Charter 2012 Annual Report Download - page 19

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Pricing of Our Products and Services
Our revenues are derived principally from the monthly fees customers pay for the services we provide. We typically charge a
one-time installation fee which is sometimes waived or discounted during certain promotional periods. The prices we charge for
our products and services vary based on the level of service the customer chooses and in some cases the geographic market. In
accordance with FCC rules, the prices we charge for video cable-related equipment, such as set-top boxes and remote control
devices, and for installation services, are based on actual costs plus a permitted rate of return in regulated markets.
In mid-2012, Charter launched a new pricing and packaging approach which emphasizes the triple play products of video, Internet
and telephone services and combines our most popular services in core packages at a fair price. We believe the benefits of this
new approach are:
• simplicity for both our customers in understanding our offers, and our employees in service delivery;
• the ability to package more services at the time of sale and include more product in each service, thus increasing revenue
per customer;
• higher product offering quality through more HD channels, improved pricing for HD and HD/DVR equipment and faster
Internet speeds; and
• lower expected churn as a result of higher customer satisfaction
• gradual price increases at the end of promotional periods.
As of December 31, 2012, approximately 30% of our customers are in the new pricing and packaging plan.
Our Network Technology
Our network includes three components: the national backbone, regional/metro networks and the "last-mile" network. Both our
national backbone and regional/metro network components utilize or plan to utilize a redundant Internet Protocol ("IP”) ring/mesh
architecture with the capability to differentiate quality of service for each residential or commercial product offering. The national
backbone provides connectivity from the regional demarcation points to nationally centralized content, connectivity and services
such as HD programming, voice interexchange points and Internet interexchange points. The regional/metro network components
provide connectivity between the regional demarcation points and headends within a specific geographic area and enable the
delivery of content and services between these network components.
Our last-mile network utilizes a traditional hybrid fiber coaxial cable (“HFC”) architecture, which combines the use of fiber optic
cable with coaxial cable. In most systems, we deliver our signals via fiber optic cable from the headend to a group of nodes, and
use coaxial cable to deliver the signal from individual nodes to the homes served by that node. For our fiber Internet, Ethernet,
carrier wholesale, SIP and PRI commercial customers, fiber optic cable is extended from the individual nodes all the way to the
customer's site. On average, our system design enables up to 400 homes passed to be served by a single node and provides for
six strands of fiber to each node, with two strands activated and four strands reserved for spares and future services. We believe
that this hybrid network design provides high capacity and signal quality. The design also provides two-way signal capacity for
the addition of further interactive services.
HFC architecture benefits include:
• bandwidth capacity to enable traditional and two-way video and broadband services;
• dedicated bandwidth for two-way services, which avoids return signal interference problems that can occur with two-
way communication capability; and
• signal quality and high service reliability.
Approximately 98% of our estimated passings are served by systems that have bandwidth of 550 megahertz or greater and are
two-way activated as of December 31, 2012. This bandwidth capacity enables us to offer digital television, Internet services,
telephone services and other advanced video services.
As of December 31, 2012, we have deployed DOCSIS 3.0 wideband technology to 94% of our estimated passings allowing us to
offer faster high-speed Internet service. We have also deployed SDV technology to accommodate the increasing demands for
greater capacity in our network. SDV technology expands network capacity by transmitting only those digital and HD video
channels that are being watched within a given grouping of homes at any given time, and allows us to expand bandwidth for
additional services. As of December 31, 2012, 85% of our estimated passings received some portion of their video service via
SDV technology. In 2013, we plan to begin a transition from analog to digital transmission of the channels we distribute which
will allow us to recapture bandwith and expand our video service offerings.