Time Warner Cable 2012 Annual Report Download - page 18

Mobility Holdings, Inc. (“Motorola Mobility”) in May 2012 and has entered into an agreement to sell Motorola Mobility’s
Home unit to ARRIS Group, Inc. (“ARRIS Group”)), and Samsung Electronics Co., Ltd. TWC rents these devices to
subscribers at monthly rates. See “—Regulatory Matters” below. TWC purchases routers, switches and other network
equipment from a variety of providers, the most significant of which are Cisco Systems and ARRIS Group. See “Risk
Factors—Risks Related to Dependence on Third Parties—TWC may not be able to obtain necessary hardware, software and
operational support.” In addition to the Open Cable Digital Navigator (“ODN”) and Mystro Digital Navigator (“MDN”)
program guides developed by the Company, TWC provides certain of its subscribers with set-top box program guides from
Rovi Corporation.
High-speed data and voice connectivity. TWC delivers its high-speed data and voice services through its HFC network.
TWC uses circuits that are either owned by TWC or leased from third parties to connect to the Internet, the public switched
telephone network and to interconnect to its network. TWC pays fees for leased circuits based on the amount of capacity
available to it and pays for Internet connectivity based on the amount of IP-based traffic received from and sent over the
other carrier’s 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 Nextel Corporation (“Sprint”), Sprint assists TWC in
providing voice service by routing some of the Company’s 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 terminating these
arrangements with Sprint and obtaining the required services from alternative providers at significantly lower costs. As of
December 31, 2012, TWC had replaced Sprint with respect to nearly half of TWC’s voice lines. The Company expects to replace
the majority of the remaining voice lines in the second half of 2013, with the process completed during the first quarter of 2014.
Competition
Residential Services
TWC faces intense competition for residential services customers from a variety of alternative communications,
information and entertainment delivery sources. TWC competes with incumbent local telephone companies and other
overbuilders across each of its primary residential services. Some of these competitors 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 service.
Each of TWC’s residential services also faces competition from other companies that provide services on a stand-alone
basis. TWC’s residential video service faces competition from direct broadcast satellite (“DBS”) services, including
DIRECTV and DISH Network Corporation (“DISH Network”), and increasingly from companies that deliver content to
consumers over the Internet and on mobile devices. TWC’s residential high-speed data and voice services face competition
from wireless Internet and voice providers. TWC’s residential voice service also faces competition from “over-the-top”
phone services and other alternatives, including texting, social networking, video conferencing and email. Additionally,
technological advances and product innovations have increased and will likely continue to increase the number of
alternatives available to TWC’s current and potential residential customers, further intensifying competition. See “Risk
Factors—Risks Related to Competition.”
Principal Competitors
Incumbent local telephone companies. TWC’s residential video, high-speed data and voice services face competition
from the video, digital subscriber line (“DSL”), wireless broadband and wireline and wireless phone offerings of AT&T and
Verizon. TWC estimates that AT&T and Verizon have upgraded their networks in approximately 26% and 12%,
respectively, of TWC’s operating areas to carry two-way video, high-speed data and IP-based telephony services, each of
which is similar to the corresponding residential 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. 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, CenturyLink, Inc., Cincinnati Bell, Inc. and Windstream Corp.
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