TiVo 2007 Annual Report Download - page 29

Table of Contents
The Federal Communications Commission, or FCC, has broad jurisdiction over the telecommunications and cable industries. The FCC could
promulgate new regulations, or interpret existing regulations in a manner that would cause us to incur significant compliance costs or force us to alter or
eliminate certain features or functionality of the TiVo products or services which may adversely affect our business. For example, the FCC could determine
that certain of our products fail to comply with regulations concerning matters such as electrical interference, copy protection, digital tuners, or display of
television programming based on rating systems. The FCC could also impose limits on the number of copies, the ability to transfer or move copies, the length
of time a consumer may retain copies, or the ability to access some or all types of television programming.
If there is increased use of switched digital video technologies to transmit television programs by cable operators (also known as switched
digital) in the future, the desirability and competitiveness of our current products could be reduced in which case our business would be harmed.
We rely on conditional access security cards supplied by cable operators called CableCARDs for certain types of our DVRs to receive encrypted digital
television signals without a cable operator supplied set-top box. These DVRs presently are limited to using CableCARDs to access digital cable, High
Definition, and premium cable channels like HBO that are delivered in a linear fashion where all programs are broadcast to all subscribers all the time. Certain
cable operators are beginning to test and deploy switched digital video technologies to transmit television programs in a non-linear fashion (switched digital)
only to subscribers who request to watch a particular program. Although cable operators expect to deploy a solution to enable our customers to receive
channels delivered with switched technologies in the future, if this technology is not successful or deployed in a timely manner to our customers, then the
increased use of switched technologies and the continued inability of our products to receive switched cable programming may reduce the desirability and
competitiveness of our products and services and adversely affect sales of our TiVo-Owned subscriptions in which case our business would be harmed.
Our business could be adversely impacted in the event of a natural disaster.
Our corporate headquarters is located in Alviso, California which is where the overwhelming majority of our employees work. Our primary servers are
located nearby in San Jose, California. Alviso and San Jose lay near the San Andreas Fault, a major source of earthquake activity in California. In the event of
an earthquake or similar natural disaster, our ability to continue operations could be adversely affected and our business could be harmed.
Legislation, laws or regulations relating to environmental issues, employment matters, and unclaimed property may adversely impact our
business in the future.
It is possible that future proposed environmental regulations on consumer electronic devices, such as DVRs and set-top boxes, may regulate and
increase the production, manufacture, use, and disposal costs incurred by us and our customers. For example future energy regulations could potentially make
it more costly for us to design, manufacture, and sell our DVRs to our customers thus harming the growth of our business.
Additionally, as our business grows and we expand our employed and contracted work force, employment laws and regulations will have an increasing
impact on our ability to manage and grow our work-force. Regulations and laws relating to the status of contractors, classification and related benefits for
exempt and non-exempt employees all may adversely impact our business if we are unable to properly manage and comply with federal, state, and local laws.
Furthermore, as part of our regular business activities now, and in the past, we engage in the issuance of gift subscriptions and the marketing of rebate
offers related to the sale of our products and services. It is possible that money received by us for the sale of gift subscriptions or related to our past rebates
offers could be subject to state and federal escheat, or unclaimed property, laws in the future. If this were the case, our business could be adversely impacted.
If we fail to comply with the laws and regulations relating to the collection of sales tax and payment of income taxes in the various States in
which we do business, we could be exposed to unexpected costs, expenses, penalties, and fees as a result of our noncompliance in which case our
business could be harmed.
As our business grows and expands, we have started to do business in an increasing number of States nationally. By engaging in business activities in
these States, we become subject to their various laws and regulations, including requirements to collect sales tax from our sales within those States and the
payment of income taxes on revenue generated from activities in those States. The laws and regulations governing the collection of sales tax and payment of
income taxes are numerous, complex, and vary between States. If we fail to comply with these laws and regulations requiring the collection of sales tax and
payment of income taxes in one or more States where we do business, we could be subject to significant costs, expenses, penalties, and fees in which case our
business could be harmed.
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