Time Warner Cable 2010 Annual Report Download - page 20

network. TWC also has entered into a number of “settlement-free peering” arrangements with third-party networks that
allow TWC to exchange traffic with those networks without a fee.
Voice services. Under multi-year agreements between TWC and Sprint, Sprint assists TWC in providing voice
service by routing voice traffic to and from destinations outside of TWC’s network via the public switched telephone
network, delivering E911, operator and directory assistance services and assisting in order processing, local number
portability and long-distance traffic carriage. In the fourth quarter of 2010, TWC began replacing Sprint as the provider of
these services, a process that is expected to continue through the first quarter of 2014.
Competition
TWC faces intense competition for customers from a variety of alternative communications, information and
entertainment delivery sources. TWC competes with incumbent local telephone companies, including AT&T Inc.
(“AT&T”) and Verizon, across each of its primary services. Some of these telephone companies offer a broad range of
services with features and functions comparable to those provided by TWC and in bundles similar to those offered by
TWC, sometimes including wireless services. Each of TWC’s services also faces competition from other companies that
provide services on a stand-alone basis. TWC’s video service faces competition from direct broadcast satellite (“DBS”)
services, and increasingly from companies that deliver content to consumers over the Internet. TWC’s high-speed data
service faces competition from wireless data providers, and competition in voice service is increasing as more homes in
the United States are replacing their wireline telephone service with wireless service or “over-the-top” phone service.
Additionally, technological advances and product innovations have increased and will likely continue to increase the
number of alternatives available to TWC’s customers and potential customers, further intensifying competition. See “Risk
Factors—Risks Related to Competition.”
Principal Competitors
Incumbent local telephone companies. TWC’s video, high-speed data and Digital Phone services face competition
from the video, digital subscriber line (“DSL”), wireless broadband and wireline and wireless phone offerings of
AT&T and Verizon. In a significant number of TWC’s operating areas, AT&T and Verizon have upgraded their networks
to carry two-way video, high-speed data and IP-based telephony services, each of which is similar to the corresponding
service offered by TWC. Moreover, AT&T and Verizon aggressively market and sell bundles of video, high-speed data
and voice services plus, in some cases, wireless services, and they market cross-platform features with their wireless
services, such as remote DVR control from a wireless handsets. In addition, both AT&T and Verizon have begun offering
services that allow subscribers to view television programming and rent movies on mobile devices. TWC also faces
competition in some areas from the DSL, wireless broadband and phone offerings of smaller incumbent local telephone
companies, such as Frontier Communications Corporation (“Frontier Communications”) and Cincinnati Bell, Inc.
(“Cincinnati Bell”).
Direct broadcast satellite. TWC’s video service faces competition from DBS services, such as DISH Network
Corporation (“Dish Network”) and DirecTV. Dish Network and DirecTV offer satellite-delivered pre-packaged
programming services that can be received by relatively small and inexpensive receiving dishes. These providers
offer aggressive promotional pricing, exclusive programming (e.g., NFL Sunday Ticket
TM
) and video services that are
comparable in many respects to TWC’s digital video service, including its DVR service and some of its interactive
programming features.
In some areas, incumbent local telephone companies and DBS operators have entered into co-marketing
arrangements that allow the telephone companies to offer synthetic bundles (i.e., video service provided principally
by the DBS operator, and DSL, wireline phone service and, in some cases, wireless service provided by the telephone
company). From a consumer standpoint, the synthetic bundles appear similar to TWC’s bundles.
Cable overbuilders. TWC operates its cable systems under non-exclusive franchises granted by state or local
authorities. The existence of more than one cable system, including municipality-owned systems, operating in the same
territory is referred to as an “overbuild.” In some of TWC’s operating areas, other operators have overbuilt TWC’s systems
and offer video, high-speed data and voice services in competition with TWC.
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