Charter 2007 Annual Report Download - page 30

that may reduce the amounts available for repayment to
holders of our outstanding notes.
All of our and our subsidiaries’ outstanding debt is subject to change of
control provisions. We may not have the ability to raise the funds
necessary to fulfill our obligations under our indebtedness following a
change of control, which would place us in default under the applicable
debt instruments.
We may not have the ability to raise the funds necessary to fulfill
our obligations under our and our subsidiaries’ notes and credit
facilities following a change of control. Under the indentures
governing our and our subsidiaries’ notes, upon the occurrence
of specified change of control events, we are required to offer to
repurchase all of these notes. However, Charter and our subsid-
iaries may not have sufficient funds at the time of the change of
control event to make the required repurchase of these notes,
and our subsidiaries are limited in their ability to make distribu-
tions or other payments to fund any required repurchase. In
addition, a change of control under our credit facilities would
result in a default under those credit facilities. Because such
credit facilities and our subsidiaries’ notes are obligations of our
subsidiaries, the credit facilities and our subsidiaries’ notes would
have to be repaid by our subsidiaries before their assets could be
available to us to repurchase our convertible senior notes. Our
failure to make or complete a change of control offer would
place us in default under our convertible senior notes. The failure
of our subsidiaries to make a change of control offer or repay the
amounts accelerated under their notes and credit facilities would
place them in default.
Paul G. Allen and his affiliates are not obligated to purchase equity
from, contribute to, or loan funds to us or any of our subsidiaries.
Paul G. Allen and his affiliates are not obligated to purchase
equity from, contribute to, or loan funds to us or any of our
subsidiaries.
Risks Related to Our Business
We operate in a very competitive business environment, which affects
our ability to attract and retain customers and can adversely affect our
business and operations.
The industry in which we operate is highly competitive and has
become more so in recent years. In some instances, we compete
against companies with fewer regulatory burdens, easier access to
financing, greater personnel resources, greater resources for mar-
keting, greater and more favorable brand name recognition, and
long-established relationships with regulatory authorities and
customers. Increasing consolidation in the cable industry and the
repeal of certain ownership rules have provided additional bene-
fits to certain of our competitors, either through access to
financing, resources, or efficiencies of scale.
Our principal competitors for video services throughout our
territory are DBS providers. The two largest DBS providers are
DirecTV and Echostar. Competition from DBS, including inten-
sive marketing efforts with aggressive pricing, exclusive program-
ming and increased high definition broadcasting has had an
adverse impact on our ability to retain customers. DBS has
grown rapidly over the last several years. The cable industry,
including us, has lost a significant number of video customers to
DBS competition, and we face serious challenges in this area in
the future.
Telephone companies, including two major telephone com-
panies, AT&T and Verizon, and utilities can offer video and
other services in competition with us, and we expect they will
increasingly do so in the future. AT&T and Verizon are both
upgrading their networks. Upgraded portions of these networks
carry two-way video services comparable to ours, in the case of
Verizon, high-speed data services that operate at speeds as high
as or higher than ours, and digital voice services that are similar
to ours. These services are offered at prices similar to those for
comparable Charter services. Based on our internal estimates, we
believe that AT&T and Verizon are offering these services in
areas serving approximately 5% to 6% of our estimated homes
passed as of December 31, 2007. Additional upgrades and
product launches, primarily by AT&T, are expected in markets
in which we operate. With respect to our Internet access
services, we face competition, including intensive marketing
efforts and aggressive pricing, from telephone companies and
other providers of DSL. DSL service is competitive with high-
speed Internet service and is often offered at prices lower than
our Internet services, although often at speeds lower than the
speeds we offer. In addition, in many of our markets, these
companies have entered into co-marketing arrangements with
DBS providers to offer service bundles combining video services
provided by a DBS provider with DSL and traditional telephone
and wireless services offered by the telephone companies and
their affiliates. These service bundles substantially resemble our
bundles. Moreover, as we expand our telephone offerings, we
will face considerable competition from established telephone
companies and other carriers.
The existence of more than one cable system operating in
the same territory is referred to as an overbuild. Overbuilds could
adversely affect our growth, financial condition, and results of
operations, by creating or increasing competition. Based on
internal estimates and excluding telephone companies, as of
December 31, 2007, we are aware of traditional overbuild situa-
tions impacting approximately 7% to 8% of our estimated homes
passed, and potential traditional overbuild situations in areas
servicing approximately an additional 2% of our estimated homes
passed. Additional overbuild situations may occur in other
systems.
In order to attract new customers, from time to time we
make promotional offers, including offers of temporarily reduced
price or free service. These promotional programs result in
significant advertising, programming and operating expenses, and
also require us to make capital expenditures to acquire and install
customer premise equipment. Customers who subscribe to our
services as a result of these offerings may not remain customers
following the end of the promotional period. A failure to retain
customers could have a material adverse effect on our business.
Mergers, joint ventures, and alliances among franchised,
wireless, or private cable operators, DBS providers, local
CHARTER COMMUNICATIONS, INC. 2007 FORM 10-K
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