Charter 2006 Annual Report Download - page 22

CHARTER COMMUNICATIONS, INC. 2006 FORM 10-K
up to 40 channels. We also provide cross-channel advertising to (dedicated bandwidth for two-way services, which avoids
some programmers. reverse signal interference problems that can occur with
From time to time, certain of our vendors, including two-way communication capability; and
programmers and equipment vendors, have purchased advertis- (clean signal quality and high service reliability.
ing from us. For the years ending December 31, 2006, 2005 and
The following table sets forth the technological capacity of
2004, we had advertising revenues from programmers of
our systems as of December 31, 2006 based on a percentage of
approximately $17 million, $15 million, and $16 million,
homes passed:
respectively. These revenues resulted from purchases at market
rates pursuant to binding agreements.
Less than Two-way
550 megahertz 550 megahertz 750 megahertz 860/870 megahertz activated
PRICING OF OUR PRODUCTS AND SERVICES
7% 5% 41% 47% 93%
Our revenues are derived principally from the monthly fees
customers pay for the services we offer. We typically charge a Approximately 93% of our homes passed are served by
one-time installation fee which is sometimes waived or dis- systems that have bandwidth of 550 megahertz or greater. This
counted during certain promotional periods. The prices we bandwidth capacity enables us to offer digital television, high-
charge for our products and services vary based on the level of speed Internet services, telephone service and other advanced
service the customer chooses and the geographic market. Most services.
of our pricing is reviewed throughout the year and adjusted on We have reduced the number of headends that serve our
an annual basis. customers from 1,138 at January 1, 2001 to 553 at December 31,
In accordance with the Federal Communications Commis- 2006. Because headends are the control centers of a cable
sion’s (‘‘FCC’’) rules, the prices we charge for video cable-related system, where incoming signals are amplified, converted,
equipment, such as set-top boxes and remote control devices, processed and combined for transmission to the customer,
and for installation services, are based on actual costs plus a reducing the number of headends reduces related equipment,
permitted rate of return in regulated markets. service personnel, and maintenance expenditures. As of Decem-
Although our broadband service offerings vary across the ber 31, 2006, approximately 88% of our customers were served
markets we serve because of various factors including competi- by headends serving at least 10,000 customers. After completion
tion, regulatory factors, and service availability, our services are of the sale of certain cable systems in January 2007, we further
typically offered at monthly prices, excluding franchise fees and reduced the number of headends that serve our customers to
other taxes. 393.
We offer reduced-price service for promotional periods in As of December 31, 2006, our cable systems consisted of
order to attract new customers and to promote the bundling of approximately 205,500 strand and trench miles of coax, and
two or more services. There is no assurance that these approximately 54,300 strand and trench miles of fiber optic
customers will remain as customers when the promotional cable, passing approximately 11.8 million households and
pricing service expires. When customers bundle services, they serving approximately 5.7 million customers. After completion of
enjoy prices that are lower per service than if they had only the sale of certain cable systems in January 2007, our cable
purchased a single service. systems consisted of approximately 201,700 strand and trench
miles of coax, and approximately 54,100 strand and trench miles
OUR NETWORK TECHNOLOGY of fiber optic cable, passing approximately 11.7 million house-
holds and serving approximately 5.7 million customers.
We employ the hybrid fiber coaxial cable (‘‘HFC’’) architecture
for our systems. HFC architecture combines the use of fiber MANAGEMENT OF OUR SYSTEMS
optic cable with coaxial cable. In most systems, we deliver our
signals via fiber optic cable from the headend to a group of The corporate office, which includes employees of Charter and
nodes, and use coaxial cable to deliver the signal from individual Charter Holdco, is responsible for coordinating and overseeing
nodes to the homes passed served by that node. Our system overall operations including establishing company wide policies
design enables a maximum of 500 homes passed to be served by and procedures. The corporate office performs certain financial
a single node. Currently, our average node serves approximately and administrative functions on a centralized basis such as
385 homes passed. Our system design provides for six strands of accounting, cash management, taxes, billing, finance, human
fiber to each node, with two strands activated and four strands resources, risk management, telephone, payroll, information
reserved for spares and future services. We believe that this system design and support, internal audit, legal, purchasing,
hybrid network design provides high capacity and signal quality. customer care, marketing and programming contract administra-
The design also provides reserve capacity for the addition of tion and Internet service, network and circuits administration
future services. and oversight and coordination of external auditors and consul-
HFC architecture benefits include: tants. The corporate office performs these services on a cost
reimbursement basis pursuant to a management services agree-
(bandwidth capacity to enable traditional and two-way video ment. Our field operations are managed within three divisions.
and broadband services;
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