Time Warner Cable 2006 Annual Report Download - page 15

TWC has agreements with Verizon Communications, Inc. (“Verizon”) and Sprint Nextel Corporation
(“Sprint”) under which these companies assist TWC in providing Digital Phone service by routing voice traffic
to the public switched telephone network, delivering enhanced 911 service and assisting in local number portability
and long distance traffic carriage. In July 2006, TWC agreed to expand its multi-year relationship with Sprint as its
primary provider of these services, including in the Acquired Systems. See Item 1A, “Risk Factors — Risks Related
to Dependence on Third Parties — TWC may not be able to obtain necessary hardware, software and operational
support.”
Circuit-switched Telephone. In the Exchange, TWC acquired customers in the Comcast Acquired Systems
who receive traditional, circuit-switched local and long distance telephone services. TWC continues to provide
traditional, circuit-switched services to those subscribers and will continue to do so for some period of time, while it
will simultaneously market its Digital Phone product to those customers. After some period of time, TWC intends to
discontinue the circuit-switched offering in accordance with regulatory requirements, at which time the only voice
services provided by TWC in those systems will be its Digital Phone service.
Service Bundles
In addition to selling its services separately, TWC is focused on marketing differentiated packages of multiple
services and features, or “bundles,” for a single price. Increasingly, many of TWC’s customers subscribe to two or
three of its services. The bundle represents a discount from the price of buying the services separately and the
convenience of a single monthly bill. TWC believes that these “Double Play” and “Triple Play” offerings increase
its customers’ satisfaction with TWC, increase customer retention and encourage subscription to additional
features. In the Legacy Systems as of December 31, 2006, 46.1% of TWC’s customers, received at least two
services. The table below sets forth the number of TWC’s “Double Play” and “Triple Play” customers as of the dates
indicated.
2004 2005 2006
(1)
As of December 31,
(in thousands)
Double Play ............................................... 2,850 3,099 4,647
Triple Play ................................................ 145 760 1,523
(1)
Double Play and Triple Play subscribers include approximately 68,000 and 24,000 subscribers, respectively, acquired from Comcast in
the Exchange who receive traditional, circuit-switched telephone service.
Cross-platform Features
In support of TWC’s bundled services strategy, TWC is developing features that operate across two or more of
its services. For example, TWC has begun to offer customers who subscribe to both Time Warner Digital Cable and
Digital Phone, at no charge, a Caller ID on TV feature that displays incoming call information on the customer’s
television set. In July 2006, TWC introduced a new feature called “PhotoShowTV” in its Oceanic division in Hawaii
that gives customers who subscribe to both Time Warner Digital Cable and Road Runner high-speed online service
the ability to create and share their personal photo shows with TWC’s other Time Warner Cable digital video
customers using TWC’s VOD technology.
New Opportunities
Commercial Voice
TWC believes that continued innovation on its advanced cable infrastructure may create additional business
opportunities in the future. One such opportunity is the offering of IP-based telephony service to commercial
customers as an adjunct to TWC’s existing commercial data business. TWC intends to introduce a commercial
voice service to small- to medium-sized businesses in most of the Legacy Systems during 2007.
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