Time Warner Cable 2012 Annual Report Download - page 19

Direct broadcast satellite. TWC’s residential video service faces competition from DBS services, primarily 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) and video services that are comparable in many respects to TWC’s
residential 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/or voice services in competition with TWC. For example, in Kansas City, Kansas,
TWC’s residential video and high-speed data services compete with Google’s recently launched video and broadband
services, and Google may decide to launch similar video and broadband services in additional locations where TWC
operates.
Other Competition and Competitive Factors
Aside from competing with the video, high-speed data and voice services offered by incumbent local telephone
companies, DBS providers and cable overbuilders, each of TWC’s residential services also faces competition from other
companies that provide services on a stand-alone basis.
Video competition. TWC’s residential video service faces competition from a number of different sources, including
companies that deliver movies, television shows and other video programming over broadband Internet connections, such as
Hulu.com, Apple Inc.’s “iTunes,” Amazon.com, Inc.’s “Prime,” Netflix Inc.’s “Watch Instantly” and YouTube. Increasingly,
content owners are utilizing Internet-based delivery of content directly to consumers, some without charging a fee for access
to the content. Furthermore, due to consumer electronics innovations, consumers are able to watch such Internet-delivered
content on television sets and mobile devices. TWC also competes with online order services with mail delivery and video
stores.
Internet competition. TWC’s residential high-speed data service faces competition from a variety of companies that
offer other forms of online services, including wireless and satellite-based broadband services.
Voice competition. TWC’s residential voice service competes with wireline, wireless and “over-the-top” phone
providers. An increasing number of homes in the U.S. are replacing their traditional wireline telephone service with wireless
phone service, a trend commonly referred to as “wireless substitution.” Wireless phone providers are encouraging this trend
with aggressive marketing and the launch of wireless products targeted for home use. TWC also competes with “over-the-
top” providers, such as Vonage, Skype, magicJack, Google Voice, and Ooma, Inc. and companies that sell phone cards at a
cost per minute for both national and international service. In addition, TWC’s residential voice service competes with other
forms of communication, such as text messaging on cellular phones, instant messaging, social networking services, video
conferencing and email. The increase in wireless substitution, the number of different technologies capable of carrying voice
services and the number of alternative communication options available to customers has intensified the competitive
environment in which TWC operates its residential voice 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. To the extent that TWC’s services converge with theirs, TWC competes with the manufacturers of consumer
electronics products. For instance, TWC’s DVR service competes with similar devices manufactured by consumer
electronics companies.
Business Services
TWC competes across each of its business data and voice services with incumbent local exchange carriers (“ILECs”),
including AT&T and Verizon, competitive local exchange carriers (“CLECs”) and interexchange carriers (“IXCs”). TWC’s
cell tower backhaul service also faces competition from ILECs and CLECs, as well as other carriers, such as metro and
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