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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K/A



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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

COMMISSION FILE NUMBER: 000-32647

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KNOLOGY, INC.

(Exact name of registrant as specified in its charter)

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| | DELAWARE(State or other jurisdiction ofincorporation or organization) |  | 58-2424258(I.R.S. EmployerIdentification No.) | 
| | --------------------------------------------------------------------- |  | --------------------------------------------- | 

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

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

Securities registered pursuant to Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of the Act:Options to Purchase Shares of Common StockOptions to Purchase Shares of Series A Preferred StockSeries 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 o

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 by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).Yes o No x

The aggregate market value
of the voting and non-voting common equity held by non-affiliates is not applicable, as no public market exists for the voting or non-voting common equity of the registrant.

As of January 31, 2003, we had 503,197 shares of common stock, 51,040,457 shares of Series A preferred stock, 21,180,131 shares of Series B preferred stock, 50,219,562 shares of Series C preferred stock, 10,684,751
shares of Series D preferred stock and 21,701,279 shares of Series E preferred stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:None.

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TABLE OF CONTENTS



|         |  |                                                                                                | PAGE
|-------- |  | ---------------------------------------------------------------------------------------------- | ----
|         |  | PART I                                                                                         |     
|         |  |                                                                                                |     
|ITEM 1.  |  | BUSINESS                                                                                       | 1   
|ITEM 2.  |  | PROPERTIES                                                                                     | 31  
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                              | 31  
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            | 32  
|         |  |                                                                                                |     
|         |  |                                                                                                |     
|         |  | PART II                                                                                        |     
|         |  |                                                                                                |     
|ITEM 5.  |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                          | 33  
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                        | 34  
|ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          | 35  
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     | 48  
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    | 49  
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           | 49  
|         |  |                                                                                                |     
|         |  |                                                                                                |     
|         |  | PART III                                                                                       |     
|         |  |                                                                                                |     
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             | 50  
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                         | 53  
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 55  
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 | 58  
|ITEM 14. |  | CONTROLS AND PROCEDURES                                                                        | 59  
|         |  |                                                                                                |     
|         |  |                                                                                                |     
|         |  | PART IV                                                                                        |     
|         |  |                                                                                                |     
|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               | 60  

|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 IN ITEM 1 OF PART I 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.BUSINE
SS

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 or, Broadband. This transaction is described in more detail under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations.

Through 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.

We began expanding into Knoxville, Tennessee in early 2000, obtaining franchise agreements from the local governments and beginning
construction of a new interactive broadband network. We expect to complete construction of this network by 2004.

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.

Globe Telecommunications is a deregulated provider of telephone services for Interstate Telephone and Valley Telephone. Globe Telecommunications
provides local and long distance services to residential and business customers. Globe Telecommunications also provides competitive local telephone services to residential and business customers located in the Newnan, Fairburn and Union City,
Georgia markets.

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, 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.

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. 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 six 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



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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.

Subject to the availability of equity financing, 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, 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, 2002, video, voice and data and other services accounted for 42.8%, 41.4% and 15.8% of our consolidated revenue, respectively.



We have operating experience in the video, voice and data transmission industries and in the design, development and construction of communications
facilities, including more than six 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 Venture Capital Inc., AT&T Ventures, Wachovia Corporation and PNC Bancorp.



Our Financial Restructuring

On October 22, 1997, Broadband issued units consisting of the
Broadband discount notes and warrants to purchase preferred stock and received net proceeds of approximately $242.4 million. The Broadband discount notes were sold at a substantial discount from their principal amount at maturity and accreted to
face value of $444.1 million on October 15, 2002. Based on Broadbands plans for expansion and its expectations with respect to market conditions at the time of issuance of the Broadband discount notes, Broadband believed, at that time, that it
would be able to make the interest payments when they became due.

In order to reduce the amount of its outstanding debt, on June 29, 2001, Knology through
its wholly owned subsidiaries, Globe Telecommunications, Interstate Telephone and Valley Telephone, entered into a credit facility with CoBank ACB, $22.8 million of which was used in September and October 2001 by Valley Telephone to repurchase
Broadband discount notes with a principal amount at maturity of $64.2 million. As part of the restructuring described below, Valley Telephone surrendered those Broadband discount notes to Broadband in consideration for receipt from Broadband of a
$22.8 million guaranty of the CoBank credit facility.

For the year ended 2001, Knology reported a net loss of $90.4 million, and Broadband reported a net
loss of $122.9 million. Both companies reported record growth in connections and revenue for the year ended 2001. However, despite both companies improving operating performances, management was concerned that the amount of debt that Broadband
carried might still be too great and therefore, pursued a restructuring plan.

In response to Broadbands possible inability to service its debt
obligations, Knology engaged Credit Suisse First Boston Corporation (CSFB) on February 28, 2002, to assist it in evaluating its strategic alternatives. After examining Broadbands alternatives, CSFB recommended either that Broadband continue
its operations and attempt to satisfy its obligations under the Broadband discount notes when they become payable in April 2003 or that Knology and Broadband open discussions with the holders of the Broadband discount notes and offer to exchange the
Broadband discount notes for new debt and equity of Knology. Knology elected to open discussions with holders of the Broadband discount notes.

After
extensive negotiations during April, May and June of 2002, in July 2002, Knology and Broadband entered into a lockup agreement with the members of an informal committee of holders of the Broadband discount notes, as well as Wachovia Bank, National
Association and CoBank, with whom the we have banking relationships, and several of Knology's major stockholders, setting forth the terms of a restructuring plan. Under the terms of the restructuring plan agreed upon by Knology, Broadband and the
other parties to the lockup agreement, the Broadband discount notes would be exchanged for an aggregate of $193.5 million of new 12% senior notes due 2009 of Knology and shares of new Knology preferred stock, representing approximately 19.3% of
Knology's outstanding stock, on an as-converted basis, after giving effect to the restructuring.



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On July 25, 2002, Knology and Broadband commenced both an exchange offer and a solicitation of acceptances of a prepackaged plan of
reorganization of Broadband. As the parties had agreed, the exchange offer was conditioned upon Knologys receipt of tenders from 100% of the Broadband discount notes held by noteholders (other than Valley Telephone) that were accredited
investors, qualified institutional buyers (QIBs) or persons other than U.S. Persons, in each case as such terms are defined under the Securities Act of 1933, as amended.

The exchange offer was initially scheduled to expire on August 22, 2002, but was extended by Knology first to September 6, 2002, and then to September 13, 2002. As of September 13, 2002, the holders
of $354.4 million of principal amount at maturity of Broadband discount notes, or approximately 93% of the Broadband discount notes held by persons other than Valley Telephone, were tendered.

As of August 22, 2002, the expiration date of the solicitation period for voting on the prepackaged plan, all of the parties to the lockup agreement entitled to vote on the prepackaged plan had voted
to accept the prepackaged plan. In addition, all other holders of Broadband discount notes who returned ballots voted to accept the prepackaged plan.

Since
the 100% tender condition was not met or waived, but Knology and Broadband had received the acceptances of each class of impaired claims necessary to obtain the bankruptcy courts approval of the prepackaged plan, Knology chose not to extend
the exchange offer after it expired on September 13, 2002. Accordingly, on September 18, 2002, Broadband filed a petition under Chapter 11 of the Bankruptcy Code, and Knology and Broadband jointly filed the prepackaged plan.

On October 22, 2002 the United States Bankruptcy Court for the Northern District of Georgia confirmed the prepackaged plan without modification.

On November 6, 2002, the following transactions became effective pursuant to the prepackaged plan:

Knology received $39.0 million gross cash proceeds from the issuance of 13,000,000
shares of Series C preferred stock in a private placement to existing investors SCANA Communications Holdings and ITC Telecom Ventures. The proceeds will be used to pay transaction expenses of approximately $1.7 million and for general corporate
purposes.

$379.9 million aggregate principal amount at maturity of Broadband discount notes were exchanged for $193.5 million of new Knology notes, and 10,618,352 shares of new Knology Series D preferred stock and 21,701,279 shares of new Knology
Series E preferred stock.

The $15.5 million, 4-year senior secured credit facility by and among Wachovia, as lender, Broadband, as guarantor, and the subsidiaries of Broadband as
borrowers, was amended and restated.

The $40.0 million 10-year senior, secured credit facility by and among CoBank, , as lender and Valley Telephone, Globe Telecommunications, Inc., Interstate
Telephone, as borrowers, was amended.

$64.2 million aggregate principal amount at maturity of Broadband discount notes held by Valley Telephone, were canceled in exchange for a limited guaranty by
Broadband of the CoBank credit facility.

$15.3 million owed to Knology by Broadband under two intercompany loan facilities was canceled in exchange for a limited guaranty by Broadband of the CoBank
credit facility.

The Knology Stockholders Agreement was amended to provide the holders of Broadband discount notes who received new Knology preferred stock in the restructuring
with registration rights and co-sale rights, as well to provide holders of the Series D preferred stock the right to nominate a director to be elected to Knologys board of directors.

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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:

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.

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.

Target Attractive Cities for Market Expansion.Subject to the availability of equity financing, we intend to evaluate expansion of our
operations to southeastern or other markets that have the size, market conditions, demographics and geographical location suitable for our business strategy.

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.

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.

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 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 that
encourages customer loyalty.

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:

high-speed;

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

made up of high-capacity fiber-optic cables, traditional coaxial cables and twisted pairs.

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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. 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. Additionally, individual nodes that are served by hubs are equipped with back-up power. 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 Telecommunications, Inc.. This agreement expires in September 2005. We provide long-distance service using leased
facilities from other telecommunications service providers.

We have entered into an agreement with Business Telecom, Inc. 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.

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 2004 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.

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 Services. We offer our customers basic, expanded basic, premium and digital cable television services. 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:

television signals from local broadcast stations;

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

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

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

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.

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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:

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

video-on-demand (VOD), which permits customers to order movies and other programming on demand with VCR-like functions for a fee-per-viewing basis;

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

multiplex channels of HBO, Cinemax, Showtime, The Movie Channel and Encore/Starz, with 6-8 additional channels per network;

approximately 35-45
digital-quality music channels which are available 24 hours a day and are commercial free;

interactive television content providing news, weather, sports, horoscopes, games and programming information;

parental controls which block selected
channels, time periods and programming by content ratings; and

email from a subscribers television set.

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 Services. 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.

Data Services. We offer both residential and business Internet packages that include high-speed connections to the Internet using cable modems and a new Internet
package known as Intronet, which only differs from our traditional offerings in terms of upstream and downstream speeds. 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 offer the following:

unlimited use for a fixed monthly fee;

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

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

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

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

direct links to search engines;

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

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 their 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:

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

closed-circuit television security monitoring and alarm systems;

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

voice transmission employing traditional telephone functions via the Internet.

Markets

Current Markets

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

Huntsville, Alabama;

Montgomery, Alabama;

Panama City, Florida;

Augusta, Georgia;

Columbus, Georgia;

Charleston, South
Carolina;

Knoxville, Tennessee; and

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

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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 have been granted franchises in Nashville, Tennessee and Louisville, Kentucky. 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 cables 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, 2002, our networks passed 436,462 marketable homes
and supported 288,161 on-net connections.

In Knoxville, we have deployed 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, we maintain our own construction crews, we also use contractors for the construction of our networks. We serve as the project manager of the construction process, directing and supervising the various construction
crews. Historically, we have generated revenues from customers within one year following 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 primary 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. We have recently deployed a second switch in Huguley, Alabama.
All of our voice and data traffic passes through one of our switches. If one of our switches were to fail to operate, a portion of our customers would not be able to access our voice and data services until the failure is corrected. Both switches
employ 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 switches.

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 2005. 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:

the right to connect to each others facilities;

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

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:

automatically renew our existing interconnection agreement by notifying BellSouth of our intention to renew

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within the applicable timeframe;

negotiate the terms of a new agreement with BellSouth;

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

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 implementing such 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.

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
as we activate each node.

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:

order taking;

customer activations;

billing inquiries and collections;

service upgrades;

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provision of customer premise equipment; and

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 in each market. 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. We strive to resolve customer problems prior to the customer being aware of any service interruptions.

Billing

In five of our markets, 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 are in the process
of implementing a convergent billing system which enables us to send a single bill to our customers for video, voice and data services and which was developed by Ushacom. We have completed implementation of the billing system in three markets and
intend to complete implementation of all our markets in 2003.

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.

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, Charter
Communications, Mediacom and Time Warner Cable. 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 continue to compete with other cable television providers in our 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.

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:

broadcast television;

direct broadcast satellite systems;

wireless cable systems;

satellite master antenna television systems; and

local telephone
companies.

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

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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 14% 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.

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, various long distance providers and voice over Internet protocal (IP) telephone 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 someday 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.

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 as compared to that of competitors.

In providing telephone services to business customers, we compete with Business Telecom and
ITC/\DeltaCom, from whom we also purchase services. 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

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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:

traditional dial-up Internet service providers;

providers of satellite-based Internet services;

incumbent local exchange providers which provide digital
subscriber lines;

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

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 using
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 speed 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. 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:

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rates for tiers of cable video services;

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

access to cable channels by unaffiliated programming services;

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

ownership of cable systems;

customer service
requirements;

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;

technical standards; and,

cable equipment compatibility.

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

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

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

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:

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;

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

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

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,

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.

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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 arrangements 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. 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 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 agreements and pays fees for such consents or has agreed to carry additional services. 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,

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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 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

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FCC has adopted rules implementing the two different statutory formulas 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, none has certified to the FCC. 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 has 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 but has no right of access to the premises, the Multiple
dwelling unit 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 Multiple dwelling
unit 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 operators
such as DirecTV to compete with Knology in certain Multiple dwelling units. The FCC recently decided not to abrogate or restrict existing or future exclusive video Multiple dwelling unit access contracts by multichannel video programming
distributors. The decision not to abrogate existing exclusive Multiple dwelling unit access contracts may restrict Knology in competing with the incumbent cable operator (or other video or telecommunications competitors) in those Multiple dwelling
units where another cable operator and/or telecommunications carrier has obtained an exclusive access arrangement. The FCC 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 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,
at least with regard to its provision of telecommunications services.



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 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

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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 expired 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:

restrictions on origination and cablecasting by cable system operators;

application of the rules governing political
broadcasts;

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

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

customer service standards;

limitations on advertising contained in nonbroadcast childrens programming; and,

equal employment opportunity (new outreach and reporting requirements regarding full time hires were effective March 10, 2003).

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 Knologys business may 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 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.

Interstate Telephone and Valley Telephone are regulated by the FCC as dominant carriers in the provision of interstate access services. As
dominant carriers, Interstate Telephone and Valley Telephone must file tariffs with the FCC and must provide the FCC

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with notice prior to changing their rates, terms or conditions of interstate access services. Interstate Telephone has its own tariffs on file with the FCC,
while Valley Telephone concurs in tariffs filed by the National Exchange Carrier Association. Interstate Telephone and Valley 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 others 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), previously concluded that state public service commissions lack the authority under Section 252 of the federal Communications Act to interpret and enforce interconnection agreements, the courten
banchas reversed that conclusion and agreed with six other federal circuits that the states do have such authority.

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 was remanded by the US Court of Appeals for the D.C. Circuit, for the second time in 2002; at least one party has filed for
Supreme Court review of the appellate courts decision.

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 Interstate
Telephone and Valley 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. The Supreme Court has upheld the FCCs price methodology for making
unbundled network elements available. 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. In its Triennial Review proceeding, among other issues, the
FCC sought to identify which, if any, network elements that incumbent local exchange carriers should no longer be required to offer on an unbundled basis. The FCC also analyzed the issue of which elements must be unbundled in response to a remand of
its previous rules by the US Court of Appeals for the DC Circuit, and has recently adopted an order determining that certain network elements will no longer be subject to unbundling, and has given the state public utility commissions a limited
period to make findings as to local circuit switching. As of the filing of this annual report, the full text of the FCCs order is not available. Additionally, following that orders publication in the Federal Register, interested parties
will be able to request FCC reconsideration or judicial review of that order. Consequently, we cannot at this time state with any certainty the impact of that order upon our business. 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); conversely, the limiting of elements and platforms available on an unbundled basis may discourage potential competitors who cannot, or do not wish to expend the capital required to build out their own facilities.



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.

Universal Service. The FCC has adopted rules implementing the universal service requirements of the Telecommunications

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Act of 1996. Pursuant to those rules, all telecommunications providers must contribute a small
percentage of their telecommunications revenues to a Universal Service Fund. 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 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 incumbent local exchange carriers and protect universal service in areas served by those incumbent local exchange carriers. 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 approved BellSouths application to provide in-region interLATA long distance service in Georgia, Louisiana, Florida, Tennessee, Alabama, Kentucky,
Mississippi, North Carolina and South Carolina. Several of those BellSouth applications had previously been rejected by the FCC or withdrawn by BellSouth; however, requests for the affected States were subsequently resubmitted and approved by the
FCC. 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 has obtained in-region, interLATA
authority from the FCC.

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

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

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

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;

comply with verification procedures in connection with changing a customers carrier;

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

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;

pay annual regulatory fees to the FCC; and

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

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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, was designed, in part, to reduce the costs of the incumbents competitors provision of digital
subscriber line, or DSL, services to small businesses and residential customers. The Court of Appeals for the D.C. Circuit reversed the FCCs line sharing order in the same decision discussed earlier, underUnbundled
Network Elements,and the FCCs recently-adopted remand order held that the high-frequency portion of the loop is not an unbundled network element (although the entire loop is such an element). The FCC has adopted a
three-year transition period to implement this rule change. The FCCs decision could benefit us by eliminating a discount available to companies competing with our broadband services; however, because that order is still subject to agency and
judicial review, we cannot state with certainty what the impact on our business may be.



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 schemesthatrequire 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:

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

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

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 Knologys markets), recently concluded that state public service commissions have the authority under Section 252 of the federal Communications Act to interpret and enforce interconnection agreements.

Interstate Telephone and Valley Telephone are subject to additional requirements under state law, including rate regulation and quality of service requirements. In Alabama,
both Interstate Telephone and Valley Telephone are subject to a price cap form of

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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:

time limitations on commencement and completion of system construction;

customer service standards;

minimum number of
channels; and

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.

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



|Market Area                |  | Term (years) |  | Expiration Date | 
|-------------------------- |  | ------------ |  | --------------- | 
|                           |  |              |  |                 | 
|Huntsville, AL             |  |              |  |                 | 
|Huntsville, AL             |  | 15           |  | 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             |  | 15           |  | 1/5/2006        | 

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|Market Area                 |  | Term (years) |  | Expiration Date | 
|--------------------------- |  | ------------ |  | --------------- | 
|                            |  |              |  |                 | 
|                            |  |              |  |                 | 
|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           |  | 12/3/2012       | 
|                            |  |              |  |                 | 
|Augusta, GA                 |  |              |  |                 | 
|Augusta Richmond County, GA |  | 15           |  | 1/20/2013       | 
|Aiken County, SC            |  | 15           |  | 6/30/2015       | 
|Burnettown, SC              |  | 15           |  | 6/20/2015       | 
|Columbia County, GA         |  | 11           |  | 11/1/2009       | 
|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       | 
|                            |  |              |  |                 | 
|Charleston, SC              |  |              |  |                 | 
|Berkeley County, SC         |  | 15           |  | 11/05/2013      | 
|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        | 

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.

RISK FACTORS



Risks Related to Our
Business



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

As of December 31, 2002, we had an accumulated deficit of $310.1 million. We expect to incur net losses for the next several years as our business matures. Our ability to generate profits and
positive cash flow will depend in large part on our ability to obtain enough subscribers for our revenues 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.





Our substantial indebtedness may adversely affect our cash flows, future financing and flexibility.



As
of December 31, 2002, we had approximately $252.4 million of outstanding indebtedness, including accrued interest, and our stockholders equity was $184.5 million. We currently pay interest in cash on our credit facilities and will be required
to pay interest in cash on our outstanding 12% senior notes due 2009 beginning in November 2004. We may incur additional indebtedness in the future. Our level of indebtedness could adversely affect our business in a number of ways, including:



we may have to dedicate a significant amount of our available funding and cash flow from operating activities to the payment of interest and the repayment of principal on outstanding indebtedness;

depending on the levels
of our outstanding debt, we may have trouble obtaining future financing for working capital, capital expenditures, general corporate and other purposes;

high levels of indebtedness may limit our flexibility in planning for or reacting to
changes in our business; and

increases in our outstanding indebtedness and leverage will make us more vulnerable to adverse changes in general economic and industry conditions, as well as to
competitive pressure.



Our earnings were not sufficient to cover our fixed charges in 2002. Our ability to make future principal and interest
payments depends upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If we cannot grow and generate
sufficient cash flow from operating activities to service our debt payments, we may be required, among other things to:



seek additional financing in the debt or equity markets;

refinance or restructure all or a portion of
our debt;

sell selected assets; or

reduce or delay planned capital expenditures.



These measures
may not be sufficient to enable us to service our debt. In addition, any such financing, refinancing or sale of assets may not be available on commercially reasonable terms, or at all.



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



Our indenture and our credit agreements 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, among other things:



incur additional debt or issue mandatorily
redeemable equity securities;

create liens on our assets;

make investments and certain capital expenditures;

use the proceeds from any sale of assets;

make distributions on or
redeem our stock;

consolidate, merge or transfer all or substantially all our assets;

enter into transactions with affiliates;

utilize revenues except for specified uses;
and

utilize excess liquidity except for specified uses.



In addition, our existing credit facilities require us to maintain specified financial
ratios, such as a maximum leverage ratio and a minimum debt service coverage ratio. We are also required to maintain a minimum level of liquidity. 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
scheduled maturity.



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

We commenced sales of bundled services in 1997 and have
grown rapidly since then. As a result of that growth and our recently completed financial restructuring described above, 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 legal or similar 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 is the primary incumbent local phone company in our 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

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include:

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;

regional Bell operating companies other than BellSouth;

wireless telephone
carriers;

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

utility companies; and

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

Major long-distance service providers offer price discounts and promotional activities. We expect these discounts 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 Comcast Corporation, Charter Communications, Inc., Mediacom Communications Corporation and Time Warner Cable. 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 their service areas and wireless cable companies, which could adversely affect our results of operations.

Legislation now allows 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:

traditional dial-up Internet service providers;

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

providers of satellite-based Internet access services;

long-distance telephone companies; and

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cable television companies.

We expect to compete in the future in
providing high-speed data 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, and our relatively small base of subscribers limits our ability to negotiate lower pricing. 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. Since we provide
programming in each of these markets, exclusivity arrangements would 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.

Pending and future acquisitions and joint ventures could strain our business and resources.

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

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

divert resources
and management time;

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

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

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

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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 September 2003.



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 may not be able to 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.

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:

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

long-distance telephone
services;

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

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.

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 2005. 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.



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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 voice services, including reduced demand for:

traditional and premium telephone services;

additional access lines per household; and

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:

competition;

pricing;

regulatory uncertainties; or

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.

We may
encounter difficulties in implementing and developing new technologies.

We have invested in advanced technology platforms that support advanced
communications services and multiple emerging interactive services, such as video-on-demand, subscriber video-on-demand, digital video recording, interactive television, IP Centrex services and passive optical network services. We have also invested
in our new enterprise management system. However, existing and future technological implementations and developments may allow new competitors to emerge, reduce our networks competitiveness or require expensive and time-consuming upgrades or
additional equipment, which may also require the write-down of existing 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.

It may take
us longer to construct our networks and generate connections than anticipated, which could adversely affect our growth, financial condition and results of operations.

When we enter new markets or upgrade existing markets, we project the capital expenditures that will be required based in part on the amount of time necessary to complete the construction or upgrade of the network and
the difficulty of such construction. If construction lasts longer than anticipated or is more difficult than anticipated, our capital expenditures could be significantly higher, which could adversely affect our growth, financial condition and
results of operations.

It may take us longer to generate connections than anticipated, which could adversely affect our growth, financial condition and results of
operations.

When we enter new markets or upgrade existing markets, we project the amount of revenue we will receive in such markets based in part on
how quickly we are able to generate new connections. If we are not able to generate connections as quickly as anticipated, we will not be able to generate revenue in such markets as quickly as anticipated, which could adversely affect our growth,
financial condition and results of operations.

We depend on third-party equipment and software suppliers. If we are unable to procure the necessary equipment, our ability
to

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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, voice ports 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.

Our operations could
be adversely affected if we are unable to implement our new billing system effectively.

We are currently implementing a new
billing system that provides a single bill to our customers, regardless of which bundled broadband services the customers receives. The new billing system also impacts other operational processes including dispatch, collection and write-off
procedures. Although we have successfully converted three of our markets to the new billing system, we have a significant number of customers in the remaining markets to convert to the new combined billing system. If we are unable to successfully
implement the new billing system in the remaining markets it could adversely affect our business and results of operations.

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 one of our switches in West Point, Georgia and Huguley, Alabama, and our switches may fail to
operate.

All of our voice and data traffic passes through one of our switches located in West Point, Georgia and Huguley,
Alabama. If one or both of our switches were to fail to operate, a portion or all of 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.

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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 or regulations and whether they are favorable to
us.

Risks Related to Relationships with Stockholders, Affiliates and Related Parties

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

SCANA Communications Holdings is our largest stockholder and owns
approximately 15.4% of our outstanding voting stock on an as-converted basis. Additionally, J. H. Whitney IV, L.P., ITC Telecom and The Blackstone Group private equity funds beneficially own approximately 9.5%, 8.9% and 7.2% of our outstanding
voting stock, on an as-converted basis, respectively. Further, approximately 6.0% of our outstanding voting stock on an as-converted basis is owned by Campbell B. Lanier, III, the chairman of our board of directors, and members of
Mr. Laniers family. SCANA and ITC Telecom together own approximately 59.0% of the outstanding shares of our Series C preferred stock, and J. H. Whitney IV, LP and The Blackstone Group private equity funds together own approximately 69.6%
of the outstanding shares of our Series B preferred stock. As a result, these stockholders have significant voting power with respect to the ability to:

authorize additional shares of capital stock or otherwise amend our certificate of
incorporation or bylaws;

elect our directors; or

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.

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.

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, an indirect wholly owned subsidiary of ITC Holding, invested $25.0 million in Series C preferred stock in January 2001 and $19.5 million in Series C preferred stock in November 2002, ITC Holding has no further
obligation to provide financing to us or enter into other transactions with us in the future.

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

Campbell B. Lanier, III, the chairman of our board of directors and one of our major stockholders, is a significant
stockholder of ITC/\DeltaCom. Additionally, some of our other major stockholders, including private equity funds associated with AT&T Ventures, J.H. 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 the Companys, these stockholders may support our competitor or take other actions that could adversely affect our interests.

No trading market exists for our securities, and many of 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. In addition, many of our outstanding securities were issued in private transactions and
generally may not be resold without registration under federal securities laws or an available exemption from registration.

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

As of January 31, 2003, we had outstanding 503,197 shares of common stock,
51,040,457 shares of Series A preferred stock and 21,180,131 shares of Series B preferred stock and 50,219,562 shares of Series C preferred stock, 10,684,751 shares of Series D preferred stock and 21,701,279 shares of Series E preferred stock. We
also had outstanding on that date options to purchase 8,052,269 shares of common stock and 2,908,537 shares of Series A preferred stock as well as warrants to purchase 994,961

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shares of Series A preferred stock. Future stock issuances also will reduce the percentage ownership of our current stockholders.



Forward-looking statements should be read with caution.

This Annual Report on Form 10-K for the year ended December 31, 2002 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:

plans to develop future networks and upgrade facilities;

the market opportunity presented by markets
we have targeted;

future business developments;

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

our anticipated capital expenditures;

our anticipated sources of
capital and other funding;

the effects of regulatory reform on our business;

competitive and technological developments;

possible acquisitions and alliances; and

projected revenues,
liquidity, interest costs and income.

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, 2003 we had 1,229 full-time employees. We consider our relations with our employees to be good, and we

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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 growth plan, including 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:



|Location        |  | Address                               |  | Lease/Own |  | Primary Use                        | 
|--------------- |  | ------------------------------------- |  | --------- |  | ---------------------------------- | 
|                |  |                                       |  |           |  |                                    | 
|Augusta, GA     |  | 3714 Wheeler Road                     |  | Own       |  | Administrative offices and headend | 
|                |  | 621 N.W. Frontage, STE 220            |  | Lease     |  | Call Center                        | 
|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             | 
|                |  | 1570 Phillips Rd.                     |  | Own       |  | Administrative offices             | 
|Montgomery, AL  |  | 1050 Ann Street                       |  | Lease     |  | Headend and technical offices      | 
|                |  | 6175 Perimeter Parkway Court          |  | Lease     |  | Business Office                    | 
|                |  | 3173 Taylor Rd. (Sturbridge Villiage) |  | Lease     |  | Customer Pay Station               | 
|                |  | 127 Burnt Oaks                        |  | Lease     |  | Customer Pay Station               | 
|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   | 
|                |  | 206 West 9th Street                   |  | Lease     |  | Network operations center          | 
|                |  | 206 1⁄2 West 9th Street                 |  | Own       |  | Data Group Office                  | 
|                |  | 910 First Ave.                        |  | Own       |  | Switch Building                    | 

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

On September 18, 2002, Broadband filed a petition under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Northern District of Georgia. On October 22, 2002 the court confirmed the joint plan of reorganization of Knology and Knology Broadband without modification, and on November 6, 2002 the plan became effective. See Item 1,
Business  Our Financial Restructuring for more information.

In September 2000, the City of Louisville, Kentucky granted Knology of
Louisville, Inc., our subsidiary, a cable television franchise.  On November 2, 2000, Insight filed a complaint against the City of Louisville in Kentucky Circuit Court in Jefferson County, Kentucky claiming that our franchise was more
favorable than Insights franchise.  Insights complaint suspended our franchise until there is a final, nonappealable order in Insights Kentucky Circuit Court case.  In April 2001 the City of Louisville moved for summary
judgment in Kentucky Circuit Court against Insight.  In March 2002, the Kentucky Circuit Court ruled that Insights complaint had no merit and the Kentucky Circuit Court granted the City of Louisvilles motion to dismiss
Insights complaint.  Insight appealed the Kentucky Circuit Court order dismissing their complaint and in June 2003 the Kentucky Court of Appeals upheld the Kentucky Circuit Court ruling.  Insight sought discretionary review of the
Kentucky Court of Appeals ruling by the Kentucky Supreme Court and that request is pending.



On November 8, 2000, we filed an action in the
U.S. District Court for the Western District of Kentucky against Insight seeking monetary damages, declaratory and injunctive relief from Insight and the City arising out of Insights complaint and the suspension of our franchise.  In
March 2001, the U.S. District Court issued an order granting our motion for preliminary injunctive relief and denying Insights motion to dismiss.  At this time it is impossible to determine with certainty the ultimate outcome of the
litigation.



On November 21, 2001, we filed a complaint against Georgia Power Company requesting FCC adjudication of a dispute regarding amounts
Georgia Power charged us in connection with the construction of our network in Augusta, Georgia.  We requested the FCC to review these charges to determine whether they were reasonable in accordance with FCC pole attachment
regulations. We requested reimbursement from Georgia Power of approximately $2.5 million.  Georgia Power responded to the FCC complaint by asserting we owed Georgia Power approximately $900,000 for additional construction-related charges.



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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

Our stockholders adopted on October 18, 2002 by written consent an amendment to
our amended and restated certificate of incorporation. The amendment:

increased the number of shares of capital stock and preferred stock that we are authorized to issue;

designated two new series of preferred stock, the Series D
preferred stock and the non-voting Series E preferred stock, to be issued in the restructuring, each with a liquidation preference superior to the existing Series A, B and C preferred stock;

authorized a new class of nonvoting common
stock;

amended the rights, preferences and privileges of the existing Series A, B and C preferred stock to, among other things, eliminate most separate class voting rights and eliminate most anti-dilution protections;

amended the definition of
Qualified Public Offering, upon which our preferred stock automatically converts into common stock, to eliminate the minimum requirements with respect to the per share public offering price and the aggregate gross proceeds to be received
by us; and

increased the number of shares of common stock that may be reserved for issuance to our management pursuant to the exercise of stock options.

The
amendment was approved by the holders of 39,073,150 shares out of 51,022,231 shares of our Series A preferred stock outstanding on the record date, 18,031,599 shares out of 21,180,131 shares of our Series B preferred stock outstanding on the record
date, 31,286,487 shares out of 37,219,562 shares of our Series C preferred stock outstanding on the record date and 98,704,961 shares out of 122,120,822 shares of our common stock, on an as-converted basis, outstanding on the record date.

At an annual meeting on December 16, 2002, the holders of our Series A preferred stock, Series B preferred stock, Series C preferred stock, Series D preferred stock and
common stock voted to re-elect Eugene I. Davis and Rodger L. Johnson and Campbell B. Lanier, 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.

Each of Messrs. Davis, Johnson and Lanier was elected by 98,666,043 shares out of 145,807,607 shares of our common stock, on an as-converted basis. Each of Messrs. Pearlman and Laverack,
was elected by 16,968,443 shares out of 21,180,131 shares of our Series B preferred stock.

During the December 16, 2002 meeting, the stockholders voted to
approve the 2002 Long-Term Incentive Plan, which is intended to promote our success by linking the personal interests of our employees, officers, directors and consultants to those of our stockholders. The 2002 Long-term Incentive Plan was approved
by the holders of 32,905,581 shares out of 51,022,231 shares of Series A preferred stock outstanding on the record date, 16,968,443 shares out of 21,180,131 shares of our Series B preferred stock outstanding on the record date, 39,308,834 shares out
of 50,219,562 shares of Series C preferred stock outstanding on the record date and 98,666,043 shares out of 145,807,607 shares of our common stock, on an as converted basis, outstanding on the record date.



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##### Table of Contents

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, 2003, we had 503,197 shares of common stock outstanding held of record by approximately 80 stockholders, 51,040,457 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, 50,219,562 shares of Series C preferred stock outstanding held of record by
approximately 94 stockholders, 10,684,751 shares of Series D preferred stock outstanding held of record by approximately 20 stockholders and 21,701,279 shares of Series E preferred stock outstanding held of record by one stockholder.

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, Inc. and by the terms of our credit facilities.



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Recent Sales Of Unregistered Securities

On November 6,
2002, Knology issued approximately $193.5 million of 12% senior notes, 10,618,352 shares of Series D preferred stock and 21,701,279 shares of Series E preferred stock. The notes and shares were issued pursuant to a plan of reorganization jointly
proposed by Knology and Broadband in Chapter 11 Case No. 02-11514 filed with the United States Bankruptcy Court for the Northern District of Georgia and Section 1145(a) of Title 11 of the United States Code. The joint plan was confirmed by the
bankruptcy court and the notes and shares issued pursuant to the joint plan were exempt from registration under the Securities Act of 1933, as amended, and any state and local securities laws and is freely transferable pursuant to Section 1145(a).

Also on November 6, 2002, Knology issued 13 million shares of Series C preferred stock at a price of $3.00 per share to two existing accredited investors,
SCANA Communications Holdings and ITC Telecom Ventures. Further, on November 6, 2002, Knology issued $1,173,836.00 of 12% senior notes and 66,399 shares of Series D preferred stock to HLHZ Investments, LLC, the financial advisor to the informal
noteholders committee, and an accredited investor. The issuances of these shares and notes were made in reliance on exemptions from registration provided by Section 4(2) or Regulation D of the Securities Act of 1933, as amended, as
transactions by an issuer not involving any public offering. The persons and entities receiving securities in the transactions represented their intention to acquire the securities for investment only and not with a view to or for distribution in
connection with such transactions, and appropriate legends were affixed to the share certificates issued in such transactions. All recipients had adequate access to information about Knology through their relationship with Knology or through
information about Knology made available to them.

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. 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.

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.





|                                                                                                      |  | Year Ended December 31, |       
|----------------------------------------------------------------------------------------------------- |  | ----------------------- | ------
|                                                                                                      |  |                         |       
|                                                                                                      |  | 1998                    |       
|                                                                                                      |  |                         |       
|                                                                                                      |  | (in thousands)          |       
|Statement of Operations Data:                                                                         |  |                         |       
|Operating revenues                                                                                    |  | $                       | 45,132
|Operating expenses:                                                                                   |  |                         |       
|Cost of services                                                                                      |  | 16,797                  |       
|Selling, operations and administrative                                                                |  | 33,266                  |       
|Depreciation and amortization                                                                         |  | 17,327                  |       
|Gain on extinguishment of debt                                                                        |  | 0                       |       
|Reorganization professional fees                                                                      |  | 0                       |       
|Asset impairment                                                                                      |  | 0                       |       
|Non-cash stock option compensation                                                                    |  | 0                       |       
|Litigation fees                                                                                       |  | 0                       |       
|                                                                                                      |  |                         |       
|Total operating expenses                                                                              |  | 67,390                  |       
|                                                                                                      |  |                         |       
|Operating (loss) income                                                                               |  | (22,258                 | )     
|Interest (expense), net                                                                               |  | (19,428                 | )     
|Gain on adjustments of warrants to market                                                             |  | 0                       |       
|Other income (expense), net                                                                           |  | 784                     |       
|                                                                                                      |  |                         |       
|Loss before minority interest, income taxes and cumulative effect of a change in
accounting principle |  | (40,902                 | )     
|Minority interest                                                                                     |  | 13,294                  |       
|Income tax (provision) benefit                                                                        |  | 5,631                   |       

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|                                                              |  | Year Ended December 31, |        
|------------------------------------------------------------- |  | ----------------------- | -------
|                                                              |  |                         |        
|                                                              |  | 1998                    |        
|                                                              |  |                         |        
|                                                              |  | (in thousands)          |        
|Cumulative effect of a benefit change in accounting principle |  | (583                    | )      
|                                                              |  |                         |        
|Net loss                                                      |  | (22,560                 | )      
|Subsidiary preferred stock dividends                          |  | (1,424                  | )      
|Non-cash distribution to preferred stockholders               |  | 0                       |        
|                                                              |  |                         |        
|Net loss attributable to common stockholders                  |  | $                       | (23,984
|                                                              |  |                         |        
|Other Financial Data:                                         |  |                         |        
|Capital expenditures                                          |  | $                       | 120,227
|Capitalized interest                                          |  | 2,469                   |        
|Cash provided by (used in) operating activities               |  | 23,036                  |        
|Cash used in investing activities                             |  | (34,587                 | )      
|Cash provided by financing activities                         |  | 16,083                  |        



|                                           |  | December 31,   |       
|------------------------------------------ |  | -------------- | ------
|                                           |  |                |       
|                                           |  | 1998           |       
|                                           |  |                |       
|                                           |  | (in thousands) |       
|Balance Sheet Data:                        |  |                |       
|Cash and cash equivalents                  |  | $              | 5,159 
|Net working capital                        |  | 49,979         |       
|Property and equipment, net                |  | 211,886        |       
|Total assets                               |  | 374,681        |       
|Long-term debt, including accrued interest |  | 276,179        |       
|Total liabilities                          |  | 314,414        |       
|Minority interest                          |  | 3,268          |       
|Accumulated deficit                        |  | (20,802        | )     
|Total stockholders equity                 |  |                | 54,512



ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS 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, (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 RISKS 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, 2002 and other 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.



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Background

Knology 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 Broadband. In November 1999, in order to effectuate the reorganization:

ITC Holding contributed to Knology:

 its 85% interest in 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

 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

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

As a result of the November 1999
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 interests 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.

On November 6, 2002 we completed a restructuring of the capitalization of us and Broadband. For more
information regarding our restructuring, see "Busines- OUR FINANCIAL RESTRUCTURING" in Item 1 of Part I.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and
assumptions. We believe that, of our significant accounting policies described in Note 2 to our audited consolidated financial statements included in Item 8 of this annual report, the following may involve a higher degree of judgment and
complexity.

Revenue Recognition. The Company generates recurring or multi-period operating revenues, as well as nonrecurring
revenues. We recognize revenue in accordance with SEC Staff Accounting Bulletin, or SAB, No. 101, Revenue Recognition in Financial Statements, as amended by SAB Nos. 101A and 101B. SAB No. 101 requires that the following four basic
criteria must be satisfied before revenues can be recognized:

There is persuasive evidence that an arrangement exists;

Delivery has occurred or services rendered;

The fee is fixed and determinable; and,

Collectibility is
reasonably assured.

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In regard to the first and second bullet point, we believe that persuasive evidence of an arrangement and delivery has occurred upon
instillation.

We base our determination of the third and fourth criteria above on our judgment regarding the fixed nature of the fee we have charged for the
services rendered and products delivered, and the prospect that those fees will be collected. If changes in conditions should cause us to determine that these criteria likely will not be met for certain future transactions, revenue recognized for
any reporting period could be materially affected.

We generate recurring revenues for our broadband offerings of video, voice and data and other services.
Revenues generated from these services primarily consists of a fixed monthly fee for access to cable programming, local phone services and enhanced services and access to the internet. Additional fees are charged for services including pay-per-view
movies, events such as boxing matches and concerts, long distance service and cable modem rental. Revenues are recognized as services are provided and advance billings or cash payments received in advance of services performed are recorded as
deferred revenue.

Allowance for Doubtful Accounts.We use estimates to determine our allowance for bad debts. These estimates are
based on historical collection experience, current trends, credit policy and a percentage of our customer accounts receivable. In determining these percentages, we look at historical write-offs of our receivables, but our history is limited.

Valuation of Long-Lived and Intangible Assets and Goodwill. We assess the impairment of identifiable long-lived assets and related
goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable in accordance with Statement of Financial Accounting Standards, or SFAS No. 121, and beginning January 1, 2002 SFAS No. 144. Factors we
consider important and that could trigger an impairment review include the following:

Significant underperformance of our assets relative to expected historical or projected future operating results;

Significant changes in the manner in which we
use our asset or in our overall business strategy; and,

Significant negative industry of economic trends.

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. We recognized an asset impairment of approximately $9.9 million during the year ended December 31, 2002 in accordance with SFAS No. 144.

We adopted
SFAS No. 142 on January 1, 2002 and have performed a goodwill impairment test in accordance with SFAS No. 142. Based on the results of the goodwill impairment test, we recorded an impairment loss of $1.3 million in the first quarter of 2002 as a
cumulative effect of change in accounting principle.

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation-Transition
and Disclosure, which amends FASB Statement No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.
Finally, SFAS No. 148 amends APB Opinion No. 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. SFAS No. 148 is to be applied for financial statements for fiscal years ending
after December 15, 2002. In December 2002, we elected to adopt the recognition provisions of SFAS No. 123. We also elected to report the change in accounting principle using the prospective method in accordance with SFAS No. 148. Under the
prospective method, the recognition of compensation costs is applied to all employee awards granted, modified or settled after the beginning of the fiscal year in which the recognition provisions are first applied. As a result, we recorded $3.3
million of non-cash stock option compensation expense for the year ended December 31, 2002.

The foregoing list in not intended to be a comprehensive list of
all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for us to judge the application. There are
also areas in which our judgment in selecting any available alternative would not produce a materially different result. See our consolidated financial statements and related notes thereto included elsewhere in this annual report, which contain
accounting policies and other disclosures required by accounting principles generally accepted in the United States.

Recent Accounting Pronouncements

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. We 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

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a fair-value-based test.

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. We do not expect SFAS No. 143 to have a material impact on our financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction, which provides for the rescission of several previously issued accounting
standards, new accounting guidance for the accounting of certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. Effective December 31, 2002, the Company has adopted SFAS No. 145
and reclassed the extraordinary gain on extinguishment of debt for the year ended December 31, 2001, of $31.9 million to operating expenses.

In July 2002, the
FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We do not expect SFAS No. 146 to have a material impact on our financial position and results of
operations.

In November 2002, FASB Interpretation No, (FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantors, Including
Indirect Guarantees of Indebtedness of Others, was issued. FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee. Guarantors will also be
required to meet expanded disclosure obligations. The initial recognition and measurement provision of FIN 45 are effective for guarantees issued after December 31, 2002. The disclosure requirements are effective for annual and interim financial
statements that end after December 15, 2002, and had no impact on the Companys financial position of results of operations.

Revenues and Expenses

We can group our revenues into the following categories:

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, fees for Video on Demand (VOD) and events such as boxing matches and concerts, that involve a charge for each viewing. Video revenues accounted for approximately 46.0% and 42.8% of
our consolidated revenues for the years ended December 31, 2001 and 2002, respectively. In providing video services we currently compete with Comcast, Time Warner Cable, Mediacom and Charter. We also compete with satellite television providers
DirecTV and Echostar. 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 their service areas and with wireless cable companies.

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 42.2% and 41.4% of our consolidated revenues for the years ended December 31, 2001 and 2002, respectively. 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. BellSouth is the incumbent local phone company and is a particularly strong competitor in our current markets and
throughout the southeastern United States. We also compete with long-distance phone companies such as AT&T, WorldCom and Sprint.

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 11.8% and 15.8% of our consolidated
revenues for the years ended December 31, 2001 and 2002, respectively. Providing data services is a rapidly growing business and competition is increasing in each of our markets. Some of our competitors, traditional dial up providers in particular,
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

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percentage of consolidated revenues in the future.

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

Cost of services
include:

Video cost of services. Video cost of services consists 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 47.5% and 48.1% for the years ended December 31, 2001 and 2002, 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.

Voice cost of services. Voice cost of services consists primarily of transport cost and network access fees. The voice cost of services as a
percentage of voice revenues were approximately 18.5% and 17.3% for the years ended December 31, 2001 and 2002, respectively.

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 7.9% and 7.4% for the years ended December 31, 2001 and 2002, respectively.

We expect the growth of new video connections to decrease as the video segment matures in our current markets. While the number of new video connections may decrease, management feels that 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:

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

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

Service and installation
expenses. Service and installation expenses include payroll and departmental cost incurred for customer installation and service personnel.

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

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 costs in excess of net assets and other intangible assets related to acquisitions. For periods beginning after January 1, 2002, we no longer amortize goodwill related to acquisitions in accordance with SFAS
142.

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

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##### Table of Contents

The following table sets forth financial data as a percentage of operating revenues for the years ended December 31, 2000, 2001 and 2002.



|                                                                                 |  | Year EndedDecember 31, |   
|-------------------------------------------------------------------------------- |  | ---------------------- | --
|                                                                                 |  |                        |   
|                                                                                 |  | 2000                   |   
|                                                                                 |  |                        |   
|Operating revenues:                                                              |  |                        |   
|Video                                                                            |  | 51                     | % 
|Voice                                                                            |  | 42                     |   
|Data                                                                             |  | 7                      |   
|                                                                                 |  |                        |   
|Total                                                                            |  | 100                    |   
|Operating expenses:                                                              |  |                        |   
|Cost of services                                                                 |  | 38                     |   
|Selling, operating and administrative                                            |  | 71                     |   
|Depreciation and amortization                                                    |  | 73                     |   
|Gain on extinguishment of debt                                                   |  | 0                      |   
|Reorganization professional fees                                                 |  | 0                      |   
|Non-cash stock option compensation                                               |  | 0                      |   
|Asset impairment                                                                 |  | 0                      |   
|Litigation fees                                                                  |  | 0                      |   
|                                                                                 |  |                        |   
|Total                                                                            |  | 182                    |   
|                                                                                 |  |                        |   
|Operating (loss) income                                                          |  | (82                    | ) 
|Other income and (expense)                                                       |  | (44                    | ) 
|                                                                                 |  |                        |   
|Loss before income taxes and cumulative effect of change in accounting principle |  | (126                   | ) 
|Income tax benefit (provision)                                                   |  | 4                      |   
|Cumulative effect of change in accounting principle                              |  | 0                      |   
|                                                                                 |  |                        |   
|Net loss                                                                         |  | (122                   | ) 
|Preferred stock dividends                                                        |  | 0                      |   
|                                                                                 |  |                        |   
|Net loss attributable to common stockholders                                     |  | (122                   | )%
|                                                                                 |  |                        |   

Connections

The following table sets forth the number of connections and marketable homes passed as of December 31, 2000, 2001 and 2002. 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.



|                            |  | AS OF DECEMBER 31, | 
|--------------------------- |  | ------------------ | 
|                            |  |                    | 
|                            |  | 2000               | 
|                            |  |                    | 
|Connections: (1)            |  |                    | 
|Video                       |  | 101,872            | 
|Voice:                      |  |                    | 
|On-net                      |  | 55,311             | 
|Off-net                     |  | 7,142              | 
|Data                        |  | 14,898             | 
|                            |  |                    | 
|Total Connections           |  | 179,223            | 
|                            |  |                    | 
|Marketable Homes Passed (2) |  | 380,027            | 
|                            |  |                    | 

---

(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 25,679 lines as of December 31, 2000, 2001 and 2002, 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.

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Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Revenues. Operating revenues increased 33.6% from $106.2 million for the year ended December 31, 2001, to $141.9 million for the year ended December 31, 2002. Operating revenues from video
services increased 24.4% from $48.8 million for the year ended December 31, 2001, to $60.8 million for the same period in 2002. Operating revenues from voice services increased 31.1% from $44.8 million for the year ended December 31, 2001, to $58.7
million for the same period in 2002. Operating revenues from data and other services increased 78.1% from $12.6 million for the year ended December 31, 2001, to $22.4 million for the same period in 2002, $21.3 million of which were revenues from
data services in 2002.



The increased revenues from video, voice and data and
other services are primarily due to rate increases and an increase in the number of connections, from 238,942 as of December 31, 2001, to 293,149 as of December 31, 2002.Rate increases accounted for approximately 13% of the increased
revenues for the year ended December 31, 2002, and the increase in the number of connections accounted for approximately 87% of the increased revenue for the same period. The additional connections primarily resulted from:



The completion of our broadband networks, through the construction of additional facilities and the extension of additional cables passing marketable homes and
businesses in the Augusta and Charleston markets, which provide opportunities for sales to new customers. For the year ended December 31, 2002, these markets together provided us with an increase in video revenues of 36.5%, voice revenues of 23.8%,
data and other revenues of 24.5% and total revenues of 28.4%, in each case, as a percentage of total product revenue increases.

The upgrade of our existing broadband network in Huntsville for high capacity interactive communication allowing the market to
provide voice, data and enhanced products, including digital video. This provides opportunity for new sales to existing customers and sales to new customers in response to requests for bundles of services. For the year ended December 31, 2002,
Huntsville provided an increase in video revenues of 23.8%, voice revenues of 22.4%, data and other revenues of 30.0% and total revenues of 25.0%, in each case, as a percentage of total revenue increases.

The construction of the broadband network in the
Knoxville market.

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
our customer base.

Cost of Services. Cost of services increased 26.3% from $32.5 million for the year ended December 31, 2001, to
$41.0 million for the year ended December 31, 2002. Cost of services for video services increased 25.8% from $23.2 million for the year ended December 31, 2001, to $29.2 million for the same period in 2002. Cost of services for voice services
increased 22.7% from $8.3 million for the year ended December 31, 2001, to $10.1 million for the same period in 2002. Cost of services for data and other services increased 67.4% from $993,000 for the year ended December 31, 2001, to $1.7 million
for the same period in 2002. 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 36.8% from $73.7 million
for the year ended December 31, 2001, to $100.9 million for the year ended December 31, 2002. Margins for video services increased 23.1% from $25.6 million for the year ended December 31, 2001, to $31.6 million for the same period in 2002. Margins
for voice services increased 33.0% from $36.5 million for the year ended December 31, 2001, to $48.6 million for the same period in 2002. Margins for data and other services increased 79% from $11.6 million for the year ended December 31, 2001, to
$20.7 million for the same period in 2002.

Operating Expenses. Our operating expenses, excluding depreciation and amortization,
increased 8.9% from $73.3 million for the year ended December 31, 2001, to $79.8 for the year ended December 31, 2002. The increase in our operating expenses is consistent with the growth in revenues and is a result of the expansion of our
operations and an increase in the number of employees associated with such expansion and growth in our markets. Selling, operations and administrative expenses will increase operating expenses as our markets mature.

Our depreciation and amortization increased from $79.0 million for the year ended December 31, 2001, to $80.5 million for the year ended December 31, 2002. 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. We expect depreciation and amortization expense to increase as we make capital expenditures to extend our existing networks and build additional networks. We have ceased amortization of goodwill in accordance with the
adoption of SFAS No. 142. Amortization of goodwill for the year ended December 31, 2001 was $4.8 million.

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Gain on Debt Extinguishment. We recognized a gain of $109.8 million with the completion of our financial
restructuring generating expenses for professional fees of $3.8 million for the year ended December 31, 2002. In September 2001, our subsidiary, Valley Telephone, 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 Telephone repurchased Broadband discount notes with a face amount of $5.7 million for approximately $2.5 million
in cash. These transactions resulted in a 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.

We adopted SFAS No. 144 and recognized $9.9 million in asset impairment for the year ended December 31, 2002. We also adopted SFAS No. 123 in
accordance with SFAS No. 148 and recorded a non-cash stock option compensation expense of $3.3 million for the year ended December 31, 2002

Other Income
and Expense, Including Interest Income and Interest Expense. Our total other expense decreased from $40.9 million for the year ended December 31, 2001, to $33.3 million for the year ended December 31, 2002. Interest income
was $2.7 million for the year ended December 31, 2001, compared to $395,000 for the same period in 2002. The decrease in interest income primarily reflects a lower average cash balance for the year ended December 31, 2002. We capitalized interest
related to the construction of our broadband networks of $2.4 million for the year ended December 31, 2001. Interest expense decreased from $42.8 million for the year ended December 31, 2001, to $36.3 million for the year ended December 31, 2002.
The interest expense is principally the accretion of the book value of the Broadband discount notes issued in October 1997. We expect interest expense in 2003 to be significantly lower than in prior years as a result of our financial restructuring.
Although the interest rate payable on the new Knology notes is comparable to the rate payable on the canceled Broadband notes, the aggregate amount of notes outstanding is substantially lower. In connection with the restructuring, and during the
year ended December 31, 2002, we adjusted the carrying value of the outstanding warrants to purchase our series A preferred stock to market value based on the approximate per share value of the Series A preferred stock. The approximate per share
value of Series A preferred stock is deemed to be $1.87 per share resulting in a $2.9 million gain on the adjustment of warrants to market value. Other expenses, net decreased from $834,000 for the year ended December 31, 2001 to $321,000 for the
year ended December 31, 2002. The decrease reflects charges taken for obsolescence and changes in technology related to inventory.

Income Tax
Provision. We recorded income tax expense of $2.8 million for the year ended December 31, 2001, compared to $0 income tax expense for the same period in 2002. 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.

Loss and Income
Before Cumulative Effect of Change in Accounting Principle. We incurred a loss before cumulative effect of change in accounting principle of $90.4 million for the year ended December 31, 2001, compared to income before
cumulative effect of change in accounting principle of $1.3 million for the year ended December 31, 2002.

Cumulative Effect of Change in Accounting
Principle. We adopted SFAS No. 142 on January 1, 2002. We have performed a goodwill impairment test in accordance with SFAS 142 and based on the results of this test we recorded an impairment loss of $1.3 million for the year
ended December 31, 2002.

Net LossAttributable to Common Stockholders. We incurred a
net loss attributable to common stockholders of $127.0 million and $2.6 million for the years ended December 31, 2001 and 2002, respectively. We expect net losses to continue as our business matures.

We have experienced operating losses as a result of the expansion of our network 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 network in accordance with our business plan.

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. Rate increases accounted for approximately 1% of the increased revenues for the year ended December 31, 2001, and the increase in connections accounted for approximately 99% of the increased revenues for the same period. The
additional connections primarily resulted from:

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

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connections and grow our 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.

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.

Gain on Debt Extinguishment. In September 2001, our subsidiary, Valley Telephone,
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 Telephone repurchased Broadband
discount notes with a face amount of $5.7 million for approximately $2.5 million in cash. These transactions resulted in a 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.

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. We
capitalized interest related to the construction of our 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 Broadband discount notes. 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.

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 the Company by ITC Holding, we no
longer participate in the tax sharing agreement. Therefore, we no longer receive any payments from ITC Holding related to income tax benefits. As a stand-alone entity after the spin-off, we now record 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.

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.

Liquidity and Capital Resources

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As of December 31, 2002, we had net working capital of $24.0 million, compared to net working capital of $617,000 as of December 31,
2001. The increase from December 31, 2001 to December 31, 2002 is primarily due to an increase in cash from the proceeds of the Series C preferred stock private placement transaction completed in connection with our financial restructuring, a $1.4
million increase in accounts receivable, net of allowance for doubtful accounts, a reduction of $13.7 million in the current portion of notes payable, and a decrease of $2.4 million in accounts payable.

Net cash provided by operations totaled $35.9 million for the year ended December 31, 2000 compared to net cash used in operations of $13.3 million for the year ended December 31, 2001 and compared
to net cash provided by operations of $10.3 million for the year ended December 31, 2002. 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:

depreciation and amortization;

non-cash stock option compensation;

asset impairment;

gain on early extinguishment of debt;

loss on disposition of
assets;

deferred income taxes;

cumulative effect of change in accounting principle; and

gain on adjustments of warrants to market.

Net cash used for investing activities was $150.0 million, $89.1 million and $44.8 million for the years ended December 31, 2000, 2001 and 2002, respectively. Our investing activities for the year ended December 31,
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. Investing activities in 2002 consisted of $44.4 million of capital expenditures and $1.4 million in
organizational and franchise expenditures partially offset by $1.0 million of proceeds from the sale of property.

We received net cash flow from financing
activities of $126.9 million, $119.8 million and $40.4 million for the years ended December 31, 2000, 2001 and 2002, respectively. 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 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. In 2002 financing activities consisted primarily of $39.0 million from an equity private placement of our
Series C preferred stock and $5.5 million of proceeds from our long-term debt facility partially offset by $4.1 million in expenditures related to the prepackaged plan of reorganization.

Funding to Date

Knology has raised equity capital and borrowed money to finance a significant portion of its operating,
investing and financing activities in the development of its business.

Debt Financings. On October 22, 1997, Broadband received
net proceeds of $242.4 million from the offering of units consisting of the Broadband discount notes and warrants to purchase Broadband preferred stock. The Broadband discount notes were sold at a substantial discount from their principal amount at
maturity, and there was no payment of cash interest on the Broadband discount notes scheduled prior to April 15, 2003. The Broadband discount notes outstanding (excluding those held by Valley Telephone) fully accreted to a face value of $379.9
million on October 15, 2002. From and after October 15, 2002, the Broadband discount notes bore interest, which would have been payable in cash, at a rate of 117/8% per annum on
April 15 and October 15 of each year, commencing April 15, 2003. In November 1999, Knology completed an exchange in which Knology received the Broadband warrants, issued in connection with the Broadband discount notes in 1997, in exchange for
warrants to purchase shares of Knology Series A preferred stock.

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In September 2001, Knologys subsidiary, Valley Telephone, repurchased Broadband 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 a 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 Broadband discount notes in October 1997. In October 2001, Valley Telephone repurchased Broadband discount notes with a face amount of $5.7 million for
approximately $2.5 million in cash. Valley Telephone used funds borrowed by its telephone operations group under the CoBank credit facility to purchase the Broadband discount notes.

As stated above, on November 6, 2002, Knology and Broadband completed the restructuring pursuant to the prepackaged plan of reorganization. Under the plan, $379.9 million aggregate principal amount at maturity of
Broadband discount notes were exchanged for $193.5 million of new Knology notes and 32,386,021 shares of new Knology preferred stock. The $64.2 million aggregate principal amount at maturity of Broadband discount notes held by Valley Telephone were
canceled in exchange for a limited guaranty by Broadband of the CoBank credit facility.

The completion of the restructuring enabled Knology to significantly
lower its debt service requirements, which has improved its liquidity and financial condition. After giving effect to the completion of the restructuring, Knologys first interest payment on the new Knology notes will be due two years after
issuance (Knology presently intends to pay interest incurred for the first 18 months in kind through the issuance of additional notes) in the amount of $14.1 million, with consistent semiannual interest payments due through the seventh anniversary
of the issuance of the new Knology notes. The old Broadband discount notes would have matured on October 15, 2007 with an aggregate amount due at maturity of $444.1 million. The new Knology notes will increase to the amount due of $235.5 million,
assuming payment in kind of interest incurred during the first 18 months of the new notes.

The indenture governing the new Knology notes places certain
restrictions on the ability of Knology and its subsidiaries to take certain actions including the following:

pay dividends or make other restricted payments;

incur additional debt or issue mandatorily redeemable
equity;

create or permit to exist certain liens;

incur restrictions on the ability of its subsidiaries to pay dividends or other payments;

consolidate, merge or transfer all or substantially all its
assets;

enter into transactions with affiliates;

utilize revenues except for specified uses;

utilize excess liquidity except for specified uses;

make capital expenditures for Knology of
Knoxville, Inc.; and

permit the executive officers of Knology to serve as executive officers or employees of other entities in competition with Knology.

These covenants are subject to a number of exceptions and qualifications.

On December 22, 1998, Broadband
entered into a $50 million four-year senior secured credit facility with Wachovia Bank, National Association (formerly First Union National Bank). The Wachovia credit facility, as amended and restated pursuant to the restructuring, allows Broadband
to borrow approximately $15.5 million. The Wachovia credit facility may be used for working capital and other purposes, including capital expenditures and permitted acquisitions. At 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 Wachovia credit facility contains a number of covenants that
restrict the ability of Broadband and its subsidiaries to take many actions, including the ability to:

incur indebtedness;

create liens;

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pay dividends;

make distributions or stock repurchases;

make investments;

engage in transactions with affiliates;

sell assets; and

engage in mergers and acquisitions.

The Wachovia credit facility also includes covenants requiring compliance with operating and financial ratios on a
consolidated basis, including total leverage ratio and debt service coverage ratio. Broadband is currently in compliance with these covenants, as amended. Should Broadband not be in compliance with the covenants, 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 Wachovia credit facility could be payable to the lender on demand. A change of control of Broadband, as defined in the Wachovia
credit facility, would constitute a default under the covenants. The restructuring resulted in the amendment and restatement of the Wachovia credit facility, including an adjustment of the maturity date which allows Knology to make scheduled
quarterly principal payments beginning in the third quarter of 2004 with a final payment due in the second quarter of 2006.

The maximum amount available
under the Wachovia credit facility as of December 31, 2002, was approximately $15.5 million. As of December 31, 2002, approximately $15.5 million had been drawn against the facility.

On January 1, 2002, Knology extended to Broadband a $34.5 million subordinated intercompany loan facility. The intercompany loan facility was guaranteed by the subsidiaries of Broadband and secured by a second-priority
lien and security interest in substantially all of the assets of Broadband and its subsidiaries. The intercompany loan facility was subordinated to the Wachovia credit facility. As of September 30, 2002, $13.0 million had been drawn against the
Intercompany credit facility. In addition to the intercompany loan facility, Knology has advanced to Broadband an additional $10.0 million on an unsecured basis pursuant to a promissory note dated October 1, 2000. As a part of the restructuring, all
indebtedness and obligations owing by Broadband to Knology, including all principal of, and accrued and unpaid interest on, the intercompany loan facility and the unsecured note, was discharged and extinguished in full in exchange for a limited
guaranty by Broadband of CoBank credit facility.

Knology 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 Knology 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 Series A preferred stock, and Knology issued to ITC Holding a note under which it will pay ITC Holding any proceeds from option exercises received by Knology, 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.

On June 29, 2001, Knology through its wholly owned
subsidiaries, Globe Telecommunications, Interstate Telephone and Valley, entered into the credit facility with CoBank, a $40 million, 10-year, secured master loan agreement. The CoBank credit facility, as amended pursuant to the restructuring,
allows the borrowers to make one or more advances in an amount not to exceed $40 million. The loan proceeds may be used to finance capital expenditures, working capital and for general corporate purposes of the borrowers. Interest is payable
quarterly and will accrue, at Knology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 CoBank credit facility contains a number of covenants that restrict the ability of the borrowers to take many actions, including the ability to:

incur indebtedness;

create liens;

merge or consolidate with
any other entity;

make distributions or stock repurchases;

make investments;

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engage in transactions with affiliates; and

sell or transfer assets.

The CoBank credit facility 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 CoBank credit facility could be payable on demand. In connection with the completion of our financial restructuring the maximum amount available under the master
loan agreement has been amended to $38.0 million.

As of December 31, 2002, Knology had $38.0 million outstanding under the CoBank credit facility.

Equity Financings.    In connection with Knologys spin-off from ITC Holding in February 2000, Knology entered into an
agreement with ITC Holding in which Knology agreed to covenants that restricted its ability to issue additional shares of capital stock. In connection with its private placement of 31,166,667 shares of its Series C preferred stock on January
12, 2001, ITC Holding agreed to release Knology from these covenants pursuant to the agreement. Accordingly, Knology is no longer restrained by the ITC Holding agreement with respect to the issuance of additional shares of capital stock.

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

On January 12, 2001, Knology issued to a group of new accredited investors in a private placement 31,166,667 shares
of its Series C preferred stock at a purchase price of $3.00 per share, for aggregate proceeds of $93.5 million. On March 30, 2001, Knology completed another private placement of 1,885,996 shares of Series C preferred stock to a group of
accredited investors for approximately $5.7 million. On April 13, 2001, Knology completed another private placement of 2,621,930 shares of Series C preferred stock to a group of accredited investors for approximately $7.9 million. On June 29, 2001,
Knology completed another private placement of 1,544,970 shares of Series C preferred stock to a group of accredited investors for approximately $4.6 million. In connection with the completion of these private placements, Knology amended its amended
and restated certificate of incorporation to adjust the ratios at which Series A preferred stock and Series B preferred stock convert into common stock. Prior to the completion of the private placements 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 stock was adjusted to one-to-1.4865, subject to further customary anti-dilution adjustments. With respect to the amendment of the conversion prices of the Series A preferred stock and Series
B preferred stock, Knology recognized a non-cash dividend in the approximate amount of $36.6 million in the first quarter of 2001.

On November 6, 2002,
Knology received $39.0 million gross cash proceeds from the issuance of 13 million shares of Series C preferred stock in a private placement to two existing investors. Also on November 6, 2002, Knology issued 10,684,751 shares of Series D preferred
stock and 21,701,279 shares of Series E preferred stock in exchange for a portion of the old Broadband discount notes.

Future Funding

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

Knology has completed the construction of its networks in Montgomery, Alabama; Columbus, Georgia and Panama City, Florida. In 2003 Knology expects to spend approximately $40.0 million for capital expenditures, of
which $14.1 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. Knology has sufficient cash to cover its planned operating expenses and capital expenditures during 2003.

Based on the $39.0 million
cash infusion and the reduction of, and the delay in, principal and interest payments as described under Funding to Date, Knology believes that the restructuring transactions have resulted in a fully funded business plan. Further,
Knology should be able to meet its obligations and operate as a going concern through 2003.

The following table sets forth our long-term debt, capital lease
and operating lease obligations for 2003, for the following five years and thereafter.  The long-term debt obligations are our cash debt service obligations, including both principal and interest.  The capital lease obligations are our
future rental payments under one lease with a 10-year term.   Operating lease obligations are the future minimum rental payments required under the operating leases that have initial or remaining noncancelable lease terms in excess of one
year as of January 1, 2003.



|                            | Payment due by period 
|--------------------------- | ----------------------
|
|                            | (dollars in thousands)
|Long-term debt obligations  |                       
|Capital lease obligations   |                       
|Operating lease obligations |                       
|                           
|Total                       |                       
|                           



In addition to the contractual commitments
described above, we have entered into contracts with various entities to provide programming to be aired on our network.  We pay a monthly fee for the programming services, generally based on the number of average video subscribers to the
program, although some fees are adjusted based on the total number of video subscribers to the system and/or the system penetration percentage. Certain contracts have minimum monthly fees.   We estimate that we will pay approximately $34.7
million in programming fees under these contracts during 2003.



Programming has been our largest single operating expense and we expect this to
continue. In recent years, the cable industry has experienced rapid increases in the cost of programming, particularly sports programming. Our relatively small base of subscribers limits our ability to negotiate lower programming costs. Since
programming cost is partially based on numbers of subscribers, it will increase as we add more subscribers. It will also increase as costs per channel increase over time.  We expect these increases to continue, and we may not be able to pass
our programming cost increases on to our customers. In addition, as we increase the channel capacity of our systems and add programming to our expanded basic and digital programming tiers, we may face additional market constraints on our ability to
pass programming costs on to our customers. Any inability to pass programming cost increases on to our customers would have an adverse impact on our gross profit.



As discussed above, we expect to spend $40.0 million in capital expenditures in 2003.  We expect to fund the contractual obligations discussed above, programming costs and expected capital expenditures through
internally generated funds, borrowings permitted under our indenture and other credit facilities, and the proceeds of future equity offerings.



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Knology has received franchises to build networks in Nashville, Tennessee and Louisville, Kentucky, although its franchise in Louisville
is currently being contested by the incumbent cable provider. Knology has 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, planned expansion into Nashville and Louisville has been delayed. Among the covenants included in the New Indenture governing the new Knology notes is a covenant limiting the ability of Knology to fund expansion into new
markets, including Nashville and Louisville, from operating cash flows or new borrowings. Knology also plans to expand to additional cities in the southeastern United States. Knology estimates 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 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, population density, 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 Knology pays
for or finances, utility requirements and other factors. Knology will need additional financing to complete this expansion, for new business activities or in the event Knology decides to make acquisitions. The schedule for Knologys 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 Knology is not successful in raising additional
capital, it 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.

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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
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 ANDFINANCIAL DISCLOSURE

Effective June 20, 2002, at the recommendation of
the Audit Committee, our Board of Directors engaged Deloitte & Touche LLP (Deloitte) as our independent auditors. This appointment followed our decision to seek proposals from independent accountants to audit our financial statements for the
year ending December 31, 2002.

Deloitte replaced Arthur Andersen LLP (Andersen) as our independent auditors. Our Board of Directors upon the recommendation
of the Audit Committee determined to dismiss Andersen on June 20, 2002.

Andersens report on our consolidated financial statements for the year
ended December 31, 2000 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. Andersens report on our consolidated financial statements for
the year ended December 31, 2001 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to audit scope or accounting principles, but was modified as to our ability to continue as a going concern.

During our two most recent fiscal years ended December 31, 2001 and the subsequent interim period through June 20, 2002, there were no disagreements with Andersen on any
matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to Andersens satisfaction, would have caused them to make reference to the matter in connection with their
reports on our consolidated financial statements. Additionally, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

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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.



|Name                        |  | Age |  | Position                                              |  | TermExpires | 
|--------------------------- |  | --- |  | ----------------------------------------------------- |  | ----------- | 
|Rodger L. Johnson           |  | 55  |  | President, Chief Executive Officer and Director       |  | 2005        | 
|Robert K. Mills             |  | 39  |  | Chief Financial Officer, Vice President and Treasurer |  |             | 
|Felix L. Boccucci, Jr.      |  | 45  |  | Vice President of Business Development                |  |             | 
|Anthony J. Palermo, Jr      |  | 48  |  | Vice President of Operations and Marketing            |  |             | 
|Chad S. Wachter             |  | 36  |  | Vice President, General Counsel and Secretary         |  |             | 
|Thomas P. Barrett           |  | 61  |  | Vice President of Information Technology              |  |             | 
|Marcus R. Luke, Ph.D        |  | 47  |  | Chief Technology Officer                              |  |             | 
|Bret T. McCants             |  | 43  |  | Vice President of Network Services                    |  |             | 
|Campbell B. Lanier, III     |  | 52  |  | Chairman of the Board                                 |  | 2005        | 
|Richard S. Bodman           |  | 64  |  | Director                                              |  | 2003        | 
|Alan A. Burgess(1)          |  | 67  |  | Director                                              |  | 2004        | 
|Donald W. Burton(2)         |  | 58  |  | Director                                              |  | 2004        | 
|Eugene I. Davis             |  | 47  |  | Director                                              |  | 2005        | 
|L. Charles Hilton, Jr.(1)   |  | 71  |  | Director                                              |  | 2003        | 
|William Laverack, Jr.(1)(3) |  | 45  |  | Director                                              |  | 2003        | 
|Bret Pearlman(2)(3)         |  | 36  |  | Director                                              |  | 2003        | 
|William H. Scott, III(2)    |  | 55  |  | Director                                              |  | 2004        | 

______________

(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. Johnsonhas 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. Millshas 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.

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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.
Wachterhas 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. Barretthas 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 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. McCantshas 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, IIIhas 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 eCompanyStore. Mr. Lanier has served as a Managing
Director of South Atlantic Private Equity Fund, IV, Limited Partnership since July 1997.

Richard S. Bodmanhas 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. Burgesshas 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. Burtonhas 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 Cluster A of the Merrill Lynch Investment Managers and several private companies. Mr. Burton also serves as a member of the Investment Advisory Council of the Florida State Board
of Administration.

Eugene I. Daviswas appointed as a director on November 26, 2002. Mr. Davis is Chairman and Chief Executive
Officer of Pirinate Consulting Group, L.L.C., a privately held consulting firm, of RBX Industries, Inc., a manufacturer and distributor of rubber and plastic products, and of Murdock Communications Corp., a telecommunications enterprise. During 1999
and 2001 he served as

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Chief Executive Officer of SmarTalk Teleservices Corp., an independent provider of prepaid calling cards. Mr. Davis was Chief Operating Officer of
Total-Tel Communications, Inc., a long distance telecommunications provider, during 1998 and 1999. Mr. Davis currently serves as a director of Metrocall Holdings, Inc., FLAG Telecom Holdings Limited, Metals USA, Inc., Elder-Beerman Stores,
Inc., Coho Energy, Inc., Murdock Communications Corp., and Tipperary Corporation. Mr. Davis was elected to the board of directors pursuant to the provisions of Knologys stockholders agreement, as amended, which permitted certain holders
of the Series D preferred stock to designate a nominee to serve as director for a three-year term.

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 Managing Partner of Whitney & Co., LLC. which he joined in 1993. 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, 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
Pearlmanhas 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.

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:

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

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;

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

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

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

Compensation of Directors

Knologys directors historically have not received directors fees. Mr. Davis, who was appointed to the board of directors pursuant to Knologys stockholders agreement, as
amended, will receive a fee for attending board and committee meetings in an amount to be determined by the board of directors. Directors are reimbursed for their reasonable out-of-pocket travel expenditures.

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Knologys directors also have received grants of stock options, pursuant to the 1999 Plan, upon their election to the board of directors, and received
replacement options pursuant to Knologys 2002 Long-Term Incentive Plan in December 2002. In the future, directors will be eligible to receive future grants, pursuant to Knologys 2002 Long-Term Incentive Plan. The number of options, if
any, to be granted to directors is within the discretion of the board of directors or the Compensation and Stock Option Committee.

COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT

To our knowledge, based solely on a review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2002,
all Section 16(a) filing requirements applicable to directors, executive officers and greater than ten percent beneficial owners were complied with by such persons, except that Messrs. Wachter, Luke and Boccucci each filed a late Form 3 after
being designated a Section 16 officer during 2002.

ITEM 11.EXECUTIVE COMPENSATION

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.

Summary Compensation Table



|                              |  | Annual Compensation |  | Long-TermCompensation Awards |        
|----------------------------- |  | ------------------- |  | ---------------------------- | -------
|                              |  |                     |  |                              |        
|Name and Title                |  | Year                |  | Salary                       |        
|                              |  |                     |  |                              |        
|Rodger L. Johnson             |  | 2002                |  | $                            | 251,435
|President & Chief             |  | 2001                |  | 236,764                      |        
|Executive Officer             |  | 2000                |  | 205,638                      |        
|                              |  |                     |  |                              |        
|Anthony J. Palermo            |  | 2002                |  | 205,178                      |        
|Vice President of             |  | 2001                |  | 186,449                      |        
|Operations and Marketing      |  | 2000                |  | 154,675                      |        
|                              |  |                     |  |                              |        
|Patrick T. Barrett            |  | 2002                |  | 178,635                      |        
|Vice President of             |  | 2001                |  | 168,692                      |        
|Information Technology        |  | 2000                |  | 153,117                      |        
|                              |  |                     |  |                              |        
|Bret T. McCants               |  | 2002                |  | 171,847                      |        
|Vice President of Network     |  | 2001                |  | 155,688                      |        
|Construction and Maintenance  |  | 2000                |  | 124,986                      |        
|                              |  |                     |  |                              |        
|Robert K. Mills               |  | 2002                |  | 145,115                      |        
|Vice President, Chief         |  | 2001                |  | 139,087                      |        
|Financial Officer & Treasurer |  | 2000                |  |                              | 156,773

______________

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

(2)For fiscal year 2002, includes premiums on term life insurance
($4,787, $1,552, $6,527, $977 and $435 for Johnson, Palermo, Barrett, McCants and Mills, respectively) and employer matching contributions to our 401(k) plan ($6,000, $3,172, $3,476, $4,502 and $5,500 for Johnson, Palermo, Barrett, McCants and
Mills, respectively). 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).

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Option Grants in Last Fiscal Year

The
following table contains information about option awards made to the named executive officers during 2002.



|                   |  | Individual Grants                              |           |                                                          |                 |               |     | Potential Realizable Valueat Assumed Annual Ratesof Stock Price Appreciationfor Option Term(2) |     
|------------------ |  | ---------------------------------------------- | --------- | -------------------------------------------------------- | --------------- | ------------- | --- | ---------------------------------------------------------------------------------------------- | ----
|                   |  |                                                |           |                                                          |                 |               |     |                                                                                               
|                   |  | Number ofSecuritiesUnderlyingOptionsGranted(1) |           | Percent ofTotal OptionsGranted
toEmployees inFiscal 2002 |                 | ExercisePrice |     |                                                                                                |     
|Name               |  |                                                |           |                                                          | Expiration Date |               | 5%  |                                                                                                | 10% 
|                   |  |                                                |           |                                                          |                 |               |     |                                                                                                |     
|Rodger L. Johnson  |  |                                                | 1,020,000 |                                                          |                 | 11.4          | %   | $                                                                                              | 1.87
|                   |  | 980,000                                        |           | 10.9                                                     | %               | 1.87          |     | August 4, 2009                                                                                 |     
|                   |  | 19,421                                         |           | 0.2                                                      | %               | 1.87          |     | May 5, 2010                                                                                    |     
|                   |  | 12,947                                         |           | 0.1                                                      | %               | 1.87          |     | August 2, 2010                                                                                 |     
|                   |  | 329,244                                        |           | 3.7                                                      | %               | 1.87          |     | May 16, 2011                                                                                   |     
|                   |  | 68,333                                         |           | 0.8                                                      | %               | 1.87          |     | May 18, 2011                                                                                   |     
|                   |  | 80,800                                         |           | 0.9                                                      | %               | 3.00          | (3) | April 24, 2012                                                                                 |     
|                   |  | 80,800                                         |           | 0.9                                                      | %               | 1.87          |     | April 24, 2012                                                                                 |     
|                   |  | 125,538                                        |           | 1.4                                                      | %               | 1.87          |     | December 31, 2012                                                                              |     
|Robert K. Mills    |  | 200,000                                        |           | 2.2                                                      | %               | 1.87          |     | August 4, 2009                                                                                 |     
|                   |  | 200,000                                        |           | 2.2                                                      | %               | 1.87          |     | February 2, 2010                                                                               |     
|                   |  | 1,825                                          |           | 0.0                                                      | %               | 1.87          |     | May 5, 2010                                                                                    |     
|                   |  | 65,096                                         |           | 0.7                                                      | %               | 1.87          |     | May 16, 2011                                                                                   |     
|                   |  | 12,041                                         |           | 0.1                                                      | %               | 1.87          |     | May 18, 2011                                                                                   |     
|                   |  | 20,417                                         |           | 0.2                                                      | %               | 3.00          | (3) | April 24, 2012                                                                                 |     
|                   |  | 20,417                                         |           | 0.2                                                      | %               | 1.87          |     | April 24, 2012                                                                                 |     
|                   |  | 24,969                                         |           | 0.3                                                      | %               | 1.87          |     | December 31, 2012                                                                              |     
|Anthony J. Palermo |  | 400,000                                        |           | 4.5                                                      | %               | 1.87          |     | August 4, 2009                                                                                 |     
|                   |  | 6,316                                          |           | 0.1                                                      | %               | 1.87          |     | May 5, 2010                                                                                    |     
|                   |  | 65,824                                         |           | 0.7                                                      | %               | 1.87          |     | May 16, 2011                                                                                   |     
|                   |  | 14,138                                         |           | 0.2                                                      | %               | 1.87          |     | May 18, 2011                                                                                   |     
|                   |  | 27,750                                         |           | 0.3                                                      | %               | 3.00          | (3) | April 24, 2012                                                                                 |     
|                   |  | 27,750                                         |           | 0.3                                                      | %               | 1.87          |     | April 24, 2012                                                                                 |     
|                   |  | 25,702                                         |           | 0.3                                                      | %               | 1.87          |     | December 31, 2012                                                                              |     
|Patrick T. Barrett |  | 400,000                                        |           | 4.5                                                      | %               | 1.87          |     | August 4, 2009                                                                                 |     
|                   |  | 3,158                                          |           | 0.0                                                      | %               | 1.87          |     | May 5, 2010                                                                                    |     
|                   |  | 65,312                                         |           | 0.7                                                      | %               | 1.87          |     | May 16, 2011                                                                                   |     
|                   |  | 14,009                                         |           | 0.2                                                      | %               | 1.87          |     | May 18, 2011                                                                                   |     
|                   |  | 24,871                                         |           | 0.3                                                      | %               | 3.00          | (3) | April 24, 2012                                                                                 |     
|                   |  | 24,871                                         |           | 0.3                                                      | %               | 1.87          |     | April 24, 2012                                                                                 |     
|                   |  | 25,368                                         |           | 0.3                                                      | %               | 1.87          |     | December 31, 2012                                                                              |     
|Bret T. McCants    |  | 14,824                                         |           | 0.2                                                      | %               | 1.87          |     | February 3, 2009                                                                               |     
|                   |  | 42,000                                         |           | 0.5                                                      | %               | 1.87          |     | May 8, 2009                                                                                    |     
|                   |  | 80,000                                         |           | 0.9                                                      | %               | 1.87          |     | August 4, 2009                                                                                 |     
|                   |  | 120,000                                        |           | 1.3                                                      | %               | 1.87          |     | February 5, 2010                                                                               |     
|                   |  | 8,842                                          |           | 0.1                                                      | %               | 1.87          |     | May 5, 2010                                                                                    |     
|                   |  | 43,038                                         |           | 0.5                                                      | %               | 1.87          |     | May 16, 2011                                                                                   |     
|                   |  | 11,414                                         |           | 0.1                                                      | %               | 1.87          |     | May 18, 2011                                                                                   |     
|                   |  | 23,240                                         |           | 0.3                                                      | %               | 3.00          | (3) | April 24, 2012                                                                                 |     
|                   |  | 23,240                                         |           | 0.3                                                      | %               | 1.87          |     | April 24, 2012                                                                                 |     
|                   |  |                                                | 17,168    |                                                          |                 | 0.2           | %   |                                                                                                | 1.87

______________

(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.

(3)These options were
canceled and replaced as of December 31, 2002 with options issued under our 2002 Long-Term Insentive Plan.

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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, 2002 and the year-end value of exercisable options as of December 31, 2002 for the named executive
officers.



|                   |  | SharesAcquiredOnExercise |   | ValueRealized |  | Number of SecuritiesUnderlying UnexercisedOptions atDecember 31, 2002 |  | Value of UnexercisedIn-The-Money Options atDecember 31, 2002(1) |          
|------------------ |  | ------------------------ | - | ------------- |  | --------------------------------------------------------------------- |  | --------------------------------------------------------------- | ---------
|                   |  |                          |   |               |  |                                                                       | 
|Name               |  |                          |   | Exercisable   |  | Unexercisable                                                         |  | Exercisable                                                     |          
|                   |  |                          |   |               |  |                                                                       |  |                                                                 |          
|                   |  |                          |   |               |  |                                                                       |  |                                                                 |          
|Rodger L. Johnson  |  |                          |  |               |  |                                                                      |  |                                                                 | 1,870,577
|Robert K. Mills    |  |                         |   |              |  | 320,196                                                               |  | 204,152                                                         |          
|Anthony J. Palermo |  |                         |   |              |  | 323,148                                                               |  | 216,582                                                         |          
|Patrick Barrett    |  |                         |   |              |  | 321,409                                                               |  | 211,309                                                         |          
|Bret T. McCants    |  |                          |  |               |  |                                                                      |  |                                                                 | 254,857  

______________

(1)The value
of the unexercised in-the-money options as of December 31, 2002 was calculated using a market price of $1.87 per share.



ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information as of January 31, 2003 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.



55



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##### Table of Contents

Knology, Inc Beneficial Ownership TableAs of January 31, 2003



|                                                                   |  | Series A Preferred                        |  | Series B Preferred       |   | Series C Preferred                        |  | Series D Preferred       |   | Series E Preferred                        |  | Common                   |   | As Converted (3)                          | 
|------------------------------------------------------------------ |  | ----------------------------------------- |  | ------------------------ | - | ----------------------------------------- |  | ------------------------ | - | ----------------------------------------- |  | ------------------------ | - | ----------------------------------------- | 
|                                                                   |  |                                           |  |                          |   |                                           |  |                          |   |                                           |  |                          |   |                                           | 
|Name and Address ofBeneficial Owner (1)                            |  | (1)Amount andNature ofBeneficialOwnership |  | (2)Percentof SeriesStock |   | (1)Amount andNature ofBeneficialOwnership |  | (2)Percentof SeriesStock |   | (1)Amount andNature ofBeneficialOwnership |  | (2)Percentof SeriesStock |   | (1)Amount andNature ofBeneficialOwnership | 
|                                                                   |  |                                           |  |                          |   |                                           |  |                          |   |                                           |  |                          |   |                                           | 
|5 % SHAREHOLDERS                                                   |  |                                           |  |                          |   |                                           |  |                          |   |                                           |  |                          |   |                                           | 
|SCANA Communications, Inc (4)                                      |  | 7,234,271                                 |  | 14.2                     | % |                                          |  |                         |   | 14,833,333                                |  | 29.5                     | % |                                          | 
|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                                 |  | 6.6                      | % |                                          | 
|The Blackstone Group (7)                                           |  |                                          |  |                         |   | 6,315,789                                 |  | 29.8                     | % | 2,666,667                                 |  | 5.3                      | % |                                          | 
|South Atlantic Private Equity Funds (8)                            |  | 3,356,443                                 |  | 6.6                      | % | 1,578,947                                 |  | 7.5                      | % | 666,667                                   |  | 1.3                      | % |                                          | 
|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                                 |  | 6.6                      | % |                                          | 
|ITC Telecom Ventures, Inc. (12)                                    |  |                                          |  |                         |   |                                          |  |                         |   | 14,833,333                                |  | 29.5                     | % |                                          | 
|William E. Morrow (13)                                             |  | 13,527                                    |  | *                        |   |                                          |  |                         |   |                                          |  |                         |   |                                          | 
|Felix L. Boccucci, Jr. (14)                                        |  | 352                                       |  | *                        |   | 4,200                                     |  | *                        |   |                                          |  |                         |   |                                          | 
|Marcus R. Luke (15)                                                |  | 26,898                                    |  | *                        |   | 1,600                                     |  | *                        |   |                                          |  |                         |   |                                          | 
|O. Gene Gabbard (16)                                               |  | 305,263                                   |  | *                        |   |                                          |  |                         |   |                                          |  |                         |   |                                          | 
|Chad S. Wachter (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)                                            |  | 9,363,705                                 |  | 18.3                     | % |                                          |  |                         |   | 333,333                                   |  | *                        |   |                                          | 
|Richard Bodman (5) (24)                                            |  | 4,267,800                                 |  | 8.4                      | % | 421,052                                   |  | 2.0                      | % |                                          |  |                         |   |                                          | 
|Alan A. Burgess (25)                                               |  |                                          |  |                         |   |                                          |  |                         |   |                                          |  |                         |   |                                          | 
|Donald W. Burton (7) (26)                                          |  | 3,575,831                                 |  | 7.0                      | % | 1,789,473                                 |  | 8.4                      | % | 1,333,334                                 |  | 2.7                      | % | 2,346,080                                 | 
|Eugene I. Davis (29)                                               |  |                                          |  |                         |   |                                          |  |                         |   |                                          |  |                         |   |                                          | 
|L. Charles Hilton, Jr. (27)                                        |  | 377,197                                   |  | *                        |   |                                          |  |                         |   |                                          |  |                         |   |                                          | 
|Bret Pearlman (8)                                                  |  |                                          |  |                         |   | 6,315,789                                 |  | 29.8                     | % | 2,666,667                                 |  | 5.3                      | % |                                          | 
|William H. Laverack, Jr. (6)                                       |  |                                          |  |                         |   | 8,421,053                                 |  | 39.8                     | % | 3,333,333                                 |  | 6.6                      | % |                                          | 
|William H. Scott III (28)                                          |  | 1,260,491                                 |  | 2.5                      | % |                                          |  |                         |   |                                          |  |                         |   |                                          | 
|                                                                   |  |                                           |  |                          |   |                                           |  |                          |   |                                           |  |                          |   |                                           | 
|All Named Executive Officers and Directors as a Group (14 persons) |  |                                           |  |                          |   |                                           |  |                          |   |                                           |  |                          |   |                                           | 
|                                                                   |  | 18,854,407                                |  | 36.7                     | % | 16,970,567                                |  | 80.1                     | % | 7,666,667                                 |  | 15.3                     | % | 2,346,080                                 | 
|                                                                   |  |                                           |  |                          |   |                                           |  |                          |   |                                           |  |                          |   |                                           | 

*Less than 1%

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*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, 2003. 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, 2003 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 134,196 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 145,833 shares of common stock issuable under
options.

(16)The address of Mr. Gabbard is 102 Marseille
Place, Cary, NC 27511. Includes 68,642 shares of Series A preferred stock issuable under options and 187,290 shares of common stock issuable under options.

(17)Includes 172,647 shares of common stock issuable under options.

(18)Includes 1,615,577 shares of common stock issuable under options.

(19)Includes 270,196 shares of common stock issuable under options.

(20)Includes 323,148 shares of common stock issuable under options.

(21)Includes 321,409 shares of common stock issuable under options.

(22)Includes 251,151 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 127,383 shares of Series A preferred stock issuable under options and 43,701 shares of
common stock issuable under options.

(24)Includes 43,700 shares of
common stock issuable under options.

(25)Includes 33,201 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, 133,333 shares of Series C preferred stock and
586,520 of Series D 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, 533,334 shares of Series C preferred stock and 1,759,560
shares of Series D 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

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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 43,701 shares of common stock issuable
under options.

(27)Includes 43,701 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 93,058 shares of
Series A preferred stock issuable under options and 43,701 shares of common stock issuable under options.

(29)The address of Mr. Davis is 5 Canoe Drive, Livingston, NJ 07039.

Equity Compensation Plan
Information

The following table gives information about the common stock that may be issued upon the exercise of options, warrants and rights under all of
Knologys existing equity compensation plans as of December 31, 2002.



|                                                       |  | (a)                                                                                      |     | (b)                                                                     |  | (c)                                                                                                                                    | 
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------- | --- | ----------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- | 
|Plan Category                                          |  | Number of SecuritiesTo be Issued Upon ExerciseOf Outstanding Options,Warrants and Rights |     | WeightedAverage Exercise Priceof
OutstandingOptions, Warrants andRights |  | Number of SecuritiesRemaining Available forFuture Issuance UnderEquity Compensation Plans(Excluding SecuritiesReflected in Column (a)) | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|Equity Compensation Plans Approved by Stockholders     |  | 8,052,269                                                                                | (1) | 1.87                                                                    |  | 3,947,731                                                                                                                              | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|                                                       |  | 3,016,444                                                                                | (2) | 1.54                                                                    |  | 0                                                                                                                                      | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|Equity Compensation Plans Not Approved by Stockholders |  | 0                                                                                        |     | 0                                                                       |  | 0                                                                                                                                      | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|                                                       |  |                                                                                          |     |                                                                         |  |                                                                                                                                        | 
|Total                                                  |  | 11,068,713                                                                               |     | 1.78                                                                    |  | 3,947,731                                                                                                                              | 

______________

(1)2002 Long-Term Incentive Plan. Options issued under this plan are
exercisable for shares of common stock.

(2)Knology, Inc. Spin-Off Plan. Options issued under this plan are exercisable for shares of Series A preferred stock. The number of shares listed and the weighted average exercise price reflects the conversion of the shares of Series A
preferred stock subject to the options outstanding into shares of common stock. Each share of Series A preferred stock is convertible into 1.0371 shares of common stock.

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:

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.

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.

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

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 2002, we paid $3.8 million for these services. During 2002, our company provided ITC/\DeltaCom with local and long-distance telephone, programming and other services for which we received
$331,256. As of December 31, 2002, Mr. Lanier owned less than 5% 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.

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We provided services to InterCall, our parent company prior to the spin-off and a wholly owned subsidiary of ITC Holding, in 2002, for
which we received $2.0 million. 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 largest stockholders and note holders and was a principal investor in Knology in the past, as discussed below. We lease this pole space pursuant to
an annual pole attachment agreement. In 2002, we paid $116,511 under this agreement.

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 2002, this company charged us $141,456 for
insurance services.

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.

On November 6, 2002, in connection with the restructuring of the capitalization of Knology and Broadband, ITC Telecom and SCANA each contributed $19.5 million to Knology in exchange for 6.5 million
shares of Knologys Series C preferred stock. Additionally, SCANA, as a holder of $118,071,000 aggregate principal amount at maturity Broadbands 11 7/8% senior discount notes due
2007, exchanged those notes for $42,794,000 aggregate principal amount of Knologys 12% senior notes due 2009 and 21,701,279 shares of Knologys Series E preferred stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of our compensation and stock option committee are
Messrs. Scott, Pearlman and Burton. Each of Messrs. Scott and Burton 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.

ITEM 14.CONTROLS AND PROCEDURES



Based on an evaluation carried out as of the end of the period covered by this report, under the supervision and with the participation of the Companys
management, including its Chief Executive Officer and Chief Financial Officer, the Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective. As of the end of the period covered by this report, there have been no significant changes in the Companys internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART IV

ITEM 15.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, 2001 and
2002.

Consolidated Statements of Operations for the Years Ended December 31, 2000, 2001 and 2002.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and 2002.

Consolidated
Statements of Stockholders (Deficit) Equity for the Years Ended December 31, 2000, 2001 and 2002.

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:



|EXHIBITNUMBER | EXHIBIT DESCRIPTION                                                                                                                                                                                                                                                                                                  
|------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                                                                                                                                                      
|2.1           | Joint Plan of Reorganization of Knology Broadband, Inc. filed with the United States Bankruptcy Court for the Northern District of Georgia,
Newnan Division, by Knology, Inc. and Knology Broadband, Inc., on September 18, 2002, confirmed on October 22, 2002 and effective on November 6, 2002 (previously filed).
|              |                                                                                                                                                                                                                                                                                                                      
|3.1           | Amended and Restated Certificate of Incorporation of Knology, Inc. (Incorporated herein by reference to Exhibit 4.1 to Knology Inc.s
Registration Statement on Form S-8 (File No. 333-103248)).                                                                                                                     
|              |                                                                                                                                                                                                                                                                                                                      
|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)).                                                                                                                                                                   
|              |                                                                                                                                                                                                                                                                                                                      
|4.1           | Indenture, dated as of November 6, 2002, by and between Knology Inc. and Wilmington Trust Company, as Trustee, relating to the 12% Senior Notes
Due 2009 of Knology, Inc. (previously filed).                                                                                                                        
|              |                                                                                                                                                                                                                                                                                                                      
|4.2           | Form of Senior Note (contained in Exhibit 4.1).                                                                                                                                                                                                                                                                      
|              |                                                                                                                                                                                                                                                                                                                      
|10.1.1        | 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                                                     

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|       | Exhibit 10.84 to Knology, Inc.s Post-Effective Amendment No. 2 to Form S-1 (File No. 333-89179)).                                                                                                                                                                                                                                                        
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                           
|10.1.2 | 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).
|       |                                                                                                                                                                                                                                                                                                                                                           
|10.1.3 | Amendment No. 2 to Stockholders Agreement, dated as of February 7, 2000, by and among Knology, Inc. and the other signatories thereto, as
amended as of January 12, 2001, dated as of October 18, 2002, by and among Knology, Inc. and the other signatories thereto (previously filed).                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                           
|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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, Inc.s Annual Report on Form 10-K for the year ended December 31, 1998).                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                           
|10.9   | Ordinance No. 16-90 (Montgomery, Alabama) dated March 6, 1990 (Incorporated herein by reference to Exhibit 10.44 to Knology Broadband,
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 Broadband, Inc.s Registration
Statement on Form S-4 (File No. 333-43339)).                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                           
|10.11  | Ordinance No. 9-90 (Montgomery, Alabama) dated January 16, 1990                                                                                                                                                                                                                                                                                           

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|      | (Incorporated herein by reference to Exhibit 10.45.1 to Knology Broadband, 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 Broadband,
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
Broadband, 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 Broadband,
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 Broadband,
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
Broadband, 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
Broadband, 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
Broadband, 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 Broadband
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 Broadband, 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. (Incorporated herein by reference to Exhibit 10.21 to Knology, Inc.s Annual Report on Form 10-K for the year ended December 31, 2001).                   
|      |                                                                                                                                                                                                                                                                                     
|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 Broadband, Inc.s Annual Report on Form 10-K for the year ended December 31, 1998). 
|      |                                                                                                                                                                                                                                                                                     
|10.23 | Lease Agreement dated October 12, 1998 between Southern Company Services, Inc. and Knology Holdings, Inc. (Incorporated herein by                                                                                                                                                   

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|        | reference to Exhibit 10.39 to Knology Broadband, 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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, 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 Broadband, Inc.s Annual Report on Form 10-K for the year ended December 31, 1998).                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.32.1 | Amended and Restated Credit Agreement, between certain subsidiaries of Knology Broadband, Inc. and Wachovia Bank, National Association, dated
October 22, 2002 (previously filed).                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.32.2 | Note Payable to Wachovia, dated October 22, 2002 (previously filed).                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.32.3 | Reaffirmation Agreement, dated October 22, 2002 (previously filed).                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.32.4 | Collateral Agreement, dated October 22, 2002 (previously filed).                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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)).                                                                                                                                                                                                                                                  

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|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 | Knology, Inc. 2002 Long Term Incentive Plan (Incorporated by reference to exhibit 99.1 to Knology, Inc's
Registration Statement on Form S-8 (File No. 333-103248)).                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                         
|10.38 | 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)).              
|      |                                                                                                                                                                                                                                                                                                         
|10.39 | 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)).                                  
|      |                                                                                                                                                                                                                                                                                                         
|10.40 | 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)).                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                         
|10.41 | 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)).                                                                                                           
|      |                                                                                                                                                                                                                                                                                                         
|10.42 | 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).
|      |                                                                                                                                                                                                                                                                                                         
|10.43 | 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).                                                 
|      |                                                                                                                                                                                                                                                                                                         
|10.44 | 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).                                                                 
|      |                                                                                                                                                                                                                                                                                                         
|10.45 | 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).                            
|      |                                                                                                                                                                                                                                                                                                         
|10.46 | Amendment to Master Capacity Lease dated November 1, 1999 between                                                                                                                                                                                                                                       

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|        | 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).                                                                                                                                                        
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.47   | 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).                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.48   | 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).                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.49   | 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).                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.50   | 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).                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.51   | 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).                                
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.52.1 | 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).                          
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.52.2 | 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).
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.52.3 | 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).                                   
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.52.4 | 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).                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                     
|10.52.5 | 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).                          

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|10.52.6  | 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).  
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                 
|10.52.7  | 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).
|         |                                                                                                                                                                                                                                                 
|10.52.8  | 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). 
|         |                                                                                                                                                                                                                                                 
|10.52.9  | Letter from CoBank to Globe Telecommunications, Inc., Interstate Telephone Co. and Valley regarding Consent, Waiver and Amendments to Master
Loan Agreement, dated June 6, 2002 (previously filed).                                             
|         |                                                                                                                                                                                                                                                 
|10.52.10 | Letter from CoBank to Globe Telecommunications, Inc., Interstate Telephone Co. and Valley regarding Amendments to Master Loan Agreement, dated
July 3, 2002 (previously filed).                                                                 
|         |                                                                                                                                                                                                                                                 
|10.52.11 | Amended and Restated First Supplement to Master Loan Agreement, dated June 6, 2002 (previously
filed).                                                                                                                                          
|         |                                                                                                                                                                                                                                                 
|10.52.12 | Continuing Guaranty by Knology of Knoxville, Inc., dated November 6, 2002 (previously filed).                                                                                                                                                   
|         |                                                                                                                                                                                                                                                 
|10.52.13 | Security Agreement by Knology of Knoxville, Inc., dated November 6, 2002 (previously filed).                                                                                                                                                    
|         |                                                                                                                                                                                                                                                 
|10.52.14 | Continuing Guaranty by Knology, Inc., dated November 6, 2002 (previously filed).                                                                                                                                                                
|         |                                                                                                                                                                                                                                                 
|10.52.15 | Continuing Guaranty by Knology Broadband, Inc., dated November 6, 2002 (previously filed).                                                                                                                                                      
|         |                                                                                                                                                                                                                                                 
|10.52.16 | Companion Continuing Guaranty by Knology Broadband, Inc., dated November 6, 2002 (previously filed).                                                                                                                                            
|         |                                                                                                                                                                                                                                                 
|10.53    | Registration Rights Agreement, dated November 6, 2002, by and between Knology, Inc. and SCANA Communications Holdings, Inc. (previously
filed).                                                                                                 
|         |                                                                                                                                                                                                                                                 
|21.1     | Subsidiaries of Knology, Inc. (previously filed).                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                 
|23.1     | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                 
|31.1     | Certification of President and Chief Executive Officer of Knology, Inc. pursuant to Securities Exchange Act
Rules 13a-15(e) and 15d-15(e) (Section 302 of the Sarbanes-Oxley Act of 2002).                                                      
|         |                                                                                                                                                                                                                                                 
|31.2     | Certification of Chief Financial Officer of Knology, Inc. pursuant to Securities Exchange Act Rules 13a-15(e)
and 15d-15(e) (Section 302 of the Sarbanes-Oxley Act of 2002).                                                                    

|     |                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------
|32.1 | Statement of the Chief Executive Officer of Knology, Inc. pursuant to 18 U.S.C. § 1350. (Section 906 of
the Sarbanes-Oxley Act of 2002).
|     |                                                                                                                                         
|32.2 | Statement of the Chief Financial Officer of Knology, Inc. pursuant to 18 U.S.C. § 1350. (Section 906 of
the Sarbanes-Oxley Act of 2002).

(b)REPORTS ON FORM 8-K.

On November 8, 2002 Knology filed a current report on form 8-K announcing the completion of its restructuring. With the completion of the restructuring, the reorganization plan of Broadband became effective on November 6, 2002, and Broadband
has emerged from Chapter 11 proceedings.

On November 13, 2002 Knology filed a current report on form 8-K reporting its 2002 third quarter
results.

66



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##### Table of Contents

(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.

67



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##### Table of Contents

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.



| | KNOLOGY, INC.
| | -------------
| | By:          
| |              
| |              
| |              
| |              
| |              
| |              



68



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##### Table of Contents

KNOLOGY, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                             | Page
|---------------------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                             |     
|Report of Independent Public Accountants                                                                                     | F-2 
|                                                                                                                             |     
|Report of Independent Public Accountants                                                                                     | F-3 
|                                                                                                                             |     
|Consolidated Balance SheetsDecember 31, 2001 and 2002                                                                       | F-4 
|                                                                                                                             |     
|Consolidated Statements of Operations for the Years Ended December 31, 2000, 2001, and
2002                                  | F-5 
|                                                                                                                             |     
|Consolidated Statements of Stockholders Equity and Comprehensive Loss for the Years Ended
December 31, 2000, 2001, and 2002 | F-6 
|                                                                                                                             |     
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001, and
2002                                  | F-7 
|                                                                                                                             |     
|Notes to Consolidated Financial Statements                                                                                   | F-8 
|                                                                                                                             |     

F-1



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##### Table of Contents

INDEPENDENT AUDITORS REPORT

Knology, Inc.

We have audited the accompanying consolidated balance sheet of KNOLOGY, INC. (a Delaware corporation) AND SUBSIDIARIES (the Company) as of December 31, 2002 and the related consolidated
statements of operations, stockholders equity and comprehensive loss, and cash flows for the year ended December 31, 2002. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audit. The consolidated financial statements of the Company as of December 31, 2001 and for each of the two years in the period then ended, before these revisions to Note 2 and 10,
were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements and included an explanatory paragraph that expressed substantial doubt about the Companys ability to
continue as a going concern in their report dated February 7, 2002.

We conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2002 and the results of their operations and their cash flows for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting
Standards No. 142 Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Also as discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for
stock-based compensation to conform to Statement of Financial Accounting Standards No. 123 Accounting for Stock-Based Compensation, which was adopted by the Company as of December 31, 2002.

As discussed above, the consolidated financial statements of Knology, Inc., and subsidiaries as of December 31, 2001 and for each of the years in the period then ended were audited by other auditors who have ceased
operations. These consolidated financial statements have been revised as follows:



| |  | 1. | As described in Note 2, these consolidated financial statements have been revised to include the transition disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to 2001 and 2000 included (a) agreeing previous reported net loss to the previously issued consolidated financial statements and the adjustments to
reported net loss representing amoritzation expense recognized in those periods relating to goodwill to the Company's underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net loss
to reported net loss.
| |  | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | 2. | As described in Notes 2 and 10, these consolidated financial statements have been revised to include the reclassification provisions required by Statement of Financial Accounting Standards No. 145, "Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction," which was adopted by the Company as of December 31, 2002. Our audit procedures with respect to 2001 included (a) agreeing the reported
amount to underlying accounting records obtained from management, and (b) testing the mathematical accuracy of reclassification of gain on early extinguishment of debt to operating expenses.                                                                                              

In our opinion, such disclosures and reclassifications are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 consolidated financial
statements of the Company other than with respect to such disclosures and reclassifications, and accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 consolidated financial statements taken as a
whole.

| |  |  |                                  
| |  |  | ---------------------------------
| |  |  | /s/ Deloitte & Touche LLP        
| |  |  |                                  
| |  |  | Atlanta, GeorgiaFebruary 14, 2003



F-2



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##### Table of Contents

The following report of Arthur Andersen LLP (Andersen) is a copy of the report previously issued by Andersen on February 7, 2002. The report of
Andersen is included in this annual report on Form 10-K pursuant to rule 2-02(c) of regulation S-X. The Company has not been able to obtain a reissued report from Andersen. Andersen has not consented to the inclusion of its report in this annual
report on Form 10-K. Because Andersen has not consented to the inclusion of its report in this annual report, it may be difficult to seek remedies against Andersen, and the ability to seek relief against Andersen may be impaired

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/ ARTHURANDERSENLLP           
| |  |  | Atlanta, GeorgiaFebruary 7, 2002

F-3



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##### Table of Contents

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

|                                                                                                                                                                                       |  | DECEMBER 31, |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                                                                                                                       |  |              |        
|                                                                                                                                                                                       |  | 2001         |        
|                                                                                                                                                                                       |  |              |        
|                                                                                                                                                                                       |  |              |        
|ASSETS                                                                                                                                                                                 |  |              |        
|CURRENT ASSETS:                                                                                                                                                                        |  |              |        
|Cash (including $5,745 of restricted cash as of December 31, 2002) (Note
3)                                                                                                            |  | $            | 38,074 
|Accounts receivable, net of allowance for doubtful accounts of $811 and $2,194 as of December 31,
2001 and 2002, respectively                                                          |  | 13,420       |        
|Accounts receivableaffiliates                                                                                                                                                         |  | 594          |        
|Prepaid expenses                                                                                                                                                                       |  | 946          |        
|                                                                                                                                                                                       |  |              |        
|Total current assets                                                                                                                                                                   |  | 53,034       |        
|PROPERTY, PLANT AND EQUIPMENT:                                                                                                                                                         |  |              |        
|System and installation equipment                                                                                                                                                      |  | 467,977      |        
|Test and office equipment                                                                                                                                                              |  | 40,717       |        
|Automobiles and trucks                                                                                                                                                                 |  | 9,855        |        
|Production equipment                                                                                                                                                                   |  | 669          |        
|Land                                                                                                                                                                                   |  | 3,748        |        
|Buildings                                                                                                                                                                              |  | 16,998       |        
|Construction and premise inventory                                                                                                                                                     |  | 24,846       |        
|Leasehold improvements                                                                                                                                                                 |  | 2,133        |        
|                                                                                                                                                                                       |  |              |        
|                                                                                                                                                                                       |  | 566,943      |        
|Less accumulated depreciation and amortization                                                                                                                                         |  | (166,092     | )      
|                                                                                                                                                                                       |  |              |        
|Property, plant, and equipment, net                                                                                                                                                    |  | 400,851      |        
|                                                                                                                                                                                       |  |              |        
|OTHER LONG-TERM ASSETS:                                                                                                                                                                |  |              |        
|Intangible assets, net                                                                                                                                                                 |  | 44,363       |        
|Deferred issuance costs, net                                                                                                                                                           |  | 5,479        |        
|Investments                                                                                                                                                                            |  | 12,625       |        
|Other                                                                                                                                                                                  |  | 188          |        
|                                                                                                                                                                                       |  |              |        
|Total assets                                                                                                                                                                           |  | $            | 516,540
|                                                                                                                                                                                       |  |              |        
|                                                                                                                                                                                       |  |              |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                   |  |              |        
|                                                                                                                                                                                       |  |              |        
|CURRENT LIABILITIES:                                                                                                                                                                   |  |              |        
|Current portion of notes payable                                                                                                                                                       |  | $            | 17,096 
|Accounts payable                                                                                                                                                                       |  | 18,102       |        
|Accrued liabilities                                                                                                                                                                    |  | 10,583       |        
|Unearned revenue                                                                                                                                                                       |  | 6,636        |        
|                                                                                                                                                                                       |  |              |        
|Total current liabilities                                                                                                                                                              |  | 52,417       |        
|                                                                                                                                                                                       |  |              |        
|NONCURRENT LIABILITIES:                                                                                                                                                                |  |              |        
|Notes payable                                                                                                                                                                          |  | 31,331       |        
|Unamortized investment tax credits                                                                                                                                                     |  | 182          |        
|Senior discount notes, net of discount                                                                                                                                                 |  | 339,486      |        
|                                                                                                                                                                                       |  |              |        
|Total noncurrent liabilities                                                                                                                                                           |  | 370,999      |        
|                                                                                                                                                                                       |  |              |        
|Total liabilities                                                                                                                                                                      |  | 423,416      |        
|                                                                                                                                                                                       |  |              |        
|COMMITMENTS AND CONTINGENCIES (NOTE 6)                                                                                                                                                 |  |              |        
|                                                                                                                                                                                       |  |              |        
|WARRANTS (NOTE 4)                                                                                                                                                                      |  | 4,726        |        
|                                                                                                                                                                                       |  |              |        
|STOCKHOLDERS EQUITY:                                                                                                                                                                  |  |              |        
|Series A preferred stock, $.01 par value per share; 56,000,000 shares authorized,
50,990,888 and 51,040,457, shares issued and outstanding at December 31, 2001 and 2002, respectively |  | 510          |        
|Series B preferred stock, $.01 par value per share; 21,180,131 shares authorized, 21,180,131 and
21,180,131, shares issued and outstanding at December 31, 2001 and 2002, respectively |  | 212          |        
|Series C preferred stock, $.01 par value per share; 60,000,000 shares authorized,
37,219,562 and 50,219,562, shares issued and outstanding at December 31, 2001 and 2002, respectively |  | 372          |        
|Series D preferred stock, $.01 par value per share; 34,000,000 shares authorized, 0 and 10,684,751,
shares issued and outstanding at December 31, 2001 and 2002, respectively (Note 8) |  | 0            |        
|Series E preferred stock, $.01 par value per share; 25,000,000 shares authorized,
0 and 21,701,279, shares issued and outstanding at December 31, 2001 and 2002, respectively (Note 8) |  | 0            |        
|Common stock, $.01 par value per share; 200,000,000 shares authorized, 502,194 and 503,197 shares
issued and outstanding at December 31, 2001 and 2002, respectively                   |  | 5            |        
|Additional paid-in capital                                                                                                                                                             |  | 394,741      |        
|Accumulated deficit                                                                                                                                                                    |  | (307,442     | )      
|                                                                                                                                                                                       |  |              |        
|Total stockholders equity                                                                                                                                                             |  | 88,398       |        
|                                                                                                                                                                                       |  |              |        
|Total liabilities and stockholders equity                                                                                                                                             |  | $            | 516,540
|                                                                                                                                                                                       |  |              |        

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

F-4



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##### Table of Contents

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)





|                                                                                                 |  | YEAR ENDED DECEMBER 31, |         
|------------------------------------------------------------------------------------------------ |  | ----------------------- | --------
|                                                                                                 |  |                         |         
|                                                                                                 |  | 2000                    |         
|                                                                                                 |  |                         |         
|                                                                                                 |  |                         |         
|OPERATING REVENUES:                                                                              |  |                         |         
|Video                                                                                            |  | $                       | 41,821  
|Voice                                                                                            |  | 34,943                  |         
|Data services and other                                                                          |  | 5,809                   |         
|                                                                                                 |  |                         |         
|Total operating revenues                                                                         |  | 82,573                  |         
|                                                                                                 |  |                         |         
|                                                                                                 |  |                         |         
|OPERATING EXPENSES:                                                                              |  |                         |         
|Costs of services (excluding depreciation and amortization)                                      |  | 31,010                  |         
|Selling, general and administrative expenses                                                     |  | 58,725                  |         
|Depreciation and amortization                                                                    |  | 60,672                  |         
|Reorganization professional fees                                                                 |  | 0                       |         
|Gain on debt extinguishment (Note 4)                                                             |  | 0                       |         
|Asset impairment                                                                                 |  | 0                       |         
|Non-cash stock option compensation                                                               |  | 0                       |         
|Litigation fees (Note 6)                                                                         |  | 0                       |         
|                                                                                                 |  |                         |         
|Total operating expenses                                                                         |  | 150,407                 |         
|                                                                                                 |  |                         |         
|OPERATING (LOSS) INCOME                                                                          |  | (67,834                 | )       
|                                                                                                 |  |                         |         
|OTHER INCOME (EXPENSE):                                                                          |  |                         |         
|Interest income                                                                                  |  | 4,858                   |         
|Interest expense (contractual interest of $41,619 for the twelve months ended
December 31, 2002) |  | (39,715                 | )       
|Affiliate interest expense, net                                                                  |  | (2                      | )       
|Gain on adjustment of warrants to market                                                         |  | 0                       |         
|Other expense, net                                                                               |  | (1,373                  | )       
|                                                                                                 |  |                         |         
|Total other expense                                                                              |  | (36,232                 | )       
|                                                                                                 |  |                         |         
|                                                                                                 |  |                         |         
|LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE                 |  | (104,066                | )       
|INCOME TAX BENEFIT (PROVISION)                                                                   |  | 3,170                   |         
|                                                                                                 |  |                         |         
|                                                                                                 |  |                         |         
|LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE                                  |  | (100,896                | )       
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                                              |  | 0                       |         
|                                                                                                 |  |                         |         
|                                                                                                 |  |                         |         
|NET LOSS                                                                                         |  | (100,896                | )       
|NON-CASH DISTRIBUTION TO PREFERRED STOCKHOLDERS (Note 8)                                         |  | 0                       |         
|                                                                                                 |  |                         |         
|NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                                     |  | $                       | (100,896
|                                                                                                 |  |                         |         



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



F-5



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##### Table of Contents

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

AND COMPREHENSIVE LOSS

(DOLLARS IN THOUSANDS)



|                                                         |  | Series APreferred Stock |            | Series BPreferred Stock |   | Series CPreferred Stock |  | Series DPreferred Stock |            | Series EPreferred Stock |   | Common StockShares |  | AdditionalPaid-inCapital |            | AccumulatedDeficit |   | AccumulatedOtherComprehensiveIncome (loss) |  | TotalStockholdersEquity |           
|-------------------------------------------------------- |  | ----------------------- | ---------- | ----------------------- | - | ----------------------- |  | ----------------------- | ---------- | ----------------------- | - | ------------------ |  | ------------------------ | ---------- | ------------------ | - | ------------------------------------------ |  | ------------------------ | ----------
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |  
|                                                         |  | Shares                  |            | Amount                  |   | Shares                  |  | Amount                  |            | Shares                  |   | Amount             |  | Shares                   |            | Amount             |   | Shares                                     |  | Amount                   |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|BALANCE, December 31, 1999                               |  |                         | 48,035,531 |                         | $ | 480                     |  |                         | 0          |                         | $ | 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 8)               |  |                         |            |                         |   | 21,180,131              |  | 212                     |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|ITC Holding loan conversion                              |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|BALANCE, December 31, 2000                               |  |                         | 50,912,155 |                         | $ | 509                     |  |                         | 21,180,131 |                         | $ | 212                |  |                          | 0          |                    | $ | 0                                          |  |                          | 0         
|Comprehensive Loss:                                      |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Net loss attributable to common stockholders             |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Comprehensive Loss                                       |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Non-Cash Distribution to Preferred Shareholders (Note
8) |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|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                                        |  |                          | 0         
|Comprehensive Loss:                                      |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Net loss attributable to common stockholders             |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Comprehensive Loss                                       |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Exercise of stock options                                |  | 49,569                  |            | 0                       |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Private Placement                                        |  |                         |            |                         |   |                         |  |                         |            | 13,000,000              |   | 130                |  |                          |            |                    |   |                                            |  |                          |           
|Non-cash stock option compensation                       |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|Reorganization, net of fees of $3,842 (Note 8)           |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  | 10,684,751               |            | 107                |   | 21,701,279                                 |  | 217                      |           
|                                                         |  |                         |            |                         |   |                         |  |                         |            |                         |   |                    |  |                          |            |                    |   |                                            |  |                          |           
|BALANCE, December 31, 2002                               |  |                         | 51,040,457 |                         | $ | 510                     |  |                         | 21,180,131 |                         | $ | 212                |  |                          | 50,219,562 |                    | $ | 502                                        |  |                          | 10,684,751

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

F-6



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##### Table of Contents

KNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)



|                                                                                          |  | YEAR ENDED DECEMBER 31, |         
|----------------------------------------------------------------------------------------- |  | ----------------------- | --------
|                                                                                          |  |                         |         
|                                                                                          |  | 2000                    |         
|                                                                                          |  |                         |         
|                                                                                          |  |                         |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                         |         
|Net loss                                                                                  |  | $                       | (100,896
|Adjustments to reconcile net loss to net cash provided (used in) by operating
activities: |  |                         |         
|Depreciation and amortization                                                             |  | 60,672                  |         
|Non-cash stock option compensation                                                        |  | 0                       |         
|Gain on debt extinguishment                                                               |  | 0                       |         
|Asset impairment                                                                          |  | 0                       |         
|Litigation fees                                                                           |  | 0                       |         
|Write off of investment                                                                   |  | 0                       |         
|Amortization of bond discount                                                             |  | 40,152                  |         
|Loss (gain) on disposition of assets                                                      |  | 344                     |         
|Cumulative effect of change in accounting principle                                       |  | 0                       |         
|Gain on adjustment of warrants to market                                                  |  | 0                       |         
|Amortization of deferred investment tax credit                                            |  | (72                     | )       
|Other deferred credits                                                                    |  | 0                       |         
|Changes in operating assets and liabilities:                                              |  |                         |         
|Accounts receivable                                                                       |  | (1,659                  | )       
|Accounts receivableaffiliate                                                             |  | 14,918                  |         
|Prepaid expenses and other                                                                |  | (411                    | )       
|Accounts payable                                                                          |  | 15,303                  |         
|Accrued liabilities                                                                       |  | 6,995                   |         
|Unearned revenue                                                                          |  | 538                     |         
|                                                                                          |  |                         |         
|Total adjustments                                                                         |  | 136,780                 |         
|                                                                                          |  |                         |         
|Net cash provided by (used in) operating activites                                        |  | 35,884                  |         
|                                                                                          |  |                         |         
|                                                                                          |  |                         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                         |         
|Capital expenditures                                                                      |  | (146,706                | )       
|Organizational and franchise cost expenditures                                            |  | (1,402                  | )       
|Proceeds from the sale of investments                                                     |  | 6,069                   |         
|Proceeds from sale of property                                                            |  | 276                     |         
|Investment in Grande                                                                      |  | (8,223                  | )       
|Other                                                                                     |  | 0                       |         
|                                                                                          |  |                         |         
|Net cash used in investing activities                                                     |  | (149,986                | )       
|                                                                                          |  |                         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                         |         
|Principal payments on debt and short-term borrowings                                      |  | (3,549                  | )       
|Expenditures related to issuance of debt                                                  |  | (109                    | )       
|Proceeds from private placement, net of offering expenses                                 |  | 100,011                 |         
|Proceeds from affiliate loan                                                              |  | 29,726                  |         
|Proceeds from long-term debt facility                                                     |  | 0                       |         
|Stock options exercised                                                                   |  | 1,170                   |         
|Expenditures related to reorganization                                                    |  | 0                       |         
|Repurchase of senior discount notes                                                       |  | 0                       |         
|Advances to affiliates                                                                    |  | (338                    | )       
|                                                                                          |  |                         |         
|Net cash provided by financing activities                                                 |  | 126,911                 |         
|                                                                                          |  |                         |         
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                 |  | 12,809                  |         
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                            |  | 7,819                   |         
|                                                                                          |  |                         |         
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                  |  | $                       | 20,628  
|                                                                                          |  |                         |         
|                                                                                          |  |                         |         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                        |  |                         |         
|Cash paid during the year for interest                                                    |  | $                       | 1,903   
|                                                                                          |  |                         |         
|Cash received during period for income taxes                                              |  | $                       | 16,656  
|                                                                                          |  |                         |         
|Stock issued for purchase of land                                                         |  | $                       | 0       
|                                                                                          |  |                         |         

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

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KNOLOGY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2000, 2001, AND 2002

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

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

ORGANIZATION

Knology, Inc. (Knology or 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).

PREPACKAGED PLAN OF REORGANIZATION UNDER CHAPTER 11

Knology Broadband, Inc., or Broadband, a wholly owned subsidiary of Valley Telephone Co., Inc., which is a wholly owned subsidiary of Knology, on September 18, 2002 filed a bankruptcy petition under Chapter 11 of the federal bankruptcy laws
in the United States Bankruptcy Court for the Northern District of Georgia. On that same date, Knology and Broadband filed a prepackaged plan of reorganization of Broadband under Chapter 11.

Broadband received approval from the Bankruptcy Court to pay all trade claims and employee wages in the ordinary course of business, including prepetition claims.

Contractual interest on debt obligations for the twelve months ended December 31, 2002 is $41,619, which is $6,857 in excess of reported interest expense, as reported interest
expense excludes contractual interest during the bankruptcy proceeding which will not be paid.

On October 22, 2002 the Bankruptcy Court confirmed the
prepackaged plan of reorganization of Broadband without modification.

On November 6, 2002, the following transactions became
effective pursuant to the prepackaged plan:

Knology received $39,000 gross cash proceeds from the issuance of 13,000,000 shares of Series C preferred stock in a private placement to existing investors SCANA
Holding and ITC Telecom Ventures. The proceeds will be used to pay transaction expenses of approximately $1,700 and for general corporate purposes.

$379,900 aggregate principal amount at maturity of Broadband discount notes were exchanged
for $193,500 of new Knology notes and 10,618,352 shares of new Knology Series D preferred stock and 21,701,279 shares of new Knology Series E preferred stock.

The $15,500, 4-year senior secured credit facility by and among Wachovia, as lender,
Broadband, as guarantor, and the subsidiaries of Broadband as borrowers, was amended and restated.

The $40,000 10-year senior, secured credit facility by and among CoBank as lender and Valley Telephone, Globe Telecommunications,
Inc., Interstate Telephone, as borrowers, was amended.

$64,200 aggregate principal amount at maturity of Broadband discount notes held by Valley Telephone, were canceled in exchange for a limited guaranty by Broadband of
the CoBank credit facility.

$15,300 owed to Knology by Broadband under two intercompany loan facilities was canceled in exchange for a limited guaranty by Broadband of the CoBank credit
facility.

The Knology Stockholders Agreement was amended to provide the holders of Broadband discount notes who received new Knology preferred stock in the restructuring with registration rights and co-sale rights, as well to provide holders of the
Series D preferred stock the right to nominate a director to be elected to Knologys board of directors.

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NATURE OF BUSINESS

Knology, Broadband and their
respective 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.

Our telephone operations group, consisting
of Interstate Telephone Company, Globe Telecommunications, Inc., ITC Globe, Inc., and Valley Telephone Co., Inc. (our 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.

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.

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, 2000, 2001 and 2002 was $41,976, $63,333 and $78,623, respectively.

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 $2,329 and $2,430 of interest cost was
capitalized in 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,
2001 and 2002 are as follows:

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|                              |  | 2001   |        | 2002   |   | AMORTIZATIONPERIOD(YEARS) | 
|----------------------------- |  | ------ | ------ | ------ | - | ------------------------- | 
|                              |  |        |        |        |   |                           | 
|Goodwill                      |  |        | 56,291 |        |   | 54,870                    | 
|Subscriber base               |  | 34,757 |        | 328    |   | 3                         | 
|Noncompete agreement          |  | 1,500  |        | 0      |   | 3                         | 
|Other                         |  | 2,846  |        | 798    |   | 1-15                      | 
|                              |  |        |        |        |   |                           | 
|                              |  | 95,394 |        | 55,996 |   |                           | 
|Less accumulated amortization |  | 51,031 |        | 14,912 |   |                           | 
|                              |  |        |        |        |   |                           | 
|Intangibles, net              |  | $      | 44,363 |        | $ | 41,084                    | 
|                              |  |        |        |        |   |                           | 

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. 142as of January 1, 2003 and will perform this test annually on January 1. The
Company uses a two step process to test for impairment to the carrying value of goodwill in accordance with SFAS No. 142. The first step of the process compares the fair value of each reporting unit with the carrying value of the reporting unit,
including any goodwill. Each geographic operating unit is deemed to be a reporting unit for testing purposes. The Company utilizes a discounted cash flow valuation methodology to determine the fair value of each reporting unit. If the fair value of
each reporting unit exceeds the carrying amount of the reporting unit, goodwill is deemed not to be impaired in which case the second step in the process is unnecessary. If the carrying amount exceeds fair value, the Company performs the second step
to measure the amount of impairment loss. Any impairment loss is measured by comparing the implied fair value of goodwill, calculated per SFAS No. 142, with the carrying amount of goodwill at the reporting unit, with the excess of the carrying
amount over the fair value recognized as an impairment loss.

The Company accounts for the impairment of amortizable intangible assets in accordance with SFAS
No. 144 as described under Long-lived assets. Based on the results of the goodwill impairment test, the Company recorded 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 no longer recorded amortization of goodwill. A goodwill impairment test will be performed at least annually on January 1. During 2002 the Company recorded approximately $791 in amortization expense.

The following is a pro forma presentation of reported net loss, adjusted for the exclusion of goodwill amortization net of related income tax effect:



|                                   |  | Pro Forma Results for the Year EndedDecember 31, |         
|---------------------------------- |  | ------------------------------------------------ | --------
|                                   |  |                                                  |         
|                                   |  | 2000                                             |         
|                                   |  |                                                  |         
|Reported net loss                  |  | $                                                | (100,896
|Goodwill amortization (net of tax) |  | 4,812                                            |         
|                                   |  |                                                  |         
|Adjusted net loss                  |  | $                                                | (96,084 
|                                   |  |                                                  |         

The net amount of goodwill at December 31, 2002 and
December 31, 2001 was $40,834 and $42,128, respectively. There were no intangible assets reclassified to goodwill upon adoption of SFAS No. 142.

Amortization
expense related to goodwill and intangible assets was $791 and $14,492 for the years ended December 31, 2002 and 2001, respectively.

Scheduled amortization of
intangible assets for the next five years is as follows



|           |     
|---------- | ----
|2003       | $354
|2004       | 1   
|2005       | 0   
|2006       | 0   
|2007       | 0   
|Thereafter | 0   
|           |     
|           | $355

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, 2001 and 2002 are as follows:



| |  |      |  |      |  | AMORTIZATIONPERIOD | 
| |  | ---- |  | ---- |  | ------------------ | 
| |  | 2001 |  | 2002 |  | (YEARS)            | 
| |  |      |  |      |  |                    | 

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|Deferred issuance costs      |  | $9,173 |   | $1,858 |   | 4-10 | 
|---------------------------- |  | ------ | - | ------ | - | ---- | 
|Accumulated amortization     |  | (3,694 | ) | (1,411 | ) |      | 
|                             |  |        |   |        |   |      | 
|Deferred issuance costs, net |  | $5,479 |   | $447   |   |      | 
|                             |  |        |   |        |   |      | 

In connection with restructuring, $3,841, net of
related amortization, of deferred issuance cost was written off as a result of the exchange of the Broadband Senior Discount Notes.

LONG-LIVED ASSETS

On January 1, 2002, we adopted FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). Under SFAS No.
144, the Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined
not be recoverable, a write-down to fair value is recorded. The effects of adopting SFAS No. 144 were not material to our results of operations.

In connection
with the restructuring of our capitalization pursuant to the prepackaged plan of reorganization, we issued new 12% senior notes due 2009, which include covenants limiting our ability to fund expansion into new markets, including Nashville and
Louisville. Due to the restrictive nature of the new covenants as they relate to the use of operating cash flows or new borrowings for expansion, we have evaluated our assets for impairment. The asset impairment charge was measured in accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets.

Based on our evaluation of the impact the new covenants will
have on our business plan, the Company recognized an asset impairment of approximately $9,946 during the year ended December 31, 2002. The total asset impairment is comprised of the following:



|Abandoned construction in progress |  | $     | 6,094 | 
|---------------------------------- |  | ----- | ----- | 
|Franchise costs                    |  | 1,398 |      
|Construction inventory             |  | 2,454 |      
|                                   |  |       |      
|Total asset impairment             |  | $     | 9,946 | 





COST OF SERVICES

Cost of services related to video consists primarily of monthly fees to the National Cable Television Cooperative and other programming providers and is generally based on the
average number of subscribers to each program. Cost of services related to voice and data services and other consists primarily of transport cost and network access fees specifically associated with each of these revenue streams.



STOCK BASED COMPENSATION

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation-Transition and Disclosure, which amends FASB Statement No. 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Finally, this Statement amends APB Opinion No. 28, Interim Financial Reporting, to require disclosure
about those effects in interim financial information. SFAS No. 148 is to be applied for financial statements for fiscal years ending after December 15, 2002. In December 2002 the Company elected to adopt the recognition provisions of SFAS No. 123
which is considered the preferable accounting method for stock-based employee compensation. The Company also elected to report the change in accounting principle using the prospective method in accordance with SFAS No. 148. Under the prospective
method, the recognition of compensation costs is applied to all employee awards granted, modified or settled after the beginning of the fiscal year in which the recognition provisions are first applied. As a result, the Company recorded $3,266 of
non-cash stock option compensation expense for the year ended December 31, 2002. We will continue to provide pro forma net income and earnings per share information related to prior awards.



The following table illustrates the effect on net loss if Knology had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation:



|                                                                                                                             |   | Year Ended December 31 |  
|---------------------------------------------------------------------------------------------------------------------------- | - | ---------------------- | -
|                                                                                                                             |  
|                                                                                                                             |   | 2000                   |  
|                                                                                                                             |   |                        |  
|Net loss, as
reported                                                                                                        | $ | (100,896               | )
|Add:  Stock-based compensation, as
reported                                                                                  |   |                       |  
|Deduct:  Total stock-based compensation determined under 
                fair value based method for all awards, net of tax |   | (2,102                 | )
|                                                                                                                             |   |                        |  
|Pro forma net
loss                                                                                                           | $ | (102,988               | )
|                                                                                                                             |   |                        |  



INVESTMENTS

Investments and equity ownership in associated companies consisted of the following at December 31, 2001 and 2002:



|                                                                                                 |  | 2001 |        | 2002   |  
|------------------------------------------------------------------------------------------------ |  | ---- | ------ | ------ | -
|                                                                                                 |  |      |        |        |  
|Nonmarketable investments, at cost:                                                              |  |      |        |        |  
|ClearSource common and preferred stock, 2,238,388 and 0 shares in 2001 and 2002,
respectively    |  | $    | 12,575 |        | $
|Grande Communications common stock, 500,000 and 10,123,829 shares in 2001 and
2002, respectively |  | 5    |        | 12,580 |  
|Hybrid Networks, Inc. common stock, 90,000 and 0 shares in 2001 and 2002, respectively           |  | 45   |        | 0      |  
|                                                                                                 |  |      |        |        |  
|Total investments                                                                                |  | $    | 12,625 |        | $
|                                                                                                 |  |      |        |        |  

At December 31, 2002, the Company, through its
wholly owned subsidiaries, owned approximately 2.43% of Grande. The Companys investment in Grande is accounted for under the cost method of accounting. During 2002 Grande acquired Clearsourse,

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Inc. Grande builds and operates broadband networks offering bundled communication services to several markets in Texas.

ACCRUED LIABILITIES

Accrued liabilities at December 31, 2001 and 2002 consists of the following:



|                       |  | 2001  |        | 2002  |  
|---------------------- |  | ----- | ------ | ----- | -
|                       |  |       |        |       |  
|Accrued trade expenses |  | $     | 8,012  |       | $
|Accrued property taxes |  | 857   |        | 1,470 |  
|Accrued compensation   |  | 1,124 |        | 973   |  
|Accrued interest       |  | 590   |        | 434   |  
|                       |  |       |        |       |  
|Total                  |  | $     | 10,583 |       | $
|                       |  |       |        |       |  

REVENUE RECOGNITION

The Company generates recurring revenues for broadband offerings of video, voice and data and other services. The revenues generated from these services primarily consists of a fixed monthly fee for
access to cable programming, local phone services and enhanced services and access to the internet. Additional fees are charged for services including pay-per-view movies, events such as boxing matches and concerts, long distance service and cable
modem rental. Revenues are recognized as services are provided and advance billings or cash payments received in advance of services performed are recorded as deferred revenue.

ADVERTISING COSTS

The Company expenses all advertising costs as incurred. Approximately $1,980, $3,308 and $3,552 of advertising expense are
recorded in the Companys consolidated statements of operations for the years ended December 31, 2000, 2001, and 2002, respectively.

INSTALLATION FEES



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



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).

Prior to the short
tax year ended December 31, 2000, the Company was included in the consolidated tax return of ITC Holding. Under a tax sharing arrangement, the Company recorded an income tax provision of $2,789 and a receivable in the amount of $684 at December 31,
2001, for the utilization of net operating losses included in the consolidated tax return of ITC Holding.

The Company has been a separate taxable entity
since ITC Holdings completed a reorganization of some of its subsidiaries in February 2000. The Company files a consolidated federal income tax return resulting in a consolidated loss. The Company has significant net operating loss carryforwards, a
portion of which are subject to limitation. The Company recorded an income tax

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provision of $0 at December 31, 2002. For income tax purposes, the Company believes that the prepackaged plan of reorganization did not result in any taxable
income or loss from the extinguishment of debt. The remaining amount of the accrued interest on the Broadband notes will be deductible upon the future retirement of the new notes and stock exchanged in the prepackaged plan of reorganization. With
respect to the prepackaged plan of reorganization and the issues discussed above, there is a risk that the Internal Revenue Service may take a different position.

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.

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. We do not expect SFAS No. 143 to have a material impact on our financial position or results of
operations.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Correction, which provides for the rescission of several previously issued accounting standards, new accounting guidance for the accounting of certain lease modifications and various technical corrections that are not substantive in
nature to existing pronouncements. We will adopt SFAS No. 145 on January 1, 2003, except for the provisions relating to the amendment of SFAS No. 13, which was adopted for transactions occurring subsequent to May 15, 2002. Effective December 31,
2002, we adopted SFAS No. 145 and reclassed the extraordinary gain on extinguishment of debt for the year ended December 31, 2001, of $31,875 to operating expenses.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We do not expect SFAS No. 146 to have a material impact on our financial
position and results of operations.

In November 2002, FASB Interpretation No, (FIN) 45, Guarantors Accounting and Disclosure Requirements
for Guarantors, Including Indirect Guarantees of Indebtedness of Others, was issued. FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee.
Guarantors will also be required to meet expanded disclosure obligations. The initial recognition and measurement provision of FIN 45 are effective for guarantees issued after December 31, 2002. The disclosure requirements are effective for annual
and interim financial statements that end after December 15, 2002, and had no impact on the Companys financial position of results of operations.

3. CASH

As of December 31, 2002, the Company has $5,745 of cash that is restricted in use. Of this amount, $4,755 is held at the telephone operations group and is restricted for
use by these entities. Also, the Company has pledged $990 of cash as collateral for amounts potentially payable under certain surety bond agreements.

4. LONG-TERM DEBT

Long-term debt at December 31, 2001 and 2002 consists of the following:



|                                                                                                                                                                                                                                                                        |  | 2001    |   | 2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | - | ---- | -
|                                                                                                                                                                                                                                                                        |  |         |   |      |  
|Senior Unsecured Notes including accrued interest, with a face value of $194,659
bearing interest in-kind at 13% beginning November 6, 2002, interest payable semiannually at 12% beginning November 30, 2004, with principle and unpaid interest due November 30, 2009 |  | $       | 0 |      | $
|Senior Discount Notes including accrued interest, with a face value of $379,894, 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.            |  | 339,486 |   | 0    |  
|Senior secured Wachovia credit facility, at a rate of LIBOR plus 2.5%, interest
payable quarterly with principal and any unpaid                                                                                                                                         |  |         |   |      |  

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|                                                                                                                                                                                                                              |  | 2001    |         | 2002    |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | ------- | ------- | -
|                                                                                                                                                                                                                              |  |         |         |         |  
|interest due June 15, 2006                                                                                                                                                                                                    |  | 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 |  | 32,482  |         | 37,952  |  
|Capitalized lease obligation, at a rate of 7%, with monthly principal and
interest payments through October 2011                                                                                                              |  | 480     |         | 479     |  
|                                                                                                                                                                                                                              |  |         |         |         |  
|                                                                                                                                                                                                                              |  | 387,913 |         | 252,351 |  
|Less current maturities                                                                                                                                                                                                       |  | 17,096  |         | 3,406   |  
|                                                                                                                                                                                                                              |  |         |         |         |  
|                                                                                                                                                                                                                              |  | $       | 370,817 |         | $
|                                                                                                                                                                                                                              |  |         |         |         |  

Following are maturities of long-term debt for each of the next five
years as of December 31, 2002:



|2003       |  | $3,232   | 
|---------- |  | -------- | 
|2004       |  | 5,199    | 
|2005       |  | 12,440   | 
|2006       |  | 9,651    | 
|2007       |  | 4,565    | 
|Thereafter |  | 253,932  | 
|           |  |          | 
|Total      |  | $289,019 | 
|           |  |          | 

On November 6, 2002, Knology and Broadband completed
the financial restructuring pursuant to the prepackaged plan of reorganization. Under the plan, $379,900 aggregate principal amount at maturity of Broadband discount notes were exchanged for $193,500 of new Knology notes and 32,386,021 shares of new
Knology preferred stock. The $64,200 aggregate principal amount at maturity of Broadband discount notes held by Valley Telephone were canceled in exchange for a limited guaranty by Broadband of the CoBank credit facility.

The completion of the restructuring enabled Knology to significantly lower its debt service requirements, which has improved its liquidity and financial condition. After giving
effect to the completion of the restructuring, Knologys first interest payment on the new Knology notes will be due two years after issuance (Knology presently intends to pay interest incurred for the first 18 months in kind through the
issuance of additional notes) in the amount of $14,131, with consistent semiannual interest payments due through the seventh anniversary of the issuance of the new Knology notes. The old Broadband discount notes would have matured on October 15,
2007 with an aggregate amount due at maturity of $444,100. The new Knology notes will increase to the amount due of $235,526, assuming payment in kind of interest incurred during the first 18 months of the new notes.

The indenture governing the new Knology notes places certain restrictions on the ability of Knology and its subsidiaries to take certain actions including the following:

pay
dividends or make other restricted payments;

incur additional debt or issue mandatorily redeemable equity;

create or permit to exist certain liens;

incur restrictions on the ability of its subsidiaries to pay dividends
or other payments;

consolidate, merge or transfer all or substantially all its assets;

enter into transactions with affiliates;

utilize revenues except for specified uses;

utilize
excess liquidity except for specified uses;

make capital expenditures for Knology of Knoxville, Inc.; and

permit the executive officers of Knology to serve as executive officers or employees of other entities in
competition with Knology.

These covenants will be subject to a number of exceptions and qualifications.

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In November 1999, Knology completed an exchange in which Knology received the Broadband warrants which were issued in connection with the
Broadband Senior Discount Notes issued in October 1997. These warrants were exchanged for warrants to purchase shares of Knology Series A preferred stock. During the second quarter 2002, Knology adjusted the carrying value of the outstanding
warrants to market value based on the approximate per share value of the Series A preferred stock. In connection with our financial restructuring, the approximate per share value of Series A preferred stock is deemed to be $1.87 per share resulting
in a $2,865 gain on the adjustment of warrants to market value.

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 a 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 December 22, 1998, Broadband entered into a
$50,000 four-year senior secured credit facility with Wachovia Bank, National Association (formerly First Union National Bank). The Wachovia credit facility, as amended and restated pursuant to the restructuring, allows Broadband to borrow
approximately $15,500. The Wachovia credit facility may be used for working capital and other purposes, including capital expenditures and permitted acquisitions. At 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 Wachovia credit facility contains a number of covenants that restrict the
ability of Broadband and its subsidiaries to take many actions, including:

the ability to incur debt;

create liens;

pay dividends;

make distributions or stock repurchases;

make investments;

engage in transactions
with affiliates; and

sell assets and engage in mergers and acquisitions.

The Wachovia
credit facility also includes covenants requiring compliance with operating and financial ratios on a consolidated basis, including total leverage ratio and debt service coverage ratio. Broadband is currently in compliance with these covenants, as
amended. Should Broadband not be in compliance with the covenants, 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 Wachovia credit facility
could be payable to the lender on demand. A change of control of Broadband, as defined in the Wachovia credit facility, would constitute a default under the covenants. The restructuring resulted in the amendment and restatement of the Wachovia
credit facility, including an adjustment of the maturity date which allows Knology to make scheduled quarterly principal payments beginning in the third quarter of 2004 with a final payment due in the second quarter of 2006. The maximum amount
available under the Wachovia credit facility as of December 31, 2002, was approximately $15,500. As of December 31, 2002, approximately $15,475 had been drawn against the facility.

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;

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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. The CoBank credit
facility 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 CoBank credit facility could be payable on demand. In connection with the completion of our financial restructuring the maximum amount available under the master loan agreement has been
amended to $38,000.

5. 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.

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, 2002 are as follows:



|2003                         |  | 1,574  | 
|---------------------------- |  | ------ | 
|2004                         |  | 1,312  | 
|2005                         |  | 1,300  | 
|2006                         |  | 1,046  | 
|2007                         |  | 732    | 
|Thereafter                   |  | 2,785  | 
|                             |  |        | 
|Total minimum lease payments |  | $8,749 | 
|                             |  |        | 

Total rental expense for all operating leases was
approximately $1,127, $1,167 and $2,600 for the years ended December 31, 2000, 2001, and 2002, respectively.

6. 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 $34,669 in programming fees under these contracts during 2003.

LEGAL PROCEEDINGS

On September 18, 2002, Broadband filed a petition under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Georgia. On October 22, 2002 the court confirmed the joint plan of reorganization of Knology and Broadband without modification, and on November 6, 2002 the plan
became effective. See Note 1, Prepackaged Plan of Reorganization Under Chapter 11 for more information.

In September 2000, the City of
Louisville, Kentucky granted Knology of Louisville, Inc. a cable television franchise. Insight filed a complaint against the City of Louisville in state court claiming that Knologys franchise was more favorable than Insights franchise.
Insights complaint suspended Knologys franchise until there is a final, nonappealable order in Insights state court case. In April 2001 the City of Louisville moved for summary judgment in state court against Insight. In March
2002, the state court ruled that Insights complaint had no merit and the state court granted the Citys motion to dismiss Insights complaint. Insight appealed the state courts order dismissing their complaint and their appeal
is pending.

In November 2000, Knology filed a federal court action against Insight Communications Company, Inc. seeking monetary damages, declaratory and
injunctive relief from Insight and the City arising out of Insights complaint and the suspension of Knologys franchise. In March 2001, the federal court issued an Order granting Knologys motion for preliminary injunctive
relief

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and denying Insights motion to dismiss. The federal court order granting Knologys motion for preliminary injunction found that Insight violated
the Cable Act of 1992 and the Telecommunications act of 1996. Knologys complaint for monetary damages, its request for monetary relief, and both parties motions for summary judgment are pending before the federal court. At this time it
is impossible to determine with certainty the ultimate outcome of the litigation. The Company incurred $1,266 in litigation fees through December 31, 2002.

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.

7. INCOME TAXES

The benefit/(provision) for income taxes from continuing operations consisted of the following for the years ended December 31, 2000, 2001, and 2002:



|                                           |  | 2000    |       | 2001    |   | 2002   |  
|------------------------------------------ |  | ------- | ----- | ------- | - | ------ | -
|                                           |  |         |       |         |   |        |  
|Current                                    |  | $       | 3,170 |         | $ | (2,789 | )
|Deferred                                   |  | 31,381  |       | 38,318  |   | (7,840 | )
|(Increase) decrease in valuation allowance |  | (31,381 | )     | (38,318 | ) | 7,840  |  
|                                           |  |         |       |         |   |        |  
|Income tax benefit (provision)             |  | $       | 3,170 |         | $ | (2,789 | )
|                                           |  |         |       |         |   |        |  

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, 2001 and
2002 are as follows:



|                                                    |  | 2001    |   | 2002    |  
|--------------------------------------------------- |  | ------- | - | ------- | -
|                                                    |  |         |   |         |  
|Deferred tax assets:                                |  |         |   |         |  
|Net operating loss & other attributes carryforwards |  | $65,342 |   | $88,290 |  
|Equity in losses of subsidiaries                    |  | 1,189   |   | 1,189   |  
|Deferred bond interest                              |  | 54,521  |   | 17,003  |  
|Deferred revenues                                   |  | 639     |   | 370     |  
|Alternative minimum tax credit carryforward         |  | 2,334   |   | 2,334   |  
|Other                                               |  | 2,254   |   | 8,567   |  
|Valuation allowance                                 |  | (94,431 | ) | (86,591 | )
|                                                    |  |         |   |         |  
|Total deferred tax assets                           |  | 31,848  |   | 31,162  |  
|Deferred tax liabilities:                           |  |         |   |         |  
|Depreciation and amortization                       |  | 31,848  |   | 31,162  |  
|                                                    |  |         |   |         |  
|Net deferred income taxes                           |  | $0      |   | $0      |  

At December 31, 2002 the Company had available
federal net operating loss carryforwards of approximately $228,000 that expire from 2011 to 2021. The utilization of $112,000 of these loss carryforwards and $2,334 AMT carryforwards is subject to an annual limitation as a result of a change in
ownership of the Company, as defined in the Internal Revenue Code. The limitation does not reduce the total amount of net operating losses that may be taken, but rather substantially limits the amount that may be used during a particular year. The
Company also had various state net operating loss carryforwards totaling approximately $287,000. Unless utilized, the state net operating loss carryforwards expire from 2011 to 2021. Management has recorded a total valuation allowance of $86,591
against its deferred tax assets including the operating loss carryforwards.

A reconciliation of the income tax provision computed at statutory tax rates to
the income tax provision for the years ended December 31, 2000, 2001, and 2002 is as follows:



|                                                        |  | 2000 |    | 2001 |   | 2002  |   
|------------------------------------------------------- |  | ---- | -- | ---- | - | ----- | --
|                                                        |  |      |    |      |   |       |   
|Income tax benefit at statutory rate                    |  | 34   | %  | 34   | % | 34    | % 
|State income taxes, net of federal benefit              |  | 3    | %  | 3    | % | 4     | % 
|Non taxable book gain on early extinguishment           |  |      |    |      |   | 1587  | % 
|Reduction in deferred interest on senior discount notes |  |      |    |      |   | (1883 | )%
|Interest  high yield debt                              |  |      |    |      |   | (13   | )%
|Other                                                   |  | (6   | )% | 3    | % | (28   | )%

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|                                           |  | 2000 |    | 2001 |    | 2002 |   
|------------------------------------------ |  | ---- | -- | ---- | -- | ---- | --
|                                           |  |      |    |      |    |      |   
|(Increase) decrease in valuation allowance |  | (28  | )% | (42  | )% | (299 | )%
|                                           |  |      |    |      |    |      |   
|Income tax benefit (provision)             |  | 3    | %  | (2   | )% | (0   | )%
|                                           |  |      |    |      |    |      |   

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.

8. 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.

The Company has authorized
200,000,000 shares of $.01 par value common stock, 56,000,000 shares of $.01 par value Series A convertible preferred stock, 21,180,131 shares of $.01 par value Series B convertible preferred stock, 60,000,000 shares of $.01 par value Series C
convertible stock, 34,000,000 shares of $.01 par value Series D convertible preferred stock, and 25,000,000 shares of $.01 par value Series E convertible preferred stock.

The holders of Series A, B, C and D 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, C and D 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. The holders of Series E preferred stock do not have rights except with respect to amendment of the terms of the Series E preferred stock and as otherwise required by Delaware
law.

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.

On November 6, 2002, Knology received $39,000 gross cash proceeds from the issuance of 13 million shares of Series C preferred stock in a private placement to two existing investors. Also on November 6, 2002, Knology
issued 10,684,751 shares of Series D preferred stock and 21,701,279 shares of Series E preferred stock in exchange for a portion of the old Broadband senior discount notes.

In connection with the Reorganization, the Companys warrant holders elected to exchange the warrants to purchase shares of the preferred stock of Broadband for warrants to purchase shares of the Series A preferred
stock of Knology. Broadbands warrants were subsequently canceled.

KNOLOGY, INC. STOCK OPTION PLANS

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In December 2002, the board of directors and stockholders approved the Knology, Inc. 2002 Long-Term Incentive Plan (the 2002
Plan). This plan authorizes the issuance of up to 20 million shares of common stock pursuant to stock option awards. Effective December 31, 2002 all outstanding awards previously granted under the Broadband 1995 stock option plan (the
1995 Plan) and the Knology 1999 Long-Term Incentive Plan (the 1999 Plan) were cancelled. Also effective December 31, 2002, an equal number of the awards cancelled under these plans were granted, along with additional awards,
under the 2002 Plan. The 1995 and 1999 plans are no longer maintained by the Company.

In November 1999, the Company had assumed the 1995 Plan. Each
outstanding option to purchase stock of 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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 1999 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 1995 Plan and 1999 Plan.

The 2002 Plan is 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 private equity transactions and other analyses. The options expire ten years from the date of grant., with the exception of the options that were granted to replace the cancelled options. The expiration date of theses
replacement options is the same as the expiration date of the related cancelled options.

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.

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.

In 2002 the Company elected to adopt the fair value recognition of compensation cost provisions of SFAS
No.123.The Company also elected to report the change in accounting principle from APB No. 25 using the prospective method in accordance with SFAS No. 148, Accounting for Stock-Based Compensation
 Transition and Disclosure. Under the prospective method, the recognition of compensation cost is applied to all employee awards granted, modified, or settled after the beginning of the fiscal year in which the recognition provisions are first
applied. In December 2002, the Company cancelled all outstanding awards for common stock as of December 31, 2002 and granted an equal number of replacement options at the current fair market value with the same expiration date as the related
canceled option. The replacement options, as well as all other awards granted and settled during 2002,

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were included in the calculation of compensation cost in accordance with SFAS No. 123 and SFAS No. 148. The Company recorded a non-cash stock option
compensation charge of $3,266 related to the replacement and the adoption of the provisions of SFAS No. 123 and SFAS no. 148. The following represent the expected stock option compensation expense for the next five years assuming no additional
grants.



|2003       |  | $1,708 | 
|---------- |  | ------ | 
|2004       |  | 764    | 
|2005       |  | 444    | 
|2006       |  | 165    | 
|2007       |  | 0      | 
|Thereafter |  | 0      | 
|           |  |        | 
|           |  | $3,081 | 
|           |  |        | 

Prior to 2002, the Company accounted for Knology,
Inc.s stock option plans and the Spin-off options under APB Opinion No. 25, under which no compensation cost was recognized by the Company. However, the Company has computed, for pro forma disclosure purposes, the value of all options for
shares of Knology 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 2000, 2001, and 2002:



|                        |  | 2000       |   | 2001               |   | 2002       |  
|----------------------- |  | ---------- | - | ------------------ | - | ---------- | -
|                        |  |            |   |                    |   |            |  
|                        |  |            |   | Common             |   |            |  
|                        |  |            |   |                    |   |            |  
|Risk-free interest rate |  | 6.03%-6.88 | % | 3.35%-5.08         | % | 2.79       | %
|Expected dividend yield |  | 0          | % | 0                  | % | 0          | %
|Expected lives          |  | Five years |   | Four years         |   | Four years |  
|Expected volatility     |  | 92         | % | 121                | % | 38         | %
|                        |  |            |   |                    |   |            |  
|                        |  |            |   | Series A Preferred |   |            |  
|                        |  |            |   |                    |   |            |  
|Risk-free interest rate |  |            |   | 4.60%-7.49         | % |            |  
|Expected dividend yield |  |            |   | 0                  | % |            |  
|Expected lives          |  |            |   | Six years          |   |            |  
|Expected volatility     |  |            |   | 92                 | % |            |  

The total fair value of
options granted to employees under both plans during 2000 and 2001 was computed as approximately $3,040 and $3,388, respectively, which would be amortized on a pro forma basis over the four-year vesting period of the options.

A summary of the status of the 2002 Plan at December 31, 2002 is presented in the following table:



|                                 |  | COMMONSHARES |           | WEIGHTEDAVERAGEEXERCISEPRICE PERSHARE |  | SERIES APREFERREDSHARES |   | WEIGHTEDAVERAGEEXERCISEPRICE PERSHARE |  
|-------------------------------- |  | ------------ | --------- | ------------------------------------- |  | ----------------------- | - | ------------------------------------- | -
|                                 |  |              |           |                                       |  |                         |   |                                       |  
|Outstanding at December 31, 1999 |  |              | 6,571,044 |                                       |  | 2.71                    |   |                                       | 0
|Granted                          |  |              | 1,146,166 |                                       |  | 4.44                    |   |                                       | 0
|Assumed at Spin-off              |  | 0            |           | 0                                     |  | 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                    |   |                                       | 0
|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                                  |  
|Granted                          |  | 8,958,861    |           | 1.99                                  |  | 0                       |   | 0                                     |  
|Forfeited                        |  | (7,963,655   | )         | 2.99                                  |  | (68,220                 | ) | 2.36                                  |  
|Exercised                        |  | (1,000       | )         | 2.63                                  |  | (49,567                 | ) | .45                                   |  
|                                 |  |              |           |                                       |  |                         |   |                                       |  
|                                 |  |              |           |                                       |  |                         |   |                                       |  

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|Outstanding at December 31, 2002           |  |  | 8,052,269 |  | $ | 1.87 |  | 2,908,537 |  | $ | 1.60 | 
|------------------------------------------ |  |  | --------- |  | - | ---- |  | --------- |  | - | ---- | 
|                                           |  |  |           |  |   |      |  |           |  |   |      | 
|Exercisable shares as of December 31, 2002 |  |  | 4,438,364 |  | $ | 1.87 |  | 2,576,427 |  | $ | 1.44 | 
|                                           |  |  |           |  |   |      |  |           |  |   |      | 

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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



|RANGE OFEXERCISEPRICES |  | OUTSTANDINGAS OF12/31/2002 |  | WEIGHTEDAVERAGEREMAININGCONTRACTUALLIFE |  | WEIGHTEDAVERAGEEXERCISEPRICE |  | EXERCISABLEAS OF12/31/2002 |  | AVERAGEEXERCISEPRICE | 
|---------------------- |  | -------------------------- |  | --------------------------------------- |  | ---------------------------- |  | -------------------------- |  | -------------------- | 
|                       |  |                            |  |                                         |  |                              |  |                            |  |                      | 
|$0.00-$2.00            |  | 8,043,127                  |  | 7.1                                     |  | $1.87                        |  | 4,429,972                  |  | $1.87                | 
|$2.01-$4.75            |  | 9,142                      |  | 1.7                                     |  | $3.28                        |  | 8,392                      |  | $3.31                | 

SERIES A
PREFERRED SHARES



|RANGE OFEXERCISEPRICES |  | OUTSTANDINGAS OF12/31/2002 |  | WEIGHTEDAVERAGEREMAININGCONTRACTUALLIFE |  | WEIGHTEDAVERAGEEXERCISEPRICE |  | EXERCISABLEAS OF12/31/2002 |  | AVERAGEEXERCISEPRICE | 
|---------------------- |  | -------------------------- |  | --------------------------------------- |  | ---------------------------- |  | -------------------------- |  | -------------------- | 
|                       |  |                            |  |                                         |  |                              |  |                            |  |                      | 
|$0.00-$0.27            |  | 110,696                    |  | 1.20                                    |  | $0.25                        |  | 110,696                    |  | $0.25                | 
|$0.28-$1.71            |  | 1,673,782                  |  | 4.00                                    |  | $0.77                        |  | 1,569,434                  |  | $0.75                | 
|$1.72-$3.70            |  | 1,124,059                  |  | 6.30                                    |  | $2.95                        |  | 896,297                    |  | $2.93                | 

At December 31, 2002, 4,438,314 options for the Companys common shares with a weighted average price of $1.87 per share were exercisable by employees of the Company. At December 31, 2002,
2,576,427 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.

9.
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, 2000, 2001, and 2002, the Company recorded approximately $19, $131, and $0, 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, 2000, 2001, and 2002, the Company received services from these affiliated entities in the amounts of approximately $2,567,
$3,888, and $3,999, 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 $3,549, $1,845, and $2,467 for the years ended December 31, 2000, 2001, and 2002 respectively, and are reflected in operating revenues in the Companys consolidated statements of operations.

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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 $1,239, $1,211, and $141 for the years ended December 31, 2000, 2001, and 2002, respectively.

10. QUARTER-BY-QUARTER
COMPARISON (UNAUDITED).

Summarized quarterly financial data for the years ended December 31, 2000, 2001 and 2002 are as follows:



|Quarters:                                           |  | First   |         | Second  |   | Third   |   | Fourth  |        
|--------------------------------------------------- |  | ------- | ------- | ------- | - | ------- | - | ------- | -------
|                                                    |  |         |         |         |   |         |   |         |        
|2000                                                |  |         |         |         |   |         |   |         |        
|Operating revenues                                  |  | $       | 18,740  |         | $ | 20,254  |   | $       | 20,885 
|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) income                             |  |         | (20,356 | )       |   | (20,512 | ) |         | 9,030  
|Net loss                                            |  | (29,975 | )       | (30,817 | ) | (1,565  | ) | (28,016 | )      
|Non-cash distribution to preferred stockholders     |  | (36,579 | )       | 0       |   | 0       |   | 0       |        
|2002                                                |  |         |         |         |   |         |   |         |        
|Operating revenues                                  |  | 32,034  |         | 34,878  |   | 36,132  |   | 38,822  |        
|Operating (loss) income                             |  |         | (15,917 | )       |   | (15,907 | ) |         | (28,208
|Cumulative effect of change in accounting principle |  | (1,294  | )       | 0       |   | 0       |   | 0       |        
|Net (loss) income                                   |  |         | (27,882 | )       |   | (24,258 | ) |         | (37,470
|                                                    |  |         |         |         |   |         |   |         |        

The Company has adopted the provisions of SFAS
No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections, which provides for the rescission of several previously issued accounting standards, new accounting guidance for
certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. In accordance with the adoption of SFAS No. 145, the Company has reclassified the extraordinary gain on extinguishment of
debt, as previously reported, of $29,394 and $2,481 for the quarters ended September 30, 2001 and December 31, 2001, respectively, to operating expenses.



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INDEPENDENT AUDITORSREPORT



To the Board of Directors and Stockholders of Knology, Inc.

We have
audited the consolidated financial statements of Knology, Inc. and subsidiaries as of and for the year ended December 31, 2002 and have issued our report thereon dated February 14, 2003 (which report expresses an unqualified opinion includes
explanatory paragraphs relating to the Companys change in its method of accounting for stock-based compensation to conform with Statement of Financial Accounting Standards No.
123, the Companys change in its method of accounting for goodwill and other intangible assets to conform with Statement of Financial Accounting Standards No. 142, and the
application of procedures relating to certain disclosures of financial statement amounts related to the 2001 and 2000 financial statements that were audited by other auditors who have ceased operations); such report is included elsewhere in this
Form 10-K. Our audit also included the 2002 consolidated financial statement schedule of Knology, Inc., listed in Item 15. This consolidated financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion based on our audit. In our opinion, such 2002 consolidated financial statement schedule, when considered in relation to the basic 2002
consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. The financial statement schedules of the Company for the years ended December 31, 2001 and 2000 were audited by other
auditors who have ceased operations. Those auditors expressed an opinion, in their report dated February 7, 2002, that such 2001 and 2000 financial statement schedules, when considered in relation to the 2001 and 2000 basic financial statements
taken as a whole (prior to the disclosures referred to above), presented fairly, in all material respects, the information set forth therein.



| |  |  | /s/Deloitte & Touche LLP          
| |  |  | ----------------------------------
| |  |  |                                   
| |  |  | Atlanta, Georgia February 14, 2003

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SCHEDULE II

KNOLOGY, INC. AND
SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTSFOR THE YEARS ENDED DECEMBER 31, 2000, 2001, AND 2002

(DOLLARS IN THOUSANDS)



|                                                              |  | YEAR ENDEDDECEMBER 31, |     | YEAR ENDEDDECEMBER 31, |   | YEAR ENDEDDECEMBER 31, |  
|------------------------------------------------------------- |  | ---------------------- | --- | ---------------------- | - | ---------------------- | -
|                                                              |  |                        |     |                        |   |                        |  
|                                                              |  | 2000                   |     | 2001                   |   | 2002                   |  
|                                                              |  |                        |     |                        |   |                        |  
|                                                              |  |                        |     |                        |   |                        |  
|Allowance for doubtful accounts, balance at beginning of year |  | $                      | 695 |                        | $ | 748                    |  
|Addition charged to cost and expense                          |  | 1,922                  |     | 2,823                  |   | 3,595                  |  
|Deductions                                                    |  | (1,869                 | )   | (2,760                 | ) | (2,204                 | )
|                                                              |  |                        |     |                        |   |                        |  
|Allowance for doubtful accounts, balance at end of year       |  | $                      | 748 |                        | $ | 811                    |  
|                                                              |  |                        |     |                        |   |                        |  

S-2