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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002

          Indicate by check mark whether each registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Not Applicable

          Indicate by check mark whether the registrant is an accelerated filer (as defined in  Exchange Act Rule 12b-2).

          State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrants:  Not Applicable

          Indicate the number of shares outstanding of the registrants’ common stock:  Not Applicable

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FORWARD-LOOKING STATEMENTS

                    Some of the information in this report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully because they:

                    We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to accurately predict or over which we have no control. The risk factors listed in this report, as well as any other cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Examples of these risks include our history and expectation of future net losses, our substantial debt, changes in laws and regulations, increasing programming costs and competition. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, operating results and financial condition.

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PART I

Item 1.  Business

                    In this report, we rely on and refer to information and statistics regarding the cable television industry and our market share in the sectors in which we compete.  We obtained this information and statistics from various third-party sources, discussions with our customers and our own internal estimates.  We believe that these sources and estimates are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness.

Our Manager

                    Insight Communications Company, Inc. is the ninth  largest cable television system operator in the United States based on customers served.  Through its wholly owned and managed systems, Insight Communications currently serves approximately 1.4 million customers, all of which are concentrated in the four contiguous states of Indiana, Kentucky, Illinois and Ohio. In addition to its geographic concentration, our manager’s communications network is tightly-grouped, or “clustered,” with approximately 95% of our manager’s customers served from fourteen headends after giving effect to the remaining network upgrades of the Illinois systems expected to be substantially completed by mid-2003.  As a result, the amount of capital necessary to deploy new and enhanced products and services is significantly reduced on a per home basis because of the large number of customers served by a single headend. A headend processes signals received for distribution to customers over our network.  Clustering enables us to efficiently deploy a bundled suite of entertainment, information and communications services. This combination of geographic concentration and clustering has enabled our manager to offer, under the Insight Digital brand, a complete bundle of interactive digital video, high-speed data access and telephone services.

Insight Midwest

                    We are owned 50% by our manager and 50% by an indirect subsidiary of Comcast Cable Holdings, LLC  (formerly known as AT&T Broadband, LLC), which is a subsidiary of Comcast Corporation. Through our subsidiaries, we own and operate cable television systems in Indiana, Kentucky, Illinois and Ohio  which pass approximately 2.2 million homes and serve approximately 1.3 million customers.  On November 18, 2002, Comcast Corporation acquired the broadband business of AT&T Corp., and presently is the largest cable television system operator in the United States.  The transaction did not result in any direct change in our ownership structure, and our manager continues to serve as our general partner and as the manager of all of our systems, and the Comcast Cable subsidiary serves as our limited partner.

                    As a result of our upgrade efforts, as of December 31, 2002, we estimate that 92% of our customers were passed by our upgraded network, which enables delivery of an advanced suite of entertainment, information and communications services.

                    We are the largest operator of cable television systems in the State of Indiana. As of December 31, 2002, the Indiana systems passed approximately 569,230 homes and served approximately 326,000  customers. The Indiana systems are located primarily in the university cities of Bloomington, Evansville and Lafayette and demographically desirable areas of suburban Indianapolis.  Approximately 95% of the Indiana systems’ customers are served by three headends.

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                    We are also the largest operator of cable television systems in the State of Kentucky. As of December 31, 2002, the Kentucky systems passed approximately 783,100 homes and served approximately 449,100 customers. Our Kentucky systems are located in four of the five largest cities in the state: Louisville, Lexington, Covington and Bowling Green. Approximately  99% of Insight Kentucky’s customers are served by four headends.

                    We are the second largest operator of cable television systems in the State of Illinois.  As of December 31, 2002, our Illinois systems passed approximately 687,800 homes and served approximately 413,700 customers. The Illinois systems are located primarily in mid-sized communities, including Springfield, Rockford, Peoria and Champaign/Urbana. Upon completion of our consolidation of headends, approximately 95% of the Illinois systems’ customers will be served by six headends. The network upgrades and consolidation of headends are expected to be substantially completed during the first half of 2003.

                    As of December 31, 2002, our Ohio system passed approximately 198,700 homes and served approximately 88,100  customers in the eastern portion of the City of Columbus and the surrounding suburban communities. All of the Ohio system’s customers are served from a single headend. Approximately 91% of the Ohio system’s customers are served by a network upgraded to 870 MHz capacity, and our upgrade efforts are continuing.

                    Recognizing the opportunities presented by newly available products and services, the strength of our market characteristics and favorable changes in the regulatory environment, we deployed a strategy to become a competitive, full service provider of entertainment, information and communications services for the communities served by our networks. We intend to continue capitalizing on our highly clustered cable television systems to economically upgrade the technological capabilities of our broadband networks in order to deploy enhanced new services.

                    We believe that an integrated package of existing multi-channel video, new and enhanced products and services, such as interactive digital video, including video-on-demand or near video-on-demand, high-speed Internet access and telephone services, coupled with our commitment to locally focused customer service enhances our ability to acquire and retain customers in a competitive environment while increasing revenues per customer. We believe that the highly clustered nature of our systems also enables us to more efficiently deploy our marketing dollars and maximizes our ability to enhance customer awareness, increase use of our products and services and build brand support.  In addition to our broad product offerings, we also emphasize a high level of locally-focused content and customer service. To augment this growth, we will continue to seek strategic acquisitions that fit our clustering and operating strategy.

                    We have long-term agreements with Comcast Cable  to facilitate the delivery of local telephone services.   Under the terms of these agreements, we  lease for a fee certain capacity on our network to Comcast Cable.  We  also provide certain services and support for which we receive additional payments. The capital required to deploy telephone services over our networks is  shared, with Comcast Cable  responsible for switching and transport facilities.

                    Our principal offices are located at c/o Insight Communications Company, Inc., 810 Seventh Avenue, New York, New York 10019, and our telephone number is (917) 286-2300.

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Strategy

                    Our strategy is to be a competitive, full-service provider of entertainment, information and communications services. This strategy is centered on the deployment of new and enhanced products and services for the communities served by our networks and consists of the following elements:

          Focus on operating large, tightly-grouped clusters of cable systems with attractive technical and demographic profiles

                    We operate large, tightly-grouped clusters of cable systems, most of which have attractive technical and demographic profiles. Our systems are characterized by high housing densities and high ratios of customers to headends. As a result, the amount of capital necessary to deploy new and enhanced products and services is significantly reduced on a per home basis because of the large number of customers served by a single headend. We believe that the highly clustered nature of our systems enables us to more efficiently deploy our marketing dollars and maximize our ability to enhance customer awareness, increase use of our products and services and build brand support. Furthermore, our clustered systems, across 95% of our customers, providing for headends serving an average of 93,000 customers upon completion of our planned network upgrades, allow us to be capital efficient as we invest in necessary technology. Our demographic profile is characterized by good housing growth and low unemployment in growing communities, many of which are centered around large universities and/or major commercial enterprises. We believe that households with our demographic profile are more likely to subscribe to these new and enhanced products and services than the national average demographic profile.

          Expeditiously upgrade our network

                    We are upgrading our network expeditiously in order to provide new and enhanced products and services, increase the programming and communications choices for our customers, improve our competitive position and increase overall customer satisfaction. We are in the process of upgrading almost all of our network to provide at least 750 MHz capacity, or “bandwidth,” and two-way active capability with an average of 700 homes per fiber node, which can be further subdivided if necessary.  Nodes are the point of interface between our headends and our network. The result will be a significant increase in network capacity, quality and reliability which facilitates the delivery of new and enhanced products and services and reduced operating costs. Our aggressive investment in our broadband cable network upgrade allows us to expeditiously offer these services to substantially all of our customers.

          Introduce new and enhanced products and services, including interactive Insight Digital service, high-speed data service and telephone service

                    Our marketing strategy is to offer our customers an array of entertainment, information and communications services on a bundled basis. By bundling our products and services, we provide our customers with an increased choice of services in value-added packages, which we believe results in higher customer satisfaction, increased use of our services and greater customer retention. We have conducted research and held numerous focus group sessions in our local markets, which lead us to believe that these services have high customer appeal. We expect that our ability to provide bundled services will provide us with a strong competitive advantage over alternative video providers, such as direct broadcast satellite television systems, and incumbent telephone companies. To accelerate the deployment of these services, we have entered into arrangements and technical initiatives with several industry leaders, including: (1) Comcast Cable (formerly known as AT&T Broadband) to provide telephone services; (2) Comcast Corp. and RoadRunner to provide certain high-speed data services; (3) SeaChange International, Inc. to provide

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video-on-demand; (4) Liberate Technologies to utilize its software platform for the deployment of interactive television services; and (5) SourceSuite LLC to provide an interactive program guide as well as local information and community guides.

          Leverage strong local presence to enhance customer and community relations

                    Excellent customer service is a key element of our strategy. We are dedicated to quality customer service and seek a high level of customer satisfaction by employing localized customer care, extensively using market research and providing customers with an attractively priced product offering. A significant number of our customers visit their local office on a monthly basis providing us the opportunity to demonstrate and sell our new and enhanced products and services. Our localized customer care initiatives create substantial marketing and promotion opportunities, which we believe are effective in the deployment of interactive, digital and high-speed data products. We believe that we achieve customer satisfaction levels that are substantially above industry averages.  Annually, we commission Peter D. Hart Research Associates to survey our customers with respect to service and product knowledge. Based upon our most recent survey conducted in November 2002, our customers continue to be highly satisfied with our service.

                    In addition, we are dedicated to fostering strong relations in the communities we serve. We sponsor local charities and community causes through staged events and promotional campaigns, including the industry’s Cable in the Classroom program. Our emphasis on customer service and strong community involvement has led to higher customer satisfaction, reduced customer churn and excellent franchise relationships. To further strengthen community relations and differentiate us from direct broadcast satellite television systems and other multichannel video providers, we provide locally produced and oriented programming that offers, among other things, community information, local government proceedings and local specialty interest shows. In some of our markets, we are the only broadcaster of local college and high school sporting events, which allows us to provide important programming that builds customer loyalty.

          Pursue value-enhancing transactions in nearby or adjacent geographies

                    To support our strategy, we intend to pursue value-enhancing transactions. To augment our internal customer growth, we will seek to swap or acquire systems that strategically fit our clustering and operating strategy. We do not currently have any agreements, commitments or understandings for any future acquisitions. There is no assurance that any additional acquisitions will be completed. We believe that by acquiring or swapping systems in close proximity we can improve revenue growth and operating margins. This is achieved through the consolidation of headends and spread of fixed costs over larger systems and the increase of operating efficiencies associated with larger systems.

Technical Overview

                    We believe that in order to achieve consistently high levels of customer service, reduce operating costs, maintain a strong competitive position and deploy important new technologies, we will need to install and maintain a state-of-the-art technical platform. The deployment of fiber optic cable which has a capacity for a very large number of channels, an increase in the bandwidth to 750 MHz or higher, the activation of a two-way communications network and the installation of digital equipment will allow us to deliver new and enhanced products and services, including interactive digital video, high-speed data services and telephone services provided by Comcast Cable.

                    As of December 31, 2002, our systems were comprised of approximately 28,300 miles of

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network serving approximately 1.3 million customers and passing approximately 2.3 million homes resulting in a density of approximately 80 homes per mile. As of that date, our systems were made up of an aggregate of 45 headends. We intend to continue our strategy of consolidating headends by eliminating approximately 32 headends, at which point 95% of our customers will be served by fourteen headends. As of December 31, 2002, we estimate that 92% of our customers were passed by our upgraded network. After completion of our planned network upgrades, approximately  97% of our customers will be served by a network that is two-way active and 750 MHz.

                    Our network design calls for an analog and digital two-way active network with fiber optic cable carrying signals from the headend to the distribution point within our customers’ neighborhoods. The signals are transferred to our coaxial cable network at the node for delivery to our customers. We have designed the fiber system to be capable of subdividing the nodes if traffic on the network requires additional capacity.

                    We believe that active use of fiber optic technology as a supplement to coaxial cable plays a major role in expanding channel capacity and improving the performance of our systems. Fiber optic strands are capable of carrying hundreds of video, data and voice channels over extended distances without the extensive signal amplification typically required for coaxial cable. We will continue to deploy fiber optic cable to further reduce amplifier cascades while improving picture quality and system reliability.

                    A direct result of this extensive use of fiber optics is an improvement in picture quality and a reduction of outages because system failures will be both significantly reduced and will impact far fewer customers when they do occur. Our design allows our systems to have the capability to run multiple separate channel line-ups from a single headend and to insert targeted advertisements into specific neighborhoods.

                    To enable us to deliver telephone services, Comcast Cable is required to install and maintain the necessary switching and transport facilities. We are required to deploy the necessary equipment at the headends and at customers’ homes, and are responsible for expanding and upgrading our network to provide the required capacity. We are increasing the reliability of the services by implementing centralized powering and status monitoring on our networks as telephone services are deployed in our systems. Centralized power provides the reliability, including lifeline reliability, required in delivering telephone services. The existing commercial power structure employed by cable networks is subject to the general power disruptions experienced by the local power utility. Centralized power will provide immediate battery back-up for a limited duration followed by unlimited gas-powered generator back-up. This reliability will not only benefit the delivery of telephone service, but also the reliability of the other products and services delivered over the network. Status monitoring will enable us to examine key components of our network so that we can diagnose problems before they become critical and interfere with the stability of our network.

Products and Services

          Traditional Cable Television Services

                    We offer our customers a full array of traditional cable television services and programming offerings. We tailor both our basic line-up and our additional channel offerings to each regional system in response to demographics, programming preferences, competition and local regulation. We offer a basic level of service which includes up to 25 channels of television programming. As of December 31, 2002, approximately 91% of our customers chose to pay an additional amount to receive additional channels under our “Classic” or “expanded” service. Premium channels, which are offered individually or in

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packages of several channels, are optional add-ons to the basic service or the classic service. As of December 31, 2002, premium units as a percentage of basic subscribers was approximately 48%.

                    Our analog cable television service offering includes the following:

          New and Enhanced Products and Services

                    As network upgrades have been activated, we deploy new and enhanced products and services in most of our markets, including interactive digital video and high-speed data services. In addition, we are offering telephone services to our customers in selected markets.

                    Interactive Digital Video

                    The implementation of interactive digital technology significantly enhances and expands the video and service offerings we provide to our customers. Most digital launches by other cable operators have been limited to simply offering more channels as a defensive move against competition from direct broadcast satellite television systems. Because of the significantly increased bandwidth and two-way transmission capability of our state-of-the-art technical platform, which continues to be built in conjunction with our digital launches, we have designed a more extensive digital product that is rich in program offerings and highly interactive with our customers. Our interactive digital service is designed to exploit the advantages of a broadband network in the existing generation of set-top devices.  The digital service encompasses three interactive applications: (1) an interactive program guide; (2) interactive local information and community guides; and (3) a video-on-demand service. 

                    We have conducted numerous focus groups and commissioned research studies, the findings of which have helped to develop our interactive digital strategy. We believe that our digital penetration will continue to increase as a result of our differentiated services such as a graphically rich local information network and video-on-demand pay-per-view with full VCR functionality.

                    We are packaging a “Digital Gateway” brand.  For $7.95 per month, our customers receive the following services:

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                    We have an agreement with Liberate Technologies that enables us to utilize the Liberate software platform for the deployment of interactive television services.  The Liberate software provides the middleware component of our interactive digital product.   Throughout our systems, we have deployed Motorola’s DCT-2000 digital set-top boxes.  More recently, we have deployed the less expensive DCT-1700 set-top boxes, and for systems that have launched high definition television, we have deployed the DCT-5100.

                    We have transitioned our digital customers from the video-on-demand service provided by DIVA Systems Corporation to a new video-on-demand infrastructure provided by SeaChange International, Inc. SeaChange provides a true video-on-demand service over the cable television infrastructure. Customers receive the movies electronically over the network and have full VCR functionality, including pause, play, fast forward and rewind. The movies are delivered with a high quality digital picture and digital sound. Our video-on-demand product is designed to provide movies at prices comparable to those charged for videotape rentals, pay-per-view and near video-on-demand movies, but with far greater convenience and functionality.  On May 29, 2002, DIVA filed for reorganization under Chapter 11 of the Bankruptcy Code.

                    On March 14, 2002, our manager purchased the remaining 50% equity interest in SourceSuite LLC that it did not already own. Through SourceSuite, our interactive digital platform provides its local Internet-style service and its interactive program guide.

                    Upon the completion of the network upgrades of the Indiana, Kentucky and Illinois systems, we will continue to migrate the previous owners’ digital products to our interactive Insight Digital product. While the previous owners’ digital products were targeted to fill programming voids, our interactive Insight Digital service is designed to provide our customers with an Internet-style experience as well as enhanced programming choices, which have resulted in higher penetration and customer satisfaction and reduced churn.

          High-Speed Data

                    We offer high-speed data service for personal computers for all of our upgraded systems through our own regional network branded Insightbb.com^SM, except for our Columbus, Ohio system, which utilizes the RoadRunner service.   AT&T Corp. provides the IP network backbone for our Insightbb.com service and certain core Internet support functions.  This arrangement replaces our previous

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Internet access provider Excite@Home.  We transitioned our customers from the Excite@Home network to our new regional network in mid-February 2002.  As of December 31, 2002, high-speed data services were made available in 2 million of our homes and served approximately 144,800 of our customers.

                    The broad bandwidth of our cable network enables data to be transmitted significantly faster than traditional telephone-based modem technologies, and the cable connection does not interfere with normal telephone activity or usage. For example, cable’s on-line customers can download large files from the Internet in a fraction of the time it takes when using any widely available telephone modem technology. Moreover, surfing the Internet on a high-speed network removes the long delays for Web pages to fully appear on the computer screen, allowing the experience to more closely approximate the responsiveness of changing channels on a television set. In addition, the cable modem is always on and does not require the customer to dial into an Internet service provider and await authorization. We believe that these factors of speed and easy accessibility will increase the use and impact of the Internet. Although other high-speed alternatives are being developed to compete with cable, we believe that the cable platform currently is best able to deliver these services.

          Telephone Services

                    We have a long-term agreement with Comcast Cable that allows us to deliver local telephone service using our network infrastructure and Comcast Cable’s switching and transport facilities. We lease certain capacity on our network to Comcast Cable for a monthly fee for each of the first four lines ordered by a customer. Additionally, Comcast Cable is required to pay us a fee for each customer installation. We are compensated on a per transaction basis for sales of Comcast Cable services as Comcast Cable’s agent. For our provision of billing and collection services, Comcast Cable is required to pay us a monthly fee per customer. We are also entitled to additional compensation if revenue exceeds the projected target revenue for local service lines and features, such as enhanced caller ID or voice mail.

                    Comcast Cable is the regulated telephone carrier for the provision of telephone services.  The Comcast Cable digital telephone services are marketed and carried as part of our bundle of Insight Digital services. We market the services, as Comcast Cable’s agent, both on a stand-alone basis and bundled with our other products and services, such as interactive digital video and high-speed data access. We also bill  customers for Comcast Cable’s services, as well as provide installation, maintenance and marketing support for Comcast Cable’s services. Pursuant to the agreement, the services are to be provided in the territories in which we currently provide cable television service, other than our Illinois systems. If both parties agree, the agreements can be expanded to include the Illinois systems.  Telephone services have been deployed in areas within Louisville, Kentucky, Evansville, Indiana, Lexington, Kentucky and Columbus, Ohio and are available to a total of approximately 533,000 households, with approximately 30,600 active customers as of December 31, 2002. 

                    The capital required to deploy telephone services over our networks is a shared obligation. We are responsible for upgrading and maintaining our network to meet specified measures of quality, including increasing the capacity on our network to an average capacity of two lines per residential household passed, assuming a specified service penetration rate. We also acquire and install equipment to be located at the customer premises that is required to provide telephone services.  Comcast Cable is responsible for switching and transport facilities.

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Business Background of Our Manager

                    Insight Communications was co-founded in 1985 as a limited partnership under the name Insight Communications Company, L.P. by Sidney R. Knafel and Michael S. Willner after a previous association with one another at Vision Cable Communications where Mr. Knafel was co-founder and Chairman and Mr. Willner held various operating positions, ultimately holding the position of Executive Vice President and Chief Operating Officer. Vision Cable was sold to The Newhouse Group Inc. in 1981 and Mr. Willner remained there to run the cable operations until 1985 when he and Mr. Knafel formed Insight Communications.

                    In addition to many years of conventional cable television experience, Insight Communications’ management team has been involved in the development and deployment of full service communications networks since 1989. Through a then related entity, Insight Communications Company UK, L.P., Insight Communications’ management and related parties entered the cable television market in the United Kingdom, where today modern networks are widely deployed.

                    As a result of our management’s British experience, Insight Communications recognized that the technology and products developed in the United Kingdom would migrate to the United States in similar form. Insight Communications focused on planning to upgrade our network promptly after it became clear that the 1996 Telecom Act would encourage competition in the communications industries. Insight Communications understood, however, that the new products and services available with new technology were best deployed in markets which provided for efficiencies for branding and technical investment. Insight Communications’ original acquisition strategy, which focused on customer growth, was very successful. However, Insight Communications’ management team recognized the opportunity to evolve from our role as a cable television operator providing only home video entertainment into a full service alternative communications network providing not only standard video services, but also interactive digital video, high-speed data access and communications products and services.

                    Recognizing the opportunities presented by newly available products and services and favorable changes in the regulatory environment, Insight Communications executed a series of asset swaps, acquisitions and entered into several joint ventures that resulted in its current composition. The largest of these transactions were the 50/50 joint ventures formed with AT&T Broadband (now known as Comcast Cable) and its affiliates in October 1998 with respect to the Indiana systems, in October 1999 with respect to the Kentucky systems and on January 5, 2001 with respect to the Illinois systems. As of December 31, 1997, Insight Communications’ systems had approximately 180,000 customers with the two largest concentrations in Utah and Indiana, which together represented less than half of its customers. Insight Communications believes that it has successfully transformed its assets so that  it currently owns,  operates and manages a cable television network serving approximately 1.4 million customers, all of which are  clustered in the contiguous states of Indiana, Kentucky, Illinois and Ohio. Insight Communications’ current assets are reflective of its strategy to own systems that have high ratios of customers to headends.

                    In July 1999, the holders of the partnership interests of Insight Communications Company, L.P, (“Insight LP”) exchanged their respective partnership interests for common stock of Insight Communications. As a result, Insight LP became a wholly-owned subsidiary of Insight Communications. Simultaneous with the exchange, Insight Communications consummated an initial public offering of 26,450,000 shares of its Class A common stock, raising an aggregate of approximately $650.0 million. Insight Communications’ Class A common stock is currently listed on The Nasdaq National Market under the symbol “ICCI.”

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Our Systems

                    Our systems in Indiana, Kentucky, Illinois and Ohio serve approximately 1.3 million customers. We are the largest operator of cable systems in both Indiana and Kentucky and the second largest in Illinois. Our systems are clustered or are capable of being clustered to serve an average of 100,000 customers per headend.

                    We are able to realize significant operational synergies due to the size of the clusters in these states and the demographic proximity of all of our systems. In all of our systems, we have nearly completed upgrading our system infrastructures to enable us to deliver new technologies, products and services to provide our customers with greater value and choices in the face of growing competition. The highly clustered nature of our systems enables us to (a) more efficiently invest our marketing dollars and maximize our brand awareness, (b) more economically introduce new and enhanced services, and (c) reduce our overall operating and maintenance costs as a result of our ability to deploy fiber and reduce the number of headends we use throughout our systems. As a result, we believe we will be able to achieve improved operating performance on both a combined and system-wide basis. Our relationship with Comcast Cable provides us with substantial purchasing economies for both our programming and hardware needs.

          The Indiana Systems

                    General

                    As of December 31, 2002, the Indiana systems passed approximately 569,200 homes and served approximately 326,000 customers.  The Indiana systems are owned by Insight Communications Midwest, which is the largest cable operator in the state. Insight Communications Midwest, which was capitalized on October 31, 1998, was a 50/50 joint venture between Insight LP and an indirect subsidiary of AT&T Broadband (now known as Comcast Cable) until the contribution of its equity interests on October 1, 1999 into us. Insight Communications serves as manager of the Indiana systems. We believe that there are additional opportunities to augment our position in Indiana through additional acquisitions and swaps.  Approximately 95% of our customers in Indiana are served by three headends.

                    Insight Communications manages the day-to-day operations of Indiana and Kentucky cable television systems owned by Comcast of Montana/Indiana/Kentucky/Utah (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, which served approximately 114,600 customers as of December 31, 2002. The systems are operated by employees of our Indiana and Kentucky systems, and the overhead for these systems is allocated and charged against the cash flow of the managed systems. On February 28, 2003, we exchanged with an affiliate of Comcast Cable the system we owned in Griffin, Georgia serving approximately 11,800 customers, plus $25 million, for certain of these managed systems serving approximately 23,400 customers which are presently tied into our Louisville system. The management arrangement for the remaining managed systems  expires on June 30, 2003.

                    The Indiana systems are organized in four management districts:

                    The Central District

                    As of December 31, 2002, the Central District passed approximately 143,900  homes and served approximately 80,400  customers, principally in the community of Bloomington. The City of Bloomington, located 45 miles south of Indianapolis, is the home of Indiana University. Besides the

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University, major employers include United Technology, Cook Incorporated and General Electric. The median household income for the area is approximately $43,000 per year, while the median family income is approximately $55,800 per year. Household income differs from family income by including income from all persons in all households, including persons living alone and other non-family households.

                    Digital video service was launched in Bloomington by AT&T Broadband (now known as Comcast Cable) prior to the formation of Insight Communications Midwest. All Bloomington digital customers have been migrated to our interactive Insight Digital service, including the video-on-demand service. Our Insightbb.com high-speed Internet service is also available in most of the district.  We expect to  complete the upgrade of this district during 2003.

                    The Southwest District

                    As of December 31, 2001, the Southwest District passed approximately 127,100 homes and served approximately 59,600 customers, principally in the communities of Evansville and Jasper. The median household income for the area is approximately $40,500 per year, while the median family income is approximately $49,900 per year. Major employers include Alcoa, Whirlpool and Bristol-Myers Squibb.

                    By the end of 2001, we completed the network upgrade of the Southwest District to 750 MHz and we are currently migrating the digital customers to our interactive Insight Digital service, including our video-on-demand service and the LocalSource interactive information service. Our Insightbb.com high-speed Internet service is available in Evansville. In addition,telephone service was launched in parts of Evansville in August of 2001, with service expected to be available throughout most of the district by the end of the second quarter of 2003.

                    A related party of Southern Indiana Gas and Electric Co. has overbuilt the City of Evansville. Southern Indiana Gas and Electric Co. has obtained franchises to provide cable television service in the City of Evansville and neighboring areas and commenced service in April 1999. We believe the Southern Indiana Gas and Electric Co. overbuild passed approximately 82,300homes in our service area as of December 2002 and is expected to pass additional homes, and has commenced offering telephone and data service.

                    The Northwest District

                    As of December 31, 2001, the Northwest District passed approximately 103,700 homes and served approximately 68,200 customers, principally in the communities of Lafayette and Kokomo.  The City of Lafayette is the home of Purdue University. Besides Purdue University, major employers include Great Lakes Chemical, Lafayette Life Insurance, General Motors and Delco Remy. The median household income for the area is approximately $41,000 per year, while the median family income is approximately $52,400 per year.

                    The upgrades of the Lafayette and Kokomo systems to 750 MHz are completed. Our Insightbb.com high-speed Internet service and Insight Digital service, including the LocalSource product and our video-on-demand service is available in all of these markets.

                    The Northeast District

                    As of December 31, 2002, the Northeast District passed approximately 194,500  homes and served approximately 117,800  customers in Richmond as well as in the suburban communities near

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Indianapolis, including Anderson and Noblesville. Indianapolis is the state capital of Indiana and is the twelfth largest city in the United States. Major employers include General Motors, Eli Lilly and Belden Wire and Cable. The median household income for the area is approximately $55,000  per year, while the median family income is approximately $63,500  per year.

                    The upgrade of the Northeast District to 750 MHz was substantially completed in 2002.Our Insightbb.com high-speed Internet service is availablethroughout most of the district. AT&T Broadband (now known as Comcast Cable) launched digital service in several of the markets in 1998, and we have  migrated most of those customers to our interactive Insight Digital service, simultaneous with the launch throughout the district of our Insight Digital service, including the LocalSource product and our  video-on-demand service.

          The Kentucky Systems

                    General

                    As of December 31, 2002, the Kentucky systems passed approximately 783,100 homes and served approximately 449,100 customers. This includes approximately 46,800 homes passed and approximately 23,400 customers served by the Jeffersonville, Indiana system, which is owned by Insight Communications Midwest and operated by the management of the Louisville, Kentucky system. The Kentucky systems are owned by Insight Kentucky Partners II, L.P., which is the largest cable operator in the state. Our manager acquired a combined 50% interest in Insight Kentucky’s parent on October 1, 1999, with related parties of AT&T Broadband (now known as Comcast Cable) holding the other 50% interest. Simultaneous with this acquisition, all of the equity interests were contributed into us. Insight Communications serves as manager of the Kentucky systems.

                    Our Kentucky systems are located in and around four of the five largest cities in the state: Louisville, Lexington, Covington, and Bowling Green. Over 99% of Insight Kentucky’s customers are served by a two-way active, 750 MHz network. Additionally, approximately 99% of the systems’ customers are served by four headends.

                    Summary statistics for the Kentucky systems are as follows:

                    Louisville

                    As of December 31, 2001, the Louisville system passed approximately 472,900 homes and served approximately 260,000  customers. Louisville is the 16^th largest city in the United States and Kentucky’s largest city. It is located in the northern region of the state, bordering Indiana. Louisville is located within a day’s drive of nearly 50% of the United States population, which makes it an important crossroads for trade and business. Major employers in the Louisville metropolitan area include Humana, UPS, General Electric and Ford. The median household income for the area is approximately $39,800, while the median family income is approximately $48,300.  Knology, Inc. obtained a franchise to provide cable television service in the City of Louisville, although it had not  built a cable system as of December 31, 2002.

                    The Louisville system substantially completed a network upgrade and we serve substantially all of our customers with two-way, 750 MHz cable. The system is also in the final stage of headend consolidation, which will allow 99% of the customers in the system to be served from a single headend.

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                    InterMedia Capital Partners VI, L.P. launched its digital service in Louisville in November 1998. The service had approximately 85,600 customers in the Louisville system  as of December 31, 2002. Wehave  migratedthese customers to our interactive Insight Digital service, including the LocalSource product and our  video-on-demand service. Digital phone service is available in over 73% of Louisville and our Insightbb.com high-speed Internet service is available in the Louisville system.

                    Lexington

                    As of December 31, 2002, the Lexington system passed approximately 125,500 homes and served approximately 83,400 customers from a single headend. Lexington is Kentucky’s second largest city, located in the central part of the state. Major employers in the Lexington area include the University of Kentucky, Toyota and Lexmark International. The median household income for the area is approximately $40,000, while the median family income is approximately $50,700.

                    As of December 31, 2002, slightly over 34% of customers have subscribed to our interactive digital service.  Nearly 17% of customers have Insightbb.com high speed Internet service.  In addition, digital telephone service was launched in mid-year 2002 on a node by node basis with completion anticipated in 2003.

                    The Lexington system has completed a network upgrade and we serve all of our customers with two-way, 750 MHz cable. Our Insightbb.com high-speed Internet service and Insight Digital service, including the LocalSource product and our video-on-demand service are available throughout the system. 

                    Covington

                    As of December 31, 2002, the Covington system passed approximately 149,100 homes and served approximately 82,900  customers from a single headend. Covington is Kentucky’s fifth largest city. Major employers in the Covington area include Delta Airlines, Toyota, Citicorp, DHL, Ashland, Inc., Fidelity Investments, BICC General Cable Corporation, Omnicare, COMAIR, Levis Strauss, Gap, Inc., Mazak Corp., and R.A. Jones, Inc. The median household income for the area is approximately $48,700,  while the median family income is approximately $57,000.

                    The Covington system has completed a network upgrade and we serve all of our customers with two-way, 750 MHz cable. Our Insightbb.com high-speed Internet service and Insight Digital service, including the LocalSource product and our video-on-demand service are available in the Covington system. 

                    Bowling Green

                    As of December 31, 2001, the Bowling Green system passed approximately 35,600 homes and served approximately 22,800 customers from a single headend. Bowling Green is located 120 miles south of Louisville, 110 miles southwest of Lexington and 70 miles north of Nashville, Tennessee. Bowling Green is the fourth largest city in Kentucky and is the home of Western Kentucky University. Major employers in the Bowling Green area include General Motors, Fruit of the Loom, Commonwealth Health Corporation, DESA International and Houchens Industries. The median household income for the area is approximately $32,600, while the median family income is approximately $42,700.

                    The Bowling Green system is fully upgraded to two-way, 750 MHz cable. Our Insightbb.com high-speed Internet service and Insight Digital service, including the LocalSource product are available in

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Bowling Green.

          The Illinois Systems

                    The Illinois systems are owned and operated by Insight Communications Midwest, and were contributed to us on January 5, 2001.   Insight Communications serves as manager of the Illinois systems. These systems are located primarily in mid-sized communities, including Springfield, Rockford, Peoria, Dixon and Champaign/Urbana. The Rockford system was contributed by Insight Communications and the other Illinois systems were acquired from certain  cable subsidiaries of AT&T Corp.

                    In total, the Illinois systems passed approximately 687,800  homes and served approximately 413,700  customers as of December 31, 2002, making us the second largest operator of cable television systems in the State of Illinois. These systems are served by networks with approximately 6000  miles having a capacity greater than or equal to 750 MHz, 1,400  miles having a capacity greater than or equal to 450 MHz and less than 750 MHz, and 220 miles having a capacity less than 450 MHz. Consistent with our strategy of expeditiously upgrading our network to facilitate the deployment of our enhanced products and services, we are continuing to upgrade the network of the Illinois systems and intend to completely migrate the digital customers to our  Insight Digital service. We expect to invest approximately $14.1 million to substantially complete the upgrade of these systems, and expect that the upgrades will be substantially completed during the first half of 2003. In the interim, we will launch Insight Digital on a node-by-node basis as system upgrades are completed. We anticipate additional deployments of our video-on-demand service by the middle of 2003 in selected areas in the Illinois systems.

                    The Illinois systems are organized in five management districts:

                    The Rockford District

                    As of December 31, 2002, the Rockford District passed approximately 131,600 homes and served approximately 78,400 customers. Rockford is Illinois’ second largest city. Major employers in the Rockford metropolitan area include Chrysler Corporation, Rockford Health System, Sundstrand Corporation and Swedish American Health Systems. The median household income for the area is approximately $36,500 per year, while the median family income is approximately $44,600 per year.

                    We completed the upgrade of the Rockford system, and began launching our Insight Digital service on a node-by-node basis as system upgrades were completed beginning in February 1999. Since launching our Insight Digital service in the Rockford system, the activated areas achieved approximately 24% digital penetration from its customers, with incremental revenue per digital customer of approximately $20 per month.  Our Insightbb.com high-speed Internet service is available throughout the district. 

                    The Peoria District

                    As of December 31, 2002, the Peoria District passed approximately 200,800  homes  and served approximately 124,200 customers, principally in the communities of Bloomington and Peoria. Bloomington is located in the north central part of the state. The Bloomington system is home to Illinois State University with over 20,000 students and Illinois Wesleyan University with over 2,000 students. Peoria is the fifth  largest city in Illinois, located in the north central part of the state. Major employers in the Peoria area include Maytag, Gates Rubber and the headquarters of Caterpillar. The median household income for the area is approximately $41,400, while the median family income is approximately $54,000.

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                    The Peoria system is currently undergoing a network upgrade from 550 MHz to 860 MHz, which is expected to be substantially completed during 2003. As of December 31, 2002, the Peoria District  achieved penetration levels for its digital service of nearly 21% in areas where digital service is available. We continue to migrate these customers to our interactive Insight Digital service, including the Local Source product and our video-on-demand service, during 2003. The system has launched high-speed data service and has achieved penetration levels of over 11% as of December 31, 2002 in areas where the service is available.

                    The Dixon District

                    As of December 31, 2002, the Dixon District passed approximately 68,700 homes and served approximately 43,800 customers, principally in the communities of Rock Falls, Peru and Dixon. Dixon is located in the north/central part of the State of Illinois. Major employers in the Dixon area include the State of Illinois, Raynor Manufacturing Company and Borg Warner Automotive. The median household income for the area is approximately $36,400, while the median family income is approximately $46,600.

                    Approximately 63% of the Dixon system currently operates with a 860 MHz network. As of December 31, 2002, the district achieved penetration levels for its digital service of approximately 17% in areas where the service is available. We continue to migrate these customers to our interactive Insight Digital service, including the LocalSource product and the Insightbb.com high-speed Internet service during 2003.

                    The Springfield District

                    As of December 31, 2002, the Springfield District passed approximately 187,900 homes and served approximately 115,300 customers, principally in the communities of Decatur and Springfield.    Springfield is the capital of Illinois and the sixth largest city in the state, located in the central part of the state. The major employer in the Springfield area is the State of Illinois. The median household income for the area is approximately $36,200, while the median family income is approximately $46,800.  The City of Springfield is considering a municipal overbuild utilizing an existing plant owned by the city.

                    The Springfield District is currently undergoing a network upgrade from 450 MHz to at least  750 MHz and two-way active. As of December 31, 2002, the district achieved penetration levels for its digital service of over 21% in the areas where the service is available. We continue to migrate these customers to our interactive Insight Digital service, including the Local Source product and our video-on-demand service. The system is currently rolling out the Insightbb.com high speed Internet service on a node-by-node basis.

                    The Champaign District

                    As of December 31, 2002, the Champaign District passed approximately 98,800 homes and served approximately 52,000 customers. Champaign/Urbana is located in the eastern central part of the state. The Champaign District is home to the University of Illinois with over 45,000 students. Major employers in the Champaign and Urbana areas include the University of Illinois, Kraft Foods and the Carle Clinic Association. The median household income for the area is approximately $30,300 and the median family income for the area is approximately $47,600.

                    The Champaign District serves substantially all of its customers by a two-way, 750 MHz

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network. The district had approximately 9,700 digital customers as of December 31, 2002.  We continue to migrate these customers to our interactive Insight Digital service, including the LocalSource service and our video-on-demand service, by the end of 2003. The Champaign District has launched high-speed data service and as of December 31, 2002, had over 8,400 customers.

          The Ohio System

                    In connection with the AT&T transactions in January 2001, the common equity of Insight Communications of Central Ohio, LLC, the entity holding the Ohio system, was contributed to us. As of December 31, 2002, the Ohio system passed approximately 198,700 homes and served approximately 88,100 customers from a single headend. The system serves the eastern portion of the City of Columbus and adjacent suburban communities within eastern Franklin County and the contiguous counties of Delaware, Licking, Fairfield and Pickaway. The City of Columbus is the 34th largest designated market area, the capital of Ohio and the home of Ohio State University. In addition to the state government and university, the Columbus economy is well diversified with the significant presence of prominent companies such as The Limited, Merck, Wendy’s, Nationwide Insurance, Borden and Worthington Industries. The median household income for our service area is approximately $40,300 per year, while the median family income is approximately $50,600 per year.

                    Approximately 91% of the Ohio system’s customers are served by a network upgraded to 870 MHz capacity, and our upgrade efforts are continuing. We began servicing customers from our upgraded network in November 1999. We are currently launching our interactive Insight Digital service, on a node-by-node basis, including our video-on-demand service and the LocalSource interactive information service. As of December 31, 2002, approximately 29,400 customers have subscribed to our interactive digital service, representing a penetration of nearly 36% in areas where digital service is available. The RoadRunner high-speed data service, launched in 2000, has achieved a penetration of 10% as of December 31, 2002 in areas where digital service is available. In addition, the Ohio system provides exclusive sports programming under the “Central Ohio Sport!” brand, featuring sporting events from Ohio State University.

                    In 1996, Ameritech obtained a citywide cable television franchise for the City of Columbus and suburban communities in Franklin County. WideOpenWest acquired the assets of Ameritech in December 2001, and has built its citywide franchise, both in our service area and in the Time Warner service area on the west side of Columbus. We and Time Warner service virtually distinct areas and therefore do not compete with one another. The areas of the Ohio system served by both us and WideOpenWest pass approximately 129,100 homes, representing 65% of the Ohio system’s total homes passed as of December 31, 2002.

                    We have launched a telephone service alternative to SBC (Ameritech) through our arrangement with Comcast Cable.

Customer Rates

                    Rates charged to customers vary based on the market served and service selected.  As of December 31, 2002, the weighted average revenue for our monthly combined basic and classic service was approximately $32.65. The national average was estimated to be $32.85 for the same services as of December 31, 2002, as reported by Paul Kagan & Associates.

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                    A one-time installation fee, which we may reduce during promotional periods, is charged to new customers, as well as reconnected customers. We charge monthly fees for set top boxes and remote control devices. We also charge administrative fees for delinquent payments for service. Customers are free to discontinue service at any time without additional charge and may be charged a reconnection fee to resume service. Commercial customers, such as hotels, motels and hospitals, are charged negotiated monthly fees and a non-recurring fee for the installation of service. Multiple dwelling unit accounts may be offered a bulk rate in exchange for single-point billing and basic service to all units.

Sales and Marketing

                    Our strategy is to sell multiple services to our customers, including video, high-speed data and telephone services. Customers who purchase more than one service are eligible for a bundled discount.  We regularly use targeted campaigns to sell the appropriate services to both our existing and our potential customer base. Our customer service representatives are trained and given the support to use their daily contacts with customers as opportunities to sell our new service offerings.

                    Due to the nature of the communities we serve, we are able to market our services in ways not typically used by urban cable operators. We can market products and services to our customers at our local offices where many of our customers pay their cable bills in person. Examples of our in-store marketing include the promotion of premium services as well as point-of-purchase demonstrations that will allow customers to experience our high-speed Internet service and digital products. We aggressively promote our services utilizing both broad and targeted marketing tactics, including outdoor billboards, outbound telemarketing, retail partnerships, direct mail, door-to-door sales, cross-channel promotion, print and broadcast.

                    We build awareness of the Insight Communications brand through advertising campaigns and strong community relations. As a result of our branding efforts and consistent service standards, we believe we have developed a reputation for quality and reliability. We also believe that our marketing strategies are particularly effective due to our regional clustering and market significance, which enables us to reach a greater number of both current and potential customers in an efficient, uniform manner.

Programming Suppliers

                    Most cable companies purchase their programming product directly from the program networks by entering into a contractual relationship with the program supplier. The vast majority of these program suppliers offer the cable operator license fee rate cards with size-based volume discounts and other financial incentives, such as launch and marketing support and cross-channel advertising.

                    Currently there are over 160 cable networks competing for carriage on our analog and digital platforms. We have continued to leverage both our systems’ analog upgrades and newly deployed digital packages as an incentive to our suppliers to secure long term programming deals with reasonable price structures and other creative financial arrangements to offset license fee increases.

                    Because of our relationship with Comcast Cable (formerly known as AT&T Broadband), we have the right to purchase certain programming services for our systems directly through Comcast Cable’s programming supplier Satellite Services, Inc. We believe that Satellite Services has attractive programming costs. Additionally, given the clustering of our systems in the Midwest, we have been successful in affiliating with regionally based programming products such as sports and news, at lower than average license fees.

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                    Under the terms of our partnership agreement, our manager and Comcast Cable are each required to use commercially reasonable efforts to extend to us all of the programming discounts available to them.  Accordingly, we should benefit from both the existing Satellite Services arrangement as well as additional discounts available to Comcast Cable.  However, we cannot predict with certainty when these benefits will occur, or the extent to which they actually will be achieved.

Commitment to Community Relations

                    We believe that maintaining strong community relations will continue to be an important factor in ensuring our long-term success. Our community-oriented initiatives include educational programs and the sponsorship of programs and events recognizing local citizens. In addition, members of our management team host community events for political and business leaders as well as representatives of the local media, where they discuss our operations and recent developments in the telecommunications industry. We have received numerous awards recognizing our ongoing community relations, and we believe that such initiatives result in consumer and governmental goodwill and name recognition, increasing customer loyalty and likely facilitating any future efforts to provide new communications services.

                    We encourage all of our local management teams to take leadership roles in community and civic activities. Over the years, our systems have received various forms of  recognition for their efforts to support local causes and charities as well as programs that encourage a better way of life in the communities they serve.

                    All of our systems provide ongoing support for Cable in the Classroom, an industry initiative that earns recognition both locally and nationally for its efforts in furthering the education of children. Our newest public affairs initiative, “In the Know,” further underscores our commitment to education by offering the vast uses of high-speed Internet access into each accredited school in our service area. “In the Know” builds upon the cable industry’s pledge to provide free high-speed Internet access to eligible local schools and public libraries. We have taken that pledge a step further to offer students and teachers the resources of broadband content and robust cable programming to enrich the learning experience.

                    With cable modems in the classroom, teachers and students alike can benefit from the speedy downloads and access to advanced applications to enhance the learning experience. In addition to providing this advanced technology free of charge, we intend to continue offering programming enhancements in partnership with various cable networks. As an increasing number of areas become serviceable for high-speed service, “In the Know” is designed to incorporate multi-faceted synergies with these programmers in order to provide specialized educational offerings for each of our systems.

                    In 2001, our Louisville, Kentucky system partnered with Oxygen Media to form “The Young Women’s Technology Fellowship” as part of our “In the Know” efforts.  This program was a synergy of the common goals between Insight and Oxygen in order to address the issue of the digital divide through cable’s robust resources.  The Fellowship provided advanced training and resources to 12 motivated young women most in need.  This program received a great deal of recognition both locally and industry-wide, including a 2002 Beacon Award by the Cable Television Public Affairs Association.

                    Building upon the success of our previous “In the Know” efforts, in 2002 we introduced a similar  program in partnership with ESPN and the Boys &Girls Club in Anderson, Indiana. Also aimed at bridging the digital divide, this four-week online curriculum centered around the NCAA basketball

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tournament and incorporated online research skills with the technology of cable modem access.

                    One of the advantages a local cable operator has over nationally distributed competitors is its ability to develop local programming. To further strengthen community relations and differentiate us from direct broadcast satellite television systems and other multichannel video providers, we provide locally produced and oriented programming. Several of our systems have full production capabilities, with in-house and/or mobile production studios to create local content. To attract viewers, we offer a broad range of local programming alternatives, including community information, local government proceedings and local specialty interest shows. In some of our markets, we are the exclusive broadcaster of local college and high school sporting events, which we believe provides unique programming and builds customer loyalty. We believe that our emphasis on local programming creates significant opportunities for increased advertising revenues. Locally originated programming will also play an integral role in the deployment of our new and enhanced products and services.

Franchises

                    Cable television systems are constructed and operated under fixed-term non-exclusive franchises or other types of operating authorities that are granted by either local governmental or centralized state authorities. These franchises typically contain many conditions, such as:

                    These local franchises are subject to limits imposed by federal law.

                    As of December 31, 2002, we held 548 franchises in the aggregate, consisting of 196 in Indiana, 195 in Kentucky, 124 in Illinois, 29 in Ohio and 4 in Georgia. Many of these franchises require the payment of fees to the issuing authorities of 3% to 5% of gross revenues, as defined by each franchise agreement, from the related cable system.

                    The 1984 Cable Act prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross annual revenues and also permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances that render performance commercially impracticable.

                    The following table summarizes information relating to the year of expiration of our franchises, excluding the managed systems, as of December 31, 2002:

*  Such franchises are operated on a month-to-month basis and are in the process of being renewed.

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                    The Communications  Act  of 1934, as amended, provides, among other things, for an orderly franchise renewal process which limits a franchising authority’s ability to deny a franchise renewal if the incumbent operator follows prescribed renewal procedures. In addition, the Communications  Act of 1934, as amended established comprehensive renewal procedures which require, when properly elected by an operator, that an incumbent franchisee’s renewal application be assessed on its own merits and not as part of a comparative process with competing applications.

                    We believe that our cable systems generally have good relationships with their respective franchise authorities. We have never had a franchise revoked or failed to have a franchise renewed.

Competition

                    Cable systems face increasing competition from alternative methods of receiving and distributing their core video business. Both wireline and wireless competitors have made inroads in competing against incumbent cable operators. The extent to which a cable operator is competitive depends, in part, upon its ability to provide to customers, at a reasonable price, a greater variety of programming and other communications services than are available off-air or through alternative delivery sources and upon superior technical performance and customer service.

                    Congress has enacted legislation and the FCC has adopted regulatory policies providing a more favorable operating environment for new and existing technologies, in particular direct broadcast satellite television systems operators, that have the potential to provide increased competition to cable systems. Congress has also enacted legislation which permits direct broadcast satellite companies to retransmit local television signals, eliminating one of the objections of consumers about switching to satellites.

                    The 1996 Telecom Act makes it easier for local exchange telephone companies and others to provide a wide variety of video services competitive with services provided by cable systems.  Local exchange telephone companies in various states have either announced plans, obtained local franchise authorizations or are currently competing with our cable communications systems. Local exchange telephone companies and other companies also provide facilities for the transmission and distribution to homes and businesses of interactive computer-based services, including the Internet, as well as data and other non-video services. The ability of local exchange telephone companies to cross-subsidize video, data and telecommunication services also poses some threat to cable operators.

                    Franchised cable systems compete with private cable systems for the right to service condominiums, apartment complexes and other multiple unit residential developments. The operators of these private systems, known as satellite master antenna television systems often enter into exclusive agreements with apartment building owners or homeowners’ associations that preclude franchised cable television operators from serving residents of such private complexes. However, the 1984 Cable Act gives franchised cable operators the right to use existing compatible easements within their franchise areas on nondiscriminatory terms and conditions. Accordingly, where there are preexisting compatible easements, cable operators may not be unfairly denied access or discriminated against with respect to access to the premises served by those easements. Conflicting judicial decisions have been issued interpreting the scope

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of the access right granted by the 1984 Cable Act, particularly with respect to easements located entirely on private property.

                    The 1996 Telecom Act may exempt some of our competitors from regulation as cable systems. The 1996 Telecom Act amends the definition of a “cable system” such that providers of competitive video programming are only regulated and franchised as “cable systems” if they use public rights-of-way. Thus, a broader class of entities providing video programming, including operators of satellite master antenna television systems, may be exempt from regulation as cable television systems under the 1996 Telecom Act. This exemption may give these entities a competitive advantage over us.

                    Cable television systems are operated under non-exclusive franchises granted by local authorities thereby allowing more than one cable system to be built in the same area. Although the number of municipal and commercial overbuild cable systems is small, the potential profitability of a cable system is adversely affected if the local customer base is divided among multiple systems. Additionally, constructing a competing cable system is a capital intensive process which involves a high degree of risk. We believe that in order to be successful, a competitor’s overbuild would need to be able to serve the homes in the overbuilt area on a more cost-effective basis than we can. Any such overbuild operation would require either significant access to capital or access to facilities already in place that are capable of delivering cable television programming. As of December 31, 2002, our Evansville, Indiana and Columbus, Ohio systems were overbuilt. As a result, approximately 10% of the total homes passed by our systems were overbuilt as of such date.

                    Direct broadcast satellite television systems use digital video compression technology to increase the channel capacity of their systems. Direct broadcast satellite television systems’ programming is currently available to individual households, condominiums and apartment and office complexes through conventional, medium and high-power satellites. High-power direct broadcast satellite television system service is currently being provided by DIRECTV, Inc., and EchoStar Communications Corporation. Direct broadcast satellite television systems have some advantages over cable systems that were not upgraded, such as greater channel capacity and digital picture quality. In addition, legislation has been enacted which permits direct broadcast satellite television systems to retransmit the signals of local television stations in their local markets. However, direct broadcast satellite television systems have a limited ability to offer locally produced programming, and do not have a significant local presence in the community. In addition, direct broadcast satellite television systems packages can be more expensive than cable, especially if the subscriber intends to view the service on more than one television in the household. Finally, direct broadcast satellite television systems do not have the same full two-way capability, which we believe will limit their ability to compete in a meaningful way in interactive television, high-speed data and voice communications. Direct broadcast satellite has enjoyed a 19% average penetration nationwide, and we believe that satellite penetration in our various markets generally is in accordance with such average.

                    Several telephone companies are introducing digital subscriber line technology (“DSL”), which allows Internet access over traditional phone lines at data transmission speeds greater than those available by a standard telephone modem. Although these transmission speeds are not as great as the transmission speeds of a cable modem, we believe that the transmission speeds of DSL technology are sufficiently high that such technology will compete with cable modem technology. The FCC is currently considering its authority to promulgate rules to facilitate the deployment of these services and regulate areas including high-speed data and interactive Internet services. We cannot predict the outcome of any FCC proceedings, or the impact of that outcome on the success of our Internet access services or on our operations. In addition to DSL and dialup modems for providing Internet access, other technologies are entering the

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marketplace. For example, there is a wireless technology popularly known as “Wi-Fi,” which is faster than dial-up, but slower than cable modem technology.

                    As we expand our offerings to include telephone services, our telephone  branded services will be subject to competition from existing providers, including both local exchange telephone companies and long-distance carriers. The telecommunications industry is highly competitive and many telephone service providers may have greater financial resources than we have, or have established relationships with regulatory authorities. We cannot predict the extent to which the presence of these competitors will influence customer penetration in our telephone service areas. While we intend to add our telephone service offering to our various markets, the service has only  been launched in selected markets and has not yet achieved any material penetration levels.

                    Other new technologies may become competitive with services that cable communications systems can offer. Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environment are constantly occurring. Thus, we cannot predict the effect of ongoing or future developments on the cable communications industry or on our operations.

Legislation and Regulation

                    The cable television industry is regulated by the FCC, some state governments and the applicable local governments. In addition, various legislative and regulatory proposals under consideration from time to time by Congress and various federal agencies have in the past, and may in the future, materially affect us. The following is a summary of federal laws and regulations materially affecting the growth and operation of the cable television industry and a description of certain state and local laws. We believe that the regulation of the cable television industry remains a matter of interest to Congress, the FCC and other regulatory authorities. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities may take or the effect thereof on us.

          Federal Legislation

                    The principal federal statute governing the cable television industry is the Communications Act. As it affects the cable television industry, the Communications Act has been significantly amended on three occasions, by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom Act altered the regulatory structure governing the nation’s telecommunications providers. It removed barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduced the scope of cable rate regulation.

          Federal Regulation

                    The FCC, the principal federal regulatory agency with jurisdiction over cable television, has adopted regulations covering such areas as cross-ownership between cable television systems and other communications businesses, carriage of television broadcast programming, cable rates, consumer protection and customer service, leased access, indecent programming, programmer access to cable television systems, programming agreements, technical standards, consumer electronics equipment compatibility, ownership of home wiring, program exclusivity, equal employment opportunity, consumer education and lockbox enforcement, origination cablecasting and sponsorship identification, children’s programming, signal leakage and frequency use, maintenance of various records, and antenna structure notification, marking and lighting. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other

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administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. A brief summary of certain of these federal regulations as adopted to date follows.

                    Rate Regulation

                    The 1984 Cable Act codified existing FCC preemption of rate regulation for premium channels and optional non-basic program tiers. The 1984 Cable Act also deregulated basic cable rates for cable television systems determined by the FCC to be subject to effective competition. The 1992 Cable Act substantially changed the previous statutory and FCC rate regulation standards. The 1992 Cable Act replaced the FCC’s old standard for determining effective competition, under which most cable television systems were not subject to rate regulation, with a statutory provision that resulted in nearly all cable television systems becoming subject to rate regulation of basic service. The 1996 Telecom Act expanded the definition of effective competition to cover situations where a local telephone company or its affiliate, or any multichannel video provider using telephone company facilities, offers comparable video service by any means except direct broadcast satellite television systems. Satisfaction of this test deregulates all rates.

                    For cable systems not subject to effective competition, the 1992 Cable Act required the FCC to adopt a formula for franchising authorities to assure that basic cable rates are reasonable; allowed the FCC to review rates for cable programming service tiers, other than per-channel or per-program services, in response to complaints filed by franchising authorities and/or cable customers; prohibited cable television systems from requiring basic customers to purchase service tiers above basic service in order to purchase premium services if the system is technically capable of compliance; required the FCC to adopt regulations to establish, on the basis of actual costs, the price for installation of cable service, remote controls, converter boxes and additional outlets; and allowed the FCC to impose restrictions on the retiering and rearrangement of cable services under certain limited circumstances. The 1996 Telecom Act limited the class of complainants regarding cable programming service tier rates to franchising authorities only, and ended FCC regulation of cable programming service tier rates on March 31, 1999. The 1996 Telecom Act also relaxes existing uniform rate requirements by specifying that such requirements do not apply where the operator faces effective competition, and by exempting bulk discounts to multiple dwelling units, although complaints about predatory pricing may be lodged with the FCC.

                    The FCC’s implementing regulations contain standards for the regulation of basic service rates. Local franchising authorities are empowered to order a reduction of existing rates which exceed the maximum permitted level for basic services and associated equipment, and refunds can be required. The FCC adopted a benchmark price cap system for measuring the reasonableness of existing basic service rates. Alternatively, cable operators have the opportunity to make cost-of-service showings which, in some cases, may justify rates above the applicable benchmarks. The rules also require that charges for cable-related equipment, converter boxes and remote control devices, for example, and installation services be unbundled from the provision of cable service and based upon actual costs plus a reasonable profit. The regulations also provide that future rate increases may not exceed an inflation-indexed amount, plus increases in certain costs beyond the cable operator’s control, such as taxes, franchise fees and increased programming costs. Cost-based adjustments to these capped rates can also be made in the event a cable television operator adds or deletes channels. There is also a streamlined cost-of-service methodology available to justify a rate increase on the basic tier for “significant” system upgrades.

                    Finally, there are regulations which require cable television systems to permit customers to purchase video programming on a per channel or a per program basis without the necessity of subscribing to any tier of service, other than the basic service tier.

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                    Carriage of Broadcast Television Signals

                    The 1992 Cable Act contains signal carriage requirements which allow commercial television broadcast stations that are “local” to a cable television system, that is to say that the system is located in the station’s area of dominant influence, to elect every three years whether to require the cable television system to carry the station, subject to certain exceptions, or whether the cable television system will have to negotiate for “retransmission consent” to carry the station. The next election between must-carry and retransmission consent was  October 1, 2002. A cable television system is generally required to devote up to one-third of its activated channel capacity for the carriage of local commercial television stations whether pursuant to mandatory carriage requirements or the retransmission consent requirements of the 1992 Cable Act. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, within the larger of: (i) a 50 mile radius from the station’s city of license; or (ii) the station’s Grade B contour, a measure of signal strength. Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable television systems have to obtain retransmission consent for the carriage of all “distant” commercial broadcast stations, except for certain “superstations,” which are commercial satellite-delivered independent stations such as WGN. To date, compliance with the “retransmission consent” and “must carry” provisions of the 1992 Cable Act has not had a material effect on us, although this result may change in the future depending on such factors as market conditions, channel capacity and similar matters when such arrangements are renegotiated. The FCC has issued a decision in a rulemaking proceeding dealing with the carriage of television signals in a digital format, both high definition and standard digital. The rules require carriage of local television broadcast stations that transmit solely in a digital format. However, a station that transmits in both analog and digital formats during the current several-year transition period is entitled to carriage of only its analog signal. The FCC has been asked to reconsider this decision. The FCC is also considering whether the mandatory carriage obligation should extend beyond the primary video signal to multiple services transmitted by a station over its digital channel.  The outcome of these proceedings could have a material effect on the number of services that a cable operator will be required to carry.

                    Deletion of Certain Programming

                    Cable television systems that have 1,000 or more customers must, upon the appropriate request of a local television station, delete the simultaneous or nonsimultaneous network programming of a distant station when such programming has also been contracted for by the local station on an exclusive basis. FCC regulations also enable television stations that have obtained exclusive distribution rights for syndicated programming in their market to require a cable television system to delete or “black out” such programming from other television stations which are carried by the cable television system.

                    Franchise Fees

                    Although franchising authorities may impose franchise fees under the 1984 Cable Act, such payments cannot exceed 5% of a cable television system’s annual gross revenues from the provision of cable services. Under the 1996 Telecom Act, franchising authorities may not exact franchise fees from revenues derived from telecommunications services, although they may be able to exact some additional compensation for the use of public rights-of-way. The FCC has ruled that franchise fees may not be imposed on revenue from cable modem service. Franchising authorities are also empowered, in awarding new franchises or renewing existing franchises, to require cable television operators to provide cable-related facilities and equipment and to enforce compliance with voluntary commitments. In the case of

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franchises in effect prior to the effective date of the 1984 Cable Act, franchising authorities may enforce requirements contained in the franchise relating to facilities, equipment and services, whether or not cable-related. The 1984 Cable Act, under certain limited circumstances, permits a cable operator to obtain modifications of franchise obligations.

                    Renewal of Franchises

                    The 1984 Cable Act and the 1992 Cable Act establish renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal and to provide specific grounds for franchising authorities to consider in making renewal decisions, including a franchisee’s performance under the franchise and community needs. Even after the formal renewal procedures are invoked, franchising authorities and cable television operators remain free to negotiate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements such as upgrading facilities and equipment, although the municipality must take into account the cost of meeting such requirements. Similarly, if a franchising authority’s consent is required for the purchase or sale of a cable television system or franchises, such authority may attempt to impose burdensome or onerous franchise requirements in connection with a request for such consent. Historically, franchises have been renewed for cable television operators that have provided satisfactory services and have complied with the terms of their franchises. At this time, we are not aware of any current or past material failure on our part to comply with our franchise agreements. We believe that we have generally complied with the terms of our franchises and have provided quality levels of service.

                    The 1992 Cable Act makes several changes to the process under which a cable television operator seeks to enforce its renewal rights which could make it easier in some cases for a franchising authority to deny renewal. Franchising authorities may consider the “level” of programming service provided by a cable television operator in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities are no longer precluded from denying renewal based on failure to substantially comply with the material terms of the franchise where the franchising authority has “effectively acquiesced” to such past violations. Rather, the franchising authority is estopped if, after giving the cable television operator notice and opportunity to cure, it fails to respond to a written notice from the cable television operator of its failure or inability to cure. Courts may not reverse a denial of renewal based on procedural violations found to be “harmless error.”

                    Channel Set-Asides

                    The 1984 Cable Act permits local franchising authorities to require cable television operators to set aside certain television channels for public, educational and governmental access programming. The 1984 Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion of their channel capacity for commercial leased access by unaffiliated third parties to provide programming that may compete with services offered by the cable television operator. The 1992 Cable Act requires leased access rates to be set according to a formula determined by the FCC.

                    Ownership

                    The 1996 Telecom Act repealed the statutory ban against local exchange carriers providing video programming directly to customers within their local exchange telephone service areas. Consequently, the 1996 Telecom Act permits telephone companies to compete directly with operations of cable television systems. Under the 1996 Telecom Act and FCC rules adopted to implement the 1996

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Telecom Act, local exchange carriers may provide video service as broadcasters, common carriers, or cable operators. In addition, local exchange carriers and others may also provide video service through “open video systems,” a regulatory regime that may give them more flexibility than traditional cable television systems. Open video system operators (including local exchange carriers) can, however, be required to obtain a local cable franchise, and they can be required to make payments to local governmental bodies in lieu of cable franchise fees. In general, open video system operators must make their systems available to programming providers on rates, terms and conditions that are reasonable and nondiscriminatory. Where carriage demand by programming providers exceeds the channel capacity of an open video system, two-thirds of the channels must be made available to programmers unaffiliated with the open video system operator.

                    The 1996 Telecom Act generally prohibits local exchange carriers from purchasing a greater than 10% ownership interest in a cable television system located within the local exchange carrier’s telephone service area, prohibits cable operators from purchasing local exchange carriers whose service areas are located within the cable operator’s franchise area, and prohibits joint ventures between operators of cable television systems and local exchange carriers operating in overlapping markets. There are some statutory exceptions, including a rural exemption that permits buyouts in which the purchased cable television system or local exchange carrier serves a non-urban area with fewer than 35,000 inhabitants, and exemptions for the purchase of small cable television systems located in non-urban areas. Also, the FCC may grant waivers of the buyout provisions in certain circumstances.

                    The 1996 Telecom Act made several other changes to relax ownership restrictions and regulations of cable television systems. The 1996 Telecom Act repealed the 1992 Cable Act’s three-year holding requirement pertaining to sales of cable television systems. The statutory broadcast/cable cross-ownership restrictions imposed under the 1984 Cable Act were eliminated in 1996, although the parallel FCC regulations prohibiting broadcast/cable common-ownership remained in effect.  The U.S. Court of Appeals for the District of Columbia Circuit  struck down these rules. The FCC’s rules also generally prohibit cable operators from offering satellite master antenna service separate from their franchised systems in the same franchise area, unless the cable operator is subject to “effective competition” there.

                    The 1996 Telecom Act amended the definition of a “cable system” under the Communications Act so that competitive providers of video services will be regulated and franchised as “cable systems” only if they use public rights-of-way. Thus, a broader class of entities providing video programming may be exempt from regulation as cable television systems under the Communications Act.

                    The 1996 Telecom Act provides that registered utility holding companies and subsidiaries may provide telecommunications services, including cable television, notwithstanding the Public Utilities Holding Company Act of 1935, as amended. Electric utilities must establish separate subsidiaries known as “exempt telecommunications companies” and must apply to the FCC for operating authority. Due to their resources, electric utilities could be formidable competitors to traditional cable television systems.

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                    Access to Programming

                    The 1992 Cable Act imposed restrictions on the dealings between cable operators and cable programmers. Of special significance from a competitive business posture, the 1992 Cable Act precludes video programmers affiliated with cable companies from favoring their affiliated cable operators and requires such programmers to sell their programming to other multichannel video distributors. This provision limits the ability of vertically integrated cable programmers to offer exclusive programming arrangements to cable companies. The prohibition on certain types of exclusive programming arrangements was set to expire on October 5, 2002, but  the FCC has determined that a five year extension of the prohibition is necessary to preserve and protect competition in video programming distribution.

                    Privacy

                    The 1984 Cable Act imposes a number of restrictions on the manner in which cable television operators can collect and disclose data about individual system customers. The statute also requires that the system operator periodically provide all customers with written information about its policies regarding the collection and handling of data about customers, their privacy rights under federal law and their enforcement rights. In the event that a cable television operator was found to have violated the customer privacy provisions of the 1984 Cable Act, it could be required to pay damages, attorneys’ fees and other costs. Under the 1992 Cable Act, the privacy requirements were strengthened to require that cable television operators take such actions as are necessary to prevent unauthorized access to personally identifiable information.  Certain of these requirements were modified by the Electronic Communications Privacy Act of 2001.

                    Franchise Transfers

                    The 1992 Cable Act requires franchising authorities to act on any franchise transfer request submitted after December 4, 1992 within 120 days after receipt of all information required by FCC regulations and by the franchising authority. Approval is deemed to be granted if the franchising authority fails to act within such period.

                    Technical Requirements

                    The FCC has imposed technical standards applicable to all classes of channels which carry downstream National Television System Committee video programming. The FCC also has adopted additional standards applicable to cable television systems using frequencies in the 108 to 137 MHz and 225 to 400 MHz bands in order to prevent harmful interference with aeronautical navigation and safety radio services and has also established limits on cable television system signal leakage. Periodic testing by cable television operators for compliance with the technical standards and signal leakage limits is required and an annual filing of the results of these measurements is required. The 1992 Cable Act requires the FCC to periodically update its technical standards to take into account changes in technology. Under the 1996 Telecom Act, local franchising authorities may not prohibit, condition or restrict a cable television system’s use of any type of customer equipment or transmission technology.

                    The FCC has adopted regulations to implement the requirements of the 1992 Cable Act designed to improve the compatibility of cable television systems and consumer electronics equipment. These regulations, among other things, generally prohibit cable television operators from scrambling their basic service tier. The 1996 Telecom Act directs the FCC to set only minimal standards to assure compatibility between television sets, VCRs and cable television systems, and otherwise to rely on the

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marketplace. Pursuant to the 1992 Cable Act, the FCC has adopted rules to assure the competitive availability to consumers of customer premises equipment, such as converters, used to access the services offered by cable television systems and other multichannel video programming distributors. Pursuant to those rules, consumers are given the right to attach compatible equipment to the facilities of their multichannel video programming distributors so long as the equipment does not harm the network, does not interfere with the services purchased by other customers and is not used to receive unauthorized services. As of July 1, 2000, multichannel video programming distributors, other than operators of direct broadcast satellite television systems, were required to separate security from non-security functions in the customer premises equipment which they sell or lease to their customers and offer their customers the option of using component security modules obtained from the multichannel video programming distributors with set-top units purchased or leased from retail outlets. As of January 1, 2005, multichannel video programming distributors will be prohibited from distributing new set-top equipment integrating both security and non-security functions to their customers.

                    Inside Wiring; Customer Access

                    FCC rules require an incumbent cable operator upon expiration of a multiple dwelling unit service contract to sell, abandon, or remove “home run” wiring that was installed by the cable operator in a multiple dwelling unit building. These inside wiring rules   assist building owners in their attempts to replace existing cable operators with new programming providers who are willing to pay the building owner a higher fee, where such a fee is permissible. The FCC has also issued an order preempting state, local and private restrictions on over-the-air reception antennas placed on rental properties in areas where a tenant has exclusive use of the property, such as balconies or patios. However, tenants may not install such antennas on the common areas of multiple dwelling units, such as on roofs. This order limits the extent to which multiple dwelling unit owners may enforce certain aspects of multiple dwelling unit agreements which otherwise would prohibit, for example, placement of direct broadcast satellite television systems television receiving antennae in multiple dwelling unit areas, such as apartment balconies or patios, under the exclusive occupancy of a renter.

                    Pole Attachments

                    The FCC currently regulates the rates and conditions imposed by certain public utilities for use of their poles unless state public service commissions are able to demonstrate that they adequately regulate the rates, terms and conditions of cable television pole attachments. A number of states and the District of Columbia have certified to the FCC that they adequately regulate the rates, terms and conditions for pole attachments. Illinois, Ohio, and Kentucky, states in which we operate, have made such a certification. In the absence of state regulation, the FCC administers such pole attachment and conduit use rates through use of a formula which it has devised. Pursuant to the 1996 Telecom Act, the FCC has adopted a new rate formula for any attaching party, including cable television systems, which offers telecommunications services. This new formula will result in higher attachment rates than at present, but they will apply only to cable television systems which elect to offer telecommunications services. Any increases pursuant to this new formula began in 2001, and will be phased in by equal increments over the five ensuing years. The FCC ruled that the provision of Internet services will not, in and of itself, trigger use of the new formula. The Supreme Court affirmed this decision and also held that the FCC ‘s authority to regulate rates for attachments to utility poles extended to attachments by cable operators and telecommunications carriers that are used to provide Internet service or for wireless telecommunications service.  This development benefits our business and will place a constraint on the prices that utilities can charge with regard to the cable facilities over which we also provide Internet access service.  However, the FCC has also initiated a proceeding to determine whether it should adjust certain elements of the current rate formula. If adopted,

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these adjustments could increase rates for pole attachments and conduit space.

                    Other FCC Matters

                    FCC regulation pursuant to the Communications Act also includes matters regarding a cable television system’s carriage of local sports programming; restrictions on origination and cablecasting by cable television operators; rules governing political broadcasts; equal employment opportunity; deletion of syndicated programming; registration procedure and reporting requirements; customer service; closed captioning; obscenity and indecency; program access and exclusivity arrangements; and limitations on advertising contained in nonbroadcast children’s programming.

                    The FCC has recently issued a Notice of Inquiry covering a wide range of issues relating to Interactive Television (“ITV”). Examples of ITV services are interactive electronic program guides and access to a graphic interface that provides supplementary information related to the video display. In the near term, cable systems are likely to be the platform of choice for the distribution of ITV services. The FCC has posed a series of questions including the definition of ITV, the potential for discrimination by cable systems in favor of affiliated ITV providers, enforcement mechanisms, and the proper regulatory classification of ITV service.

                    Copyright

                    Cable television systems are subject to federal copyright licensing covering carriage of broadcast signals. In exchange for making semi-annual payments to a federal copyright royalty pool and meeting certain other obligations, cable television operators obtain a statutory license to retransmit broadcast signals. The amount of this royalty payment varies, depending on the amount of system revenues from certain sources, the number of distant signals carried, and the location of the cable television system with respect to over-the-air television stations. Any future adjustment to the copyright royalty rates will be done through an arbitration process to be supervised by the U.S. Copyright Office. Cable television operators are liable for interest on underpaid and unpaid royalty fees, but are not entitled to collect interest on refunds received for overpayment of copyright fees.

                    Various bills have been introduced into Congress over the past several years that would eliminate or modify the cable television compulsory license. Without the compulsory license, cable television operators would have to negotiate rights from the copyright owners for all of the programming on the broadcast stations carried by cable television systems. Such negotiated agreements would likely increase the cost to cable television operators of carrying broadcast signals. The 1992 Cable Act’s retransmission consent provisions expressly provide that retransmission consent agreements between television broadcast stations and cable television operators do not obviate the need for cable operators to obtain a copyright license for the programming carried on each broadcaster’s signal.

                    Copyrighted music performed in programming supplied to cable television systems by pay cable networks, such as HBO, and basic cable networks, such as USA Network, is licensed by the networks through private agreements with the American Society of Composers and Publishers, generally known as ASCAP, and BMI, Inc., the two major performing rights organizations in the United States. Both the American Society of Composers and Publishers and BMI offer “through to the viewer” licenses to the cable networks which cover the retransmission of the cable networks’ programming by cable television systems to their customers.

                    Licenses to perform copyrighted music by cable television systems themselves, including on

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local origination channels, in advertisements inserted locally on cable television networks, and in cross-promotional announcements, must be obtained by the cable television operator from the American Society of Composers and Publishers, BMI and/or SESAC, Inc.

                    State and Local Regulation

                    Cable television systems generally are operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local government entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction, and even from city to city within the same state, historically ranging from reasonable to highly restrictive or burdensome. Franchises generally contain provisions governing fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and occupancy of public streets and number and types of cable television services provided. The terms and conditions of each franchise and the laws and regulations under which it was granted directly affect the profitability of the cable television system. The 1984 Cable Act places certain limitations on a franchising authority’s ability to control the operation of a cable television system. The 1992 Cable Act prohibits exclusive franchises, and allows franchising authorities to exercise greater control over the operation of franchised cable television systems, especially in the area of customer service and rate regulation. The 1992 Cable Act also allows franchising authorities to operate their own multichannel video distribution system without having to obtain a franchise and permits states or local franchising authorities to adopt certain restrictions on the ownership of cable television systems. Moreover, franchising authorities are immunized from monetary damage awards arising from regulation of cable television systems or decisions made on franchise grants, renewals, transfers and amendments. The 1996 Telecom Act prohibits a franchising authority from either requiring or limiting a cable television operator’s provision of telecommunications services.

                    Various proposals have been introduced at the state and local levels with regard to the regulation of cable television systems, and a number of states have adopted legislation subjecting cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a character similar to that of a public utility. To date, none of the states in which we currently operate has enacted state level regulation.

                    The foregoing describes all material present and proposed federal, state and local regulations and legislation relating to the cable television industry. Other existing federal regulations, copyright licensing and, in many jurisdictions, state and local franchise requirements, currently are the subject of a variety of judicial proceedings, legislative hearings and administrative and legislative proposals which could change, in varying degrees, the manner in which cable television systems operate. Neither the outcome of these proceedings nor their impact upon the cable television industry or us can be predicted at this time.

                    Internet Access Service

                    We offer a service which enables consumers to access the Internet at high speeds via high capacity broadband transmission facilities and cable modems. We compete with many other providers of Internet access services which are known as Internet service providers (“ISPs”). ISPs include such companies as America Online and Mindspring Enterprises as well as major telecommunications providers, including AT&T and local exchange telephone companies. A number of local franchising authorities have attempted to require cable companies offering Internet access service over their broadband facilities to allow access to those facilities on an unbundled basis to other ISPs.  To date, all such efforts have been

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overturned in the courts.  However, many ISPs and local franchising authorities have continued to ask the U.S. Congress and the FCC to mandate such access, or at least to allow local authorities to impose such a requirement.  Although the FCC has thus far declined to impose such an access requirement on cable companies, the issue remains under consideration.  The FCC has recently decided that cable Internet service should be classified for regulatory purposes as an “information service” rather than either a “cable service” or a “telecommunications service.”  Concurrently the FCC has initiated a wide-ranging rulemaking proceeding in which it seeks comment on the regulatory ramifications of this classification.  Among the issues to be decided are whether the FCC should permit local authorities to impose an access requirement, whether local authorities should be prohibited from imposing fees on cable Internet service revenues, and what regulatory role local authorities should be permitted to play.  The outcome of this proceeding could have a material impact on our provision of cable Internet service.

                    There are currently few laws or regulations which specifically regulate communications or commerce over the Internet. Section 230 of the Communications Act, added to that act by the 1996 Telecom Act, declares it to be the policy of the United States to promote the continued development of the Internet and other interactive computer services and interactive media, and to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by federal or state regulation. One area in which Congress did attempt to regulate content over the Internet involved the dissemination of obscene or indecent materials. The provisions of the 1996 Telecom Act, generally referred to as the Communications Decency Act, were found to be unconstitutional, in part, by the United States Supreme Court in 1997. In response, Congress passed the Child Online Protection Act. In May 2002, the United States Supreme Court reversed the finding by the Third Circuit Court of Appeals that the use of “contemporary community standards” to identify material “harmful to minors “ was overly broad and therefore violative of the First Amendment.  The Supreme Court, however, remanded the matter to the Third Circuit to determine the validity of other challenges to the constitutionality of the Child Online Protection Act and kept the stay prohibiting government enforcement in place until further action by the lower courts. The constitutionality of this act is currently being challenged in the courts.  Finally, disclosure of customer communications or records is governed by the Electronic Communications Privacy Act of 2001 and the Cable Act, both of which were amended by the USA Patriot Act.

          Local Telecommunications Services

                    The 1996 Telecom Act provides that no state or local laws or regulations may prohibit or have the effect of prohibiting any entity from providing any interstate or intrastate telecommunications service. States are authorized, however, to impose “competitively neutral” requirements regarding universal service, public safety and welfare, service quality and consumer protection. State and local governments also retain their authority to manage the public rights-of-way and may require fair and reasonable, competitively neutral and non-discriminatory compensation for management of the public rights-of-way when cable operators provide telecommunications service. State and local governments must publicly disclose required compensation from telecommunications providers for use of public rights-of-way.

                    We have long-term agreements with Comcast Cable (formerly known as AT&T Broadband) that allow Comcast Cable to provide to customers telephone services using our network infrastructure and AT&T Broadband’s switching and long distance transport facilities. Local telecommunications service is subject to regulation by state utility commissions. Use of local telecommunications facilities to originate and terminate long distance services, a service commonly referred to as “exchange access,” is subject to regulation both by the FCC and by state utility commissions. As a provider of local exchange service, Comcast Cable would be subject to the requirements imposed upon local exchange carriers by the 1996

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Telecom Act. These include requirements governing just and reasonable rates and practices, service quality, resale, telephone number portability, dialing parity, access to rights-of-way, reciprocal compensation, access for people with disabilities and truth-in-billing.  Although we do not provide telecommunications services, and are not currently regulated with regard to Comcast Cable’s provision of telecommunications services over our facilities, some states do regulate companies that own facilities over which telecommunications services are offered.  Therefore, there is a possibility that we could be subject to increased regulation in the future in the states where  we currently provide service, or if we expand into a state that already regulates companies that facilitate provision of telecommunications services.  Although, we cannot predict whether and the extent to which a state may seek to regulate us, increased regulation would likely increase our cost of doing business.

          Employees

                    As of December 31, 2002, we employed approximately 3,200 full-time employees and 150 part-time employees. We consider our relations with our employees to be good.

Item 2.  Properties

                    A cable television system consists of three principal operating components:

                    We own and lease parcels of real property for signal reception sites which house our antenna towers and headends, microwave complexes and business offices which includes our principal executive offices. In addition, we own our cable systems’ distribution networks, various office fixtures, test equipment and service vehicles. The physical components of our cable systems require maintenance and periodic upgrading to keep pace with technological advances. We believe that our properties, both owned and leased, are in good condition and are suitable and adequate for our business operations as presently conducted and as proposed to be conducted.

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Item 3.  Legal Proceedings

                    Insight Kentucky and certain prior owners of the Kentucky systems, including affiliates of AT&T Broadband, have been named in class actions generally alleging that the Kentucky systems have improperly passed through state and local property tax charges to customers.  The plaintiffs in these actions seek monetary damages and the enjoinment of the collection of such taxes.  Such class actions are (i) Alfred P. Sykes, Jr., Charles Pearl, Linda Pearl vs. InterMedia Partners of Kentucky, L.P. and TCI TKR of Jefferson County, Inc., which was filed on March 26, 1999 in Jefferson County Circuit Court and consolidated with James F. Dooley vs. TCI TKR of Jefferson County and InterMedia Partners of Kentucky, L.P., which was filed on March 24, 1999 in Jefferson County Circuit Court, and (ii)Charles Shaw and Loretta Shaw vs. TCI TKR of Northern Kentucky, Inc. TCI TKR of Southern Kentucky, Inc., TCI Cablevision of North Central Kentucky, Inc., TCI Cablevision of Kentucky, Inc. and InterMedia Partners of Kentucky, L.P., which was filed on June 4, 1999 in the Franklin County Circuit Court.  We have entered into agreements with Plaintiffs’ counsel to settle these lawsuits, which received final court approval in December 2002.  The settlements will not have a material effect on our results of operations.

                    The City of Louisville, Kentucky has granted additional franchises to Knology, Inc. and TotaLink of Kentucky, LLC.  Our Kentucky subsidiary’s franchise from the City of Louisville provides us with the right to challenge the grant of any subsequent franchises that are on terms more favorable than our own.  Pursuant to such franchise provision, we filed for declaratory judgment in the Jefferson County Circuit Court against the City of Louisville, Kentucky for its grant of a more favorable franchise to Knology on November 2, 2000, and to TotaLink on December 21, 2000.  In May 2002,TotaLink requested and was granted a repeal of their franchise.  The City of Louisville has been granted summary judgment in the Knology action on the basis that the franchise granted Knology was not more favorable than our own.  On October 24, 2002, we filed our appeal of such ruling and await a decision from the Court.

                    On November 8, 2000, Knology filed a federal court action in the United States District Court for the Western District of Kentucky, naming Insight LP and our Kentucky operating subsidiary as defendants. The action also named the City of Louisville, Kentucky as a defendant.  The suit seeks money damages and injunctive relief for alleged violations of the antitrust laws, the Communications Act and the Civil Rights Act of 1866, arising out of our having filed, under provisions of our own franchise from the City, the state court challenge to Knology’s cable television franchise awarded by the City.  On December 20, 2000, we moved to dismiss the federal court action for failure to state a claim for relief and for being outside the jurisdiction of the federal court.  On the same date, Knology moved for a preliminary injunction “against” a provision of its franchise that suspends the franchise’s effectiveness during the pendency of our state court challenge.  The court denied our motion to dismiss and granted Knology the preliminary injunction effectively removing the stay of their franchise.  We believe we have substantial and meritorious defenses to the asserted federal claims and intend to defend the action vigorously.

                    We believe there are no other pending or threatened legal proceedings that, if adversely determined, would have a material adverse effect on us.

Item 4.  Submission of Matters to a Vote of Security Holders

             None.

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PART II

Item 5.  Market for Registrant’s Common Stock and Related Stockholder Matters

                    There is no public trading market for our equity, all of which is held equally by our manager, through Insight LP, and Comcast Cable (formerly known as AT&T Broadband), through TCI of Indiana Holdings.

                    On December 17, 2002, we completed a $185.0 million offering of 9 ¾% senior notes due 2009.  The notes were issued as additional debt securities under the indenture pursuant to which we previously issued $200.0 million of the same series of notes.   We received proceeds of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that will be repaid to holders of the senior notes in the first semi-annual interest payment due on April 1, 2003, and net of discounts to the initial purchasers  of $3.1 million and an original issue  discount of $8.8 million that is being amortized through October 2009.  The net proceeds were used to repay a portion of the outstanding debt under the Midwest Holdings credit facility. The notes were issued to Credit Suisse First Boston Corporation, Banc of America Securities LLC, BNY Capital Markets, Inc., Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc., TD Securities (USA) Inc., Fleet Securities, Inc., Sun Trust Capital Markets, Inc., BNP Paribas Securities Corp. and UBS Warburg LLC pursuant to a purchase agreement dated December 12, 2002. The initial purchasers subsequently resold the notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, and outside the United States in accordance with Regulation S under the Securities Act.

Item 6.  Selected Financial Data

                    In the table below, we provide you with our selected consolidated historical financial and other data, including our predecessors, as of and for the five years ended December 31, 2002.  We have prepared the selected financial information using:

                    When you read this selected consolidated historical financial and other data, it is important that you read along with it the historical financial statements and related notes in our consolidated financial statements included in this report, as well as “Management’s Discussion and Analysis of Financial

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Condition and Results of Operations,” also included in this report.

                    Under our franchise agreements, we are obligated to pay to local franchising authorities a percentage of our revenue derived from providing cable and other services the majority of which are passed through to customers.  We have historically recorded revenue net of franchise fees charged to our customers.  Staff Announcement D-103, issued by the FASB in November 2001, specifies that reimbursements received from a customer should be reflected as revenues and not as a reduction of expenses.  This Staff Announcement applies to financial reporting periods beginning after December 15, 2001.  Upon application of this Staff Announcement, comparative financial statements for prior periods are required to be reclassified to comply with the guidance in this Staff Announcement.  Consequently, we have reclassified the prior period amounts in the accompanying consolidated statements of operations to reflect franchise fees on a gross basis with reimbursements as revenue and payments as expense.  The effect on the prior period statements of operations was to increase both revenue and selling, general and administrative costs by $24.0 million, $13.0 million, $6.9 million and $2.0 million for each of the years ended December 31, 2001, 2000, 1999 and 1998.

                    In addition, in accordance with the adoption of SFAS No. 142, beginning January 1, 2002, we no longer record amortization expense associated with franchise costs, goodwill and other indefinite lived intangible assets.  This change in accounting would have resulted in a net income (loss) of $(72.1) million, $(49.4) million, $(15.7) million and $8.9 million for each of the years ended December 31, 2001, 2000, 1999 and 1998.

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

                    On July 17, 2000, we entered into a ten-year agreement with AT&T Broadband (now known as Comcast Cable) that allows Comcast Cable to provide telephone services  using our network infrastructure and Comcast Cable’s  switching and transport facilities.

                    On January 5, 2001 (effective January 1, 2001), we completed a series of transactions with Insight LP and certain cable subsidiaries of AT&T Corp. that increased by approximately 530,000 the number of customers we serve. We refer in this report to these transactions, including related bank financing, as the “AT&T transactions.” Specifically, we acquired:

We financed the acquisition of the systems from Insight LP and the AT&T cable subsidiaries by borrowing  $685.0 million under the Insight Midwest credit facility. 

Results of Operations

                    Revenues are earned from customer fees for cable television programming services including premium, digital and pay-per-view services and ancillary services, such as rental of converters and remote control devices, installations and from selling advertising.  In addition, we earn revenues from providing

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high-speed data services and from facilitating the delivery of telephone services as well as from commissions for products sold through home shopping networks.

                    Under our franchise agreements, we are obligated to pay to local franchising authorities a percentage of our revenue derived from providing cable and other services the majority of which are passed through to customers.  We have historically recorded revenue net of franchise fees charged to our customers.  Staff Announcement D-103, issued by the FASB in November 2001, specifies that reimbursements received from a customer should be reflected as revenues and not as a reduction of expenses.  This Staff Announcement applies to financial reporting periods beginning after December 15, 2001.  Upon application of this Staff Announcement, comparative financial statements for prior periods are required to be reclassified to comply with the guidance in this Staff Announcement.  Consequently, we have reclassified the prior period amounts in the accompanying consolidated statements of operations to reflect franchise fees on a gross basis with reimbursements as revenue and payments as expense.  The effect on the prior period statements of operations was to increase both revenue and selling, general and administrative costs by $24.0 million for the year ended December 31, 2001 and $13.0 million for the year ended December 31, 2000.

                    We have generated increases in revenues and Operating Cash Flow for each of the past three fiscal years, primarily through a combination of acquisitions, internal customer growth, increases in monthly revenue per customer and growth in advertising and increasingly new revenue from selling new services including high-speed data access and interactive digital video.

                    Some of the principal reasons for our net losses through December 31, 2001 include depreciation and amortization associated with our acquisitions and capital expenditures related to the construction and upgrading of our systems, and interest costs on borrowed money.  Beginning January 1, 2002, we no longer record amortization expense associated with goodwill and franchise costs; however, we expect to continue to report net losses for the foreseeable future.  We cannot predict what impact, if any, continued losses will have on our ability to finance our operations in the future.

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                    The following table is derived for the periods presented from our consolidated financial statements that are included in this report and sets forth certain statement of operations data for our consolidated operations:

                    Operating Cash Flow (“OCF”) represents operating income or loss before depreciation and amortization and non-recurring high-speed data costs.  We believe that OCF is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity.  However, OCF is not intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either operating income or net income as an indicator of operating performance or cash flows as a measure of liquidity, as determined in accordance with accounting principles generally accepted in the United States.  Refer to our consolidated financial statements, including our consolidated statements of cash flows, which appear elsewhere in this report.

                    The following calculations of OCF are not necessarily comparable to similarly titled amounts of other companies:

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

                    Revenue increased $78.8 million or 11% to $804.8 million for the year ended December 31, 2002 from $726.0 million for the year ended December 31, 2001.  The increase in revenue was primarily the result of gains in our high-speed data and digital services with revenue increases over the prior year period of 65% and 40%.  In addition, our basic cable service revenue increased primarily due to basic cable rate increases. 

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          Revenue by service offering were as follows for the years ended December 31, (in thousands):

          RGUs (Revenue Generating Units) were approximately 1,798,900 as of December 31, 2002 compared to approximately 1,640,200 as of December 31, 2001.  This represents a growth rate of 10%.  RGUs represent the sum of basic, digital,  high-speed data and telephone customers.

          Average monthly revenue per basic customer was $51.91 for the year ended December 31, 2002 compared to $47.34 for the year ended December 31, 2001, primarily reflecting the continued successful rollout of new product offerings in all markets.  Average monthly revenue per basic customer for high-speed data and interactive digital video increased to $8.07 for the year ended December 31, 2002 from $5.41 for the year ended December 31, 2001.

          Programming and other operating costs increased $16.3 million or 6% to $273.2 million for the year ended December 31, 2002 from $256.9 million for the year ended December 31, 2001.  The increase in programming and other operating costs was primarily the result of increased programming rates for our classic and digital service as well as for additional programming added in rebuilt systems offset by decreases in high-speed data costs.  Programming costs increased 11% for the year ended December 31, 2002 as compared to the year ended December 31, 2001.

          Selling, general and administrative expenses increased $18.9 million or 14% to $153.6 million for the year ended December 31, 2002 from $134.7 million for the year ended December 31, 2001.  The increase in selling, general and administrative expenses was primarily the result of increased customer service and insurance costs partially offset by a decrease in marketing costs.

          Management fees are directly related to revenue as these fees are calculated as approximately 3% of revenues.

          On September 28, 2001, At Home Corporation (“@Home”), the former provider of high-speed data services for all of our systems except for those located in Ohio, filed for protection under Chapter 11 of the Bankruptcy Code.  For the purpose of continuing service to existing customers and to resume the provisioning of service to new customers, we entered into an interim agreement with @Home to extend

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service through November 30, 2001.  Further, in December 2001, we entered into an additional interim service arrangement whereby we paid $10.0 million to @Home to extend service for three months through February 28, 2002, which was recorded as expense ratably over this three-month period.

          As a result of these interim arrangements we incurred approximately $2.8 million in excess of our original agreed-to cost for such services rendered during the year ended December 31, 2001.  Additionally, as of December 31, 2001, we recorded an allowance for bad debt of $1.0 million for a net receivable from @Home in connection with monies @Home collected from our high-speed data customers on our behalf prior to September 28, 2001.  Additionally, we incurred approximately $4.1 million in excess of our original agreed-to cost for such services rendered during the three months ended March 31, 2002.  These additional costs are included in non-recurring high-speed data service charges in our statement of operations.

          Depreciation and amortization expense decreased $161.2 million or 43% to $211.8 million for the year ended December 31, 2002 from $373.0 million for the year ended December 31, 2001.  The decrease in depreciation and amortization expense was primarily the result of ceasing the amortization of goodwill and indefinite lived intangible assets associated with the adoption of SFAS No. 142, effective January 1, 2002.  This was partially offset by an $11.1 million write-down of the carrying value of current video-on-demand equipment, which was replaced as of December 31, 2002 in connection with our transition to a new video-on-demand service provider.

          OCF increased $40.7 million or 13% to $354.4 million for the year ended December 31, 2002 from $313.7 million for the year ended December 31, 2001.  This increase was primarily due to increased digital and high-speed data revenue, partially offset by increases in programming and other operating costs and selling, general and administrative costs.

          Interest expense decreased $8.1 million or 4% to $180.5 million for the year ended December 31, 2002 from $188.6 million for the year ended December 31, 2001.  This decrease was the result of lower interest rates, which averaged 7.4% for the year ended December 31, 2002, compared to 8.5% for the year ended December 31, 2001, partially offset by higher outstanding debt.

          For the year ended December 31, 2002, the net loss was $42.0 million primarily for the reasons set forth above.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

                    Revenue increased $333.3 million or 85% to $726.0 million for the year ended December 31, 2001 from $392.7 million for the year ended December 31, 2000. The increase in revenue was primarily the result of the cable systems acquired in the AT&T transactions, including the Ohio Systems. The incremental revenue generated by the cable systems acquired in the AT&T transactions approximated $293.3 million, which represents 88% of the increase in consolidated revenue. Excluding the systems acquired in the AT&T transactions, revenue increased $40.0 million or 10% largely due to the sale of new services, and revenue for digital and high-speed data increased by $27.0 million, a combined 136% growth rate. 

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Revenue by service offering were as follows for the years ended December 31, (in thousands):

                    Average monthly revenue per basic customer was $47.34 for the year ended December 31, 2001 compared to $44.11 for the year ended December 31, 2000 primarily reflecting the continued successful rollout of new product offerings in the Indiana, Kentucky and Ohio markets. Average monthly revenue per basic customer for high-speed data and interactive digital video increased to $5.41 for the year ended December 31, 2001 from $2.08 for the year ended December 31, 2000. Excluding the systems acquired in the AT&T transactions, the number of high-speed data service customers increased to approximately 48,000 as of December 31, 2001 from approximately 23,600 as of December 31, 2000, while digital customers increased to approximately 168,300 as of December 31, 2001 from approximately 74,900 as of December 31, 2000.

                    Programming and other operating costs increased $123.7 million or 93% to $256.9 million for the year ended December 31, 2001 from $133.2 million for the year ended December 31, 2000. The increase in programming and other operating costs was primarily the result of the cable systems acquired in the AT&T transactions. The incremental expense resulting from the acquisition of these systems approximated $102.4 million, which represents 83% of the increase in programming and other operating costs. Excluding these systems, programming and other operating costs increased by approximately $21.3 million or 16%, primarily as a result of increased programming rates and additional programming.

                    Selling, general and administrative expenses increased $62.2 million or 86% to $134.7 million for the year ended December 31, 2001 from $72.5 million for the year ended December 31, 2000. The increase in selling, general and administrative expenses was primarily the result of the cable systems acquired in the AT&T transactions. The incremental expense resulting from the acquisition of these systems approximated $56.6 million, which represents 91% of the increase in selling, general and administrative costs. Excluding these systems, selling, general and administrative costs increased by approximately $5.6 million or 8%, primarily reflecting increased marketing activity and corporate expenses associated with new service introductions.

                    Management fees are directly related to revenue as these fees are calculated as approximately 3% of revenues.

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                    Non-recurring high-speed data service charges were incurred in the year ended December 31, 2001 as a result of payments made to @Home. For the purpose of continuing service to existing customers and to resume the provisioning of service to new customers, we entered into an interim agreement with @Home to extend service through November 30, 2001. Further, in December 2001, we entered into an additional interim service arrangement whereby we paid $10.0 million to @Home to extend service for three months through February 28, 2002 that is being recorded into expense ratably over the three-month period. As a result of these interim arrangements we incurred approximately $2.8 million in excess of our original agreed-to cost for such services rendered during the year ended December 31, 2001. Additionally, we have recorded an allowance for bad debt of $1.0 million for a net receivable from @Home in connection with monies @Home collected from our high-speed data customers on our behalf prior to September 28, 2001. These additional costs are included in non-recurring high-speed data service charges in our statement of operations.  

                    Depreciation and amortization expense increased $177.4 million or 91% to $373.0 million for the year ended December 31, 2001 from $195.7 million for the year ended December 31, 2000. The increase in depreciation and amortization expense was primarily the result of the cable systems acquired in the AT&T transactions. The incremental expense resulting from the acquisition of these systems approximated $144.4 million, which represents 81% of the increase in depreciation and amortization expense. Excluding these systems, depreciation and amortization expense increased by approximately $33.0 million or 17%, primarily due to capital expenditures made to rebuild our existing cable equipment, roll-out new product offerings and add telephony capabilities to our network.

                    OCF increased $137.7 million or 78% to $313.7 million for the year ended December 31, 2001 from $176.0 million for the year ended December 31, 2000. This increase was primarily due to the result of the cable systems acquired in the AT&T transactions. 

                    Interest expense increased $75.6 million or 67% to $188.6 million for the year ended December 31, 2001 from $113.1 million for the year ended December 31, 2000. The increase in interest expense was primarily the result of higher outstanding debt resulting from the cable systems acquired in the AT&T transactions and funding of capital expenditures during the past year offset by lower average interest rates.

                    For the year ended December 31, 2001, the net loss was $263.2 million primarily for the reasons set forth above.

Liquidity and Capital Resources

          Our business requires cash for operations, debt service, capital expenditures and acquisitions.  The cable television business has substantial on-going capital requirements for the construction, expansion and maintenance of its broadband networks.  Expenditures have been made for various purposes including the upgrade of our existing cable network, and in the future will be used for network extensions, new services, converters and network upgrades.  Historically, we have been able to meet our cash requirements with cash flow from operations, borrowings under our credit facilities and issuances of private and public debt.

          Cash provided by operations for the years ended December 31, 2002 and 2001 was $170.2 million and $161.5 million.  The increase was primarily attributable to the timing of cash receipts and payments related to working capital accounts.

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          Cash used in investing activities for the years ended December 31, 2002 and 2001 was $290.2 million and $400.0 million.  The decrease was primarily attributable to a decrease in capital expenditures and the absence of significant cable television system acquisitions in 2002.

          Cash provided by financing activities for the years ended December 31, 2002 and 2001 was $117.8 million and $244.9 million.  The decrease was primarily attributable to lower net borrowings from credit facilities in 2002 and the absence of significant cable television system acquisitions in 2002.

          For the years ended December 31, 2002 and 2001, we spent $280.0 million and $320.0 million in capital expenditures largely to support our plant rebuild in Illinois, which is expected to be substantially complete by mid-2003, telephone deployment and success-based capital including interactive digital and high-speed data expansion.  For the year ending December 31, 2003, it is anticipated that we will spend approximately $217.5 million on capital expenditures. 

          We have concluded a number of financing transactions, which fully support our operating plan.  These transactions are detailed as follows:

          On October 1, 1999, in connection with our formation and the acquisition of a 50% interest in the Kentucky systems, we completed an offering of $200.0 million principal amount of its 9¾% senior notes due 2009.   The net proceeds of the offering were used to repay certain outstanding debt of the Kentucky systems.  On November 6, 2000, we completed an offering of $500.0 million principal amount of our 10½% senior notes due 2010.  The net proceeds of the offering of $486.0 million were used to repay a portion of the Indiana and Kentucky credit facilities.  Interest on the 9¾% senior notes is payable on April 1 and October 1 of each year and interest on the 10½% senior notes is payable on May 1 and November 1 of each year.  The indentures relating to these senior notes impose certain limitations on our ability to, among other things, incur debt, make distributions, make investments and sell assets.

          On January 5, 2001, we consummated the AT&T transactions with Insight LP and the AT&T cable subsidiaries.  As a result of these AT&T transactions, additional cable television systems serving approximately 530,000 customers were contributed to us.  In conjunction with the AT&T transactions, our subsidiary, Insight Midwest Holdings, LLC, which serves as a holding company for all of our systems other than the Columbus, Ohio system, consummated on January 5, 2001 a $1.75 billion credit facility from which it borrowed $663.0 million to repay the then-existing credit facilities and $685.0 million to finance the AT&T transactions.  In connection with the financing of the AT&T Transactions, Insight LP borrowed approximately $20.0 million from Insight Midwest Holdings pursuant to a three-year revolving note.  On February 15, 2001, Insight LP repaid the note, in full, including interest.

          The Midwest Holdings credit facility permits the distribution of cash from Midwest Holdings’ subsidiaries to enable us to pay principal and interest on our 9¾% senior notes and 10½% senior notes, so long as there exists no default under the credit facility.  The Midwest Holdings credit facility contains covenants restricting, among other things, the ability of Midwest Holdings and its subsidiaries to acquire or dispose of assets, make investments and engage in transactions with related parties.  The facility also requires compliance with certain financial ratios and contains customary events of default.  As of December 31, 2002, we were in compliance with the Midwest Holdings credit facility’s covenant

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requirements.  Given current operating conditions and projected results of operations, we anticipate continued compliance under this credit facility agreement for the foreseeable future.

          We acquired all of the common equity interests of Insight Ohio as part of the AT&T transactions.  Insight Ohio is an unrestricted subsidiary under the indentures governing our notes, and is prohibited by the terms of its indebtedness from making distributions to us.  Insight Ohio has a $25.0 million reducing revolving credit facility that supports the Ohio system.  The facility requires principal payments commencing in March 2003 through September 2004.  As of December 31, 2002, $25.0 million was outstanding under this credit facility.  We have determined that Insight Ohio’s cash flow from operations will not be sufficient to finance its operating and capital requirements, debt service requirements and preferred interest distributions over the next year.  As such, we have committed to provide capital contributions to fund the cash requirements of Insight Ohio through December 31, 2003.  Given current operating conditions and projected results of operations, we anticipate full compliance with this credit facility agreement for the foreseeable future.

          Insight Holdings of Ohio LLC, our wholly owned subsidiary, owns 100% of the common equity of Insight Ohio and Coaxial Communications of Central Ohio, Inc. owns 100% of the preferred equity of Insight Ohio.  Such common and preferred equity was issued in August 1998 as part of a financing plan which resulted in (i) Coaxial Communications contributing the Ohio system to Insight Ohio, (ii) Coaxial Communications and Phoenix Associates, an affiliate of Coaxial Communications, issuing $140.0 million principal amount of 10% senior notes due 2006, (iii) Coaxial LLC and Coaxial Financing Corp., an affiliate of Coaxial LLC, issuing $55.9 million principal amount at maturity of 12 7/8% senior discount notes due 2008 and (iv) the Coaxial 10% senior notes and the Coaxial 12 7/8% senior discount notes being conditionally guaranteed by Insight Ohio.

          Interest on the Coaxial 10% senior notes is payable on February 15 and August 15 of each year.  The indenture governing the Coaxial 10% senior notes imposes certain limitations on the ability of Coaxial Communications, Phoenix and Insight Ohio to, among other things, incur debt, make distributions, make investments and sell assets. Interest on the Coaxial 12 7/8% senior discount notes does not accrue and is not payable prior to August 15, 2003.  Thereafter, cash interest on the Coaxial 12 7/8% senior discount notes will be payable on February 15 and August 15 of each year, commencing on February 15, 2004.  The indenture governing the Coaxial 12 7/8% senior discount notes imposes certain limitations on the ability of Coaxial LLC, Coaxial Financing, Coaxial Communications and Insight Ohio to, among other things, incur debt, make distributions, make investments and sell assets.  The ability of Coaxial to make scheduled payments with respect to the 10% senior notes and 12 7/8% senior discount notes will depend on the financial and operating performance of Insight Ohio. The distributions on the Series A and B Preferred Interests equal the interest payments on the senior notes and senior discount notes.

          On April 18, 2002, we entered into an amendment to the Insight Midwest Holdings credit facility which delayed by six months the scheduled reduction to the leverage ratio covenant to allow Insight Midwest Holdings more financing flexibility, and increased the aggregate amount that can be distributed to us for the purpose of making investments in Insight Ohio.  Previously, on March 28, 2002, Insight Communications loaned $100.0 million to us to lower its effective interest rates, $97.0 million of which was contributed to Insight Midwest Holdings on April 18, 2002 for use in paying down the credit facility balance and in funding financing costs associated with the amendments, and $3.0 million of which was

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contributed to Insight Ohio.  On June 6, 2002, a further amendment to the credit facility was entered into which permits distributions by Insight Midwest Holdings to us for the purpose of repaying the $100.0 million loan so long as there is no default under the Midwest Holdings credit facility.  The loan to us bears annual interest of 9%, has a scheduled maturity date of January 31, 2011 and permits prepayments.

          On December 17, 2002, we completed a $185.0 million add-on offering under the 9¾% senior notes indenture.  We received proceeds of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that will be repaid to holders of the bonds in the first semi-annual interest payment due on April 1, 2003, and net of an underwriting fee of $3.1 million and reflects a bond discount of $8.8 million that is being amortized through October 2009.  The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Midwest Holdings Credit Facility.  Since this add-on offering occurred under the 9¾% senior notes indenture, these additional debt securities and the previous 9¾% senior notes are considered a single series of senior notes with identical terms.

          We have a substantial amount of debt.  Our high level of debt could have important consequences for you.    Our principal source of cash is derived from our subsidiaries’ operations and borrowings which we use to pay our obligations.    We believe that the Midwest Holdings credit facility, cash on-hand and our cash flow from operations are sufficient to support our current operating plan.  We have the ability to draw upon the $312.0 million of unused availability under the Midwest Holdings Credit Facility as of December 31, 2002 to fund any shortfall resulting from the inability of our cash from operations to fund our capital expenditures, meet our debt service requirements or otherwise fund our operations.

          The following table summarizes our contractual obligations and commitments, excluding interest, preferred dividends and commitments for programming, as of December 31, 2002, including periods in which the related payments are due (in thousands):