Charter 2015 Annual Report Download - page 24

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Advertising Services
In 2015, sales of advertising represented approximately 3% of our total revenues. Our advertising sales division, Spectrum Reach®,
provides local, regional and national business with the opportunity to advertise in individual markets on cable television networks.
We receive revenues from the sale of local advertising on digital advertising networks and satellite-delivered networks such as
MTV®, CNN® and ESPN®. In any particular market, we generally insert local advertising on over 50 channels. In most cases,
the available advertising time is sold by our sales force, however in some markets, we enter into representation agreements with
contiguous cable system operators under which another operator in the area will sell advertising on our behalf for a percentage of
the revenue. In some markets, we sell advertising on behalf of other operators.
Charter has deployed Enhanced TV Binary Interchange Format (“EBIF”) technology to set-top boxes in most service areas within
the Charter footprint. EBIF is a technology foundation that will allow Charter to deliver enhanced and interactive television
applications for advertising. From time to time, certain of our vendors, including programmers and equipment vendors, have
purchased advertising from us.
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.
Charter's pricing and packaging approach emphasizes the triple play products of video, Internet and voice services and combines
our most popular and competitive services in core packages at what we believe is a fair price. We believe our approach offers:
• 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;
• a higher quality product offering through more HD channels, improved pricing for HD and HD/DVR equipment and
faster Internet speeds;
• lower expected churn as a result of higher customer satisfaction; and
• gradual price increases at the end of promotional periods.
Our Network Technology and Customer Premise Equipment
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. The national backbone provides connectivity from the regional demarcation points to nationally centralized content,
connectivity and services. 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 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. Our
design standard is six strands of fiber to each node, with two strands activated and four strands reserved for spares and future
services. This design standard allows these strands to be utilized for additional residential traffic capacity, and enterprise customer
needs as they arise. We believe that this hybrid network design provides high capacity and signal quality. The design also provides
two-way signal capabilities for the support of interactive services.
HFC architecture benefits include:
• bandwidth capacity to enable traditional and two-way video and broadband services;
• dedicated bandwidth for two-way services; and
• signal quality and high service reliability.