Time Warner Cable 2008 Annual Report Download - page 102

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, 2008, TWC served approximately 14.6 million customers who subscribed
to one or more of its video, high-speed data and voice services, representing approximately 34.2 million revenue
generating units.
Time Warner Inc. (“Time Warner”) currently owns approximately 84% of the common stock of TWC
(representing a 90.6% voting interest), and also currently owns an indirect 12.43% non-voting common stock
interest in TW NY Cable Holding Inc. (“TW NY”), a subsidiary of TWC. The financial results of TWC’s operations
are consolidated by Time Warner. On May 20, 2008, TWC and its subsidiaries, Time Warner Entertainment
Company, L.P. (“TWE”) and TW NY, entered into a Separation Agreement (the “Separation Agreement”) with
Time Warner and its subsidiaries, Warner Communications Inc. (“WCI”), Historic TW Inc. (“Historic TW”) and
American Television and Communications Corporation (“ATC”), the terms of which will govern TWC’s legal and
structural separation from Time Warner. Refer to Note 4 for further details.
TWC principally offers three services – video, high-speed data and voice – over its broadband cable systems.
TWC markets its services separately and in “bundled” packages of multiple services and features. As of
December 31, 2008, 54% of TWC’s customers subscribed to two or more of its primary services, including
21% of its customers who subscribed to all three primary services. Historically, TWC has focused primarily on
residential customers, while also selling video, high-speed data and networking and transport services to com-
mercial customers. As part of an increased emphasis on its commercial business, TWC also began selling its
commercial Digital Phone service, Business Class Phone, to small- and medium-sized businesses during 2007.
During 2008, TWC generated nearly $800 million of revenues from its commercial services. In addition, TWC sells
advertising to a variety of national, regional and local customers.
Video is TWC’s largest service in terms of revenues generated and, as of December 31, 2008, TWC had
approximately 13.1 million basic video subscribers, of which approximately 8.6 million subscribed to TWC’s
digital video service. 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. TWC’s digital video subscribers provide a broad base of
potential customers for additional services.
As of December 31, 2008, TWC had approximately 8.4 million residential high-speed data subscribers. TWC
also offers commercial high-speed data services and had 283,000 commercial high-speed data subscribers as of
December 31, 2008.
As of December 31, 2008, TWC had approximately 3.7 million residential Digital Phone subscribers. TWC
rolled out Business Class Phone to small- and medium-sized businesses during 2007 in the majority of its operating
areas and substantially completed the roll-out in the remainder of its operating areas during 2008. As of
December 31, 2008, TWC had 30,000 commercial Digital Phone subscribers.
Basis of Presentation
Changes in Basis of Presentation
Consolidation of Kansas City Pool. As discussed more fully in Note 10, 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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