Time Warner Cable 2010 Annual Report Download - page 70

TWC’s capital expenditures included the following major categories (in millions):
2010 2009 2008
Year Ended December 31,
Customer premise equipment
(a)
.................................... $ 1,136 $ 1,251 $ 1,628
Scalable infrastructure
(b)
......................................... 713 787 600
Line extensions
(c)
.............................................. 351 335 350
Upgrades/rebuilds
(d)
............................................. 150 174 315
Support capital
(e)
............................................... 580 684 629
Total capital expenditures ........................................ $ 2,930 $ 3,231 $ 3,522
(a)
Amounts represent costs incurred in the purchase and installation of equipment that resides at a customer’s home or business for the purpose of
receiving/sending video, high-speed data and/or voice signals. Such equipment includes digital (including high-definition) set-top boxes, remote
controls, high-speed data modems (including wireless), telephone modems and the costs of installing such new equipment. Customer premise
equipment also includes materials and labor costs incurred to install the “drop” cable that connects a customer’s dwelling or business to the closest
point of the main distribution network.
(b)
Amounts represent costs incurred in the purchase and installation of equipment that controls signal reception, processing and transmission
throughout TWC’s distribution network, as well as controls and communicates with the equipment residing at a customer’s home or business.
Also included in scalable infrastructure is certain equipment necessary for content aggregation and distribution (video-on-demand equipment)
and equipment necessary to provide certain video, high-speed data and Digital Phone service features (voicemail, e-mail, etc.).
(c)
Amounts represent costs incurred to extend TWC’s distribution network into a geographic area previously not served. These costs typically
include network design, the purchase and installation of fiber optic and coaxial cable and certain electronic equipment.
(d)
Amounts primarily represent costs incurred to upgrade or replace certain existing components or an entire geographic area of TWC’s distribution
network. These costs typically include network design, the purchase and installation of fiber optic and coaxial cable and certain electronic
equipment.
(e)
Amounts represent all other capital purchases required to run day-to-day operations. These costs typically include vehicles, land and buildings,
computer hardware/software, office equipment, furniture and fixtures, tools and test equipment. Amounts include capitalized software costs of
$203 million, $202 million and $201 million in 2010, 2009 and 2008, respectively.
TWC incurs expenditures associated with the construction of its cable systems. Costs associated with the
construction of transmission and distribution facilities are capitalized. TWC generally capitalizes expenditures for
tangible fixed assets having a useful life of greater than one year. Capitalized costs include direct material, labor and
overhead, as well as interest. Sales and marketing costs, as well as the costs of repairing or maintaining existing fixed
assets, are expensed as incurred. With respect to customer premise equipment, which includes set-top boxes and high-
speed data and telephone modems, TWC capitalizes installation costs only upon the initial deployment of these assets. All
costs incurred in subsequent disconnects and reconnects of previously installed customer premise equipment are
expensed as incurred. Depreciation on these assets is provided using the straight-line method over their estimated
useful lives. For set-top boxes and modems, the useful life is 3 to 5 years, and, for distribution plant, the useful life is up to
16 years.
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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)