Charter 2006 Annual Report Download - page 34

CHARTER COMMUNICATIONS, INC. 2006 FORM 10-K
Risks Related to Our Business bandwidth Internet access services, to residential and business
customers and they are now offering such service in limited
We operate in a very competitive business environment, which affects areas. Some of these telephone companies have obtained, and
our ability to attract and retain customers and can adversely affect are now seeking, franchises or operating authorizations under
our business and operations. terms and conditions more favorable than those imposed on us.
The industry in which we operate is highly competitive and has With respect to our Internet access services, we face
become more so in recent years. In some instances, we compete competition, including intensive marketing efforts and aggressive
against companies with fewer regulatory burdens, easier access pricing, from telephone companies and other providers of DSL
to financing, greater personnel and other resources, greater and ‘‘dial-up’’. DSL service is competitive with high-speed
brand name recognition, and long-established relationships with Internet service over cable systems. In addition, DBS providers
regulatory authorities and customers. Increasing consolidation in have entered into joint marketing arrangements with Internet
the cable industry and the repeal of certain ownership rules may access providers to offer bundled video and Internet service,
provide additional benefits to certain of our competitors, either which competes with our ability to provide bundled services to
through access to financing, resources, or efficiencies of scale. our customers. Moreover, as we expand our telephone offerings,
Our principal competitor for video services throughout our we face considerable competition from established telephone
territory is DBS. The two largest DBS providers are DIRECTV companies and other carriers, including VoIP providers.
and Echostar Communications. Competition from DBS, includ- In order to attract new customers, from time to time we
ing intensive marketing efforts with aggressive pricing and make promotional offers, including offers of temporarily
exclusive programming such as the ‘‘NFL Sunday Ticket,’’ has reduced-price or free service. These promotional programs result
had an adverse impact on our ability to retain customers. DBS in significant advertising, programming and operating expenses,
has grown rapidly over the last several years. The cable and also require us to make capital expenditures to acquire
industry, including us, has lost a significant number of video additional digital set-top boxes. Customers who subscribe to our
customers to DBS competition, and we face serious challenges services as a result of these offerings may not remain customers
in this area in the future. In some areas, DBS operators have for any significant period of time following the end of the
entered into co-marketing arrangements with other of our promotional period. A failure to retain existing customers and
competitors to offer service bundles combining video services customers added through promotional offerings or to collect the
provided by the DBS operator and DSL and traditional amounts they owe us could have a material adverse effect on
telephone service offered by the telephone companies. These our business and financial results.
service bundles resemble our bundles and result in a single bill Mergers, joint ventures and alliances among franchised,
to the customer. We believe that competition from DBS service wireless or private cable operators, satellite television providers,
providers may present greater challenges in areas of lower local exchange carriers and others, may provide additional
population density, and that our systems service a higher benefits to some of our competitors, either through access to
concentration of such areas than those of certain other major financing, resources or efficiencies of scale, or the ability to
cable service providers. provide multiple services in direct competition with us.
Local telephone companies and electric utilities can offer In addition to the various competitive factors discussed
video and other services in competition with us and they above, our business is subject to risks relating to increasing
increasingly may do so in the future. Two major local telephone competition for the leisure and entertainment time of consum-
companies, AT&T and Verizon, have both announced that they ers. Our business competes with all other sources of entertain-
intend to make upgrades of their networks. Some upgraded ment and information delivery, including broadcast television,
portions of these networks are or will be capable of carrying movies, live events, radio broadcasts, home video products,
two-way video services that are technically comparable to ours, console games, print media, and the Internet. Technological
high-speed data services that operate at speeds as high or higher advancements, such as video-on-demand, new video formats,
than those we make available to customers in these areas and and Internet streaming and downloading, have increased the
digital voice services that are similar to ours. In addition, these number of entertainment and information delivery choices
companies continue to offer their traditional telephone services available to consumers, and intensified the challenges posed by
as well as bundles that include wireless voice services provided audience fragmentation. The increasing number of choices
by affiliated companies. We believe that AT&T and Verizon’s available to audiences could negatively impact not only con-
upgrades have been completed in systems representing approxi- sumer demand for our products and services, but also advertis-
mately 1% of our homes passed as of December 31, 2006. ers’ willingness to purchase advertising from us. If we do not
Additional upgrades in markets in which we operate are respond appropriately to further increases in the leisure and
expected. In areas where they have launched video services, entertainment choices available to consumers, our competitive
these parties are aggressively marketing video, voice and data position could deteriorate, and our financial results could suffer.
bundles at entry level prices similar to those we use to market We cannot assure you that our cable systems will allow us
our bundles. Certain telephone companies have begun more to compete effectively. Additionally, as we expand our offerings
extensive upgrades in their networks that enable them to begin to include other telecommunications services, and to introduce
providing video services, as well as telephone and high new and enhanced services, we will be subject to competition
20