Time Warner Cable 2007 Annual Report Download - page 11

amount of capacity available to TWC and pays for Internet connectivity based on the amount of data traffic received
from and sent over the provider’s backbone network. TWC also has entered into a number of “settlement-free
peering” arrangements with affiliated and third-party networks that allow TWC to exchange traffic with those
networks without a fee.
In addition to Road Runner, most of TWC’s cable systems provide their high-speed data subscribers with
access to the services of certain other on-line providers, including Earthlink.
Voice Services
Digital Phone. TWC has offered its Digital Phone service broadly since 2004. Under TWC’s primary calling
plan, its customers receive unlimited local, in-state and U.S., Canada and Puerto Rico calling and a number of
calling features, including call waiting, caller ID and Enhanced 911 (“E911”) services, for a fixed monthly fee.
TWC also offers additional calling plans with a variety of calling options that are designed to meet customers’
particular usage patterns, including a local-only calling plan, an unlimited in-state calling plan and an international
calling plan.
The following table presents selected statistical data regarding TWC’s Digital Phone subscribers:
2007 2006 2005
December 31,
(in thousands, except percentages)
Homes passed
(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,611 16,623 14,308
Digital Phone subscribers
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,895 1,860 998
Digital Phone penetration
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8% 11.2% 7.0%
(1)
Homes passed represent the estimated number of Digital Phone service-ready single residence homes, apartment and condominium units
and commercial establishments passed by TWC’s cable systems without further extending the transmission lines.
(2)
Digital Phone subscriber numbers reflect billable subscribers who receive an internet protocol (“IP”)-based telephony service.
(3)
Digital Phone penetration represents Digital Phone subscribers as a percentage of Digital Phone service-ready homes passed.
As of December 31, 2007, TWC had 2.9 million Digital Phone customers, and penetration of voice services to
serviceable homes was approximately 12%. Since no comparable IP-based telephony service was available in the
systems acquired in and retained after the Transactions (the “Acquired Systems”) at the time of acquisition, the
continued introduction of Digital Phone in the Acquired Systems, separately and as part of a bundle, was a high
priority during 2007. The Company started selling Digital Phone in the Acquired Systems during 2007 and, as of
December 31, 2007, the launch of Digital Phone to residential customers in the Acquired Systems was substantially
complete.
TWC delivers Digital Phone service over the same system facilities that it uses to provide video and high-speed
data services. Under a multi-year agreement between TWC and Sprint Nextel Corporation (“Sprint”), Sprint assists
TWC in providing Digital Phone service by routing voice traffic to and from destinations outside of TWC’s network
via the public switched telephone network, delivering E911 service and assisting in local number portability and
long-distance traffic carriage. Unlike Internet phone providers, such as Vonage Holdings Corp. (“Vonage”), TWC
does not utilize the public Internet to transport telephone calls. See “Risk Factors—Risks Related to Dependence on
Third Parties—TWC may not be able to obtain necessary hardware, software and operational support.”
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, TWC’s customers subscribe to two or three of its
primary services. TWC customers who subscribe to a bundle receive a discount from the price of buying the
services separately as well as the convenience of a single monthly bill. TWC also is developing services that are
available only to customers who subscribe to a bundle. See “—Cross-platform Features” below. TWC believes that
bundled offerings increase its customers’ satisfaction with TWC, increase customer retention and encourage
subscription to additional features. The table below sets forth the number of TWC’s double play and triple play
subscribers as of the dates indicated.
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