<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K/A

  |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
             ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                        COMMISSION FILE NUMBER: 333-89179

                                  KNOLOGY, INC.
             (Exact name of registrant as specified in its charter)


          DELAWARE                                              58-2424258
--------------------------------------------------------------------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


         KNOLOGY, INC.
    1241 O.G. SKINNER DRIVE
      WEST POINT, GEORGIA                                      31833
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

       Registrant's telephone number, including area code: (706) 645-8553

           Securities registered pursuant to Section 12(b) of the Act:

                                 Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

             Options to Purchase Shares of Series A Preferred Stock

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

     Indicate by check mark 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 registrant's knowledge, in definitive proxy or information statements
incorporated herein by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. |X|

     The aggregate market value of the voting stock held by non-affiliates is
not applicable as no public market exists for the voting stock of the
registrant.

     As of January 31, 2002, we had 502,434 shares of common stock, 50,997,760
shares of Series A preferred stock, 21,180,131 shares of Series B preferred
stock, and 37,219,562 shares of Series C preferred stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      None.


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                               TABLE OF CONTENTS
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<S>          <C>                                                                 <C>
                                     PART I
ITEM 1.      BUSINESS .........................................................      1
ITEM 2.      PROPERTIES .......................................................     32
ITEM 3.      LEGAL PROCEEDINGS ................................................     33
ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..............     33

                                    PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                   STOCKHOLDER MATTERS ........................................     35
ITEM 6.      SELECTED FINANCIAL DATA ..........................................     35
ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS ........................     37
ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .......     47
ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......................     47
ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                   ACCOUNTING FINANCIAL DISCLOSURE ............................     47

                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................     47
ITEM 11.    EXECUTIVE COMPENSATION ............................................     51
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                   AND MANAGEMENT .............................................     53
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ....................     57

                                    PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                   REPORTS ON FORM 8-K ........................................     59

SIGNATURES ....................................................................     68

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ....................................    F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON THE FINANCIAL STATEMENT
                  SCHEDULES ...................................................    S-1

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THIS ANNUAL REPORT ON FORM 10-K INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE FEDERAL SECURITIES LAWS, INCLUDING THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, THAT INVOLVE RISKS AND UNCERTAINTIES. IN
ADDITION, MEMBERS OF OUR SENIOR MANAGEMENT MAY, FROM TIME TO TIME, MAKE CERTAIN
FORWARD-LOOKING STATEMENTS CONCERNING OUR OPERATIONS, PERFORMANCE AND OTHER
DEVELOPMENTS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING
THOSE SET FORTH UNDER THE CAPTION "BUSINESS--RISK FACTORS" AND ELSEWHERE IN THIS
ANNUAL REPORT ON FORM 10-K, AS WELL AS FACTORS WHICH MAY BE IDENTIFIED FROM TIME
TO TIME IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION OR IN
THE DOCUMENTS WHERE SUCH FORWARD-LOOKING STATEMENTS APPEAR.

                                     PART I

ITEM 1. BUSINESS

OUR STRUCTURE.

       We were formed in September 1998. We own 100% of Knology Broadband,
Inc., Interstate Telephone Company, Valley Telephone Co., Inc., Globe
Telecommunications, Inc. and ITC Globe, Inc. We acquired these companies in
November 1999 from ITC Holding Company, Inc. and other stockholders of Knology
Broadband. This transaction is described in more detail under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

       KNOLOGY AND KNOLOGY BROADBAND

       Through Knology Broadband and its subsidiaries, we have been providing
cable television service since 1995, telephone and high-speed Internet access
services since 1997 and broadband carrier services since 1998. We own, operate
and manage interactive broadband networks in seven metropolitan areas:
Montgomery and Huntsville, Alabama; Columbus and Augusta, Georgia; Panama City,
Florida; Charleston, South Carolina and Knoxville, Tennessee.

       Knology Broadband began providing cable television service by acquiring
cable television systems in Montgomery, Alabama and Columbus, Georgia in 1995
and using those systems as a base for constructing new interactive broadband
networks. Since acquiring the Montgomery and Columbus systems, we have
significantly expanded these networks and upgraded the acquired networks to
offer additional broadband communications services.

       In December 1997, Knology Broadband acquired a cable television system in
Panama City Beach, Florida. We completed the upgrade of this cable system and
the extension of the network into the Panama City metropolitan area in 2001.

       In early 1998, Knology Broadband began expanding into Augusta, Georgia
and Charleston, South Carolina by obtaining new franchise agreements with the
local governments and by constructing new interactive broadband networks.

       In June 1998, Knology Broadband acquired TTE Inc., a reseller of local,
long distance and operator services to small and medium-sized business customers
throughout South Carolina.

       In October 1998, Knology Broadband acquired the Cable Alabama cable
television system serving the Huntsville, Alabama area. We completed the upgrade
of this cable system to an interactive broadband network in 2001.

       In early 2000, Knology, Inc. began expanding into Knoxville, Tennessee by
obtaining new franchise agreements with the local governments and by
constructing a new interactive broadband network. We expect to complete
construction of these networks by 2004.

       INTERSTATE TELEPHONE AND VALLEY TELEPHONE

       Interstate Telephone and Valley Telephone provide local telephone
services throughout the Georgia/Alabama border area known as the valley, which
includes the towns of West Point, Georgia; Lanett, Alabama and Valley, Alabama
and unincorporated portions of counties in both states.


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       GLOBE TELECOMMUNICATIONS

       Globe Telecommunications was formed in 1983 to be a deregulated provider
of services for Valley Telephone. Globe Telecommunications has been providing
deregulated services to Interstate Telephone since 1996. Globe
Telecommunications provides local and long distance services to residential and
business customers. Globe Telecommunications also has been providing competitive
local telephone services to residential and business customers located in the
Newnan, Georgia area since April 1998 and in Fairburn and Union City, Georgia
since 2000.

       ITC GLOBE

       ITC Holding formed ITC Globe in 1997 to be a provider of local broadband
services in West Point, Georgia and the Georgia/Alabama border area. ITC Globe,
under the trade name "KNOLOGY Connecting The Valley," also provides traditional
(analog) cable television, digital cable television and high-speed Internet
access to customers within the local telephone territory of Interstate Telephone
and Valley Telephone.

RELATIONSHIPS WITH AFFILIATES.

       ITC Holding, a diversified telecommunications company, previously owned
90% of our stock, which it distributed to its stockholders in February 2000. We
receive services from and/or provide services to ITC/\DeltaCom, Inc. and other
companies that may be deemed a related parties. These relationships and services
are described in detail under the caption "Certain Transactions and
Relationships." We believe that the transactions with ITC/\DeltaCom and other
companies that may be deemed related parties, are representative of arms-length
transactions and we expect that our existing contracts with these companies will
continue.

       One of our principal stockholders, SCANA Communications Holdings, Inc.,
is also a stockholder of ITC Holding. SCANA Communications Holdings is an
affiliate of SCANA Communications, Inc. SCANA Communications has loaned us money
in the past. We lease pole space from SCANA Corporation, the parent company of
SCANA Communications, which owns and operates public utilities in South
Carolina. See "Certain Transactions and Relationships" for a description of our
relationship with SCANA Communications and SCANA Corporation.

OVERVIEW OF OUR BUSINESS.

       We are a facilities-based provider of bundled broadband communications
services to residential and business customers in the southeastern United
States. By "facilities-based," we mean that we own and operate our own local
networks. Our current service offerings include digital and analog cable
television, local and long-distance telephone and high-speed Internet access
which we refer to as video, voice and data services throughout this Annual
Report on Form 10-K. We deliver our services through interactive broadband
networks and believe that our capability to deliver multiple services to any
given customer provides us with a competitive advantage. Our strategy is to
become the leading single-source provider of video, voice and data services to
residential and business customers in each of our markets by offering individual
and bundled service options over our integrated networks, which include
"last-mile" connectivity. We believe that we are one of the first
facilities-based providers of bundled video, voice and data services to focus on
the residential and business markets in the United States and that we are the
first provider of these bundled services in our existing markets. We have been
operating advanced broadband networks and offering bundled services for five
years.

       Our interactive broadband networks are in select mid-sized markets in the
southeastern United States: Huntsville and Montgomery, Alabama; Panama City,
Florida; Augusta and Columbus, Georgia; Charleston, South Carolina; and
Knoxville, Tennessee. We entered these markets based on specific criteria,
including favorable demographic profiles, population densities, and our ability
to be the first provider of bundled broadband services. In each of these
markets, we provide a full suite of local and long-distance telephone, analog
and digital cable television and high-speed Internet access services. We also
currently provide local telephone and broadband services in West Point, Georgia;
Lanett Alabama and Valley Alabama.

       We plan to selectively expand our networks into additional
mid-to-large-sized markets in the southeastern United States. We have been
awarded franchises in Nashville, Tennessee and Louisville, Kentucky, although
our franchise in Louisville is being contested by the incumbent cable provider.
Our strategy is to capitalize on competitive opportunities in markets where
demographics and the aging infrastructure of the incumbent service providers'
network facilities combine to create an attractive environment for deploying
local interactive broadband networks.

       Our interactive broadband networks are designed with sufficient capacity
to meet the growing demand for high-speed and high-bandwidth video, voice and
data services. Our networks also have significant excess capacity that is
available for the introduction of new products and services. To optimize the
utilization of our networks and increase our return on invested capital,


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we also provide access to our networks and various network-related services to
other telecommunications carriers. We refer to these services as broadband
carrier services. For example, other telephone companies and Internet access
providers lease our network capacity to gain access to areas where our networks
are located.

       Because we deliver a variety of services to our customers, we report an
aggregate number of connections for video, voice and data services. For example,
a single customer who purchases local telephone, cable television and Internet
access services would count as three connections. On-net connections are
connections provided over our networks as opposed to telephone lines leased from
third parties. For the year ended December 31, 2001, video, voice and data and
other services accounted for 46.0%, 42.2% and 11.8% of our consolidated revenue,
respectively.

       We have extensive operating experience in the video, voice and data
transmission industries and in the design, development and construction of
communications facilities, including more than five years of experience
operating advanced broadband networks and decades of experience operating and
upgrading telephone networks. Our management team is led by Rodger L. Johnson,
our chief executive officer, and Campbell B. Lanier, III, the chairman of our
board and the chairman of the board of ITC Holding. Our equity investors include
ITC Telecom Ventures, Inc. (an affiliate of ITC Holding), SCANA Communications
Holdings and private equity funds associated with Whitney & Co., The Blackstone
Group, L.P., South Atlantic Capital Inc., AT&T Ventures, Wachovia Corporation
and PNC Bank National Association.

Our Strategy

       Our goal is to become the leading provider of broadband communications
services to residential and business customers in our target markets. To achieve
this objective, we are pursuing the following strategies:

o      Expand Existing Interactive Broadband Networks. We build our
       high-capacity, interactive broadband networks to carry fiber optics as
       close to the customer as economically feasible. This allows us to offer
       our residential and business customers a wide range of high-quality
       broadband communications services. We have designed our interactive
       broadband networks to provide sufficient capacity to meet the growing
       demand for high-speed, high-capacity video, voice and data services and
       with additional capacity to accommodate new products and services. We
       believe that this gives us a competitive advantage over cable, telephone
       and wireless systems that do not have such capacities.

o      Offer a Bundle of Broadband Video, Voice and High-Speed Data Services. We
       believe that by offering high-quality video, voice and high-speed,
       always-on data communications services to our customers in product
       bundles, we distinguish ourselves from our competition. We believe that
       the cost savings on a bundle of services and the advantages of one-stop
       shopping are attractive, particularly since most of our prospective
       customers presently buy services from multiple sources. In addition, by
       bundling services, we increase pricing flexibility, revenue per customer,
       and customer retention, as well as reduce our customer acquisition and
       installation costs.

o      Target Attractive Cities for Market Expansion. We intend to expand our
       operations to southeastern markets that have the size, market conditions,
       demographics and geographical location suitable for our business
       strategy. We plan to target cities that have the following
       characteristics, among others:

       -  an average of at least 70 homes per mile;

       -  at least 100,000 households; and

       -  the opportunity to capture a substantial number of customers and be
          the leading provider of bundled communications services.

       We believe that we are the first provider of a bundled video, voice and
       data services package in our existing markets, and we intend to be the
       first to offer similar service packages in each new market that we
       enter. By penetrating cities with broadband services before our
       competitors, we expect to realize benefits in network construction,
       rights-of-way and brand recognition that may be limited or more
       expensive for later entrants.

o      Leverage the Capacity in Our Facilities-Based Local Networks for Existing
       and Future Services. Many incumbent facilities-based service providers
       have been slow to upgrade their local networks, or the "last mile," to
       provide bandwidth for multimedia or interactive applications which often
       require a high-speed connection. Our advanced network architecture has
       capacity for interactive broadband services for residential and business
       customers and excess fiber capacity for future use.


o      Enhance the Customer's Experience by Delivering Personalized and
       Responsive Customer Service. We monitor our networks and provide live
       customer service 24 hours a day, seven days a week. Through our network
       operations center, we


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       monitor our voice services to the customer level and our video and
       high-speed data services to the node level. We strive to resolve customer
       problems prior to the customer being aware of any service interruptions.
       Because we own our own local networks, we have greater control over our
       customers' experience with us. Our sales and customer service
       representatives are able to provide customer-specific information, which
       builds a strong support relationship and experience that encourages
       customer loyalty.

o      Offer New Products and Services Over Our Advanced Technology Platforms.
       We have invested in advanced technology platforms that will support
       multiple emerging interactive services such as video-on-demand,
       television-based email and Web browsing. Many of these new applications
       will be based on Internet protocols and will address the growing demand
       for new video, voice and data services. We are developing our personal
       computer and television portal to provide access to expanded local and
       personalized content and to support interactive advertising services.

Our Interactive Broadband Networks

       Our interactive broadband networks are:

o      high-speed;

o      two-way interactive, allowing customers to send and receive signals at
       the same time; and

o      made up of high-capacity fiber-optic cables and traditional coaxial
       cables.

       Our interactive broadband networks are designed using redundant
fiber-optic cables. Redundant cables increase network reliability by providing
an alternate route for signals to travel if problems arise. Our fiber networks
are "self-healing," which means that they provide for automatic network back-up
with 100% redundancy so that if there is a point of failure on our fiber ring,
our service will continue. By comparison, most traditional cable television
systems do not have redundant architectures. In addition, we provide power to
our systems from locations along each network called hub sites, each of which is
equipped with a generator and battery back-up power source to allow service to
continue during a power outage. We operate a network operations center in West
Point, Georgia, and we monitor our networks 24 hours a day, seven days a week.
Technicians in each of our service areas schedule and perform installations and
repairs and monitor the performance of our interactive broadband networks. Our
technicians perform maintenance and repair of our networks on an ongoing basis.
We maintain the quality of our networks to minimize service interruptions and
extend the networks' operational life.

       Our interactive broadband networks can support numerous channels of basic
and premium cable television services, telephone services, Internet access and
other broadband communications services. Our networks have extra capacity, to
readily accommodate new services as content and technology become available.

       We offer local telephone service over these networks in much the same way
local phone companies provide service. We provide dial tone service and install
a network interface box outside a customer's home and may add wiring inside the
premises as well. We can offer multiple lines of telephone service. Our networks
interconnect with those of other local phone companies through a nine-state
interconnection agreement with BellSouth. This agreement expires in September
2002. We provide long-distance service using leased facilities from other
telecommunications service providers.

       We have entered into an agreement with Business Telecom under which we
lease a portion of Business Telecom's long-distance telephone facilities. Under
the agreement, Business Telecom also provides us with call switching services
and operator and directory assistance. This agreement expires in September 2002.

       We have entered into an agreement with ITC/\DeltaCom under which we lease
a portion of ITC/\DeltaCom's Internet facilities, this agreement expires in
January 2003. ITC/\DeltaCom also provides us with operator and directory
assistance, and wide area network and transport services for our voice and data
networks.

       We provide Internet access using high-speed cable modems in much the same
way customers currently receive Internet services over modems linked to the
local telephone network. The cable modems we presently use are significantly
faster than dial-up modems generally in use today. Our customer's Internet
connection is always on, and there is no need to dial up for access to the
Internet or wait to connect through a port leased by an Internet service
provider.


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Our Broadband Communications Services

       We sell video, voice and data services to residential and business
customers. Our goal is to sell these services in bundled packages. We sell
individual services at prices competitive to those of the incumbent providers,
but offer increasing discounts as customers purchase additional services from
our bundle.

       VIDEO. We offer our customers three types of cable television services:
expanded basic, premium, and digital. Customers generally pay fixed monthly fees
for cable programming and premium television services, which constitute our
principal sources of video revenue.

       Most customers choose to subscribe to expanded basic cable service. We
call this service expanded basic because it includes many more channels than
traditional basic cable service. Our expanded basic cable service consists of
approximately 65-75 channels of programming, including:

o      television signals from local broadcast stations;

o      television signals from so-called super stations such as WGN (Chicago);

o      numerous satellite-delivered, non-broadcast channels such as TBS
       (Atlanta), CNN, MTV, ESPN, The Discovery Channel, Nickelodeon and
       various home shopping networks;

o      displays of information featuring news, weather, stock and financial
       market reports; and

o      public, government and educational access channels.

       We offer a variety of premium services for an extra monthly charge.
Premium services include channels with feature programming such as HBO, Showtime
and Cinemax or other special channels. The premium services are available
through our expanded basic and digital tiers of services. We also provide our
customers access to additional channels offering pay-per-view feature movies,
live and taped sports events, concerts and other special features which involve
a charge for each viewing.

       We began offering digital video service in November 1998. Our digital
video service consists of approximately 120 digital channels of programming in
addition to our expanded basic cable service. Digital cable uses technologies
that significantly increase the number of television channels available by
converting signals into a digital format and compressing them into the space
normally occupied by one signal. A set-top video box converts the digital signal
back into channels that can be viewed on a normal television set. We have added
digital video as an additional service without reducing the current number of
expanded basic channels.

         Digital technology permits us to offer our customers the following
services:

o      25 channels of near video-on-demand, which includes movies or other
       programs that commence in frequent intervals, to customers for a
       fee-per-viewing basis;

o      digital basic channels, which offer special programming for all
       interests;

o      multiplex channels of HBO, Cinemax, Showtime, The Movie Channel and
       Encore/Starz, 4-8 additional channels per network;

o      over 35 digital-quality music channels which are available 24 hours a day
       and are commercial free; and

o      an interactive program guide, offering parental control and advance
       scheduling information.

       Programming for our cable television services comes from over 70 national
and local television networks. Since January 1, 1996, our arrangements with many
of these networks, constituting approximately 60% of our channels, have been
obtained through our association with the National Cable Television Cooperative,
Inc. The National Cable Television Cooperative obtains programming rates from
most major networks, which are made available to us as a member of the
cooperative. By obtaining programming rates through the cooperative, we benefit
from volume discounts not otherwise available to us. In addition, the
cooperative handles our contracting and billing arrangements with the networks.
Although we can terminate our membership in the cooperative at any time, we plan
to continue our membership for the foreseeable future.

       VOICE. Our telephone service includes local and long-distance telephone
services. Our customers pay a fixed monthly rate for all local calling and fees
based on usage for long-distance calling. Customers may elect to receive call
blocking, call waiting, call forwarding, voice mail, caller ID and other value-
added services, which generally involve an additional fixed charge per month per
telephone line. Our long-distance service offers features and prices comparable
to those of our competitors.


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       DATA SERVICES. We offer both residential and business Internet packages
that include high-speed connections to the Internet using cable modems. Because
a customer's Internet service is offered over the existing cable connection in
the home, no second phone line is required and there is no disruption of service
when the phone rings or when the television is on. All of our Internet packages
currently include the following:

o      unlimited use for a fixed monthly fee;

o      service that is always on, eliminating the need to dial-up to connect to
       the Internet;

o      7 email accounts free of charge, with additional email accounts available
       for a monthly charge;

o      10 megabytes of free online storage space to host a personal website;

o      access to local content, broadband content, technical support
       information, national news, sports and financial reports;

o      direct links to search engines;

o      a DOCSIS compliant modem for a fixed monthly fee with installation
       provided by a trained professional cable-modem installer; and

o      technical support.

       BROADBAND CARRIER CAPACITY. We use extra, unused capacity on our networks
to offer wholesale services to other local and long-distance telephone
companies, Internet service providers and other integrated services providers.
We call these services our "broadband carrier services." We believe our
interactive broadband networks offer other service providers a reliable and cost
competitive alternative to other telecommunication service providers.

       We sell access to our networks to long-distance telephone companies for
interstate and intrastate long-distance phone calls to and from our customers.
We sell access to our networks to connect local telephone companies to business
customers. We offer traditional special access and local private line services
through our networks by providing high capacity connections to medium and large
commercial users, local telephone companies and other carriers throughout a
metropolitan service area. Special access lines are dedicated lines that connect
customers directly to a long-distance carrier. Private lines are dedicated lines
linking a customer location to one or more other customer locations.

       FUTURE BROADBAND COMMUNICATIONS SERVICES. We believe that our interactive
broadband networks will enable us to provide additional broadband services in
the future, including:

o      email and web browsing from a subscriber's television set;

o      e-commerce services from a television-based Internet gateway;

o      closed-circuit television security monitoring and alarm systems;

o      interactive energy management services in partnership with power
       companies allowing customers to monitor energy usage and cost online; and

o      voice transmission employing traditional telephone functions via the
       Internet.





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Markets

  Current Markets

       We currently serve the following markets with our interactive broadband
networks:

o      Huntsville, Alabama;

o      Montgomery, Alabama;

o      Panama City, Florida;

o      Augusta, Georgia;

o      Columbus, Georgia;

o      Charleston, South Carolina;

o      Knoxville, Tennessee; and

o      West Point, Georgia and Valley, Alabama.

       We provide video, voice and data services over our interactive
broadband networks in Huntsville, Montgomery, Panama City, Augusta, Columbus,
Charleston, and Knoxville. In West Point, Georgia and Valley, Alabama, we
provide telephone service over a traditional copper wire telephone network and
video and Internet services over a broadband network. In each of these markets,
substantially all of our networks are fully two-way interactive.

  New Markets

       We plan to expand our operations to southeastern markets that have the
size, market conditions, demographics and geographical location suitable for our
business strategy. We plan to target cities that have the following
characteristics, among others:

o      an average of at least 70 homes per mile;

o      at least 100,000 households; and

o      the opportunity to capture a substantial number of customers and be the
       leading provider of bundled communications services.

       We have been granted franchises in Nashville, Tennessee and Louisville,
Kentucky. In addition, we have applied for franchises in new markets in the
Louisville area. Our franchise in Louisville is currently being contested by the
incumbent cable provider.

Network Construction, Switching and Interconnection

  Network Construction

       Our interactive broadband networks consist of fiber-optic cable,
coaxial cable and copper wire. Fiber-optic cable is a communication medium that
uses hair-thin glass fibers to transmit signals over long distances with minimum
signal loss or distortion. In most of our networks, our system's main
high-capacity fiber-optic cable connect to multiple nodes throughout a network.
These nodes are connected to individual homes and buildings by coaxial cable and
are shared by a number of customers. Coaxial cable is the type of cable most
commonly used for cable video systems, but it is suitable to provide data
transmission and telephone service. This type of cable has excellent broadband
frequency characteristics and physical durability. As of December 31, 2001, our
networks passed 423,201 marketable homes and supported 232,698 on-net
connections. Approximately 95% of our 423,201 passings were served by systems
with at least 750 megahertz bandwidth capacity and were two-way interactive. All
of our networks that have been upgraded are served with systems that are at
least 750 megahertz and will be two-way interactive.

       In Knoxville, we are deploying a new network design that will allow us
to generally provide fiber to an average of 24 homes per node. This increases
the amount of bandwidth available for each home for high-speed data and other
advanced services.

       With the exception of West Point, Georgia and Valley, Alabama, where we
maintain our own construction crews, we use contractors for the construction of
our networks. We serve as the manager of the construction process, directing and
supervising


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the various construction crews. Historically, we have generated revenues from
customers within one year from the date we start construction in a new market,
and construction of the network has been completed, in a new market, within
three to five years.

  Switching

       Switches are devices that direct voice and data traffic. Our switch, a
Nortel DMS 500 located in West Point, Georgia, allows us to provide enhanced
custom calling services including call waiting, call forwarding and three-way
calling. All of our voice and data traffic passes through our switch. If our
switch were to fail to operate, our customers would not be able to access our
voice and data services until the failure is corrected. Our switch employs two
sources of redundant power back up, a generator back-up and a battery back up.
In addition, we have made arrangements with Nortel to provide emergency support
in the event that we experience problems with our switch.

   Interconnection

       We rely on local telephone companies and other companies to connect our
local telephone customers with customers of other local telephone providers. We
have access to BellSouth's telephone network under a nine-state interconnection
agreement, which expires in September 2002. The Telecommunications Act of 1996
established certain requirements and standards for interconnection arrangements,
and our interconnection agreement with BellSouth is based on these requirements.
However, these requirements and standards are still being developed and
implemented by the FCC in conjunction with the states through a process of
negotiation and arbitration, as discussed below under the caption "--
Legislation and Regulation--Federal Regulation of Telecommunications Services."

       The key terms of our interconnection agreement with BellSouth are:

o      the right to connect to each other's facilities;

o      the rates we pay each other for handling and delivery of one another's
       telephone traffic; and

o      the right to attach network facilities to each other's telephone poles
       and rights-of-way.

       Under the Telecommunications Act of 1996, BellSouth is required to
allow us to interconnect to their network. Pursuant to the Telecommunications
Act of 1996 and the terms of our existing agreement, we can either:

o      automatically renew our existing interconnection agreement by notifying
       BellSouth of our intention to renew within the applicable timeframe;

o      negotiate the terms of a new agreement with BellSouth;

o      choose another interconnection agreement that BellSouth has with another
       telephone company and enter into an interconnection agreement on those
       same terms and conditions; or

o      accept the default pricing and terms and conditions offered by BellSouth.

       It is generally expected that the Telecommunications Act of 1996 will
continue to undergo considerable interpretation and implementation, which could
have a negative impact on our interconnection agreement with BellSouth. Our
ability to compete successfully in the provision of services will depend on the
timing of such implementing regulations and whether they are favorable to us.

Marketing and Sales

   Marketing Strategy

       We believe that we are the first provider of a bundled video, voice and
data communications service package in our current markets, and we intend to be
the first to offer similar service packages in each market we seek to enter. We
believe that cost savings on a bundle of services and the advantages of one-stop
shopping are attractive, particularly since most of our prospective customers
now buy services from multiple sources. We also believe that selling a bundled
service offering increases revenue per customer, helps achieve a faster growth
rate, reduces installation costs, increases customer loyalty, and distinguishes
us in the marketplace. Our focus includes multiple dwelling units, many of which
are subject to exclusivity arrangements with other cable providers that have not
yet expired or which involve more complex arrangements with the property owner.



                                       8

<PAGE>


   Sales Strategy

       We have different sales strategies for marketing to customers in newly
constructed network areas and to customers in mature network areas. In new
markets, we undertake an extensive marketing campaign prior to the activation of
service. We begin with direct mail and door-hangers followed by door-to-door
solicitations and outbound telemarketing.

       When we market our services in mature network areas, we assign
territories to individual direct sales representatives. By assigning the
territories to specific representatives, we have the ability to adjust sales
techniques to fit the profile of different types of buyers in particular sales
territories. In mature network areas, we also focus heavily on marketing
additional services to those customers who have previously subscribed to one or
two of our services. As in our new markets, we use direct mail, outbound
telemarketing, radio, newspaper and billboard advertising along with our
door-to-door sales.

       Our sales and marketing materials emphasize the convenience, savings
and improved service that can be obtained by subscribing to bundled services. By
focusing on improved service and customer satisfaction, we attempt to gain
customer referrals for additional sales.

       We have a sales staff in each of our markets including managers and
direct sales teams for both residential and business services. Our standard
residential team consists of direct sales, outbound sales, and front counter
sales as well as support personnel. Our business services sales team consists of
our account executives and specialized business installation coordinators. Our
call center sales team handles all telemarketing sales.

Customer Service and Billing

   Customer Service

       Customer service is an essential element of our operations and
marketing, and we believe our quality and responsiveness differentiates us from
many of our competitors. A significant number of our employees are dedicated to
customer service activities, including:

o      order taking;

o      customer activations;

o      billing inquiries and collections;

o      service upgrades;

o      provision of customer premise equipment; and

o      administration of our customer satisfaction program.


       In addition, we provide 24-hour-a-day, seven-day-a-week customer
service. We operate a centralized customer phone center in Augusta, Georgia for
all customer service transactions other than network trouble calls, which are
handled locally. We believe it is a competitive advantage to provide our
customers with the convenience of a single point of contact for all customer
service issues for our video, voice and data service offerings.

       We monitor our networks 24 hours a day, seven days a week. Through our
network operations center, we monitor our voice services to the customer level
and our video and high-speed data services to the node level, and we strive to
resolve customer problems prior to the customer being aware of any service
interruptions.

  Billing

       Billing services for video and data are provided by DST Innovis, Inc.,
while billing services for voice are provided by Quintrex. Our customers
currently receive separate billing statements for video and data services and
for voice services, but we intend to offer a single billing option in the
future. We have entered into an agreement with UshaComm to develop a convergent
billing system which would enable us to send a single bill to our customers for
video, voice and data services. We intend to implement this new billing system
in 2002.

  Competition

       We face significant competition from other providers of video, voice
and data services. Some of our competitors offer more than one of these
services, although none of our current competitors offer all of the services
that we provide.


                                       9

<PAGE>

  Video Services

       Other Cable Systems. Other cable television operations exist in each of
our current markets, and many of those operations have long-standing customer
relationships with the residents in those markets. Our competitors include
Comcast Cable Communications, Time Warner Cable and Charter Communications. We
compete with these companies on terms of pricing and programming content,
including the number of channels and the availability of local programming. We
obtain our programming by entering into contracts or arrangements with cable
programming vendors. A cable programming vendor may enter into an exclusive
arrangement with one of our cable television competitors. This would create a
competitive advantage for the cable television competitor by restricting our
access to programming.

       We expect that we will compete with other cable television providers in
each of our future markets. Furthermore, federal law prohibits cities from
granting exclusive cable franchises and from unreasonably refusing to grant
additional, competitive franchises. This makes it easier for competitors to
enter our markets. In addition, an increasing number of cities are considering
the feasibility of owning their own cable systems in a manner similar to
city-provided utility services.

       A continuing trend toward business combinations and alliances in the
cable television area and the telecommunications industry as a whole may create
significant new competitors for us. This trend toward business combinations may
be shrinking the number of attractive acquisition targets.

       Other Television Providers. Cable television distributors may, in certain
markets, compete for customers with other video programming distributors and
other providers of entertainment, news and information. Alternative methods of
distributing the same or similar video programming offered by cable television
systems exist. Congress and the FCC have encouraged these alternative methods
and technologies in order to offer services in direct competition with existing
cable systems. These competitors include:

o      broadcast television;

o      direct broadcast satellite systems;

o      wireless cable systems;

o      satellite master antenna television systems; and

o      local telephone companies.

         We compete with these entities on terms of pricing and programming
content, including the number of channels and the availability of local
programming.

       We encounter competition from direct broadcast satellite systems that
transmit signals to small dish antennas owned by the end-user. DirecTV and
Echostar offer multichannel programming via satellites to dish antennas with a
diameter of only approximately 18 inches. Although satellite television
providers presently serve only approximately 13.5% of pay television subscribers
according to industry sources, their share has been growing steadily.
Competition from direct broadcast satellites could become substantial as
developments in technology increase satellite transmitter power and decrease the
cost and size of equipment. Additionally, providers of direct broadcast
satellites are not required to obtain local franchises or pay franchise fees.
The Intellectual Property and Communications Omnibus Reform Act of 1999 permits
satellite carriers to carry local television broadcast stations and is expected
to enhance satellite carriers' ability to compete with us for subscribers. As a
result, competition from these companies may increase.

       Wireless cable represents another type of video distribution service.
These systems deliver programming services over microwave channels to
subscribers with special antennas. Wireless cable systems are less capital
intensive, are not required to obtain local franchises or pay franchise fees,
and are subject to fewer regulatory requirements than cable television systems.
While few operate today, purchases of licenses by Sprint and WorldCom may
provide capital for the wireless cable industry to expand.

       We also compete with systems that provide multichannel program services
directly to hotel, motel, apartment, condominium and other multi-unit complexes
through a satellite master antenna--a single satellite dish for an entire
building or complex. These systems are generally free of any regulation by state
and local governmental authorities. Pursuant to the Telecommunications Act of
1996, these systems, called satellite master antenna television systems, are not
commonly owned or managed and do not cross public rights-of-way and, therefore,
do not need a franchise to operate.


                                       10

<PAGE>

       The Telecommunications Act of 1996 eliminated many restrictions on
local telephone companies offering video programming, and we may face increased
competition from them. Several major local telephone companies, including
BellSouth, have announced plans to provide video services to homes.

  Voice Services

       In providing local and long-distance telephone services, we compete
with the incumbent local phone company and various long distance providers in
each of our markets. We are not the first provider of telephone services in most
of our markets, and we have to convince people in our markets to switch from
other telephone companies to us. BellSouth is the incumbent local phone company
and is a particularly strong competitor in our current markets and throughout
the southeastern United States where we hope to expand. We also compete with
long-distance phone companies such as AT&T, WorldCom and Sprint.

       We continue to expect to face intense competition in providing our
telephone and related telecommunications services. The Telecommunications Act of
1996 allows service providers to enter markets that were previously closed to
them. Incumbent local telephone carriers are no longer protected from
significant competition in local service markets. In addition, under certain
circumstances, regional Bell operating companies may enter the long-distance
market. These provisions blur the distinctions that previously existed between
local and long distance services.

       One major impact of the Telecommunications Act of 1996 may be a trend
toward the use and acceptance of bundled service packages. As a result, we will
be competing with:

o      incumbent local telephone companies such as BellSouth, as well as other
       competitive local telephone companies;

o      traditional providers of long-distance services such as AT&T, WorldCom
       and Sprint; and

o      cable television service providers such as Comcast Cable Communications,
       Time Warner Cable and Charter Communications.

       Our ability to compete successfully will depend on the attributes of
the overall bundle of services we are able to offer, including our price,
features and customer service.

       We compete with Business Telecom and ITC/\DeltaCom in providing
telephone services to business customers. We purchase services from Business
Telecom and ITC/\DeltaCom. Our agreements with Business Telecom and
ITC/\DeltaCom are described above under the heading "--Our Interactive Broadband
Networks."

       Wireless telephone service, such as cellular and personal communication
services, or PCS, currently is viewed by consumers as a supplement to, not a
replacement for, traditional telephone service. Wireless service generally is
more expensive than traditional local telephone service and is priced on a
usage-sensitive basis. However, in the future, the rate differential between
wireless and traditional telephone service is expected to decrease and lead to
more competition between providers of these two types of services.

       We may also face competition from providers of wireless cable services
such as multi-channel multipoint distribution systems and local multipoint
distribution systems. The FCC has auctioned spectrum for local, multipoint
distribution system services in all markets, and later this year will auction
spectrum in the 700 Megahertz range. This spectrum is expected to be used for
wireless cable and telephone services, including high-speed digital services, to
both businesses and individual customers.

  Data Services

       Internet Access Services. Providing Internet access services is a
rapidly growing business and competition is increasing in each of our markets.
Some of our competitors benefit from greater experience, resources and marketing
capabilities and stronger name recognition.

       In providing Internet access services, we compete with:

o      traditional dial-up Internet service providers;

o      providers of satellite-based Internet services;

o      incumbent local exchange providers which provide digital subscriber
       lines;


                                       11

<PAGE>


o      incumbent cable television companies, which provide Internet access
       service via cable modems; and

o      other long-distance telephone companies.

       We compete with companies offering broadband connections such as
DirecPC, one of the principal providers of satellite-based Internet services in
the United States; long-distance telephone companies such as AT&T and WorldCom;
traditional Internet service providers such as AOL Time Warner, Inc. and
EarthLink; digital subscriber line, or DSL, Internet access providers such as
BellSouth; and cable modem services.

       A large number of companies provide businesses and individuals with
direct access to the Internet and a variety of supporting services. In addition,
many companies such as AOL Time Warner Inc., CompuServe Corporation, MSN,
Prodigy Communications Corporation and WebTV Networks, Inc. offer online
services consisting of access to closed, proprietary information networks with
services similar to those available on the Internet, in addition to direct
access to the Internet. These companies generally offer Internet services over
telephone lines using computer modems. A few Internet service providers also
offer high-speed integrated services digital network connections and DSL
connections to the Internet.

       A few satellite companies provide broadband access to the Internet from
desktop PCs using a small dish antenna and receiver kit comparable to that used
for satellite television reception. DirecPC is one of the largest providers of
satellite-based Internet services in the United States.

       Long-distance companies are aggressively entering the Internet access
markets. Long-distance carriers have substantial transmission capabilities and
have an established billing system that permits them easily to add new services.
We expect competition from such companies to be vigorous due to their greater
resources, operating history and name recognition.

       Cable television companies are also entering the Internet access
market. The incumbent cable television company in each of our markets currently
offers high Internet access services.

       We may also face competition from providers of wireless cable services
such as multi-channel multipoint distribution systems and local multipoint
distribution systems.

Legislation and Regulation

       The cable television industry is regulated by the FCC, some state
governments and most local governments. Telecommunications carriers are
regulated by the FCC and state public utility commissions. Providers of Internet
services generally are not subject to regulation. Federal legislative and
regulatory proposals under consideration may materially affect the cable
television, telecommunications services, and Internet services industries. The
following is a summary of federal laws and regulations affecting the growth and
operation of the cable television and telecommunications industries and a
description of certain state and local laws.

       Future federal and state legislative and regulatory changes may
adversely or beneficially affect Knology's operations. We cannot predict the
impact of such legislative or regulatory actions on our operations. The
following description of certain major regulatory factors does not purport to be
a complete summary of all present and proposed legislation and regulations
pertaining to our operations.

     Cable Television Consumer Protection and Competition Act of 1992

       The Cable Television Consumer Protection and Competition Act of 1992
("1992 Cable Act") increased the regulation of the cable industry by imposing
rules governing, among other things:

o      rates for tiers of cable video services;

o      access to programming by competitors of cable operators and restrictions
       on certain exclusivity arrangements by cable operators;

o      access to cable channels by unaffiliated programming services;

o      terms and conditions for the lease of channel space for commercial use by
       parties unaffiliated with the cable operator;

o      ownership of cable systems;

o      customer service requirements;


                                       12

<PAGE>


o      mandating carriage of certain local television broadcast stations by
       cable systems and the right of television broadcast stations to withhold
       consent for cable systems to carry their stations;

o      technical standards; and,

o      cable equipment compatibility.

       The legislation also encouraged competition with existing cable
       television systems by:

o      allowing municipalities to own and operate their own cable television
       systems without a franchise;

o      preventing franchising authorities from granting exclusive franchises or
       unreasonably refusing to award additional franchises covering an existing
       cable system's service area; and

o      prohibiting the common ownership of cable systems and other types of
       multichannel video distribution systems.

     Telecommunications Act of 1996

       The Telecommunications Act of 1996 and the FCC rules implementing this
Act radically altered the regulatory structure of telecommunications markets by
mandating that states permit competition for local telephone services. This Act
permitted regional Bell operating companies to apply to the FCC for authority to
provide long-distance services. It also included significant changes in the
regulation of cable operators. For example, the FCC's authority to regulate the
rates for "cable programming service" tiers (all tiers other than the lowest
level "basic service tier") of all cable operators expired on March 31, 1999.
The legislation also:

o      repealed the anti-trafficking provisions of the 1992 Cable Act, which
       required cable systems to be owned by the same person or company for at
       least three years before they could be sold to a third party;

o      allows cable operators to enter telecommunications markets which
       historically have been closed to them;

o      limits the rights of franchising authorities to require certain
       technology or to prohibit or condition the provision of
       telecommunications services by the cable operator;

o      adjusts the favorable pole attachment rates afforded cable operators
       under federal law such that they may be increased, beginning in 2001, if
       the cable operator also provides telecommunications services over its
       network; and,

o      allows some telecommunications providers to begin providing competitive
       cable service in their local service areas.

     Federal Regulation of Cable Services

       The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has promulgated regulations covering many aspects of cable
television operations. The FCC may enforce its regulations through the
imposition of fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of FCC
licenses. A brief summary of certain key federal regulations follows.

       Rate Regulation. The 1992 Cable Act authorized rate regulation for
certain cable services and equipment. It requires communities to certify with
the FCC before regulating basic cable rates. Cable service rate regulation does
not apply where a cable operator demonstrates to the FCC that it is subject to
effective competition in the community. To the extent that any municipality
attempts to regulate Knology's basic rates or equipment, we believe we could
demonstrate to the FCC that our systems all face effective competition and,
therefore, are not subject to rate regulation.

       Program Access. To promote competition with incumbent cable operators
by independent cable programmers, the 1992 Cable Act placed restrictions on
dealings between cable programmers and cable operators. It prohibits satellite
video programmers affiliated with cable operators from favoring those cable
operators over competing distributors of multichannel video programming, such as
DBS distributors, MMDS distributors, and competitive cable operators such as
Knology. These restrictions are designed to limit the ability of vertically
integrated satellite cable programmers from offering exclusive programming
arrangement or preferred pricing or non-price terms to cable operators. Congress
and the FCC have considered proposals to expand the program access rights of
cable competitors such as Knology, including the possibility of applying all
program access requirements to terrestrially delivered video programming and
video programmers that are not affiliated with cable operators. The FCC
currently is considering whether it should allow the exclusivity restrictions in
the program access rules to sunset, on October 5, 2002, or whether it should
extend these restrictions to further assist competitors to incumbent cable
operators. If the exclusivity


                                       13

<PAGE>

restrictions are allowed to sunset, this could have a materially adverse impact
on Knology if incumbent cable operators use the greater flexibility to deny
important programming to Knology's systems.

       Carriage of Broadcast Television Signals. The 1992 Cable Act
established broadcast signal carriage requirements that allow local commercial
television broadcast stations to elect every three years whether to require the
cable system to carry the station ("must-carry") or whether to require the cable
system to negotiate for consent to carry the station ("retransmission consent").
Stations are generally considered local to a cable system where the system is
located in the station's Nielsen designated market area. Cable systems must
obtain retransmission consent for the carriage of all distant commercial
broadcast stations, except for certain superstations, which are commercial
satellite-delivered independent stations such as WGN. Pursuant to the Satellite
Home Viewer Improvement Act, the FCC enacted rules governing retransmission
consent negotiations between broadcasters and all distributors of multichannel
video programming (including cable operators). Local non-commercial television
stations are also given mandatory carriage rights, subject to certain
exceptions, within a certain limited radius. Non-commercial stations are not
given the option to negotiate for retransmission consent. Must-carry requests
may decrease the attractiveness of the cable operator's overall programming
offerings by including less popular programming on the channel line-up, while
retransmission consent elections may involve cable operator payments (or other
concessions) to the programmer. Knology carries some stations pursuant to
retransmission consent and pays fees for such consents or have agreed to carry
additional services pursuant to retransmission consent agreements. Knology
carries other stations pursuant to must-carry elections.

       The FCC has adopted rules for the carriage of digital broadcast
signals. The FCC is in the process of considering whether to require cable
systems (which would include Knology's systems) to carry both the analog and
digital signals of television broadcast stations entitled to must-carry rights
during those stations' transition to full digital operations. The FCC
tentatively concluded that it will not adopt the "dual carriage" requirement
during the transition, and has also concluded that a cable operator need only
carry a broadcaster's "primary video" service (rather than all of the digital
broadcaster's "multi-cast" services), but those conclusions may change during
the course of the FCC's reconsideration of these matters. If the "dual carriage"
rule is adopted, or if the FCC concludes that after the transition to digital
television, cable operators must carry all of the multicast services in a
broadcaster's digital feed, this would have a negative impact on Knology because
it would reduce available channel capacity and thereby require us to discontinue
other channels of programming or prevent us from carrying new channels of
programming that are more desired by our customers.

       Registration Procedures and Reporting Requirements. Before beginning
operation in a particular community, all cable television systems must file a
registration statement with the FCC listing the broadcast signals they will
carry and certain other information. Additionally, cable operators periodically
are required to file various informational reports with the FCC. Cable operators
that operate in certain frequency bands, including Knology, are required on an
annual basis to file the results of their periodic cumulative leakage testing
measurements. Operators that fail to make this filing or who exceed the FCC's
allowable cumulative leakage index risk being prohibited from operating in those
frequency bands in addition to other sanctions.

       Technical Requirements. The FCC imposes certain technical standards
applicable to the cable channels on which broadcast stations are carried
(including carriage of digital television signals), standards to prevent harmful
interference with aeronautical navigation and safety radio services and limits
on cable system signal leakage. The FCC also adopted regulations to assure
compatibility among televisions, VCRs and cable systems, leaving all features,
functions, protocols and other product and service options for selection through
open competition in the market. The Telecommunications Act of 1996 also
prohibits states or franchising authorities from prohibiting, conditioning or
restricting a cable system's use of any type of subscriber equipment or
transmission technology.

       Customer Equipment Regulation. As noted, cable customer equipment is
subject to rate regulation unless the FCC deems the cable system to face
effective competition. The FCC has also required that cable customers be
permitted to purchase cable converters and other navigation device equipment
from third parties, such as retailers. It developed a multi-year phase-in period
during which security functions (which remain in the exclusive control of the
cable operator) would be unbundled from non-security functions, which then could
be supplied by third-party vendors. July 1, 2000 was the implementation date for
the first phase. The separate security module requirement applies to all digital
devices as well as to devices that access both analog and digital services
("hybrid devices"), although it does not apply to analog-only devices. As long
as cable operators subject to the rules comply with the separate security module
requirement, they may continue to provide their customers with devices that
contain both embedded security and non-security functions ("integrated devices")
until January 1, 2005, at which time they will be prohibited from placing these
devices in service. The FCC restrictions could negatively affect how Knology
develops and markets new services and equipment to its customers.

       Franchise Authority. Cable television systems operate pursuant to
franchises issued by local franchising authorities (which are the cities,
counties or political subdivisions in which a cable operator provides cable
service). Local franchising


                                       14

<PAGE>

authority is premised upon the cable operator's facilities crossing the public
rights-of-way. Franchises are typically of fixed duration with the prospect for
renewal. These franchises must be nonexclusive. The terms of local franchises
vary by community, but typically include requirements concerning service rates,
franchise fees, construction timelines, mandated service areas, customer service
standards, technical requirements, public, educational and government access
channels, and channel capacity. Franchises often may be terminated, or penalties
may be assessed, if the franchised cable operator fails to adhere to the
conditions of the franchise. Although largely discretionary, the exercise of
local franchise authority is limited by federal law. For example, local
franchise authorities may not issue exclusive franchises, may not require
franchise fees that exceed 5% of gross revenues from the provision of cable
services, and may not mandate the use or a particular technology. Local
franchise authorities are permitted to charge fees other than cable franchise
fees, such as fees for a telecommunications providers' use of public
rights-of-way. Knology holds cable franchises in all of the franchise areas in
which we provide service. We believe that the conditions in our franchises are
fairly typical for the industry. Our franchises generally provide for the
payment of fees to the municipality ranging from 3% to 5% of revenues from
telephone and cable television service, respectively. The Telecommunications Act
of 1996 exempted those telecommunications services provided by a cable operator
or its affiliate from cable franchise requirements, although municipalities
retain authority to regulate the manner in which a cable operator uses the
public rights-of-way to provide telecommunications services.

       Franchise Renewal. Franchise renewal, or approval for the sale or
transfer of a franchise, may involve the imposition of additional burdens not
present in the initial franchise (such as facility upgrades or funding for
public, educational, and government access channels). Although franchise renewal
is not guaranteed, federal law imposes certain standards to prohibit the
arbitrary denial of franchise renewal. Our franchises generally have ten to 15
year terms, and we expect our franchises to be renewed by the relevant
franchising authority before or upon expiration.

       Franchise Transfer. Local franchise authorities are required to act on
a cable operator's franchise transfer request within 120 days after receipt of
all information required by FCC regulations and the franchising authority.
Approval is deemed granted if the franchising authority fails to act within such
period.

       Channel Set-Asides. Local franchising authorities may require cable
operators to set aside certain channels for public, educational and governmental
("PEG") access programming. Federal law requires cable television systems with
36 or more activated channels to designate a portion of their channel capacity
for commercial leased access by unaffiliated third parties. An FCC-prescribed
formula governs the calculation of leased access rates. By occupying capacity on
our systems, PEG and leased access channels may replace programming that is more
attractive to our subscribers.

       Ownership. Pursuant to the Telecommunications Act of 1996, local
exchange carriers may now provide video programming by radio-based systems,
common carrier systems, open video systems or cable systems in their local
exchange service territories. Companies that elect to provide open video systems
must allow others to use up to two-thirds of their activated channel capacity.
These companies are relieved of regulation as common carriers, and are not
required by federal law to obtain local franchises (although local requirements
to obtain a franchise remain valid), but are still subject to many other
regulations applicable to cable systems. Companies operating as cable systems
are subject to all rules governing cable systems, including franchising
requirements.

       A local telephone company or its affiliate is prohibited from acquiring
more than a 10% financial or management interest in any cable operator providing
cable service in its telephone service area. Likewise, a cable operator or its
affiliate is prohibited from acquiring more than a 10% financial or management
interest in any local telephone company providing telephone service in its
franchise area. A local telephone company and cable operator whose telephone
service area and cable franchise area are in the same market may not enter into
a joint venture to provide telecommunications services or video programming.
There are exceptions to these limitations for rural facilities, very small cable
systems, and small local telephone companies in non-urban areas, and such
restrictions do not apply to local exchange carriers that were not providing
local telephone service prior to January 1, 1993.

         Pole Attachments. Federal law requires 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. The right to access is
beneficial to facilities-based providers such as Knology. Federal law also
establishes principles to govern the pricing of and terms of such access.
Utilities may charge telecommunications carriers (and cable operators providing
both cable television service and telecommunications service, such as Knology) a
different (often higher) rate for pole attachments than they charge cable
operators providing solely cable service. The FCC has adopted rules implementing
the two different statutory formulae for pole attachment rates. The federal
access and rate provisions apply only in those states that have not certified to
the FCC that they regulate pole attachment rates. Currently, 18 states plus the
District of Columbia have certified to the FCC, leaving pole attachment matters
to be regulated by those states. Of the states in which Knology operates, only
Kentucky has certified to the FCC, leaving pole


                                       15

<PAGE>


attachment matters in the other states under FCC jurisdiction. The FCC has
clarified that the provision of Internet services by a cable operator does not
affect the agency's jurisdiction over pole attachments by that cable operator,
nor does it affect the rate formula otherwise applicable to the cable operator.
The Eleventh Circuit Court of Appeals overturned the FCC's conclusion. However,
the United States Supreme Court recently upheld the FCC's decision by reversing
the decision of the Eleventh Circuit Court of Appeals and confirming the FCC's
authority.

       Inside Wiring of Multiple Dwelling Units. FCC rules provide generally
that, in cases where the cable operator owns the wiring inside a multiple
dwelling unit ("MDU") but has no right of access to the premises, the MDU owner
may give the cable operator notice that it intends to permit another cable
operator to provide service there. The cable operator then must elect whether to
remove the inside wiring, sell the inside wiring to the MDU owner at a price not
to exceed the replacement cost of the wire on a per-foot basis, or abandon the
inside wiring. The FCC also adopted rules that, among other things, require
utilities (including incumbent local exchange carriers) to provide
telecommunications carriers and cable operators with reasonable and
non-discriminatory access to utility-owned or controlled conduits and
rights-of-way in all "multiple tenant environments" (including, for example,
apartment buildings, office buildings, campuses, etc.) in those states where the
FCC possesses authority to regulate pole attachments.


       Access to and Competition in Multiple Dwelling Units. The FCC has
preempted laws and rules that restrict occupants of MDUs from placing small
satellite antennas on their balconies (or areas under the occupant's exclusive
use). The FCC's action increases the ability of direct broadcast satellite
("DBS") operators such as DirecTV to compete with Knology in certain MDUs. The
FCC is considering the abrogation or restriction of existing and future
exclusive video MDU access contracts currently held by cable operators. The FCC
already has prohibited future exclusive access agreements for telecommunications
carriers in commercial multi-tenant environments and is considering whether to
abrogate existing exclusive telecommunications carrier access arrangements. The
FCC is also considering whether to extend such exclusivity prohibitions to
residential multi-tenant environments. The abrogation of existing exclusive MDU
access contracts would allow Knology to compete with the incumbent cable
operator (or other video or telecommunications competitors) in those MDUs where
another cable operator and/or telecommunications carrier has obtained an
exclusive access arrangement. The FCC is considering rules that would require
owners of multi-tenant environments to allow telecommunications carriers
nondiscriminatory access to their buildings. If adopted, these requirements may
facilitate Knology's access to customers in multi-tenant environments.

       Privacy. Federal law restricts the manner in which cable operators can
collect and disclose data about individual system customers. Federal law also
requires that the cable operator periodically provide all customers with written
information about its policies regarding the collection and handling of data
about customers, their privacy rights under federal law and their enforcement
rights. Cable operators must also take such actions as are necessary to prevent
unauthorized access to personally identifiable information. Failure to adhere to
these requirements subjects the cable operator to payment of damages, attorneys'
fees and other costs.

       Copyright. Cable television systems are subject to federal compulsory
copyright licensing covering carriage of broadcast signals. In exchange for
making semi-annual payments to a federal copyright royalty pool and meeting
certain other obligations, cable operators obtain a statutory license to
retransmit broadcast signals. The amount of the royalty payment varies,
depending on the amount of system revenues from certain sources, the number of
distant signals carried, and the location of the cable system with respect to
over-the-air television stations. Adjustments in copyright royalty rates are
made through an arbitration process supervised by the U.S. Copyright Office. The
modification or elimination of the compulsory copyright licensing scheme could
adversely affect Knology's ability to provide its subscribers with their desired
broadcast programming.

       Copyrighted music performed in programming supplied to cable television
systems by pay cable networks, such as HBO, and cable programming networks, such
as USA Network, has generally been licensed by the networks through private
agreements with the American Society of Composers and Publishers and BMI, Inc.,
the two major performing rights organizations in the United States. The American
Society of Composers and Publishers and BMI, Inc. offer "through to the viewer"
licenses to the cable networks which cover the retransmission of the cable
networks' programming by cable television systems to their subscribers.

       Internet Service. The FCC recently rejected requests by some Internet
service providers to require cable operators to provide unaffiliated Internet
service providers with direct access to the operators' broadband facilities. A
contrary decision may have facilitated greater competition by
non-facilities-based Internet service providers with Knology's broadband service
offerings. The FCC recently classified cable modem service as an "information
service," not a cable service, with no separate telecommunications service
offering. Consequently, local franchise authorities may not include Knology's
revenues from cable modem services in the total revenues from which the cable
franchise fee is calculated. This decision has been appealed and additional
appeals remain possible. In addition, the FCC recently sought comment on the
scope of its jurisdiction to regulate cable modem service and the extent to
which state and local governments may regulate cable modem service. Although the
FCC has


                                       16

<PAGE>

indicated a preference for minimizing regulation of broadband services, future
regulation of cable modem service by federal, state or local government entities
remains possible. The FCC also sought comment on whether it should resolve any
disputes that may arise over cable operators' previous collection of franchise
fees from their customers based, in part, on cable modem service revenues, or
whether the FCC should leave such matters to the courts. There remains a risk
that Knology will confront litigation on this issue.

       Regulatory Fees. The FCC requires payment of annual regulatory fees by
the various industries it regulates, including the cable television industry.
Per-subscriber regulatory fees may be passed on to subscribers as external cost
adjustments to rates for basic cable service. Fees are also assessed for other
FCC licenses, including licenses for business radio, cable television relay
systems and earth stations. These fees, however, may not be collected directly
from subscribers as long as the FCC's rate regulations remain applicable to the
cable system.

       Tier Buy Through. Federal law requires cable operators to allow customers
to purchase premium services or pay-per-view video programming offered by the
cable operator on a per-channel or per-program basis without the need to
subscribe to any tier of service except the basic service tier unless the cable
system's lack of addressable converter boxes or other technological limitations
prohibit it from doing so. The exemption for cable operators lacking the
technological ability to comply expires in October 2002, although the FCC may
extend that period on a case-by-case basis as necessary pursuant to an
appropriate waiver request. Knology's systems currently comply with these
requirements and Knology does not avail itself of the technological exemption.

       Emergency Alert System. In December 1994, the FCC adopted new cable
television and broadcast technical standards to support a new emergency alert
system. All of our networks are in compliance with the new standards.

       FCC regulations also address:

o      restrictions on origination and cablecasting by cable system operators;

o      application of the rules governing political broadcasts;

o      nonduplication of network programming from distant same-network stations
       upon the appropriate request of the local television station;

o      deletion of syndicated programming of a distant same-network station upon
       the appropriate request of the local television station;

o      customer service standards;

o      limitations on advertising contained in nonbroadcast children's
       programming; and,

o      equal employment opportunity (currently suspended as a result of a
       judicial ruling, although the FCC recently sought to reimpose a subset of
       these rules).

       Potential Regulatory Change. The regulation of cable television systems
at the federal, state, and local levels is subject to the political process and
has seen constant change over the past decade. Material changes in the law and
regulatory requirements must be anticipated, and there can be no assurance that
Knology's business will not be affected by future legislation or new
regulations.

     Federal Regulation of Telecommunications Services

       Our telecommunications services are subject to varying degrees of
federal, state and local regulation. Pursuant to the Communications Act of 1934,
as amended by the Telecommunications Act of 1996, the FCC generally exercises
jurisdiction over the facilities of, and the services offered by,
telecommunications carriers that provide interstate or international
communications services. Barring federal preemption, State regulatory
authorities retain jurisdiction over the same facilities to the extent that they
are used to provide intrastate communications services. Various international
authorities may also seek to regulate the provision of certain services.

       Tariffs and Detariffing. Knology Broadband is classified by the FCC as
a non-dominant carrier with respect to both its domestic interstate and
international long-distance carrier services and its competitive local exchange
carrier services. As a non-dominant carrier, its rates presently are not
generally regulated by the FCC. The FCC has ordered mandatory detariffing of
non-dominant carriers' interstate and international interexchange services.
Non-dominant carriers are not permitted to file tariffs with the FCC for their
interstate access services if the charges for such services are higher than
FCC-established benchmarks. If a non-dominant carrier's charges for interstate
access services are equal to or below the FCC-established benchmark, it is
permitted, but


                                       17

<PAGE>

not required, to file tariffs with the FCC for such services. Knology's
interstate access services fall within the FCC-established benchmark and it has
a tariff on file with the FCC for those services.

       Valley Telephone and Interstate Telephone are regulated by the FCC as
dominant carriers in the provision of interstate access services. As dominant
carriers, Valley Telephone and Interstate Telephone must file tariffs with the
FCC and must provide the FCC with notice prior to changing their rates, terms or
conditions of interstate access services. Valley Telephone concurs in tariffs
filed by the National Exchange Carrier Association, while Interstate Telephone
has its own tariffs on file with the FCC. Valley Telephone and Interstate
Telephone are both classified as nondominant in the provision of interstate and
international interexchange services, rendering them subject to mandatory
detariffing at the FCC for such services.

       Interconnection and Compensation for Transport and Termination. The
Telecommunications Act of 1996 established a national policy of permitting the
development of local telephone competition. This Act preempts laws that prohibit
competition for local telephone services and establishes requirements and
standards for local network interconnection, unbundling of network elements, and
resale. The Telecommunications Act of 1996 also requires incumbent local
telephone carriers to enter into mutual compensation arrangements with
competitive local telephone companies for transport and termination of local
calls on each others' networks. The interconnection, unbundling and resale
standards were developed initially by the FCC and were further implemented by
the states. The terms of interconnection agreements among the carriers have
been, and are likely to continue to be, overseen by the states, although a panel
of judges from the Court of Appeals for the Eleventh Circuit (which governs many
of Knology's markets), recently concluded that State public service commissions
lack the authority under Section 252 of the federal Communications Act to
interpret and enforce interconnection agreements. A petition seeking a rehearing
of the case by the full court of appeals -- a decision which stands in direct
conflict with the decisions of six other federal circuits -- is now pending
before the Eleventh Circuit.

       We have executed a local network interconnection agreement with
BellSouth for, among other things, the transport and termination of local
telephone traffic. This agreement has been filed with, and approved by, the
applicable regulatory authority in each state in which we conduct our
operations.

       The FCC has concluded that calls to Internet service providers are
jurisdictionally interstate and the exchange of ISP-bound traffic is not subject
to the reciprocal compensation requirements of the Telecommunications Act of
1996. This decision remains subject to appeal.

       The Telecommunications Act of 1996 includes an exemption from
interconnection requirements for rural telephone companies. Under this
exemption, a competitor is not entitled to interconnect with a rural telephone
company absent a finding by the appropriate state commission that the request is
not unduly economically burdensome. Both Valley Telephone and Interstate
Telephone are rural telephone companies as defined by the federal Communications
Act. The Alabama Public Service Commission and, with respect to Interstate
Telephone, the Georgia Public Service Commission have determined that these
companies should be exempt from the interconnection requirements of the
Telecommunications Act of 1996.

       Unbundled Network Elements. The FCC has established pricing principles
for use by the states to determine rates for unbundled local network elements
and to calculate resale discounts. The state commissions have significant
responsibility for the implementation of the FCC's rules, including the actual
setting of rates for unbundled network elements. Pending before the Supreme
Court is a challenge to the constitutionality of the methodology adopted by the
FCC to be used in establishing the rates for ILECs' unbundled network elements.
The FCC requires incumbent local telephone carriers to provide a platform that
includes all of the network elements required by a competitor to provide a
retail telecommunications service. Competitors using such platforms may be able
to provide retail local services entirely through the use of the local telephone
carriers' facilities at lower discounts than those available for local resale.
The FCC has begun a proceeding to identify which, if any, network elements that
ILECs should no longer be required to offer on an unbundled basis. The
availability of unbundled network platforms and a wide variety of available
unbundled network elements could benefit those of our local telecommunications
competitors who, unlike us, do not provide service entirely over their own
facilities (but instead rely, in whole or in part, on the facilities of the
incumbent).

       Number Portability. All local telephone service carriers must provide
customers with the ability to retain, at the same location, existing telephone
numbers when switching local telephone companies without impairment of quality,
reliability or convenience. This number portability is intended to remove one
barrier to entry faced by new competitors, which would otherwise have to
persuade customers to switch local service providers despite having to change
telephone numbers. The FCC ordered permanent number portability to be made
available in the 100 largest metropolitan areas by December 31, 1998. Number
portability is available in all of our required markets. While number
portability benefits our competitive local exchange carrier operations, it
represents a burden to Valley Telephone and Interstate Telephone. At this time,
we are unable to predict the impact, if any, of possible number portability
delays or complications in our service territories.


                                       18

<PAGE>

       Universal Service. The FCC has adopted rules implementing the universal
service requirements of the Telecommunications Act of 1996. Pursuant to those
rules, all telecommunications providers must contribute a small percentage of
their telecommunications revenues to a Universal Service Fund ("USF"). There is
an exemption for providers whose contribution would be less than $10,000 in a
particular year. The FCC is conducting a comprehensive review of the rules
governing contributions to USF and recovery of those contributions from
customers. For example, the FCC is considering whether to base contributions on
the number of end user connections, including those used for cable modem
services, provided by a company. If adopted, such a rule would significantly
increase Knology's contribution obligations, although its competitors'
obligations would also increase. Knology, Interstate Telephone and Valley
Telephone presently contribute to the fund. We cannot be certain whether we will
be able to either recover the costs of fund contributions from our customers or
to receive offsetting fund disbursements. Changes to federal universal service
funding obligations could adversely affect us by increasing the payments owed to
support the fund.

       Access Charge Reform. The FCC is in the process of reducing access
charges imposed by local telephone companies for origination and termination of
interstate long distance traffic. Overall decreases in local telephone carriers'
access charges as contemplated by the FCC's access reform policies would likely
put downward pricing pressure on our charges to domestic interstate and
international long-distance carriers for comparable access. Changes to the
federal access charge regime could adversely affect us by reducing the revenues
that we generate from charges to domestic interstate and international
long-distance carriers for originating and terminating interstate traffic over
our telecommunications facilities.

       The FCC has adopted an order (the "MAG Plan") to reform interstate
access charges and universal service support for rate-of-return incumbent local
exchange carriers such as Valley Telephone. The MAG Plan is designed to lower
access charges toward cost, replace implicit support for universal service with
explicit and support that is portable to all eligible telecommunications
carriers, and provide certainty and stability for the small and mid-sized local
telephone companies serving rural and high-cost areas by permitting them to
continue to set rates based on a rate-of-return of 11.25 percent, thereby
encouraging rural investment. The MAG Plan, as adopted, will reduce switched
access fees for small ILECs and protect universal service in areas served by
those ILECs. Although the MAG Plan significantly reduces per-minute access
charge revenues to these carriers, it is designed to protect them for at least
the term of the plan from potentially much larger revenue reductions. Petitions
for reconsideration of the MAG Plan are currently pending before the FCC and the
FCC has sought further comment on certain proposals related to the MAG Plan.

       Regional Bell Operating Company Entry into Long Distance. The
Telecommunications Act of 1996 establishes standards for regional Bell operating
companies and their affiliates to obtain from the FCC authority to provide long
distance telecommunications services originating in their in-region local access
and transport areas, or LATAs, to points outside that area. LATAs are
geographical regions in the United States within which a Bell Operating Company
may offer local telephone service. The FCC is considering BellSouth's
application to provide in-region interLATA long distance service in Georgia and
Louisiana. The FCC's decision is expected by May 15, 2002. Several other
BellSouth applications to provide in-region interLATA service have been rejected
by the FCC or withdrawn by BellSouth. Because of its existing base of local
telephone service customers and its extensive telecommunications network, we
anticipate that BellSouth will be a significant competitor in each of the states
in which it obtains in-region, interLATA authority from the FCC.

       Additional Requirements. The FCC imposes additional obligations on all
telecommunications carriers, including obligations to:

o      interconnect with other carriers and not to install equipment that cannot
       be connected with the facilities of other carriers;

o      ensure that their services are accessible and usable by persons with
       disabilities;

o      provide telecommunications relay service either directly or through
       arrangements with other carriers or service providers, which service
       enables hearing impaired individuals to communicate by telephone with
       hearing individuals through an operator at a relay center;

o      comply with verification procedures in connection with changing a
       customer's carrier;

o      protect the confidentiality of proprietary information obtained from
       other carriers, manufacturers and customers;

o      maintain equipment, facilities, and services in such a manner as to allow
       for the interception of wire and electronic communications and access to
       call-identifying information by authorized law enforcement;

o      pay annual regulatory fees to the FCC; and



                                       19

<PAGE>



o      contribute to the Telecommunications Relay Services Fund, as well as
       funds to support telephone numbering administration and local number
       portability.

       Forbearance. The Telecommunications Act of 1996 permits the FCC to
forbear from requiring telecommunications carriers to comply with certain
regulations if certain conditions are present. Future reduction or elimination
of federal regulatory requirements could free us from regulatory burdens, but
also might increase the flexibility of our competitors.

       Advanced Services. The FCC is currently reviewing the regulatory
treatment of incumbent local exchange carrier provision of stand-alone broadband
and broadband sold in combination with Internet access services where the
incumbent local exchange carrier is classified as dominant in the provision of
local exchange and exchange access service. If the FCC exempts or substantially
reduces incumbent local exchange carriers from regulation of these services (for
example, by eliminating regulations governing end user prices, collocation of
competitive xDSL providers' equipment in central offices, and unbundling), the
incumbent local exchange carriers' broadband offerings may place greater
competitive pressures on Knology's broadband service offerings.

       Line Sharing. Where an incumbent local exchange carrier provides voice
service to a customer (and subject to certain technical conditions), the FCC has
required incumbent local exchange carriers, like BellSouth, to offer to
unaffiliated telecommunications carriers on an unbundled basis the
high-frequency portion of the incumbent's loops or subloops (lines connecting
customer premises to the switch used for basic telephone service). This
requirement, known as "line sharing," is designed, in part, to reduce the costs
of the incumbent's competitors' provision of digital subscriber line ("DSL")
services to small businesses and residential customers. The line sharing
requirements primarily benefit entities offering DSL services who compete
directly with our broadband communications service offerings. Consequently, line
sharing requirements may prove on balance to have an adverse competitive effect
on us. The FCC's line sharing order has been appealed to the Court of Appeals
for the D.C. Circuit and a decision remains pending.

     State Regulation of Telecommunications Services

       Traditionally, the states have exercised jurisdiction over intrastate
telecommunications services. The Telecommunications Act of 1996 modifies the
dimensions of state authority in relation to federal authority. It also
prohibits states and localities from adopting or imposing any legal requirement
that may prohibit, or have the effect of prohibiting, market entry by new
providers of interstate or intrastate telecommunications services. The FCC is
required to preempt any such state or local requirement to the extent necessary
to enforce the Telecommunications Act of 1996's open market entry requirements.
States and localities may, however, continue to regulate the provision of
intrastate telecommunications services (barring federal preemption) and require
carriers to obtain certificates or licenses before providing service.

       Alabama, Georgia, Florida, Kentucky, South Carolina and Tennessee each
have adopted statutory and regulatory schemes that require us to comply with
telecommunications certification and other regulatory requirements. To date, we
are authorized to provide intrastate local telephone, long-distance telephone
and operator services in Alabama, Georgia, Florida, Kentucky, South Carolina and
Tennessee. As a condition of providing intrastate telecommunications services,
we are required, among other things:

o      to file and maintain intrastate tariffs or price lists describing the
       rates, terms and conditions of our services;

o      to comply with state regulatory reporting, tax and fee obligations,
       including contributions to intrastate universal service funds; and

o      to comply with, and to submit to, state regulatory jurisdiction over
       consumer protection policies (including regulations governing customer
       privacy, changing of service providers, and content of customer bills),
       complaints, transfers of control and certain financing transactions.

       Generally, state regulatory authorities can condition, modify, cancel,
terminate or revoke certificates of authority to operate in a state for failure
to comply with state laws or the rules, regulations and policies of the state
regulatory authority. Fines and other penalties may also be imposed for such
violations. As we expand our telecommunications services into new states, we
will likely be required to obtain certificates of authority to operate, and be
subject to similar ongoing regulatory requirements, in those states as well.

       In addition, the states have authority under the Telecommunications Act
of 1996 to determine whether Knology is eligible to receive USF funds. They also
possess authority to approve or (in limited circumstances) reject agreements for
the interconnection of telecommunications carriers' facilities with those of the
local exchange carrier, and to arbitrate disputes arising in negotiations for
interconnection, although, as mentioned, the Court of Appeals for the Eleventh
Circuit (which governs many of


                                       20

<PAGE>

Knology's markets), recently concluded that State public service commissions
lack the authority under Section 252 of the federal Communications Act to
interpret and enforce interconnection agreements.

       Valley Telephone and Interstate Telephone are subject to additional
requirements under state law, including rate regulation and quality of service
requirements. In Alabama, both Valley Telephone and Interstate Telephone are
subject to a price cap form of rate regulation. Under price caps, the companies
have limited ability to raise rates for intrastate telephone services, but the
Alabama Public Service Commission does not regulate the rate of return earned by
the companies.

     Local Regulation

       Occasionally we are required to obtain street use and construction
permits and franchises to install and expand our interactive broadband network
using state, city, county or municipal rights-of-way. Some municipalities where
we have installed or anticipate constructing networks require the payment of
license or franchise fees which are based upon a percentage of gross revenues or
on a per linear foot basis. The Telecommunications Act of 1996 requires
municipalities to manage public rights-of-way in a competitively neutral and
non-discriminatory manner.

Franchises

       As described above, cable television systems and local telephone
systems generally are constructed and operated under the authority of
nonexclusive franchises, granted by local and/or state governmental authorities.
Franchises typically contain many conditions, such as:

o      time limitations on commencement and completion of system construction;

o      customer service standards;

o      minimum number of channels; and

o      the provision of free service to schools and certain other public
       institutions.

       We believe that the conditions in our franchises are fairly typical for
the industry. Our franchises generally provide for the payment of fees to the
municipality ranging from 3% to 5% of revenues from telephone and cable
television service, respectively. Our franchises generally have ten to 15 year
terms, and we expect our franchises to be renewed by the relevant franchising
authority before or upon expiration.

       Prior to the scheduled expiration of most franchises, we initiate
renewal proceedings with the relevant franchising authorities. The Cable
Communications Policy Act of 1984 provides for an orderly franchise renewal
process in which the franchising authorities may not unreasonably deny renewals.
If a renewal is withheld and the franchising authority takes over operation of
the affected cable system or awards the franchise to another party, the
franchising authority must pay the cable operator the "fair market value" of the
system. The Cable Communications Policy Act of 1984 also established
comprehensive renewal procedures requiring that the renewal application be
evaluated on its own merit and not as part of a comparative process with other
proposals.


                                       21

<PAGE>

       The following table lists our existing and pending franchises by market,
term and expiration date.

<TABLE>
<CAPTION>
                                         Term       Expiration
Market Area                             (years)        Date
-----------                             -------     ----------
<S>                                     <C>        <C>    <C>
Huntsville, AL
   Huntsville, AL                         6           3/6/2006
   Limestone County, AL                   15          5/7/2005
   Madison, AL                            15        10/22/2006
   Madison County, AL                     10        11/20/2009
   Redstone Arsenal, AL                   10          2/8/2011

Montgomery, AL
   Autauga County, AL                     15        10/15/2013
   Maxwell Air Force Base, AL             5          9/30/2003
   Montgomery, AL                         15          3/6/2005
   Prattville, AL                         15          7/7/2013

Valley, AL/ West Point, GA
   Chambers County, AL                    15        12/15/2012
   Lanett, AL                             15         1/20/2013
   Valley, AL                             15         1/12/2013
   West Point, GA                         15         1/19/2013

Panama City, FL
   Bay County, FL                         8           1/5/2006
   Cedar Grove, FL                        15          6/9/2013
   Callaway, FL                           10         9/28/2009
   Lynn Haven, FL                         20         5/12/2018
   Panama City, FL                        20         3/10/2018
   Parker, FL                             10         12/7/2009
   Panama City Beach, FL                  15         8/22/2007

Augusta, GA
   AugustaRichmond County, GA             15         1/20/2013
   Aiken County, SC                       15         6/30/2015
   Berkeley County, SC                    15        11/05/2013
   Burnettown, SC                         15         6/20/2015
   North Augusta, SC                      10        6//30/2010

Columbus, GA
   Columbia County, GA                    11         11/1/2009
   Columbus, GA                           10         3/16/2009

Louisville, KY
   Louisville, KY                         15         9/12/2015
   Jefferson County, KY                            Application
                                                       Pending

Charleston, SC
   Charleston, SC                         15         4/28/2013
   Charleston County, SC                  15        12/15/2013
   Dorchester County, SC                  15         7/20/2013
   Goose Creek, SC                        15        11/17/2013
   Hanahan, SC                            15          9/8/2013
   Lincolnville, SC                       15         12/2/2013
   Mount Pleasant, SC                     15          3/9/2014
   North Charleston, SC                   15         5/28/2013
   Summerville, SC                        15         8/31/2013

Knoxville, TN
   Knox County, TN                        10          6/9/2010
   Knoxville, TN                          15         5/18/2015

Nashville, TN
   Brentwood, TN                          15         4/24/2015
   Franklin County, TN                    15          5/9/2015
   Nashville, TN                          15        10/17/2015
   Williamson County, TN                  15          5/8/2015

</TABLE>

       The Cable Communications Policy Act of 1984 also prohibits franchising
authorities from granting exclusive franchises or unreasonably refusing to award
additional franchises covering an existing cable system's service area. This
simplifies the application process for our obtaining a new franchise. This
process usually takes about six to nine months. While this makes it easier for
us to enter new markets, it also makes it easier for competitors to enter the
markets in which we currently have franchises.


                                       22

<PAGE>

RISK FACTORS

       The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us or that we
currently believe to be immaterial may also adversely affect our business. If
any of the following risks actually occur, our business prospects, financial
condition and results of operations could be materially adversely affected.

Risks Related to Our Business

Failure to obtain additional funding would limit our ability continue in
business, to complete our existing networks or to expand our business.

       As of December 31, 2001, we had $617,000 of working capital, $307.4
million of accumulated deficit and $370.8 of long-term debt. We currently expect
to spend approximately $13.0 million during 2002 to expand and upgrade our
networks in the markets where we currently provide service. Planned capital
expenditures in 2003 and thereafter to complete our networks in the markets
where we currently provide service will have to be funded from the proceeds from
additional debt or equity financings. There can be no assurance that we will
raise proceeds sufficient to remain in business or to completely build out our
existing markets. We cannot assure you that additional financing will be
available to us or, if available, that it can be obtained on a timely basis and
with acceptable terms. If we fail to obtain sufficient financing, we may be
required to discontinue our business or to defer or abandon our plans, which
could have a material adverse effect on our business. See Item 7-"Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".

       In addition, we plan to selectively expand into new cities, including
Nashville and Louisville, where we do not currently have networks. We estimate
the cost of launching service in new markets, including construction and
implementation of networks in new cities, to be approximately $75 million to
$100 million per 100,000 homes. Actual costs may exceed this estimate if, for
example, we were to make changes in our build-out schedule or if our engineering
costs are greater than we expect. We will need significant additional financing
to expand into these additional markets, as well as for new business activities
and for any additional acquisitions. We cannot assure you that additional
financing will be available to us or, if available, that it can be obtained on a
timely basis and with acceptable terms. If we fail to obtain sufficient
financing, we may be required to defer or abandon our expansion plans.

The significant amount of debt we have could harm our business.

       As of December 31, 2001, we had $386.5 million of debt, including
accrued interest, and $88.4 million of stockholders' equity. Our management is
currently evaluating alternatives to improve our capital structure, including
restructuring our debt. However, there is no guarantee that our restructuring
efforts will be successful.

       Our debt could adversely affect our business in a number of ways, as:

o      we have to spend a significant amount of our available funding to pay
       interest and repay principal on debt;

o      we may have difficulty obtaining additional financing;

o      we may have limited flexibility in planning for or reacting to changes in
       our business;

o      we may have more debt relative to our competitors, which may place us at
       a disadvantage;

o      we may be more vulnerable to any economic downturns; and

o      we may not have sufficient funding to make interest and principal
       payments on our debt, and as a result, we may be forced to consider
       bankruptcy.

       Our earnings were not sufficient to cover our fixed charges by $76.7
million in 1999, $104.1million in 2000 and by $119.5 million in 2001. We will
need to grow and generate profits in order to generate the cash to repay our
debt. If we cannot meet our debt payments, we may need to seek additional
financing or sell some of our assets, which would adversely affect our business,
operations and the value of our company. We cannot assure you that additional
financing will be available to us or, if available, that it can be obtained on a
timely basis and on acceptable terms. If we fail to obtain such financing, it
could result in the


                                       23

<PAGE>


delay or curtailment of our development, expansion plans and
capital expenditures and could have a material adverse effect on our business.

We have lost money on our operations to date and expect to continue to lose
money in the future.

       As of December 31, 2001, we had an accumulated deficit of $307.4 million.
We expect to incur net losses for the next several years as we continue to build
our networks. Our ability to generate profits and positive cash flow will depend
in large part on our ability to obtain enough subscribers for our services to
offset the costs of constructing and operating our networks. If we cannot
achieve operating profitability or positive cash flows from operating
activities, our business, financial condition and operating results will be
adversely affected.

We received a going concern opinion from our independent accountants with
respect to our audited financial statements for the three years ended December
31, 2001.

         Due to recurring losses from operations, an unfavorable working capital
position, and uncertainty related to our liquidity position, our independent
accountants issued audit opinions with respect to our audited financial
statements for the three years ended December 31, 2001 which raised substantial
doubt about our ability to continue as a going concern. As a result, our
suppliers and customers may either refuse to continue doing business with us or
may refuse to extend trade credit to us.

Restrictions on our business imposed by our debt agreements could limit our
growth or activities.

       Our indenture and our existing credit agreements currently, and any new
credit agreements that we enter into in the future will, place operating and
financial restrictions on us and our subsidiaries. These restrictions, and any
restrictions created by future financings, will affect our and our subsidiaries'
ability to:

o      incur additional debt;

o      create liens on our assets;

o      make investments;

o      use the proceeds from any sale of assets; and

o      make distributions on or redeem our stock.

       In addition, our existing credit facilities requires us to maintain
specified financial ratios. These limitations may affect our ability to finance
our future operations or to engage in other business activities that may be in
our interest. If we violate any of these restrictions or any restrictions
created by future financings, we could be in default under our agreements and be
required to repay our debt immediately rather than at the maturity of the debt.

We have grown rapidly and have a limited history of operating our current
systems. This makes it difficult for you to completely evaluate our performance.

       We commenced sales of bundled services in 1997 and have grown rapidly
since then. As a result, historical financial information about us may not be
indicative of the future or of results that we can achieve. Our recent growth in
revenues over our short operating history is not necessarily indicative of
future performance.

We may encounter difficulties expanding into additional markets, which could
adversely affect our results of operations.

       To expand into additional cities we will have to obtain pole attachment
agreements, construction permits, franchises and other regulatory approvals.
Delays in entering into pole attachment agreements and in receiving the
necessary construction permits and in conducting the construction itself have
adversely affected our schedule in the past and could do so again in the future.
Further, as we are currently experiencing in Louisville, we may face resistance
from competitors who are already in these markets. For example, a competitor may
oppose or delay our franchise application or our request for pole attachment
space. These difficulties could significantly harm or delay the development of
our business in new markets.

The rates we pay for pole attachments may significantly increase, which could
adversely affect our results of operations.

       The rates we must pay utility companies for space on their utility
poles is the subject of frequent disputes. If the rates we pay for pole
attachments were to increase significantly, it would cause our networks to be
more expensive to operate and could have a material adverse effect on our cash
flows and margins. It could also place us in a competitive disadvantage to video
providers who do not require pole attachments, such as satellite providers.

Competition from other providers of voice services could adversely affect our
results of operations.

         In providing local and long-distance telephone services, we compete
with the incumbent local phone company in each of our markets and a number of
long-distance phone companies such as AT&T Corp., WorldCom, Inc. and Sprint
Corporation. We are not the first provider of telephone services in most of our
markets, and we have to convince people in our markets to switch from other
telephone companies. BellSouth Telecommunications, Inc. is the primary incumbent
local phone company in our


                                       24

<PAGE>

targeted region and is a particularly strong competitor in our current markets
and throughout the southeastern United States where we hope to expand. Our other
competitors include:

o      independent or competitive local exchange carriers, which are local phone
       companies other than the incumbent phone company that provide local
       telephone services and access to long-distance services over their own
       networks or over networks leased from other companies;

o      regional Bell operating companies other than BellSouth;

o      wireless telephone carriers;

o      cable television service operators who have announced their intention to
       offer telephone services in the future;

o      utility companies; and

o      companies offering advanced technologies such as Internet-based
       telephony.

       Major long-distance service providers have recently adopted price
decreases and promotional activities. We expect these price decreases to
continue into the foreseeable future and additional price decreases may be
adopted. We expect that we will need to lower our long distance prices to remain
competitive, which could have a material adverse impact on our results of
operations.

Competition from other providers of video services could adversely affect our
results of operations.

       To be successful, we will need to retain our existing cable television
subscribers and to attract cable television subscribers away from our
competitors. Some of our competitors have competitive advantages over us, such
as long-standing customer relationships and greater experience, resources,
marketing capabilities and name recognition. In addition, a continuing trend
toward business combinations and alliances in the cable television area and in
the telecommunications industry as a whole may create significant new
competitors for us. In providing video service, we currently compete with AT&T
Broadband, Comcast Cable Communications, Inc., Time Warner Cable, Mediacom
Communications Corporation and Charter Communications, Inc. We also compete with
satellite television providers DirecTV, Inc. and Echostar Communications
Corporation. Our other competitors include:

o      other cable television providers;

o      broadcast television stations; and

o      other satellite television companies.

We expect in the future to compete with telephone companies providing cable
television service within their service areas and wireless cable companies,
which could adversely affect our results of operations.

       New legislation has allowed satellite television providers to offer
local programming. This could reduce our current advantage over satellite
television providers in this area and hurt our ability to attract and maintain
subscribers. In addition, major providers of video services in our new markets
generally adopt promotional discounts. We expect these promotional discounts in
our new markets to continue into the foreseeable future and additional
promotional discounts may be adopted. We expect that we will also need to offer
promotional discounts to be competitive, which could have a material adverse
impact on our results of operations.

Competition from other providers of data services could adversely affect our
results of operations.

       Providing data services is a rapidly growing business and competition
is increasing in each of our markets. Some of our competitors have competitive
advantages over us, such as greater experience, resources, marketing
capabilities and stronger name recognition.

       In providing data services, we compete with:

o      traditional dial-up Internet service providers;

o      incumbent local exchange providers which provide digital subscriber
       lines, or DSL;

o      providers of satellite-based Internet access services;

o      long-distance telephone companies; and


                                       25

<PAGE>

o      cable television companies.

       We also expect to compete in the future in providing high-speed data
services with providers of multi-channel multipoint distribution services as
well as providers of local multipoint distribution services. In addition, major
providers of data services have adopted price decreases and promotional
activities, such as free Internet access. We expect these price decreases and
promotional activities to continue into the foreseeable future and additional
price decreases may be adopted. We expect that we will need to lower our prices
for data services to remain competitive, which could have a material adverse
impact on our results of operations.

Our programming costs are increasing, which could reduce our cash flow and
operating margins.

       Programming has been our largest single operating expense item and we
expect this to continue. In recent years, the cable industry has experienced a
rapid increase in the cost of programming, particularly sports programming. We
expect this increase to continue, and we may not be able to pass programming
costs increases on to our customers. In addition, as we increase the channel
capacity of our systems and add programming to our expanded basic programming
tiers, we may face additional market constraints on our ability to pass
programming costs on to our customers. The inability to pass programming cost
increases on to our customers would have an adverse impact on our cash flow and
operating margins.

Programming exclusivity in favor of our competitors could adversely affect the
demand for our cable services.

       We obtain our programming by entering into contracts or arrangements
with cable programming vendors. A cable programming vendor may enter into an
exclusive arrangement with one of our cable television competitors. This would
create a competitive advantage for the cable television competitor by
restricting our access to programming. We provide programming in each of these
markets as well, and these exclusivity arrangements restrict our access to
programming. Our restricted ability to offer popular programming on our cable
television systems may adversely affect the demand for our cable services or
increase our cost to obtain programming.

If we are not able to manage our growth, our business and our results of
operations will be harmed.

       Our ability to grow will depend, in part, upon our ability to:

o      successfully implement our strategy;

o      evaluate markets;

o      secure financing;

o      restructure our existing debt;

o      construct facilities;

o      obtain any required government authorizations; and

o      hire and retain qualified personnel.

       In addition, as we increase our service offerings and expand our
targeted markets, including possible expansion into Louisville and Nashville, we
will have additional demands on our customer support, sales and marketing,
administrative resources and network infrastructure. If we cannot effectively
manage our growth, our business and results of operations will be harmed.

Acquisitions and joint ventures could strain our business and resources.

       If we acquire existing companies or networks, or enter into joint
ventures, we may:

o      miscalculate the value of the acquired company or joint venture;

o      divert resources and management time;

o      experience difficulties in integration of the acquired business or joint
       venture with our operations;

o      experience relationship issues, such as with customers, employees and
       suppliers, as a result of changes in management;


                                       26

<PAGE>

o      incur additional liabilities or obligations as a result of the
       acquisition or joint venture; and

o      assume additional financial burdens or dilution incurred with the
       transaction.

       Additionally, ongoing consolidation in our industry may be shrinking
the number of attractive acquisition targets.

We operate our networks under franchises that are subject to non-renewal or
termination, either of which could adversely affect our business.

       Our networks generally operate pursuant to franchises, permits or
licenses typically granted by a municipality or other state or local government
controlling the public rights-of-way. Often, franchises are terminable if the
franchisee fails to comply with material terms of the franchise order or the
local franchise authority's regulations. Further, franchises generally have
fixed terms and must be renewed periodically. Local franchising authorities may
resist granting a renewal if they consider either past performance or the
prospective operating proposal to be inadequate. Our franchises expire at
various times in the future beginning in 2003. See Item 1-"Business--
Franchises". If one of our franchises is not renewed or is terminated, it could
adversely affect our business.

If we are not able to obtain new franchises in a timely manner and on acceptable
terms and conditions, our business will be harmed.

       Our business depends on our ability to obtain new franchises in a
timely manner and on acceptable terms and conditions. We cannot predict whether
we will obtain franchises in new markets on terms that will make construction of
a network and provision of broadband communications services economically
attractive for us. We have been awarded a franchise in Louisville, Kentucky, but
it is being contested by the incumbent cable provider. Until litigation relating
to the Louisville franchise is resolved, we do not plan to begin construction of
our network in that market.

Since we operate our systems under franchises that are non-exclusive, local
franchising authorities can grant additional franchises and create more
competition for us in our markets.

       Our franchises are non-exclusive. The local franchising authorities can
grant franchises to competitors who may build networks in our market areas. This
could adversely affect our growth and our profitability.

Local franchise authorities have the ability to impose regulatory constraints or
requirements on our business, which could increase our expenses.

       In the past, local franchise authorities have imposed regulatory
constraints, by local ordinance or as part of the process of granting or
renewing a franchise, on the construction of our networks. They have also
imposed requirements on the level of customer service we provide, as well as
other requirements. The local franchise authorities in our new markets may also
impose regulatory constraints or requirements which could increase our expenses
in operating our business.

Loss of access to other companies' networks could impair our telephone services.

       We rely on other companies to provide:

o      communications capacity between our facility that switches telephone
       calls and our local networks;

o      long-distance telephone services;

o      space at areas along our networks or in switching centers to locate
       equipment. Because our equipment needs to be located near and often
       connected to similar equipment operated by other providers for efficiency
       reasons, which is called co-location, available space can be quite
       limited; and

o      special network services for Internet transport requirements.

       We purchase these services from two primary vendors, Business Telecom,
Inc. and ITC/\DeltaCom, both of which compete with us. If we lost services from
either of these companies, we would have to find another entity that could
provide these services for us and may have to pay more for the same services or
meet a higher minimum purchase commitment. Further, if either of these companies
reduced our access to its facilities because that company did not have the
capacity to provide these services to us, our business would be harmed.


                                       27

<PAGE>

Loss of interconnection arrangements could impair our telephone service.

       We rely on other companies to connect our local telephone customers
with customers of other local telephone providers. We presently have access to
BellSouth's telephone network under a nine-state interconnection agreement,
which expires in September 2002. If our interconnection agreement is not
renewed, we will have to negotiate another interconnection agreement with
BellSouth. The renegotiated agreement could be on terms less favorable than our
current terms.

       It is generally expected that the Telecommunications Act of 1996 will
continue to undergo considerable interpretation and implementation, which could
have a negative impact on our interconnection agreement with BellSouth. It is
also possible that further amendments to the Communications Act of 1934 may be
enacted which could have a negative impact on our interconnection agreement with
BellSouth. Our ability to compete successfully in the provision of services will
depend on the nature and timing of any such legislative changes and implementing
regulations and whether they are favorable to us.

Changes in demand for our voice services could harm our business.

       We could be affected by changes in demand for our telephone services,
including reduced demand for:

o      traditional and premium telephone services;

o      additional access lines per household; and

o      billing and collection services.

       In addition, increased local competition in our market areas could
result in a decline in demand for our voice services.

The demand for our bundled communications services could be lower than we
expect.

       We have only been providing bundled broadband communications services
since 1997. Our bundled broadband communications strategy could be unsuccessful
due to:

o      competition;

o      pricing;

o      regulatory uncertainties; or

o      operating and technical difficulties.

       In addition, the demand for some of our planned broadband
communications services, either alone or as part of a bundle, cannot readily be
determined. Our business could be adversely affected if demand for bundled
broadband communications services is materially lower than we expect.

Existing and future technological implementations and developments may hurt our
business.

       Existing and future technological implementations and developments may
reduce our networks' competitiveness or require expensive and time-consuming
upgrades or additional equipment. In addition, we may be required to select in
advance one technology over another and may not choose the technology that is
the most economic, efficient or attractive to customers. We may also encounter
difficulties in implementing new technologies, products and services and may
encounter disruptions in service as a result. We are currently implementing a
new customer billing system, which may not be implemented successfully.

We depend on third-party equipment and software suppliers. If we are unable to
procure the necessary equipment, our ability to offer our services could be
impaired. This could adversely affect our growth, financial condition and
results of operations.

         We depend on vendors to supply the set-top converter boxes, digital
headend equipment, and cable modems. This equipment is available from a limited
number of suppliers. We typically purchase this equipment under purchase orders
placed from time to time and we do not carry significant inventories. If demand
exceeds our inventories and we are unable to obtain required equipment on a
timely basis and at an acceptable cost, our ability to recognize additional
revenue from digital services could be delayed or impaired. In addition, if
there are no suppliers who are able to provide devices that comply with evolving
Internet and telecommunications standards or that are compatible with other
products or components we use, our business would be impaired.


                                       28

<PAGE>

We may experience difficulty in engaging sufficient construction contractors and
our construction costs could increase.

       The expansion and upgrade of our existing networks and the development
of future networks require us to hire construction contractors. We have had and
may continue to have difficulty hiring experienced contractors because of
increases in demand for construction services. Our construction costs could
increase significantly over the next few years if demand for construction
services continues to grow.

We could be damaged by the loss of our key personnel.

       Our business is currently managed by a small number of key management
and operating personnel. We do not have any employment agreements with, nor do
we maintain "key man" insurance on, these or any other employees.

Since our business is concentrated in specific geographic locations, our
business could be hurt by a depressed economy in these areas.

       We provide our services to areas in Alabama, Florida, Georgia, South
Carolina and Tennessee, which are all in the southeastern United States. A
stagnant or depressed economy in the southeastern United States could affect all
of our markets, and adversely affect our business and results of operations.

Our service networks or other facilities could be damaged by natural
catastrophe.

       Our success depends on the efficient and uninterrupted operation of our
communications services. Our networks are attached to poles and other structures
in our service areas, and our ability to provide service depends on the
availability of electric power. A tornado, hurricane, flood or other
catastrophic event in one of these areas could damage our networks, interrupt
our service and harm our business in the affected area. In addition, many of our
markets are close together, and a single natural disaster could damage several
of our networks.

All of our voice and data traffic passes through our switch in West Point,
Georgia, and our switch may fail to operate.

       All of our voice and data traffic passes through our switch in West
Point, Georgia. If our switch were to fail to operate, our customers would not
be able to access our voice and data services, which likely would damage our
relationship with our customers and could have a material adverse impact on our
business.

We could be hurt by future interpretation or implementation of regulations.

       The current communications and cable legislation is complex and in many
areas sets forth policy objectives to be implemented by regulation. There are
proposals before the United States Congress and the FCC to require all cable
operators to make a portion of their cable systems' capacity available to other
Internet service providers, such as telephone companies. AT&T previously
announced that it would open its systems to competing Internet service
providers, or ISPs, including EarthLink, and, in November of 2000, announced
plans to test market a service allowing customers to access eight different ISPs
over AT&T's DSL lines. Both the FTC and FCC imposed conditions on the merger of
American Online Inc. and Time Warner Inc., requiring the combined company to
provide unaffiliated ISPs with access to the company's cable systems. Certain
local franchising authorities are considering or have already approved similar
open access requirements. If regulators decide to require us to provide
competing telephone or Internet service providers with access to our broadband
networks under unfavorable terms, much of the competitive advantage we have from
owning our own networks could be eliminated. Competing Internet service
providers could stream video over their systems, in direct competition with our
programming services.

       Our interconnection agreements, which we depend on to reach users who
are not our customers, are subject to regulation by the FCC and state
authorities. Unfavorable regulation that delays interconnection or increases the
cost of interconnection would hurt our business.

       It is generally expected that the Telecommunications Act of 1996 will
continue to undergo considerable interpretation and implementation. It is also
possible that further amendments to the Communications Act of 1934 may be
enacted. Our ability to compete successfully will depend on the nature and
timing of any such legislative changes and implementing regulations and whether
they are favorable to us.


                                       29

<PAGE>

Risks Related to Relationships with Stockholders, Affiliates and Related Parties

Our relationships with ITC Holding's companies may cause conflicts of interests.

       Prior to February 2000, we were a subsidiary of ITC Holding. We
continue to have relationships with several of ITC Holding's subsidiaries and
affiliated companies. Some of our directors and stockholders are directors,
stockholders or officers of various ITC Holding companies. When the interests of
ITC Holding or other ITC Holding companies differ from ours, the ITC Holding
companies act in their own respective best interests, which could be adverse to
our interests. Moreover, conflicts may arise in the negotiation and enforcement
of our agreements with these companies.

A small number of stockholders control a significant portion of our stock.

       As of January 31, 2002, approximately 8.3% of our outstanding voting
stock on an as-converted basis was beneficially owned by Campbell B. Lanier,
III, the chairman of our board of directors, and members of Mr. Lanier's family.
Our directors and executive officers as a group beneficially owned on that date
45.8% of our outstanding voting stock on an as-converted basis. Further, SCANA
Communications Holdings, J. H. Whitney IV, L.P., The Blackstone Group private
equity funds, ITC Telecom Ventures, South Atlantic Capital private equity funds
and AT&T Ventures private equity funds beneficially owned approximately 13.0%,
13.0%, 9.9%, 6.8%, 5.3% and 4.1% of our outstanding voting stock, on an
as-converted basis, respectively. Furthermore, SCANA Communications Holdings and
ITC Telecom Ventures together own approximately 44.8% of the shares of Series C
preferred stock, and J. H. Whitney IV, L.P. and The Blackstone Group private
equity funds together own approximately 69.6% of the shares of Series B
preferred stock. As a result, these stockholders have significant voting power
with respect to the ability to:

o      authorize the creation and issuance of additional shares of capital
       stock;

o      elect our directors;

o      amend our certificate of incorporation or bylaws; or

o      effect a merger, sale of assets or other corporate transaction.

       The extent of ownership by these stockholders may also discourage a
potential acquirer from making an offer to acquire us. This could reduce the
value of our stock.

Some of our major stockholders own stock in our competitors and may have
conflicts of interest.

       As of December 31, 2001, Campbell B. Lanier, III, the chairman of our
board of directors and one of our major stockholders, owned approximately 10% of
the outstanding stock of ITC/\DeltaCom. Additionally, some of our other major
stockholders, including private equity funds associated with AT&T Ventures,
Whitney & Co. and The Blackstone Group, own or in the future may own interests
in companies that may compete with us. When the interests of one of our
competitors differs from ours, these stockholders may support our competitor or
take other actions that could adversely affect our interests.

We have entered into a stockholders agreement with our Series A, Series B and
Series C preferred stockholders that gives them registration rights and
preemptive rights which may make it more difficult for us to issue our
securities to new investors.

       We have entered into a stockholders agreement with the holders of our
Series B preferred stock, the holders of our Series C preferred stock and some
of the holders of our Series A preferred stock that grants them registration
rights and preemptive rights. These rights may inhibit our ability to conduct
future sales of our securities.

  We are no longer able to rely on ITC Holding for access to capital.

       In the past, ITC Holding has contributed equity to us and has lent
money to us. Since our spin-off was completed in February 2000, we no longer
have access to capital through ITC Holding. Although ITC Telecom Ventures, an
indirect wholly owned subsidiary of ITC Holding, invested $25.0 million in our
Series C preferred stock in January 2001, ITC Holding has no obligation to
provide financing to us or enter into other transactions with us in the future.

Anti-takeover provisions in our charter documents could make it hard for a third
party to acquire us.

       Our charter and bylaws may have the effect of discouraging, delaying or
preventing a merger, tender offer or proxy contest involving our company. Any of
these anti-takeover provisions could lower the value of our stock.


                                       30

<PAGE>

No trading market exists for our securities, and our securities are subject to
transfer restrictions.

       Our stock is not traded on any stock exchange or quoted on the Nasdaq
National Market, or any other established trading market, and no market makers
currently make a market in our stock. We do not expect that an active public
market for our stock will develop. With the lack of an active public market for
our stock, our stockholders' ability to sell securities is limited.

If we issue more stock in future offerings, the percentage of our stock that our
stockholders own will be diluted.

       As of January 31, 2002, we had 502,434 shares of common stock,
50,997,760 shares of Series A preferred stock and 21,180,131 shares of Series B
preferred stock and 37,219,562 shares of Series C preferred stock outstanding.
We also had outstanding on that date options to purchase 7,057,816 shares of
common stock and 3,045,972 shares of Series A preferred stock as well as
warrants to purchase 994,961 shares of Series A preferred stock. Future stock
issuances also will reduce the percentage ownership of our current stockholders.

Although our stock is not publicly traded, the value of our stock could be hurt
by substantial price fluctuations.

       The value of our capital stock could be subject to sudden and material
increases and decreases, even though it is not publicly traded. The value of our
stock could fluctuate in response to:

o      our quarterly operating results;

o      changes in our business;

o      changes in the market's perception of our bundled services;

o      changes in the businesses or market perceptions of our competitors; and

o      changes in general market or economic conditions.

       In addition, the stock market has experienced extreme price and volume
fluctuations in recent years that have significantly affected the value of
securities of many companies. The changes often appear to occur without regard
to specific operating performance. The value of our capital stock could increase
or decrease based on change of this type, even though our stock is not publicly
traded. These fluctuations could materially reduce the value of our stock.

Forward-looking statements should be read with caution.

       This Annual Report on Form 10-K for the year ended December 31, 2001
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 including, specifically, the information under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business," as well as other places in this Annual Report.
Statements in this Annual Report that are not historical facts are
"forward-looking statements." Such forward-looking statements include those
relating to:

o      plans to develop future networks and upgrade facilities;

o      the market opportunity presented by markets we have targeted;

o      future business developments;

o      the current and future markets for our services and products;

o      our anticipated capital expenditures;

o      our anticipated sources of capital;

o      the effects of regulatory reform on our business;

o      competitive and technological developments;

o      possible acquisitions and alliances; and

o      projected revenues, liquidity, interest costs and income.


                                       31

<PAGE>

       The words "estimate," "project," "intend," "expect," "believe," "may,"
"could," "plan" and similar expressions are intended to identify forward-looking
statements. Wherever they occur in this annual report or in other statements
attributable to us, forward-looking statements are necessarily estimates
reflecting our best judgment. However, these statements involve a number of
risks and uncertainties that could cause actual results to differ materially
from those suggested by the forward-looking statements such as the risks
discussed above. We caution you to carefully consider these risks and not to
place undue reliance on our forward-looking statements.

EMPLOYEES

       At January 31, 2002 we had 1,157 full-time employees. We consider our
relations with our employees to be good, and we structure our compensation and
benefit plans in order to attract and retain high caliber personnel. We will
need to recruit additional employees in order to implement our expansion plan,
including general managers for each new city and additional personnel for
installation, sales, customer service and network construction. We recruit from
several major industries for employees with skills in video, voice and data
technologies. We do not believe we will have problems retaining personnel with
the necessary qualifications.

ITEM 2. PROPERTIES

         We own or lease property in the following locations:

<TABLE>
<CAPTION>
Location                Address                                                      Lease/Own Primary Use
--------                -------                                                      ---------------------
<S>                     <C>                                        <C>      <C>
Augusta, GA. ......     3714 Wheeler Road                          Own      Administrative offices and headend

Charleston, SC ....     4506 Dorchester Road                       Own      Administrative offices and headend
                        3270-B Associated Drive                    Lease    Construction Warehouse

Columbus, GA ......     1701 Boxwood Place                         Lease    Administrative offices and headend
                        6440 West Hamilton Park Drive              Lease    Sales Office

Huntsville, AL ....     2401 10th Street                           Own      Administrative offices and headend
                        915 Miller Blvd, Madison, AL               Own      Construction office / HUB A
                        Madkin Mountain                            Lease    Tower Site

Knoxville, TN. ....     10115 Sherrill Boulevard                   Own      Administrative offices and headend

Louisville, KY ....     4738 Allmond Ave.                          Lease    Construction Warehouse

Lanett, AL ........     415 Gilmer                                 Own      Administrative offices

Montgomery, AL ....     1450 Ann Street                            Lease    Headend and technical offices
                        6175 Perimeter Parkway Court               Lease    Business Office
                        3173 Taylor Rd. (Sturbridge Village)       Lease    Customer Pay Station
                        127 Burnt Oaks                             Lease    Customer Pay Station
</TABLE>


                                       32

<PAGE>

<TABLE>
<CAPTION>
<S>                     <C>                                        <C>      <C>
Panama City, FL ...     13200 Panama City Beach Pkwy.              Lease    Administrative offices and headend
                        2149 N. Sherman Ave.                       Lease    Construction Warehouse
                        2141-A. N. Sherman Ave.                    Lease    Operations
                        2325 Frankford Ave., Ste A                 Lease    Sales Office

West Point, GA ....     1241 O.G. Skinner Drive                    Own      Corporate administrative offices
                        312 W. 8th Street                          Lease    Operations
                        206 West 9th Street                        Lease    Network operations center
</TABLE>

       Our principal physical assets consist of fiber optic and coaxial
broadband cable and equipment, located either at the hub (equipment site) or
along the networks. Our distribution equipment along the networks is generally
attached to utility poles we own or use under standard pole attachment
agreements with local public utilities, although in some areas the distribution
cable is buried in underground ducts or trenches. Under our pole attachment
agreements, local public utilities and other pole owners rent us space on
utility poles to attach our network cables and equipment. The rate a pole owner
charges us for space varies, but the rate is generally based upon the amount of
space we rent. See "Item 1--Business--Legislation and Regulation" for a
discussion of the FCC's regulation of pole attachment rates. Our franchises give
us rights-of-way for our networks. The physical components of the networks
require maintenance and periodic upgrading to keep pace with technological
advances. We believe that our properties, taken as a whole, are in good
operating condition and are suitable for our business operations.

ITEM 3. LEGAL PROCEEDINGS

       We are also subject to other litigation in the normal course of our
business. However, in our opinion, there is no legal proceeding pending against
us which would have a material adverse effect on our financial position, results
of operations or liquidity. We are also a party to regulatory proceedings
affecting the relevant segments of the communications industry generally.

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

       On November 14, 2001, the holders of our Series A preferred stock,
Series B preferred stock, Series C preferred stock and Common stock, voting
together as single class, re-elected Alan A. Burgess, Donald W. Burton and
William H. Scott III as board members who will serve for three-year terms or
until their successors are duly elected and qualified, and the holders of our
Series B preferred stock, voting as a separate class, re-elected Bret Pearlman
and William Laverack, Jr. as board members who will serve for one-year terms or
until their successors are duly elected and qualified.

       The election of Mr. Burgess, Mr. Burton and Mr. Scott was approved by the
holders of 88,448,326 shares out of 122,217,896 shares of our common stock, on
an as-converted basis. The election of Mr. Pearlman and Mr. Laverack was
approved by the holders of 17,540,205 shares out of 21,180,131 shares of our
Series B preferred stock.

       The stockholders also adopted on November 14, 2001 an amendment to our
amended and restated certificate of incorporation. The amendment extended until
December 31, 2001 the deadline by which Knology could issue additional shares of
Series C preferred stock without separately obtaining the approval of a majority
of the holders of Series A preferred stock and a majority of the holders of
Series B preferred stock or without triggering certain anti-dilution rights of
the holders of Series A preferred stock, Series B preferred stock or Series C
preferred stock.

       The amendment was approved by the holders of 39,050,214 shares out of
50,989,707 shares of our Series A preferred stock outstanding on the record
date, 17,540,205 shares out of 21,180,131 shares of our Series B preferred stock
outstanding on the record date, 21,875,834 shares out of 37,219,562 shares of
our Series C preferred stock outstanding on the record date and


                                       33

<PAGE>

88,448,326 shares out of 122,217,896 shares of our common stock, on an
as-converted basis, outstanding on the record date. The amendment, which was
effective on November 14, 2001, is Exhibit 3.1.2 to this Annual Report on Form
10-K and is incorporated herein by reference.


                                       34

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION

       Our stock is not traded on any exchange or quoted on the Nasdaq
National Market or any other established trading market. No market makers
currently make a market in our stock and we do not plan to engage a market
maker. Therefore, there is no established public trading market and no high and
low bid information or quotations available.

HOLDERS

       As of January 31, 2002, we had 502,434 shares of common stock
outstanding held of record by approximately 80 stockholders, 50,997,760 shares
of Series A preferred stock outstanding held of record by approximately 462
stockholders, 21,180,131 shares of Series B preferred stock outstanding held of
record by approximately 24 stockholders and 37,219,562 shares of Series C
preferred stock outstanding held of record by approximately 94 shareholders.

DIVIDENDS

       We have never declared or paid any cash dividends on our capital stock
and do not anticipate paying cash dividends on our capital stock in the
foreseeable future. It is the current policy of our board of directors to retain
earnings to finance the expansion of our operations. Future declaration and
payment of dividends, if any, will be determined based on the then-current
conditions, including our earnings, operations, capital requirements, financial
condition, and other factors the board of directors deems relevant. In addition,
our ability to pay dividends is limited by the terms of the indenture governing
the outstanding senior discount notes of Knology Broadband and by the terms of
our credit facilities.

RECENT SALES OF UNREGISTERED SECURITIES

       Not Applicable

ITEM 6. SELECTED FINANCIAL DATA

       We were formerly a subsidiary of ITC Holding. We own 100% of Knology
Broadband, Interstate Telephone, Valley Telephone, Globe Telecommunications and
ITC Globe, each of which ITC Holding owned separately before we owned it. ITC
Holding formed us in September 1998 and, in November 1999, contributed these
companies to us along with other related assets in a transaction that we refer
to as our reorganization. See Note 1 to our financial statements for more
information regarding the reorganization. In February 2000, ITC Holding
distributed all of its shares of our stock and options to purchase shares of our
stock to its stockholders and option holders, which we refer to as our spin-off
from ITC Holding.

       For the years ended December 31, 1996 and December 31, 1997, Knology
Broadband was not consolidated for financial reporting purposes, but was
reflected as an equity investment in subsidiary. As a result, the financial data
in this memorandum for the years ended December 31, 1996 and December 31, 1997,
includes only our equity in Knology Broadband's net loss for such years. The
financial data for the year ended December 31, 1998, includes the financial
results of Cable Alabama from September 1, 1998, the date of its acquisition by
Knology Broadband, which was accounted for as a purchase.

       The selected financial data set forth below should be read in
conjunction with the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations," our financial statements and the
related notes, and other financial data included elsewhere in this Annual
Report.


                                       35

<PAGE>
<TABLE>
<CAPTION>
                                                                                        For the
                                                                                 Year Ended December 31,
                                                                                 -----------------------
                                                                                       (in thousands)
                                                            1997            1998            1999            2000           2001
                                                            ----            ----            ----            ----           ----
<S>                                                      <C>            <C>                 <C>           <C>           <C>
Statement of Operations Data:
Operating revenues ..................................... $     17,633   $      45,132        $  66,721    $    82,573   $   106,189
Operating expenses:
  Cost of services .....................................        3,121          16,797           26,965         31,010        32,469
  Selling, operations and administrative ...............        9,498          33,266           45,960         58,725        73,322
Depreciation and amortization ..........................        2,782          17,327           40,970         60,672        78,954
                                                         ------------   -------------        ---------    -----------   -----------
Total operating expenses ...............................       15,401          67,390          113,895        150,407       184,745
Operating income (loss) ................................        2,232         (22,258)         (47,174)       (67,834)      (78,556)
Interest (expense), net ................................          455         (19,428)         (32,944)       (34,859)      (40,069)
Equity losses in subsidiary ............................       (2,445)              0                0              0             0
Other income (expense), net ............................          (59)            784              107         (1,373)         (834)
Income (loss) before minority interest,
   income tax (provision) benefit, extraordinary item,
   and cumulative effect of a change in accounting
   principle ...........................................          183         (40,902)         (80,011)      (104,066)     (119,459)
Minority interest ......................................            0          13,294            3,268              0             0
Income tax (provision) benefit .........................       (1,011)          5,631           19,697          3,170        (2,789)
Extraordinary gain on debt extinguishment ..............            0               0                0              0        31,875
Cumulative effect of a benefit change in
   accounting principle ................................            0            (583)               0              0             0
                                                         ------------   -------------        ---------    -----------   -----------
Net income (loss) ......................................         (828)        (22,560)         (57,046)      (100,896)      (90,373)
Subsidiary preferred stock dividends ...................       (4,193)         (1,424)          (1,745)             0             0
                                                         ------------   -------------        ---------    -----------   -----------
Non-cash distribution to preferred shareholders ........            0               0                0              0       (36,579)
                                                         ------------   -------------        ---------    -----------   -----------
Net income (loss) attributable to common
   stockholders ........................................ $     (5,021)  $     (23,984)       $ (58,791)   $  (100,896)  $  (126,952)
                                                         ============   =============        =========    ===========   ===========
Other Financial Data:
Capital expenditures ................................... $      1,727   $     120,227        $  87,386    $   146,706    $   86,696
Capitalized interest ...................................          676           2,469            3,040          2,329         2,430
Cash provided by (used in) operating activities ........        3,680          23,036            2,236         35,884       (13,251)
Cash used in investing activities ......................      (22,224)        (34,587)         (29,316)      (149,986)     (111,927)
Cash provided by financing activities ..................       18,726          16,083           29,740        126,911       142,624
Ratio of earnings to fixed charges and
   preference dividends(1) .............................        1.03x               0                0              0             0


</TABLE>


<TABLE>
<CAPTION>
                                                                                          As of
                                                                                       December 31,
                                                                                       ------------
                                                                                      (in thousands)
                                                            1997           1998            1999          2000          2001
                                                            ----           ----            ----          ----          ----
<S>                                                       <C>            <C>             <C>            <C>           <C>
Balance Sheet Data:
Cash and cash equivalents ..............................  $   627        $  5,159         $  7,819      $  20,628     $  38,074
Net working capital ....................................   (1,240)         49,979           15,664        (12,918)          617
Property and equipment, net ............................   11,261         211,886          273,897        377,421       400,851
Total assets ...........................................   30,196         374,681          400,334        489,406       516,540
Long-term debt, including
   accrued interest ....................................       --         276,179          331,012        367,915       370,999
Total liabilities ......................................    6,656         314,414          357,684        416,715       423,416
Minority interest ......................................       --           3,268               --             --            --
Retained earnings
  (accumulated deficit..................................    3,181         (20,802)         (79,593)      (180,490)     (307,442)
Total stockholders' equity .............................   23,540          54,512           37,923         67,965        88,398


</TABLE>



                                       36

<PAGE>

(1)    Earnings consist of income before preferred stock dividends, income taxes
       and fixed charges. Fixed charges consist of interest expense, capitalized
       interest and the portion of rent expense under operating leases
       representing interest, which is estimated to be one-third of such
       expense. Our earnings were not sufficient to cover our fixed charges by
       $76.7 million, $104.1 million and $119.5 million for the years ended
       December 31, 1999, 2000 and 2001, respectively.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE MANAGEMENT'S DISCUSSION AND ANALYSIS AND OTHER PORTIONS OF THIS ANNUAL
REPORT INCLUDE "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF THE FEDERAL
SECURITIES LAWS, INCLUDING THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995,
THAT ARE SUBJECT TO FUTURE EVENTS, RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED. IMPORTANT
FACTORS THAT EITHER INDIVIDUALLY OR IN THE AGGREGATE COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE EXPRESSED INCLUDE, WITHOUT LIMITATION, (1) THAT
WE WILL NOT RETAIN OR GROW OUR CUSTOMER BASE, (2) THAT OUR SUPPLIERS AND
CUSTOMERS MAY REFUSE TO CONTINUE DOING BUSINESS WITH US OR MAY REFUSE TO EXTEND
TRADE CREDIT TO US AS A RESULT OF A GOING CONCERN OPINION WE RECEIVED FROM OUR
INDEPENDENT ACCOUNTANTS WITH RESPECT TO OUR AUDITED FINANCIAL STATEMENTS FOR THE
THREE YEARS ENDED DECEMBER 31, 2001, (3) THAT WE WILL FAIL TO BE COMPETITIVE
WITH EXISTING AND NEW COMPETITORS, (4) THAT WE WILL NOT ADEQUATELY RESPOND TO
TECHNOLOGICAL DEVELOPMENTS IMPACTING OUR INDUSTRY AND MARKETS, (5) THAT NEEDED
FINANCING WILL NOT BE AVAILABLE, (6) THAT A SIGNIFICANT CHANGE IN THE GROWTH
RATE OF THE OVERALL U.S. ECONOMY WILL OCCUR SUCH THAT CONSUMER AND CORPORATE
SPENDING ARE MATERIALLY IMPACTED, AND (7) THAT SOME OTHER UNFORESEEN
DIFFICULTIES OCCUR, AS WELL AS THOSE RISK SET FORTH IN ITEM 1--BUSINESS--RISK
FACTORS. THIS LIST IS INTENDED TO IDENTIFY ONLY CERTAIN OF THE PRINCIPAL FACTORS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE
FORWARD-LOOKING STATEMENTS INCLUDED HEREIN.

       The following is a discussion of our consolidated financial condition
and results of operations for the three years ended December 31, 2001 and
certain factors that are expected to affect our prospective financial condition.
The following discussion and analysis should be read in conjunction with our
"Selected Consolidated Financial Data" and our financial statements and related
notes elsewhere in this Annual Report.

Background

       Knology, Inc. was formed in September 1998 to enable ITC Holding to
complete a reorganization of some of its subsidiaries. One of those ITC Holding
subsidiaries was Knology Broadband, Inc., which operated most of the broadband
network subsidiaries we currently operate. In November 1999, in order to
effectuate the reorganization:

o      ITC Holding contributed to Knology:

       -- its 85% interest in Knology Broadband;

       -- all of the outstanding capital stock of Interstate Telephone,
          Valley Telephone, Globe Telecommunications and ITC Globe,
          referred to as our "telephone operations group;"

       -- a note in the principal amount of $9.6 million; and


                                       37

<PAGE>

       -- its 6% interest in ClearSource, Inc., subscription rights to purchase
          ClearSource shares and $5.7 million in cash to purchase the additional
          ClearSource shares; and

o      the holders of the remaining 15% interest in Knology Broadband exchanged
       that interest for shares of Knology, and the holders of outstanding
       warrants to purchase Knology Broadband preferred stock exchanged those
       warrants for warrants to purchase the Series A preferred stock of
       Knology.

       As a result of the reorganization, ITC Holding held a 90% interest in us,
which it distributed to its stockholders in February 2000. The reorganization
was accounted for in a manner similar to a pooling of interest for the telephone
operations group.

       Broadband and its subsidiaries have been consolidated with us since
1998 in relation to the 85% controlling interest obtained by ITC Holding in July
1998, which was recorded at ITC Holding's historical cost. During 1999, the 15%
of Broadband that we did not own has been reflected as minority interest and the
pro rata losses attributed to the minority holders to the extent that their
investment was greater than zero in accordance with Financial Accounting
Standards Board (FASB) Current Text on Consolidation and Statement of Financial
Accounting Standards (SFAS) No. 94.

       The exchange of the remaining 15% of Broadband for shares of our Series A
preferred stock was accounted for as an acquisition of a minority interest of a
subsidiary. The stock issued in the exchange was valued at $22.4 million and was
recorded as goodwill since the book value of net assets acquired (which
approximated fair value) was less than zero. We had recorded 100% of Broadband's
losses since Broadband's equity was less than zero.

       In January 2000, InterCall, Inc., a subsidiary of ITC Holding, loaned us
$29.7 million to fund our capital expenditures and working capital. The loan,
which had a maturity date of March 31, 2000, provided that InterCall could elect
to convert it into options to purchase our Series A preferred stock. In February
2000, InterCall converted the loan into options to purchase 6,258,036 shares of
our Series A preferred stock, and we issued to ITC Holding a note under which we
will pay ITC Holding any proceeds from option exercises received by us,
including an amount equal to the exercise price for cashless exercises. The
options were distributed to ITC Holding's option holders on February 4, 2000.

Significant Accounting Policies

       Our significant accounting policies are more fully described in Note 2
to the consolidated financial statements included in Item 8 of this form 10-K.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amount of 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.

       The Company's revenues are recognized when services are provided,
regardless of the period in which they are billed. Fees billed in advance are
recorded in the consolidated balance sheets as unearned revenue and are deferred
until the month the service is provided.

Recent Accounting Pronouncements

       The Financial Accounting Standards Board ("FASB") issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets"
in June 2001. SFAS No. 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method. The Company had no
business combinations initiated after June 30, 2001. SFAS No. 142 provides that
goodwill is no longer subject to amortization over its estimated useful life. It
requires that goodwill be assessed for impairment on at least an annual basis by
applying a fair-value-based test.

       The Company adopted SFAS No. 142 on January 1, 2002. The Company has
performed a goodwill impairment test in accordance with SFAS No. 142. Based on
the results of the goodwill impairment test the Company expects to record an
impairment loss of $1.3 million in the first quarter of 2002 as a cumulative
effect of change in accounting principle.

       In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations." SFAS No. 143, addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for fiscal years
beginning after June 15, 2002. The Company is currently assessing the impact of
this new standard.

        In July 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after
December 15, 2001. The provisions of this statement provide a single accounting
model for impairment of long-lived assets. The Company is currently assessing
the impact of this new standard.



                                       38

<PAGE>

Revenues and Expenses

       We can group our revenues into the following categories:

o      Video revenues. Our video revenues consist of fixed monthly fees for
       expanded basic, premium and digital cable television services, as well as
       fees from pay-per-view movies and events such as boxing matches and
       concerts, that involve a charge for each viewing. Video revenues
       accounted for approximately 50.6% and 46.0% of our consolidated revenues
       for the years ended December 31, 2000 and 2001, respectively. In
       providing video services we currently compete with AT&T Broadband,
       Comcast Cable Communications, Inc., Time Warner Cable, Mediacom
       Communications Corporation and Charter Communications, Inc. We also
       compete with satellite television providers DirecTV, Inc. and Echostar
       Communications Corporation. Our other competitors include other cable
       television providers; broadcast television stations; and other satellite
       television companies. We expect in the future to compete with telephone
       companies providing cable television service within its service areas and
       with wireless cable companies.

o      Voice revenues. Our voice revenues consist primarily of fixed monthly
       fees for local service, enhanced services, such as call waiting and voice
       mail, and usage fees for long-distance service. Voice revenues accounted
       for approximately 42.4% and 42.2% of our consolidated revenues for the
       years ended December 31, 2000 and 2001, respectively.

o      Data revenues and other revenues. Our data revenues consist primarily of
       fixed monthly fees for Internet access service and rental of cable
       modems. Other revenues result principally from broadband carrier services
       and video production services. These combined revenues accounted for
       approximately 7.0% and 11.8% of our consolidated revenues for the year
       ended December 31, 2000 and 2001, respectively. Providing data services
       is a rapidly growing business and competition is increasing in each of
       our markets. Some of our competitors have competitive advantages, such as
       greater experience, resources, marketing capabilities and stronger name
       recognition. In providing data services, we compete with traditional
       dial-up Internet service providers; incumbent local exchange providers
       that provide digital subscriber lines, or DSL; providers of
       satellite-based Internet access services; long-distance telephone
       companies; and cable television companies. We also expect to compete in
       the future with providers of wireless high-speed data services.

       As we continue to sell bundled services, we expect that our voice and
       data and other revenues will continue to increase at a higher rate
       compared to video revenues. Accordingly, we expect that our voice and
       data and other revenues will represent a higher percentage of
       consolidated revenues in the future.

       Our operating expenses include cost of services, selling, operations
and administrative and depreciation and amortization.

Cost of services include:

o      Video cost of services. Video cost of services consist primarily of
       monthly fees to the National Cable Television Cooperative and other
       programming providers and are generally based on the average number of
       subscribers to each program. Programming costs as a percentage of video
       revenue were approximately 44.1% and 47.5% for the years ended December
       31, 2000 and 2001, respectively. Programming costs are our largest single
       cost and we expect this to continue. Since programming cost is partially
       based on numbers of subscribers, it will increase as we add more
       subscribers. Additionally, programming cost will increase as costs per
       channel increase over time.

o      Voice Cost of Services. Voice cost of services consist primarily of
       transport cost and network access fees. The voice cost of services as a
       percentage of voice revenues were approximately 34.2% and 18.5% for the
       years ended December 31, 2000 and 2001, respectively.

o      Data and other cost of services. Data and other cost of services consist
       primarily of transport cost and network access fees. The data and other
       cost of services as a percentage of data and other revenue were 10.6% and
       7.9% for the years ended December 31, 2000 and 2001, respectively.

       Based on the anticipated changes in our revenue mix, we expect that our
       consolidated cost of services as a percentage of our consolidated
       revenues will decrease.

       We expect the growth of new video connections to decrease as the video
segment matures in its current markets. While the number of new video
connections may decrease, management feels that the opportunity to increase
revenue and video margins is available with the introduction of new products and
new technology. New voice and data connections are expected to increase with
sales and marketing efforts directed at selling customers a bundle of services
and penetrating untapped market segments and offering new services. Relative to
our current product mix, voice and data revenue will become larger percentages
of our overall revenue, and potentially will provide higher margins. Based on
the anticipated changes in our revenue mix, we expect that our consolidated cost
of services as a percentage of our consolidated revenues will decrease.

Selling, operations and administrative expenses include:

o      Sales and marketing expenses. Sales and marketing expenses include the
       cost of sales and marketing personnel and advertising and promotional
       expenses.

o      Network operations and maintenance expenses. Network operations and
       maintenance expenses include payroll and departmental costs incurred for
       network design and maintenance monitoring.

o      Customer service expenses. Customer service expenses include payroll and
       departmental costs incurred for customer service representatives and
       management.

o      General and administrative expenses. General and administrative expenses
       consist of corporate and subsidiary management and administrative costs.

       Depreciation and amortization expenses include depreciation of our
       interactive broadband networks and equipment and amortization of cost
       in excess of net assets and other intangible assets related to
       acquisitions.



                                       39

<PAGE>

       As our sales and marketing efforts continue and our networks expand, we
expect to add customer connections resulting in increased revenue. We also
expect our operating expenses, including depreciation and amortization, to
increase as we expand our networks and business.

       We have experienced operating losses as a result of the expansion of
our advanced broadband communications networks and services into new and
existing markets. We expect to continue to focus on increasing our customer base
and expanding our broadband operations. Accordingly, we expect that our
operating expenses and capital expenditures will continue to increase as we
extend our interactive broadband networks in existing and new markets in
accordance with our business plan.

Results of Operations

       The following table sets forth financial data as a percentage of
operating revenues for the years ended December 31, 1999, 2000 and 2001.

<TABLE>
<CAPTION>
                                                                   Year Ended
                                                                   -----------
                                                                  December 31,
                                                                  ------------
                                                         1999          2000         2001
                                                         ----          ----         ----
<S>                                                      <C>           <C>          <C>
Operating revenues:
    Video .............................................     53%          51%          46%
    Voice .............................................     43           42           42
    Data ..............................................      4            7           12
                                                          ----         ----         ----
        Total .........................................    100          100          100
Operating expenses:
    Cost of services ..................................     40           38           31
    Selling, operating and administrative .............     69           71           69
    Depreciation and amortization .....................     61           73           74
                                                          ----         ----         ----
       Total ..........................................    170          182          174
                                                          ----         ----         ----
Operating loss ........................................    (70)         (82)         (74)
Other income and expense ..............................    (50)         (44)         (38)
                                                          ----         ----         ----
Loss before minority interest, income taxes and
   extraordinary item .................................   (120)        (126)        (112)
Minority interest .....................................      5            0            0
Income tax benefit (provision) ........................     30            2           (3)
Extraordinary gain on debt extinguishment .............      0            0           30
                                                          ----         ----         ----
Net loss ..............................................    (85)        (124)         (85)
Preferred stock dividends .............................      0            0          (35)
                                                          ----         ----         ----
Net loss attributable to common stockholders ..........    (85)%       (124)%       (120)%
                                                          ====         ====         ====
</TABLE>

Connections

       The following table sets forth certain operating data as of December 31,
1999, 2000 and 2001. The information provided in the table reflects
revenue-generating connections. Because we deliver multiple services to our
customers, we report the total number of our various revenue generating service
connections for video, voice and data rather than the total number of customers.
For example, a single customer who purchases cable television, local telephone
and Internet access services would count as three connections.
<TABLE>
<CAPTION>

                                                AS OF DECEMBER 31,
                                                ------------------
                                       1999          2000           2001
                                       ----          ----           ----
<S>                                   <C>           <C>            <C>
Connections: (1)
Video                                  89,937       101,872        118,224
Voice:
   On-net                              35,879        55,311         81,901
   Off-net                              7,908         7,142          6,244
Data                                    4,989        14,898         32,573
                                      -------        ------         ------

Total Connections                     138,713       179,223        238,942
                                      =======       =======        =======
Marketable Homes Passed (2)           305,773       380,027        423,201
                                      =======       =======        =======
</TABLE>


                                       40

<PAGE>

-------
(1)    All of our video and data connections are provided over our networks. Our
       voice connections consist of both "On-net" and "Off-net" connections.
       On-net refers to lines provided over our broadband networks. It includes
       23,538, 23,315, and 23,513 lines as of December 31, 1999, 2000 and 2001,
       respectively, provided using traditional copper telephone lines. Off-net
       refers to telephone connections provided over telephone lines leased from
       third parties.

(2)    Marketable homes passed are the number of business and residential units,
       such as single residence homes, apartments and condominium units, passed
       by our broadband networks other than those we believe are covered by
       exclusive arrangements with other providers of competing services.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

   Revenues.  Operating revenues increased 28.6% from $82.6 million for the
year ended December 31, 2000, to $106.2 million for the year ended December 31,
2001. Operating revenues from video services increased 16.8% from $41.8 million
for the year ended December 31, 2000, to $48.8 million for the same period in
2001. Operating revenues from voice services increased 28.2% from $34.9 million
for the year ended December 31, 2000, to $44.8 million for the same period in
2001. Operating revenue from data and other services increased 116% from $5.8
million for the year ended December 31, 2000, to $12.6 million for the same
period in 2001, $11.6 million of which were revenues from data services in
2001. The increased revenues from video, voice and data and other services are
due primarily to an increase in the number of connections, from 179,223 as of
December 31, 2000, to 238,942 as of December 31, 2001. The factors that
contributed to this increase in connections include:

  .   our existence as one of the sole providers offering a bundled
      communication solution;

  .   the organic sales and marketing efforts by our direct sales force
      and customer service groups; and

  .   the construction of new networks and the extension and upgrading of
      existing networks. The construction and extension of our networks
      are continually adding new marketable homes available to the sales and
      marketing efforts.

All of these factors and our competitive pricing have allowed us to, and are
expected to continue to allow us to, add connections and grow its connection
base.

    Cost of Services.  Cost of services increased 4.7% from $31.0 million for
the year ended December 31, 2000, to $32.5 million for the year ended December
31, 2001. Cost of services for video services increased 25.9% from $18.4
million for the year ended December 31, 2000, to $23.2 million for the same
period in 2001. Cost of services for voice services decreased 30.9% from $12.0
million for the year ended December 31, 2000, to $8.3 million for the same
period in 2001. Cost of services for data and other services increased 61.4%
from $615,000 for the year ended December 31, 2000, to $993,000 for the same
period in 2001. We expect our cost of services to continue to increase as we
add more connections. Programming costs, which are our largest single
expense item, have been increasing over the last several years on an aggregate
basis due to an increase in subscribers and on a per subscriber basis due to an
increase in costs per program channel. Management expects this trend to
continue. We may not be able to pass these higher costs on to customers
because of competitive forces, which would adversely affect our cash flow and
operating margins.

   Operating Margins.  Margins increased 43.0% from $51.6 million for the year
ended December 31, 2000, to $73.7 million for the year ended December 31, 2001.
Margins for video services increased 9.6% from $23.4 million for the year ended
December 31, 2000, to $25.6 million for the same period in 2001. Margins for
voice services increased 58.9% from $23.0 million for the year ended December
31, 2000, to $36.5 million for the same period in 2001. Margins for data and
other services increased 123% from $5.2 million for the year ended December 31,
2000, to $11.6 million for the same period in 2001.

    Operating Expenses. Our operating expenses, excluding depreciation and
amortization, increased 24.9% from $58.7 million for the year ended December 31,
2000, to $73.3 for the year ended December 31, 2001. The increase in our
operating expenses is consistent with the growth in revenues and is a result of
the expansion of Knology's operations and an increase in the number of employees
associated with such expansion and growth into new markets. Selling, operations
and administrative expenses will increase operating expenses as we expand into
additional markets.

    Our depreciation and amortization increased from $60.7 million for the year
ended December 31, 2000, to $79.0 million for the year ended December 31, 2001.
The increase in depreciation and amortization is due to significant additions in
property, plant, equipment and intangible assets resulting from the expansion of
our networks, the upgrading of older systems to broadband capabilities, and the
purchase of buildings, computers and office equipment.

   Other Income and Expense, Including Interest Income and Interest
Expense.  Our total other expense increased from $36.2 million for the
year ended December 31, 2000, to $40.9 million for the year ended December 31,
2001. Interest income was $4.9 million for the year ended December 31, 2000,
compared to $2.7 million for the same period in 2001. The decrease in interest
income primarily reflects the interest earned from the investment of proceeds
received in the Series C preferred stock offering completed in June 2001.
Knology capitalized interest related to the construction of its broadband
networks of $2.3 million and $2.4 million for the years ended December 31, 2000
and 2001, respectively. Interest expense increased from $39.7 million for the
year ended December 31, 2000, to $42.8 million for the year ended December 31,
2001. The increase in interest expense is due to the accretion of the book
value of the 11 7/8 senior discount notes due 2007 issued by Broadband. Other
expenses, net decreased from $1.4 million for the year ended December 31, 2000
to $834,000 for the year ended December 31, 2001. The decrease reflects charges
taken for obsolescence and changes in technology related to inventory.


                                       41

<PAGE>

   Income Tax Provision.  We recorded an income tax benefit of $3.2 million
for the year ended December 31, 2000, compared to an income tax expense
of $2.8 million for the same period in 2001. The income tax benefit in 2000
resulted from our utilizing net tax losses under a tax sharing agreement
with ITC Holding. We recorded an income tax provision of $2.8 million at
December 31, 2001, which includes a $2.3 million reserve recorded against a
receivable for an alternative minimum tax (ATM) credit carryforward. The tax
sharing agreement became effective August 1998 upon the acquisition by ITC
Holding of its majority-owned interest in Broadband. Following the spin-off of
Knology by ITC Holding, Knology no longer participates in the tax sharing
agreement. Therefore, Knology no longer receives any payments from ITC Holding
related to income tax benefits. As a stand-alone entity after the spin-off,
Knology now records a full valuation allowance against any income tax benefit
until management determines that it will be more likely than not that a tax
benefit will be realized, at which time a tax benefit will be recorded.

   Loss Before Extraordinary Item.  We incurred a loss before
extraordinary item of $100.9 million for the year ended December 31, 2000,
compared to a loss before extraordinary item of $122.2 million for the year
ended December 31, 2001.

   Extraordinary Gain on Debt Extinguishment.  In September 2001, our
subsidiary, Valley, repurchased Broadband discount notes with a face amount of
$58.5 million and a carrying amount of $50.5 million as of the respective
repurchase dates for approximately $20.3 million in cash. In October 2001,
Valley repurchased Broadband discount notes with a face amount of $5.7 million
for approximately $2.5 million in cash. These transactions resulted in an
extraordinary gain of $31.9 million, consisting of a gain of $32.7 million due
to the discount, offset by the write-off of $0.8 million in issue costs
associated with the original issuance of the Broadband discount notes in
October 1997.

   Net Loss Attributable to Common Stockholders.  We incurred a net loss
attributable to common stockholders of $100.9 million for the year ended
December 31, 2000, compared to a net loss attributable to common stockholders
of $127.0 million for the year ended December 31, 2001.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

   Revenues.  Operating revenues increased 23.8% from $66.7 million for the
year ended December 31, 1999, to $82.6 million for the year ended December 31,
2000. Operating revenues from video services increased 18.9% from $35.2 million
for the year ended December 31, 1999, to $41.8 million for the same period in
2000. Operating revenues from voice services increased 21.4% from $28.8 million
for the year ended December 31, 1999, to $34.9 million for the same period in
2000. Operating revenue from data and other services increased 109% from $2.8
million for the year ended December 31, 1999, to $5.8 million for the same
period in 2000, $5.5 million of which were revenues from data services in 2000.
The increased revenues from video, voice and data and other services are due
primarily to an increase in the number of connections, from 138,713 as of
December 31, 1999, to 179,223 as of December 31, 2000. The additional
connections resulted primarily from:

  .   the extension of our broadband networks in the Augusta, Charleston
      and Panama City markets;

  .   the upgrade of existing networks to broadband capacity in Huntsville and
      Panama City; and

  .   internal growth in connections generated by our sales and marketing
      efforts.

   Cost of Services.  Cost of services increased 15.0% from $26.9 million for
the year ended December 31, 1999, to $31.0 million for the year ended December
31, 2000. Cost of services for video services increased 22.3% from $15.1
million for the year ended December 31, 1999, to $18.4 million for the same
period in 2000. Cost of services for voice services decreased 3.1% from $11.6
million for the year ended December 31, 1999, to $12.0 million for the same
period in 2000. Cost of services for data and other services increased 107%
from $297,000 for the year ended December 31, 1999, to $615,000 for the same
period in 2000. Management expects our cost of services to continue to
increase as we add more connections. Programming costs, which are
our largest single expense item, have been increasing over the last
several years on an aggregate basis due to an increase in subscribers and on a
per subscriber basis due to an increase in costs per program channel.
Management expects this trend to continue. We may not be able to pass
these higher costs on to customers because of competitive forces, which would
adversely affect our cash flow and operating margins.

   Operating Margins.  Margins increased 29.7% from $39.8 million for the year
ended December 31, 1999, to $51.6 million for the year ended December 31, 2000.
Margins for video services increased 16.4% from $20.1 million for the year
ended December 31, 1999, to $23.4 million for the same period in 2000. Margins
for voice services increased 33.8% from $17.2 million for the year ended
December 31, 1999 to $23.0 million for the same period in 2000. Margins for
data and other services increased 109% from $2.5 million for the year ended
December 31, 1999, to $5.2 million for the same period in 2000.

   Operating Expenses. Our operating expenses, excluding depreciation and
amortization, increased 27.8% from $46.0 million for the year ended December 31,
1999, to $58.7 million for the year ended December 31, 2000. The increase in our
operating expenses is consistent with the growth in revenues and is a result of
the expansion of Knology's operations and an increase in the number of employees
associated with such expansion and growth into new markets. Selling, operations
and administrative expenses will increase operating expenses as we expand into
additional markets.

   Our depreciation and amortization increased from $41.0 million for the
year ended December 31, 1999, to $60.7 million for the year ended December 31,
2000.

   Other Income and Expense, Including Interest Income and Interest
Expense.  Our total other expense increased from $32.8 million for the
year ended December 31, 1999 to $36.2 million for the year ended December 31,
2000. Interest income was $1.5 million for the year ended December 31, 1999,
compared to $4.9 million for the same period in 2000. The increase in interest
income primarily reflects the interest earned from the investment of proceeds
received in the Series B preferred stock offering completed in February 2000.
Knology's capitalized interest related to the construction of its broadband
networks of $3.0 million and $2.3 million for the years ended December 31, 1999
and 2000, respectively. Interest expense increased from


                                       42

<PAGE>
$34.3 million for the year ended December 31, 1999, to $39.7 million for the
year ended December 31, 2000. The increase in interest expense is due to the
accretion of the book value of the Broadband discount notes. Other income
(expenses), net was income of $107,000 for the year ended December 31, 1999,
and an expense of $1.4 million for the year ended December 31, 2000. The
expense of $1.4 million in 2000 reflects charges taken for obsolescence and
changes in technology related to inventory.

   Income Tax Benefit.  We recorded an income tax benefit of $19.7 million
for the year ended December 31, 1999, compared to an income tax benefit of $3.2
million for the same period in 2000. The income tax benefit in 1999 resulted
from our utilizing net tax losses under the former tax sharing agreement
with ITC Holding.

   Net Loss Attributable to Common Stockholders.  We incurred a net loss
attributable to common stockholders of $58.8 million for the year ended
December 31, 1999, compared to a net loss attributable to common stockholders
of $100.9 million for the year ended December 31, 2000.


Liquidity and Capital Resources

       As of December 31, 2001, we had net working capital of $617,000,
compared to a net working capital deficit of $12.9 million as of December 31,
2000. The increase from December 31, 2000 to December 31, 2001 is due to
increase in cash from the proceeds of the Series C private equity transactions,
a reduction of $12.3 million in accounts payable offset by an increase of $17.1
million in the current portion of notes payable primarily for the maturity of
the Wachovia Corporation credit facility.

       Net cash provided by operations totaled $2.2 million and $35.9 million
for the years ended December 31, 1999 and 2000, respectively, and net cash used
by operations totaled $13.3 million for the year ended December 31, 2001. The
net cash flow activity related to operations consists primarily of changes in
operating assets and liabilities and adjustments to net income for non-cash
transactions including:

o      depreciation and amortization;

o      extraordinary gain on early extinguishment of debt;

o      loss on disposition of assets;

o      deferred income taxes; and

o      minority interest in subsidiaries' net loss.

       Net cash used for investing activities was $29.3 million, $150.0
million and $89.1 million for the years ended December 31, 1999, 2000 and 2001,
respectively. Our investing activities for the year ended December 31, 1999
consisted of $87.4 million of capital expenditures partially offset by $60.2
million in proceeds from the sale of short-term investments. Investing
activities in 2000 consisted of $146.7 million of capital expenditures and an
additional investment in ClearSource of $8.2 million offset by $6.1 million in
proceeds from the sale of short-term investments. In 2001 investing activities
consisted of $86.7 million of capital expenditures, $1.1 million of
organizational and franchise expenditures and an additional investment in
ClearSource of $1.1 million.

       We received net cash flow from financing activities of $29.7 million,
$126.9 million and $119.8 million for the years ended December 31, 1999, 2000
and 2001, respectively. Financing activities in 1999 consisted primarily of
$28.6 million of short-term borrowings through our existing credit facility and
affiliates, $8.1 million from the issuance of warrants, the contribution of
ClearSource and the exercise of options, partially offset by $6.1 million in
repayments to affiliates. Financing activities in 2000 consisted primarily of
$29.7 million of short-term borrowings through an affiliate, subsequently
converted to options to purchase Series A preferred stock, and $100.0 million
from an equity private placement of our Series B preferred stock. Financing



                                       43

<PAGE>

activities in 2001 consisted of $109.7 million from an equity private placement
of our Series C preferred stock, $32.5 million in proceeds from long-term debt
facility and $22.8 million for the purchase of affiliate bonds.

Funding to Date

       We have raised equity capital and borrowed money to finance a
significant portion of our operating, investing and financing activities in the
development of our business. On October 22, 1997, Knology Broadband received net
proceeds of $242.4 million from the offering of units consisting of senior
discount notes due 2007 and warrants to purchase preferred stock. The notes were
sold at a substantial discount from their principal amount at maturity, and
there will not be any payment of cash interest on the notes prior to April 15,
2003. The notes will fully accrete to face value of $444.1 million on October
15, 2002. From and after October 15, 2002, the notes will bear interest, which
will be payable in cash, at a rate of 11 7/8% per annum on April 15 and October
15 of each year, commencing April 15, 2003. The indenture contains covenants
that affect, and in certain cases restrict, the ability of Knology Broadband to:

o      incur indebtedness;

o      pay dividends;

o      prepay subordinated indebtedness;

o      redeem capital stock;

o      make investments;

o      engage in transactions with stockholders and affiliates;

o      create liens;

o      sell assets; and

o      engage in mergers and consolidations.

       If Knology Broadband fails to comply with these covenants, Knology
Broadband's obligation to repay the notes may be accelerated. However, these
limitations are subject to a number of important qualifications and exceptions.
In particular, while the indenture restricts Knology Broadband's ability to
incur additional indebtedness by requiring compliance with specified leverage
ratios, it permits Knology Broadband and its subsidiaries to incur an unlimited
amount of indebtedness to finance the acquisition of equipment, inventory and
network assets and to secure such indebtedness, and to incur up to $50.0 million
of additional secured indebtedness. Upon a change of control of Knology
Broadband, as defined in the indenture, Knology Broadband would be required to
make an offer to purchase the notes at a purchase price equal to 101% of their
accreted value, plus accrued interest.

       In November 1999, we completed an exchange in which we received the
Knology Broadband warrants, issued in connection with the senior discount notes
in 1997, in exchange for warrants to purchase shares of our Series A preferred
stock.

       In September 2001, we repurchased senior discount notes with a face
amount of $58.5 million and a carrying amount of $50.5 million as of the
repurchase date for approximately $20.3 million in cash. The transaction
resulted in an extraordinary gain of $29.4 million, consisting of a gain of
$30.2 million due to the discount, offset by the write-off of $0.8 million in
issue costs associated with the original issuance of the notes in October 1997.
In October 2001, the Company repurchased senior discount notes with a face
amount of $5.7 million for approximately $2.5 million in cash.

       The Company used funds borrowed by our telephone operations group under
the CoBank, ACB master loan agreement discussed below to purchase the senior
discount notes. The Company currently intends to hold the repurchased notes
rather than contributing them to Knology Broadband for retirement. The Company
will continue to monitor the pricing of outstanding notes on the open market and
may repurchase additional notes when terms are deemed favorable by management.

       On December 22, 1998, Knology Broadband entered into a $50 million
four-year senior secured credit facility with First Union National Bank and
First Union Securities, Inc. On November 7, 2001, Knology Broadband, First Union
National Bank and First Union Securities, Inc. agreed to amend the credit
facility. The credit facility, as amended, allows Knology Broadband to borrow up
to the greater of (i) $15.5 million or (ii) three times the annualized
consolidated cash flow of Knology Broadband. The credit facility may be used for
working capital and other purposes, including capital expenditures and permitted
acquisitions. At Knology Broadband's option, interest will accrue based on
either the prime or federal funds rate plus applicable margin or the LIBOR rate
plus applicable margin. The applicable margin may vary from 4.0% for Base Rate
Loans to 5.0% for LIBOR Rate Loans. The credit facility contains a number of
covenants that restrict the ability of Knology Broadband and its subsidiaries to
take certain actions, including the ability to:


                                       44

<PAGE>


       - incur indebtedness;

       - create liens;

       - pay dividends;

       - make distributions or stock repurchases;

       - make investments;

       - engage in transactions with affiliates;

       - sell assets; and

       - engage in mergers and acquisitions.

       The credit facility also includes covenants requiring compliance with
certain operating and financial ratios on a consolidated basis, including the
number of customer connections and average revenue per subscriber. Knology
Broadband is currently in compliance with these covenants, as amended, but there
can be no assurances that Knology Broadband will remain in compliance. Should
Knology Broadband not be in compliance with the covenants, Knology Broadband
would be in default and would require a waiver from the lender. In the event the
lender would not provide a waiver, amounts outstanding under the facility could
be payable to the lender on demand. A change of control of Knology Broadband, as
defined in the credit facility agreement, would constitute a default under the
covenants. In connection with the amendment of the credit facility, Knology
Broadband paid First Union National Bank $250,000.

       The maximum amount available under the amended credit facility as of
December 31, 2001 was approximately $15.5 million. As of December 31, 2001,
$15.5 million had been drawn against the credit facility.

       In January 2002, Knology Broadband also entered into a secured
intercompany credit facility with Knology, Inc. The secured intercompany credit
facility is intended to provide a mechanism for any funding Knology chooses to
advance to Knology Broadband; however, the facility does not represent a present
commitment from Knology to fund any future cash needs of Knology Broadband. The
intercompany credit facility is secured by substantially all of the assets of
Knology Broadband and is subordinate to the Wachovia Credit Facility.

       We obtained an aggregate of approximately $39.4 million in loans from
ITC Holding and its subsidiary InterCall during November 1999 and January 2000.
Approximately $9.6 million was advanced to us in November 1999. This loan was
converted into 2,029,724 shares of Series A preferred stock in November 1999.
Another $29.7 million loan was made in January 2000. The loan bore interest at
an annual rate of 11 7/8% and had a maturity date of March 31, 2000. In February
2000, the loan was converted into options to purchase up to 6,258,036 shares of
our Series A preferred stock, and we issued to ITC Holding a note under which we
will pay ITC Holding any proceeds from option exercises received by us,
including an amount equal to the exercise price for cashless exercises. The
options were distributed to ITC Holding's option holders on February 4, 2000.

       In connection with our spin-off from ITC Holding in February 2000, we
entered into an agreement with ITC Holding in which we made certain covenants
that restricted our ability to issue addition shares of capital stock under
certain circumstances. In connection with our private placement of 31,166,667
shares of our Series C preferred stock on January 12, 2001, ITC Holding agreed
to release us from these covenants pursuant to the agreement. Accordingly, we
are no longer restrained by the ITC Holding agreement with respect to the
issuance of additional shares of capital stock.

       In February 2000, we issued to accredited investors in a private
placement 21,180,131 shares of our Series B preferred stock at a purchase price
of $4.75 per share, for aggregate proceeds of $100.6 million.

       In 2001, we issued to certain of our existing investors and a select
group of new accredited investors in a private placement 37,219,563 shares of
our Series C preferred stock at a purchase price of $3.00 per share, for
aggregate proceeds of $111.7 million. In connection with the completion of this
private placement, we amended our amended and restated certificate of
incorporation to adjust the ratios at which our Series A preferred stock and
Series B preferred stock convert into common stock. Prior to the completion of
the private placement of Series C preferred stock, both the shares of Series A
preferred stock and shares of Series B preferred stock converted into shares of
common stock on a one-to-one basis. As amended, the conversion ratio for each
share of Series A preferred stock was adjusted to one-to-1.0371 and the
conversion ratio for each share of Series B preferred



                                       45

<PAGE>

stock was adjusted to one-to-1.4865, subject to customary anti-dilution
adjustments. With respect to the amendment of the conversion prices of the
Series A preferred stock and Series B preferred stock, we recognized a non-cash
dividend in the approximate amount of $36.6 million in the first quarter of
2001.

       On June 29, 2001, Knology through its wholly owned subsidiaries, Globe
Telecommunications, Interstate Telephone and Valley Telephone entered into a $40
million secured master loan agreement with CoBank, ACB. This master loan
agreement allows the Borrowers to make one or more advances in an amount not to
exceed $40 million. The loan proceeds may be used to purchase the senior
discount notes issued by Knology Broadband and to finance capital expenditures,
working capital and for general corporate purposes of the Borrowers. Interest is
payable quarterly and will accrue, at the Company's option, based on either a
variable rate established by CoBank, a fixed quoted rate established by CoBank
or a LIBOR rate plus applicable margin. The applicable margin may vary from
1.50% to 3.00% based on the leverage ratio of the Borrowers. The master loan
agreement contains a number of covenants that restrict the ability of the
Borrowers to take certain actions, including the ability to:

       -  incur indebtedness;

       -  create liens;

       -  merge or consolidate with any other entity;

       -  make distributions or stock repurchases;

       -  make investments;

       -  engage in transactions with affiliates; and

       -  sell or transfer assets.

       The master loan agreement also includes covenants requiring compliance
with certain operating and financial ratios of the Borrowers on a consolidated
basis, including a total leverage ratio and a debt service coverage ratio. The
Borrowers are currently in compliance with these covenants, but there can be no
assurances that the Borrowers will remain in compliance. Should the Borrowers
not be in compliance with the covenants, the Borrowers would be in default and
would require a waiver from CoBank In the event CoBank would not provide a
waiver, amounts outstanding under the master loan agreement could be payable on
demand.

       As of December 31, 2001, we have $32.5 million outstanding under the
master loan agreement.

Future Funding

       Our business requires substantial investment to finance capital
expenditures and related expenses, incurred in connection with the expansion and
upgrade of our interactive broadband networks, funding subscriber equipment,
maintaining the quality of our networks, and to finance the repayment,
extinguishment or repurchase of our debt.

       We have completed the construction of our networks in Montgomery,
Alabama; Columbus, Georgia and Panama City, Florida. In 2002, we expect to spend
approximately $50.5 million for capital expenditures, of which $13.0 million
relates to network construction and the remainder relates to the purchase of
customer premise equipment, such as cable set-top boxes and cable modems;
network equipment, including switching and transport equipment; and billing and
information systems. We will need to obtain additional financing to complete our
2002 planned capital expenditures.


   Following are the cash obligations for maturities of long-term debt for each
of the next five years as of December 31, 2001:

<TABLE>
<CAPTION>
                                                   In millions
                                                   -----------
                        <S>        <C>
                        2002......................   $ 18.8
                        2003......................     58.4
                        2004......................     58.4
                        2005......................     58.4
                        2006......................     58.4
                        Thereafter................    515.7
                        Total.....................   $768.0
</TABLE>

   Knology leases office space, utility poles, and other assets for varying
periods. Leases that expire are generally expected to be renewed or replaced by
other leases. Future minimum rental payments required under the operating
leases that have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                 In millions
                                                 -----------
                    <S>                          <C>
                    2002..........................    $0.6
                    2003..........................     0.9
                    2004..........................     0.7
                    2005..........................     0.7
                    2006..........................     0.5
                    Thereafter....................     3.0
                    Total minimum lease payments..    $6.3
</TABLE>


         Funding to complete the construction of our networks throughout our
markets and for our working capital needs, current and future operating losses,
and debt service requirements will require continuing capital investment. We
have historically relied on debt and equity financing to meet our funding
requirements and plan to continue to rely on debt and equity financing to fund
our capital needs, however, sufficient debt or equity funding might not continue
to be available in the future or be available on terms acceptable to us. If we
are not successful in raising additional capital, we may not be able to complete
the construction of our networks throughout our markets. This may cause us to
violate our franchise agreements, which could adversely affect us, or may limit
our growth within these markets. Failure to obtain additional funding would also
limit our ability to continue in business or to expand our business. As a result
of the aforementioned factors and related uncertainties, there is substantial
doubt about the Company's ability to continue as a going concern.

       Management is currently in discussions with ITC Telecom Ventures, Inc., a
current investor and related party, to negotiate a commitment whereby ITC will
commit to purchase, at a price, and on terms and conditions, to be negotiated
and agreed to by the parties, up to $19.5 million of debt or equity securities
of the Company during the year ended December 31, 2002. The ITC commitment will
be contingent upon the successful restructuring of our capital structure,
including Knology Broadband's senior discount notes. Although there can be no
assurance we will be able to do so, if we are successful in our efforts to
restructure our capital structure and are able to enter into the $19.5 million
commitment with ITC, the financing obtained through the commitment should allow
us to meet our obligations and operate as a going concern through 2002.

       We have received franchises to build networks in Nashville, Tennessee
and Louisville, Kentucky, although our franchise in Louisville is currently
being contested by the incumbent cable provider. We have spent approximately
$6.6 million to obtain franchise agreements and perform preliminary construction
activity in Nashville and Louisville. Due to the uncertainties in the current
financial markets, there is a possibility that planned expansion into Nashville
and Louisville may be delayed. We also plan to expand to additional cities in
the southeastern United States. We estimate the cost of constructing networks
and funding initial subscriber equipment in these new cities as well as others
at approximately $750 to $1,000 per home. The actual costs of each new



                                       46

<PAGE>

market may vary significantly from this range and will depend on the number of
miles of network to be constructed, the geographic and demographic
characteristics of the city, costs associated with the cable franchise in each
city, the number of subscribers in each city, the mix of services purchased, the
cost of subscriber equipment we pay for or finance and other factors. We will
need additional financing to complete this expansion, for new business
activities or in the event we decide to make acquisitions. The schedule for our
planned expansion will depend upon the availability of sufficient capital.
Definitive decisions on which cities will be chosen for expansion are not
expected to be made until this capital has been raised. If we are not successful
in raising additional capital, we will not be able to expand as planned.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       We are exposed to market risk from changes in interest rates. We manage
our exposure to this market risk through our regular operating and financing
activities. Derivative instruments are not currently used and, if used, are
employed as risk management tools and not for trading purposes.

       We have no derivative financial instruments outstanding to hedge
interest rate risk. Our only borrowings subject to market conditions are our
borrowings under our credit facilities which are based on either a prime or
federal funds rate plus applicable margin or LIBOR plus applicable margin. Any
changes in these rates would affect the rate at which we could borrow funds
under our bank credit facilities. A hypothetical 10% increase in interest rates
on our variable rate bank debt for a duration of one year would increase
interest expense by an immaterial amount.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

       Item 8 is incorporated by reference to pages F-1 through F-24 and S-1
through S-2 herein.

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE

       None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

       The following table sets forth information regarding our directors and
executive officers. Generally, our board of directors is divided among three
classes, with members serving for three-year terms expiring in the years
indicated. However, two of our directors were elected by the holders of our
Series B preferred stock pursuant to the provisions of our amended and restated
certificate of incorporation, and serve for one-year terms.

<TABLE>
<CAPTION>
                                                                                              Term
Name                              Age                       Position                         Expires
----                              ---                       --------                         -------
<S>                               <C>   <C>                                                    <C>
Rodger L. Johnson .............   54    President, Chief Executive Officer and Director        2002
Robert K. Mills ...............   38    Chief Financial Officer, Vice President and
                                            Treasurer
Felix L. Boccucci, Jr. ........   44    Vice President of Business Development
Anthony J. Palermo, Jr. .......   47    Vice President of Operations and Marketing
Chad S. Wachter ...............   35    Vice President, General Counsel and Secretary
Thomas P. Barrett .............   60    Vice President of Information Technology
Marcus R. Luke, Ph.D. .........   46    Chief Technology Officer
Bret T. McCants ...............   43    Vice President of Network Services

</TABLE>

                                       47

<PAGE>



<TABLE>
<S>                               <C>   <C>                                                    <C>
Campbell B. Lanier, III .......   51    Chairman of the Board                                  2002
Richard S. Bodman .............   63    Director                                               2003
Alan A. Burgess(1) ............   66    Director                                               2004
Donald W. Burton(2) ...........   58    Director                                               2004
L. Charles Hilton, Jr.(1) .....   70    Director                                               2003
William Laverack, Jr.(1)(3) ...   44    Director                                               2002
Bret Pearlman(2)(3) ...........   35    Director                                               2002
William H. Scott, III(2) ......   54    Director                                               2004
Donald W. Weber(1)(2) .........   65    Director                                               2002

</TABLE>

-------
(1) Member of the audit committee.
(2) Member of the compensation and stock option committee.
(3) Elected by holders of Series B preferred stock and serving a one-year term.

       Provided below are biographies of each of the officers and directors
listed in the table above. Some of the our officers served as officers of our
subsidiary, Knology Broadband, prior to our formation in September 1998. In the
following biographies, we have included service with Knology Broadband as
service with us.

       Rodger L. Johnson has served as President and as a director since April
1999, and as our Chief Executive Officer since June 1999. Prior to joining
Knology, Mr. Johnson had served as President and Chief Executive Officer, as
well as a Director, of Communications Central Inc., a provider of coin-operated
and inmate telephones, since November 1995. Prior to joining Communications
Central, Mr. Johnson served as the President and Chief Executive Officer of JKC
Holdings, Inc., a consulting company providing advice to the information
processing industry. In that capacity, Mr. Johnson also served as the Chief
Operating Officer of CareCentric, Inc., a publicly traded medical software
manufacturer. Before founding JKC Holdings, Inc., Mr. Johnson served for
approximately eight years as the President and Chief Operating Officer and as
the President and Chief Executive Officer of Firstwave Technologies, Inc., a
publicly traded sales and marketing software provider.

       Robert K. Mills has served as Chief Financial Officer, Vice President and
Treasurer since November 1999. He worked for ITC Holding from September to
November 1999 as Vice President of Corporate Development. From 1994 to September
1999, Mr. Mills served as Vice President--Treasurer and Strategic Planning of
Powertel, Inc., which was a provider of wireless communications services. Mr.
Mills is a CPA and from 1987 to 1994 practiced accounting at Arthur Andersen
LLP.

       Felix L. Boccucci, Jr. has served as Vice President of Business
Development since August 1997, and he served as the Chief Financial Officer,
Treasurer and Secretary from November 1995 through August 1997. In addition, he
currently serves as the Chief Financial Officer for Interstate and Valley
Telephone Companies. From October 1994 until December 1995, Mr. Boccucci served
as Vice President Finance Broadband of ITC Holding. Prior to such time, Mr.
Boccucci worked for GTE Corporation, a telecommunications company, which merged
with Contel Corporation in March 1991. From May 1993 to October 1994, he served
as a Senior Financial Analyst for GTE. From 1991 to 1993, Mr. Boccucci served as
Financial Director for GTE's Central Area Telephone Operations. From 1987 to
1991, he was the Assistant Vice President controller in charge of Contel's
Eastern Region Telephone Operations comprising 13 companies in twelve states.

       Anthony J. Palermo, Jr. has served as Vice President of Operations and
Marketing since July 1999. Prior to joining Knology, Mr. Palermo served as a
consultant to Nokia and Optima Technologies from November 1998 through July
1999. From November 1995 to November 1998, Mr. Palermo was employed at
Communications Central, Inc., where he served as Vice President of Sales,
Marketing, and Operations. Prior to Communications Central, Inc., spent six
years at Brock Control Systems as Vice President of Operations and Chief
Operating Officer. Mr. Palermo has also spent eleven years in the communications
industry with AT&T Long Lines and RCA-Cylix.

         Chad S. Wachter has served as Vice President since October 1999 and as
General Counsel and Secretary since August 1998. From April 1997 to August 1998,
Mr. Wachter served as Assistant General Counsel of Powertel, Inc., which was a
provider of wireless communications services. From May 1990 until April 1997,
Mr. Wachter was an associate and then a partner with Capell, Howard, Knabe &
Cobbs, P.A. in Montgomery, Alabama.

         Thomas P. Barrett has served as Vice President of Information
Technology since October 1999. Prior to joining us, from July 1998 to September
1999, Mr. Barrett served as the President of Quintiles Americas. Quintiles
Americas is a division of Quintiles Inc., a pharmaceutical research company.
From January 1993 to June 1998, Mr. Barrett was employed by Perot Systems as an
account manager. He also served as the human resources director for a period of
time while at Perot Systems. From October


                                       48

<PAGE>

1992 to January 1993, Mr. Barrett worked for General Research Corporation as an
account manager for a software development project. From August 1963 to
September 1999, Mr. Barrett served in the U.S. Army in a number of command and
staff positions and achieved the rank of Brigadier General.

       Marcus R. Luke, Ph.D. has served as Chief Technology Officer since August
1997. Prior to this he served as our Vice President of Network Construction from
November 1995 until August 1997, and Director of Engineering of Cybernet
Holding, L.L.C., from May 1995 until November 1995. Prior to joining Knology,
Dr. Luke served as Southeast Division Construction Manager for TCI from July
1993 to May 1995. From July 1987 to June 1993, he served as Area Technical
Manager for TCI's southeast area. Dr. Luke worked for Storer Communications Inc.
from 1985 to 1987 as Vice President of Engineering. Prior to 1985, he spent 12
years in various engineering and management positions with Storer Communications
Inc.

       Bret T. McCants has served as Vice President of Network Services since
April 1997. Prior to joining Knology, Mr. McCants was a co-founder of CSW
Communications. From January 1996 to April 1997 he served as CSW Communications,
Director of Operations, and from 1994 to 1996, he participated in the
development and managed the deployment of voice, data and interactive energy
management equipment to homes in Laredo, Texas. Prior to joining CSW
Communications, Mr. McCants served in various capacities with Central Power and
Light Company including as Corporate Manager of Commercial and Small Industrial
Marketing from 1992 to 1994, and as Business Manager from 1990 to 1992. From
1982 to 1990, Mr. McCants held several positions in the Sales, Marketing and
Engineering at Central Power and Light Company.

       Campbell B. Lanier, III has been one of our directors since November 1995
and has served as our Chairman of the Board since September 1998. Mr. Lanier
serves as Chairman of the Board and Chief Executive Officer of ITC Holding and
has served as a director of ITC Holding since the company's inception in May
1989. In addition, Mr. Lanier is also an officer and director of several ITC
Holding subsidiaries. Mr. Lanier also is a Vice-Chairman of the Board and a
director of ITC/\DeltaCom, Inc which provides wholesale and retail
telecommunications services and a director of AirTuit and eCompanyStore. Mr.
Lanier has served as a Managing Director of South Atlantic Private Equity Fund,
IV, Limited Partnership since July 1997.

       Richard S. Bodman has been one of our directors since June 1996.
Mr. Bodman was elected to Knology's board of directors pursuant to a
stockholders agreement under which AT&T Venture Fund I, L.P. had the right to
elect one director to Knology's board. This stockholders agreement has
terminated. Mr. Bodman is currently the Managing General Partner of VMS, Inc,
managers of AT&T Ventures. From August 1990 to May 1996, Mr. Bodman served as
Senior Vice President of Corporate Strategy and Development for AT&T. Mr. Bodman
also is currently a director of Internet Security Systems, Inc. and Tyco
International Inc.

       Alan A. Burgess has been one of our directors since January 1999. From
1967 until his retirement in 1997, Mr. Burgess was a partner with Accenture
(formerly Andersen Consulting). Over his 30-year career he held a number of
positions as Managing Partner, including Managing Partner of Regulated
Industries from 1974 to 1989. In 1989 he assumed the role of Managing Partner of
the Communications Industry Group. In addition, he served on Andersen
Consulting's Global Management council and was a member of the Partner Income
Committee.

       Donald W. Burton has been one of our directors since January 1996.
Since December 1983, he has served as Managing General Partner of South Atlantic
Venture Fund I, II and III, Limited Partnerships and Chairman of South Atlantic
Private Equity Fund IV, Limited Partnership. Mr. Burton has been the general
partner of The Burton Partnership, Limited Partnership since October 1979. Since
January 1981, he has served as President of South Atlantic Capital Corporation.
Mr. Burton also serves on the board of directors of several companies related to
ITC Holding companies, including ITC Holding and ITC/\DeltaCom, Inc. He is a
director of the Heritage Group of Mutual Funds and several private companies.

       L. Charles Hilton, Jr. has been one of our directors since Knology
acquired the beach cable system in Panama City, Florida in December 1997. Mr.
Hilton was the founder and sole stockholder of Beach Cable, Inc., and served as
its Chief Executive Officer from 1991 to December 1997. Since 1958, Mr. Hilton
has served as Chairman and Chief Executive Officer of Golf Asphalt Corporation a
general construction firm. Mr. Hilton has been a partner in the law firm of
Hilton, Hilton, Kolk & Roesch since 1984, and currently serves as Chief
Executive Officer of Hilton, Inc., a family corporation which owns and operates
various commercial buildings in Bay County, Florida.

       William Laverack, Jr. has been one of our directors since August 2000.
Mr. Laverack is a Partner of Whitney & Co., LLC. which he joined in 1993. Prior
to joining Whitny in 1993, Mr. Laverack was with Gleacher & Co. as a Managing
Director, with Morgan Stanley & Co. as a Principal in the Merchant Banking
Department, and with J.P. Morgan & Co. as a corporate lending officer. Mr.
Laverack is a director of Informio, Inc., NuVox Communications, Inc., HOB
Entertainment, Inc., NeuroMetrix, Inc., Aramiska, R.V. and Aqua-Chem, Inc. Mr.
Laverack was elected to our board by the holders of our Series B preferred
stock, as provided in our amended and restated certificate of incorporation, and
was nominated by J. H. Whitney IV,



                                       49

<PAGE>

L.P. pursuant to our stockholders agreement which provides that J. H. Whitney
IV, L.P. has the right to nominate a director to our board so long as it
continues to own at least 45.0% of its original investment in our capital stock.

       Bret Pearlman has been one of our directors since March 2000.
Mr. Pearlman became a Senior Managing Director of The Blackstone Group L.P. in
January 2000, and is a member of Blackstone Management Associates III L.L.C., a
general partner of each of Blackstone CCC Capital Partners L.P., Blackstone CCC
Offshore Capital Partners L.P. and Blackstone Family Investment Partnership III
L.P., each of which has invested in us. Mr. Pearlman has been involved in The
Blackstone Group's principal investing activities since 1989. Mr. Pearlman also
serves as a director of American Axle & Manufacturing Holdings, Inc. Mr.
Pearlman was elected to our board by the holders of our Series B preferred
stock, as provided in our amended and restated certificate of incorporation, and
was nominated by Blackstone CCC Capital Partners L.P., Blackstone CCC Offshore
Capital Partners L.P. and Blackstone Family Investment Partnership III L.P.
pursuant to our stockholders agreement which provides that Blackstone CCC
Capital Partners L.P., Blackstone CCC Offshore Capital Partners L.P. and
Blackstone Family Investment Partnership III L.P. and their respective
affiliates will collectively have the right to nominate a director to our board
of directors so long as they continue to own at least 45.0% of their original
investment in our capital stock.

       William H. Scott, III, has been one of our directors since November
1995. He has served as President of ITC Holding since December 1991 and has been
a director of ITC Holding since May 1989. He also is an officer and director of
several ITC Holding subsidiaries. In addition, Mr. Scott is a director of
ITC/\DeltaCom.

       Donald W. Weber has been a director since August 1998. Since 1997,
Mr. Weber has been a consultant and private investor. Since 1995, Mr. Weber
served as President and Chief Executive Officer of ViewStar Entertainment
Services, Inc., a digital satellite service company. From 1987 to 1991, Mr.
Weber held various executive positions, including President and Chief Executive
Officer, and served as a director of Contel Corporation, a telecommunications
company. Currently, Mr. Weber serves as director of Matria Healthcare, Inc., a
disease management services provider.

Committees of the Board of Directors

       Our board currently has two committees, the audit committee and the
compensation and stock option committee.

       The audit committee, among other things:

o      recommends the firm to be appointed as independent accountants to audit
       our financial statements;

o      discusses the scope and results of the audit with the independent
       accountants, reviews with management and the independent accountants our
       interim and year-end operating results;

o      considers the adequacy of our internal accounting controls and audit
       procedures; and

o      reviews the non-audit services to be performed by the independent
       accountants.

       The members of the audit committee are Messrs. Burgess, Hilton, Weber and
Laverack.

       The compensation and stock option committee reviews and recommends the
compensation arrangements for management and administers our stock option plans.
The members of the compensation and stock option committee are Messrs. Burton,
Pearlman, Scott and Weber.

Compensation of Directors

       Our directors do not receive directors' fees. Directors are reimbursed
for their reasonable out-of-pocket travel expenditures. Our directors are also
eligible to receive grants of stock options under our stock option plans.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

       Based solely on review of the copies of reporting forms furnished to
the Company, or written representations that no forms were required, the Company
believes that during the year ended December 31, 2001, all required events of
its officers, directors and 10% stockholders to the Securities and Exchange
Commission of their ownership and changes in ownership of Shares (as required
pursuant to Section 16(a) of the Securities Exchange Act of 1934) have been
filed.


                                       50

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

       Our executive officers were appointed in October and November 1999.
However, as most of our executive officers were executive officers of Knology
Broadband immediately prior to our formation, we have set forth below the
compensation received by our executive officers from Knology and Knology
Broadband for the fiscal years ended December 31, 1999, 2000 and 2001.

       The following table provides compensation information for our chief
executive officer and the four most highly compensated other executive officers
whose total annual salary and bonus exceed $100,000. We will use the term "named
executive officers" to refer to these people later in this Annual Report.


                                       51

<PAGE>

                           Summary Compensation Table
<TABLE>
<CAPTION>

                                                                                             Long-Term
                                                            Annual Compensation          Compensation Awards
                                                            -------------------          -------------------
                                                                                               Securities
                                                                                               Underlying        All Other
                 Name and Title                     Year(1)       Salary          Bonus        Options(2)     Compensation(3)
                 --------------                     -------       ------          -----        ----------     ---------------
<S>                                                  <C>         <C>            <C>               <C>              <C>
Rodger L. Johnson ..............................     2001        $236,764       $101,026          397,577          $13,419
    President & Chief                                2000         205,638        144,779           32,368           12,693
     Executive Officer                               1999         139,617             --        2,000,000            3,181

Anthony J. Palermo .............................     2001         186,449         53,907           79,962            9,561
    Vice President of                                2000         154,675         86,634            6,316            9,772
     Operations and Marketing                        1999          66,348         15,100          400,000            3,934

Patrick T. Barrett .............................     2001         168,692         49,304           79,321           14,858
    Vice President of                                2000         153,117         65,216            3,528           11,908
     Information Technology                          1999          26,070             --          400,000            2,072

Bret T. McCants ................................     2001         155,688         44,866           54,452           10,002
    Vice President of Network                        2000         124,986         54,282            8,842            9,759
     Construction and Maintenance                    1999         115,962         25,198           94,824            4,308

Robert K. Mills ................................     2001         139,087         40,846           77,137            5,694
    Vice President, Chief                            2000         156,773         32,973          201,825            2,116
     Financial Officer & Treasurer                   1999           3,888             --          200,000                3
</TABLE>

-------
(1)  As noted above, all of the named executive officers were initially employed
     by Knology Broadband. The summary compensation table reflects the
     compensation earned from both Knology Broadband and Knology.

(2)  All options are exercisable for shares of our common stock.

(3)  For fiscal year 2001, includes premiums on term life insurance ($3,369,
     $1,755, $6,954, $950 and $443 for Johnson, Palermo, Barrett, McCants and
     Mills, respectively) and employer matching contributions to our 401(k) plan
     ($5,250, $3,006, $3,104, $4,252 and $5,250 for Johnson, Palermo, Barrett,
     McCants and Mills, respectively). For fiscal year 2000, includes premiums
     on term life insurance ($2,643, $1,437, $4,067, $746 and $260 for Johnson,
     Palermo, Barrett, McCants and Mills, respectively) and employer matching
     contributions to our 401(k) plan ($5,250, $3,535, $3,041, $4,212 and $1,856
     for Johnson, Palermo, Barrett, McCants and Mills, respectively).


                                       52

<PAGE>

Option Grants in Last Fiscal Year

The following table contains information about option awards made to the named
executive officers during 2001.
<TABLE>
<CAPTION>

                                       Individual Grants
                                       -----------------                                              Potential Realizable Value
                                  Number of      Percent of                                             at Assumed Annual Rates
                                  Securities    Total Options                                         of Stock Price Appreciation
                                  Underlying     Granted to                                               for Option Term(2)
                                   Options      Employees in        Exercise                              ------------------
             Name                 Granted(1)     Fiscal 2001         Price        Expiration Date         5%             10%
             ----                 ----------     -----------         -----        ---------------         --             ---
<S>                                <C>              <C>                <C>        <C>                 <C>           <C>
Rodger L. Johnson ..............   329,244          20.5%              $3.00       May 16, 2011       $ 621,179     $1,574,190
                                    68,333           4.3%               3.00       May 18, 2011         128,923        326,716
Robert K. Mills ................    65,096           4.1%               3.00       May 16, 2011         122,816        311,239
                                    12,041           0.8%               3.00       May 18, 2011          22,718         57,571
Anthony J. Palermo .............    65,824           4.1%               3.00       May 16, 2011         124,189        314,720
                                    14,138           0.9%               3.00       May 18, 2011          26,674         67,597
Patrick T. Barrett .............    65,312           4.1%               3.00       May 16, 2011         123,223        312,272
                                    14,009           0.9%               3.00       May 18, 2011          26,431         66,980
Bret T. McCants ................    43,038           2.7%               3.00       May 16, 2011          81,199        205,774
                                    11,414           0.7%               3.00       May 18, 2011          34,242         54,573
</TABLE>
-------
(1)  Options generally vest over five years unless such person's employment is
     terminated, in which case options that have not vested at that time will
     terminate.

(2)  Values shown are the result of calculation at assumed 5% and 10%
     appreciation rates called for by the SEC and are not intended to forecast
     possible future appreciation in the market price of our common stock.

Option Exercises and Fiscal Year-End Values

       The following table sets forth the number of shares covered by both
exercisable and unexercisable options as of December 31, 2001 and the year-end
value of exercisable options as of December 31, 2001 for the named executive
officers.

<TABLE>
<CAPTION>

                                                                    Number of Securities
                                                                   Underlying Unexercised             Value of Unexercised
                                    Shares                               Options at                  In-The-Money Options at
                                   Acquired                           December 31, 2001               December 31, 2001(1)
                                      On           Value           ----------------------            -----------------------
             Name                  Exercise      Realized        Exercisable       Unexercisable     Exercisable    Unexercisable
             ----                  --------      ---------       -----------       -------------     -----------    -------------
<S>                                <C>           <C>             <C>                 <C>             <C>            <C>
Rodger L. Johnson ..............      -              -           1,263,091           1,166,854       $ 213,350      $ 126,650
Robert K. Mills ................      -              -             200,456             278,506          17,000         17,000
Anthony J. Palermo .............      -              -             201,579             284,699          34,000         34,000
Patrick Barrett ................      -              -             200,789             281,690          34,000         34,000
Bret T. McCants ................      -              -             215,328             104,790         110,690          7,430
</TABLE>
-------
(1) The value of the unexercised in-the-money options as of December 31, 2001
    was calculated using a market price of $3.00 per share.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The following table sets forth certain information as of January 31,
2002 regarding beneficial ownership of our voting capital stock by:

       - each person known by us to beneficially own more than 5% of our
         outstanding voting capital stock,

       - each of our named executive officers,

       - each of our directors, and

       - all of our directors and executive officers as a group.

       Unless otherwise indicated, the address of each of the named individuals
is c/o Knology, Inc., 1241 O.G. Skinner Drive, West Point, Georgia 31833.


                                       53

<PAGE>

<TABLE>
<CAPTION>


                                     SERIES A PREFERRED             SERIES B PREFERRED           SERIES C PREFERRED
                                  ---------------------------------------------------------------------------------------
                                       (1)                         (1)                           (1)
                                   AMOUNT AND        (2)        AMOUNT AND       (2)         AMOUNT AND        (2)
                                    NATURE OF      PERCENT      NATURE OF       PERCENT       NATURE OF      PERCENT
 NAME AND ADDRESS OF               BENEFICIAL      OF SERIES    BENEFICIAL     OF SERIES      BENEFICIAL     OF SERIES
 BENEFICIAL OWNER (1)               OWNERSHIP       STOCK       OWNERSHIP       STOCK         OWNERSHIP       STOCK
-------------------------------------------------------------------------------------------------------------------------
<S>                                <C>             <C>          <C>             <C>           <C>             <C>
5% SHAREHOLDERS
 SCANA Communications, Inc (4)      7,234,271       14.2%               -          -          8,333,333        22.4%
 AT&T Ventures Fund (5)             4,267,800        8.4%         421,052         2.0%                -          -
 J. H. Whitney (6)                          -         -         8,421,053        39.8%        3,333,333        9.0%
 The Blackstone Group (7)                   -         -         6,315,789        29.8%        2,666,667        7.2%
 South Atlantic Private Equity
   Funds (8)                        3,356,443        6.6%       1,578,947         7.5%          666,667        1.8%
 American Water Works, Inc. (9)     3,820,943        7.5%               -          -                  -          -
 First Union Capital Partners
   2001, L.L.C. (10)                        -         -         2,105,263         9.9%          333,333          *
 PNC Venture Corporation (11)               -         -                 -          -          3,333,333        9.0%
 ITC Telecom Ventures, Inc. (12)            -         -                 -          -          8,333,333        22.4%
 William E. Morrow (13)                13,527         *                 -          -                  -          -
 Peggy Warner                               -         -                 -          -                  -          -
 Felix K. Boccucci, Jr. (14)              352         *             4,200          *                  -          -
 Marcus R. Luke (15)                   26,898         *             1,600          *                  -          -
 O. Gene Gabbard (16)                 299,806         *                 -          -                  -          -
 Chad S. Whacter (17)                       -         -            10,500          *                  -          -


EXECUTIVE OFFICERS

 Rodger L. Johnson (18)                     -         -            10,000          *                  -          -
 Robert K. Mills (19)                   3,929         *             3,200          *                  -          -
 Anthony J. Palermo (20)                    -         -            10,000          *                  -          -
 Thomas P. Barrett (21)                     -         -                 -          -                  -          -
 Bret T. McCants (22)                   5,454         *                 -          -                  -          -


DIRECTORS

 Campbell B. Lanier (23)            9,323,399       18.2%               -          -            333,333          *
 Richard Bodman (5) (24)            4,267,800        8.4%         185,684          *                  -          -
 Alan A. Burgess (25)                       -         -                 -          -                  -          -
 Donald W. Burton (7) (26)          3,575,831        7.0%       1,789,473         8.4%        1,333,334        3.6%
 L. Charles Hilton, Jr. (27)          377,197         *                 -          -                  -          -
 Bret Pearlman (8)                          -         -         6,315,789        29.8%        2,666,667        7.2%
 William H. Laverack, Jr. (6)               -         -         8,421,053        39.8%        3,333,333        9.0%
 William H. Scott III (28)          1,236,933        2.4%               -          -                  -          -
 Donald W. Weber (29)                  97,638         *                 -          -                  -          -
    All Named Executive Officers
    and Directors as a Group
    (14 persons)
                                   18,888,181       36.8%      16,735,199        79.0%        7,666,667        20.6%

* Less than 1%

</TABLE>

<TABLE>
<CAPTION>

                                                         COMMON                   AS CONVERTED (3)
                                              --------------------------------------------------------------
                                                     (1)                          (1)
                                                 AMOUNT AND        (2)         AMOUNT AND          (2)
                                                 NATURE OF       PERCENT       NATURE OF         PERCENT
 NAME AND ADDRESS OF                             BENEFICIAL     OF SERIES      BENEFICIAL       OF SERIES
 BENEFICIAL OWNER (1)                            OWNERSHIP       STOCK         OWNERSHIP          STOCK
------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>               <C>
5% SHAREHOLDERS
 SCANA Communications, Inc (4)                          -           -          15,835,996         13.0%
 AT&T Ventures Fund (5)                                 -           -           5,052,029          4.1%
 J. H. Whitney (6)                                      -           -          15,851,229         13.0%
 The Blackstone Group (7)                               -           -          12,055,087          9.9%
 South Atlantic Private Equity
   Funds (8)                                            -           -           6,494,739          5.3%
 American Water Works, Inc. (9)                         -           -           3,962,700          3.2%
 First Union Capital Partners
   2001, L.L.C. (10)                                    -           -           3,462,807          2.8%
 PNC Venture Corporation (11)                           -           -           3,333,333          2.7%
 ITC Telecom Ventures, Inc. (12)                        -           -           8,333,333          6.8%
 William E. Morrow (13)                           345,000         68.7%           359,029           *
 Peggy Warner                                           -           -                   -           -
 Felix K. Boccucci, Jr. (14)                      118,776         19.1%           244,160           *
 Marcus R. Luke (15)                              135,436         21.4%           310,730           *
 O. Gene Gabbard (16)                             180,000         26.4%           736,458           *
 Chad S. Whacter (17)                             121,501         19.5%           258,610           *


EXECUTIVE OFFICERS

 Rodger L. Johnson (18)                         1,263,091         71.5%         2,541,047          2.1%
 Robert K. Mills (19)                             200,456         28.5%           409,744           *
 Anthony J. Palermo (20)                          201,579         28.6%           418,023           *
 Thomas P. Barrett (21)                           200,789         28.6%           401,578           *
 Bret T. McCants (22)                             215,328         30.0%           436,312           *


DIRECTORS

 Campbell B. Lanier (23)                           31,500         5.9%         10,168,896          8.3%
 Richard Bodman (5) (24)                           31,500         5.9%          4,765,155          3.9%
 Alan A. Burgess (25)                              31,500         5.9%             63,000           *
 Donald W. Burton (7) (26)                         31,500         5.9%          7,819,087          6.4%
 L. Charles Hilton, Jr. (27)                       31,500         5.9%            454,191           *
 Bret Pearlman (8)                                      -           -          12,055,087          9.9%
 William H. Laverack, Jr. (6)                           -           -          15,851,229         13.0%
 William H. Scott III (28)                         31,500         5.9%          1,417,902          1.2%
 Donald W. Weber (29)                              31,500         5.9%            181,242           *
    All Named Executive Officers
    and Directors as a Group
    (14 persons)
                                                2,301,743         68.6%        56,982,492         45.5%

* Less than 1%
</table>

<PAGE>


*     Less than 1%

(1)  A person is deemed to be a "beneficial owner" of a security if he or she
     has or shares the power to vote or direct the voting of such security or
     the power to dispose or direct the disposition of such security. A person
     is also deemed to be a beneficial owner of any securities of which that
     person has the right to acquire beneficial ownership within 60 days from
     January 31, 2002. More than one person may be deemed to be a beneficial
     owner of the same securities. All persons shown in the table above have
     sole voting and investment power, except as otherwise indicated.
(2)  For the purpose of computing the percentage ownership of each beneficial
     owner, any securities which were not outstanding but which were subject to
     options, warrants, rights or conversion privileges held by such beneficial
     owner exercisable within 60 days from January 31, 2002 were deemed to be
     outstanding in determining the percentage owned by such person, but were
     not deemed outstanding in determining the percentage owned by any other
     person.
(3)  "As converted" amounts assume that the shares of Series A preferred stock,
     Series B preferred stock and Series C preferred stock are converted to
     common stock. Each share of Series A preferred stock converts into 1.0371
     shares of common stock; each shares of Series B preferred stock converts
     into 1.4865 shares of common stock; and each share of Series C preferred
     stock converts into one share of common stock.
(4)  The address of SCANA Communications Holdings, Inc. is 200 West Ninth Street
     Plaza, Suite 600 Wilmington, Delaware 19801.
(5)  The address of each of the AT&T venture funds and of Mr. Bodman is 2
     Wisconsin Circle, #610, Chevy Chase, Maryland 20815. Includes 325,800
     shares of Series A preferred stock and 20,632 shares of Series B preferred
     stock held by Venture Fund I, L.P., of which Venture Management I, a
     general partnership, is the general partner, of which Mr. Bodman is the
     managing general partner; 2,931,600 shares of Series A preferred stock and
     185,684 shares of Series B preferred stock held by AT&T Venture Fund II,
     L.P., of which Venture Management, L.L.C. is the general partner, of which
     Mr. Bodman is a manager; 153,600 shares of Series A preferred stock and
     32,677 shares of Series B preferred stock held by Special Partners Fund,
     L.P., of which Venture Management III, L.L.C. is the general partner, of
     which Mr. Bodman is a manager; and 856,800 shares of Series A preferred
     stock and 182,059 shares of Series B preferred stock held by Special
     Partners Fund International, L.P., of which the investment general partner
     is Venture Management III, L.L.C., of which Mr. Bodman is a manager. Each
     of the respective AT&T venture funds has sole voting and investment power
     with respect to the shares beneficially owned by such fund.
(6)  The address of J. H. Whitney IV, L.P. is 177 Broad Street, Stamford, CT
     06901. The general partner of J. H. Whitney IV, L.P. is J. H. Whitney
     Equity Partners IV, LLC, of which William Laverack, Jr. is the managing
     member.
(7)  The address of Blackstone Management Associates III L.L.C. is 345 Park
     Avenue, 31st Floor, New York, New York 10154. Includes 5,029,244 shares of
     Series B preferred stock and 2,123,459 shares of Series C preferred stock
     held by Blackstone CCC Capital Partners L.P., 907,598 shares of Series B
     preferred stock and 383,208 shares of Series C preferred stock held by
     Blackstone CCC Offshore Capital Partners L.P. and 378,947 shares of Series
     B preferred stock and 160,000 shares of Series C preferred stock held by
     Blackstone Family Investment Partnership III L.P., for each of which
     Blackstone Management Associates III L.L.C. is the general partner and of
     which Bret Pearlman is a member.
(8)  The address of each entity comprising South Atlantic is 614 West Bay
     Street, Tampa, Florida 33606. Includes 1,685,251 shares of Series A
     preferred stock held by South Atlantic Venture Fund III, Limited
     Partnership, of which South Atlantic Venture Partners III, Limited
     Partnership is the sole general partner, of which Mr. Burton is the
     managing partner; 592,268 shares of Series A preferred stock, 663,158
     shares of Series B preferred stock and 280,000 shares of Series C preferred
     stock held by South Atlantic Private Equity Fund IV, Limited Partnership,
     of which Mr. Burton is a general partner; and 872,250 shares of Series A
     preferred stock, 915,789 shares of Series B preferred stock and 386,667
     shares of Series C preferred stock held by South Atlantic Private Equity
     Fund IV (QP), Limited Partnership, of which Mr. Burton is a general
     partner; and 206,674 shares of Series A preferred stock held by South
     Atlantic Venture Fund II, of which Mr. Burton is a general partner. Each of
     the respective South Atlantic funds has sole voting and investment power
     with respect to the shares beneficially owned by such fund.
(9)  The address of American Water Works Company, Inc. is 1025 Laurel Oak Road,
     P. O. Box 1770, Voorhees, NJ 08043.
(10) The address of First Union Capital Partners 2001, L.L.C. is 301 South
     College Street, NC0732, Charlotte, NC 28288-0732.
(11) The address of PNC Venture Corporation is 3150 CNG Tower, Pittsburgh, PA
     15222.
(12) The address of ITC Telecom Ventures, Inc. is 3300 20th Avenue, Valley, AL
     36854.
(13) The address of Mr. William E. Morrow is 401 Carlson Circle, San Marcos TX
     78666.
(14) Includes 118,776 shares of common stock issuable under options and 218
     shares of Series A preferred stock owned by his wife.
(15) Includes 13,098 shares of Series A preferred stock issuable under options
     and 131,436 shares of common stock issuable under options.
(16) The address of Mr. Gabbard is 102 Marseille Place, Cary, NC 27511. Includes
     63,185 shares of Series A preferred stock issuable under options and
     180,000 shares of common stock issuable under options.
(17) Includes 121,501 shares of common stock issuable under options.

<PAGE>

(18) Includes 1,263,091 shares of common stock issuable under options.
(19) Includes 200,456 shares of common stock issuable under options.
(20) Includes 201,579 shares of common stock issuable under options.
(21) Includes 200,789 shares of common stock issuable under options.
(22) Includes 215,328 shares of common stock issuable under options.
(23) Includes 121,958 shares of Series A preferred stock held by the Jane Lowery
     Zachry Hyatt Lanier Trust, of which Mr. C. Lanier, III is trustee; 136,419
     shares of Series A preferred stock held by The Campbell B. Lanier, Jr.
     Irrevocable Life Insurance Trust, of which Mr. C. Lanier, III is trustee;
     56,759 shares of Series A preferred stock held by the Lanier Family
     Foundation, of which Mr. C. Lanier, III is co-trustee; and 392 shares of
     Series A preferred stock held by Mr. C. Lanier, III's wife. Also includes
     99,572 shares of Series A preferred stock issuable under options and 31,500
     shares of common stock issuable under options.
(24) Includes 31,500 shares of common stock issuable under options.
(25) Includes 31,500 shares of common stock issuable under options.
(26) The address of Mr. Burton and of each entity comprising South Atlantic is
     614 West Bay Street, Tampa, Florida 33606. Includes 117,784 shares of
     Series A preferred stock, 52,631 shares of Series B preferred stock and
     133,333 shares of Series C preferred stock held by The Burton Partnership,
     Limited Partnership, of which Mr. Burton is the sole general partner;
     157,895 shares of Series B preferred stock and 533,334 shares of Series C
     preferred stock held by The Burton Partnership (QP), Limited Partnership,
     of which Mr. Burton is the sole general partner; 1,685,251 shares of Series
     A preferred stock held by South Atlantic Venture Fund III, Limited
     Partnership, of which South Atlantic Venture Partners III, Limited
     Partnership is the sole general partner, of which Mr. Burton is the
     managing partner; 592,268 shares of Series A preferred stock, 663,158
     shares of Series B preferred stock and 280,000 shares of Series C preferred
     stock held by South Atlantic Private Equity Fund IV, Limited Partnership,
     of which Mr. Burton is a general partner; and 872,250 shares of Series A
     preferred stock, 915,789 shares of Series B preferred stock and 386,667
     shares of Series C preferred stock held by South Atlantic Private Equity
     Fund IV (QP), Limited Partnership, of which Mr. Burton is a general
     partner; and 206,674 shares of Series A preferred stock held by South
     Atlantic Venture Fund II, of which Mr. Burton is a general partner. Each of
     the respective South Atlantic funds has sole voting and investment power
     with respect to the shares beneficially owned by such fund. Also includes
     49,336 shares of Series A preferred stock held by four Burton Family trusts
     of which Mr. Burton is trustee. Includes 52,268 shares of Series A
     preferred stock issuable under options and 31,500 shares of common stock
     issuable under options.
(27) Includes 31,500 shares of common stock issuable under options.
(28) Includes 44,857 shares of Series A preferred stock held by The Martha J.
     Scott, Trustee FBO Mary Martha Scott U/A 6/26/91 Trust, of which Mr.
     Scott's wife is trustee; 87,322 shares of Series A preferred stock held by
     The Melissa H. Lanier 1997 GST Trust, of which Mr. Scott is trustee;
     161,149 shares of Series A preferred stock held by The Campbell B. Lanier,
     III Charitable Remainder Trust; 129,305 shares of Series A preferred stock
     held by the William H. Scott III 2000 Annuity Trust; 44,813 shares of
     Series A preferred stock held by the Margaret Scott Rollison, Trustee FBO
     John Davis Scott U/A 4/26/91; 44,813 shares of Series A preferred stock
     held by the Margaret Scott Rollison, Trustee FBO Mary Martha Scott U/A
     4/26/91; and 2,510 shares of Series A preferred stock held by Martha
     Jernigan Scott. Also includes 69,500 shares of Series A preferred stock
     issuable under options and 31,500 shares of common stock issuable under
     options.
(29) Includes 81,264 shares of Series A preferred stock held by
     Turtlecreek Limited Partnership, of which Mr. Weber is the sole general
     partner. Includes 16,374 shares of Series A preferred stock issuable under
     options and 31,500 shares of common stock issuable under options.

<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       We were formerly a subsidiary of ITC Holding. We own 100% of Knology
Broadband, Interstate Telephone, Valley Telephone, Globe Telecommunications and
ITC Globe, each of which ITC Holding owned separately before we owned it. ITC
Holding determined that Knology Broadband and these other companies had parallel
growth in the same markets and that combining their businesses would enhance
their ability to take advantage of the opportunities in these markets. To
accomplish this, ITC Holding formed us in September 1998 and, in November 1999,
contributed these companies to us along with other related assets. In February
2000, ITC Holding distributed all of its shares of our stock and options to
purchase shares of our stock to its stockholders and option holders, which we
refer to as our spin-off from ITC Holding.

       ITC Holding is a diversified telecommunications company that owns
interests in many companies that have businesses similar to ours. Because of our
relationship with ITC Holding, we are affiliated with certain of these
companies. Some of them, such as ITC/\DeltaCom provide us with and/or receive
from us, services and products. We have described the nature and amount of the
business that we do with affiliated companies in greater detail below.

       We have adopted a policy requiring that any material transactions
between us and others affiliated with our officers, directors or principal
stockholders be on terms no less favorable to us than reasonably could have been
obtained in arm's-length transactions with independent third parties.

Transactions with ITC Companies

       Certain of our directors and officers hold or held the following
positions with companies that are affiliated with us:

o      Campbell B. Lanier, III, who serves as the chairman of our board of
       directors, also serves as chairman of the board and chief executive
       officer of ITC Holding and all of its subsidiaries including InterCall,
       and is also a director of companies that were formerly subsidiaries of
       ITC Holding, such as ITC/\DeltaCom.

o      William H. Scott, III, one of our directors, serves as president, chief
       operating officer and a director of ITC Holding and all of its
       subsidiaries including InterCall, and is also a director of companies
       that were formerly subsidiaries of ITC Holding, such as ITC/\DeltaCom.

o      Donald W. Burton, one of our directors, is a director of ITC Holding and
       ITC/\DeltaCom.

o      Felix L. Boccucci, our Vice President of Business Development, served as
       an executive officer of ITC Holding prior to October 1997.

       We are affiliated with all of these companies by reason of our common
stockholder bases and common directorships, and we have a business relationship
with some of them, as described in detail below.

       At the time of our spin-off from ITC Holding, Campbell B. Lanier, III
beneficially owned approximately 23% of the common stock of ITC Holding, and
William Scott and Donald Burton beneficially owned approximately 1% and 8%,
respectively, of the common stock of ITC Holding. Most of our other officers,
directors and stockholders also owned stock in ITC Holding and, as such, they
all received the same amount of stock on a pro rata basis in the spin-off as the
rest of the ITC Holding stockholders.

       ITC/\DeltaCom provides us with voice and data transport and related
services and leases capacity to us on certain of its fiber routes. In 1999, 2000
and 2001, we paid $1.8 million, $1.9 million and $3.5 million, respectively, for
these services. We received these services from ITC/\DeltaCom pursuant to an
agreement that expires in April 2002. During those years, our company provided
ITC/\DeltaCom with local and long-distance telephone, programming and other
services for which we received $698,332, $729,780 and $328,003, respectively. As
of December 31, 2001, Mr. Lanier owned approximately 10% of ITC/\DeltaCom.
Messrs. Lanier and Scott serve as executive officers and directors of
ITC/\DeltaCom and Mr. Burton serves as a director of ITC/\DeltaCom.

       We provided services to InterCall, our parent company prior to the
spin-off and a wholly owned subsidiary of ITC Holding, in 1999, 2000 and 2001
for which we received $983,000, $1.1 million and $1.4 million, respectively. We
provide these services to InterCall pursuant to an agreement which expires in
July 2004.

         We lease pole space from South Carolina Electric & Gas Co., an
affiliate of SCANA Communications Holdings which is one of our stockholders and
was a principal investor in Knology Broadband in the past, as discussed below.
We lease this pole



                                       57

<PAGE>

space pursuant to an annual pole attachment agreement. In 2001, we paid $188,380
under this agreement. In 1998, we purchased fiber-optic cables from SCANA
Communications for a total purchase price of $306,530.

       In November 1999, we entered into a services agreement and a related
support agreement with a wholly owned subsidiary of ITC Holding, ITC Service
Company, under which we agreed to provide human resources, information
technology and other services to ITC Service Company and under which ITC Service
Company agreed to lease storage space as needed and provide certain
administrative services to us. We expect to be paid approximately $60,000 per
year for services provided by us, and we expect to pay a substantially smaller
amount for services that ITC Service Company provides to us, under these
agreements. The agreements have no expiration date, but may be terminated on 30
days' notice by either party.

       ITC Holding occasionally provides us with certain administrative
services, such as legal and tax-planning services. The costs of these services
are charged to us based primarily on the salaries and related expenses of the
ITC Holding executives who provide these services and an estimate of their time
spent on our projects. For the year ended December 31, 2001, Knology Broadband
recorded $130,900 in selling, operations, administrative and rent expenses
related to these services. We believe that the methodology used to calculate the
amounts charged was reasonable.

       Our insurance provider is J. Smith Lanier & Co. Campbell B. Lanier,
III's brother and uncle are principal owners of this insurance placement
company, both of whom, as stockholders in ITC Holding, received shares of our
Series A preferred stock in the spin-off. In 1999, 2000 and 2001, this company
charged us $977,000, $1.2 million and $1.2 million, respectively, for insurance
services.

       We leased office space in 1998 and part of 1999 to ITC/\DeltaCom, for
which we received $122,000 and $40,000, respectively, in lease payments.

       In 1998, our subsidiary Interstate Telephone paid $1.4 million in
dividends to ITC Holding, and in 1999, paid $1.7 million.

       Effective August 1998, upon the acquisition by ITC Holding of its
majority interest in Knology Broadband, we participated in a tax sharing
agreement with ITC Holding. The tax sharing agreement allowed ITC Holding to
include our results in a consolidated federal income tax return. Based upon our
taxable losses being included in the consolidated tax return, we recorded income
tax benefits for $5,600 and $19,700 for the years ended December 31, 1998 and
1999, respectively. Upon completion of our spin-off from ITC Holding in February
2000, this tax-sharing agreement was terminated.

       In October 1999, InterCall agreed to lend up to $13.0 million to
Knology Broadband under a line of credit which matured on the earlier of
November 16, 2002 or one day after the commitment under Knology Broadband's
existing credit facility was reduced to zero. Interest accrued on the loan at a
rate of 11 3/4% per year. This loan was subordinate to the senior secured credit
facility Knology Broadband has with First Union National Bank and First Union
Securities, Inc. In November 1999, we borrowed $9.6 million under this line of
credit. In accordance with the terms of the loan, InterCall immediately
converted this loan into shares of our Series A preferred stock at a price of
$4.75 per share, at which time the line of credit terminated.

       In November 1999, we acquired Knology Broadband, Interstate Telephone,
Valley Telephone, Globe Telecommunications and ITC Globe from ITC Holding. ITC
Holding contributed to us stock representing approximately 85% of the
outstanding equity of Knology Broadband, stock representing 100% of each of
Interstate Telephone, Valley Telephone, Globe Telecommunications and ITC Globe,
272,832 shares of preferred stock of ClearSource, subscription rights to
purchase an additional 810,501 shares of preferred stock of ClearSource, $5.6
million in cash to be used for the subscription payments to ClearSource and a
note of Knology Broadband in the principal amount of up to $13.0 million.
Concurrently with this November 1999 acquisition, we completed an exchange with
other Knology Broadband stockholders in which we received Knology Broadband
common stock and preferred stock in exchange for our common stock and Series A
preferred stock. We now hold 100% of the outstanding capital stock of Knology
Broadband.

       In January 2000, after the contribution and exchange discussed above,
InterCall loaned us $29.7 million under a line of credit. The proceeds of this
loan were to be used for construction by Knology Broadband of its networks and
for working capital. This loan accrued interest at a rate of 11 3/4% per year
and had a maturity date of March 31, 2000. Under the terms of this loan,
InterCall converted all of the principal and interest of the loan into options
to purchase shares of our Series A preferred stock at a price of $4.75 per
option. InterCall paid $4.75 for each share subject to a Knology option, which
was the value placed on the shares underlying the options for purposes of the
spin-off. The parties agreed as part of the conversion transaction that Knology
would pay the option exercise prices to ITC Holding when they were received by
Knology. A residual note evidences this agreement. Under the residual note, no
amount is due to ITC Holding from Knology in the event of an option expiring or
terminating.



                                       58

<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

       The current members of our compensation and stock option committee are
Messrs. Scott, Weber and Burton. Each of these members serves as a director or
executive officer of ITC Holding. We have engaged in several transactions with
ITC Holding or its affiliates, as discussed above.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)(1) The following Consolidated Financial Statements of the Company
                and independent auditor's report are included in Item 8 of this
                Form 10-K.

                Report of Independent Public Accountants.

                Consolidated Balance Sheets as of December 31, 2000 and 2001.

                Consolidated Statements of Operations for the Years Ended
         December 31, 1999, 2000 and 2001.

                Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1999, 2000 and 2001.

                Consolidated Statements of Stockholders' (Deficit) Equity for
         the Years Ended December 31, 1999, 2000 and 2001.

                Notes to Consolidated Financial Statements.

         (a)(2) The following financial statement schedule is filed as part of
                this report and is attached hereto as pages S-1 and S-2.

                Independent Auditor's Report on the Financial Statement
                Schedules.

                Schedule II--Valuation and Qualifying Accounts.

       All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission either have
been included in the Consolidated Financial Statements of the Company or the
notes thereto, are not required under the related instructions or are
inapplicable, and therefore have been omitted.

         (a)(3) The following exhibits are either provided with this Form 10-K
                or are incorporated herein by reference:

   EXHIBIT
    NUMBER                              EXHIBIT DESCRIPTION
   -------                              -------------------
     3.1      Amended and  Restated  Certificate  of  Incorporation  of
              Knology, Inc. (Incorporated herein by reference to Exhibit 3.1 to
              Knology Inc.'s Current Report on Form 8-K filed on January 26,
              2001).

     3.1.1    Amendment to Amended and Restated Certificate of Incorporation of
              Knology, Inc. (Incorporated herein by reference to Exhibit 3.1.1
              to Knology, Inc.'s Quarterly Report on Form 10-Q for the quarter
              ended June 30, 2001).

     3.1.2**  Amendment to Amended and Restated Certificate of Incorporation of
              Knology, Inc.

     3.2      Bylaws of Knology, Inc. (Incorporated herein by  reference to
              Exhibit 3.2 to Knology Inc. Registration Statement on Form S-1
              (File No. 333-89179)).




                                       59

<PAGE>

     4.1      Indenture dated as of October 22, 1997 between Knology Holdings,
              Inc. and United States Trust Company of New York, as Trustee,
              relating to the 11 7/8% Senior Discount Notes Due 2007 of Knology
              Holdings, Inc. (Incorporated herein by reference to Exhibit 4.1 to
              Knology Holdings, Inc.'s Registration Statement on Form S-4 (File
              No. 333-43339)).

     4.2      Form of Senior Discount Note (contained in Exhibit 4.1).

     4.3      Form of Exchange Note (contained in Exhibit 4.1).

    10.1      Stockholders Agreement dated February 7, 2000 among Knology, Inc.,
              Certain holders of the Series A preferred stock, the holders of
              Series B Preferred stock, certain management holders and certain
              additional stockholders (Incorporated herein by reference to
              Exhibit 10.84 to Knology, Inc.'s Post-Effective Amendment No. 2 to
              Form S-1 (File No. 333-89179)).

    10.1.1    Amendment No.1 to Stockholders Agreement, dated as of February 7,
              2000, by and among Knology, Inc. and the other signatories
              thereto, dated as of January 12, 2001, by and among Knology, Inc.
              and the other signatories thereto (Incorporated herein by
              reference to Exhibit 10.2 to Knology, Inc.'s Current Report on
              Form 8-K filed January 26, 2001).

    10.1.2    Joinder Agreement, dated as of January 12, 2001, by and among
              Knology, Inc. and the stockholders thereof who are signatories
              thereto (Incorporated herein by reference to Exhibit 10.3 to
              Knology, Inc.'s Current Report on Form 8-K filed January 26,
              2001).

    10.2      Lease Agreement dated April 15, 1996 by and between D.L. Jordan
              and American Cable Company, Inc. (Incorporated herein by reference
              to Exhibit 10.5 to Knology Holdings, Inc.'s Registration Statement
              on Form S-4 (File No. 333-43339)).

    10.3      Pole Attachment Agreement dated January 1, 1998 by and between
              Gulf Power Company and Beach Cable, Inc. (Incorporated herein by
              reference to Exhibit 10.7 to Knology Holdings, Inc.'s Registration
              Statement on Form S-4 (File No. 333-43339)).

    10.4      Telecommunications Facility Lease and Capacity Agreement, dated
              September 10, 1996, by and between Troup EMC Communications, Inc.
              and Cybernet Holding, Inc. (Incorporated herein by reference to
              Exhibit 10.16 to Knology Holdings, Inc.'s Registration Statement
              on Form S-4 (File No. 333-43339)).

    10.5      Master Pole Attachment agreement dated January 12, 1998 by and
              between South Carolina Electric and Gas and Knology Holdings, Inc.
              d/b/a/ Knology of Charleston (Incorporated herein by reference to
              Exhibit 10.17 to Knology Holdings, Inc.'s Registration Statement
              on Form S-4 (File No. 333-43339)).

    10.6      Lease Agreement, dated December 5, 1997 by and between The Hilton
              Company and Knology of Panama City, Inc. (Incorporated herein by
              reference to Exhibit 10.25 to Knology Holdings, Inc.'s
              Registration Statement on Form S-4 (File No. 333-43339))

    10.7      Certificate of Membership with National Cable Television
              Cooperative, dated January 29, 1996, of Cybernet Holding, Inc.
              (Incorporated herein by reference to Exhibit 10.34 to Knology
              Holdings, Inc.'s Registration Statement on Form S-4 (File No.
              333-43339)).

    10.8      Ordinance No. 99-16 effective March 16, 1999 between Columbus
              consolidated Government and Knology of Columbus Inc. (Incorporated
              herein by reference to Exhibit 10.18 to Knology Holdings, Inc.'s
              Annual Report on Form 10-K for the year ended December 31, 1998).




                                       60

<PAGE>

    10.9      Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990
              (Incorporated herein by reference to Exhibit 10.44 to Knology
              Holdings, Inc.'s Registration Statement on Form S-4 (File No.
              333-43339)).

    10.10     Ordinance No. 50-76 (Montgomery, Alabama) (Incorporated herein by
              reference to Exhibit 10.45 to Knology Holdings, Inc.'s
              Registration Statement on Form S-4 (File No. 333-43339)).

    10.11     Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990
              (Incorporated herein by reference to Exhibit 10.45.1 to Knology
              Holdings, Inc.'s Registration Statement on Form S-4 (File No.
              333-43339)).

    10.12     Resolution No. 58-95 (Montgomery, Alabama) dated April 6, 1995
              (Incorporated herein by reference to Exhibit 10.46 to Knology
              Holdings, Inc.'s Registration Statement on Form S-4 (File No.
              333-43339)).

    10.13     Resolution No. 97-22 (Panama City Beach, Florida) dated
              December 3, 1997 (Incorporated herein by reference to Exhibit
              10.49 to Knology Holdings, Inc.'s Registration Statement on Form
              S-4 (File No. 333-43339)).

    10.14     Ordinance No. 5999 (Augusta, Georgia) dated January 20, 1998
              (Incorporated herein by reference to Exhibit 10.53 to Knology
              Holdings, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1997).

    10.15     Ordinance No. 1723 (Panama City, Florida) dated March 10, 1998
              (Incorporated herein by reference to Exhibit 10.54 to Knology
              Holdings, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1997).

    10.16     Franchise Agreement (Charleston County, South Carolina) dated
              December 15, 1998 (Incorporated herein by reference to Exhibit
              10.31 to Knology Holdings, Inc.'s Annual Report on Form 10-K for
              the year ended December 31, 1998).

    10.17     Ordinance No. 1998-47 (North Charleston, South Carolina) dated
              May 28, 1998 (Incorporated herein by reference to Exhibit 10.32 to
              Knology Holdings, Inc.'s Annual Report on Form 10-K for the year
              ended December 31, 1998).

    10.18     Ordinance No. 1998-77 (Charleston, South Carolina) dated April 28,
              1998 (Incorporated herein by reference to Exhibit 10.33 to Knology
              Holdings, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1998).

    10.19     Ordinance No. 98-5 (Columbia County, Georgia) dated August 18,
              1998 (Incorporated herein by reference to Exhibit 10.34 to Knology
              Holdings, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1998).

    10.20     Network Access Agreement dated July 1, 1998 between SCANA
              Communications, Inc., f/k/a MPX Systems, Inc. and Knology
              Holdings, Inc. (Incorporated herein by reference to Exhibit 10.36
              to Knology Holdings, Inc.'s Annual Report on Form 10-K for the
              year ended December 31, 1998).

    10.21***  Master Agreement for Internet Access Services dated January 2,
              2002, by and between ITC/\DeltaCom, Inc. and Knology, Inc.

    10.22     Collocation Agreement for Multiple Sites dated on or about June
              1998 between Interstate FiberNet, Inc. and Knology Holdings, Inc.
              (Incorporated herein by reference to Exhibit 10.38 to Knology
              Holdings, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1998).



                                       61

<PAGE>

    10.23     Lease Agreement dated October 12, 1998 between Southern Company
              Services, Inc. and Knology Holdings, Inc. (Incorporated herein by
              reference to Exhibit 10.39 to Knology Holdings, Inc.'s Annual
              Report on Form 10-K for the year ended December 31, 1998).

    10.24     Facilities Transfer Agreement dated February 11, 1998 between
              South Carolina Electric and Gas Company and Knology Holdings,
              Inc., d/b/a Knology of Charleston (Incorporated herein by
              reference to Exhibit 10.40 to Knology Holdings, Inc.'s Annual
              Report on Form 10-K for the year ended December 31, 1998).

    10.25     License Agreement dated March 3, 1998 between BellSouth
              Telecommunications, Inc. and Knology Holdings, Inc. (Incorporated
              herein by reference to Exhibit 10.41 to Knology Holdings, Inc.'s
              Annual Report on Form 10-K for the year ended December 31, 1998).

    10.26     Pole Attachment Agreement dated February 18, 1998 between Knology
              Holdings, Inc. and Georgia Power Company (Incorporated herein by
              reference to Exhibit 10.44 to Knology Holdings, Inc.'s Annual
              Report on Form 10-K for the year ended December 31, 1998).

    10.27     Assignment Agreement dated March 4, 1998 between Gulf Power
              Company and Knology of Panama City, Inc. (Incorporated herein by
              reference to Exhibit 10.46 to Knology Holdings, Inc.'s Annual
              Report on Form 10-K for the year ended December 31, 1998).

    10.28     Interconnection Agreement, effective September 9,  2000 among
              BellSouth Telecommunications, Inc., Knology of Alabama, Inc.,
              Knology of Florida, Inc., Knology of Georgia, Inc., Knology of
              Kentucky, Inc., Knology of North Carolina, Inc., Knology of South
              Carolina, Inc., and Knology of Tennessee, Inc. (Incorporated
              herein by reference to Exhibit 10.28 to Knology, Inc.'s Annual
              Report on Form 10K for the year ended December 31, 2000).

    10.29     Carrier Services Agreement dated July 16, 2001 between Business
              Telecom, Inc. And Knology, Inc. (Incorporated herein by reference
              to Exhibit 10.2 to Knology, Inc.'s Quarterly Report on Form 10-Q
              for the quarter ended September 30, 2001).

    10.30     Reseller Services Agreement dated September 9, 1998 between
              Business Telecom, Inc. and Knology Holdings, Inc. (Incorporated
              herein by reference to Exhibit 10.51 to Knology Holdings, Inc.'s
              Annual Report on Form 10-K for the year ended December 31, 1998).

    10.31     Private Line Services Agreement dated September 10, 1998 between
              BTI Communications Corporation and Knology Holdings, Inc.
              (Incorporated herein by reference to Exhibit 10.52 to Knology
              Holdings, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1998).

    10.32     Credit Facility Agreement between First Union National Bank,
              First Union Capital Markets Corp. and Knology Holdings, Inc. dated
              December 22, 1998 (Incorporated herein by reference to Exhibit
              10.53 to Knology Holdings, Inc.'s Annual Report on Form 10-K for
              the year ended December 31, 1998).

    10.32.1   First Amendment to Credit Facility Agreement, dated as of July 8,
              1999 (Incorporated herein by reference to Exhibit 10.4.1 to
              Knology, Inc.'s Quarterly Report on Form 10-Q for the quarter
              ended March 31, 2001).

    10.32.2   Second Amendment to Credit Facility Agreement, dated as of
              November 24, 1999 (Incorporated herein by reference to Exhibit
              10.4.2 to Knology, Inc.'s Quarterly Report on Form 10-Q for the
              quarter ended March 31, 2001).




                                       62

<PAGE>

    10.32.3   Third Amendment to Credit Facility Agreement, dated as of
              March 31, 2000 (Incorporated herein by reference to Exhibit 10.4.3
              to Knology, Inc.'s Quarterly Report on Form 10-Q for the quarter
              ended March 31, 2001).

    10.32.4   Fourth Amendment to Credit Facility Agreement, dated as of
              September 30, 2000 (Incorporated herein by reference to Exhibit
              10.4.4 to Knology, Inc.'s Quarterly Report on Form 10-Q for the
              quarter ended March 31, 2001).

    10.32.5   Fifth Amendment to Credit Facility Agreement, dated as of
              March 31, 2001 (Incorporated herein by reference to Exhibit 10.4.5
              to Knology, Inc.'s Quarterly Report on Form 10-Q for the quarter
              ended March 31, 2001).

    10.32.6   Sixth Amendment to Credit Facility Agreement, dated as of
              November 7, 2001 (Incorporated herein by reference to Exhibit
              10.3.1 to Knology, Inc.'s Quarterly Report on Form 10-Q for the
              quarter ended September 30, 2001).

    10.32.7** Seventh Amendment to Credit Facility Agreement, dated as
              of January 1, 2002.

    10.33     Tax Separation Agreement between ITC Holding and Knology, Inc.
              (Incorporated herein by reference for Exhibit 10.59 to Knology,
              Inc.'s Registration Statement on Form S-1 (File No. 333-89179)).

    10.34     Right of First Refusal and Option Agreement, Dated November 19,
              1999 by and between Knology of Columbus, Inc. and ITC Service
              Company, Inc. (Incorporated herein by reference to Exhibit 10.60
              to Knology, Inc.'s Registration Statement on Form S-1 (File No.
              333-89179)).

    10.35     Services Agreement dated November 2, 1999 between Knology, Inc.
              and ITC Service Company, Inc. (Incorporated herein by reference to
              Exhibit 10.61 to Knology, Inc.'s Registration Statement on Form
              S-1 (File No. 333-89179)).

    10.36     Support Agreement, dated November 2, 1999 between Interstate
              Telephone Company, Inc. and ITC Service Company, Inc.
              (Incorporated herein by reference to Exhibit 10.62 to Knology,
              Inc.'s Registration Statement on Form S-1 (File No. 333-89179)).

    10.37     1995 Knology Holdings, Inc. Stock Option Plan, assumed by Knology,
              Inc. as of November 23, 1999 (Incorporated herein by reference to
              Exhibit 10.63 to Knology, Inc.'s Registration Statement on Form
              S-1 (File No. 333-89179)).

    10.38     Knology, Inc. Long Term Incentive Plan (Incorporated  herein by
              reference to Exhibit 10.64 to Knology, Inc.'s Registration
              Statement on Form S-1 (File No. 333-89179)).

    10.39     Warrant Agreement, dated as of December 3, 1999, between  Knology,
              Inc. and United States Trust Company of New York (including form
              of Warrant Certificate) (Incorporated herein by reference to
              Exhibit 10.65 to Knology, Inc.'s Registration Statement on Form
              S-1 (File No. 333-89179)).

    10.40     Warrant Registration Rights Agreement, dated as of December 3,
              1999, between Knology, Inc. and United States Trust Company of
              New York (Incorporated herein by reference to Exhibit 10.66 to
              Knology, Inc.'s Registration Statement on Form S-1 (File No.
              333-89179)).

    10.41     Knology, Inc. Spin-Off Plan (Incorporated  herein by reference to
              Exhibit 10.71 to Knology, Inc.'s Registration Statement on Form
              S-1 (File No. 333-89179)).

    10.42     Residual Note from Knology, Inc. to ITC Holding Company, Inc.
              (Incorporated herein by reference to Exhibit 10.74 to Knology,
              Inc.'s Registration Statement on Form S-1 (File No. 333-89179)).




                                       63

<PAGE>

    10.46     Joint Ownership Agreement dated as of December 8, 1998, among ITC
              Service Company, Powertel, Inc., ITC/\DeltaCom Communications,
              Inc. and Knology Holdings, Inc. (Incorporated herein by reference
              to Exhibit 10.48 to Knology, Inc.'s Annual Report on Form 10-K for
              the year ended December 31, 1999).

    10.47     On/Line Operating and License Agreement dated March 18, 1998
              between Knology Holdings, Inc. and CableData, Inc. (Incorporated
              herein by reference to Exhibit 10.49 to Knology, Inc.'s Annual
              Report on Form 10-K for the year ended December 31, 1999).

    10.48     Dedicated Capacity  Agreement between DeltaCom and Knology
              Holdings, Inc. dated August 22, 1997. (Incorporated herein by
              reference to Exhibit 10.50 to Knology, Inc.'s Annual Report on
              Form 10-K for the year ended December 31, 1999).

    10.49     Agreement for Telecommunications Services dated April 28, 1999
              between ITC/\DeltaCom Communications, Inc. and Knology Holdings,
              Inc. (Incorporated herein by reference to Exhibit 10.51 to
              Knology, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1999).

    10.50     Amendment to Master Capacity Lease dated November 1, 1999 between
              Interstate Fibernet, Inc. and Knology Holdings, Inc. (Incorporated
              herein by reference to Exhibit 10.52 to Knology, Inc.'s Annual
              Report on Form 10-K for the year ended December 31, 1999).

    10.51     Duct Sharing Agreement dated July 27, 1999 between Knology
              Holdings, Inc. and Interstate Fiber Network. (Incorporated herein
              by reference to Exhibit 10.53 to Knology, Inc.'s Annual Report on
              Form 10-K for the year ended December 31, 1999).

    10.52     Assumption of Lease Agreement dated November 9, 1999 between
              Knology Holdings, Inc. ITC Holding Company, Inc. and J. Smith
              Lanier II. (Incorporated herein by reference to Exhibit 10.54 to
              Knology, Inc.'s Annual Report on Form 10-K for the year ended
              December 31, 1999).

    10.53     Assumption of Lease Agreement dated November 9, 1999 among Knology
              Holdings, Inc. ITC Holding Company, Inc. and Midtown Realty, Inc.
              (Incorporated herein by reference to Exhibit 10.55 to Knology,
              Inc.'s Annual Report on Form 10-K for the year ended December 31,
              1999).

    10.54     Contract for Centrex Switching Services dated January 4, 1999
              between Interstate Telephone Company and InterCall, Inc.
              (Incorporated herein by reference to Exhibit 10.56 to Knology,
              Inc.'s Annual Report on Form 10-K for the year ended December 31,
              1999).

    10.55     Series C Preferred Stock Purchase Agreement, dated as of
              January 12, 2001, by and among Knology, Inc. and each of those
              persons and entities whose names are set forth on Exhibit A
              thereto (Incorporated herein by reference to Exhibit 10.1 to
              Knology, Inc.'s Current Report on Form 8-K filed January 26,
              2001).

    10.55     Master Loan Agreement, dated as of June 29, 2001, by and between
              CoBank, ACB and Globe Telecommunications, Inc., Interstate
              Telephone Company and Valley Telephone Co., Inc. (Incorporated
              herein by reference to Exhibit 10.1 to Knology, Inc.'s Quarterly
              Report on Form 10-Q for the quarter ended September 30, 2001).

    10.55.1   First Supplement to the Master Loan Agreement, dated as of
              June 29, 2001, by and between CoBank, ACB and Globe
              Telecommunications, Inc., Interstate Telephone Company and Valley
              Telephone Co., Inc. (Incorporated herein by reference to Exhibit
              10.1.1 to Knology, Inc.'s Quarterly Report on Form 10-Q for the
              quarter ended September 30, 2001).




                                       64

<PAGE>

    10.55.2   Promissory Note, dated June 29, 2001, made by Globe
              Telecommunications, Inc., Interstate Telephone Company and Valley
              Telephone Co., Inc. in favor of CoBank, ACB (Incorporated herein
              by reference to Exhibit 10.1.2 to Knology, Inc.'s Quarterly Report
              on Form 10-Q for the quarter ended September 30, 2001).

    10.55.3   Stock Pledge Agreement, dated as of June 29, 2001, by and between
              Globe Telecommunications, Inc. and CoBank, ACB (Incorporated
              herein by reference to Exhibit 10.1.3 to Knology, Inc.'s Quarterly
              Report on Form 10-Q for the quarter ended September 30, 2001).

    10.55.4   Security Agreement, dated as of June 29, 2001, made by Globe
              Telecommunications, Inc., Interstate Telephone Company and Valley
              Telephone Co., Inc. in favor of CoBank, ACB (Incorporated herein
              by reference to Exhibit 10.1.4 to Knology, Inc.'s Quarterly Report
              on Form 10-Q for the quarter ended September 30, 2001).

    10.55.5   Security Agreement, dated as of June 29, 2001, made by ITC Globe,
              Inc. in favor of CoBank, ACB (Incorporated herein by reference to
              Exhibit 10.1.5 to Knology, Inc.'s Quarterly Report on Form 10-Q
              for the quarter ended September 30, 2001).

    10.55.6   Continuing Guaranty, dated as of June 29, 2001 by ITC Globe, Inc.
              for the benefit of CoBank, ACB (Incorporated herein by reference
              to Exhibit 10.1.6 to Knology, Inc.'s Quarterly Report on Form 10-Q
              for the quarter ended September 30, 2001).

    10.55.7   Stock Pledge Agreement, dated as of June 29, 2001, by and between
              Knology, Inc. and CoBank, ACB (Incorporated herein by reference to
              Exhibit 10.1.7 to Knology, Inc.'s Quarterly Report on Form 10-Q
              for the quarter ended September 30, 2001).

    10.56**   Subordinated Intercompany Credit Agreement Promissory Note, dated
              January 1, 2002 made by KNOLOGY Broadband, Inc. in favor of
              KNOLOGY, Inc.

    10.56.1** Intercompany Loan Guaranty, dated as of January 1, 2002, executed
              by KNOLOGY of Columbus, Inc., KNOLOGY of Montgomery, Inc., KNOLOGY
              of Panama City, Inc., KNOLOGY of Augusta, Inc., KNOLOGY of
              Charleston, Inc, KNOLOGY of South Carolina, Inc., KNOLOGY of
              Alabama, and KNOLOGY of Florida, Inc., KNOLOGY of Huntsville,
              Inc., and KNOLOGY Broadband, Inc., as Guarantors in favor of
              KNOLOGY, Inc.

    10.56.2** Security Agreement, dated as of January 1, 2002, made by
              KNOLOGY Broadband, Inc., and certain undersigned Subsidiaries of
              KNOLOGY Broadband, Inc. in favor of KNOLOGY, Inc.

    10.56.3** Pledge Agreement, dated as of January 1, 2002, made by
              KNOLOGY Broadband, Inc., in favor of KNOLOGY, Inc.

    21.1**    Subsidiaries of Knology, Inc.

    23.1**    Consent of Arthur Andersen LLP

    99.1**    Letter from Knology, Inc. to the SEC regarding Arthur Andersen LLP

    99.2      Statement of the Chief Executive Officer and the Chief Financial
              Officer of Knology, Inc. pursuant to 18 U.S.C. (s)1350.

    ----------------
     *        Confidential treatment has been requested pursuant to Rule 24b-2
              of the Securities Exchange Act of 1934, as amended. The copy on
              file as an exhibit omits the information subject to the
              Confidentiality Request. Such omitted information has been filed
              separately with the commission.

    **        Previously filed.

                                       65

<PAGE>

       (b) REPORTS ON FORM 8-K.

       On March 11, 2002 Knology filed a current report on form 8-K reporting it
2001 fourth quarter and year-end results.


                                       66

<PAGE>

       (c) EXHIBITS

       We hereby file as part of this Form 10-K the Exhibits listed in the Index
to Exhibits.

       (d) FINANCIAL STATEMENT SCHEDULE

The following financial statement schedule is filed herewith:

       Schedule II--Valuation and Qualifying Accounts

       Schedules not listed above have been omitted because they are
inapplicable or the information required to be set forth therein is provided in
our Consolidated Financial Statements or notes thereto.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

The registrant has not sent an annual report or proxy materials to its security
holders.


                                       67

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized as of the 29th day
of October, 2002.

                              KNOLOGY, INC.

                              By:   /s/ Rodger L. Johnson
                              --------------------------------
                              Rodger L. Johnson
                              President and Chief Executive Officer


                                 CERTIFICATIONS


I, Rodger L. Johnson, President and Chief Executive Officer of Knology, Inc.,
certify that:

1. I have reviewed this annual report on Form 10-K of Knology, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

                                           /s/ Rodger L. Johnson
Date: October 29, 2002                     ________________________________
                                           Rodger L. Johnson
                                           President and Chief Executive Officer


I, Robert K. Mills, Chief Financial Officer of Knology, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Knology, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.

                                            /s/ Robert K. Mills
Date: October 29, 2002                      ________________________________
                                            Robert K. Mills
                                            Chief Financial Officer

                                       68

<PAGE>

                         KNOLOGY, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                      Page
                                                                      ----
<S>                                                                   <C>
Report of Independent Public Accountants ........................     F-2

Consolidated Balance Sheets--December 31, 2000 and 2001 .........     F-3

Consolidated Statements of Operations for the
   Years Ended December 31, 1999, 2000, and 2001 ................     F-4

Consolidated Statements of Stockholders' Equity
   and Comprehensive Loss for the Years Ended December 31,
   1999, 2000, and 2001 .........................................     F-5

Consolidated Statements of Cash Flows for the Years
    Ended December 31, 1999, 2000, and 2001 .....................     F-6

Notes to Consolidated Financial Statements ......................     F-7
</TABLE>



                                       F-1

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Knology, Inc.:

       We have audited the accompanying consolidated balance sheets of
KNOLOGY, INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31, 2000
and 2001 and the related consolidated statements of operations, stockholders'
equity and comprehensive loss and cash flows for each of the three years in the
period ended 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 audits.

       We conducted our audits 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 audits provide a reasonable basis
for our opinion.

       In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Knology,
Inc. and subsidiaries as of December 31, 2000 and 2001 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.

       The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and is in an unfavorable working capital and uncertain liquidity
position that raises substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are also described in
Note 1. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
company be unable to continue as a going concern.

/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia
February 7, 2002


THE ABOVE REPORT OF ARTHUR ANDERSEN LLP IS A COPY OF THE PREVIOUSLY ISSUED
REPORT OF ARTHUR ANDERSEN LLP, AND THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.



                                       F-2

<PAGE>

                         KNOLOGY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                   --------------------------
                                                                                      2000           2001
                                                                                   --------       -----------
                                     ASSETS
<S>                                                                                <C>            <C>
CURRENT ASSETS:
      Cash (including $14,004 of restricted cash as of December 31, 2001)
        (Note 2)................................................................   $ 20,628         $ 38,074
      Accounts receivable, net of allowance for doubtful accounts
        of $748 and $811 as of December 31, 2000 and 2001,
        respectively ...........................................................     10,697           13,420
      Accounts receivable--affiliates ..........................................      3,326              594
      Prepaid expenses .........................................................      1,231              946
                                                                                   --------         --------
                 Total current assets ..........................................     35,882           53,034

PROPERTY, PLANT AND EQUIPMENT:
      System and installation equipment ........................................    392,868          467,977
      Test and office equipment ................................................     25,099           40,717
      Automobiles and trucks ...................................................      8,025            9,855
      Production equipment .....................................................        887              669
      Land .....................................................................      3,260            3,748
      Buildings ................................................................     16,614           16,998
      Inventory ................................................................     31,705           24,846
      Leasehold improvements ...................................................      1,883            2,133
                                                                                   --------         --------
                                                                                    480,341          566,943
      Less accumulated depreciation and amortization ...........................   (102,920)        (166,092)
                                                                                   --------         --------
                 Property, plant, and equipment, net ...........................    377,421          400,851
                                                                                   --------         --------
OTHER LONG-TERM ASSETS:
      Intangible assets, net ...................................................     57,489           44,363
      Deferred issuance costs, net .............................................      6,977            5,479
      Investments ..............................................................     11,472           12,625
      Other ....................................................................        165              188
                                                                                   --------         --------
                 Total assets ..................................................   $489,406         $516,540
                                                                                   ========         ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
      Current portion of notes payable .........................................   $     12         $ 17,096
      Accounts payable .........................................................     30,442           18,102
      Accrued liabilities ......................................................     14,028           10,583
      Unearned revenue .........................................................      4,318            6,636
                                                                                   --------         --------
                 Total current liabilities .....................................     48,800           52,417

NONCURRENT LIABILITIES:
      Notes payable ............................................................     15,562           31,331
      Unamortized investment tax credits .......................................        299              182
      Senior discount notes, net of discount ...................................    352,054          339,486
                                                                                   --------         --------
                 Total noncurrent liabilities ..................................    367,915          370,999
                                                                                   --------         --------
                 Total liabilities .............................................    416,715          423,416
                                                                                   --------         --------
COMMITMENTS AND CONTINGENCIES (NOTE 5)
WARRANTS (NOTE 3) ..............................................................      4,726            4,726
                                                                                   --------         --------
STOCKHOLDERS' EQUITY:
  Series A preferred stock, $.01 par value per share; 75,000,000 shares
      authorized, 50,912,155 and 50,990,888 shares issued and outstanding
      at December 31, 2000 and 2001, respectively ..............................        509              510
  Series B preferred stock, $.01 par value per share; 50,000,000
      shares authorized, 21,180,131 and  21,180,131, shares issued and
      outstanding at December 31, 2000 and 2001, respectively ..................        212              212
  Series C preferred stock, $.01 par value per share; 50,000,000
      shares authorized, 0 and  37,219,562, shares issued and
      outstanding at December 31, 2000 and 2001, respectively (Note 7) .........          0              372
  Common stock, $.01 par value per share; 200,000,000 shares
      authorized, 443,301 and 502,194 shares issued and outstanding
      at December 31, 2000 and 2001, respectively ..............................          4                5

      Additional paid-in capital ...............................................    247,730          394,741
      Accumulated deficit ......................................................   (180,490)        (307,442)
                                                                                   --------         --------
                 Total stockholders' equity ....................................     67,965           88,398
                                                                                   --------         --------
                 Total liabilities and stockholders' equity ....................   $489,406         $516,540
                                                                                   ========         ========

</TABLE>


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

                                      F-3

<PAGE>
                         KNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                            YEAR ENDED DECEMBER 31,
                                                                              --------------------------------------------------
                                                                                  1999                2000                2001
                                                                                  ----                ----                ----
<S>                                                                           <C>                <C>                <C>
OPERATING REVENUES:
    Video .................................................................   $   35,166         $   41,821         $     48,834
    Voice .................................................................       28,774             34,943               44,793
    Data services and other ...............................................        2,781              5,809               12,562
                                                                              ----------         ----------         ------------
            Total operating revenues ......................................       66,721             82,573              106,189
                                                                              ----------         ----------         ------------
OPERATING EXPENSES:
    Costs and expenses, excluding depreciation and amortization ...........       72,925             89,735              105,791
    Depreciation and amortization .........................................       40,970             60,672               78,954
                                                                              ----------         ----------         ------------
            Total operating expenses ......................................      113,895            150,407              184,745
                                                                              ----------         ----------         ------------
OPERATING LOSS ............................................................      (47,174)           (67,834)             (78,556)
                                                                              ----------         ----------         ------------
OTHER INCOME (EXPENSE):
        Interest income ...................................................        1,479              4,858                2,724
        Interest expense ..................................................      (34,309)           (39,715)             (42,793)
        Affiliate interest expense, net ...................................         (114)                (2)                   0
        Other income (expense), net .......................................          107             (1,373)                (834)
                                                                              ----------         ----------         ------------
            Total other expense ...........................................      (32,837)           (36,232)             (40,903)
                                                                              ----------         ----------         ------------
LOSS BEFORE  MINORITY INTERESTS, INCOME TAXES,
     AND EXTRAORDINARY ITEM ...............................................      (80,011)          (104,066)            (119,459)
MINORITY INTERESTS ........................................................        3,268                  0                    0
                                                                              ----------         ----------         ------------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM ...........................      (76,743)          (104,066)            (119,459)
INCOME TAX BENEFIT (PROVISION) ............................................       19,697              3,170               (2,789)
                                                                              ----------         ----------         ------------
LOSS BEFORE EXTRAORDINARY ITEM ............................................      (57,046)          (100,896)            (122,248)
EXTRAORDINARY GAIN ON DEBT EXTINGUISHMENT (Note 3) ........................            0                  0               31,875
                                                                              ----------         ----------         ------------
NET LOSS ..................................................................      (57,046)          (100,896)             (90,373)
SUBSIDIARY PREFERRED STOCK DIVIDENDS ......................................       (1,745)                 0                    0
NON-CASH DISTRIBUTION TO PREFERRED
    STOCKHOLDERS (Note 7) .................................................            0                  0              (36,579)
                                                                              ----------         ----------         ------------
NET LOSS ATTRIBUTABLE TO COMMON
    STOCKHOLDERS ..........................................................   $  (58,791)        $ (100,896)        $   (126,952)
                                                                              ==========         ==========         ============
</TABLE>


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

                                      F-4

<PAGE>
                         KNOLOGY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             AND COMPREHENSIVE LOSS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                       SERIES A                       SERIES B                      SERIES C
                                                    PREFERRED STOCK               PREFERRED STOCK                PREFERRED STOCK
                                             --------------------------    ----------------------------    -------------------------
                                                 SHARES          AMOUNT         SHARES           AMOUNT       SHARES          AMOUNT
                                             ---------------     ------    ---------------       ------    --------------     ------
<S>                                          <C>                 <C>       <C>                    <C>      <C>                <C>
BALANCE, December 31, 1998 ...............              0        $  0                 0           $  0             0           $  0
Comprehensive Loss:
    Net loss attributable to common
      stockholders .......................
    Unrealized loss on marketable
      securities .........................
         Comprehensive Loss ..............
Exercise of stock options ................
Reorganization (Note 1) ..................     48,035,531         480
Acquisition of minority interest .........
Additional infusion of equity ............
Exercise of SCANA warrants ...............
                                             ------------       -----        ----------           ----    ----------           -----
BALANCE, December 31, 1999 ...............     48,035,531        $480                 0           $  0             0           $  0
Comprehensive Loss:
    Net loss attributable to common
      stockholders .......................
    Unrealized loss on marketable
      securities .........................
         Comprehensive Loss ..............
Exercise of stock options ................      2,876,624          29
Private Placement /Reorganization (Note 1)                                   21,180,131            212
ITC Holding loan conversion ..............
                                             ------------       -----        ----------           ----    ----------           -----
BALANCE, December 31, 2000 ...............     50,912,155        $509        21,180,131           $212             0           $  0
Comprehensive Loss:
    Net loss attributable to common
      stockholders .......................
         Comprehensive Loss ..............
Non-Cash Distribution to Preferred
   Shareholders (Note 7) .................
Exercise of stock options ................         78,733           1                                              -
Private Placement ........................                                                                37,149,262            371
Stock issued for purchase of land ........                                                                    70,300              1
                                             ------------       -----        ----------           ----    ----------           -----
BALANCE, December 31, 2001 ...............     50,990,888        $510        21,180,131           $212    37,219,562           $372
                                             ============       =====        ==========           ====    ==========           =====

</TABLE>

<TABLE>
<CAPTION>

                                                                        ADDITIONAL                    UNREALIZED         TOTAL
                                             COMMON STOCK                PAID-IN       ACCUMULATED      GAINS        STOCKHOLDERS'
                                                SHARES       AMOUNT      CAPITAL         DEFICIT       (LOSSES)         EQUITY
                                             ------------    ------     ---------      -----------    ----------     -------------
<S>                                          <C>             <C>        <C>            <C>            <C>            <C>
BALANCE, December 31, 1998 ...............         100        $ 0       $ 75,312        $ (20,803)     $   2             54,511
Comprehensive Loss:
    Net loss attributable to common
      stockholders .......................                                                (58,791)                      (58,791)
    Unrealized loss on marketable
      securities .........................                                                               (33)               (33)
                                                                                                                     -----------
         Comprehensive Loss ..............                                                                              (58,824)
                                                                                                                     -----------
Exercise of stock options ................       6,476          0          1,318                                          1,318
Reorganization (Note 1) ..................        (100)        (0)          (480)                                             -
Acquisition of minority interest .........                                36,967                                         36,967
Additional infusion of equity ............                                 2,025                                          2,025
Exercise of SCANA warrants ...............                                 1,925                                          1,925
                                             ---------     -------     ---------       -----------     -----         ----------
BALANCE, December 31, 1999 ...............       6,476        $ 0      $ 117,067       $  (79,594)     $ (31)            37,922
Comprehensive Loss:
    Net loss attributable to common
      stockholders .......................                                               (100,896)                     (100,896)
    Unrealized loss on marketable
      securities .........................                                                                31                 31
                                                                                                                     -----------
         Comprehensive Loss ..............                                                                             (100,865)
                                                                                                                     -----------
Exercise of stock options ................     436,825          4          1,137                                          1,170
Private Placement /Reorganization (Note 1)                                99,800                                        100,012
ITC Holding loan conversion ..............                                29,726                                         29,726
                                             ---------     -------     ---------       -----------     -----         ----------
BALANCE, December 31, 2000 ...............     443,301        $ 4      $ 247,730       $ (180,490)       ($0)            67,965
Comprehensive Loss:
    Net loss attributable to common
      stockholders .......................                                                (90,373)                      (90,373)
                                                                                                                     -----------
         Comprehensive Loss ..............                                                                              (90,373)
                                                                                                                     -----------
Non-Cash Distribution to Preferred
   Shareholders (Note 7) .................                                36,579          (36,579)                            -
Exercise of stock options ................      58,893          1            891                                            893
Private Placement ........................                               109,331                                        109,702
Stock issued for purchase of land ........                                   210                                            211
                                             ---------     -------     ---------       -----------     -----         ----------
BALANCE, December 31, 2001 ...............     502,194        $ 5      $ 394,741       $ (307,442)       ($0)          $ 88,398
                                             =========     =======     =========       ===========     =====         ==========


</TABLE>

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

                                       F-5

<PAGE>
                         KNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                               YEAR ENDED DECEMBER 31,
                                                                                     -----------------------------------------
                                                                                     1999                2000             2001
                                                                                     ----                ----             ----
<S>                                                                                 <C>               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss ....................................................................  $(57,046)         $(100,896)       $(90,373)
     Adjustments to reconcile net loss to net cash
        provided (used in) by operating activities:
       Depreciation and amortization .............................................    40,970             60,672          78,954
       Amortization of bond discount .............................................    35,845             40,152          42,948
       Extraordinary gain on early extinguishment of debt ........................         0                  0         (31,875)
       Gain (loss) on disposition of assets ......................................        (7)               344             427
       Deferred income taxes .....................................................      (322)                 0               0
       Interest related to exercise of warrants ..................................       795                  0               0
       Cash surrender value of life insurance ....................................       387                  0               0
       Amortization of deferred investment tax credit ............................       (72)               (72)            (72)
       Other deferred credits ....................................................         0                  0             (45)
       Minority interest in net loss of subsidiary ...............................    (3,268)                 0               0
       Changes in operating assets and liabilities:
         Accounts receivable .....................................................    (5,623)            (1,659)         (2,699)
         Accounts receivable--affiliate ..........................................         0             14,918           2,710
         Prepaid expenses and other ..............................................      (280)              (411)            242
         Accounts payable ........................................................    (4,423)            15,303         (12,340)
         Accrued liabilities .....................................................    (5,269)             6,995          (3,446)
         Unearned revenue ........................................................       549                538           2,318
                                                                                    --------          ---------        --------
          Total adjustments ......................................................    59,282            136,780          77,122
                                                                                    --------          ---------        --------
           Net cash provided by (used in) operating activities ....................     2,236             35,884         (13,251)
                                                                                    --------          ---------        --------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures ........................................................   (87,386)          (146,706)        (86,696)
     Organizational and franchise cost expenditures ..............................         0             (1,402)         (1,367)
     Proceeds from the sale of investments .......................................    60,162              6,069               0
     Proceeds from sale of property ..............................................        75                276              99
     Dividends from affiliate /return of capital .................................    (1,745)                 0               0
     Investment in ClearSource ...................................................      (587)            (8,223)         (1,108)
     Other .......................................................................       165                  0             (45)
                                                                                    --------          ---------        --------
           Net cash used in investing activities .................................   (29,316)          (149,986)        (89,117)
                                                                                    --------          ---------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments on debt and short-term borrowings ........................       (12)            (3,549)            (11)
     Expenditures related to issuance of debt ....................................       (52)              (109)           (442)
     Proceeds from private placement, net of offering expenses ...................         0            100,011         109,702
     Proceeds from credit facility ...............................................    19,000                  0               0
     Proceeds from affiliate loan ................................................     9,641             29,726               0
     Proceeds from the issuance of subsidiary common stock .......................        10                  0               0
     Proceeds from the issuance of warrants ......................................     1,130                  0               0
     Proceeds from the contribution of ClearSource ...............................     5,663                  0               0
     Proceeds from long-term debt facility .......................................         0                  0          32,482
     Stock options exercised .....................................................     1,308              1,170             946
     Expenditures related to reorganization ......................................      (849)                 0               0
     Repurchase of senior discount notes .........................................         0                  0         (22,810)
     Advances to affiliates ......................................................    (6,099)              (338)            (53)
                                                                                    --------          ---------        --------
         Net cash provided by financing activities ...............................    29,740            126,911         119,814
                                                                                    --------          ---------        --------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................................     2,660             12,809          17,446
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ...................................     5,159              7,819          20,628
                                                                                    --------          ---------        --------
CASH AND CASH EQUIVALENTS AT END OF YEAR .........................................  $  7,819             20,628        $ 38,074
                                                                                    ========          =========        ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the year for interest ......................................  $    670          $   1,903        $  2,758
                                                                                    ========          =========        ========
     Cash received during period for income taxes ................................  $  9,274          $  16,656        $    712
                                                                                    ========          =========        ========
     Subsidiary preferred stock dividends ........................................  $  1,745          $       0        $      0
                                                                                    ========          =========        ========

Stock issued for purchase of land ................................................  $      0          $       0        $    211
                                                                                    ========          =========        ========

</TABLE>


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

                                      F-6

<PAGE>

                         KNOLOGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 2000, AND 2001

                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. ORGANIZATION, NATURE OF BUSINESS, AND BASIS OF PRESENTATION

ORGANIZATION

       Knology, Inc. (the "Company") was a wholly owned subsidiary of ITC
Holding Company, Inc. ("ITC Holding") through February 2000 and was incorporated
under the laws of the State of Delaware in September 1998. The purpose of
incorporating the Company was to enable ITC Holding to complete a reorganization
of certain of its wholly owned and majority-owned subsidiaries on November 23,
1999 (the "Reorganization"), as follows:

       a. ITC Holding contributed all of the outstanding capital stock of
          Interstate Telephone, Inc; Valley Telephone Co, Inc.; Globe
          Telecommunications, Inc.; and ITC Globe, Inc. to the Company
          (collectively, the "Telephone Operations Group").

       b. ITC Holding contributed its 85% interest in Knology Broadband, Inc.
          ("Knology Broadband") to the Company.

       c. ITC Holding contributed a note in the principal amount of $9,600,
          which was subsequently converted into equity.

       d. ITC Holding contributed its 6% interest in ClearSource, Inc.
          ("ClearSource"), $5,700 in cash to purchase additional ClearSource
          shares, and subscription rights to purchase ClearSource shares to the
          Company.

       e. Other minority shareholders exchanged the remaining 15% of Knology
          Broadband for shares of stock of the Company.

       As a result of the Reorganization, the Telephone Operations Group and
Knology Broadband and subsidiaries are now wholly owned subsidiaries of the
Company. Immediately following the Reorganization, ITC Holding held a 90%
interest in the Company. ITC Holding currently does not own any capital stock of
the Company following the distribution of the Company's shares to ITC Holding's
shareholders, which was completed in February 2000.

       The Reorganization has been accounted for in a manner similar to a
pooling of interest for the Telephone Operations Group. Knology Broadband and
subsidiaries have been consolidated with the Company since 1998 in relation to
the 85% controlling interest obtained in July 1998, which was recorded at ITC
Holding's historical cost. During 1999, the 15% of Knology Broadband that the
Company did not own has been reflected as minority interest and the pro rata
losses attributed to the minority holders to the extent that their investment
was greater than zero in accordance with Financial Accounting Standards Board
Current Text on Consolidation and Statement of Financial Accounting Standards
No. 94.

       The exchange of the remaining 15% of Knology Broadband for shares of
stock of the Company was accounted for as an acquisition of a minority interest
of a subsidiary. The stock issued in the exchange was valued at $22,400 and was
recorded as goodwill since the book value of net assets acquired (which
approximated fair value) was less than zero. The Company had recorded 100% of
Knology Broadband's losses since Knology Broadband's equity was less than zero.

       In January 2000, InterCall, Inc., a subsidiary of ITC Holding, loaned
the Company $29,700 to fund capital expenditures and working capital. The loan,
which had a maturity date of March 31, 2000, provided that InterCall could elect
to convert it into options to purchase Series A preferred stock. In February
2000, InterCall converted the loan into options to purchase 6,258,036 shares of
our Series A preferred stock, and the Company issued ITC Holding a note under
which we will pay ITC Holding any proceeds from option exercises received by us,
including an amount equal to the exercise price for cashless exercises.

       In February 2000, ITC Holding distributed to its option holders options
to purchase 6,258,036 shares of the Company's Series A preferred stock and
distributed to its shareholders 43,211,531 shares of the Company's Series A
preferred stock (the "Distribution").


                                       F-7

<PAGE>


NATURE OF BUSINESS

       Knology Broadband and its subsidiaries own and operate advanced
interactive broadband networks and provide residential and business customers
broadband communications services, including analog and digital cable
television, local and long-distance telephone, high-speed Internet access, and
broadband carrier services to various markets in the southeastern United States.

       The Telephone Operations Group is wholly owned and provides a full line
of local telephone and related services and broadband services. Certain of the
Telephone Operations Group subsidiaries are subject to regulation by state
public service commissions of applicable states for intrastate
telecommunications services. For applicable interstate matters related to
telephone service, certain Telephone Operations Group subsidiaries are subject
to regulation by the Federal Communications Commission.

BASIS OF PRESENTATION

       The consolidated financial statements are prepared on the accrual basis
of accounting and include the accounts of the Company and its wholly owned and
majority-owned subsidiaries. Investments in which the Company does not exercise
significant control are accounted for using the cost method of accounting. All
significant intercompany balances have been eliminated. Certain prior year
amounts have been reclassed to be consistent with current year presentation.

FINANCIAL CONDITION

       The Company has experienced operating losses as a result of the
expansion of the advanced broadband communications networks and services into
new and existing markets. The Company expects to continue to focus on increasing
its customer base and expanding its broadband operations. Accordingly, the
Company expects that it will continue to experience operating losses.

       The Company is subject to various risks in connection with the
operation of its business including, among other things, (i) changes in external
competitive market factors, (ii) inability to satisfy anticipated working
capital or other cash requirements, (iii) changes in the Company's business
strategy or an inability to execute is strategy due to unanticipated changes in
the market, (iv) various competitive factors that may prevent the Company from
competing successfully in the marketplace, and (v) the Company's lack of
liquidity and its ability to raise additional capital. The Company has $617 of
working capital, $307,442 of accumulated deficit and $370,817 of long-term debt
as of December 31, 2001. Management is evaluating alternatives to improve the
Company's capital structure, including the Knology Broadband senior discount
notes. Funding of the Company's working capital needs, current and future
operating losses, debt service requirements, and future expansion will require
continuing capital investment. During 2001, the Company issued to certain
existing investors and a select group of new accredited investors in private
placement transactions 37,219,562 shares of Series C preferred stock at a
purchase price of $3.00 per share, for aggregate proceeds of $111,659. The
Company has historically relied on debt and equity financing to meet its funding
requirements and plans to continue to rely on debt and equity financing to fund
its capital needs, however, there can be no assurance that sufficient debt or
equity funding will continue to be available in the future or that it will be
available on terms acceptable to the Company. Failure to obtain sufficient
capital could materially affect the Company's operations and expansion
strategies. As a result of the aforementioned factors and related uncertainties,
there is substantial doubt about the Company's ability to continue as a going
concern.

       Management is currently in discussions with ITC Telecom Ventures, Inc.,
a current investor and related party, to negotiate a commitment whereby ITC will
commit to purchase, at a price, and on terms and conditions, to be negotiated
and agreed to by the parties, up to $19,500 of debt or equity securities of the
Company during the year ended December 31, 2002. The ITC commitment will be
contingent upon the Company's successful restructuring of its capital structure,
including the Knology Broadband senior discount notes. If the Company is
successful in the efforts to restructure its capital structure and is able to
enter into the $19,500 commitment with ITC, the financing obtained through the
commitment should allow the Company to meet its obligations and operate as a
going concern.


                                       F-8

<PAGE>


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING ESTIMATES

       The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amount 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.

UNAUDITED PRO FORMA NET LOSS

       Following the Distribution, the Company became a separate taxable
entity. Accordingly, the pro forma income taxes reflect income taxes as if the
Company were a separate taxable entity.

                                                       YEAR ENDED DECEMBER 31,
                                                       -----------------------
                                                       1999            2000
                                                       ----            ----
UNAUDITED PRO FORMA DATA:
Pro forma income tax benefit ........................  $      0     $       0
                                                       --------     ---------
Pro forma net loss attributable to
   common stockholders ..............................  $(78,488)    $(104,066)
                                                       --------     ---------


CASH

       At December 31, 2001, $14,004 in cash was restricted for use only by
Interstate Telephone, Inc., Valley Telephone Co., Inc. and Globe
Telecommunications, Inc., the borrowers of the CoBank loan (Note 3). The CoBank
loan agreement requires that the cash provided by the operations of the
borrowers and cash proceeds from the credit facility be used only by the
borrowers for specific purposes.

PROPERTY, PLANT, AND EQUIPMENT

       Property, plant, and equipment are stated at cost. Depreciation and
amortization are calculated using the straight-line method over the estimated
useful lives of the assets, commencing when the asset is installed or placed in
service. Maintenance, repairs, and renewals are charged to expense as incurred.
The cost and accumulated depreciation of property and equipment disposed of are
removed from the related accounts, and any gain or loss is included in or
deducted from income. Depreciation and amortization (excluding telephone plant)
are provided over the estimated useful lives as follows:

                                                  YEARS
                                                  -----
Buildings ......................................     25
System and installation equipment ..............   7-10
Production equipment ...........................      9
Test and office equipment ......................    3-7
Automobiles and trucks .........................      5
Leasehold improvements .........................   5-20

       Depreciation of telephone plant is provided on a straight-line method,
using class or overall group rates acceptable to regulatory authorities. Such
rates range from 2% to 24%. Depreciation expense for the years ended December
31, 1999, 2000 and 2001 was $25,222, $41,976 and $63,333, respectively.



                                      F-9

<PAGE>

       Inventories are valued at the lower of cost or market (determined on a
weighted average basis) and include customer premise equipment and certain plant
construction materials. These items are transferred to system and installation
equipment when installed.

       Interest is capitalized in connection with the construction of the
Company's broadband networks. The capitalized interest is recorded as part of
the asset to which it relates and is amortized over the asset's estimated useful
life. Approximately $3,040, $2,329 and $2,430 of interest cost was capitalized
in 1999, 2000 and 2001, respectively.

INTANGIBLE ASSETS

       Intangible assets include the excess of the purchase price of
acquisitions over the fair value of net assets acquired as well as various other
acquired intangibles. Intangible assets and the related useful lives and
accumulated amortization at December 31, 2000 and 2001 are as follows:

                                                            AMORTIZATION
                                                               PERIOD
                                    2000        2001           (YEARS)
                                    ----        ----           -------
Goodwill .........................  $56,291      $56,291        10-40
Subscriber base ..................   34,429       34,757          3
Noncompete agreement .............    1,500        1,500          3
Other ............................    1,808        2,846        10-15
                                    -------      -------        -----
                                     94,028       95,394
Less accumulated amortization ....   36,539       51,031
                                    -------       ------
Intangibles, net .................  $57,489      $44,363
                                    =======      =======

       The Financial Accounting Standards Board ("FASB") issued SFAS No. 141,
"Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible
Assets", in June 2001. SFAS No. 141 requires all business combinations initiated
after June 30, 2001 to be accounted for using the purchase method. The Company
had no business combinations initiated after June 30, 2001. SFAS No. 142
provides that goodwill is no longer subject to amortization over its estimated
useful life. It requires that goodwill be assessed for impairment on at least an
annual basis by applying a fairvalue-based test.

      The Company adopted SFAS No. 142 on January 1, 2002. The Company has
performed a goodwill impairment test in accordance with SFAS No. 142. Based on
the results of the goodwill impairment test, the Company expects to record an
impairment loss of $1,294 in the first quarter of 2002 as a cumulative effect of
change in accounting principle.

       During 2001 the Company recorded approximately $4,794 in amortization of
goodwill. Excluding the impaired assets noted above amortization expense would
have been $4,760. Effective January 1, 2002, the Company will no longer record
amortization of goodwill. A goodwill impairment test will be performed at least
annually on January 1.

DEFERRED ISSUANCE COSTS

       Deferred issuance costs include costs associated with the issuance of
debt and the consummation of credit facilities (Note 3). Deferred issuance costs
and the related useful lives and accumulated amortization at December 31, 2000
and 2001 are as follows:

                                                                AMORTIZATION
                                                                   PERIOD
                                       2000        2001           (YEARS)
                                       ----        ----           -------
Deferred issuance costs                $ 9,542      $ 9,173         4-10
Accumulated amortization                (2,565)      (3,694)
                                       -------      -------
Deferred issuance costs, net           $ 6,977      $ 5,479
                                       =======      =======


                                       F-10

<PAGE>


LONG-LIVED ASSETS

       The Company reviews its long-lived assets, such as property and
equipment and other intangible assets, for impairment at each balance sheet date
or whenever events or changes in circumstances indicate that the carrying amount
of an asset should be assessed. Management evaluates the tangible and intangible
assets related to each acquisition individually to determine whether an
impairment has occurred. An impairment is recognized when the undiscounted
future cash flows estimated to be generated by the assets are not sufficient to
recover the unamortized balance of the asset. Estimates of future cash flows are
based on many factors, including current operating results, expected market
trends, and competitive influences. If an impairment has occurred, a loss equal
to the difference between the carrying value of the asset and its fair value is
recognized. The resulting reduced carrying amount of the asset is accounted for
as its new cost and depreciated over the asset's remaining useful life.
Management believes that the long-lived assets in the accompanying consolidated
balance sheets are appropriately valued.

INVESTMENTS

       Investments and equity ownership in associated companies consisted of
the following at December 31, 2000 and 2001:

                                                         2000        2001
                                                         ----        ----
Nonmarketable investments, at cost:
ClearSource common and preferred stock,
   2,127,625 and 2,238,388 shares in 2000 and
   2001, respectively ................................  $11,467     $12,575

Grande Communications common stock, 500,000 and
   500,000 shares in 2000 and 2001, respectively .....        5           5

Hybrid Networks, Inc. common stock, 0 and 90,000
   shares in 2000 and 2001, respectively .............        0          45
                                                        -------     -------
Total investments ....................................  $11,472     $12,625
                                                        =======     =======

       At December 31, 2001, the Company, through its wholly owned
subsidiaries, owned approximately 9.7% of ClearSource. ClearSource was formed
during 1998 to build and operate advanced broadband networks offering a bundle
of communications services to residential and business customers. The Company's
investment in ClearSource, Grande and Hybrid Networks are accounted for under
the cost method of accounting.

ACCRUED LIABILITIES

Accrued liabilities at December 31, 2000 and 2001 consists of the following:

                                                    2000         2001
                                                    ----         ----
Accrued expenses, including accrued accounts
  payable .....................................   $12,651       $8,012
Accrued property taxes ........................       298          857
Accrued compensation ..........................       913        1,124
Accrued interest ..............................       166          590
                                                  -------      -------
                  Total .......................   $14,028      $10,583
                                                  =======      =======

REVENUE RECOGNITION

       The Company's revenues are recognized when services are provided,
regardless of the period in which they are billed. Fees billed in advance are
included in the accompanying consolidated balance sheets as unearned revenue and
are deferred until the month the service is provided.

ADVERTISING COSTS

       The Company expenses all advertising costs as incurred. Approximately
$1,476, $1,980 and $3,308 of advertising expense are recorded in the Company's
consolidated statements of operations for the years ended December 31, 1999,
2000, and 2001, respectively.

INSTALLATION FEES

       The Company recognizes installation revenue when the customer is
initially billed for the connection of services as the installation direct costs
exceed installation revenue on a per customer basis.



                                       F-11

<PAGE>

SOURCES OF SUPPLIES

       The Company purchases customer premise equipment and plant materials
from outside vendors. Although numerous suppliers market and sell customer
premise equipment and plant materials, the Company currently purchases each
customer premise component from a single vendor and has several suppliers for
plant materials. If the suppliers are unable to meet the Company's needs as it
continues to build out its network infrastructure, then delays and increased
costs in the expansion of the Company's network could result, which would
adversely affect operating results.

CREDIT RISK

       The Company's accounts receivable potentially subject the Company to
credit risk, as collateral is generally not required. The Company's risk of loss
is limited due to advance billings to customers for services and the ability to
terminate access on delinquent accounts. The potential for material credit loss
is mitigated by the large number of customers with relatively small receivable
balances. The carrying amount of the Company's receivables approximates their
fair values.

INCOME TAXES

       The Company utilizes the liability method of accounting for income
taxes, as set forth in SFAS No. 109, "Accounting for Income Taxes." Under the
liability method, deferred taxes are determined based on the difference between
the financial and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Deferred
tax benefit represents the change in the deferred tax asset and liability
balances (Note 6).

       For the year ended December 31, 1999 and the short period ended
February 4, 2000, prior to the Distribution, the Company was included in the
consolidated tax return of ITC Holding. Under a tax sharing arrangement, the
Company recorded an income tax benefit of $3,170 and $0 and a receivable in the
amount of $2,962 and $465 at December 31, 2000 and 2001, respectively, for the
utilization of net operating losses included in the consolidated tax return of
ITC Holding.

       Included in the receivable at December 31, 2000 was an alternative
minimum tax ("AMT") credit carry-forward of $2,334. An AMT credit can be carried
forward indefinitely as a credit against regular tax liability. However, because
the Company has historically had, and is expected to have, net operating losses,
it is more likely than not that the benefit of the tax credit will not be
realized. Accordingly, a reserve has been recorded against the $2,334 AMT
credit.

       Since the distribution, the Company has been a separate taxable entity.
The Company recorded an income tax provision of $2,789 at December 31, 2001,
which includes the $2,334 reserve discussed above.

       The Company and all of its subsidiaries file a consolidated Alabama
income tax return. The Company and its subsidiaries with all operations in
Georgia file a consolidated Georgia income tax return. The remaining
subsidiaries file separate state income tax returns.

       Investment tax credits related to telephone plant have been deferred
and are being amortized as a reductions of federal income tax expense over the
estimated useful lives of the assets giving rise to the credits.

COMPREHENSIVE LOSS

       The Company follows SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
loss and its components in a full set of general purpose financial statements.
The Company has chosen to disclose comprehensive loss, which consists of net
loss and unrealized gains (losses) on marketable securities, in the consolidated
statements of stockholders' equity and comprehensive loss.



                                       F-12

<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

       In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations." SFAS No. 143, addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement is effective for fiscal years
beginning after June 15, 2002. The Company is currently assessing the impact of
this new standard.

       In July 2001, the FASB issued SFAS No. 144, "Impairment or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001. The provisions of this statement provide a single accounting model for
impairment of long-lived assets. The Company does not expect to be impacted by
the adoption of this new standard.

3. LONG-TERM DEBT

       Long-term debt at December 31, 2000 and 2001 consists of the following:

<TABLE>
<CAPTION>
                                                                                               2000            2001
                                                                                               ----            ----
<S>                                                                                           <C>           <C>
Senior Discount Notes including interest, with a face value of
   $379,894,000, bearing interest at 11.875% beginning October 15,
   2002, interest payable semiannually beginning April 15, 2003 with
   principal and any unpaid interest due October 15, 2007 ..................................  $352,054      $339,486
Senior secured First Union credit facility, at a rate of LIBOR plus 2.5%,
   interest payable quarterly with principal and any unpaid
   interest due November 15, 2002 ..........................................................    15,465        15,465
Senior secured CoBank term credit facility, currently at a rate of 7.5%,
  interest payable quarterly, principal payments due quarterly beginning July 20,
  2002 with final principal and any unpaid interest due April 20, 2011 .....................         0        32,482
Capitalized lease obligation, at a rate of 10% paid off in 2001 ............................       109             0
Capitalized lease obligation, at a rate of 7%, with monthly principal and interest
  payments through October 2011 ............................................................         0           480
                                                                                              --------      --------
                                                                                               367,628       387,913
Less current maturities ....................................................................        12        17,096
                                                                                              --------      --------
                                                                                              $367,616      $370,817
                                                                                              --------      --------
</TABLE>

       Following are maturities of long-term debt for each of the next five
years as of December 31, 2001:

2002 .......................... $  17,096
2003 ..........................     3,372
2004 ..........................     3,634
2005 ..........................     3,916
2006 ..........................     4,220
Thereafter ....................   460,326
                                  -------
Total .........................  $492,564
                                 ========

       The fair value of the Senior Discount Notes at December 31, 2001 is
estimated to be approximately $156,164 based on the closing bond price at
year-end.


                                       F-13

<PAGE>


       In the fourth quarter of 1997, Knology Broadband issued units consisting
of senior discount notes due in 2007 and warrants to purchase Preferred Stock
for gross proceeds of approximately $250,000. The notes were offered at a
substantial discount from face value, with no interest payable for the first
five years. Approximately $2,500 of the gross proceeds has been allocated to the
warrants. Each warrant allowed the holder to purchase .003734 shares of Knology
Broadband's preferred stock at an exercise price of $0.01 per share. The
warrants have been exchanged for warrants to purchase Knology, Inc. Series A
preferred stock. The warrants may be exercised at any time after October 22,
1998 and will expire on October 22, 2007. Upon a repurchase event, including a
change of control, Knology must make an offer to repurchase for cash all
outstanding warrants. Knology Broadband incurred approximately $7,900 in costs
to issue the senior discount notes. These costs are being amortized at an
effective rate over the life of the notes. The indenture relating to the notes
contains certain covenants that, among other things, limit the ability of
Knology Broadband to incur indebtedness, pay dividends, prepay subordinated
indebtedness, repurchase capital stock, make investments, engage in transactions
with stockholders and affiliates, create liens, sell assets, and engage in
mergers and consolidations. The proceeds from the offering of the units have
been, and will be, used to repay certain indebtedness of Knology Broadband, to
fund expansion of Knology Broadband's business, and for additional working
capital and general corporate purposes.

       On December 22, 1998, Knology Broadband entered into a $50,000
four-year senior secured credit facility with First Union National Bank and
First Union Capital Markets Corp., which may be used for working capital and
other purposes, including capital expenditures and permitted acquisitions. At
Knology Broadband's option, interest will accrue based on either the Alternate
Base Rate plus applicable margin or the LIBOR rate plus applicable margin as
defined. Obligations under the credit facility are secured by substantially all
tangible and intangible assets of Knology Broadband and its current and future
subsidiaries. The credit facility includes a number of covenants, including,
among others, covenants limiting the ability of Knology Broadband and its
subsidiaries and their present and future subsidiaries to incur debt, create
liens, pay dividends, make distributions or stock repurchases, make certain
investments, engage in transactions with affiliates, sell assets, and engage in
certain mergers and acquisitions. The credit facility also includes covenants
requiring compliance with certain operating and financial ratios on a
consolidated basis. The credit facility allows Knology Broadband to borrow up to
five times certain individual subsidiary's "consolidated adjusted cash flow" as
defined in the credit facility. In connection with the initiation of the
revolving credit facility, Knology Broadband incurred approximately $1,397 in
related costs which are being amortized on a straight-line basis over the
five-year term.

       During the third and fourth quarters of 2001, the Company repurchased
senior discount notes with a face amount of $64,206 and a carrying amount of
$55,516. The Company paid cash of approximately $22,810 to repurchase the notes.
The transaction resulted in an extraordinary gain of $31,875, consisting of a
gain of $32,706 due to the discount, offset by $831 for the writeoff of debt
issue costs associated with the original issuance of the notes in October 1997.

       On June 29, 2001, the Company, through its wholly owned subsidiaries,
Globe Telecommunications, Inc., Interstate Telephone Company and Valley
Telephone Co., Inc. (the "Borrowers"), entered into a $40,000 secured master
loan agreement with CoBank, ACB. This master loan agreement allows the Borrowers
to make one or more advances in an amount not to exceed $40,000. The loan
proceeds may be used to purchase senior discount notes issued by Knology
Broadband and to finance capital expenditures, working capital and for general
corporate purposes of the Borrowers. Obligations under the loan agreement are
secured by substantially all tangible and intangible assets of the Borrowers.
The master loan agreement contains a number of covenants that restrict the
ability of the Borrowers to take certain actions, including the ability to incur
indebtedness; create liens; merge or consolidate with any other entity; make
distributions or stock repurchases; make investments; engage in transactions
with affiliates; and sell or transfer assets. The master loan agreement also
includes covenants requiring compliance with certain operating and financial
ratios of the Borrowers on a consolidated basis.

4. OPERATING LEASES

       The Company leases office space, utility poles, and other assets for
varying periods. Leases that expire are generally expected to be renewed or
replaced by other leases.


                                       F-14

<PAGE>

       Future minimum rental payments required under the operating leases that
have initial or remaining noncancelable lease terms in excess of one year as of
December 31, 2001 are as follows:

 2002 ........................................   1,094
 2003 ........................................     852
 2004 ........................................     728
 2005 ........................................     704
 2006 ........................................     501
 Thereafter ..................................   2,952
                                                ------
       Total minimum lease payments ..........  $6,831
                                                ======

       Total rental expense for all operating leases was approximately $745,
$1,127 and $1,167 for the years ended December 31, 1999, 2000, and 2001,
respectively.

5. COMMITMENTS AND CONTINGENCIES

   PURCHASE COMMITMENTS

       The Company has entered into contracts with various entities to provide
programming to be aired by the Company. The Company pays a monthly fee as cost
for the programming services, generally based on the number of average
subscribers to the program, although some fees are adjusted based on the total
number of subscribers to the system and/or the system penetration percentage.
Certain contracts have minimum monthly fees. The Company estimates that it will
pay approximately $27,820 in programming fees under these contracts during 2001.

   LEGAL PROCEEDINGS

       In the normal course of business, the Company is subject to various
litigation; however, in management's opinion, there are no legal proceedings
pending against the Company which would have a material adverse effect on the
financial position, results of operations, or liquidity of the Company.

6. INCOME TAXES

       The benefit/(provision) for income taxes from continuing operations
consisted of the following for the years ended December 31, 1999, 2000, and
2001:

                                       1999              2000            2001
                                       ----              ----            ----
Current                               $19,376          $  3,170       $ (2,789)
Deferred                                9,276            31,381         38,318
Increase in valuation allowance.       (8,955)          (31,381)       (38,318)
                                      -------          --------       --------
Income tax benefit(provision)         $19,697          $  3,170       $ (2,789)
                                      =======          ========       ========




                                       F-15

<PAGE>

       Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The significant
components of deferred tax assets and liabilities as of December 31, 2000 and
2001 are as follows:

                                                        2000          2001
                                                        ----          ----
Deferred tax assets:
   Net operating loss carryforwards ................... $ 37,973     $ 65,342
   Equity in losses of subsidiaries ...................    1,189        1,189
   Deferred bond interest .............................   38,914       54,521
   Deferred revenues ..................................      660          639
   Alternative minimum tax credit carryforward ........        0        2,334
   Other ..............................................    2,311        2,254
   Valuation allowance  ...............................  (56,113)     (94,431)
                                                        --------     --------
      Total deferred tax assets .......................   24,934       31,848
Deferred tax liabilities:
   Depreciation and amortization  .....................   24,934       31,848
                                                        --------     --------
Net deferred income taxes ............................. $      0     $      0
                                                        ========     ========

       At December 31, 2001 the Company had available federal net operating
loss carryforwards of approximately $169,000 which expire from 2011 to 2021. The
Company also had various state net operating loss carryforwards totaling
approximately $248,600. Unless utilized, the state net operating loss
carryforwards expire from 2006 to 2021. Management has recorded a total
valuation allowance of $94,431 against its deferred tax assets including the
operating loss carryforwards, the majority of which contain limitations on
utilization.

       A reconciliation of the income tax provision computed at statutory tax
rates to the income tax provision for the years ended December 31, 1999, 2000,
and 2001 is as follows:

                                                  1999        2000       2001
                                                  ----        ----       ----
 Income tax benefit at statutory rate ..........   34%         34%        34%
 State income taxes, net of federal benefit ....    3           3          3
 Other .........................................    0          (6)         3
 Increase in valuation allowance ...............  (12)        (28)       (42)
                                                  ---         ---        ---
 Income tax benefit (provision) ................   25%          3%       (2)%
                                                  ===         ===        ===


       Investment tax credits related to telephone plant have been deferred
and are being amortized as a reduction of federal income tax expense over the
estimated useful lives of the assets giving rise to the credits.

7. EQUITY INTERESTS

   CAPITAL TRANSACTIONS

       During 2001, the Company issued to certain existing investors and a
select group of new accredited investors in private placement transactions
37,219,562 shares of Series C preferred stock at a purchase price of $3.00 per
share, for aggregate proceeds of $111,659. In connection with the private
placement, the Company amended its amended and restated certificate of
incorporation to adjust the ratios at which the Series A preferred stock and
Series B preferred stock convert into common stock. Prior to the completion of
the private placement of Series C preferred stock, both the shares of Series A
preferred stock and shares of Series B preferred stock converted into shares of
common stock on a one-to-one basis. As amended, each share of Series A preferred
stock converts into 1.0371 shares of common stock and each share of Series B
preferred stock converts into 1.4865 shares of common stock. In January 2001, a
non-cash dividend of $36,579 was recognized in conjunction with the issuance of
Series C preferred stock and the amendment of the conversion ratios of the
Company's Series A preferred stock and Series B preferred stock into common
stock.


                                      F-16

<PAGE>

       The Company has authorized 200,000,000 shares of $.01 par value common
stock, 75,000,000 shares of $.01 par value Series A convertible preferred stock,
50,000,000 shares of $.01 par value Series B convertible preferred stock, and
50,000,000 shares of $.01 par value Series C convertible stock.

       The holders of Series A, B and C preferred stock have the right to vote
together with the holders of common stock, on an as-converted basis, on all
matters presented to the holders of common stock. Additionally, the holders of
Series A, B and C preferred stock, each voting as a separate class, have the
right to approve certain matters, including:

       .    authorizations, designations or issuances any new class or series of
            the Company's securities with rights and preferences superior to, or
            in parity with, that series of preferred stock;

       .    authorizations, designations or issuances of shares of that series
            of preferred stock;

       .    amendments of the Company's certificate of incorporation or bylaws
            in a way that materially adversely affects the holders of that
            series of preferred stock; or

       .    voluntary dissolutions of the Company.

       Further Knology's preferred stockholders have the right to approve
certain business combinations and redemptions of Knology's stock. Additionally,
the preferred stockholders have the right to approve any amendment, modification
or waiver of the terms of their respective series of preferred stock.

       In February 2000, ITC Holding distributed to its option holders options
to purchase 6,258,036 shares of the Company's Series A preferred stock and
distributed to its shareholders 43,211,531 shares of the Company's Series A
preferred stock.

       On February 7, 2000, the Company completed a private placement of
shares of its Series B preferred stock to a small group of institutional
investors and certain officers of the Company for approximately $100,600 or
$4.75 per share.

       In connection with the Reorganization (Note 1), the Company's warrant
holders elected to exchange the Bond Warrants of Knology Broadband for warrants
in Knology, Inc.'s preferred stock. Knology Broadband's Bond Warrants were
subsequently canceled.

KNOLOGY, INC. STOCK OPTION PLANS

       In November 1999, the Company assumed the Knology Broadband 1995 stock
option plan (the "1995 Plan"). Each outstanding option to purchase stock of
Knology Broadband was converted into an option to purchase four shares of common
stock of the Company at the same time the stock option plan was assumed.

       Under the 1995 Plan, as adopted in December 1995 and amended in
February 1998, 8,000,000 shares of Knology, Inc.'s common stock are reserved and
authorized for issuance upon the exercise of the options.

       In November 1999 the board of directors and stockholders approved the
Knology, Inc. 1999 Long-term Incentive Plan ("Long-term Incentive Plan"). This
plan authorizes the issuance of up to 8,000,000 shares of common stock pursuant
to awards.

       Upon the reorganization, all employees of the Company became eligible
to receive stock options under the Company's 1995 Plan and Long-term Incentive
Plan.

       Both plans are administered by the compensation and stock option
committee of the board of directors. Options granted under the plans are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended. All options are granted at an
exercise price equal to the estimated fair value of the common stock at the
dates of grant as determined by the board of directors based on equity
transactions and other analyses. The options expire ten years from the date of
grant.

KNOLOGY, INC. SERIES A PREFERRED SPIN-OFF OPTIONS

       Prior to the Distribution, ITC Holding sponsored a stock option plan
which provided for the granting of stock options to substantially all employees
of ITC Holding and its wholly owned and majority-owned subsidiaries, including
the employees of the Company's telephone operations group. Options were
generally granted at a price (established by ITC Holding's board of directors
based on equity transactions and other analyses) equal to at least 100% of the
fair market value of ITC Holding's common stock on the option grant date.
Options granted generally became exercisable 40% after two years and 20% per
annum for the next three years and remained exercisable for ten years after the
option grant date. At February 4, 2000 (the effective date of the spin-off for
option holders), employees of the Company held options outstanding for a total
of 410,463 of ITC Holding's shares at option prices ranging from $1.45 to $19.82
per share.


                                       F-17

<PAGE>

       In connection with the spin-off, stock options outstanding under ITC
Holding's stock option plan were adjusted. Each ITC Holding option holder
received 1.09153 options of Series A Preferred shares in the Company (the
"Spin-off Options"). The Spin-off Options were at exercise prices that preserved
the economic benefit of the ITC Holding options at the spin-off date. As a
result, options for 6,258,036 shares of the Company's Series A Preferred Stock
were issued under the Spin-off Plan at exercise prices ranging from $.08 per
share to $3.70 per share.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

       The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation," which defines a fair value-based method of accounting for an
employee stock option or similar equity instrument and encourages all entities
to adopt that method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure compensation
cost for those plans using the method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting methodology required
by APB Opinion No. 25 must make pro forma disclosures of net income and, if
presented, earnings per share as if the fair value-based method of accounting
defined in SFAS No. 123 had been applied.

       The Company accounts for Knology, Inc.'s Stock Option Plans and the
Spin-off Options under APB Opinion No. 25, under which no compensation cost has
been recognized by the Company. However, the Company has computed, for pro forma
disclosure purposes, the value of all options for shares of Knology, Inc.'s
common stock and Series A preferred stock to employees of the Company using the
Black-Scholes option pricing model and the following weighted average
assumptions in 1999, 2000, and 2001:

<TABLE>
<CAPTION>
                                 1999               2000               2001
                                 ----               ----               ----
                                                   Common
                                                   -------
<S>                            <C>                 <C>                <C>
Risk-free interest rate .....         5.78%         6.03%-6.88%       3.35%-5.08%
Expected dividend yield .....            0%                  0%                0%
Expected lives. .............  Seven years          Five years        Four years
Expected volatility .........           30%                 92%              121%

</TABLE>

<TABLE>
<CAPTION>
                                             Series A Preferred
                                             ------------------
<S>                                                <C>
Risk-free interest rate ...................         4.60%-7.49%
Expected dividend yield ...................                  0%
Expected lives ............................          Six years
Expected volatility .......................                 92%

</TABLE>

       The total fair value of options granted to employees under both plans
during 1999, 2000, and 2001 was computed as approximately $5,735, $3,040, and
$3,388, respectively, which would be amortized on a pro forma basis over the
four-year vesting period of the options.


                                       F-18

<PAGE>

       A summary of the status of the Stock Option Plan and the Long-term
Incentive Plan at December 31, 2001 is presented in the following table:

<TABLE>
<CAPTION>
                                                                                 WEIGHTED                      WEIGHTED
                                                                                 AVERAGE                       AVERAGE
                                                                                 EXERCISE       SERIES A       EXERCISE
                                                                  COMMON         PRICE PER      PREFERRED      PRICE PER
                                                                  SHARES          SHARE          SHARES         SHARE
                                                                  ------         ---------      ---------      ---------
<S>                                                              <C>             <C>            <C>            <C>
 Outstanding at December 31, 1998 .............................  2,768,672         $2.42          --            $--
    Granted ...................................................  4,625,376          2.85          --             --
    Forfeited .................................................   (816,604)         2.48          --             --
    Exercised .................................................     (6,400)         2.05          --             --
                                                                 ---------

 Outstanding at December 31, 1999 .............................  6,571,044          2.71          --             --
    Granted ...................................................  1,146,166          4.44          --             --
    Assumed at Spin-off .......................................    --                --         6,258,036       1.05
    Forfeited ................................................. (1,226,665)         2.93         (137,409)      1.85
    Exercised .................................................   (436,825)         2.34       (2,876,624)       .39
                                                                ----------                     -----------

 Outstanding at December 31, 2000 .............................  6,053,720          3.00        3,244,003       1.62
    Granted ...................................................  1,603,644          3.00          --             --
    Forfeited .................................................   (540,408)         3.08         (138,946)      3.36
    Exercised .................................................    (58,893)         2.64          (78,733)       .68
                                                                ----------                     ----------

 Outstanding at December 31, 2001 .............................  7,058,063         $2.99        3,026,324      $1.59
                                                                ==========                     ==========
 Exercisable shares as of December 31, 2001 ...................  2,875,180         $2.82        2,038,654      $1.25
                                                                ==========                     ==========
</TABLE>

       A summary of the status of the Telephone Operations Group's portion of
ITC Holding's stock option plan through the date of the spin-off is presented in
the following table:

                                                              WEIGHTED
                                                               AVERAGE
                                                              EXERCISE
                                                              PRICE PER
                                            SHARES              SHARE
                                           --------         ------------
Outstanding at December 31, 1998: .......  515,084          $ 1.29-$10.17
    Granted .............................   60,132          $15.89-$21.65
    Forfeited ...........................  (69,953)         $ 1.96-$18.85
    Exercised ...........................  (84,734)         $ 1.58-$ 3.50
                                           --------         -------------

Outstanding at December 31, 1999: .......   420,529         $ 1.29-$17.61
    Forfeited ...........................   (43,805)        $ 1.59-$14.44
    Exercised ...........................  (202,527)        $ 1.29-$10.17
                                           ---------        -------------

Outstanding at February 7, 2000 .........   174,197         $ 1.29-$17.61
                                           ========         =============






                                      F-19

<PAGE>

PRO FORMA NET LOSS

       If the Company had accounted for these plans in accordance with SFAS
No. 123, the Company's net loss for the periods presented would be as follows:

<TABLE>
<CAPTION>
                                                                                 AS
                                                                              REPORTED           PRO FORMA
                                                                              --------           ---------
<S>                                                                          <C>                 <C>
Net loss attributable to common stockholders for the years ended
    December 31:
    1999 .................................................................. $ (58,791)          $ (60,348)
    2000 ..................................................................  (100,896)           (102,998)
    2001 ..................................................................  (126,952)           (129,799)

</TABLE>


       The following table sets forth the exercise price range, number of
shares, weighted average exercise price, and remaining contractual lives by
groups of similar price and grant date:

COMMON SHARES

<TABLE>
<CAPTION>
                                                     WEIGHTED
                                                     AVERAGE              WEIGHTED
      RANGE OF             OUTSTANDING              REMAINING              AVERAGE         EXERCISABLE           AVERAGE
      EXERCISE               AS OF                 CONTRACTUAL             EXERCISE           AS OF              EXERCISE
       PRICES              12/31/2001                  LIFE                 PRICE           12/31/2001            PRICE
      --------             ----------              -----------            ---------        -----------           --------
<S>                        <C>                     <C>                     <C>             <C>                   <C>
    $2.00-$3.00             6,343,107                  7.7                 $2.80            2,690,814             $2.68
    $3.01-$4.75              714,713                   8.3                 $4.75              184,366             $4.75

</TABLE>

SERIES A PREFERRED SHARES


<TABLE>
<CAPTION>
                                                     WEIGHTED
                                                     AVERAGE              WEIGHTED
      RANGE OF             OUTSTANDING              REMAINING              AVERAGE         EXERCISABLE           AVERAGE
      EXERCISE               AS OF                 CONTRACTUAL             EXERCISE           AS OF              EXERCISE
       PRICES              12/31/2001                  LIFE                 PRICE           12/31/2001            PRICE
      --------             ----------              -----------            ---------        -----------           --------
<S>                        <C>                     <C>                     <C>             <C>                   <C>
    $0.00-$0.27               128,788                 2.00                   $0.23             128,788             $0.23
    $0.27-$1.71             1,726,382                 5.90                   $0.74           1,354,881             $0.66
    $1.72-$3.70             1,171,154                 8.58                   $2.91             554,985             $2.08

</TABLE>

       At December 31, 2001, 2,875,180 options for the Company's common shares
with a weighted average price of $2.81 per share were exercisable by employees
of the Company. At December 31, 2001, 2,038,654 options for the Company's Series
A preferred shares with a weighted average price of $1.25 per share were
exercisable by the employees of the Company.


                                       F-20

<PAGE>

8. RELATED-PARTY TRANSACTIONS

       ITC Holding occasionally provides certain administrative services, such
as legal and tax planning services, for the Company. The costs of these services
are charged to the Company based primarily on the salaries and related expenses
for certain of the ITC Holding executives and an estimate of their time spent on
projects specific to the Company. For the years ended December 31, 1999, 2000,
and 2001, the Company recorded approximately $2,574, $19, and $131,
respectively, in selling, operations, and administrative expenses related to
these services. In the opinion of management, amounts charged to the Company are
consistent with costs that would be incurred from third-party providers.

       Certain of ITC Holding's affiliates provide the Company with various
services and/or receive services provided by the Company. These entities include
InterCall, Inc., which provides conference calling services. In addition, the
Company receives services from ITC/\DeltaCom, Inc., an affiliate of ITC Holding,
which provides wholesale long-distance and related services and which leases
capacity on certain of its fiber routes. In management's opinion, the Company's
transactions with these affiliated entities are representative of arm's-length
transactions.

       For the years ended December 31, 1999, 2000, and 2001, the Company
received services from these affiliated entities in the amounts of approximately
$2,344, $2,567, and $3,888, respectively, which are reflected in cost of
services and selling, operations, and administrative expenses in the Company's
consolidated statements of operations.

       The Company also provides switching, programming, and other services
for various affiliated companies on a contracted or time and materials basis.
Total amounts paid by the affiliated companies for these services approximated
$1,795, $3,549, and $1,845 for the years ended December 31, 1999, 2000, and 2001
respectively, and are reflected in operating revenues in the Company's
consolidated statements of operations.

       Relatives of the stockholders of ITC Holding are stockholders and
employees of the Company's insurance provider. The costs charged to the Company
for insurance services were approximately $977, $1,239, and $1,211 for the years
ended December 31, 1999, 2000, and 2001, respectively.

9. UNAUDITED QUARTER-BY-QUARTER COMPARISON

       Summarized quarterly financial data for the years ended  December 31,
1999, 2000 and 2001 are as follows:

<TABLE>
<CAPTION>

                                           Quarters          First           Second            Third           Fourth
                                                             -----           ------            -----           ------
<S>                                                       <C>                <C>              <C>              <C>
1999
   Operating revenues ...................................      $15,238          $15,884          $17,702          $17,897
   Operating loss .......................................      (10,311)         (11,765)         (12,960)         (12,138)
   Net loss .............................................      (13,739)         (16,267)         (13,719)         (13,321)
   Subsidiary preferred stock dividends .................            0                0                0          (1,745)

2000
   Operating revenues ...................................       18,740           20,254           20,885           22,694
   Operating loss .......................................      (14,450)         (15,997)         (18,448)         (18,939)
   Net loss .............................................      (21,042)         (24,063)         (27,300)         (28,491)

2001
   Operating revenues ...................................       23,506           25,452           27,396           29,835
   Operating loss .......................................      (20,356)         (20,512)         (20,364)         (17,324)
   Extraordinary gain on debt extinguishment ............            0                0           29,394            2,481
   Net loss .............................................      (29,975)         (30,817)          (1,565)         (28,016)
   Non-cash distribution to preferred stockholders ......      (36,579)                0                0                0

</TABLE>


                                   F-21

<PAGE>

10. SEGMENT INFORMATION

       Effective January 1998, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which established
revised standards for the reporting of financial and descriptive information
about operating segments in financial statements. Management has identified the
reportable segments based on broadband services offered.

       While management of the Company monitors the revenue generated from
each of the various broadband services, operations are managed and financial
performance is evaluated based upon the delivery of a multiple of the services
to customers over a single network. As a result of multiple services being
provided over a single network, there are many shared expenses and shared assets
related to providing the various broadband services to customers. Management
believes that any allocation of the shared expenses or assets to the broadband
services would be arbitrary and impractical.

       The Company owns and operates advanced interactive broadband networks
and provides residential and business customers broadband communications
services, including video analog and digital cable television and local and
long-distance telephone.

       Internet services include high-speed Internet access via cable modems,
local transport services, such as local Internet transport, special access,
local private line, and local exchange transport services.

                                                      INTERNET
                                                      SERVICES
                            VIDEO     TELEPHONE       AND OTHER     CONSOLIDATED
                            -----     ---------       ---------     ------------
1999:
    Operating revenues ..  $35,166       $28,774        $2,781         $66,721
    Cost of services ....   15,067        11,601           297          26,965
                           -------       -------        ------         -------
    Gross margin ........  $20,099       $17,173        $2,484         $39,756
                           =======       =======        ======         =======

2000:
    Operating revenues ..  $41,821       $34,943        $5,809         $82,573
    Cost of services ....   18,433        11,962           615          31,010
                           -------       -------        ------         -------
    Gross margin ........  $23,388       $22,981        $5,194         $51,563
                           =======       =======        ======         =======

2001:
    Operating revenues ..  $48,834       $44,793       $12,562        $106,189
    Cost of services ....   23,206         8,270           993          32,469
                           -------       -------       -------         -------
    Gross margin ........  $25,628       $36,523       $11,569         $73,720
                           =======       =======       =======         =======



                                       F-22

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

       We have audited in accordance with auditing standards generally
accepted in the United States, the financial statements of KNOLOGY, INC.
included in this Annual Report on Form 10-K and have issued our report thereon
dated February 7, 2002. Our audit was made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The supplemental Schedule
II--Valuation and Qualifying Accounts ("Schedule II") is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a part of the basic
financial statements. The Schedule II has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth in relation to the basic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 7, 2002


THE ABOVE REPORT OF ARTHUR ANDERSEN LLP IS A COPY OF THE PREVIOUSLY ISSUED
REPORT OF ARTHUR ANDERSEN LLP, AND THE REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP.

                                       S-1

<PAGE>

                                   SCHEDULE II

                         KNOLOGY, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000, AND 2001

                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                              YEAR ENDED        YEAR ENDED        YEAR ENDED
                                                                             DECEMBER 31,      DECEMBER 31,      DECEMBER 31,
                                                                             ------------      ------------      ------------
                                                                                 1999              2000              2001
                                                                                 ----              ----              ----
<S>                                                                              <C>               <C>               <C>
Allowance for doubtful accounts, balance at beginning of year ............       $418              $695              $748
Addition charged to cost and expense .....................................      1,416              1,922             2,823
Deductions ...............................................................     (1,139)            (1,869)           (2,760)
                                                                               -------            -------           -------
Allowance for doubtful accounts, balance at end of year ..................       $695              $748              $811
                                                                                 ====              ====              ====

</TABLE>

                                       S-2