A New Connection with Customers

TEAM BRUINGENUITYJake Darby, Mark Glenn, Deepauk Murugesan

3Q’11 ∆ in Subscribers(1)

TWC losing to competitors, not cord cutters

Economy

California Unemployment Rate

Cord Cutting Competition

Today Tomorrow

Threat Neutralized Future Threat Immediate Threat!

• TV Essentials plan developed for those affected most

• Affects entire industry• Economy slowly

stabilizing

• Future unclear as Netflix & Hulu continue to face hurdles

• Apple & Google actively searching for opportunities

• Market disruption imminent, but uncertain as to means

• Price war for lower customer tiers

• Lack of differentiation in video subscriber services

+ 131,000 + 176,000 + 327,000

(128,000)

Source: (1) 3Q’11 subscriber numbers provided in respective 3Q investor reports and 10-Q’s

Differentiation limited to secondary factors

Signature Features

iPad App Fiber-Optic HD Interactive TV Sports Packages

Availability Strong Penetration Slowed Expansion Continuing expansion Everywhere

Infrastructure Cable Fiber to Home Fiber to Node Satellite

- All Programming- All Premium channels- Multiple HD/DVR boxes

PremiumPackage

- DVR and additional boxes- Expanded Digital and HD Programming- Premium movie/sports packages- On-line Offerings (e.g. HBO Go, iPad app, etc.)

ChoicePackage

- 100+ Digital Channels- Limited HD Programming- Short-term promotional offerings (Premium channels and/or DVR/HD boxes)

ValuePackage

$30 $60 $90Price

Differentiating Factors

Parity in programming, pricing, and basic

features

TWC customers are unsatisfied ...

• Survey results reflect customer opinions, not objective performance data• Previously established parity in programming, pricing, and basic features Conclude that reliability and customer service are driving poor overall customer

satisfaction

Overall SatisfactionProgrammingCost of Service BillingOfferings

& Promotion

s

Performance &

Reliability

Customer Service

Verizon FIOS

DirecTV

AT&T U-verse

Time Warner Cable

Scoring Legend

JD Power 2011 Residential Television Customer Satisfaction Study

How do we increase customer satisfaction?

Build satisfaction through improved connection to customers

Issue: Low Customer Satisfaction

Improve customer service and features

Increase customer involvement in brand

Allow customers to share with friends

Expanded SignatureHome services

New Loyalty Program

New Referral Program

Objectives Solutions

It’s all about the customer … every customerSignatureHome ... Improve and expand availability to all customer tiers

SignatureHome Benefits Execution Plan

Priority Installation

Premium Service Plan

• 30 minute installation window

• Satisfaction guarantee

• Phased roll-out within Southern Cal.

• Start with high income residents to gauge willingness to pay

• Priority service line

• 24/7 advisors, no holding time

• 2X reimbursement for outages (minimal cost)

• Increase customer service reps

• Define metrics for customer satisfaction (e.g. call wait times, management referrals, JD Power survey, etc.)

• Priority Installation: $25 (Covers cost of labor for additional window time) (1)

• Annual Membership: $10-15/mo. (Revenue to support add’l customer service investment)

Pricing Strategy

(1) Support for installation calculation provided in appendix

Boost loyalty and pride in current subscribers

LoyaltyRewards*(Pick One)

Year 1

• Free On-Demand (3)• Free Premium Channel• Free Pay Per View

* Requires loyalty program sign-up for new and existing customers

Year 2

• 6 mo. Tier Upgrade• 6 mo. Sports Package• $50 off cable bill

Year 3

• 1 Year Tier Upgrade• 1 Year Sports Package• $75 off cable bill

~$10 Cost ~$30 Cost ~$75 Cost

5% 10% 15% 20%$700

$800

$900

$1,000

Goal: Reduce churn and boost CLV

CLV

Loyalty programs proven to boost pride, involvement in brand

Gain valuable customer insights, data through sign-up process

Customer value of rewards exceed cost to TWC

Churn Rate Improvement

$739 current CLV

CLV calculation provided in appendix

Break even with8%

improvement in churn rate!

Target referral program to multi-family residences

ReferralProgram

1ST Referral

• Free box/DVR service for both parties (1 Year)

2nd Referral

• Referrer receives free package upgrade

• Free DVR for sign-up

3rd Referral

• Referrer receives +$50 off current bill

• Free DVR for sign-up

~$50 Cost ~$100 Cost ~$100 Cost

1 2 3 $0

$500$1,000$1,500$2,000$2,500

CLV of new customers outweighs costs

Cost to TWCCLV of New Cus-tomers

SoCal home prices continue to drive residents towards apartments with high turnover rates

Choice of cable TV provider often based on friend or neighbor

CLV much greater than cost of referral Number of Referrals

CLV calculation provided in appendix

Looking toward the future…The Industry The Customer

• Higher-priced, valued added services driving future revenues• New technologies• Broadband

• Higher margins cancelled out by new investment in technologies, infrastructure

Cable TV Forecasts (1)

2002 20162011

RevenueCable Subscribers

+6.4% CAGR

+1.9% CAGR

• TV still essential in everyday life, but prevalence of online video growing- Total TV- 2008: 4.2 hrs 2010: 4.4 hrs (2)

- 80-90% awareness of all online video(2)

•25% multitasking daily across media (3)

40%

40%

Sources: (1) IBIS; (2) eMarketer, Dec 2010, (3) Ofcom Media Report, August 2010

% of TV Subscribers who also subscribe to online video (2)

The two worlds are beginning to collideSmart TV• WIFI + hard drive pre-installed • À la carte content via Apps available now• Large On-Demand Library (e.g. iTunes)• Steve Jobs: “Integrated television …

simplest interface … I finally cracked it”

2010 2011 2015

8%15%

65%Connected TV Penetration(1)

(1) Morgan Stanley, May 2011.

New MSO competition• Leading tech companies evaluating new

infrastructure investment• Wireless and fiber-optic-based

broadband currently in test and trial phases

TWC in prime position to capitalize on industry trends and TV/Broadband convergence

1) Promote Broadband’s competitive strength

- vs. non-existent DBS- vs. slower AT&T- vs. unavailable FIOS

2) Develop new multi-platform technologies

- Second Screen Apps- Wirelessly Connected and

Personalized DVR

TWC should reposition Broadband as primary service

3) Investigate Strategic Partnerships with Tech

- Combine cable and tech industry strengths

- Share infrastructure expansion costs

TV customers declining, Broadband

increasingOnline Video

PopularityTV Viewer

Multi-Tasking

Summary• Time Warner Cable losing subscribers primarily due

to low customer satisfaction versus its competition New dedication to premium customer service to

associate TWC brand with quality and reliability Loyalty and referral programs will also help to curb

subscriber loss and boost involvement in brand• While cord-cutting not significant issue, cable TV

future is filled with uncertainty Repositioning broadband as signature offering will

ensure TWC brand maintains strong relevance in consumer’s minds

Appendix

Competitive Analysis

Method of Content Delivery

• Traditional Cable • Fiber-Optic direct to home

• Fiber-Optic to node • Satellite

Pricing and Incentives

• TV: $30-$55• TV/HSI: $40-$140• Multi-room HD: freeHBO $15/mo for 3

months

• TV: $65-$90• TV/HSI: $75+• No annual TV

contract; 2 year for bundles

• Multi-room HD: free

• TV: $29-$92• TV/HSI: $49-$74• HD free for 6 months• DVR: $8

• TV: $25-$84• Showtime free for 3

months• DVR: $7• Multi-room HD: free

Differentiating Features

• 10,000 titles on-demand

• Price Advantages• Whole-house DVR• iPad app with live TV,

guide, and remote DVR programming

• 24,000 titles on-demand

• Superior HSI/TV Quality

• Sports in 3D• Multi-Room DVR with

remote programming• FlexView

• IPTV• NBA TV and MLB

packages• No contract required• Free WiFi• National hotspot

network

• NFL Sunday ticket availability for low tier

• Extensive foreign-language programming

BrandPerception • Mid-tier products

• Quality/Service issues• Poor customer service

• High quality products and services

• Poor customer service

• High quality• Good value and

service• Limited availability

• High quality programming

• No HIS; Must bundle with competitors

2.7M ~.24M 1.2M~.60M# of Subscribers in Southern California

CLV Calculation – Current EstimateAssumptions Month Year Assumptions      # Customers 14,446 Per TWC Financials ARPU 113 1,356 Per TWC Financials Gross Margin % 50% Per TWC Financials Direct Mktg (44) Per TWC Financials Average Churn Rate 2.00% 24% Estimates range 1.5 and 4% Average Retention Rate 98% 76% Calculation Annual Discount Rate 10% Standard Acquisition Costs (125) Per eMetrics from 2002

Year: 0 1 2 3 4 5 6Margin per Year 0 679 679 679 679 679 679 Cost of Direct Marketing - (44) (44) (44) (44) (44) (44)Survival Rate 0% 76% 52% 28% 4% 0% 0%Expected Profit - 483 331 178 25 - - Retention Costs - - - - - - - Acquisition Costs (125) - - - - - - Profit/(Loss) (125) 483 331 178 25 - - NPV of Profit/(Loss) (125) 439 273 134 17 - - CLV 739

CLV Calculation – Loyalty ProgramAssumptions Month Year Assumptions      # Customers 14,446 Per TWC Financials ARPU 113 1,356 Per TWC Financials Gross Margin % 50% Per TWC Financials Direct Mktg (44) Per TWC Financials Average Churn Rate 1.84% 22% Estimates range 1.5 and 4%  Average Retention Rate 98% 78% Calculation Annual Discount Rate 10% Standard Acquisition Costs (125) Per eMetrics from 2002

Year: 0 1 2 3 4 5 6Margin per Year 0 679 679 679 679 679 679 Cost of Direct Marketing - (44) (44) (44) (44) (44) (44)Survival Rate 0% 78% 56% 34% 12% 0% 0%Expected Profit - 495 355 214 73 - - Retention Costs - (10) (30) (75) - - - Acquisition Costs (125) - - - - - - Profit/(Loss) (125) 485 325 139 73 - - NPV of Profit/(Loss) (125) 441 268 104 50 - - CLV 739

SignatureHome Pricing

SignatureHome Installs Install SigHomePrice of Installation - 25 Suggested Pricing

Daily Install Windows 8 4 Reduced efficiency to guarantee customer windows

Revenue per Day - 100 CalculationLabor Cost (200) (200) Assumes $25/hr for 8 hour dayDaily Profit/(Loss) (200) (100)Cost per Install (25) (25)

Value ChainConten

tNetworks Consumer

sAggregator

s

Broadcast

Cable

Studios

Online

MSOs