Time Warner Cable 2012 Annual Report Download - page 62

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TIME WARNER CABLE INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION—(Continued)
Business services revenue. The major components of business services revenue were as follows (in millions):
Year Ended December 31,
2011 2010 % Change
Business services:
Video .......................................................$ 286 $ 266 7.5%
High-speed data ............................................... 727 614 18.4%
Voice ....................................................... 197 127 55.1%
Wholesale transport ............................................ 154 91 69.2%
Other(a) ...................................................... 105 9 NM
Total business services ...........................................$ 1,469 $ 1,107 32.7%
NM—Not meaningful.
(a) 2011 amounts primarily consist of revenue from NaviSite.
Business services revenue increased primarily due to growth in high-speed data and voice subscribers, a $56 million
increase in cell tower backhaul revenue and the acquisition of NaviSite in the second quarter of 2011. NaviSite’s revenue
from the date of acquisition (April 21, 2011) through December 31, 2011 was $94 million.
Advertising revenue. Advertising revenue was flat as $47 million of growth in lower margin revenue from ad rep
agreements and an $11 million increase in revenue primarily from regional and local businesses offset a $59 million decline
in political advertising revenue.
Cost of revenue. The major components of cost of revenue were as follows (in millions, except per subscriber data):
Year Ended December 31,
2011 2010 % Change
Video programming ...............................................$ 4,342 $ 4,213 3.1%
Employee(a) ...................................................... 2,621 2,532 3.5%
High-speed data .................................................. 170 152 11.8%
Voice .......................................................... 595 669 (11.1%)
Video franchise and other fees(b) ..................................... 500 493 1.4%
Other direct operating costs(a) ....................................... 910 814 11.8%
Total ...........................................................$ 9,138 $ 8,873 3.0%
Cost of revenue as a percentage of revenue ............................. 46.4% 47.0%
Average monthly video programming costs per video subscriber ............$ 29.59 $ 27.70 6.8%
Average monthly voice costs per voice subscriber .......................$ 10.76 $ 12.75 (15.6%)
(a) Employee and other direct operating costs include costs directly associated with the delivery of the Company’s video, high-speed data, voice and other
services to subscribers and the maintenance of the Company’s delivery systems.
(b) Video franchise and other fees include fees collected on behalf of franchising authorities and the FCC.
Cost of revenue increased primarily related to growth in video programming, employee and other direct operating costs,
partially offset by a decrease in voice costs.
The increase in video programming costs was primarily due to contractual rate increases and increased costs associated
with retransmission of certain local broadcast stations, partially offset by a decline in video subscribers. From time to time,
video programming costs are impacted by changes in cost estimates for programming services carried during contract
negotiations, changes in programming audit reserves and certain contract settlements. Such items reduced video
programming costs in both 2011 and 2010 by approximately $25 million.
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