<PAGE>   1



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

For the quarterly period ended September 30, 1998
                               ------------------

                                       or

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

For the transition period from to ___________

Commission File Number: 0-16718
                        -------

              NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
               (Exact Name of Registrant as Specified in Charter)

       Washington                                       91-1366564
-----------------------                     ------------------------------------
(State of Organization)                     (I.R.S. Employer Identification No.)

   1201 Third Avenue, Suite 3600, Seattle, Washington               98101
--------------------------------------------------------------------------------
       (Address of Principal Executive Offices)                   (Zip Code)

                                 (206) 621-1351
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)


Indicate by check mark whether the 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 registrant was
required to file such reports), and (2) has subject to such filing requirements
for the past 90 days.

                             Yes   X       No
                                 -----        -----

------------------------
This filing contains __ pages. Exhibits index appears on page __.


<PAGE>   2

PART 1 - FINANCIAL INFORMATION

ITEM 1. Financial Statements

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)


<TABLE>
<CAPTION>
                                                     September 30        December 31,
                                                         1998                1997
                                                     ------------        ------------
<S>                                                  <C>                 <C>         
                                     ASSETS

Cash                                                 $  2,015,844        $    586,000
Accounts receivable                                       369,401             794,000
Prepaid expenses                                          121,232              83,906
Property and equipment, net of accumulated
  depreciation of $14,966,728 and $13,322,455,
  respectively                                         13,428,502          13,877,059
Intangible assets, net of accumulated
  amortization of $5,900,677 and $26,703,631,
  respectively                                         18,726,638          20,961,739
                                                     ------------        ------------
Total assets                                         $ 34,661,617        $ 36,302,704
                                                     ============        ============

                           LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued expenses                $  1,734,267        $  1,419,226
Due to managing general partner and affiliates             44,692              58,553
Converter deposits                                         33,407              30,241
Subscriber prepayments                                    354,215             650,182
Notes payable                                          41,349,913          41,543,600
                                                     ------------        ------------
                  Total liabilities                    43,516,494          43,701,802
                                                     ------------        ------------

Partners' equity:
 General Partners:
   Contributed capital, net                               (25,367)            (25,367)
   Accumulated deficit                                   (275,651)           (261,093)
                                                     ------------        ------------
                                                         (301,018)           (286,460)
                                                     ------------        ------------

 Limited Partners:
   Contributed capital, net                            18,735,576          18,735,576
   Accumulated deficit                                (27,289,435)        (25,848,214)
                                                     ------------        ------------
                                                       (8,553,859)         (7,112,638)
                                                     ------------        ------------
                  Total partners' equity               (8,854,877)         (7,399,098)
                                                     ------------        ------------
Total liabilities and partners' equity               $ 34,661,617        $ 36,302,704
                                                     ============        ============
</TABLE>




            The accompanying notes to unaudited financial statements
                    are an integral part of these statements



                                        2
<PAGE>   3


NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)


<TABLE>
<CAPTION>
                                               For the nine months ended September 30,
                                               ---------------------------------------
                                                       1998               1997
                                                   ------------        -----------
<S>                                                <C>                 <C>        
Service revenues                                   $ 12,543,646        $ 9,912,298

Expenses:
  Operating                                           1,093,338            914,917
  General and administrative (including
     $1,422,096 and $1,233,615 to affiliates
     in 1998 and 1997, respectively)                  2,918,270          2,353,926
Programming                                           3,322,807          2,492,873
Depreciation and amortization                         3,922,235          3,843,155
                                                   ------------        -----------
                                                     11,256,650          9,604,871
                                                   ------------        -----------

Income from operations                                1,286,996            307,427

Other income (expense):
   Interest expense                                  (2,691,087)        (1,897,867)
   Interest income                                       21,293              3,319
   Other income (expense)                                (2,240)            11,877
   Loss on disposal of assets                           (70,741)           (11,076)
                                                   ------------        -----------
                                                     (2,742,775)        (1,893,747)
                                                   ------------        -----------

Net loss                                           $ (1,455,779)        (1,586,320)
                                                   ============        ===========

Allocation of net loss:

   General Partners                                $    (14,558)       $   (15,863)
                                                   ============        ===========

   Limited Partners                                $ (1,441,221)       $(1,570,457)
                                                   ============        ===========

Net loss per limited partnership unit:
 (49,656 units)                                    $        (29)       $       (32)
                                                   ============        ===========

Net loss per $1,000 investment                     $        (58)       $       (63)
                                                   ============        ===========
</TABLE>




            The accompanying notes to unaudited financial statements
                    are an integral part of these statements



                                        3
<PAGE>   4



NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)


<TABLE>
<CAPTION>
                                          For the three months ended September 30,
                                          ----------------------------------------
                                                  1998               1997
                                               -----------        -----------
<S>                                            <C>                <C>        
Service revenues                               $ 4,308,231        $ 3,398,358

Expenses:
  Operating                                        379,844            313,407
  General and administrative (including
     $511,597 and $456,545 to affiliates
     in 1998 and 1997, respectively)             1,030,973            807,709
Programming                                      1,157,063            838,176
Depreciation and amortization                    1,309,636          1,277,278
                                               -----------        -----------
                                                 3,877,516          3,236,570
                                               -----------        -----------

Income from operations                             430,715            161,788

Other income (expense):
   Interest expense                               (905,135)          (621,417)
   Interest income                                  13,104              3,068
   Other income (expense)                           (2,240)                --
   Gain/loss on sale of assets                          --                 --
                                               -----------        -----------
                                                  (894,271)          (618,349)
                                               -----------        -----------

Net loss                                       $  (463,556)       $  (456,561)
                                               ===========        ===========

Allocation of net loss:

   General Partners                            $    (4,636)       $    (4,566)
                                               ===========        ===========

   Limited Partners                            $  (458,920)       $  (451,995)
                                               ===========        ===========

Net loss per limited partnership unit:
 (49,656 units)                                $        (9)       $        (9)
                                               ===========        ===========

Net loss per $1,000 investment                 $       (18)       $       (18)
                                               ===========        ===========
</TABLE>




            The accompanying notes to unaudited financial statements
                    are an integral part of these statements



                                        4
<PAGE>   5


NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)


<TABLE>
<CAPTION>
                                                     For the nine months ended September 30,
                                                     ---------------------------------------
                                                             1998               1997
                                                          -----------        -----------
<S>                                                       <C>                <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                  $(1,455,779)       $(1,586,320)
Adjustments to reconcile net loss to
   cash provided by operating activities:
   Depreciation and amortization                            3,922,234          3,840,620
   Loss on disposal of assets                                  70,742             11,076
   (Increase) decrease in operating assets:
     Accounts receivable                                      424,599            (45,810)
     Prepaid expenses                                         (37,326)           (21,130)
   Increase (decrease) in operating liabilities
     Accounts payable and accrued expenses                    315,041            407,442
     Due to managing general partner and affiliates           (13,861)            19,351
     Converter deposits                                         3,166             (4,334)
     Subscriber prepayments                                  (295,967)          (221,527)
                                                          -----------        -----------
Net cash from operating activities                          2,932,849          2,399,368
                                                          -----------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net                    (1,301,187)          (870,561)
Proceeds from sale of assets                                    1,000
Increase in intangibles                                        (9,131)
                                                          -----------        -----------
Net cash used in investing activities                      (1,309,318)          (870,561)
                                                          -----------        -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net            190,000                 --
Principal payments on borrowings                             (383,687)        (1,720,000)
Distributions to partners                                          --                 --
Loan fees and other costs incurred                                 --           (280,835)
Repurchase of limited partner interest                             --                 --
                                                          -----------        -----------
Net cash used in financing activities                        (193,687)        (2,000,835)
                                                          -----------        -----------

INCREASE (DECREASE) IN CASH                                 1,429,844           (472,028)

CASH, beginning of period                                     586,000            648,440
                                                          -----------        -----------
CASH, end of period                                       $ 2,015,844        $   176,412
                                                          ===========        ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid during the period for interest               $ 2,262,277        $ 1,641,955
                                                          ===========        ===========
</TABLE>




            The accompanying notes to unaudited financial statements
                    are an integral part of these statements



                                        5
<PAGE>   6



              NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

                     NOTE TO UNAUDITED FINANCIAL STATEMENTS


(1) These unaudited financial statements are being filed in conformity with Rule
10-01 of Regulation S-X regarding interim financial statement disclosure and do
not contain all of the necessary footnote disclosures required for a fair
presentation of the Balance Sheets, Statements of Operations and Statements of
Cash Flows in conformity with generally accepted accounting principles. However,
in the opinion of management, this data includes all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the Partnership's
financial position at September 30, 1998 and December 31, 1997, its Statements
of Operations for the nine and three months ended September 30, 1998 and 1997,
and its Statements of Cash Flows for the nine months ended September 30, 1998
and 1997. Results of operations for these periods are not necessarily indicative
of results to be expected for the full year.

(2) In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.

Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before
January 1, 1998).

The Partnership has not yet quantified the impacts of adopting Statement 133 on
its financial statements and has not determined the timing of or method of
adoption of Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.



                                       6
<PAGE>   7


(3) The Partnership has adopted Statement of Financial Accounting Standards No.
130 - "Reporting Comprehensive Income" (SFAS 130), which was effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. Comprehensive income is the change
in the equity of a business enterprise during a period from transactions and the
events and circumstances from non-owner sources.

For the periods presented in the accompanying statement of operations,
comprehensive income equals the amounts reported on the accompanying statement
of operations.













                                       7
<PAGE>   8


                               PART I (continued)

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

Revenues totaled $4,308,231 for the three months ended September 30, 1998
representing an increase of approximately 27% over the same period in 1997. Of
these revenues, $3,039,905 (71%) was derived from basic service charges,
$364,317 (9%) from premium services, $317,991 (7%) from tier services, $101,240
(2%) from installation charges, $96,167 (2%) from service maintenance contracts,
$248,463 (6%) from advertising and $140,148 (3%) from other sources. The
December 1997 addition of approximately 7,400 subscribers acquired in the
purchase of cable systems serving the communities of Toccoa, Royston and certain
unincorporated areas of Stephens, Franklin and Hart counties, all in the state
of Georgia increased revenues 22%. The remaining 5% of the revenue growth is
attributable to rate increases placed into effect in August of 1998 and a 9%
increase in the number of tier subscribers.

As of September 30, 1998, the Partnership's systems served approximately 39,700
basic subscribers, 16,600 premium subscribers and 12,800 tier subscribers.

Operating expenses totaled $379,844 for the three months ended September 30,
1998, representing an increase of approximately 21% over the same period in
1997. The increase in operating expenses was primarily attributable to the
acquisition of the Toccoa and Royston, GA systems.

General and administrative expenses totaled $1,030,974 for the three months
ended September 30, 1998, representing an increase of approximately 28% over the
same period in 1997. The increase is due to the acquisition of the Toccoa and
Royston, GA systems, with general and administrative expenses for other systems
remaining relatively unchanged.

Programming expenses totaled $1,157,063 for the three months ended September 30,
1998, representing an increase of approximately 38% over the same period in
1997. The addition of the Toccoa and Royston, GA systems increased programming
expenses 29%. Programming expenses for the three months ended September 30, 1997
were decreased 5% by certain launch incentive fees received from programmers.
The remaining 4% increase is due to higher programming costs resulting from rate
increases charged by various program suppliers and a one-time adjustment to
advertising agency fee expenses.

Depreciation and amortization expense for the three months ended September 30,
1998 increased approximately 3% over the same period in 1997. The addition of
assets acquired in the purchase of the Toccoa and Royston, GA systems increased
depreciation and amortization expense 30%. Excluding the effects of the
acquisition of the Toccoa and Royston, GA systems, depreciation and



                                       8
<PAGE>   9

amortization decreased by 27% as a result of assets becoming fully depreciated
and amortized in 1997, offset by depreciation and amortization on current year
purchases of plant and equipment.

Interest expense for the three months ended September 30, 1998 increased
approximately 46% compared to the same period in 1997. The Partnership's average
bank debt outstanding increased from $30,040,000 in the third quarter of 1997 to
$41,100,000 in the third quarter of 1998, and the Partnership's effective
interest rate increased from 8.27% during the third quarter of 1997 to 8.81%
during the third quarter of 1998.

Liquidity and Capital Resources

The Partnership's primary sources of liquidity are cash flow provided from
operations and borrowing capacity under the Partnership's existing revolving
credit facility. Based on management's analysis, the Partnership's cash flow
from operations is sufficient to cover future operating costs, debt service and
planned capital expenditures.

Under the terms of the Partnership's loan agreement, the Partnership has agreed
to restrictive covenants which require the maintenance of certain ratios
including a maximum ratio of senior debt to annualized operating cash flow of
5.75 to 1.00 and a minimum ratio of annualized operating cash flow to pro forma
debt service of 1.20 to 1.00. As of September 30, 1998 the Partnership was in
compliance with its required financial covenants.

As of the date of this filing, the balance under the credit facility is
$40,975,000. Certain fixed rate agreements in place as of June 30, 1998 expired
during the third quarter of 1998, and the Partnership entered into new fixed
rate agreements. As of the date of this filing, interest rates on the credit
facility were as follows: $20,625,000 fixed at 8.635% under the terms of a self
amortizing interest rate swap agreement with the Partnership's lender expiring
December 29, 2000; $9,000,000 fixed at 8.315% under the terms of an interest
rate swap agreement with the Partnership's lender expiring June 15, 2000;
$6,000,000 fixed at 8.335% under the terms of an interest rate swap agreement
with the Partnership's lender expiring March 12, 2001; $4,100,000 fixed at
8.335% under the terms of an interest rate swap agreement with the Partnership's
lender expiring March 12, 2001; and $1,000,000 at a Libor based rate of 8.125%
expiring December 15, 1998. The balance of $250,000 bears interest at prime plus
1.25% (currently 9.25%). The above rates include a margin paid to the lender
based on overall leverage, and may increase or decrease as the Partnership's
leverage fluctuates.

Capital Expenditures

During the third quarter of 1998, the Partnership incurred approximately
$508,000 in capital expenditures, including the construction of a fiber optic
backbone in the Camano, WA system; the second phase of an upgrade of a portion
of the distribution plant to 450 MHz and the purchase of headend equipment to
launch new channels in the Bay City, TX system; the initial phase of an upgrade
of the distribution plant to 550 MHz in the Toccoa, GA system; and various line
extensions in all of the systems.



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<PAGE>   10


Planned expenditures for the balance of 1998 include the completion of a fiber
backbone in the Camano, WA system; continuation of an upgrade of the
distribution plant to 450 MHz in the Bay City, TX system; continuation of the
upgrade of the Toccoa, GA system to 550 MHz; and various line extensions in all
of the systems.

Acquisition

On December 5, 1997, the Partnership acquired substantially all operating assets
and franchise rights of the cable television systems serving approximately 7,400
subscribers in and around the communities of Toccoa and Royston and certain
unincorporated areas of Stephens, Franklin and Hart counties, all in the state
of Georgia. The systems were acquired at a purchase price of $11,360,000.

Pro forma operating results of the Partnership for the nine and three months
ending Sept 30, 1997, assuming the acquisition of the Toccoa and Royston, GA
systems had been completed as of the beginning of the period, are as follows:

<TABLE>
<CAPTION>
                            Nine months ending     Three months ending
                              Sept 30, 1997           Sept 30, 1997
                            ------------------     -------------------
<S>                            <C>                     <C>       
Revenue                        $12,042,340             $4,154,569
                               ===========             ==========
Net income                     $(2,443,737)            $ (760,664)
                               ===========             ==========
Net loss per limited
  partnership unit             $       (49)            $     (15)
                               ===========             ==========
</TABLE>





                                       10
<PAGE>   11


                           PART II - OTHER INFORMATION


ITEM 1 Legal proceedings

          None

ITEM 2 Changes in securities

          None

ITEM 3 Defaults upon senior securities

          None

ITEM 4 Submission of matters to a vote of security holders

          None

ITEM 5 Other information

          None

ITEM 6 Exhibits and Reports on Form 8-K

(a)  Exhibit index

        27.0  Financial Data Schedule

(b) No reports on Form 8-K have been filed during the quarter ended September
30, 1998.






                                       11
<PAGE>   12



                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

              NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

                            BY:  Northland Communications Corporation,
                                 Managing General Partner



Dated:                      BY:  /s/ RICHARD I. CLARK
       -------------                 ----------------------------------
                                     Richard I. Clark
                                     (Vice President/Treasurer)



Dated:                      BY:  /s/ GARY S. JONES
       -------------                 ----------------------------------
                                     Gary S. Jones
                                     (Vice President)






                                       12
<PAGE>   13


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

              NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

                            BY:  Northland Communications Corporation,
                                 Managing General Partner



Dated:                      BY:
       -------------             --------------------------------------
                                 Richard I. Clark
                                 (Vice President/Treasurer)



Dated:                      BY:
       -------------             --------------------------------------
                                 Gary S. Jones
                                 (Vice President)











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