Time Warner Cable 2008 Annual Report Download - page 66

FINANCIAL STATEMENT PRESENTATION
Revenues
The Company’s revenues consist of Subscription and Advertising revenues. Subscription revenues consist of
revenues from video, high-speed data and voice services.
Video revenues include subscriber fees for basic, expanded basic and digital services from both residential and
commercial subscribers. Video revenues from digital services, or digital video revenues, include revenues from
digital tiers, digital pay channels, pay-per-view, video-on-demand, subscription-video-on-demand and digital video
recorder services. Video revenues also include related equipment rental charges, installation charges and franchise
fees collected on behalf of local franchising authorities. Several ancillary items are also included within video
revenues, such as commissions earned on the sale of merchandise by home shopping services and rental income
earned on the leasing of antenna attachments on transmission towers owned by the Company.
High-speed data revenues include subscriber fees from both residential and commercial subscribers, along
with related equipment rental charges, home networking fees and installation charges. High-speed data revenues
also include fees received from certain distributors of TWC’s Road Runner
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high-speed data service (including
cable systems managed by the Advance/Newhouse Partnership). High-speed data revenues also include fees paid to
TWC by the Advance/Newhouse Partnership for managing certain functions for the Advance/Newhouse Partner-
ship, including, among others, programming and engineering. The aggregate of such fees from the Advance/
Newhouse Partnership and other third-party distributors totaled $139 million, $132 million and $112 million in
2008, 2007 and 2006, respectively. High-speed data revenues also include fees received from third-party internet
service providers whose on-line services are provided to some of TWC’s customers. High-speed data revenues in
2008 included $7 million generated by the sale of commercial networking and transport services (i.e., cellular
backhaul). Additionally, in 2006, high-speed data revenues included fees received from Texas and Kansas City
Cable Partners, L.P. (“TKCCP”), which was a 50-50 joint venture between a consolidated subsidiary of TWC (Time
Warner Entertainment-Advance/Newhouse Partnership (“TWE-A/N”)) and Comcast that distributed its assets to
TWC and Comcast on January 1, 2007.
Voice revenues include subscriber fees from residential and commercial Digital Phone subscribers, along with
related installation charges. For the years ended December 31, 2007 and December 31, 2006, voice revenues also
included subscriber fees from circuit-switched telephone (9,000 and 106,000 subscribers as of December 31, 2007
and December 31, 2006, respectively). During the first half of 2008, TWC completed the process of discontinuing
the provision of circuit-switched telephone service in accordance with regulatory requirements. As a result, during
2008, Digital Phone was the only voice service offered by TWC.
Advertising revenues primarily include the fees charged to local, regional and national advertising customers
for advertising placed on the Company’s video and high-speed data services. Nearly all Advertising revenues are
attributable to advertising placed on the Company’s video service.
Costs and Expenses
Costs of revenues include: video programming costs (including fees paid to programming vendors net of
certain amounts received from the vendors); high-speed data connectivity costs; voice network costs; other service-
related expenses, including non-administrative labor costs directly associated with the delivery of services to
subscribers; maintenance of the Company’s delivery systems; franchise fees; and other related costs. The
Company’s programming agreements are generally multi-year agreements that provide for the Company to make
payments to the programming vendors at agreed upon market rates based on the number of subscribers to which the
Company provides the programming service.
Selling, general and administrative expenses include amounts not directly associated with the delivery of
services to subscribers or the maintenance of the Company’s delivery systems, such as administrative labor costs,
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)