues to
increase video revenues through the offering of advanced digital video services such as video-on-demand (“VOD”),
subscription-video-on-demand (“SVOD”), high definition television (“HDTV”) and set-top boxes equipped with
digital video recorders (“DVRs”), as well as through price increases and subscriber growth. TWC’s digital video
subscribers provide a broad base of potential customers for additional advanced services.
High-speed data has been one of TWC’s fastest-growing products over the past several years and is a key driver
of its results. At December 31, 2006, TWC had approximately 6.6 million residential high-speed data subscribers
(including approximately 374,000 managed subscribers in the Kansas City Pool). TWC also offers commercial
high-speed data services and had approximately 245,000 commercial high-speed data subscribers (including
approximately 15,000 managed subscribers in the Kansas City Pool) at December 31, 2006.
TWC’s voice service, Digital Phone, is TWC’s newest product, and approximately 1.9 million subscribers
(including approximately 141,000 managed subscribers in the Kansas City Pool) received the service as of
December 31, 2006. For a monthly fixed fee, Digital Phone customers typically receive the following services:
unlimited local, in-state and U.S., Canada and Puerto Rico long-distance calling, as well as call waiting, caller ID
and E911 services. TWC also is currently deploying a lower-priced unlimited in-state-only calling plan to serve
those customers that do not use long-distance services extensively and, in the future, intends to offer additional
plans with a variety of local and long-distance options. Digital Phone enables TWC to offer its customers a
convenient package, or “bundle,” of video, high-speed data and voice services, and to compete effectively against
similar bundled products available from its competitors.
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