<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                 ---------------

(Mark One)

    [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2001.

    [ ] 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 000-26153

                                 ---------------

                             HIGH SPEED ACCESS CORP.
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                          61-1324009
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                         Identification Number)

                             10901 WEST TOLLER DRIVE
                            LITTLETON, COLORADO 80127
          (Address of principal executive offices, including zip code)

                                  720/922-2500
              (Registrant's telephone number, including area code)

   FORMER NAME, FORMER ADDRESS, AND FORMER YEAR, IF CHANGED SINCE LAST REPORT:
                                 NOT APPLICABLE

    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 been subject to such
filing requirements for the past 90 days.

                                 YES [X] NO [ ]

Number of shares of Common Stock outstanding as of July 31, 2001. . . 58,809,052


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<PAGE>   2



                                      INDEX

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>
PART I - FINANCIAL INFORMATION

  Item 1 - Financial Statements

    Condensed Consolidated Balance Sheets as of June 30, 2001 (Unaudited) and
    December 31, 2000                                                                       3

    Condensed Consolidated Statements of Operations for the three and six
    months ended June 30, 2001 and 2000 (Unaudited)                                         4

    Condensed Consolidated Statements of Cash Flows for the
    six months ended June 30, 2001 and 2000 (Unaudited)                                     5

    Notes to Condensed Consolidated Financial Statements (Unaudited)                        6

  Item 2 - Management's  Discussion and Analysis of Financial  Condition and Results of
           Operations                                                                      10

  Item 3 - Quantitative and Qualitative Disclosures About Market Risk                      28

PART II - OTHER INFORMATION

  Item 1 - Legal Proceedings                                                               28

  Item 2 - Changes in Securities and Use of Proceeds                                       28

  Item 3 - Defaults upon Senior Securities                                                 29

  Item 4 - Submission of Matters to a Vote of Security Holders                             29

  Item 5 - Other Information                                                               29

  Item 6 - Exhibits and Reports on Form 8-K                                                29

  Signatures                                                                               30

</TABLE>

                                       2
<PAGE>   3
Part I.  Financial Information
     Item 1.  Financial Statements

                         HIGH SPEED ACCESS CORP.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                  (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<Table>
<Caption>
                                                                                                  JUNE 30,      DECEMBER 31,
                                                                                                    2001           2000
                                                                                                  ---------     ------------
                                                                                                 (UNAUDITED)
<S>                                                                                               <C>            <C>
                                 ASSETS

Current assets:
     Cash and cash equivalents                                                                    $  25,977      $ 114,847
     Short-term investments                                                                          30,489         13,229
     Restricted cash                                                                                  2,404          2,469
     Accounts receivable, net of allowance for doubtful accounts of $491
       and $296, respectively                                                                         4,561          2,087
     Prepaid expenses and other current assets                                                        5,747          3,818
                                                                                                  ---------      ---------
            Total current assets                                                                     69,178        136,450

Property, equipment and improvements, net                                                            55,662         63,008
Intangible assets, net                                                                                3,444          4,197
Deferred distribution agreement costs, net                                                            9,724         11,783
Other non-current assets                                                                              6,171          4,269
                                                                                                  ---------      ---------
            Total assets                                                                          $ 144,179      $ 219,707
                                                                                                  =========      =========
                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                                                             $   7,836      $  15,395
     Accrued compensation and related expenses                                                        5,843          6,757
     Other current liabilities                                                                       10,777          9,073
     Long-term debt, current portion                                                                  2,345          2,633
     Capital lease obligations, current portion                                                       8,223          7,790
                                                                                                  ---------      ---------
            Total current liabilities                                                                35,024         41,648

Long-term debt                                                                                        1,072          2,313
Capital lease obligations                                                                             7,333         11,380
Other liabilities                                                                                       617             --
                                                                                                  ---------      ---------
            Total liabilities                                                                        44,046         55,341
                                                                                                  ---------      ---------
Commitments and contingencies

Stockholders' equity:
     Preferred stock, $.01 par value (aggregate liquidation preference of $75.0 million),
     10,000,000 shares authorized, 75,000 shares issued and outstanding at June 30,
     2001 and December 31, 2000                                                                           1              1

     Common stock, $.01 par value, 400,000,000 shares authorized, 58,809,052
     and 58,684,052 shares issued and outstanding at June 30, 2001 and
     December 31, 2000, respectively                                                                    588            587

     Class A common stock, 100,000,000 shares authorized, none issued                                    --             --
     and outstanding

     Additional paid-in-capital                                                                     742,063        737,215

     Deferred compensation                                                                           (2,296)          (713)

     Accumulated deficit                                                                           (640,616)      (573,217)

     Accumulated other comprehensive income                                                             393            493
                                                                                                  ---------      ---------
            Total stockholders' equity                                                              100,133        164,366
                                                                                                  ---------      ---------
            Total liabilities and stockholders' equity                                            $ 144,179      $ 219,707
                                                                                                  =========      =========
</Table>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                       3
<PAGE>   4



                             HIGH SPEED ACCESS CORP.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)


<Table>
<Caption>
                                                                             THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                        ---------------------------    ----------------------------
                                                                           2001            2000            2001            2000
                                                                        -----------    ------------    ------------    ------------
<S>                                                                     <C>            <C>             <C>             <C>
Net Revenue                                                             $     9,300    $      2,757    $     16,304    $      4,751

Costs and expenses:
Operating                                                                    24,050          14,844          46,147          30,790
Engineering                                                                   5,561           5,479          12,840          10,391
Sales and marketing                                                           2,806           6,249           7,440          12,465

General and administrative:
  Non-cash compensation expense from stock options, warrants
       and restricted stock                                                     193              24             270              48
  Amortization of distribution agreement costs                                4,075             891           4,679           1,116
  Other general and administrative expenses                                   6,928           5,107          13,399           9,140
                                                                        -----------    ------------    ------------    ------------
  Total general and administrative                                           11,196           6,022          18,348          10,304
                                                                        -----------    ------------    ------------    ------------
  Total costs and expenses                                                   43,613          32,594          84,775          63,950
                                                                        -----------    ------------    ------------    ------------
Loss from operations                                                        (34,313)        (29,837)        (68,471)        (59,199)
Investment income                                                               882           1,866           2,299           3,991
Interest expense                                                               (578)           (530)         (1,227)         (1,020)
                                                                        -----------    ------------    ------------    ------------
Net loss available to common stockholders                               $   (34,009)   $    (28,501)   $    (67,399)   $    (56,228)
                                                                        ===========    ============    ============    ============
Basic and diluted net loss available to common stockholders per share   $     (0.58)   $      (0.52)   $      (1.15)   $      (1.03)
                                                                        ===========    ============    ============    ============

Weighted average shares used in computation of basic and diluted net
  loss available to common stockholders per share                        58,767,843      55,232,317      58,726,179      54,780,674
</Table>



              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.




                                       4
<PAGE>   5




                             HIGH SPEED ACCESS CORP.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<Table>
<Caption>
                                                                                               2001         2000
                                                                                            ---------    ---------
<S>                                                                                         <C>          <C>
OPERATING ACTIVITIES
Net loss                                                                                    $ (67,399)   $ (56,228)
     Adjustments to reconcile net loss to net cash used
     in operating activities:
          Depreciation and amortization                                                        20,241        7,599
          Non-cash compensation expense from stock options, warrants and restricted stock         270           48
          Amortization of distribution agreement costs                                          4,679        1,116
          Changes in operating assets and liabilities:
              Restricted cash                                                                      65       (1,937)
              Accounts receivable                                                              (2,474)        (461)
              Prepaid expenses and other current assets                                        (1,929)         212
              Other non-current assets                                                         (1,902)      (1,195)
              Accounts payable                                                                (11,926)         309
              Accrued compensation and related expenses                                          (914)           8
              Other current liabilities                                                         2,079        4,282
              Other liabilities                                                                   617           --
                                                                                            ---------    ---------
Net cash used in operating activities                                                         (58,593)     (46,247)
                                                                                            ---------    ---------
INVESTING ACTIVITIES
     Purchases of short-term investments                                                      (31,703)     (65,883)
     Sales and maturities of short-term investments                                            14,343      126,464
     Purchases of property, equipment and improvements, net of leases                          (7,435)     (19,525)
                                                                                            ---------    ---------
Net cash (used in) provided by investing activities                                           (24,795)      41,056
                                                                                            ---------    ---------
FINANCING ACTIVITIES
     Net proceeds from issuance of common stock                                                    --       10,000
     Payments on capital lease obligations                                                     (3,953)      (2,978)
     Proceeds from long-term debt                                                                  --        1,213
     Payments on long-term debt                                                                (1,529)        (872)
     Proceeds from exercise of stock options                                                       --          588
                                                                                            ---------    ---------
Net cash (used in) provided by financing activities                                            (5,482)       7,951
                                                                                            ---------    ---------
Net change in cash and cash equivalents                                                       (88,870)       2,760

Cash and cash equivalents, beginning of period                                                114,847       53,310
                                                                                            ---------    ---------
Cash and cash equivalents, end of period                                                    $  25,977    $  56,070
                                                                                            =========    =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Equipment acquired under capital leases                                                $     339    $   3,574
     Property and equipment purchases payable                                               $   2,873    $   2,547
     Warrants earned in connection with distribution agreements                             $   2,621    $   6,558
     Issuance of common stock in connection with distribution agreement                     $     375           --
</Table>


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.




                                       5
<PAGE>   6
ITEM 1 - NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION

THE COMPANY

    High Speed Access Corp. and its subsidiaries (hereinafter referred to as the
Company, we, us, or our) provides high speed Internet access to residential and
commercial end users primarily using cable modem technology. The Company focuses
primarily on residential end users in exurban areas, although the Company has
recently begun providing broadband services in some urban markets. The Company
defines exurban markets as cable systems with fewer than 100,000 homes passed.
The term "homes passed" refers to the number of homes that potentially can be
served by a cable system. The Company enters into long-term exclusive contracts
with cable system operators to provide a suite of services on a comprehensive
"turnkey" basis, as well as on an unbundled or "Network Services" basis. These
services enable a cable system's customers to receive high speed Internet
access.

    In exchange for providing the Company with access to its customers in the
turnkey solution, we pay the cable operator a portion of the monthly fees
received from an end user that subscribes to our services. In an unbundled or
Network Services solution, we deliver fewer services and incur lower costs than
a turnkey solution, but also earn a smaller percentage of the subscription
revenue or a fixed fee on a per subscriber basis. Under the Network Services
solution, our cable partners will typically bill the end user and will remit to
us our percentage of the revenue or the fixed fee. Network Services solutions
have become a significant part of our business mix, and we anticipate this trend
will continue.

    The Company currently offers certain related services including web site
hosting, all primarily for small and medium enterprises ("SMEs"). The Company
also currently provides, on a limited basis, standard Internet access through
traditional dial-up service to residential and SME customers.

BASIS OF PRESENTATION

    The unaudited condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring adjustments, which
in the opinion of management are necessary to present fairly the Company's
financial position, results of operations and cash flows for the periods
presented. Certain information and footnote disclosures normally included in
audited financial information prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission's rules and regulations.

    The results of operations for the period ended June 30, 2001 are not
necessarily indicative of the results to be expected for any subsequent quarter
or for the entire fiscal year ending December 31, 2001. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.

ABILITY TO CONTINUE AS A GOING CONCERN

    The Company continues to closely monitor the level of its expenditures and
cash commitments and recently announced a series of significant cost reduction
measures. Among the actions being taken by the Company are the completion of its
previously announced exit from certain one-way cable TV markets, the
commencement of negotiations to exit all of its turnkey contracts with cable
operators other than Charter Communications, Inc. ("Charter"), a related party,
(covering 22,500 current subscribers), and material reductions in the workforce
of the Company. The Company has also begun scaling back the operations of
Digital Chainsaw ("Digital Chainsaw" or "Digital") including reducing its
workforce and service offerings, and is currently pursuing the sale of this
subsidiary. Finally, the Board of Directors of the Company has made the
strategic determination to no longer pursue entry into the digital subscriber
line ("DSL") market and to cease development of any other new service and
product offerings other than those that are expected to be cash flow positive in
the short term. The Company will cease further attempts to acquire DSL assets
and has begun pursuing the sale of its current DSL assets. Following completion
of these measures, the Company's business will consist of its cable internet
access business with Charter and its international ISP infrastructure services
business. The Company recently received a non-binding proposal from Charter to
acquire the Company's cable modem business with Charter. See Note 7, "Business
Developments" and "Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments" for a description of
such proposal.

    The Company has incurred losses from operations and negative cash flows from
operating activities since April 3, 1998 ("Inception"), which have been funded
primarily through the issuance of equity securities and borrowings. Management
expects to experience substantial negative cash flows for at least the next
several years. As of June 30, 2001, the Company had $56.5 million of
unrestricted cash, cash equivalents and short-term investments, which management
believes are sufficient to meet the Company's cash needs in 2001.



                                       6
<PAGE>   7
Continued implementation of the Company's revised business plan, however, will
be dependent upon obtaining substantial additional financing by no later than
early 2002 to fund continuing operations. The Company will continue to evaluate
the size of its operations with the goal of extending its cash resources and
enhancing the possibility of entering into a strategic transaction including a
financing or a business combination transaction. Management has attempted to
secure additional financing over the last several months but has thus far been
unsuccessful in its efforts. The Company believes that it is very unlikely that
it will be able to secure additional financing in the current economic
environment being faced by the telecommunications industry before the Company's
cash reserves are depleted in early 2002. In light of the difficult current
financing environment, the Company has been pursuing additional strategic
alternatives, including consideration of Charter's proposal to acquire the
Company's cable modem business with Charter. If the Charter proposal is not
consummated and if additional financing is not available on acceptable terms,
the Company will be forced to further curtail operations, which could have a
material adverse effect on the Company. Such curtailment of operations would
involve significant additional amendments to the Company's current business plan
including, but not limited to, some or all of the following: further
administrative and operating expense reductions, further reduction of our sales,
marketing and customer service efforts, sales of certain assets or of the
Company or the bankruptcy and/or dissolution of the Company.

    Consequently, there is substantial doubt as to the Company's ability to
continue as a going concern unless it is able to secure additional financing in
early 2002. The accompanying condensed consolidated financial statements have
been prepared on a going concern basis and include no adjustments that may
result from the outcome of this uncertainty.

    See Note 7, "Business Developments."

RECLASSIFICATION

    Certain prior period amounts in the condensed consolidated financial
statements have been reclassified to conform to the current period presentation.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
These estimates are based on knowledge of current events and anticipated future
events. Actual results could differ from those estimates.

NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"), which provides that all business combinations should be accounted
for using the purchase method of accounting and establishes criteria for the
initial recognition and measurement of goodwill and other intangible assets
recorded in connection with a business combination. The provisions of SFAS 141
apply to all business combinations initiated after June 30, 2001 and to all
business combinations accounted for by the purchase method that are completed
after June 30, 2001, or later. The Company will apply the provisions of SFAS 141
to any future business combinations.

    In addition, the FASB issued Statements of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which establishes
the accounting for goodwill and other intangible assets following their
recognition. SFAS 142 applies to all goodwill and other intangible assets
whether acquired singly, as part of a group, or in a business combination. SFAS
142 provides that goodwill should not be amortized but should be tested for
impairment annually using a fair-value based approach. In addition, SFAS 142
provides that other intangible assets other than goodwill should be amortized
over their useful lives and reviewed for impairment in accordance with Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 142 is
effective for the Company beginning on January 1, 2002. Upon adoption, the
Company will be required to perform a transitional impairment test for all
goodwill recorded as of January 1, 2002. Any impairment loss recorded as a
result of completing the transitional impairment test will be treated as a
change in accounting principle. The impact of the adoption of SFAS 142 on the
Company's results of operations for all periods beginning on or after January 1,
2002 will be to eliminate amortization of goodwill. Management of the Company
has not performed a transitional impairment test under SFAS 142 and accordingly
cannot estimate the impact of the adoption as of January 1, 2002.

NOTE 3 - LOSS PER SHARE

    The Company computes net loss available to common stockholders per share
under the provisions of Statements of Financial Accounting Standards No. 128,
"Earnings per Share," ("SFAS 128"). Under the provisions of SFAS 128, basic net
loss available to common stockholders per share is computed by dividing the net
loss available to common stockholders for the period by the weighted average
number of shares of common stock outstanding during the period.

    Diluted earnings per share is determined in the same manner as basic
earnings per share, except that the number of shares is increased assuming
exercise of dilutive stock options and warrants using the treasury stock method
and assuming conversion of preferred stock. In addition, income or loss is
adjusted for dividends and other transactions relating to preferred stock for
which conversion is assumed. The calculation of diluted net loss available to
common stockholders per share excludes potential common




                                       7
<PAGE>   8

shares if the effect is dilutive.

    Basic and diluted net loss available to common stockholders per share for
the three months ended June 30, 2001 and 2000, were $0.58 and $0.52 based on
weighted average shares outstanding of 58,767,843 and 55,232,317, respectively.
For the six months ended June 30, 2001 and 2000, basic and diluted net loss
available to common stockholders were $1.15 and $1.03 based on weighted average
shares outstanding of 58,726,179 and 54,780,674, respectively. Diluted loss
available to common stockholders per share equals basic loss available to common
stockholders per share because the assumed exercise of the Company's stock
options and warrants and the assumed conversion of preferred stock are dilutive.

    Options and warrants to purchase 10,850,012 shares and 5,387,718 shares of
common stock at June 30, 2001 and 2000, respectively, were excluded from the
calculation of net loss available to common stockholders per share. Also
excluded from the calculation were 75,000 shares of preferred stock that are
convertible into 14,952,906 shares of common stock at June 30, 2001.

    There is a potential to issue additional warrants pursuant to the agreements
set forth in Note 5. These potential warrants have been excluded from the
calculation above because they are not currently measurable and would be
dilutive. In the future, the Company also may issue additional stock or warrants
to purchase its common stock in connection with its efforts to expand the
distribution of its services. Stockholders could face additional dilution from
these possible future transactions.

NOTE 4 - COMPREHENSIVE LOSS

    Comprehensive loss, comprised of net loss available to common stockholders
and net unrealized holding gains and losses on investments, totaled $33.8
million and $27.3 million for the three months ended June 30, 2001 and 2000,
respectively, and $67.5 million and $55.6 million for the six months ended June
30, 2001 and 2000, respectively.

NOTE 5 - DISTRIBUTION AGREEMENTS

    As an inducement to certain cable partners to commit systems, the Company
issues warrants to purchase its common stock in connection with Network Service
agreements and other agreements, collectively referred to as distribution
agreements. The Company values warrants to purchase its common stock using an
accepted options pricing model based on the value of the stock when the warrants
are earned. The Company recognizes an addition to equity for the fair value of
any warrants issued, and recognizes the related expense over the term of the
agreement with the respective cable system, generally four to five years, in
accordance with Emerging Issues Task Force Issue No. 96-18, "Accounting for
Equity Instruments that are Issued to Other than Employees for Acquiring or in
Conjunction with Selling, Goods or Services."

    In May 2000, the Company entered into a distribution agreement with Charter,
a related party. Under this agreement, Charter committed to provide the Company
exclusive right to provide Network Services related to the delivery of Internet
access to homes passed in certain cable systems. We provide Network Services,
including system monitoring and security, as well as call center support.
Charter receives the warrants described in the following paragraph as an
incentive to provide the Company additional homes passed, although it is not
obligated to do so. Charter can terminate these exclusivity rights, on a
system-by-system basis, if the Company fails to meet performance specifications
or otherwise breaches the agreement. The agreement has an initial term of five
years and may be renewed at Charter's option for additional successive five-year
terms.

    In connection with this distribution agreement, the Company and Charter
entered into an amended and restated warrant to purchase up to 12,000,000 shares
of common stock at an exercise price of $3.23 per share and terminated two
warrants that had been issued to Charter in November 1998. The new warrant
becomes exercisable at the rate of 1.55 shares for each home passed committed to
us by Charter under the distribution agreement entered into by Charter and us in
November 1998. The warrant also becomes exercisable at the rate of .775 shares
for each home passed committed to us by Charter under the distribution agreement
entered into in May 2000 up to 5,000,000 homes passed, and at a rate of 1.55
shares for each home passed in excess of 5,000,000. Charter also has the
opportunity to earn additional warrants to purchase shares of common stock upon
any renewal of the May 2000 agreement. Such a renewal warrant will have an
exercise price of $10 per share and will be exercisable to purchase 0.5 shares
for each home passed in the systems for which the May 2000 agreement is renewed.
With respect to each home passed, launched or intended to be launched on or
before the second anniversary date of the second distribution agreement, the
Company will pay Charter, at Charter's option, a launch fee of $3.00 per home
passed committed. As of June 30, 2001, the Company has paid Charter
approximately $6.7 million of launch fees related to launched systems or systems
to be deployed in the near future. In these systems where the Company paid a
launch fee to Charter, the Company receives additional revenue in years two
through five or the distribution agreement. The launch fees paid are amortized
against the additional revenue received from Charter. The Company recently
received a non-binding proposal from Charter to acquire the Company's cable
modem business with Charter. See Note 7, "Business Developments" and "Item 2 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Developments" for a description of such proposal.




                                       8
<PAGE>   9

    For the three and six months ended June 30, 2001, the Company recognized
$4.6 million and $8.2 million of revenue, respectively, under these distribution
agreements. At June 30, 2001 the company had receivables from Charter of $5.0
million.

    As of June 30, 2001, various cable partners, including Charter, had earned
2,826,714 warrants under distribution agreements of which 91,308 of these
warrants were earned at a cost of $0.9 million in the three months ended June
30, 2001. Deferred distribution agreement costs of $9.7 million, net of
accumulated amortization of $7.5 million were recorded in conjunction with these
warrants at June 30, 2001. Amortization of distribution agreement costs of $4.1
million and $4.7 million were recognized in the statement of operations for the
three and six months ended June 30, 2001, respectively. Included in these
amounts are deferred distribution agreement costs of $2.8 million related to
warrants in terminated one-way systems. Additional deferred distribution
agreement costs may be recorded and amortized in future periods should the cable
partners earn the right to purchase additional common shares based on the number
of homes passed committed to the Company. At June 30, 2001, there were
14,973,286 additional warrants available to be earned under distribution
agreements.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

    As of June 30, 2001 the Company was not a party to any material legal
proceedings. In the opinion of management, the amount of ultimate liability with
respect to any actions known as of June 30, 2001 will not materially affect the
financial position, results of operations or cash flows of the Company. See also
Note 7, "Business Developments" for a discussion of a legal proceeding pending
in connection with Charter's proposal to acquire the Company's cable modem
business.

NOTE 7 - BUSINESS DEVELOPMENTS

    The Company recently announced a series of significant cost reduction
measures. Among the actions being taken by the Company in the third quarter are:

    o   The completion of its previously announced exit from certain one-way
        cable TV markets. In the second quarter of 2001, the Company recorded a
        $2.8 million charge for the write-down of equipment used in one-way
        markets and other operating costs, primarily non-cancelable lease
        obligations.

    o   The commencement of negotiations to exit all of its turnkey contracts
        with cable operators other than Charter (covering 22,500, or
        approximately 12% of the Company's current subscribers). The net book
        value of the equipment used in these systems is $4.3 million. The
        Company expects to record impairment charges relating to these assets as
        well as additional costs associated with these actions in the third
        quarter of 2001. The amounts of these impairment charges and possible
        additional costs are not currently estimable.

    o   Scaling back the operations of Digital Chainsaw, including reducing its
        workforce and eliminating all service offerings other than web site
        hosting. The net book value of Digital Chainsaw's assets is $0.5
        million. The Company expects to record impairment charges relating to
        these assets as well as additional costs associated with these actions
        in the third quarter of 2001. The amounts of these impairment charges
        and possible additional costs are not currently estimable.

    o   Ceasing pursuit of its previously planned entry into the DSL market and
        ceasing development of any other new service and product offerings other
        than those that are expected to be cash flow positive in the short term.
        The net book value of the Company's DSL assets is $3.5 million,
        including $3.4 million purchased in July 2001. In connection with this
        purchase, the Company entered into a $1.9 million debt financing
        agreement with Lucent Technologies ("Lucent"). This transaction, along
        with prior purchases, has fulfilled the Company's $5.0 million purchase
        obligation with Lucent. The Company expects to record impairment charges
        relating to these assets as well as additional costs associated with
        these actions in the third quarter of 2001. The amounts of these
        impairment charges and possible additional costs are not currently
        estimable.

    o   Material reductions in workforce. The Company expects to incur $2.0
        million in severance and related costs relating to these workforce
        reductions in the third quarter of 2001.

    The Company also has begun pursuing the sale of Digital Chainsaw as well as
its DSL assets. Following completion of these measures, the Company's business
will consist of its cable internet access business with Charter and its
international ISP infrastructure services business. The Company will continue to
monitor the size of its workforce and the levels of its other operating costs
and cash commitments with a view to conserving cash and enhancing the
possibility of entering into a strategic transaction including a financing or a
business combination transaction.


    On July 31, 2001, the Company received a non-binding proposal from Charter
to acquire certain contracts and associated assets of the Company's cable modem
business that service Charter's customers. The proposal relates to all assets of
the Company used in or necessary to perform services provided by the Company
under the Full Turnkey contract and Network Services Agreement for Charter cable
systems, including the Company's call center and network operations center in
Louisville, KY and all Company-owned equipment in Charter headends and customer
homes. The proposed purchase price for those contracts and associated assets is
approximately $73 million, consisting of cash and the assumption of certain
liabilities, subject to certain adjustments. In addition, as part of the
proposed transaction consideration, all 37,000 and 38,000 shares of the
Company's convertible preferred stock respectively held by Charter and Vulcan,
would be cancelled.


                                       9
<PAGE>   10



     In view of the related-party issues attendant on Charter's proposal,
Messrs. Jerald L. Kent, Stephen E. Silva and William D. Savoy have resigned from
the Company's Board of Directors. Mr. Kent is President, Chief Executive Officer
and a director of Charter and Mr. Silva is Senior Vice President, Corporate
Development and Technology of Charter. Mr. Savoy is a director of Charter and
President of Vulcan. See "Risk Factors -- Because of our relationship with
Vulcan Ventures, New Investors will have little influence over management
decisions."

     A Special Committee of the Company's Board of Directors, comprised of
directors not affiliated with Charter or Vulcan (which, following the
resignations referred to above, comprise the Company's entire Board of
Directors) has been investigating a broad range of strategic options for the
Company, including, but not limited to, a sale of the Company, a sale of the
Company's assets, an acquisition, merger, consolidation, or other business
combination transaction, a strategic transaction, joint venture or partnership
with a financial, strategic or industry partner or other similar transaction, or
a public or private sale of debt or equity securities. Lehman Brothers, a
leading investment banking firm, has been assisting the Special Committee. The
Special Committee has been considering Charter's proposal and the Company is
currently in ongoing negotiations with Charter regarding certain financial and
other material elements of Charter's proposal. The Company is also evaluating
the impact of the proposal on the Company. Among the matters being considered,
assuming a definitive agreement with Charter can be achieved on mutually
acceptable terms, is whether the Company would commence an orderly shutdown of
its remaining business and distribute the net proceeds to its stockholders or
utilize the proceeds of the sale in furtherance of a restructuring and expansion
of the Company's remaining business. There can be no assurance that the Company
will agree upon or consummate a transaction with Charter or with any other
party. The Company, its directors, Charter Communications, Inc. and Paul Allen
have been named as defendants in two class action lawsuits filed in the Court of
Chancery of the State of Delaware (Tesche v. O'Brien, et. al., Civil Action No.
19046 NC and Denault v. O'Brien et al., Civil Action No. 19045 NC). Both
lawsuits allege a breach of fiduciary duty in connection with the making of the
Charter proposal and the Company's consideration of it. The Complaint seeks
injunctive relief preventing the Company from going forward with the Charter
transaction or in the event the transaction is consummated rescission of that
transaction as well as damages in an unspecified amount. The Company intends to
vigorously defend these lawsuits.

     In April 2001, the Company notified its cable partners that it intended to
discontinue turnkey services in the majority of its one-way cable TV markets.
The change, which affected fewer than four percent of the Company's subscribers,
was accomplished by modifying the contractual relationship between the Company
and the cable operator from turnkey services to Network Services or by
terminating service in these markets. In connection with these service
terminations, the Company fully amortized deferred distribution agreement costs
of approximately $2.8 million associated with warrants issued under the related
distribution agreements. In addition, the Company recorded an impairment charge
of $1.7 million for the write-down of equipment used in one-way markets and a
charge of $1.1 million for lease termination and other costs expected to be paid
by the end of 2001.

     In February 2001, the Company began providing internet infrastructure
services to Kabel Nordrhein-Westfalen GmbH & Co. KG ("KNRW") in Germany.
Revenues from the service agreement are recognized as services are provided. For
the three and six months ended June 30, 2001, the Company recognized revenues of
$1.7 million and $2.1 million, respectively. This agreement is terminable by
KNRW in the event of a change of control of the Company.

     The Company recently entered into an agreement with Time Warner Cable, a
unit of AOL Time Warner, covering the provision of high-speed Internet access
services over AOL Time Warner's cable systems. The Company's strategy under this
agreement was to secure a national content provider to provide customer
acquisition and marketing support and consumer services. The Company has thus
far been unsuccessful in its efforts to reach agreement with a major content
provider and believes that it is very unlikely to secure such a party within the
period provided for in the Time Warner agreement.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

    This Quarterly Report on Form 10-Q contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions, involve risks
and uncertainties, and actual events or results may differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors" as well as those discussed in other filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000.

OVERVIEW

    We provide high speed Internet access to residential and commercial
customers primarily via cable modems. We focus primarily on residential and
commercial end users in exurban areas, although we have begun to provide
broadband services in some urban markets. We define exurban markets as cable
systems with fewer than 100,000 homes passed. The term "homes passed" refers to
the number of homes that potentially can be served by a cable system. We enter
into long-term exclusive contracts with cable system operators to provide a
suite of services on a comprehensive "turnkey" basis as well as on an unbundled
or "Network Services" basis. These services enable a cable system's customers to
receive high speed Internet access.

    In our turnkey solution, we generate revenue primarily from the monthly fees
we receive from end users for our cable modem-based Internet access services. In
our turnkey solution, we generally bill the end user directly and pay our cable
partners a portion of the monthly fee we receive. In these instances, we report
our revenues net of the percentage split we pay to our cable partners. For
promotional purposes, we often provide new end users with 30 days of free
Internet access when they subscribe to our services. As a result, our revenue
does not reflect new end users until the end of the promotional period. We also
receive revenues from renting cable modems to end users.

    We also offer services to our cable partners on an unbundled or "Network
Services" basis. In a Network Services solution, we deliver fewer services and
incur lower costs than in a turnkey solution but will also earn a smaller
percentage of the subscription




                                       10
<PAGE>   11

revenue or a fixed fee on a per subscriber basis. Our cable partners typically
bill the end user and remit to us our percentage of the revenue or the fixed
fee. In May 2000, we entered into a distribution agreement with Charter in which
we agreed to provide unbundled services. Network Services solutions have become
a significant part of our business mix, and we anticipate that this trend will
continue.

    Our revenue also includes international cable-based Internet service
provider infrastructure services to Kabel Nordrhein-Westfalen GmbH & Co. KG in
Germany. During 2001, international revenue has become an increasingly
significant part of our business mix, and we expect this trend to continue.

    Our revenue from dial-up services, as a percentage of total revenue, has
been decreasing and, we expect, will continue to decline as we take steps to
exit from this service offering over the coming months.

    Finally, we offer web site hosting primarily for SMEs.

    Our expenses consist of the following:

    o   Operating costs, which consist primarily of salaries and related
        personnel expenses for customer care, field technical support, network
        operations center, international, and content and web hosting employees;
        telecommunications expenses, including charges for Internet backbone and
        telecommunications circuitry; allocated cost of facilities; costs of
        installing cable modems for our end users; and depreciation and
        maintenance of equipment. Many of our operating costs are relatively
        fixed in the short term.

    o   Engineering expenses, which consist primarily of salaries and related
        personnel expenses for the development and support of our information
        systems; network design and installation of the telecommunications and
        data network hardware and software; system testing and project
        management expenses; allocated cost of facilities; and depreciation and
        maintenance on the equipment used in our engineering processes.

    o   Sales and marketing expenses, which consist primarily of salaries and
        related personnel expenses, commissions, costs associated with the
        development and distribution of sales and marketing materials, the
        preparation of database market analytics, and direct mail and
        telemarketing expenses.

    o   Non-cash compensation expense from stock options, warrants and
        restricted stock consists of the fair market value of our stock at the
        time of grant over the exercise price of the stock options granted to
        employees and directors amortized over the vesting period and the fair
        market value of non-distribution agreement warrants and restricted stock
        issued to employees amortized over the vesting period.

    o   Amortization of distribution agreement costs, which relates to warrants
        issued to cable and strategic partners in connection with distribution
        agreements. We measure the cost of warrants issued to cable and
        strategic partners based on the fair values of the warrants when earned
        by those partners. Because the fair value of the warrant is dependent to
        a large extent on the price of our common stock, the cost of warrants
        earned in the future may vary significantly. Costs of warrants granted
        in connection with distribution agreements are amortized over the term
        of the underlying agreement. For markets in which service was terminated
        during the second quarter of 2001, the remaining value of the associated
        warrants was fully amortized.

    o   Other general and administrative expenses, which consist primarily of
        salaries for our executive, administrative and finance personnel;
        allocated cost of facilities; severance payments; amortization of
        goodwill; and fees for professional services.



                                       11
<PAGE>   12

    Our operating results have varied on a quarterly basis during our short
operating history and may fluctuate significantly in the future due to a variety
of factors, many of which are outside our control. In addition, the results of
any quarter do not indicate the results to be expected for a full fiscal year.
The factors that may contribute to fluctuations in our operations are set forth
generally under the caption "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Risk Factors" and particularly in that
section under the heading "Our Quarterly Operating Results Are Likely To
Fluctuate Significantly And May Be Below Our Expectations And The Expectations
Of Analysts And Investors". As a result of such factors, our annual or quarterly
results of operations may be below the expectations of public market analysts or
investors, in which case the market price of the common stock could be
materially and adversely affected.

RECENT DEVELOPMENTS

    The Company recently announced a series of significant cost reduction
measures. Among the actions being taken by the Company in the third quarter are:

    o   The completion of its previously announced exit from certain one-way
        cable TV markets. In the second quarter of 2001, the Company recorded a
        $2.8 million charge for the write-down of equipment used in one-way
        markets and other operating costs, primarily non-cancelable lease
        obligations.

    o   The commencement of negotiations to exit all of its turnkey contracts
        with cable operators other than Charter (covering 22,500, or
        approximately 12% of the Company's current subscribers). The net book
        value of the equipment used in these systems is approximately $4.3
        million. The Company expects to record impairment charges relating to
        these assets as well as additional costs associated with these actions
        in the third quarter of 2001. The amounts of these impairment charges
        and possible additional costs are not currently estimable.

    o   Scaling back the operations of Digital Chainsaw, including reducing its
        workforce and eliminating all service offerings other than web site
        hosting. The net book value of Digital Chainsaw's assets is $0.5
        million. The Company expects to record impairment charges relating to
        these assets as well as additional costs associated with these actions
        in the third quarter of 2001. The amounts of these impairment charges
        and possible additional costs are not currently estimable.

    o   Ceasing pursuit of its previously planned entry into the DSL market and
        ceasing development of any other new service and product offerings other
        than those that are expected to be cash flow positive in the short term.
        The net book value of the Company's DSL assets is $3.5 million,
        including $3.4 million purchased in July, 2001. In connection with this
        purchase, the Company entered into a $1.9 million debt financing
        agreement with Lucent. This transaction, along with prior purchases, has
        fulfilled the Company's $5.0 million purchase obligation with Lucent.
        The Company expects to record impairment charges relating to these
        assets as well as additional costs associated with these actions in the
        third quarter of 2001. The amounts of these impairment charges and
        possible additional costs are not currently estimable.

    o   Material reductions in workforce. The Company expects to incur $2.0
        million in severance and related costs relating to these workforce
        reductions in the third quarter of 2001.

    The Company also has begun pursuing the sale of Digital Chainsaw as well as
its DSL assets. Following implementation of these measures, the Company's
business will consist primarily of its cable internet access business with
Charter and its international ISP infrastructure services business. The Company
will continue to monitor the size of its workforce and the levels of its other
operating costs and cash commitments with a view to conserving cash and
enhancing the possibility of entering into a strategic transaction including a
financing or a business combination transaction.


     On July 31, 2001, the Company received a non-binding proposal from Charter
to acquire certain contracts and associated assets of the Company's cable modem
business that service Charter's customers. The proposal relates to all assets
of the Company used in or necessary to perform services provided by the Company
under the Full Turnkey contract and Network Services Agreement for Charter
cable systems, including the Company's call center and network operations
center in Louisville, KY and all Company-owned equipment in Charter headends
and customer homes. The proposed purchase price for those contracts and
associated assets is approximately $73 million, consisting of cash and the
assumption of certain liabilities, subject to certain adjustments. In addition,
as part of the proposed transaction consideration, all 37,000 and 38,000 shares
of the Company's convertible preferred stock respectively held by Charter and
Vulcan, would be cancelled.


     In view of the related-party issues attendant on Charter's proposal,
Messrs. Jerald L. Kent, Stephen E. Silva and William D. Savoy have resigned from
the Company's Board of Directors. Mr. Kent is President, Chief Executive
Officer and a director of Charter and Mr. Silva is Senior Vice President,
Corporate Development and Technology of Charter. Mr. Savoy is a director of
Charter and President of Vulcan.

     A Special Committee of the Company's Board of Directors, comprised of
directors not affiliated with Charter or Vulcan (which, following the
resignations referred to above, comprise the Company's entire Board of
Directors) has been investigating a broad range of strategic options for the
Company, including, but not limited to, a sale of the Company, a sale of the
Company's assets, an acquisition, merger, consolidation, or other business
combination transaction, a strategic transaction, joint venture or partnership
with a financial, strategic or industry partner or other similar transaction, or
a public or private sale of debt or equity securities. Lehman Brothers, a
leading investment banking firm, has been assisting the Special Committee. The
Special Committee has been considering Charter's proposal and the Company is
currently in ongoing negotiations with Charter regarding certain financial and
other material elements of Charter's proposal. The Company is also evaluating
the impact of the proposal on the Company. Among the matters being considered,
assuming a definitive agreement with Charter can be achieved on mutually
acceptable terms, is whether the Company would commence an orderly shutdown of
its remaining business and distribute the net proceeds to its stockholders or
utilize the proceeds of the sale in furtherance of a restructuring and expansion
of the Company's remaining business. There can be no assurance that the Company
will agree upon or consummate a transaction with Charter or with any other
party. The Company, its directors, Charter Communications, Inc. and Paul Allen
have been named as defendants in two class action lawsuits filed in the Court of
Chancery of the State of Delaware (Tesche v. O'Brien, et. al., Civil Action No.
19046 NC and Denault v. O'Brien et al., Civil Action No. 19045 NC). Both
lawsuits allege a breach of fiduciary duty in connection with the making of the
Charter proposal and the Company's consideration of it. The Complaint seeks
injunctive relief preventing the Company from going forward with the Charter
transaction or in the event the transaction is consummated rescission of that
transaction as well as damages in an unspecified amount. The Company intends to
vigorously defend these lawsuits.




                                       12
<PAGE>   13

    In April 2001, the Company notified its cable partners that it intended to
discontinue turnkey services in the majority of its one-way cable TV markets.
The change, which affected fewer than four percent of the Company's subscribers,
was accomplished by modifying the contractual relationship between the Company
and the cable operator from turnkey services to Network Services or by
terminating service in these markets. In connection with these service
terminations, the Company fully amortized deferred distribution agreement costs
of approximately $2.8 million associated with warrants issued under the related
distribution agreements. In addition, the Company recorded an impairment charge
of $1.7 million for the write-down of equipment used in one-way markets and a
charge of $1.1 million for lease termination and other costs expected to be paid
by the end of 2001.

     In February 2001, the Company began providing internet infrastructure
services to KNRW in Germany. Revenues from the service agreement are recognized
as services are provided. For the three and six months ended June 30, 2001, the
Company recognized revenues of $1.7 million and $2.1 million, respectively. This
agreement is terminable by KNRW in the event of a change of control of the
Company.

     The Company recently entered into an agreement with Time Warner Cable, a
unit of AOL Time Warner, covering the provision of high-speed Internet access
services over AOL Time Warner's cable systems. The Company's strategy under this
agreement was to secure a national content provider to provide customer
acquisition and marketing support and consumer services. The Company has thus
far been unsuccessful in its efforts to reach agreement with a major content
provider and believes that it is very unlikely to secure such a party within the
period provided for in the Time Warner agreement.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 COMPARED
WITH THE THREE AND SIX MONTHS ENDED JUNE 30, 2000

REVENUES

    Net revenue consists of net monthly subscription fees for cable modem-based
and traditional dial-up Internet services, cable modem rental income,
international infrastructure services, monthly fees for web hosting services and
overall strategic consulting. Total net revenue for the three months ended June
30, 2001 and 2000 was $9.3 million and $2.8 million respectively, an increase of
$6.5 million. Total net revenue for the six months ended June 30, 2001 and 2000
was $16.3 million and $4.8 million respectively, an increase of $11.5 million.

Revenue by product offering as a percentage of total net revenue is as follows:

<TABLE>
<CAPTION>
                                                                        % OF REVENUE
                                                   THREE MONTHS ENDED JUNE 30  SIX MONTHS ENDED JUNE 30
                                                   --------------------------  ------------------------
                                                        2001          2000         2001        2000
                                                   ------------- ------------   ------------ ----------
<S>                                                     <C>          <C>          <C>           <C>
Cable modem-based subscription fees - Turnkey           32%          44%          33%           46%
Cable modem-based subscription fees - Network
Services                                                25%           7%          24%            5%
Traditional dial-up service fees                         4%          16%           5%           18%
Cable modem rental fees                                 16%          22%          17%           23%
International infrastructure services                   19%          --           13%           --
Web hosting                                              3%          --            3%           --
Other revenue                                            1%          11%           5%            8%
                                                       ----         ----         ----          ----
                                                       100%         100%         100%          100%
                                                       ====         ====         ====          ====
</TABLE>


COSTS AND EXPENSES

    OPERATING. Operating costs for the three months ended June 30, 2001 and 2000
were $24.1 million and $14.8 million, respectively, an increase of $9.3 million.
Operating costs for the six months ended June 30, 2001 and 2000 were $46.1
million and $30.8 million, respectively, an increase of $15.3 million. The
increase in operating costs during 2001 resulted primarily from an increase in
personnel and personnel related costs for additional staff in our customer care
and network operation centers, international operations and additional personnel
costs associated with the purchase of Digital, our larger subscriber base,
additional depreciation of capital equipment from the expansion of our network
and the installation of cable modems for additional subscribers. In addition,
operating costs for the three months ended June 30, 2001 includes $2.8 million
for the write-down of certain equipment and other operating costs in one-way
markets where service was terminated during this period.

    ENGINEERING. Engineering expenses for the three months ended June 30, 2001
and 2000 were $5.6 million and $5.5 million, respectively, an increase of $0.1
million. Engineering expenses for the six months ended June 30, 2001 and 2000
were $12.9 million and $10.4 million, respectively, an increase of $2.5 million.
The increase in engineering expenses resulted from the development and



                                       13
<PAGE>   14

support of information systems, continued network design and system testing, an
increase in personnel and personnel-related costs for additional technical staff
to support cable modem services and additional depreciation on capital
equipment. These increases were partially offset by a reduction in expenses for
the development of our billing system.

    SALES AND MARKETING. Sales and marketing expenses for the three months ended
June 30, 2001 and 2000 were $2.8 million and $6.2 million, respectively, a
decrease of $3.4 million. Sales and marketing expenses for the six months ended
June 30, 2001 and 2000 were $7.4 million and $12.5 million, respectively, a
decrease of $5.1 million. The decrease in sales and marketing expenses resulted
primarily from lower direct advertising costs and lower marketing costs aimed at
obtaining new cable partners.

    NON-CASH COMPENSATION EXPENSE FROM STOCK OPTIONS, WARRANTS AND RESTRICTED
STOCK. Non-cash compensation expense from stock options, warrants and restricted
stock for the three months ended June 30, 2001 and 2000 was $193,000 and
$24,000, respectively, an increase of $169,000. Non-cash compensation expense
from stock options, warrants and restricted stock for the six months ended June
30, 2001 and 2000 was $270,000 and $48,000, respectively, an increase of
$222,000. These expenses represent the excess of the fair market value of our
common stock over the exercise price of the stock options granted to employees
and directors amortized over the vesting period, the amortization of common
stock purchase warrants issued to contractors and the fair value of restricted
stock amortized over the restriction period. The increase in 2001 resulted from
the issuance of 1.5 million shares of restricted stock to key members of
management.

    AMORTIZATION OF DISTRIBUTION AGREEMENT COSTS. Amortization of distribution
agreement costs for the three months ended June 30, 2001 and 2000 was $4.1
million and $0.9 million, respectively, an increase of $3.2 million.
Amortization of distribution agreement costs for the six months ended June 30,
2001 and 2000 was $4.7 million and $1.1 million, respectively, an increase of
$3.6 million. The costs consist of the amortization of the value of warrants
earned under distribution agreements for commitments of homes passed. For the
three months ended June 30, 2001, amortization of distribution agreements costs
includes $2.8 million for the amortization of warrants issued in one-way markets
where service was terminated during this period. The Company had issued
2,826,714 and 1,215,623 warrants in connection with distribution agreements at
June 30, 2001 and 2000, respectively. We expect to incur additional material
non-cash charges related to further issuance of common stock purchase warrants
to our cable and strategic partners in the future. We will recognize an addition
to equity for the fair value of any warrants issued, and will recognize the
related expense over the term of the service agreement with the cable or
strategic partner to which the warrants relate. The amount of any such charges
is not determinable until the related warrants are earned. The use of warrants
in these and similar transactions may increase the volatility of our earnings in
the future.

    In May 2000, the Company and Charter entered into an amended and restated
warrant to purchase up to 12,000,000 shares of our common stock at an exercise
price of $3.23 per share. The restated warrant becomes exercisable at the rate
of 1.55 shares for each home passed committed to us by Charter under the
distribution agreement entered into by Charter and us in November 1998. The
warrant also becomes exercisable at the rate of .775 shares for each home passed
committed to us by Charter under the second distribution agreement entered into
in May 2000 up to 5,000,000 homes passed and at a rate of 1.55 shares for each
home passed in excess of 5,000,000. Charter also has the opportunity to earn
additional warrants to purchase shares of our common stock upon any renewal of
the May 2000 agreement. Such a renewal warrant will have an exercise price of
$10 per share and will be exercisable to purchase one-half of a share for each
home passed in the systems for which the May 2000 agreement is renewed.

    OTHER GENERAL AND ADMINISTRATIVE. Other general and administrative expenses
for the three months ended June 30, 2001 and 2000 were $6.9 million and $5.1
million, respectively, an increase of $1.8 million. Other general and
administrative expenses for the six months ended June 30, 2001 and 2000 were
$13.4 million and $9.1 million, respectively, an increase of $4.3 million. The
increase in other general and administrative expenses resulted from severance
costs associated with the termination of certain employees, additional personnel
and personnel related costs to administer the procurement, accounting and
finance functions, additional depreciation on capital equipment and the
amortization of intangible assets associated with the purchase of Digital.

    NET INVESTMENT INCOME. Net investment income for the three months ended June
30, 2001 and 2000 was $0.3 million and $1.3 million, respectively. Net
investment income for the six months ended June 30, 2001 and 2000 was $1.1
million and $3.0 million, respectively. The decrease in net investment income
for the three and six months ended June 30, 2001, is the result of lower
investment balances. Net investment income represents interest earned on cash,
cash equivalents, short-term investments and restricted cash.

    INCOME TAXES. At December 31, 2000, we accumulated net operating loss
carryforwards for federal and state tax purposes of approximately $182.1 million
which will expire beginning in 2018. At December 31, 2000, we had net deferred
tax assets of $77.6 million relating principally to our accumulated net
operating losses. Our ability to realize the value of our deferred tax assets
depends




                                       14
<PAGE>   15

on our future earnings, if any, the timing and amount of which are uncertain. We
have recorded a valuation allowance for the entire net deferred tax asset as a
result of those uncertainties. Accordingly, we did not record any income tax
benefit for net losses incurred for the three and six months ended June 30, 2001
and 2000.

LIQUIDITY AND CAPITAL RESOURCES

     To preserve cash and enhance the prospects for entering into a strategic
transaction, the Company recently announced a series of significant cost
reduction measures. Among the actions being taken by the Company are:


    o    the completion of its previously announced exit from certain one-way
         cable TV markets;


    o    the commencement of negotiations to exit all of its turnkey contracts
         with cable operators other than Charter (covering 22,500, or
         approximately 12% of the Company's current subscribers);


    o    scaling back the operations of Digital Chainsaw, including reducing its
         workforce and eliminating all service offerings other than web site
         hosting;


    o    ceasing pursuit of its previously planned entry into the DSL market and
         ceasing development of any other new service and product offerings
         other than those that are expected to be cash flow positive in the
         short term; and


    o    material reductions in workforce.


     The Company also has begun pursuing the sale of Digital as well
as its DSL assets. After these changes are completed, the Company's operations
will consist of its cable internet access cable business with Charter and our
international ISP infrastructure services business.  The Company expects these
reductions in its operations to result in future operating cost reductions the
amounts of which cannot yet be determined. However, even with these changes,
the Company will continue to experience substantial negative cash flow from its
remaining operations.  Although the Company will continue to monitor the size of
its workforce and the levels of its other operating costs and cash commitments
with a view to conserving cash, the Company will not be able to reduce costs
significantly enough to continue as a going concern without additional
financing.


     The Company will need substantial additional financing by no later than
early 2002 to fund continued operations.  Management has attempted to secure
additional financing over the last several months but has thus far been
unsuccessful in its efforts.  The Company believes that it is very unlikely
that it will be able to secure additional financing in the current economic
environment being faced by the telecommunications industry before its cash
reserves are depleted in early 2002.  In light of the difficult current
financing environment, the Company has been pursuing additional strategic
alternatives, including consideration of Charter's proposal to acquire the
Company's cable modem business with Charter. If the Charter proposal is not
consummated and if additional financing is not available on acceptable terms,
the Company will be forced to further curtail operations, which could have a
material adverse effect on the Company. Such curtailment of operations would
involve significant additional amendments to the Company's current business plan
including, but not limited to some or all of the following: further
administrative and operating expense reductions, a further reduction of our
sales, marketing and customer service efforts, sales of certain assets of the
Company, or the bankruptcy and/or dissolution of the Company. See "-- Recent
Developments."

    Such financing could involve the issuance, or deemed issuance, of additional
shares of capital stock at a price below the conversion price of our convertible
preferred stock held by Vulcan and Charter, which would result in a downward
adjustment of the conversion price. In the event of such an adjustment, the
number of shares of common stock issuable upon conversion of the convertible
preferred stock would be increased pursuant to the weighted average formula
described below under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors - Our Convertible
Preferred Stock Contains Anti-dilution Adjustments and Restrictions On Our
Future Activities". Furthermore, additional equity or debt financing could give
rise to any or all of the following:

    o   Additional dilution to our current stockholders;

    o   The issuance of securities with rights, preferences or privileges senior
        to those of the existing holders of our common stock; and

    o   The issuance of securities with covenants imposing restrictions on our
        operations.

Charter can require any lender with liens on our equipment placed in Charter
headends to deliver to Charter a non-disturbance agreement as a condition to
such financing. We can offer no assurance that we will be able to obtain
additional secured equipment financing for Charter systems subject to such a
condition or that a potential lender will be able to negotiate acceptable terms
of non-disturbance with Charter.

    At June 30, 2001, we had cash and cash equivalents of $26.0 million and
short-term investments of $30.5 million, compared with $114.8 million of cash
and cash equivalents and $13.2 million of short-term investments at December 31,
2000. We had significant negative cash flow from operating activities for the
six months ended June 30, 2001. Cash used in operating activities for the six
months ended June 30, 2001 was $58.6 million, caused primarily by a net loss of
$67.4 million, an increase in current and non-current assets of $6.2 million, a
net decrease in accounts payable, accrued expenses and other current liabilities
of $10.2 million, offset by non-cash expenses of $25.2 million.

    Cash used in investing activities for the six months ended June 30, 2001 was
$24.8 million, due to the purchase of short-term investments totaling $31.7
million and capital expenditures of $7.4 million, partially offset by sales and
maturities of short-term investments of $14.3 million. The principal capital
expenditures incurred during this period were for the purchase of cable modems
and data center equipment.

    Cash used by financing activities for the six months ended June 30, 2001 was
$5.5 million, comprised of net payments on capital lease obligations and
long-term debt.

     We expect to experience substantial negative cash flow from operating
activities and negative cash flow from investing activities for at least the
next several years. In the very unlikely event we are able to attract the
funding we need to continue as a going concern, our future cash requirements
will depend on a number of factors including:

    o   The mix of services offered by us, including whether we provide our
        services on a turnkey or Network Services basis;

    o   The pace of the rollout of our service to our cable partners, including
        the impact of substantial capital expenditures and related operating
        expenses;

    o   The rate at which we enter into contracts with cable operators for
        additional systems;

    o   The rate at which end users subscribe to our services;

    o   Changes in revenue splits with our cable partners;

    o   Price competition in the Internet and cable industries;

    o   Capital expenditures related to infrastructure costs;

    o   End user turnover rates;

    o   Our ability to protect our systems from telecommunications failures,
        power loss and software-related system failures;

    o   Changes in our operating expenses including, in particular, personnel
        expenses;

    o   The introduction of new products or services by us or our competitors;

    o   The success of our cost reduction measures; and

    o   Economic conditions specific to the Internet and cable industries, as
        well as general economic and market conditions.

     We expect to incur $12.0 million to $15.0 million of capital expenditures
in 2001 principally related to the purchase of cable modems, the upgrade of our
data center infrastructure and the purchase of $3.4 million of DSL assets. For
the six month period ended June 30, 2001, we have incurred $7.4 million of
capital expenditures.




                                       15
<PAGE>   16

    INVESTMENT PORTFOLIO. Cash equivalents are highly liquid investments with
insignificant interest rate risk and original maturities of 90 days or less and
are stated at amounts that approximate fair value based on quoted market prices.
Cash equivalents consist principally of investments in interest-bearing money
market accounts with financial institutions and highly liquid investment-grade
debt securities of corporations and the U.S. Government.

    Short-term investments are classified as available-for-sale and, as a
result, are stated at fair value. Short-term investments are principally
comprised of highly-liquid debt securities of corporations and the U.S.
Government. We record changes in the fair market value of securities held for
short-term investment as an equal adjustment to the carrying value of the
security and stockholders' equity.



                                       16
<PAGE>   17

    Restricted cash is comprised of certificates of deposit collateralizing
letters of credit backing certain leases.

    LOAN FACILITIES. The Company has $3.4 million outstanding under various loan
facilities at June 30, 2001 with interest rates on draws on the facilities
ranging from 14.63% to 15.52%. No draws were made on loan facilities for the six
months ended June 30, 2001.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"), which provides that all business combinations should be accounted
for using the purchase method of accounting and establishes criteria for the
initial recognition and measurement of goodwill and other intangible assets
recorded in connection with a business combination. The provisions of SFAS 141
apply to all business combinations initiated after June 30, 2001 and to all
business combinations accounted for by the purchase method that are completed
after June 30, 2001, or later. The Company will apply the provisions of SFAS 141
to any future business combinations.

    In addition, the FASB issued Statements of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which establishes
the accounting for goodwill and other intangible assets following their
recognition. SFAS 142 applies to all goodwill and other intangible assets
whether acquired singly, as part of a group, or in a business combination. SFAS
142 provides that goodwill should not be amortized but should be tested for
impairment annually using a fair-value based approach. In addition, SFAS 142
provides that other intangible assets other than goodwill should be amortized
over their useful lives and reviewed for impairment in accordance with Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 142 is
effective for the Company beginning on January 1, 2002. Upon adoption, the
Company will be required to perform a transitional impairment test for all
goodwill recorded as of January 1, 2002. Any impairment loss recorded as a
result of completing the transitional impairment test will be treated as a
change in accounting principle. The impact of the adoption of SFAS 142 on the
Company's results of operations for all periods beginning on or after January 1,
2002 will be to eliminate amortization of goodwill. Management of the Company
has not performed a transitional impairment test under SFAS 142 and accordingly
cannot estimate the impact of the adoption as of January 1, 2002.

RISK FACTORS

    You should carefully consider the following factors and other information in
this Form 10-Q and other filings we make with the Securities and Exchange
Commission before trading in our common stock. If any of the following risks
actually occur, our business and financial results could be materially and
adversely affected. In that case, the trading price of our common stock could
decline and you could lose all or part of your investment.

RISKS RELATED TO OUR NEED FOR CAPITAL


WE WILL NEED SUBSTANTIAL ADDITIONAL CAPITAL TO CONTINUE OUR OPERATIONS AND
THERE IS SUBSTANTIAL DOUBT THAT IT WILL BE AVAILABLE IN THE CURRENT ENVIRONMENT


     The Company has incurred losses from operations and negative cash flows
from operating activities since Inception, which have been funded primarily
through the issuance of equity securities and borrowings. Management expects to
experience substantial negative cash flows for at least the next several years.
As of June 30, 2001, the Company had $56.5 million of unrestricted cash, cash
equivalents and short-term investments, which management believes are
sufficient to meet the Company's cash needs in 2001.

     To preserve cash and enhance the prospects for entering into a strategic
transaction, the Company recently announced a series of significant cost
reduction measures. Among the actions being taken by the Company are:


    o    the completion of its previously announced exit from certain one-way
         cable TV markets;


    o    the commencement of negotiations to exit all of its turnkey contracts
         with cable operators other than Charter (covering 22,500, or
         approximately 12% of the Company's current subscribers);


    o    scaling back the operations of Digital Chainsaw, including reducing its
         workforce and eliminating all service offerings other than web site
         hosting;


    o    ceasing pursuit of its previously planned entry into the DSL market and
         ceasing development of any other new service and product offerings
         other than those that are expected to be cash flow positive in the
         short term; and


    o    material reductions in workforce.


     The Company also has begun pursuing the sale of Digital Chainsaw as well as
its DSL assets. After these changes are completed, the Company's operations will
consist of its cable internet access cable business with Charter and our
international ISP infrastructure services business.  The Company expects these
reductions in its operations to result in future operating cost reductions the
amounts of which cannot yet be determined. However, even with these changes, the
Company will continue to experience substantial negative cash flow from its
remaining operations.  Although the Company will continue to monitor the size of
its workforce and the levels of its other operating costs and cash commitments
with a view to conserving cash, the Company will not be able to reduce costs
significantly enough to continue as a going concern without additional
financing.


     The Company will need substantial additional financing by no later than
early 2002 to fund continued operations.  Management has attempted to secure
additional financing over the last several months but has thus far been
unsuccessful in its efforts.  The Company believes that it is very unlikely that
it will be able to secure additional financing in the current economic
environment being faced by the telecommunications industry before its cash
reserves are depleted in early 2002.  In light of the difficult current
financing environment, the Company has been pursuing additional strategic
alternatives, including consideration of Charter's proposal to acquire the
Company's cable modem business with Charter. If the Charter proposal is not
consummated and if additional financing is not available on acceptable terms,
the Company will be forced to further curtail operations, which could have a
material adverse effect on the Company. Such curtailment of operations would
involve significant additional amendments to the Company's current business plan
including, but not limited to some or all of the following: further
administrative and operating expense reductions, a further reduction of our
sales, marketing and customer service efforts, sales of certain assets of the
Company, or the bankruptcy and/or dissolution of the Company. See "-- Recent
Developments."



                                       17
<PAGE>   18

    Such financing could involve the issuance, or deemed issuance, of additional
shares of capital stock at a price below the conversion price of our convertible
preferred stock held by Vulcan and Charter, which would result in a downward
adjustment of the conversion price. In the event of such an adjustment, the
number of shares of common stock issuable upon conversion of the convertible
preferred stock would be increased pursuant to the weighted average formula
described below under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors - Our Convertible
Preferred Stock Contains Anti-dilution Adjustments and Restrictions On Our
Future Activities". Furthermore, additional equity or debt financing could give
rise to any or all of the following:

    o   Additional dilution to our current stockholders;

    o   The issuance of securities with rights, preferences or privileges senior
        to those of the existing holders of our common stock; and

    o   The issuance of securities with covenants imposing restrictions on our
        operations.

Charter can require any lender with liens on our equipment placed in Charter
headends to deliver to Charter a non-disturbance agreement as a condition to
such financing. We can offer no assurance that we will be able to obtain
additional secured equipment financing for Charter systems subject to such a
condition or that a potential lender will be able to negotiate acceptable terms
of non-disturbance with Charter.

    There is substantial doubt as to the Company's ability to continue as a
going concern unless it is able to secure additional financing by early 2002.
The remaining Risk Factors below are risks applicable to our business operations
and are less currently imperative to the Company than our need for additional
financing.

    See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."

OTHER RISKS RELATING TO OUR OPERATIONS

OUR AGREEMENT WITH AMERICA ON LINE/TIME WARNER WILL LIKELY NOT BENEFIT US

    We recently entered into an agreement with Time Warner Cable, a unit of AOL
Time Warner, covering the provision of our high-speed Internet access services
over AOL Time Warner's cable systems covering approximately 20 million homes
passed. The agreement is the third national internet service provider ("ISP")
agreement reached by Time Warner Cable, following similar arrangements with
Earthlink and Juno. We have been working with Time Warner Cable to coordinate
logistics and the modifications to Time Warner Cable systems needed to
accommodate multiple ISPs. Under the agreement, both companies will be free to
market their service independently.

    Our agreement with Time Warner Cable is subject to approval by the Federal
Trade Commission. We can give no assurance that the FTC will approve the
agreement. Our strategy in this multiple ISP environment is also dependent upon
our ability to secure a national content provider to provide customer
acquisition and marketing support and a compelling array of consumer services.
If we our unable to reach an agreement with a major content provider addressing
these issues, we will be unable to deploy our services and gain subscribers from
the Time Warner system in a cost effective manner. We have thus far been
unsuccessful in our efforts to reach agreement with a major content provider and
we believe that we are very unlikely to secure such a party within the period
provided for in the agreement with Time Warner Cable. Finally, the market for
high speed internet access services is very competitive, particularly in a
multiple ISP environment. See "-- Risks Related to the Market for High Speed
Internet Access -- The Market for Internet Services is Highly Competitive."
There can be no assurance that we will be successful in achieving acceptance of
our services on the Time Warner Cable system. Consequently, our agreement with
Time Warner Cable will likely be of no material benefit to us.

WE MAY BECOME SUBJECT TO RISKS OF INTERNATIONAL OPERATIONS.

    We are providing services on an international basis to Kabel
Nordrhein-Westfalen GMBH & Co., KG and are currently evaluating other
international expansion opportunities. As a result of expanding internationally
or entering into joint venture arrangements to pursue international business
opportunities, we will become subject to the risks of conducting business
internationally, including:

    o   Foreign currency fluctuations, which could result in increased operating
        expenses;

    o   Inability to locate qualified local partners and suppliers;

    o   The burdens of complying with a variety of foreign laws and trade
        standards;

    o   Tariffs and trade barriers;

    o   Difficulty in accounts receivable collection;

    o   Potentially longer payment cycles;

    o   Foreign taxes;

    o   Unexpected changes in regulatory requirements, including the regulation
        of Internet access; and

    o   Uncertainty regarding liability for information retrieved and replicated
        in foreign countries.


    If we expand internationally, we will also be subject to general
geopolitical risks, such as political and economic instability and changes in
diplomatic and trade relationships. Our international operations could harm our
revenues and ability to achieve profitability.



WE CANNOT PREDICT OUR SUCCESS BECAUSE OUR BUSINESS MODEL IS UNPROVEN, HAS
CHANGED IN THE PAST AND MAY CONTINUE TO CHANGE.

    Our success depends on continued growth in the use of the Internet and high
speed access services. Although Internet usage and popularity have grown
rapidly, we cannot be certain that this growth will continue at its present
rate, or at all. Critical issues concerning the increased use of the
Internet - including security, reliability, cost, ease of access, ease of
installation and customer acquisition and quality of service - remain unresolved
and are likely to affect the development of the market for our services.

    The success of our business ultimately will depend upon the acceptance of
our services by end users. Our current liquidity problems will limit our ability
to deploy and market our services in new and existing markets, to introduce new
services, to make changes to our product offerings to meet customer demands and
to respond to changes in our evolving industry, which may have a material
adverse effect on our business.






                                       18
<PAGE>   19
     Although our primary service offering is high bandwidth Internet access, we
currently derive a portion of our revenue from standard dial-up Internet access.
We cannot predict whether demand for our high speed Internet access services
will develop, particularly at the volume or prices we need to become profitable.
Even if sufficient demand for our high speed services is generated, we may be
unable to deploy our services at the rate required to satisfy demand.
Additionally, we believe that Network Services will become an increasingly
important part of our business. Under the Network Services arrangements, such as
the one we signed with Charter on May 12, 2000, covering a minimum of 5 million
homes passed, we will earn less revenue and absorb less operating expense per
end user than under a turnkey arrangement. In our Network Services solution, we
deliver fewer services and incur lower costs than in a turnkey solution but will
also earn a smaller percentage of the subscription revenue or a fixed fee on a
per subscriber basis.

    As part of our recently announced cost reduction measures, our Board of
Directors has made the strategic determination to no longer pursue DSL as a
potential new product offering. Therefore, our business will continue to rely on
our cable modem service, which may not be well suited for many SMEs and for
which market acceptance has been slow.

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.

    Our predecessor companies began offering services to cable operators in
October 1997. Most of our cable modem deployments occurred within the last two
years. Our senior management team and other employees have worked together at
our Company for only a short period of time. We have recognized only limited
revenues since our Inception. We do not consider any of the markets in which we
operate to be mature. As a result of our limited operating history and our
recent cost reduction measures, our business is difficult to evaluate.

WE HAVE NOT BEEN PROFITABLE AND EXPECT FUTURE LOSSES.

    Since our founding, we have not been profitable. We have incurred
substantial costs to create and introduce our broadband Internet access
services, to operate these services, and to grow our business. We incurred net
losses of approximately $288.7 million from April 3, 1998 (Inception) through
June 30, 2001. Our limited operating history, the dynamic nature of our
industry, and changes in our business model make predicting our operating
results, including operating expenses, difficult.

    We expect to incur substantial losses and experience substantial negative
cash flow from operations for at least the next several years. The principal
costs of any future expansions of our business will include:

    o   Direct and indirect selling, marketing and promotional costs;

    o   System operational expenses, including the lease of our Internet
        backbone, which has a traffic capacity in excess of our current needs;

    o   Costs incurred in connection with staffing levels to meet our growth;

    o   The acquisition and installation of the equipment, software and
        telecommunications circuits necessary to enable our cable partners to
        offer our services or to add additional products and services; and

    o   Costs in connection with acquisitions, divestitures, business alliances
        or changing technologies.




                                       19
<PAGE>   20


OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY BE
BELOW OUR EXPECTATIONS AND THE EXPECTATIONS OF ANALYSTS AND INVESTORS.

    Our revenues and expenses, and in particular our quarterly revenues,
expenses and operating results have varied in the past and may fluctuate
significantly in the future due to a variety of factors, many of which are
outside of our control. These factors include:

    o   Our ability to raise additional capital;

    o   The outcome of our current discussions with Charter regarding a possible
        business combination transaction;

    o   Changes in our operating expenses including, in particular, personnel
        expenses;

    o   The success of our cost control measures;

    o   Our ability to enter into strategic alliances with content providers;
        and

    o   Economic conditions specific to the Internet and cable industries, as
        well as general economic and market conditions.

    In addition, our operating expenses are based on our expectations of the
future demand for our services and are relatively fixed in the short term. We
may be unable to adjust spending quickly enough to offset any unexpected demand
surge or shortfall in demand. A shortfall in revenues in relation to our
expenses could have a material and adverse effect on our business and financial
results.

    The quarter-to-quarter comparisons of our results of operations should not
be relied upon as an indication of future performance. It is possible that in
some future periods our results of operations may be below our expectations and
the expectations of public market analysts and investors. In that event, the
price of our common stock is likely to fall.



                                       20
<PAGE>   21
OUR LARGEST CABLE PARTNER CAN TERMINATE ITS CONTRACT WITH US.

    Our largest cable partner is Charter. Charter is an affiliate of Vulcan, an
affiliate of Microsoft co-founder Paul Allen, who may be deemed to beneficially
own 49.5% of our outstanding common stock as of June 30, 2001, assuming 100%
conversion of the Company's convertible preferred stock and the exercise of
2,650,659 warrants owned by Charter. We have entered into several agreements
with Charter, including several distribution agreements. The first distribution
agreement was entered into in November 1998 and the second in May 2000. Under
both agreements, Charter has committed to provide us the exclusive right to
provide Network Services related to the delivery of Internet access to homes
passed in some cable systems.

    Under the May 2000 agreement, we will provide Network Services, including
call center support for cable modem customers as well as network monitoring,
troubleshooting and security services. The agreement has an initial term of five
years and may be renewed at Charter's option for additional successive five-year
terms. In a Network Services solution, we deliver fewer services and incur lower
costs than in turnkey solutions, but will also earn a smaller percentage of the
subscription revenue based on a fixed fee per subscriber. Under the November
1998 agreement, we have primarily provided comprehensive turnkey services.

    Subject to the provisions of the distribution agreements, Charter can
terminate our exclusivity rights, on a system-by-system basis, if we fail to
meet performance specifications or otherwise breach our agreement. Moreover,
Charter can terminate the November 1998 agreement, for any reason, as long as it
purchases the associated cable headend equipment and modems at book value and
pays us a termination fee based on the net present value of the revenues we
otherwise would earn for the remaining term of the agreement from those end
users subscribing to our services as of the date of termination. We may be
unable to meet the benchmarks related to its customer penetration rates.
Further, Charter may decide to terminate either agreement for any other reason.
If Charter were to terminate either agreement, in whole or for any material
system, regardless of any termination fee we may receive, we would lose end
users and market share, and likely be forced to incur significant unanticipated
costs to establish alternative arrangements, which may not be available on
competitive terms, or at all. The Company recently received a non-binding
proposal from Charter to acquire the Company's cable modem business with
Charter. See Note 7, "Business Developments" and "Item 2 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Recent Developments" for a description of such proposal.

IN THE VERY UNLIKELY EVENT THAT WE ARE ABLE TO ATTRACT ADDITIONAL FINANCING OUR
CONVERTIBLE PREFERRED STOCK CONTAINS ANTI-DILUTION ADJUSTMENTS AND RESTRICTIONS
ON OUR FUTURE ACTIVITIES.

    Vulcan and Charter own 38,000 and 37,000 convertible preferred shares,
respectively. Paul Allen controls Vulcan and Charter. The shares of convertible
preferred stock were initially convertible at a conversion price of $5.01875 per
share into 14,943,960 shares of common stock. The conversion price is subject to
an anti-dilution adjustment which increases the number of shares issuable to
Vulcan and Charter upon conversion of the convertible preferred stock if we
issue common stock (or are deemed to issue common stock) at below the conversion
price. The conversion price at June 30, 2001 was $5.01575.

    The terms of the convertible preferred stock also place significant
restrictions on our activities in the future. Among other things, these
constraints will require us to:

    o   Obtain the approval of Vulcan and Charter before declaring a dividend,
        entering into a merger, acquisition, consolidation, business
        combination, or other similar transaction, or issuing any debt or equity
        securities;



                                       21
<PAGE>   22

    o   Provide Vulcan and Charter with a right of first refusal to purchase
        shares of stock, common or otherwise, that we may offer in the future;
        and

    o   Offer and make available to Vulcan, Charter and their affiliates,
        licensing and business arrangements relating to our technologies,
        products and services, of any combination thereof, on terms and
        conditions at least as favorable as those agreed to with any third party
        at substantially the same level of purchase or other financial
        commitment.

    Because the convertible preferred stock has voting rights, its issuance has
a dilutive effect on the relative voting power of our common stockholders. You
should also be aware that conversion of the convertible preferred stock into
shares of common stock will have a dilutive effect on earnings per share of our
common stockholders. In addition, you should note that we may issue additional
shares of common stock in connection with the payment of dividends or conversion
price adjustments on the convertible preferred stock, which may increase the
number of shares of common stock issued in connection with the transaction.

    The Company recently received a non-binding proposal from Charter to acquire
the Company's cable modem business with Charter. See Note 7, "Business
Developments" and "Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments" for a description of
such proposal. If the transaction with Charter is consummated on the terms as
proposed by Charter, all shares of preferred stock held by Charter and Vulcan
would be cancelled.


OUR ABILITY TO INCREASE THE CAPACITY AND MAINTAIN THE SPEED OF OUR NETWORK IS
UNPROVEN.

    We may not be able to increase the transmission capacity of our network to
meet expected end user levels while maintaining superior performance. While peak
downstream data transmission speeds across the cable infrastructure approach 10
Mbps in each 6 megahertz (Mhz) channel, actual downstream data transmission
speeds are almost always significantly slower depending on a variety of factors.
These factors include our intentional throttling of data traffic flowing through
the local network out in order to optimize the use our network capacity and to
sell tiered price-service packages, bandwidth capacity constraints between the
cable headend and the Internet backbone, the type and location of content,
Internet traffic, the number of active end users on a given cable network node,
the number of 6 Mhz channels allocated to us by our cable partner, the
capabilities of the cable modems used and the service quality of the cable
operators' fiber-coax facilities. The actual data delivery speed that an end
user realizes also will depend on the end user's hardware, operating system and
software configurations. There can be no assurance that we will be able to
achieve or maintain a speed of data transmission sufficiently high to enable us
to attract and retain our planned number of end users, especially as the number
of end users grows. Because end users will share the available capacity on a
cable network node, we may underestimate the capacity we need to provide in
order to maintain peak transmission speeds. A perceived or actual failure to
achieve or maintain sufficiently high speed data transmission could
significantly reduce end user demand for our services or increase costs
associated with customer complaints and have a material adverse effect on our
business and financial results.

OUR NETWORK MAY BE VULNERABLE TO SECURITY RISKS.

    Despite our implementation of industry-standard security measures the
networks we operate may be vulnerable to unauthorized access, computer viruses
and other disruptive problems. Internet and online service providers in the past
have experienced, and in the future may experience, interruptions in service as
a result of the accidental or intentional actions of Internet users. Because the
cable infrastructure is a shared medium, it is inherently more vulnerable to
security risks than dedicated telephony technologies such as digital subscriber
lines. Moreover, we have no control over the security measures that our cable
partners and end users adopt. Unauthorized access could also potentially
jeopardize the security of confidential information stored in the computer
systems maintained by us and our end users. These events may result in liability
to us or harm to our end users. Eliminating computer viruses and alleviating
other security problems may require interruptions, delays or cessation of
service to our end users, which could have a material adverse effect on our
business and financial results. In addition, the threat of these and other
security risks may deter potential end users from purchasing our services, which
could have a material adverse effect on our business and financial results.

                                       22
<PAGE>   23
WE HAVE RECENTLY MADE ACQUISITIONS AND ACQUISITIONS INVOLVE NUMEROUS RISKS.

    Our growth is dependent upon market growth, our ability to enhance our
existing products and our ability to introduce new products on a timely basis.
One of the ways we have addressed the need to develop new products is through
acquisitions of other companies or business lines. In particular, we recently
acquired certain DSL facilities-based assets in order to begin offering DSL
service, although our Board of Directors has since determined not to pursue this
DSL strategy. In addition, we also recently acquired Digital in order to allow
us to offer other additional services to our customers, including web hosting
and web design. Acquisitions involve numerous risks, including the following:

    o   Difficulties in integration of the operations, technologies, and
        products of the acquired companies;

    o   The risk of diverting management's attention from normal daily
        operations of the business;

    o   Potential difficulties in completing projects associated with purchased
        in-process research and development;

    o   Risks of entering markets in which we have no or limited direct prior
        experience and where competitors in such markets have stronger market
        positions; and

    o   The potential loss of key employees of the acquired company.

    The occurrence of any of the foregoing could harm our business and operating
results. Furthermore, mergers and acquisitions of high-technology companies are
inherently risky, and we can give no assurance that our previous or future
acquisitions will be successful and will not materially adversely affect our
business, operating results or financial condition.

RISKS RELATED TO THE MARKET FOR HIGH SPEED INTERNET ACCESS

THE MARKET FOR INTERNET SERVICES IS HIGHLY COMPETITIVE.

    We face competition for partnerships with cable operators from other cable
modem-based providers of Internet access services and for end users from
providers of other types of data and Internet services.

    We believe the major competitive factors in the market for partnerships with
cable operators include breadth of service, speed and ease of deployment,
revenue sharing arrangements, cash and equity incentives and operating
experience. We believe the major competitive factors in the market to provide
high speed Internet access to end users include financial, marketing and sales
resources,




                                       23
<PAGE>   24

established customer relationships, price, ease of access and use, transmission
speed, reliability of service, quantity and quality of content, network security
and customer support. We face competition from many competitors with
significantly greater financial, sales and marketing resources, larger customer
bases, longer operating histories, greater name recognition and more established
relationships with advertisers, content and application providers and/or other
strategic partners than we have. We expect the level of this competition in
Internet access markets to increase in intensity in the future. We face
competition from both cable modem service providers and from providers of other
types of data and Internet services for end users, including DSL companies. Due
to this intense competition, there may be a time-limited market opportunity for
our cable-based high speed access. There can be no assurance that we will be
successful in achieving widespread acceptance of our services before competitors
offer services similar to our current offerings, which might preclude or delay
purchasing decisions by potential customers.

    For the reasons discussed below, we may not be able to compete successfully
against current or future competitors, and competitive pressures we face could
materially and adversely affect our business and financial results.

    CABLE-BASED INTERNET ACCESS MARKET. Our competitors in the cable-based
Internet access market are those companies that have developed their own
cable-based services and market those services to cable system operators. In
particular, Excite@Home, Road Runner, and Earthlink and their respective cable
partners, are deploying high speed Internet access services over cable networks.
Excite@Home, through its Excite@Home Solutions product, markets to systems in
markets with at least 20,000 homes passed. Other competitors in the cable-based
Internet access market are those companies seeking to establish distribution
arrangements with cable system operators in exurban markets and/or provide
one-way system capability. In addition, other cable system operators have
launched their own cable-based Internet services that could limit the market for
our services. Many of our competitors and potential competitors in the market
for partnerships with cable operators, in particular Excite@Home, have
substantially greater financial, sales and marketing resources, larger customer
bases, longer operating histories, greater name recognition and more established
relationships with cable operators, advertisers and content and application
providers than we do. Widespread commercial acceptance of any of these
competitors' products could significantly reduce the potential customer base for
our services, which could have a material adverse effect on our business and
financial results.

    DSL AND OTHER TECHNOLOGIES. Our cable-based services compete directly
against DSL companies and telecommunications companies offering DSL services to
end users. In addition, long distance inter-exchange carriers, such as AT&T,
Sprint and MCI WorldCom, have deployed large-scale Internet access networks and
sell Internet access to business and residential customers. The regional Bell
operating companies and other local exchange carriers have also entered this
field and are providing price competitive services. Many of these carriers are
offering diversified packages of telecommunications services, including Internet
access, to residential customers, and could bundle these services together,
which could put us at a competitive disadvantage. Many of these competitors are
offering, or may soon offer, technologies that will compete with our cable-based
high speed data service offerings. Such competing technologies include
integrated services digital networks, digital subscriber lines and wireless and
satellite services. Many of our competitors and potential competitors,
particularly regional Bell operating companies, have substantially greater
financial, sales and marketing resources than we have, and also may compete
favorably in terms of price, ease of access and use, transmission speed and
reliability of service. Widespread commercial acceptance of DSL or other
competing technologies could significantly reduce the potential customer base
for our cable-based services, which could have a material adverse effect on our
business and financial results.

    INTERNET AND ONLINE SERVICE PROVIDERS. We also compete with traditional
Internet service providers, which provide basic Internet access to residential
and commercial end users and businesses, generally using the existing telephone
network. While not presently offering the advantages of broadband access, these
services are widely available and inexpensive. Many online service providers,
such as America Online, have the advantage of large customer bases, industry
experience, longer operating histories, greater name recognition, established
relationships with advertisers and content and application providers, and
significant financial, marketing and sales resources. Moreover, America Online
recently merged with Time Warner, a major content provider and cable system
owner/operator, to create AOL Time Warner. One condition placed on this merger
involves AOL Time Warner permitting unaffiliated Internet access providers to
use AOL Time Warner's cable systems to provide high speed Internet access to
their customers. These "open access" arrangements may affect our business in
various respects. See "Government Regulation." Previously, AOL announced
alliances with SBC Communications and Bell Atlantic to offer AOL's services via
DSL connections to be installed by these regional Bell operating companies. The
pace at which AOL and its telephone company partners roll out DSL service could
limit our ability to attract and retain end users in areas where our service
offerings overlap.

    PEAKING CONSUMER INTEREST IN INTERNET ACCESS. Although the growth in
consumer interest in accessing the Internet has been growing for several years,
growth in consumer time spent on the Internet will eventually level off and may
decline. This leveling off of demand may be offset over time by the development
of additional Internet-based services and functions by existing and new



                                       24
<PAGE>   25

Internet-oriented firms, but there is no assurance that these new services will
actually be developed or will achieve customer acceptance. A leveling of demand
will tend to intensify competition among existing providers of Internet access,
including us and traditional dial-up providers of access.

OUR CABLE PARTNERS COULD SELL THEIR SYSTEMS OR BE ACQUIRED.

    In recent years, the cable television industry has undergone substantial
consolidation. If one of our cable partners is acquired by a cable operator that
already has a relationship with one of our competitors or that does not enter
into a contract with us, we could lose the ability to offer our cable modem
access services in the systems formerly served by our cable partner, which could
have a material and adverse effect on our business and financial results. Many
of the cable operators operate multiple systems, thus increasing the risk to us
if they are acquired. Moreover, it is common in the cable industry for operators
to swap systems, which could cause us to lose our contract for a swapped system.
Even though many of our contracts obligate our cable partners to pay us a
termination fee if they sell their system to another operator who does not
assume our contract, the potential termination fee may not be adequate to ensure
that the successor operator assumes our contract, or to compensate us fully for
the loss of future business in that system.

OUR CABLE PARTNERS COULD LOSE THEIR FRANCHISES AND ARE VULNERABLE TO
COMPETITION.

    Cable television companies operate under franchises granted by local or
state authorities that are subject to renewal and renegotiations from time to
time. A franchise is generally granted for a fixed term ranging from five to 15
years, although in many cases the franchise is terminable if the franchisee
fails to comply with the material provisions of its franchise agreement. No
assurance can be given that the cable operators that have contracts with us will
be able to retain or renew their franchises. The non-renewal or termination of
any of these franchises would result in the termination of our contract with the
applicable cable operator. Moreover, cable television operators are sometimes
subject to overbuilding by competing operators who offer competing video and
Internet access services. Moreover, many direct broadcast satellite ("DBS")
operators can compete with cable operators and provide Internet access services
to their subscribers. Any such dilution of our cable operator market base can
adversely affect our potential market base.

OUR MARKET IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE, AND OUR SERVICES
COULD BECOME OBSOLETE OR FAIL TO GAIN MARKET ACCEPTANCE.

The market for our services is characterized by rapid technological advances,
evolving industry standards, changes in end user requirements and frequent new
service introductions and enhancements. For example, the North American cable
industry has adopted a set of interface specifications, known as "DOCSIS," for
hardware and software to support cable-based data delivery using cable modems.
Our ability to adapt to rapidly changing technology and industry standards, such
as DOCSIS, and to develop and introduce new and enhanced products and service
offerings will be significant factors in maintaining or improving our
competitive position, reducing our costs, and our prospects for growth. If our
technologies become obsolete or fail to gain widespread consumer acceptance, or
if we are unable to meet newly adopted industry standards, then our business and
financial results will be materially and adversely affected.

    We currently anticipate that we will use a portion of our working capital to
acquire cable modem equipment. The technology underlying that equipment is
continuing to evolve. It is possible that the equipment we acquire could become
obsolete prior to the time we would otherwise intend to replace it, which could
require us to make unanticipated capital expenditures. Our inability to replace
obsolete equipment on a timely basis could have a material adverse effect on our
business and financial results.

WE DEPEND ON THIRD PARTIES AND OUR BUSINESS IS SUBJECT TO DISRUPTION BY EVENTS
OUTSIDE OUR CONTROL.

    Our success will depend upon the capacity, reliability and security of the
infrastructure used to carry data between our end users and the Internet. A
significant portion of that infrastructure is owned by third parties.
Accordingly, we have no control over its quality and maintenance. For example,
we rely on our cable partners to maintain their cable infrastructures. We also
rely on other third parties to provide a connection from the cable
infrastructure to the Internet and to provide fulfillment services to us.
Currently, we have transit agreements with MCI WorldCom and its affiliate,
UUNet, and others to support the exchange of traffic between our data servers,
the cable infrastructure and the Internet. We also have agreements with various
vendors to manage and oversee our customer installation process, including
installation, customer education, dispatch service, quality control, recruitment
and training. The failure of these third parties to maintain this infrastructure
and otherwise fulfill their obligations under these agreements could have a
material adverse effect on our business and financial results.



                                       25
<PAGE>   26

    Our operations also depend on our ability to avoid damages from fires,
earthquakes, floods, power losses, telecommunications failures, network software
flaws, transmission cable cuts, and similar events. The occurrence of any of
these events could interrupt our services. The failure of the Internet backbone,
our servers, or any other link in the delivery chain, whether from operational
disruption, natural disaster or otherwise, resulting in an interruption in our
operations could have a material adverse effect on our business and financial
results.

WE MAY BE HELD LIABLE FOR DEFAMATORY OR INDECENT CONTENT, AS WELL AS INFORMATION
RETRIEVED OR REPLICATED.

    In part, our business involves supplying information and entertainment to
customers over the cable systems of our cable system partners. Accordingly, we
face the same types of risks that apply to all businesses that publish or
distribute information, such as potential liability for defamation, libel,
invasion of privacy and similar claims, as well as copyright or trademark
infringement and similar claims. A number of third parties have claimed that
they hold patents covering various forms of online transactions or online
technologies. In addition, our errors and omissions and liability insurance may
not cover potential patent or copyright infringement claims and may not
adequately indemnify us for any liability that may be imposed.

    The law relating to the liability of Internet and online service providers
for information carried or disseminated through their networks is unsettled.
There are some federal laws regarding the distribution of obscene or indecent
material over the Internet under which we are subject to potential liability.
These risks are mitigated by two federal laws. One, passed in 1996, immunizes
Internet service providers from liability for defamation and similar claims for
materials the Internet service provider did not create, but merely distributed.
The other, passed in 1998, creates a "safe harbor" from copyright infringement
liability for Internet service providers who comply with its requirements, which
we intend to do. These laws apply only in the United States; if we expand our
operations to other countries, our potential liability under the laws of those
countries could be greater.

WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION, "OPEN ACCESS"
COMPETITION AND OTHER DSL- AND DBS-BASED COMPETITION.

    The regulatory climate affecting our business is uncertain at this time, and
we may become subject to burdensome governmental regulation in the future.
Historically, the Company and its cable partners believed that for regulatory
purposes our services would be considered a form of cable service, or an
unregulated information service. Some federal courts have reached decisions
consistent with these views. However, in June 2000, the federal appeals court
for the 9th Circuit concluded that a cable operator's provision of transmission
facilities in some instances is a telecommunications service under the
Communications Act. This classification could subject our cable partners, and
possibly us, to federal and state regulation as "telecommunications carriers."
If we or our cable partners were classified as telecommunications common
carriers, or otherwise subject to common carrier-like access and
non-discrimination requirements in the provision of our Internet over cable
service, the Company or its cable partners could be subject to burdensome
governmental regulations. In particular, the government might seek to regulate
us and our cable partners with respect to the terms, conditions and prices for
Internet connection services and interconnections with the public switched
telephone network, and require that we make contributions to the universal
service support fund. The law in this area thus remains unsettled. Moreover,
some local franchising authorities might claim that our cable partners need a
separate franchise to offer our service. This franchise may not be obtainable on
reasonable terms, or at all.

    In addition, some local cable franchising authorities seek to impose
"non-discrimination" or "open access" obligations on our cable partners, under
which competing ISPs would have access to the high speed transmission
capabilities of our cable partners' networks. AOL and Time Warner agreed to such
an "open access" condition, applicable to Time Warner's cable networks, in order
to obtain federal antitrust approval for their recent merger. A consortium of
dial-up Internet service providers and large telephone companies are encouraging
local franchising authorities and the Federal Communications Commission ("FCC")
to ban the type of exclusive ISP-cable operator arrangements that we have with
our cable partners that make us the exclusive supplier of high speed data on the
cable systems where our service is offered. If such arrangements are banned, the
Company could face additional competition from other Internet access providers
using the cable system to connect to their customers, which could have a
material adverse effect on our business and financial results. Both AOL Time
Warner and AT&T have announced plans to open their networks to competing
Internet service providers in the coming years, and AT&T and Time Warner Cable
have initiated "open-access" trials with selected ISPs in several markets. Other
ISPs are petitioning the FCC and various large cable operators for access to
cable plants. The Company cannot predict the degree to which such voluntary or
involuntary "open access" will affect our business.

    In addition, regulatory decisions that make services based on DSL technology
easier for competing telephone companies to deploy over normal telephone lines
and less expensive for customers to buy could negatively affect the Company's
cable-based high speed access business. The FCC issued a line-sharing ruling in
December 1999 that allows DSL providers to simply lease the data spectrum





                                       26
<PAGE>   27

of the customer's local loop from the incumbent carrier. This obviates the need
for the customers to lease a secondary DSL-provisioned loop from the incumbent
carrier in order to obtain high speed DSL data service, which in turn could make
DSL service a more cost-competitive alternative to our services. In addition, in
several decisions issued in 2000, the FCC took steps designed to make it more
efficient for DSL providers to locate their equipment in telephone company
switching centers. Furthermore, firms controlling digital broadcast spectrum
have announced plans to utilize a portion of that spectrum to offer consumers
high-bandwidth data delivery via broadcast. Some DBS video companies are also
deploying higher-bandwidth data delivery products. The Company cannot predict
when or whether these services will be offered, but if offered, they could
present material competition to our cable-based high speed access services and
could materially and adversely affect our success in the marketplace.

    In addition to regulatory activity, large Incumbent Local Exchange Carriers
("ILECs") have been pressing Congress to amend the Communications Act to make it
easier for those firms to offer high-speed Internet access services to consumers
and to participate directly in transmitting information between their customers
and the Internet backbone. If such legislation were to pass, ILECs could become
even more formidable competitors in the high speed Internet access business.

RISK RELATED TO TRADING IN OUR STOCK

BECAUSE OF OUR RELATIONSHIP WITH VULCAN VENTURES, NEW INVESTORS WILL HAVE LITTLE
INFLUENCE OVER MANAGEMENT DECISIONS.

    Vulcan and Charter currently own 36.4% and 13.1%, respectively, of our
outstanding stock assuming 100% conversion of the Company's convertible
preferred stock and the exercise of 2,650,659 warrants owned by Charter.
Charter, also has warrants to purchase up to 12,000,000 shares of our common
stock at an exercise price of $3.23 per share. Paul Allen is the controlling
stockholder of Charter and Vulcan and as a result Mr. Allen's beneficial
ownership of our outstanding stock is 49.5%. Accordingly, Mr. Allen will be able
to significantly influence and possibly exercise control over most matters
requiring approval by our stockholders, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control. In
addition, conflicts of interest may arise as a consequence of Mr. Allen's
control relationship with us, including:

    o   Conflicts between Vulcan, Charter and other affiliates of Mr. Allen and
        our other stockholders, whose interests may differ with respect to,
        among other things, our strategic direction or significant corporate
        transactions;

    o   Conflicts related to corporate opportunities that could be pursued by
        us, on the one hand, or by Vulcan, Charter or other affiliates of Mr.
        Allen, on the other hand; or

    o   Conflicts related to existing or new contractual relationships between
        us, on the one hand, and Mr. Allen and his affiliates, such as Vulcan
        and Charter, on the other hand.

    In particular Mr. Allen controls Charter, our largest cable partner.
Additionally, Vulcan has the exclusive right to provide or designate the first
page our end users see when they log on to our service and, if it provides that
first page, will be entitled to all of the related revenues. Moreover, Vulcan
can prohibit us from providing content that competes with content it chooses to
provide, and can prohibit us from providing telephony service if it chooses to
provide those services. The Company recently received a non-binding proposal
from Charter to acquire the Company's cable modem business with Charter. See
Note 7, "Business Developments" and "Item 2 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Developments" for a description of such proposal. If the transaction with
Charter is consummated on the terms as proposed by Charter, all shares of
preferred stock held by Charter and Vulcan would be cancelled.





                                       27
<PAGE>   28

THE FUTURE SALE OF SHARES MAY HURT OUR MARKET PRICE.

    A substantial number of shares of our common stock are available for resale.
If our stockholders sell substantial amounts of our common stock in the public
market, the market price of our common stock could fall. These sales also might
make it more difficult for us to sell equity securities in the future at times
and prices that we deem appropriate.

OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.

    The stock market has experienced extreme price and volume fluctuations. In
particular, the market prices of the securities of Internet-related companies
have been especially volatile. In the past, companies that have experienced
volatility in the market price of their stock have been the object of securities
class action litigation. If we were the object of securities class action
litigation, it could result in substantial costs and a diversion of our
management's attention and resources.

WE HAVE ANTI-TAKEOVER PROVISIONS.

    Certain provisions of our certificate of incorporation, our bylaws and
Delaware law, in addition to the concentration of ownership by Mr. Paul Allen,
could make it difficult for a third party to acquire us, even if doing so might
be beneficial to our other stockholders.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Our exposure to market risk is limited to interest rate sensitivity, which
is affected by changes in the general level of U.S. interest rates, and foreign
currency exchange rates. Our cash equivalents are invested with high-quality
issuers and limit the amount of credit exposure to any one issuer. Due to the
short-term nature of our cash equivalents, we believe that we are not subject to
any material market risk exposure. Substantially all of our revenues are
realized in U.S. dollars and are from customers in the United States. We do not
have any foreign currency hedging instruments.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS.

     As of June 30, 2001, the Company was not a party to any material legal
proceedings. See also Note 7, "Business Developments" for a discussion of a
legal proceeding pending in connection with Charter's proposal to acquire the
Company's cable modem business.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS.

    (a) In June 1999, we completed our initial public offering of Common Stock.
Concurrent with the initial public offering, we sold common stock to Cisco
Systems, Com21 and Microsoft under stock purchase agreements. The initial
proceeds to the Company after deducting underwriting discounts and commissions
of $13,081,250 were $199,768,750. Through June 30, 2001 the gross proceeds of
the offering have been applied as follows:



                                       28
<PAGE>   29

    Direct or indirect payment to others for:

<TABLE>
                <S>                                       <C>
                Underwriting discounts and commissions    $ 13,081,250
                Other offering expenses                   $  1,828,854
                Working capital                           $197,939,896
</TABLE>


    None of these expenses were direct or indirect payments to investors or
officers or 10% stockholders of the Company. The remainder of the proceeds is
invested in interest-bearing money market accounts with financial institutions
and highly-liquid investment-grade debt securities of corporations and the U.S.
Government.

    (b) In December 2000, we issued and sold 38,000 shares and 37,000 shares of
senior convertible preferred stock to Vulcan and Charter Communications
Ventures, LLC, an affiliate of Charter, respectively. In this private placement,
we received aggregate consideration of $38,000,000 and $37,000,000 from Vulcan
and Charter, respectively. The preferred stock may convert into common stock of
the Company at a conversion price of $5.01575 per share, subject to adjustment
for future stock issuances at less than the conversion price and other customary
adjustments. The initial proceeds to the Company were $75.0 million. Through
June 30, 2001 the proceeds have been applied as follows:

    Direct or indirect payment to others for:

<TABLE>
                <S>                                       <C>
                Offering expenses                         $  1,000,000
                Working capital                           $ 25,147,734
</TABLE>


    None of these expenses were direct or indirect payments to investors or
officers or 10% stockholders of the Company. The remainder of the proceeds is
invested in interest-bearing money market accounts with financial institutions
and highly-liquid investment-grade debt securities of corporations and the U.S.
Government. This issuance of preferred stock was made in reliance on the
exemption from registration provided by section 4(2) of the Securities Act and
Rule 506 promulgated thereunder.

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) Exhibits

           See attached exhibit index.

    (b) Reports on Form 8-K

           On June 18, 2001, the Company filed a report on Form 8-K which
announced that its Annual Meeting of Stockholders would be held on August 3,
2001.




                                       29
<PAGE>   30

                                   SIGNATURES

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

High Speed Access Corp.

Date:   August 14, 2001           By /s/ Daniel J. O'Brien
                                     ------------------------
                                         Daniel J. O'Brien
                                         President, Chief Executive Officer
                                         and Director

Date    August 14, 2001           By /s/ George Willett
                                     ------------------------
                                         George Willett
                                         Chief Financial Officer


                                       30
<PAGE>   31



                                  Exhibit Index

<Table>
<Caption>
     EXHIBIT
     NUMBER                                EXHIBIT TITLE
     -------                               -------------
<S>             <C>
     10.1       Restricted  Stock  Agreement  by and  between  High Speed  Access
                Corp. and George Willett dated February 2, 2001.

     10.2       Restricted  Stock  Agreement  by and  between  High Speed  Access
                Corp. and Gregory G. Hodges dated February 14, 2001.

     10.3       Restricted  Stock  Agreement  by and  between  High Speed  Access
                Corp. and Richard George dated February 14, 2001.

     10.4       Restricted  Stock  Agreement  by and  between  High Speed  Access
                Corp. and Charles E. Richardson III dated February 14, 2001.

     10.5       Employment  Agreement by and between High Speed Access Corp.  and
                Charles E. Richardson III dated June 4, 2001.

     10.6       Employment  Agreement by and between High Speed Access Corp.  and
                George E. Willett dated June 4, 2001.

     10.7       Employment  Agreement by and between High Speed Access Corp.  and
                John Hundley dated June 4, 2001.

     10.8       Amended and  Restated  Employment  Agreement  by and between High
                Speed Access Corp. and Daniel J. O'Brien dated June 22, 2001.

     10.9       Restricted  Stock  Agreement  by and  between  High Speed  Access
                Corp. and Daniel J. O'Brien dated June 22, 2001.

     10.10      Employment  Agreement by and between High Speed Access Corp.  and
                Gregory G. Hodges dated July 2, 2001.

     10.11      Employment  Agreement by and between High Speed Access Corp.  and
                Richard George dated July 6, 2001.
</Table>