Time Warner (TWX)

that had been upgraded to provide at least 750 megahertz of capacity. TWC believes that its network architecture is sufficiently flexible and extensible to support its current requirements. However, in order for TWC to continue to innovate and deliver new services to its customers, as well as meet its competitive needs, TWC anticipates that it will need to use the bandwidth available to its systems over the next few years. TWC believes that this can be achieved without costly upgrades. For example, to accommodate increasing demands for greater capacity in its network, TWC is deploying a technology known as switched digital video (“SDV”). SDV technology expands network capacity by transmitting only those digital and HD video channels that are being watched within a given grouping of households at any given moment. Since it is generally the case that not all such channels are being watched at all times by a given group of households, SDV technology frees up capacity that can then be made available for other uses. As of December 31, 2008, approximately 60% of TWC’s digital video subscribers received some portion of their video service via SDV technology, and TWC expects to continue to deploy SDV technology during 2009. For more information, see “Regulatory Matters — Cable System Regulation — Video Services — Switched Digital Video.”

 

Set-top Boxes. Currently, TWC’s digital video subscribers must have either a TWC-provided digital set-top box or a “digital cable-ready” television or similar device equipped with a conditional-access security card (“CableCARD”) in order to receive digital video programming. However, a “digital cable-ready” television or similar device equipped with a CableCARD cannot request certain digital signals that are necessary to receive TWC’s two-way video services, such as VOD, channels delivered via SDV technology and the interactive program guide. In order to receive TWC’s two-way video services, customers generally must have a TWC-provided digital set-top box. Tru2way-enabled televisions and other devices with tru2way technology will also be able to receive TWC’s two-way video services. TWC purchases set-top boxes and CableCARDs from a limited number of suppliers and leases these devices to subscribers at monthly rates.

 

High-Speed Data and Voice Connectivity. TWC delivers high-speed data and voice services through TWC’s HFC network, regional fiber networks that are either owned or leased from third parties and through backbone networks that provide connectivity to the Internet and are operated by third parties. TWC pays fees for leased circuits based on the amount of capacity available to TWC and pays for Internet connectivity based on the amount of data and voice traffic received from and sent over the provider’s network. TWC also has entered into a number of “settlement-free peering” arrangements with affiliated and third-party networks that allow TWC to exchange traffic with those networks without a fee.

 

 

Cable Systems. TWC transmits its video, high-speed
data and voice signals on a hybrid fiber coaxial
(“HFC”) network. As of December 31, 2008,
virtually all of the homes passed by TWC’s cable systems
were served by plant

that had been upgraded to provide at least 750 megahertz of
capacity. TWC believes that its network architecture is
sufficiently flexible and extensible to support its current
requirements. However, in order for TWC to continue to innovate
and deliver new services to its customers, as well as meet its
competitive needs, TWC anticipates that it will need to use the
bandwidth available to its systems over the next few years. TWC
believes that this can be achieved without costly upgrades. For
example, to accommodate increasing demands for greater capacity
in its network, TWC is deploying a technology known as switched
digital video (“SDV”). SDV technology expands network
capacity by transmitting only those digital and HD video
channels that are being watched within a given grouping of
households at any given moment. Since it is generally the case
that not all such channels are being watched at all times by a
given group of households, SDV technology frees up capacity that
can then be made available for other uses. As of
December 31, 2008, approximately 60% of TWC’s digital
video subscribers received some portion of their video service
via SDV technology, and TWC expects to continue to deploy SDV
technology during 2009. For more information, see
“Regulatory Matters — Cable System Regulation
— Video Services — Switched Digital
Video.”

 

Set-top Boxes. Currently, TWC’s digital video
subscribers must have either a TWC-provided digital set-top box
or a “digital cable-ready” television or similar
device equipped with a conditional-access security card
(“CableCARD”) in order to receive digital video
programming. However, a “digital cable-ready”
television or similar device equipped with a CableCARD cannot
request certain digital signals that are necessary to receive
TWC’s two-way video services, such as VOD, channels
delivered via SDV technology and the interactive program guide.
In order to receive TWC’s two-way video services, customers
generally must have a TWC-provided digital set-top box.
Tru2way-enabled
televisions and other devices with tru2way technology will also
be able to receive TWC’s two-way video services. TWC
purchases set-top boxes and CableCARDs from a limited number of
suppliers and leases these devices to subscribers at monthly
rates.

 

High-Speed Data and Voice Connectivity. TWC delivers
high-speed data and voice services through TWC’s HFC
network, regional fiber networks that are either owned or leased
from third parties and through backbone networks that provide
connectivity to the Internet and are operated by third parties.
TWC pays fees for leased circuits based on the amount of
capacity available to TWC and pays for Internet connectivity
based on the amount of data and voice traffic received from and
sent over the provider’s network. TWC also has entered into
a number of “settlement-free peering” arrangements
with affiliated and third-party networks that allow TWC to
exchange traffic with those networks without a fee.

 

similar device equipped with a CableCARD cannot receive certain digital signals and signals for premium programming that are necessary to receive TWC’s two-way video services, such as VOD and the interactive program guide. In order to receive TWC’s two-way video services, customers generally must have a digital set-top box provided by TWC. TWC purchases set-top boxes and CableCARDs from a limited number of suppliers and leases these devices to subscribers at monthly rates.

 

 

Cable Systems. TWC transmits its video, high-speed
data and voice signals on an HFC network. As of
December 31, 2007, according to TWC’s estimates,
approximately 98% of all homes passed by TWC’s cable
systems were served by plant that had been upgraded to provide
at least 750 megahertz of capacity. TWC believes that its
network architecture is sufficiently flexible and extensible to
support its current requirements. However, in order for TWC to
continue to innovate and deliver new services to its customers,
as well as meet its competitive needs, TWC anticipates that it
will need to use more efficiently the bandwidth available to its
systems over the next few years. TWC believes that this can be
achieved largely without costly upgrades. For example, to
accommodate increasing numbers of HDTV channels and other
demands for greater capacity in its network, TWC is deploying a
technology known as switched digital video (“SDV”). By
using SDV, only those channels that are being watched within a
given grouping of households are transmitted to those
households. Since it is generally the case that not all channels
are being watched at all times by a given group of households,
this frees up capacity that can then be made available for other
uses.

 

Set-top Boxes. TWC’s digital video subscribers
must have either a digital set-top box or a “digital
cable-ready” television or similar device equipped with a
CableCARD^tm.
However, a “digital cable-ready” television or

similar device equipped with a CableCARD cannot receive certain
digital signals and signals for premium programming that are
necessary to receive TWC’s two-way video services, such as
VOD and the interactive program guide. In order to receive
TWC’s two-way video services, customers generally must have
a digital set-top box provided by TWC. TWC purchases set-top
boxes and CableCARDs from a limited number of suppliers and
leases these devices to subscribers at monthly rates.