Charter 2011 Annual Report Download - page 31

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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, better access to financing, greater personnel resources, greater resources for
marketing, 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
benefits to certain of our competitors, either through access to financing, resources, or efficiencies of scale. We could also face
additional competition from multi-channel video providers if they began distributing video over the Internet to customers residing
outside their current territories.
Our principal competitors for video services throughout our territory are DBS providers. The two largest DBS providers are
DirecTV and DISH Network. Competition from DBS, including intensive marketing efforts with aggressive pricing, exclusive
programming and increased HD broadcasting has had an adverse impact on our ability to retain customers. DBS companies have
also expanded their activities in the MDU market. 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 companies, AT&T and Verizon, offer video and other services in competition
with us, and we expect they will increasingly do so in the future. Upgraded portions of these networks carry two-way video, data
service offerings and provide digital voice services similar to ours. In the case of Verizon, high-speed data services offer speeds
as high as or higher than ours. In addition, these companies continue to offer their traditional telephone services, as well as service
bundles that include wireless voice services provided by affiliated companies. Based on our internal estimates, we believe that
AT&T and Verizon are offering video services in areas serving approximately 31% to 34% and 3% to 4%, respectively, of our
estimated homes passed as of December 31, 2011, and we have experienced customer losses in these areas. AT&T and Verizon
have also launched campaigns to capture more of the MDU market. Additional upgrades and product launches 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 competes with our Internet
service and is often offered at prices lower than our Internet services, although often at speeds lower than the speeds we offer.
However one DSL provider, Century Link, offers DSL services in approximately 12% of our homes passed with speeds comparable
to our lower speed tiers. In addition, in many of our markets, DSL providers 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 offer customers similar pricing
and convenience advantages as our bundles. Continued growth in our residential telephone business faces risks. The competitive
landscape for residential and commercial telephone services is intense; we face competition from providers of Internet telephone
services, as well as incumbent telephone companies. Further, we face increasing competition for residential telephone services
as more consumers in the United States are replacing traditional telephone service with wireless service.
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, 2011, we are aware of traditional overbuild situations impacting
approximately 8% to 9% 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 may
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 exchange
carriers, and others, may provide additional benefits to some of our competitors, either through access to financing, resources, or
efficiencies of scale, or the ability to provide multiple services in direct competition with us.
In addition to the various competitive factors discussed above, our business is subject to risks relating to increasing competition
for the leisure and entertainment time of consumers. Our business competes with all other sources of entertainment and information
delivery, including broadcast television, movies, live events, radio broadcasts, home video products, console games, print media,