##### Table of Contents

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
|- | -------------------------------------------------------------------------------

For the transition period from                      to

Commission file
number 333-115602



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Grande Communications Holdings, Inc.

(Exact name of registrant as specified in its charter)



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|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|Delaware                                                      |  | 74-3005133                            
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification Number)
|                                                              | 
|401 Carlson Circle, San Marcos, TX                            |  | 78666                                 
|(Address of principal executive offices)                      |  | (Zip Code)                            

Registrants telephone number including area code: (512) 878-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days:    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer ̈Accelerated
filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x

The number of shares of the registrants Common Stock outstanding as of March 31, 2006 was 13,002,815.



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##### Table of Contents

GRANDE COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY

Index



|           |  |                                                                                       |  |         
|---------- |  | ------------------------------------------------------------------------------------- |  | --------
|           |  |                                                                                       |  | Page No.
|Part I.    |  | Financial Information                                                                 |  | 1       
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  | 1       
|           |  | Condensed Consolidated Balance Sheets                                                 |  | 1       
|           |  | Condensed Consolidated Statements of Operations                                       |  | 2       
|           |  | Condensed Consolidated Statements of Cash Flows                                       |  | 3       
|           |  | Notes to Condensed Consolidated Financial Statements                                  |  | 4       
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 7       
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 19      
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 19      
|           |  |                                                                                      
|Part II.   |  | Other Information                                                                     |  | 20      
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 20      
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  | 20      
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 20      
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 20      
|           | 
|Signatures |  | 21                                                                                   



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##### Table of Contents

PART I

FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

GRANDE COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------------- | - | -------- | -
|                                                                                                                                                                                                        |  | December 31,2005 |          |   | March 31,2006 |  
|                                                                                                                                                                                                        |  |                  |          |   | (unaudited)   |  
|Assets                                                                                                                                                                                                  |  |                  |          |   |               |   |          |  
|Current assets:                                                                                                                                                                                         |  |                  |          |   |               |   |          |  
|Cash and cash equivalents                                                                                                                                                                               |  | $                | 26,719   |   |               | $ | 55,516   |  
|Investments                                                                                                                                                                                             |  |                  | 350      |   |               |   | 350      |  
|Accounts receivable, net                                                                                                                                                                                |  |                  | 18,884   |   |               |   | 16,492   |  
|Prepaid expenses and other current assets                                                                                                                                                               |  |                  | 1,973    |   |               |   | 3,362    |  
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|Total current assets                                                                                                                                                                                    |  |                  | 47,926   |   |               |   | 75,720   |  
|Property, plant and equipment, net                                                                                                                                                                      |  |                  | 297,183  |   |               |   | 290,134  |  
|Goodwill                                                                                                                                                                                                |  |                  | 93,639   |   |               |   | 93,639   |  
|Other intangible assets, net                                                                                                                                                                            |  |                  | 1,963    |   |               |   | 1,892    |  
|Debt issue costs, net                                                                                                                                                                                   |  |                  | 5,970    |   |               |   | 5,784    |  
|Other assets                                                                                                                                                                                            |  |                  | 3,857    |   |               |   | 3,682    |  
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|Total assets                                                                                                                                                                                            |  | $                | 450,538  |   |               | $ | 470,851  |  
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|Liabilities and stockholders equity                                                                                                                                                                    |  |                  |          |   |               |   |          |  
|Current liabilities:                                                                                                                                                                                    |  |                  |          |   |               |   |          |  
|Accounts payable                                                                                                                                                                                        |  | $                | 14,232   |   |               | $ | 10,672   |  
|Accrued expenses                                                                                                                                                                                        |  |                  | 20,333   |   |               |   | 23,436   |  
|Note payable                                                                                                                                                                                            |  |                  | 8        |   |               |   | 8        |  
|Deferred revenue                                                                                                                                                                                        |  |                  | 6,006    |   |               |   | 5,891    |  
|Current portion of capital lease obligations                                                                                                                                                            |  |                  | 973      |   |               |   | 987      |  
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|Total current liabilities                                                                                                                                                                               |  |                  | 41,552   |   |               |   | 40,994   |  
|Deferred rent                                                                                                                                                                                           |  |                  | 984      |   |               |   | 941      |  
|Deferred revenue                                                                                                                                                                                        |  |                  | 4,374    |   |               |   | 4,233    |  
|Capital lease obligations, net of current portion                                                                                                                                                       |  |                  | 14,365   |   |               |   | 14,159   |  
|Long term debt                                                                                                                                                                                          |  |                  | 129,056  |   |               |   | 159,916  |  
|Commitments and contingencies                                                                                                                                                                           |  |                  |          |   |               |   |          |  
|Stockholders equity:                                                                                                                                                                                   |  |                  |          |   |               |   |          |  
|Series A preferred stock, $0.001 par value per share; 232,617,839 shares authorized, issued and outstanding; liquidation preference of
$232,618                                                         |  |                  | 233      |   |               |   | 233      |  
|Series B preferred stock, $0.001 par value per share; 20,833,333 shares authorized, issued and outstanding; liquidation preference of
$25,000                                                           |  |                  | 21       |   |               |   | 21       |  
|Series C preferred stock, $0.001 par value per share; 30,000,000 shares authorized, 17,005,191 shares issued and outstanding; liquidation
preference of $20,406                                         |  |                  | 17       |   |               |   | 17       |  
|Series D preferred stock, $0.001 par value per share; 115,384,615 shares authorized, 114,698,442 shares issued and outstanding; liquidation
preference of $149,108                                      |  |                  | 115      |   |               |   | 115      |  
|Series E preferred stock, $0.001 par value per share; 8,000,000 shares authorized, 7,999,099 shares issued and outstanding; liquidation
preference of $19,998                                           |  |                  | 8        |   |               |   | 8        |  
|Series F preferred stock, $0.001 par value per share; 12,307,792 shares authorized, 11,758,278 shares issued and outstanding; liquidation
preference of $15,286                                         |  |                  | 12       |   |               |   | 12       |  
|Series G preferred stock, $0.001 par value per share; 34,615,384 shares authorized, 34,615,330 shares issued and outstanding; liquidation
preference of $135,000                                        |  |                  | 35       |   |               |   | 35       |  
|Common stock, $0.001 par value per share; 786,835,883 and 828,835,883 shares authorized, 12,989,965 and 13,002,815 shares issued and
outstanding, at December 31, 2005 and March 31, 2006, respectively |  |                  | 13       |   |               |   | 13       |  
|Additional paid-in capital                                                                                                                                                                              |  |                  | 508,346  |   |               |   | 508,383  |  
|Treasury stock, at cost                                                                                                                                                                                 |  |                  | (5       | ) |               |   | (5       | )
|Accumulated deficit                                                                                                                                                                                     |  |                  | (248,588 | ) |               |   | (258,224 | )
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|Total stockholders equity                                                                                                                                                                              |  |                  | 260,207  |   |               |   | 250,608  |  
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  
|Total liabilities and stockholders equity                                                                                                                                                              |  | $                | 450,538  |   |               | $ | 470,851  |  
|                                                                                                                                                                                                        |  |                  |          |   |               |   |          |  

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



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##### Table of Contents

GRANDE COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In
thousands, except per share data)



|                                                                                                                                 |  |                             |         |   |      |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                                                                 |  | Three Months EndedMarch 31, |        
|                                                                                                                                 |  | 2005                        |         |   | 2006 |  
|Operating revenues                                                                                                               |  | $                           | 48,460  |   |      | $ | 47,636 |  
|Operating expenses:                                                                                                              |  |                             |         |   |      |   |        |  
|Cost of revenues (excluding depreciation and amortization)                                                                       |  |                             | 18,207  |   |      |   | 16,525 |  
|Selling, general and administrative (includes $33 of stock-based compensation expense for the three months ended March 31,
2006) |  |                             | 23,525  |   |      |   | 23,772 |  
|Depreciation and amortization                                                                                                    |  |                             | 14,527  |   |      |   | 13,882 |  
|                                                                                                                                 |  |                             |         |   |      |   |        |  
|Total operating expenses                                                                                                         |  |                             | 56,259  |   |      |   | 54,179 |  
|                                                                                                                                 |  |                             |         |   |      |   |        |  
|Operating loss                                                                                                                   |  |                             | (7,799  | ) |      |   | (6,543 | )
|Other income (expense):                                                                                                          |  |                             |         |   |      |   |        |  
|Interest income                                                                                                                  |  |                             | 315     |   |      |   | 141    |  
|Interest expense                                                                                                                 |  |                             | (4,743  | ) |      |   | (5,106 | )
|Gain on sale of assets                                                                                                           |  |                             | 72      |   |      |   | 1,872  |  
|                                                                                                                                 |  |                             |         |   |      |   |        |  
|Total other income (expense)                                                                                                     |  |                             | (4,356  | ) |      |   | (3,093 | )
|                                                                                                                                 |  |                             |         |   |      |   |        |  
|Net loss                                                                                                                         |  | $                           | (12,155 | ) |      | $ | (9,636 | )
|                                                                                                                                 |  |                             |         |   |      |   |        |  
|Basic and diluted net loss per share                                                                                             |  | $                           | (0.98   | ) |      | $ | (0.77  | )
|Basic and diluted weighted average number of common shares outstanding                                                           |  |                             | 12,422  |   |      |   | 12,497 |  

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



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GRANDE COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In
thousands)



|                                                                               |  |                             |         |   |      |   |        |  
|------------------------------------------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                               |  | Three Months EndedMarch 31, |        
|                                                                               |  | 2005                        |         |   | 2006 |  
|Cash flows from operating activities:                                          |  |                             |         |   |      |   |        |  
|Net loss                                                                       |  | $                           | (12,155 | ) |      | $ | (9,636 | )
|Adjustment to reconcile net loss to net cash provided by operating activities: |  |                             |         |   |      |   |        |  
|Depreciation                                                                   |  |                             | 13,474  |   |      |   | 13,807 |  
|Amortization of intangible assets                                              |  |                             | 1,053   |   |      |   | 75     |  
|Amortization of deferred financing costs                                       |  |                             | 244     |   |      |   | 245    |  
|Provision for bad debts                                                        |  |                             | 1,109   |   |      |   | 944    |  
|Accretion of debt discount                                                     |  |                             | 192     |   |      |   | 222    |  
|Non-cash stock-based compensation                                              |  |                             | 6       |   |      |   | 33     |  
|Gain on sale of assets                                                         |  |                             | (72     | ) |      |   | (1,872 | )
|Changes in operating assets and liabilities, net of business acquisitions:     |  |                             |         |   |      |   |        |  
|Accounts receivable, net                                                       |  |                             | (442    | ) |      |   | 1,448  |  
|Prepaid expenses and other current assets                                      |  |                             | (1,021  | ) |      |   | (1,215 | )
|Accounts payable                                                               |  |                             | 1,596   |   |      |   | (2,291 | )
|Accrued expenses                                                               |  |                             | 68      |   |      |   | 3,103  |  
|Deferred revenue                                                               |  |                             | (47     | ) |      |   | (243   | )
|Deferred rent                                                                  |  |                             | 103     |   |      |   | (43    | )
|                                                                               |  |                             |         |   |      |   |        |  
|Net cash provided by operating activities                                      |  |                             | 4,108   |   |      |   | 4,577  |  
|                                                                               |  |                             |         |   |      |   |        |  
|Cash flows from investing activities:                                          |  |                             |         |   |      |   |        |  
|Net maturities of short-term investments                                       |  |                             | 5,000   |   |      |   |       |  
|Purchases of property, plant and equipment                                     |  |                             | (15,629 | ) |      |   | (7,311 | )
|Purchase price adjustments                                                     |  |                             | (75     | ) |      |   |       |  
|Purchase of franchise rights and other                                         |  |                             | (445    | ) |      |   | (4     | )
|Sale of assets                                                                 |  |                             | 469     |   |      |   | 2,452  |  
|                                                                               |  |                             |         |   |      |   |        |  
|Net cash used in investing activities                                          |  |                             | (10,680 | ) |      |   | (4,863 | )
|                                                                               |  |                             |         |   |      |   |        |  
|Cash flows from financing activities:                                          |  |                             |         |   |      |   |        |  
|Proceeds from borrowings and promissory notes                                  |  |                             |        |   |      |   | 30,581 |  
|Payments of long-term debt                                                     |  |                             | (166    | ) |      |   | (231   | )
|Deferred financing costs                                                       |  |                             | 6       |   |      |   |       |  
|Net borrowings (repayments) on zero-balance cash account                       |  |                             | (258    | ) |      |   | (1,270 | )
|Proceeds from issuance of common stock                                         |  |                             | 3       |   |      |   | 3      |  
|                                                                               |  |                             |         |   |      |   |        |  
|Net cash (used in) provided by financing activities                            |  |                             | (415    | ) |      |   | 29,083 |  
|                                                                               |  |                             |         |   |      |   |        |  
|Net change in cash and cash equivalents                                        |  |                             | (6,987  | ) |      |   | 28,797 |  
|Cash and cash equivalents, beginning of period                                 |  |                             | 41,195  |   |      |   | 26,719 |  
|                                                                               |  |                             |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                       |  | $                           | 34,208  |   |      | $ | 55,516 |  
|                                                                               |  |                             |         |   |      |   |        |  

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



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GRANDE COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.
Organization & Nature of the Business

Grande Communications Holdings, Inc. and Subsidiaries (the Company) provides
communications services to residential and commercial customers in various areas of Texas and other portions of the United States. The Company delivers products such as cable television, local and long-distance telephone, high-speed data, wireless
security, broadband transport services, and other telephony network services.

2. Basis of Presentation

The accompanying unaudited 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 with the rules and regulations of the SEC that permit reduced disclosure for interim periods. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements have been included, and the financial
statements present fairly the financial position and results of operations for the interim periods presented. Operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2006. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with managements discussion and analysis of financial condition and results of
operations contained in the Companys financial statements for the year ended December 31, 2005 contained in the Companys Annual Report on Form 10-K filed with the SEC on March 31, 2006.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain items related to 2005 have been reclassified to conform to the 2006 reporting format. In the opinion of management, these consolidated financial
statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of the financial position of the Company as of March 31, 2006 and March 31, 2005, and for the three months ended
March 31, 2006 and March 31, 2005. The Company has reclassified the operating and financing portion of the cash flows attributable to negative book cash balances related to our zero-balance accounts for the three month period ended
March 31, 2005. In prior periods these cash flows were reported within the change in accounts payable in operating activities, and have been reclassified to cash flows from financing activities to conform with current year presentation. The
effect on operating activities was $0.3 million for the three months ended March 31, 2005. This revision did not have any affect on the Companys cash balances, compliance with debt covenants, working capital, or operations.

3. Stock-Based Compensation

In December 2004, the
Financial Accounting Standards Board (FASB) issued Statement No. 123 (Revised 2004), Share-Based Payment (No. 123R). This revised standard addresses the accounting for stock-based payment transactions
in which a company receives employee services in exchange for either equity instruments of the company or 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. Under the new standard, companies are no longer able to account for stock-based compensation transactions using the intrinsic-value method in accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees. Instead, companies are required to account for such transactions using a fair-value method and recognize the related expense in the Consolidated Statement of Operations.



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Adoption of FAS 123(R)

The Company adopted Statement No. 123R effective beginning January 1, 2006 using the prospective transition method. The prospective transition method requires that companies recognize compensation expense on
stock-based payment awards that are granted, modified or cancelled after the effective date.

The impact of adopting Statement
No. 123R was an increase of $0.03 million in selling, general and administrative expenses for the three months ended March 31, 2006 and an increase of $0.03 million in loss from operations and net loss for the three months ended
March 31, 2006. The adoption of Statement No. 123R had an impact of less than $0.01 on basic and diluted net loss per share for the three months ended March 31, 2006.

Valuation assumptions

The fair value of each award granted from the Companys stock option plan
during the three months ended March 31, 2006 was estimated at the date of grant using the Black-Scholes option pricing model, assuming no expected dividends and the following weighted average assumptions:



|                        |  |      |  
|----------------------- |  | ---- | -
|                        |  | 2006 |  
|Expected volatility     |  | 75   | %
|Expected life in years  |  | 6.25 |  
|Risk-free interest rate |  | 4.58 | %

Expected life of option: The Companys expected life of option represents the period
that the Companys stock-based awards are expected to be outstanding and was determined based on the simplified method provided in Staff Accounting Bulletin No. 107 (SAB 107) and historical experience of similar awards, giving
consideration to the contractual terms of the stock-based awards, vesting schedules and historical option exercise behavior and employee termination.

Risk free interest rate: The Company bases the risk-free interest rate used in the Black-Scholes-Merton valuation model on the U.S. Treasury yield curve in effect at the time of the grant.

Expected volatility of stock: The Company bases the expected volatility of stock used in the Black-Scholes-Merton valuation model on studies of
historical volatility of industry comparables and future expectations.

Dividends: The Black-Scholes-Merton valuation model includes
a single expected dividend yield as an input. The Company has not issued any dividends, and is prohibited to issue dividends under the indenture governing the 14% senior secured notes due 2011.

Estimated forfeitures: When estimating forfeitures, the Company considered historical forfeiture behavior, as well as other factors.

Stock Option Plan

Under the Companys 2000
stock option plan (the Stock Option Plan), 82,000,000 shares of common stock and 30,000,000 shares of Series H preferred stock are reserved and authorized for issuance upon the exercise of the options. Employees and key consultants of
the Company are eligible to receive options under the Stock Option Plan. The Stock Option Plan is administered by the compensation committee of the Board of Directors. Options granted under the Stock Option Plan may be either nonqualified
stock options or incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. The options vest ratably over a four-year term from the date of the grant and expire 10 years from the date of grant.



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A summary of the status of the Stock Option Plan is presented in the following table:



|                                 |  |                 |   |  |                               |      |                                           |    
|-------------------------------- |  | --------------- | - |  | ----------------------------- | ---- | ----------------------------------------- | ---
|                                 |  | Number ofShares |   |  | Weighted-AverageExercisePrice |      | Weighted AverageRemainingContractual Term
|Outstanding at December 31, 2005 |  | 49,414,571      |   |  | $                             | 0.32 |                                           |    
|Granted                          |  | 18,862,000      |   |  |                               | 0.09 |                                           |    
|Exercised                        |  | (12,850         | ) |  |                               | 0.21 |                                           |    
|Forfeited or expired             |  | (2,374,479      | ) |  |                               | 0.28 |                                           |    
|                                 |  |                 |   |  |                               |      |                                           |    
|Outstanding at March 31, 2006    |  | 65,889,242      |   |  | $                             | 0.23 |                                           | 7.5
|                                 |  |                 |   |  |                               |      |                                           |    
|Exercisable at March 31, 2006    |  | 29,734,753      |   |  | $                             | 0.41 |                                           | 5.5

Compensation costs related to option grants are being amortized using the straight-line method.

4. Contingencies

In early September,
the Texas Cable and Telecommunications Association filed a lawsuit in U.S. District Court, Western District of Texas, Austin division, to challenge SB 5, the legislation passed allowing for a state-wide cable franchise and obviating the need for
individual municipal franchises. Named as defendants in the lawsuit, in their official capacities, are Governor Rick Perry and Public Utility Commission of Texas Commissioners Chairman Paul Hudson, Julie Parsley and Barry Smitherman. The lawsuit
contends that SB 5 discriminates in violation of the U.S. and Texas Constitutions, discriminates in violation of the Federal Communications Act, violates the federal prohibition on exclusive franchises, and violates the federal duty to guard against
redlining. In the event that the plaintiff prevails in the SB 5 litigation, the court may rule that the current statewide franchises are unconstitutional. Grande joined Verizon, AT&T and some municipalities and intervened in the lawsuit in
support of the Texas Attorney General.

There are no other pending proceedings, which are currently anticipated to have a material adverse
effect on our business, financial condition or results of operations.

5. Subsequent Events

Interest Payment

In April 2006 we paid $9.5
million of interest due on our senior notes.

Stock Option Re-pricing

On May 3, 2006, the Board of Directors approved the re-pricing of substantially all outstanding common stock options to $0.05 per share.

Lease Abandonment

In April of 2006, the
Company abandoned its facility in Orlando, Florida and will accrue the remaining lease costs of $0.3 million in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal
Activities.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This managements discussion and analysis includes forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. When used in this report, the words
anticipate, believe, estimate, expect, intend, plan and similar expressions as they relate to Grande Communications Holdings, Inc. or our management are intended to identify
these forward-looking statements. All statements by us regarding our expected future financial position and operating results, our business strategy, our financing plans, forecasted trends relating to the markets in which we operate and similar
matters are forward-looking statements. We cannot assure you that our expectations expressed or implied in these forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because
of various factors, including those discussed below and under the caption BusinessRisk Factors Relating to Our Business in our Annual Report on Form 10-K, filed with the SEC on March 31, 2006. The following managements
discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and Notes thereto included herewith and with our Managements Discussion and Analysis of Financial Condition and Results of Operation and
Condensed Consolidated Financial Statements and Notes thereto for the three-year period ended December 31, 2005, included in our Annual Report on Form 10-K filed with the SEC on March 31, 2006.

Unless we indicate otherwise, references below to we, us, our and Grande mean Grande Communications
Holdings, Inc. and its subsidiaries.

Overview

We provide communities in Texas with a bundled package of cable television, telephone and broadband Internet and other services. We operate fully integrated advanced broadband networks in seven markets in the State of
Texas. We constructed our local networks to enable us to sell advanced communication services to residential, small business, and enterprise customers. As of March 31, 2006, we have the ability to market services to 336,596 distinct homes and
small businesses over our network. We had 138,793 residential, small business, and enterprise customers as of March 31, 2006. Operating revenues for the quarter ended March 31, 2006 were $47.6 million compared to $48.5 million in the
quarter ended March 31, 2005.

In July 2000, when our network construction was still in a very early stage, we acquired an established
telephone and data network that served as the platform for our provision of residential telephone and broadband Internet services and that still provides network services revenues. This acquisition initially provided a significant portion of our
revenues and became the foundation of our business while we moved forward with the construction of our broadband networks. Since 2001, we grew our marketable homes passed through the construction of our networks. Our retail strategy enabled us to
grow our number of bundled services customers. Because of this retail strategy, we have derived an increasing percentage of our revenues from our retail cable television, telephone and broadband Internet and other services and we expect this trend
to continue.

Since inception, we have been funded primarily with private equity investments. Between February 2000 and October 2003, we
completed a series of private placements of our preferred stock, raising aggregate gross proceeds of $338.2 million from the sale of our capital stock. The net proceeds from these private placements have been used to fund our network build-out,
operations, and our acquisitions, which are described below under the heading Acquisitions. As a result of equity investments and mergers where stock was used as consideration, we now have $508 million of total invested equity capital
and a base of over 20 institutional private equity investors. We have incurred net losses for the past six years and expect to continue to incur net losses for the next several years. However, we had positive Adjusted EBITDA in 2003, 2004, 2005 and
for the three months ended March 31, 2006. See EBITDA/Adjusted EBITDA below for a discussion of this non-GAAP measure of our operating performance as well as our use of Adjusted EBITDA.



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On March 23, 2004, we raised net proceeds of $124.5 million in a private placement of 136,000 units
each consisting of a $1,000 principal amount of 14% senior secured note due 2011 and a warrant to purchase 100.336 shares of our common stock. We used a portion of the net proceeds from the offering to repay all amounts outstanding under our
then-existing senior credit facility. That facility was terminated upon repayment and we are not able to borrow any further amounts thereunder.

On March 24, 2006, we raised net proceeds of approximately $30.5 million in a private placement of an additional $32.0 million in aggregate principal amount of 14% senior secured notes due 2011. These additional notes were issued under
the existing indenture and are part of the same series of notes as the notes issued in March 2004. These notes have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements. We will use the proceeds for capital expenditures and working capital purposes.

During the third quarter of 2005, we experienced significant changes in management with the resignation of our founder, Chief Executive Officer, and Vice Chairman, William E. Morrow; our President, Joe Ross; and our General Counsel and
Secretary, Andy Kever. As a result of these resignations, our Board of Directors began a national search for a new Chief Executive Officer and immediately appointed former Grande co-founder and Chief Operating Officer, W.K.L. Scott
Ferguson, Jr., as our Interim Chief Executive Officer and President of the Company. Scott Ferguson held this position until Roy H. Chestnutt joined Grande in February 2006 as the new Chief Executive Officer. Scott Ferguson transitioned to his
current role of Chief Operating Officer after Mr. Chestnutts arrival. The overall bundling strategy of the company remained largely the same during the transition, although the company shifted its primary focus from constructing new
marketable homes passed to selling to existing marketable homes passed and improving overall company operations.

Marketable Homes Passed, Customers,
Connections and Market Level Cash Flow

We report marketable homes passed as the number of residential and business units, such as
single residence homes, apartments and condominium units, passed by our networks other than those we believe are covered by exclusive arrangements with other providers of competing services. As of March 31, 2006, our networks passed 336,596
marketable homes and we had 138,793 residential, small business and enterprise customers.

Because we deliver multiple services to our
customers, we report our total number of connections for cable television, telephone and broadband Internet and other services in addition to our total number of customers. We count each cable television, telephone and broadband Internet and other
service purchase as a separate connection. For example, a single customer who purchases cable television, telephone and broadband Internet service would count as three connections. Similarly, a single customer who purchases our broadband Internet
service and our wireless security service would count as two connections. We do not record the purchase of long distance telephone service by a local telephone customer or digital cable services by an analog cable customer as additional connections.
However, we do record each purchase of an additional telephone line by a local telephone customer as an additional connection. As March 31, 2006, we had 286,146 connections.

Operating cash flow at the market level reflects revenue, cost of revenue and some expenses that we are able to specifically identify as directly related
to the operation of that market. We follow the same approach in allocating cost of revenue at the market level as we do for cost of revenue allocation in general, as described below under the caption Costs and ExpensesCost of
Revenues. We do not include centralized customer service expenses or corporate general and administrative expenses in determining market level operating cash flow. Because we provide services in all markets and to network service customers
using a common network infrastructure, we do not track assets or liabilities at the market level. Our method of determining operating cash flow at the market level may not be comparable to approaches of other companies. Use of a different method of
determining operating cash flow at the market level could change the operating cash flow at the market level, but not our overall operating cash flow. Based upon this method of allocating cost of revenue and excluding certain corporate expenses, we
believe that each of our markets has achieved positive operating cash flow.



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Operating Revenues

We derive our operating revenues primarily from monthly charges for the provision of cable television, telephone and broadband Internet and other services to residential and small business customers and provision of
network services and broadband transport services to medium and large enterprises and communications carriers. These services are a single business provided over a unified network. However, since our different products and services generally involve
different types of charges and in some cases different methods of recording revenues, we have presented some information on our revenues from each major product line.

Bundled services revenuescable television, telephone, broadband Internet and other.We typically provide cable television, telephone and broadband Internet and other services on a bundled basis for fixed
monthly fees billed in advance, with the amount of the monthly fee varying significantly depending upon the particular bundle of services provided. We also charge usage-based fees for additional services, such as pay-per-view movies that involve a
charge for each viewing and long-distance services that involve charges by the number of minutes of use. We generally bill for these usage-based services monthly in arrears. We generate revenues from one-time charges for the installation of premises
equipment. Most of our bundled offerings include fees for equipment rental, although in some instances we sell modems to customers. We also charge monthly or one-time fees for additional services, including advertising. We collect from our cable
customers and include in our gross revenues the fees payable to cable franchise authorities, which are usually 5% of our revenues from cable subscriptions. We began offering security services as part of our bundle in June 2004. We sell all wireless
security premise equipment to new security service customers at installation. The security revenue is included in broadband Internet and other.

Broadband transport services revenues.Our revenues from broadband transport services, which consist of access to our metro area networks and point-to-point circuits on our long-haul network, involve fixed monthly fees billed in
advance, where the amount charged varies with the amount of capacity, type of service and whether any customized capacity or services are provided. Our revenues also include non-recurring charges for construction, installation and configuration
services, which can range significantly depending upon the customers needs.

Network services revenues.Our revenues from
network services consist primarily of revenues from switched carrier services and managed modem services. We bill for most of our network services monthly in arrears based on actual usage. However, some network services, particularly our managed
modem services, involve fixed monthly charges billed in advance. Some network services include non-recurring fees for installation or other work needed to connect the customer to our networks. There are monthly charges or negotiated fees for other
services such as directory assistance, web hosting, database, collocation, technical support and billing services.

Costs and Expenses

Cost of Revenues

Cost of
revenues includes those expenses that are directly related to the generation of operating revenues and has fixed and variable components. Our network supports all of the products and services that we provide to customers, and due to a common network
infrastructure and many of the same resources and personnel being used to generate revenues from the various product and service categories it is difficult to determine cost of revenues by product. Commencing with costs incurred in 2003 we allocate
network and related costs among our products based upon the following approach:

We are able to specifically identify the costs related to
cable television and security, so no allocation is needed for these products. We allocate each cost that relates to only one of our retail telephone, broadband Internet, broadband transport and network services products entirely to that product. For
example, private line costs relate entirely to our broadband transport product and are allocated to it. Other costs, such as interconnect costs, generally are allocated among the various benefited products based upon the use of minutes or bandwidth



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or other appropriate metrics. These allocation formulas are reviewed for appropriateness every six months. Our method of allocating network and related costs
among products may not be comparable to approaches of other companies. Use of a different method of allocation could change the cost of revenues and margin associated with each product. Our overall cost of revenues and gross margin is not affected
by this allocation method.

Our cost of revenues include the following:



| |  |  | Cable costs. Programming costs historically have been the largest cost of providing our cable television services and we expect this trend to continue. We have entered into
contracts with the National Cable Television Cooperative and other programming providers to provide programming to be aired on our networks. We pay a monthly fee for these programming services, generally based on the average number of subscribers to
the program, although some fees are adjusted based on the total number of subscribers to the system or the system penetration percentage. Since programming cost is partially based on numbers of subscribers, it will increase as we add more
subscribers. It will also increase to the extent costs per channel increase over time, and may change depending upon the mix of channels we offer in each market from time to time. Our cable costs also include the fees payable to cable franchise
authorities, which are usually 5% of our revenues from cable subscriptions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Telephone costs. Our cost of revenues associated with delivering telephone services to residential and small business customers consist primarily of transport costs, which
are comprised mostly of amounts needed for the operation, monitoring and maintenance of our networks, and also include access and other fees that we pay to other carriers to carry calls outside of our networks. Transport costs for these types of
customers are largely fixed so long as we do not need to procure additional equipment or lease additional capacity. Transport costs are expected to increase when new facilities need to be obtained. The access fees are generally usage-based and,
therefore, variable.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Broadband Internet and other costs. Our cost of revenues associated with delivering broadband Internet and other services to residential and small business customers consists
primarily of transport costs and fees associated with peering arrangements we have with other carriers. Transport costs and peering fees for this service are largely fixed so long as we do not need to procure additional equipment or lease additional
capacity, but transport costs and peering fees may increase when new facilities for connecting to the Internet need to be obtained. Our security-related costs are primarily related to system monitoring with a third-party provider and the costs
associated with selling security premise equipment to customers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Broadband transport services costs. Our cost of revenues associated with delivering broadband traffic consists primarily of fixed transport costs, which are comprised mostly
of amounts needed for the operation, monitoring and maintenance of our networks, and also include access and other fees that we pay to other carriers to carry traffic outside of our networks. These costs are mostly fixed in nature. There are some
variable costs associated with external maintenance and with private line services, which can have a component that requires us to pay other carriers for a portion of the private line.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Network services costs. Our cost of revenues associated with delivering traffic consists primarily of transport costs, mostly amounts needed for the operation, monitoring and
maintenance of our networks, and access and other fees that we pay to other carriers to carry traffic outside of our networks. These costs are primarily fixed with respect to the monitoring of the traffic we carry on our networks, although there are
variable components associated with external maintenance costs and other items. The access and other carrier fees are variable and usage-based.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Selling, general and administrative expenses

Our selling, general and administrative expenses
include all of the expenses associated with operating and maintaining our networks that are not cost of revenues. These expenses primarily include payroll and departmental costs incurred for network design, monitoring and maintenance. They also
include payroll and departmental costs incurred for customer installation and service personnel, customer service representatives and



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management and sales and marketing personnel. Other included items are advertising expenses and promotional expenses, corporate and subsidiary management,
administrative costs, bad debt expense, professional fees, taxes, insurance and facilities costs.

Depreciation and amortization

Depreciation and amortization expenses include depreciation of our broadband networks and equipment and intangible assets related
to acquisitions.

Operating Data



|                             |  |               |         |              |   |                   |  |                  |         |                  |   |         |  |   |        
|---------------------------- |  | ------------- | ------- | ------------ | - | ----------------- |  | ---------------- | ------- | ---------------- | - | ------- |  | - | -------
|                             |  | Quarter Ended
|                             |  | March 31,2005 |         | June 30,2005 |   | September 30,2005 |  | December 31,2005 |         | March 31,2006(1)
|Operating Data(1):           |  |               |         |              |   |                   |  |                  |         |                  |   |         |  |   |        
|Marketable homes passed(2)   |  |               | 319,717 |              |   | 325,581           |  |                  | 328,041 |                  |   | 331,173 |  |   | 336,596
|Customers                    |  |               | 130,753 |              |   | 131,538           |  |                  | 134,919 |                  |   | 136,109 |  |   | 138,793
|Number of connections        |  |               |         |              |   |                   |  |                  |         |                  |   |         |  |   |        
|Cable television             |  |               | 84,483  |              |   | 85,440            |  |                  | 87,776  |                  |   | 89,417  |  |   | 92,174 
|Telephone                    |  |               | 114,809 |              |   | 113,589           |  |                  | 113,700 |                  |   | 114,621 |  |   | 116,789
|Broadband Internet and other |  |               | 60,768  |              |   | 63,241            |  |                  | 68,061  |                  |   | 72,104  |  |   | 77,183 
|                             |  |               |         |              |   |                   |  |                  |         |                  |   |         |  |   |        
|Total connections            |  |               | 260,060 |              |   | 262,270           |  |                  | 269,537 |                  |   | 276,142 |  |   | 286,146
|Average monthly revenue per: |  |               |         |              |   |                   |  |                  |         |                  |   |         |  |   |        
|Customer                     |  | $             | 84.75   |              | $ | 85.79             |  | $                | 85.18   |                  | $ | 85.59   |  | $ | 87.15  
|Cable television             |  |               | 47.89   |              |   | 49.04             |  |                  | 48.31   |                  |   | 48.82   |  |   | 50.74  
|Telephone                    |  |               | 43.31   |              |   | 42.86             |  |                  | 43.09   |                  |   | 42.93   |  |   | 42.23  
|Broadband Internet and other |  |               | 34.59   |              |   | 35.31             |  |                  | 34.54   |                  |   | 33.85   |  |   | 33.31  

---

|(1) | On March 31, 2006, Grande sold off-net MDU assets in Dallas for net proceeds of $1.9 million. Because we booked revenue for these assets for the entire quarter, we did not
adjust reported operating metrics. The effect of the asset sale on the operating metrics is shown in the table below:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                             |  |               |  |                                    |  |                                 
|---------------------------- |  | ------------- |  | ---------------------------------- |  | --------------------------------
|                             |  | March 31,2006 |  | Reduction inmetrics fromasset sale |  | March 31, 2006(after asset sale)
|Operating Data:              |  |               |  |                                    |  |                                 
|Marketable homes passed(2)   |  | 336,596       |  | 2,923                              |  | 333,673                         
|Customers                    |  | 138,793       |  | 1,302                              |  | 137,491                         
|Number of connections        |  |               |  |                                    |  |                                 
|Cable television             |  | 92,174        |  | 1,302                              |  | 90,872                          
|Telephone                    |  | 116,789       |  |                                   |  | 116,789                         
|Broadband Internet and other |  | 77,183        |  |                                   |  | 77,183                          
|                             |  |               |  |                                    |  |                                 
|Total connections            |  | 286,146       |  | 1,302                              |  | 284,844                         



|(2) | In the quarter ended March 31, 2006, Grande added an additional 4,000 homes to its marketable homes passed. The plant to service these homes was constructed throughout 2005 in
green-field areas and actually became marketable as new homes were built.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Results of Operations

Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005

The following table sets forth
financial data as a percentage of operating revenues for the three months ended March 31, 2005 and 2006.



|                                    |  |                             |    |  |      |   
|----------------------------------- |  | --------------------------- | -- |  | ---- | --
|                                    |  | Three Months EndedMarch 31, |   
|                                    |  | 2005                        |    |  | 2006 |   
|Consolidated Financial Data:        |  |                             |    |  |      |   
|Operating revenues:                 |  |                             |    |  |      |   
|Cable television                    |  | 25                          | %  |  | 29   | % 
|Telephone                           |  | 30                          |    |  | 31   |   
|Broadband Internet and other        |  | 13                          |    |  | 16   |   
|Broadband transport services        |  | 4                           |    |  | 5    |   
|Network services                    |  | 28                          |    |  | 19   |   
|                                    |  |                             |    |  |      |   
|Total operating revenues            |  | 100                         |    |  | 100  |   
|Operating expenses:                 |  |                             |    |  |      |   
|Cost of revenues                    |  | 38                          |    |  | 35   |   
|Selling, general and administrative |  | 48                          |    |  | 50   |   
|Depreciation and amortization       |  | 30                          |    |  | 29   |   
|                                    |  |                             |    |  |      |   
|Total operating expenses            |  | 116                         |    |  | 114  |   
|                                    |  |                             |    |  |      |   
|Operating loss                      |  | (16                         | )  |  | (14  | ) 
|Other income (expense):             |  |                             |    |  |      |   
|Interest income                     |  | 1                           |    |  |     |   
|Interest expense                    |  | (10                         | )  |  | (11  | ) 
|Gain on sale of assets              |  |                            |    |  | 4    |   
|                                    |  |                             |    |  |      |   
|Total other expense                 |  | (9                          | )  |  | (7   | ) 
|                                    |  |                             |    |  |      |   
|Net loss                            |  | (25                         | )% |  | (21  | )%
|                                    |  |                             |    |  |      |   

Operating Revenues.Our operating revenues for the three months ended March 31, 2005
and 2006 were $48.5 million and $47.6 million, respectively, a decrease of $0.9 million, or 2%. This decrease was primarily driven by three components of network services. First, our decision to de-emphasize our international carrier switched
service business drove a decrease of $1.7 million. International business has been a lower gross margin product, and the associated gross margin decrease was less than $0.1 million. Secondly, we also experienced a decrease in domestic carrier
switched services revenue, which fell by $1.7 million. Finally, reciprocal compensation revenue decreased by $0.9 million from the first quarter of 2005 to the first quarter of 2006 due to regulatory changes. Revenue from bundled services increased
by $3.2 million, partially offsetting the decrease in revenue from network service.

Operating revenues for cable television services for
the three months ended March 31, 2005 and 2006 were $12.0 million and $13.8 million, respectively, an increase of $1.8 million, or 15%. Approximately 29% of the $1.8 million increase in cable television services is due to our annual rate increase,
which occurred in January

2006. Operating revenues for telephone services for the three months ended March 31, 2005 and 2006 were $14.6 million and $14.7
million, respectively, an increase of $0.1 million, or less than 1%. Operating revenues for broadband Internet and other services for the three months ended March 31, 2005 and 2006 were $6.1 million and $7.5 million, respectively, an increase of
$1.4 million, or 23%. The increased revenues for cable television, telephone and broadband Internet and other are primarily due to growth in the number of connections, from 260,060 as of March 31, 2005 to 286,146 as of March 31, 2006, and to a
lesser extent from the aforementioned cable rate increase. The additional connections and revenues resulted primarily from continued penetration growth of marketable homes in Grandes markets and selling to customers where we recently
constructed new broadband networks.

Operating revenues for our broadband transport services for the three months ended March 31, 2005
and 2006 were $2.0 million and $2.3 million, respectively, an increase of $0.3 million, or 15%, primarily due to an increase of $0.5 million in construction revenue.



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Revenues from network services for the three months ended March 31, 2005 and 2006 were $13.7 million
and $9.4 million, respectively, a decrease of $4.3 million, or 31% due to the components outlined above.

Cost of Revenues.Our cost
of revenues for the three months ended March 31, 2005 and 2006 were $18.2 million and $16.5 million, respectively, a decrease of $1.7 million, or 9%. The decrease in our cost of revenues was primarily due to the decrease in network services
revenue. Cost of revenues as a percentage of revenues was 38% for the three months ended March 31, 2005, compared with 35% for the three months ended March 31, 2006.

Our gross margin for our bundled cable television, telephone and broadband Internet and other services was relatively flat at 72% for the three months
ended March 31, 2006 and 2005. For broadband transport services, our gross margin for the three months ended March 31, 2006 was 86%, compared with 87% for the three months ended March 31, 2005. For network services, our gross margin
was relatively flat at 35%, for the three months ended March 31, 2006 and 2005.

We expect that our overall gross margin will rise as
the percentage of revenues derived from our cable television, telephone, broadband Internet and other services and our broadband transport services, which are higher-margin services, increases in accordance with our business plan. Our margins are
determined based on an allocation of cost of revenues among our products. Our method of allocating costs and therefore, of computing margin, may not be comparable to approaches of other companies. Use of a different method of allocation could change
the margin associated with each product, although the overall gross margin would not be affected.

Selling, General and Administrative
Expense. Our selling, general and administrative expense for the three months ended March 31, 2005 and 2006 was $23.5 million and $23.8 million, respectively, an increase of $0.3 million, or 1%. Selling, general and administrative expense
increased as a percentage of revenues from 48% to 50%. We expect our selling, general and administrative expense to increase as a result of the growth of our business and customer base, and decrease over time as a percentage of revenue.

Depreciation and Amortization Expense. Our depreciation and amortization expense for the three months ended March 31, 2005 and 2006 was
$14.5 million and $13.9 million, respectively, a decrease of $0.6 million, or 4%. The decrease was primarily due to certain intangible assets becoming fully amortized during 2005, as well as the write-off of franchise fees in the fourth quarter of
2005.

Interest Expense. For the three months ended March 31, 2005 and 2006, our interest expense, which includes interest
incurred net of capitalized interest, was $4.7 million and $5.1 million, respectively, an increase of $0.4 million, or 9%. Our interest expense increased primarily due to the decrease in capitalized interest expense as the result of decreased
network construction activity. For the three months ended March 31, 2005 and 2006, we had capitalized interest of $0.8 million and $0.4 million, respectively, a decrease of $0.4 million, or 50%.

Gain on Sale of Assets. For the three months ended March 31, 2005 and 2006, our gain/loss on sale of assets was $0.1 million and $1.9
million, respectively, an increase of $1.8 million. The increase was primarily due to the March 31, 2006 closing on the sale of assets in Dallas. Proceeds from this first closing were $1.9 million. The second, and final, closing is expected to
occur by the end of May 2006 with net proceeds of $0.6 million. These assets are non-strategic in nature and were originally acquired in our October 2003 purchase of Advantex.

EBITDA/Adjusted EBITDA

We measure our operating performance on net income (loss) before interest
income, interest expense, taxes, depreciation and amortization, referred to as EBITDA. EBITDA is not a measure of financial performance under generally accepted accounting principles. We believe EBITDA is often a useful measure of a
companys operating performance, and is a significant basis used by our management to measure the operating performance of our business.

Because we have funded the build-out of our networks by raising and expending large amounts of capital, our results of operations reflect significant charges for depreciation, amortization, and interest expense. EBITDA, which excludes this
information, provides helpful information about the operating performance of our business,



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apart from the expenses associated with our physical plant or capital structure. We try to make each area of our business generate positive EBITDA, and when
we have choices about the market or area in which to best deploy our resources we generally direct our resources towards the network construction that is expected to generate the most EBITDA. EBITDA is frequently used as a basis for comparing
businesses in our industry, although our measure of EBITDA may not be comparable to similarly-titled measures of other companies. EBITDA does not purport to represent operating loss or cash flow from operating activities, as those terms are defined
under generally accepted accounting principles, and should not be considered as an alternative to those measurements as an indicator of our performance.

In the first quarter of 2004, Grande wrote off debt issuance costs of approximately $2.1 million associated with the repayment of its senior credit facility following the completion of its senior notes offering. In
the fourth quarter of 2005, Grande recognized a goodwill impairment loss of $39.6 million associated with the results of Grandes annual impairment test. In the first quarter of 2006, Grande began recognizing compensation expense for
stock-based compensation in accordance with FASB Statement No. 123R, which is a non-cash item. The company believes debt issuance costs, goodwill impairments, and non-cash stock-based compensation to be analogous to amortization or interest expense,
and therefore believes it is more useful to show EBITDA net of these amounts because Grande believes it is a better measure of operating performance and is more comparable to prior periods. However, because of the nature of these charges, the
company is referring to EBITDA, net of debt issuance costs, goodwill impairments, and non-cash stock-based compensation charges, as Adjusted EBITDA.

Adjusted EBITDA was $6.9 million and $9.3 million for the quarters ended March 31, 2005 and 2006, respectively, an increase of $2.4 million, or 35%. The increase was primarily due to a $1.8 million increase in gain on
sale of assets and the addition of new customers, added through the penetration of Grandes network passings over such periods

Since
a significant portion of our cost of revenues and overhead expenses are generally fixed in nature, increasing revenue should result in further increases in EBITDA/Adjusted EBITDA and in EBITDA/Adjusted EBITDA as a percentage of revenues. To the
extent the increased revenues are from adding residential and small business customers for our bundled services, which have higher gross margins than network services, EBITDA/Adjusted EBITDA should increase more quickly on a percentage basis.

The reconciliation of EBITDA/Adjusted EBITDA to net loss is as follows:



|                                                                |  |                             |         |   |      |   |        |  
|--------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                |  | Three Months EndedMarch 31, |        
|                                                                |  | 2005                        |         |   | 2006 |  
|                                                                |  | (Dollars in thousands)      |        
|Net loss as reported                                            |  | $                           | (12,155 | ) |      | $ | (9,636 | )
|Add back non-EBITDA/Adjusted EBITDA items included in net loss: |  |                             |         |   |      |   |        |  
|Interest income                                                 |  |                             | (315    | ) |      |   | (141   | )
|Interest expense                                                |  |                             | 4,743   |   |      |   | 5,106  |  
|Taxes                                                           |  |                             | 75      |   |      |   | 75     |  
|Depreciation and amortization                                   |  |                             | 14,527  |   |      |   | 13,882 |  
|                                                                |  |                             |         |   |      |   |        |  
|EBITDA                                                          |  |                             | 6,875   |   |      |   | 9,286  |  
|Stock-based compensation expense                                |  |                             |        |   |      |   | 33     |  
|Goodwill impairment                                             |  |                             |        |   |      |   |       |  
|Loss on extinguishment of debt                                  |  |                             |        |   |      |   |       |  
|                                                                |  |                             |         |   |      |   |        |  
|Adjusted EBITDA                                                 |  |                             | 6,875   |   |      |   | 9,319  |  
|                                                                |  |                             |         |   |      |   |        |  

Liquidity and Capital Resources

Sources and Uses of Funds

Since inception, we have raised an aggregate of $338 million in equity funding from institutional private equity investors and others to pursue our business plan. As a result of such stock issuances and our merger with



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ClearSource, we have a total of $508 million of total invested equity capital. Funds raised have been used to construct our networks, to make acquisitions,
to launch services in our existing nine markets and for working capital and operating expenses.

On March 23, 2004, we issued $136.0
million principal amount at maturity of senior secured notes with fixed interest payable at a rate of 14% per annum. We refer to these notes as the senior notes. Interest on the senior notes is payable semi-annually each April 1 and
October 1. We used a portion of the net proceeds from the sale of the senior notes to repay all amounts outstanding under our then-existing senior credit facility. The senior credit facility was terminated upon repayment and we are not able to
borrow any further amounts thereunder.

On March 24, 2006, we raised net proceeds of approximately $30.5 million in a private
placement of an additional $32.0 million in aggregate principal amount of 14% senior secured notes due 2011. These additional notes were issued under the existing indenture and are part of the same series of notes as the notes issued in March 2004.
These notes have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. We will use the net proceeds for capital
expenditures and working capital purposes.

At March 31, 2006, we had total cash and cash equivalents of $55.5 million, investments of
$0.4 million and $174.1 million of long-term debt outstanding.

As of March 31, 2006, we had net working capital of $34.7 million,
compared to net working capital of $6.4 million as of December 31, 2005. The increase in working capital resulted primarily from the net proceeds from the private placement of an additional $32 million in aggregate principal amount of 14%
senior secured notes due 2011.

Provided that we meet the our cash flow projections in our current business plan, we expect that we will
not require additional financing and that we will manage the company cash position above $20 million in accordance with the covenant set forth in our indenture. This covenant prohibits our making capital expenditures relating to the build-out of new
or additional parts of our network if such expenditures would result in us having less than $20 million in cash and cash equivalents. Our business plan is based on estimates regarding expected future costs and expected revenues. Our costs may exceed
or our revenues may fall short of our estimates, our estimates may change, and future developments may affect our estimates. Any of these factors may increase our need for funds to complete construction in our markets, which would require us to seek
additional financing.

We may need additional financing to fund our operations or to undertake initiatives not contemplated by our business
plan or obtain additional cushion against possible shortfalls. We also may pursue additional financing as opportunities arise. Future financings may include a range of different sizes or types of financing, including the sale of additional debt or
equity securities. However, we may not be able to raise additional funds on favorable terms or at all. Our ability to obtain additional financing depends on several factors, including future market conditions; our success or lack of success in
penetrating our markets and growing our overall income; our future creditworthiness; and restrictions contained in agreements with our investors or lenders, including the restrictions contained in the indenture governing the senior notes. These
financings could increase our level of indebtedness or result in dilution to our equity holders. Additionally, we currently cannot call our existing bonds until April 2008, which prohibits our ability to refinance our bonds in the event better
pricing and terms were available to us in the market.

Cash Flows from Operating Activities

Net cash provided by operations totaled $4.1 million and $4.6 million for the three months ended March 31, 2005 and 2006, respectively. The net cash
flow activity related to operations consisting primarily of changes in operating assets and liabilities and adjustments to net loss for non-cash transactions including:



| |  |  | depreciation and amortization;
| | - |  | ------------------------------



| |  |  | non-cash interest expense;
| | - |  | --------------------------



| |  |  | provision for bad debt;
| | - |  | -----------------------



| |  |  | gain on disposal of assets.
| | - |  | ---------------------------



| |  |  | stock-based compensation
| | - |  | ------------------------



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Depreciation and amortization for the three months ended March 31, 2005 and 2006 was $14.5 million
and $13.9 million, respectively. Gains on the sale of fixed assets for the three months ended March 31, 2005 and 2006 were $0.1 million and $1.9 million. Other non-cash charges for the three months ended March 31, 2005 and 2006 were $1.6
million and $1.4 million, respectively.

As of March 31, 2006 we had a $9.6 million balance in accrued liabilities related to the
semi-annual interest payment on our senior notes, of which $9.5 million was subsequently paid on April 3, 2006.

Cash Flows from
Investing Activities

Our net cash used in investing activities for the three months ended March 31, 2005 and 2006 was $10.7
million and $4.9 million, respectively. These net cash outflows are primarily due to the build-out of our network in both 2005 and 2006. Cash flows used in investing activities in 2006 consisted primarily of $7.3 million in property, plant and
equipment purchases, offset by $2.5 million in asset sales.

Cash Flows from Financing Activities

Our net cash (used in) provided by financing activities for the three months ended March 31, 2005 and 2006 was $(0.4) million and $29.1 million,
respectively. Cash flows from financing activities in the three months ended March 31, 2006 consisted primarily of the net proceeds from the private placement of an additional $32 million in aggregate principal amount of 14% senior secured
notes due 2011, which is described above.

Capital Expenditures

We spent approximately $15.6 million and $7.3 million in capital expenditures, including capitalized interest, during the three months ended March 31, 2005 and 2006, respectively. The decrease of $8.3 million is
primarily due to a slow down in constructing new marketable homes passed beginning in Q3 2005. The indenture governing the 14% senior secured notes due 2011 prohibits us from making capital expenditures when the aggregate amount of cash and cash
equivalents held by us (after giving effect to such planned capital expenditure) would be less than $20 million. The capital expenditures amounts described above relate to network construction; initial installation costs; the purchase of customer
premise equipment, such as cable set-top boxes and cable modems; and corporate and network equipment, such as switching and transport equipment; and billing and information systems.

We anticipate spending approximately $28 million to $30 million, excluding capitalized interest, in capital expenditures during the year ended
December 31, 2006. The company intends to manage its capital expenditures in accordance with the covenant set forth in the indenture to ensure that cash is not less than $20 million.

Contractual Obligations and Commercial Commitments

We are obligated to make payments under a variety of contracts and other commercial arrangements, including the following:

Long-term Debt. On March 23, 2004, the Company completed a private placement offering for 136,000 units each consisting of (1) $1,000 of 14% Senior Secured Notes due 2011 and (2) a warrant to purchase 100.336 shares of
common stock. The Senior Secured Notes accrue interest at the rate of 14% per annum with the interest payable semi-annually in arrears on April 1 and October 1. On March 24, 2006, we raised net proceeds of approximately $30.5
million in a private placement of an additional $32.0 million in aggregate principal amount of 14% senior secured notes due 2011. These additional notes were issued under the existing indenture and are part of the same series of notes as the notes
issued in March 2004.

Capital Leases.We lease office and facilities space under leasing arrangements. We also have certain capital
leases for telecom switching equipment and office equipment.

Operating Leases.We lease office space, vehicles and other assets for
varying periods. Leases that expire are generally expected to be renewed or replaced by other leases.



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Maintenance Agreements.We have numerous agreements for the maintenance of leased fiber optic
capacity.

Purchase Agreements.We may be required to purchase a minimum of $38.3 million of equipment from some of our suppliers
between April 2006 and December 2010. We entered into these agreements based upon estimates of equipment we expect to need over this five-year period. The majority of these purchase commitments are contingent upon delivery of technical and
functional next generation requirements. If we do not actually need the estimated amount and type of equipment, our financial condition could be adversely affected because we would be obligated to spend money on equipment we do not need, rather than
applying it to help grow and develop our business.

The following table represents our contractual obligations as of March 31, 2006:



|                                                |  |                        |        |       |   |        |  |      |        |      |   |              |  |   |        |  |   |         |  |   |        
|----------------------------------------------- |  | ---------------------- | ------ | ----- | - | ------ |  | ---- | ------ | ---- | - | ------------ |  | - | ------ |  | - | ------- |  | - | -------
|                                                |  | Payments Due by Period |        | Total
|Contractual Obligations                         |  | 2006                   |        | 2007  |   | 2008   |  | 2009 |        | 2010 |   | 2011 &Beyond | 
|                                                |  | (In thousands)        
|Long-term debt and related interest obligations |  | $                      | 19,136 |       | $ | 23,532 |  | $    | 23,532 |      | $ | 23,532       |  | $ | 23,524 |  | $ | 179,760 |  | $ | 293,016
|Capital lease obligations                       |  |                        | 1,680  |       |   | 2,038  |  |      | 1,571  |      |   | 1,921        |  |   | 1,643  |  |   | 20,333  |  |   | 29,186 
|Operating lease obligations                     |  |                        | 3,226  |       |   | 3,631  |  |      | 2,932  |      |   | 2,474        |  |   | 1,674  |  |   | 11,493  |  |   | 25,430 
|Maintenance obligations                         |  |                        | 788    |       |   | 1,033  |  |      | 1,033  |      |   | 1,033        |  |   | 1,015  |  |   | 10,041  |  |   | 14,943 
|Purchase obligations                            |  |                        | 204    |       |   |       |  |      | 3,589  |      |   |             |  |   | 34,497 |  |   |        |  |   | 38,290 
|                                                |  |                        |        |       |   |        |  |      |        |      |   |              |  |   |        |  |   |         |  |   |        
|Total                                           |  | $                      | 25,034 |       | $ | 30,234 |  | $    | 32,657 |      | $ | 28,960       |  | $ | 62,353 |  | $ | 221,627 |  | $ | 400,865
|                                                |  |                        |        |       |   |        |  |      |        |      |   |              |  |   |        |  |   |         |  |   |        

Our plans with respect to network construction and other capital expenditures are discussed above
under the caption Capital Expenditures. We believe those planned expenditures do not constitute contractual obligations or binding commitments since, in general, we have the ability to accelerate or postpone construction of our networks
depending upon cash availability, subject to the need to eventually complete the network in accordance with our single-family residential development agreements.

We have entered into contracts with various entities to provide us with video programming services. We pay a monthly fee for those services, generally based on the average number of video subscribers to that service
during the service period. We estimate programming fees to be approximately $30 million in 2006.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United
States. To prepare these financial statements, we must make estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets, liabilities,
revenues and expenses as well as the disclosure of contingent assets and liabilities. We periodically evaluate our estimates and assumptions and base our estimates and assumptions on our best knowledge of current events and actions we may undertake
in the future. Actual results may ultimately differ from these estimates. We believe that of our significant accounting policies, the following may involve a higher degree of judgment and complexity:

Revenue Recognition

Revenue from customers
consists of fixed monthly fees for bundled services and certain network services, and usage based fees for long distance services in certain bundles and the majority of our network services. Local governmental authorities impose franchise fees on
the majority of our franchises ranging up to a federally-mandated maximum of 5% of annual gross revenues derived from the operation of the cable television system, to provide cable television services, as provided in the franchise agreements. Such
fees are collected on a monthly basis from our customers and periodically remitted to local franchise authorities. Franchise fees collected and paid are reported as revenues and expenses, respectively. Our revenues are recognized when services are
provided,



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regardless of the period in which they are billed. Amounts billed in advance are reflected in the balance sheet as deferred revenue and are deferred until
the service is provided. As of October 25, 2005, Grandes application for a statewide franchise was approved and rather than paying fees to individual municipal franchise authorities, Grande shall remit fees associated with the provision
of cable programming to one state agency, the PUC.

We receive some revenues for construction performed for customers in connection with
network service arrangements. These revenues, which are a small percentage of total revenues, are recognized under the percentage of completion method.

Classification of Various Direct Labor and Other Overhead Costs

Our business is capital
intensive, and a large portion of our financial resources is spent on capital activities associated with building our networks. We capitalize costs associated with network construction, initial customer installations, installation refurbishments and
the addition of network equipment necessary to enable provision of bundled or network services. Capitalized costs include materials, direct labor costs and certain indirect costs. We capitalize direct labor costs associated with our personnel based
upon the specific time devoted to construction and customer installation activities. Capitalized indirect costs are those relating to the activities of construction and installation personnel and overhead costs associated with the relevant support
functions. Costs for repairs and maintenance, and disconnection and reconnection, are charged to operating expense as incurred, while equipment replacement is capitalized.

Judgment is required to determine the extent to which indirect costs, or overhead, are incurred as a result of specific capital activities, and therefore
should be capitalized. We allocate overhead based upon the portion of indirect costs that contribute to capitalizable activities using an overhead rate applied to the amount of direct labor capitalized based upon our analysis of the nature of costs
incurred in support of capitalizable activities. The primary costs that are included in the determination of overhead rates are (i) employee benefits and payroll taxes associated with capitalized direct labor, (ii) direct variable costs
associated with capitalizable activities, consisting primarily of installation and construction vehicle costs, (iii) the cost of support personnel, such as personnel who directly assist with capitalizable installation activities, and
(iv) indirect costs directly attributable to capitalizable activities. For the three months ended March 31, 2005 and 2006, $3.0 million and $2.2 million of labor and overhead costs were capitalized, respectively.

Valuation of Long-Lived Assets and Intangible Assets

We evaluate the recoverability of property, plant and equipment for impairment when events or changes in circumstances indicate that the net book value of an asset may not be recoverable. Such events or changes in
circumstances could include such factors as loss of customers accounting for a high percentage of revenues from particular network assets, changes in technology, fluctuations in the fair value of assets, adverse changes in market conditions or poor
operating results. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amounts.
Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets and is recorded in the period in which the determination was made. While we believe that our estimates of future cash flows are reasonable,
different assumptions regarding such cash flows could materially affect our evaluation of asset recoverability.

We performed our annual
goodwill impairment test as of October 1, 2005. This test was performed in accordance with Statement of Financial Accounting Standards, or SFAS, No. 142Goodwill and Other Intangible Assets, which we adopted effective
January 1, 2002. SFAS No. 142 recognizes that since goodwill and certain intangible assets may have indefinite useful lives, these assets are no longer required to be amortized but are to be evaluated at least annually for impairment. An
independent appraisal firm was used for this analysis. The estimated fair value was determined based on a discounted cash flow analysis and review of multiples for comparable companies. The assumptions used in the valuation testing have subjective
components, including anticipated future operating results and cash flows based on our business plan and overall expectations as to market and economic considerations. During the last half of 2005, we revised projections downward for our



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network services line of service based on our new managements revised business strategy, current trends in the industry and managements analysis
of the competitive environment in this line of service. We performed our annual impairment test as of October 1, 2005, which indicated carrying value exceeded estimated fair value for a portion of the Thrifty Call goodwill. Based on the results
of this test, we recorded an impairment loss of $39.6 million in 2005 related to the Thrifty Call acquisition in 2000.

Allowance for
Doubtful Accounts

We use estimates to determine our provision for bad debts. These estimates are based on historical collection
experience, current trends, credit policy and a percentage of our customer accounts receivable, as well as specific identification for larger customers. In determining these percentages, we look at historical write-offs of our receivables. Judgment
is required both to identify customer accounts where collectibility is a concern, and to determine the amount of the reserve to be established for those customer accounts.

The foregoing list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for us to judge the application. There are also areas in which our judgment in selecting any available alternative would not produce
a materially different result.

Share-Based Payment

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS 123R). SFAS 123R addresses the accounting for
share-based payments to employees, including grants of employee stock options. Under the new standard, companies will no longer be able to account for share-based compensation transactions using the intrinsic method in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Instead, companies will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated statement of
operations. SFAS 123R will be effective for the first period beginning after December 15, 2005. We adopted SFAS 123R on January 1, 2006 using the prospective method and did not restate prior periods. SFAS 123R will apply to
awards granted, modified or settled on or after January 1, 2006. Under SFAS 123R we use a Black-Scholes-Merton model to value these stock awards. Awards outstanding as of December 31, 2005 will continue to be accounted for under the
previous accounting model, the intrinsic value method under APB Opinion No. 25, whereby no compensation was recognized for most stock option awards.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our exposure to market risk relates primarily to changes in interest rates on our investment portfolio. Our marketable investments consist primarily of short-term fixed income securities. We invest only with high credit quality issuers and
we do not use derivative financial instruments in our investment portfolio. We do not believe that a significant increase or decrease in interest rates would have a material impact on the fair value of our investment portfolio.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Our management, with the
participation of our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) or Rule 15d-15(e), as applicable, under the Securities Exchange Act of 1934) as of March 31, 2006. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures are effective in timely alerting them to material information relating to Grande, including its consolidated subsidiaries, required to be included in this report and the other reports that we file or submit under the Securities
Exchange Act of 1934.

During the first fiscal quarter, there were no changes in our internal control over financial reporting that have
materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.



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PART II

OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

Legal Proceedings

In early September, the Texas Cable and Telecommunications Association filed a lawsuit in U.S. District Court, Western District of Texas, Austin division,
to challenge SB 5, the legislation passed allowing for a state-wide cable franchise and obviating the need for individual municipal franchises. Named as defendants in the lawsuit, in their official capacities, are Governor Rick Perry and Public
Utility Commission of Texas Commissioners Chairman Paul Hudson, Julie Parsley and Barry Smitherman. The lawsuit contends that SB 5 discriminates in violation of the U.S. and Texas Constitutions, discriminates in violation of the Federal
Communications Act, violates the federal prohibition on exclusive franchises, and violates the federal duty to guard against redlining. In the event that the plaintiff prevails in the SB 5 litigation, the court may rule that the current statewide
franchises are unconstitutional. Grande joined Verizon, AT&T and some municipalities and intervened in the lawsuit in support of the Texas Attorney General.

There are no other pending proceedings, which are currently anticipated to have a material adverse effect on our business, financial condition or results of operations.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

There have been no material changes
to the risk factors previously described in Part I, Item 1A included in Grandes Annual Report on Form 10-K for the year ended December 31, 2005.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

There were no matters submitted to a vote of security holders of Grande during the quarter ended March 31, 2006.



|ITEM 6. | EXHIBITS
|------- | --------

See Exhibit Index (which is incorporated
herein by reference):



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##### Table of Contents

SIGNATURES

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



|                   |  |  |  |                                      |  |                           |  |                                                          
|------------------ |  |  |  | ------------------------------------ |  | ------------------------- |  | ---------------------------------------------------------
|                   |  |  |  | Grande Communications Holdings, Inc.
|                   |  |  |  | (Registrant)                        
|                   |  |  | 
|Date: May 12, 2006 |  |  |  | By:                                  |  | /s/    MICHAEL L.
WILFLEY
|                   |  |  |  |                                      |  |                           |  | Michael L. Wilfley                                       
|                   |  |  |  |                                      |  |                           |  | Chief Financial Officer                                  
|                   |  |  |  |                                      |  |                           |  | (Duly Authorized Officer and Principal Financial Officer)



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Exhibit Index

|           |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                        
|           | 
|3.1*       |  | Restated Certificate of Incorporation of Grande Communications Holdings, Inc.                                                                                                                                                                                                                                                                                                                      
|           | 
|3.2**      |  | By-Laws of Grande Communications Holdings, Inc.                                                                                                                                                                                                                                                                                                                                                    
|           | 
|3.3****    |  | Amendment # 1 to By-Laws of Grande Communications Holding, Inc.                                                                                                                                                                                                                                                                                                                                    
|           | 
|4.1**      |  | Indenture, dated as of March 23, 2004, by and among Grande Communications Holdings, Inc., the Guarantors named therein and U.S. Bank National Association.                                                                                                                                                                                                                                         
|           | 
|4.2**      |  | Registration Rights Agreement, dated as of March 23, 2004, by and among Grande Communications Holdings, Inc., the Guarantors named therein, Bear, Stearns & Co. Inc. and Deutsche Bank
Securities Inc.                                                                                                                                                                                             
|           | 
|4.3**      |  | Form of 14% Senior Secured Note due 2011 issued in connection with March 2004 offering.                                                                                                                                                                                                                                                                                                            
|           | 
|4.4**      |  | Pledge and Security Agreement, dated March 23, 2004, by and among Grande Communications Holdings, Inc., Grande Communications Networks, Inc., Grande Communications ClearSource, Inc., Grande
Communications, Inc., Grande Communications Houston, Inc., Denton Telecom Holdings I, L.L.C., Denton Telecom Investors I, L.L.C, Denton Telecom Partners I, L.P., and U.S. Bank National Association.
|           | 
|4.5*       |  | Form of 14% Senior Secured Notes due 2011 issued in connection with March 2006 private placement.                                                                                                                                                                                                                                                                                                  
|           | 
|31.1       |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)                                                                                                                                                                                                                                                                                                   
|           | 
|31.2       |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)                                                                                                                                                                                                                                                                                                   
|           | 
|32.1       |  | Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)                                                                                                                                                                                                                                        

---



|* | Incorporated by reference to Grandes Annual Report on Form 10-K filed with the SEC on March 31, 2006.
|- | ------------------------------------------------------------------------------------------------------



|** | Incorporated by reference to Grandes Registration Statement on Form S-1 filed with the SEC on May 18, 2004.
|-- | ------------------------------------------------------------------------------------------------------------



|*** | Incorporated by reference to Grandes Quarterly Report of Form 10-Q filed with the SEC on August 13, 2004.
|--- | ----------------------------------------------------------------------------------------------------------



|**** | Incorporated by reference to Grandes Quarterly Report of Form 10-Q filed with the SEC on November 5, 2004.
|---- | -----------------------------------------------------------------------------------------------------------