Charter 2013 Annual Report Download - page 25

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or free equipment, installation, and multiple units. DBS providers are able to offer service nationwide and are able to establish a
national image and branding with standardized offerings, which together with their ability to avoid franchise fees of up to 5% of
revenues and property tax, leads to greater efficiencies and lower costs in the lower tiers of service. We believe that cable-delivered
OnDemand and Subscription OnDemand services, which include HD programming, are superior to DBS service, because cable
headends can provide two-way communication to deliver many titles which customers can access and control independently,
whereas DBS technology can only make available a much smaller number of titles with DVR-like customer control. DBS providers
have also made attempts at deployment of Internet access services via satellite, but those services have been technically constrained
and of limited appeal.
Telephone Companies and Utilities
Incumbent telephone companies, including AT&T Inc. (“AT&T”) and Verizon Communications, Inc. ("Verizon"), offer video and
other services in competition with us, and we expect they will increasingly do so in the future. These companies are able to offer
two-way video, data services and provide digital voice services similar to ours in various portions of their networks. In the case
of Verizon, high-speed data services (fiber optic service (“FiOS”)) 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 internal estimates, we believe that AT&T and Verizon are offering video services in
areas serving approximately 30% and 4%, respectively, of our estimated passings and we have experienced customer losses in
these areas. AT&T and Verizon have also launched campaigns to capture more of the multiple dwelling unit (“MDU”) market.
AT&T has publicly stated that it expects to roll out its video product beyond the territories currently served although it is unclear
where and to what extent. When AT&T or Verizon have introduced or expanded their offering of video products in our market
areas, we have seen a decrease in our video revenue as AT&T and Verizon typically roll out aggressive marketing and discounting
campaigns to launch their products.
In addition to incumbent telephone companies obtaining franchises or alternative authorizations in some areas, and seeking them
in others, they have been successful through various means in reducing or streamlining the franchising requirements applicable
to them. They have had significant success at the federal and state level in securing FCC rulings and numerous statewide franchise
laws that facilitate telephone company entry into the video marketplace. Because telephone companies have been successful in
avoiding or reducing franchise and other regulatory requirements that remain applicable to cable operators like us, their competitive
posture has often been enhanced. The large scale entry of incumbent telephone companies as direct competitors in the video
marketplace has adversely affected the profitability and valuation of our cable systems.
Most telephone companies, including AT&T and Verizon, which already have plant, an existing customer base, and other operational
functions in place (such as billing and service personnel), offer Internet access via traditional DSL service. DSL service allows
Internet access to subscribers at data transmission speeds greater than those formerly available over conventional telephone lines.
We believe DSL service is an alternative to our high-speed Internet service and is often offered at prices lower than our Internet
services, although typically at speeds lower than the speeds we offer. DSL providers may currently be in a better position to offer
voice and data services to businesses since their networks tend to be more complete in commercial areas. We expect DSL to
remain a significant competitor to our high-speed Internet services.
Many large telephone companies also provide fiber-to-the-node or fiber-to-the-home services in select areas of their footprints.
Fiber-to-the-node networks can provide faster Internet speeds than conventional DSL, but still cannot typically match our Internet
speeds. Our primary fiber-to-the-node competitor is AT&T's U-verse. The competition from U-verse is expected to intensify over
time as AT&T completes the expansion plans announced in late 2012. Fiber-to-the-home networks, however, can provide Internet
speeds equal to or greater than Charter's current Internet speeds. Verizon's FiOS is the primary fiber-to-the-home competitor.
Our voice service competes directly with incumbent telephone companies and other carriers, including Internet-based VoIP
providers, for both residential and commercial voice service customers. Because we offer voice services, we are subject to
considerable competition from such companies and other telecommunications providers, including wireless providers with an
increasing number of consumers choosing wireless over wired telephone services. The telecommunications and voice services
industry is highly competitive and includes competitors with greater financial and personnel resources, strong brand name
recognition, and long-standing relationships with regulatory authorities and customers. Moreover, mergers, joint ventures and
alliances among our competitors have resulted in providers capable of offering cable television, Internet, and voice services in
direct competition with us.
Additionally, we are subject to limited competition from utilities and/or municipal utilities (collectively, "Utilities") that possess
fiber optic transmission lines capable of transmitting signals with minimal signal distortion. Certain Utilities are also developing
broadband over power line technology, which may allow the provision of Internet, phone and other broadband services to homes
and offices.