Time Warner Cable 2006 Annual Report Download - page 42

been launched. First, TWC faces heightened customer expectations for the reliability of voice services as compared
with its video and high-speed data services. TWC has undertaken significant training of customer service
representatives and technicians, and it will continue to need a highly trained workforce. To ensure reliable service,
TWC may need to increase its expenditures, including spending on technology, equipment and personnel. If the
service is not sufficiently reliable or TWC otherwise fails to meet customer expectations, its voice services business
could be adversely affected. Second, the competitive landscape for voice services is intense; TWC faces com-
petition from providers of Internet phone services, as well as incumbent local telephone companies, cellular
telephone service providers and others. See “— Risks Related to Competition — TWC faces a wide range of
competition, which could affect its future results of operations.” Third, TWC’s voice services depend on inter-
connection and related services provided by certain third parties. As a result, TWC’s ability to implement changes
as the service grows may be limited. Finally, TWC expects advances in communications technology, as well as
changes in the marketplace and the regulatory and legislative environment. Consequently, TWC is unable to predict
the effect that ongoing or future developments in these areas might have on its voice services business and
operations.
In addition, TWC’s launch of voice services in the Acquired Systems may pose certain risks. TWC will be
unable to provide its voice services in some of the Acquired Systems without first upgrading the facilities.
Additionally, TWC may need to obtain certain services from third parties prior to deploying voice services in the
Acquired Systems. If TWC encounters difficulties or significant delays in launching voice services in the Acquired
Systems, its business and financial results may be adversely affected.
TWC’s ability to attract new basic video subscribers is dependent in part on growth in new housing in its
service areas.
Providing basic video services is an established and highly penetrated business. Approximately 85% of
U.S. households are now receiving multi-channel video service. As a result, TWC’s ability to achieve incremental
growth in basic video subscribers is dependent in part on growth in new housing in its service areas, which is
influenced by various factors outside of TWC’s control, including both national and local economic conditions. If
growth in new housing falls or if there are population declines in TWC’s operating areas, opportunities to gain new
basic subscribers will decrease, which may have a material adverse effect on TWC’s growth, business and financial
results or financial condition.
TWC relies on network and information systems and other technology, and a disruption or failure of such
networks, systems or technology as a result of computer viruses, misappropriation of data or other malfea-
sance, as well as outages, natural disasters, accidental releases of information or similar events, may disrupt
TWC’s business.
Because network and information systems and other technologies are critical to TWC’s operating activities,
network or information system shutdowns caused by events such as computer hacking, dissemination of computer
viruses, worms and other destructive or disruptive software, denial of service attacks and other malicious activity, as
well as power outages, natural disasters, terrorist attacks and similar events, pose increasing risks. Such an event
could have an adverse impact on TWC and its customers, including degradation of service, service disruption,
excessive call volume to call centers and damage to equipment and data. Such an event also could result in large
expenditures necessary to repair or replace such networks or information systems or to protect them from similar
events in the future. Significant incidents could result in a disruption of TWC’s operations, customer dissatisfaction,
or a loss of customers and revenues.
Furthermore, TWC’s operating activities could be subject to risks caused by misappropriation, misuse,
leakage, falsification and accidental release or loss of information maintained in TWC’s information technology
systems and networks, including customer, personnel and vendor data. TWC could be exposed to significant costs if
such risks were to materialize, and such events could damage its reputation and credibility. TWC also could be
required to expend significant capital and other resources to remedy any such security breach. As a result of the
increasing awareness concerning the importance of safeguarding personal information, the potential misuse of such
information and legislation that has been adopted or is being considered regarding the protection and security of
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