**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**







**FORM
      10-Q**


---







*(Mark
      One)*


**[X]     
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**





**For
      the quarterly period ended June 30, 2006**





**or**





**[  ]     
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**





**For
      the transition period from ________ to _________**





**Commission
      file number:** **333-111423**


**** **333-111423-01** ****





**CCH
      II, LLC ***


**CCH
      II Capital Corp.***




*(Exact
      name of registrants as specified in their charters)*





**Delaware**
              **Delaware**
            
            **03-0511293**
              **13-4257703***(State
                or other jurisdiction of incorporation or
                organization)*
            
            *(I.R.S.
                Employer Identification
                Number)*





**12405
      Powerscourt Drive**


**St.
      Louis, Missouri   63131**


*(Address
      of principal executive offices including zip code)*





**(314)
      965-0555**


*(Registrants’
      telephone number, including area code)*





Indicate
      by check mark whether the registrants (1) have filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrants were
      required to file such reports), and (2) have been subject to such filing
      requirements for the past 90 days. YES [X] NO [  ]





Indicate
      by check mark whether the registrants are large accelerated filers, accelerated
      filers, or non-accelerated filers. See definition of “accelerated filer and
      large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated
      filer o  Accelerated
      filer o  Non-accelerated
      filer þ





Indicate
      the number of shares outstanding of each of the issuers' classes of common
      stock, as of the latest practicable date:





All
      of
      the issued and outstanding shares of capital stock of CCH II Capital Corp.
      are
      held by CCH II, LLC. All of the limited liability company membership interests
      of CCH II, LLC are held by CCH I, LLC (an indirect wholly owned subsidiary
      of
      Charter Communications Holdings, LLC, a reporting company under the Exchange
      Act). There is no public trading market for any of the aforementioned limited
      liability company membership interests of shares of capital stock.





*
      CCH II,
      LLC and CCH II Capital Corp. meet the conditions set forth in General
      Instruction H(1)(a) and (b) to Form 10-Q and are therefore filing with the
      reduced disclosure format.













**CCH
      II, LLC**


**CCH
      II Capital Corp.**


**Quarterly
      Report on Form 10-Q for the Period ended June 30, 2006**





**Table
      of Contents**





PART
                I. FINANCIAL INFORMATION
            **Page**Item
                1.Financial
                Statements - CCH II, LLC and SubsidiariesCondensed
                Consolidated Balance Sheets as ofJune
                30, 2006and
                December 31, 2005
            4Condensed
                Consolidated Statements of Operations for the three and
                sixmonths
                endedJune
                30, 2006and
                2005
            5Condensed
                Consolidated Statements of Cash Flows for thesix
                months endedJune
                30, 2006and 2005
            6Notes
                to Condensed Consolidated Financial Statements
            7Item
                2.Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            20Item
                4.Controls
                and Procedures
            30PART
                II. OTHER INFORMATIONItem
                1.Legal
                Proceedings
            31Item
                1A. Risk Factors
            31Item
                6.Exhibits
            40SIGNATURES
            41EXHIBIT
                INDEX
            42





This
      quarterly report on Form 10-Q is for the three and six months ended June
      30, 2006. The Securities and Exchange Commission ("SEC") allows us to
      "incorporate by reference" information that we file with the SEC, which means
      that we can disclose important information to you by referring you directly
      to
      those documents. Information incorporated by reference is considered to be
      part
      of this quarterly report. In addition, information that we file with the SEC
      in
      the future will automatically update and supersede information contained in
      this
      quarterly report. In this quarterly report, "we," "us" and "our" refer to CCH
      II, LLC and its subsidiaries.














**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:**





This quarterly
      report includes
      forward-looking statements within the meaning of Section 27A of the
      Securities Act of 1933, as amended (the " Securities
      Act " ),
      and
      Section 21E of the Securities Exchange Act of 1934, as amended (the " Exchange
      Act " ),
      regarding, among other things, our plans, strategies and prospects, both
      business and financial including, without limitation, the forward-looking
      statements set forth in the " Results
      of Operations " and " Liquidity
      and Capital Resources " sections
      under Part I, Item 2. " Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations " in this quarterly
      report .
      Although we believe that our plans, intentions and expectations reflected in
      or
      suggested by these forward-looking statements are reasonable, we cannot assure
      you that we will achieve or realize these plans, intentions or expectations.
      Forward-looking statements are inherently subject to risks, uncertainties and
      assumptions including, without limitation, the factors described under " Risk
      Factors " under
      Part II, Item 1A. Many of the forward-looking statements contained in this quarterly
      report may
      be
      identified by the use of forward-looking words such as " believe, "  " expect, "  " anticipate, "  " should, "  " planned, "  " will, "  " may, "  " intend, "  " estimated, "
“aim,”
      “on track” and " potential " among
      others. Important factors that could cause actual results to differ materially
      from the forward-looking statements we make in this quarterly
      report are
      set
      forth in this quarterly
      report and
      in
      other reports or documents that we file from time to time with the SEC, and
      include, but are not limited to:





·
            the
                availability, in general, of funds to meet interest payment obligations
                under our and our parent companies’ debt and to fund our operations and
                necessary capital expenditures, either through cash flows from operating
                activities, further borrowings or other sources and, in particular,
                our
                and our parent companies’ ability to be able to provide under the
                applicable debt instruments such funds (by dividend, investment or
                otherwise) to the applicable obligor of such
                debt;


·
              our
                    and our parent companies’ ability to comply with all covenants in our and
                    our parent companies’ indentures and credit facilities, any violation of
                    which would result in a violation of the applicable facility
                    or indenture
                    and could trigger a default of other obligations under cross-default
                    provisions;


·
            our
                and our parent companies’ ability to pay or refinance debt prior to or
                when it becomes due and/or to take advantage of market opportunities
                and
                market windows to refinance that debt through new issuances, exchange
                offers or otherwise, including restructuring our and our parent companies’
                balance sheet and leverage
                position;


·
            our
                ability to sustain and grow revenues and cash flows from operating
                activities by offering video, high-speed Internet, telephone and
                other
                services and to maintain and grow a stable customer base, particularly
                in
                the face of increasingly aggressive competition from other service
                providers;


·
            our
                ability to obtain programming at reasonable prices or to pass programming
                cost increases on to our customers;


·
            general
                business conditions, economic uncertainty or slowdown;
                and


·
            the
                effects of governmental regulation, including but not limited to
                local
                franchise authorities, on our business.





All
      forward-looking statements attributable to us or any person acting on our behalf
      are expressly qualified in their entirety by this cautionary statement. We
      are
      under no duty or obligation to update any of the forward-looking statements
      after the date of this quarterly
      report .








3


**PART
      I. FINANCIAL INFORMATION.**








**Item
      1.**  **Financial
      Statements.**








**CCH
      II, LLC AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(** **DOLLARS
      IN MILLIONS** **)**





**June
                30****,**
            
            **December
                31,****2006**
            
            **2005****(Unaudited)****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            44
            
            $
            3Accounts
                receivable, less allowance for doubtful accounts of$19
                and $17, respectively
            
            
            178
            
            
            212Prepaid
                expenses and other current assets
            
            
            20
            
            
            22Assets
                held for sale
            
            
            768
            
            
            --Total
                current assets
            
            
            1,010
            
            
            237INVESTMENT
                IN CABLE PROPERTIES:Property,
                plant and equipment, net of accumulateddepreciation
                of $7,014 and $6,712, respectively
            
            
            5,354
            
            
            5,800Franchises,
                net
            
            
            9,280
            
            
            9,826Total
                investment in cable properties, net
            
            
            14,634
            
            
            15,626OTHER
                NONCURRENT ASSETS
            
            
            217
            
            
            238Total
                assets
            
            $
            15,861
            
            $
            16,101**LIABILITIES
                AND MEMBER’S EQUITY**CURRENT
                LIABILITIES:Accounts
                payable and accrued expenses
            
            $
            917
            
            $
            923Payables
                to related party
            
            
            106
            
            
            102Liabilities
                held for sale
            
            
            20
            
            
            --Total
                current liabilities
            
            
            1,043
            
            
            1,025LONG-TERM
                DEBT
            
            
            11,057
            
            
            10,624LOANS
                PAYABLE - RELATED PARTY
            
            
            109
            
            
            22DEFERRED
                MANAGEMENT FEES - RELATED PARTY
            
            
            14
            
            
            14OTHER
                LONG-TERM LIABILITIES
            
            
            359
            
            
            392MINORITY
                INTEREST
            
            
            631
            
            
            622MEMBER’S
                EQUITY:Member’s
                equity
            
            
            2,646
            
            
            3,400Accumulated
                other comprehensive income
            
            
            2
            
            
            2Total
                member’s equity
            
            
            2,648
            
            
            3,402Total
                liabilities and member’s equity
            
            $
            15,861
            
            $
            16,101







The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
 4




**CCH
      II, LLC AND SUBSIDIARIES**


**CONDENSED**  **CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(DOLLARS
      IN MILLIONS)**


**Unaudited**




**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**REVENUES
            
            $
            1,383
            
            $
            1,266
            
            $
            2,703
            
            $
            2,481COSTS
                AND EXPENSES:Operating
                (excluding depreciation and amortization)
            
            
            611
            
            
            546
            
            
            1,215
            
            
            1,081Selling,
                general and administrative
            
            
            279
            
            
            250
            
            
            551
            
            
            483Depreciation
                and amortization
            
            
            340
            
            
            364
            
            
            690
            
            
            730Asset
                impairment charges
            
            
            --
            
            
            8
            
            
            99
            
            
            39Other
                operating (income) expenses, net
            
            
            7
            
            
            (2
            )
            
            10
            
            
            61,237
            
            
            1,166
            
            
            2,565
            
            
            2,339Operating
                income from continuing operations
            
            
            146
            
            
            100
            
            
            138
            
            
            142OTHER
                INCOME AND (EXPENSES):Interest
                expense, net
            
            
            (248
            )
            
            (210
            )
            
            (488
            )
            
            (408
            )Other
                income (expenses), net
            
            
            (26
            )
            
            15
            
            
            (19
            )
            
            35(274
            )
            
            (195
            )
            
            (507
            )
            
            (373
            )Loss
                from continuing operations before income taxes
            
            
            (128
            )
            
            (95
            )
            
            (369
            )
            
            (231
            )INCOME
                TAX EXPENSE
            
            
            (2
            )
            
            (2
            )
            
            (4
            )
            
            (8
            )Loss
                from continuing operations
            
            
            (130
            )
            
            (97
            )
            
            (373
            )
            
            (239
            )INCOME
                FROM DISCONTINUED OPERATIONS,
              NET
                OF TAX
            
            
            23
            
            
            10
            
            
            38
            
            
            19Net
                loss
            
            $
            (107
            )
            $
            (87
            )
            $
            (335
            )
            $
            (220
            )




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


5


**CCH
      II, LLC AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(DOLLARS
      IN MILLIONS)**


**Unaudited**





**Six
                Months Ended****June
                30,****2006**
            
            **2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (335
            )
            $
            (220
            )Adjustments
                to reconcile net loss to net cash flows from operating
                activities:Depreciation
                and amortization
            
            
            698
            
            
            759Asset
                impairment charges
            
            
            99
            
            
            39Noncash
                interest expense
            
            
            16
            
            
            14Deferred
                income taxes
            
            
            --
            
            
            5Other,
                net
            
            
            27
            
            
            (31
            )Changes
                in operating assets and liabilities, net of effects from acquisitions
                and
                dispositions:Accounts
                receivable
            
            
            29
            
            
            (10
            )Prepaid
                expenses and other assets
            
            
            --
            
            
            (21
            )Accounts
                payable, accrued expenses and other
            
            
            (10
            )
            
            (46
            )Receivables
                from and payables to related party, including management
                fees
            
            
            1
            
            
            (20
            )Net
                cash flows from operating activities
            
            
            525
            
            
            469CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property, plant and equipment
            
            
            (539
            )
            
            (542
            )Change
                in accrued expenses related to capital expenditures
            
            
            (9
            )
            
            48Proceeds
                from sale of assets
            
            
            9
            
            
            8Purchase
                of cable system
            
            
            (42
            )
            
            --Proceeds
                from investments
            
            
            28
            
            
            16Other,
                net
            
            
            --
            
            
            (2
            )Net
                cash flows from investing activities
            
            
            (553
            )
            
            (472
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Borrowings
                of long-term debt
            
            
            5,830
            
            
            635Borrowings
                from related parties
            
            
            --
            
            
            140Repayments
                of long-term debt
            
            
            (5,838
            )
            
            (819
            )Repayments
                to related parties
            
            
            (20
            )
            
            (107
            )Proceeds
                from issuance of debt
            
            
            440
            
            
            --Payments
                for debt issuance costs
            
            
            (29
            )
            
            (3
            )Distributions
            
            
            (314
            )
            
            (367
            )Net
                cash flows from financing activities
            
            
            69
            
            
            (521
            )NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            41
            
            
            (524
            )CASH
                AND CASH EQUIVALENTS, beginning of period
            
            
            3
            
            
            546CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            44
            
            $
            22CASH
                PAID FOR INTEREST
            
            $
            451
            
            $
            390NONCASH
                TRANSACTIONS:Issuance
                of debt by Charter Communications Operating, LLC
            
            $
            37
            
            $
            333Retirement
                of Renaissance Media Group LLC debt
            
            $
            (37
            )
            $
            --Distribution
                of intercompany note to related party
            
            $
            (105
            )
            $
            --Retirement
                of Charter Communications Holdings, LLC notes and accrued
                interest
            
            $
            --
            
            $
            (343
            )Transfer
                of property, plant and equipment from parent company
            
            $
            --
            
            $
            139









The
          accompanying notes are an integral part of these condensed consolidated
          financial statements.
 6




**1.**
            **Organization
                and Basis of Presentation**





CCH
      II,
      LLC ("CCH II") is a holding company whose principal assets at June 30, 2006
      are
      the equity interests in its operating subsidiaries. CCH II is a direct
      subsidiary of CCH I, LLC ("CCH I") which is an indirect subsidiary of Charter
      Communications Holdings, LLC ("Charter Holdings"). Charter Holdings is an
      indirect subsidiary of Charter Communications, Inc. ("Charter"). The condensed
      consolidated financial statements include the accounts of CCH II and all of
      its
      subsidiaries where the underlying operations reside, which are collectively
      referred to herein as the "Company." All significant intercompany accounts
      and
      transactions among consolidated entities have been eliminated. The Company
      is a
      broadband communications company operating in the United States. The Company
      offers its customers traditional cable video programming (analog and digital
      video) as well as high-speed Internet services and, in some areas, advanced
      broadband services such as high definition television, video on demand, and
      telephone. The Company sells its cable video programming, high-speed Internet
      and advanced broadband services on a subscription basis. The Company also sells
      local advertising on satellite-delivered networks.





The
      accompanying condensed consolidated financial statements of the Company have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States for interim financial information and the rules and regulations
      of
      the Securities and Exchange Commission (the "SEC"). Accordingly, certain
      information and footnote disclosures typically included in CCH II’s Annual
      Report on Form 10-K have been condensed or omitted for this quarterly report.
      The accompanying condensed consolidated financial statements are unaudited
      and
      are subject to review by regulatory authorities. However, in the opinion of
      management, such financial statements include all adjustments, which consist
      of
      only normal recurring adjustments, necessary for a fair presentation of the
      results for the periods presented. Interim results are not necessarily
      indicative of results for a full year.




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make 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 amounts of revenues and expenses during the
      reporting period. Areas involving significant judgments and estimates include
      capitalization of labor and overhead costs; depreciation and amortization costs;
      impairments of property, plant and equipment, franchises and goodwill; income
      taxes; and contingencies. Actual results could differ from those
      estimates.




*Reclassifications*




Certain
      2005 amounts have been reclassified to conform with the 2006
      presentation.




**2.**
              **Liquidity
                  and Capital Resources**


The
      Company had net loss of $107 million and $87 million for the three months ended
      June 30, 2006 and 2005, respectively, and $335 million and $220 million for
      the
      six months ended June 30, 2006 and 2005, respectively. The Company’s net cash
      flows from operating activities were $525 million and $469 million for the
      six
      months ended June 30, 2006 and 2005, respectively.





***Recent
      Financing Transactions***





In
      January 2006, CCH II and CCH II Capital Corp. issued $450 million in debt
      securities, the proceeds of which were provided, directly or indirectly, to
      Charter Communications Operating, LLC ("Charter Operating"), which used such
      funds to reduce borrowings, but not commitments, under the revolving portion
      of
      its credit facilities.





In
      April
      2006, Charter Operating completed a $6.85 billion refinancing of its credit
      facilities including a new $350 million revolving/term facility (which converts
      to a term loan no later than April 2007), a $5.0 billion term loan due in 2013
      and certain amendments to the existing $1.5 billion revolving credit facility.
      In addition, the refinancing reduced margins on Eurodollar rate term loans
      to
      2.625% from a weighted average of 3.15% previously and margins on base rate
      term
      loans to 1.625% from a weighted average of 2.15% previously. Concurrent with
      this refinancing, the CCO Holdings, LLC ("CCO Holdings") bridge loan was
      terminated.






7
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**





The
      Company's long-term financing as of June 30, 2006 consists of $5.8 billion
      of
      credit facility debt and $5.3 billion accreted value of high-yield notes. For
      the remainder of 2006, none of the Company’s debt matures, and in 2007 and 2008,
      $25 million and $50 million mature, respectively. In 2009 and beyond,
      significant additional amounts will become due under the Company’s remaining
      long-term debt obligations.





The
      Company requires significant cash to fund debt service costs, capital
      expenditures and ongoing operations. The Company has historically funded these
      requirements through cash flows from operating activities, borrowings under
      its
      credit facilities, equity contributions from its parent companies, sales of
      assets, issuances of debt securities and cash on hand. However, the mix of
      funding sources changes from period to period. For the six months ended June
      30,
      2006, the Company generated $525 million of net cash flows from operating
      activities, after paying cash interest of $451 million. In addition, the Company
      used approximately $539 million for purchases of property, plant and equipment.
      Finally, the Company had net cash flows from financing activities of $69
      million.





The
      Company expects that cash on hand, cash flows from operating activities,
      proceeds from sales of assets, and the amounts available under its credit
      facilities will be adequate to meet its and its parent companies’ cash needs
      through 2007. The Company believes that cash flows from operating activities
      and
      amounts available under the Company’s credit facilities may not be sufficient to
      fund the Company’s operations and satisfy its and its parent companies’ interest
      and principal repayment obligations in 2008 and will not be sufficient to fund
      such needs in 2009, and beyond. The Company has been advised that Charter
      continues to work with its financial advisors in its approach to addressing
      liquidity, debt maturities and its overall balance sheet leverage.





***Debt
      Covenants***





The
      Company’s ability to operate depends upon, among other things, its continued
      access to capital, including credit under the Charter Operating credit
      facilities. The Charter Operating credit facilities, along with the Company’s
      indentures, contain certain restrictive covenants, some of which require the
      Company to maintain specified financial ratios, and meet financial tests and
      to
      provide annual audited financial statements with an unqualified opinion from
      the
      Company’s independent auditors. As of June 30, 2006, the Company is in
      compliance with the covenants under its indentures and credit facilities, and
      the Company expects to remain in compliance with those covenants for the next
      twelve months. As of June 30, 2006, t he Company’s potential availability under its credit facilities totaled
      approximately $900 million, none of which was limited by covenant
      restrictions .
      In the
      past, the Company’s actual availability under its credit facilities has been
      limited by covenant restrictions. There can be no assurance that the Company’s
      actual availability under its credit facilities will not be limited by covenant
      restrictions in the future. However, pro forma for the closing of the asset
      sales on July 1, 2006, and the related application of net proceeds to repay
      amounts outstanding under the Company’s revolving credit facility, potential
      availability under the Company’s credit facilities as of June 30, 2006 would
      have been approximately $1.7 billion, although actual availability would have
      been limited to $1.3 billion because of limits imposed by covenant restrictions. Continued
      access to the Company’s credit facilities is subject to the Company remaining in
      compliance with these covenants, including covenants tied to the Company’s
      operating performance. If any events of non-compliance occur, funding under
      the
      credit facilities may not be available and defaults on some or potentially
      all
      of the Company’s debt obligations could occur. An event of default under any of
      the Company’s debt instruments could result in the acceleration of its payment
      obligations under that debt and, under certain circumstances, in cross-defaults
      under its other debt obligations, which could have a material adverse effect
      on
      the Company’s consolidated financial condition and results of
      operations.





***Parent
      Company Debt Obligations***





Any
      financial or liquidity problems of the Company’s parent companies could cause
      serious disruption to the Company's business and have a material adverse effect
      on the Company’s business and results of operations. A failure by Charter
      Holdings, CCH I Holdings, LLC ("CIH") or CCH I to satisfy their debt payment
      obligations or a bankruptcy filing with respect to Charter Holdings, CIH or
      CCH
      I would give the lenders under the Company’s credit facilities the right to
      accelerate the payment obligations under these facilities. Any such acceleration
      would be a






8
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




default
      under the indenture governing the Company’s notes. On a consolidated basis, the
      Company’s parent companies have a significant level of debt, which, including
      the Company’s debt, totaled approximately $19.9 billion as of June 30, 2006, as
      discussed below.





Charter’s
      ability to make interest payments on its convertible senior notes, and, in
      2009,
      to repay the outstanding principal of its convertible senior notes of $863
      million, will depend on its ability to raise additional capital and/or on
      receipt of payments or distributions from Charter Holdco and its subsidiaries. As
      of June
      30,
      2006 ,
      Charter
      Holdco was owed $3 million in intercompany loans from its subsidiaries, which
      were available to pay interest and principal on Charter's convertible senior
      notes.  In
      addition, Charter
      has $74 million of U.S. government securities pledged as security for the next
      three scheduled semi-annual interest payments on Charter’s 5.875% convertible
      senior notes.





As
      of
      June 30, 2006, Charter Holdings, CIH and CCH I had approximately $7.8 billion
      principal amount of high-yield notes outstanding with approximately $105
      million, $0, $684 million and $7.0 billion maturing in 2007, 2008, 2009 and
      thereafter, respectively. Charter Holdings, CIH and CCH I will need to raise
      additional capital or receive distributions or payments from the Company in
      order to satisfy their debt obligations. However, because of their significant
      indebtedness, the Company’s ability and the ability of the parent companies to
      raise additional capital at reasonable rates or at all is uncertain. During
      the
      six months ended June 30, 2006, the Company distributed $314 million of cash
      to
      its parent company.





Distributions
      by Charter’s subsidiaries to a parent company (including Charter, Charter
      Holdco, CCHC, LLC (“CCHC”), Charter Holdings, CIH and CCH I) for
      payment of principal on parent company notes are
      restricted under the indentures governing the CIH notes, CCH I notes, CCH II
      notes, CCO Holdings notes, and Charter Operating notes unless
      there is no default under the applicable indenture, each applicable subsidiary’s
      leverage ratio test is met at the time of such distribution and, in the case
      of
      Charter’s convertible senior notes, other specified tests are met. For
      the
      quarter ended June 30, 2006, there was no default under any of these indentures
      and each such subsidiary met its applicable leverage ratio tests based on June
      30, 2006 financial results. Such
      distributions would be restricted, however, if any such subsidiary fails to
      meet
      these tests at such time. In the past, certain subsidiaries have from time
      to
      time failed to meet their leverage ratio test. There can be no assurance that
      they will satisfy these tests at the time of such distribution. Distributions
      by Charter Operating for payment of principal on parent company notes are
      further restricted by the covenants in the credit facilities.





Distributions
      by CIH, CCH I, CCH II, CCO Holdings and Charter Operating to a parent company
      for payment of parent company interest are permitted if there is no default
      under the aforementioned indentures. However, distributions for payment of
      interest on Charter’s convertible senior notes are further limited to when each
      applicable subsidiary’s leverage ratio test is met and other specified tests are
      met. There can be no assurance that the subsidiary will satisfy these tests
      at
      the time of such distribution.





***Specific
      Limitations at Charter Holdings***





The
      indentures governing the Charter Holdings notes permit Charter Holdings to
      make
      distributions to Charter Holdco for payment of interest or principal on
      Charter’s convertible senior notes, only if, after giving effect to the
      distribution, Charter Holdings can incur additional debt under the leverage
      ratio of 8.75 to 1.0, there is no default under Charter Holdings’ indentures,
      and other specified tests are met. For the quarter ended June
      30,
      2006, there was no default under Charter Holdings’ indentures and Charter
      Holdings met its leverage ratio test based on June 30, 2006 financial
      results .
      Such
      distributions would be restricted, however, if Charter Holdings fails to meet
      these tests at such time. In the past, Charter Holdings has from time to time
      failed to meet this leverage ratio test. There can be no assurance that Charter
      Holdings will satisfy these tests at the time of such distribution. During periods
      in which distributions are restricted, the
      indentures governing the Charter Holdings notes permit Charter Holdings and
      its
      subsidiaries to make specified investments (that are not restricted payments)
      in
      Charter Holdco or Charter up to an amount determined by a formula, as long
      as
      there is no default under the indentures.





9
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**


**3.**
            **Sale
                of Assets**





In
      2006,
      the Company signed three separate definitive agreements to sell certain cable
      television systems serving a total of approximately 356,000 analog video
      customers in 1) West Virginia and Virginia to
      Cebridge Connections, Inc. (the “Cebridge Transaction”); 2) Illinois and
      Kentucky to Telecommunications Management, LLC, doing business as New Wave
      Communications (the “New Wave Transaction”) and 3) Nevada, Colorado, New Mexico
      and Utah to Orange Broadband Holding Company, LLC (the
“Orange Transaction”) for a total of approximately $971 million. These cable
      systems met the criteria for assets held for sale. As such, the assets were
      written down to fair value less estimated costs to sell resulting in asset
      impairment charges during the six months ended June 30, 2006 of approximately
      $99 million related to the New Wave Transaction and the Orange Transaction.
      In
      the third quarter of 2006, the Company expects to record a gain of approximately
      $200 million on the Cebridge Transaction. In addition, assets and liabilities
      to
      be sold have been presented as held for sale. Assets held for sale on the
      Company's balance sheet as of June 30, 2006 included current assets of
      approximately $6 million, property, plant and equipment of approximately $319
      million and franchises of approximately $443 million. Liabilities held for
      sale
      on the Company's balance sheet as of June 30, 2006 included current liabilities
      of approximately $7 million and other long-term liabilities of approximately
      $13
      million.





During
      the second quarter of 2006, the Company determined, based on changes in the
      Company’s organizational and cost structure, that its asset groupings for long
      lived asset accounting purposes are at the level of their individual market
      areas, which are at a level below the Company’s geographic clustering. As a
      result, the Company has determined that the West Virginia and Virginia cable
      systems comprise operations and cash flows that for financial reporting purposes
      meet the criteria for discontinued operations. Accordingly, the results of
      operations for the West Virginia and Virginia cable systems have been presented
      as discontinued operations, net of tax for the three and six months ended June
      30, 2006 and all prior periods presented herein have been reclassified to
      conform to the current presentation.





Summarized
      consolidated financial information for the three and six months ended June
      30,
      2006 and 2005 for the West Virginia and Virginia cable systems is as follows:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenues
            
            $
            55
            
            $
            57
            
            $
            109
            
            $
            113Net
                income (loss)
            
            $
            23
            
            $
            10
            
            $
            38
            
            $
            19




In
      July
      2006, the Company closed the Cebridge Transaction and New Wave Transaction
      for
      net proceeds of approximately $896 million. The Company used the net proceeds
      from the asset sales to repay (but not reduce permanently) amounts outstanding
      under the Company’s revolving credit facility. The Orange Transaction is
      scheduled to close in the third quarter of 2006.





In
      2005,
      the Company closed the sale of certain cable systems in Texas, West Virginia
      and
      Nebraska representing a total of approximately 33,000 analog video customers.
      During the six months ended June 30, 2005, certain of those cable systems met
      the criteria for assets held for sale. As such, the assets were written down
      to
      fair value less estimated costs to sell resulting in asset impairment charges
      during the three and six months ended June 30, 2005 of approximately $8 million
      and $39 million, respectively.





**4.**
            **Franchises
                and Goodwill**





Franchise
      rights represent the value attributed to agreements with local authorities
      that
      allow access to homes in cable service areas acquired through the purchase
      of
      cable systems. Management estimates the fair value of franchise rights at the
      date of acquisition and determines if the franchise has a finite life or an
      indefinite-life as defined by Statement of Financial Accounting Standards
      (“SFAS”) No. 142, *Goodwill
      and Other Intangible Assets* . Franchises
      that qualify for






10
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




indefinite-life
      treatment under SFAS No. 142 are tested for impairment annually each
      October 1 based on valuations, or more frequently as warranted by events or
      changes in circumstances. Franchises are aggregated into essentially inseparable
      asset groups to conduct the valuations. The asset groups generally represent
      geographical clustering of the Company’s cable systems into groups by which such
      systems are managed. Management believes such grouping represents the highest
      and best use of those assets.





As
      of
      June 30, 2006 and December 31, 2005, indefinite-lived and finite-lived
      intangible assets are presented in the following table:





**June
                30, 2006**
            
            **December 31,
                2005****Gross**
              **Carrying**
              **Amount**
            
            **Accumulated**
              **Amortization**
            
            **Net**
              **Carrying**
              **Amount**
            
            **Gross**
              **Carrying**
              **Amount**
            
            **Accumulated
                Amortization**
            
            **Net**
              **Carrying**
              **Amount****Indefinite-lived
                intangible assets:**Franchises
                with indefinite lives
            
            $
            9,263
            
            $
            --
            
            $
            9,263
            
            $
            9,806
            
            $
            --
            
            $
            9,806Goodwill
            
            
            61
            
            
            --
            
            
            61
            
            
            52
            
            
            --
            
            
            52$
            9,324
            
            $
            --
            
            $
            9,324
            
            $
            9,858
            
            $
            --
            
            $
            9,858**Finite-lived
                intangible assets:**Franchises
                with finite lives
            
            $
            23
            
            $
            6
            
            $
            17
            
            $
            27
            
            $
            7
            
            $
            20





For
      the
      six months ended June 30, 2006, the net carrying amount of indefinite-lived
      and
      finite-lived franchises was reduced by $441 million and $2 million,
      respectively, related to franchises reclassified as assets held for sale. For
      the six months ended June 30, 2006, franchises with indefinite lives also
      decreased $3 million related to a cable asset sale completed in the first
      quarter of 2006 and $99 million as a result of the asset impairment charges
      recorded related to assets held for sale (see Note 3). Franchise amortization
      expense for the three and six months ended June 30, 2006 was approximately
      $1
      million and $1 million, respectively, and $1 million and $2 million for the
      three and six months ended June 30, 2005, respectively, which represents the
      amortization relating to franchises that did not qualify for indefinite-life
      treatment under SFAS No. 142, including costs associated with franchise
      renewals. The Company expects that amortization expense on franchise assets
      will
      be approximately $2 million annually for each of the next five years. Actual
      amortization expense in future periods could differ from these estimates as
      a
      result of new intangible asset acquisitions or divestitures, changes in useful
      lives and other relevant factors.





For
      the
      six months ended June 30, 2006, the net carrying amount of goodwill increased
      $9
      million as a result of the Company’s purchase of certain cable systems in
      Minnesota from Seren Innovations, Inc. in January 2006.





11
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**







**5.**
              **Accounts
                  Payable and Accrued
                  Expenses**


Accounts
      payable and accrued expenses consist of the following as of June 30, 2006 and
      December 31, 2005:





**June
                30,**
              **2006**
            
            **December 31,**
              **2005**Accounts
                payable - trade
            
            $
            72
            
            $
            100Accrued
                capital expenditures
            
            
            64
            
            
            73Accrued
                expenses:Interest
            
            
            184
            
            
            166Programming
                costs
            
            
            297
            
            
            272Franchise-related
                fees
            
            
            55
            
            
            67Compensation
            
            
            64
            
            
            60Other
            
            
            181
            
            
            185$
            917
            
            $
            923





**6.**
            **Long-Term
                Debt**





Long-term
      debt consists of the following as of June
      30,
      2006 and
      December 31, 2005:





**June
                30, 2006**
            
            **December
                31, 2005****Principal
                Amount**
            
            **Accreted
                Value**
            
            **Principal
                Amount**
            
            **Accreted
                Value****Long-Term
                Debt**CCH
                II, LLC:10.250%
                senior notes due 2010
            
            $
            2,051
            
            $
            2,042
            
            $
            1,601
            
            $
            1,601CCO
                Holdings, LLC:83⁄4%
                senior notes due 2013
            
            
            800
            
            
            795
            
            
            800
            
            
            794Senior
                floating notes due 2010
            
            
            550
            
            
            550
            
            
            550
            
            
            550Charter
                Communications Operating, LLC:8%
                senior second lien notes due 2012
            
            
            1,100
            
            
            1,100
            
            
            1,100
            
            
            1,1008
                3/8% senior second lien notes due 2014
            
            
            770
            
            
            770
            
            
            733
            
            
            733Renaissance
                Media Group LLC:10.000%
                senior discount notes due 2008
            
            
            --
            
            
            --
            
            
            114
            
            
            115**Credit
                Facilities**Charter
                Operating
            
            
            5,800
            
            
            5,800
            
            
            5,731
            
            
            5,731$
            11,071
            
            $
            11,057
            
            $
            10,629
            
            $
            10,624





The
      accreted values presented above generally represent the principal amount of
      the
      notes less the original issue discount at the time of sale plus the accretion
      to
      the balance sheet date.




In
      January 2006, CCH II and CCH II Capital Corp. issued $450 million in debt
      securities, the proceeds of which were provided, directly or indirectly, to
      Charter Operating, which used such funds to reduce borrowings, but not
      commitments, under the revolving portion of its credit facilities.





In
      March
      2006, the Company exchanged $37 million of Renaissance Media Group LLC 10%
      senior discount notes due 2008 for $37 million principal amount of new Charter
      Operating 8 3/8% senior second-lien notes due 2014 issued in a private
      transaction under Rule 144A. The terms and conditions of the new Charter
      Operating 8 3/8% senior second-lien notes due 2014 are identical to Charter
      Operating’s currently outstanding 8 3/8% senior second-lien notes






12
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




due
      2014.
      In June 2006, the Company retired the remaining $77 million principal amount
      of
      Renaissance Media Group LLC’s 10% senior discount notes due 2008.





***Gain
      (loss) on extinguishment of debt***





In
      April
      2006, Charter Operating completed a $6.85 billion refinancing of its credit
      facilities including a new $350 million revolving/term facility (which converts
      to a term loan no later than April 2007), a $5.0 billion term loan due in 2013
      and certain amendments to the existing $1.5 billion revolving credit facility.
      In addition, the refinancing reduced margins on Eurodollar rate term loans
      to
      2.625% from a weighted average of 3.15% previously and margins on base rate
      term
      loans to 1.625% from a weighted average of 2.15% previously. Concurrent with
      this refinancing, the CCO Holdings bridge loan was terminated. The refinancing
      resulted in a loss on extinguishment of debt for the three and six months ended
      June 30, 2006 of approximately $27 million included in other income (expenses),
      net on the Company’s condensed consolidated statements of
      operations.





In
      March
      and June 2005, Charter Operating consummated exchange transactions with a small
      number of institutional holders of Charter Holdings 8.25% senior notes due
      2007
      pursuant to which Charter Operating issued, in private placements, approximately
      $333 million principal amount of new notes with terms identical to Charter
      Operating's 8.375% senior second lien notes due 2014 in exchange for
      approximately $346 million of the Charter Holdings 8.25% senior notes due 2007.
      The Charter Holdings notes received in the exchange were thereafter distributed
      to Charter Holdings and cancelled.





In
      March
      2005, CCH II’s subsidiary, CC V Holdings, LLC, redeemed all of its 11.875% notes
      due 2008, at 103.958% of principal amount, plus accrued and unpaid interest
      to
      the date of redemption. The total cost of redemption was approximately $122
      million and was funded through borrowings under the Charter Operating credit
      facilities. The redemption resulted in a loss on extinguishment of debt for
      the
      six months ended June
      30,
      2005 of
      approximately $5 million included
      in other income (expenses), net on the Company’s condensed consolidated
      statements of operations . Following
      such redemption, CC V Holdings, LLC and its subsidiaries (other than
      non-guarantor subsidiaries) became guarantors under the Charter Operating credit
      facilities and granted a lien on their assets to the same extent as granted
      by
      the other guarantors under the credit facility.




**7.**
                **Loans
                    Payable-Related
                    Party**




Loans
      payable-related party as of June 30, 2006 consists of loans from Charter Holdco
      and Charter Holdings to the Company of $4 million and $105 million,
      respectively. Loans payable-related party as of December 31, 2005 consists
      of
      loans from Charter Holdco to the Company of $22 million. These loans bear
      interest at a rate of LIBOR plus 3.0%, reset quarterly. These loans are subject
      to certain limitations and may be repaid with borrowings under the Company’s
      revolving credit facility.




**8.**
                  **Minority
                      Interest**





Minority
      interest on the Company’s consolidated balance sheets as of June 30, 2006 and
      December 31, 2005 primarily
      represents preferred membership interests in CC VIII, LLC ("CC VIII"), an
      indirect subsidiary of CCH II, of $631 million and $622 million, respectively. As
      more
      fully described in Note 19, this preferred interest is held by Mr. Allen,
      Charter’s Chairman and controlling shareholder, and CCHC. Minority interest in
      the accompanying condensed consolidated statements of operations includes the
      2%
      accretion of the preferred membership interests plus approximately 18.6% of
      CC
      VIII’s income, net of accretion.





**9.**
            **Comprehensive
                Loss**





Certain
      marketable equity securities are classified as available-for-sale and reported
      at market value with unrealized gains and losses recorded as accumulated other
      comprehensive loss on the accompanying condensed consolidated balance sheets.
      Additionally, the Company reports changes in the fair value of interest rate
      agreements designated as hedging the variability of cash flows associated with
      floating-rate debt obligations, that meet the effectiveness criteria






13
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




of
      SFAS
      No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      in
      accumulated other comprehensive loss. Comprehensive loss for the three months
      ended June
      30 ,
      2006
      and 2005 was $106 million and $86 million, respectively, and $335 million and
      $210 million for the six months ended June 30, 2006 and 2005,
      respectively.





**10.**
            **Accounting
                for Derivative Instruments and Hedging
                Activities**





The
      Company uses interest rate risk management derivative instruments, such as
      interest rate swap agreements and interest rate collar agreements (collectively
      referred to herein as interest rate agreements) to manage its interest costs.
      The Company’s policy is to manage interest costs using a mix of fixed and
      variable rate debt. Using interest rate swap agreements, the Company has agreed
      to exchange, at specified intervals through 2007, the difference between fixed
      and variable interest amounts calculated by reference to an agreed-upon notional
      principal amount. Interest rate collar agreements are used to limit the
      Company’s exposure to and benefits from interest rate fluctuations on variable
      rate debt to within a certain range of rates.





The
      Company does not hold or issue derivative instruments for trading purposes.
      The
      Company does, however, have certain interest rate derivative instruments that
      have been designated as cash flow hedging instruments. Such instruments
      effectively convert variable interest payments on certain debt instruments
      into
      fixed payments. For qualifying hedges, SFAS No. 133 allows derivative gains
      and
      losses to offset related results on hedged items in the consolidated statement
      of operations. The Company has formally documented, designated and assessed
      the
      effectiveness of transactions that receive hedge accounting. For each of the
      three months ended June
      30 ,
      2006
      and 2005, other income includes gains of $0, and for the six months ended June
      30, 2006 and 2005, other income includes gains of $2 million and $1 million,
      respectively, which represent cash flow hedge ineffectiveness on interest rate
      hedge agreements arising from differences between the critical terms of the
      agreements and the related hedged obligations. Changes in the fair value of
      interest rate agreements designated as hedging instruments of the variability
      of
      cash flows associated with floating-rate debt obligations that meet the
      effectiveness criteria of SFAS No. 133 are reported in accumulated other
      comprehensive loss. For the three months ended June
      30 ,
      2006
      and 2005, a gain of $1 million and $0, respectively, and for the six months
      ended June 30, 2006 and 2005, a gain of $0 and $9 million, respectively, related
      to derivative instruments designated as cash flow hedges, was recorded in
      accumulated other comprehensive loss. The amounts are subsequently reclassified
      into interest expense as a yield adjustment in the same period in which the
      related interest on the floating-rate debt obligations affects earnings
      (losses).





Certain
      interest rate derivative instruments are not designated as hedges as they do
      not
      meet the effectiveness criteria specified by SFAS No. 133. However, management
      believes such instruments are closely correlated with the respective debt,
      thus
      managing associated risk. Interest rate derivative instruments not designated
      as
      hedges are marked to fair value, with the impact recorded as other income in
      the
      Company’s condensed consolidated statements of operations. For the three months
      ended June
      30 ,
      2006
      and 2005, other income includes gains of $3 million and losses of $1 million,
      respectively, and for the six months ended June 30, 2006 and 2005, other income
      includes gains of $9 million and $25 million, respectively, for interest rate
      derivative instruments not designated as hedges.





As
      of June
      30 ,
      2006
      and December 31, 2005, the Company had outstanding $1.8 billion and $1.8 billion
      and $20 million and $20 million, respectively, in notional amounts of interest
      rate swaps and collars, respectively. The notional amounts of interest rate
      instruments do not represent amounts exchanged by the parties and, thus, are
      not
      a measure of exposure to credit loss. The amounts exchanged are determined
      by
      reference to the notional amount and the other terms of the
      contracts.


14
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**


**11.**
              **Revenues**





Revenues
      consist of the following for the three and six months ended June 30, 2006 and
      2005:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Video
            
            $
            853
            
            $
            821
            
            $
            1,684
            
            $
            1,623High-speed
                Internet
            
            
            261
            
            
            218
            
            
            506
            
            
            425Telephone
            
            
            29
            
            
            8
            
            
            49
            
            
            14Advertising
                sales
            
            
            79
            
            
            73
            
            
            147
            
            
            135Commercial
            
            
            76
            
            
            66
            
            
            149
            
            
            128Other
            
            
            85
            
            
            80
            
            
            168
            
            
            156$
            1,383
            
            $
            1,266
            
            $
            2,703
            
            $
            2,481





**12.**
            **Operating
                Expenses**





Operating
      expenses consist of the following for the three and six months ended June 30,
      2006 and 2005:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Programming
            
            $
            379
            
            $
            336
            
            $
            755
            
            $
            678Service
            
            
            205
            
            
            186
            
            
            408
            
            
            356Advertising
                sales
            
            
            27
            
            
            24
            
            
            52
            
            
            47$
            611
            
            $
            546
            
            $
            1,215
            
            $
            1,081





**13.**
            **Selling,
                General and Administrative
                Expenses**





Selling,
      general and administrative expenses consist of the following for the three
      and
      six months ended June 30, 2006 and 2005:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**General
                and administrative
            
            $
            236
            
            $
            220
            
            $
            471
            
            $
            418Marketing
            
            
            43
            
            
            30
            
            
            80
            
            
            65$
            279
            
            $
            250
            
            $
            551
            
            $
            483





Components
      of selling expense are included in general and administrative and marketing
      expense.





15
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




**14.**
              **Other
                  Operating (Income) Expenses,
                  Net**


Other
      operating (income) expenses, net consist of the following for the three and
      six
      months ended June 30, 2006 and 2005:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Loss
                on sale of assets, net
            
            $
            --
            
            $
            --
            
            $
            --
            
            $
            4Special
                charges, net
            
            
            7
            
            
            (2
            )
            
            10
            
            
            2$
            7
            
            $
            (2
            )
            $
            10
            
            $
            6





Special
      charges for the three and six months ended June 30, 2006 primarily represent
      severance associated with the closing of call centers and divisional
      restructuring. Special charges for the six months ended June 30, 2005 primarily
      represent severance costs as a result of reducing workforce, consolidating
      administrative offices and executive severance.





For
      the
      three and six months ended June 30, 2005, special charges were offset by
      approximately $2 million related to an agreed upon discount in respect of the
      portion of settlement consideration payable under the settlement terms of class
      action lawsuits.





**15.**
            **Other
                Income (Expenses), Net**





Other
      income (expenses), net consists of the following for the three and six months
      ended June 30, 2006 and 2005:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Gain
                (loss) on derivative instruments and
              hedging
                activities, net
            
            $
            3
            
            $
            (1
            )
            $
            11
            
            $
            26Gain
                (loss) on extinguishment of debt
            
            
            (27
            )
            
            (1
            )
            
            (27
            )
            
            (6
            )Minority
                interest
            
            
            (6
            )
            
            (3
            )
            
            (10
            )
            
            (6
            )Gain
                on investments
            
            
            5
            
            
            20
            
            
            4
            
            
            21Other,
                net
            
            
            (1
            )
            
            --
            
            
            3
            
            
            --$
            (26
            )
            $
            15
            
            $
            (19
            )
            $
            35





Gain
      on
      investments for the three and six months ended June 30, 2005 primarily
      represents a
      gain
      realized on an exchange of the Company’s interest in an equity investee for an
      investment in a larger enterprise.





**16.**
            **Income
                Taxes**





CCH
      II is
      a single member limited liability company not subject to income tax. CCH II
      holds all operations through indirect subsidiaries. The majority of these
      indirect subsidiaries are limited liability companies that are also not subject
      to income tax. However, certain of CCH II’s indirect subsidiaries are
      corporations that are subject to income tax.






16
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**





As
      of
      June 30, 2006 and December 31, 2005, the Company had net deferred income tax
      liabilities of approximately $213 million. The
      net
      deferred income tax liabilities relate to certain of the Company’s indirect
      subsidiaries, which file separate income tax returns.





During
      the three and six months ended June 30, 2006, the Company recorded $2 million
      and $4 million of income tax expense, respectively, and during the three and
      six
      months ended June 30, 2005, the Company recorded $2 million and $8 million
      of
      income tax expense, respectively.  The income tax expense is
      recognized through current federal and state income tax expense as well as
      increases to the deferred tax liabilities of certain of the Company’s indirect
      corporate subsidiaries .





Charter
      Holdco is currently under examination by the Internal Revenue Service for the
      tax years ending December 31, 2002 and 2003.  The Company’s results
      (excluding the indirect corporate subsidiaries) for these years are subject
      to
      this examination. Management does not expect the results of this examination
      to
      have a material adverse effect on the Company’s condensed consolidated financial
      condition or results of operations.


**17.**
              **Contingencies**


The
      Company is a party to lawsuits and claims that arise in the ordinary course
      of
      conducting its business. The ultimate outcome of all of these legal matters
      pending against the Company or its subsidiaries cannot be predicted, and
      although such lawsuits and claims are not expected individually to have a
      material adverse effect on the Company’s consolidated financial condition,
      results of operations or liquidity, such lawsuits could have, in the aggregate,
      a material adverse effect on the Company’s consolidated financial condition,
      results of operations or liquidity.





**18.**
            **Stock
                Compensation Plans**





Charter
      has stock option plans (the “Plans”) which provide for the grant of
      non-qualified stock options, stock appreciation rights, dividend equivalent
      rights, performance units and performance shares, share awards, phantom stock
      and/or shares of restricted stock (not to exceed 20,000,000 shares of Charter
      Class A common stock), as each term is defined in the Plans. Employees,
      officers, consultants and directors of Charter and its subsidiaries and
      affiliates are eligible to receive grants under the Plans. Options granted
      generally vest over four to five years from the grant date, with 25% generally
      vesting on the anniversary of the grant date and ratably thereafter. Generally,
      options expire 10 years from the grant date. The Plans allow for the
      issuance of up to a total of 90,000,000 shares of Charter Class A common
      stock (or units convertible into Charter Class A common stock).





The
      fair
      value of each option granted is estimated on the date of grant using the
      Black-Scholes option-pricing model. The following weighted average assumptions
      were used for grants during the three months ended June 30, 2006 and 2005,
      respectively: risk-free interest rates of 5.0% and 3.8%; expected volatility
      of
      91.0% and 70.1%; and expected lives of 6.25 years and 4.5 years, respectively.
      The following weighted average assumptions were used for grants during the
      six
      months ended June 30, 2006 and 2005, respectively: risk-free interest rates
      of
      4.6% and 3.8%; expected volatility of 91.6% and 71.3%; and expected lives of
      6.25 years and 4.5 years, respectively. The valuations assume no dividends
      are
      paid. During the three and six months ended June 30, 2006, Charter granted
      0.1
      million and 4.9 million stock options, respectively, with a weighted average
      exercise price of $1.02 and $1.07, respectively. As of June 30, 2006, Charter
      had 28.6 million and 10.7 million options outstanding and exercisable,
      respectively, with weighted average exercise prices of $3.97 and $7.27,
      respectively, and weighted average remaining contractual lives of 8 years and
      6
      years, respectively.





On
      January 1, 2006, the Company adopted revised SFAS No. 123, *Share
      - Based payment,* which
      addresses the accounting for share-based payment transactions in which a company
      receives employee services in exchange for (a) equity instruments of that
      company or (b) liabilities that are based on the fair value of the company’s
      equity instruments or that may be settled by the issuance of such equity
      instruments. Because the Company adopted the fair value recognition provisions
      of SFAS No. 123 on January 1, 2003, the revised standard did not have a material
      impact on its financial statements. The Company recorded $3 million and $4
      million of option compensation expense which






17
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




is
      included in general and administrative expense for the three months ended June
      30, 2006 and 2005, respectively, and $7 million and $8 million for the six
      months ended June 30, 2006 and 2005, respectively.





In
      February 2006, the Compensation and Benefits Committee of Charter’s Board of
      Directors approved a modification to the financial performance measures under
      Charter's Long-Term Incentive Program ("LTIP") required to be met for the
      performance shares to vest. After the modification, management believes that
      approximately 2.5 million of the performance shares are likely to vest. As
      such,
      expense of approximately $3 million will be amortized over the remaining two
      year service period. During the six months ended June 30, 2006, Charter granted
      an additional 8.0 million performance shares under the LTIP. The impacts of
      such
      grant and the modification of the 2005 awards was $1 million for the six months
      ended June 30, 2006.





**19.**
            **Related
                Party Transactions**





The
      following sets forth certain transactions in which the Company and the
      directors, executive officers and affiliates of the Company are involved. Unless
      otherwise disclosed, management believes that each of the transactions described
      below was on terms no less favorable to the Company than could have been
      obtained from independent third parties.





***CC
      VIII, LLC***





As
      part
      of the acquisition of the cable systems owned by Bresnan Communications Company
      Limited Partnership in February 2000, CC VIII, LLC, CCH II’s indirect limited
      liability company subsidiary, issued, after adjustments, 24,273,943 Class A
      preferred membership units (collectively, the "CC VIII interest") with an
      initial value and an initial capital account of approximately $630 million
      to
      certain sellers affiliated with AT&T Broadband, subsequently owned by
      Comcast Corporation (the "Comcast sellers"). Mr. Allen granted the
      Comcast sellers the right to sell to him the CC VIII interest for
      approximately $630 million plus 4.5% interest annually from February 2000
      (the "Comcast put right"). In April 2002, the Comcast sellers exercised the
      Comcast put right in full, and this transaction was consummated on June 6,
      2003. Accordingly, Mr. Allen became the holder of the CC VIII
      interest, indirectly through an affiliate. In
      the
      event of a liquidation of CC VIII, the owners of the CC VIII interest would be
      entitled to a priority distribution with respect to a 2% priority return (which
      will continue to accrete). Any remaining distributions in liquidation would
      be
      distributed to CC V Holdings, LLC and the owners of the CC VIII interest in
      proportion to their capital accounts (which would have equaled the initial
      capital account of the Comcast sellers of approximately $630 million, increased
      or decreased by Mr. Allen's pro rata share of CC VIII’s profits or losses (as
      computed for capital account purposes) after June 6, 2003).





An
      issue
      arose as to whether the documentation for the Bresnan transaction was correct
      and complete with regard to the ultimate ownership of the CC VIII interest
      following consummation of the Comcast put right. Thereafter, the board of
      directors of Charter formed a Special Committee of independent directors to
      investigate the matter and take any other appropriate action on behalf of
      Charter with respect to this matter. After conducting an investigation of the
      relevant facts and circumstances, the Special Committee determined that a
      "scrivener’s error" had occurred in February 2000 in connection with the
      preparation of the last-minute revisions to the Bresnan transaction documents
      and that, as a result, Charter should seek the reformation of the Charter Holdco
      limited liability company agreement, or alternative relief, in order to restore
      and ensure the obligation that the CC VIII interest be automatically exchanged
      for Charter Holdco units.





As
      of
      October 31, 2005, Mr. Allen, the Special Committee, Charter, Charter Holdco
      and
      certain of their affiliates, agreed to settle the dispute, and execute certain
      permanent and irrevocable releases pursuant to the Settlement Agreement and
      Mutual Release agreement dated October 31, 2005 (the "Settlement"). Pursuant
      to
      the Settlement, Charter Investment, Inc. (“CII”) has retained 30% of its CC VIII
      interest (the "Remaining Interests"). The Remaining Interests are subject to
      certain transfer restrictions, including requirements that the Remaining
      Interests participate in a sale with other holders or that allow other holders
      to participate in a sale of the Remaining Interests, as detailed in the revised
      CC VIII Limited Liability Company Agreement. CII transferred the other 70%
      of
      the CC VIII interest directly and indirectly, through Charter Holdco, to a
      newly
      formed entity, CCHC (a direct subsidiary of Charter Holdco and






18
 **CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions, except where indicated)**




the
      direct parent of Charter Holdings). Of the 70% of the CC VIII interest, 7.4%
      has
      been transferred by CII to CCHC for a subordinated exchangeable note with an
      initial accreted value of $48 million, accreting at 14% per annum, compounded
      quarterly, with a 15-year maturity (the "Note"). The remaining 62.6% has been
      transferred by CII to Charter Holdco, in accordance with the terms of the
      settlement for no additional monetary consideration. Charter Holdco contributed
      the 62.6% interest to CCHC.





As
      part
      of the Settlement, CC VIII issued approximately 49 million additional Class
      B
      units to CC V in consideration for prior capital contributions to CC VIII by
      CC
      V, with respect to transactions that were unrelated to the dispute in connection
      with CII’s membership units in CC VIII. As a result, Mr. Allen’s pro rata share
      of the profits and losses of CC VIII attributable to the Remaining Interests
      is
      approximately 5.6%.





The
      Note
      is exchangeable, at CII’s option, at any time, for Charter Holdco Class A Common
      units at a rate equal to the then accreted value, divided by $2.00 (the
      "Exchange Rate"). Customary anti-dilution protections have been provided that
      could cause future changes to the Exchange Rate. Additionally, the Charter
      Holdco Class A Common units received will be exchangeable by the holder into
      Charter common stock in accordance with existing agreements between CII, Charter
      and certain other parties signatory thereto. Beginning February 28, 2009, if
      the
      closing price of Charter common stock is at or above the Exchange Rate for
      a
      certain period of time as specified in the Exchange Agreement, Charter Holdco
      may require the exchange of the Note for Charter Holdco Class A Common units
      at
      the Exchange Rate.





CCHC
      has
      the right to redeem the Note under certain circumstances, for cash in an amount
      equal to the then accreted value. Such amount, if redeemed prior to February
      28,
      2009, would also include a make whole provision up to the accreted value through
      February 28, 2009. CCHC must redeem the Note at its maturity for cash in an
      amount equal to the initial stated value plus the accreted return through
      maturity.





Charter’s
      Board of Directors has determined that the transferred CC VIII interest will
      remain at CCHC for the present time, but there are currently no contractual
      or
      other obligations of CCHC that would prevent the contribution of those assets
      to
      a subsidiary of CCHC.





**20.**
            **Recently
                Issued Accounting
                Standards**





In
      June
      2006, the FASB issued FIN 48, *Accounting
      for Uncertainty in Income Taxes—an Interpretation of FASB Statement
      No. 109* ,
      which
      provides criteria for the recognition, measurement, presentation and disclosure
      of uncertain tax positions. A tax benefit from an uncertain position may be
      recognized only if it is “more likely than not” that the position is sustainable
      based on its technical merits. The Company
      will adopt FIN 48 effective January 1, 2007. The Company is currently assessing
      the impact of FIN
      48 on
      its financial statements.








19





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





**General**





CCH
      II,
      LLC (" CCH
      II")
      is a holding company whose principal assets as of June 30, 2006 are equity
      interests in its operating subsidiaries. CCH II is a direct subsidiary of CCH
      I,
      LLC ("CCH I") which is an indirect subsidiary of Charter Communications
      Holdings, LLC ("Charter Holdings"). Charter Holdings is an indirect subsidiary
      of Charter Communications, Inc. ("Charter"). "We," "us" and "our" refer to
      CCH
      II and/or its subsidiaries.





We
      are a
      broadband communications company operating in the United States. We offer our
      customers traditional cable video programming (analog and digital video) as
      well
      as high-speed Internet services and, in some areas, advanced broadband services
      such as high definition television, video on demand, telephone and interactive
      television. We sell our cable video programming, high-speed Internet and
      advanced broadband services on a subscription basis.





The
      following table summarizes our customer statistics for analog and digital video,
      residential high-speed Internet and residential telephone as of June
      30,
      2006 and 2005 :





**Approximate
                as of****June
                30,**
            
            **June
                30,****2006
                (a)**
            
            **2005
                (a)****Cable
                Video Services:****Analog
                Video:**Residential
                (non-bulk) analog video customers (b)
            
            
            5,600,300
            
            
            5,683,400Multi-dwelling
                (bulk) and commercial unit customers (c)
            
            
            275,800
            
            
            259,700Total
                analog video customers (b)(c)
            
            
            5,876,100
            
            
            5,943,100**Digital
                Video:**Digital
                video customers (d)
            
            
            2,889,000
            
            
            2,685,600**Non-Video
                Cable Services:**Residential
                high-speed Internet customers (e)
            
            
            2,375,100
            
            
            2,022,200Residential
                telephone customers (f)
            
            
            257,600
            
            
            67,800





(a)
            "Customers"
                include all persons our corporate billing records show as receiving
                service (regardless of their payment status), except for complimentary
                accounts (such as our employees). At June 30, 2006 and 2005, "customers"
                include approximately 55,900 and 45,100 persons whose accounts were
                over
                60 days past due in payment, approximately 14,300 and 8,200 persons
                whose
                accounts were over 90 days past due in payment, and approximately
                8,900
                and 4,500 of which were over 120 days past due in payment, respectively.




(b)
              "Analog
                    video customers" include all customers who receive video services
                    (including those who also purchase high-speed Internet and telephone
                    services) but excludes approximately 296,500 and 248,400 customers
                    at June
                    30, 2006 and 2005, respectively, who receive high-speed Internet
                    service
                    only or telephone service only and who are only counted as high-speed
                    Internet customers or telephone
                    customers.


(c)
            Included
                within "video customers" are those in commercial and multi-dwelling
                structures, which are calculated on an equivalent bulk unit ("EBU")
                basis.
                EBU is calculated for a system by dividing the bulk price charged
                to
                accounts in an area by the most prevalent price charged to non-bulk
                residential customers in that market for the comparable tier of service.
                The EBU method of estimating analog video customers is consistent
                with the
                methodology used in determining costs paid to programmers and has
                been
                consistently applied year over year. As we increase our effective
                analog
                prices to residential customers without a corresponding increase
                in the
                prices charged to commercial service or multi-dwelling customers,
                our EBU
                count will decline even if there is no real loss in commercial service
                or
                multi-dwelling customers.






20





(d)
            "Digital
                video customers" include all households that have one or more digital
                set-top terminals. Included in "digital video customers" on June
                30, 2006
                and 2005 are approximately 8,400 and 9,700 customers, respectively,
                that
                receive digital video service directly through satellite transmission.





(e)
            "Residential
                high-speed Internet customers" represent those customers who subscribe
                to
                our high-speed Internet service.





(f)
            "Residential
                telephone customers" include all households receiving telephone
                service.





**Overview
      of Operations**





We
      have a
      history of net losses. Our net losses are principally attributable to
      insufficient revenue to cover the combination
      of operating costs and interest
      costs we incur because of our debt and depreciation expenses that we incur
      resulting from the capital investments we have made and continue to make in
      our
      cable properties. We expect that these expenses will remain significant, and
      we
      therefore expect to continue to report net losses for the foreseeable future.
      We
      had net losses of $335 million and $220 million for the six months ended June
      30, 2006 and 2005, respectively.




For
      the
      six months ended June 30, 2006 and 2005, our operating income from continuing
      operations was $138 million and $142 million, respectively. Operating income
      from continuing operations includes depreciation and amortization expense and
      asset impairment charges but excludes interest expense. We had operating margins
      of 5% and 6% for the six months ended June 30, 2006 and 2005, respectively.




Historically,
      our ability to fund operations and investing activities has depended on our
      continued access to credit under our credit facilities. We expect we will
      continue to borrow under our credit facilities from time to time to fund cash
      needs. The occurrence of an event of default under our credit facilities could
      result in borrowings from these credit facilities being unavailable to us and
      could, in the event of a payment default or acceleration, also trigger events
      of
      default under the indentures governing our outstanding notes and would have
      a
      material adverse effect on us. See "— Liquidity and Capital
      Resources."





**Sale
      of Assets**





In
      2006,
      we signed three separate definitive agreements to sell certain cable television
      systems serving a total of approximately 356,000 analog video customers in
      1)
      West Virginia and Virginia to
      Cebridge Connections, Inc. (the “Cebridge Transaction”); 2) Illinois and
      Kentucky to Telecommunications Management, LLC, doing business as New Wave
      Communications (the “New Wave Transaction”) and 3) Nevada, Colorado, New Mexico
      and Utah to Orange Broadband Holding Company, LLC (the
“Orange Transaction”) for a total of approximately $971 million. These cable
      systems met the criteria for assets held for sale. As such, the assets were
      written down to fair value less estimated costs to sell resulting in asset
      impairment charges during the six months ended June 30, 2006 of approximately
      $99 million related to the New Wave Transaction and the Orange Transaction.
      In
      the third quarter of 2006, we expect to record a gain of approximately $200
      million on the Cebridge Transaction. In addition, assets and liabilities to
      be
      sold have been presented as held for sale. We have also determined that the
      West
      Virginia and Virginia cable systems comprise operations and cash flows that
      for
      financial reporting purposes meet the criteria for discontinued operations.
      Accordingly, the results of operations for the West Virginia and Virginia cable
      systems have been presented as discontinued operations, net of tax for the
      three
      and six months ended June 30, 2006 and all prior periods presented herein have
      been reclassified to conform to the current presentation.





**Critical
      Accounting Policies and Estimates**





For
      a
      discussion of our critical accounting policies and the means by which we develop
      estimates therefore, see "Item 7. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations" in our 2005 Annual Report on
      Form
      10-K.


21




**RESULTS
      OF OPERATIONS**





***Six
      Months Ended*** ***June
      30, 2006*** ***Compared to Six Months Ended*** ***June
      30, 2005***





The
      following table sets forth the percentages of revenues that items in the
      accompanying condensed consolidated statements of operations constituted for
      the
      periods presented (dollars in millions, except per share and share
      data):





**Six
                Months Ended June 30,****2006**
            
            **2005**Revenues
            
            $
            2,703
            
            
            100
            %
            $
            2,481
            
            
            100
            %Costs
                and expenses:Operating
                (excluding depreciation and amortization)
            
            
            1,215
            
            
            45
            %
            
            1,081
            
            
            44
            %Selling,
                general and administrative
            
            
            551
            
            
            20
            %
            
            483
            
            
            19
            %Depreciation
                and amortization
            
            
            690
            
            
            26
            %
            
            730
            
            
            29
            %Asset
                impairment charges
            
            
            99
            
            
            4
            %
            
            39
            
            
            2
            %Other
                operating expenses, net
            
            
            10
            
            
            --
            
            
            6
            
            
            --2,565
            
            
            95
            %
            
            2,339
            
            
            94
            %Operating
                income from continuing operations
            
            
            138
            
            
            5
            %
            
            142
            
            
            6
            %Interest
                expense, net
            
            
            (488
            )
            
            
            
            
            (408
            )Other
                income (expenses), net
            
            
            (19
            )
            
            
            
            
            35(507
            )
            
            
            
            
            (373
            )Loss
                before income taxes
            
            
            (369
            )
            
            
            
            
            (231
            )Income
                tax expense
            
            
            (4
            )
            
            
            
            
            (8
            )Loss
                from continuing operations
            
            
            (373
            )
            
            
            
            
            (239
            )Income
                from discontinued operations, net of tax
            
            
            38
            
            
            
            
            
            19Net
                loss
            
            $
            (335
            )
            
            
            
            $
            (220
            )





***Revenues*** .
      The
      overall increase in revenues from continuing operations in 2006 compared to
      2005
      is principally the result of an increase from June 30, 2005 of 343,800
      high-speed Internet customers, 194,300 digital video customers and 189,800
      telephone customers, as well as price increases for video and high-speed
      Internet services, and is offset partially by a decrease of 41,400 analog video
      customers. Our goal is to increase revenues by improving customer service,
      which
      we believe will stabilize our analog video customer base, implementing price
      increases on certain services and packages and increasing the number of
      customers who purchase high-speed Internet services, digital video and advanced
      products and services such as telephone, VOD, high definition television and
      digital video recorder service.





Average
      monthly revenue per analog video customer increased to $79.73 for the six months
      ended June
      30,
      2006 from
      $72.47 for the six months ended June
      30,
      2005 primarily as a result of incremental revenues from advanced services and price
      increases. Average monthly revenue per analog video customer represents total
      revenue for the six months ended during the respective period, divided by six,
      divided by the average number of analog video customers during the respective
      period.





22


Revenues
      by service offering were as follows (dollars in millions):





**Six
                Months Ended June 30,****2006**
            
            **2005**
            
            **2006
                over 2005****Revenues**
            
            **%
                of**
              **Revenues**
            
            **Revenues**
            
            **%
                of**
              **Revenues**
            
            **Change**
            
            **%
                Change**Video
            
            $
            1,684
            
            
            62
            %
            $
            1,623
            
            
            66
            %
            $
            61
            
            
            4
            %High-speed
                Internet
            
            
            506
            
            
            19
            %
            
            425
            
            
            17
            %
            
            81
            
            
            19
            %Telephone
            
            
            49
            
            
            2
            %
            
            14
            
            
            1
            %
            
            35
            
            
            250
            %Advertising
                sales
            
            
            147
            
            
            5
            %
            
            135
            
            
            5
            %
            
            12
            
            
            9
            %Commercial
            
            
            149
            
            
            6
            %
            
            128
            
            
            5
            %
            
            21
            
            
            16
            %Other
            
            
            168
            
            
            6
            %
            
            156
            
            
            6
            %
            
            12
            
            
            8
            %$
            2,703
            
            
            100
            %
            $
            2,481
            
            
            100
            %
            $
            222
            
            
            9
            %





Video
      revenues consist primarily of revenues from analog and digital video services
      provided to our non-commercial customers. Approximately $58 million of the
      increase was the result of price increases and incremental video revenues from
      existing customers and approximately $24 million was the result of an increase
      in digital video customers. The increases were offset by decreases of
      approximately $21 million related to a decrease in analog video
      customers.





Approximately
      $73 million of the increase in revenues from high-speed Internet services
      provided to our non-commercial customers related to the increase in the average
      number of customers receiving high-speed Internet services, whereas
      approximately $8 million related to the increase in average price of the
      service.





Revenues
      from telephone services increased primarily as a result of an increase of
      189,800 telephone customers in 2006.





Advertising
      sales revenues consist primarily of revenues from commercial advertising
      customers, programmers and other vendors. Advertising sales revenues increased
      primarily as a result of an increase in local advertising sales and a one-time
      ad buy by a programmer. For the six months ended June 30, 2006 and 2005, we
      received $10 million and $6 million, respectively, in advertising sales revenues
      from programmers.





Commercial
      revenues consist primarily of revenues from video and high-speed Internet
      services provided to our commercial customers. Commercial revenues increased
      primarily as a result of an increase in commercial high-speed Internet revenues.





Other
      revenues consist of revenues from franchise fees, equipment rental, customer
      installations, home shopping, dial-up Internet service, late payment fees,
      wire
      maintenance fees and other miscellaneous revenues. For the six months ended
      June
      30, 2006 and 2005, franchise fees represented approximately 53% of total other
      revenues. The increase in other revenues was primarily the result of an increase
      in franchise fees of $5 million, installation revenue of $3 million and wire
      maintenance fees of $4 million.





23


***Operating
      Expenses*** **.** Programming costs represented 62% and 63% of operating expenses for the six
      months ended June 30, 2006 and 2005, respectively. Key expense components as
      a
      percentage of revenues were as follows (dollars in millions):





**Six
                Months Ended June 30,****2006**
            
            **2005**
            
            **2006
                over 2005****Expenses**
            
            **%
                of**
              **Revenues**
            
            **Expenses**
            
            **%
                of**
              **Revenues**
            
            **Change**
            
            **%
                Change**Programming
            
            $
            755
            
            
            28
            %
            $
            678
            
            
            27
            %
            $
            77
            
            
            11
            %Service
            
            
            408
            
            
            15
            %
            
            356
            
            
            15
            %
            
            52
            
            
            15
            %Advertising
                sales
            
            
            52
            
            
            2
            %
            
            47
            
            
            2
            %
            
            5
            
            
            11
            %$
            1,215
            
            
            45
            %
            $
            1,081
            
            
            44
            %
            $
            134
            
            
            12
            %





Programming
      costs consist primarily of costs paid to programmers for analog, premium,
      digital channels, VOD and pay-per-view programming. The increase in programming
      costs was primarily a result of rate increases and increases in digital video
      customers. Programming costs were offset by the amortization of payments
      received from programmers in support of launches of new channels of $8 million
      and $17 million for the six months ended June 30, 2006 and 2005, respectively.





Our
      cable
      programming costs have increased in every year we have operated in excess of
      customary inflationary and cost-of-living increases. We expect them to continue
      to increase due to a variety of factors, including annual increases imposed
      by
      programmers and additional programming being provided to customers as a result
      of system rebuilds and bandwidth reallocation, both of which increase channel
      capacity. In 2006, programming costs have increased and we expect will continue
      to increase at a higher rate than in 2005. These costs will be determined in
      part on the outcome of programming negotiations in 2006 and may be subject
      to
      offsetting events. Our increasing programming costs have resulted in declining
      operating margins on our video services because we have been unable to pass
      on
      all cost increases to our customers. We expect to partially offset the resulting
      margin compression on our traditional video services with revenue from advanced
      video services, increased telephone revenues, high-speed Internet revenues,
      advertising revenues and commercial service revenues.





Service
      costs consist primarily of service personnel salaries and benefits, franchise
      fees, system utilities, costs of providing high-speed Internet service and
      telephone service, maintenance and pole rent expense. The increase in service
      costs resulted primarily from increased costs of providing high-speed Internet
      and telephone service of $16 million, an increase in service personnel salaries
      and benefits of $14 million, higher fuel and utility prices of $8 million,
      increased labor and maintenance costs to support improved service levels and
      our
      advanced products of $7 million and franchise fees of $5 million. Advertising
      sales expenses consist of costs related to traditional advertising services
      provided to advertising customers, including salaries, benefits and commissions.
      Advertising sales expenses increased primarily as a result of increased salary,
      benefit and commission costs.




***Selling,
      General and Administrative Expenses.*** Key
      components of expense as a percentage of revenues were as follows (dollars
      in
      millions):





**Six
                Months Ended June 30,****2006**
            
            **2005**
            
            **2006
                over 2005****Expenses**
            
            **%
                of**
              **Revenues**
            
            **Expenses**
            
            **%
                of**
              **Revenues**
            
            **Change**
            
            **%
                Change**General
                and administrative
            
            $
            471
            
            
            17
            %
            $
            418
            
            
            17
            %
            $
            53
            
            
            13
            %Marketing
            
            
            80
            
            
            3
            %
            
            65
            
            
            2
            %
            
            15
            
            
            23
            %$
            551
            
            
            20
            %
            $
            483
            
            
            19
            %
            $
            68
            
            
            14
            %





General
      and administrative expenses consist primarily of salaries and benefits, rent
      expense, billing costs, customer care center costs, internal network costs,
      bad
      debt expense and property taxes. The increase in general and administrative
      expenses resulted primarily from a rise in salaries and benefits of $34 million,
      increases in billing






24




costs
      of
      $7 million, computer maintenance of $5 million, bad debt expense of $5 million,
      telephone expense of $4 million, contractor labor of $3 million and property
      and
      casualty insurance of $2 million partially offset by decreases in consulting
      services of $8 million.





Marketing
      expenses increased as a result of increased spending in targeted marketing
      campaigns consistent with management’s strategy to increase revenues.





***Depreciation
      and Amortization.*** ** Depreciation
      and amortization expense decreased by $40 million for
      the six months
      ended June
      30,
      2006 compared to the six months ended June 30, 2005. The decrease in
      depreciation was primarily the result of assets becoming fully
      depreciated.





***Asset
      Impairment Charges.*** Asset
      impairment charges for the six months ended June 30, 2006 and 2005 represent
      the
      write-down of assets related to cable asset sales to fair value less costs
      to
      sell .
      See
      Note 3 to the condensed consolidated financial statements .





***Other
      Operating Expenses, Net.*** Other
      operating expenses, net increased $4 million as a result of an $8 million
      increase in special charges primarily related to severance associated with
      closing call centers and divisional restructuring and a $4 million decrease
      related to losses on sales of assets.





***Interest
      Expense, Net*** **.**  Net
      interest expense increased by $80 million, or 20%, for
      the six months
      ended June
      30,
      2006 compared to the
      six
      months ended June
      30,
      2005. The increase in net interest expense was a result of an increase in our
      average borrowing rate from 7.85% in the six months ended June 30, 2005 to
      8.54%
      in the six months ended June 30, 2006 and an increase of $815 million in average
      debt outstanding from $10.0 billion for the six months ended June 30, 2005
      compared to $10.8 billion for the six months ended June 30, 2006.





***Other
      Income (Expenses), Net.*** Other
      income decreased $54 million from other income of $35 million for the six months
      ended June 30, 2005 to other expense of $19 million for the six months ended
      June 30, 2006 primarily as a result of a $21 million increase in the loss on
      extinguishment of debt from $6 million for the six months ended June 30, 2005
      to
      $27 million for the six months ended June 30, 2006. See Note 6 to the condensed
      consolidated financial statements. Other income also decreased as a result
      of a
      $15 million decrease in net gains on derivative instruments and hedging
      activities as a result of decreases in gains on interest rate agreements that
      do
      not qualify for hedge accounting under Statement of Financial Accounting
      Standards (“SFAS”) No. 133, *Accounting
      for Derivative Instruments and Hedging Activities.* In
      addition, the six months ended June 30, 2005 included a $20 million gain on
      investments for the six months ended June 30, 2005 recognized as a result of
      a
      gain realized on an exchange of our interest in an equity investee for an
      investment in a larger enterprise. ** Other
      income also includes the 2% accretion of the preferred membership interests
      in
      our indirect subsidiary, CC VIII, and the pro rata share of the profits and
      losses of CC VIII.





***Income
      Tax Expense.*** Income
      tax expense was recognized through increases in deferred tax liabilities and
      current federal and state income tax expenses of certain of our indirect
      corporate subsidiaries.





***Income
      From Discontinued Operations, Net of Tax.*** Income
      from discontinued operations, net of tax increased from $19 million for the
      six
      months ended June 30, 2005 to $38 million for the six months ended June 30,
      2006
      primarily due to a decrease in depreciation for the six months ended June 30,
      2006 as we ceased recognizing depreciation on the West Virginia and Virginia
      cable systems when we classified them as assets held for sale in the first
      quarter of 2006.





***Net
      Loss*** .
      Net
      loss increased by $115 million, or 52%, for the six months ended June
      30,
      2006 compared
      to the six months ended June
      30,
      2005 as a
      result of the factors described above.





**Liquidity
      and Capital Resources**




***Introduction*** ****




This
      section contains a discussion of our liquidity and capital resources, including
      a discussion of our cash position, sources and uses of cash, access to credit
      facilities and other financing sources, historical financing activities, cash
      needs, capital expenditures and outstanding debt.






25




***Recent
      Financing Transactions*** ****





In
      January 2006, CCH II and CCH II Capital Corp. issued $450 million in debt
      securities, the proceeds of which were provided, directly or indirectly, to
      Charter Communications Operating, LLC ("Charter Operating"), which used such
      funds to reduce borrowings, but not commitments, under the revolving portion
      of
      its credit facilities.





In
      April
      2006, Charter Operating completed a $6.85 billion refinancing of its credit
      facilities including a new $350 million revolving/term facility (which converts
      to a term loan no later than April 2007), a $5.0 billion term loan due in 2013
      and certain amendments to the existing $1.5 billion revolving credit facility.
      In addition, the refinancing reduced margins on Eurodollar rate term loans
      to
      2.625% from a weighted average of 3.15% previously and margins on base rate
      term
      loans to 1.625% from a weighted average of 2.15% previously. Concurrent with
      this refinancing, the CCO Holdings, LLC ("CCO Holdings") bridge loan was
      terminated.





Our
      long-term financing as of June 30, 2006 consists of $5.8 billion of credit
      facility debt and $5.3 billion accreted value of high-yield notes. For the
      remainder of 2006, none of the Company’s debt matures, and in 2007 and 2008, $25
      million and $50 million mature, respectively. In 2009 and beyond, significant
      additional amounts will become due under our remaining long-term debt
      obligations.





Our
      business requires significant cash to fund debt service costs, capital
      expenditures and ongoing operations. We have historically funded these
      requirements through cash flows from operating activities, borrowings under
      our
      credit facilities, equity contributions from our parent companies, sales of
      assets, issuances of debt securities and cash on hand. However, the mix of
      funding sources changes from period to period. For the six months
      ended June 30, 2006, we generated $525 million of net cash flows from operating
      activities after paying cash interest of $451 million. In addition, we used
      approximately $539 million for purchases of property, plant and equipment.
      Finally, we had net cash flows from financing activities of $69 million. We
      expect that our mix of sources of funds will continue to change in the future
      based on overall needs relative to our cash flow and on the availability of
      funds under our credit facilities, our and our parent companies’ access to the
      debt markets, the timing of possible asset sales and our ability to generate
      cash flows from operating activities. We continue to explore asset dispositions
      as one of several possible actions that we could take in the future to improve
      our liquidity, but we do not presently believe unannounced future asset sales
      to
      be a significant source of liquidity.





We
      expect
      that cash on hand, cash flows from operating activities, proceeds from sale
      of
      assets and the amounts available under our credit facilities will be adequate
      to
      meet our and our parent companies’ cash needs through 2007. We believe that cash
      flows from operating activities and amounts available under our credit
      facilities may not be sufficient to fund our operations and satisfy our and
      our
      parent companies’ interest and principal repayment obligations in 2008 and will
      not be sufficient to fund such needs in 2009 and beyond. We have been advised
      that Charter continues to work with its financial advisors in its approach
      to
      addressing liquidity, debt maturities and its overall balance sheet
      leverage.





***Debt
      Covenants***





Our
      ability to operate depends upon, among other things, our continued access to
      capital, including credit under the Charter Operating credit facilities. The
      Charter Operating credit facilities, along with our indentures, contain certain
      restrictive covenants, some of which require us to maintain specified financial
      ratios and meet financial tests and to provide annual audited financial
      statements with an unqualified opinion from our independent auditors. As of
      June
      30, 2006, we are in compliance with the covenants under our indentures and
      credit facilities, and we expect to remain in compliance with those covenants
      for the next twelve months. As of June 30, 2006, our potential availability
      under our credit facilities totaled approximately $900 million, none of which
      was limited by covenant restrictions. In
      the
      past, our actual availability under our credit facilities has been limited
      by
      covenant restrictions. There can be no assurance that our actual availability
      under our credit facilities will not be limited by covenant restrictions in
      the
      future. However, pro forma for the closing of the asset sales on July 1, 2006,
      and the related application of net proceeds to repay amounts outstanding under
      our revolving credit facility, potential availability under our credit
      facilities as of June 30, 2006 would have been approximately $1.7 billion,
      although actual availability would have been limited to $1.3 billion because
      of
      limits imposed by covenant restrictions. Continued
      access to our credit facilities is subject to our remaining in compliance with
      these covenants, including covenants tied to our operating performance. If
      any
      events of non-compliance occur, funding under the credit facilities may not
      be
      available and defaults on some or potentially all of our debt obligations could
      occur. An event of default under any of our debt instruments could result in
      the
      acceleration of our payment obligations under that debt and,






26




under
      certain circumstances, in cross-defaults under our other debt obligations,
      which
      could have a material adverse effect on our consolidated financial condition
      and
      results of operations.





***Parent
      Company Debt Obligations***





Any
      financial or liquidity problems of our parent companies could cause serious
      disruption to our business and have a material adverse effect on our business
      and results of operations. A failure by Charter Holdings, CCH I Holdings, LLC
      ("CIH") or CCH I to satisfy their debt payment obligations or a bankruptcy
      filing with respect to Charter Holdings, CIH or CCH I would give the lenders
      under our credit facilities the right to accelerate the payment obligations
      under these facilities. Any such acceleration would be a default under the
      indenture governing our notes. On a consolidated basis, our parent companies
      have a significant level of debt, which, including our debt, totaled
      approximately $19.9 billion as of June 30, 2006, as discussed
      below.





Charter’s
      ability to make interest payments on its convertible senior notes, and, in
      2009,
      to repay the outstanding principal of its convertible senior notes of $863
      million will depend on its ability to raise additional capital and/or on receipt
      of payments or distributions from Charter Holdco and its subsidiaries. As of
      June 30, 2006, Charter Holdco was owed $3 million in intercompany loans from
      its
      subsidiaries, which were available to pay interest and principal on Charter’s
      convertible senior notes. In addition, Charter has $74 million of U.S.
      government securities pledged as security for the next three scheduled
      semi-annual interest payments on Charter’s 5.875% convertible senior notes.





As
      of
      June 30, 2006, Charter Holdings, CIH and CCH I had approximately $7.8 billion
      principal amount of high-yield notes outstanding with approximately $105
      million, $0, $684 million and $7.0 billion maturing in 2007, 2008, 2009 and
      thereafter, respectively. Charter Holdings, CIH and CCH I will need to raise
      additional capital or receive distributions or payments from us in order to
      satisfy their debt obligations. However, because of their significant
      indebtedness, our ability and the ability of the parent companies to raise
      additional capital at reasonable rates or at all is uncertain. During
      the six months ended June 30, 2006, the Company distributed $314 million of
      cash
      to its parent company.





Distributions
      by Charter’s subsidiaries to a parent company (including Charter, Charter
      Holdco, CCHC, Charter Holdings, CIH and CCH I) for
      payment of principal on parent company notes are
      restricted under the indentures governing the CIH notes, CCH I notes, CCH II
      notes, CCO Holdings notes and Charter Operating notes unless
      there is no default under the applicable indenture, each applicable subsidiary’s
      leverage ratio test is met at the time of such distribution and, in the case
      of
      Charter’s convertible senior notes, other specified tests are met. For
      the
      quarter ended June 30, 2006, there was no default under any of these indentures
      and each such subsidiary met its applicable leverage ratio tests based on June
      30, 2006 financial results. Such
      distributions would be restricted, however, if any such subsidiary fails to
      meet
      these tests at such time. In the past, certain subsidiaries have from time
      to
      time failed to meet their leverage ratio test. There can be no assurance that
      they will satisfy these tests at the time of such distribution. Distributions
      by Charter Operating for payment of principal on parent company notes are
      further restricted by the covenants in the credit facilities.





Distributions
      by CIH, CCH I, CCH II, CCO Holdings and Charter Operating to a parent company
      for payment of parent company interest are permitted if there is no default
      under the aforementioned indentures. However, distributions for payment of
      interest on Charter’s convertible senior notes are further limited to when each
      applicable subsidiary’s leverage ratio test is met and other specified tests are
      met. There can be no assurance that the subsidiary will satisfy these tests
      at
      the time of such distribution.





***Specific
      Limitations at Charter Holdings***





The
      indentures governing the Charter Holdings notes permit Charter Holdings to
      make
      distributions to Charter Holdco for payment of interest or principal on Charter’s convertible
      senior notes, only if, after giving effect to the distribution, Charter Holdings
      can incur additional debt under the leverage ratio of 8.75 to 1.0, there is
      no
      default under Charter Holdings’ indentures and other specified tests are met.
      For the quarter ended June
      30,
      2006, there was no default under Charter Holdings’ indentures and Charter
      Holdings met its leverage ratio test based on June 30, 2006 financial
      results .
      Such
      distributions would be restricted, however, if Charter Holdings fails to meet
      these tests at such time. In the past, Charter Holdings has from time to time
      failed to meet this leverage ratio test. There can be no assurance that Charter
      Holdings will satisfy these tests at the time of such distribution. During periods
      in which distributions are restricted, the
      indentures governing the Charter Holdings notes permit Charter Holdings and
      its






27




subsidiaries
      to make specified investments (that are not restricted payments) in Charter
      Holdco or Charter up to an amount determined by a formula, as long as there
      is
      no default under the indentures.





Our
      ability to incur additional debt may be limited by the restrictive covenants
      in
      our indentures and credit facilities. No assurances can be given that we will
      not experience liquidity problems if we do not obtain sufficient additional
      financing on a timely basis as our debt becomes due or because of adverse market
      conditions, increased competition or other unfavorable events. If, at any time,
      additional capital or borrowing capacity is required beyond amounts internally
      generated or available under our credit facilities or through additional debt
      or
      equity financings, we would consider:





•
            issuing
                equity at a parent company level, the proceeds of which could be
                loaned or
                contributed to us;•
            issuing
                debt securities that may have structural or other priority over our
                existing notes;•
            further
                reducing our expenses and capital expenditures, which may impair
                our
                ability to increase revenue;•
            selling
                assets; or•
            requesting
                waivers or amendments with respect to our credit facilities, the
                availability and terms of which would be subject to market conditions.





If
      the
      above strategies are not successful, we could be forced to restructure our
      obligations or seek protection under the bankruptcy laws. In addition, if we
      find it necessary to engage in a recapitalization or other similar transaction,
      our noteholders might not receive principal and interest payments to which
      they
      are contractually entitled.





***Sale
      of Assets***





In
      July
      2006, we closed the Cebridge Transaction and New Wave Transaction for net
      proceeds of approximately $896 million. We used the net proceeds from the asset
      sales to repay (but not reduce permanently) amounts outstanding under our
      revolving credit facility. The Orange Transaction is scheduled to close in
      the
      third quarter of 2006.





In
      July
      2005, we closed the sale of certain cable systems in Texas and West Virginia
      and
      closed the sale of an additional cable system in Nebraska in October 2005 for
      a
      total sales price of approximately $37 million, representing a total of
      approximately 33,000 customers.





***Acquisition***





In
      January 2006, we closed the purchase of certain cable systems in Minnesota
      from
      Seren Innovations, Inc. We acquired approximately 17,500 analog video customers,
      8,000 digital video customers, 13,200 high-speed Internet customers and 14,500
      telephone customers for a total purchase price of approximately $42
      million.





***Historical
      Operating, Financing and Investing Activities***





Our
      cash
      flows include the cash flows related to our discontinued operations for all
      periods presented.





We
      held
      $44 million in cash and cash equivalents as of June 30, 2006 compared to
      $3 million as of December 31, 2005. For the six months ended June 30, 2006,
      we generated $525 million of net cash flows from operating activities after
      paying cash interest of $451 million. In addition, we used approximately $539
      million for purchases of property, plant and equipment. Finally, we had net
      cash
      flows from financing activities of $69 million.




***Operating
      Activities.*** ** Net
      cash
      provided by operating activities increased $56 million, or 12%, from $469
      million for the six months ended June 30, 2005 to $525 million for the six
      months ended June 30, 2006. For the six months ended June 30, 2006, net cash
      provided by operating activities increased primarily as a result of changes
      in
      operating assets and liabilities that provided $117 million more cash during
      the
      six months ended June 30, 2006 than the corresponding period in 2005 coupled
      with an increase in revenue over cash costs offset by an increase in cash
      interest expense of $78 million over the corresponding prior period.






28




***Investing
      Activities.*** ** Net
      cash
      used by investing activities for the six months ended June 30, 2006 and 2005
      was
      $553 million and $472 million, respectively. Investing activities used $81
      million more cash during the six months ended June 30, 2006 than the
      corresponding period in 2005 primarily as a result of increased cash used for
      the purchase of cable systems discussed above coupled with a decrease in our
      liabilities related to capital expenditures.




***Financing
      Activities.*** ** Net
      cash
      provided by financing activities was $69 million for the six months ended June
      30, 2006 and net cash used in financing activities was $521 million for the
      six
      months ended June 30, 2005. The increase in cash provided during the six months
      ended June 30, 2006 as compared to the corresponding period in 2005, was
      primarily the result of proceeds from the issuance of debt.





***Capital
      Expenditures*** ****





We
      have
      significant ongoing capital expenditure requirements. Capital expenditures
      were
      $539 million and $542 million for the six months ended June
      30,
      2006 and
      2005,
      respectively. Capital expenditures decreased as a result of decreases in
      expenditures related to line extensions and support capital partially offset
      by
      increased spending on customer premise equipment as a result of increases in
      digital video, high-speed Internet and telephone customers. See the table below
      for more details.




Our
      capital expenditures are funded primarily from cash flows from operating
      activities, the issuance of debt and borrowings under credit facilities. In
      addition, during the six months ended June
      30,
      2006 and
      2005, our liabilities related to capital expenditures decreased $9 million
      and
      increased $48 million, respectively.





During
      2006, we expect capital expenditures to be approximately $1.0 billion to $1.1
      billion. We expect that the nature of these expenditures will continue to be
      composed primarily of purchases of customer premise equipment related to
      telephone and other advanced services, support capital and for scalable
      infrastructure costs. We expect to fund capital expenditures for 2006 primarily
      from cash flows from operating activities, proceeds from asset sales and
      borrowings under our credit facilities.




We
      have
      adopted capital expenditure disclosure guidance, which was developed by eleven
      publicly traded cable system operators, including Charter, with the support
      of
      the National Cable & Telecommunications Association ("NCTA"). The disclosure
      is intended to provide more consistency in the reporting of operating statistics
      in capital expenditures and customers among peer companies in the cable
      industry. These disclosure guidelines are not required disclosure under
      Generally Accepted Accounting Principles ("GAAP"), nor do they impact our
      accounting for capital expenditures under GAAP.





The
      following table presents our major capital expenditures categories in accordance
      with NCTA disclosure guidelines for the three and six months ended June 30,
      2006
      and 2005 (dollars in millions):





**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Customer
                premise equipment (a)
            
            $
            128
            
            $
            142
            
            $
            258
            
            $
            228Scalable
                infrastructure (b)
            
            
            63
            
            
            47
            
            
            97
            
            
            89Line
                extensions (c)
            
            
            33
            
            
            48
            
            
            59
            
            
            77Upgrade/Rebuild
                (d)
            
            
            14
            
            
            12
            
            
            23
            
            
            22Support
                capital (e)
            
            
            60
            
            
            82
            
            
            102
            
            
            126Total
                capital expenditures
            
            $
            298
            
            $
            331
            
            $
            539
            
            $
            542





(a)
            Customer
                premise equipment includes costs incurred at the customer residence
                to
                secure new customers, revenue units and additional bandwidth revenues.
                It
                also includes customer installation costs in accordance with SFAS
                No. 51,*Financial
                Reporting by Cable Television Companies,*and
                customer premise equipment (e.g., set-top terminals and cable modems,
                etc.).


(b)
            Scalable
                infrastructure includes costs, not related to customer premise equipment
                or our network, to secure growth of new customers, revenue units
                and
                additional bandwidth revenues or provide service enhancements (e.g.,
                headend equipment).


(c)
            Line
                extensions include network costs associated with entering new service
                areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
                make-ready and design engineering).






29









(d)
            Upgrade/rebuild
                includes costs to modify or replace existing fiber/coaxial cable
                networks,
                including betterments.


(e)
            Support
                capital includes costs associated with the replacement or enhancement
                of
                non-network assets due to technological and physical obsolescence
                (e.g.,
                non-network equipment, land, buildings and
                vehicles).




**Item
      4.****Controls
      and Procedures.**





As
      of the
      end of the period covered by this report, management, including our Chief
      Executive Officer and Chief Financial Officer, evaluated the effectiveness
      of
      the design and operation of our disclosure controls and procedures with respect
      to the information generated for use in this quarterly report. The evaluation
      was based in part upon reports and affidavits provided by a number of
      executives. Based upon, and as of the date of that evaluation, our Chief
      Executive Officer and Chief Financial Officer concluded that the disclosure
      controls and procedures were effective to provide reasonable assurances that
      information required to be disclosed in the reports we file or submit under
      the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the Commission’s rules and forms.





There
      was
      no change in our internal control over financial reporting during the quarter
      ended June 30, 2006 that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





In
      designing and evaluating the disclosure controls and procedures, our management
      recognized that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable, not absolute, assurance of achieving
      the
      desired control objectives and management necessarily was required to apply
      its
      judgment in evaluating the cost-benefit relationship of possible controls and
      procedures. Based upon the above evaluation, our management believes that our
      controls provide such reasonable assurances.


30


**PART
      II. OTHER INFORMATION.**





**Item
      1.****Legal
      Proceedings.**





We
      are a
      party to lawsuits and claims that have arisen in the ordinary course of
      conducting our business. The ultimate outcome of all of these legal matters
      pending against us or our subsidiaries cannot be predicted, and although such
      lawsuits and claims are not expected individually to have a material adverse
      effect on our consolidated financial condition, results of operations or
      liquidity, such lawsuits could have, in the aggregate, a material adverse effect
      on our consolidated financial condition, results of operations or liquidity.





**Item
      1A.**  **Risk
      Factors**





**Risks
      Related to Significant Indebtedness of Us and Our Parent
      Companies**





***We
      may not generate (or, in general,***  ***we
      and our parent companies may not have available to the applicable obligor)
      sufficient cash flow or have access to additional external liquidity sources
      to
      fund our capital expenditures, ongoing operations and our and our parent
      companies’ debt obligations.***





Our
      ability to service our and our parent companies’ debt and to fund our planned
      capital expenditures and ongoing operations will depend on both our ability
      to
      generate cash flow and our and our parent companies’ access to additional
      external liquidity sources, and in general our and our parent companies’ ability
      to provide (by dividend or otherwise), such funds to the applicable issuer
      of
      the debt obligation. Our ability to generate cash flow is dependent on many
      factors, including:




·
              our
                  future operating performance;  ·
                  the
                      demand for our products and
                      services;


·
            general
                economic conditions and conditions affecting customer and advertiser
                spending;





·
            competition
                and our ability to stabilize customer losses;
                and





·
            legal
                and regulatory factors affecting our
                business.





Some
      of
      these factors are beyond our control. If we and our parent companies’ are unable
      to generate sufficient cash flow or access additional external liquidity
      sources, we and our parent companies’ may not be able to service and repay our
      and our parent companies’ debt, operate our business, respond to competitive
      challenges or fund our and our parent companies’ other liquidity and capital
      needs. Although CCH II and CCH II Capital Corp. sold $450 million principal
      amount of 10.250% senior notes due 2010 in January 2006 and our subsidiary,
      Charter Operating, completed a $6.85 billion refinancing of its credit
      facilities in April 2006, we or our parent companies may not be able to access
      additional sources of external liquidity on similar terms, if at all. We expect
      that cash on hand, cash flows from operating activities, proceeds from sales
      of
      assets and the amounts available under our credit facilities will be adequate
      to
      meet our cash needs through 2007. We believe
      that cash flows from operating activities and amounts available under our credit
      facilities may not be sufficient to fund our operations and satisfy our and
      our
      parent companies’ interest and principal repayment obligations in 2008
      and
      will not be sufficient to fund such needs in 2009
      and
      beyond. See “Item 2. Management’s Discussion and Analysis of Financial Condition
      and Results of Operations — Liquidity and Capital Resources.”





***We
      may not be able to access funds under our credit facilities if we fail to
      satisfy the covenant restrictions in our credit facilities, which could
      adversely affect our financial condition and our ability to conduct our
      business.***





We
      have
      historically relied on access to credit facilities in order to fund operations
      and to service our and our parent company debt, and we expect such reliance
      to
      continue in the future. Our total potential borrowing availability under the
      Charter Operating credit facilities was approximately $900 million as of June
      30, 2006, none of which was limited by covenant restrictions. In
      the
      past, our actual availability under our credit facilities has been limited
      by
      covenant restrictions. There can be no assurance that our actual availability
      under our credit facilities will not be limited by covenant restrictions in
      the
      future. However, pro forma for the closing of the asset sales on July 1, 2006,
      and the related application of net proceeds to repay amounts outstanding under
      our revolving credit facility, potential






31




availability
      under our credit facilities as of June 30, 2006 would have been approximately
      $1.7 billion, although actual availability would have been limited to $1.3
      billion because of limits imposed by covenant restrictions.





An
      event
      of default under the credit facilities or indentures, if not waived, could
      result in the acceleration of those debt obligations and, consequently, our
      and
      our parent companies’ other debt obligations. Such acceleration could result in
      exercise of remedies by our creditors and could force us to seek the protection
      of the bankruptcy laws, which could materially adversely impact our ability
      to
      operate our business and to make payments under our debt instruments. In
      addition, an event of default under the credit facilities, such as the failure
      to maintain the applicable required financial ratios, would prevent additional
      borrowing under our credit facilities, which could materially adversely affect
      our ability to operate our business and to make payments under our and our
      parent companies’ debt instruments.





***Because
      of our holding company structure, our outstanding notes are structurally
      subordinated in right of payment to all liabilities of our subsidiaries.
      Restrictions in our subsidiaries’ debt instruments and under applicable law
      limit their ability to provide funds to us.***





Our
      sole
      assets are our equity interests in our subsidiaries. Our operating subsidiaries
      are separate and distinct legal entities and are not obligated to make funds
      available to us for payments on our notes or other obligations in the form
      of
      loans, distributions or otherwise. Our subsidiaries’ ability to make
      distributions to us is subject to their compliance with the terms of their
      credit facilities and indentures and restrictions under applicable law. Under
      the Delaware limited liability company act, our subsidiaries may only pay
      dividends to us if they have “surplus” as defined in the act. Under fraudulent
      transfer laws, our subsidiaries may not pay dividends to us if they are
      insolvent or are rendered insolvent thereby. While we believe that our
      subsidiaries currently have surplus and are not insolvent, there can be no
      assurance that our subsidiaries will be permitted to make distributions in
      the
      future in compliance with these restrictions in amounts needed to service our
      indebtedness. Our direct or indirect subsidiaries include the borrowers and
      guarantors under the Charter Operating credit facilities. Several of our
      subsidiaries are also obligors under other senior high yield notes. See “Item 2.
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations — Liquidity and Capital Resources — Debt Covenants.” Our notes are
      structurally subordinated in right of payment to all of the debt and other
      liabilities of our subsidiaries. As of June 30, 2006, our total debt was
      approximately $11.1 billion, of which approximately $9.0 billion was
      structurally senior to the CCH II notes.





In
      the
      event of bankruptcy, liquidation or dissolution of one or more of our
      subsidiaries, that subsidiary’s assets would first be applied to satisfy its own
      obligations, and following such payments, such subsidiary may not have
      sufficient assets remaining to make payments to us as an equity holder or
      otherwise. In that event:





·
            the
                lenders under Charter Operating’s credit facilities and the holders of our
                subsidiaries’ other debt instruments will have the right to be paid in
                full before us from any of our subsidiaries’ assets;
                and


·
            the
                holders of preferred membership interests in our subsidiary, CC VIII,
                would have a claim on a portion of its assets that may reduce the
                amounts
                available for repayment to holders of our outstanding notes.





In
      addition, our outstanding notes are unsecured and therefore will be effectively
      subordinated in right of payment to all existing and future secured debt we
      may
      incur to the extent of the value of the assets securing such debt.





***We
      and our parent companies have a significant amount of existing debt and may
      incur significant additional debt, including secured debt, in the future, which
      could adversely affect our***  ***and
      our parent companies’ financial health and our and their ability to react to
      changes in our business.***





We
      and
      our parent companies have a significant amount of debt and may (subject to
      applicable restrictions in their debt instruments) incur additional debt in
      the
      future. As of June 30, 2006, our total debt was approximately $11.1 billion,
      our
      member’s equity was approximately $2.6 billion and the deficiency of earnings to
      cover fixed charges for the three and six months ended June 30, 2006 was $99
      million and $321 million, respectively.





As
      of
      June 30, 2006, Charter had outstanding approximately $863 million aggregate
      principal amount of convertible notes. Charter will need to raise additional
      capital and/or receive distributions or payments from its subsidiaries in order
      to satisfy its debt obligations in 2009. However, because of its and our
      significant indebtedness, our and our parent companies’ ability to raise
      additional capital at reasonable rates or at all is uncertain, and our and
      our
      parent companies’ ability to make distributions or payments to our and their
      respective parent companies is subject to






32




availability
      of funds and restrictions under our and our subsidiaries’ applicable debt
      instruments. If we or our parent companies were to engage in a recapitalization
      or other similar transaction, our noteholders might not receive principal and
      interest to which they are contractually entitled.





Our
      and
      our parent companies’ significant amount of debt could have other important
      consequences. For example, the debt will or could:





·
            require
                us to dedicate a significant portion of our cash flow from operating
                activities to make payments on our and our parent companies’ debt, which
                will reduce our funds available for working capital, capital expenditures
                and other general corporate
                expenses;





·
            limit
                our flexibility in planning for, or reacting to, changes in our business,
                the cable and telecommunications industries and the economy at
                large;





·
            place
                us at a disadvantage as compared to our competitors that have
                proportionately less debt;





·
            make
                us vulnerable to interest rate increases, because a significant portion
                of
                our borrowings are, and will continue to be, at variable rates of
                interest;





·
            expose
                us to increased interest expense as we refinance existing lower interest
                rate instruments;





·
            adversely
                affect our relationship with customers and
                suppliers;





·
            limit
                our and our parent companies’ ability to borrow additional funds in the
                future, if we need them, due to applicable financial and restrictive
                covenants in our and our parent companies’ debt;
                and





·
            make
                it more difficult for us to satisfy our obligations to the holders
                of our
                notes and to the lenders under our credit facilities as well as our
                parent
                companies’ ability to satisfy their obligations to their
                noteholders.





A
      default
      by us or one of our parent companies under our or its debt obligations could
      result in the acceleration of those obligations and the obligations under our
      and our parent companies’ other notes. We and our parent companies may incur
      substantial additional debt in the future. If current debt levels increase,
      the
      related risks that we now face will intensify.





***The
      agreements and instruments governing our and our parent companies’ debt contain
      restrictions and limitations that could significantly affect our ability to
      operate our business, as well as significantly affect our and our parent
      companies’ liquidity.***





The
      Charter Operating credit facilities and the indentures governing our and our
      parent companies’ debt contain a number of significant covenants that could
      adversely affect our ability to operate our business, as well as significantly
      affect our and our parent companies’ liquidity, and therefore could adversely
      affect our results of operations. These covenants will restrict, among other
      things, our and our parent companies’ ability to:




·
              incur
                  additional debt;


·
            repurchase
                or redeem equity interests and
                debt;





·
            make
                certain investments or
                acquisitions;




·
              pay
                  dividends or make other
                  distributions;


·
            dispose
                of assets or merge;




·
              enter
                  into related party transactions


·
            grant
                liens and pledge assets.






33




Furthermore,
      Charter Operating’s credit facilities require our subsidiaries to, among other
      things, maintain specified financial ratios, meet specified financial tests
      and
      provide annual audited financial statements, with an unqualified opinion from
      our independent auditors. Charter Operating’s ability to comply with these
      provisions may be affected by events beyond our control.





The
      breach of any covenants or obligations in our or our parent companies’ foregoing
      indentures or credit facilities, not otherwise waived or amended, could result
      in a default under the applicable debt agreement or instrument and could trigger
      acceleration of the related debt, which in turn could trigger defaults under
      other agreements governing our and our parent companies’ long-term indebtedness.
      In addition, the secured lenders under the Charter Operating credit facilities
      and the holders of the Charter Operating senior second-lien notes could
      foreclose on their collateral, which includes equity interests in our
      subsidiaries, and exercise other rights of secured creditors. Any default under
      those credit facilities or the indentures governing our or our parent companies’
notes could adversely affect our growth, our financial condition and our results
      of operations and our ability to make payments on our notes and Charter
      Operating’s credit facilities and other debt of our subsidiaries.





***All
      of our and our parent companies’ outstanding debt is subject to change of
      control provisions. We and our parent companies may not have the ability to
      raise the funds necessary to fulfill our and our parent companies’ obligations
      under our and our parent companies’ indebtedness following a change of control,
      which would place us and our parent companies in default under the applicable
      debt instruments.***





We
      and
      our parent companies may not have the ability to raise the funds necessary
      to
      fulfill our obligations under our and our parent companies’ notes and our credit
      facilities following a change of control. Under the indentures governing our
      and
      our parent companies’ notes, upon the occurrence of specified change of control
      events, each such issuer is required to offer to repurchase all of its
      outstanding notes. However, we and our parent companies may not have sufficient
      funds at the time of the change of control event to make the required repurchase
      of the applicable notes and all of the notes issuers are limited in their
      ability to make distributions or other payments to their respective parent
      company to fund any required repurchase. In addition, a change of control under
      our credit facilities would result in a default under those credit facilities.
      Because such credit facilities and our subsidiaries’ notes are obligations of
      our subsidiaries, the credit facilities and our subsidiaries’ notes would have
      to be repaid by our subsidiaries before their assets could be available to
      us or
      our parent companies to repurchase our and our parent companies’ notes. Any
      failure to make or complete a change of control offer would place the applicable
      issuer or borrower in default under its notes. The failure of our subsidiaries
      to make a change of control offer or repay the amounts accelerated under their
      credit facilities would place them in default.





***Paul
      G. Allen and his affiliates are not obligated to purchase equity from,
      contribute to or loan funds to us or any of our parent
      companies.***





Paul
      G.
      Allen and his affiliates are not obligated to purchase equity from, contribute
      to or loan funds to us or any of our parent companies.





**Risks
      Related to Our Business**





***We
      operate in a very competitive business environment, which affects our ability
      to
      attract and retain customers and can adversely affect our business and
      operations. We have lost a significant number of video customers to direct
      broadcast satellite competition and further loss of video customers could have
      a
      material negative impact on our business.***





The
      industry in which we operate is highly competitive and has become more so in
      recent years. In some instances, we compete against companies with fewer
      regulatory burdens, easier access to financing, greater personnel resources,
      greater brand name recognition and long-established relationships with
      regulatory authorities and customers. Increasing consolidation in the cable
      industry and the repeal of certain ownership rules may provide additional
      benefits to certain of our competitors, either through access to financing,
      resources or efficiencies of scale.





Our
      principal competitor for video services throughout our territory is direct
      broadcast satellite (“DBS”). Competition from DBS, including intensive marketing
      efforts and aggressive pricing has had an adverse impact on our ability to
      retain customers. DBS has grown rapidly over the last several years and
      continues to do so. The cable industry, including us, has lost a significant
      number of subscribers to DBS competition, and we face serious






34




challenges
      in this area in the future. We believe that competition from DBS service
      providers may present greater challenges in areas of lower population density,
      and that our systems service a higher concentration of such areas than those
      of
      other major cable service providers.





Local
      telephone companies and electric utilities can offer video and other services
      in
      competition with us and they increasingly may do so in the future. Certain
      telephone companies have begun more extensive deployment of fiber in their
      networks that enable them to begin providing video services, as well as
      telephone and high bandwidth Internet access services, to residential and
      business customers and they are now offering such service in limited areas.
      Some
      of these telephone companies have obtained, and are now seeking, franchises
      or
      operating authorizations that are less burdensome than existing Charter
      franchises.





The
      subscription television industry also faces competition from free broadcast
      television and from other communications and entertainment media. Further loss
      of customers to DBS or other alternative video and Internet services could
      have
      a material negative impact on the value of our business and its performance.





With
      respect to our Internet access services, we face competition, including
      intensive marketing efforts and aggressive pricing, from telephone companies
      and
      other providers of DSL and “dial-up”. DSL service is competitive with high-speed
      Internet service over cable systems. In addition, DBS providers have entered
      into joint marketing arrangements with Internet access providers to offer
      bundled video and Internet service, which competes with our ability to provide
      bundled services to our customers. Moreover, as we expand our telephone
      offerings, we will face considerable competition from established telephone
      companies and other carriers, including VoIP providers.





In
      order
      to attract new customers, from time to time we make promotional offers,
      including offers of temporarily reduced-price or free service. These promotional
      programs result in significant advertising, programming and operating expenses,
      and also require us to make capital expenditures to acquire additional digital
      set-top terminals. Customers who subscribe to our services as a result of these
      offerings may not remain customers for any significant period of time following
      the end of the promotional period. A failure to retain existing customers and
      customers added through promotional offerings or to collect the amounts they
      owe
      us could have a material adverse effect on our business and financial results.





Mergers,
      joint ventures and alliances among franchised, wireless or private cable
      operators, satellite television providers, local exchange carriers and others,
      may provide additional benefits to some of our competitors, either through
      access to financing, resources or efficiencies of scale, or the ability to
      provide multiple services in direct competition with us.





We
      cannot
      assure you that our cable systems will allow us to compete effectively.
      Additionally, as we expand our offerings to include other telecommunications
      services, and to introduce new and enhanced services, we will be subject to
      competition from other providers of the services we offer. We cannot predict
      the
      extent to which competition may affect our business and operations in the
      future.





***We
      have a history of net losses and expect to continue to experience net losses.
      Consequently, we may not have the ability to finance future
      operations.***





We
      have
      had a history of net losses and expect to continue to report net losses for
      the
      foreseeable future. Our net losses are principally attributable to insufficient
      revenue to cover the combination of operating costs and interest costs we incur
      because of our debt and the depreciation expenses that we incur resulting from
      the capital investments we have made in our cable properties. We expect that
      these expenses will remain significant, and we expect to continue to report
      net
      losses for the foreseeable future. We reported net losses of $107 million and
      $87 million for the three months ended June 30, 2006 and 2005, respectively,
      and
      $335 million and $220 million for the six months ended June 30, 2006 and 2005,
      respectively. Continued losses would reduce our cash available from operations
      to service our indebtedness, as well as limit our ability to finance our
      operations.





***We
      may not have the ability to pass our increasing programming costs on to our
      customers, which would adversely affect our cash flow and operating
      margins.***





Programming
      has been, and is expected to continue to be, our largest operating expense
      item.
      In recent years, the cable industry has experienced a rapid escalation in the
      cost of programming, particularly sports programming. We






35




expect
      programming costs to continue to increase because of a variety of factors,
      including inflationary or negotiated annual increases, additional programming
      being provided to customers and increased costs to purchase programming. The
      inability to fully pass these programming cost increases on to our customers
      has
      had an adverse impact on our cash flow and operating margins. As measured by
      programming costs, and excluding premium services (substantially all of which
      were renegotiated and renewed in 2003), as of July 7, 2006, approximately 11%
      of
      our current programming contracts were expired, and approximately another 4%
      were scheduled to expire at or before the end of 2006. There can be no assurance
      that these agreements will be renewed on favorable or comparable terms. Our
      programming costs increased by approximately 13% and 11% in the three and six
      months ended June 30, 2006 compared to the corresponding periods in 2005,
      respectively. We expect our programming costs in 2006 to continue to increase
      at
      a higher rate than in 2005. To the extent that we are unable to reach agreement
      with certain programmers on terms that we believe are reasonable we may be
      forced to remove such programming channels from our line-up, which could result
      in a further loss of customers.





***If
      our required capital expenditures*** ***in 2006 and 2007*** ***exceed our projections, we may not have sufficient funding, which could
      adversely affect our growth, financial condition and results of
      operations.***





During
      the three and six months ended June 30, 2006, we spent approximately $298
      million and $539 million, respectively, on capital expenditures. During 2006,
      we
      expect capital expenditures to be approximately $1.0 billion to $1.1 billion.
      The actual amount of our capital expenditures depends on the level of growth
      in
      high-speed Internet and telephone customers and in the delivery of other
      advanced services, as well as the cost of introducing any new services. We
      may
      need additional capital in
      2006
      and 2007 if
      there
      is accelerated growth in high-speed Internet customers, telephone customers
      or
      in the delivery of other advanced services. If we cannot obtain such capital
      from increases in our cash flow from operating activities, additional
      borrowings, proceeds from asset sales or other sources, our growth, financial
      condition and results of operations could suffer materially.





***Our
      inability to respond to technological developments and meet customer demand
      for
      new products and services could limit our ability to compete
      effectively.***





Our
      business is characterized by rapid technological change and the introduction
      of
      new products and services. We cannot assure you that we will be able to fund
      the
      capital expenditures necessary to keep pace with unanticipated technological
      developments, or that we will successfully anticipate the demand of our
      customers for products and services requiring new technology. Our inability
      to
      maintain and expand our upgraded systems and provide advanced services in a
      timely manner, or to anticipate the demands of the marketplace, could materially
      adversely affect our ability to attract and retain customers. Consequently,
      our
      growth, financial condition and results of operations could suffer materially.





***Malicious
      and abusive Internet practices could impair our high-speed Internet
      services.***





Our
      high-speed Internet customers utilize our network to access the Internet and,
      as
      a consequence, we or they may become victim to common malicious and abusive
      Internet activities, such as unsolicited mass advertising (i.e., “spam”) and
      dissemination of viruses, worms and other destructive or disruptive software.
      These activities could have adverse consequences on our network and our
      customers, including degradation of service, excessive call volume to call
      centers and damage to our or our customers’ equipment and data. Significant
      incidents could lead to customer dissatisfaction and, ultimately, loss of
      customers or revenue, in addition to increased costs to us to service our
      customers and protect our network. Any significant loss of high-speed Internet
      customers or revenue or significant increase in costs of serving those customers
      could adversely affect our growth, financial condition and results of
      operations.





**Risks
      Related to Mr. Allen’s Controlling Position**





***The
      failure by Mr. Allen to maintain a minimum voting and economic interest in
      us
      could trigger a change of control default under our subsidiary’s credit
      facilities.***





The
      Charter Operating credit facilities provide that the failure by (a) Mr. Allen,
      (b) his estate, spouse, immediate family members and heirs and (c) any trust,
      corporation, partnership or other entity, the beneficiaries, stockholders,
      partners or other owners of which consist exclusively of Mr. Allen or such
      other
      persons referred to in (b) above or a combination thereof, to maintain a 35%
      direct or indirect voting interest in the applicable borrower would result
      in a






36




change
      of
      control default. Such a default could result in the acceleration of repayment
      of
      our and our subsidiaries’ indebtedness, including borrowings under the Charter
      Operating credit facilities.





***Mr.
      Allen controls us and may have interests that conflict with your
      interests.***





Mr.
      Allen
      has the ability to control us. Through his control as of June 30, 2006 of
      approximately 90% of the voting power of the capital stock of our manager,
      Charter, Mr. Allen is entitled to elect all but one of Charter’s board members
      and effectively has the voting power to elect the remaining board member as
      well. Mr. Allen thus has the ability to control fundamental corporate
      transactions requiring equity holder approval, including, but not limited to,
      the election of all of Charter’s directors, approval of merger transactions
      involving us and the sale of all or substantially all of our assets.





Mr.
      Allen
      is not restricted from investing in, and has invested in, and engaged in, other
      businesses involving or related to the operation of cable television systems,
      video programming, high-speed Internet service, telephone or business and
      financial transactions conducted through broadband interactivity and Internet
      services. Mr. Allen may also engage in other businesses that compete or may
      in
      the future compete with us.





Mr.
      Allen’s control over our management and affairs could create conflicts of
      interest if he is faced with decisions that could have different implications
      for him, us and the holders of our notes. Further, Mr. Allen could effectively
      cause us to enter into contracts with another entity in which he owns an
      interest or to decline a transaction into which he (or another entity in which
      he owns an interest) ultimately enters.





Current
      and future agreements between us and either Mr. Allen or his affiliates may
      not
      be the result of arm’s-length negotiations. Consequently, such agreements may be
      less favorable to us than agreements that we could otherwise have entered into
      with unaffiliated third parties.





***We
      are not permitted to engage in any business activity other than the cable
      transmission of video, audio and data unless Mr. Allen authorizes us to pursue
      that particular business activity, which could adversely affect our ability
      to
      offer new products and services outside of the cable transmission business
      and
      to enter into new businesses, and could adversely affect our growth, financial
      condition and results of operations.***





Charter’s
      certificate of incorporation and Charter Holdco’s limited liability company
      agreement provide that Charter and Charter Holdco and their subsidiaries,
      including us, cannot engage in any business activity outside the cable
      transmission business except for specified businesses. This will be the case
      unless Mr. Allen consents to our engaging in the business activity. The cable
      transmission business means the business of transmitting video, audio (including
      telephone services), and data over cable television systems owned, operated
      or
      managed by us from time to time. These provisions may limit our ability to
      take
      advantage of attractive business opportunities.





***The
      loss of Mr. Allen’s services could adversely affect our ability to manage our
      business.***





Mr.
      Allen
      is Chairman of Charter’s board of directors and provides strategic guidance and
      other services to Charter. If Charter were to lose his services, our growth,
      financial condition and results of operations could be adversely impacted.





**Risks
      Related to Regulatory and Legislative Matters**





***Our
      business is subject to extensive governmental legislation and regulation, which
      could adversely affect our business.***





Regulation
      of the cable industry has increased cable operators’ administrative and
      operational expenses and limited their revenues. Cable operators are subject
      to,
      among other things:





·
            rules
                governing the provision of cable equipment and compatibility with
                new
                digital technologies;





·
            rules
                and regulations relating to subscriber
                privacy;





·
            limited
                rate regulation;





37




·
              requirements
                  governing when a cable system must carry a particular broadcast
                  station
                  and when it must first obtain consent to carry a broadcast
                  station;
  ·
              rules
                    and regulations relating to provision of voice
                    communications;
 
 ·
              rules
                    for franchise renewals and transfers;
                    and


·
            other
                  requirements covering a variety of operational areas such as equal
                  employment opportunity, technical standards and customer service
                  requirements.





Additionally,
      many aspects of these regulations are currently the subject of judicial
      proceedings and administrative or legislative proposals. There are also ongoing
      efforts to amend or expand the federal, state and local regulation of some
      of
      our cable systems, which may compound the regulatory risks we already face.
      Certain states and localities are considering new telecommunications taxes
      that
      could increase operating expenses.





***Our
      cable systems are operated under franchises that are non-exclusive. Accordingly,
      local franchising authorities can grant additional franchises and create
      competition in market areas where none existed previously, resulting in
      overbuilds, which could adversely affect results of
      operations.***





Our
      cable
      systems are operated under non-exclusive franchises granted by local franchising
      authorities. Consequently, local franchising authorities can grant additional
      franchises to competitors in the same geographic area or operate their own
      cable
      systems.  In addition, certain telephone companies are seeking authority to
      operate in local communities without first obtaining a local franchise.  As
      a result, competing operators may build systems in areas in which we hold
      franchises.  In some cases municipal utilities may legally compete with us
      without obtaining a franchise from the local franchising authority.





Different
      legislative proposals have been introduced in the United States Congress and
      in
      some state legislatures that would greatly streamline cable franchising. 
This legislation is intended to facilitate entry by new competitors,
      particularly local telephone companies.  Such legislation has passed in at
      least five states in which we have operations and one of these newly enacted
      statutes is subject to court challenge.  Although various legislative
      proposals provide some regulatory relief for incumbent cable operators, these
      proposals are generally viewed as being more favorable to new entrants due
      to a
      number of factors, including provisions withholding streamlined cable
      franchising from incumbents until after the expiration of their existing
      franchises.  To the extent incumbent cable operators are not able to avail
      themselves of this streamlined franchising process, such operators may continue
      to be subject to more onerous franchise requirements at the local level than
      new
      entrants.  A proceeding is pending at the Federal Communications Commission
      ("FCC'') to determine whether local franchising authorities are impeding the
      deployment of competitive cable services through unreasonable franchising
      requirements and whether such impediments should be preempted.  We are not
      yet able to determine what impact such proceeding may have on us.





The
      existence of more than one cable system operating in the same territory is
      referred to as an overbuild.  These overbuilds could adversely affect our
      growth, financial condition and results of operations by creating or increasing
      competition.  As of June 30, 2006, we are aware of overbuild situations
      impacting approximately 8% of our estimated homes passed, and potential
      overbuild situations in areas servicing approximately an additional 5% of our
      estimated homes passed.  Additional overbuild situations may occur in other
      systems.





***Local
      franchise authorities have the ability to impose additional regulatory
      constraints on our business, which could further increase our
      expenses.***





In
      addition to the franchise agreement, cable authorities in some jurisdictions
      have adopted cable regulatory ordinances that further regulate the operation
      of
      cable systems.  This additional regulation increases the cost of operating
      our business.  We cannot assure you that the local franchising authorities
      will not impose new and more restrictive requirements.  Local franchising
      authorities also generally have the power to reduce rates and order refunds
      on
      the rates charged for basic services.





***Further
      regulation of the cable industry could cause us to delay or cancel service
      or
      programming enhancements or impair our ability to raise rates to cover our
      increasing costs, resulting in increased losses.***






38





Currently,
      rate regulation is strictly limited to the basic service tier and associated
      equipment and installation activities.  However, the FCC and the U.S.
      Congress continue to be concerned that cable rate increases are exceeding
      inflation.  It is possible that either the FCC or the U.S. Congress will
      again restrict the ability of cable system operators to implement rate
      increases.  Should this occur, it would impede our ability to raise our
      rates.  If we are unable to raise our rates in response to increasing
      costs, our losses would increase.





There
      has
      been considerable legislative and regulatory interest in requiring cable
      operators to offer historically bundled programming services on an á la carte
      basis or to at least offer a separately available child-friendly “Family
      Tier.”  It is possible that new marketing restrictions could be adopted in
      the future.  Such restrictions could adversely affect our operations.





***Actions
      by pole owners might subject us to significantly increased pole attachment
      costs.***





Pole
      attachments are cable wires that are attached to poles.  Cable system
      attachments to public utility poles historically have been regulated at the
      federal or state level, generally resulting in favorable pole attachment rates
      for attachments used to provide cable service.  The FCC clarified that a
      cable operator’s favorable pole rates are not endangered by the provision of
      Internet access, and that approach ultimately was upheld by the Supreme Court
      of
      the United States.  Despite the existing regulatory regime, utility pole
      owners in many areas are attempting to raise pole attachment fees and impose
      additional costs on cable operators and others.  The favorable pole
      attachment rates afforded cable operators under federal law can be increased
      by
      utility companies if the operator provides telecommunications services, in
      addition to cable service, over cable wires attached to utility poles.  To
      date, Voice over Internet Protocol or VoIP service has not been classified
      as
      either a telecommunications service or cable service under the Communications
      Act.  If VoIP were classified as a telecommunications service under the
      Communications Act by the FCC, a state Public Utility Commission, or an
      appropriate court, it might result in significantly increased pole attachment
      costs for us, which could adversely affect our financial condition and results
      of operations.  Any significant increased costs could have a material
      adverse impact on our profitability and discourage system upgrades and the
      introduction of new products and services.





***We
      may be required to provide access to our networks to other Internet service
      providers or restrictions could be imposed on our ability to manage our
      broadband infrastructure, either of which could significantly increase our
      competition and adversely affect our ability to provide new products and
      services.***





A
      number
      of companies, including independent Internet service providers, or ISPs, have
      requested local authorities and the FCC to require cable operators to provide
      non-discriminatory access to cable’s broadband infrastructure, so that these
      companies may deliver Internet services directly to customers over cable
      facilities.  In a June 2005 ruling, commonly referred to as *Brand
      X* ,
      the
      Supreme Court upheld an FCC decision (and overruled a conflicting Ninth Circuit
      opinion) making it less likely that any nondiscriminatory “open access”
requirements (which are generally associated with common carrier regulation
      of
“telecommunications services”) will be imposed on the cable industry by local,
      state or federal authorities.  The Supreme Court held that the FCC was
      correct in classifying cable provided Internet service as an “information
      service,” rather than a “telecommunications service.” Notwithstanding *Brand
      X* ,
      there
      has been increasing advocacy by certain internet content providers and consumer
      groups for new federal laws or regulations to limiting the ability of broadband
      network owners (like Charter) to manage and control their own networks. 
The proposals might prevent network owners, for example, from charging bandwidth
      intensive content providers, such as certain online gaming, music, and video
      service providers, an additional fee to ensure quality delivery of the services
      to consumers.  If we were required to allocate a portion of our bandwidth
      capacity to other Internet service providers, or were prohibited from charging
      heavy bandwidth intensive services a fee for use of our networks, we believe
      that it could impair our ability to use our bandwidth in ways that would
      generate maximum revenues.





If
      we
      were required to allocate a portion of our bandwidth capacity to other Internet
      service providers, or were prohibited from charging heavy bandwidth intensive
      services a fee for use of our networks, we believe that it would impair our
      ability to use our bandwidth in ways that would generate maximum revenues.





***Changes
      in channel carriage regulations could impose significant additional costs on
      us.***





Cable
      operators also face significant regulation of their channel carriage.  They
      currently can be required to devote substantial capacity to the carriage of
      programming that they would not carry voluntarily, including certain local
      broadcast signals, local public, educational and government access programming,
      and unaffiliated commercial






39




leased
      access programming.  This carriage burden could increase in the future,
      particularly if cable systems were required to carry both the analog and digital
      versions of local broadcast signals (dual carriage) or to carry multiple program
      streams included with a single digital broadcast transmission (multicast
      carriage).  Additional government-mandated broadcast carriage obligations
      could disrupt existing programming commitments, interfere with our preferred
      use
      of limited channel capacity and limit our ability to offer services that would
      maximize customer appeal and revenue potential.  Although the FCC issued a
      decision in February 2005, confirming an earlier ruling against mandating either
      dual carriage or multicast carriage, that decision has been appealed.  In
      addition, the FCC could reverse its own ruling or Congress could legislate
      additional carriage obligations.





***Offering
      voice communications service may subject us to additional regulatory burdens,
      causing us to incur additional costs.***





In
      2002,
      we began to offer voice communications services on a limited basis over our
      broadband network.  We continue to develop and deploy Voice over Internet
      Protocol or VoIP services.  The FCC has declared that certain VoIP services
      are not subject to traditional state public utility regulation.  The full
      extent of the FCC preemption of state and local regulation of VoIP services
      is
      not yet clear. Expanding our offering of these services may require us to obtain
      certain authorizations, including federal and state licenses.  We may not
      be able to obtain such authorizations in a timely manner, or conditions could
      be
      imposed upon such licenses or authorizations that may not be favorable to
      us.  The FCC has extended certain traditional telecommunications
      requirements, such as E911 and Universal Service requirements, to many VoIP
      providers, such as Charter.  The FCC has also required that these VoIP
      providers comply with obligations applied to traditional telecommunications
      carriers to ensure their networks can accommodate law enforcement wiretaps
      by
      May 2007.  Telecommunications companies generally are subject to other
      significant regulation which could also be extended to VoIP providers.  If
      additional telecommunications regulations are applied to our VoIP service,
      it
      could cause us to incur additional costs.





**Item
      6.****Exhibits.**





The
      index
      to the exhibits begins on page 42 of this quarterly report.







40


**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, CCH
      II,
      LLC and CCH II Capital Corp. have duly caused this quarterly report to be signed
      on their behalf by the undersigned, thereunto duly authorized.





CCH
      II,
      LLC


Registrant


By:
      CHARTER COMMUNICATIONS, INC., Sole Manager





Dated:
      August 10, 2006  By: /s/
      Kevin D. Howard


Name:
      Kevin D. Howard


Title: *Vice
      President and*


*Chief
      Accounting Officer*



















CCH
      II
      CAPITAL CORP.


Registrant




Dated:
        August 10, 2006  By: /s/
        Kevin D. Howard
 Name:
        Kevin D. Howard
 Title: *Vice
        President and*
 *Chief
        Accounting Officer*




41


**EXHIBIT
      INDEX**








Exhibit
              Number
            Description
                of Document3.1
            Certificate
                of Formation of CCH II, LLC (incorporated by reference to Exhibit 3.1
                to Amendment No. 1 to the registration statement on Form S-4 of CCH
                II, LLC and CCH II Capital Corporation filed on March 24, 2004 (File
                No.
                333-111423)).3.2
            Amended
                and Restated Limited Liability Company Agreement of CCH II, LLC,
                dated as
                of July 10, 2003 (incorporated by reference to Exhibit 3.2 to
                Amendment No. 1 to the registration statement on Form S-4 of CCH II,
                LLC and CCH II Capital Corporation filed on March 24, 2004 (File
                No.
                333-111423)).3.3
            Certificate
                of Incorporation of CCH II Capital Corporation (incorporated by reference
                to Exhibit 3.3 to Amendment No. 1 to the registration statement on
                Form S-4 of CCH II, LLC and CCH II Capital Corporation filed on March
                24, 2004 (File No. 333-111423)).3.4
            Amended
                and Reinstated By-laws of CCH II Capital Corporation (incorporated
                by
                reference to Exhibit 3.4 to Amendment No. 1 to the registration
                statement on Form S-4 of CCH II, LLC and CCH II Capital Corporation
                filed on March 24, 2004 (File No. 333-111423)).10.1
            Amended
                and Restated Credit Agreement, dated as of April 28, 2006, among
                Charter
                Communications Operating, LLC, CCO Holdings, LLC, the lenders from
                time to
                time parties thereto and JPMorgan Chase Bank, N.A., as administrative
                agent (incorporated by referenceto
                Exhibit 10.1 on the current report on Form 8-K of Charter Communications,
                Inc. filed April 28, 2006 (File No. 000-27927)).10.2+
            Charter
                Communications, Inc. 2005 Executive Cash Award Plan, amended for
                2006
                (incorporated by reference to Exhibit 10.1 on the current report
                on Form
                8-K of Charter Communications, Inc. filed April 17, 2006 (File No.
                000-27927)).31.1*
            Certificate
                of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a)
                under
                the Securities Exchange Act of 1934.31.2*
            Certificate
                of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a)
                under
                the Securities Exchange Act of 1934.32.1*
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer).32.2*
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer).





*
      Document attached





+
      Management compensatory plan or arrangement





42