Charter 2002 Annual Report Download - page 113

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002, 2001 and 2000
(dollars in millions, except where indicated)
assurance that any of these business relationships will be successful, that the Company will realize any beneÑts
from these relationships or that the Company will enter into any business relationships in the future with
Mr. Allen's aÇliated companies.
Mr. Allen and his aÇliates have made, and in the future likely will make, numerous investments outside
of the Company and its business. The Company cannot assure that, in the event that the Company or any of
its subsidiaries enter into transactions in the future with any aÇliate of Mr. Allen, such transactions will be on
terms as favorable to the Company as terms it might have obtained from an unrelated third party. Also,
conÖicts could arise with respect to the allocation of corporate opportunities between the Company and
Mr. Allen and his aÇliates. The Company has not instituted any formal plan or arrangement to address
potential conÖicts of interest.
High Speed Access Corp. (High Speed Access) has been a provider of high-speed Internet access
services over cable modems. During the period from 1997 to 2000, certain Charter entities entered into
Internet-access related service agreements, and both Vulcan Ventures, an entity controlled by Mr. Allen, and
certain of Charter's subsidiaries made equity investments in High Speed Access.
On February 28, 2002, Charter's subsidiary and an aÇliate to the Company, CC Systems, purchased
from High Speed Access the contracts and associated assets, and assumed related liabilities, that served the
Company's customers, including a customer contact center, network operations center and provisioning
software. Immediately prior to the asset purchase, Vulcan Ventures beneÑcially owned approximately 37%,
and the Company beneÑcially owned approximately 13%, of the common stock of High Speed Access
(including the shares of common stock which could be acquired upon conversion of the Series D preferred
stock, and upon exercise of the warrants owned by Charter Communications Holding Company). Following
the consummation of the asset purchase, neither the Company nor Vulcan Ventures beneÑcially owned any
securities of, or were otherwise aÇliated with, High Speed Access.
The Company receives or will receive programming for broadcast via its cable systems from TechTV,
USA Networks, Oxygen Media and Action Sports. The Company pays a fee for the programming service
generally based on the number of customers receiving the service. Such fees for the years ended December 31,
2002 and 2001 were each less than 2% of total operating expenses. In addition, the Company receives
commissions from USA Networks for home shopping sales generated by its customers. Such revenues for the
years ended December 31, 2002 and 2001 were less than 1% of total revenues. On November 5, 2002, Action
Sports announced that it was discontinuing its business. The Company believes that the failure of Action
Sports will not materially aÅect the Company's business or results of operations.
As discussed in Note 5, in April 2002, Interlink Communications Partners, LLC, Rifkin Acquisition
Partners, LLC and Charter Communications Entertainment I, LLC, each an indirect, wholly-owned
subsidiary of the Company, completed the cash purchase of certain assets of Enstar Income Program II-2,
L.P., Enstar Income Program IV-3, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar Cable of
Macoupin County and Enstar Income IV/PBD Systems Venture, serving in the aggregate approximately
21,600 (unaudited) customers, for a total cash sale price of approximately $48 million. In September 2002,
Charter Communications Entertainment I, LLC purchased all of Enstar Income Program II-1, L.P.'s Illinois
cable television systems, serving approximately 6,400 (unaudited) customers, for a cash sale price of
$15 million. Enstar Communications Corporation, a direct subsidiary of Charter Holdco, is a general partner
of the Enstar limited partnerships but does not exercise control over them. All of the executive oÇcers of
Charter and Charter Holdco act as oÇcers of Enstar Communications Corporation.
The Company purchases certain equipment for use in the Company's business from ADC Telecommuni-
cations, which provides broadband access and network equipment. Mr. Wangberg, a director for Charter,
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