**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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




For
      the
      Quarterly Period Ended June 30, 2007




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





**Grande
      Communications Holdings, Inc.**





**(Exact
      name of registrant as specified in its charter)**




**Delaware**
            
            **74-3005133****(State
                or other jurisdiction of **incorporation
                or organization)****
            
            **(I.R.S.
                Employer **Identification
                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 July 31,
      2007 was 12,608,540.










1





**GRANDE
      COMMUNICATIONS HOLDINGS, INC. AND
      SUBSIDIARY**




**Index**




**Page No.**Part
                I.
            
            Financial
                Information
            3Item 1.
            
            Financial
                Statements
            3Condensed
                Consolidated Balance Sheets
            3Condensed
                Consolidated Statements of
                Operations
            4Condensed
                Consolidated Statements of Cash
                Flows
            5Notes
                to Condensed Consolidated Financial
                Statements
            6Item 2.
            
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            8Item 3.
            
            Quantitative
                and Qualitative Disclosures about Market
                Risk
            21Item 4.
            
            Controls
                and Procedures
            21Part
                II.
            
            Other
                Information
            22Item 1.
            
            Legal
                Proceedings
            22Item 1A.
            
            Risk
                Factors
            22Item 2.
            
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            22Item 3.
            
            Defaults
                Upon Senior Securities
            22Item 4.
            
            Submission
                of Matters to a Vote of Security
                Holders
            22Item 5.
            
            Other
                Information
            22Item 6.
            
            Exhibits
            22Signatures
            24





2
 *Index*





**ART
      I**




**FINANCIAL
      INFORMATION**




**ITEM 1.**
            **FINANCIAL
                STATEMENTS**






**GRANDE
      COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY**




**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      thousands, except share data)**




**December 31,**
            
            
            **June
                30,****2006**
            
            
            **2007****(unaudited)****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            43,948
            
            
            $
            32,593Accounts
                receivable, net of allowance for doubtful accounts of $1,193 and
                $839
            
            
            17,241
            
            
            
            18,022Prepaid
                expenses
            
            
            1,823
            
            
            
            2,493Total
                current assets
            
            
            63,012
            
            
            
            53,108Property,
                plant and equipment, net of accumulated depreciation of $261,485
                and
                $286,779
            
            
            271,939
            
            
            
            263,296Intangible
                assets, net
            
            
            1,748
            
            
            
            1,623Debt
                issue costs, net
            
            
            5,115
            
            
            
            4,612Other
                assets
            
            
            3,227
            
            
            
            3,479Total
                assets
            
            $
            345,041
            
            
            $
            326,118**Liabilities
                and stockholders’ equity**Current
                liabilities:Accounts
                payable
            
            $
            11,981
            
            
            $
            13,328Accrued
                liabilities
            
            
            20,436
            
            
            
            19,130Deferred
                revenue
            
            
            6,546
            
            
            
            6,980Current
                portion of long term debt
            
            
            9
            
            
            
            1,916Current
                portion of capital lease obligations
            
            
            3,859
            
            
            
            3,466Total
                current liabilities
            
            
            42,831
            
            
            
            44,820Deferred
                rent
            
            
            1,268
            
            
            
            1,254Deferred
                revenue
            
            
            4,551
            
            
            
            4,244Capital
                lease obligations, net of current portion
            
            
            16,634
            
            
            
            14,927Long
                term debt, net of current portion
            
            
            160,797
            
            
            
            163,337Total
                liabilities
            
            
            226,081
            
            
            
            228,582Commitments
                and contingencies (Note 4)Stockholders’
                equity:Senior
                series preferred stock: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
            
            
            
            35Junior
                series preferred stock:Series
                A preferred stock, $0.001 par value per share; 232,617,839 shares
                authorized, 232,617,838 shares issued and outstanding; liquidation
                preference of $232,618
            
            
            233
            
            
            
            233Series
                B preferred stock, $0.001 par value per share; 20,833,333 shares
                authorized, issued and outstanding; liquidation preference of
                $25,000
            
            
            21
            
            
            
            21Series
                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
            
            
            
            17Series
                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
            
            
            
            115Series
                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
            
            
            
            8Series
                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
            
            
            
            12Series
                H preferred stock, $0.001 par value per share; 30,000,000 shares
                authorized, no shares issued and outstanding
            
            
            —
            
            
            
            —Common
                stock, $0.001 par value per share; 828,835,883 shares authorized,
                13,091,140 and 13,106,140 shares issued, 12,591,140 and 12,606,140
                shares
                outstanding, at December 31, 2006 and June 30, 2007,
                respectively
            
            
            13
            
            
            
            13Additional
                paid-in capital
            
            
            508,736
            
            
            
            509,106Treasury
                stock, at cost
            
            
            (5
            )
            
            
            (5
            )Accumulated
                deficit
            
            
            (390,225
            )
            
            
            (412,019
            )Total
                stockholders’ equity
            
            
            118,960
            
            
            
            97,536Total
                liabilities and stockholders’ equity
            
            $
            345,041
            
            
            $
            326,118




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





3
 *Index*




**GRANDE
      COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY**




**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


**(In
      thousands, except per share data)**




**Three
                Months Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2006**
            
            
            **2007**
            
            
            **2006**
            
            
            **2007**Operating
                revenues
            
            $
            47,557
            
            
            $
            49,852
            
            
            $
            95,192
            
            
            $
            98,247Operating
                expenses:Cost
                of revenues (excluding depreciation and amortization)
            
            
            16,475
            
            
            
            17,506
            
            
            
            33,000
            
            
            
            34,034Selling,
                general and administrative
            
            
            24,825
            
            
            
            23,635
            
            
            
            48,597
            
            
            
            46,064Depreciation
                and amortization
            
            
            14,192
            
            
            
            13,854
            
            
            
            28,075
            
            
            
            26,898Total
                operating expenses
            
            
            55,492
            
            
            
            54,995
            
            
            
            109,672
            
            
            
            106,996Operating
                loss
            
            
            (7,935
            )
            
            
            (5,143
            )
            
            
            (14,480
            )
            
            
            (8,749
            )Other
                income (expense):Interest
                income
            
            
            416
            
            
            
            272
            
            
            
            558
            
            
            
            705Interest
                expense, net of capitalized interest
            
            
            (6,295
            )
            
            
            (6,765
            )
            
            
            (11,401
            )
            
            
            (13,434
            )Net
                gain on sale of assets
            
            
            622
            
            
            
            269
            
            
            
            2,495
            
            
            
            244Total
                other income (expense)
            
            
            (5,257
            )
            
            
            (6,224
            )
            
            
            (8,348
            )
            
            
            (12,485
            )Loss
                before income tax expense
            
            
            (13,192
            )
            
            
            (11,367
            )
            
            
            (22,828
            )
            
            
            (21,234
            )Income
                tax expense
            
            
            —
            
            
            
            (691
            )
            
            
            —
            
            
            
            (560
            )Net
                loss
            
            $
            (13,192
            )
            
            $
            (12,058
            )
            
            $
            (22,828
            )
            
            $
            (21,794
            )Basic
                and diluted net loss per share
            
            $
            (1.06
            )
            
            $
            (0.96
            )
            
            $
            (1.83
            )
            
            $
            (1.73
            )Basic
                and diluted weighted average number of common shares
                outstanding
            
            
            12,503
            
            
            
            12,600
            
            
            
            12,500
            
            
            
            12,596




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





4
 *Index*





**GRANDE
      COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY**




**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**(In
      thousands)**




**Six
                Months Ended****June
                30,****2006**
            
            
            **2007**Cash
                flows from operating
                activities:Net
                loss
            
            $
            (22,828
            )
            
            $
            (21,794
            )Adjustments
                to reconcile net loss to net cash provided by operating
                activities:Depreciation
            
            
            27,937
            
            
            
            26,773Amortization
                of intangible assets
            
            
            138
            
            
            
            125Amortization
                of deferred financing costs
            
            
            497
            
            
            
            503Provision
                for bad debts
            
            
            1,792
            
            
            
            1,274Accretion
                of debt discount
            
            
            512
            
            
            
            639Non-cash
                compensation expense
            
            
            88
            
            
            
            370Net
                gain on sale of assets
            
            
            (2,495
            )
            
            
            (244
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (439
            )
            
            
            (2,055
            )Prepaid
                expenses and other assets
            
            
            (267
            )
            
            
            (922
            )Accounts
                payable
            
            
            (823
            )
            
            
            1,507Accrued
                liabilities
            
            
            (243
            )
            
            
            (1,306
            )Deferred
                revenue
            
            
            (276
            )
            
            
            304Deferred
                rent
            
            
            316
            
            
            
            (14
            )Net
                cash provided by operating activities
            
            
            3,909
            
            
            
            5,160Cash
                flows from investing
                activities:Maturities
                of short term investments
            
            
            350
            
            
            
            —Purchases
                of property, plant and equipment
            
            
            (15,122
            )
            
            
            (19,575
            )Proceeds
                from sale of assets and sales tax refund
            
            
            3,126
            
            
            
            1,512Other
                investing activity
            
            
            (29
            )
            
            
            —Net
                cash used in investing activities
            
            
            (11,675
            )
            
            
            (18,063
            )Cash
                flows from financing activities:Net
                proceeds from borrowings
            
            
            30,581
            
            
            
            3,826Payments
                of long-term debt
            
            
            (466
            )
            
            
            (2,118
            )Deferred
                financing costs
            
            
            (86
            )
            
            
            —Net
                borrowings (repayments) on zero-balance cash account
            
            
            217
            
            
            
            (160
            )Other
                financing activity
            
            
            8
            
            
            
            —Net
                cash provided by financing activities
            
            
            30,254
            
            
            
            1,548Net
                change in cash and cash equivalents
            
            
            22,488
            
            
            
            (11,355
            )Cash
                and cash equivalents, beginning of period
            
            
            26,719
            
            
            
            43,948Cash
                and cash equivalents, end of period
            
            $
            49,207
            
            
            $
            32,593




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




5
 *Index*




**GRANDE
      COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARY**




**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**


**(UNAUDITED)**






**1.
      Background and Basis of Presentation**




The
      primary business of Grande Communications Holdings, Inc. and its consolidated
      subsidiary, Grande Communications Networks, Inc. (collectively the “Company”) is
      providing residential and small and medium sized business customers in Texas
      with a bundled package of cable television, telephone, and broadband Internet
      and other services. The Company provides these services in seven markets in
      the
      state of Texas using local broadband networks that the Company constructed.
      In
      addition, the Company provides broadband transport services to medium and large
      enterprises and communication carriers as well as providing network services
      by
      offering telecommunications and data products to medium and large enterprises
      and communication carriers within the wholesale markets.




The
      accompanying unaudited condensed consolidated financial statements of the
      Company have been prepared in conformity with U.S. generally accepted accounting
      principles (“GAAP”) for interim financial information and with the rules and
      regulations of the Securities and Exchange Commission (the “SEC”) that permit
      reduced disclosure for interim periods. Accordingly, they do not include all
      of
      the information and notes required by GAAP for complete financial statements.
      In
      the opinion of management, these condensed 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 June
      30,
      2006 and 2007, and for the three and six months ended June 30, 2006 and 2007.
      Operating results for the three and six months ended June 30, 2007 are not
      necessarily indicative of the results that may be expected for the year ended
      December 31, 2007. The December 31, 2006 balance sheet is derived from
      the audited financial statements for the year ended December 31, 2006.
      These interim financial statements should be read in conjunction with the
      consolidated financial statements for the year ended December 31, 2006 and
      notes thereto, together with management’s discussion and analysis of financial
      condition and results of operations contained in the Company’s Annual Report for
      the year ended December 31, 2006 on Form 10-K filed with the SEC on
      March 30, 2007.




Preparation
      of financial statements in conformity with GAAP requires management to make
      estimates and assumptions that affect the amounts reported in the consolidated
      financial statements and accompanying disclosures. These estimates are based
      on
      management’s best knowledge of current events and actions the Company may
      undertake in the future. Actual results may ultimately differ from these
      estimates.




**2.
      Income Taxes**




The
      Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109”
(“FIN 48”), on January 1, 2007. FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with FASB Statement No. 109, “Accounting for Income Taxes”, and
      prescribes a recognition threshold and measurement process for financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition.




Based
      on
      our evaluation, we have concluded that there are no significant unrecognized
      tax
      benefits requiring recognition in our financial statements. Our evaluation
      was
      performed for the tax years ended December 31, 2003, 2004, 2005 and 2006,
      the tax years that remain subject to examination by federal jurisdiction as
      of
      June 30, 2007.  The tax years that remain subject to examination by
      the state of Texas include the previously mentioned tax years as well as the
      tax
      year ended December 31, 2002.




We
      may
      from time to time be assessed interest or penalties by major tax jurisdictions,
      although any such assessments historically have been minimal and immaterial
      to
      our financial results. In the event we have received an assessment for interest
      and/or penalties, it has been classified in the financial statements as interest
      expense and selling, general and administrative expense,
      respectively.




Effective
      January 1, 2007, the state of Texas changed its Texas franchise tax, which
      was based
      on
      taxable capital,to a gross margin tax resulting in income tax expense
      for the Company during the three and six months ended June 30,
      2007.  The 2006 Texas franchise tax expense is included as a component
      of selling, general and administrative expense in the accompanying condensed
      consolidated statements of operations for the three and six months ended June
      30, 2006.




6
 *Index*




**3.
      Long Term Debt**




During
      May and June 2007, the Company completed new financing of $3.8 million with
      a
      term of 24 months, which was utilized for the purchase of network
      equipment.  The financing is secured by the network equipment
      purchased with the proceeds of the borrowing and bears interest at an effective
      annual rate of approximately 15.3% with monthly payments based on 4.2%
      multiplied by the total amounts drawn for network equipment
      purchases.  This financing is permitted under the indenture between
      Grande and U.S. Bank National Association, as Indenture Trustee, dated March
      23,
      2004 (the “Indenture”) governing the 14% senior secured notes due 2011 (the
“senior notes”).




**4.
      Contingencies**




***Legal
      Proceedings***




We
      are
      subject to litigation in the normal course of our business. However, there
      are
      no pending proceedings that are currently anticipated to have a material adverse
      effect on our business, financial condition or results of
      operations.




***Insurance***




The
      Company carries a broad range of insurance coverage, including property,
      business, auto liability, general liability, directors and officers, workers’
compensation and an umbrella policy. The Company has not incurred significant
      claims or losses on any of these insurance policies.




The
      Company utilizes self-insurance with respect to employee medical coverage.
      Such
      self-insurance is provided in connection with a plan that includes certain
      stop-loss coverage on a per employee and total claims basis. The Company
      estimates the liability for claims based on Company experience. Additionally,
      the Company utilizes self-insurance for its distribution line equipment.
      Management believes that the risk of loss related to this equipment is not
      significant.




**5.
      Subsequent Events**




***14%
      Senior Secured Notes***




On
      July
      18, 2007, the Company completed a private placement offering of an additional
      $25 million in aggregate principal amount of 14% senior secured notes due 2011
      for gross proceeds of approximately $26.0 million including a premium on
      issuance of $1.0 million.  We expect total debt issuance costs to be
      approximately $0.2 million.  We plan to use the proceeds for capital
      expenditures and working capital purposes. These additional senior notes were
      issued under the Indenture and are part of the same series of senior notes
      as
      those issued in March 2004 and 2006.  The holders of a majority of the
      outstanding principal balance of the senior notes waived the covenant in the
      Indenture limiting additional indebtedness to allow the Company to complete
      this
      offering and we entered into a Supplemental Indenture to reflect this waiver
      on
      July 18, 2007.





7
 *Index*




**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, as
      amended, and Section 21E of the Securities Exchange Act of 1934, as
      amended. 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,” “should,”
“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 “Risk Factors—Risks Relating to Our Business” in our Annual
      Report on Form 10-K, filed with the SEC on March 30, 2007. 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 Consolidated Financial Statements and Notes thereto
      for
      the three-year period ended December 31, 2006, included in our Annual
      Report on Form 10-K filed with the SEC on March 30, 2007.*




*Unless
      we indicate otherwise, references below to “we,” “us,” “our,” “the Company” and
“Grande” mean Grande Communications Holdings, Inc. and our consolidated
      subsidiary, Grande Communications Networks, Inc., taken as a
      whole.*




**Overview**




Grande’s
      primary business is providing residential and small and medium sized business
      customers in Texas with a bundled package of cable television, telephone, and
      broadband Internet and other services. We provide these services in seven
      markets in the state of Texas using local broadband networks that we
      constructed. We refer to the homes and businesses that our network is capable
      of
      providing services to as “marketable homes passed.” As of June 30, 2007, we had
      the ability to market services to 340,000 distinct homes and businesses over
      our
      networks and had 139,558 residential and business customers. Our operating
      revenues were $47.6 million and $49.9 million for the three months ended June
      30, 2006 and 2007, respectively, and $95.2 million and $98.2 million for the
      six
      months ended June 30, 2006 and 2007, respectively.




Grande
      was founded in October 1999 and was funded with $232 million of initial equity
      capital to pursue a retail strategy of constructing broadband networks in order
      to offer bundled cable television, telephone, and broadband Internet services
      to
      customers. Operating revenues from bundled services were $36.7 million and
      $38.8
      million for the three months ended June 30, 2006 and 2007, respectively, and
      $72.6 million and $76.6 million for the six months ended June 30, 2006 and
      2007,
      respectively.




We
      believe that an important measure of our growth potential is the number of
      marketable homes passed by our networks. Marketable homes passed are the number
      of residential and business units, such as single family residential 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. Since 2001, we have grown our marketable homes passed through the
      construction of our networks. The expansion of our networks has, in turn,
      allowed us to pursue a retail strategy of offering bundled cable television,
      telephone and broadband Internet services to residential and business customers.
      We have derived an increasing percentage of our revenues from our bundled
      services and we expect this trend to continue. Because of our local networks
      and
      fixed infrastructure in the markets in which we currently operate, we believe
      we
      can continue to grow our business without incurring the significant capital
      investment required to launch operations in new markets.




In
      addition, we have leveraged our retail metro network build-out with the 2003
      acquisition of a long haul fiber optic network, primarily located in Texas,
      to
      allow us to provide broadband transport services to medium and large enterprises
      and communication carriers. Operating revenues for broadband transport services
      were $1.9 million and $2.3 million for the three months ended June 30, 2006
      and
      2007, respectively, and $4.3 million and $4.7 million for the six months ended
      June 30, 2006 and 2007, respectively.




In
      July
      2000, when our network construction was still in a very early stage, we acquired
      Thrifty Call, which had an established telephone and data network that served
      as
      the platform for the provisioning of residential telephone and broadband
      Internet services and that still provides network services to medium and large
      enterprises and communication carriers in the wholesale market. Operating
      revenues for network services were $9.0 million and $8.8 million for the three
      months ended June 30, 2006 and 2007, respectively, and $18.3 million and $16.9
      million for the six months ended June 30, 2006 and 2007,
      respectively.





8
 *Index*




Our
      network services are primarily provided using our existing infrastructure and
      personnel with minimal incremental operating costs and capital expenditures
      for
      maintenance. By leveraging our brand, communications infrastructure, voice
      and
      data volume, and personnel that predominantly support our core retail business
      and its products, we have gained efficiencies of scale by offering
      telecommunications and data products into the wholesale markets.




We
      have
      incurred net losses for the past five years and expect to continue to incur
      net
      losses in the future. However, we had positive Adjusted EBITDA during the fiscal
      years 2002 through 2006 as well as for the three and six months ended June
      30,
      2006 and 2007. 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.




Our
      financial results depend upon many factors that significantly affect our results
      of operations including, without limitation:




•
            the
                availability of, and our ability to obtain additional funding, if
                necessary,




•
            our
                ability to obtain enough customers for our services to offset the
                costs of
                operating our networks, and




•
            increasing
                programming and other costs.




**Availability
      of Capital**




As
      described more fully under “Liquidity and Capital Resources” below, our
      principal sources of capital going forward will primarily be cash on hand and
      cash flow from operations. If we do not continue to increase the number of
      customers and the average prices received for our services, cash flow from
      operations will be adversely effected and cash on hand will
      decline.




Since
      inception, we have been funded primarily with private equity investments and
      the
      issuance of debt securities. 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. The net proceeds from these private
      placements have been used to fund our network build-out, operations, and our
      acquisitions. As a result of these equity investments and our merger with
      ClearSource in 2002, where stock was used as consideration, we now have $509
      million of total invested equity capital and a base of over 20 institutional
      private equity investors.




Since
      2004 through June 30, 2007, we have also raised net proceeds of approximately
      $155.0 million of senior secured debt. On March 23, 2004, we raised net
      proceeds of approximately $124.5 million in a private placement of 136,000
      units, with each unit consisting of a $1,000 principal amount of 14% senior
      secured note due 2011 (“senior notes”) and a warrant to purchase 100.336 shares
      of our common stock. The senior notes are governed by the indenture between
      Grande and U.S. Bank National Association, as Indenture Trustee, dated
      March 23, 2004 (“Indenture”). 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.




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 Indenture. We used the proceeds for capital expenditures and working capital
      purposes.




On
      July
      18, 2007, the Company completed a private placement offering of an additional
      $25 million in aggregate principal amount of 14% senior secured notes due 2011,
      for gross proceeds of approximately $26.0 million including a premium on
      issuance of $1.0 million.  We expect total debt issuance costs to be
      approximately $0.2 million.  We plan to use the proceeds for capital
      expenditures and working capital purposes. These additional senior notes were
      issued under the Indenture and are part of the same series of senior notes
      as
      those issued in March 2004 and 2006.  The holders of a majority of the
      outstanding principal balance of the senior notes waived the covenant in the
      Indenture limiting additional indebtedness to allow the Company to complete
      this
      offering and we entered into a Supplemental Indenture to reflect this waiver
      on
      July 18, 2007.




During
      May and June 2007, we completed new financing of $3.8 million with a term of
      24
      months, which was utilized for the purchase of network equipment.  The
      financing is secured by the network equipment purchased with the proceeds of
      the
      borrowing and bears interest at an effective annual rate of approximately 15.3%
      with monthly payments based on 4.2% multiplied by the total amounts drawn for
      network equipment purchases.  This financing is permitted under the
      Indenture governing the senior notes.





9
 *Index*




**Marketable
      Homes Passed, Customers and Connections**




We
      report
      marketable homes passed as the number of residential and business units, such
      as
      single family 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 June 30, 2007, our networks passed
      340,000 marketable homes and we had 139,558 residential and business
      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 telephone 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 of June 30, 2007,
      we had 303,517 connections.




**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 business customers. In addition, we derive operating revenues by providing
      broadband transport services to medium and large enterprises and communication
      carriers as well as providing network services by offering telecommunications
      and data products to medium and large enterprises and communication carriers
      within the wholesale markets. 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 billing methods,
      we have presented the following 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
      also 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. Revenue generated from
      equipment sales is an insignificant portion of our total revenues. 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 approximately 5%
      of
      our revenues from cable subscriptions. We began offering security services
      as
      part of our bundle in June 2004. We discontinued actively marketing our security
      services in 2006. However, we continue to provide service to our existing
      customer base. 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 fiber optic 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, and technical
      support.





10
 *Index*




**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, however it does not
      include depreciation or amortization. Our network supports 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.




Our
      cost
      of revenues include the following:




•
            *Cable
                costs.* Programming costs historically have been the largest portion
                of the cost of providing our cable television services and we expect
                this
                trend to continue. We have entered into contracts for cable programming
                through the National Cable Television Cooperative and directly with
                programming providers to provide programming to be aired on our networks.
                We pay a monthly fee for these programming services 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 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 approximately 5% of our
                revenues
                from cable subscriptions.




•
            *Telephone
                costs*. Our cost of revenues associated with delivering telephone
                services to residential and 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 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 network 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
                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
                as
                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 security system monitoring
                by a third-party provider.




•
            *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 employee compensation and
      departmental costs incurred for network design, monitoring and maintenance.
      They
      also include employee compensation and departmental costs incurred for customer
      disconnection and reconnection and service personnel, customer service
      representatives and management, and sales and marketing personnel. Other
      included items are advertising expenses, promotional expenses, corporate and
      subsidiary management, administrative costs, bad debt expense, professional
      fees, property taxes, insurance and facilities costs.




***Depreciation
      and amortization***




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





11
 *Index*




**Operating
      Data**




**Quarter
                Ended****June 30,**
            
            
            **September 30,**
            
            
            **December 31,**
            
            
            **March 31,**
            
            
            **June 30,****2006**
            
            
            **2006**
            
            
            **2006**
            
            
            **2007**
            
            
            **2007**Operating
                Data:Marketable
                homes passed
            
            
            334,528
            
            
            
            335,818
            
            
            
            337,025
            
            
            
            338,852
            
            
            
            340,000Customers
            
            
            136,920
            
            
            
            138,542
            
            
            
            137,542
            
            
            
            139,226
            
            
            
            139,558Number
                of connections:Cable
                television
            
            
            91,156
            
            
            
            93,709
            
            
            
            93,778
            
            
            
            95,585
            
            
            
            96,582Telephone
            
            
            116,463
            
            
            
            117,071
            
            
            
            116,229
            
            
            
            116,679
            
            
            
            116,204Broadband
                Internet and other
            
            
            79,372
            
            
            
            83,229
            
            
            
            85,117
            
            
            
            88,526
            
            
            
            90,731Total
                connections
            
            
            286,991
            
            
            
            294,009
            
            
            
            295,124
            
            
            
            300,790
            
            
            
            303,517Average
                monthly revenue per:Customer
                – bundled services
            
            $
            88.64
            
            
            $
            88.61
            
            
            $
            89.00
            
            
            $
            91.07
            
            
            $
            92.80Cable
                television connection
            
            
            52.15
            
            
            
            52.18
            
            
            
            52.40
            
            
            
            54.56
            
            
            
            55.98Telephone
                connection
            
            
            41.72
            
            
            
            40.73
            
            
            
            40.18
            
            
            
            40.04
            
            
            
            40.48Broadband
                Internet and other connection
            
            
            32.87
            
            
            
            32.30
            
            
            
            31.90
            
            
            
            31.95
            
            
            
            31.73




**Results
      of Operations**




**Three
      Months Ended June 30, 2006 Compared to Three Months Ended June 30,
      2007**




The
      following table sets forth financial data as a percentage of operating revenues
      for the three months ended June 30, 2006 and 2007.




**Three Months Ended****June
                30,****2006**
            
            
            **2007****Consolidated
                Financial Data:**Operating
                revenues:Cable
                television
            
            
            30
            %
            
            
            32
            %Telephone
            
            
            31
            
            
            
            28Broadband
                Internet
            
            
            16
            
            
            
            17Broadband
                transport services
            
            
            4
            
            
            
            5Network
                services
            
            
            19
            
            
            
            18Total
                operating revenues
            
            
            100
            
            
            
            100Operating
                expenses:Cost
                of revenues
            
            
            35
            
            
            
            35Selling,
                general and administrative
            
            
            52
            
            
            
            47Depreciation
                and amortization
            
            
            30
            
            
            
            28Total
                operating expenses
            
            
            117
            
            
            
            110Operating
                loss
            
            
            (17
            )
            
            
            (10
            )Other
                income (expense):Interest
                income
            
            
            1
            
            
            
            1Interest
                expense, net of capitalized interest
            
            
            (13
            )
            
            
            (14
            )Net
                gain on sale of assets
            
            
            1
            
            
            
            —Total
                income (expense)
            
            
            (11
            )
            
            
            (13
            )Loss
                before income tax expense
            
            
            (28
            )
            
            
            (23
            )Income
                tax expense
            
            
            —
            
            
            
            (1
            )Net
                loss
            
            
            (28
            )%
            
            
            (24
            )%





12
 *Index*







*Operating
      Revenues.*Our operating revenues for the three months ended June 30, 2006
      and 2007 were $47.6 million and $49.9 million, respectively, an increase of
      $2.3
      million, or 5%. This increase was driven primarily by a $2.1 million and $0.4
      million increase in bundled services revenues and broadband transport services
      revenues, respectively, partially offset by a $0.2 million decrease in revenues
      from network services.




Operating
      revenues for our bundled services for the three months ended June 30, 2006
      and
      2007 were $36.7 million and $38.8 million, respectively, an increase of $2.1
      million, or 6%. Bundled services revenues increased due to growth in the number
      of connections, from 286,991 as of June 30, 2006 to 303,517 as of June 30,
      2007,
      and, to a lesser extent, from the cable rate increases described
      below.  The additional connections and revenues resulted primarily
      from the continued increase in penetration of existing marketable homes and
      to a
      lesser extent, sales to new marketable homes built during the period from July
      1, 2006 through June 30, 2007.




Operating
      revenues for our cable television services for the three months ended June
      30,
      2006 and 2007 were $14.4 million and $16.1 million, respectively, an increase
      of
      $1.7 million, or 12%. Approximately 57% of the $1.7 million increase in cable
      television services was due to our annual rate increase, which occurred during
      January 2007, as well as increases related to an increase in connections and
      an
      increased number of customers adding premium services and advanced services,
      such as HD and DVR.




Operating
      revenues for our telephone services for the three months ended June 30, 2006
      and
      2007 were $14.6 million and $14.2 million, respectively, a decrease of $0.4
      million, or 3%, primarily due to a 3% decrease in average monthly revenue per
      unit.  Of the decrease in average monthly revenue per unit,
      approximately 55% was due to a regulatory mandated reduction in meet point
      billing access rates.




Operating
      revenues for our broadband Internet and other services for the three months
      ended June 30, 2006 and 2007 were $7.7 million and $8.5 million, respectively,
      an increase of $0.8 million, or 10%, primarily due to a 14% increase in
      connections related to residential high speed Internet service and business
      Ethernet service partially offset by a 3% decrease in average monthly revenue
      per connection.




Operating
      revenues for our broadband transport services for the three months ended June
      30, 2006 and 2007 were $1.9 million and $2.3 million, respectively, an increase
      of $0.4 million, or 21%, as a result of an increase in construction and dark
      fiber sales as well as moderate customer growth.




Operating
      revenues for our network services for the three months ended June 30, 2006
      and
      2007 were $9.0 million and $8.8 million, respectively, a decrease of $0.2
      million, or 2%.  This decrease consisted of a $0.3 million decrease in
      revenues from data services as the result of a $0.2 million decrease in
      reciprocal compensation revenue due to a regulatory mandated reduction as well
      as a decrease in volume from customers.  In addition, there was a $0.2
      million decrease in national directory assistance service revenues due to a
      decrease in customer volume.  These decreases were partially offset by
      an increase in carrier switched services revenues of $0.3 million as a result
      of
      an increase in rates exceeding decreased customer volume.




*Cost
      of Revenues.*Our cost of revenues for the three months ended June 30, 2006
      and 2007 were $16.5 million and $17.5 million, respectively, an increase of
      $1.0
      million, or 6%. Cost of revenues remained consistent as a percentage of revenues
      at 35% for the three months ended June 30, 2006 and 2007.  The
      increase in our cost of revenues was primarily due to an increase in cable
      television services costs of approximately $1.1 million partially offset by
      a
      $0.1 million decrease in network services and broadband transport services
      costs.




*Selling,
      General and Administrative Expense*. Our selling, general and administrative
      expense for the three months ended June 30, 2006 and 2007 was $24.8 million
      and
      $23.6 million, respectively, a decrease of $1.2 million, or 5%. Selling, general
      and administrative expense decreased as a percentage of revenues from 52% to
      47%.  Decreases in selling, general and administrative expense of
      approximately $2.9 million related to property tax, a 2006 nonrecurring early
      termination expense related to a property lease, reductions in contract labor
      charges as sales and customer service positions were brought in-house as well
      as
      decreases in network repairs and maintenance, utilities and other administrative
      expenses all contributed to the overall decrease.  Partially
      offsetting these decreases were $1.7 million of increases related to sales
      and
      marketing expense as we continued to grow the bundled service business,
      compensation primarily related to the sales and customer service positions
      described above, professional services in support of internal control projects
      related to the compliance requirements of the Sarbanes-Oxley Act of 2002 and
      other valuation services, stock based compensation, and other miscellaneous
      expenses.  We expect our selling, general and administrative expense
      to continue to decrease during each period of 2007 compared to the comparable
      period of 2006 as we stabilize the management team, focus on cost reductions
      and
      gain efficiencies.





13
 *Index*




*Depreciation
      and Amortization Expense.*Our depreciation and amortization expense for the
      three months ended June 30, 2006 and 2007 was $14.2 million and $13.9 million,
      respectively, a decrease of $0.3 million, or 2%. The decrease was primarily
      due
      to certain assets that became fully depreciated during the period from July
      2006
      through June 2007.  To a lesser extent, the decrease was also related
      to sales and dispositions occurring during the same period.  These
      decreases were partially offset by depreciation expense related to property,
      plant and equipment additions during the period of July 2006 through June 2007,
      primarily for customer premise equipment, network construction and capitalized
      labor.




*Interest
      Expense*. For the three months ended June 30, 2006 and 2007, our interest
      expense, which includes interest incurred net of capitalized interest, was
      $6.3
      million and $6.8 million, respectively, an increase of $0.5 million, or 8%.
      Our
      interest expense increased primarily due to a decrease in capitalized interest
      (and a corresponding increase in interest expense).  For the three
      months ended June 30, 2006 and 2007, we had capitalized interest of $0.5 million
      and $0.2 million, respectively, a decrease of $0.3 million or 60%.




*Net
      Gain on Sale of Assets*. For the three months ended June 30, 2006 and 2007,
      our net gain on sale of assets was $0.6 million and $0.3 million, respectively,
      a decrease of approximately $0.3 million. The 2006 net gain was primarily due
      to
      the sale of off-net multiple family dwelling units (“MDU”) assets in
      Dallas.  Net proceeds from this closing, which occurred on June 19,
      2006, were $0.6 million.  This was the second closing of the sale of
      assets in Dallas, which were non-strategic in nature and were originally
      acquired in our October 2003 acquisition of Advantex. The net gain recognized
      during 2007 related primarily to (i) amortization of deferred gains related
      to
      the sale and leaseback of Company land and buildings and customer premise
      equipment of approximately $0.1 million and (ii) the sale or disposal of certain
      communications plant, vehicles, network and other equipment.




*Income
      Tax Expense*. For the three months ended June 30, 2007, our income tax
      expense was $0.7 million. Effective January 1, 2007, the state of Texas
      changed its Texas franchise tax, which was based
      on
      taxable capital,to a gross margin Tax resulting in income tax expense
      for the Company during the three months ended June 30, 2007.  The 2006
      Texas franchise tax expense is included as a component of selling, general
      and
      administrative expense in the accompanying condensed consolidated statements
      of
      operations for the three months ended June 30, 2006.





14
 *Index*




**Six
      Months Ended June 30, 2006 Compared to Six Months Ended June 30,
      2007**




The
      following table sets forth financial data as a percentage of operating revenues
      for the six months ended June 30, 2006 and 2007.




**Six Months Ended****June
                30,****2006**
            
            
            **2007****Consolidated
                Financial Data:**Operating
                revenues:Cable
                television
            
            
            30
            %
            
            
            32
            %Telephone
            
            
            31
            
            
            
            29Broadband
                Internet
            
            
            16
            
            
            
            17Broadband
                transport services
            
            
            4
            
            
            
            5Network
                services
            
            
            19
            
            
            
            17Total
                operating revenues
            
            
            100
            
            
            
            100Operating
                expenses:Cost
                of revenues
            
            
            35
            
            
            
            35Selling,
                general and administrative
            
            
            51
            
            
            
            47Depreciation
                and amortization
            
            
            29
            
            
            
            27Total
                operating expenses
            
            
            115
            
            
            
            109Operating
                loss
            
            
            (15
            )
            
            
            (9
            )Other
                income (expense):Interest
                income
            
            
            —
            
            
            
            1Interest
                expense, net of capitalized interest
            
            
            (12
            )
            
            
            (14
            )Other
                income
            
            
            —
            
            
            
            —Net
                gain on sale of assets
            
            
            3
            
            
            
            —Total
                other income (expense)
            
            
            (9
            )
            
            
            (13
            )Loss
                before income tax expense
            
            
            (24
            )
            
            
            (22
            )Income
                tax expense
            
            
            —
            
            
            
            —Net
                loss
            
            
            (24
            )%
            
            
            (22
            )%




*Operating
      Revenues.*Our operating revenues for the six months ended June 30, 2006 and
      2007 were $95.2 million and $98.2 million, respectively, an increase of $3.0
      million, or 3%. This increase was driven primarily by a $4.0 million and $0.4
      million increase in bundled services revenues and broadband transport services
      revenues, respectively, partially offset by a $1.4 million decrease in revenues
      from network services.




Operating
      revenues for our bundled services for the six months ended June 30, 2006 and
      2007 were $72.6 million and $76.6 million, respectively, an increase of $4.0
      million, or 6%. Bundled services revenues increased due to growth in the number
      of connections, from 286,991 as of June 30, 2006 to 303,517 as of June 30,
      2007,
      and, to a lesser extent, from the cable rate increases described
      below.  The additional connections and revenues resulted primarily
      from the continued increase in penetration of existing marketable homes and
      to a
      lesser extent, sales to new marketable homes built during the period from July
      1, 2006 through June 30, 2007.




Operating
      revenues for our cable television services for the six months ended June 30,
      2006 and 2007 were $28.2 million and $31.6 million, respectively, an increase
      of
      $3.4 million, or 12%. Approximately 53% of the $3.4 million increase in cable
      television services was due to our annual rate increase, which occurred during
      January 2007, as well as increases related to an increase in connections and
      an
      increased number of customers adding premium services and advanced services,
      such as HD and DVR.




Operating
      revenues for our telephone services for the six months ended June 30, 2006
      and
      2007 were $29.2 million and $28.1 million, respectively, a decrease of $1.1
      million, or 4%, primarily due to a 3% decrease in average monthly revenue per
      unit.  Of the decrease in average monthly revenue per unit,
      approximately 55% was due to a regulatory mandated reduction in meet point
      billing access rates.




Operating
      revenues for our broadband Internet and other services for the six months ended
      June 30, 2006 and 2007 were $15.2 million and $16.9 million, respectively,
      an
      increase of $1.7 million, or 11%, primarily due to a 14% increase in connections
      related to residential high speed service and business Ethernet service
      partially offset by a 3% decrease in average monthly revenue per
      connection.





15
 *Index*




Operating
      revenues for our broadband transport services for the six months ended June
      30,
      2006 and 2007 were $4.3 million and $4.7, respectively, an increase of $0.4
      million, or 9%, as a result of moderate customer growth as well as an increase
      in construction and dark fiber sales.




Operating
      revenues for our network services for the six months ended June 30, 2006 and
      2007 were $18.3 million and $16.9 million, respectively, a decrease of $1.4
      million, or 8%.  This decrease consisted of a $0.9 million decrease in
      revenues from data services as the result of a $0.5 million decrease in
      reciprocal compensation revenue due to a regulatory mandated reduction as well
      as a decrease in volume from customers.  In addition, there was a $0.2
      million and $0.3 million decrease in revenues from carrier switched services
      and
      national directory assistance service, respectively, due to a decrease in
      customer volume.




*Cost
      of Revenues.*Our cost of revenues for the six months ended June 30, 2006
      and 2007 were $33.0 million and $34.0 million, respectively, an increase of
      $1.0
      million, or 3%. Cost of revenues remained consistent as a percentage of revenues
      at 35% for the six months ended June 30, 2006 and 2007.  The increase
      in our cost of revenues was primarily due to an increase in cable television
      services costs of approximately $2.2 million that was partially offset by a
      $1.0
      million decrease in network services and broadband transport services
      costs.




*Selling,
      General and Administrative Expense*. Our selling, general and administrative
      expense for the six months ended June 30, 2006 and 2007 was $48.6 million and
      $46.1 million, respectively, a decrease of $2.5 million, or 5%. Selling, general
      and administrative expense decreased as a percentage of revenues from 51% to
      47%. Decreases in selling, general and administrative expense of approximately
      $4.7 million related to property tax, a 2006 nonrecurring early termination
      expense related to a property lease, reductions in contract labor charges as
      sales and customer service positions were brought in-house as well as decreases
      in network repairs and maintenance, utilities and other administrative expenses
      all contributed to the overall decrease.  Partially offsetting these
      decreases were $2.2 million of increases related to sales and marketing expense
      as we continued to grow the bundled service business, compensation primarily
      related to the sales and customer service positions described above,
      professional services in support of internal control projects related to the
      compliance requirements of the Sarbanes-Oxley Act of 2002 and other valuation
      services, stock based compensation, and other miscellaneous expenses. We expect
      our selling, general and administrative expense to continue to decrease during
      each period of 2007 compared to the comparable period of 2006 as we stabilize
      the management team, focus on cost reductions and gain
      efficiencies.




*Depreciation
      and Amortization Expense*. Our depreciation and amortization expense for the
      six months ended June 30, 2006 and 2007 was $28.1 million and $26.9 million,
      respectively, a decrease of $1.2 million, or 4%. The decrease was primarily
      due
      to certain assets that became fully depreciated during the period from July
      2006
      through June 2007.  The remaining decrease was related to sales and
      dispositions occurring during the same period and to a $0.7 million reduction in
      depreciation expense related to a sales tax refund as a result of a review
      of
      vendor invoices in the years 2004 and 2005. Because a portion of the sales
      taxes
      associated with those invoices were capitalized as property and equipment and
      were partially depreciated, $0.7 million of the refund was applied as a
      reduction of depreciation expense.   These decreases were
      partially offset by depreciation expense related to property, plant and
      equipment additions during the period of July 2006 through June 2007, primarily
      for customer premise equipment, network construction and capitalized
      labor.




*Interest
      Expense*. For the six months ended June 30, 2006 and 2007, our interest
      expense, which includes interest incurred net of capitalized interest, was
      $11.4
      million and $13.4 million, respectively, an increase of $2.0 million, or 18%.
      Interest expense increased primarily due to the private placement of an
      additional $32.0 million of senior notes in March 2006 as well as a decrease
      in
      capitalized interest (and a corresponding increase in interest expense). For
      the
      six months ended June 30, 2006 and 2007, we had capitalized interest of $1.1
      million and $0.4 million, respectively, a decrease of $0.7 million, or
      64%.




*Net
      Gain on Sale of Assets*. For the six months ended June 30, 2006 and 2007,
      our net gain on sale of assets was $2.5 million and $0.2 million, respectively,
      a decrease of $2.3 million. The 2006 net gain was primarily due to the sale
      of
      off-net MDU assets in Dallas.  Net proceeds from the first closing,
      which occurred on March 31, 2006, were $1.9 million, and net proceeds from
      the
      second closing, which occurred on June 19, 2006, were $0.6
      million.  These assets were non-strategic in nature and were
      originally acquired in our October 2003 acquisition of Advantex. The net gain
      recognized during 2007 related primarily to (i) amortization of deferred gains
      related to the sale and leaseback of Company land and buildings and customer
      premise equipment of approximately $0.18 million and (ii) the sale or disposal
      of certain communications plant, vehicles, network and other
      equipment.





16
 *Index*




*Income
      Tax Expense.*For the six months ended June 30, 2007, our income tax expense
      was $0.6 million. Effective January 1, 2007, the state of Texas changed its
      Texas franchise tax, which was based
      on
      taxable capital,to a gross margin tax resulting in income tax expense
      for the Company during the six months ended June 30, 2007.  The 2006
      Texas franchise tax expense is included as a component of selling, general
      and
      administrative expense in the accompanying condensed consolidated statements
      of
      operations for the six months ended June 30, 2006.




**EBITDA/Adjusted
      EBITDA**




We
      measure our operating
      performance on earnings before interest income, interest expense, income taxes,
      depreciation and amortization, referred to as “EBITDA.” EBITDA is not a measure
      of financial performance under GAAP. 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, apart from the expenses associated with our physical plant or capital
      structure. We manage all areas of our business to 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 GAAP, and should not be considered
      as an alternative to those measurements as an indicator of our
      performance.




The
      Company believes amortization of debt issuance costs and non-cash stock-based
      compensation are similar to amortization expense and interest expense, in that
      it is more useful to report EBITDA net of these amounts to better measure
      operating performance in comparison to prior periods. However, because of the
      nature of these charges, the Company is referring to EBITDA, net of amortization
      of debt issuance costs and non-cash stock-based compensation charges, as
“Adjusted EBITDA.”




Because
      a
      significant portion of our cost of revenues and overhead expenses are generally
      fixed in nature, increasing revenues 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 the result of adding
      residential and 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 Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2006**
            
            
            **2007**
            
            
            **2006**
            
            
            **2007****(in
                thousands)**
            
            
            **(in
                thousands)**Net
                loss as reported
            
            $
            (13,192
            )
            
            $
            (12,058
            )
            
            $
            (22,828
            )
            
            $
            (21,794
            )Add
                back non-EBITDA/Adjusted EBITDA items included in net
                loss:Interest
                income
            
            
            (416
            )
            
            
            (272
            )
            
            
            (558
            )
            
            
            (705
            )Interest
                expense, net of capitalized interest
            
            
            6,295
            
            
            
            6,765
            
            
            
            11,401
            
            
            
            13,434Income
                tax expense
            
            
            —
            
            
            
            691
            
            
            
            —
            
            
            
            560Franchise
                tax expense (benefit)
            
            
            75
            
            
            
            (268
            )
            
            
            150
            
            
            
            (268
            )Depreciation
                and amortization
            
            
            14,192
            
            
            
            13,854
            
            
            
            28,075
            
            
            
            26,898EBITDA
            
            
            6,954
            
            
            
            8,712
            
            
            
            16,240
            
            
            
            18,125Stock-based
                compensation expense
            
            
            55
            
            
            
            254
            
            
            
            88
            
            
            
            370Adjusted
                EBITDA (1)
            
            $
            7,009
            
            
            $
            8,966
            
            
            $
            16,328
            
            
            $
            18,495




**(1)**Adjusted EBITDA includes a net gain on sale of assets of $0.6 million
      and $0.3 million during the three months ended June 30, 2006 and 2007,
      respectively and $2.5 million and $0.2 million during the six months ended
      June
      30, 2006 and 2007, respectively.





17
 *Index*




Adjusted
      EBITDA was $7.0 million and $9.0 million during the three months ended June
      30,
      2006 and 2007, respectively, an increase of $2.0 million, or 29%. The increase
      was primarily due to a $2.3 million increase in revenues as well as a $1.0
      million decrease in selling, general and administrative expenses, excluding
      stock-based compensation and franchise tax expense, partially offset by a
      $1.0 million increase in costs of revenues and a $0.3 million decrease in net
      gain on sale of assets.




Adjusted
      EBITDA was $16.3 million and $18.5 million during the six months ended June
      30,
      2006 and 2007, respectively, an increase of $2.2 million, or 13%. The increase
      was primarily due to a $3.0 million increase in revenues as well as a $2.4
      million decrease in selling, general and administrative expenses, excluding
      stock-based compensation and franchise tax expense, partially offset by a $1.0
      million increase in costs of revenues and a $2.3 million decrease in net gain
      on
      sale of assets.




**Liquidity
      and
      Capital Resources**




***Sources
      and Uses of Funds***




Since
      inception, we have been funded primarily with private equity investments and
      issuance of debt securities. 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 were used to fund our network
      build-out, operations, and our acquisitions. As a result of equity investments
      and our merger with ClearSource in 2002, where stock was used as consideration,
      we now have $509 million of total invested equity capital and a base of over
      20
      institutional private equity investors.




We
      have
      also raised net proceeds of approximately $155.0 million from the sale of our
      senior notes from March 2004 through June 30, 2007. On March 23, 2004, we
      issued $136.0 million principal amount at maturity of senior notes and in March
      2006, we raised net proceeds of approximately $30.5 million in a private
      placement of an additional $32 million in aggregate principal amount of 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 issuance of
      the senior notes in 2004 to repay all amounts outstanding under our
      then-existing senior credit facility. We used the net proceeds from the sale
      of
      the additional senior notes in March 2006 for capital expenditures and working
      capital purposes.




On
      July
      18, 2007, the Company completed a private placement offering of an additional
      $25 million in aggregate principal amount of 14% senior secured notes due 2011
      for gross proceeds of approximately $26.0 million including a premium on
      issuance of $1.0 million.  We expect total debt issuance costs to be
      approximately $0.2 million.  We plan to use the proceeds for capital
      expenditures and working capital purposes. These additional senior notes were
      issued under the Indenture and are part of the same series of senior notes
      as
      those issued in March 2004 and 2006.  The holders of a majority of the
      outstanding principal balance of the senior notes waived the covenant in the
      Indenture limiting additional indebtedness to allow the Company to complete
      this
      offering and we entered into a Supplemental Indenture to reflect this waiver
      on
      July 18, 2007.




During
      May and June 2007, we completed new financing of $3.8 million with a term of
      24
      months, which was utilized for the purchase of network equipment.  The
      financing is secured by the network equipment purchased with the proceeds of
      the
      borrowing and bears interest at an effective annual rate of approximately 15.3%
      with monthly payments based on 4.2% multiplied by the total amounts drawn for
      network equipment purchases.  This financing is permitted under the
      Indenture governing the senior notes.




At
      June
      30, 2007, we had total cash and cash equivalents of $32.6 million and $163.3
      million of long-term debt outstanding, net of current portion, and net of
      discounts of $6.6 million. In April 2007, we paid $11.8 million of interest
      due
      on our senior notes.




As
      of
      June 30, 2007, we had net working capital of $8.3 million, compared to net
      working capital of $20.2 million as of December 31,
      2006.  Excluding the impact of the $11.8 million April 2007 payment of
      interest on our senior notes, which reduced both cash and accrued liabilities,
      the $11.9 million decrease in working capital resulted primarily from a $13.8
      million increase in current liabilities partially offset by a $1.9 million
      increase in current assets.




Our
      primary sources of liquidity are cash on hand and cash flows from operating
      activities. Provided that we meet our cash flow projections in our current
      business plan, we expect that we will not require additional financing and
      that
      we will manage our cash position above $20 million in accordance with the
      covenant set forth in the Indenture over the next twelve months. 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.





18
 *Index*




We
      may
      need additional financing to fund our operations or to undertake initiatives
      not
      contemplated by our business plan or to 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. These financings could increase
      our
      level of indebtedness or result in dilution to our equity holders. Additionally,
      we currently cannot call our existing senior notes until April 2008, which
      limits our near term ability to refinance our senior notes in the event better
      pricing and terms are available to us in the market.




***Cash
      Flows from Operating Activities***




Net
      cash
      provided by operations totaled $3.9 million and $5.2 million for the six months
      ended June 30, 2006 and 2007, respectively. The net cash flow activity related
      to operations consists primarily of changes in operating assets and liabilities
      and adjustments to net loss for non-cash transactions including:




•
            depreciation
                and amortization expense;


•
            amortization
                of deferred financing costs;


•
            provision
                for bad debt;


•
            net
                gain on sale of assets; and


•
            non-cash
                compensation expense.




Depreciation
      and amortization for the six months ended June 30, 2006 and 2007 was $28.1
      million and $26.9 million, respectively. Net gains on the sale of assets for
      the
      six months ended June 30, 2006 and 2007 were $2.5 million and $0.2 million,
      respectively.  Other non-cash charges for the six months ended June
      30, 2006 and 2007 were $2.9 million and $2.8 million, respectively.




As
      of
      June 30, 2007, accrued liabilities included $5.9 million related to the interest
      due on our senior notes, which will be paid on October 1, 2007.




***Cash
      Flows from Investing Activities***




Our
      net
      cash used in investing activities for the six months ended June 30, 2006 and
      2007 was $11.7 million and $18.1 million, respectively. These net cash outflows
      are primarily due to the purchase of customer premise equipment, installation
      costs and other capital assets in both 2006 and 2007. Cash flows used in
      investing activities for the six months ended June 30, 2006 and 2007 consisted
      primarily of $15.1 million and $19.6 million in property, plant and equipment
      purchases, respectively, partially offset by $3.1 million and $1.5 million
      in
      proceeds, primarily related to the 2006 sales of off-net MDU assets in Dallas
      and the 2007 sales tax refund and other sales of certain property, plant and
      equipment, respectively.




***Cash
      Flows from Financing Activities***




Our
      net
      cash provided by financing activities for the six months ended June 30, 2006
      and
      2007 was $30.3 million and $1.5 million, respectively. Cash flows from financing
      activities in the six months ended June 30, 2006 consisted primarily of the
      net
      proceeds from the private placement of an additional $32 million in aggregate
      principal amount of senior notes.  Cash flows from financing
      activities for the six months ended June 30, 2007 consisted primarily of $3.8
      million received in financing from secured borrowings partially offset by $2.1
      million in payments on capital leases.




**Capital
      Expenditures**




We
      had
      capital expenditures of approximately $15.1 million and $19.6 million, including
      capitalized interest, during the six months ended June 30, 2006 and 2007,
      respectively. The increase of $4.5 million is primarily due to capital equipment
      purchases related to our long haul fiber optic network upgrade. The Indenture
      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 expenditure amounts
      described above primarily relate to: network construction; initial installation
      costs; the purchase of customer premise equipment, such as cable set-top boxes
      and cable modems; corporate and network equipment, such as switching and
      transport equipment; and billing and information systems.




We
      anticipate spending approximately $30 million to $35 million,
      excluding capitalized interest, in capital expenditures during the year ended
      December 31, 2007. 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.


19
 *Index*




**Contractual
      Obligations and Commercial Commitments**




The
      following table represents contractual obligations at June 30,
      2007:




**Payments
                  Due by Period****2007**
              
              
              **2008**
              
              
              **2009**
              
              
              **2010**
              
              
              **2011**
              
              
              **2012
                  &**
                **Beyond**
              
              
              **Total****(In
                  thousands)**Long-term
                  debt and related interest obligations
              
              $
              12,567
              
              
              $
              25,454
              
              
              $
              25,388
              
              
              $
              23,524
              
              
              $
              179,760
              
              
              $
              —
              
              
              $
              266,693Capital
                  lease obligations
              
              
              2,547
              
              
              
              5,003
              
              
              
              2,494
              
              
              
              1,750
              
              
              
              1,654
              
              
              
              19,290
              
              
              
              32,738Operating
                  lease obligations
              
              
              1,999
              
              
              
              3,794
              
              
              
              3,255
              
              
              
              2,239
              
              
              
              1,929
              
              
              
              10,524
              
              
              
              23,740Maintenance
                  obligations
              
              
              461
              
              
              
              1,046
              
              
              
              1,046
              
              
              
              1,027
              
              
              
              1,027
              
              
              
              9,153
              
              
              
              13,760Purchase
                  obligations
              
              
              364
              
              
              
              2,747
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              3,111Total
              
              $
              17,938
              
              
              $
              38,044
              
              
              $
              32,183
              
              
              $
              28,540
              
              
              $
              184,370
              
              
              $
              38,967
              
              
              $
              340,042


During
      the six months ended June 30, 2007, our aggregate contractual obligations
      decreased approximately $19 million compared to those previously described
      in
      Part II, Item 7 included in Grande’s Annual Report on Form 10-K for the year
      ended December 31, 2006.  The decrease is primarily related to
      payments on capital and operating leases and maintenance and purchase
      obligations as well as the semi-annual $11.8 million interest payment on the
      senior notes, partially offset by new network equipment financing, office space
      and vehicle operating leases.




*Long-term
      Debt.* On March 23, 2004, the Company completed a private placement
      offering for 136,000 units, with each unit consisting of (1) $1,000 of
      senior notes and (2) a warrant to purchase 100.336 shares of common stock.
      The senior notes accrue interest at the rate of 14% per annum with the
      interest payable semi-annually in cash 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 note due 2011. These additional notes
      were issued under the Indenture and are part of the same series of senior notes
      as those issued in March 2004.




On
      July
      18, 2007, the Company completed a private placement offering of an additional
      $25 million in aggregate principal amount of 14% senior secured notes due 2011,
      for gross proceeds of approximately $26.0 million including a premium on
      issuance of $1.0 million.  We expect total debt issuance costs to be
      approximately $0.2 million.  We plan to use the proceeds for capital
      expenditures and working capital purposes. These additional senior notes were
      issued under the Indenture and are part of the same series of senior notes
      as
      those issued in March 2004 and 2006.  The holders of a majority of the
      outstanding principal balance of the senior notes waived the covenant in the
      Indenture limiting additional indebtedness to allow the Company to complete
      this
      offering and we entered into a Supplemental Indenture to reflect this waiver
      on
      July 18, 2007.




The
      Indenture contains covenants that, among other things, limit our ability
      to:




•
            incur
                additional indebtedness, issue disqualified capital stock (as defined
                in
                the Indenture) and, in the case of our restricted subsidiary, issue
                preferred stock;




•
            create
                liens on our assets;




•
            pay
                dividends on, redeem or repurchase our capital stock or make other
                restricted payments;




•
            make
                investments in other companies;




•
            enter
                into transactions with affiliates;




•
            enter
                into sale and leaseback
                transactions;




•
            sell
                or make dispositions of assets;




•
            place
                restrictions on the ability of our subsidiary to pay dividends or
                make
                other payments to us; and




•
            engage
                in certain business activities.




In
      addition, the Indenture contains a covenant restricting our 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.




The
      Indenture also contains customary events of default, including
      nonpayment of principal or interest, violations of covenants, cross default
      and
      cross acceleration to certain other indebtedness and material judgments and
      liabilities.


20
 *Index*




During
      May and June 2007, we completed new financing of $3.8 million with a term of
      24
      months, which was utilized for the purchase of network equipment.  The
      financing is secured by the network equipment purchased with the proceeds of
      the
      borrowing and bears interest at an effective annual rate of approximately 15.3%
      with monthly payments based on 4.2% multiplied by the total amounts drawn for
      network equipment purchases.  This financing is permitted under the
      Indenture governing the senior notes.




**Critical
      Accounting Policies and Estimates**




Our
      consolidated financial statements are prepared in accordance with GAAP. 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.




There
      have been no material changes to the critical accounting policies and estimates
      previously described in Part II, Item 7 included in Grande’s Annual Report on
      Form 10-K for the year ended December 31, 2006.




**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 June 30, 2007.
      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 subsidiary, 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 three months ended June 30,
      2007, 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.




21
 *Index*




**PART
      II**




**OTHER
      INFORMATION**




**ITEM 1.**
            **LEGAL
                PROCEEDINGS**




We
      are
      subject to litigation in the normal course of our business. However, there
      are
      no 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, 2006.




**ITEM 2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**




None.




**ITEM 3.**
            **DEFAULTS
                UPON SENIOR
                SECURITIES**




None.




**ITEM 4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**




None.




**ITEM 5.**
            **OTHER
                INFORMATION**




None.




**ITEM 6.**
            **EXHIBITS**




Unless
      designated by an asterisk
      indicating that such document has been filed herewith, the Exhibits listed
      below
      have been heretofore filed by the Company pursuant to Section 13 or 15(d)
      of the Exchange Act and are hereby incorporated herein by reference to the
      pertinent prior filing.




**Exhibit****No**
            
            **Description**3.1
            
            Restated
                Certificate of Incorporation of Grande Communications Holdings, Inc.
                (previously filed as exhibit 3.1 to Form 10-K dated March 31,
                2006).3.2
            
            Bylaws
                of Grande Communications Holdings, Inc. (previously filed as exhibit
                3.2
                to Form S-1 dated May 18, 2004).3.3
            
            Amendment
                No. 1 to Bylaws of Grande Communications Holdings, Inc. (previously
                filed
                as exhibit 3.3 to Form 10-Q dated November 5,
                2004).3.4
            
            Amendment
                No. 2 to Bylaws of Grande Communications Holdings, Inc. (previously
                filed
                as exhibit 3.4 to Form 10-K dated March 30, 2007).4.6
            
            Supplemental
                Indenture No. 1, dated as of July 18, 2007, by and among Grande
                Communications Holdings, Inc., the Guarantors named therein and U.S.
                Bank
                National Association (previously filed as exhibit 10.1 to Form 8-K
                dated
                July 23, 2007).10.1
            
            Purchase
                Agreement dated July 6, 2007 by and among Grande Communications Holdings,
                Inc., Grande Communications Networks, Inc., Goldman Sachs & Co.,
                Highland Crusader Offshore Partners, L.P. Communications Media Advisors,
                LLC and Highland Capital Management, L.P. (previously filed as Exhibit
                10.1 to Form 8-K dated July 11, 2007).10.2
            
            Schedule
                No. 05, dated May 2, 2007, between Varilease Finance, Inc. as Secured
                Party, and Grande Communications Holdings, Inc., as Co-Debtor and
                Grande
                Communications Networks, Inc. as Co-Debtor to the Master Lease Agreement
                dated as of March 14, 2006 between Varilease Finance, Inc., Grande
                Communications Holdings, Inc. and Grande Communications Networks,
                Inc.  (Secured Credit Facility) (previously filed as Exhibit
                10.17 Post Effective Amendment No. 3 to Form S-1 dated May 23,
                2007).24*
            
            Power
                of Attorney of Grande Communications Holdings, Inc. (included on
                signature
                page).





22
 *Index*





**Exhibit****No**
            
            **Description**


31.1*
            
            Certification
                of the President and Chief Executive Officer pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
                1350).31.2*
            
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).32.1*
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
                1350).





*
            Filed
                herewith.




23
 *Index*




**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:
              August 14, 2007
            By:
            /s/    Michael
                L. Wilfley**Michael
                L. Wilfley****Chief
                Financial Officer****(Duly
                Authorized Officer and Principal Financial
                Officer)**






24