##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 
 FORM 10-K   Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the fiscal year ended December 31, 2003 Commission File Numbers:
    
    333-72440333-72440-01
 Mediacom Broadband LLC
Mediacom Broadband Corporation* (Exact names of Registrants as specified in their charters)
 Delaware
Delaware(State or other jurisdiction of
incorporation or organization)
    
    06-1615412
06-1630167(I.R.S. Employer
Identification Numbers)
 100 Crystal Run Road
Middletown, New York 10941(Address of principal executive offices)(845) 695-2600(Registrants telephone number) Securities registered pursuant to Section 12(b) of the Exchange Act:
None Securities registered pursuant to Section 12(g) of the Exchange Act:
None Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: Not Applicable Indicate by checkmark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Act). Yes  No X State the aggregate market value of the common equity held by
non-affiliates of the Registrants: Not Applicable Indicate the number of shares outstanding of the Registrants common
stock: Not Applicable *Mediacom Broadband Corporation meets the conditions set forth in General
Instruction I (1) (a) and (b) of Form 10-K and is therefore filing this form
with the reduced disclosure format.




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MEDIACOM BROADBAND LLC
2003 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS  
 PagePART IItem 1.
    
    Business
    
    
    4Item 2.
    
    Properties
    
    
    26Item 3.
    
    Legal Proceedings
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    26PART IIItem 5.
    
    Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    27Item 6.
    
    Selected Financial Data
    
    
    28Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    31Item 7A.
    
    Quantitative and
Qualitative Disclosures about Market Risk
    
    
    47Item 8.
    
    Financial Statements and Supplementary Data
    
    
    48Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    79Item 9A.
    
    Controls and Procedures
    
    
    79PART IIIItem 10.
    
    Directors and Executive Officers of the Registrants
    
    
    80Item 11.
    
    Executive Compensation
    
    
    83Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    83Item 13.
    
    Certain Relationships and Related Transactions
    
    
    83Item 14.
    
    Principal Accountant Fees and Services
    
    
    84PART IVItem 15.
    
    Exhibits, Financial Statement Schedule and Reports on Form 8-K
    
    
    85EX-14.1: CODE OF ETHICSEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-31.1: CERTIFICATIONSEX-31.2: CERTIFICATIONSEX-32.1: CERTIFICATIONSEX-32.2: CERTIFICATIONS
  2




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Mediacom Broadband LLC was organized as a Delaware limited liability
company in 2001 and is a wholly-owned subsidiary of Mediacom Communications
Corporation, a Delaware corporation. Mediacom Broadband Corporation was
organized as a Delaware corporation in 2001 and is a wholly-owned subsidiary of
Mediacom Broadband LLC. Mediacom Broadband Corporation was formed for the sole
purpose of acting as co-issuer with Mediacom Broadband LLC of debt securities
and does not conduct operations of its own. References in this Annual Report to we, us, or our are to Mediacom
Broadband LLC and its direct and indirect subsidiaries, unless the context
specifies or requires otherwise. References in this Annual Report to MCC are
to Mediacom Communications Corporation. Cautionary Statement Regarding Forward-Looking Statements You should carefully review the information contained in this Annual
Report and in other reports or documents that we file from time to time with
the Securities and Exchange Commission (the SEC). In this Annual Report, we
state our beliefs of future events and of our future financial performance. In
some cases, you can identify those so-called forward-looking statements by
words such as may, will, should, expects, plans, anticipates,
believes, estimates, predicts, potential, or continue or the negative
of those words and other comparable words. You should be aware that those
statements are only our predictions. Actual events or results may differ
materially. In evaluating those statements, you should specifically consider
various factors, including the risks discussed in this Annual Report and other
reports or documents that we file from time to time with the SEC. Those
factors may cause our actual results to differ materially from any of our
forward-looking statements. All forward-looking statements attributable to us
or a person acting on our behalf are expressly qualified in their entirety by
this cautionary statement. 3




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##### Table of Contents



PART I 
 ITEM 1. BUSINESS Our Manager Mediacom Communications Corporation, our parent and manager, is currently
the nations eighth largest cable television company based on customers served
and the leading cable operator focused on serving the smaller cities and towns
in the United States. Mediacom Communications provides its customers with a
wide array of broadband products and services, including traditional analog
video services, digital television, video-on-demand, high-definition television
and high-speed Internet access. As of December 31, 2003, our managers cable
systems, which are owned and operated through the operating subsidiaries of
Mediacom Broadband LLC and Mediacom LLC, passed approximately 2.76 million
homes and served approximately 1.54 million basic subscribers in 23 states. A
basic subscriber is a customer that subscribes to a package of basic cable
television services. Our manager was founded in July 1995 by Rocco B.
Commisso, its Chairman and Chief Executive Officer, and its Class A common
stock is traded on The Nasdaq National Market under the symbol MCCC. Mediacom Broadband LLC We are a wholly-owned subsidiary of our manager. Prior to June 29, 2001,
we had no operations or significant assets. On June 29, 2001, we acquired from
AT&T Broadband, LLC cable systems serving approximately 94,000 basic
subscribers in the state of Missouri for a purchase price of approximately
$300.0 million in cash. On July 18, 2001, we acquired from AT&T Broadband
cable systems serving approximately 706,000 basic subscribers in the states of
Georgia, Illinois and Iowa for an aggregate purchase price of approximately
$1.76 billion in cash. Many of our cable systems are located in
markets that are contiguous with, or in close proximity to, cable
systems owned and operated by Mediacom LLC, a wholly-owned subsidiary
of our manager. Business Strategy We believe that our high-speed, interactive broadband network is the
superior platform for the delivery of advanced video, data and voice products
and services. Our strategy is to use the capabilities of our broadband network
to expand the products and services we offer our subscribers, attract new
customers and diversify our revenue streams. We believe that the investment in
our broadband network and facilities, together with our attractive bundled
products and services, reliable customer service and local community presence
will enable us to execute our strategy and compete effectively in our markets. Technology In 2003, we completed our planned network upgrade program that
significantly increased bandwidth and enabled interactivity. As of December
31, 2003, approximately 99% of our cable network was upgraded with 550MHz to
870MHz bandwidth capacity and about 97% of our homes passed were activated with
two-way communications capability. Expressed in megahertz, or MHz, bandwidth
represents a systems capacity to deliver telecommunications services. Our upgrade program increased our cable systems network capacity and
reliability, and the quality of the service that they deliver. This has allowed
us to introduce additional video programming and other products and services,
including digital video, video-on-demand, or VOD, high-definition television,
or HDTV, digital video recorders, or DVRs, and high-speed Internet access or
cable modem service. In addition, beginning in the fourth quarter of
2004, we plan
to introduce in certain markets Internet protocol
telephony service, which is sometimes referred to as
Voice-over-Internet-Protocol, or VoIP, telephony. 4




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Bundling We plan to leverage the capacity and flexibility of our upgraded broadband
network, as we increasingly emphasize our offerings of bundled products and
services. A bundled customer is one who subscribes to two or more of our
primary services. Bundled products and services offer our subscribers key
benefits such as a single provider contact for ordering, provisioning, billing
and customer care. We currently offer video and data bundles, and when we
introduce telephony we will be able to offer a triple-play bundle of video,
data and voice. The availability of our multiple products and services in most of our
footprint has allowed us to offer bundled service to most of our subscribers.
As of December 31, 2003, our digital cable service was available to 98% of our
basic subscribers, and we served approximately 231,600 digital customers. Our
VOD and HDTV services were available to approximately 60% and 85% of our
digital customers. In addition, our high-speed Internet access was marketed to
approximately 97% of the homes passed by our cable systems, and we served
approximately 157,800 data customers. Customer Service Attaining higher levels of customer satisfaction is critical to our
success in the increasingly competitive environment we face today. We continue
to invest in our customer care personnel and call center technology to improve
our capabilities in customer service and have developed and attained internal
customer service standards that meet or exceed those standards established by
the National Cable and Telecommunications Association. In 2003, we invested in
virtual contact technology across our call centers and raised our level of
customer service and improved the productivity of our call center personnel. Community Presence When
our company commenced operations in 1996, one of our key objectives
was to bridge the digital divide that had developed between the smaller
cities and towns and the large urban markets in the United States. Over the
past several years we have made significant investments in our cable systems,
and as a result, substantially all of the homes in our markets now have access
to the latest in broadband products and services. We continue our efforts to build good relationships with the communities
we serve by participating in a wide range of local educational and community
service initiatives. Our major company-wide programs include the Mediacom
Cable in the Classroom program which provides more than 1,373 schools with
free cable service and, where available, high-speed Internet access. We also
provide free cable service to government buildings, libraries, and
not-for-profit hospitals in our franchise areas. We also develop and offer
unique local programming in our communities. Corporate Address and Website Our managers principal executive offices are located at 100 Crystal Run
Road, Middletown, New York 10941, and our managers telephone number at that
address is (845) 695-2600. Our managers website is located at
www.mediacomcc.com. We have made available free of charge through our
managers website (follow the Corporate Info link to the Investor Relations tab
to Annual Reports/SEC Filings) our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 as soon as reasonably practicable after such material was
electronically filed with, or furnished to, the Securities and Exchange
Commission. The information on our managers website is not part of this
Annual Report. Products and Services Through our one operating segment, broadband services, we offer our
customers an array of traditional analog video services, also referred to as
our core cable television services. In addition, we offer to a significant
portion of our customer base advanced broadband products and services,
including digital cable television, VOD, HDTV and high-speed Internet access.
We introduced DVRs in March 2004 and plan to launch VoIP telephony
service in certain cable systems during the fourth quarter of 2004. 5




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Traditional Analog Video Services We receive the majority of our revenues from subscription services.
Subscribers typically pay us on a monthly basis and generally may discontinue
services at any time. Monthly subscription rates and related charges vary
according to the type of service selected and the type of equipment used by
subscribers. We design both our basic channel line-up and our additional channel
offerings for each system according to demographics, programming preferences,
channel capacity, competition, price sensitivity and local regulation. Our
core cable television service offerings are presented in an analog format and
include the following in most of our cable systems: Limited Basic Service.Our limited basic service includes, for a monthly
fee, local broadcast channels, network and independent stations, limited
satellite-delivered programming, and local public, government, home-shopping
and leased access channels. Expanded Basic Service.Our expanded basic service includes, for an
additional monthly fee, various satellite-delivered channels such as CNN, MTV,
USA Network, ESPN, Lifetime, Nickelodeon and TNT. Premium Service.Our premium services are satellite-delivered channels
consisting principally of feature films, original programming, live sports
events, concerts and other special entertainment features, usually presented
without commercial interruption. These services included HBO, Cinemax,
Showtime, The Movie Channel and Starz/Encore. Such premium programming services
are offered by our systems both on a per-channel basis and as part of premium
service packages designed to enhance customer value. Pay-Per-View Service.Our pay-per-view services allow customers to pay to
view a single showing of a feature film, live sporting event, concert and other
special event, on an unedited, commercial-free basis. Such pay-per-view
services are offered by us on a per-viewing basis, with subscribers only paying
for programs which they select for viewing. Digital Services Digital Cable.Digital video technology has significantly enhanced and
expanded the video and other service offerings we provide to our customers.
This technology has enabled us to improve picture quality and reliability, and
to greatly increase our channel offerings through the use of compression, which
converts one analog channel into eight to 12 digital channels. Customers who subscribe to our digital cable offerings receive up to 230
analog and digital channels in many of our systems. We currently offer our
customers several digital cable programming packages that include digital basic
channels, multichannel premium services, pay-per-view movie and sports
channels, digital music and an interactive on-screen program guide. Subscribers typically pay us on a monthly basis for digital cable service
and generally may discontinue services at any time. A digital converter is
required to receive our digital cable service. Monthly rates vary generally
according to the level of service and the number of digital converters selected
by the subscriber. As of December 31, 2003, our digital cable service was
available to approximately 98% of our basic subscribers and we served
approximately 231,600 digital customers. We have also introduced new digital video services to bolster our
competitive position and general additional video revenues. Video-On-Demand.Video-on-demand is an interactive television service
that provides access to movies, special events or general interest titles on
demand with the ability to pause, rewind and fast forward selected programming.
Customers can watch their selected feature repeatedly during the viewing
window, which typically runs up to 24 hours, or stop the selection before it is
completed and return to it at a later time during the viewing window. Fees are
typically charged on a per-selection basis, although certain on-demand
programming services are available free of charge (such as Mag Rack), or for a
flat monthly fee (such as premium services), also known as subscription-based
video-on-demand. We currently offer VOD service to approximately 60% of our
digital customers. During 2004, we plan to make VOD service available in
additional cable systems representing another 15% of our digital customers and
increase the amount of content available to our customers via this service. 6




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High-Definition Television.High-definition television signals have twice
the color resolution and six times the picture sharpness of standard television
signals. A television set capable of receiving and displaying high-definition
signals is required to utilize this service. Our HDTV service requires the use
of an advanced digital converter for which we charge an additional monthly fee.
This service typically includes high-definition signals for certain premium
programming networks and local broadcast stations. We currently offer HDTV
service in markets serving approximately 85% of our digital customers. During
2004, we plan to make HDTV service available in additional cable systems
representing another 5% of our digital customers and to increase the amount of
HDTV content available to our customers. Digital
Video Recorders.A digital video recorder, or DVR, has the
ability to
store programs on a hard disk drive contained in an advanced digital converter.
DVRs provide consumers with the ability to view recorded programming at will,
and to pause and rewind live broadcasts. We began deploying digital video
recorders in certain of our cable systems in March 2004 and plan to expand to
additional markets during the balance of the year. High-Speed Internet Access Our broadband cable network enables our high-speed Internet customers,
also referred to as cable modem customers, to transmit data up to 100 times
faster than traditional telephone modem technologies. Our cable modem customers
can receive and transmit large files over the Internet in a fraction of the
time required when using the traditional telephone modem. Our high-speed
Internet access service also allows much quicker response times when surfing
the Internet, providing a richer experience for the customer that capitalizes
on the significant capacity of our broadband cable network. In addition, cable
modem service eliminates the need to use a telephone line to access the
Internet. It is also always activated, and as a result, the customer does not
need to dial into an Internet service provider and await authorization.
Monthly subscription rates and related charges vary according to whether the
customer leases or owns the cable modem and whether the customer subscribes to
our video services. As of December 31, 2003, our cable modem service was
marketed to about 97% of our homes passed, and we served approximately 157,800
data customers. Commercial Data Services During 2003, we began providing commercial high-speed Internet access
services to small and medium-sized businesses. This commercial cable modem
service allows businesses with multiple users to select from various service
options to suit their needs. We are currently rolling out on a broader scale advanced customized data
services to large commercial customers. We have the flexibility to provide
enterprise network services to these customers because as part of our network
upgrade and headend consolidation programs we deployed over 2,000 route miles
of fiber optic cable and created large high-capacity regional networks with
excess capacity. These services include virtual private networks, wide area
networks and point-to-point data communication. Telecommunications Services We
are in active development of a VoIP platform, from which we
plan to launch voice services in certain cable systems in the fourth
quarter of 2004. VoIP technology converts voice signals into data packets that
are transmitted over the Internet and then reconverted into voice signals at
the destination. VoIP technology is an alternative to traditional phone
networks that use dedicated circuits for each call. We believe the ability to
offer customers a bundle of video, voice and data services from a single
provider using its own network will be unique in nearly all of our markets. Advertising We generate revenues from the sale of local advertising on
satellite-delivered channels such as CNN, MTV, USA Network, ESPN, Lifetime,
Nickelodeon and TNT. We have an advertising sales infrastructure that includes
in-house production facilities, production and administrative employees and a
locally based sales workforce. We are extending our advertising infrastructure
to our cable systems that have third-party advertising agreements that are
expiring. In addition, the increasing concentration of customers served by our
headend facilities as a result of our headend consolidation program has also
positioned us to increase our advertising sales. 7




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Description of Our Cable Systems Overview The following table provides an overview of selected operating and cable
network data for our cable systems for the years ended: 2003
    
    2002
    
    2001Operating Data:Core VideoHomes passed(1)
    
    
    1,472,500
    
    
    
    1,463,000
    
    
    
    1,430,000Basic subscribers(2)
    
    
    819,300
    
    
    
    840,000
    
    
    
    824,000Basic penetration(3)
    
    
    55.6
    %
    
    
    57.4
    %
    
    
    57.6
    %Digital CableDigital-ready basic subscribers(4)
    
    
    804,000
    
    
    
    838,000
    
    
    
    800,000Digital customers(5)
    
    
    231,600
    
    
    
    238,000
    
    
    
    233,000Digital penetration(6)
    
    
    28.8
    %
    
    
    28.4
    %
    
    
    29.1
    %DataData-ready homes passed(7)
    
    
    1,435,000
    
    
    
    1,270,000
    
    
    
    815,000Data-ready homes marketed(8)
    
    
    1,430,000
    
    
    
    1,220,000
    
    
    
    810,000Data customers(9)
    
    
    157,800
    
    
    
    110,000
    
    
    
    77,000Data penetration(10)
    
    
    11.0
    %
    
    
    9.0
    %
    
    
    9.5
    %Revenue Generating Units(11)
    
    
    1,208,700
    
    
    
    1,188,000
    
    
    
    1,134,000Customer Relationships(12)
    
    
    834,100
    
    
    
    851,000
    
    
    
    833,000Cable Network Data:Miles of plant
    
    
    19,750
    
    
    
    19,500
    
    
    
    19,100Density(13)
    
    
    75
    
    
    
    75
    
    
    
    75Percentage of cable network at
550MHz to 870MHz
    
    
    99
    %
    
    
    95
    %
    
    
    55
    %
   (1)
    
    Represents the estimated number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
systems service area.(2)
    
    Represents a dwelling with one or more television sets that receives a
package of over-the-air broadcast stations, local access channels or
certain satellite-delivered cable television services. Accounts that are
billed on a bulk basis, which typically receive discounted rates, are
converted into full-price equivalent basic subscribers by dividing total
bulk billed basic revenues of a particular system by the most prevalent
combined limited and expanded cable rate charged to basic subscribers in
that system. Basic subscribers include connections to schools, libraries,
local government offices and employee households that may not be charged
for limited and expanded cable services, but may be charged for premium
service, pay-per-view events or high-speed Internet service. Customers
who exclusively purchase high-speed Internet service are not counted as
basic subscribers. Our methodology of calculating the number of basic
subscribers may not be identical to those used by other cable companies.(3)
    
    Represents basic subscribers as a percentage of homes passed.(4)
    
    A subscriber is digital-ready if the subscriber is in a cable system
where digital cable services are available.(5)
    
    Represents customers that receive digital cable services.(6)
    
    Represents digital customers as a percentage of digital-ready basic
subscribers.(7)
    
    A home passed is data-ready if it is in a cable system with two-way
communications capability.(8)
    
    Represents data-ready homes passed where cable modem service is
available.(9)
    
    Represents residential data customers and small to medium-sized
commercial accounts billed at higher rates than residential customers.
Small to medium-sized commercial accounts generally represent customers
with bandwidth requirements less than 5MHz. These commercial accounts are
converted to equivalent residential data customers by dividing their
associated revenues by the applicable residential rate. Our data
customers exclude large commercial accounts. Our methodology of
calculating data customers may not be identical to those used by other
cable companies.(10)
    
    Represents the number of data customers as a percentage of data-ready
homes marketed.(11)
    
    Represents the sum of basic subscribers, digital customers and data
customers.(12)
    
    Represents the total number of customers that receive at least one level
of service, encompassing video and data services, without regard to which
service(s) customers purchase.(13)
    
    Represents homes passed divided by miles of plant. 8




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Technology Overview We believe in investing in advanced technology to improve our competitive
position. Since our inception we have made significant investments in our
cable network upgrade program to allow us to introduce new and enhanced
products and services to our customers. We completed our planned upgrade
program during 2003. As a result, we have transformed legacy cable plant into
a state-of-the-art broadband network. The primary features of our upgraded
broadband network are:  
    
    hybrid fiber-optic coaxial architecture;
    
    99% of bandwidth capacity is 550MHz to 870MHz;
    
    97% of homes passed have two-way communications capability; and
    
    the ability to provide advanced broadband services across virtually our entire footprint. A central feature of our cable network is the deployment of high capacity,
hybrid fiber-optic coaxial architecture. The hybrid fiber-optic coaxial
architecture combines the use of fiber optic cable, which can carry hundreds of
video, data and voice channels over extended distances, with coaxial cable,
which requires more extensive signal amplification in order to obtain the
desired levels for delivering channels. Our upgraded network design connects fiber optic cable to individual nodes
serving an average of 350 homes or commercial buildings. A node is a single
connection to a cable systems main, high-capacity fiber optic cable that is
shared by a number of customers. Coaxial cable is then connected from each
node to the individual homes or buildings. Our network design generally
provides for six strands of fiber to each node, with two strands active and
four strands reserved for future services. Our design also allows for the use
of advanced technology such as node-splitting, digital compression and
multi-plexing to increase capacity. The use of fiber optic technology in our cable network improves picture
quality and network reliability. It also gives our systems the flexibility to
run multiple separate channel line-ups from a single headend and transmit
advertisements to specific local communities. The following table describes the technological state of our cable network
as of December 31, 2001, 2002 and 2003 and displays the progress we made during
these periods with our network upgrade program: Percentage of Cable NetworkLess than
    
    
    
    
    
    Greater than
    
    
    Two-Way550MHz
    
    550MHz
    
    550MHz
    
    
    CapableDecember 31, 2001
    
    
    45
    %
    
    
    19
    %
    
    
    36
    %
    
    
    
    57
    %December 31, 2002
    
    
    5
    %
    
    
    10
    %
    
    
    85
    %
    
    
    
    87
    %December 31, 2003
    
    
    1
    %
    
    
    
    
    
    
    99
    %
    
    
    
    97
    %
 Two-way communications capability permits our customers to send and
receive signals over the cable network so that interactive services, such as
VOD, are accessible and high-speed Internet access does not require a separate
telephone line. Our two-way communications capability, together with hybrid
fiber-optic coaxial architecture, enhances our cable networks ability to
provide advanced telecommunications services, such as the VoIP telephony
service. A headend facility is the location where signals are received and
processed for distribution over a cable system. As of December 31, 2003, our
cable systems were operated from 33 headend facilities. Fiber optics and
advanced transmission technologies make it cost effective to consolidate our
headend facilities, allowing us to realize operating efficiencies and resulting
in lower fixed capital costs on a per home basis as we introduce new products
and services. As part of our headend consolidation program, we have deployed over 2,000
route miles of fiber optic cable, creating large regional fiber optic networks
with the potential to provide advanced telecommunications services. 9




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These regional networks have excess fiber optic capacity to accommodate new and
expanded products and services, such as our commercial data business. With our upgrade from the traditional coaxial network design to hybrid
fiber-optic coaxial architecture, our broadband network now provides higher
capacity, superior signal quality, greater network reliability, reduced
operating costs and more reserve capacity for the addition of future services. We also believe that the combination of reserve fiber strands and continued
advancements in bandwidth management techniques such as compression and
multi-plexing technology will preclude the need for additional widespread cable
network upgrades in the foreseeable future. Programming Supply Except as noted below, we have various contracts to obtain basic and
premium programming for our cable systems from program suppliers whose
compensation is typically based on a fixed monthly fee per customer. Our
programming contracts are generally for a stated period of time. We are a member of the National Cable Television Cooperative, Inc., a
programming cooperative primarily consisting of small to medium-sized multiple
system operators serving, in the aggregate, over 14 million cable subscribers.
The cooperative may help create efficiencies in the areas of obtaining and
administering programming contracts, as well as securing, in some cases, more
favorable programming rates and contract terms for small to medium-sized cable
operators. We negotiate programming contract renewals both directly and
through the cooperative. From time to time, the contracts covering the
programming services carried on our cable systems expire, and we generally
provide such services to our customers without written contracts with the
respective program suppliers as we negotiate contract renewals. Our programming costs are expected to rise in the future due to increased
costs to purchase programming, particularly sports programming, additional
programming being provided to our customers, and other factors affecting the
cable television industry. Although we are legally able to pass through
expected increases in our programming costs to customers, there can be no
assurance that competitive conditions or other factors in the marketplace will
allow us to do so. We also have various retransmission consent arrangements with commercial
broadcast stations, which generally expire in December 2005. In some cases,
retransmission consents have been contingent upon our carriage of satellite
delivered cable programming offered by companies affiliated with the stations
owners or the broadcast network carried by such stations. Customer Service System reliability and customer satisfaction represent a cornerstone of
our business strategy. We expect that investments in our cable network and our
regional contact centers significantly strengthen customer service, enhance the
reliability of our cable network and allow us to introduce new services to our
customers. We maintain regional contact centers staffed with dedicated
customer service representatives, or CSRs, who are available to respond to
customer calls 24 hours a day, seven days a week, on a toll-free basis. We
believe our regional contact centers allow us to effectively coordinate
installation appointments and reduce response times to customer inquiries. During 2003, we implemented virtual contact center technology which
provides customers with extensive self-service capabilities, such as making a
payment and verifying service appointments, and enables us to re-route customer
calls among our regional contact centers to minimize hold times. Our virtual
contact centers also give our CSRs instant access to the calling customers
file and our products and services in the customers market. We believe our
virtual contact centers will help us ensure the most efficient utilization of
our CSRs and the most effective customer interactions. Reinforcing our
commitment to customer service, we have developed and attained customer service
standards that meet or exceed those standards established by the National Cable
and Telecommunications Association. We continue to invest in both personnel and equipment and technology to
improve our customer care. Our newest initiatives include e-Care, a web-based
customer service platform, and field workforce management programs designed to
increase the productivity and sales performance of our technical field
employees. 10




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Community Relations We are dedicated to fostering strong community relations in the
communities served by our cable systems. We support local charities and
community causes in various ways, including staged events and promotional
campaigns to raise funds and supplies for persons in need and in-kind donations
that include production services and free airtime on cable networks. We
participate in the Cable in the Classroom program, which provides more than
1,373 schools with free cable service and, where available, high-speed Internet
service. We also provide free cable television service to government
buildings, libraries and not-for-profit hospitals in our franchise areas. We also develop and offer local programming to our communities, a
capability not available to direct broadcast satellite service providers, our
primary competition in our video business. Several of our systems have
production facilities to create local content. These locally produced programs
include local school sports events, fund-raising telethons by local chapters of
national charitable organizations, local concerts and other entertainment. We
also have the exclusive right to carry many of these events. For instance, in
Iowa, we are the exclusive broadcaster of city council meetings, the Little
League Championships in Des Moines and the Iowa High School State Football
Championships. We believe increasing our emphasis on local programming builds
customer loyalty. Franchises Cable systems are generally operated under non-exclusive franchises
granted by local governmental authorities. These franchises typically contain
many conditions, such as: time limitations on commencement and completion of
construction; conditions of service, including number of channels, types of
programming and the provision of free service to schools and other public
institutions; and the maintenance or posting of insurance or indemnity bonds by
the cable operator. Many of the provisions of local franchises are subject to
federal regulation under the Communications Act of 1934, or Communications Act
as amended. As of December 31, 2003, we held 455 cable television franchises. These
franchises provide for the payment of fees to the issuing authority. In most
of the cable systems, such franchise fees are passed through directly to the
customers. The Cable Communications Policy Act of 1984, or 1984 Cable Act,
prohibits franchising authorities from imposing franchise fees in excess of 5%
of gross revenues from specified cable services and also permits the cable
operator to seek renegotiation and modification of franchise requirements if
warranted by changed circumstances. Substantially all of the basic subscribers of our cable systems are in
service areas that require a franchise. The table below groups the franchises

of our cable systems by year of expiration and presents the approximate number
and percentage of basic subscribers for each group as of December 31, 2003. Percentage of
    
    Number of
    
    Percentage ofNumber of
    
    Total
    
    Basic
    
    Total BasicYear of Franchise Expiration
    
    Franchises
    
    Franchises
    
    Subscribers
    
    Subscribers2004 through 2007
    
    
    232
    
    
    
    51.0
    %
    
    
    351,000
    
    
    
    42.8
    %2008 and thereafter
    
    
    223
    
    
    
    49.0
    
    
    
    468,300
    
    
    
    57.2Total
    
    
    455
    
    
    
    100.0
    %
    
    
    819,300
    
    
    
    100.0
    %
 We have never had a franchise revoked or failed to have a franchise
renewed. In addition, substantially all of our franchises eligible for renewal
have been renewed or extended prior to their stated expirations, and no
franchise community has refused to consent to a franchise transfer to us. The
1984 Cable Act provides, among other things, for an orderly franchise renewal
process in which franchise renewal will not be unreasonably withheld or, if
renewal is denied and the franchising authority acquires ownership of the cable
system or effects a transfer of the cable system to another person, the cable
operator generally is entitled to the fair market value for the cable system
covered by such franchise. In addition, the 1984 Cable Act established
comprehensive renewal procedures, which require that an incumbent franchisees
renewal application be assessed on its own merits and not as part of a
comparative process with competing applications. We believe that we have
satisfactory relationships with our franchising communities. 11




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Competition We, like most operators of cable systems, compete on the basis of several
factors, including price and the quality and variety of products and services
offered. We face competition from various communications and entertainment
providers, the number and type of which we expect will increase as we expand
the products and services offered over our broadband network. In recent years,
Congress has passed legislation and the Federal Communications Commission, or
FCC, has adopted policies authorizing new technologies and a more favorable
operating environment for certain existing technologies that provide, or may
provide, substantial additional competition for cable systems. The extent to
which a cable system operator is competitive depends in significant part upon
the operators ability to provide a greater variety of programming, superior
technical performance, the variety of services offered, including digital
cable, VOD, HDTV, DVRs, and superior customer service than are available with
over-the-air broadcasting or other competitive alternative delivery sources. We
believe our ability to package multiple services in a bundle, such as combining
our video products and services with our high speed Internet access services,
is a unique advantage in our competitive business environment. Providers of Broadcast Television and Other Entertainment The extent to which a cable system competes with over-the-air
broadcasting, which provides signals that a viewer is able to receive directly,
depends upon the quality and quantity of the broadcast signals available by
direct antenna reception compared to the quality and quantity of such signals
and alternative services offered by a cable system. As local over-the-air
broadcasters continue their federally-mandated transition to digital-only
signal formats, the extent to which those local broadcasters offer digital
feeds of their analog programming, additional programming on other digital
channels and/or HDTV signals may increase competition for customers with
digital or HDTV receivers where such signals are not carried on the cable
system. Cable systems also face competition from other sources of
entertainment such as live sporting events, movie theaters and home video
products, including videotape recorders and videodisc players. Direct Broadcast Satellite Providers Direct broadcast satellite service, or DBS service, is the cable
industrys most significant competitor. DBS customers have grown rapidly over
the past several years, far exceeding the basic subscriber growth rate of the
cable industry. According to recent industry reports, DBS service providers
currently deliver video programming services to over 21 million individual
households, condominiums, apartments and office complexes in the United States.
The two largest DBS companies, DIRECTV, Inc. and EchoStar Communications
Corporation, provide service to substantially all of these DBS customers and
are each among the four largest providers of multichannel video programming
services based on reported customers. The News Corporation Limited, or News
Corporation, recently acquired a significant interest in DIRECTV. Affiliation
with News Corporation could strengthen DIRECTVs competitive positioning, as
News Corporation also owns Fox Television Network and several cable programming
services. A recently launched direct broadcast service, VOOM, has begun
offering primarily HDTV services on a national basis. DBS service can be received virtually anywhere in the continental United
States through the installation of a small rooftop or side-mounted antenna. DBS
service providers use video compression technology to increase channel capacity
and digital technology to improve the quality of the signals transmitted to
their customers, and typically offer more than 300 channels of programming,
including local television broadcast stations and other programming services
substantially similar to those provided by our cable systems. A change in legislation in 1999 allowed DBS service providers to deliver
local broadcast signals, eliminating a significant competitive advantage which
we and other cable system operators had over DBS service providers. As of
December 31, 2003, DBS service providers delivered local broadcast stations in
markets representing an estimated 75% of our basic subscribers. Based on
announced new markets, this figure could increase to an estimated 78% of our
basic subscribers. However, unlike our locally-based cable systems, DBS
service providers have limited ability to offer locally-produced programming in
each community where service is offered and do not have a meaningful local
presence in those communities. In addition, for the foreseeable future, there
may be technological and other limitations as to the capability of DBS service
providers to deliver most local broadcast signals in all markets, particularly
as these signals are delivered in the HDTV format. Overall, we believe our
digital cable service, recent launch of DVRs, unique ability to offer VOD,
greater quantities of HDTV programming and locally produced content make us
competitive with the video products and services delivered by DBS service
providers. 12




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DBS service providers also are currently offering two alternatives of
satellite-delivered high-speed Internet access service. One alternative is a
one-way service that utilizes a telephone return path, in contrast to our
two-way, high-speed service, which does not require a telephone line. The other
alternative is a two-way, high-speed service, which requires additional
equipment purchases by the customer and is offered at higher prices than our
own equivalent service. DBS service providers and certain phone companies are now jointly offering
bundled services that include video, voice and high-speed Internet access. We
believe our comparable bundled services are competitive with those offered by
the DBS and phone company alliances, particularly as we roll out our planned
voice telephony services over our cable systems. Multichannel Multipoint Distribution Multichannel multipoint distribution systems, also known as MMDS, or
wireless cable systems, deliver programming services over microwave channels
licensed by the FCC and received by subscribers with special antennas. These
wireless cable systems are less capital intensive and subject to fewer
regulatory requirements than cable systems, and are not required to obtain
local franchises or pay franchise fees. Although relatively few wireless cable
systems in the United States are currently in operation or under construction,
virtually all markets have been licensed or tentatively licensed. The use of
digital compression technology, and the FCCs recent amendment to its rules to
permit reverse path or two-way transmission over wireless facilities, enable
multichannel multipoint distribution systems to deliver more channels and
additional services, including Internet related services. Digital compression
technology refers to the conversion of the standard video signal into a digital
signal and the compression of that signal to facilitate multiple channel
transmissions through a single channels signal. Generally, wireless cable
operators are now concentrated on data transmission services rather than
video-service. We have very limited competition from MMDS operators. Private Cable Television Systems Private cable television systems known as satellite master antenna
television, or SMATV systems, compete with conventional cable television
systems for the right to service condominiums, apartment complexes and other
multiple dwelling unit facilities. SMATV systems typically use a single
satellite dish for an entire building or complex to provide improved reception
of local television stations and many of the same satellite-delivered
programming services offered by franchised cable systems. SMATV systems
typically are not subject to regulation like local franchised cable operators. Under the Telecommunications Act of 1996, or 1996 Telecom Act, SMATV
systems can interconnect non-commonly owned buildings without having to comply
with local, state and federal regulatory requirements that are imposed upon
cable systems providing similar services, as long as they do not use public
rights of way. The FCC has held that the latter provision is not violated so
long as interconnection across public rights of way is provided by a third
party. SMATV system operators often enter into exclusive agreements with
apartment building owners or homeowners associations that preclude franchised
cable television operators from serving residents of such private complexes.
However, the 1984 Cable Act gives franchised cable operators the right to use
existing compatible easements within their franchise areas on nondiscriminatory
terms and conditions. Accordingly, where there are preexisting dedicated
compatible easements, cable operators may not be unfairly denied access or
discriminated against with respect to access to the premises served by those
easements. Conflicting judicial decisions have been issued interpreting the
scope of the access right granted by the 1984 Cable Act, with respect to
easements located entirely on private property. Traditional Overbuilds Cable television systems are operated under non-exclusive franchises
granted by local authorities. More than one cable system may legally be built
in the same area by another cable operator, a municipal-owned utility or
another service provider. Some of these competitors may be granted franchises
on more favorable terms or conditions or enjoy other advantages such as
exemptions from taxes or regulatory requirements to which we are subject. Well
financed businesses from outside the cable industry, such as public utilities
which already possess or are developing fiber optic and other transmission
facilities in the areas they serve, may over time become competitors. We
believe that various entities are currently offering cable service to an
estimated 11.2% of the homes passed in the service areas of our franchises. 13




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Internet Access We offer high-speed Internet access, or cable modem service, in many of
our cable systems. Our cable modem service competes with the high-speed
Internet access services offered by existing Internet service providers,
commonly known as ISPs, DBS providers, and local and long distance telephone
companies. Many of these competitors have substantial resources. Digital subscriber line technology, known as DSL, provides Internet access
to subscribers at data transmission speeds equal to or greater than that of
standard telephone line modems, putting DSL service in direct competition with
cable modem service. Numerous companies, including telephone companies, have
introduced DSL services. DBS providers currently offer satellite-delivered
high-speed Internet access with a telephone return path through a one-way
service or a two-way interactive high-speed service. Certain telecommunications companies are seeking to provide high-speed
broadband services, including interactive online services, using wireless
technologies that may transcend present service boundaries and avoid certain
regulatory restrictions. Moreover, some electric utilities have announced plans
to deliver broadband services over their electrical distribution networks. The
FCC has an on-going rulemaking which, to date, appears limited to basic
regulations to avoid technical interference with existing services. If
electric utilities provide broadband services over their existing electrical
distribution networks, depending upon the variety, quality and pricing of such
services, it could have a detrimental impact on us. A number of ISPs have asked local authorities and the FCC to give them
rights of access to cable systems broadband infrastructure so that they can
deliver their services directly to cable systems customers. This kind of
access is often called open access. Many local franchising authorities have
examined the issue of open access and a few have required cable operators to
provide such access. Several Federal courts have ruled that localities are not
authorized to require open access. The FCC has classified cable modem service
as an information service, not as a telecommunications service. As an
information service, the FCC has held that cable systems are not required to
open their networks for use by others to provide ISP services. The 9th Circuit
Court of Appeals has issued a contrary decision that finds cable modem services
to include both telecommunications service and information service
components. If the 9th Circuits decision (which is on appeal) prevails, it
could result in an open access requirement. If we were required to provide
open access to ISPs as a result of FCC action or court decisions, other
companies could use our cable system infrastructure to offer Internet services
competitive with our own. Telephony We
plan to offer VoIP telephony service to subscribers in
certain markets beginning in the fourth quarter of 2004 and expanding to
additional markets in subsequent years. Our planned telephony service will
provide both local and long distance calling. As such, it will directly compete
with the incumbent local phone company and long-distance service providers.
Other competitors include competitive local exchange carriers, which are
non-incumbent local phone companies that provide local services and access to
long distance services over their own networks or over leased networks, and
wireless telephone carriers. Other companies offering VoIP telephony will also
compete with our telephony service. We believe the addition of VoIP service
will help us compete with bundled service providers of voice, video and data,
including telephone/DBS bundled marketing arrangements. Other Competition Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment, are constantly
occurring. The FCC has authorized a new interactive television service which
permits non-video transmission of information between an individuals home and
entertainment and information service providers. This service, which can be
used by direct broadcast satellite systems, television stations and other video
programming distributors, including cable television systems, is an alternative
technology for the delivery of interactive video services. It does not appear
at the present time that this service will have a material impact on the
operations of cable television systems. The FCC has allocated spectrum in the 28GHz range for a new multichannel
wireless service that can be used to provide video and telecommunications
services. The FCC completed the process of awarding licenses to use this
spectrum via a market-by-market auction. We do not know whether such a service
would have a material impact on the operations of cable television systems. 14




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The 1996 Telecom Act eliminated many restrictions on the ability of local
telephone companies to offer video programming. Our markets are served by a
number of local telephone companies that may become competitors to our video
service if they decide to offer video services to homes. Local telephone
companies have a number of different ways to enter the video programming
business, some of which do not require obtaining a local franchise. Local
telephone companies and other potential competitors have the ability to certify
their competing video service as an open video system. Open video system
operators are not subject to certain requirements imposed by the Cable Act upon
more traditional cable operators. The 1996 Telecom Act directed the FCC to establish, and the FCC has
adopted, regulations and policies for the issuance of licenses for digital
television to incumbent television broadcast licensees. Digital television can
deliver high-definition television pictures and multiple digital-quality
program streams, as well as CD-quality audio programming and advanced digital
services, such as data transfer or subscription video. The FCC also has
authorized television broadcast stations to transmit text and graphic
information that may be useful to both consumers and businesses. The FCC also
permits commercial and non-commercial FM stations to use their subcarrier
frequencies to provide non-broadcast services, including data transmission. Employees As of December 31, 2003, we employed 2,031 full-time employees and 39
part-time employees. None of our employees were represented by a labor union.
We consider our relations with our employees to be satisfactory. 15




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Legislation and Regulation General Federal, state and local laws regulate the development and operation of
cable communications systems. In the following paragraphs, we summarize the
federal laws and regulations materially affecting the growth and operation of
the cable industry. We also provide a brief description of certain state and
local laws. Currently few laws or regulations apply to Internet services.
Existing federal, state and local laws and regulations and state and local
franchise requirements are currently the subject of judicial proceedings,
legislative hearings and administrative proceedings that could change, in
varying degrees, the manner in which cable systems operate. Neither the
outcome of these proceedings nor their impact upon the cable industry or our
business or operations can be predicted at this time. Federal Regulation The principal federal statutes governing the cable industry, the
Communications Act of 1934, as amended by the Cable Communications Policy Act
of 1984, the Cable Television Consumer Protection and Competition Act of 1992
and the Telecommunications Act of 1996, collectively the Cable Act, establish
the federal regulatory framework for the industry. The Cable Act allocates
principal responsibility for enforcing the federal policies among the Federal
Communications Commission, or FCC and state and local governmental authorities. The Cable Act and the regulations and policies of the FCC affect
significant aspects of our cable system operations, including:  
    
    subscriber rates;
    
    the content of the programming we offer to subscribers, as well as
the way we sell our program packages to subscribers;
    
    the use of our cable systems by the local franchising authorities,
the public and other unrelated companies;
    
    our franchise agreements with local governmental authorities;
    
    cable system ownership limitations and prohibitions; and
    
    our use of utility poles and conduit. The FCC and some state regulatory agencies regularly conduct
administrative proceedings to adopt or amend regulations implementing the
statutory mandate of the Cable Act. At various times, interested parties to
these administrative proceedings challenge the new or amended regulations and
policies in the courts with varying levels of success. Further court actions
and regulatory proceedings may occur that might affect the rights and
obligations of various parties under the Cable Act. The results of these
judicial and administrative proceedings may materially affect the cable
industry and our business and operations. Subscriber Rates The Cable Act and the FCCs regulations and policies limit the ability of
cable systems to raise rates for basic services and customer equipment. No
other rates are subject to regulation. Federal law exempts cable systems from
all rate regulation in communities that are subject to effective competition,
as defined by federal law and where affirmatively declared by the FCC. Where there is no effective competition to the cable operators services,
federal law gives local franchising authorities the responsibility to regulate
the rates charged by the operator for:  
    
    the lowest level of programming service offered by cable operator,
typically called basic service, which includes, at a minimum, the local
broadcast channels and any public access or governmental channels that
are required by the operators franchise; 16




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
    
    the installation of cable service and related service calls; and
    
    the installation, sale and lease of equipment used by subscribers
to receive basic service, such as converter boxes and remote control
units. Local franchising authorities who wish to regulate basic service rates and
related equipment rates must first obtain FCC certification to regulate by
following a simplified FCC certification process and agreeing to follow
established FCC rules and policies when regulating the cable operators rates. Several years ago, the FCC adopted detailed rate regulations, guidelines
and rate forms that a cable operator and the local franchising authority must

use in connection with the regulation of basic service and equipment rates.
The FCC adopted a benchmark methodology as the principal method of regulating
rates. However, if this methodology produces unacceptable rates, the operator
may also justify rates using a detailed cost-of-service methodology. The Cable
Act and FCC rules also allow franchising authorities to regulate equipment
rates on the basis of actual cost plus a reasonable profit, as defined by the
FCC. If the local franchising authority concludes that a cable operators rates
are too high under the FCCs rate rules, the local franchising authority may
require the cable operator to reduce rates and to refund overcharges to
subscribers, with interest. The cable operator may appeal adverse local rate
decisions to the FCC. The FCCs regulations allow a cable operator to modify regulated rates on
a quarterly or annual basis to account for changes in:  
    
    the number of regulated channels;
    
    inflation; and
    
    certain external costs, such as franchise and other governmental
fees, copyright and retransmission consent fees, taxes, programming
fees and franchise-imposed obligations.The Cable Act and/or the FCCs regulations also:
    
    require cable operators to charge uniform rates throughout each
franchise area that is not subject to effective competition;
    
    prohibit regulation of non-predatory bulk discount rates offered by
cable operators to subscribers in multiple dwelling units; and
    
    permit regulated equipment rates to be computed by aggregating
costs of broad categories of equipment at the franchise, system,
regional or company level. Content Requirements Must Carry and Retransmission Consent The FCCs regulations contain broadcast signal carriage requirements that
allow local commercial television broadcast stations to elect once every three
years whether to require a cable system:  
    
    to carry the station, subject to certain exceptions; or
    
    to negotiate the terms by which the cable system may carry the
station on its cable systems, commonly called retransmission consent. 17




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The Cable Act and the FCCs regulations require a cable operator to devote
up to one-third of its activated channel capacity for the carriage of local
commercial television stations. The Cable Act and the FCCs rules also give
certain local non-commercial, educational television stations mandatory
carriage rights, but not the option to negotiate retransmission consent.
Additionally, cable systems must obtain retransmission consent for carriage of:  
    
    all distant commercial television stations, except for certain
commercial satellite-delivered independent superstations such as WGN;
    
    commercial radio stations; and
    
    certain low-power television stations. Must-carry obligations may decrease the attractiveness of the cable
operators overall programming offerings by including less popular programming
on the channel line-up, while cable operators may need to provide some form of
consideration to broadcasters to obtain retransmission consent to carry more
popular programming. We carry both broadcast stations based on must-carry
obligations and others that have granted retransmission consent. The FCC has issued a decision that effectively requires mandatory carriage
of local television stations that broadcast only digital signals. These
stations are entitled to request carriage in their choice of digital or
converted analog format. Stations transmitting in both digital and analog
formats (Dual Format Broadcast Stations), which is permitted during the
current several-year transition period, have no carriage rights for the digital
format during the transition unless and until they turn in their analog
channel. The FCC has an ongoing proceeding to determine whether cable
operators will be required to carry the digital signal of Dual Format Broadcast
Stations that currently have must-carry rights for their analog signals. The
FCC had tentatively concluded that it will not adopt the dual carriage
requirement during the transition, and had also concluded that a cable operator
need only carry a broadcasters primary video service (rather than all of the
digital multi-cast services) but those conclusions may change as a result of
the FCCs current proceeding. If the dual carriage rule is adopted, or the
FCC concludes that cable operators must carry all of the multi-cast services in
a broadcasters digital feed, this would have a negative impact on us because
it would reduce available channel capacity and thereby could require us to
either discontinue other channels of programming or restrict us from carrying
new channels of programming that are more desired by our customers. Tier Buy Through The Cable Act and the FCCs regulations require our cable systems, other
than those systems which are subject to effective competition, to permit
subscribers to purchase video programming we offer on a per channel or a per
program basis without the necessity of subscribing to any tier of service other
than the basic service tier. Program Access To increase competition between cable operators and other video program
distributors, the Cable Act and the FCCs regulations:  
    
    preclude any satellite video programmer affiliated with a cable
company, or with a common carrier providing video programming directly
to its subscribers, from favoring an affiliated company over
competitors;
    
    require such programmers to sell their programming to other
unaffiliated video program distributors; and
    
    limit the ability of such programmers to offer exclusive
programming arrangements to their related parties. Other Programming Federal law actively regulates other aspects of our programming, involving
such areas as:  
    
    our use of syndicated and network programs and local sports broadcast programming;
    
    advertising in childrens programming;
    
    political advertising; 18




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
    
    origination cablecasting;
    
    adult programming;
    
    sponsorship identification; and
    
    closed captioning of video programming. Use of Our Cable Systems by the Government and Unrelated Third Parties The Cable Act allows local franchising authorities and unrelated third
parties to have access to our cable systems channel capacity for their own
use. For example, the Cable Act:  
    
    permits franchising authorities to require cable operators to set
aside channels for public, educational and governmental access
programming; and
    
    requires a cable system with 36 or more activated channels to
designate a significant portion of its channel capacity for commercial
leased access by third parties to provide programming that may compete
with services offered by the cable operator. The
FCC regulates various aspects of third-party commercial use of channel
capacity on our cable systems, including:  
    
    the maximum reasonable rate a cable operator may charge for
third-party commercial use of the designated channel capacity;
    
    the terms and conditions for commercial use of such channels; and
    
    the procedures for the expedited resolution of disputes concerning
rates or commercial use of the designated channel capacity. Franchise Matters We have non-exclusive franchises in virtually every community in which we
operate that authorize us to construct, operate and maintain our cable systems.
Although franchising matters are normally regulated at the local level through
a franchise agreement and/or a local ordinance, the Cable Act provides
oversight and guidelines to govern our relationship with local franchising
authorities. For example, the Cable Act and/or FCC regulations and determinations: Provide guidelines for the exercise of local regulatory authority that:  
    
    affirm the right of franchising authorities, which may be
state or local, depending on the practice in individual states, to
award one or more franchises within their jurisdictions;
    
    generally prohibit us from operating in communities without a
franchise;
    
    permit local authorities, when granting or renewing our
franchises, to establish requirements for cable-related facilities
and equipment, but prohibit franchising authorities from
establishing requirements for specific video programming or
information services other than in broad categories; and
    
    permit us to obtain modification of our franchise
requirements from the franchise authority or by judicial action if
warranted by commercial impracticability. 19




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##### Table of Contents



Generally prohibit franchising authorities from:  
    
    imposing requirements during the initial cable franchising
process or during franchise renewal that require, prohibit or
restrict us from providing telecommunications services,
    
    imposing franchise fees on revenues we derive from providing
telecommunications or information services over our cable systems,
    
    restricting our use of any type of subscriber equipment or transmission
technology, and
    
    requiring payment of franchise fees to the local franchising
authority in excess of 5.0% of our gross revenues derived from
providing cable services over our cable system.Encourage competition with existing cable systems by:
    
    allowing municipalities to operate their own cable systems without
franchises, and
    
    preventing franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional
franchises covering an existing cable systems service area. Provide renewal procedures:  
    
    The Cable Act contains renewal procedures designed to protect
us against arbitrary denials of renewal of our franchises although,
under certain circumstances, the franchising authority could deny us
a franchise renewal. Moreover, even if our franchise is renewed,
the franchising authority may seek to impose upon us new and more
onerous requirements, such as significant upgrades in facilities and
services or increased franchise fees as a condition of renewal to
the extent permitted by law. Similarly, if a franchising
authoritys consent is required for the purchase or sale of our
cable system or franchise, the franchising authority may attempt to
impose more burdensome or onerous franchise requirements on the
purchaser in connection with a request for such consent.
Historically, cable operators providing satisfactory services to
their subscribers and complying with the terms of their franchises
have almost always obtained franchise renewals. We believe that we
have generally met the terms of our franchises and have provided
quality levels of service. We anticipate that our future franchise
renewal prospects generally will be favorable.
    
    Various courts have considered whether franchising
authorities have the legal right to limit the number of franchises
awarded within a community and to impose substantive franchise
requirements. These decisions have been inconsistent and, until the
U.S. Supreme Court rules definitively on the scope of cable
operators First Amendment protections, the legality of the
franchising process generally and of various specific franchise
requirements is likely to be in a state of flux. Ownership Limitations The Cable Act generally prohibits us from owning or operating a satellite
master antenna television system or multichannel multipoint distribution system
in any area where we provide franchised cable service and do not have effective
competition, as defined by federal law. We may, however, acquire and operate a
satellite master antenna television system in our existing franchise service
areas if the programming and other services provided to the satellite master
antenna television system subscribers are offered according to the terms and
conditions of our local franchise agreement. The Cable Act also authorizes the FCC to adopt nationwide limits on the
number of subscribers under the control of a cable operator and to impose
limits on the number of channels which can be occupied on a cable system by a
video programmer in which a cable operator has an interest. The U.S. Court of
Appeals for the District of Columbia Circuit overturned the FCCs rules
implementing these statutory provisions and remanded the case to the FCC for
further proceedings. 20




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##### Table of Contents



The 1996 amendments to the Cable Act eliminated the statutory prohibition
on the common ownership, operation or control of a cable system and a
television broadcast station in the same service area. The identical FCC
regulation has been invalidated by a federal appellate court. The FCC has
eliminated its regulatory restriction on cross-ownership of cable systems and
national broadcasting networks. The 1996 amendments to the Cable Act also made far-reaching changes in the
relationship between local telephone companies and cable service providers.
These amendments:  
    
    eliminated federal legal barriers to competition in the local
telephone and cable communications businesses, including allowing local
telephone companies to offer video services in their local telephone
service areas;
    
    preempted legal barriers to telecommunications competition that
previously existed in state and local laws and regulations;
    
    set basic standards for relationships between telecommunications
providers; and
    
    generally limited acquisitions and prohibited joint ventures
between local telephone companies and cable operators in the same
market. Pursuant to these changes in federal law, local telephone companies may
now provide service as traditional cable operators with local franchises or
they may opt to provide their programming over open video systems, subject to
certain conditions, including, but not limited to, setting aside a portion of
their channel capacity for use by unaffiliated program distributors on a
non-discriminatory basis. The decision as to whether an operator of an open
video system must obtain a local franchise is left to each community. Pole Attachment Regulation The Cable Act requires certain public utilities, defined to include all
local telephone companies and electric utilities except those owned by
municipalities and co-operatives, to provide cable operators and
telecommunications carriers with nondiscriminatory access to poles, ducts,
conduit and rights-of-way at just and reasonable rates. This right to access
is beneficial to us. Federal law also requires the FCC to regulate the rates,
terms and conditions imposed by such public utilities for cable systems use of
utility pole and conduit space unless state authorities have demonstrated to
the FCC that they adequately regulate pole attachment rates, as is the case in
certain states in which we operate. In the absence of state regulation, the
FCC administers pole attachment rates on a formula basis. The FCC adopted a
new rate formula that became effective in 2001 which governs the maximum rate
certain utilities may charge for attachments to their poles and conduit by
companies providing telecommunications services, including cable operators. Increases in attachment rates due to the FCCs new rate formula are phased
in over a five-year period in equal annual increments, beginning in February
2001. This new formula will result in higher attachment rates than at present,
but they will apply only to cable television systems which elect to offer
telecommunications services. The FCC ruled that the provision of Internet
services will not, in and of itself, trigger use of the new formula. The
Supreme Court affirmed this decision and also held that the FCCs authority to
regulate rates for attachments to utility poles extended to attachments by
cable operators and telecommunications carriers that are used to provide
Internet service or for wireless telecommunications service. This development
benefits our business and will place a constraint on the prices that most
utilities can charge with regard to the cable facilities over which we also
provide Internet service so long as we do not offer other telecommunications
services over the cable system. Other Regulatory Requirements of the Communications Act and the FCC The FCC has adopted cable inside wiring rules to provide a more specific
procedure for the disposition of residential home wiring and internal building
wiring that belongs to an incumbent cable operator that is forced by the
building owner to terminate its cable services in a building with multiple
dwelling units. 21




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##### Table of Contents



The Cable Act and/or FCC rules include provisions, among others,
regulating other parts of our cable operations, involving such areas as:  
    
    equal employment opportunity;
    
    consumer protection and customer service;
    
    technical standards and testing of cable facilities;
    
    consumer electronics equipment compatibility;
    
    registration of cable systems;
    
    maintenance of various records and public inspection files;
    
    microwave frequency usage; and
    
    antenna structure notification, marking and lighting. The FCC may enforce its regulations through the imposition of fines, the
issuance of cease and desist orders or the imposition of other administrative
sanctions, such as the revocation of FCC licenses needed to operate
transmission facilities often used in connection with cable operations. The
FCC has ongoing rulemaking proceedings that may change its existing rules or
lead to new regulations. We are unable to predict the impact that any further
FCC rule changes may have on our business and operations. Copyright Our cable systems typically include in their channel line-ups local and
distant television and radio broadcast signals, which are protected by the
copyright laws. We generally do not obtain a license to use this programming
directly from the owners of the programming, but instead comply with an
alternative federal compulsory copyright licensing process. In exchange for
filing certain reports and contributing a percentage of our revenues to a
federal copyright royalty pool, we obtain blanket permission to retransmit the
copyrighted material carried on these broadcast signals. The nature and amount
of future copyright payments for broadcast signal carriage cannot be predicted
at this time. In a report to Congress, the U.S. Copyright Office recommended that
Congress make major revisions to both the cable television and satellite
compulsory licenses. In 1999, Congress modified the satellite compulsory
license in a manner that permits DBS providers to become more competitive with
cable operators. While this authority is due to expire on December 31, 2004,
extension legislation has been introduced in Congress. The possible
simplification, modification or elimination of the cable communications
compulsory copyright license is the subject of continuing legislative review.
The elimination or substantial modification of the cable compulsory license
could adversely affect our ability to obtain suitable programming and could
substantially increase the cost of programming that remains available for
distribution to our subscribers. We are unable to predict the outcome of this
legislative activity related to either the cable compulsory license or the
right of direct broadcast satellite providers to deliver local broadcast
signals. Copyrighted material in programming supplied to cable television systems
by pay cable networks and basic cable networks is licensed by the networks
through private agreements with the copyright owners. These entities generally
offer through to-the-viewer licenses to the cable networks that cover the
retransmission of the cable networks programming by cable television systems
to their customers. Our cable systems also utilize music in other programming and advertising
that we provide to subscribers. The rights to use this music are controlled by
various music performing rights organizations from which performance licenses
must be obtained. Cable industry representatives recently negotiated standard
license agreements with the three largest music performing rights organizations
covering locally originated programming, including advertising inserted by the
cable operator in programming produced by other parties. These standard
agreements require the payment of music license fees for earlier time periods,
but such license fees have not had a significant impact on our business and
operations. 22




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##### Table of Contents



Interactive Television The FCC has issued a Notice of Inquiry covering a wide range of issues
relating to interactive television, or ITV. Examples of ITV services are
interactive electronic program guides and access to a graphic interface that
provides supplementary information related to the video display. In the near
term, cable systems are likely to be the platform of choice for the
distribution of ITV services. The FCC posed a series of questions including
the definition of ITV, the potential for discrimination by cable systems in
favor of affiliated ITV providers, enforcement mechanisms, and the proper
regulatory classification of ITV service. Privacy The Cable Act imposes a number of restrictions on the manner in which
cable television operators can collect, disclose and retain data about
individual system customers, as well as requiring cable operators to take such
actions as necessary to prevent unauthorized access to such information. The
statute also requires that the system operator periodically provide all
customers with written information about its policies including the types of
information collected; the use of such information; the nature, frequency and
purpose of any disclosures; the period of retention; the times and places where
a customer may have access to such information; the limitations placed on the
cable operator by the Cable Act; and a customers enforcement rights. In the
event that a cable television operator is found to have violated the customer
privacy provision of the Cable Act, it could be required to pay damages,
attorneys fees and other costs. Certain of these Cable Act requirements have
been modified by certain more recent federal laws. In addition, some states in
which we operate have also enacted customer privacy statutes that are in some
cases more restrictive than those in federal law. Voice-Over-Internet Protocol Numerous cable operators are either exploring or have commenced offering
VoIP as a competitive alternative to traditional circuit-switched telephone
service. Various states, including states where we operate, have adopted or
are considering differing regulatory treatment, ranging from minimal or no
regulation to full-blown common carrier status. The FCC has announced a
proceeding to determine any appropriate regulatory obligations for VoIP. While
the outcome of this proceeding cannot be predicted, it is generally believed
that the FCC favors a light touch regulatory approach for VoIP, which might
include preemption of certain state or local regulation. Cable Modem Service There are currently few laws or regulations that specifically regulate
communications or commerce over the Internet. Section 230 of the
Communications Act declares it to be the policy of the United States to promote
the continued development of the Internet and other interactive computer
services and interactive media, and to preserve the vibrant and competitive
free market that presently exists for the Internet and other interactive
computer services, unfettered by federal or state regulation. One area in
which Congress did attempt to regulate content over the Internet involved the
dissemination of obscene or indecent materials. The Digital Millennium Copyright Act is intended to reduce the liability
of online service providers for listing or linking to third-party websites that
include materials that infringe copyrights or other rights or if customers use
the service to publish or disseminate infringing materials. The Childrens
Online Protection Act and the Childrens Online Privacy Protection Act are
intended to restrict the distribution of certain materials deemed harmful to
children and impose additional restrictions on the ability of online services
to collect user information from minors. In addition, the Protection of
Children From Sexual Predators Act of 1998 requires online service providers to
report evidence of violations of federal child pornography laws under certain
circumstances. A number of ISPs have asked local authorities and the FCC to give them
rights of access to cable systems broadband infrastructure so that they can
deliver their services directly to cable systems customers, which is often
called open access. Many local franchising authorities have examined the
issue of open access and a few have required cable operators to provide such
access. Several federal courts have ruled that localities are not authorized
to require open access. 23




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In March of 2002, the FCC announced that it was classifying Internet
access service provided through cable modems as an interstate information
service. At the same time, the FCC initiated a rulemaking proceeding designed
to address a number of issues resulting from this regulatory classification,
including the following:  
    
    the FCC confirmed that there is no current legal requirement for
cable operators to grant open access now that cable modem service is
classified as an information service. The FCC is considering, however,
whether it has the authority to impose open access requirements and, if
so, whether it should do so, or whether to permit local authorities to
impose such a requirement.
    
    the FCC found that cable modem service is an information service,
not a cable service, which has resulted in several court rulings that
local franchise authorities may not collect franchise fees on cable
modem service revenues under existing law and regulations.
    
    the FCC concluded that federal law does not permit local franchise
authorities to impose additional franchise requirements on cable modem
service. It is considering, however, whether local franchise
authorities nonetheless have the authority to impose restrictions,
requirements or fees because cable modem service is delivered over
cable using public rights of way.
    
    the FCC is considering whether cable operators providing cable
modem service should be required to contribute to a universal service
fund designed to support making service available to all consumers,
including those in low income, rural and high-cost areas at rates that
are reasonably comparable to those charged in urban areas.
    
    the FCC is considering whether it should take steps to ensure that
the regulatory burdens on cable systems providing cable modem service
are comparable to those of other providers of Internet access service,
such as telephone companies. One method of achieving comparability
would be to make cable operators subject to some of the regulations
that do not now apply to them, but are applicable to telephone
companies. Challenges to the FCCs classification of cable Internet access service as
an information service and not a cable service or a telecommunications
service have been filed in federal court. Based on a finding that it was
bound by an earlier decision, the Ninth Circuit Court of Appeals overturned the
FCCs classification and found cable Internet service to include both
information service and telecommunications service components. The Ninth
Circuits decision is under appeal. In other previous actions over the
regulatory classification of cable modem service, the courts have issued
conflicting decisions. These conflicting rulings and the new court proceedings
increase the possibility that the classification of cable Internet service
could be decided by the Supreme Court. State and Local Regulation Our cable systems use local streets and rights-of-way. Consequently, we
must comply with state and local regulation, which is typically imposed through
the franchising process. Our cable systems generally are operated in
accordance with non-exclusive franchises, permits or licenses granted by a
municipality or other state or local government entity. Our franchises
generally are granted for fixed terms and in many cases are terminable if we
fail to comply with material provisions. The terms and conditions of our
franchises vary materially from jurisdiction to jurisdiction. Each franchise
generally contains provisions governing:  
    
    franchise fees;
    
    franchise term;
    
    system construction and maintenance obligations;
    
    system channel capacity;
    
    design and technical performance;
    
    customer service standards; 24




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##### Table of Contents




    
    sale or transfer of the franchise;
    
    territory of the franchise;
    
    indemnification of the franchising authority;
    
    use and occupancy of public streets; and
    
    types of cable services provided. In the process of renewing franchises, a franchising authority may seek to
impose new and more onerous requirements, such as upgraded facilities,
increased channel capacity or enhanced services, although protections available
under the Cable Act require the municipality to take into account the cost of
meeting such requirements. The Cable Act also contains renewal procedures and
criteria designed to protect incumbent franchisees against arbitrary denials of
renewal. A number of states subject cable systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Attempts in other states to
regulate cable systems are continuing and can be expected to increase. To
date, other than Delaware, no state in which we operate has enacted such
state-level regulation. State and local franchising jurisdiction is not
unlimited; it must be exercised consistent with federal law. The Cable Act
immunizes franchising authorities from most monetary damage awards arising from
regulation of cable systems or decisions made on franchise grants, renewals,
transfers and amendments. 25




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##### Table of Contents



ITEM 2. PROPERTIES Our principal physical assets consist of cable television operating plant
and equipment, including signal receiving, encoding and decoding devices,
headend facilities and distribution systems and equipment at or near customers
homes for each of the systems. The signal receiving apparatus typically
includes a tower, antenna, ancillary electronic equipment and earth stations
for reception of satellite signals. Headend facilities are located near the
receiving devices. Our distribution system consists primarily of coaxial and
fiber optic cables and related electronic equipment. Customer premise
equipment consists of decoding converters and cable modems. Our cable television plant and related equipment generally are attached to
utility poles under pole rental agreements with local public utilities,
although in some areas the distribution cable is buried in underground ducts or
trenches. The physical components of the cable systems require maintenance and
periodic upgrading to improve system performance and capacity. We own and lease the real property housing our regional call centers,
business offices and warehouses throughout our operating regions. Our headend
facilities, signal reception sites and microwave facilities are located on
owned and leased parcels of land, and we generally own the towers on which
certain of our equipment is located. We own most of our service vehicles. We
believe that our properties, both owned and leased, are in good condition and
are suitable and adequate for our operations. 
 ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which we are a party or
to which any of our properties are subject. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2003. 26




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##### Table of Contents



PART II 
  ITEM 5.
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES There is no public trading market for our equity, all of which is held by MCC. 27




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA In the table below, we provide you with:  
    
    selected historical financial data for the period from January 1,
1999 through February 28, 1999 (Old Mediacom) and for the period
March 1, 1999 through July 18, 2001 (New Mediacom), and balance sheet
data as of February 28, 1999, December 31, 1999 and 2000 and July 18,
2001, which are derived from the audited financial statements of
Mediacom Systems (Predecessor Company); and
    
    selected historical consolidated financial and operating data for
the period from our inception on April 5, 2001 through December 31,
2003 and balance sheet data as of December 31, 2003, which are derived
from our audited consolidated financial statements. See Managements Discussion and Analysis of Financial Condition and
Results of Operations. Mediacom Broadband LLC
    
    
    
    
    Mediacom Systems (Predecessor Company)Inception
    
    
    
    
    
    Period from
    
    
    
    
    
    Period from
    
    Period from(April 5, 2001)
    
    
    
    
    
    January 1
    
    
    
    
    
    March 1
    
    January 1Year Ended
    
    Year Ended
    
    Through
    
    
    
    
    
    Through
    
    Year Ended
    
    Through
    
    ThroughDecember 31,
    
    December 31,
    
    December 31,
    
    
    
    
    
    July 18,
    
    December 31,
    
    December 31,
    
    February 28,2003
    
    2002
    
    2001
    
    
    
    
    
    2001
    
    2000
    
    1999
    
    1999(dollars in thousands)(unaudited)Statement of Operations
Data:Revenues
    
    $
    552,342
    
    
    $
    512,792
    
    
    $
    215,900
    
    
    
    
    
    
    
    $
    249,238
    
    
    $
    439,541
    
    
    $
    336,571
    
    
    $
    63,335Costs and expenses:Service costs
    
    
    215,310
    
    
    
    207,053
    
    
    
    89,006
    
    
    
     
    
    
    
    
    117,205
    
    
    
    223,530
    
    
    
    168,582
    
    
    
    31,500Selling, general and
administrative expenses
    
    
    118,918
    
    
    
    105,407
    
    
    
    42,442
    
    
    
    
    
    
    
    
    42,449
    
    
    
    39,892
    
    
    
    35,466
    
    
    
    5,586Management fee expense(1)
    
    
    9,322
    
    
    
    6,967
    
    
    
    2,875
    
    
    

    
    
    
    
    18,625
    
    
    
    22,267
    
    
    
    13,440
    
    
    
    1,927Depreciation and
amortization
    
    
    113,007
    
    
    
    123,704
    
    
    
    88,463
    
    
    


    
    
    
    
    83,610
    
    
    
    137,182
    
    
    
    90,166
    
    
    
    10,831Restructuring charge(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    


    
    
    
    
    570
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    95,785
    
    
    
    69,661
    
    
    
    (6,886
    )
    
    


    
    
    
    
    (13,221
    )
    
    
    16,670
    
    
    
    28,917
    
    
    
    13,491Interest expense, net(3)
    
    
    (82,536
    )
    
    
    (76,790
    )
    
    
    (41,430
    )
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain (loss) on derivative
instruments, net
    
    
    2,807
    
    
    
    (15,049
    )
    
    
    
    
    
    


    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other expense
    
    
    (5,974
    )
    
    
    (5,066
    )
    
    
    (2,270
    )
    
    


    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposition of assets(4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    


    
    
    
    
    5,183
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) before
income taxes
    
    
    10,082
    
    
    
    (27,244
    )
    
    
    (50,586
    )
    
    


    
    
    
    
    (8,038
    )
    
    
    16,670
    
    
    
    28,917
    
    
    
    13,491(Provision) benefit for income
taxes(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    


    
    
    
    
    3,546
    
    
    
    (6,646
    )
    
    
    (11,620
    )
    
    
    (5,440
    )Net income (loss)
    
    $
    10,082
    
    
    $
    (27,244
    )
    
    $
    (50,586
    )
    
    

    
    
    
    $
    (4,492
    )
    
    $
    10,024
    
    
    $
    17,297
    
    
    $
    8,051Balance Sheet Data
(end of period):Total assets
    
    $
    2,287,784
    
    
    $
    2,281,948
    
    
    $
    2,234,091
    
    
    


    
    
    
    $
    1,941,047
    
    
    $
    2,307,354
    
    
    $
    2,306,050
    
    
    $
    937,792Total debt
    
    
    1,354,668
    
    
    
    1,298,000
    
    
    
    1,200,000
    
    
    


    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total members equity
    
    
    589,016
    
    
    
    610,522
    
    
    
    666,294
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (continued on next page) 28




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##### Table of Contents



Mediacom Broadband LLC
    
    
    Mediacom Systems (Predecessor Company)Inception
    
    
    Period from
    
    
    
    
    
    Period from
    
    Period from(April 5, 2001)
    

    January 1
    
    
    
    
    
    March 1
    
    January 1Year Ended
    
    Year Ended
    
    Through
    

    Through
    
    Year Ended
    
    Through
    
    ThroughDecember 31,
    
    December 31,
    
    December 31,
    

    July 18,
    
    December 31,
    
    December 31,
    
    February 28,2003
    
    2002
    
    2001
    

    2001
    
    2000
    
    1999
    
    1999(dollars in thousands)(unaudited)Other Data:Operating income before
depreciation and
amortization(6)
    
    $
    208,792
    
    
    $
    193,365
    
    
    $
    81,577
    
    

    $
    70,389
    
    
    $
    153,852
    
    
    $
    119,083
    
    
    $
    24,322Operating income before
depreciation and
amortization margin(7)
    
    
    37.8
    %
    
    
    37.7
    %
    
    
    37.8
    %
    

    
    28.2
    %
    
    
    35.0
    %
    
    
    35.4
    %
    
    
    38.4
    %Net cash flows provided by
(used in):Operating activities
    
    $
    96,052
    
    
    $
    125,059
    
    
    $
    161,651
    
    

    $
    (34,278
    )
    
    $
    119,756
    
    
    $
    89,707
    
    
    $
    10,607Investing activities
    
    
    (116,038
    )
    
    
    (239,310
    )
    
    
    (2,151,583
    )
    

    
    (34,682
    )
    
    
    (131,177
    )
    
    
    (159,052
    )
    
    
    (16,028
    )Financing activities
    
    
    19,058
    
    
    
    68,980
    
    
    
    2,045,510
    
    

    
    47,806
    
    
    
    14,493
    
    
    
    77,695
    
    
    
    (74
    )Operating Data:(end of period, except
average):Homes passed(8)
    
    
    1,472,500
    
    
    
    1,463,000
    
    
    
    1,430,000Basic subscribers(9)
    
    
    819,300
    
    
    
    840,000
    
    
    
    824,000Basic penetration(10)
    
    
    55.6
    %
    
    
    57.4
    %
    
    
    57.6
    %Digital customers (11)
    
    
    231,600
    
    
    
    238,000
    
    
    
    233,000Data customers(12)
    
    
    157,800
    
    
    
    110,000
    
    
    
    77,000
   (1)
    
    For all periods presented prior to our inception on April 5, 2001,
management fees were paid to AT&T Broadband, LLC. Upon our acquisition of
our cable systems, Mediacom Communications Corporation replaced AT&T
Broadband as manager and AT&T Broadband was no longer entitled to receive
management fees from our cable systems.(2)
    
    As part of a cost reduction plan undertaken by our predecessor company in
2001, approximately 63 employees were terminated, resulting in a
restructuring charge of approximately $570,000. The entire charge was
paid in cash by our predecessor company.(3)
    
    For all periods presented prior to our inception on April 5, 2001, our
cable systems operated as fully integrated businesses of AT&T Broadband
and no debt or interest expense was allocated to these operations.(4)
    
    Represents the gain on disposition from the sale of the Missouri systems
to Mediacom Broadband LLC on June 29, 2001 for cash proceeds of
approximately $308.1 million, before final closing adjustments.(5)
    
    Provision (benefit) for income taxes in Mediacom Systems (Predecessor
Company) combined financial statements were based upon the AT&T cable
systems contribution to the overall tax liability or benefit of AT&T
Corp. and its affiliates. Under our ownership, these cable systems are
organized as limited liability companies and are subject to minimum income
taxes.(6)
    
    Operating income before depreciation and amortization represents a
non-GAAP measure and is one of the primary measures used by our management
to evaluate our performance and to forecast future results. We believe
operating income before depreciation and amortization is useful for
investors because it enables them to assess our performance in a manner
similar to the method used by our management, and provides a measure that
can be used to analyze, value and compare the companies in the cable
television industry, which may have different depreciation and
amortization policies. A limitation of this measure, however, is that it
excludes depreciation and amortization, which represents the period costs
of certain capitalized tangible and intangible assets. It is also not
intended to be a performance measure that should be regarded as an
alternative either to operating income (loss) or net income (loss) as an
indicator of operating performance or to the statement of cash flows as a
measure of liquidity and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. Our definitions of operating 29




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##### Table of Contents



income before depreciation and amortization may not be identical to
similarly titled measures reported by other companies.The following represents a reconciliation of operating income before
depreciation and amortization to operating income (loss), which is the most
directly comparable GAAP measure: Mediacom Broadband LLC

    
    

    Mediacom Systems (Predecessor Company)Inception(April 5,

    
    

    Period from

    
    
    
    

    
    Period from

    
    Period fromYear Ended

    
    
    
    

    
    2001)

    

January 1

    
    
    
    

    
    March 1

    
    January 1December

    
    Year Ended

    
    Through

    
    

    Through

    
    Year Ended

    
    Through

    
    Through31,

    
    December 31,

    
    December 31,

    
    
    July 18,

    
    December 31,

    
    December 31,

    
    February 28,2003

    
    2002

    
    2001

    
    

    2001

    
    2000

    
    1999

    
    1999(dollars in thousands)(unaudited)Operating income
before depreciation
and amortization

    
    $
    208,792
    

    
    $
    193,365
    

    
    $
    81,577
    

    
    
    $
    70,389
    

    
    $
    153,852
    

    
    $
    119,083
    

    
    $
    24,322Depreciation and
amortization

    
    
    (113,007
    )

    
    
    (123,704
    )

    
    
    (88,463
    )

    
    
    
    (83,610
    )

    
    
    (137,182
    )

    
    
    (90,166
    )

    
    
    (10,831
    )Operating income
(loss)

    
    $
    95,785
    

    
    $
    69,661
    

    
    $
    (6,886
    )

    
    
    $
    (13,221
    )

    
    $
    16,670
    

    
    $
    28,917
    

    
    $
    13,491
   (7)
    
    Represents operating income before depreciation and amortization as a
percentage of revenue. See note 7 above.(8)
    
    Represents the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
systems service area.(9)
    
    Represents a dwelling with one or more television sets that receives a
package of over-the-air broadcast stations, local access channels or
certain satellite-delivered cable television services. Accounts that are
billed on a bulk basis, which typically receive discounted rates, are
converted into full-price equivalent basic subscribers by dividing total
bulk billed basic revenues of a particular system by the applicable
combined limited and expanded cable rate charged to basic subscribers in
that system. Basic subscribers include connections to schools, libraries,
local government offices and employee households that may not be charged
for limited and expanded cable services, but may be charged for premium
units, pay-per-view events or high-speed Internet service. Customers who
exclusively purchase high-speed Internet service are not counted as basic
subscribers. Our methodology of calculating the number of basic
subscribers may not be identical to those used by other cable companies.(10)
    
    Represents basic subscribers as a percentage of homes passed.(11)
    
    Represents customers that receive digital cable services.(12)
    
    Represents residential data customers and small to medium-sized
commercial accounts billed at higher rates than residential customers.
Small to medium-sized commercial accounts generally represent customers
with bandwidth requirement less than 5MHz. These commercial accounts are
converted to equivalent residential data customers by dividing their
associated revenues by the applicable residential rate. Our data
customers excludes large commercial accounts. Our methodology of
calculating data customers may not be identical to those used by other
cable companies. 30




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##### Table of Contents



ITEM 7.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reference is made to the Risk Factors below for a discussion of
important factors that could cause actual results to differ from expectations
and any of our forward-looking statements contained herein. The following
discussion should be read in conjunction with our audited consolidated
financial statements as of December 31, 2003 and 2002, for the years ended
December 31, 2003 and 2002 and for the period from our inception (April 5, 2001)
through December 31, 2001. Overview We commenced operations on June 29, 2001 with the acquisition from AT&T
Broadband, LLC of cable systems serving approximately 94,000 basic subscribers
in the state of Missouri. The purchase price for these cable systems was
approximately $300.0 million. On July 18, 2001, we acquired from AT&T
Broadband cable systems serving approximately 706,000 basic subscribers in the
states of Georgia, Illinois and Iowa. The aggregate purchase price for these
cable systems was approximately $1.76 billion. In 2003, we completed our planned network upgrade program that
significantly increased bandwidth and enabled interactivity. As of December
31, 2003, approximately 99% of our cable network was upgraded with 550MHz to
870MHz bandwidth capacity and about 97% of our homes passed were activated with
two-way communications capability. Expressed in megahertz, or MHz, bandwidth
represents a systems capacity to deliver telecommunication services. Our upgraded network allows us to introduce additional programming and
other services such as digital video, high-speed Internet access,
video-on-demand and high-definition television. Beginning in the fourth
quarter of 2004, we plan to introduce in certain markets
Internet protocol telephony service, which is sometimes referred to as
Voice-over-Internet-Protocol, or VoIP, telephony. We currently offer video and
data bundles. VoIP telephony will allow us to offer an attractive triple-play
bundle of video, data and voice products and services. Bundled products and
services offer our subscribers key benefits such as a single provider contact
for provisioning, billing and customer care. We face increasing competition for our video programming services, most
notably from direct broadcast satellite service, or DBS service providers. In
2003, competitive pressure from DBS service providers intensified when they
launched local television channels in additional markets representing an
estimated 50% of our basic subscriber base. Since they have been permitted to
deliver local television broadcast signals beginning in 1999, DIRECTV, Inc. and
Echostar Communications Corporation, the two largest DBS service providers,
have been gradually increasing the number of markets in which they deliver
these local television signals. These local-into-local launches were usually
accompanied by heavy marketing and advertising and were the primary cause of
our loss of basic subscribers in 2003. As of December 31, 2003, local-to-local
launches in our markets represented an estimated 75% of our basic subscribers. 31




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Results of Operations Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 The following table sets forth the consolidated statement of operations
for the years ended December 31, 2003 and 2002 (dollars in
thousands and percentage changes that are not meaningful are marked
NM): Year Ended December 31,2003
    
    2002
    
    $ Change
    
    % ChangeRevenues
    
    $
    552,342
    
    
    $
    512,792
    
    
    $
    39,550
    
    
    
    7.7
    %Costs and expenses:Service costs
    
    
    215,310
    
    
    
    207,053
    
    
    
    8,257
    
    
    
    4.0Selling, general and administrative
expenses
    
    
    118,918
    
    
    
    105,407
    
    
    
    13,511
    
    
    
    12.8Management fee expense
    
    
    9,322
    
    
    
    6,967
    
    
    
    2,355
    
    
    
    33.8Depreciation and amortization
    
    
    113,007
    
    
    
    123,704
    
    
    
    (10,697
    )
    
    
    (8.6
    )Operating income
    
    
    95,785
    
    
    
    69,661
    
    
    
    26,124
    
    
    
    37.5Interest expense, net
    
    
    (82,536
    )
    
    
    (76,790
    )
    
    
    (5,794
    )
    
    
    7.5Gain (loss) on derivative instruments, net
    
    
    2,807
    
    
    
    (15,049
    )
    
    
    17,856
    
    
    NMOther expense
    
    
    (5,974
    )
    
    
    (5,066
    )
    
    
    (908
    )
    
    
    17.9Net income (loss)
    
    $
    10,082
    
    
    $
    (27,244
    )
    
    $
    37,326
    
    
    NM
 Revenues The following table sets forth revenue information for the years ended
December 31, 2003 and 2002 (dollars in thousands): Year Ended December 31,2003
    
    2002% of
    
    
    
    
    
    % ofAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    $ Change
    
    % ChangeVideo
    
    $
    451,580
    
    
    
    81.8
    %
    
    $
    433,069
    
    
    
    84.4
    %
    
    $
    18,511
    
    
    
    4.3
    %Data
    
    
    65,929
    
    
    
    11.9
    
    
    
    45,026
    
    
    
    8.8
    
    
    
    20,903
    
    
    
    46.4Advertising
    
    
    34,833
    
    
    
    6.3
    
    
    
    34,697
    
    
    
    6.8
    
    
    
    136
    
    
    
    0.4$
    552,342
    
    
    
    100.0
    %
    
    $
    512,792
    
    
    
    100.0
    %
    
    $
    39,550
    
    
    
    7.7
    %
 32




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##### Table of Contents



Video revenues represent monthly subscription fees charged to customers
for our core cable television products services (including basic, expanded
basic and analog premium programming, digital cable television programming
services, wire maintenance, equipment rental and services to commercial
establishments), pay-per-view charges, installation and reconnection fees,
late payment fees, and other ancillary revenues. Data revenues primarily
represent monthly subscription fees charged to customers for our data products
and services and equipment rental fees. Franchise fees charged to customers
for payment to local franchising authorities are included in their
corresponding revenue category. Revenues
rose 7.7% attributable to a 43% increase in high-speed data
customers and basic rate increases applied on our video customers, driven in
large part by our own programming cost increases. Video revenues increased 4.3% as a result of the aforementioned basic rate
increases, partially offset by a 2.2% decline in basic subscribers after
adjusting for small acquisitions and divestitures during 2003. Our loss in
basic subscribers resulted primarily from greater competitive pressures by DBS
service providers, particularly in those markets where we experienced their
local-to-local launches. To reverse this video customer trend, we are
increasing our video customer retention efforts and our emphasis on bundling,
enhancing and differentiating our video products and services with
video-on-demand, high-definition television and digital video recorders. Data revenues rose 46.4% due, in large part, to a 43% increase in data
customers from 110,000 to 157,800. We expect this customer trend in our data
business to continue and anticipate continued demand for our high-speed data
service. Advertising revenues increased slightly by 0.4% primarily as a result of
weak conditions in local markets during the first half of 2003. Costs and Expenses Service costs include fees paid to programming suppliers, expenses related
to wages and salaries of technical personnel, who maintain our cable network
and perform customer installation activities, high-speed Internet access costs,
including costs of bandwidth connectivity, customer provisioning and technical
support for our customers, and plant operating costs, such as utilities and
pole rental expense. Programming costs, which are payments to programmers for
content and are generally paid on a per subscriber basis, have historically
increased due to both increases in the rates charged for existing programming
services and the introduction of new programming services to our basic
subscribers. Service costs increased 4.0% over the prior year, which included $3.0
million of one-time incremental costs related to our transition to our Mediacom
Online high-speed Internet access service. These costs represented the excess
over the agreed-upon charges owed to our former high-speed provider that were
incurred in the first quarter of 2002. Excluding these incremental costs,
service costs would have increased 5.5% or $11.3 million. Approximately 68% of
this increase was due to servicing 47,800 new data customers, with the balance
primarily represented by increases in unit costs for basic programming. The
increase in total programming costs, however, was primarily offset by the
aforementioned decline in basic subscribers as well as a decrease in analog
premium service units. As a percentage of revenues, service costs were 39.0%
for the year ended December 31, 2003, as compared to 40.4% for the year ended
December 31, 2002. We expect continued increases in programming costs and will continue to
pass through some portion of these increases to our customers. Under the
Federal Communication Commissions existing cable rate regulations, we are
allowed to increase our rates for cable television services to more than cover
any increases in the programming. However, competitive conditions or other
factors in the marketplace may limit our ability to increase our rates. Selling, general and administrative expenses include: wages and salaries
for our call center, customer service and support, and administrative
personnel; franchise fees and taxes; and expenses related to billing,
telecommunications, marketing, bad debt, advertising and office administration. Selling, general and administrative expenses increased 12.8%, principally
due to higher customer support, bad debt and marketing expenses, and higher
taxes and fees. Customer support expenses increased 38.2% as a result of
higher staffing levels and employee commissions. We expect customers support
expense increases to moderate as customer support staffing is now at an
appropriate level. Bad debt expense rose 23.6% primarily as a result of higher
customer churn and the implementation throughout the year of tighter customer
credit controls. We expect bad debt 33




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expense to moderate as we continue to improve our customer credit controls.
Marketing expenses rose 18.4% to support the digital television and data
products and services, in addition to advertising campaigns we deployed to
dampen competitive pressures from DBS, and to commissions paid to our marketing
personnel. We expect to maintain this level of marketing expense going
forward. Expenses relating to taxes and fees increased 11.2% due to higher
levels of franchise fees and property taxes. As a percentage of revenues,
selling, general and administrative expenses were 21.5% for the year ended
December 31, 2003, as compared with 20.6% for the year ended December 31, 2002. We expect continued growth in advanced services, which include digital
cable, high-speed Internet access and, in late 2004, our launch of
VoIP telephony service. As a result, we expect our cost of services and
selling general and administrative expenses to increase. Management fee expense reflects charges incurred under our management
arrangements with our parent, Mediacom Communications Corporation (MCC).
Management fee expense increased 33.8% to $9.3 million for the year ended
December 31, 2003, from $7.0 million for the year ended December 31, 2002.
This increase reflects greater overhead costs charged by MCC during the year
ended December 31, 2003. As a percentage of revenues, management fee expense
was 1.7% for the year ended December 31, 2003, as compared with 1.4% for the
year ended December 31, 2002. Depreciation and amortization decreased 8.6% to $113.0 million for the
year ended December 31, 2003, as compared to $123.7 million for the year ended
December 31, 2002. The decrease was primarily due to changes, effective July
1, 2003, in the estimated useful lives of our cable systems and equipment in
conjunction with the completion of our network upgrade and rebuild program.
These changes reduced depreciation by $22.3 million for the year ended December
31, 2003. This decrease was offset in part by increased depreciation for
investments in our cable network and ongoing investments to continue the
rollout of products and services such as video-on-demand, high-definition
television and high-speed Internet access. We expect depreciation and
amortization to decrease in 2004 as a result of the full year impact of the
changes in estimated lives. See Note 2 to our consolidated financial
statements. Interest expense, net Interest expense, net, increased 7.5% primarily due to higher average
indebtedness, offset in part by a decrease in market interest rates on our
variable rate debt. Gain(loss) on derivative instruments, net Our stated strategy is to manage our interest expense using a combination
of fixed and variable interest rate debt. We enter into interest rate exchange
agreements, or interest rate swaps, to fix the interest rate on a portion of
our variable rate debt to reduce the potential volatility in our interest
expense due to changes in variable market interest rates. As of December 31,
2003 we had interest rate swaps with an aggregate principal amount of $500.0
million, compared to $400.0 million as of December 31, 2002. These interest
rate swaps are accounted for as fair value hedges of debt instruments as
prescribed by SFAS No. 133. The changes in their mark-to-market values are
derived from changes in variable market interest rates and the decrease in
their time to maturity. The aggregate change in their value is reported as
either a noncash gain or loss on derivative instruments, net. Gain on
derivative instruments, net, was $2.8 million for the year ended December 31,
2003, as compared to loss on derivative instruments, net of $15.0 million for
the year ended December 31, 2002. Other expense Other expense was $6.0 million for the year ended December 31, 2003, as
compared to $5.1 million for the year ended December 31, 2002. Other expense
primarily represents amortization of deferred financing costs and fees on
unused credit commitments under our bank credit facility and for the year ended
December 31, 2003. Net income (loss) Due to the factors described above, net income was $10.1 million for the
year ended December 31, 2003, as compared to net loss of $27.2 million for the
year ended December 31, 2002. 34




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Year Ended December 31, 2002 Compared to Year Ended December 31, 2001 The following information includes the actual results of our operations
from the dates of our acquisitions of the AT&T cable systems, comprising the
Missouri systems acquired on June 29, 2001 and the Georgia, Illinois and Iowa
systems acquired on July 18, 2001. The information presented for the period
prior to our acquisitions of the AT&T cable systems, except for depreciation
and amortization, interest expense, net, and other expenses, is derived from
the audited financial statements of Mediacom Systems (Predecessor Company) and
reflects a reclassification from selling, general and administrative expenses
to service costs to conform to the presentation of our results of operations.
Depreciation and amortization, interest expense, net, and other expenses for
the period prior to our acquisitions of the AT&T cable systems have been
adjusted as if we owned them as of January 1, 2001. The information and the
following discussion and analysis are presented for comparative purposes only
and are not necessarily indicative of what our results of operations would have
been had we owned the AT&T cable systems as of January 1, 2001 (dollars in
thousands and percentage changes that are not meaningful are marked
NM). Year Ended December 31,2002
    
    2001
    
    $ Change
    
    % ChangeRevenues
    
    $
    512,792
    
    
    $
    465,138
    
    
    $
    47,654
    
    
    
    10.2
    %Costs and expenses:Service costs
    
    
    207,053
    
    
    
    191,214
    
    
    
    15,839
    
    
    
    8.3Selling, general and
administrative expenses
    
    
    105,407
    
    
    
    99,869
    
    
    
    5,538
    
    
    
    5.5Management fee expense
    
    
    6,967
    
    
    
    21,500
    
    
    
    (14,533
    )
    
    
    (67.6
    )Restructuring charge
    
    
    
    
    
    
    570
    
    
    
    (570
    )
    
    NMDepreciation and amortization
    
    
    123,704
    
    
    
    182,341
    
    
    
    (58,637
    )
    
    
    (32.2
    )Operating income (loss)
    
    
    69,661
    
    
    
    (30,356
    )
    
    
    100,017
    
    
    NMInterest expense, net
    
    
    (76,790
    )
    
    
    (88,056
    )
    
    
    11,266
    
    
    
    (12.8
    )Loss on derivative instruments, net
    
    
    (15,049
    )
    
    
    
    
    
    
    (15,049
    )
    
    NMOther expense
    
    
    (5,066
    )
    
    
    (4,798
    )
    
    
    (268
    )
    
    
    5.6Gain on disposition of assets
    
    
    
    
    
    
    5,183
    
    
    
    (5,183
    )
    
    NMNet loss before benefit for income taxes
    
    
    (27,244
    )
    
    
    (118,027
    )
    
    
    90,783
    
    
    
    (76.9
    )Benefit for income taxes
    
    
    
    
    
    
    3,546
    
    
    
    (3,546
    )
    
    NMNet loss
    
    $
    (27,244
    )
    
    $
    (114,481
    )
    
    $
    87,237
    
    
    NM
 Revenues The following table sets forth revenue information for the years ended
December 31, 2002 and 2001 (dollars in thousands): Year Ended December 31,2002
    
    2001% of
    
    
    
    
    
    % ofAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    $ Change
    
    % ChangeVideo
    
    $
    433,069
    
    
    
    84.4
    %
    
    $
    405,871
    
    
    
    87.3
    %
    
    $
    27,198
    
    
    
    6.7
    %Data
    
    
    45,026
    
    
    
    8.8
    
    
    
    30,227
    
    
    
    6.5
    
    
    
    14,799
    
    
    
    49.0Advertising
    
    
    34,697
    
    
    
    6.8
    
    
    
    29,040
    
    
    
    6.2
    
    
    
    5,657
    
    
    
    19.5$
    512,792
    
    
    
    100.0
    %
    
    $
    465,138
    
    
    
    100.0
    %
    
    $
    47,654
    
    
    
    10.2
    %
 35




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Revenues increased 10.2% to $512.8 million for the year ended December
31, 2002, as compared to $465.1 million for the year ended December 31, 2001.
Revenues increased primarily due to basic rate increases applied on our video
customers, services and to customer growth in our basic subscribers and
digital and high-speed Internet access customers. Costs and Expenses Service costs increased 8.3% to $207.1 million for the year ended
December 31, 2002, from $191.2 million for the year ended December 31, 2001.
Service costs increased primarily as a result of higher programming expenses,
including rate increases by programming suppliers for existing services and
the cost of new channel additions, and greater technical employee support and
other operating costs directly related to customer growth in our high-speed
Internet access services. This increase was partially offset by higher
capitalized labor and overhead associated with the significant increase in our
cable network upgrade activities and the greater utilization of internal labor
to perform these upgrade activities and customer installations. As a
percentage of revenues, service costs were 40.4% for the year ended December
31, 2002, as compared with 41.1% for the year ended December 31, 2001. Selling, general and administrative expenses increased 5.5% to $105.4
million for the year ended December 31, 2002, from $99.9 million for the year
ended December 31, 2001. Selling, general and administrative expenses
increased primarily as a result of higher marketing and office expenses. As a
percentage of revenues, selling, general and administrative expenses were 20.6%
for the year ended December 31, 2002, as compared with 21.5% for the year ended
December 31, 2001. Management fee expense decreased to $7.0 million for the year ended
December 31, 2002, from $21.5 million for the year ended December 31, 2001.
The decrease in management fees was principally due to lower management fees
charged by MCC subsequent to our acquisitions of the AT&T cable systems. As a
percentage of revenues, management fee expense was 1.4% for the year ended
December 31, 2002, as compared with 4.6% for the year ended December 31, 2001. Restructuring charge was $570,000 for the year ended December 31, 2001.
Restructuring charge was part of a cost reduction plan undertaken by AT&T
Broadband in 2001, whereby certain employees of the Georgia systems were
terminated resulting in a one-time charge. Depreciation and amortization decreased to $123.7 million for the year
ended December 31, 2002, as compared to $182.3 million for the year ended
December 31, 2001. The decrease was substantially due to the adoption of SFAS
142, effective January 1, 2002, which eliminates amortization of goodwill and
indefinite-lived assets, partially offset by our ongoing capital investments to
upgrade our cable systems. The adoption of SFAS No. 142 reduced amortization
expense by $99.9 million during the year ended December 31, 2002. Interest expense, net Interest expense, net, was $76.8 million for the year ended December 31,
2002, as compared to $88.1 million for the year ended December 31, 2001. This
decrease principally reflects lower average interest rates on our variable rate
debt. Loss on derivative instruments, net Loss on derivative instruments, net, was $15.0 million for the year ended
December 31, 2002. The loss reflects a decline in market interest rates
relative to the fixed interest rates we pay under our interest rate exchange
agreements. Other expense Other expense was $5.1 million for the year ended December 31, 2002, as
compared to $4.8 million for the year ended December 31, 2001. Other expense
primarily reflects fees on unused credit commitments under our bank credit
facility and amortization of deferred financing costs. 36




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Gain on disposition of assets The financial statements of Mediacom Systems (Predecessor Company) for the
year ended December 31, 2001 included a gain of approximately $5.2 million on
the sale to us of the Missouri systems. This gain will not impact our future
results. Benefit for income taxes Benefit for income taxes was $3.5 million for the year ended December 31,
2001. Under our ownership, the AT&T cable systems are organized as limited
liability companies and are subject to minimum income taxes. There was no
provision or benefit for income taxes for Mediacom Broadband in 2001. Net loss Due to the factors described above, net loss was $27.2 million for the
year ended December 31, 2002, as compared to $114.5 million for the year ended
December 31, 2001. Liquidity and Capital Resources As an integral part of our business plan, we have significantly invested,
and will continue to invest, additional capital in our cable network to enhance
its reliability and capacity, which will allow for the introduction of new
advanced broadband services. We also will continue to pursue a business
strategy that includes selective acquisitions. We expect to fund our capital
requirements through a combination of internally generated funds, and amounts
available under our bank credit facilities. Operating Activities Net cash flows
provided by operating activities decreased 23.2%, or $29.0
million, reflecting a $27.8 million increase in working capital accounts,
mostly attributable to a decrease in our accounts payable and accrued
expenses, partially
offset by a significant decrease in net loss. Investing Activities Net cash flows used in investing activities consist principally of
investments in our cable network. During 2003, net cash flows used in
investing activities decreased by $123.3 million, or 51.5%, to $116.0 million.
This decrease reflected significantly lower capital expenditures in 2003, due
to the completion of our planned network upgrade and rebuild program. Our capital expenditures were approximately $123.8 million (including $5.8
million of capital expenditures financed through capital leases), $234.8
million and $38.1 million for the years ended December 31, 2003, 2002 and 2001,
respectively. As of December 31, 2003, as a result of our cumulative capital
investment in our network upgrade program, approximately 99% of our cable
network was upgraded with 550MHz to 870MHz bandwidth capacity and about 97% of
our homes passed were activated with two-way communications capability. At
year end 2003, our digital cable service was available to about 804,000 basic
subscribers, and our cable modem service was marketed to about 1.4 million
homes passed by our cable systems. With the completion of our planned network upgrade program, we expect
prospective capital expenditures to consist primarily of the costs of new
advanced service installations and equipment, new plant construction and
network replacement. Financing Activities Net cash flows provided by financing activities decreased 72.3% to $19.1
million for the year ended December 31, 2003. The decrease was primarily due
to a decrease in net borrowings as a result of the completion of our planned
network upgrade and rebuild program noted above. 37




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Mediacom LLC, a wholly-owned subsidiary of MCC, has a $150.0 million
preferred equity investment in us. The preferred equity investment has a 12%
annual dividend, payable quarterly in cash. During the year ended December 31,
2003, we paid in aggregate $18.0 million in cash dividends on the preferred
equity to Mediacom LLC. During the year ended December 31, 2003, we also paid
in aggregate cash dividends of $13.6 million directly to MCC. Our operating subsidiaries have a $1.4 billion credit facility expiring in
September 2010, of which $950.0 million was outstanding as of December 31,
2003. We have entered into interest rate exchange agreements, which expire
from June 2005 through March 2007, to hedge $500.0 million of floating rate
debt. Under the terms of all of our interest rate exchange agreements, we are
exposed to credit loss in the event of nonperformance by the other parties of
the interest rate exchange agreements. However, due to the high
creditworthiness of our counterparties, we do not anticipate their
nonperformance. As of December 31, 2003, about 67% of our outstanding
indebtedness was at fixed interest rates or subject to interest rate
protection. As of December 31, 2003, our total debt was $1.4 billion and we had unused
credit commitments of about $442.2 million under our bank credit facility and
our annualized cost of debt capital was approximately 6.4%. As of January 1,
2004, after giving effect to scheduled step downs in the maximum leverage
covenants in our bank credit facilities, approximately $270.9 million could be
borrowed and used for general corporate purposes under the most restrictive
covenants in our debt arrangements. We were in compliance with all debt
covenants as of, and for all periods, in the year ended December 31, 2003. As of December 31, 2003, approximately $7.8 million of letters of credit
were issued to various parties to secure our performance relating to insurance
and franchise requirements. Although we have not generated earnings sufficient to cover fixed charges,
we have generated cash and obtained financing sufficient to meet our short-term
requirements, including our debt service, working capital and capital
expenditures. We expect that we will continue to be able to generate funds and
obtain financing sufficient to service our long-term business plan, service our
debt obligations and complete our future acquisitions. However, there can be
no assurance that we will be able to obtain sufficient financing, or, if we
were able to do so, that the terms would be favorable to us. Contractual Obligations and Commercial Commitments The following table summarizes our contractual obligations and commercial
commitments for the five years subsequent to December 31, 2003 and thereafter: Capital
    
    OperatingDebt
    
    Leases
    
    Leases
    
    Total2004
    
    $
    8,500
    
    
    $
    1,271
    
    
    $
    1,156
    
    
    $
    10,9272005
    
    
    35,000
    
    
    
    1,306
    
    
    
    446
    
    
    
    36,7522006
    
    
    42,500
    
    
    
    1,340
    
    
    
    326
    
    
    
    44,1662007
    
    
    65,000
    
    
    
    721
    
    
    
    213
    
    
    
    65,9342008
    
    
    65,000
    
    
    
    30
    
    
    
    174
    
    
    
    65,204Thereafter
    
    
    1,134,000
    
    
    
    
    
    
    
    510
    
    
    
    1,134,510Total cash obligations
    
    $
    1,350,000
    
    
    $
    4,668
    
    
    $
    2,825
    
    
    $
    1,357,493
 Critical Accounting Policies The foregoing discussion and analysis of our financial condition and
results of operations is based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. Periodically, we evaluate our estimates,
including those related to doubtful accounts, long-lived assets, capitalized
costs and accruals. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable. Actual results may
differ from these estimates under different assumptions or conditions. We
believe that the application of the critical accounting policies discussed
below requires 38




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significant judgments and estimates on the part of management. For a summary
of our accounting policies, see Note 2 of our consolidated financial
statements. Property, Plant and Equipment We capitalize the costs of new construction and replacement of our cable
transmission and distribution facilities and new cable service installations.
Capitalized costs include all direct labor and materials, as well as certain
indirect costs, and are based on historical construction and installation costs.
Capitalized costs are recorded as additions to property, plant and equipment
and depreciate over the life of the related asset. We perform periodic
evaluations of the estimates used to determine the amount of costs that are
capitalized. Any changes to these estimates, which may be significant, would
be applied during the period in which the evaluations were completed. Intangibles Our cable systems operate under non-exclusive franchises granted by state
and local governmental authorities for varying lengths of time. We acquired
these cable franchises through acquisitions of cable systems and were accounted
for using the purchase method of accounting. We have concluded that our cable
franchise rights have an indefinite useful life since, among other things,
there are no legal, regulatory, contractual, competitive, economic or other
factors limiting the period over which these cable franchise rights contribute
to our revenues. Accordingly, with our adoption of SFAS No. 142, we no longer
amortize the cable franchise rights and other indefinite-lived assets.
Instead, such assets are tested annually for impairment, or more frequently if
impairment indicators arise. Based on the guidance outlined in
Emerging Issues Task Force, or EITF,
issue No. 02-7, we determined that the unit of accounting for testing franchise
value for impairment resides at a cable system cluster level. Such level
reflects the financial reporting level managed and reviewed by the corporate
office (i.e., chief operating decision maker), as well as how we allocated
capital resources and utilize the assets. Lastly, the unit reporting level
reflects the level at which the purchase method of accounting for our
acquisitions was originally recorded. We have three cable system clusters, or
reporting units, for the purpose of applying SFAS No. 142. We assess the fair value of our franchise costs based on a discounted cash
flow methodology. If the determined fair value of our franchise costs is less
the carrying amount on the financial statements, an impairment charge would be
recognized for the difference between the fair value and the carrying value of
the assets. To test the impairment of the goodwill carried on our financial
statements, the fair value of the cable system clusters tangible and
intangible assets (including franchise value) other than goodwill is deducted
from the cable system clusters fair value. The balance represents the fair
value of goodwill which is then compared to the carrying value of goodwill to
determine if there is any impairment. Upon adoption of SFAS No. 142, we determined that no impairment of our
franchise costs and goodwill existed as of January 1, 2002. Subsequent
impairment tests as of September 2002 and 2003 reflected no impairment of our
franchise costs and goodwill. Our use of discounted cash flow analyses in
determining the fair value of each cable system cluster involves certain
assumptions and estimates, which are consistent with the expectations of buyers
and sellers of cable systems in determining fair value. Significant impairment
in value resulting in impairment charges may result if these estimates and
assumptions used in the fair value determination change in the future. Impairment of Long-Lived Assets We follow the provisions of SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and provides
guidance on classification and accounting for such assets when held for sale or
abandonment. There have been no changes in our circumstances that would
indicate that we would need to perform an impairment review. Recent Accounting Pronouncements In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. In general, SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 39




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30, 2003. We adopted SFAS No. 149 on July 1, 2003, and such adoption did
not have a material impact on our financial condition or results of operations. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures in
its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. In accordance with SFAS No.
150, certain financial instruments that embody obligations for the issuer are
required to be classified as liabilities. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise shall be effective at the beginning of the first interim period
beginning after June 15, 2003. We adopted SFAS No. 150 on July 1, 2003, and
such adoption did not have a material impact on our financial condition or
results of operations. Inflation and Changing Prices Our systems costs and expenses are subject to inflation and price
fluctuations. Such changes in costs and expenses can generally be passed
through to subscribers. Programming costs have historically increased at rates
in excess of inflation and are expected to continue to do so. We believe that
under the Federal Communications Commissions existing cable rate regulations
we may increase rates for cable television services to more than cover any
increases in programming. However, competitive conditions and other factors in
the marketplace may limit our ability to increase our rates. Risk Factors We have a history of net losses. We have a history of net losses. We reported net losses of $27.4 million
and $50.6 million for the year ended December 31, 2002 and for the period from
our inception on April 5, 2001 through December 31, 2001; however, we reported
net income of $10.1 million for the year ended December 31, 2003. The principal
reasons for our prior net losses include the depreciation and amortization
expenses associated with acquisitions, the capital expenditures related to
expanding and upgrading our cable systems, and interest costs on borrowed
money. We are a holding company with no operations and we depend on our operating
subsidiaries for cash to fund our obligations. As a holding company, we do not have any operations or hold any assets
other than our investments in and our advances to our operating subsidiaries.
Consequently, our subsidiaries conduct all of our consolidated operations and
own substantially all of our consolidated assets. The only source of cash we
have to pay interest on, and repay the principal of, our indebtedness and to
meet our other obligations is the cash that our subsidiaries generate from
their operations and their borrowings. Our subsidiaries are not obligated to
make funds available to us. Our subsidiaries ability to make payments to us
will depend upon their operating results and will be subject to applicable laws
and contractual restrictions, including the agreements governing our subsidiary
credit facilities and other indebtedness. Those agreements permit our
subsidiaries to distribute cash to us under certain circumstances, but only so
long as there is no default under any of such agreements. We have substantial existing debt and may incur substantial additional
debt, which could adversely affect our ability to obtain financing in the
future and require our operating subsidiaries to apply a substantial portion of
their cash flow to debt service. Our total debt as of December 31, 2003 was approximately $1.4 billion.
Our interest expense for the year ended December 31, 2003 was $82.5 million.
We cannot assure you that our business will generate sufficient cash flows to
permit us, or our subsidiaries, to repay indebtedness or that refinancing of
that indebtedness will be possible on commercially reasonable terms or at all. 40




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This high level of debt and our debt service obligations could have
material consequences, including that:  
    
    our ability to access new sources of financing for working capital,
capital expenditures, acquisitions or other purposes may be limited;
    
    we may need to use a large portion of our revenues to pay interest
on borrowings under our subsidiary credit facilities and our senior
notes, which will reduce the amount of money available to finance our
operations, capital expenditures and other activities;
    
    some of our debt has a variable rate of interest, which may expose
us to the risk of increased interest rates;
    
    we may be more vulnerable to economic downturns and adverse
developments in our business;
    
    we may be less flexible in responding to changing business and
economic conditions, including increased competition and demand for new
products and services;
    
    we may be at a disadvantage when compared to those of our competitors that have less debt; and
    
    we may not be able to fully implement our business strategy. A default under our indenture or our subsidiary credit facility could
result in an acceleration of our indebtedness or a foreclosure on the
membership interests of our operating subsidiaries. The agreements and instruments governing our own and our subsidiaries
indebtedness contain numerous financial and operating covenants. The breach of
any of these covenants could cause a default, which could result in the
indebtedness becoming immediately due and payable. If this were to occur, we
would be unable to adequately finance our operations. In addition, a default
could result in a default or acceleration of our other indebtedness subject to
cross-default provisions. If this occurs, we may not be able to pay our debts
or borrow sufficient funds to refinance them. Even if new financing is
available, it may not be on terms that are acceptable to us. The membership
interests of our operating subsidiaries are pledged as security under our
subsidiary credit facility. A default under our subsidiary credit facility
could result in a foreclosure by the lenders on the membership interests
pledged under that facility. Because we are dependent upon our operating
subsidiaries for all of our revenues, a foreclosure would have a material
adverse effect on our business, financial condition and results of operations. The terms of our indebtedness could materially limit our financial and
operating flexibility. Several of the covenants contained in the agreements and instruments
governing our own and our subsidiaries indebtedness could materially limit our
financial and operating flexibility by restricting, among other things, our
ability and the ability of our operating subsidiaries to:  
    
    incur additional indebtedness;
    
    create liens and other encumbrances;
    
    pay dividends and make other payments, investments, loans and guarantees;
    
    enter into transactions with related parties;
    
    sell or otherwise dispose of assets and merge or consolidate with another entity;
    
    repurchase or redeem capital stock, other equity interests or debt;
    
    pledge assets; and
    
    issue capital stock or other equity interests. Complying with these covenants could cause us to take actions that we
otherwise would not take or cause us not to take actions that we otherwise
would take. 41




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We may not be able to obtain additional capital to continue the
development of our business. We have invested substantial capital for the upgrade, expansion and
maintenance of our cable systems and the launch and expansion of new or
additional services. While we have completed our planned system upgrades, if
there is accelerated growth in our digital cable and data customers, or we
decide to introduce new advanced services, or the cost to provide these
services increases, we may need to make unplanned additional capital
expenditures. We may not be able to obtain the funds necessary to finance
additional capital requirements through internally generated funds, additional
borrowings or other sources. If we are unable to obtain these funds, we would
not be able to implement our business strategy and our results of operations
would be adversely affected. If we are unable to keep pace with technological change, our business and
results of operations could be adversely affected. The cable business is characterized by rapid technological change and the
introduction of new products and services. We cannot assure you that we will
be able to fund the capital expenditures necessary to keep pace with future
technological developments. We also cannot assure you that we will
successfully anticipate the demand of our customers for products and services
requiring new technology. This type of rapid technological change could
adversely affect our ability to maintain or expand our systems and respond to
competitive pressures. An inability to maintain and expand our systems and
provide advanced services in a timely manner, or to anticipate the demands of
the market place, could adversely affect our ability to compete and our results
of operations. If we are unsuccessful implementing our growth strategy, our business and
results of operations could be adversely affected. We expect that a substantial portion of our future growth in revenues will
come from the expansion of relatively new services, the introduction of new
ones and acquisitions of additional cable systems. Relatively new services
include high-speed Internet access service, digital cable services,
video-on-demand and HDTV. We plan to offer VoIP telephony service to our
subscribers beginning with certain markets in the fourth quarter of 2004 and
expanding to additional markets in subsequent years. We may not be able to
successfully expand existing services or introduce VoIP telephony due to
unpredictable technical, operational or regulatory challenges. It is also
possible that these services will not generate significant revenue growth. We
may not be successful in identifying attractive acquisition targets or
obtaining the financing necessary to complete future acquisitions. Among other
things, in recent years, the cable television industry has undergone dramatic
consolidation, which has reduced the number of future acquisition prospects and
may increase the purchase price for any acquisitions we pursue. Our programming costs are increasing, and our business and results of
operations will be adversely affected if we cannot pass through a sufficient
part of the additional costs to subscribers. Our programming costs have been, and are expected to continue to be, one
of our largest single expense items. In recent years, the cable and satellite
video industries have experienced a rapid increase in the cost of programming,
particularly sports programming. This increase in programming costs is
expected to continue, and we may not be able to pass all programming cost
increases on to our customers. In addition, as we add programming to our basic
and expanded basic programming tiers, we may not be able pass all of our costs
of the additional programming on to our customers without the potential loss of
basic subscribers. To the extent that we are unable to pass increased or
additional programming costs through to subscribers, our business and results
of operations will be adversely affected. We also expect to be subject to increasing financial and other demands by
broadcasters to obtain the required consents for the transmission of broadcast
programming to our subscribers. We cannot predict the impact of these
negotiations on our business and results of operations or the effect on our
subscribers should we be required to suspend the carriage of this programming. Failure to negotiate or renew programming contracts could adversely affect
our business and results of operations. From time to time, the contracts covering the programming services carried
on our cable systems expire, and we generally provide such services to our
customers without written contracts with the respective program suppliers as we
negotiate contract renewals. While we could obtain access to most of these
programming services through a national 42




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programming purchasing cooperative or by relying on certain protective
provisions of the Communications Act, we are unable to guarantee that we will
be able to provide without interruption any programming service that is not
covered by a written contract. Prolonged loss of access to certain of these
programming services could result in our customers switching to our competitors
or have other material adverse effects on our business and results of
operations. We may not be able to compete effectively in the highly competitive media
and telecommunications industries. The communications industry in which we operate is highly competitive and
is often subject to rapid and significant changes and developments in the
marketplace and in the regulatory and legislative environment. In some
instances, we compete against companies with fewer regulatory burdens, easier
access to financing, greater resources and operating capabilities, greater
brand name recognition and long-standing relationships with regulatory
authorities. Our traditional cable television business faces direct competition
from other cable companies, municipal-owned utilities, telephone companies,
and, most significantly, from DBS service providers. Our high-speed Internet
access service is subject to competition from telephone companies using digital
subscriber line technology, DBS service providers and other Internet service
providers. We also face competition from over-the-air television and radio
broadcasters and from other communications and entertainment media such as
movie theaters, live entertainment and sports events, newspapers and home video
products. We anticipate that future advances in communications technology and new
business combinations and alliances in the communications industry could lead
to the introduction of new competitors and products and services that may
compete with our businesses. We cannot assure you that our upgraded cable
systems will allow us to compete effectively. Additionally, if we expand and
introduce new and enhanced telecommunications services, we will be subject to
competition from new and established telecommunications providers. We cannot
predict the extent to which competition may affect our business and results of
operations in the future. Continued growth of DBS operators could adversely affect our business and
results of operations. DBS service providers have grown at a rate far exceeding the recent cable
television industry growth rate and have emerged as the cable industrys most
significant competitors. DBS service consists of television programming
transmitted via high-powered satellites to individual homes, each served by a
small satellite dish. According to recent industry reports, DBS service
providers currently deliver video programming services to over 21 million
individual households, condominiums, apartments and office complexes in the
United States. The two largest DBS companies, DIRECTV, Inc. and EchoStar
Communications Corporation, provide service to substantially all of these DBS
customers and are each among the four largest providers of multichannel video
programming services based on reported customers. The News Corporation
Limited, or News Corporation, recently acquired a significant interest in
DIRECTV. Affiliation with News Corporation could strengthen DIRECTVs
competitive positioning, as News Corporation also owns Fox Television Network
and several cable programming services. A recently launched direct broadcast
service, VOOM, has begun offering primarily HDTV services on a national basis. Legislation permitting DBS service providers to transmit local broadcast
signals was enacted on November 29, 1999. This eliminated a significant
competitive advantage that cable system operators had over DBS service
providers. DBS service providers deliver local broadcast signals in many
markets that we serve. They are developing ways to bring advanced
communications services to their customers. They are currently offering
satellite-delivered high-speed Internet access services. They and certain phone
companies are also now jointly offering bundled services that include voice and
high-speed Internet access. We may not be able to obtain critical items at a reasonable cost or when
required, which could adversely affect our business, financial condition and
results of operations. We depend on third-party suppliers for equipment, software, services and
other items that are critical for the operation of our cable systems and the
provision of advanced services, including analog and digital set-top converter
boxes, servers and routers, fiber-optic cable, telephone circuits, software,
the backbone telecommunications network for our Internet access service and
construction services for expansion and upgrades of our cable systems. These
items are available from a limited number of suppliers. Demand for these items
has increased with the general growth in demand for Internet and
telecommunications services. We typically do not carry significant inventories
of equipment. Moreover, if there are no suppliers that are able to provide
set-top converter boxes that comply with evolving Internet 43




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and telecommunications standards or that are compatible with other equipment
and software that we use, our business, financial condition and results of
operations could be materially adversely affected. If we are unable to obtain
critical equipment, software, services or other items on a timely basis and at
an acceptable cost, our ability to offer our products and services and roll out
advanced services may be impaired, and our business, financial condition and
results of operations could be materially adversely affected. We depend on our manager for the provision of essential management
functions. We do not have separate senior management and are dependent on our manager
for the operation of our business. Our manager also manages Mediacom LLCs
operating subsidiaries. Following our acquisitions of the AT&T cable systems,
the number of customers served by the cable systems managed by our manager
increased significantly and our manager continues to devote a significant
portion of its personnel and other resources to the management of Mediacom
LLCs cable systems. As a result, the attention of our managers senior
executive officers may be diverted from the management of our cable systems and
the allocation of resources between our cable systems and Mediacom LLCs cable
systems could give rise to conflicts of interest. The successful execution of our business strategy depends on the ability
of our manager to efficiently manage our cable systems. If our manager were to
experience any material adverse change in its business, the risks described in
this risk factor could intensify and our business, financial condition and
results of operations could be materially adversely affected. In addition, we
are also dependent on our manager to operate Mediacom LLCs cable systems
effectively in order to enable us to achieve operating synergies, such as the
joint purchasing of programming. Mediacom LLCs operating subsidiaries have
substantial indebtedness that, among other things, could make our manager more
vulnerable to economic downturns and to adverse developments in its business.
Although our manager charged management fees to our operating subsidiaries in
an amount equal to 1.7% of our gross operating revenues for the year ended
December 31, 2003, we cannot assure you that it will not exercise its right
under its management agreements with our operating subsidiaries to increase the
management fees, which under such agreements may not exceed 4.0% of each
subsidiarys gross operating revenues. If our manager were to lose key personnel, our business could be adversely
affected. If any of our managers key personnel ceases to participate in our
business and operations, our profitability could suffer. Our success is
substantially dependent upon the retention of, and the continued performance
by, our managers key personnel, including Rocco B. Commisso, the Chairman and
Chief Executive Officer of our manager. Our manager has not entered into an
employment agreement with Mr. Commisso. Neither our manager nor we currently
maintains key man life insurance on Mr. Commisso or other key personnel. In addition, our subsidiary credit facility provides that a default will
result if any person or group, other than Mr. Commisso and certain of his
affiliates, becomes the beneficial owner of an amount of aggregate voting power
of our managers common stock on a fully-diluted basis that equals or exceeds
the greater of: (i) 35% and (ii) the amount of aggregate voting power of our
managers common stock on a fully diluted basis owned by Mr. Commisso and such
affiliates at the time. The Chairman and Chief Executive Officer of our manager has the ability to
control all major decisions, and a sale of his stock in our manager could
result in a change of control that would have unpredictable effects. Rocco B. Commisso, the Chairman and Chief Executive Officer of our
manager, beneficially owned common stock of our manager representing
approximately 80.5% of the combined voting power of all of its common stock as
of December 31, 2003. As a result, Mr. Commisso generally has the ability to
control the outcome of all matters requiring approval by stockholders of our
manager, including the election of its entire board of directors, and Mr.
Commisso may be deemed to control our company. We cannot assure you that Mr. Commisso will maintain all or any portion of
his ownership in our manager or that he would continue as an officer or
director of our manager if he sold a significant part of his stock. The
disposition by Mr. Commisso of a sufficient number of his shares of our
managers stock could result in a change in control of our manager and of us,
and we cannot assure you that a change of control would not adversely affect
our business, financial condition or results of operations. As noted above, it
could also result in a default under our bank credit facility. 44




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Our cable television business is subject to extensive governmental
regulation. The cable television industry is subject to extensive legislation and
regulation at the federal and local levels, and, in some instances, at the
state level. Many aspects of such regulation are currently the subject of
judicial and administrative proceedings and legislative and administrative
proposals. We expect that court actions and regulatory proceedings will
continue to refine our rights and obligations under applicable federal, state
and local laws. The results of these judicial and administrative proceedings
and legislative activities may materially affect our business operations.
Local authorities grant us non-exclusive franchises that permit us to operate
our cable systems. We renew or renegotiate these franchises from time to time.
Local franchising authorities may demand concessions, or other commitments, as
a condition to renewal, and these concessions or other commitments could be
costly to obtain. The Communications Act contains renewal procedures and
criteria designed to protect incumbent franchisees against arbitrary denials of
renewal, and although such Act requires the local franchising authorities to
take into account the costs of meeting such concessions or commitments, there
is no assurance that we will not be compelled to meet their demands in order to
obtain renewals. We cannot predict whether any of the markets in which we
operate will expand the regulation of our cable systems in the future or the
impact that any such expanded regulation may have upon our business. Similarly, due to the increasing popularity and use of commercial online
services and the Internet, it is possible that a number of laws and regulations
may be adopted with respect to commercial online services and the Internet.
These include laws covering such issues as privacy, access to some types of
content by minors, pricing, bulk e-mail or spam, encryption standards,
consumer protection, electronic commerce, taxation of e-commerce, copyright
infringement and other intellectual property matters. The adoption of such
laws or regulations in the future may decrease the growth of such services and
the Internet, which could in turn decrease the demand for our cable modem
service, increase our costs of providing such service or have other adverse
effects on our business, financial condition and results of operations. Our franchises are non-exclusive and local franchising authorities may
grant competing franchises in our markets. Our cable systems are operated under non-exclusive franchises granted by
local franchising authorities. As a result, competing operators of cable
systems and other potential competitors, such as municipal utility providers,
may be granted franchises and may build cable systems in markets where we hold
franchises. Any such competition could adversely affect our business. The
existence of multiple cable systems in the same geographic area is generally
referred to as an overbuild. As of the filing date of this report,
approximately 9.2% of the homes passed by our cable systems were overbuilt by
other cable operators. We cannot assure you that competition from overbuilders
will not develop in other markets that we now serve or will serve after any
future acquisitions. Pending FCC and court proceedings could adversely affect our Internet
access service. The legal and regulatory status of providing high-speed Internet access
service by cable television companies is uncertain. The adoption of new rules
by the FCC or rulings in court proceedings could place additional costs and
regulatory burdens on us, reduce our anticipated revenues or increase our
anticipated costs for this service, complicate the franchise renewal process,
result in greater competition or otherwise adversely affect our business. The
FCC has issued a declaratory ruling that cable modem service, as it is
currently offered, is properly classified as an interstate information service
that is not subject to common carrier regulation. However, the FCC is still
considering the following: whether to require cable companies to provide
capacity on their systems to other entities to deliver high-speed Internet
directly to customers, also known as open access; whether certain other
regulatory requirements do or should apply to cable modem service; and whether
and to what extent cable modem service should be subject to local franchise
authorities regulatory requirements or franchise fees. There can be no
assurance that regulatory authorities will not impose open access or similar
requirements on us as part of an industry-wide requirement. Such requirements
could have a negative impact on our business and results of operations. 45




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We may become subject to additional regulatory burdens when we offer
telephony service. The regulatory obligations of Internet protocol telephony are currently
under consideration by the FCC and state authorities. If our planned VoIP
telephony service is deemed by regulators to be a telecommunications service or
a state-regulated telephone service, such service could subject us to
significant regulation as well as higher fees for pole attachments. The
additional regulatory requirements could cause us to incur additional costs and
we may not be able to meet them in a timely manner. We may be subject to legal liability because of the acts of our Internet
service customers or because of our own negligence. Our cable modem service enables individuals to access the Internet and to
exchange information, generate content, conduct business and engage in various
online activities on an international basis. The law relating to the liability
of providers of these online services for activities of their users is
currently unsettled both within the United States and abroad. Potentially,
third parties could seek to hold us liable for the actions and omissions of our
cable modem service customers, such as defamation, negligence, copyright or
trademark infringement, fraud or other theories based on the nature and content
of information that our customers use our service to post, download or
distribute. We also could be subject to similar claims based on the content of
other Websites to which we provide links or third-party products, services or
content that we may offer through our Internet service. Due to the global
nature of the Web, it is possible that the governments of other states and
foreign countries might attempt to regulate its transmissions or prosecute us
for violations of their laws. It is also possible that information provided directly by us will contain
errors or otherwise be negligently provided to users, resulting in third
parties making claims against us. For example, we offer Web-based email
services, which expose us to potential risks, such as liabilities or claims
resulting from unsolicited email, lost or misdirected messages, illegal or
fraudulent use of email, or interruptions or delays in email service. To date, no one has filed such a claim against us. However, in the future
someone may file such a claim against us in either a domestic or international
jurisdiction and may succeed in imposing liability on us. Our defense of any
such actions could be costly and involve significant distraction of our
management and other resources. If we are held or threatened with significant
liability, we may decide to take actions to reduce our exposure to this type of
liability. This may require us to spend significant amounts of money for new
equipment and may also require us to discontinue offering some features or our
cable modem service. Since we launched our proprietary Mediacom OnlineSM Internet service in
February 2002, we from time to time receive notices of claimed infringements by
our cable modem service users. The owners of copyrights and trademarks have
been increasingly active in seeking to prevent use of the Internet to violate
their rights. In many cases, their claims of infringement are based on the
acts of customers of an Internet service providerfor example, a customers
use of an Internet service or the resources it provides to post, download or
disseminate copyrighted music or other content without the consent of the
copyright owner or to seek to profit from the use of the goodwill associated
with another persons trademark. In some cases, copyright and trademark owners
have sought to recover damages from the Internet service provider, as well as
or instead of the customer. The law relating to the potential liability of
Internet service providers in these circumstances is unsettled. In 1996,
Congress adopted the Digital Millennium Copyright Act, which is intended to
grant ISPs protection against certain claims of copyright infringement
resulting from the actions of customers, provided that the ISP complies with
certain requirements. So far, Congress has not adopted similar protections for
trademark infringement claims. 46




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we manage our interest expense using a
combination of fixed and variable interest rate debt. We enter into interest
rate exchange agreements, or interest rate swaps, to fix the interest rate on
a portion of our variable interest rate debt to reduce the potential volatility
in our interest expense that would otherwise result from changes in market
interest rates. As of December 31, 2003, we had interest rate exchange
agreements with various banks pursuant to which the interest rate on $500.0
million is fixed at a weighted average rate of approximately 3.4%, plus the
average applicable margin over the eurodollar rate option under our bank credit
agreements. Under the terms of the interest rate exchange agreements, which expire
from 2005 through 2007, we are exposed to credit loss in the event of
nonperformance by the other parties. However, due to the high creditworthiness
of our counterparties, we do not anticipate their nonperformance. At December
31, 2003, based on the mark-to-market valuation, we would have paid
approximately $12.2 million if we terminated these agreements, inclusive of
accrued interest. The change in the mark-to-market value of our interest rate exchange
agreements is reflected as either a noncash gain or loss on derivative
instruments, net, in consolidated statement of operations. For the year ended
December 31, 2003 we had a net gain of $2.8 million. We have no plans to
change our hedging strategy as outlined above. Future gains or losses on

derivative instruments are largely dependent on changes in variable market
interest rates, which we cannot predict, and the reduction in the time to
maturity of our existing interest rate exchange agreements. All else being
equal, as time elapses on our interest rate exchange agreements, the
mark-to-market gains or losses we have incurred under our interest rate
exchange agreements will reduce, resulting in corresponding losses or gains,
respectively, on derivative instruments. If we maintain these agreements to
maturity, their ultimate value will be zero, and all gains or losses on
derivative instruments, net, recognized to date will have been reversed. The table below provides the expected maturity and estimated fair value of
our debt as of December 31, 2003 (dollars in thousands). See Note 6 to our
consolidated financial statements. Bank Credit
    
    Capital LeaseSenior
Notes
    

Facilities
    

Obligations
    

TotalExpected
Maturity:January 1, 2004 to December 31, 2004
    
    $
    
    
    
    $
    8,500
    
    
    $
    1,271
    
    
    $
    9,771January 1, 2005 to December 31, 2005
    
    
    
    
    
    
    35,000
    
    
    
    1,306
    
    
    
    36,306January 1, 2006 to December 31, 2006
    
    
    
    
    
    
    42,500
    
    
    
    1,340
    
    
    
    43,840January 1, 2007 to December 31, 2007
    
    
    
    
    
    
    65,000
    
    
    
    721
    
    
    
    65,721January 1, 2008 to December 31, 2008
    
    
    
    
    
    
    65,000
    
    
    
    30
    
    
    
    65,030Thereafter
    
    
    400,000
    
    
    
    734,000
    
    
    
    
    
    
    
    1,134,000Total
    
    $
    400,000
    
    
    $
    950,000
    
    
    $
    4,668
    
    
    $
    1,354,668Fair Value
    
    $
    449,500
    
    
    $
    950,000
    
    
    $
    4,668
    
    
    $
    1,404,168Weighted Average Interest Rate
    
    
    11.0
    %
    
    
    3.3
    %
    
    
    3.1
    %
    
    
    5.6
    %
 47




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MEDIACOM BROADBAND LLC AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Contents  PageMediacom Broadband LLCReport of Independent AuditorsPricewaterhouseCoopers LLP
    
    
    49Report of Independent Auditors on Financial Statement SchedulePricewaterhouseCoopers LLP
    
    
    50Report of Independent Public Accountants-Arthur Andersen LLP
    
    
    51Consolidated Balance Sheets as of December 31, 2003 and 2002
    
    
    52Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and the Period from Inception (April 5, 2001) through December 31, 2001
    
    
    53Consolidated Statements of Changes in Members Equity for the years ended December 31, 2003, 2002 and the Period from Inception (April 5, 2001) through December 31, 2001
    
    
    54Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and the Period from Inception (April 5, 2001) through December 31, 2001
    
    
    55Notes to Consolidated Financial Statements
    
    
    56Financial Statement Schedule: Schedule IIValuation and Qualifying Accounts
    
    
    66Mediacom Systems (Predecessor Company)Report of Independent Accountants New Mediacom
    
    
    67Combined Statements of Operations and Parents Investment for the Period from January 1 to July 18, 2001 and Year ended December 31, 2000
    
    
    68Combined Statements of Cash Flows for the Period from January 1 to July 18, 2001 and Year ended December 31, 2000
    
    
    69Notes to Combined Financial Statements
    
    
    70Schedule IIValuation and Qualifying Accounts
    
    
    78
 48




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Report of Independent Auditors To the Member of Mediacom Broadband LLC: In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders equity, and
of cash flows present fairly, in all material respects, the financial position
of Mediacom Broadband LLC and its subsidiaries (the Company) at December 31,
2003 and 2002, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Companys management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion. The Companys consolidated financial statements as of December 31,
2001, and for the period from inception (April 5, 2001) through December 31,
2001, were audited by other independent accountants who have ceased operations.
Those independent accountants expressed an unqualified opinion on those
financial statements in their report dated February 13, 2002. As discussed above, the Companys consolidated financial statements as of
December 31, 2001, and for the period from inception (April 5, 2001) through
December 31, 2001, were audited by other independent accountants who have
ceased operations. As described in Note 5, those financial statements have been
revised to include the transitional disclosures required by Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
which was adopted by the Company as of January 1, 2002. We audited the
transitional disclosures for 2001 included in Note 5. In our opinion, the
transitional disclosures for 2001 in Note 5 are appropriate. However, we were
not engaged to audit, review, or apply any procedures to the 2001 financial
statements of the Company other than with respect to such disclosures and,
accordingly, we do not express an opinion or any other form of assurance on the
2001 financial statements taken as a whole. As discussed in Notes 2 and 5 to the consolidated financial statements, the
Company changed its method of accounting for goodwill effective January 1,
2002. /s/ PricewaterhouseCoopers LLP
New York, New York
March 9, 2004 49




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Report of Independent Auditors
on Financial Statement Schedule To the Member of Mediacom Broadband LLC: Our audits of the consolidated financial statements referred to in our report
dated March 9, 2004 appearing in this Annual Report on Form 10-K also included
an audit of the financial statement schedule listed in Item 8 of this Form
10-K. In our opinion, the financial statement schedule for the years ended
December 31, 2003 and 2002 present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. The financial statement schedule of
Mediacom Broadband LLC and its subsidiaries for the period from
inception (April 5, 2001) through December 31,
2001, was audited by other independent accountants who have ceased operations.
Those independent accountants expressed an unqualified opinion on that
financial statement schedule in their report dated February 13, 2002. /s/ PricewaterhouseCoopers LLP
New York, New York
March 9, 2004 50




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THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR
ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. 
 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Member of Mediacom Broadband LLC: We have audited the accompanying consolidated balance sheet of Mediacom
Broadband LLC (a Delaware limited liability company) and subsidiaries as of
December 31, 2001, and the related consolidated statements of operations,
changes in members equity and cash flows for the period from inception (April
5, 2001) through December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion. In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mediacom Broadband LLC and its
subsidiaries as of December 31, 2001 and the results of their operations and
their cash flows for the period from inception (April 5, 2001) through December
31, 2001 in conformity with accounting principles generally accepted in the
United States. Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule IIValuation and
Qualifying Accounts is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole. /S/ ARTHUR ANDERSEN LLP
 Stamford, Connecticut
February 13, 2002 51




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
(dollars in thousands) December 31,2003
    
    2002ASSETSCURRENT ASSESTSCash and cash equivalents
    
    $
    9,379
    
    
    $
    10,307Investment
    
    
    644
    
    
    
    Subscriber accounts receivable, net of allowance for doubtful accounts of
$2,455 and $2,683, respectively
    
    
    34,522
    
    
    
    35,449Prepaid expenses and other assets
    
    
    9,853
    
    
    
    8,323Total current assets
    
    
    54,398
    
    
    
    54,079Investment in cable television systems:Property, plant and equipment, net of accumulated depreciation of $204,305
and $131,507, respectively
    
    
    743,120
    
    
    
    727,369Intangible assets, net of accumulated amortization of $53,377 and $49,907,
respectively
    
    
    1,473,854
    
    
    
    1,481,972Total investment in cable television systems
    
    
    2,216,974
    
    
    
    2,209,341Other assets, net of accumulated amortization of $5,176 and $3,085, respectively
    
    
    16,412
    
    
    
    18,528Total assets
    
    $
    2,287,784
    
    
    $
    2,281,948LIABILITIES, PREFERRED MEMBERS INTERESTS
AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    148,969
    
    
    $
    180,266Deferred revenue
    
    
    27,202
    
    
    
    18,371Current portion of long-term debt
    
    
    9,771
    
    
    
    Total current liabilities
    
    
    185,942
    
    
    
    198,637Long-term debt, less current portion
    
    
    1,344,897
    
    
    
    1,298,000Other non-current liabilities
    
    
    17,929
    
    
    
    24,789Total liabilities
    
    
    1,548,768
    
    
    
    1,521,426Commitments and Contingencies (Note 11)PREFERRED MEMBERS INTERESTS
    
    
    150,000
    
    
    
    150,000MEMBERS EQUITYCapital contributions
    
    
    725,000
    
    
    
    725,000Accumulated deficit
    
    
    (135,984
    )
    
    
    (114,478
    )Total members equity
    
    
    589,016
    
    
    
    610,522Total liabilities, preferred members interests and members equity
    
    $
    2,287,784
    
    
    $
    2,281,948
 The accompanying notes to consolidated financial statements
are an integral part of these statements. 52




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES 
 CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands) Inception(April 5, 2001)throughYears Ended December 31,
    
    December 31,2003
    
    2002
    
    2001Revenues
    
    $
    552,342
    
    
    $
    512,792
    
    
    $
    215,900Costs and expenses:Service costs (exclusive of depreciation
and amortization of $113,007, $123,704 and
$88,463, respectively, shown separately
below)
    
    
    215,310
    
    
    
    207,053
    
    
    
    89,006Selling, general and administrative expenses
    
    
    118,918
    
    
    
    105,407
    
    
    
    42,442Management fee expense
    
    
    9,322
    
    
    
    6,967
    
    
    
    2,875Depreciation and amortization
    
    
    113,007
    
    
    
    123,704
    
    
    
    88,463Operating income (loss)
    
    
    95,785
    
    
    
    69,661
    
    
    
    (6,886
    )Interest expense, net
    
    
    (82,536
    )
    
    
    (76,790
    )
    
    
    (41,430
    )Gain (loss) on derivative instruments, net
    
    
    2,807
    
    
    
    (15,049
    )
    
    
    Other expense
    
    
    (5,974
    )
    
    
    (5,066
    )
    
    
    (2,270
    )Net income (loss)
    
    $
    10,082
    
    
    $
    (27,444
    )
    
    $
    (50,586
    )
 The accompanying notes to consolidated financial statements
are an integral part of these statements. 53




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES 
 CONSOLIDATED STATEMENT OF CHANGES IN
MEMBERS EQUITY
(dollars in thousands) Capital
    
    AccumulatedContributions
    
    Deficit
    
    TotalBalance, Inception (April 5, 2001)
    
    $
    
    
    
    $
    
    
    
    $
    Net loss
    
    
    
    
    
    
    (50,586
    )
    
    
    (50,586
    )Equity contribution from MCC
    
    
    725,000
    
    
    
    
    
    
    
    725,000Dividend payments to Related Party on Preferred
Members Interest
    
    
    
    
    
    
    (8,120
    )
    
    
    (8,120
    )Balance, December 31, 2001
    
    $
    725,000
    
    
    $
    (58,706
    )
    
    $
    666,294Net loss
    
    
    
    
    
    
    (27,244
    )
    
    
    (27,244
    )Dividend payments to Related Party on Preferred
Members Interest
    
    
    
    
    
    
    (18,000
    )
    
    
    (18,000
    )Dividend payments to MCC
    
    
    
    
    
    
    (10,528
    )
    
    
    (10,528
    )Balance, December 31, 2002
    
    $
    725,000
    
    
    $
    (114,478
    )
    
    $
    610,522Net income
    
    
    
    
    
    
    10,082
    
    
    
    10,082Dividend payments to Related Party on Preferred
Members
Interest
    
    
    
    
    
    
    (18,000
    )
    
    
    (18,000
    )Dividend payments to MCC
    
    
    
    
    
    
    (13,588
    )
    
    
    (13,588
    )Balance, December 31, 2003
    
    $
    725,000
    
    
    $
    (135,984
    )
    
    $
    589,016
 54




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES 
 CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands) Inception(April 5, 2001)throughYears Ended
December 31,
    
    December 31,2003
    
    2002
    
    2001CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:Net income (loss)
    
    $
    10,082
    
    
    $
    (27,244
    )
    
    $
    (50,586
    )Adjustments to reconcile net loss to net cash flows from operating activities:Depreciation and amortization
    
    
    113,007
    
    
    
    123,704
    
    
    
    88,463(Gain) loss on investments, net
    
    
    (1,636
    )
    
    
    15,049
    
    
    
    Amortization of deferred financing costs
    
    
    2,365
    
    
    
    2,248
    
    
    
    1,086Changes in assets and liabilities, net of effects from acquisitions:Subscriber accounts receivable, net
    
    
    927
    
    
    
    (9,521
    )
    
    
    (11,746
    )Prepaid expenses and other assets
    
    
    (1,530
    )
    
    
    (1,723
    )
    
    
    (63,600
    )Accounts payable and accrued expenses
    
    
    (29,134
    )
    
    
    18,627
    
    
    
    180,840Deferred revenue
    
    
    8,831
    
    
    
    2,369
    
    
    
    36,673Other non-current liabilities
    
    
    (6,860
    )
    
    
    1,550
    
    
    
    (19,479
    )Net cash flows provided by operating activities
    
    
    96,052
    
    
    
    125,059
    
    
    
    161,651CASH FLOWS USED IN INVESTING ACTIVITIES:Capital expenditures
    
    
    (118,039
    )
    
    
    (234,832
    )
    
    
    (38,102
    )Acquisitions of cable television systems
    
    
    (5,047
    )
    
    
    
    
    
    
    (2,113,336
    )Proceeds from sale of cable television systems
    
    
    11,989
    
    
    
    
    
    
    
    Other investment activities
    
    
    (4,941
    )
    
    
    (4,478
    )
    
    
    (145
    )Net cash flows used in investing activities
    
    
    (116,038
    )
    
    
    (239,310
    )
    
    
    (2,151,583
    )CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:New borrowings
    
    
    144,554
    
    
    
    183,000
    
    
    
    1,282,000Repayment of debt
    
    
    (93,659
    )
    
    
    (85,000
    )
    
    
    (82,000
    )Sale of preferred members interests
    
    
    
    
    
    
    
    
    
    
    150,000Dividend payments on preferred members interests
    
    
    (18,000
    )
    
    
    (18,000
    )
    
    
    (8,120
    )Dividend payments to parent
    
    
    (13,588
    )
    
    
    (10,528
    )
    
    
    Capital contribution
    
    
    
    
    
    
    
    
    
    
    725,000Financing costs
    
    
    (249
    )
    
    
    (492
    )
    
    
    (21,370
    )Net cash flows provided by financing activities
    
    
    19,058
    
    
    
    68,980
    
    
    
    2,045,510Net (decrease) increase in cash and cash equivalents
    
    
    (928
    )
    
    
    (45,271
    )
    
    
    55,578CASH AND CASH EQUIVALENTS, beginning of period
    
    
    10,307
    
    
    
    55,578
    
    
    
    CASH AND CASH EQUIVALENTS, end of period
    
    $
    9,379
    
    
    $
    10,307
    
    
    $
    55,578SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for interest, net of amounts capitalized
    
    $
    81,429
    
    
    $
    81,015
    
    
    $
    12,782SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:Capital expenditures financed through capital leases
    
    $
    5,773
    
    
    $
    
    
    
    $
    
 55




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (1)
    
    Organization Mediacom Broadband LLC (Mediacom Broadband, and collectively with its
subsidiaries, the Company), a Delaware limited liability company,
wholly-owned by of Mediacom Communications Corporation (MCC) was organized
for the purpose of acquiring cable systems from AT&T Broadband, LLC in 2001.
As of December 31, 2003, the Company was operating cable systems in the states
of Georgia, Illinois, Iowa and Missouri. Mediacom Broadband relies on its parent, MCC, for various services such as
corporate and administrative support. The financial position, results of
operations and cash flows of Mediacom Broadband could differ from those that
would have resulted had Mediacom Broadband operated autonomously or as an
entity independent of MCC. See Notes 7, 8 and 9. Mediacom
Broadband Corporation, a Delaware corporation wholly-owned by
Mediacom Broadband, co-issued, jointly and severally, with Mediacom
Broadband $400.0 million aggregate principal amount of the 11%
senior notes due July 15, 2013. Mediacom Broadband Corporation
has no assets (other than a $100 receivable from affiliate),
operations, revenues or cash flows. Therefore, separate financial
statements have not been presented for this entity.  (2)
    
    Summary of Significant Accounting Policies Basis of Preparation of Consolidated Financial Statements The consolidated financial statements include the accounts of Mediacom
Broadband and its subsidiaries. All significant intercompany transactions and
balances have been eliminated. The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Change in Estimate Effective July 1, 2003, the Company changed the estimated useful lives of
its cable systems and equipment in conjunction with the Companys recently
completed network upgrade and rebuild program. The changes in estimated useful
lives were made to reflect managements evaluation of the longer economic lives
of the Companys upgraded and rebuilt network. The new asset lives are
consistent with those used by companies in the cable television industry. The
weighted average useful lives of such fixed assets changed from approximately 7
years to approximately 12 years. These changes were made on a prospective basis
and resulted in a decrease in net loss of approximately $22.3 million for the
year ended December 31, 2003. Revenue Recognition Revenues include amounts billed to customers for services provided,
installations, advertising and other services. Revenues from video and data
services are recognized when the services are provided to the customers.
Installation revenues are recognized to the extent of direct installation costs
incurred. Advertising sales are recognized in the period that the
advertisements are exhibited. Franchise fees are collected on a monthly basis
and are periodically remitted to local franchise authorities. Franchise fees
collected and paid are reported as revenues and expenses. Cash and Cash Equivalents The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. 56




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Concentration of Credit Risk The Companys accounts receivable are comprised of amounts due from
subscribers in varying regions throughout the United States. Concentration of
credit risk with respect to these receivables is limited due to the large
number of customers comprising the Companys customer base and their geographic
dispersion. The Company invests its cash with high quality financial
institutions. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Additions to
property, plant and equipment generally include material, labor and indirect
costs. Depreciation is calculated on a straight-line basis over the following
useful lives: Buildings
    
    40 yearsLeasehold improvements.
    
    Life of respective leaseCable systems and equipment and subscriber devices
    
    4 to 20 yearsVehicles
    
    5 yearsFurniture, fixtures and office equipment.
    
    5 years
 The Company capitalizes improvements that extend asset lives and expenses
repairs and maintenance as incurred. At the time of retirements, sales or
other dispositions of property, the original cost and related accumulated
depreciation are removed from the respective accounts and the gains and losses
are presented as a component of depreciation expense. The Company capitalizes the costs associated with the construction of
cable transmission and distribution facilities, and new cable installations.
Costs include direct labor and material, as well as certain indirect costs.
The Company performs periodic evaluations of certain estimates used to
determine such costs that are capitalized. Any changes to these estimates,
which may be significant, are applied in the period in which the evaluations
were completed. The costs of disconnecting service at a customers dwelling or
reconnecting to a previously installed dwelling are charged as expense in the
period incurred. Costs associated with subsequent installations of additional
services not previously installed at a customers dwelling are capitalized to
the extent such costs are incremental and directly attributable to the
installation of such additional services. Intangible Assets Indefinite-lived intangible assets include goodwill and cable franchise
costs and are accounted for in accordance with SFAS No. 142, Goodwill and Other
Intangible Assets. The provisions of SFAS No. 142, which were adopted by the
Company on January 1, 2002, prohibit the amortization of indefinite-lived
intangible assets and goodwill, but require such assets to be tested annually
for impairment, or more frequently if impairment indicators arise. The Company
has determined that its cable franchise costs and goodwill are indefinite-lived
assets. Accordingly, on January 1, 2002, the Company ceased the amortization
of its indefinite-lived intangible assets. Other finite-lived intangible
assets, which consist of subscriber lists continue to be amortized over 5
years. See Note 5, Intangible Assets. Other Assets Other assets, net represent debt financing costs incurred to raise debt
and are deferred and amortized as other expense over the expected term of such
financings and are included in other expense. 57




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Segment Reporting SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, requires the disclosure of factors used to identify an
enterprises reportable segments. The Companys operations are organized and
managed on the basis of cable system clusters that represent operating segments
responsible for certain geographical regions. Each operating segment derives
its revenues from the delivery of similar products and services to a customer
base that is also similar. Each operating segment deploys similar technology
to deliver our products and services and operates within a similar regulatory
environment. In addition, each operating segment has similar economic
characteristics. Management evaluated the criteria for aggregation of the
geographic operating segments under SFAS No. 131 and believes the Company meets
each of the respective criteria set forth. Accordingly, management has
identified broadband services as the Companys one reportable segment. Accounting for Derivative Instruments The Companys stated strategy is to manage its interest expense using a
combination of fixed and variable interest rate debt. The Company enters into
interest rate exchange agreements to fix the interest rate on a portion of its
variable interest rate debt to reduce the potential volatility in its interest
expense that would otherwise result from changes in market interest rates. Accounting for Asset Retirement The Company adopted SFAS No. 143, Accounting for Asset Retirement
Obligations, on January 1, 2003. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Company
reviewed its asset retirement obligations to determine the fair value of such
liabilities and if a reasonable estimate of fair value can be made. This
entailed the review of leases covering tangible long-lived assets, as well as
the Companys rights-of-way under franchise agreements. In determining the
fair value of the Companys asset retirement obligation, consideration was
given to the Cable Communications Policy Act of 1984, which generally entitles
the cable operator to the fair market value for the cable system covered by a
franchise, if renewal is denied and the franchising authority acquires
ownership of the cable system or effects a transfer of the cable system to
another person. Upon adoption of SFAS No. 143, the Company determined that in certain
instances it is obligated by contractual terms or regulatory requirements to
remove facilities or perform other remediation activities upon the retirement
of its assets. The aggregate fair value of this liability is
immaterial to the Companys consolidated financial statements taken as a whole. Income Taxes Since the Company is a limited liability company, it is not subject to
federal or state income taxes and no provision for income taxes relating to its
operations has been reflected in the accompanying consolidated financial
statements. Income or loss of the limited liability company is reported in
MCCs income tax returns. Reclassifications Certain reclassifications have been made to prior years amounts to
conform to the current years presentation. Recent Accounting Pronouncements In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. In general, SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The Company adopted SFAS No. 149 on July 1,
2003, and such adoption did not have a material impact on the Companys
financial condition or results of operations. 58




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures in
its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. In accordance with SFAS No.
150, certain financial instruments that embody obligations for the issuer are
required to be classified as liabilities. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise shall be effective at the beginning of the first interim period
beginning after June 15, 2003. The Company adopted SFAS No. 150 on July 1,
2003, and such adoption did not have a material impact on the Companys
financial condition or results of operations.  (3)
    
    Acquisitions The acquisitions discussed below were made to establish the Companys
initial operations. These acquisitions were accounted for using the purchase
method of accounting, and accordingly, the purchase price of these acquisitions
has been allocated to the assets acquired and liabilities assumed at their
estimated fair values at their respective dates of acquisition. The results of
operations of the acquisitions have been included with those of the Company
since the dates of acquisition. On June 29, 2001, the Company acquired cable systems serving approximately
94,000 basic subscribers in the state of Missouri from affiliates of AT&T
Broadband for a purchase price of approximately $300.0 million. The
acquisition was financed with a portion of MCCs $336.4 million equity
contribution on June 29, 2001. On July 18, 2001, the Company acquired cable systems serving approximately
706,000 basic subscribers in the states of Georgia, Illinois and Iowa from
affiliates of AT&T Broadband for an aggregate purchase price of approximately
$1.76 billion. These acquisitions were financed with a portion of MCCs $388.6
million equity contribution on July 18, 2001, and the $150.0 million preferred
equity investment by subsidiaries of Mediacom LLC, the net proceeds from the
Companys private offering of 11% senior notes due 2013 and borrowings under
the Companys bank credit facility. Summarized below are the pro forma unaudited results of operations for the
year ended December 31, 2001, assuming the purchase of the AT&T cable systems
had been consummated as of January 1, 2001 (dollars in thousands). Adjustments
have been made to: (i) depreciation and amortization reflecting the fair value
of the assets acquired; and (ii) interest expense reflecting the debt incurred
to finance the acquisitions. The pro forma results may not be indicative of
the results that would have occurred if the acquisitions had been completed on
the date indicated or which may be obtained in the future. 2001(unaudited)Revenues
    
    $
    465,138Operating loss
    
    $
    (30,356
    )Net loss
    
    $
    (114,481
    )
 59




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (4)
    
    Property, Plant and Equipment As of December 31, 2003 and 2002, property, plant and equipment consisted
of (dollars in thousands): 2003
    
    2002Land and land improvements
    
    $
    4,518
    
    
    $
    4,487Buildings and leasehold improvements
    
    
    22,941
    
    
    
    20,948Cable systems, equipment and subscriber devices
    
    
    878,600
    
    
    
    809,836Vehicles
    
    
    33,491
    
    
    
    17,211Furniture, fixtures and office equipment
    
    
    7,875
    
    
    
    6,394947,425
    
    
    
    858,876Accumulated depreciation
    
    
    (204,305
    )
    
    
    (131,507
    )Property, plant and equipment, net
    
    $
    743,120
    
    
    $
    727,369
 Depreciation expense for the years ended December 31, 2003 and 2002 and
the period ended December 31, 2001 was approximately $109.6 million, $117.5
million and $36.4 million, respectively. As of December 31, 2003 and 2002, the Company
had property under capitalized leases of $5.3 million and $0.2 million,
respectively, before accumulated depreciation, and $4.7 million and $0.2
million, respectively, net of accumulated depreciation.  (5)
    
    Intangible Assets The Company operates its cable systems under non-exclusive cable
franchises that are granted by state or local government authorities for
varying lengths of time. The Company acquired these cable franchises through
acquisitions of cable systems and were accounted for using the purchase method
of accounting. On January 1, 2002, the Company adopted SFAS No. 142, which eliminates
amortization of goodwill and certain intangibles that have indefinite lives but
requires that such assets be tested for impairment at least annually. Prior to
adoption of SFAS No. 142 on January 1, 2002, the Company amortized cable
franchises and goodwill over 15 years. The Company evaluated the expected
useful life of its cable franchises, also referred to as franchise costs, upon
adoption of SFAS No. 142 and determined that all of its cable franchises have
an indefinite useful life. As such, the Company ceased amortizing its cable
franchises effective January 1, 2002. In determining whether its cable
franchises have an indefinite life, the Company considered that (i) there are
no legal, regulatory, contractual, competitive, economic or other factors
limiting the period over which these cable franchise rights will continue to
contribute to the Companys revenues, (ii) the Company has sufficient
experience with the local franchising authorities to conclude that franchise
renewals can and will be accomplished indefinitely, (iii) the Company has never
had a cable franchise right revoked, and has never been denied a franchise
renewal, (iv) in the Companys history of renewing franchises, minimal costs
have been incurred in the franchise renewal process, (v) the Company has
sufficiently upgraded the technological state of its cable systems, (vi) under
the 1984 Cable Act, a local franchising authority may not unreasonably withhold
the renewal of a cable system franchise, and (vii) valuations of cable
franchises by market participants presume that franchise renewals can and will
be accomplished indefinitely. The Company will continue to reevaluate the
expected life of its cable franchises periodically to determine whether events
and circumstances continue to support an indefinite life. Based on the guidance of
Emerging Issues Task Force, or EITF, Issue No.
02-7, Unit for Accounting for Testing Impairment of Indefinite-Lived Intangible
Assets, the Company determined that the unit of accounting for testing cable
franchise value for impairment resides at the cable system cluster level. Such
level reflects the financial reporting level managed and reviewed by the
corporate office (i.e., chief operating decision maker) as well as how the
Company allocates capital resources and utilizes the assets. Lastly, the
financial unit level reflects the level at which the purchase method of
accounting for the Companys acquisitions were originally recorded. The
Company has three cable system clusters, or reporting units, for the purpose of
applying SFAS No. 142. 60




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company assesses the fair value of its franchise costs based on a
discounted cash flow methodology. If the determined fair value of the
Companys franchise costs is less than the carrying amount on the financial
statements, an impairment charge would be recognized for the difference between
the fair value and the carrying value of the assets. To test the impairment of
the goodwill carried on the Companys financial statements, the fair value of
the cable system clusters tangible and intangible assets (includes franchise
costs) other than goodwill is deducted from the cable system clusters fair
value. The balance represents the fair value of goodwill which is then
compared to the carrying value of goodwill to determine if there is any
impairment. The Company completed its SFAS No. 142 impairment test as of
September 2003. Such test indicated no impairment of franchise costs or
goodwill. The following table provides a reconciliation of the reported net income
(loss) for the years ended December 31, 2003 and 2002 and for the period April
5, 2001 (date of inception) to December 31, 2001 to the net income (loss) that
would have been reported had franchise cost and goodwill amortization not been
recorded as of April 5, 2001: 2003
    
    2002
    
    2001(dollars in thousands)(unaudited)Reported net income (loss)
    
    $
    10,082
    
    
    $
    (27,244
    )
    
    $
    (50,586
    )Add back: franchise cost amortization
    
    
    

    
    
    
    
    
    
    
    38,752Adjusted pro forma net income (loss)
    
    $
    10,082
    
    
    $
    (27,244
    )
    
    $
    (11,834
    )
 The following table summarizes the net asset value for each intangible
asset category as of December 31, 2003 and 2002 (dollars in thousands): Gross Asset
    
    Accumulated
    
    Net Asset2003
    
    Value
    
    Amortization
    
    ValueFranchise costs
    
    $
    1,289,526
    
    
    $
    38,752
    
    
    $
    1,250,774Goodwill
    
    
    204,582
    
    
    
    
    
    
    
    204,582Subscriber lists
    
    
    33,123
    
    
    
    14,625
    
    
    
    18,498$
    1,527,231
    
    
    $
    53,377
    
    
    $
    1,473,854
 Gross Asset
    
    Accumulated
    
    Net Asset2002
    
    Value
    
    Amortization
    
    ValueFranchise costs
    
    $
    1,293,379
    
    
    $
    38,752
    
    
    $
    1,254,627Goodwill
    
    
    204,805
    
    
    
    
    
    
    
    204,805Subscriber lists
    
    
    33,695
    
    
    
    11,155
    
    
    
    22,540$
    1,531,879
    
    
    $
    49,907
    
    
    $
    1,481,972
 Amortization expense for the years ended December 31, 2003 and 2002, and
for the period ended December 31, 2001 was approximately $3.4 million, $6.2
million and $51.9 million, respectively. The Companys estimated aggregate
amortization expense for the year of 2004 through 2008 and beyond is $2.2
million, $2.1 million, $2.1 million, $2.1 million, $2.1 million and $7.9
million, respectively. 61




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (6)
    
    Debt As of December 31, 2003 and 2002, debt consisted of (dollars in
thousands): 2003
    
    2002Bank credit facility
    
    $
    950,000
    
    
    $
    898,00011% senior notes
    
    
    400,000
    
    
    
    400,000Capital lease obligations
    
    
    4,668
    
    
    
    $
    1,354,668
    
    
    $
    1,298,000Less: current portion
    
    
    9,771
    
    
    
    Total long-term debt
    
    $
    1,344,897
    
    
    $
    1,298,000
 Bank Credit Facility On July 18, 2001, the operating subsidiaries of Mediacom Broadband entered
into a $1.4 billion senior secured credit facility, consisting of a $600.0
million revolving credit facility, a $300.0 million tranche A term loan and a
$500.0 million tranche B term loan (the Broadband Credit Agreement). The
revolving credit facility expires on March 31, 2010, and commitments under the
revolving credit facility are subject to quarterly reductions beginning on
December 31, 2004, ranging from 2.00% to 8.00% of the original commitment
amount. As of December 31, 2003, $150.0 million was outstanding under the
revolving credit facility. The tranche A term loan matures on March 31, 2010
and the tranche B term loan matures on September 30, 2010. The term loans are
payable in quarterly installments beginning on September 30, 2004. For the
year ended December 31, 2004, the outstanding debt under tranche A will be
reduced by $6.0 million, or 2% of the original amount of the term loan, while
tranche B will be reduced by $2.5 million, or 0.5% of the original amount. The
Broadband Credit Agreement requires mandatory reductions of the revolving
credit facility from excess cash flow, as defined therein, beginning December
31, 2004. For the year ended December 31, 2004, the maximum commitment amount
under the revolving credit facility will be reduced by
$12.0 million, or 2% of
the original commitment amount. The Broadband Credit Agreement provides for
interest at varying rates based upon various borrowing options and the
attainment of certain financial ratios, and for commitment fees of 3/8% to 5/8%
per annum on the unused portion of available credit under the revolving credit
facility. Interest on outstanding revolving loans and the tranche A term loan
is payable at either the eurodollar rate plus a floating percentage ranging
from 1.00% to 2.50% or the base rate plus a floating percentage ranging from
0.25% to 1.50%. Interest on the tranche B term loan is payable at either the
eurodollar rate plus a floating percentage ranging from 2.50% to 2.75% or the
base rate plus a floating percentage ranging from 1.50% to 1.75%. The Broadband Credit Agreement requires compliance with certain financial
covenants including, but not limited to, leverage, interest coverage and debt
service coverage ratios, as defined therein. The Broadband Credit Agreement
also requires compliance with other covenants including, but not limited to,
limitations on mergers and acquisitions, consolidations and sales of certain
assets, liens, the incurrence of additional indebtedness, certain restricted
payments, and certain transactions with affiliates. The Company was in
compliance with all covenants of the Broadband Credit Agreement as of and for
all periods in the year ended December 31, 2003. The Broadband Credit Agreement is collateralized by Mediacom Broadbands
pledge of all its ownership interests in its operating subsidiaries and is
guaranteed by Mediacom Broadband on a limited recourse basis to the extent of
such ownership interests. The average interest rate on debt outstanding under the Broadband Credit
Agreement was 3.3% and 4.8% for the year ended December 31, 2003 and 2002,
respectively, before giving effect to the interest rate exchange agreements
discussed below. As of December 31, 2003, the Company had approximately $442.2
million of unused bank commitments under the Broadband Credit Agreement. 62




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company uses interest rate exchange agreements in order to fix the
interest rate on its floating rate debt. As of December 31, 2003, the Company
had interest rate exchange agreements with various banks pursuant to which the
interest rate on $500.0 million is fixed at a weighted average rate of
approximately 3.4%, plus the average applicable margin over the eurodollar rate
option under the Companys bank credit agreements. Under the terms of the
interest rate exchange agreements, which expire from 2005 through 2007, the
Company is exposed to credit loss in the event of nonperformance by the other
parties. However, due to high creditworthiness of its counterparties, the
Company does not anticipate their nonperformance. The fair value of the interest rate exchange agreements is the estimated
amount that the Company would receive or pay to terminate such agreements,
taking into account current interest rates, the remaining time to maturities
and the current creditworthiness of the Companys counterparties. At December
31, 2003, based on the mark-to-market valuation, the Company would have paid
approximately $12.2 million if these agreements were terminated, inclusive of
accrued interest. Senior Notes On June 29, 2001, Mediacom Broadband and Mediacom Broadband Corporation
(the Issuers) jointly issued $400.0 million aggregate principal amount of 11%
senior notes due June 2013 (the 11% Senior Notes). The 11% Senior Notes are
unsecured obligations of the Issuers, and the indenture for the 11% Senior
Notes stipulates, among other things, restrictions on incurrence of
indebtedness, distributions, mergers and asset sales and has cross-default
provisions related to other debt of the Issuers. Interest accrues at 11% per
annum, beginning from the date of issuance and is payable semi-annually on
January 15 and July 15 of each year, which commenced on January 15, 2002. The
Issuers were in compliance with the indenture governing the 11% Senior Notes as
of and for all periods in the year ended December 31, 2003. Fair Value and Debt Maturities The fair value of the Companys bank credit facility approximates the
carrying value. The fair value at December 31, 2003 of the 11% Senior Notes
was approximately $450.0 million. The stated maturities of all debt outstanding as of December 31, 2003 are
as follows (dollars in thousands): 2004
    
    $
    9,7712005
    
    
    36,3052006
    
    
    43,8412007
    
    
    65,7212008
    
    
    65,030Thereafter
    
    
    1,134,000$
    1,354,668
  (7)
    
    Preferred Members Interests On July 18, 2001, the Company received a $150.0 million preferred equity
investment from Mediacom LLC. The preferred equity investment has a 12% annual
dividend, payable quarterly in cash. During each of the years ended December
31, 2003 and 2002, the Company paid in aggregate $18.0 million in cash
dividends on the preferred equity.  (8)
    
    Members Equity As a wholly-owned subsidiary of MCC, the Companys business affairs,
including its financing decisions, are directed by MCC. In January, July and
December of 2003, the Company paid cash dividends of approximately $4.5
million, in each of these months, to MCC, as permitted under the Companys debt
arrangements. 63




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (9)
    
    Related Party Transactions MCC manages the Company pursuant to a management agreement with each
operating subsidiary. Under the management agreements, MCC has full and
exclusive authority to manage the day to day operations and conduct the
business of the Company. The Company remains responsible for all expenses and
liabilities relating to construction, development, operation, maintenance,
repair, and ownership of its systems. Management fees for the years ended
December 31, 2003, 2002 and 2001 amounted to approximately $9.3 million, $7.0
million and $2.9 million, respectively. As compensation for the performance of its services, subject to certain
restrictions, MCC is entitled under each management agreement to receive
management fees in an amount not to exceed 4.0% of the annual gross operating
revenues of each of the operating subsidiaries. MCC is also entitled to the
reimbursement of all expenses necessarily incurred in its capacity as manager. Mediacom LLC, a wholly-owned subsidiary of MCC, is a preferred equity
investor in the Company. See Note 7 for a discussion on the transactions
between these two parties.  (10)
    
    Employee Benefit Plans Substantially all employees of the Company are eligible to participate in
a defined contribution plan pursuant to the Internal Revenue Code Section
401(k) (the Plan). Under such Plan, eligible employees may contribute up to
15% of their current pretax compensation. The Plan permits, but does not
require, matching contributions and non-matching (profit sharing) contributions
to be made by the Company up to a maximum dollar amount or maximum percentage
of participant contributions, as determined annually by the Company. The
Company presently matches 50% on the first 6% of employee contributions. The
Companys contributions under the Plan totaled approximately $1.1 million for
each of the years ended December 31, 2003 and 2002 and $0.4 million for the
period ended December 31, 2001.  (11)
    
    Commitments and Contingencies Under various lease and rental agreements for offices, warehouses and
computer terminals, the Company had rental expense of approximately $2.4
million, $2.2 million and $1.9 million for the years ended December 31, 2003,
2002 and the period ended December 31, 2001, respectively. Future minimum
annual rental payments are as follows (dollars in thousands): 2004
    
    $
    1,1562005
    
    
    4462006
    
    
    3262007
    
    
    2132008
    
    
    174Thereafter
    
    
    510
 In addition, the Company rents utility poles in its operations generally
under short-term arrangements, but the Company expects these arrangements to
recur. Total rental expense for utility poles was approximately $4.0 million,
$2.9 million and $1.3 million for the years ended December 31, 2003, 2002 and
the period ended December 31, 2001, respectively. As of December 31, 2003, approximately $7.8 million of letters of credit
were issued in favor of various parties to secure the Companys performance
relating to franchise and lease requirements. The fair value of such letters
of credit were not material. 64




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MEDIACOM BROADBAND LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Legal Proceedings There are no material pending legal proceedings to which the Company is a
party or to which any of the Companys properties are subject. 65




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Schedule II MEDIACOM BROADBAND LLC AND SUBSIDIARIES 
 VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands) Additions
    
    DeductionsBalance at
    
    Charged to
    
    Charged to
    
    Charged to
    
    Charged tobeginning of
    
    costs
    
    other
    
    costs and
    
    other
    
    Balance atperiod
    
    and expenses
    
    accounts
    
    expenses
    
    accounts
    
    end of periodDecember 31, 2001Allowance for doubtful accountsCurrent receivables
    
    $
    
    
    
    $
    3,477
    
    
    $
    2,557
    
    
    $
    3,886
    
    
    $
    
    
    
    $
    2,148Acquisition reserves(1)Accrued expenses
    
    $
    
    
    
    $
    
    
    
    $
    42,156
    
    
    $
    5,577
    
    
    $
    
    
    
    $
    36,579December 31, 2002Allowance for doubtful accountsCurrent receivables
    
    $
    2,148
    

    
    $
    6,909
    
    
    $
    
    
    
    $
    6,374
    
    
    $
    
    
    
    $
    2,683Acquisition reserves(1)Accrued expenses
    
    $
    36,579
    
    
    $
    
    
    
    $
    300
    
    
    $
    4,613
    
    
    $
    31,966
    
    
    $
    300December 31, 2003Allowance for doubtful accountsCurrent receivables
    
    $
    2,683
    
    
    $
    4,534
    
    
    $
    
    
    
    $
    4,762
    
    
    $
    
    
    
    $
    2,455Acquisition reservesAccrued expenses
    
    $
    300
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    300
   (1)
    
    Additions were charged in connection with purchase accounting. 66




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REPORT OF INDEPENDENT ACCOUNTANTS To Mediacom Broadband LLC: In our opinion, the accompanying combined statements of operations and parents
investment and of cash flows present fairly, in all material respects, Mediacom
Systems (New Mediacom) (a combination of certain assets and liabilities as
defined in Note 1 to the combined financial statements) for the period from
January 1, 2001 to July 18, 2001 and the year ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the
Companies management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion. As discussed in Note 1, on March 9, 1999 (effective March 1, 1999 for financial
reporting purposes), AT&T Corp., the parent company of New Mediacom, acquired
Tele-Communications, Inc., parent company of Old Mediacom, in a business
combination accounted for as a purchase. As a result of the acquisition, the
combined financial statements for the periods after the acquisition reflects
AT&T Corp.s basis in the business. As discussed in Note 1, effective June 29, 2001 and July 18, 2001, the Mediacom
Systems were sold to Mediacom Communications Corporation. /s/ PricewaterhouseCoopers LLP Denver, Colorado
March 8, 2002 67




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) 
 COMBINED STATEMENTS OF OPERATIONS AND PARENTS INVESTMENT
(dollars in thousands) New MediacomPeriod fromJanuary 1to
    
    Year endedJuly 18,
    
    December 31,2001
    
    2000Revenue
    
    $
    249,238
    
    
    $
    439,541Costs and expenses:Operating
(note 3)
    
    
    117,205
    
    
    
    192,543Selling, general and administrative
    
    
    42,449
    
    
    
    70,879Management
fees (note 3)
    
    
    18,625
    
    
    
    22,267Restructuring charge (note 4)
    
    
    570
    
    
    
    Depreciation
    
    
    48,327
    
    
    
    72,615Amortization
    
    
    35,283
    
    
    
    64,567Operating income (loss) before income taxes
    
    
    (13,221
    )
    
    
    16,670Gain on disposition of assets
    
    
    5,183
    
    
    
    Net income (loss) before taxes
    
    
    (8,038
    )
    
    
    16,670Provision for income taxes (benefit)
    
    
    (3,546
    )
    
    
    6,646Net income (loss)
    
    
    (4,492
    )
    
    
    10,024Parents investment:Beginning of period
    
    
    1,493,084
    
    
    
    1,468,567Change in
transfers from parent, net (note 3)
    
    
    47,806
    
    
    
    14,493Disposed cable systems
    
    
    (294,559
    )
    
    
    End of period
    
    $
    1,241,839
    
    
    $
    1,493,084
 68




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) 
 COMBINED STATEMENTS OF CASH FLOWS
(dollars in thousands) New MediacomPeriod fromJanuary 1
    
    Yearto
    
    endedJuly 18,
    
    December 31,2001
    
    2000CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (4,492
    )
    
    $
    10,024Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Gain on disposition of assets
    
    
    (5,183
    )
    
    
    Depreciation and amortization
    
    
    83,610
    
    
    
    137,182Deferred tax benefit
    
    
    (114,635
    )
    
    
    (24,781
    )Changes in operating assets and liabilities:Decrease (increase) in trade and other receivables
    
    
    3,185
    
    
    
    (2,801
    )Decrease (increase) in other assets
    
    
    813
    
    
    
    57Increase (decrease) in accounts payable
    
    
    (360
    )
    
    
    (761
    )Increase in accrued liabilities
    
    
    2,784
    
    
    
    836Net cash provided by (used in) operating activities
    
    
    (34,278
    )
    
    
    119,756CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures for property and equipment
    
    
    (34,490
    )
    
    
    (131,177
    )Other
    
    
    (192
    )
    
    
    Net cash used in investing activities
    
    
    (34,682
    )
    
    
    (131,177
    )CASH FLOWS FROM FINANCING ACTIVITIES:Change in transfers from parent, net
    
    
    47,806
    
    
    
    14,493Net change in cash and cash equivalents
    
    
    (21,154
    )
    
    
    3,072Cash and cash equivalents at beginning of period
    
    
    21,154
    
    
    
    18,082Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    21,154
 69




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) 
 NOTES TO COMBINED FINANCIAL STATEMENTS  (1)
    
    Basis of Presentation and Summary of Significant Accounting Policies Effective upon the end of business on June 29, 2001, subsidiaries of AT&T
Corp. (AT&T) sold to Mediacom Communications Corporation (Mediacom) certain
cable television systems serving approximately 94,000 customers located
primarily in Missouri, and wholly owned by various cable subsidiaries and
partnerships of AT&T (the Missouri Mediacom Systems) for net cash proceeds of
approximately $300 million. AT&T recognized an estimated gain on the sale of
the Missouri Mediacom Systems of approximately $5 million. The results of
operations and cash flows of the Missouri Mediacom Systems are included in the
combined financial statements through June 29, 2001. Effective upon the end of business on July 18, 2001, subsidiaries of AT&T
sold to Mediacom certain cable television systems serving approximately 706,000
customers located primarily in Iowa, Georgia and Southern Illinois, and wholly
owned by various cable subsidiaries and partnerships of AT&T for net cash
proceeds of approximately $1.76 billion. AT&T recognized an estimated loss on
this sale of approximately $93 million. These cable systems combined with the
Missouri Mediacom Systems are collectively referred to herein as the Mediacom
Systems or the Systems. The accompanying combined financial statements include the specific
accounts directly related to the activities of the Mediacom Systems. All
significant inter-system accounts and transactions have been eliminated in
combination. The combined net assets of the Mediacom Systems are referred to
as Parents Investment. On March 9, 1999, AT&T acquired AT&T Broadband, LLC (AT&T Broadband,
formerly known as Tele-Communications, Inc.) in a merger (the AT&T Merger).
In the AT&T Merger, AT&T Broadband became a subsidiary of AT&T. For financial
reporting purposes, the AT&T Merger was deemed to have occurred on March 1,
1999. The combined financial statements of Mediacom Systems for periods prior
to March 1, 1999 are referred to herein as Old Mediacom. The combined
financial statements of Mediacom Systems for periods subsequent to February 28,
1999 are referred to herein as New Mediacom. Due to the application of
purchase accounting in connection with the AT&T Merger, the predecessor
combined financial statements of Old Mediacom are not comparable to the
successor combined financial statements of New Mediacom. Certain costs of AT&T Broadband are charged to the Systems based primarily
on Mediacom Systems number of customers (see note 4). Although such
allocations are not necessarily indicative of the costs that would have been
incurred by the Mediacom Systems on a stand alone basis, management believes
that the resulting allocated amounts are reasonable. The net assets of the Systems are held by various wholly-owned
subsidiaries and partnerships of AT&T Broadband. Accordingly, the combined
financial statements of the Mediacom Systems do not reflect all of the assets,
liabilities, revenues and expenses that would be indicative of a stand-alone
business. The financial condition, results of operations and cash flows of the
Mediacom Systems could differ from reported results had the Mediacom Systems
operated autonomously or as an entity independent of AT&T. In particular, no
interest expense incurred by AT&T and its subsidiaries on their debt
obligations has been allocated to the Mediacom Systems. The Mediacom Systems are included in the consolidated federal income tax
return of AT&T and its affiliates for the period from January 1 to July 18,
2001 and the year ended December 31, 2000. Combined income tax provisions or
benefits, related to tax payments or refunds, and deferred tax balances of AT&T
and its affiliates or TCI and its affiliates, as applicable, have been
allocated to the Mediacom Systems based principally on the taxable income and
tax credits directly attributable to the Mediacom Systems, essentially a stand
alone presentation. These allocations reflect the Mediacom Systems
contribution to AT&Ts or TCIs consolidated taxable income and consolidated
tax liability and tax credit position, as applicable. 70




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS Cash and Cash Equivalents Cash and cash equivalents consist of deposits with banks and financial
institutions that are unrestricted as to withdrawal or use and have maturities
of less than 90 days. AT&T performs cash management functions on behalf of AT&T Broadband,
including the Mediacom Systems. Substantially all of the Systems cash
balances are swept to AT&T on a daily basis, where they are managed and
invested by AT&T. Transfers of cash to and from AT&T are reflected as a
component of Parents investment, with no interest income or expense reflected.
Net transfers to or from AT&T are assumed to be settled in cash. AT&Ts
capital contributions for purchase business combinations to the Systems have
been treated as non-cash transactions. In addition, proceeds from the sale of
the Missouri Mediacom Systems have been treated as a non-cash transaction with
AT&T. Effective on the date of sale of the respective Mediacom Systems, all cash
was swept by AT&T through Parents investment. Property and Equipment Property and equipment is stated at cost, including acquisition costs
allocated to tangible assets acquired. Construction costs, labor and
applicable overhead related to installations are capitalized. Interest
capitalized was not significant for any periods presented. Depreciation is computed on a straight-line basis using estimated useful
lives of 3 to 15 years for distribution systems and 3 to 40 years for support
equipment and buildings. Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. At the time of ordinary retirements, sales or other
dispositions of property, the original cost and cost of removal of such
property are charged to accumulated depreciation, and salvage, if any, is
credited thereto. Gains or losses are only recognized in connection with the
sale of properties in their entirety. Intangible Assets Intangible assets consist primarily of franchise costs and intangibles for
customer relationships. Franchise costs represent the difference between AT&T
Broadbands allocated historical cost of acquired assets of the Mediacom
Systems and amounts allocated to the tangible assets. Franchise costs and
customer relationships are generally amortized on a straight-line basis over 25
to 40 and 10 years, respectively. Costs incurred by the Mediacom Systems in
negotiating and renewing franchise agreements are amortized on a straight-line
basis over the average lives of the franchise, generally 10 to 20 years. Impairment of Long-lived Assets Management of the Systems periodically reviews the carrying amounts of
property and equipment and its identifiable intangible assets to determine
whether current events or circumstances warrant adjustments to such carrying
amounts. If an impairment adjustment is deemed necessary, based on an analysis
of undiscounted cash flows, such loss is measured by the amount that the
carrying value of such assets exceeds the fair value. Considerable management
judgment is necessary to estimate the fair value of assets, accordingly, actual
results could vary significantly from such estimates. 71




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS Income Taxes Mediacom Systems is not a separate taxable entity for federal and state
income tax purposes and its results of operations are included in the
consolidated federal and state income tax returns of AT&T and its affiliates or
TCI and its affiliates, as applicable. Mediacom Systems provision or benefit
for income taxes is based upon its contribution to the overall income tax
liability or benefit of AT&T and its affiliates or TCI and its affiliates, as
applicable. Revenue Recognition Revenue for customer fees, equipment rental, advertising, pay-per-view
programming and revenue sharing agreements is recognized in the period that
services are delivered. Installation revenue is recognized in the period the
installation services are provided to the extent of direct selling costs. Any
remaining amount is deferred and recognized over the estimated average period
that customers are expected to remain connected to the cable distribution
system. Statement of Cash Flows Transactions effected through the intercompany account due to (from)
parent have been considered constructive cash receipts and payments for
purposes of the combined statement of cash flows. Stock-Based Compensation Stock-based compensation is accounted for in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25) and related interpretations. The Systems follow the disclosure-only
provisions of Statement of Financial Accounting Standard (SFAS) No. 123,
Accounting for Stock-Based Compensation (SFAS 123). Estimates The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. Reclassifications Certain prior periods amounts have been reclassified to conform to the
current period presentation. Recent Pronouncements In 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 141, Business Combinations
(SFAS 141) and No. 142, Goodwill and Other Intangible Assets (SFAS 142).
SFAS 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS 142, goodwill and
intangible assets with indefinite lives will no longer be amortized, but rather
will be tested for impairment upon adoption and at least annually thereafter.
Separable intangible assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives. The amortization provisions
of SFAS 142 apply immediately to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior
to July 1, 2001, the provisions of SFAS 142 are effective January 1, 2002.
Management is currently evaluating the effect that SFAS 141 and SFAS 142 will
have on the results of operations, financial position or cash flows of the
Systems. 72




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS In 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations (SFAS 143). This standard requires that obligations associated
with the retirement of tangible long-lived assets be recorded as liabilities
when those obligations are incurred, with the amount of the liability initially
measured at fair value. Upon initially recognizing a liability for an asset
retirement obligation, an entity must capitalize the cost by recognizing an
increase in the carrying amount of the related long-lived asset. Over time,
this liability is accreted to its present value, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. Management
of the Systems does not expect that the adoption of this statement will have a
material impact on the Systems results of operations, financial position or
cash flows. In 2001, the FASB issued Statements of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
144). This statement addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS 144 supersedes Statement of
Financial Accounting standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of, and provides
guidance on classification and accounting for fiscal years beginning after
December 15, 2001. Management of the Systems does not expect that the adoption
of SFAS 144 will have a material impact on the Systems financial position,
results of operations or cash flows.  (2)
    
    Intangibles Intangible
assets are summarized as follows (dollars in thousands): July 18,
    
    December 31,2001
    
    2000Franchising costs
    
    $
    1,560,198
    
    
    $
    1,802,251Other intangible assets
    
    
    78,124
    
    
    
    87,7911,638,322
    
    
    
    1,890,042Less accumulated amortization
    
    
    130,008
    
    
    
    111,101Intangible assets, net
    
    $
    1,508,314
    
    
    $
    1,778,941
 Amortization expense on franchise costs was $30.5 million and $55.3
million for the period from January 1 to July 18, 2001 and the year ended
December 31, 2000, respectively. Amortization expense for other intangible
assets was $4.8 million and $9.3 million for the period from January 1 to July
18, 2001 and the year ended December 31, 2000, respectively.  (3)
    
    Parents Investment Parents investment in the Mediacom Systems is summarized as follows
(dollars in thousands): July 18,
    
    December 31,2001
    
    2000Transfers from parent, net
    
    $
    1,219,010
    
    
    $
    1,465,763Cumulative net income since March 1, 1999
    
    
    22,829
    
    
    
    27,321$
    1,241,839
    
    
    $
    1,493,084
 73




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS The non-interest bearing transfers from parent include AT&T Broadbands
equity in acquired systems, programming charges, management fees and advances
for operations, acquisitions and construction costs, as well as the amounts
charged as a result of the allocation of certain costs from AT&T. As a result of AT&Ts 100% ownership of the Mediacom Systems, the
transfers from parent amounts have been classified as a component of Parents
investment in the accompanying combined balance sheets. The Mediacom Systems purchase, at AT&T Broadbands cost, certain pay
television and other programming through a certain indirect subsidiary of AT&T
Broadband. Charges for such programming are included in operating expenses in
the accompanying combined financial statements. Certain subsidiaries of AT&T Broadband provide administrative services to
the Mediacom Systems and have assumed managerial responsibility of the Mediacom
Systems cable television system operations and construction. As compensation
for these services, the Mediacom Systems pay a monthly management fee
calculated on a per-subscriber basis. The parent transfers and expense allocation activity consist of the
following (dollars in thousands): New MediacomPeriod fromJanuary 1
    
    Yearto
    
    endedJuly 18,
    
    December 31,2001
    
    2000Beginning of period
    
    $
    1,465,763
    
    
    $
    1,451,270Programming charges
    
    
    77,287
    
    
    
    123,993Management fees
    
    
    18,625
    
    
    
    22,267Cash transfers
    
    
    (48,106
    )
    
    
    (131,767
    )Disposal of cable systems
    
    
    (294,559
    )
    
    
    Acquisition of cable systems
    
    
    
    
    
    
    End of period
    
    $
    1,219,010
    
    
    $
    1,465,763
  (4)
    
    Restructuring Charge As part of a cost reduction plan undertaken by AT&T Broadband in 2001,
approximately 63 employees of the Systems were terminated, resulting in a
restructuring charge of approximately $570,000 during the first quarter of
2001. Terminated employees primarily performed customer service and field
operations functions. The restructuring charge consists of severance and other
employee benefits. As of July 18, 2001, all of the charge has been paid in
cash.  (5)
    
    Employee Benefit and Stock-Based Compensation Plans AT&T sponsors savings plans for the majority of its employees. Prior to
the AT&T Merger, TCI also sponsored savings plans for the majority of its
employees. The plans allow employees to contribute a portion of their pre-tax
and/or after-tax income in accordance with specified guidelines. Employee
contributions are matched up to certain limits. AT&T and TCI contributions, as
applicable, for employees of the Mediacom Systems amounted to $1,082,000 and
$2,947,000 for the period from January 1 to July 18, 2001 and the year ended
December 31, 2000, respectively. Under AT&Ts 1997 Long-term Incentive Program (the Program), which was
amended March 14, 2000, AT&T grants stock options, performance shares,
restricted stock and other awards on AT&T common stock as well as stock options
on the AT&T Wireless Group tracking stock. Employees of the Mediacom Systems
were eligible to receive stock options under this program effective with the
AT&T Merger (see note 1). 74




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS Under the Program, there were 150 million shares of AT&T common stock
available for grant with a maximum of 22.5 million common shares that could be
used for awards other than stock options. Beginning with January 1, 2000, the
remaining shares available for grant at December 31 of the prior year, plus
1.75% of the shares of AT&T common stock outstanding on January 1 of each year,
become available for grant. There is a maximum of 37.5 million shares that may
be used for awards other than stock options. The exercise price of any stock
option is equal to the stock price when the option is granted. Generally, the
options vest over three or four years and are exercisable up to 10 years from
the date of grant. Under the AT&T 1996 Employee Stock Purchase Plan (the Plan), which was
effective July 1, 1996, AT&T is authorized to sell up to 75 million shares of
AT&T common stock to its eligible employees. Under the terms of the Plan,
employees may have up to 10% of their earnings withheld to purchase AT&Ts
common stock. The purchase price of the stock on the date of exercise is 85%
of the average high and low sale prices of shares on the New York Stock
Exchange for that day. The Systems apply APB 25, and related interpretations in accounting for
its plans. Accordingly, no compensation expense has been recognized for
stock-based compensation plans for the Mediacom Systems. The Systems have adopted the disclosure-only provisions of SFAS 123. If
the Systems had elected to recognize compensation costs based on the fair value
at the date of grant for AT&T awards granted to Systems employees in 2000,
consistent with the provisions of SFAS 123, Mediacom Systems net income (loss)
would have been adjusted to reflect additional compensation expense resulting
in pro forma net income (loss) of $(5,996,000) and $9,339,000 for the period
from January 1, 2001 to July 18, 2001 and the year ended December 31, 2000,
respectively. There were no AT&T awards granted to systems employees in 1999
or 2001. The stock option information included herein has not been adjusted for the
July 2001 split-off of the AT&T Wireless Group from AT&T. AT&T granted
approximately 259,800 and 86,600 stock options to the Mediacom Systems
employees during 2000 for AT&T stock options and AT&T Wireless Group tracking
stock, respectively. At the date of grant, the exercise price for AT&T options
and AT&T Wireless Group tracking stock options granted to AT&T Broadband
employees during 2000 was $33.81 and $27.56, respectively. The fair value at
date of grant for AT&T options and AT&T Wireless Group tracking stock options
granted to AT&T Broadband employees during 2000 was $10.59 and $11.74,
respectively, and was estimated using the Black-Scholes option-pricing model.
The following assumptions were applied for 2000 for the AT&T options and the
AT&T Wireless Group tracking stock options: (i) expected dividend yield of
1.7% and 0%, respectively, (ii) expected volatility rate of 34% and 55%,
respectively, (iii) risk-free interest rate of 6.24% and 6.2%, respectively,
and (iv) expected life of 3 years. 75




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS  (6)
    
    Income Taxes The Mediacom Systems is not a separate taxable entity for federal and
state income tax purposes and its results of operations are included in the
consolidated federal and state income tax returns of AT&T and its affiliates or
TCI and its affiliates, as applicable (see note 1). The following table shows the principal reasons for the difference between
the effective income tax rate and the U.S. federal statutory income tax rate
(dollars in thousands): New MediacomPeriod fromJanuary 1
    
    Yearto
    
    endedJuly 18,
    
    December 31,2001
    
    2000U.S. federal statutory income tax rate
    
    
    35.0
    %
    
    
    35.0
    %Federal income tax at statutory rate
    
    $
    (2,813
    )
    
    $
    5,834State and local income taxes, net of federal income tax effect
    
    
    (733
    )
    
    
    812Provision (benefit) for income taxes
    
    $
    (3,546
    )
    
    $
    6,646Effective income tax rate
    
    
    44.1
    %
    
    
    39.9
    %
 The components of the provision (benefit) for income taxes are presented in
this table (dollars in thousands): New MediacomPeriod fromJanuary 1
    
    Yearto
    
    endedJuly 18,
    
    December 31,2001
    
    2000Current:Federal
    
    $
    103,860
    
    
    $
    25,053State and local
    
    
    7,229
    
    
    
    6,374Deferred:Federal
    
    
    (106,278
    )
    
    
    (19,655
    )State and local
    
    
    (8,357
    )
    
    
    (5,126
    )Provision (benefit) for income taxes
    
    $
    (3,546
    )
    
    $
    6,646
 Deferred income tax liabilities are income taxes Mediacom Systems expects
to incur in future periods. Similarly, deferred income tax assets are recorded
for expected reductions in income taxes payable in future periods. Deferred
income taxes arise because of differences in the book and tax basis of certain
assets and liabilities. 76




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MEDIACOM SYSTEMS (PREDECESSOR COMPANY)
(A combination of certain assets and liabilities, as defined in note 1) NOTES TO COMBINED FINANCIAL STATEMENTS Deferred
income tax liabilities consist of the following (dollars in
thousands): July 18,
    
    December 31,2001
    
    2000Long-term deferred income tax liabilities:Property, plant and equipment
    
    $
    62,130
    
    
    $
    72,417Franchise costs
    
    
    590,563
    
    
    
    690,070Other
    
    
    22,936
    
    
    
    27,777Total long-term deferred income tax liabilities
    
    $
    675,629
    
    
    $
    790,264
  (7)
    
    Commitments The Mediacom Systems lease business offices, have entered into pole rental
agreements and use certain equipment under lease arrangements. Rental expense
for such arrangements amounted to $2,179,000 and $2,680,000 for the period from
January 1 to July 18, 2001 and the year ended December 31, 2000. Future minimum lease payments under noncancelable operating leases for
each of the next five years are summarized as follows (amounts in thousands): 2002
    
    $
    1,2262003
    
    
    1,2102004
    
    
    1,1872005
    
    
    1,1322006
    
    
    919
 It is expected that, in the normal course of business, expiring leases
will be renewed or replaced by leases on other properties. 77




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Schedule II MEDIACOM SYSTEMS (PREDECESSOR COMPANY) 
 VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands) Balance atbeginning of
    
    Charged to costs
    
    
    
    
    
    Balance atperiod
    
    and expenses
    
    Deductions
    
    end of periodDecember 31, 2000Allowance for doubtful accountsCurrent receivables
    
    $
    1,292
    
    
    $
    7,222
    
    
    $
    6,865
    
    
    $
    1,649January 1 to July 18, 2001Allowance for doubtful accountsCurrent receivables
    
    $
    1,649
    
    
    $
    6,136
    
    
    $
    6,987
    
    
    $
    798
 78




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ITEM 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We have previously reported in a current report on Form 8-K, dated April
19, 2002, that we terminated our engagement of Arthur Andersen LLP. 
 ITEM 9A. CONTROLS AND PROCEDURES Mediacom Broadband LLC The management of Mediacom Broadband LLC (Mediacom Broadband) carried
out an evaluation, with the participation of the Mediacom Broadbands Chief
Executive Officer and Chief Financial Officer, of the effectiveness of
Mediacom Broadbands disclosure controls and procedures as of December 31,
2003. Based upon that evaluation, Mediacom Broadbands Chief Executive
Officer and Chief Financial Officer concluded that Mediacom Broadbands
disclosure controls and procedures were effective to ensure that information
required to be disclosed by Mediacom Broadband in reports that it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the Securities and Exchange Commission. There has not been any change in Mediacom Broadbands internal control
over financial reporting in connection with the evaluation required by Rule
15d-15(d) under the Exchange Act that occurred during the quarter ended
December 31, 2003 that has materially affected, or is reasonably likely to
materially affect, Mediacom Broadbands internal control over financial
reporting. Mediacom Broadband Corporation The management of Mediacom Broadband Corporation carried out an
evaluation, with the participation of the Mediacom Broadband Corporations
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
Mediacom Broadband Corporations disclosure controls and procedures as of
December 31, 2003. Based upon that evaluation, Mediacom Broadband
Corporations Chief Executive Officer and Chief Financial Officer concluded
that Mediacom Broadband Corporations disclosure controls and procedures were
effective to ensure that information required to be disclosed by Mediacom
Broadband in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. There has not been any change in Mediacom Broadband Corporations internal
control over financial reporting in connection with the evaluation required by
Rule 15d-15(d) under the Exchange Act that occurred during the quarter ended
December 31, 2003 that has materially affected, or is reasonably likely to
materially affect, Mediacom Broadband Corporations internal control over
financial reporting. 79




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PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS MCC is our sole voting member and manager. MCC serves as manager of our
operating subsidiaries. The executive officers of Mediacom Broadband LLC and
the directors and executive officers of MCC and Mediacom Broadband Corporation
are: Name
    
    Age
    
    PositionRocco B. Commisso
    
    
    54
    
    
    Chairman and Chief Executive Officer
of Mediacom Broadband LLC and MCC and
President and Chief Executive Officer and
Director of Mediacom Broadband
CorporationMark E. Stephan
    
    
    47
    
    
    Executive Vice President, Chief Financial
Officer and Treasurer of Mediacom
Broadband LLC and MCC, Director of MCC,
and Treasurer and Secretary of Mediacom
Broadband CorporationJohn G. Pascarelli
    
    
    42
    
    
    Executive Vice President, Operations of
MCCItalia Commisso Weinand
    
    
    50
    
    
    Senior Vice President, Programming and
Human Resources of MCCCharles J. Bartolotta
    
    
    49
    
    
    Senior Vice President, Customer
Operations of MCCCalvin G. Craib
    
    
    49
    
    
    Senior Vice President, Business
Development of MCCWilliam I. Lees, Jr.
    
    
    45
    
    
    Senior Vice President, Corporate
Controller of MCCJoseph E. Young
    
    
    55
    
    
    Senior Vice President, General Counsel
and Secretary of MCCCraig S. Mitchell
    
    
    45
    
    
    Director of MCCWilliam S. Morris III
    
    
    69
    
    
    Director of MCCThomas V. Reifenheiser
    
    
    68
    
    
    Director of MCCNatale S. Ricciardi
    
    
    55
    
    
    Director of MCCRobert L. Winikoff
    
    
    57
    
    
    Director of MCC
 Rocco B. Commissohas 26 years of experience with the cable television
industry and has served as our Chairman and Chief Executive Officer since our
inception in April 2001 and our managers Chairman and Chief Executive Officer
since founding its predecessor company in July 1995. Mr. Commisso has served
as President, Chief Executive Officer and Director of Mediacom Broadband
Corporation since its inception in May 2001. From 1986 to 1995, he served as
Executive Vice President, Chief Financial Officer and a director of Cablevision
Industries Corporation. Prior to that time, Mr. Commisso served as Senior Vice
President of Royal Bank of Canadas affiliate in the United States from 1981,
where he founded and directed a specialized lending group to media and
communications companies. Mr. Commisso began his association with the cable
industry in 1978 at The Chase Manhattan Bank, where he managed the banks
lending activities to communications firms including the cable industry. He
serves on the board of directors and executive committees of the National Cable
Television Association and Cable Television Laboratories, Inc., and on the
board of directors of C-SPAN. Mr. Commisso holds a Bachelor of Science in
Industrial Engineering and a Master of Business Administration from Columbia
University. Mark E. Stephanhas 17 years of experience with the cable television
industry and has served as our Executive Vice President, Chief Financial
Officer and Treasurer since November 2003. Prior to that, he was Senior Vice
President, Chief Financial Officer and Treasurer since the commencement of our
operations in March 1996. Before joining us, Mr. Stephan served as Vice
President, Finance for Cablevision Industries from July 1993. Prior to that
time, Mr. Stephan served as Manager of the telecommunications and media lending
group of Royal Bank of Canada. 80




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John G. Pascarellihas 23 years of experience in the cable television
industry and has served as our managers Executive Executive Vice President,
Operations since November 2003. Prior to that he was our managers Senior Vice
President, Marketing Consumer Services from June 2000 and our managers Vice
President of Marketing from 1998. Before joining our manager in March 1998,
Mr. Pascarelli served as Vice President, Marketing for Helicon from January
1996 to February 1998 and as Corporate Director of Marketing for Cablevision
Industries from 1988 to 1995. Prior to that time, Mr. Pascarelli served in
various marketing and system management capacities for Continental Cablevision,
Cablevision Systems and Storer Communications. Mr. Pascarelli is a member of
the board of directors of the Cable and Telecommunications Association for
Marketing. Italia Commisso Weinandhas 27 years of experience in the cable television
industry. Before joining our manager in April 1996, Ms. Weinand served as
Regional Manager for Comcast Corporation from July 1985. Prior to that time,
Ms. Weinand held various management positions with Tele-Communications, Times
Mirror Cable and Time Warner. Ms. Weinand is the sister of Mr. Commisso. Charles J. Bartolottahas 21 years of experience in the cable television
industry. Before joining our manager in October 2000, Mr. Bartolotta served as
Division President for AT&T Broadband, LLC from July 1998, where he was
responsible for managing an operating division serving nearly three million
customers. Prior to that time, he served as Regional Vice President of
Telecommunications, Inc. from January 1997 and as Vice President and General
Manager for TKR Cable Company from 1989. Prior to that time, Mr. Bartolotta
held various management positions with Cablevision Systems Corporation. Calvin G. Craibhas 22 years of experience in the cable television
industry. Before joining our manager in April 1999 as Vice President, Business
Development, Mr. Craib served as Vice President, Finance and Administration for
Interactive Marketing Group from June 1997 to December 1998 and as Senior Vice
President, Operations, and Chief Financial Officer for Douglas Communications
from January 1990 to May 1997. Prior to that time, Mr. Craib served in various
financial management capacities at Warner Amex Cable and Tribune Cable. William I. Lees, Jr.has over 2 years experience in the cable television
industry. Before joining us in October 2001 as Senior Vice President,
Corporate Controller, Mr. Lees served as Executive Vice President and Chief
Financial Officer for Regus Business Centre Corp., a multinational real estate
services company, from July 1999 to September 2001. Prior to that time, he
served as Corporate Controller and Director for Formica Corporation from
September 1998 to July 1999, and as Chief Financial Officer for Imperial
Schrade Corporation from September 1993 to September 1998. He was previously
employed for 13 years by Ernst & Young. Joseph E. Younghas 19 years of experience with the cable television
industry. Before joining our manager in November 2001 as Senior Vice President
and General Counsel, Mr. Young served as Executive Vice President, Legal and
Business Affairs, for LinkShare Corporation, an Internet-based provider of
marketing services, from September 1999 to October 2001. Prior to that time,
he practiced corporate law with Baker & Botts, LLP from January 1995 to
September 1999. Previously, Mr. Young was a partner with the Law Offices of
Jerome H. Kern and a partner with Shea & Gould. Craig S. Mitchellhas held various management positions with Morris
Communications Company LLC for more than the past five years. He currently
serves as its Senior Vice President of Finance, Treasurer and Secretary and is
also a member of its board of directors. William S. Morris IIIhas served as the Chairman and Chief Executive
Officer of Morris Communications for more than the past five years. He was the
Chairman of the board of directors of the Newspapers Association of America for
1999-2000. Thomas V. Reifenheiserserved for more than five years as a Managing
Director and Group Executive of the Global Media and Telecom Group of Chase
Securities Inc. until his retirement in September 2000. He joined Chase in 1963
and had been the Global Media and Telecom Group Executive since 1977. He also
had been a director of the Management Committee of The Chase Manhattan Bank.
Mr. Reifenheiser is a member of the board of directors of Cablevision Systems
Corporation and Lamar Advertising Company, a leading owner and operator of
outdoor advertising and logo sign displays. 81




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Natale S. Ricciardihas held various management positions with Pfizer Inc.
for more than the past five years. Mr. Ricciardi joined Pfizer in 1972 and
currently serves as its Vice President, U.S. Manufacturing, with responsibility
for all of Pfizers U.S. manufacturing facilities. Robert L. Winikoffhas been a partner of the law firm of Sonnenschein Nath
& Rosenthal, LLP since August 2000. Prior thereto, he was a partner of the law
firm of Cooperman Levitt Winikoff Lester & Newman, P.C. for more than five
years. Sonnenschein Nath & Rosenthal, LLP currently serves as MCCs outside
general counsel and prior to such representation Cooperman Levitt Winikoff
Lester & Newman, P.C. served as MCCs outside general counsel since 1995. Since we are not a listed company, we are not required to establish an
audit committee. Rather, the functions of an audit committee for our company
are performed by the audit committee of our manager. The audit committee of our
manager consists of three directors, all of whom are independent directors as
defined by the listing standards of the Nasdaq Stock Market. The current
members of the audit committee are Thomas V. Reifenheiser (Chairman), Craig S.
Mitchell, and Natale S. Ricciardi. The board of directors of our manager has
determined that Mr. Reifenheiser meets the SEC definition of an audit committee
financial expert. The board of directors of our manager has adopted a code of ethics
applicable to all of our employees, including our chief executive officer,
chief financial officer and chief accounting officer. This code of ethics has
been filed as an exhibit to this annual report. 82




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ITEM 11. EXECUTIVE COMPENSATION The executive officers and directors of MCC are compensated exclusively by
MCC and do not receive any separate compensation from Mediacom Broadband LLC or
Mediacom Broadband Corporation. MCC acts as our manager and in return receives
a management fee. 
  ITEM 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Mediacom Broadband Corporation is a wholly-owned subsidiary of Mediacom
Broadband LLC. MCC is the sole voting member of Mediacom Broadband. The
address of MCC is 100 Crystal Run Road, Middletown, New York 10941. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Management Agreements Pursuant to management agreements between MCC and our operating
subsidiaries, which commenced on the respective dates of the acquisitions of
the AT&T cable systems, MCC is entitled to receive annual management fees in
amounts not to exceed 4.0% of our gross operating revenues. For the year ended
December 31, 2003, MCC received $9.8 million of such management fees. Other Relationships Investment banking firms or their affiliates have in the past engaged in
transactions with and performed services for us and our affiliates in the
ordinary course of business, including commercial banking, financial advisory
and investment banking services. Furthermore, these companies or their
affiliates may perform similar services for us and our affiliates in the
future. Affiliates of certain of these companies are agents and lenders under
our subsidiary credit facility. The Bank of New York, an affiliate of BNY
Capital Markets, Inc., acts as trustee for our senior notes. On July 18, 2001, we received a $150.0 million preferred equity investment
from Mediacom LLC. The preferred equity investment has a 12% annual dividend,
payable quarterly in cash. For the year ended December 31, 2003, we paid in
aggregate $18.0 million in cash dividends on the preferred equity. In January, July and December 2003, we paid cash dividends of
approximately $4.5 million, in each of these months, to MCC. 83




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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Fees for professional services provided by our independent auditors in
each of the last two fiscal years, in each of the following categories are as
follows (dollars in thousands): 2003
    
    
    2002Audit fees
    
    
    $295
    
    
    
    $258Audit-related fees
    
    
    30
    
    
    
    Total
    
    
    $325
    
    
    
    $258 Fees for audit services include fees associated with the annual audit, the
reviews of our quarterly reports on Form 10-Q and assistance with and review of
documents filed with the Securities and Exchange Commission.
Audit-related fees consist of a controls review, and related
audit consultation. The audit committee of our manager has adopted a policy that requires
advance approval of all audit, audit-related, tax services, and other services
performed by our independent auditor. The policy provides for pre-approval by
the audit committee of specifically defined audit and non-audit services.
Unless the specific service has been previously pre-approved with respect to
that year, the audit committee must approve the permitted service before the
independent auditor is engaged to perform it. 84




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PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K  (a)
    
    Financial StatementsOur financial statements as set forth in the Index to Consolidated Financial
Statements under Part II, Item 8 of this Form 10-K are hereby incorporated
by reference.(b)
    
    ExhibitsThe following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein: ExhibitNumber
    
    Exhibit Description2.1
    
    Asset Purchase Agreement, dated February 26, 2001 among Mediacom Communications Corporation and the
AT&T Broadband Parties (Central Missouri) (1)2.2
    
    Asset Purchase Agreement, dated February 26, 2001 among Mediacom Communications Corporation and the
AT&T Broadband Parties (Georgia) (1)2.3
    
    Asset Purchase Agreement, dated February 26, 2001 among Mediacom Communications Corporation and the
AT&T Broadband Parties (Iowa/Illinois) (1)2.4
    
    Asset Purchase Agreement, dated February 26, 2001 among Mediacom Communications Corporation and the
AT&T Broadband Parties (Southern Illinois) (1)3.1
    
    Certificate of Formation of Mediacom Broadband LLC (2)3.2
    
    Amended and Restated Limited Liability Company Operating Agreement of Mediacom Broadband LLC (2)3.3
    
    Certificate of Incorporation of Mediacom Broadband Corporation (2)3.4
    
    By-Laws of Mediacom Broadband Corporation (2)4.1
    
    Indenture relating to 11% senior notes due 2013 of Mediacom Broadband LLC and Mediacom Broadband
Corporation (2)4.2
    
    Indenture Supplement No. 1, dated as of August 6, 2002, to the Indenture relating to 11% senior
notes due 2013 of Mediacom Broadband LLC and Mediacom Broadband
Corporation (3)10.1
    
    Credit Agreement dated as of
July 18, 2001 for the Mediacom Broadband Subsidiary Credit Facility (2)10.2
    
    Amendment No. 1 dated September 12, 2002 between MCC Iowa LLC, MCC Illinois LLC, MCC Georgia LLC,
MCC Missouri LLC and JPMorgan Chase Bank, as administrative agent for the lenders (4)10.3
    
    Amended and Restated Limited Liability Company Operating Agreement of Mediacom Broadband LLC (2)14.1
    
    Code of Ethics21.1
    
    Subsidiaries of Mediacom Broadband LLC (2)23.1
    
    Consent of PricewaterhouseCoopers LLP
 85




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ExhibitNumber
    
    Exhibit Description23.2
    
    Consent of PricewaterhouseCoopers LLP23.3
    
    Consent of Arthur Andersen LLP(5)31.1
    
    Rule 15d-14(a) Certifications of Mediacom Broadband LLC31.2
    
    Rule 15d-14(a) Certifications of Mediacom Broadband Corporation32.1
    
    Section 1350 Certifications of Mediacom Broadband LLC32.2
    
    Section 1350 Certifications of Mediacom Broadband Corporation
  (c)
    
    Financial Statement Schedules The
following financial statement schedules - Schedule II - Valuation of
Qualifying Accounts - are part of this Form 10-K and are on pages 66
and 78.  (d)
    
    Reports on Form 8-K None.   (1) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 of Mediacom Communications Corporation and incorporated
herein by reference. (2) Filed as an exhibit to the Registration Statement on Form S-4 (File No.
333-72440) of Mediacom Broadband LLC and Mediacom Broadband Corporation and
incorporated herein by reference. (3) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002 of Mediacom Communications Corporation and incorporated
herein by reference. (4) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002 of Mediacom Communications Corporation and
incorporated herein by reference. (5) The consolidated financial statements of Mediacom Broadband LLC and
Mediacom Broadband Corporation (the Registrants) as of December 31, 2001 and
2000 and for the years then ended included in this Annual Report on Form 10-K
which are incorporated by reference into the Registrants Registration
Statement on Form S-3/A (File Nos. 333-82124-03 and 333-82124-02), have been
audited by Arthur Andersen LLP, independent public accountants (AA). However,
after reasonable efforts, the Registrants have been unable to obtain the
written consent of AA with respect to the incorporation by reference of such
financial statements in the Registration Statement. Therefore, the Registrants
have dispensed with the requirement to file the written consent of AA in
reliance upon Rule 437a of the Securities Act of 1933. As a result, you may not
be able to recover damages from AA under Section 11 of the Securities Act of
1933, for any untrue statements of material fact or any omissions to state a
material fact, if any, contained in the aforementioned financial statements of
the Registrants which are incorporated in the Registration Statement by
reference. 86




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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. Mediacom Broadband LLCMarch 26, 2004
    
    By:
    
    /s/ Rocco B. CommissoRocco B. CommissoManager, Chairman andChief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Signature
    
    Title
    
    Date/s/ Rocco B. CommissoRocco B. Commisso
    

Manager, Chairman and
Chief Executive Officer (principal
executive officer)
    
    March 26, 2004/s/ Mark E. StephanMark E. Stephan
    

Senior Vice President,
Chief Financial Officer and Treasurer
(principal financial officer and principal
accounting officer)
    
    March 26, 2004
 87




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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. Mediacom Broadband CorporationMarch 26, 2004
    
    By:
    
    /s/ Rocco B. CommissoRocco B. CommissoPresident, Chief ExecutiveOfficer and Director
 Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Signature
    
    Title
    
    Date/s/ Rocco B. CommissoRocco B. Commisso
    
    President, Chief Executive Officer
and Director (principal executive officer)
    
    March 26, 2004/s/ Mark E. StephanMark E. Stephan
    

Treasurer and Secretary
(principal financial officer
and principal accounting officer)
    
    March 26, 2004
 88