Time Warner Cable 2008 Annual Report Download - page 25

Other Competition and Competitive Factors
Aside from competing with the video, high-speed data and voice services offered by DBS providers, local
incumbent telephone companies and cable overbuilders, each of TWC’s services also faces competition from other
companies that provide services on a stand-alone basis.
Video competition. TWC’s video services face competition from a number of different sources, including
companies that deliver movies, television shows and other video programming over broadband Internet connec-
tions, such as Hulu.com, as well as online order services with mail delivery, and video stores and home video
services. Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers, often
without charging a fee for access to the content. Furthermore, due to consumer electronics innovations, consumers
will over time be more readily able to watch such Internet-delivered content on television sets.
“Online” competition. TWC’s high-speed data services face or may face competition from a variety of
companies that offer other forms of online services, including low cost dial-up services over ordinary telephone
lines and third-generation wireless broadband services, such as those offered by Verizon, AT&T, Sprint and
T-Mobile USA, Inc. (“T-Mobile”), and developing technologies, such as fourth-generation wireless services,
Internet service via power lines, satellite and various other wireless services (e.g., Wi-Fi).
Digital Phone competition. TWC’s Digital Phone service competes with traditional and wireless phone
providers. An increasing number of homes in the U.S. are replacing their traditional telephone service with wireless
phone service, a trend commonly referred to as “wireless substitution.” This trend may be sensitive to economic
conditions and consumer spending trends. TWC also competes with national providers of IP-based telephony
products, such as Vonage, Skype and magicJack, and companies that sell phone cards at a cost per minute for both
national and international service. The increase in the number of different technologies capable of carrying voice
services has intensified the competitive environment in which TWC operates its Digital Phone service.
Additional competition. In addition to multi-channel video providers, cable systems compete with all other
sources of news, information and entertainment, including over-the-air television broadcast reception, live events,
movie theaters and the Internet. In general, TWC also faces competition from other media for advertising dollars. To
the extent that TWC’s services converge with theirs, TWC competes with the manufacturers of consumer
electronics products. For instance, TWC’s DVRs compete with similar devices manufactured by consumer
electronics companies.
Commercial competition. TWC’s commercial video, high-speed data, voice and networking and transport
services face competition from local incumbent telephone companies, especially AT&T and Verizon, as well as
from a variety of other national and regional business services competitors. These companies include facilities-
based business service providers, such as Level 3 Communications, Inc. and tw telecom inc., which provide fiber
optic services to enterprise and small- to medium-sized business customers, smaller regional competitive local
exchange carriers (“CLECs”) that offer voice and high-speed data services using local access lines leased from local
incumbent telephone operators, and national providers of IP-telephony products such as Vonage, which provide
voice and/or high-speed data services on a residential broadband connection.
Franchise process. Under the Cable Television Consumer Protection and Competition Act of 1992, fran-
chising authorities are prohibited from unreasonably refusing to award additional franchises. In December 2006, the
FCC adopted an order intended to make it easier for competitors to obtain franchises, by defining when the actions
of county- and municipal-level franchising authorities will be deemed to be unreasonable as part of the franchising
process. Furthermore, legislation supported by regional telephone companies has been enacted in a number of states
to allow these companies to enter the video distribution business without obtaining local franchise approval.
Legislation of this kind has been enacted in California, Kansas, New Jersey, North Carolina, Ohio, South Carolina,
Texas and Wisconsin, which include some of the Company’s largest operating areas. See “—Regulatory
Matters—Video Services—Franchising” and “Risk Factors—Risks Related to Government Regulation.”
15