Time Warner Cable 2007 Annual Report Download - page 88

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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., with technologically advanced, well-clustered systems located mainly in five geographic
areas—New York state (including New York City), the Carolinas, Ohio, southern California (including Los
Angeles) and Texas. As of December 31, 2007, TWC served approximately 14.6 million customers who subscribed
to one or more of its video, high-speed data and voice services, representing approximately 32.1 million revenue
generating units.
On July 31, 2006, a subsidiary of TWC, Time Warner NY Cable LLC (“TW NY”), and Comcast Corporation
(together with its subsidiaries, “Comcast”) completed the acquisition of substantially all of the cable assets of
Adelphia Communications Corporation (“Adelphia”) and related transactions. In addition, effective January 1,
2007, TWC began consolidating the results of certain cable systems located in Kansas City, south and west Texas
and New Mexico (the “Kansas City Pool”) upon the distribution of the assets of Texas and Kansas City Cable
Partners, L.P. (“TKCCP”) to TWC and Comcast. Prior to January 1, 2007, TWC’s interest in TKCCP was reported
as an equity-method investment. Refer to Note 4 for further details.
Time Warner Inc. (“Time Warner”) currently owns approximately 84.0% of the common stock of TWC
(representing a 90.6% voting interest). The financial results of TWC’s operations are consolidated by Time Warner.
Time Warner also owns a 12.43% non-voting common stock interest in a subsidiary of TWC. On February 6, 2008,
Time Warner announced that it has commenced a review of its ownership interest in the Company. Time Warner has
initiated discussions with the Company regarding a possible change in such ownership.
TWC principally offers three services—video, high-speed data and voice —over its broadband cable systems.
TWC markets its services separately and as “bundled” packages of multiple services and features. Historically,
TWC has focused primarily on residential customers, and in 2007, it began expanding its service offerings to small-
and medium-sized businesses. As of December 31, 2007, 48% of TWC’s customers subscribed to two or more of its
primary services, including 16% of its customers who subscribed to all three primary services. In addition, TWC
earns revenues by selling advertising time to national, regional and local businesses.
Video is TWC’s largest service in terms of revenues generated and, as of December 31, 2007, TWC had
approximately 13.3 million basic video subscribers. Although providing video services is a competitive and highly
penetrated business, TWC continues to increase video revenues through the offering of advanced digital video
services, as well as through price increases and digital video subscriber growth. As of December 31, 2007, TWC had
approximately 8.0 million digital video subscribers, which represented approximately 61% of its basic video
subscribers. TWC’s digital video subscribers provide a broad base of potential customers for additional advanced
services.
As of December 31, 2007, TWC had approximately 7.6 million residential high-speed data subscribers. TWC
also offers commercial high-speed data services and had 280,000 commercial high-speed data subscribers as of
December 31, 2007.
Approximately 2.9 million subscribers received Digital Phone service, TWC’s voice service, as of
December 31, 2007. In 2007, TWC also began the roll out of Business Class Phone, a commercial Digital
Phone service, to small- and medium-sized businesses.
Basis of Presentation
Changes in Basis of Presentation
Consolidation of Kansas City Pool. As discussed more fully in Note 4, on January 1, 2007, the Company
began consolidating the results of the Kansas City Pool it received upon the distribution of the assets of TKCCP to
TWC and Comcast. Prior to January 1, 2007, the Company accounted for TKCCP as an equity-method investment.
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