##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from                    to
 
 Commission file number 1-16805
 
 
 RCN Corporation
 (Exact name of registrant as specified in charter)
 Delaware
    
    22-3498533(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 196 Van Buren Street, Herndon, VA
    
    20170(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (703) 434-8200
 Securities Registered Pursuant to Section 12(b) of the Act: None
 Securities Registered Pursuant to Section 12(g) of the Act:
Common stock, par value $0.01 per share
(Title of Classes)
 
  o þ
   ̈ þ
  þ o
 o
  o Large accelerated filer
    
    þ Accelerated filer
    

o Non-accelerated filer
    
    o Smaller reporting company
 o þ
  þ o
 DOCUMENTS INCORPORATED BY REFERENCE




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##### 



RCN CORPORATION AND SUBSIDIARIES
For the year ended December 31, 2007
 Table of Contents
 PagePART IItem 1 Business
    
    
    4Item 1A Risk Factors
    
    
    18Item 1B Unresolved Staff Comments
    
    
    22Item 2 Properties
    
    
    22Item 3 Legal Proceedings
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    23PART IIItem 5 Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    23Item 6 Selected Financial Data
    
    
    24Item 7 Managements Discussion and Analysis of Financial Condition And Results of Operations
    
    
    25Item 7A Quantitative and Qualitative Disclosures about Market Risk
    
    
    37Item 8 Financial Statements and Supplementary Data
    
    
    37Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    37Item 9A Controls and Procedures
    
    
    37Item 9B Other Information
    
    
    38PART IIIItem 10 Directors and Executive Officers of the Registrant
    
    
    38Item 11 Executive Compensation
    
    
    38Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    38Item 13 Certain Relationships and Related Transactions
    
    
    39Item 14 Principal Accountants Fees and Services
    
    
    39PART IVItem 15 Exhibits and Financial Statement Schedules
    
    
    39SIGNATURES
    
    
    S-1INDEX TO EXHIBITS
    
    
    E-1INDEX TO FINANCIAL STATEMENTSExhibit 10.4Exhibit 10.11Exhibit 10.12Exhibit 10.13Exhibit 10.30Exhibit 21.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Cautionary Statement Regarding Forward Looking Statements:
   
    
    our ability to operate in compliance with the terms of our financing facilities (particularly the financial covenants);
    
    our ability to maintain adequate liquidity and produce sufficient cash flow to fund our capital expenditures and debt service;
    
    our ability to attract and retain qualified management and other personnel;
    
    our ability to maintain current price levels;
    
    our ability to acquire new customers and retain existing customers;
    
    changes in the competitive environment in which we operate, including the emergence of new competitors;
    
    changes in government and regulatory policies;
    
    uncertainty relating to economic conditions generally and in particular, affecting the markets in which we operate;
    
    pricing and availability of equipment and programming;
    
    our ability to obtain regulatory approvals and our ability to meet the requirements in our license agreements;
    
    our ability to complete acquisitions or divestitures and to integrate any business or operation acquired;
    
    our ability to enter into strategic alliances or other business relationships;
    
    our ability to overcome significant operating losses;
    
    our ability to expand our operating margins;
    
    our ability to develop products and services and to penetrate existing and new markets;
    
    technological developments and changes in the industry; and
    
    the risks discussed in Risk Factors under Item 1A below.
   3




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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 Introduction
      Available Information and Websites
 www.sec.gov www.rcn.com
 Key Transactions
  Recapitalization
    4




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##### Table of Contents



2007 Highlights
 RCN and RCN Business Services Growth
 RCN Metro Growth.
 Margin Expansion
 2008 Strategy
 Leverage the Vertical Model.
 Continued Revenue Growth and Margin Expansion
 Invest in Enhancing the Customer Experience.
 Lead Delivery of All-Digital Video Services
 Expand RCN Metro
  5




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##### Table of Contents



Execute Accretive Corporate Development Initiatives.
 RCN and RCN Business Services
  Video Services
   Our video services include:
 
    
    Basic and Expanded Basic Package: Our video customers receive a package of basic
programming that generally consists of local broadcast television stations, local
community programming (including governmental and public access), and limited
satellite-delivered or non-broadcast channels. The basic channel line-up generally
includes between 18 and 30 channels and is accessible to customers with or without a
digital set-top box. Our expanded basic programming level includes approximately 45
to 60 additional channels, including many popular cable networks. Both of these
service levels are available in a 100% digital viewing format if our customers elect
to utilize a digital set-top box. Following conversion to an all-digital network,
customers receiving the equivalent of our basic and expanded basic packages will
receive a newly-aligned 100-channel programming package that substantially improves
our expanded basic level of service.
    
    Digitalvision and Digitalvision Plus: We provide additional programming content
to customers who obtain a digital set-top box and desire broader programming choices.
With the use of the digital-set top box, our customers enjoy a robust, interactive
program guide and 45 channels of commercial-free digital music. Digitalvision
includes more than 20 special interest networks and Digitalvision Plus includes an
additional 30 channels of commercial free movie and entertainment networks including
Showtime, The Movie Channel, Starz, Encore and Cinemax. Since September 2006, RCN
has also offered MiVision, a 30-channel package of Hispanic programming that can be
purchased in total or in more limited, content-themed tiers, providing choice to our
growing Hispanic customer base. Following conversion to an all-digital network,
customers receiving the equivalent of our Digitalvision and Digitalvision Plus
packages will receive our augmented expanded basic lineup, and will be able to
customize their video programming service by subscribing to one or more of our new
content-themed digital programming tiers on an a la carte basis.
  6




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##### Table of Contents




    
    Premium Channels: In addition to availability in our Digitalvision Plus service
level, our customers can also purchase premium movie and entertainment channels, such
as Showtime, HBO, Starz, Encore, and The Movie Channel, on an a la carte basis for a
monthly fee. All such services include Video-on-Demand content as part of the
monthly subscription. We also provide foreign language programming and adult
content for an additional monthly fee.
    
    High Definition Television (HDTV): We offer more than 30 HD television
channels as part of our Digitalvision programming package. Following conversion to
an all-digital platform, we anticipate the ability to launch up to an additional 60
HD channels as quality HD programming becomes more available from the networks.
    
    Video on Demand (VOD) and Subscription Video on Demand (SVOD): Video-on-Demand
provides our customers in all of our markets with access to hundreds of movies and
other television content with complete control over the timing and playback of that
content. Pay-per-use movies, International movies and adult VOD are among the most
popular categories and we continue to expand our library as content becomes available
in these categories. RCN also offers SVOD services that are included as part of
several of RCNs service bundles or that can be added for an additional fee.
    
    Digital Video Recorder (DVR): RCN offers a dual-tuner High Definition DVR
set-top box that allows our customers to record one program while viewing another
whether it is recorded in standard definition or high definition. DVR technology
affords the ability to our customers to digitally record, store and play television
programs without the inconvenience of tape or DVDs
    
    Pay-Per-View (PPV): PPV or Big Event programming remains the most popular and
efficient way to offer one-time special sporting events, music concerts or other
commercial-free programming on a specific activated channel. Beginning in 2007, RCN
also added to our PPV content Major League Baseballs MLB Extra Innings, National
Hockey Leagues NHL on Ice and the National Basketball Associations NBA League
Pass which added hundreds of hours of new content for our customers.
  Bulk Video Services
  High-Speed Data Services
  Voice
  Starpower VoIP Service
   7




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RCN and RCN Business Services Network
     Customer Service
  Sales and Marketing
   8




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##### Table of Contents



Pricing of Our Products and Services
  Programming
   RCN Metro
   RCN Metro Products
  
    
    Transport Services: We provide SONET and Ethernet-based data transport services both
within our metro markets and between cities over our intercity fiber network. Specific
service offerings include: SONET Private Line services at bandwidth levels including DS-1,
DS-3, OC-3, OC-12, OC-48, and OC-192; Wavelength (DWDM) services enabling flexible and
scalable high capacity transport at 2.5 and 10 Gbps; and Ethernet services via dedicated,
point-to-point as well as point-to-multipoint connectivity. We offer these services
utilizing a variety of equipment platforms, enabling us to deliver services to customers in
their preferred telecommunications architecture, including Cisco, Nortel, Lucent, and Ciena
equipment.
  9




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##### Table of Contents




    
    Co-Location Services: We offer co-location services to our customers by maintaining
secured and monitored technical space in the same facilities as several of our larger
network operations locations. We offer full disaster recovery and data back-up
capabilities in facilities that assure maximum server and data availability, as well as
customized monitoring, maintenance and hosting services, and provide cost-effective pricing
for customers who desire to combine co-location and hosting services with our data
transport services.
    
    Internet Access: Our Internet access offerings include dedicated access services
targeted at businesses that desire single or multipoint high-speed, dedicated connections
to the Internet. Our dedicated Internet access service provides internet speeds ranging
from 1.544 megabits per second up to a Gigabit per second. We are a tier-1 Internet
backbone provider in the U.S., with numerous public and private peering arrangements with
other Internet backbone networks in our geographic footprint.
 RCN Metro Network
     Sales & Customer Support
   10




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##### Table of Contents



Pricing
  Competition
  RCN and RCN Business Services Competition
   RCN Metro Competition
  Employees
  Segment Information
 Disclosures about segments of an enterprise and related information
  11




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Licenses
    Regulation
 Overview
  Regulation of Video Services
 Cable Television Systems
     12




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##### Table of Contents



OVS
  Cable and OVS Regulation
       13




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##### Table of Contents



Regulation of Information Services
  Regulation of Telecommunications Services
 Federal Regulation
   
    
    InterconnectionRequires the ILECs to permit their competitors to interconnect with ILEC
facilities at any technically feasible point in the ILECs network.
  14




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##### Table of Contents




    
    Reciprocal CompensationRequires all ILECs and CLECs to complete calls originated by
competing local exchange carriers under reciprocal arrangements at prices set by the FCC,
PUCs or negotiated prices.
    
    Access to Unbundled Network ElementsRequires ILECs to provide nondiscriminatory access
to unbundled network elements (UNEs), including network facilities, equipment, features,
functions and capabilities, at any technical feasible point within their networks, on
nondiscriminatory terms, at prices based on the ILECs forward looking costs, which may
include a reasonable profit.
    
    Collocation of EquipmentAllows CLECs to install and maintain their own network
equipment in ILEC central offices.
    
    ResaleRequires the ILEC to establish wholesale discounted rates for services it
provides to end-users at retail rates.
    
    Number PortabilityRequires all ILECs and CLECs to permit users of telecommunications
services to retain existing telephone numbers without impairment of quality, reliability or
convenience when switching from one telecommunications provider to another.
    
    Dialing ParityRequires the ILECs and CLECs to establish dialing parity so that all
customers must dial the same number of digits to place the same type of call.
    
    Access to Rights-of-WayRequires all ILECs to permit competing carriers access to poles,
ducts, conduits and rights-of-way at regulated prices.
    Reciprocal Compensation
  Access Charges
   15




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Slamming and Cramming
    Digital Phone and VoIP
   State Regulation
   Taxes and Regulatory Fees
   16




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Other Regulatory Issues
 Digital Set-Top Box Regulation
  Right-of-Way Access
  Pole and Conduit Attachments
  Program Access
  Commercial Leased Access
  Building Access
   17




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##### Table of Contents



Customer Proprietary Network Information
    
 ITEM 1A. RISK FACTORS
 Risks Related to Our Business
 We have a history of net losses and we emerged from Chapter 11 reorganization in 2004.
  We are subject to regulation by federal, state and local governments, which may impose costs
and restrictions.
    18




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We depend on third party suppliers and licensors, and in some cases, a single vendor in order
to obtain economics of scale for the cost of procuring equipment; thus, if we are unable to procure
the necessary equipment, software or licenses on reasonable terms and on a timely basis, our
ability to offer services could be impaired, and our growth, operations, and financial results
could be materially adversely affected.
  In the event of a substantial failure of our information systems or loss of key facilities or
personnel, our disaster recovery plans may not enable us to fully recover our services for an
extended period, which would adversely affect our revenues or capital resources.
  Programming costs have risen in past years and are expected to continue to rise, and we may
not be able to pass such programming costs through to our customers, which could adversely affect
our cash flow and operating margins.
  Our markets are highly competitive.
  
    
    significant economies of scale;
    
    greater brand recognition;
    
    greater financial, technical, marketing and other resources;
  19




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##### Table of Contents




    
    well-established customer and vendor relationships;
    
    significant control over limited conduit and pole space (in the case of incumbent cable and
telephone companies); and
    
    ownership of content and/or significant cost advantages in the acquisition of content.
   Our revenue is highly susceptible to changes in general economic conditions, and any
significant downturn in the U.S. economy as a whole, or in any geographic market in which we
provide services, could substantially impact our sales, customer churn, bad-debt and collections,
and overall results of operations.
  Our inability to respond to technological developments and meet customer demand for new
products and services could limit our ability to compete effectively.
  We experience turnover among our experienced and trained employee base, which could result in
our inability to continue performing certain functions and completing certain initiatives in
accordance with our existing budgets and operating plans.
  There are risks of network failure and disruption.
   20




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We may be unable to successfully integrate the network and operations of NEON Communications
Group, Inc. into our business, which would negatively impact our anticipated revenue and cost
synergies.
  Future sales of our common stock could adversely affect the price of our stock and our ability
to raise capital.
  We rely on a number of outsourced service providers for key operational functions; if we are
unable to maintain quality performance from our outsourced service providers, our ability to offer
services could be impaired, and our brand, growth, and results of operations could be materially
adversely affected.
  Risks Related to Our Indebtedness
 We and our subsidiaries have had, and may in the future incur, a significant amount of
indebtedness, including secured debt, which could adversely affect our financial health and our
ability to react to changes in our business.
    The covenants in our credit agreement restrict our financial and operational flexibility.
  
    
    incur additional debt;
    
    create liens on our assets;
    
    make particular types of investments or other restricted payments;
    
    engage in transactions with affiliates;
    
    acquire assets or make certain capital expenditures;
    
    utilize proceeds from asset sales for purposes other than debt reduction except for limited
exceptions for reinvestment in the business;
    
    merge or consolidate or sell substantially all of our assets; and
    
    pay dividends or repurchase shares of our common stock.
  21




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##### Table of Contents



ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
 Real Estate
   
 ITEM 3. LEGAL PROCEEDINGS
 ERISA Litigation
     City of Chicago Franchise Fee
   22




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM
5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 Market Information
   Period
    
    High Price
    
    
    Low Price2007First Quarter
    
    $
    30.49
    
    
    $
    25.13Second Quarter
    
    $
    28.76
    
    
    $
    18.00Third Quarter
    
    $
    19.02
    
    
    $
    12.21Fourth Quarter
    
    $
    16.23
    
    
    $
    12.15
 Period
    
    High Price
    
    
    Low Price2006First Quarter
    
    $
    25.90
    
    
    $
    23.24Second Quarter
    
    $
    26.95
    
    
    $
    24.10Third Quarter
    
    $
    28.75
    
    
    $
    23.32Fourth Quarter
    
    $
    30.39
    
    
    $
    28.05
  23




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Purchases of Equity Securities
  Dividends
  Description of RCN Corporations Equity Securities
    
 ITEM 6. SELECTED FINANCIAL DATA
    24




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##### Table of Contents



RCN CORPORATION
SELECTED FINANCIAL DATA
(dollars in thousands, except per share amounts)
 Successor
    
    
    PredecessorDec. 21 to
    
    
    Jan. 1 toDec. 31,
    
    
    Dec. 20,2007 (1)
    
    
    2006 (2)
    
    
    2005
    
    
    2004 (3)
    
    
    2004
    
    
    2003Revenues
    
    $
    636,097
    
    
    $
    585,476
    
    
    $
    530,412
    
    
    $
    15,501
    
    
    $
    442,514
    
    
    $
    456,231(Loss) income from continuing
operations
    
    
    (169,642
    )
    
    
    (14,320
    )
    
    
    (138,731
    )
    
    
    (3,427
    )
    
    
    976,709
    (4)(5)
    
    
    (475,708
    )(Loss) income from continuing
operations per average common share:Basic
    
    $
    (4.58
    )
    
    $
    (0.39
    )
    
    $
    (3.85
    )
    
    $
    (0.09
    )
    
    $
    8.39
    
    
    $
    (5.85
    )Diluted
    
    $
    (4.58
    )
    
    $
    (0.39
    )
    
    $
    (3.85
    )
    
    $
    (0.09
    )
    
    $
    6.45
    
    
    $
    (5.85
    )Total assets
    
    
    1,095,777
    
    
    
    975,381
    
    
    
    1,253,940
    
    
    
    1,400,510
    
    
    
    1,254,689
    
    
    
    1,529,356Total debt
    
    
    744,945
    
    
    
    202,792
    
    
    
    492,097
    
    
    
    493,568
    
    
    
    1,669,560
    
    
    
    1,654,585Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,825,212
    
    
    
    1,772,310Preferred stock dividend and accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,902
    
    
    
    173,392
 (1)
    
    The results of operations from NEON are included in the above financial
information from the date of acquisition (November 13, 2007) and all periods
thereafter.(2)
    
    The results of operations from CEC are included in the above financial
information from the date of acquisition (March 17, 2006) and all periods
thereafter.(3)
    
    On December 21, 2004, we increased our ownership interest in Starpower
Communications, LLC (Starpower) from 50% to 100%. The 11 day period from
December 21, 2004 to December 31, 2004 and all periods thereafter include
consolidated Starpower results.(4)
    
    Includes a gain from fresh start adjustments of approximately $173.2 million.(5)
    
    Includes a gain on settlement of liabilities as a result of RCNs bankruptcy
restructuring under Chapter 11 of the Bankruptcy Code of approximately $1.2
billion. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
                OPERATIONS
    25




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Overview
        Critical Accounting Policies and Estimates
  
    
    Revenue recognition
    
    Direct expenses
    
    Selling, general and administrative expenses
    
    Valuation of indefinite-lived assets and long-lived assets
    
    Exit Costs and Other Lease Related Costs
    
    Accounts Receivable
    
    Legal contingencies
   26




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##### Table of Contents



Revenue Recognition
   Direct Expenses
   Selling,
General and Administrative Expenses
  Valuation of Indefinite-Lived Intangible Assets and Long-Lived Assets
 Accounting for the
Impairment or Disposal of Long-Lived Assets
  27




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##### Table of Contents



, Goodwill and Other Intangible Assets
 Exit Costs and Other Lease Related Costs
 Accounting for Costs Associated with Exit or Disposal Activities
  Fresh Start Accounting
  Accounts Receivable
  Legal Contingencies
  Reclassifications
   Segment Reporting
   28




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##### Table of Contents



Key Financial and Statistical Measures
   2007
    
    
    2006Basic Video RGUs 1
    
    
    358,000
    
    
    
    355,000Data RGUs 1
    
    
    285,000
    
    
    
    259,000Voice RGUs 1
    
    
    250,000
    
    
    
    249,000Total RGUs (Excluding Digital) 1
    
    
    893,000
    
    
    
    863,000Customers 2
    
    
    416,000
    
    
    
    406,000Average Revenue Per Customer 3
    
    $
    109
    
    
    $
    107Average RGUs Per Customer
    
    
    2.1
    
    
    
    2.1
 (1)
    
    RGUs are all video, high-speed data, and voice connections provided to residential households
and businesses. Dial-up Internet and long distance voice services are not included. Additional
telephone lines are each counted as a RGU, but additional room hook-ups for video service are not
counted. For bulk arrangements in residential MDUs, including dormitories, the number of RGUs is
based on the number of video, high-speed data and voice connections provided and paid for in that
MDU. Commercial structures such as hotels and offices are counted as one RGU regardless of how many
units are in the structure. Delinquent accounts are generally disconnected and no longer counted as
RGUs after a set period of time in accordance with our credit and disconnection policies. RGUs may
include customers receiving some services for free or at a reduced rate in connection with
promotional offers or bulk arrangements. RGUs provided free of charge under courtesy account
arrangements are not counted, but additional services paid for are counted.(2)
    
    A Customer is a residential household or business that has at least one paid video,
high-speed data or local voice connection. Customers with only Dial-up Internet or long distance
voice service are not included. For bulk arrangements in residential MDUs, including dormitories,
each unit for which service is provided and paid for is counted as a Customer. Commercial
structures such as hotels and offices are counted as one Customer regardless of how many units are
in the structure. Delinquent accounts are generally disconnected and no longer counted as Customers
after a set period of time in accordance with our credit and disconnection policies.(3)
    
    Average Revenue per Customer is total revenue for a given monthly period (excluding Dial-up
Internet, reciprocal compensation and certain commercial revenue) divided by the average number of
Customers for the period.  29




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##### Table of Contents



Results of Operations
  RCN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
 Year Ended
December 31,2007
    
    
    2006
    
    
    2005Revenues
    
    $
    636,097
    
    
    $
    585,476
    
    
    $
    530,412Costs and expenses:Direct expenses
    
    
    224,770
    
    
    
    201,370
    
    
    
    188,950Selling, general and administrative (including
stock-based compensation of $33,206, $18,162,
and $8,913)
    
    
    288,426
    
    
    
    276,471
    
    
    
    268,236Impairments, exit costs and restructuring charges
    
    
    8,194
    
    
    
    6,702
    
    
    
    5,130Depreciation and amortization
    
    
    195,239
    
    
    
    192,964
    
    
    
    184,568Operating loss
    
    
    (80,532
    )
    
    
    (92,031
    )
    
    
    (116,472
    )Investment income
    
    
    9,424
    
    
    
    5,983
    
    
    
    5,648Interest expense
    
    
    (34,510
    )
    
    
    (24,659
    )
    
    
    (42,333
    )Gain on sale of investment in unconsolidated entity
    
    
    
    
    
    
    125,370
    
    
    
    (Loss) gain on sale of assets
    
    
    (827
    )
    
    
    (2,119
    )
    
    
    2,536Loss on the early extinguishment of debt
    
    
    (63,795
    )
    
    
    (19,287
    )
    
    
    Other (expense) income, net
    
    
    (451
    )
    
    
    35
    
    
    
    1,556Loss from continuing operations before reorganization
items and income taxes
    
    
    (170,691
    )
    
    
    (6,708
    )
    
    
    (149,065
    )Reorganization income, net
    
    
    
    
    
    
    
    
    
    
    11,113Income tax (benefit) expense
    
    
    (1,049
    )
    
    
    7,612
    
    
    
    779Net loss from continuing operations
    
    
    (169,642
    )
    
    
    (14,320
    )
    
    
    (138,731
    )Income from discontinued operations, net of tax
    
    
    1,684
    
    
    
    2,464
    
    
    
    19Gain on sale of discontinued operations, net of tax
    
    
    15,921
    
    
    
    
    
    
    
    Net loss before cumulative effect of change in
accounting principle
    
    
    (152,037
    )
    
    
    (11,856
    )
    
    
    (138,712
    )Cumulative effect on prior years of retroactive
application of a change in accounting for legal fees,
net of tax
    
    
    
    
    
    
    
    
    
    
    2,600Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )
  30




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##### Table of Contents



Revenues
  RevenueFor the year ended December 31,Fav(unfav)
    
    
    
    
    
    
    Fav(unfav)2007
    
    
    2006
    
    
    Var %
    
    
    2005
    
    
    Var %Video
    
    $
    266,787
    
    
    $
    245,875
    
    
    
    8.5
    %
    
    $
    237,144
    
    
    
    3.7
    %Data
    
    
    132,314
    
    
    
    119,947
    
    
    
    10.3
    %
    
    
    102,396
    
    
    
    17.1
    %Voice
    
    
    112,353
    
    
    
    121,780
    
    
    
    (7.7
    %)
    
    
    132,792
    
    
    
    (8.3
    %)Other
    
    
    7,241
    
    
    
    8,448
    
    
    
    (14.3
    %)
    
    
    6,832
    
    
    
    23.7
    %Total Core Residential
    
    
    518,695
    
    
    
    496,050
    
    
    
    4.6
    %
    
    
    479,164
    
    
    
    3.5
    %Commercial
    
    
    100,558
    
    
    
    71,764
    
    
    
    40.1
    %
    
    
    25,439
    
    
    
    182.1
    %Dial-Up
    
    
    9,003
    
    
    
    13,074
    
    
    
    (31.1
    %)
    
    
    19,693
    
    
    
    (33.6
    %)Recip Comp / Other
    
    
    7,841
    
    
    
    4,588
    
    
    
    70.9
    %
    
    
    6,116
    
    
    
    (25.0
    %)Total
    
    $
    636,097
    
    
    $
    585,476
    
    
    
    8.6
    %
    
    $
    530,412
    
    
    
    10.4
    %
        31




---



##### Table of Contents



Direct Expenses
   Selling, General and Administrative Expenses
  SG&AFor the year ended December 31,Fav/(unfav)
    
    
    
    
    
    
    Fav/(unfav)2007
    
    
    2006
    
    
    Var %
    
    
    2005
    
    
    Var %Network operations and construction
    
    $
    95,335
    
    
    $
    92,240
    
    
    
    (3.4
    %)
    
    $
    89,000
    
    
    
    (3.6
    %)Sales and marketing
    
    
    56,589
    
    
    
    51,470
    
    
    
    (9.9
    %)
    
    
    46,979
    
    
    
    (9.6
    %)Customer Service
    
    
    21,587
    
    
    
    21,696
    
    
    
    0.5
    %
    
    
    19,812
    
    
    
    (9.5
    %)General and administrative
    
    
    81,709
    
    
    
    92,903
    
    
    
    12.0
    %
    
    
    103,532
    
    
    
    10.3
    %Stock-based Compensation
    
    
    33,206
    
    
    
    18,162
    
    
    
    (82.8
    %)
    
    
    8,913
    
    
    
    (103.8
    %)Total SG&A
    
    $
    288,426
    
    
    $
    276,471
    
    
    
    (4.3
    %)
    
    $
    268,236
    
    
    
    (3.1
    %)
   Stock-Based Compensation
    32




---



##### Table of Contents



Impairments, Exit Costs and Restructuring charges
   Depreciation and Amortization
   Investment Income
   Interest Expense
    Gain on sale of investment in unconsolidated entity
  Gain on sale of assets
   33




---



##### Table of Contents



Loss on the early extinguishment of debt
   Other income, net
  Reorganization income
  Discontinued Operations
  Liquidity and Capital Resources
 December 31,
    
    
    December 31,2007
    
    
    2006Cash, cash equivalents and short-term investments
    
    $
    67,692
    
    
    $
    124,515Debt (including current maturities and capital lease obligations)
    
    
    744,945
    
    
    
    202,792
  Operating Activities
    34




---



##### Table of Contents



Investing Activities
  Financing Activities
   Off Balance Sheet Arrangements and Contractual Obligations
 Contractual Obligations and Commercial Commitments
  (dollars in thousands)Payments Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsLong-term debt (1)
    
    $
    741,899
    
    
    $
    7,205
    
    
    $
    14,410
    
    
    $
    14,410
    
    
    $
    705,874Capital lease obligations
    
    
    3,046
    
    
    
    133
    
    
    
    310
    
    
    
    379
    
    
    
    2,224Total long-term debt
    
    
    744,945
    
    
    
    7,338
    
    
    
    14,720
    
    
    
    14,789
    
    
    
    708,098Operating leases
    
    
    92,088
    
    
    
    18,111
    
    
    
    31,097
    
    
    
    20,853
    
    
    
    22,027Purchase obligations (2)
    
    
    207,931
    
    
    
    43,909
    
    
    
    51,673
    
    
    
    40,160
    
    
    
    72,189Other long-term liabilities
    
    
    34,815
    
    
    
    8,008
    
    
    
    15,957
    
    
    
    8,729
    
    
    
    2,121Total contractual obligations
    
    $
    1,079,779
    
    
    $
    77,366
    
    
    $
    113,447
    
    
    $
    84,531
    
    
    $
    804,435
 (1)
    
    Excludes interest payments.(2)
    
    Purchase obligations consist of agreements to purchase goods and services that are
enforceable and legally binding on us and that specify all significant terms, including
fixed or minimum quantities to be purchased, price provisions and timing. Our purchase
obligations principally consist of contracts with customer premise equipment manufacturers,
telecommunications providers, and other contracts entered into in the normal course of
business. Amounts reflected as accounts payable and accrued expenses in the consolidated
balance sheets at December 31, 2007 are excluded from the table above. Description of Outstanding Debt
   35




---



##### Table of Contents



Former First-Lien Credit Agreement
  First-Lien Credit Agreement
      Second-Lien Convertible Notes
  Letters of Credit
  Recently Issued Accounting Pronouncements
   36




---



##### Table of Contents



Inflation
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL 
                DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
   
  37




---



##### Table of Contents



Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
 Internal Control  Integrated Framework Internal Control  Integrated Framework
  Managements Report on Internal
Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports,
Frequently Asked Questions (revised October 6, 2004).
 Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   38




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
   
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) The following documents are filed as part of this Annual Report:(1)
    
    Financial Statements.A listing of the financial statements, notes and reports of independent registered public
accountants required by Item 8 begins on page F-1 of this annual report.(2)
    
    Financial Statement SchedulesSee Schedule IIValuation and Qualifying Accounts on page F-29(3)
    
    The index to the Exhibits begins on page E-1 of this Annual Report.
  39




---



##### Table of Contents



SIGNATURES
  Date: March 11, 2008
    RCN CorporationBy:
    /s/ Peter D. AquinoPeter D. Aquino  Name
    
    Title
    
    DatePRINCIPAL EXECUTIVE OFFICERS:/s/ Peter D. Aquino
    
    President and Chief
Executive Officer
    
    March 11, 2008Peter D. Aquino
    
    (Principal Executive
Officer)/s/ Michael T. Sicoli
    
    Executive Vice President
and Chief
    
    March 11, 2008Michael T. Sicoli
    
    Financial
Officer (Principal
Financial Officer)DIRECTORS:/s/ Peter D. Aquino
    
    
    
    March 11, 2008Peter D. Aquino/s/ Benjamin C. Duster IV
    
    
    
    March 11, 2008Benjamin C. Duster IV/s/ Lee S. Hillman
    
    
    
    March 11, 2008Lee S. Hillman/s/ Michael E. Katzenstein
    
    Non Executive Chairman
    
    March 11, 2008Michael E. Katzenstein/s/ Theodore H. Schell
    
    
    
    March 11, 2008Theodore H. Schell/s/ Daniel Tseung
    
    
    
    March 11, 2008Daniel Tseung
  S-1




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##### Table of Contents



EXHIBITS INDEX
 (Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K).
 Exhibit No.
    
    Description2.1
    
    Joint Plan of Reorganization of RCN Corporation and Certain
Subsidiaries, dated as of December 21, 2004 (incorporated by reference
to Exhibit 2.1 of RCNs Current Report on Form 8-K filed on December
14, 2004).2.2
    
    Order Confirming the Joint Plan of Reorganization of RCN Corporation
and Certain Subsidiaries, dated as of December 8, 2004 (incorporated
by reference to Exhibit 2.2 of RCNs Current Report on Form 8-K filed
on December 14, 2004).3.1
    
    Amended and Restated Certificate of Incorporation of RCN Corporation,
dated as of December 21, 2004 (incorporated by reference to Exhibit
3.1 of RCNs Current Report on Form 8-K filed on December 27, 2004
8-K).3.2
    
    Amended and Restated Bylaws of RCN Corporation (incorporated by
reference to Exhibit 3.2 of RCNs Current Report on Form 8-K filed on
December 27, 2004).4.1
    
    Registration Rights Agreement, dated as of December 21, 2004, by and
between RCN Corporation and the Stockholders listed on the signature
pages thereto (incorporated by reference to Exhibit 4.2 of RCNs
Current Report on Form 8-K filed on December 27, 2004).4.2
    
    Warrant Agreement, dated as of May 25, 2007, by and RCN Corporation
and HSBC Bank USA, National Association. (incorporated by reference to
Exhibit 4.1 of RCNs Current Report on Form 8-K filed
on May 25, 2007).4.3
    
    Registration Rights Agreement, dated as of May 25, 2007, by and among
RCN Corporation, and the Holders, as defined therein. (incorporated by
reference to Exhibit 4.2 of RCNs Current Report on Form 8-K filed on
May 25, 2007).10.1
    
    Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan
Fiber Systems/McCourt, Inc. and RCN Telecom Services of Massachusetts,
Inc. (is incorporated by reference to Exhibit 10.2 to RCNs Amendment
No. 2 to Form 10/A filed September 5, 1997 (Commission File No.
0-22825)).10.2 (**)
    
    First Amendment dated as of November 28, 2006 between MCImetro Access
Transmission Services of Massachusetts, as successor-in-interest to
Metropolitan Fiber Systems McCourt, Inc. and RCN Telecom Services,
Inc. as successor-in-interest to RCN Telecom Services of
Massachusetts, Inc. amending the Dark Fiber IRU Agreement dated as of
May 8, 1997 among Metropolitan Fiber Systems/McCourt, Inc. and RCN
Telecom Services of Massachusetts, Inc. (incorporated by reference to
Exhibit 10.20 of RCNs Annual Report on Form 10-K filed on March 15,
2007).10.3
    
    Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan
Fiber Systems of New York, Inc. and RCN Telecom Services of New York,
Inc. (is incorporated by reference to Exhibit 10.3 to RCNs Amendment
No. 2 to Form 10/A filed September 5, 1997 (Commission File No.
0-22825)).10.4 (*) (**)
    
    First Amendment to Dark Fiber IRU Agreement between Metropolitan Fiber
Systems of New York, Inc. and RCN Telecom Services, Inc. dated as of
December 5, 2007, amending the May 8, 1997 Dark Fiber IRU Agreement
between Metropolitan Fiber Systems of New York, Inc. and RCN Telecom
Services, Inc.10.5
    
    Second Amended and Restated Operating Agreement of RCN-Becocom, LLC
made and effective as of June 19, 2002 (incorporated by reference to
Exhibit 10.01 of RCNs Current Report on Form 8-K filed on June 21,
2002).10.6
    
    Management Agreement dated as of June 17, 1997 among RCN Operating
Services, Inc. and RCN-Becocom, Inc. (is incorporated herein by
reference to Exhibit 10.9 to RCNs Amendment No. 2 to Form 10/A filed
September 5, 1997 (Commission File No. 0-22825)).10.7
    
    Construction and Indefeasible Right of Use Agreement dated as of June
17, 1997 between RCN-Becocom, Inc. and RCN-Becocom, LLC (is
incorporated herein by reference to Exhibit 10.10 to RCNs Amendment
No. 2 to Form 10/A filed September 5, 1997 (Commission File No.
0-22825)).
  E-1




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##### Table of Contents



Exhibit No.
    
    Description10.8
    
    License Agreement dated as of June 17, 1997 between Boston Edison
Company and RCN-Becocom, Inc. (is incorporated by reference to Exhibit
10.11 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997
(Commission File No. 0-22825)).10.9
    
    Joint Investment and Non-Competition Agreement dated as of June 17,
1997 among RCN Telecom Services of Massachusetts, Inc., RCN-Becocom,
Inc. and RCN-BecoCom, LLC (is incorporated by reference to Exhibit
10.12 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997
(Commission File No. 0-22825)).10.10
    
    Amended and Restated Operating Agreement of Starpower Communications,
L.L.C. by and between Pepco Communications, L.L.C. and RCN Telecom
Services of Washington, D.C. Inc. dated October 28, 1997(is
incorporated by reference to Exhibit 10.13 to RCNs Annual Report on
Form 10-K for the year ended December 31, 1997 (Commission File No.
0-22825)).10.11 (*)
    
    Form of Second Amended and Restated Agreement for the Provision of
Fiber Optic Facilities and Services between Northeast Utilities
Service Company, The Connecticut Light & Power Company, Western
Massachusetts Electric Company, Public Service Company of New
Hampshire, and Neon Optica, Inc. as Successor in Interest to Necom LLC
as of December 23, 2002 - Phase One.10.12 (*)
    
    Form of Second Amended and Restated Agreement for the Provision of
Fiber Optic Facilities and Services between Northeast Utilities
Service Company, The Connecticut Light & Power Company, Western
Massachusetts Electric Company, Public Service Company of New
Hampshire, and Neon Optica, Inc. as Successor in Interest to Necom LLC
as of December 23, 2002 - Phase Two.10.13 (*)
    
    Form of Agreement Concerning the Reimbursement of Fees Among The
Connecticut Light & Power Company Western Massachusetts Electric
Company, Public Service Company of New Hampshire and Mode
1 Communications, Inc. and Neon Optica, Inc. dated as of November 5,
2004.10.14 (**)
    
    Master Service Agreement, dated as of September 27, 2007, by and
between RCN Telecom Services and Sitel Operating Corporation
(incorporated by reference to Exhibit 10.1 of RCNs Quarterly Report
on Form 10-Q filed on November 8, 2007.10.15
    
    Credit Agreement, dated as of May 25, 2007, by and among RCN
Corporation, the various lenders party to the Credit Agreement, and
Deutsche Bank Trust Company Americas, as Administrative Agent
(incorporated by reference to Exhibit 10.1 of RCNs Current Report on
Form 8-K filed on May 25, 2007.10.16
    
    Incremental Commitment Agreement, dated as of November 13, 2007, by
and among RCN Corporation, the various lenders party to the Credit
Agreement, and Deutsche Bank Trust Company Americas, as Administrative
Agent (incorporated by reference to Exhibit 10.1 of RCNs Current
Report on Form 8-K filed on November 13, 2007).10.17
    
    Security Agreement, dated as of May 25, 2007, by and among RCN
Corporation, certain subsidiaries of RCN Corporation, and Deutsche
Bank Trust Company Americas, as First-Lien Collateral Agent
(incorporated by reference to Exhibit 10.2of RCNs Current Report on
Form 8-K filed on May 25, 2007).10.18
    
    Pledge Agreement, dated as of May 25, 2007, by and among RCN
Corporation, certain subsidiaries of RCN Corporation, and Deutsche
Bank Trust Company Americas, as First-Lien Collateral Agent
(incorporated by reference to Exhibit 10.3 of RCNs Current Report on
Form 8-K filed on May 25, 2007).10.19
    
    Subsidiary Guaranty, dated as of May 25, 2007, by and among certain
subsidiaries of RCN Corporation and Deutsche Bank Trust Company
Americas, as Collateral Agent (incorporated by reference to Exhibit
10.4 of RCNs Current Report on Form 8-K filed on May 25, 2007).10.20
    
    RCN Corporation Senior Executive Annual Bonus Plan (incorporated by
reference to Exhibit 99.1 of RCNs Current Report on Form 8-K, filed
on July 26, 2005).10.21+
    
    RCN Corporation 2005 Stock Compensation Plan, as amended
(incorporated by reference to Annex A to RCNs Definitive Proxy
Statement for the 2007 Annual Meeting of Stockholders, filed on April
27, 2007).10.22+
    
    RCN Corporation Change of Control Severance Plan dated April 7, 2006
(incorporated by reference to Exhibit 10.37 to RCNs Amendment No. 1
to its Annual Report on Form 10-K filed on April 10, 2006).10.23+
    
    RCN Corporation 2007 Short-Term Incentive Plan (incorporated by
reference to Exhibit 10.28 of RCNs Amended Quarterly Report on Form
10-Q/A filed on May 14, 2007).
  E-2




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##### Table of Contents



Exhibit No.
    
    Description10.24+
    
    Amended Form Non-Qualified Option Agreement (incorporated by reference
to Exhibit 10.29 to RCNs Amendment No. 1 to its Annual Report on From
10-K as filed on April 10, 2006).10.25+
    
    Amended Form Incentive Stock Option Agreement (incorporated by
reference to Exhibit 10.30 to RCNs Amendment No. 1 to its Annual
Report on Form 10-K as filed on April 10, 2006).10.26+
    
    Form Director Restricted Stock Agreement (incorporated by reference to
Exhibit 10.3 of RCNs Current Report on Form 8-K, filed on January 6,
2006).10.27+
    
    Amended Form Executive Restricted Stock Agreement (incorporated by
reference to Exhibit 10.20 of RCNs Annual Report on Form 10-K filed
on March 15, 2007).10.28+
    
    Form of Director Restricted Stock Unit Agreement (incorporated by
reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on
February 7, 2008).10.29+
    
    Form of Deferral Election Form (incorporated by reference to Exhibit
10.2 of RCNs Current Report on Form 8-K filed on February 7, 2008).10.30(*) +
    
    Form of
Executive Restricted Stock Unit Agreement.10.31+
    
    Amended and Restated Employment Agreement, effective as of December
21, 2007, by and between RCN Corporation and Peter D. Aquino
(incorporated by reference to Exhibit 10.1 of RCNs Current Report on
Form 8-K filed on December 27, 2007).10.32+
    
    Employment Letter by and between RCN Corporation and Michael Sicoli,
dated May 12, 2005 (incorporated by reference to Exhibit 99.2 of RCNs
Current Report on Form 8-K, filed on May 12, 2005).10.33+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Michael E. Katzenstein (incorporated by reference to
Exhibit 10.1 of RCNs Current Report on Form 8-K, filed on May 31,
2006).10.34+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Theodore H. Schell (incorporated by reference to
Exhibit 10.2 of RCNs Current Report on Form 8-K, filed on May 31,
2006).10.35+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Benjamin C. Duster, IV (incorporated by reference to
Exhibit 10.3 of RCNs Current Report on Form 8-K, filed on May 31,
2006).10.36+
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Lee S. Hillman (incorporated by reference to Exhibit
10.4 of RCNs Current Report on Form 8-K, filed on May 31, 2006).10.37 +
    
    Restricted Stock Agreement dated May 25, 2006 by and between RCN
Corporation and Daniel Tseung (incorporated by reference to Exhibit
10.5 of RCNs Current Report on Form 8-K, filed on May 31, 2006).10.38 +
    
    Restricted Stock Agreement by and between RCN Corporation and Peter D.
Aquino (incorporated by reference to Exhibit 10.3 of RCNs Current
Report on Form 8-K filed June 6, 2006).10.39 +
    
    Restricted Stock Agreement by and between RCN Corporation and Michael
T. Sicoli (incorporated by reference to Exhibit 10.4 of RCNs Current
Report of Form 8-K filed on June 6, 2006).
  E-3




---



##### Table of Contents



Exhibit No.
    
    Description10.40 +
    
    Employment Letter by and between RCN Corporation and Benjamin R.
Preston dated April 5, 2006 (incorporated by reference to Exhibit 99.2
of RCNs Current Report on Form 8-K, filed on April 5, 2006).10.41 +
    
    Severance Agreement and Release, dated as of February 4, 2008, by and
between RCN Corporation and James F. Mooney (incorporated by reference
to Exhibit 10.3 of RCNs Current Report on Form 8-K filed on February
7, 2008).10.42
    
    Stock Purchase Agreement between RCN Corporation and Consolidated
Edison, Inc., dated as of December 5, 2005 (incorporated by reference
to Exhibit 10.33 to RCNs Amendment No. 1 to its Annual Report on Form
10-K as filed on April 10, 2006).10.43
    
    Stock Purchase Agreement, dated March 6, 2006, entered into by and
among RCN International Holdings, Inc, Teleholding, S.A. de C.V., Mega
Cable, S.A. de C.V. and MCM Holding, S.A. de C.V. (incorporated by
reference to Exhibit 99.2 of RCNs Current Report on Form 8-K, filed
on March 8, 2006).10.44
    
    Settlement Agreement, dated March 6, 2006, entered into by and among
RCN International Holdings, Inc., Teleholding, S.A. de C.V., Mega
Cable, S.A. de C.V., MCM Holding, S.A. de C.V. and the Private
Shareholders listed therein (incorporated by reference to Exhibit
10.35 to RCNs Amendment No. 1 to its Annual Report on Form 10-K as
filed on April 10, 2006).10.45
    
    Asset Purchase Agreement by and among RCN Telecom Services, Inc. , RCN
Corporation and Astound Broadband, LLC (incorporated by reference to
Exhibit 99.2 of RCNs Current Report on Form 8-K filed on August 18,
2006).10.46
    
    Agreement and Plan of Merger, dated as of June 24, 2007, by and among
RCN Corporation, Raven Acquisition Corporation, and NEON
Communications Group, Inc. (incorporated by reference to Exhibit 2.1
of RCNs Current Report on Form 8-K filed on June 25, 2007).21.1 (*)
    
    Subsidiaries
of Registrant.23.2 (*)
    
    Consent of Friedman LLP, Independent Registered Public Accounting Firm.31.1 (*)
    
    Certification of Chief Executive Officer pursuant to Rules 13a-14 and
15d-14 promulgated under the Securities and Exchange Act of 1934, as
amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act
of 2002.31.2 (*)
    
    Certification of the Executive Vice President and Chief Financial
Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the
Securities and Exchange Act of 1934, as amended, as adopted pursuant
to section 302 of the Sarbanes-Oxley Act of 2002.32.1 (*)
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.2 (*)
    
    Certification of Executive Vice President and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 *
    
    Document attached.**
    
    Confidential treatment requested as to certain portions of the document, which portions have
been omitted and filed separately with the Securities and Exchange Commission.+
    
    Management compensatory plan or arrangement.  E-4




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##### Table of Contents



Index to Financial Statements
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005
    
    
    F-3Consolidated Balance Sheets as of December 31, 2007 and December 31, 2006
    
    
    F-4Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
    
    
    F-5Consolidated Statements of Changes in Common Stockholders Equity (Deficit) for the years
ended December 31, 2007, 2006 and 2005
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7Schedule IIValuation
and Qualifying Accounts
    
    
    F-29
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
  F-2




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##### Table of Contents



RCN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
 Year ended December 31,2007
    
    
    2006
    
    
    2005Revenues
    
    $
    636,097
    
    
    $
    585,476
    
    
    $
    530,412Costs and expenses:Direct expenses
    
    
    224,770
    
    
    
    201,370
    
    
    
    188,950Selling, general and administrative (including stock-based
compensation of $33,206, $18,162, and $8,913)
    
    
    288,426
    
    
    
    276,471
    
    
    
    268,236Impairments, exit costs and restructuring charges
    
    
    8,194
    
    
    
    6,702
    
    
    
    5,130Depreciation and amortization
    
    
    195,239
    
    
    
    192,964
    
    
    
    184,568Operating loss
    
    
    (80,532
    )
    
    
    (92,031
    )
    
    
    (116,472
    )Investment income
    
    
    9,424
    
    
    
    5,983
    
    
    
    5,648Interest expense
    
    
    (34,510
    )
    
    
    (24,659
    )
    
    
    (42,333
    )Gain on sale of investment in unconsolidated entity
    
    
    
    
    
    
    125,370
    
    
    
    (Loss) gain on sale of assets
    
    
    (827
    )
    
    
    (2,119
    )
    
    
    2,536Loss on early extinguishment of debt
    
    
    (63,795
    )
    
    
    (19,287
    )
    
    
    Other (expense) income, net
    
    
    (451
    )
    
    
    35
    
    
    
    1,556Loss from continuing operations before reorganization items and
income taxes
    
    
    (170,691
    )
    
    
    (6,708
    )
    
    
    (149,065
    )Reorganization income, net
    
    
    
    
    
    
    
    
    
    
    11,113Income tax (benefit) expense
    
    
    (1,049
    )
    
    
    7,612
    
    
    
    779Net loss from continuing operations
    
    
    (169,642
    )
    
    
    (14,320
    )
    
    
    (138,731
    )Income from discontinued operations, net of tax
    
    
    1,684
    
    
    
    2,464
    
    
    
    19Gain on sale of discontinued operations, net of tax
    
    
    15,921
    
    
    
    
    
    
    
    Net loss before cumulative effect of change in accounting principle
    
    
    (152,037
    )
    
    
    (11,856
    )
    
    
    (138,712
    )Cumulative effect on prior years of retroactive application of a
change in accounting for legal fees, net of tax
    
    
    
    
    
    
    
    
    
    
    2,600Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )Net (loss) income per common share:Basic and Diluted:Loss from continuing operations
    
    $
    (4.58
    )
    
    $
    (0.39
    )
    
    $
    (3.85
    )Income from discontinued operations
    
    
    0.05
    
    
    
    0.07
    
    
    
    Gain on sale of discontinued operations
    
    
    0.43
    
    
    
    
    
    
    
    Net loss before cumulative effect of change in accounting principle
    
    $
    (4.11
    )
    
    $
    (0.32
    )
    
    $
    (3.85
    )Cumulative effect of change in accounting for legal fees
    
    
    
    
    
    
    
    
    
    
    0.07Net loss attributable to common stockholders
    
    $
    (4.11
    )
    
    $
    (0.32
    )
    
    $
    (3.78
    )Weighted average shares outstanding, Basic and Diluted
    
    
    37,033,456
    
    
    
    36,756,494
    
    
    
    36,040,165
   F-3




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##### Table of Contents



RCN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
 December 31,2007
    
    
    2006ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    21,793
    
    
    $
    66,342Short-term investments
    
    
    45,899
    
    
    
    58,173Accounts receivable, net of allowance for doubtful accounts of $4,298 and $4,205
    
    
    64,681
    
    
    
    58,483Prepaid expenses and other current assets
    
    
    22,799
    
    
    
    13,025Assets of discontinued operations
    
    
    
    
    
    
    39,573Total current assets
    
    
    155,172
    
    
    
    235,596Property, plant and equipment, net of accumulated depreciation of $502,905 and $339,061
    
    
    793,407
    
    
    
    613,572Intangible assets, net of accumulated amortization of $58,676 and $37,968
    
    
    107,511
    
    
    
    98,264Long-term restricted investments
    
    
    22,767
    
    
    
    16,031Deferred charges and other assets
    
    
    16,920
    
    
    
    11,918Total assets
    
    $
    1,095,777
    
    
    $
    975,381LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    24,021
    
    
    $
    23,089Advance billings and customer deposits
    
    
    41,937
    
    
    
    38,783Accrued expenses and other
    
    
    78,027
    
    
    
    68,342Accrued employee compensation and related expenses
    
    
    17,647
    
    
    
    18,108Accrued exit costs
    
    
    2,618
    
    
    
    2,761Current portion of long-term debt and capital lease obligations
    
    
    7,338
    
    
    
    871Current liabilities of discontinued operations
    
    
    
    
    
    
    10,068Total current liabilities
    
    
    171,588
    
    
    
    162,022Long-term debt and capital lease obligations, net of current maturities
    
    
    737,607
    
    
    
    201,921Other long-term liabilities
    
    
    69,707
    
    
    
    41,502Total liabilities
    
    
    978,902
    
    
    
    405,445Commitments and contingenciesStockholders Equity:Common
stock, par value $0.01 per share, 100,000,000 shares authorized, 37,654,546 and 37,455,912 shares issued and outstanding
    
    
    377
    
    
    
    374Additional paid-in-capital
    
    
    444,738
    
    
    
    722,589Treasury stock, 194,184 and 56,758 shares at cost
    
    
    (4,709
    )
    
    
    (1,388
    )Accumulated deficit
    
    
    (303,693
    )
    
    
    (151,656
    )Accumulated other comprehensive (loss) income
    
    
    (19,838
    )
    
    
    17Total stockholders equity
    
    
    116,875
    
    
    
    569,936Total liabilities and stockholders equity
    
    $
    1,095,777
    
    
    $
    975,381
   F-4




---



##### Table of Contents



RCN CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )Income from discontinued operations, net of tax
    
    
    (1,684
    )
    
    
    (2,464
    )
    
    
    (19
    )Gain on sale of discontinued operations
    
    
    (15,921
    )
    
    
    
    
    
    
    Cumulative effect of change in accounting for legal fees
    
    
    
    
    
    
    
    
    
    
    (2,600
    )Net loss from continuing operations
    
    
    (169,642
    )
    
    
    (14,320
    )
    
    
    (138,731
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Accretion of discounted debt
    
    
    
    
    
    
    1,663
    
    
    
    4,680Amortization of financing costs
    
    
    740
    
    
    
    1,304
    
    
    
    2,333Non-cash stock-based compensation
    
    
    33,206
    
    
    
    18,162
    
    
    
    8,913Loss (gain) on sale of assets
    
    
    827
    
    
    
    2,119
    
    
    
    (2,536
    )Loss on early extinguishment of debt
    
    
    63,795
    
    
    
    19,287
    
    
    
    Gain on sale of investment in unconsolidated entity
    
    
    
    
    
    
    (125,370
    )
    
    
    Depreciation and amortization
    
    
    195,239
    
    
    
    192,964
    
    
    
    184,568Deferred income taxes, net
    
    
    (1,049
    )
    
    
    145
    
    
    
    Provision for doubtful accounts
    
    
    10,880
    
    
    
    11,039
    
    
    
    9,088Non-cash impairments, exit costs and restructuring charges
    
    
    2,460
    
    
    
    4,402
    
    
    
    8,264Net change in certain assets and liabilities, net of
business acquisitions:Accounts receivable and unbilled revenues
    
    
    (10,448
    )
    
    
    (15,642
    )
    
    
    (5,445
    )Accounts payable
    
    
    (1,231
    )
    
    
    1,437
    
    
    
    (4,732
    )Accrued expenses
    
    
    (14,885
    )
    
    
    (8,721
    )
    
    
    11,254Advanced billing and customer deposits
    
    
    338
    
    
    
    4,512
    
    
    
    (825
    )Payment of deferred reorganization costs
    
    
    
    
    
    
    
    
    
    
    (21,644
    )Other assets and liabilities
    
    
    (1,542
    )
    
    
    (1,464
    )
    
    
    7,924Net cash provided by continuing operations
    
    
    108,688
    
    
    
    91,517
    
    
    
    63,111Cash provided by (used in) discontinued operations
    
    
    476
    
    
    
    3,498
    
    
    
    (2,685
    )Net cash provided by operating activities
    
    
    109,164
    
    
    
    95,015
    
    
    
    60,426Cash flows from investing activities:Additions to property, plant and equipment
    
    
    (115,510
    )
    
    
    (86,195
    )
    
    
    (85,028
    )Investment in acquisitions and intangibles, net of cash
acquired
    
    
    (261,843
    )
    
    
    (40,854
    )
    
    
    (2,244
    )Net proceeds from sale of discontinued operations and
other assets
    
    
    46,877
    
    
    
    
    
    
    
    Decrease (increase) in short-term investments
    
    
    12,268
    
    
    
    13,828
    
    
    
    (21,559
    )Proceeds from sale of assets
    
    
    1,955
    
    
    
    999
    
    
    
    6,259Proceeds from sale of investment in unconsolidated entity
    
    
    
    
    
    
    307,467
    
    
    
    Decrease in restricted investments
    
    
    754
    
    
    
    1,537
    
    
    
    Decrease in investments restricted for debt service
    
    
    
    
    
    
    
    
    
    
    9,020Net cash (used in) provided by continuing operations
    
    
    (315,499
    )
    
    
    196,782
    
    
    
    (93,552
    )Cash used in discontinued operations
    
    
    (243
    )
    
    
    (2,156
    )
    
    
    (4,322
    )Net cash (used in) provided by investing activities
    
    
    (315,742
    )
    
    
    194,626
    
    
    
    (97,874
    )
  F-5




---



##### Table of Contents



Year
Ended December 31,2007
    
    
    2006
    
    
    2005Cash flows from financing activities:Repayments of long-term debt, including debt premium
    
    
    (219,351
    )
    
    
    (372,160
    )
    
    
    (6,037
    )Payment of debt issuance costs
    
    
    (13,944
    )
    
    
    (4,412
    )
    
    
    Dividends paid
    
    
    (348,380
    )
    
    
    
    
    
    
    Cost of common shares repurchased
    
    
    (6,960
    )
    
    
    (1,388
    )
    
    
    Payments of capital lease obligations
    
    
    (129
    )
    
    
    (372
    )
    
    
    (558
    )Proceeds from the issuance of long-term debt
    
    
    745,000
    
    
    
    75,000
    
    
    
    Proceeds from the exercise of stock options
    
    
    5,793
    
    
    
    9,127
    
    
    
    1,410Net cash provided by (used in) financing activities
    
    
    162,029
    
    
    
    (294,205
    )
    
    
    (5,185
    )Net decrease in cash and cash equivalents
    
    
    (44,549
    )
    
    
    (4,564
    )
    
    
    (42,633
    )Cash and cash equivalents at beginning of period
    
    
    66,342
    
    
    
    70,906
    
    
    
    113,539Cash and cash equivalents at end of period
    
    $
    21,793
    
    
    $
    66,342
    
    
    $
    70,906Supplemental disclosures of cash flow informationCash paid during the periods for:Interest, net of capitalized interest of $0
    
    $
    38,663
    
    
    $
    21,477
    
    
    $
    31,277Income taxes
    
    $
    0
    
    
    $
    7,467
    
    
    $
    0
   F-5




---



##### Table of Contents



RCN CORPORATION
 
 Consolidated Statements of Stockholders Equity/(Deficit)
(dollars in thousands, except share and per share data)
 CommittedCommon Stock
    
    
    Committed
    
    
    Committed
    
    
    Capital
    
    
    
    
    
    
    
    
    
    Treasury
    
    
    
    
    
    
    Accumulated Other
    
    
    Total CommonCommon Stock
    
    
    Class A
    
    
    Capital
    
    
    Capital
    
    
    in Excess
    
    
    Additional
    
    
    Accumulated
    
    
    Stock
    
    
    Treasury
    
    
    Comprehensive
Income
    
    
    StockholdersClass A Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    of Par
    
    
    Paid in Capital
    
    
    Deficit
    
    
    Shares
    
    
    Stock Amount
    
    

(Loss)
    
    
    Equity (Deficit)Balance December 31, 2004
    
    
    31,919,044
    
    
    $
    319
    
    
    
    4,101,806
    
    
    $
    41
    
    
    $
    131,355
    
    
    $
    576,895
    
    
    $
    (3,688
    )
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    704,922Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136,112
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136,112
    )Issuance of committed shares in payment of claims
    
    
    3,303,981
    
    
    
    33
    
    
    
    (3,303,981
    )
    
    
    (33
    )
    
    
    (105,806
    )
    
    
    105,806
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock
    
    
    730,086
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of warrant
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Return of committed shares
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of restricted stock award
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,109Amortization of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,804
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,804Stock option exercised
    
    
    75,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,409
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,410Adjustment to deferred tax valuation allowance
related to indefinite-lived intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,819
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,819
    )Warrant issuance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    565
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    565Foreign currency translation gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,896
    
    
    
    6,896Gain on assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    127Balance December 31, 2005
    
    
    36,028,116
    
    
    $
    360
    
    
    
    797,938
    
    
    $
    8
    
    
    $
    25,549
    
    
    $
    669,762
    
    
    $
    (139,800
    )
    
    
    
    
    
    $
    
    
    
    $
    7,023
    
    
    $
    562,902Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,856
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,856
    )Issuance of restricted stock, net of forfeitures
    
    
    168,379
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Return of committed shares
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of committed shares in payment of claims
    
    
    797,938
    
    
    
    8
    
    
    
    (797,938
    )
    
    
    (8
    )
    
    
    (25,550
    )
    
    
    25,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of warrants
    
    
    179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,758
    
    
    
    (1,388
    )
    
    
    
    
    
    
    (1,388
    )Stock options exercised
    
    
    461,413
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,122
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,126Amortization of restricted stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,791Amortization of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,371Foreign currency translation gain (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,896
    )
    
    
    (6,896
    )Unrealized appreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Balance December 31, 2006
    
    
    37,455,912
    
    
    $
    374
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    722,589
    
    
    $
    (151,656
    )
    
    
    56,758
    
    
    $
    (1,388
    )
    
    $
    17
    
    
    $
    569,936Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,777
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,777
    )Issuance of restricted stock, net of forfeitures
    
    
    145,110
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    315,124
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,818
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,821Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,450Repurchase of common stock
    
    
    (261,600
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,639
    )
    
    
    
    
    
    
    137,426
    
    
    
    (3,321
    )
    
    
    
    
    
    
    (6,962
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,206
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,206Dividends declared: $9.33 per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351,684
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351,684
    )Foreign currency translation loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73
    )
    
    
    (73
    )Fair market value of interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,817
    )
    
    
    (19,817
    )Unrealized depreciation on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35
    
    
    
    35Balance December 31, 2007
    
    
    37,654,546
    
    
    $
    377
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    444,738
    
    
    $
    (303,433
    )
    
    
    194,184
    
    
    $
    (4,709
    )
    
    $
    (19,838
    )
    
    $
    117,135
   F-6




---



##### Table of Contents



RCN CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and per share data)
 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
    Dividends and Recapitalization
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Use of Estimates and Assumptions
    F-7




---



##### Table of Contents



Revisions and Reclassifications
   Fresh Start Accounting
 Financial Reporting By Entities in Reorganization Under the
Bankruptcy Code
 Cash and Cash Equivalents
  Short-term Investments
 Accounting for Certain Investments in Debt and Equity
Securities
 2007
    
    
    2006Commercial Paper
    
    $
    29,679
    
    
    $
    11,713Federal Agency
    
    
    16,220
    
    
    
    46,460Total
    
    $
    45,899
    
    
    $
    58,173
 Concentration of Credit Risk
    Accounts Receivable
  Long-Term Restricted Investments
   F-8




---



##### Table of Contents



Property, Plant and Equipment
   Useful Life
    
    2007
    
    
    2006Telecommunications plant
    
    5-22.5 years
    
    $
    1,027,418
    
    
    $
    711,971Capital leases
    
    5-15 years
    
    
    84,456
    
    
    
    74,800Computer equipment
    
    3-5 years
    
    
    64,316
    
    
    
    55,210Buildings, leasehold improvements and land
    
    5-30 years
    
    
    45,810
    
    
    
    45,835Furniture, fixtures and vehicles
    
    3-10 years
    
    
    28,070
    
    
    
    27,960Construction materials and other
    
    5-10 years
    
    
    46,242
    
    
    
    36,857Total property, plant and equipment
    
    
    
    
    1,296,312
    
    
    
    952,633Less: accumulated depreciation
    
    
    
    
    (502,905
    )
    
    
    (339,061
    )Property, plant and equipment, net
    
    
    
    $
    793,407
    
    
    $
    613,572
   Asset Retirement Obligations
 Accounting for Asset Retirement
Obligations, Accounting for Conditional Asset Retirement Obligations  an
Interpretation of FASB Statement No. 143,
  Intangibles
 Goodwill and Other Intangible Assets
  F-9




---



##### Table of Contents



Accounting for Costs of Computer
Software Developed or Obtained for Internal Use.
 Valuation
of Indefinite-Lived Intangible Assets and Long-Lived Assets
 Accounting for the
Impairment or Disposal of Long-Lived Assets,
  Legal Contingencies
 Accounting for Contingencies
 Revenue Recognition
   Direct Expenses
   F-10




---



##### Table of Contents



Selling,
General and Administrative Expenses
  Advertising Expense
  Change in Accounting for Legal Fees
  Non-Cash
Stock-Based Compensation
  Exit Costs and Other Lease Related Costs
 Accounting for Costs Associated with Exit or Disposal Activities
  Debt Issuance Costs
  Income Taxes
 Accounting for Income
Taxes
  F-11




---



##### Table of Contents



Derivative Instruments and Hedging Activities
 Accounting
for Derivative Instruments and Hedging Activities
 Comprehensive Loss
  Year ended December 31,2007
    
    
    2006
    
    
    2005Net loss
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (136,112
    )Reversal of
accumulated translation gains upon sale of investment in unconsolidated subsidiary
    
    
    
    
    
    
    (6,896
    )
    
    
    Foreign currency translation (loss) gain
    
    
    (73
    )
    
    
    
    
    
    
    6,896Change in fair value of interest rate swaps
    
    
    (19,817
    )
    
    
    
    
    
    
    Unrealized
appreciation (depreciation) on
investments
    
    
    35
    
    
    
    (110
    )
    
    
    127Comprehensive loss
    
    $
    (171,892
    )
    
    $
    (18,862
    )
    
    $
    (129,089
    )
   Segment Reporting
 Disclosures about segments of an enterprise and
related information
 Recently Issued Accounting Pronouncements
 Business Combinations
  F-12




---



##### Table of Contents



Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51
 The Fair Value Option for Financial Assets
and Financial Liabilities-including an Amendment of FASB Statement No. 115
 Fair
Value Measurements
 3. ACQUISITIONS AND DISPOSITIONS
 Acquisition of NEON Communications Group, Inc.
    Current assets
    
    $
    32,288Property and equipment
    
    
    239,637Intangible assets
    
    
    29,000Other non-current assets
    
    
    10,039Total assets acquired
    
    
    310,964Total liabilities assumed
    
    
    29,577Net assets acquired
    
    
    281,387Less: cash acquired
    
    
    21,794Total purchase price, net of cash acquired
    
    $
    259,593
  F-13




---



##### Table of Contents



2007
    
    

2006Revenues, net *
    
    $
    702,394
    
    
    $
    654,730Operating
loss * (1)
    
    $
    (186,778
    )
    
    $
    (38,990
    )Net Income
(loss) * (1)
    
    $
    (170,464
    )
    
    $
    17,632Net loss per common share, basic and diluted *
    
    $
    (5.04
    )
    
    $
    (1.06
    )
 *
    
    from continuing operations(1)
    
    Includes non recurring charges incurred by NEON including deal-related costs and stock-based compensation
expense totaling $5.4 million during 2007. Sale of San Francisco Operations and Exit of Los Angeles Operations
   December 31,2006Current assets
    
    $
    4,568Property, plant and equipment, net
    
    
    33,506Other intangible assets, net
    
    
    1,364Other non current assets
    
    
    135Total assets
    
    $
    39,573Total current liabilities
    
    $
    10,068
  Sale of Megacable, S.A. de C.V.
   F-14




---



##### Table of Contents



Acquisition of Consolidated Edison Communications Holding Company, Inc.
  4. IMPAIRMENTS, EXIT COSTS AND RESTRUCTURING CHARGES
  Year ended December 31,2007
    
    
    2006
    
    
    2005Exit costs for excess facilities
    
    $
    7,875
    
    
    $
    4,402
    
    
    $
    8,743Restructuring charges
    
    
    3,443
    
    
    
    2,300
    
    
    
    3,011Recoveries, net
    
    
    (3,124
    )
    
    
    
    
    
    
    Reversal of deferred rent
    
    
    
    
    
    
    
    
    
    
    (6,903
    )Asset impairment
    
    
    
    
    
    
    
    
    
    
    279Total
    
    $
    8,194
    
    
    $
    6,702
    
    
    $
    5,130
   Lease FairValue
    
    
    Exit Costs
    
    
    TotalBalance, December 31, 2005
    
    $
    4,554
    
    
    $
    8,018
    
    
    $
    12,572Additional accrued costs
    
    
    
    
    
    
    2,779
    
    
    
    2,779Acquisition of CEC
    
    
    1,400
    
    
    
    
    
    
    
    1,400Amortization
    
    
    (875
    )
    
    
    (1,447
    )
    
    
    (2,322
    )Reversals/Settlements
    
    
    (153
    )
    
    
    
    
    
    
    (153
    )Balance, December 31, 2006
    
    
    4,926
    
    
    
    9,350
    
    
    
    14,276Additional accrued costs
    
    
    
    
    
    
    2,731
    
    
    
    2,731Amortization
    
    
    (773
    )
    
    
    (2,344
    )
    
    
    (3,117
    )Reversals/Settlements
    
    
    (808
    )
    
    
    
    
    
    
    (808
    )Balance, December 31, 2007
    
    
    3,345
    
    
    
    9,737
    
    
    
    13,082Less current portion
    
    
    655
    
    
    
    1,962
    
    
    
    2,617Long-term portion December 31, 2007
    
    $
    2,690
    
    
    $
    7,775
    
    
    $
    10,465
     F-15




---



##### Table of Contents



5. FAIR VALUE OF FINANCIAL INSTRUMENTS
  Carrying
    
    
    FairAmount
    
    
    ValueCash and cash equivalents
    
    $
    21,793
    
    
    $
    21,793Short-term investments
    
    
    45,899
    
    
    
    45,899Floating rate long-term debt:First-Lien Term Loan
    
    
    716,899
    
    
    
    677,921Revolving credit facility
    
    
    25,000
    
    
    
    25,000Interest rate swaps liability
    
    
    19,817
    
    
    
    19,817Unrecognized financial instrumentsLetters of credit
    
    
    46,973
    
    
    
    46,973
 6. INVESTMENTS IN JOINT VENTURES
 Megacable
 Criteria for Applying the Equity Method of Accounting
for Investments in Common Stock
  F-16




---



##### Table of Contents



7. INTANGIBLE ASSETS
  2007
    
    
    2006Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedUseful Life
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCustomer relationships
    
    4 years
    
    $
    97,472
    
    
    $
    (50,160
    )
    
    $
    66,221
    
    
    $
    (32,246
    )Trademarks/tradenames
    
    5 years
    
    
    13,573
    
    
    
    (8,263
    )
    
    
    13,753
    
    
    
    (5,568
    )Software
    
    3 years
    
    
    300
    
    
    
    (253
    )
    
    
    120
    
    
    
    (154
    )Sub-total
    
    
    
    $
    111,345
    
    
    $
    (58,676
    )
    
    $
    80,094
    
    
    $
    (37,968
    )Franchises
    
    Indefinite life
    
    
    54,842
    
    
    
    
    
    
    
    56,138
    
    
    
    Total
    
    
    
    $
    166,187
    
    
    $
    (58,676
    )
    
    $
    136,232
    
    
    $
    (37,968
    )
   Year ended December 31,2008
    
    $
    28,5982009
    
    
    13,6892010
    
    
    9,1862011
    
    
    2812012
    
    
    281Thereafter
    
    
    633
 8. DEFERRED CHARGES AND OTHER ASSETS
  2007
    
    
    2006Debt issuance cost, net of accumulated amortization
    
    $
    10,722
    
    
    $
    5,443Security deposits
    
    
    3,558
    
    
    
    1,817Other long-term assets
    
    
    2,640
    
    
    
    4,658Total deferred charges and other assets
    
    $
    16,920
    
    
    $
    11,918
   F-17




---



##### Table of Contents



9. OTHER LONG-TERM LIABILITIES
  2007
    
    
    2006Deferred taxes
    
    $
    22,763
    
    
    $
    23,812Lease cost/fair value reserve
    
    
    2,690
    
    
    
    4,063Unearned revenue
    
    
    12,398
    
    
    
    3,886Lease exit costs
    
    
    7,775
    
    
    
    7,452Other deferred credits
    
    
    2,716
    
    
    
    2,289Dividend payable
    
    
    1,548
    
    
    
    Interest rate swaps
    
    
    19,817
    
    
    
    Total other long-term liabilities
    
    $
    69,707
    
    
    $
    41,502
   10. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  2007
    
    
    2006First-Lien Term Loan
    
    $
    716,899
    
    
    $
    74,625Revolving Line of Credit
    
    
    25,000
    
    
    
    Second-Lien Convertible Notes
    
    
    
    
    
    
    125,000Capital Leases
    
    
    3,046
    
    
    
    3,167Total
    
    
    744,945
    
    
    
    202,792Due within one year
    
    
    7,338
    
    
    
    871Total long-term debt
    
    $
    737,607
    
    
    $
    201,921
  Contractual MaturitiesFor the year ending December 31,2008
    
    $
    7,3382009
    
    
    7,3522010
    
    
    7,3682011
    
    
    7,3852012
    
    
    7,404Thereafter
    
    
    708,098Total
    
    $
    744,945
  Former First-Lien Credit Agreement
   F-18




---



##### Table of Contents



First-Lien Credit Agreement
      Second-Lien Convertible Notes
   2006
Activity
  11. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
   F-19




---



##### Table of Contents



12. STOCKHOLDERS EQUITY AND STOCK PLANS
 Income (Loss) Per Share
    2007
    
    
    2006Options
    
    
    3,884,652
    
    
    
    2,963,674Warrants
    
    
    8,018,276
    
    
    
    Shares issuable upon conversion of convertible debt
    
    
    
    
    
    
    4,968,204Unvested restricted stock
    
    
    437,482
    
    
    
    655,103Total
    
    
    12,340,410
    
    
    
    8,586,981
 RCN Common Stock and Dividends
     Stock Repurchase Program
   F-20




---



##### Table of Contents



RCN Stock-Based Compensation
    Year ended December 31,2007
    
    
    2006
    
    
    2005Restricted stock awards
    
    $
    9.9
    
    
    $
    5.8
    
    
    $
    4.0Stock options
    
    
    23.3
    
    
    
    12.4
    
    
    
    4.9Total
stock-based compensation expense
    
    $
    33.2
    
    
    $
    18.2
    
    
    $
    8.9
  Stock Options
   2007
    
    
    2006
    
    
    2005WeightedWeighted
    
    
    average
    
    
    Aggregate
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    remaining
    
    
    intrinsic
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Exercise
    
    
    contractual life
    
    
    value
    
    
    Number of
    
    
    Exercise
    
    
    Number
    
    
    Exerciseof Shares
    
    
    Price
    
    
    (in years)
    
    
    (in millions)
    
    
    Shares
    
    
    Price
    
    
    of Shares
    
    
    PriceAwards Outstanding
at January 1
    
    
    2,963,674
    
    
    $
    23.37
    
    
    
    
    
    
    
    
    
    
    
    3,433,951
    
    
    $
    21.64
    
    
    
    
    
    
    $
    Granted
    
    
    330,677
    
    
    
    14.39
    
    
    
    
    
    
    
    
    
    
    
    674,900
    
    
    
    27.16
    
    
    
    3,610,759
    
    
    
    21.53Exercised
    
    
    (315,130
    )
    
    
    18.38
    
    
    
    
    
    
    
    
    
    
    
    (461,413
    )
    
    
    19.78
    
    
    
    (75,000
    )
    
    
    18.80Forfeitures
    
    
    (422,368
    )
    
    
    18.76
    
    
    
    
    
    
    
    
    
    
    
    (683,764
    )
    
    
    20.86
    
    
    
    (101,808
    )
    
    
    19.77Special
Dividend
Adjustment
    
    
    1,327,799
    
    
    
    15.57Awards Outstanding
at December 31
    
    
    3,884,652
    
    
    $
    15.49
    
    
    
    4.72
    
    
    $
    0.2
    
    
    
    2,963,674
    
    
    $
    23.37
    
    
    
    3,433,951
    
    
    $
    21.64Awards Exercisable
at December 31
    
    
    2,283,819
    
    
    $
    15.77
    
    
    
    4.47
    
    
    $
    (0.4
    )
    
    
    670,249
    
    
    $
    23.16
    
    
    
    
    
    
    $
    
   F-21




---



##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedNumber
    
    
    average
    
    
    Weighted
    
    
    
    
    
    
    WeightedExercise price
    
    
    outstanding
    
    
    remaining
    
    
    average
    
    
    
    
    
    
    averageof
    
    
    at
    
    
    contractual
    
    
    exercise
    
    
    As of
    
    
    exercise priceoptions
    
    
    12/31/2007
    
    
    life (years)
    
    
    price
    
    
    12/31/2007
    
    
    per option$
    12.36
    
    
    
    543,858
    
    
    
    4.40
    
    
    $
    12.36
    
    
    
    237,171
    
    
    $
    12.36$
    13.79
    
    
    
    1,448,708
    
    
    
    4.40
    
    
    $
    13.79
    
    
    
    1,065,491
    
    
    $
    13.79$
    14.29
    
    
    
    279,239
    
    
    
    4.91
    
    
    $
    14.29
    
    
    
    173,188
    
    
    $
    14.29$
    14.39
    
    
    
    254,076
    
    
    
    6.67
    
    
    $
    14.39
    
    
    
    
    
    
    $
    14.39$
    16.63
    
    
    
    121,739
    
    
    
    5.24
    
    
    $
    16.63
    
    
    
    40,578
    
    
    $
    16.63$
    17.42
    
    
    
    463,826
    
    
    
    5.43
    
    
    $
    17.42
    
    
    
    178,458
    
    
    $
    17.42$
    19.78
    
    
    
    138,274
    
    
    
    5.93
    
    
    $
    19.78
    
    
    
    48,065
    
    
    $
    19.78$
    20.68
    
    
    
    634,932
    
    
    
    4.00
    
    
    $
    20.68
    
    
    
    540,868
    
    
    $
    20.68$
    12.36    $20.68
    
    
    
    3,884,652
    
    
    
    4.72
    
    
    $
    15.53
    
    
    
    2,283,819
    
    
    $
    15.77
   (weighted average)
    
    2007
    
    
    2006
    
    
    2005Fair Value
    
    $
    
    
    
    $
    10.99
    
    
    $
    11.49Dividend yield
    
    
    
    
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    
    
    
    
    58
    %
    
    
    58
    %Risk-free interest rate
    
    
    
    
    
    
    3.72
    %
    
    
    3.96
    %Expected life (in years)
    
    
    
    
    
    
    4.67
    
    
    
    4.01
  (weighted average)
    
    2007
    
    
    2006
    
    
    2005Fair Value
    
    $
    5.87
    
    
    $
    9.60
    
    
    $
    10.61Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    53
    %
    
    
    46
    %
    
    
    58
    %Risk-free interest rate
    
    
    4.31
    %
    
    
    4.98
    %
    
    
    3.76
    %Expected life (in years)
    
    
    4.08
    
    
    
    4.28
    
    
    
    4.11
   F-22




---



##### Table of Contents



Restricted Stock
   2007
    
    
    2006
    
    
    2005WeightedWeighted
    
    
    
    
    
    
    average
    
    
    
    
    
    
    WeightedNumber
    
    
    average
    
    
    Number
    
    
    grant
    
    
    Number
    
    
    averageof Shares
    
    
    grant price
    
    
    of Shares
    
    
    price
    
    
    of Shares
    
    
    grant priceNonvested, January 1
    
    
    599,159
    
    
    $
    25.25
    
    
    
    730,086
    
    
    $
    23.96
    
    
    
    
    
    
    
    Granted
    
    
    220,000
    
    
    
    27.27
    
    
    
    168,379
    
    
    
    28.58
    
    
    
    730,086
    
    
    $
    23.96Vested
    
    
    (362,731
    )
    
    
    24.71
    
    
    
    (243,362
    )
    
    
    23.96
    
    
    
    
    
    
    
    Forfeited
    
    
    (18,946
    )
    
    
    30.10
    
    
    
    (55,944
    )
    
    
    24.01
    
    
    
    
    
    
    
    Nonvested,
December 31
    
    
    437,482
    
    
    $
    26.50
    
    
    
    599,159
    
    
    $
    25.25
    
    
    
    730,086
    
    
    $
    23.96
  13. INCOME TAXES
  Year ended December 31,2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    (30
    )Foreign
    
    
    
    
    
    
    7,467
    
    
    
    
    
    
    
    7,467
    
    
    
    (30
    )Deferred:Federal
    
    
    (408
    )
    
    
    (1,267
    )
    
    
    State
    
    
    (641
    )
    
    
    1,412
    
    
    
    809(1,049
    )
    
    
    145
    
    
    
    809Total
    
    $
    (1,049
    )
    
    $
    7,612
    
    
    $
    779
  2007
    
    
    2006
    
    
    2005Net operating loss carryforwards
    
    $
    552,924
    
    
    $
    429,338
    
    
    $
    350,500Capital loss
carryforwards
    
    
    7,283
    
    
    
    7,166
    
    
    
    Employee benefit plan
    
    
    2,786
    
    
    
    3,075
    
    
    
    5,452Allowance
for doubtful accounts
    
    
    1,754
    
    
    
    1,767
    
    
    
    1,553Stock-based compensation
    
    
    13,087
    
    
    
    5,776
    
    
    
    3,105Investment in unconsolidated entity
    
    
    
    
    
    
    
    
    
    
    43,507Unearned revenue
    
    
    5,166
    
    
    
    1,597
    
    
    
    1,955Deferred rent
    
    
    2,376
    
    
    
    4,965
    
    
    
    3,397Reserve for obsolete inventory
    
    
    557
    
    
    
    409
    
    
    
    10,818
  F-23




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##### Table of Contents



2007
    
    
    2006
    
    
    2005Accruals for non-recurring charges
and contract settlements
    
    
    5,951
    
    
    
    4,270
    
    
    
    4,554Property, plant, and equipment
    
    
    (54,481
    )
    
    
    60,767
    
    
    
    85,992Other, net
    
    
    3,071
    
    
    
    4,753
    
    
    
    3,342Total deferred tax assets
    
    
    540,474
    
    
    
    523,883
    
    
    
    514,175Intangibles
    
    
    (31,923
    )
    
    
    (26,956
    )
    
    
    (32,068
    )Total deferred tax liabilities
    
    
    (31,923
    )
    
    
    (26,956
    )
    
    
    (32,068
    )Net deferred tax assets
    
    
    508,551
    
    
    
    496,927
    
    
    
    482,107Valuation allowance
    
    
    (531,314
    )
    
    
    (520,739
    )
    
    
    (505,926
    )Net deferred tax liabilities
    
    $
    (22,763
    )
    
    $
    (23,812
    )
    
    $
    (23,819
    )
  Year ended December 31,2007
    
    
    2006
    
    
    2005Net loss before cumulative effect of a
change in accounting principle
    
    $
    (152,037
    )
    
    $
    (11,856
    )
    
    $
    (138,712
    )Cumulative effect on prior years of
retroactive application of a change in
accounting for legal fees, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    2,600Total (benefit) provision for income taxes
    
    
    (1,049
    )
    
    
    7,612
    
    
    
    779Loss before provision for income taxes
    
    $
    (153,086
    )
    
    $
    (4,244
    )
    
    $
    (135,333
    )Federal income tax benefit at statutory rate
    
    $
    (53,580
    )
    
    $
    (1,485
    )
    
    $
    (47,366
    )State income taxes, net of federal income
tax provision
    
    
    (8,864
    )
    
    
    918
    
    
    
    507Valuation allowance
    
    
    44,927
    
    
    
    2,642
    
    
    
    47,230Restructuring costs
    
    
    15,282
    
    
    
    
    
    
    
    Nondeductible expenses
    
    
    746
    
    
    
    359
    
    
    
    13Reversal of stock-based compensation
    
    
    440
    
    
    
    324
    
    
    
    395Foreign income tax, net of federal income
tax provision
    
    
    
    
    
    
    4,854
    
    
    
    Total (benefit) provision for income taxes
    
    $
    (1,049
    )
    
    $
    7,612
    
    
    $
    779
    F-24




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##### Table of Contents



Accounting for Uncertainty
in Income Taxes  an interpretation of FASB Statement
No. 109
 14. EMPLOYEE BENEFIT PLANS
 401(k)
 15. COMMITMENTS AND CONTINGENCIES
 Rent Expense
   AggregateYear
    
    Amounts2008
    
    $
    18,1112009
    
    
    16,9332010
    
    
    14,1642011
    
    
    11,5732012
    
    
    9,280Thereafter
    
    
    22,028
 Unused Letters of Credit
  Guarantees
   F-25




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##### Table of Contents



Litigation
 ERISA Class Action
     Centre Street Realty
  City of Chicago Franchise Fee
 
    F-26




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##### Table of Contents



16. SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
    17. SELECTED FINANCIAL DATA
  20071st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th Quarter
    
    
    TotalRevenues
    
    $
    153,337
    
    
    $
    159,153
    
    
    $
    155,701
    
    
    $
    167,906
    
    
    $
    636,097Operating loss
    
    
    (20,506
    )
    
    
    (10,229
    )
    
    
    (26,702
    )
    
    
    (23,095
    )
    
    
    (80,532
    )Net loss from continuing operations
    
    
    (22,439
    )
    
    
    (79,505
    )
    
    
    (34,933
    )
    
    
    (32,765
    )
    
    
    (169,642
    )Net income (loss) from discontinued operations
    
    
    2,047
    
    
    
    (260
    )
    
    
    (305
    )
    
    
    202
    
    
    
    1,684Gain on sale
of discontinued operations
    
    
    15,744
    
    
    
    
    
    
    
    45
    
    
    
    132
    
    
    
    15,921Net loss
    
    $
    (4,648
    )
    
    $
    (79,765
    )
    
    $
    (35,193
    )
    
    $
    (32,431
    )
    
    $
    (152,037
    )Basic and Diluted:Net loss from continuing operations per share (1)
    
    $
    (0.62
    )
    
    $
    (2.15
    )
    
    $
    (0.93
    )
    
    $
    (0.89
    )
    
    $
    (4.58
    )Net income (loss) from discontinued operations
per share (1)
    
    
    0.06
    
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    0.05Gain on sale
of discontinued operations per share
    
    
    0.43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.43Net loss per share (1)
    
    $
    (0.13
    )
    
    $
    (2.16
    )
    
    $
    (0.94
    )
    
    $
    (0.88
    )
    
    $
    (4.11
    )
  F-27




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##### Table of Contents



20061st Quarter (2)
    
    
    2nd Quarter (2)
    
    
    3rd Quarter
    
    
    4th Quarter
    
    
    TotalRevenues
    
    $
    135,823
    
    
    $
    149,352
    
    
    $
    149,688
    
    
    $
    150,613
    
    
    $
    585,476Operating loss
    
    
    (30,114
    )
    
    
    (19,066
    )
    
    
    (19,980
    )
    
    
    (22,871
    )
    
    
    (92,031
    )Net income (loss) from continuing operations
    
    
    60,942
    
    
    
    (26,259
    )
    
    
    (22,972
    )
    
    
    (26,031
    )
    
    
    (14,320
    )Net income from discontinued operations
    
    
    19
    
    
    
    952
    
    
    
    141
    
    
    
    1,352
    
    
    
    2,464Net income (loss)
    
    $
    60,961
    
    
    $
    (25,307
    )
    
    $
    (22,831
    )
    
    $
    (24,679
    )
    
    $
    (11,856
    )Basic:Net income (loss) from continuing
operations per share (1)
    
    $
    1.68
    
    
    $
    (0.72
    )
    
    $
    (0.63
    )
    
    $
    (0.71
    )
    
    $
    (0.39
    )Net income from discontinued operations
per share
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    0.04
    
    
    
    0.07Net income (loss) per share (1)
    
    $
    1.68
    
    
    $
    (0.69
    )
    
    $
    (0.63
    )
    
    $
    (0.67
    )
    
    $
    (0.32
    )Diluted:Net income (loss) from continuing
operations per share (1)
    
    $
    1.52
    
    
    $
    (0.72
    )
    
    $
    (0.63
    )
    
    $
    (0.71
    )
    
    $
    (0.39
    )Net income from discontinued operations
per share
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    0.04
    
    
    
    0.07Net income (loss) per share (1)
    
    $
    1.52
    
    
    $
    (0.69
    )
    
    $
    (0.63
    )
    
    $
    (0.67
    )
    
    $
    (0.32
    )
 (1)
    
    As a result of rounding, the total of the four quarters earnings per share does not
equal the earnings per share for the year. In addition, in the first quarter of 2006, the
diluted earnings per share calculation includes the interest expense on the convertible
notes of approximately $2.3 million.(2)
    
    Certain amounts differ from amounts previously reported on
various Form 10-Qs due to the
reclassification of discontinued operations.  F-28




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##### Table of Contents



SCHEDULE II
 RCN
CORPORATION
 
 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(DOLLARS IN THOUSANDS)
 AdditionsBalance at
    
    
    Charged
    
    
    Charged
    
    
    Accounts
    
    
    Balance atBeginning of
    
    
    to Cost and
    
    
    to Other
    
    
    Written
    
    
    End ofDescription
    
    Period
    
    
    Expense
    
    
    Accounts (2)
    
    
    Off (1)
    
    
    PeriodAllowance for Doubtful AccountsDeducted from Accounts
Receivable in the
Consolidated Balance SheetsDecember 31, 2007
    
    $
    4,205
    
    
    $
    10,880
    
    
    $
    396
    
    
    $
    11,183
    
    
    $
    4,298December 31, 2006
    
    $
    3,535
    
    
    $
    11,039
    
    
    $
    1,126
    
    
    $
    11,495
    
    
    $
    4,205December 31, 2005
    
    $
    4,448
    
    
    $
    9,088
    
    
    $
    
    
    
    $
    10,001
    
    
    $
    3,535
 (1)
    
    Consists of write-offs, net of recoveries and collection fees in each year.(2)
    
    Includes additions for acquisitions.  F-29




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##### Table of Contents



Exhibits23.2
    
    
    Consent of Friedman LLP, Independent Registered Public Accounting Firm.31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not,
except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.  F-30