3. Stock Power and Delivery of Restricted Shares. Certificates representing the Restricted Shares will be held by the Company for the Grantee until the Vesting Date. Upon

pursuant to this Section 5 will be subject to the same vesting and delivery conditions that apply to the shares of Deferred Stock with respect to which the Dividend Equivalents are issued.

6. Vesting. The number of shares set forth below shall vest as of the “Vesting Dates” specified in the Table below, provided that the Grantee has not had a Termination of Employment (as defined below) prior to such Vesting Date.

14. Governing Law. The validity, construction and interpretation of this Agreement shall be governed by and determined in accordance with the laws of the State of New York.

11. Tax Withholding.

Section 1. Appointment. The Company hereby appoints Carlyle, for the duration of the Term, to render the advisory, consulting and oversight services described in Section 2(a) to the Company.

Section 2. Services.

Section 3. Fees.

Section 4. Indemnification.

Section 5. Term; Termination.

Section 7. Miscellaneous.

(b) The Consulting Fee shall be payable as follows:

resulting solely from the gross negligence or willful misconduct of Carlyle, as determined by a court in a final judgment from which no further appeal may be taken.

and postage prepaid, to the following addresses (or to such other address as shall be given in writing by one Party to the other Party in accordance herewith):

(d) Entire Agreement. This Agreement shall constitute the entire agreement between the Parties with respect to the subject matter hereof, and shall supersede all previous oral and written (and all contemporaneous oral) negotiations, commitments, agreements and understandings relating hereto.

(f) Waiver of Jury Trial. Each of the Parties hereto irrevocably and unconditionally waives the right to trial by jury with respect to any claim or action arising out of, relating to or in connection with this agreement or any transaction contemplated hereby.

(h) Headings. The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

(i) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement.

(i) For the period commencing on the date of this Agreement and ending on December 31, 2005, the Consulting Fee shall be pro rated on the basis of a 365 day year and shall be payable on the date hereof; and

PART I

Item 1. Business

In this report, we rely on and refer to information and statistics regarding the cable television industry and our market share in the sectors in which we compete. We obtained this information and statistics from various third-party sources, discussions with our customers and our own internal estimates. We believe that these sources and estimates are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness.

General

Insight Communications Company, Inc. is the ninth largest cable television system operator in the United States based on customers served. We currently serve approximately 1.3 million customers, all of whom are concentrated in the four contiguous states of Indiana, Kentucky, Illinois and Ohio. We offer our customers an array of broadband products and services, including analog and digital video, high-speed Internet access and, in certain markets, telephone services.

On December 16, 2005, we completed the going-private transaction contemplated by the Agreement and Plan of Merger dated as of July 28, 2005 between us and Insight Acquisition Corp., an entity organized by certain affiliates of The Carlyle Group. Pursuant to the merger agreement, Insight Acquisition Corp. merged with and into us, and we are the surviving corporation. All shares of our then outstanding Class A common stock, other than those shares held by certain stockholders who elected to maintain their investment in us and those held by stockholders who demanded appraisal rights, were converted into the right to receive $11.75 per share in cash, and we were recapitalized with new classes of capital stock. Immediately after completion of the going-private transaction, our Class A common stock was delisted from The Nasdaq National Market, and we are now a privately-held corporation.

Insight Midwest, L.P. is a partnership owned 50% by us and 50% by an indirect subsidiary of Comcast Cable Holdings, LLC, which is a subsidiary of Comcast Corporation. Insight Midwest is the owner of the systems serving all of our customers, and our 50% interest in Insight Midwest constitutes substantially all of our operating assets. The Insight Midwest partnership agreement provides that at any time after December 31, 2005 either partner has the right to commence a split-up process with respect to Insight Midwest, subject to a limited right of postponement held by the non-initiating partner. To date, neither partner has commenced the split-up process.

The going-private transaction did not result in any direct change in Insight Midwest’s ownership structure, and we continue to serve as the sole general partner of Insight Midwest and as the manager of each of its systems. Through a new class of Series A voting preferred stock issued in connection with the transaction, Sidney R. Knafel, Michael S. Willner and related parties continue to maintain control of a majority of our voting power. Accordingly, the merger is not expected to result in a change in the operational aspects of our business.

This report, our quarterly reports on Form 10-Q, our current reports on Form 8-K, as well as any other materials that we file with or furnish to the Securities and Exchange Commission are available free of charge through our website www.insightcom.com as soon as reasonably practicable after such material is electronically filed or furnished.

Our principal offices are located at 810 Seventh Avenue, New York, New York 10019, and our telephone number is (917) 286-2300.

Strategy

Our strategy is to be a full-service provider of the highest caliber of entertainment, information and communications services. The centerpiece of our strategy, however, is to provide exceptional customer service. We focus on building strong relationships with our customers and potential customers in the communities in which we operate because we believe that the single most important factor in generating customer loyalty is customer service. We believe that our local presence and more personal relationships with our communities distinguishes us from our competitors and results in higher customer satisfaction. In addition, we continually explore opportunities to leverage the capacity and capability of our upgraded broadband network to provide new and enhanced products and services for our customers.

Deliver excellent customer service and enhance community relations

We seek to secure a high level of customer satisfaction by managing local customer care units, staffed by professionals familiar with the communities they serve; using market research to determine customer needs and priorities and by providing customers with an attractively priced product offering. A significant number of our customers visit their local office on a monthly basis, providing us the opportunity to demonstrate and sell our new and enhanced products and services. We believe that these distinct marketing and promotion opportunities are effective sales channels, providing a competitive advantage as well as building customer loyalty.

We believe that our commitment to the communities in which we operate enhances our ability to attract and retain customers and fosters excellent franchise relationships. We are dedicated to building and sustaining strong community relations by providing valuable in-kind services and promotional opportunities to an array of local charities and organizations. We also support the cable industry’s Cable in the Classroom initiative and provide free cable and high-speed Internet access to local schools. To further strengthen our bond with our communities and differentiate ourselves from other multichannel video providers, we provide locally produced and oriented programming.

Focus on operating large, tightly-grouped clusters of cable systems in markets with attractive demographic profiles

In addition to its geographic concentration, our communications network is tightly-grouped, or “clustered,” with approximately 97% of our customers served from 13 headends, or an average of approximately 99,000 customers per headend (a headend processes signals received for distribution to customers over our network). As a result, the amount of capital necessary to deploy new and enhanced products and services is significantly reduced on a per home basis. We believe that the highly clustered nature of our systems also enables us to more efficiently deploy our marketing dollars and maximizes our ability to enhance customer awareness, increase use of our products and services and build brand support.

Our geographic concentration enables our local management teams to focus on the customer experience within their communities. We believe that the deployment of these local resources and our local expertise provides us with an advantage over our competitors, and is a key component of our operating strategy.

Many communities we serve are characterized by good housing growth, higher than average household income and low unemployment, and many are home to large universities and major commercial enterprises. We believe that the demographic profile of our communities make them attractive markets for our existing and new products.

Leverage our advanced broadband network to offer bundled services and introduce new and enhanced products

Our advanced broadband network provides significant capacity and the flexibility to offer our customers an array of products and services. The capacity of a cable system to offer products and services

is determined by its bandwidth. As of December 31, 2005, we estimate that approximately 97% of our customers were passed by our upgraded network, with a bandwidth capacity of 750 megahertz (MHz) or greater. At the end of 2005, digital cable was available to 97% of basic customers passed by our broadband network, high-speed Internet was available to 98% of homes passed and telephone service was available to 34% of homes passed.

Our marketing strategy is to offer our customers an array of entertainment, information and communications services on a bundled basis. A bundled customer is one who subscribes to two or more of our primary services (video, high-speed Internet access and telephone). Where available, all of our services are offered on a bundled basis, supported by a single, integrated back-office platform, which allows our customers to make one call to a single customer service representative regarding any and all of their services and to receive a single bill for all services if they choose. By bundling our products and services, we provide our customers with increased choice in value-added packages, which we believe results in higher customer satisfaction, increased use of our services and greater customer retention.

Pursue value-enhancing transactions in nearby or adjacent geographies

We will seek to swap or acquire systems that strategically fit our clustering and operating strategy and are accretive to our value. We do not currently have any agreements, commitments or understandings for any future acquisitions. There is no assurance that any additional acquisitions will be completed. We believe that by acquiring or swapping systems in close proximity we have the opportunity to improve revenue growth and operating margins. This is achieved through the consolidation of headends, spreading of fixed costs over larger systems and increased operating efficiencies associated with larger systems.

Technical Overview

We believe that in order to achieve consistently high levels of customer service, reduce operating costs, maintain a strong competitive position and deploy important new technologies, we need to maintain a state-of-the-art technical platform. The deployment of fiber optic cable which has a capacity for a very large number of channels, the increase in the bandwidth to 750 MHz or higher, the activation of a two-way communications network and the installation of digital equipment allows us to deliver new and enhanced products and services, including interactive digital video, high-speed Internet services and telephone services.

As of December 31, 2005, our systems were comprised of approximately 30,700 network miles serving approximately 1.3 million customers and passing approximately 2.4 million homes resulting in a density of approximately 78 homes per mile. As of that date, our systems were made up of an aggregate of 28 headends, and approximately 97% of our customers were served by 13 headends. As of December 31, 2005, we estimate that approximately 97% of our customers were passed by our upgraded network.

Our network design calls for an analog and digital two-way active network with fiber optic cable carrying signals from the headend to the distribution point within our customers’ neighborhoods. The signals are transferred to our coaxial cable network at the node for delivery to our customers. We have designed the fiber system to be capable of subdividing the nodes if traffic on the network requires additional capacity.

We believe that active use of fiber optic technology as a supplement to coaxial cable plays a major role in expanding channel capacity and improving the performance of our systems. Fiber optic strands are capable of carrying hundreds of video, data and voice channels over extended distances without the extensive signal amplification typically required for coaxial cable. We will continue to deploy fiber optic cable to further reduce amplifier cascades while improving picture quality and system reliability.

A direct result of this extensive use of fiber optics is an improvement in picture quality and a reduction of outages because system failures will be both significantly reduced and will impact far fewer customers when they do occur. Our design allows our systems to have the capability to run multiple separate channel line-ups from a single headend and to insert targeted advertisements into specific neighborhoods.

We are improving the reliability of telephone services by implementing standby powering and status monitoring on our local network as telephone services are deployed in our systems. The existing commercial power structure deployed in cable networks is subject to potential disruptions in local power utility service. Standby power provides battery back-up for a limited duration, thereby making both telephone services and other products and services delivered over our local network more reliable. Status monitoring will enable us to monitor key components of our local network so that we can help reduce and diagnose problems affecting the performance of our local network.

Products and Services

We offer our customers a full array of traditional cable television services and programming offerings. We tailor both our basic line-up and our additional channel offerings to each regional system in response to demographics, programming preferences, competition and local regulation. We offer a basic level of service which includes up to 25 channels of television programming. As of December 31, 2005, approximately 91% of our customers chose to pay an additional amount to receive additional channels under our “Classic” or “expanded” service. Premium channels, which are offered individually or in packages of several channels, are optional add-ons to the basic service or the classic service. As of December 31, 2005, premium units as a percentage of basic subscribers was approximately 36%.

As network upgrades were activated, we deployed new and enhanced products and services in substantially all of our markets, including interactive digital video and high-speed Internet services. In addition, we are offering telephone services to our customers in selected markets.

Analog Video

Our analog cable television service offering includes the following:

· Basic Service. All of our video customers receive the basic level of service, which generally consists of over-the-air local broadcast television and local community programming, including government and public access, and may include a limited number of satellite-delivered channels.

· Classic Service or Expanded Service. This expanded level of service includes a group of satellite-delivered or non-broadcast channels such as ESPN, CNN, Discovery Channel and Lifetime.

· Premium Channels. These channels provide unedited, commercial-free movies, sports and other special event entertainment programming such as HBO, Cinemax, Starz! and Showtime. We offer subscriptions to these channels primarily as a multi-channel digital service, along with subscription video-on-demand services.

· Pay-Per-View. These analog channels allow customers with addressable analog or digital set-top boxes to pay to view a one-time special sporting event or music concert on an unedited, commercial-free basis. Pay-per-view movies are available through our video-on-demand digital service.

Interactive Digital Video

The implementation of interactive digital technology significantly enhances and expands the video and service offerings we provide to our customers. Because of the significantly increased bandwidth and two-way transmission capability of our state-of-the-art technical platform, we have designed a more extensive

digital product that is rich in attractive features and provides customers with a high degree of interactive capability. Our interactive digital service is designed to exploit the advantages of a broadband network in the existing generation of set-top devices. The digital service encompasses three interactive applications: (1) an interactive program guide; (2) interactive local information and community guides; and (3) a video-on-demand service.

We have conducted numerous focus groups and commissioned research studies, the findings of which have helped to develop our interactive digital strategy. We believe that our digital penetration will continue to increase as a result of our differentiated services such as a graphically rich local information network and video-on-demand pay-per-view with full VCR functionality.

We are packaging our digital service under the “Insight Digital” brand, which includes the following features:

· A digital set-top box and remote control;

· An interactive navigational program guide for all analog and digital channels;

· A local, interactive Internet-style service;

· Access to multi-channel premium service for customers who separately subscribe to premium channels, such as HBO and Showtime, and in some cases with subscription video-on-demand;

· Access to video-on-demand;

· Mag Rack, a selection of video magazines with video-on-demand functionality; and

· A digital 40-channel audio music service.

We offer a high-definition programming service consisting of broadcast networks and premium channels. Digital customers with high-definition television (HDTV) sets can receive any high-definition programming that is available from local broadcasters. HDTV customers who have HBO or Showtime would receive any HDTV programs available from these networks as well. We believe that offering HDTV programming from local broadcasters puts us in a favorable competitive position with the direct broadcast satellite television distributors which have limited HDTV programming due to capacity restrictions.

Through our wholly-owned subsidiary, Insight Interactive, LLC, our interactive digital platform provides its local, interactive Internet-style service and an interactive program guide. For an additional monthly charge over our Insight Digital price, we also offer a single digital set-top box which integrates our existing HDTV programming and video-on-demand services with a new digital video recorder (DVR) service. These advanced services are supported by Gemstar-TV Guide’s interactive program guide but do not include the local service.

Our digital customers are served by a video-on-demand (VOD) infrastructure provided by SeaChange International, Inc. Customers receive the movies electronically over the network and have full VCR functionality, including pause, play, fast forward and rewind. The movies are delivered with a high quality digital picture and digital sound. Our video-on-demand product is designed to provide movies at prices comparable to those charged for videotape rentals, pay-per-view and near video-on-demand movies, but with far greater convenience and functionality. Additionally, customers who subscribe to premium services, such as HBO and Showtime, can access selected movies and original programming from these networks at no additional cost to their regular monthly premium channel fee utilizing our video-on-demand system. Insight’s video-on-demand system also provides free content from certain cable networks including the NFL Network, Food Network, DIY Network and the National Geographic Channel to any digital customer with VOD access. As of December 31, 2005, approximately 40% of our customers had access to video-on-demand services.

High-Speed Internet

We offer high-speed Internet service for personal computers for all of our upgraded systems through our own regional network branded Insight BroadbandSM, except for our Columbus, Ohio system, which utilizes the RoadRunner service. AT&T Corp. provides the IP network backbone for our Insight Broadband service and certain core Internet support functions. As of December 31, 2005, high-speed Internet services were available in approximately 2.4 million of our homes passed and served approximately 470,400 of our customers.

The broad bandwidth of our cable network enables data to be transmitted significantly faster than traditional telephone-based modem technologies, and the cable connection does not interfere with normal telephone activity or usage. For example, cable’s on-line customers can download large files from the Internet in a fraction of the time it takes when using any widely available telephone modem technology. Moreover, surfing the Internet on a high-speed network removes the long delays for Web pages to fully appear on the computer screen, allowing the experience to more closely approximate the responsiveness of changing channels on a television set. In addition, the cable modem is always on and does not require the customer to dial into an Internet service provider and await authorization. We believe that these factors of speed and easy accessibility will increase the use and impact of the Internet.

Telephone Services

Under the “Insight Phone” brand, telephone services are currently available in portions of the Louisville and Lexington, Kentucky, Evansville, Indiana, and Columbus, Ohio areas and were available to a total of approximately 832,000 marketable homes passed, with approximately 89,900 customers as of December 31, 2005.

In August 2005, we launched Insight Phone to customers in selected areas of Northern Indiana. This launch was subsequently suspended due to the discontinuance of service by a key vendor. We have since completed our transition off of this vendor’s service.

We currently anticipate that we will launch Insight Phone in new markets during 2006.

Business Background

We were co-founded in 1985 as a limited partnership under the name Insight Communications Company, L.P. by Sidney R. Knafel and Michael S. Willner after a previous association with one another at Vision Cable Communications where Mr. Knafel was co-founder and Chairman and Mr. Willner held various operating positions, ultimately holding the position of Executive Vice President and Chief Operating Officer. Vision Cable was sold to The Newhouse Group Inc. in 1981 and Mr. Willner remained there to run the cable operations until 1985 when he and Mr. Knafel formed Insight Communications.

In addition to many years of conventional cable television experience, our management team has been involved in the development and deployment of full service communications networks since 1989. Through a then related entity, Insight Communications Company UK, L.P., our management and related parties entered the cable television market in the United Kingdom, where today modern networks are widely deployed.

As a result of our management’s British experience, we recognized that the technology and products developed in the United Kingdom would migrate to the United States in similar form. We focused on planning to upgrade our network promptly after it became clear that the 1996 Telecom Act would encourage competition in the communications industries. We understood, however, that the new products and services available with new technology were best deployed in markets which provided for efficiencies for branding and technical investment. Our original acquisition strategy, which focused on customer growth, was very successful. However, our management team recognized the opportunity to evolve from

our role as a cable television operator providing only home video entertainment into a full service alternative communications network providing not only standard video services, but also interactive digital video, high-speed Internet access and communications products and services.

Recognizing the opportunities presented by newly available products and services and favorable changes in the regulatory environment, we executed a series of asset swaps, acquisitions and entered into several joint ventures that resulted in our current composition. The largest of these transactions were the 50/50 joint ventures formed with Comcast Cable (formerly known as AT&T Broadband) and its affiliates in October 1998 with respect to the Indiana systems, in October 1999 with respect to the Kentucky systems and in January 2001 with respect to the Illinois systems. As of December 31, 1997, our systems had approximately 180,000 customers with the two largest concentrations in Utah and Indiana, which together represented less than half of our customers. We believe that we have successfully transformed our assets so that we currently own, operate and manage a cable television network serving approximately 1.3 million customers, all of which are clustered in the contiguous states of Indiana, Kentucky, Illinois and Ohio. Our current assets are reflective of our strategy to own systems that have high ratios of customers to headends.

In July 1999, we completed an initial public offering of 26,450,000 shares of our Class A common stock, raising an aggregate of approximately $650.0 million. In December 2005, we completed a going-private merger with Insight Acquisition Corp., an entity organized by certain affiliates of The Carlyle Group. As a result of the transaction, all shares of our then outstanding Class A common stock, other than those shares held by certain stockholders who elected to maintain their investment in us and those held by stockholders who demanded appraisal rights, were converted into the right to receive $11.75 per share in cash, and we were recapitalized with new classes of capital stock. The transaction resulted in us becoming a privately-held corporation.

Our Systems

Our systems in Indiana, Kentucky, Illinois and Ohio serve approximately 1.3 million customers. We are the largest operator of cable systems in Kentucky and the second-largest in both Indiana and Illinois. Our systems are clustered to serve an average of 99,000 customers per headend.

We are able to realize significant operational synergies due to the size of the clusters in these states and the demographic proximity of all of our systems. In all of our systems, we have substantially completed upgrading our system infrastructures to enable us to deliver new technologies, products and services to provide our customers with greater value and choices in the face of growing competition. As network upgrades were activated, we deployed new and enhanced products and services in substantially all of our markets, including interactive digital video and high-speed Internet services. In addition, we are offering telephone services to our customers in selected markets.

The highly clustered nature of our systems enables us to (a) more efficiently invest our marketing dollars and maximize our brand awareness, (b) more economically introduce new and enhanced services, and (c) reduce our overall operating and maintenance costs as a result of our ability to deploy fiber and reduce the number of headends we use throughout our systems. As a result, we believe we are able to achieve improved operating performance on both a combined and system-wide basis. Our relationship with Comcast Cable provides us with substantial purchasing economies for both our programming and hardware needs.

The East Region

As of December 31, 2005, the East Region passed approximately 836,600 homes and served approximately 417,300 customers. Approximately 98% of our customers in the East Region are served by six headends. The East Region, comprised of systems located within the States of Indiana, Kentucky and Ohio, is organized in six management districts:

The Central District

As of December 31, 2005, the Central District passed approximately 144,700 homes and served approximately 78,900 customers, principally in the community of Bloomington. The City of Bloomington, located 45 miles south of Indianapolis, is the home of Indiana University. Besides the University, major employers include Bloomington Hospital, Cook Incorporated and General Electric.

The Southwest District

As of December 31, 2005, the Southwest District passed approximately 128,500 homes and served approximately 58,200 customers, principally in the communities of Evansville, Boonville, Mt. Vernon, Princeton and Jasper, Indiana, as well as Henderson, Kentucky. Major employers include Alcoa, Whirlpool and Bristol-Myers Squibb.

In January 2003, HDTV was launched in this District. Telephone service is now fully deployed in Evansville, Boonville and Mt. Vernon, Indiana, as well as in Henderson, Kentucky.

SIGECOM, LLC has overbuilt the City of Evansville, providing cable television, high-speed Internet and telephone services in the City of Evansville and neighboring areas. We believe the SIGECOM overbuild passed approximately 83,000 homes, representing 65% of the Southwest District’s total homes passed as of December 31, 2005.

The Lexington District

As of December 31, 2005, the Lexington District passed approximately 144,600 homes and served approximately 85,900 customers from a single headend. Lexington is Kentucky’s second largest city, located in the central part of the state. Major employers in the Lexington area include the University of Kentucky, Toyota and Lexmark International.

As of December 31, 2005, approximately 49% of customers have subscribed to our interactive Insight Digital service. Approximately 29% of customers have Insight Broadband high-speed Internet service. Our phone service is available in over 78% of Lexington.

The Northern Kentucky District

As of December 31, 2005, the Northern Kentucky District passed approximately 158,400 homes and served approximately 81,600 customers from a single headend primarily in the City of Edgewood. Covington is Kentucky’s fifth largest city. Major employers in the Covington area include Delta Airlines, Toyota, Citicorp, Ashland, Inc., Fidelity Investments, BICC General Cable Corporation, Omnicare, COMAIR, Levis Strauss, Gap, Inc., Mazak Corp. and R.A. Jones, Inc and Ticona.

The Bowling Green District

As of December 31, 2005, the Bowling Green District passed approximately 39,000 homes and served approximately 24,700 customers from a single headend. Bowling Green is located 120 miles south of Louisville, 110 miles southwest of Lexington and 70 miles north of Nashville, Tennessee. Bowling Green is the fourth largest city in Kentucky and is the home of Western Kentucky University. Major employers in the Bowling Green area include General Motors, Fruit of the Loom, Commonwealth Health Corporation, DESA International and Houchens Industries.

The Columbus District

As of December 31, 2005, the Columbus District passed approximately 221,200 homes and served approximately 87,900 customers from a single headend. The District serves the eastern portion of the City of Columbus and adjacent suburban communities within eastern Franklin County and the contiguous counties of Delaware, Licking, Fairfield and Pickaway. The City of Columbus is the 34th largest designated

market area, the capital of Ohio and the home of Ohio State University. In addition to the state government and university, the Columbus economy is well diversified with the significant presence of prominent companies such as The Limited, Merck, Wendy’s, Nationwide Insurance, JP Morgan Chase Bank and Worthington Industries.

As of December 31, 2005, approximately 43,800 of customers have subscribed to our interactive Insight Digital service, representing a penetration of nearly 52% in areas where digital service is available. The RoadRunner high-speed Internet service, launched in 2000, has achieved a penetration of approximately 20% as of December 31, 2005 in areas where service is available. We have launched a telephone service alternative to SBC (Ameritech) in the Columbus District. In addition, the Columbus District provides exclusive local sports and entertainment programming, featuring a variety of sporting events from area high schools and the Ohio State University to Columbus Clippers baseball and Columbus Crew major league soccer.

In 1996, Ameritech obtained a citywide cable television franchise for the City of Columbus and most other suburban communities in Franklin County. WideOpenWest acquired the assets of Ameritech in December 2001, and has built its system, both in our service area and in the Time Warner service area on the west side of Columbus. The areas of the Columbus District served by both us and WideOpenWest pass approximately 132,000 homes, representing 60% of the Columbus District’s total homes passed as of December 31, 2005.

The West Region

As of December 31, 2005, the West Region passed approximately 1,026,700 homes and served approximately 588,000 customers. Approximately 96% of our customers in the West Region are served by six headends. The West Region, comprised of systems located within the States of Indiana and Illinois, is organized in six management districts:

The Northwest District

As of December 31, 2005, the Northwest District passed approximately 108,800 homes and served approximately 68,000 customers, principally in the communities of Lafayette and Kokomo. The City of Lafayette is the home of Purdue University. Besides Purdue University, major employers include Eli Lilly, Subaru, Caterpillar, Great Lakes Chemical, Lafayette Life Insurance, Delphi Electronics and Chrysler.

The Northeast District

As of December 31, 2005, the Northeast District passed approximately 211,500 homes and served approximately 116,900 customers in Richmond as well as in the suburban communities near Indianapolis, including Noblesville and extending north to Anderson and east to Richmond, Indiana. Indianapolis is the state capital of Indiana and is the twelfth largest city in the United States. Major employers include General Motors, Eli Lilly, Sallie May, Roche, Bridgestone/Firestone and Anderson University.

The Northern Illinois District

As of December 31, 2005, the Northern Illinois District, which is comprised of Rockford and Dixon, Illinois, passed approximately 206,600 homes and served approximately 117,000 customers. Rockford is Illinois’ second largest city. Major employers in the Rockford metropolitan area include Chrysler Corporation, Rockford Health System, Sundstrand Corporation and Swedish American Health Systems.

Dixon customers are principally in the communities of Rock Falls, Peru and Dixon. Dixon is located in the north/central part of the State of Illinois. Major employers in the Dixon area include the State of Illinois, Raynor Manufacturing Company and Borg Warner Automotive.

Approximately 99% of the Northern Illinois District currently operates with a network of 750 MHz or higher. As of December 31, 2005, the district achieved penetration levels for its digital service of approximately 35% in areas where the service is available.

The Peoria District

As of December 31, 2005, the Peoria District passed approximately 206,900 homes and served approximately 123,000 customers, principally in the communities of Bloomington and Peoria, Illinois. Bloomington is located in the north central part of the state. The Bloomington system is home to Illinois State University with over 21,000 students and Illinois Wesleyan University with over 2,100 students. The major employers in Bloomington are State Farm Insurance and Mitsubishi Motor Company of America. Peoria is the fifth largest city in Illinois, located in the north central part of the state. The Peoria system is home to Bradley University. Major employers in the Peoria area include the world headquarters of Caterpillar. Peoria is the regional medical center in the State of Illinois outside Chicago. With the University of Illinois College of Medicine and four recognized hospitals within the city limits, Peoria ranks high on the list of those cities offering superior health care.

The Peoria District completed the upgrade of all but 68 miles of its 2,300 mile network to 750 MHz or higher. As of December 31, 2005, the Peoria District achieved penetration levels for its digital service of approximately 36% in areas where digital service is available. The District has launched high-speed Internet service and has achieved penetration levels of approximately 22% as of December 31, 2005 in areas where the service is available. In September 2003, video-on-demand and HDTV services were made available to customers in the Peoria District.

The Springfield District

As of December 31, 2005, the Springfield District passed approximately 191,800 homes and served approximately 111,600 customers, principally in the communities of Decatur and Springfield. Springfield is the capital of Illinois and the sixth largest city in the state, located in the central part of the state. The major employer in the Springfield area is the State of Illinois.

Approximately 74% of the Springfield District operates with a network which is two-way interactive. As of December 31, 2005, the district achieved penetration levels for its digital service of 37% in the areas where the service is available. The district has launched Insight Broadband high-speed Internet service and has achieved penetration levels of approximately 19% in areas where the service is available. In September 2003, video-on-demand and HDTV services were made available to customers in the Springfield District.

The Champaign District

As of December 31, 2005, the Champaign District passed approximately 101,200 homes and served approximately 51,400 customers. Champaign/Urbana is located in the eastern central part of the state. The Champaign District is home to the University of Illinois with over 45,000 students. Major employers in the Champaign and Urbana areas include the University of Illinois, Kraft Foods and the Carle Clinic Association.

The Champaign District serves substantially all of its customers by a two-way, 750 MHz network. The district had approximately 19,700 digital customers as of December 31, 2005. The Champaign District has launched Insight Broadband high-speed Internet service and as of December 31, 2005 had approximately 22,800 customers.

The South Region

As of December 31, 2005, the South Region passed approximately 557,300 homes and served approximately 276,400 customers, principally in the City of Louisville, Kentucky. This region includes approximately 92,798 homes passed and approximately 42,059 customers served by the Scottsburg, Jeffersonville and New Albany, Indiana systems which are operated by the management of the Louisville, Kentucky system. Louisville is the 16th largest city in the United States and is Kentucky’s largest city. It is located in the northern region of the state, bordering Indiana. Louisville is located within a day’s drive of nearly 50% of the United States population, which makes it an important crossroads for trade and business. Major employers in the Louisville metropolitan area include Humana, UPS, General Electric and Ford. Knology, Inc. obtained a franchise to provide cable television service in the City of Louisville in September 2000, although it had not commenced building a cable system as of December 31, 2005.

Substantially all of the customers of the Louisville system are served by two-way 750 MHz cable from a single headend. As of December 31, 2005, approximately 116,000 customers in the Louisville system have subscribed to our interactive Insight Digital service. Our phone service is available in approximately 79% of Louisville.

Customer Rates

Rates charged to customers vary based on the market served and service selected. As of December 31, 2005, the weighted average revenue for our monthly combined basic and classic service was approximately $39.40.

A one-time installation fee, which we may reduce during promotional periods, is charged to new customers, as well as reconnected customers. We charge monthly fees for set top boxes and remote control devices. We also charge administrative fees for delinquent payments for service. Customers are free to discontinue service at any time without additional charge and may be charged a reconnection fee to resume service. Commercial customers, such as hotels, motels and hospitals, are charged negotiated monthly fees and a non-recurring fee for the installation of service. Multiple dwelling unit accounts may be offered a bulk rate in exchange for single-point billing and basic service to all units.

Sales and Marketing

Our strategy is to improve customer satisfaction and reduce churn in addition to selling video, high-speed Internet and telephone services to our customers and potential customers, thereby increasing market share. Customers who purchase more than one service may in some cases be eligible for a bundled discount. We regularly use targeted campaigns to sell the appropriate services to both our existing and our potential customer base. Our customer service representatives are trained and given the support to use their daily contacts with customers as opportunities to sell them additional services.

Due to the nature of the communities we serve, we are able to market our services in ways not typically used by urban cable operators. We can market products and services to our customers at our local offices where many of our customers pay their monthly cable bills in person. Examples of our in-store marketing include the promotion of premium services as well as point-of-purchase demonstrations that will allow customers to experience our high-speed Internet service and digital products. We aggressively promote our services utilizing both broad and targeted marketing tactics, including outdoor billboards, outbound telemarketing, retail partnerships, including Best Buy and H.H. Gregg, direct mail, door-to-door sales, cross-channel promotion, print and broadcast.

We build awareness of the “Insight” brand through advertising campaigns and strong community relations. As a result of our branding efforts and consistent service standards, we believe we have developed a reputation for quality and reliability. We also believe that our marketing strategies are

particularly effective due to our regional clustering and market significance, which enables us to reach a greater number of both current and potential customers in an efficient, uniform manner.

Programming Suppliers

Most cable companies purchase their programming product directly from the program networks by entering into a contractual relationship with the program supplier. The vast majority of these program suppliers offer the cable operator license fee rate cards with size-based volume discounts and other financial incentives, such as launch and marketing support and cross-channel advertising.

Currently there are over 180 cable networks competing for carriage on our analog and digital platforms. We have continued to leverage both our systems’ channel capacity and newly deployed digital services including video-on-demand as an incentive to our suppliers to secure long term programming deals with reasonable price structures to offset license fee increases.

Because of our relationship with Comcast Cable, we have the right to purchase certain programming services for our systems directly through Comcast Cable’s programming supplier Satellite Services, Inc. We believe that Satellite Services has attractive programming costs. Additionally, given the clustering of our systems in the Midwest, we have been successful in affiliating with regionally based programming products such as sports and news, at lower than average license fees.

Under the terms of Insight Midwest’s partnership agreement, we and Comcast Cable are each required to use commercially reasonable efforts to extend to Insight Midwest all of the programming discounts available to us. Accordingly, we should benefit from both the existing Satellite Services arrangement as well as additional discounts available to Comcast Cable. However, we cannot predict with certainty when these benefits will occur, or the extent to which they actually will be achieved.

Commitment to Community Relations

We believe that maintaining strong community relations will continue to be an important factor in ensuring our long-term success. Our community-oriented initiatives include educational programs and the sponsorship of programs and events recognizing local citizens and supporting local charitable organizations. In addition, members of our management team host community events for political and business leaders as well as representatives of the local media, where they discuss our operations, recent enhancements to our service and recent developments in the telecommunications industry. We have received numerous awards recognizing our ongoing community relations, and we believe that such initiatives result in consumer and governmental goodwill and name recognition, increasing customer loyalty and likely facilitating any future efforts to provide new communications services.

We encourage all of our local management teams to take leadership roles in community and civic activities. Over the years, our systems have received various forms of recognition for their support of local causes and charities as well as their sponsorship of programs that improve the quality of life in the communities they serve.

All of our systems provide ongoing support for Cable in the Classroom, an industry initiative that earns recognition both locally and nationally for its efforts in furthering the education of students. We further underscore our commitment to education by offering high-speed Internet access to each accredited school in our service area, building upon the cable industry’s pledge to provide free high-speed Internet access to eligible local schools and public libraries. We offer students and teachers the resources of broadband content and robust cable programming to enrich the learning experience.

With cable modems in the classroom, teachers and students alike can benefit from the speedy downloads and access to advanced applications to enhance the learning experience. In addition to

providing this advanced technology free of charge, we intend to continue offering programming enhancements in partnership with various cable networks.

One of the advantages a local cable operator has over nationally distributed competitors is its ability to develop local programming. To further strengthen community relations and differentiate us from direct broadcast satellite television systems and other multichannel video providers, we provide locally produced and oriented programming. Several of our systems have full production capabilities, with in-house and/or mobile production studios to create local content. We offer a broad range of local programming alternatives, including community information, local government proceedings and local specialty interest shows. In some of our markets, we are the exclusive broadcaster of local college and high school sporting events, which we believe provides unique programming and builds customer loyalty. We believe that our emphasis on local programming creates significant opportunities for increased advertising revenues. Locally originated programming will also play an integral role in the deployment of our new and enhanced products and services.

Franchises

Cable television systems are constructed and operated under fixed-term non-exclusive franchises or other types of operating authorities that are granted by either local governmental or centralized state authorities. These franchises typically contain many conditions, such as:

· Time limitations on commencement and completion of construction;

· Conditions of service, including the number of channels, the provision of free service to schools and other public institutions;

· The maintenance of insurance and indemnity bonds; and

· The payment of fees to communities.

As of December 31, 2005, we held 547 franchises in the aggregate, consisting of 201 in Indiana, 192 in Kentucky, 125 in Illinois and 29 in Ohio. Many of these franchises require the payment of fees to the issuing authorities of 3% to 5% of gross revenues, as defined by each franchise agreement, from the related cable system.

The Communications Act of 1934 prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross annual revenues from the provision of cable services and also permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances that render performance commercially impracticable.

The following table summarizes information relating to the year of expiration of our franchises, as of December 31, 2005:

Year of Franchise Expiration	Number of Franchises		Percentage of Total Franchises			Estimated Number of Basic Customers		Percentage Total Basic Customers Under Franchises
Expired*.		109		19.9	%		128,790		10.7	%
2006		26		4.8	%		156,415		13.0	%
2007.		15		2.7	%		104,536		8.7	%
2008.		32		5.9	%		74,903		6.2	%
2009		44		8.0	%		123,103		10.2	%
After 2009		321		58.7	%		618,172		51.2	%

* Such franchises are operated on a month-to-month basis and are in the process of being renewed. Of these franchises, 41 serve communities in Indiana and may be renewed pursuant to the state-level franchising statute that will take effect July 1, 2006.

The Communications Act provides, among other things, for an orderly franchise renewal process which limits a franchising authority’s ability to deny a franchise renewal if the incumbent operator follows prescribed statutory criteria. In addition, the Communications Act includes comprehensive renewal procedures which require, when properly elected by an operator, that an incumbent franchisee’s renewal application be assessed on its own merits and not as part of a comparative process with competing applications.

We believe that our cable systems generally have good relationships with their respective franchise authorities. We have never had a franchise revoked or failed to have a franchise renewed.

Competition

Cable systems face increasing competition from alternative methods of receiving and distributing their core video business. Both wireline and wireless competitors have made inroads in competing against incumbent cable operators. The extent to which a cable operator is competitive depends, in part, upon its ability to provide to customers, at a reasonable price, a greater variety of programming and other communications services than are available off-air or through alternative delivery sources and upon superior technical performance and customer service.

Congress has enacted legislation and the FCC has adopted regulatory policies providing a more favorable operating environment for new and existing technologies, in particular direct broadcast satellite television system operators, that continue to provide increased competition to cable systems. Congress has also enacted legislation which permits direct broadcast satellite companies to retransmit local television signals, eliminating one of the objections of consumers about switching to satellites.

The 1996 Telecom Act contains provisions designed to encourage local exchange telephone companies and others to provide a wide variety of video services competitive with services provided by cable systems. Local exchange telephone companies in various states have either announced plans, obtained local franchise authorizations or are currently competing with our cable communications systems. Certain telephone companies have begun to deploy fiber more extensively in their networks and some are carrying out announced plans to deploy broadband services, including video programming services, using a switched Internet protocol platform or other technologies designed to avoid certain regulatory burdens imposed on our business. Legislation recently passed in several states and similar legislation is pending, or has been proposed in certain other states and in Congress, that would allow local telephone companies to deliver services in competition with our cable service, without obtaining equivalent local franchises. Another proposal in Congress would also limit our ability to maintain competitive prices. Such a legislatively granted advantage to our competitors could adversely affect our business. Indiana, the state in

which we have the greatest number of local franchises, recently passed legislation under which the Indiana Utility Regulatory Commission would become the state’s sole video franchising authority on July 1, 2006. Some franchise obligations under these state-issued franchises are tied to a pro-rata application of the obligations imposed on the incumbent under it’s locally-issued franchise issued prior to July 1, 2006. This legislation may significantly speed the ability to fulfill the regulatory prerequisites to new entrants seeking to provide video service in Indiana. Local exchange telephone companies and other companies also provide facilities for the transmission and distribution to homes and businesses of interactive computer-based services, including the Internet, as well as data and other non-video services. The ability of local exchange telephone companies to cross-subsidize video, data and telecommunication services also poses some threat to cable operators.

Franchised cable systems compete with private cable systems for the right to service condominiums, apartment complexes and other multiple unit residential developments. The operators of these private systems, also known as satellite master antenna television systems, often enter into exclusive agreements with apartment building owners or homeowners’ associations that preclude franchised cable television operators from serving residents of such private complexes. However several states, including Illinois and Ohio where we operate, have adopted legislation granting cable operators the right to serve residents of such private complexes under certain conditions and Indiana has passed legislation that provides the right to all communication service providers to access all multi-tenant properties used for business purposes.

The 1984 Cable Act gives franchised cable operators the right to use existing compatible easements within their franchise areas on nondiscriminatory terms and conditions. Accordingly, where there are preexisting compatible easements, cable operators may not be unfairly denied access or discriminated against with respect to access to those easements. Conflicting judicial decisions have been issued interpreting the scope of the access right granted by the 1984 Cable Act, particularly with respect to private easements granted to a specific utility and not “dedicated” to the public. Moreover, this statutory easement access right does not appear to allow a cable operator to install facilities within a building without permission from the property owner.

The 1996 Telecom Act may exempt some of our competitors from regulation as cable systems. The 1996 Telecom Act amends the definition of a “cable system” such that providers of competitive video programming are only regulated and franchised as “cable systems” if they use public rights-of-way. Thus, a broader class of entities providing video programming, including operators of satellite master antenna television systems, may be exempt from regulation as cable television systems under the 1996 Telecom Act. This exemption may give these entities a competitive advantage over us. The 1996 Telecom Act also exempts telephone company facilities that provide video services exclusively on an “interactive on-demand” basis from the definition of a “cable system,” which some telephone companies argue exempts them from local franchising and other requirements applicable to cable operators.

Cable television systems are operated under non-exclusive franchises granted by local or state authorities thereby allowing more than one cable system to be built in the same area. Although the number of municipal and commercial overbuild cable systems is small, the potential profitability of a cable system is adversely affected if the local customer base is divided among multiple systems. Additionally, constructing a competing cable system is a capital intensive process which involves a high degree of risk. We believe that in order to be successful, a competitor’s overbuild would need to be able to serve the homes in the overbuilt area on a more cost-effective basis than we can. Any such overbuild operation would require either significant access to capital or access to facilities already in place that are capable of delivering cable television programming. As of December 31, 2005, our Evansville, Indiana and Columbus, Ohio systems were overbuilt. As a result, approximately 9% of the total homes passed by our systems were overbuilt as of such date.

Direct broadcast satellite television systems use digital video compression technology to increase the channel capacity of their systems. Direct broadcast satellite television systems’ programming is currently available to individual households, condominiums and apartment and office complexes through conventional, medium and high-power satellites. High-power direct broadcast satellite television system service is currently being provided by DIRECTV, Inc., EchoStar Communications Corporation which during 2005 acquired certain assets of the VOOM satellite service to provide high definition programming. Direct broadcast satellite television systems have some advantages over cable systems that have not been upgraded, such as greater channel capacity and digital picture quality. The 2003 acquisition of DIRECTV by News Corp. has provided it with access to financial, programming and other resources that could enhance its competitive potential. In addition, legislation has been enacted which permits direct broadcast satellite television systems to retransmit the signals of local television stations in their local markets. However, direct broadcast satellite television systems have a limited ability to offer locally produced programming, and do not have a significant local presence in the community. In addition, direct broadcast satellite television system packages can be more expensive than cable, especially if the subscriber intends to view the service on more than one television in the household. Finally, direct broadcast satellite television systems do not have the same full two-way capability, which we believe will limit their ability to compete in a meaningful way in interactive television, high-speed Internet and voice communications. Direct broadcast satellite has enjoyed a 27.7% average penetration nationwide, and we believe that satellite penetration in our various markets generally is at or below such average.

Telephone companies have introduced digital subscriber line technology (“DSL”), which allows Internet access over traditional phone lines at data transmission speeds typically greater than those available by a standard telephone modem. Although these transmission speeds are not as great as the transmission speed of a cable modem, we believe that the transmission speed of DSL technology is sufficiently high that such technology competes with cable modem technology. The FCC is currently considering its authority to promulgate rules to facilitate the deployment of these services and regulate areas including high-speed Internet and interactive Internet services. We cannot predict the outcome of any FCC proceedings, or the impact of that outcome on the success of our Internet access services or on our operations. Major telephone companies have also begun to carry out their announced plans to construct new fiber networks over the next several years and to offer high-speed data and video services over these fiber networks. In addition, other technologies are entering the marketplace such as broadband wireless networks. One major provider, AT&T, recently announced plans to acquire BellSouth Corp. which could give it access to greater resources and economies of scale as well as increase its geographic footprint. In addition, the FCC has recently approved the provision of broadband Internet service to consumers over electronic power lines.

As we expand our offerings to include telephone services, such services will be subject to competition from existing providers, including both local exchange telephone companies and long-distance carriers as well as competing providers using alternative technologies such as voice over Internet protocol (“VoIP”). The telecommunications industry is highly competitive and many telephone service providers may have greater financial resources than we have, or have established relationships with regulatory authorities. In addition, new technologies such as VoIP may allow competing telephone providers to offer service in competition with us over an existing broadband connection (e.g., cable modem or DSL), thereby avoiding significant capital expenditures for a local distribution infrastructure. We cannot predict the extent to which the presence of these competitors will influence customer penetration in our telephone service areas. While we may add our telephone service offering to various markets, the service has only been launched in selected markets and has not yet achieved material penetration levels.

Other new technologies may become competitive with services that cable communications systems can offer. Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environment are constantly occurring. Thus, we cannot predict the effect of ongoing or future developments on the cable communications industry or on our operations.

Legislation and Regulation

The cable television industry is regulated by the FCC, some state governments and the applicable local governments. In addition, various legislative and regulatory proposals under consideration from time to time by Congress and various federal agencies have in the past, and may in the future, materially affect us. The following is a summary of federal laws and regulations materially affecting the growth and operation of the cable television industry and a description of certain state and local laws. We believe that the regulation of the cable television industry remains a matter of interest to Congress, the FCC and other regulatory authorities. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities may take or the effect thereof on us.

Federal Legislation

The principal federal statute governing the cable television industry is the Communications Act. As it affects the cable television industry, the Communications Act has been significantly amended on three occasions, by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom Act altered the regulatory structure governing the nation’s telecommunications providers. It reduced barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduced the scope of cable rate regulation.

Federal Regulation

The FCC, the principal federal regulatory agency with jurisdiction over cable television, has adopted regulations covering such areas as cross-ownership between cable television systems and other communications businesses, carriage of television broadcast programming, cable rates, consumer protection and customer service, leased access, obscene and indecent programming, programmer access to cable television systems, programming agreements, technical standards, consumer electronics equipment compatibility and consumer education, ownership of home wiring, availability of programming to competitors, equal employment opportunity, availability of devices to block objectionable programming, origination cablecasting, sponsorship identification, closed captioning, political advertising, advertising limits for children’s programming, signal leakage and frequency use, maintenance of various records as well as antenna structure notification, marking and lighting. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. A brief summary of certain of these federal regulations as adopted to date follows.

Rate Regulation

The 1984 Cable Act codified existing FCC preemption of rate regulation for premium channels and optional non-basic program tiers. The 1984 Cable Act also deregulated basic cable rates for cable television systems determined by the FCC to be subject to effective competition. The 1992 Cable Act substantially changed the previous statutory and FCC rate regulation standards. The 1992 Cable Act replaced the FCC’s old standard for determining effective competition, under which most cable television systems were not subject to rate regulation, with a statutory provision that resulted in nearly all cable television systems becoming subject to rate regulation of basic and cable programming service (expanded basic) tiers. The 1992 Cable Act allows cable operators to obtain deregulation of all rates upon demonstrating effective competition based on cable system penetration of less than 30%, aggregate penetration by competing providers in excess of 15%, or competition from a municipally-owned provider available to at least 50% of the community.

For cable systems not subject to effective competition, the 1992 Cable Act required the FCC to adopt a formula for franchising authorities to assure that basic cable rates are reasonable; allowed the FCC to review rates for cable programming service tiers, other than per-channel or per-program services, in response to complaints filed by franchising authorities and/or cable customers; prohibited cable television systems from requiring basic customers to purchase service tiers above basic service in order to purchase premium services if the system is technically capable of compliance; required the FCC to adopt regulations to establish, on the basis of actual costs, the price for installation of cable service, remote controls, converter boxes and additional outlets; and allowed the FCC to impose restrictions on the retiering and rearrangement of cable services under certain limited circumstances. The 1996 Telecom Act limited the class of complainants regarding cable programming service tier rates to franchising authorities only, and ended FCC regulation of cable programming service tier rates on March 31, 1999. The 1996 Telecom Act also relaxed existing uniform rate requirements by specifying that such requirements do not apply where the operator faces effective competition, and by exempting bulk discounts to multiple dwelling units, although complaints about predatory pricing may be lodged with the FCC. In addition, the 1996 Telecom Act expanded the definition of effective competition to cover situations where a local telephone company or its affiliate, or any multichannel video provider using telephone company facilities, offers comparable video service by any means except direct broadcast satellite television systems.

The FCC’s implementing regulations contain standards for the regulation of basic service rates. Local franchising authorities are empowered to order a reduction of existing rates which exceed the maximum permitted level for basic services and associated equipment, and refunds can be required. The FCC adopted a benchmark price cap system for measuring the reasonableness of existing basic service rates. The rules also require that charges for cable-related equipment, converter boxes and remote control devices, for example, and installation services be unbundled from the provision of cable service and based upon actual costs plus a reasonable profit. The regulations also provide that future rate increases may not exceed an inflation-indexed amount, plus increases in certain costs beyond the cable operator’s control, such as taxes, franchise fees and increased programming costs. Cost-based adjustments to these capped rates can also be made in the event a cable television operator adds or deletes channels. Alternatively, cable operators have the opportunity to make cost-of-service showings which, in some cases, may justify rates above the applicable benchmarks. There is also a streamlined cost-of-service methodology available to justify a rate increase on the basic tier for “significant” system upgrades.

Carriage of Broadcast Television Signals

The 1992 Cable Act contains signal carriage requirements which allow commercial television broadcast stations that are “local” to a cable television system, that is to say that the system is located in the station’s Nielsen “designated market area,” to elect every three years whether to require the cable television system to carry the station, subject to certain exceptions, or whether the cable television system will have to negotiate for “retransmission consent” to carry the station. The last election between must-carry and retransmission consent was October 1, 2005. Both broadcasters electing to require retransmission consent and affected cable operators are subject to FCC rules that impose reciprocal requirements on each party to negotiate in good faith over such consent. These rules do not require, however, that an agreement be actually reached. A cable television system is generally required to devote up to one-third of its activated channel capacity for the carriage of local commercial television stations whether pursuant to mandatory carriage requirements or the retransmission consent requirements of the 1992 Cable Act. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, within the larger of: (i) a 50 mile radius from the station’ city of license; or (ii) the station’ Grade B contour, a measure of signal strength. Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable television systems have to obtain retransmission consent for the carriage of all “distant” commercial broadcast stations, except for certain “superstations,” which are commercial satellite-delivered

independent stations such as WGN. To date, compliance with the “retransmission consent” and “must carry” provisions of the 1992 Cable Act has not had a material effect on us, although this result may change in the future depending on such factors as market conditions, channel capacity and similar matters when such arrangements are renegotiated. FCC rules require carriage of local television broadcast stations that transmit solely in a digital format. In addition, the FCC recently reaffirmed that a station transmitting in both analog and digital formats during the current transition period which will end on February 17, 2009, is entitled to carriage of only its analog signal and that the mandatory carriage obligation extends only to the primary video signal, not to multiple services transmitted by a station over its digital channel. No later than February 18, 2009, all television broadcasts must be solely in digital format.

Packaging of Certain Programming

Reversing the findings of a November 2004 report, the FCC released a report in February 2006 finding that consumers could benefit under certain a la carte models for delivery of video programming. The staff-level report did not specifically recommend or propose the adoption of any specific rules by the FCC and it did not endorse a pure a la carte model where subscribers could purchase specific channels without restriction. Instead, it favored tiers plus individual channels or smaller theme-based tiers. Shortly after release of the report, the FCC voted to seek additional information as to whether cable systems with at least 36 channels are available to at least 70 percent of U.S. homes and whether 70 percent of households served by those systems subscribe. If so, the FCC may have additional discretion under the Cable Act to promulgate additional rules necessary to promote diversity of information sources. The FCC did not specify what rules it would seek to promulgate; however, the Chairman of the FCC has expressed support for family-friendly tiers of programming and availability of programming on an a la carte basis. Certain cable operators, including us, have responded by announcing the intent to offer “family-friendly” programming tiers. It is not certain whether those efforts will ultimately be regarded as a sufficient response. Congress may also consider legislation regarding programming packaging, bundling or a-la-carte delivery of programming. Any such requirements could fundamentally change the way in which we package and price our services. We cannot predict the outcome of any current or future FCC proceedings or legislation in this area, or the impact of such proceedings on our business at this time.

Deletion of Certain Programming

Cable television systems that have 1,000 or more customers must, upon the appropriate request of a local television station, delete the simultaneous or nonsimultaneous network programming of distant stations when such programming has also been contracted for by the local station on an exclusive basis. FCC regulations also enable television stations that have obtained exclusive distribution rights for syndicated programming in their market to require a cable television system to delete or “black out” such programming from other television stations which are carried by the cable television system. In addition, the rights holder to a local sports event can prohibit a cable operator from carrying that event on a distant station if the event is not broadcast live by a local station.

Franchising

The FCC recently issued a Notice of Proposed Rulemaking seeking comment on whether the current local franchising process constitutes an impediment to widespread issuance of franchises to competitive cable providers in terms of the sheer number of franchising authorities, the impact of state-level franchising authorities, the burdens some local franchising authorities seek to impose as conditions of granting franchises and whether state “level-playing field” statutes also create barriers to entry. We cannot determine the outcome of any potential new rules on our business; however, any change that would lessen the local franchising burdens and requirements imposed on our competitors relative to those that are or have been imposed on us could harm our business.

Franchise Fees

Although franchising authorities may impose franchise fees under the 1984 Cable Act, such payments cannot exceed 5% of a cable television system’s annual gross revenues from the provision of cable services. Under the 1996 Telecom Act, franchising authorities may not exact franchise fees from revenues derived from telecommunications services, although they may be able to exact some additional compensation for the use of public rights-of-way. The FCC has ruled that franchise fees may not be imposed on revenue from cable modem service. Franchising authorities are also empowered, in awarding new franchises or renewing existing franchises, to require cable television operators to provide cable-related facilities and equipment and to enforce compliance with voluntary commitments. In the case of franchises in effect prior to the effective date of the 1984 Cable Act, franchising authorities may enforce requirements contained in the franchise relating to facilities, equipment and services, whether or not cable-related. The 1984 Cable Act, under certain limited circumstances, permits a cable operator to obtain modifications of franchise obligations.

Renewal of Franchises

The 1984 Cable Act and the 1992 Cable Act establish renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal and to provide specific grounds for franchising authorities to consider in making renewal decisions, including a franchisee’s performance under the franchise and community needs. Even after the formal renewal procedures are invoked, franchising authorities and cable television operators remain free to negotiate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements such as upgrading facilities and equipment, although the municipality must take into account the cost of meeting such requirements. Similarly, if a franchising authority’s consent is required for the purchase or sale of a cable television system or franchise, such authority may attempt to impose burdensome or onerous franchise requirements in connection with a request for such consent. Historically, franchises have been renewed for cable television operators that have provided satisfactory services and have complied with the terms of their franchises. At this time, we are not aware of any current or past material failure on our part to comply with our franchise agreements. The Telecommunications Board of Northern Kentucky (“TBNK”) has alleged that Insight has failed to comply with a franchise provision regarding certain operational capabilities of Insight’s cable television system that serves communities in northern Kentucky. This matter is currently subject to litigation before the U.S. District Court for the Northern District of Kentucky. We cannot predict the outcome of this matter. We believe that we have generally complied with the terms of our franchises and have provided quality levels of service.

The 1992 Cable Act makes several changes to the process under which a cable television operator seeks to enforce its renewal rights which could make it easier in some cases for a franchising authority to deny renewal. Franchising authorities may consider the “level” of programming service provided by a cable television operator in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities are no longer precluded from denying renewal based on failure to substantially comply with the material terms of the franchise where the franchising authority has “effectively acquiesced” to such past violations. Rather, the franchising authority is estopped if, after giving the cable television operator notice and opportunity to cure, it fails to respond to a written notice from the cable television operator of its failure or inability to cure. Courts may not reverse a denial of renewal based on procedural violations found to be “harmless error.”

Channel Set-Asides

The 1984 Cable Act permits local franchising authorities to require cable television operators to set aside certain television channels for public, educational and governmental access programming. The 1984

Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion of their channel capacity for commercial leased access by unaffiliated third parties to provide programming that may compete with services offered by the cable television operator. The 1992 Cable Act requires leased access rates to be set according to a formula determined by the FCC.

Ownership

The 1996 Telecom Act repealed the statutory ban against local exchange carriers providing video programming directly to customers within their local exchange telephone service areas. Consequently, the 1996 Telecom Act permits telephone companies to compete directly with operations of cable television systems. Under the 1996 Telecom Act and implementing rules adopted by the FCC local exchange carriers may provide video service as broadcasters, common carriers, or cable operators. In addition, local exchange carriers and others may also provide video service through “open video systems,” a regulatory regime that may give them more flexibility than traditional cable television systems. Open video system operators (including local exchange carriers) can, however, be required to obtain a local franchise, and they can be required to make payments to local governmental bodies in lieu of cable franchise fees. In general, open video system operators must make up to two-thirds of the channels on their systems available to programming providers (other than the incumbent cable operator) on rates, terms and conditions that are reasonable and nondiscriminatory.

The 1996 Telecom Act generally prohibits local exchange carriers from purchasing a greater than 10% ownership interest in a cable television system located within the local exchange carrier’s telephone service area, prohibits cable operators from purchasing local exchange carriers whose service areas are located within the cable operator’s franchise area, and prohibits joint ventures between operators of cable television systems and local exchange carriers operating in overlapping markets. There are some statutory exceptions, including a rural exemption that permits buyouts in which the purchased cable television system or local exchange carrier serves a non-urban area with fewer than 35,000 inhabitants, and exemptions for the purchase of small cable television systems located in non-urban areas. Also, the FCC may grant waivers of the buyout provisions in certain circumstances.

The 1996 Telecom Act made several other changes to relax ownership restrictions and regulations of cable television systems. The 1996 Telecom Act repealed the 1992 Cable Act’s three-year holding requirement pertaining to sales of cable television systems. The statutory broadcast/cable cross-ownership restrictions imposed under the 1984 Cable Act were eliminated in 1996, although the parallel FCC regulations prohibiting broadcast/cable common-ownership remained in effect. The U.S. Court of Appeals for the District of Columbia circuit struck down these rules. The FCC’s rules also generally prohibit cable operators from offering satellite master antenna service separate from their franchised systems in the same franchise area, unless the cable operator is subject to “effective competition” there.

The 1996 Telecom Act amended the definition of a “cable system” under the Communications Act so that competitive providers of video services will be regulated and franchised as “cable systems” only if they use public rights-of-way. Thus, a broader class of entities providing video programming may be exempt from regulation as cable television systems under the Communications Act.

The 1996 Telecom Act provides that registered utility holding companies and subsidiaries may provide telecommunications services, including cable television, notwithstanding the Public Utilities Holding Company Act of 1935, as amended. Electric utilities must establish separate subsidiaries known as “exempt telecommunications companies” and must apply to the FCC for operating authority. Certain electric power providers are exploring the provision of broadband service over power lines. In 2004, the FCC adopted rules: 1) that affirmed the ability of electric service providers to provide broadband Internet access services over their distribution systems; and 2) that seek to avoid interference with existing services.

Due to their resources, electric utilities could be formidable competitors to traditional cable television systems.

Access to Programming

The 1992 Cable Act imposed restrictions on the dealings between cable operators and cable programmers. Of special significance from a competitive business posture, the 1992 Cable Act precludes video programmers affiliated with cable companies from favoring their affiliated cable operators and requires such programmers to sell their programming to other multichannel video distributors. This provision limits the ability of vertically integrated cable programmers to offer exclusive programming arrangements to cable companies. The prohibition on certain types of exclusive programming arrangements was set to expire on October 5, 2002, but the FCC has determined that a five-year extension of the prohibition is necessary to preserve and protect competition in video programming distribution.

Privacy

The 1984 Cable Act imposes a number of restrictions on the manner in which cable television operators can collect and disclose data about individual system customers. The statute also requires that the system operator periodically provide all customers with written information about its policies regarding the collection and handling of data about customers, their privacy rights under federal law and their enforcement rights. In the event that a cable television operator was found to have violated the customer privacy provisions of the 1984 Cable Act, it could be required to pay damages, attorneys’ fees and other costs. Under the 1992 Cable Act, the privacy requirements were strengthened to require that cable television operators take such actions as are necessary to prevent unauthorized access to personally identifiable information. Certain of these requirements were modified by the Electronic Communications Privacy Act of 2001. Additionally, certain states have enacted laws that require disclosure to residents of those states if certain personal information held about them is accessed or is reasonably believed to have been accessed without authorization.

Franchise Transfers

The 1992 Cable Act requires franchising authorities to act on any franchise transfer request submitted after December 4, 1992 within 120 days after receipt of all information required by FCC regulations and by the franchising authority. Approval is deemed to be granted if the franchising authority fails to act within such period.

Technical Requirements

The FCC has imposed technical standards applicable to all classes of channels which carry downstream National Television System Committee video programming. The FCC also has adopted additional standards applicable to cable television systems using frequencies in the 108 to 137 MHz and 225 to 400 MHz bands in order to prevent harmful interference with aeronautical navigation and safety radio services and has also established limits on cable television system signal leakage. Periodic testing by cable television operators for compliance with the technical standards and signal leakage limits is required and an annual filing of the results of these measurements is required. The 1992 Cable Act requires the FCC to periodically update its technical standards to take into account changes in technology. Under the 1996 Telecom Act, local franchising authorities may not prohibit, condition or restrict a cable television system’s use of any type of customer equipment or transmission technology.

The FCC has adopted regulations to implement the requirements of the 1992 Cable Act designed to improve the compatibility of cable television systems and consumer electronics equipment. These regulations, among other things, generally prohibit cable television operators from scrambling their basic

service tier. The 1996 Telecom Act directs the FCC to set only minimal standards to assure compatibility between television sets, VCRs and cable television systems, and otherwise to rely on the marketplace. Pursuant to the 1992 Cable Act, the FCC has adopted rules to assure the competitive availability to consumers of customer premises equipment, such as converters, used to access the services offered by cable television systems and other multichannel video programming distributors. Pursuant to those rules, consumers are given the right to attach compatible equipment to the facilities of their multichannel video programming distributors so long as the equipment does not harm the network, does not interfere with the services purchased by other customers and is not used to receive unauthorized services. As of July 1, 2000, multichannel video programming distributors, other than operators of direct broadcast satellite television systems, were required to separate security from non-security functions in the customer premises equipment which they sell or lease to their customers and offer their customers the option of using component security modules obtained from the multichannel video programming distributors with set-top units purchased or leased from retail outlets. As of July 1, 2007, multichannel video programming distributors will be prohibited from distributing new set-top equipment integrating both security and non-security functions to their customers.

Inside Wiring; Customer Access

FCC rules require an incumbent cable operator upon expiration of a multiple dwelling unit service contract to sell, abandon, or remove “home run” wiring that was installed by the cable operator in a multiple dwelling unit building. These inside wiring rules assist building owners in their attempts to replace existing cable operators with new programming providers who are willing to pay the building owner a higher fee, where such a fee is permissible. The FCC has also issued an order preempting state, local and private restrictions on over-the-air reception antennas placed on rental properties in areas where a tenant has exclusive use of the property, such as balconies or patios. However, tenants may not install such antennas on the common areas of multiple dwelling units, such as on roofs. This order limits the extent to which multiple dwelling unit owners may enforce certain aspects of multiple dwelling unit agreements which otherwise would prohibit, for example, placement of direct broadcast satellite television systems television receiving antennae in multiple dwelling unit areas, such as apartment balconies or patios, under the exclusive occupancy of a renter.

Pole Attachments

The FCC currently regulates the rates and conditions imposed by certain public utilities for use of their poles unless state public service commissions are able to demonstrate that they adequately regulate the rates, terms and conditions of cable television pole attachments. A number of states and the District of Columbia have certified to the FCC that they adequately regulate the rates, terms and conditions for pole attachments. Illinois, Ohio, and Kentucky, states in which we operate, have made such a certification. In the absence of state regulation, the FCC administers such pole attachment and conduit use rates through use of a formula which it has devised. Pursuant to the 1996 Telecom Act, the FCC has adopted a new rate formula for any attaching party, including cable television systems, which offers telecommunications services. This new formula will result in higher attachment rates that will apply only to cable television systems which elect to offer telecommunications services. Any increases pursuant to this new formula began in 2001,and will be phased in by equal increments over the five ensuing years. The FCC ruled that the provision of Internet services will not, in and of itself, trigger use of the new formula. The Supreme Court affirmed this decision and also held that the FCC ‘s authority to regulate rates for attachments to utility poles extended to attachments by cable operators and telecommunications carriers that are used to provide Internet service or for wireless telecommunications service. This development benefits our business and will place a constraint on the prices that utilities can charge with regard to the cable facilities over which we also provide Internet access service.

Interactive Television

The FCC has issued a Notice of Inquiry covering a wide range of issues relating to Interactive Television (“ITV”). Examples of ITV services are interactive electronic program guides and access to a graphic interface that provides supplementary information related to the video display. In the near term, cable systems are likely to be the platform of choice for the distribution of ITV services. The FCC has posed a series of questions including the definition of ITV, the potential for discrimination by cable systems in favor of affiliated ITV providers, enforcement mechanisms, and the proper regulatory classification of ITV service.

Copyright

Cable television systems are subject to federal copyright licensing covering carriage of broadcast signals. In exchange for making semi-annual payments to a federal copyright royalty pool and meeting certain other obligations, cable television operators obtain a statutory license to retransmit broadcast signals. The amount of this royalty payment varies, depending on the amount of system revenues from certain sources, the number of distant signals carried, and the location of the cable television system with respect to over-the-air television stations. Adjustment to the copyright royalty rates are done through an arbitration process supervised by the U.S. Copyright Office. Cable television operators are liable for interest on underpaid and unpaid royalty fees, but are not entitled to collect interest on refunds received for overpayment of copyright fees.

Various bills have been introduced into Congress over the past several years that would eliminate or modify the cable television compulsory license. Without the compulsory license, cable television operators would have to negotiate rights from the copyright owners for all of the programming on the broadcast stations carried by cable television systems. Such negotiated agreements would likely increase the cost to cable television operators of carrying broadcast signals. The 1992 Cable Act’s retransmission consent provisions expressly provide that retransmission consent agreements between television broadcast stations and cable television operators do not obviate the need for cable operators to obtain a copyright license for the programming carried on each broadcaster’s signal.

Several petitions are currently pending with the United States Copyright Office seeking revisions to certain compulsory copyright license reporting requirements and clarification of certain issues relating to the application of the compulsory license to the carriage of digital broadcast stations. The Copyright Office may open one or more rulemakings in response to these petitions. We cannot predict the outcome of any such rulemakings; however, it is possible that certain changes in the rules or copyright compulsory license fee computations could have an adverse affect on our business by increasing our copyright compulsory license fee costs or by causing us to reduce or discontinue carriage of certain broadcast signals that we currently carry on a discretionary basis.

Copyrighted music performed in programming supplied to cable television systems by pay cable networks, such as HBO, and basic cable networks, such as USA Network, is licensed by the networks through private agreements with performing rights organizations such as the American Society of Composers and Publishers, generally known as ASCAP, BMI, Inc. and SESAC, Inc. ASCAP and BMI offer “through to the viewer” licenses to the cable networks which cover the retransmission of the cable networks’ programming by cable television systems to their customers.

Licenses to perform copyrighted music by cable television systems themselves, including on local origination channels, in advertisements inserted locally on cable television networks, and in cross-promotional announcements, must be obtained by the cable television operator from the appropriate performing rights organization.

State and Local Regulation

Cable television systems generally are operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local government entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction, and even from city to city within the same state, historically ranging from reasonable to highly restrictive or burdensome. Franchises generally contain provisions governing fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and occupancy of public streets and number and types of cable television services provided. The terms and conditions of each franchise and the laws and regulations under which it was granted directly affect the profitability of the cable television system. The 1984 Cable Act places certain limitations on a franchising authority’s ability to control the operation of a cable television system. The 1992 Cable Act prohibits exclusive franchises, and allows franchising authorities to exercise greater control over the operation of franchised cable television systems, especially in the area of customer service and rate regulation. The 1992 Cable Act also allows franchising authorities to operate their own multichannel video distribution system without having to obtain a franchise and permits states or local franchising authorities to adopt certain restrictions on the ownership of cable television systems. Moreover, franchising authorities are immunized from monetary damage awards arising from regulation of cable television systems or decisions made on franchise grants, renewals, transfers and amendments. The 1996 Telecom Act restricts a franchising authority from either requiring or limiting a cable television operator’s provision of telecommunications services.

Various proposals have been introduced at the state and local levels with regard to the regulation of cable television systems, and a number of states have adopted legislation subjecting cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a character similar to that of a public utility. A new Kentucky statute enacted in 2005 replaces the fees established by individual franchise with a 3% excise tax and a 2.4% gross receipts tax which is also imposed on other providers of video programming service, such as DBS.

Several states have recently passed legislation and similar legislation is pending, or has been proposed in certain other states and in Congress, that would allow local telephone companies to deliver services that would compete with our cable service, without obtaining equivalent local franchise. To the extent that incumbents have made prior payments, including capital grants, incumbents would still remain at a competitive disadvantage under the legislation. Another proposal in Congress would also limit our ability to maintain competitive prices. Any such legislatively granted advantages to our competitors could adversely affect our business. The effect of such initiatives, if any, on our obligation to obtain local franchises, many of which have years remaining in the terms, cannot be predicted.

Under a bill recently passed by the Indiana Legislature, effective July 1, 2006, the Indiana Utility Regulatory Commission would become the state’s sole video franchising authority. Under this legislation we would have until November 1, 2006 to elect to switch to the state-issued certificate or our existing local franchises will continue until the later of January 1, 2009 or the termination or expiration of each franchise. A state-issued certificate with respect to us would have some of the same obligations under the existing local franchises. Some franchise obligations under these state-issued franchises are tied to a pro-rata application of the obligations imposed on the incumbent under it’s locally-issued franchise issued prior to July 1, 2006. This legislation would greatly speed fulfillment of the regulatory prerequisites to new entrants seeking to provide video service in Indiana.

The foregoing summarizes certain material present and proposed federal, state and local regulations and legislation relating to the cable television industry. Other existing federal regulations, copyright licensing and, in many jurisdictions, state and local franchise requirements, currently are the subject of a variety of judicial proceedings, legislative hearings and administrative and legislative proposals which could

change, in varying degrees, the manner in which cable television systems operate. Neither the outcome of these proceedings nor their impact upon the cable television industry or us can be predicted at this time.

Internet Access Service

We offer a service which enables consumers to access the Internet at high speeds via high capacity broadband transmission facilities and cable modems. We compete with many other providers of Internet access services which are known as Internet service providers (“ISPs”). ISPs include such companies as America Online, MSN and Earthlink as well as major telecommunications providers, including AT&T and local exchange telephone companies. The FCC has decided and the United States Supreme Court has affirmed that cable Internet service should be classified for regulatory purposes as an “information service” rather than either a “cable service” or a “telecommunications service.” Concurrently, the FCC has initiated a wide-ranging rulemaking proceeding in which it seeks comment on the regulatory ramifications of this classification. Among the issues to be decided are whether the FCC should permit local authorities to impose an access requirement, whether local authorities should be prohibited from imposing fees on cable Internet service revenues, and what regulatory role local authorities should be permitted to play. We cannot predict the outcome of the current FCC proceeding or its impact on our business.

There are currently few laws or regulations which specifically regulate communications or commerce over the Internet. Section 230 of the Communications Act, added to that act by the 1996 Telecom Act, declares it to be the policy of the United States to promote the continued development of the Internet and other interactive computer services and interactive media, and to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by federal or state regulation. One area in which Congress did attempt to regulate content over the Internet involved the dissemination of obscene or indecent materials. The provisions of the 1996 Telecom Act, generally referred to as the Communications Decency Act, were found to be unconstitutional, in part, by the United States Supreme Court in 1997. In response, Congress passed the Child Online Protection Act. The constitutionality of this act is currently being challenged in the courts. In May 2002, the United States Supreme Court reversed the finding by the Third Circuit Court of Appeals that the use of “contemporary community standards” to identify material “harmful to minors “ was overly broad and therefore violative of the First Amendment. The Supreme Court, however, remanded the matter to the Third Circuit to determine the validity of other challenges to the constitutionality of the Child Online Protection Act and kept the stay prohibiting government enforcement in place until further action by the lower courts. Finally, disclosure of customer communications or records is governed by the Electronic Communications Privacy Act of 2001 and the Cable Act, both of which were amended by the USA Patriot Act.

Local Telecommunications Services

The 1996 Telecom Act provides that no state or local laws or regulations may prohibit or have the effect of prohibiting any entity from providing any interstate or intrastate telecommunications service. States are authorized, however, to impose “competitively neutral” requirements regarding universal service, public safety and welfare, service quality and consumer protection. State and local governments also retain their authority to manage the public rights-of-way and may require fair and reasonable, competitively neutral and non-discriminatory compensation for management of the public rights-of-way when cable operators or others provide telecommunications service using public rights-of-way. State and local governments must publicly disclose required compensation from telecommunications providers for use of public rights-of-way.

Local telecommunications services are subject to regulation by state utility commissions. Use of local telecommunications facilities to originate and terminate long distance services, a service commonly referred to as “exchange access,” is subject to regulation both by the FCC and by state utility commissions. As providers of local exchange service, we are subject to the requirements imposed upon competitive local

exchange companies by the 1996 Telecom Act. These include requirements governing resale, telephone number portability, dialing parity, access to rights-of-way and reciprocal compensation, among others. Further, the FCC has recently initiated a proceeding to determine whether additional safeguards are required to protect the privacy of certain customer information including call records. Although we cannot predict whether and the extent to which a state may seek to regulate us, increased regulation would likely increase our cost of doing business.

Numerous cable operators are either exploring or have commenced offering voice over Internet protocol (“VoIP”) as a competitive alternative to traditional circuit-switched telephone service. Various states, including states where we operate, have adopted or are considering differing regulatory treatment for VoIP, ranging from minimal or no regulation to full-blown common carrier status. The FCC recently decided that alternative voice technologies, like certain types of VoIP telephony, should be regulated only at the federal level, rather than by individual states. Many implementation details remain unresolved, and there are substantial regulatory changes being considered that could either benefit or harm VoIP telephony as a business operation. While the final outcome of the FCC proceedings cannot be predicted, it is generally believed that the FCC favors a “light touch” regulatory approach for VoIP telephony, which might include preemption of certain state or local regulation.

Employees

As of December 31, 2005, we employed approximately 3,770 full-time employees and 59 part-time employees. We consider our relations with our employees to be good.

Item 1A. Risk Factors

Our business faces many risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, may also impair our business operations or financial results. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer.

We have substantial debt and significant interest payment requirements, which may adversely affect our ability to obtain financing in the future, to finance our operations and to react to changes in our business.

We have a substantial amount of debt. The following table shows certain important credit statistics about us.

Our high level of combined debt could have important consequences for you, including the following:

· Our ability to obtain additional financing in the future for capital expenditures, acquisitions, working capital or other purposes may be limited;

· We will need to use a large portion of our revenues to pay interest on our borrowings, which will reduce the amount of money available to fund our operations, capital expenditures and other activities;

· Some of our debt has a variable rate of interest, which exposes us to the risk of increased interest rates; and

· Our indebtedness may limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions.

Our 50% stake in Insight Midwest constitutes substantially all of our operating assets, and our sole business is the management of Insight Midwest’s cable television systems. We may be forced to liquidate Insight Midwest before our 12¼% senior discount notes mature.

Although our financial statements consolidate the results of Insight Midwest, we own only 50% of the outstanding partnership interests in Insight Midwest. The other 50% of Insight Midwest is owned by an indirect subsidiary of Comcast Corporation, an entity over which we have no control. As a result, although our financial statements include 100% of the revenues of Insight Midwest, we are only entitled to share in the results and assets of Insight Midwest to the extent of our partnership interest. Insight Midwest accounted for substantially all of our 2005 revenues. Our 50% interest in Insight Midwest constitutes substantially all of our operating assets. The only cash we receive directly from Insight Midwest is a management fee of 3% based on revenues of the cable television systems and reimbursement of expenses.

The Insight Midwest partnership agreement provides that at any time after December 31, 2005 either Comcast Cable or Insight LP (our wholly-owned subsidiary that owns our 50% interest in Insight Midwest) has the right to cause a split-up of Insight Midwest, subject to a limited right of postponement held by the non-initiating partner. To date, neither partner has commenced the split-up process. The split-up would reduce the cash flow from operations that we need to repay our debt, and could require us to make a change of control offer which we may be unable to finance.

We depend upon our operating subsidiaries for cash to fund our obligations.

Our investments in our operating subsidiaries, including Insight Midwest, constitute substantially all of our operating assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our consolidated assets. The only source of the cash we have to pay interest and principal on our indebtedness is the cash that our subsidiaries generate from their operations and their borrowings. The ability of our operating subsidiaries to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Accordingly, we cannot assure you that our subsidiaries will generate cash flow from operations in amounts sufficient to enable us to pay the principal and interest on our indebtedness.

The terms of the Insight Midwest Holdings credit facility and any inability to refinance any borrowings under such facility may limit our ability to access the cash flow of our subsidiaries.

Insight Midwest’s ability to receive cash from its subsidiaries is restricted by the terms of the Insight Midwest Holdings credit facility. Insight Midwest Holdings’ credit facility permits it to distribute cash to Insight Midwest, subject to certain limitations, provided that there is no default under such credit facility. If there is a default under the Insight Midwest Holdings credit facility, Insight Midwest would not have any cash to pay interest on its obligations.

Cash interest on our 12¼% senior discount notes began to accrue on February 15, 2006, and cash interest on the 12¼% notes becomes payable semiannually in arrears beginning on August 15, 2006. Even if Insight Midwest receives funds from its subsidiaries, there can be no assurance that Insight Midwest can or would distribute cash to us to make payments on our outstanding 12¼% notes due to restrictions imposed by the indentures governing Insight Midwest’s outstanding senior notes and the Insight Midwest partnership agreement. The indentures governing Insight Midwest’s outstanding 10½% senior notes and 9¾% senior notes limit Insight Midwest’s ability to distribute cash to us for any purpose. Furthermore, because we only own a 50% equity interest in Insight Midwest, the Insight Midwest partnership agreement provides that Insight Midwest may not pay dividends or make other distributions to us without the consent of our partner, Comcast Cable. As a result, even if the creditors of Insight Midwest and its subsidiaries

were to permit distributions to us, Comcast Cable could prohibit any such distribution. As a result, if we are unable to refinance the indebtedness of Insight Midwest and its subsidiaries on terms that provide Insight Midwest with a greater ability to provide us with funds, we may not be able to make payments required under the 12¼% senior discount notes.

Furthermore, borrowings under the Insight Midwest Holdings credit facility are secured and will mature prior to our and Insight Midwest’s outstanding notes. Accordingly, we may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

The Insight Midwest Holdings credit facility requires us to comply with various financial and operating restrictions which could limit our ability to compete as well as our ability to expand.

The Insight Midwest Holdings credit facility contains covenants that restrict Insight Midwest Holdings and its subsidiaries’ ability to:

· distribute funds or pay dividends to Insight Midwest;

· incur additional indebtedness or issue additional equity;

· repurchase or redeem equity interests and indebtedness;

· pledge or sell assets or merge with another entity;

· create liens; and

· make certain capital expenditures, investments or acquisitions.

Such restrictions could limit our ability to compete as well as our ability to expand. The ability of Insight Midwest Holdings’ subsidiaries to comply with these provisions may be affected by events beyond our control. If they were to breach any of these covenants, they would be in default under the credit facility and they would be prohibited from making distributions to Insight Midwest.

We have a history of net losses, and may not be profitable in the future.

We have a history of net losses and expect to incur additional net losses in the future. We incurred a net loss before accruals of preferred interests of $74.8 million for the year ended December 31, 2001, $42.3 million for the year ended December 31, 2002, $14.2 million for the year ended December 31, 2003, $13.8 million for the year ended December 31, 2004 and $84.9 million for the year ended December 31, 2005.

We have and will continue to have a substantial amount of interest expense in respect of debt incurred and depreciation and amortization expenses relating to acquisitions of cable systems as well as expansion and upgrade programs. Such expenses have contributed to the net losses we experienced.

Our programming costs are substantial and they may increase, which could result in a decrease in profitability if we are unable to pass that increase on to our customers.

In recent years, the cable and satellite video industries have experienced an escalation in the cost of programming, and sports programming in particular. Our cable programming services are dependent upon our ability to procure programming that is attractive to our customers at reasonable rates. Programming costs may continue to escalate, and we may not be able to pass programming cost increases on to our customers. Our financial condition and results of operations could be negatively affected by further increases in programming costs. Programming has been and is expected to continue to be our largest single expense item and accounted for approximately 37% of the total programming and other operating costs and selling, general and administrative expenses for our systems for the year ended December 31, 2005.

Because of our relationship with Comcast Cable, we currently have the right to purchase certain programming services for our systems directly through Comcast Cable’s programming supplier Satellite Services, Inc. In addition, under the terms of Insight Midwest’s partnership agreement, we and Comcast Cable are each required to use commercially reasonable efforts to extend to Insight Midwest all of the programming discounts available to us. If a split-up of the Insight Midwest partnership were to occur, we may no longer be able to benefit from the favorable programming costs available through Comcast Cable.

The competition we face from other cable networks and alternative service providers may cause us to lose market share.

The impact from competition, particularly from direct broadcast satellite television systems and companies that overbuild in our market areas, has resulted in a decrease in customer growth rates as well as a loss of customers. According to the FCC, the percentage of multichannel video customers served by cable television operators dropped from 71.6% as of June 2004 to 69.4% as of June 2005, while the percentage of customers served nationwide by direct broadcast satellite grew from 25.1% to 27.7% during this same period. This growing competition has negatively impacted our financial performance. Increased competition may continue to impact our financial performance. Many of our potential competitors have substantially greater resources than we do, and we cannot predict the market share our competitors will eventually achieve, nor can we predict their ability to develop products which will compete with our planned new and enhanced products and services such as high-speed Internet access, video-on-demand and telephone services.

Direct broadcast satellite service consists of television programming transmitted via high-powered satellites to individual homes, each served by a small satellite dish. Legislation permitting direct broadcast satellite operators to transmit local broadcast signals was enacted on November 29, 1999. This eliminates a significant competitive advantage that cable system operators have had over direct broadcast satellite operators. Direct broadcast satellite operators currently deliver local broadcast signals in the largest markets and continue to expand such carriage to additional markets.

The 1996 Telecom Act contains provisions designed to encourage local exchange telephone companies and others to provide a wide variety of video services competitive with services provided by cable systems. Local exchange telephone companies in various states have either announced plans, obtained local franchise authorizations or are currently competing with our cable communications systems. Certain telephone companies have begun to deploy fiber more extensively in their networks and to deploy broadband services, including video programming services, using a switched Internet protocol platform or other technologies designed to avoid the same regulatory burdens imposed on our business. New laws or regulations at the federal or state level may clarify the ability of local telephone companies to provide their services without obtaining state or local cable franchises. If local telephone companies are not required to obtain local cable franchises comparable to ours, it would be adverse to our business.

Since our cable systems are operated under non-exclusive franchises, competing operators of cable systems and other potential competitors, such as municipalities and municipal utility providers, may be granted franchises to build cable systems in markets where we hold franchises. Competition in geographic areas where a secondary franchise is obtained and a cable network is constructed is called “overbuilding.” As of December 31, 2005, approximately 9% of the homes passed by our cable systems were overbuilt. As of December 31, 2005, SIGECOM, LLC had overbuilt our Evansville, Indiana system and passed approximately 83,000 homes also passed by us. In addition, as of December 31, 2005, WideOpenWest had overbuilt our Columbus, Ohio system and passed approximately 132,000 homes also passed by us. We cannot predict what effect competition from these or future competitors will have on our business and operations.

We will face competition from providers of alternatives to our Internet and telephone services.

Several telephone companies are offering digital subscriber line technology (also known as DSL services), which allows Internet access over traditional phone lines at data transmission speeds greater than those available by a standard telephone modem. Although these transmission speeds generally have not been as fast as the transmission speeds of a cable modem, we believe that the transmission speeds of digital subscriber line technology are sufficiently high that such technology will compete with cable modem technology. We cannot predict the impact DSL technology will have on our Internet access services or on our operations.

As we expand our offerings to include telephone services in additional markets, the telephone services we deliver will be subject to competition from existing providers, including both local exchange telephone companies and long-distance carriers as well as competing providers using alternative technologies such as voice over Internet protocol (“VoIP”). We cannot predict the extent to which the presence of these competitors will influence customer penetration in our telephone service areas.

We expect that the most significant competitors for our Internet access and telephone service offerings will be the existing local exchange telephone companies as well as resellers using the local exchange telephone companies’ networks, although the FCC, after a one-year grace period, will no longer require telecommunications companies to unbudle and resell DSL services as a stand alone product. These competitors are currently the predominant providers of Internet and telephone services in our markets.

Our business has been and continues to be subject to extensive governmental legislation and regulation, and changes in this legislation and regulation could increase our costs of compliance and reduce the profitability of our business.

The cable television industry is subject to extensive legislation and regulation at the federal and local levels, and, in some instances, at the state level, and many aspects of such regulation are currently the subject of judicial proceedings and administrative or legislative proposals. Operating in a regulated industry increases the cost of doing business generally. We may also become subject to additional regulatory burdens and related increased costs. As we continue to introduce additional communications services, we may be required to obtain federal, state and local licenses or other authorizations to offer such services. We may not be able to obtain such licenses or authorizations in a timely manner, or at all, or conditions could be imposed upon such licenses and authorizations that may not be favorable to us.

We could face considerable business and financial risk in implementing our acquisition strategy.

As part of our strategy of pursuing value-enhancing transactions, we intend to seek to swap or acquire systems that strategically fit our clustering and operating strategy. Although we regularly engage in discussions with respect to possible acquisitions and joint ventures, we do not currently have any understandings, commitments or agreements relating to any acquisitions. Future acquisitions could result in the incurrence of debt and contingent liabilities and an increase in amortization expenses related to goodwill and other intangible assets, which could have a material adverse effect upon our business, financial condition and results of operations.

Risks we could face with respect to acquisitions include:

· difficulties in the integration of the operations, technologies, products and personnel of the acquired company;

· risks of entering markets in which we have no or limited prior experience;

· diversion of management’s attention away from other business concerns; and

· expenses of any undisclosed or potential legal liabilities of the acquired company.

The risks associated with acquisitions could have a material adverse effect upon our business, financial condition and results of operations. We cannot assure that we will be successful in consummating future acquisitions on favorable terms or at all.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

A cable television system consists of three principal operating components:

· The first component, the signal reception processing and originating point called a “headend,” receives television, cable programming service, radio and data signals that are transmitted by means of off-air antennas, microwave relay systems and satellite earth systems. Each headend includes a tower, antennae or other receiving equipment at a location favorable for receiving broadcast signals and one or more earth stations that receives signals transmitted by satellite. The headend facility also houses the electronic equipment, which amplifies, modifies and modulates the signals, preparing them for passage over the system’s network of cables.

· The second component of the system, the distribution network, originates at the headend and extends throughout the system’s service area. A cable system’s distribution network consists of microwave relays, coaxial or fiber optic cables placed on utility poles or buried underground and associated electronic equipment.

· The third component of the system is a “drop cable,” which extends from the distribution network into each customer’s home and connects the distribution system to the customer’s television set.

We own and lease parcels of real property for signal reception sites which house our antenna towers and headends, microwave complexes and business offices which includes our principal executive offices. In addition, we own our cable systems’ distribution networks, various office fixtures, test equipment and service vehicles. The physical components of our cable systems require maintenance and periodic upgrading to keep pace with technological advances. We believe that our properties, both owned and leased, are in good condition and are suitable and adequate for our business operations as presently conducted and as proposed to be conducted.

Item 3. Legal Proceedings

Between March 7 and March 15, 2005, five purported class action lawsuits were filed in the Delaware Court of Chancery naming Insight Communications Company, Inc. and each of its directors as defendants. Three of the lawsuits also named The Carlyle Group as a defendant. The cases were subsequently consolidated under the caption In Re Insight Communications Company, Inc. Shareholders Litigation (Civil Action No. 1154-N), and, on April 11, 2005, a Consolidated Amended Complaint (“Complaint”) was filed against each director and The Carlyle Group. The Complaint alleges, among other things, that the defendant directors breached their fiduciary duties to our stockholders in connection with a proposal from Sidney R. Knafel, Michael Willner, together with certain related and other parties, and The Carlyle Group to acquire all of our outstanding, publicly-held Class A common stock. The Complaint also alleges that the proposed transaction violated our Charter and that The Carlyle Group aided and abetted the alleged fiduciary duty breaches. The Complaint seeks the certification of a class of our stockholders; a declaration that the proposed transaction violates our Charter; an injunction prohibiting the defendants from proceeding with the proposed transaction; rescission or other damages in the event the proposed

transaction is consummated; an award of costs and disbursements including attorneys’ fees; and other relief.

On July 28, 2005, the parties to the action entered into a memorandum of understanding setting forth the terms of a proposed settlement of the litigation which, among other things, provides that the buyers shall proceed with the merger, subject to the terms and conditions of the merger agreement including the “majority of the minority” stockholder voting condition, and under which the defendants admit to no wrongdoing or fault. The memorandum of understanding contemplates certification of a plaintiff class consisting of all record and beneficial owners of our Class A common stock, other than the buyers, during the period beginning on and including March 6, 2005, through and including the date of the consummation of the merger, a dismissal of all claims with prejudice, and a release in favor of all defendants of any and all claims related to the merger. The proposed settlement is subject to a number of conditions, including consummation of the merger which closed on December 16, 2005, the plaintiffs’ approval of a definitive settlement agreement and final court approval of the settlement.

In April 2005, Acacia Media Technologies Corporation filed a lawsuit against us and others in the United States District Court for the Southern District of New York. The complaint alleges, among other things, infringement of certain United States patents that allegedly relate to systems and methods for transmitting and/or receiving digital audio and video content. The complaint seeks injunctive relief and damages in an unspecified amount. In the event that a court ultimately determines that we infringe on ay of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain products and services that we currently offer to subscribers. We believe that the claims are without merit and intend to defend the action vigorously. The final disposition of this claim is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, at this time the outcome of the litigation is impossible to predict, and no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

We believe there are no other pending or threatened legal proceedings that, if adversely determined, would have a material adverse effect on us.

Item 4. Submission of Matters to a Vote of Security Holders

On December 16, 2005, we held a special meeting of stockholders (i) to consider and vote upon a proposal to adopt and approve the Agreement and Plan of Merger dated as of July 28, 2005 between us and Insight Acquisition Corp. which, among other things, provided for the merger of Insight Acquisition Corp. with and into us, with us as the surviving corporation, and (ii) to consider and vote upon a proposal to approve a charter amendment making Section 5.6 of our certificate of incorporation, which provided that holders of each class of common stock must receive equal per share payments upon a merger, inapplicable to the merger and the other transactions contemplated by the merger agreement.

The stockholders adopted and approved the merger agreement. The proposal required the affirmative vote of the holders of a majority of the voting power of the outstanding shares of our Class A common stock and Class B common stock entitled to vote on the matter, voting together as a single class. The result of this vote was as follows:

	Vote For				Vote Against				Abstained
123,305,778				403,064				4,557

The proposal also required the affirmative vote of the holders of a majority of the outstanding shares of our Class A common stock entitled to vote on the matter not held by Insight Acquisition Corp., certain stockholders who elected to maintain their investment in us or any member of their immediate families,

The Carlyle Group or any of its affiliates, or any of our officers or directors or any member of their immediate families. The result of this vote was as follows:

	Vote For				Vote Against				Abstained
36,095,493				403,064				4,557

The stockholders also adopted and approved the charter amendment. The proposal required the affirmative vote of the holders of a majority of the outstanding shares of our Class A common stock entitled to vote, voting separately as a class. The result of this vote was as follows:

	Vote For				Vote Against				Abstained
37,259,962				661,055				897,842

The proposal to approve the charter amendment also required the affirmative vote of the holders of a majority of the outstanding shares of our Class B common stock entitled to vote, voting separately as a class. The result of this vote was as follows:

	Vote For				Vote Against				Abstained
8,489,454				0				0

PART II

Item 5. Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

There is no public trading market for our equity securities. As a result of our going-private transaction completed on December 16, 2005, all shares of our then outstanding Class A common stock, other than those shares held by certain stockholders who elected to maintain their investment in us and those held by stockholders who demanded appraisal rights, were converted into the right to receive $11.75 per share in cash, and we were recapitalized with new classes of capital stock. Immediately after completion of the going-private transaction, our Class A common stock was delisted from The Nasdaq National Market.

Dividend Policy

We have never paid any cash dividends and intend, for the foreseeable future, to retain any future earnings for the development of our business. Our charter as well as the terms of our indebtedness and the indebtedness of our subsidiaries restrict our ability to pay dividends. Our future dividend policy will be determined by the Board of Directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities.

Item 6. Selected Financial Data

In the following table, we provide you with our selected consolidated historical financial and other data. We have prepared the consolidated selected financial information using our consolidated financial statements for the five years ended December 31, 2005. When you read this selected consolidated historical financial and other data, it is important that you read along with it the historical financial statements and related notes in our consolidated financial statements included in this report, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” also included in this report. Certain prior year amounts have been reclassified to conform to the current year’s presentation.

	Year Ended December 31,
	2005			2004			2003			2002			2001
	(dollars in thousands, except per share data)
Statement of Operations Data:
Revenue	$	1,117,681		$	1,002,456		$	902,592		$	811,995		$	729,038
Total operating costs and expenses	976,102			813,971			747,248			672,993			799,871
Operating income (loss)	141,579			188,485			155,344			139,002			(70,833		)
Total other expense, net	(220,520		)	(204,089		)	(177,495		)	(203,106		)	(173,872		)
Loss before minority interest, investment activity, extinguishments of obligations, gain on contract settlement, income taxes and extraordinary item	(78,941		)	(15,604		)	(22,151		)	(64,104		)	(244,705		)
Minority interest income (expense)	(5,488		)	(14,023		)	(7,936		)	31,076			141,314
Equity in losses of investees	—			—			-			—			(2,031		)
Gain (loss) from early extinguishment of debt(1)	—			—			(10,879		)	3,560			(10,315		)
Loss on settlement of put obligation	—			—			(12,169		)	—			—
Gain on settlement of programming contract	—			—			37,742			—			—
Impairment write-down of investments	—			—			(1,500		)	(18,023		)	(9,899		)
Loss before income taxes and extraordinary item	(84,429		)	(29,627		)	(16,893		)	(47,491		)	(125,636		)
Benefit (provision) for income taxes	(500		)	201			2,702			5,175			50,847
Loss before extraordinary item	(84,929		)	(29,426		)	(14,191		)	(42,316		)	(74,789		)
Extraordinary item, net of tax	—			15,627			—			—			—
Loss before preferred interests(2)	(84,929		)	(13,799		)	(14,191		)	(42,316		)	(74,789		)
Accrual of preferred interests(3)	—			—			(10,353		)	(20,107		)	(19,432		)
Net loss	$	(84,929	)	$	(13,799	)	$	(24,544	)	$	(62,423	)	$	(94,221	)

	Year Ended December 31,
	2005			2004			2003		2002			2001
	(dollars in thousands)
Other Financial Data:
Capital expenditures	$	220,102		$	174,096		$	196,658	$	283,004		$	325,581
Net cash provided by operating activities	233,573			289,914			197,788		175,296			161,325
Net cash used in investing activities	218,711			173,544			234,691		293,390			802,875
Net cash provided by (used in) financing activities	(85,224		)	(76,398		)	22,225		(5,604		)	806,365
Balance Sheet Data:
Cash and cash equivalents	$	29,782		$	100,144		$	60,172	$	74,850		$	198,548
Fixed assets, net	1,130,705			1,154,251			1,216,304		1,220,251			1,151,709
Total assets	3,665,164			3,769,872			3,809,655		3,789,062			3,867,392
Total debt, including preferred interests(3)	2,759,918			2,807,563			2,848,291		2,772,824			2,728,189
Stockholders’ equity	480,545			545,810			557,119		587,055			646,030

	As of December 31, 2005
	South Region		East Region		West Region		Total
Technical Data:
Network miles	6,900		11,000		12,800		30,700
Number of headends	2		9		17		28
Number of headends serving 97% of our customers	1		6		6		13
Operating Data:
Homes passed(4)	557,300		836,600		1,026,700		2,420,600
Basic customers(5)	276,400		417,300		588,000		1,281,700
Basic penetration(6)	49.6	%	49.9	%	57.3	%	52.9	%
Digital ready homes(7)	276,300		403,400		558,900		1,238,600
Digital customers(8)	116,000		187,500		215,300		518,800
Digital penetration(9)	42.0	%	46.5	%	38.5	%	41.9	%
Premium units(10)	125,500		156,000		178,300		459,800
Premium penetration(11)	45.4	%	37.4	%	30.3	%	35.9	%
High-Speed Internet customers(12)	100,800		164,300		205,300		470,400

(1) The Financial Accounting Standards Board has issued SFAS No. 145 which is effective for fiscal years beginning after May 15, 2002 and generally eliminates the classification of gains and losses from the early extinguishment of debt as extraordinary items. With the adoption of SFAS No. 145, we reclassified $10.3 million recorded in 2001 to results from continuing operations.

(2) In accordance with the adoption of SFAS No. 142, beginning January 1, 2002, we no longer record amortization expense associated with franchise costs, goodwill and other indefinite lived intangible assets. This change in accounting would have resulted in a net loss of $11.8 million for the year ended December 31, 2001.

(3) The preferred interests were converted to common interests as of September 26, 2003.

(4) Homes passed are the number of single residence homes, apartments and condominium units passed by the cable distribution network in a cable system’s service area.

(5) Basic customers are customers of a cable television system who receive a package of over-the-air broadcast stations, local access channels and certain satellite-delivered cable television services, other than premium services, and who are usually charged a flat monthly rate for a number of channels.

(6) Basic penetration means basic customers as a percentage of total number of homes passed.

(7) Digital ready homes means the total number of basic customers to whom digital service is available.

(8) Customers with a digital converter box.

(9) Digital penetration means digital service units as a percentage of digital ready homes.

(10) Premium units mean the total number of subscriptions to premium services, which are paid for on an individual unit basis.

(11) Premium penetration means premium service units as a percentage of the total number of basic customers. A customer may purchase more than one premium service, each of which is counted as a separate premium service unit. This ratio may be greater than 100% if the average customer subscribes to more than one premium service unit.

(12) Customers receiving high-speed Internet service.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Our revenues are earned from customer fees for cable television video services including basic, premium, digital and pay-per-view services and ancillary services, such as rental of converters and remote control devices and installations. In addition, we earn revenues from providing high-speed Internet services, selling advertising, providing telephone services, commissions for products sold through home shopping networks and, through July 31, 2004, management fees for managing cable systems.

We have generated increases in revenues for each of the past three fiscal years, primarily through a combination of internal customer growth, increases in monthly revenue per customer, growth in advertising revenue and increasing revenue from selling new services including high-speed Internet access, interactive digital video and telephone services.

We have historically recorded net losses through December 31, 2005. Some of the principal reasons for these net losses include i) depreciation and amortization associated with our capital expenditures for the construction, expansion and maintenance of our systems, and ii) interest costs on borrowed money. We expect to continue to report net losses for the foreseeable future. We cannot predict what impact, if any, continued losses will have on our ability to finance our operations in the future.

We face intense competition for our video programming services, primarily from direct broadcast satellite service, or DBS service providers. In 2004, competitive pressure from the DBS service providers increased when they launched local television channels in markets representing an estimated 37% of our basic customer base. Since they have been permitted to deliver local television broadcast signals beginning in 1999, DirecTV, Inc. and Echostar Communications Corporation, the two largest DBS service providers, have been increasing the number of markets in which they deliver these local television signals. These “local-into-local” launches were typically accompanied by significant marketing and advertising and were a major cause of our loss of basic customers in 2004. As of December 31, 2005, local television coverage in our markets by one or more DBS service provider represented an estimated 98% of our basic customers.

The following table is derived for the periods presented from our consolidated financial statements that are included in this report and sets forth certain statement of operations data for our consolidated

operations. Certain prior year amounts have been reclassified to conform to the current year’s presentation.

	Year Ended December 31,
	2005			2004			2003
	(in thousands)
Revenue	$	1,117,681		$	1,002,456		$	902,592
Operating costs and expenses:
Programming and other operating costs	380,277			342,636			327,505
Selling, general and administrative	269,446			227,774			187,983
Transaction-related costs	61,972			—			—
Stock-based compensation	17,368			4,438			1,729
Depreciation and amortization	247,039			239,123			230,031
Total operating costs and expenses	976,102			813,971			747,248
Operating income	141,579			188,485			155,344
Interest expense	(226,956		)	(201,450		)	(206,031		)
Benefit (provision) for income taxes	(500		)	201			2,702
Minority interest expense	(5,488		)	(14,023		)	(7,936		)
Extraordinary item	—			15,627			—
Net loss	(84,929		)	(13,799		)	(24,544		)
Net cash provided by operating activities	233,573			289,914			197,788
Net cash used in investing activities	218,711			173,544			234,691
Net cash provided by (used in) financing activities	(85,224		)	(76,398		)	22,225
Capital expenditures	220,102			174,096			196,658

Use of Operating Income before Depreciation and Amortization and Free Cash Flow

We utilize Operating Income before Depreciation and Amortization, among other measures, to evaluate the performance of our businesses. Operating Income before Depreciation and Amortization is considered an important indicator of the operational strength of our businesses and is a component of our annual compensation programs. In addition, our debt agreements use Operating Income before Depreciation and Amortization, adjusted for certain non-recurring items, in their leverage and other covenant calculations. We also use this measure to determine how we will allocate resources and capital. Our management finds this measure helpful because it captures all of the revenue and ongoing operating expenses of our businesses and therefore provides a means to directly evaluate the ability of our business operations to generate returns and to compare operating capabilities across our businesses. This measure is also used by equity and fixed income research analysts in their reports to investors evaluating our businesses and other companies in the cable television industry. We believe Operating Income before Depreciation and Amortization is useful to investors because it enables them to assess our performance in a manner similar to the methods used by our management and provides a measure that can be used to analyze, value and compare companies in the cable television industry, which may have different depreciation and amortization policies.

A limitation of Operating Income before Depreciation and Amortization, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures, investment spending and Free Cash Flow. Management also evaluates the costs of capitalized tangible and intangible assets by analyzing returns provided on the capital dollars deployed. Another limitation of Operating Income before Depreciation and Amortization is that it does not reflect income net of interest expense, which is a significant expense for us because of the substantial debt we incurred to acquire cable television systems and finance capital expenditures to upgrade our cable network. Management evaluates the impact of interest expense through measures including interest expense itself, Free Cash Flow, the returns analysis discussed above and debt service covenant ratios under our credit facility.

Free Cash Flow is net cash provided by operating activities (as defined by accounting principles generally accepted in the United States) less capital expenditures. Free Cash Flow is considered to be an important indicator of our liquidity, including our ability to repay indebtedness. We believe Free Cash Flow is useful for investors because it enables them to assess our ability to service our debt and to fund continued growth with internally generated funds in a manner similar to the methods used by our management, and provides a measure that can be used to analyze, value and compare companies in the cable television industry.

Both Operating Income before Depreciation and Amortization and Free Cash Flow should be considered in addition to, not as a substitute for, Operating Income, Net Income and various cash flow measures (e.g., Net Cash Provided by Operating Activities), as well as other measures of financial performance and liquidity reported in accordance with accounting principles generally accepted in the United States.

Reconciliation of Net Loss to Operating Income before Depreciation and Amortization

The following table reconciles Net loss to Operating Income before Depreciation and Amortization. In addition, the table provides the components from Net loss to Operating Income for purposes of the discussions that follow.

	Year Ended December 31,
	2005			2004			2003
	(in thousands)
Net loss	$	(84,929	)	$	(13,799	)	$	(24,544	)
Accrual of preferred Interests	—			—			10,353
Loss before preferred interests	(84,929		)	(13,799		)	(14,191		)
Extraordinary item, net of tax	—			(15,627		)	—
Loss before extraordinary item	(84,929		)	(29,426		)	(14,191		)
(Benefit) provision for income taxes	500			(201		)	(2,702		)
Loss before income taxes and extraordinary item	(84,429		)	(29,627		)	(16,893		)
Impairment write-down of investments	—			—			1,500
Gain on settlement of programming contract	—			—			(37,742		)
Loss on settlement of put obligation	—			—			12,169
Loss from early extinguishments of debt	—			—			10,879
Minority interest expense	5,488			14,023			7,936
Loss before minority interest, investment activity, extinguishments of obligations, gain on contract settlement, income taxes and extraordinary item	(78,941		)	(15,604		)	(22,151		)
Other (income) expense:
Other	(3,541		)	3,388			31
Interest income	(2,895		)	(749		)	(1,433		)
Interest expense	226,956			201,450			206,031
Gain on cable system exchange	—			—			(27,134		)
Total other expense, net	220,520			204,089			177,495
Operating income	141,579			188,485			155,344
Depreciation and amortization	247,039			239,123			230,031
Stock-based compensation	17,368			4,438			1,729
Operating Income before Depreciation and Amortization	$	405,986		$	432,046		$	387,104

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

The following table provides a reconciliation from net cash provided by operating activities to Free Cash Flow. In addition, the table provides the components from net cash provided by operating activities to operating income for purposes of the discussions that follow.

	Year Ended December 31,
	2005			2004
	(in thousands)
Operating income	$	141,579		$	188,485
Depreciation and amortization	247,039			239,123
Stock-based compensation	17,368			4,438
Operating Income before Depreciation and Amortization	405,986			432,046
Changes in working capital accounts (1)	16,069			25,741
Cash paid for interest	(188,216		)	(167,602		)
Cash paid for taxes	(266		)	(271		)
Net cash provided by operating activities	233,573			289,914
Capital expenditures	(220,102		)	(174,096		)
Free Cash Flow	$	13,471		$	115,818

(1) Changes in working capital accounts are based on the net cash changes in current assets and current liabilities, excluding changes related to interest and taxes and other non-cash expenses.

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenue for the year ended December 31, 2005 totaled $1.1 billion, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as basic and classic video rate increases. High-speed Internet service revenue increased 45% over the prior year, which is mainly attributable to an increased customer base. We added a net 139,900 high-speed Internet customers during the year to end the year at 470,400 customers. In addition, digital service revenue increased 13% over the prior year due to an increased customer base. We added a net 67,500 digital customers during the year to end the year at 518,800 customers.

Basic cable service revenue increased 4% primarily due to basic and classic video rate increases, partially offset by promotional discounts. Although the number of basic video customers was higher at December 31, 2005 than December 31, 2004, the average number of customers during the year declined slightly. We are increasing our customer retention efforts by emphasizing bundling, enhancing and differentiating our video services and providing video-on-demand, high definition television and digital video recorders. We are also continuing to focus on improving customer satisfaction through higher service levels, increased education of our product offerings and increased spending on sales and marketing efforts.

Revenue by service offering was as follows for the year ended December 31 (in thousands):

	Revenue by Service Offering
	2005		% of Total Revenue			2004		% of Total Revenue			% Change in Revenue
Basic	$	596,321		53.4	%	$	573,650		57.2	%		4.0	%
High-speed Internet	190,820			17.1	%	132,011			13.2	%		44.5	%
Digital	111,202			9.9	%	98,797			9.9	%		12.6	%
Advertising	76,004			6.8	%	68,415			6.8	%		11.1	%
Premium	54,414			4.9	%	57,054			5.7	%		(4.6	)%
Telephone	35,502			3.2	%	15,254			1.5	%		132.7	%
Franchise fees	30,721			2.7	%	28,721			2.9	%		7.0	%
Other	22,697			2.0	%	28,554			2.8	%		(20.5	)%
Total	$	1,117,681		100.0	%	$	1,002,456		100.0	%		11.5	%

Total Customer Relationships were approximately 1,347,500 as of December 31, 2005, an increase of 24,800 from 1,322,700 as of December 31, 2004. Total Customer Relationships represent the number of customers who receive one or more of our products (i.e. basic cable, high-speed Internet or telephone) without regard to which product they purchase. Revenue Generating Units (“RGUs”), which represent the sum of basic, digital, high-speed Internet and telephone customers, as of December 31, 2005 increased 11% as compared to December 31, 2004. RGUs by category were as follows (in thousands):

	December 31, 2005		December 31, 2004
Basic		1,281.6		1,272.5
Digital		518.8		451.3
High-speed Internet		470.4		330.5
Telephone		89.9		64.3
Total RGUs		2,360.7		2,118.6

Average monthly revenue per basic customer was $73.30 for the year ended December 31, 2005, compared to $64.96 for the year ended December 31, 2004. This primarily reflects the continued growth of high-speed Internet and digital product offerings in all markets as well as basic and classic video rate increases. In addition, telephone revenues for the year ended December 31, 2005 reflect service revenues earned directly from customers compared to the year ended December 31, 2004, which reflected revenues billed to Comcast under a previous contractual agreement that was terminated effective December 31, 2004. Also included in telephone revenue for the year ended December 31, 2005 is the continued amortization of installation revenue under the previous arrangement with Comcast in the amount of $3.3 million.

Programming and other operating costs increased $37.6 million, or 11%. Total programming costs for our video products decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004. The substantial increases in programming rates were offset by programming credits. The credits resulted from favorable resolution of pricing negotiations related to certain prior period programming costs that were accrued at a higher rate than the amount actually paid and a settlement of disputed claims with a vendor. In addition, direct operating costs increased due to an increased volume of modems sold and cost of sales associated with telephone that were previously paid by Comcast. Other operating costs increased primarily as a result of increases in technical salaries for new and existing employees, in addition to decreased capitalized labor costs due to the continued transition from upgrade and new connect activities to maintenance and reconnect activities. Other operating costs also increased as a result of increases in repairs and maintenance costs due to increased repair costs for customer premise

equipment, an increase in drop materials due to customer growth and increased property taxes due to a favorable reversal of accrued property taxes recorded in 2004.

Selling, general and administrative expenses increased $41.7 million, or 18%, primarily due to increased payroll and payroll related costs, including an increase in the number of employees and salary increases for existing employees. Marketing support funds (recorded as a reduction to selling, general and administrative expenses) decreased from the prior year. Marketing expenses increased over the prior year to support the continued rollout of high-speed Internet, digital and telephone products, and to maintain the company’s core video customer base. A decrease in expenses previously allocated to Comcast under our prior agreement to manage certain Comcast systems also contributed to the increase in selling, general and administrative expenses. As this agreement was terminated effective July 31, 2004, the year ended December 31, 2005 does not include any of these expense allocations, and the year ended December 31, 2004 includes seven months of these expense allocations. Some cost savings have been realized upon termination of the management agreement, and the impact of certain of these savings is reflected in programming and other operating costs.

Transaction-related costs of $62.0 million were recorded for the year ended December 31, 2005. These costs were comprised of sponsor and investment fees, legal and accounting fees, financial advisor fees, the cancellation of in-the-money stock options, printing and mailing and other miscellaneous expenses related to the going-private transaction.

Stock-based compensation expense increased $12.9 million due to the expense associated with the accelerated vesting of certain restricted shares in connection with the going-private transaction and in connection with the granting of restricted and deferred shares during the year ended December 31, 2005.

Depreciation and amortization expense increased $7.9 million, or 3%, primarily as a result of additional capital expenditures through December 31, 2005. These expenditures were primarily for telephone equipment, purchases of customer premise equipment and drop materials and network extensions, all of which we consider necessary in order to continue to maintain and grow our customer base and expand our service offerings. Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since December 31, 2004.

As a result of the factors discussed above, Operating Income before Depreciation and Amortization decreased $26.0 million. After adjusting for going-private transaction-related costs of $62.0 million, Operating Income before Depreciation and Amortization increased $36.0 million to $468.0 million, an increase of 8% over 2004.

Interest expense increased $25.5 million, or 13%, due to higher interest rates, which averaged 8.2% for the year ended December 31, 2005, as compared to 7.1% for the year ended December 31, 2004, and an increase in the accreted value of the 12 ¼% Senior Discount Notes.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenue for the year ended December 31, 2004 totaled $1.0 billion, an increase of 11% over the prior year, due primarily to customer gains in high-speed Internet and digital services, as well as basic rate increases. High-speed Internet service revenue increased 41% over the prior year, primarily due to an increased customer base. We added a net 100,500 high-speed Internet customers during the year to end the year at 330,500 customers. Basic cable service revenue increased 7%, primarily due to basic rate increases partially offset by customer losses. Our loss in basic customers resulted primarily from greater competitive pressures by DBS service providers, particularly in those markets where we experienced their “local-to-local” launches. In addition, digital service revenue increased 18% over the prior year, primarily due to an increased customer base. We added a net 48,400 digital customers during the year to end the year at 451,300 customers.

Revenue by service offering was as follows for the year ended December 31, (dollars in thousands):

	Revenue by Service Offering
	2004		% of Total Revenue			2003		% of Total Revenue			% Change in Revenue
Basic	$	573,650		57.2	%	$	537,026		59.5	%		6.8	%
High-speed Internet	132,011			13.2	%	93,937			10.4	%		40.5	%
Digital	98,797			9.9	%	83,471			9.3	%		18.4	%
Advertising	68,415			6.8	%	58,832			6.5	%		16.3	%
Premium	57,054			5.7	%	57,247			6.3	%		(0.3	)%
Franchise fees	28,721			2.9	%	27,350			3.0	%		5.0	%
Other	28,554			2.8	%	32,396			3.6	%		(11.9	)%
Telephone	15,254			1.5	%	12,333			1.4	%		23.7	%
Total	$	1,002,456		100.0	%	$	902,592		100.0	%		11.1	%

Total Customer Relationships were approximately 1,322,700 as of December 31, 2004 compared to 1,327,200 as of December 31, 2003. RGUs as of December 31, 2004 increased 7% as compared to December 31, 2003. RGUs by category were as follows (in thousands):

	December 31, 2004		December 31, 2003
Basic		1,272.5		1,293.6
Digital		451.3		402.9
High-speed Internet		330.5		230.0
Telephone		64.3		55.4
Total RGUs		2,118.6		1,981.9

Average monthly revenue per basic customer was $64.96 for the year ended December 31, 2004, compared to $58.03 for the year ended December 31, 2003 primarily reflecting the continued successful rollout of new product offerings in all markets. Average monthly revenue per basic customer for high-speed Internet and digital service increased to $14.95 for the year ended December 31, 2004, up from $11.41 for the year ended December 31, 2003.

Programming and other operating costs increased $15.1 million, or 5%. Partially offsetting the increase in programming and other operating costs was the reversal of a $14.7 million accrual for property taxes for the years 1999 through 2004. Excluding the reversal of this accrual, programming and other operating costs increased 9%. Programming costs increased 11%, primarily as a result of increased programming rates for our classic service and an increase in digital customers served. In addition, programming costs increased due to an increase in high-speed Internet costs driven by the net addition of 100,500 high-speed Internet customers. This increase in high-speed Internet costs was partially offset by more favorable per customer charges under a new agreement with our Internet service provider, beginning July 2004. In addition, programming costs increased as a result of an increased volume of modems provided to customers under certain marketing campaigns. Excluding the reversal of the property tax accrual, other operating costs increased 4%, primarily attributable to increases in labor costs, which increased due to a reduction of network rebuild/upgrade activities.

Selling, general and administrative expenses increased $39.8 million, or 21%, primarily due to increased payroll and related costs reflecting salary increases for existing employees and increases in health insurance costs. In addition, marketing expenses increased to support the continued rollout of high-speed Internet and digital products and to maintain the core video customer base. A decrease in expenses previously allocated to Comcast Cable in connection with the cable systems we previously managed for a Comcast Cable affiliate also contributed to the increase in selling, general and administrative expenses. As this management arrangement was terminated effective July 31, 2004, the year ended December 31, 2004 contains only seven months of expense allocations versus a full year for the year ended December 31, 2003. While cost savings have been realized upon termination of the management arrangement, the impact of some of these savings is reflected in programming and other operating costs. In addition, bad debts and collection costs increased, reflecting an increase in the number of accounts written off combined with a higher balance per average account written off.

Depreciation and amortization expense increased $9.1 million, or 4%, primarily as a result of additional capital expenditures through December 31, 2004 to extend the plant and continue the rollout of digital, high-speed Internet and telephone services to existing and new service areas.

As a result of the factors discussed above, Operating Income before Depreciation and Amortization increased $44.9 million, or 12%.

Interest expense decreased $4.6 million, or 2%. The decrease is related to lower interest rates, which averaged 7.1% for the year ended December 31, 2004, compared to 7.4% for the year ended December 31, 2003. For the years ended December 31, 2004 and 2003, our outstanding debt averaged $2.8 billion and $2.7 billion.

Liquidity and Capital Resources

Our business requires cash for operations, debt service and capital expenditures. The cable television business has substantial on-going capital requirements for the construction, expansion and maintenance of its broadband networks and provision of new services. In the past, expenditures have been made for various purposes including the upgrade of our existing cable network, and in the future will be made for network extensions, installation of new services, customer premise equipment (e.g., set-top boxes), deployment of new product and service offerings, and, to a lesser extent, network upgrades. Historically, we have been able to meet our cash requirements with cash flow from operations, borrowings under our credit facilities and issuances of private and public debt and equity.

Cash provided by operations for the years ended December 31, 2005 and 2004 was $233.6 million and $289.9 million. The decrease was primarily attributable to an increase in net loss due to costs incurred in connection with the going-private transaction partially offset by the effect of non-cash items.

Cash used in investing activities for the years ended December 31, 2005 and 2004 was $218.7 million and $173.5 million. The increase primarily was due to capital expenditures to launch our telephone product in additional markets, customer premise equipment and drop materials.

Cash used in financing activities for the years ended December 31, 2005 and 2004 was $85.2 million and $76.4 million. The increase was primarily due to increased amortization payments on the credit facility in 2005.

For the years ended December 31, 2005 and 2004, we spent $220.1 million and $174.1 million in capital expenditures. These expenditures principally constituted purchases of customer premise equipment, telephone equipment, capitalized labor, drop materials, headend equipment and system upgrades and rebuilds, all of which are necessary to maintain our existing network, grow our customer base and expand our service offerings.

Free Cash Flow for the year ended December 31, 2005 totaled $13.5 million compared to $115.8 million for the year ended December 31, 2004. The decrease was primarily driven by the following:

· A $46.0 million increase in capital expenditures;

· A $26.0 million decrease in Operating Income before Depreciation and Amortization (including the impact of $62.0 million of going-private transaction-related costs);

· A $20.6 million increase in cash interest expense paid driven by an increase in interest rates; and

· A $16.0 million source of Free Cash Flow for the year ended December 31, 2005 compared to a $25.7 million source for the year ended December 31, 2004 from changes in working capital accounts.

The above changes resulted in an overall decrease in Free Cash Flow from 2004 to 2005 of $102.3 million.

While we expect to continue to use Free Cash Flow to repay our indebtedness, as interest rates continue to increase, we expect our interest costs will also be higher.

We have concluded a number of financing transactions, which fully support our operating plan. These transactions are detailed as follows:

On October 1, 1999, in connection with the formation of Insight Midwest and our acquisition of a 50% interest in the Kentucky systems, Insight Midwest completed an offering of $200.0 million principal amount of its 93¤4% senior notes due 2009. The net proceeds of the offering were used to repay certain outstanding debt of the Kentucky systems. On November 6, 2000, Insight Midwest completed an offering of $500.0 million principal amount of its 101¤2% senior notes due 2010. The net proceeds of the offering of $486.0 million were used to repay a portion of the then existing Indiana and Kentucky credit facilities. Interest on the Insight Midwest 93¤4% senior notes is payable on April 1 and October 1 of each year and interest on the Insight Midwest 101¤2% senior notes is payable on May 1 and November 1 of each year. The indentures relating to these senior notes impose certain limitations on the ability of Insight Midwest to, among other things, incur debt, make distributions, make investments and sell assets.

On December 17, 2002 Insight Midwest completed a $185.0 million add-on offering under the 93¤4% senior notes indenture. Insight Midwest received proceeds of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that was repaid to holders of the bonds in the first semi-annual interest payment due on April 1, 2003, and net of an underwriting fee of $3.1 million and a bond discount of $8.8 million that is being amortized through October 2009. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the credit facility of Insight Midwest Holdings, LLC. Since this add-on offering occurred under the 93¤4% senior notes indenture, these additional debt securities and the previous 93¤4% senior notes are considered a single series of senior notes with identical terms.

On December 9, 2003, Insight Midwest completed a $130.0 million add-on offering under the 101¤2% senior notes indenture. Insight Midwest received proceeds of $140.9 million, including $1.4 million of interest accruing from November 1, 2003 through the date of issuance that was repaid to holders of the bonds in the first semi-annual interest payment on May 1, 2004 and a bond premium of $11.4 million that is being amortized through November 2010, and net of an underwriting fee of $2.0 million. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Insight Midwest Holdings credit facility. Since this additional add-on offering occurred under the 101¤2% senior notes indenture, these additional debt securities and the previous 101¤2% senior notes are considered a single series of senior notes with identical terms.

On January 5, 2001, in conjunction with a series of transactions with cable subsidiaries of AT&T Broadband (now known as Comcast Cable), Insight Midwest Holdings, LLC, a subsidiary of Insight Midwest which serves as a holding company for all of Insight Midwest’s systems, entered into a $1.75 billion credit facility. Insight Midwest Holdings borrowed $663.0 million to repay the then existing Indiana and Kentucky credit facilities and $685.0 million to finance the AT&T Broadband transactions.

The Insight Midwest Holdings credit facility permits the distribution of cash from Midwest Holdings’ subsidiaries to enable Insight Midwest to pay interest on its 93¤4% senior notes and 101¤2% senior notes, so long as there exists no default under the credit facility. The Insight Midwest Holdings credit facility contains covenants restricting, among other things, the ability of Midwest Holdings and its subsidiaries to acquire or dispose of assets, make investments and engage in transactions with related parties. The facility also requires compliance with certain financial ratios and contains customary events of default. As of December 31, 2005, we were in compliance with the credit facility’s covenant requirements. Given current operating conditions and projected results of operations, we anticipate continued compliance under this credit facility for the foreseeable future.

On February 6, 2001, we completed an offering of $400.0 million principal amount at maturity of 121¤4% senior discount notes due 2011. These notes were issued at a discount to their principal amount at maturity resulting in gross proceeds to us of approximately $220.1 million. We utilized approximately $20.2 million of the proceeds to repay the outstanding amount of our inter-company loan from Insight Midwest, which we incurred in connection with the financing of the AT&T Broadband transactions. No cash interest on the discount notes accrued prior to February 15, 2006. Cash interest began to accrue on the discount notes beginning on February 15, 2006 and will be payable on February 15 and August 15 of each year, commencing August 15, 2006.

On December 18, 2002 we repurchased $40.0 million face amount of the 121¤4% senior discount notes at the then accreted value of $27.4 million for $23.2 million, resulting in a gain of $3.6 million, net of the write-off of unamortized deferred financing costs of $616,000. In June 2004, we repurchased $10.0 million face amount of the 121¤4% Senior Discount Notes at the then accreted value of $8.1 million for $8.9 million, resulting in a loss of $843,000, which includes the write-off of unamortized deferred financing costs of $127,000. As of December 31, 2005 and 2004, the outstanding principal and accreted amounts of these notes were $350.0 million and $343.6 million and $350.0 million and $305.2 million.

On March 28, 2002, we loaned $100.0 million to Insight Midwest. The loan to Insight Midwest bears annual interest of 9%, compounded semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments. Insight Midwest Holdings is permitted under the credit facility to make distributions to Insight Midwest for the purpose of repaying our loan, including accrued interest, provided that there are no defaults existing under the credit facility. As of December 31, 2005 and 2004, the balance of the $100.0 million loan, including accrued interest, was $139.1 and $127.4 million.

On July 21, 2005 we completed a refinancing of the existing $1.1 billion Term B loan facility under the Insight Midwest Credit Agreement. This refinancing reduced the applicable margins for LIBOR rate borrowings from LIBOR plus 275 basis points to LIBOR plus 200 basis points and the applicable margin will be reduced an additional 25 basis points if the Midwest Holdings leverage ratio drops below 2.75. The maximum total leverage ratio covenant was reset from 3.75 to 4.50 on July 1, 2005 with step downs to 4.25 on July 1, 2006 and 4.00 on July 1, 2007. The facility was also amended to provide certain flexibility to refinance the senior notes at Insight Midwest.

We have a substantial amount of debt. Our high level of debt could have important consequences for you. Our investments in our operating subsidiaries, including Insight Midwest, constitute substantially all of our operating assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our operating assets. Our principal source of cash we need to pay our obligations and to repay the principal amount of our debt obligations is the cash that our subsidiaries generate from their

operations and their borrowings. Our subsidiaries are not obligated to make funds available to us and are restricted by the terms of their indebtedness from doing so. Because of such restrictions, our ability to access the cash flow of our subsidiaries may be contingent upon our ability to refinance the debt of our subsidiaries.

We believe that the Insight Midwest Holdings credit facility, cash on-hand and our cash flow from operations are sufficient to support our current operating plan. For the years ended December 31, 2005 and 2004 we had positive Free Cash Flow. We had the ability to draw upon $302.0 million of unused availability under the Insight Midwest Holdings Credit Facility as of December 31, 2005 to fund any shortfall resulting from the inability of Insight Midwest’s cash from operations to fund its capital expenditures, meet its debt service requirements or otherwise fund its operations.

The following table summarizes our contractual obligations and commitments, excluding interest and commitments for programming, as of December 31, 2005, including periods in which the related payments are due (in thousands):

	CONTRACTUAL OBLIGATIONS
	Long-Term Debt		Operating Leases			TOTAL
2006	$	83,500		$	4,637	$	88,137
2007	83,500			3,486		86,986
2008	104,750			3,050		107,800
2009	1,517,500			2,169		1,519,669
2010	630,000			783		630,783
Thereafter	350,000			740		350,740
Total cash obligations	$	2,769,250		$	14,865	$	2,784,115

Recent Accounting Pronouncements

On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, and supersedes APB Opinion No. 25. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the next fiscal year that begins after June 15, 2005. In addition, SFAS No. 123(R) will cause unrecognized expense related to previously issued options vesting after the date of initial adoption to be recognized as a charge to results of operations over the remaining vesting period. We are required to adopt SFAS No. 123(R) in our first quarter of 2006. The FASB has concluded that companies may adopt the new standard in one of two ways: the modified prospective transition method and the modified retrospective transition method. Under the modified retrospective transition method, prior periods may be retroactively adjusted either as of the beginning of the year of adoption or for all periods presented. The modified prospective transition method requires that compensation expense be recorded for all unvested stock options and share awards at the beginning of the fiscal period of adoption of SFAS No. 123R, while the retrospective method would record compensation expense for all unvested stock options and share awards beginning with the fiscal period retroactively adjusted. We do not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.

In March 2005, FASB issued Interpretation No. 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations (an Interpretation of SFAS No. 143)”. This Interpretation provides clarification with respect to the timing of liability recognition for legal obligations associated with the retirement of long-lived assets when the timing and/or method of settlement of the obligation is conditional on a future event. This Interpretation requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it occurred if a reasonable estimate of fair value can be made. FIN 47 is

effective for fiscal years ending after December 2005. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements and changes the requirements for the accounting for and reporting of a change in accounting principles. SFAS No. 154 applies to all voluntary changes in an accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific provisions, those provisions should be followed. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning in 2006. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.

Critical Accounting Policies

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical to us, in that they are important to the portrayal of our financial statements and they require our most difficult, subjective or complex judgments in the preparation of our consolidated financial statements.

Fair Value of Assets Acquired and Liabilities Assumed in Purchase Combinations

The purchase combinations carried out by us require management to estimate the fair value of the assets acquired and liabilities assumed in the combinations. These estimates of fair value are based on our business plan for the entities acquired including planned redundancies, restructuring, use of assets acquired and assumptions as to the ultimate resolution of obligations assumed for which no future benefit will be received. We also utilize appraisal reports issued by independent appraisers. Should actual use of assets or resolution of obligations differ from our estimates, revisions to the estimated fair values would be required. If a change in estimate occurs after one year of the acquisition, the change would be recorded in our statement of operations.

Goodwill and Other Identifiable Intangibles

We assess the impairment of goodwill and other indefinite-lived intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Some factors we consider important which could trigger an impairment review include the following:

· Significant underperformance relative to expected historical or

· projected future operating results;

· Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and

· Significant negative industry or economic trends.

When we determine that the carrying value of goodwill and other indefinite-lived intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. With the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002 we ceased amortizing goodwill and franchise costs arising from acquisitions. In lieu of amortization, we perform an annual impairment analysis. If we determine through the impairment review process that goodwill has been impaired, we would record an impairment charge in our statement of operations.

Investments

Periodically, we make strategic investments. All marketable securities are classified as available-for-sale securities and are carried at fair value. All other equity investments are carried at cost. Periodically, we assess the value of these investments by using information acquired from industry trends, the management of these companies and other external sources. Based on the information acquired, we record an impairment charge when we believe an investment has experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring an impairment charge in the future.

Fixed Assets

Fixed assets include costs capitalized for labor and overhead incurred in connection with the construction of cable systems and is stated at cost. Depreciation for buildings, cable system equipment, furniture, fixtures and office equipment is calculated using the straight-line method over estimated useful lives ranging from 2 to 30 years. Leasehold improvements are amortized using the straight-line method over shorter of the remaining terms of the leases or the estimated lives of the improvements.

Refer to Note 2 to our consolidated financial statements included in Item 8 for a discussion of our accounting policies with respect to these and other items.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Our revolving credit and term loan agreements bear interest at floating rates. Accordingly, we are exposed to potential losses related to changes in interest rates. In order to manage our exposure to interest rate risk, we enter into derivative financial instruments, typically interest rate swaps. The counter-parties to our swap agreements are major financial institutions. We do not enter into derivatives or other financial instruments for trading or speculative purposes. As of December 31, 2005, $130.0 million of our interest rate swap agreements expire in November 2010.

The aggregate fair market value and aggregate carrying value of our 9¾% senior notes, 10½% senior notes and 12¼ senior discount notes was $1.4 billion as of December 31, 2005. The fair market value of our credit facility borrowings approximates its carrying value as the credit facility borrowings bear interest at floating rates of interest. As of December 31, 2005 and 2004, the cost, if terminated, of our interest rate swap agreements were $2.4 million and $1.6 million and is reflected in our financial statements as other non-current liabilities. Changes in the fair value of our interest rate derivative financial instruments are either recognized in income or in stockholders’ equity as a component of other comprehensive income depending on whether the derivative financial instruments qualify for hedge accounting.

Item 8. Financial Statements and Supplementary Data

Reference is made to our consolidated financial statements beginning on page F-1 of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2005. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that (i) our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and (ii) our disclosure controls and procedures were designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on our assessment, management concluded that, as of December 31, 2005, our internal control over financial reporting was effective.

Our independent auditors have issued an audit report on our assessment of our internal control over financial reporting. This report appears on page F-1.

Item 9B. Other Information

Independent Director Compensation

On February 27, 2006, our board of directors approved compensation arrangements for our independent directors (as defined below). Our current independent directors are Geraldine B. Laybourne, Amos B. Hostetter, Jr. and Stephen C. Gray. The compensation arrangements consist of an annual retainer fee of $50,000, payable quarterly in cash. In addition, each of the independent directors was granted 10,370 shares of our Series E non-voting common stock, subject to a five-year vesting schedule, with 20% of the shares vesting at the end of each completed year of service.

Our amended and restated certificate of incorporation defines an “independent director” as one (x) who a majority of the independent directors determines has no material relationship with our company and has no current or prior relationship with our management, our company or the holders of the Series A voting preferred stock or Series B voting preferred stock that might cause such director to act other than entirely independently with respect to all issues that come before the board of directors; and (y) who satisfies the independence requirements under Rule 303A.02 of the Listed Company Manual of the New York Stock Exchange. Geraldine Laybourne, Amos Hostetter and Stephen Gray were each deemed independent directors as of December 16, 2005.

Awards Pursuant to the 2005 Incentive Plan

On December 16, 2005, our board of directors adopted the Insight Communications Company, Inc. 2005 Stock Incentive Plan (the “Plan”). Under the Plan, our board has the authority to grant awards of shares of our Series F non-voting common stock to officers, employees and directors. A total of 100,000 shares of Series F non-voting common stock are available for issuance under the Plan.

On February 27, 2006, our board authorized the issuance of Series F non-voting common stock to the following executive officers:

Name	Number of Shares of Series F Non-Voting Preferred
Dinni Jain		9,000
John Abbot		4,500
Christopher Slattery		2,700
Elliot Brecher		1,800

Shares granted under the Plan require the execution of a subscription agreement. All participants in the Plan must also become a party to our Securityholders Agreement. Unless otherwise provided in the applicable subscription agreement, Series F shares will vest in five equal annual installments commencing on December 16, 2006.

PART III

Item 10. Directors and Executive Officers of the Registrant

Our executive officers and directors are as follows:

Name	Age	Position
Sidney R. Knafel	75	Chairman of the Board and Director
Michael S. Willner	53	Vice Chairman, Chief Executive Officer and Director
Dinni Jain	42	President, Chief Operating Officer and Director
John Abbot	43	Executive Vice President and Chief Financial Officer
Christopher Slattery	38	Executive Vice President, Field Operations
Elliot Brecher	40	Senior Vice President, General Counsel and Secretary
James A. Attwood, Jr.	47	Director
Michael J. Connelly	54	Director
Stephen C. Gray	47	Director
Amos B. Hostetter, Jr.	69	Director
William E. Kennard	49	Director
Geraldine B. Laybourne	58	Director

Sidney R. Knafel has served as Chairman of the Board since 1985. He serves as chairman of the governance committee. Mr. Knafel was the founder, Chairman and an equity holder of Vision Cable Communications, Inc. from 1971 until its sale in 1981. Mr. Knafel is presently the managing partner of SRK Management Company, a private investment company. He is a director of General American Investors Company, Inc., IGENE Biotechnology, Inc. and VirtualScopics, Inc., as well as several private companies. Mr. Knafel is a graduate of Harvard College and Harvard Business School.

Michael S. Willner has served as Chief Executive Officer since 1985. Mr. Willner has also served as Vice Chairman since August 2002, and as President from 1985 to August 2002 and from August 2003 to February 2006. Mr. Willner served as Executive Vice President and Chief Operating Officer of Vision Cable from 1979 through 1985, Vice President of Marketing for Vision Cable from 1977 to 1979 and General Manager of Vision Cable’s Bergen County, New Jersey cable television system from 1975 to 1977. He currently serves on the board of directors and Executive Committee of the National Cable & Telecommunications Association. He also serves on the boards of C-SPAN, Women in Cable and Telecommunications, the Cable Center and the Walter Kaitz Foundation, as well as the Executive Committee of CableLabs. Mr. Willner is a graduate of Boston University’s College of Communication and serves on the school’s Executive Committee.

Dinni Jain has served as President since February 2006 and as Chief Operating Officer since October 2003. Mr. Jain served as Executive Vice President between October 2003 and February 2006. He joined our company in January 2002 as Senior Vice President and Chief Financial Officer. From 1994 through 2002, he served in a number of roles in sales, marketing, customer service, strategy, corporate development and general management at NTL Incorporated, one of Europe’s leading cable and telecommunications companies. He ultimately served as Deputy Managing Director of NTL’s Consumer Division, overseeing customer and new business growth, as well as the quality of customer satisfaction. He also managed the operations of NTL’s Cable and Wireless Consumer Group from 2000 to 2001. He currently serves on the board of directors of The Cable & Telecommunication Association for Marketing Foundation. Mr. Jain attended Princeton University.

John Abbot has served as Executive Vice President since February 2006 and as Chief Financial Officer since January 2004. Mr. Abbot served as Senior Vice President between January 2004 and February 2006. From January 1995 to January 2004, Mr. Abbot served in a number of roles at Morgan Stanley, most recently as Managing Director in the Global Media and Communications Group of its Investment Banking

Division. Prior to joining Morgan Stanley, Mr. Abbot was an associate at Goldman, Sachs & Co., and he also served six years as a Surface Warfare Officer in the U.S. Navy. Mr. Abbot received a bachelor’s degree in Systems Engineering from the U.S. Naval Academy, an ME in Industrial Engineering from Pennsylvania State University and an MBA from Harvard Business School.

Christopher Slattery has served as Executive Vice President, Field Operations since February 2006. He joined our company in October 2004 as Senior Vice President, Sales, then served as Senior Vice President, Growth from April 2005 until January 2006 when he was named Senior Vice President, Field Operations. Prior to joining our company, from September 2002, Mr. Slattery served as a Managing Director of NTL’s London operations, responsible for the management of 1.5 million cable network homes, and with responsibility in the areas of sales, growth strategy, reduction of churn and customer experience. Prior thereto, from September 2001, he served as Sales Director for NTL’s European operations, responsible for designing, developing and implementing customer growth strategies across NTL’s then newly-acquired European assets. From August 2000 to August 2001, Mr. Slattery served as a General Manager of NTL’s United Kingdom operations, with overall responsibility for sales and marketing, customer retention, customer care and network maintenance, as well as budget strategy, planning and implementation. Prior thereto, from January 1990, Mr. Slattery served in a number of sales-related roles at NTL and its predecessors.

Elliot Brecher has served as Senior Vice President and General Counsel since January 2000. Previously, he was associated with the law firm Cooperman Levitt Winikoff Lester & Newman, P.C., which served as Insight’s legal counsel until July 2000 when it merged with Sonnenschein Nath & Rosenthal LLP, which continues to serve as Insight’s legal counsel. He joined that firm in February 1994 and served as a partner from January 1996 until joining Insight Communications. Prior to that, he was an associate of the law firm Rosenman & Colin from October 1988. Mr. Brecher received his law degree from Fordham University.

James A. Attwood, Jr. was elected as a director effective immediately prior to the effective time of the going-private transaction on December 16, 2005. He serves as a member of the governance committee. Mr. Attwood has served as a managing director of The Carlyle Group since November 2000. Prior to joining Carlyle, he served as Executive Vice President-Strategy, Development and Planning for Verizon Communications. Prior thereto, he served as Executive Vice President-Strategic Development and Planning at GTE Corporation. Mr. Attwood joined GTE Corporation in 1996 as Vice President-Corporate Planning and Development after more than ten years in the investment banking division of Goldman, Sachs & Co. Mr. Attwood currently also serves as a director of R.H. Donnelley Corporation, Hawaiian Telecommunications, Inc. and WILLCOM, Inc.

Michael J. Connelly was elected as a director effective immediately prior to the effective time of the going-private transaction. He serves as chairman of the audit committee. Since December 2002, Mr. Connelly has served as a managing director of Carlyle. Before joining Carlyle, Mr. Connelly served as a managing director of Credit Suisse First Boston. Mr. Connelly is also a member of the board of directors of AMC Entertainment Corporation and PanAmSat.

Stephen C. Gray was elected as a director effective immediately prior to the effective time of the going-private transaction. He serves as a member of the audit and compensation committees. Mr. Gray has served as the Executive Chairman of Security Coverage, Inc. since October 2005. From 1994 through 2004, Mr. Gray served as the President of McLeodUSA Incorporated. Mr. Gray joined McLeodUSA in 1992 as its Chief Operating Officer. Mr. Gray was also a member of the board of directors of McLeodUSA Incorporated from 1992 to 2004 and a member of the executive committee from 2001 to 2004. On January 31, 2002, McLeodUSA Incorporated filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. On April 16, 2002, McLeodUSA Incorporated emerged from the Bankruptcy Court proceedings pursuant to the terms of its amended plan of reorganization, which became

effective on that date. From August 1990 to September 1992, Mr. Gray served as Vice President of Business Services at MCI Communications Corp., where he was responsible for MCI’s local access strategy and for marketing and sales support of the Business Markets division. From February 1988 to August 1990, he served as Senior Vice President of National Accounts and Carrier Services for Telecom*USA, Inc., where his responsibilities included sales, marketing, key contract negotiations and strategic acquisitions and combinations. From September 1986 to February 1988 Mr. Gray held a variety of management positions with Williams Telecommunications Company. Mr. Gray is a graduate of the University of Tennessee.

Amos B. Hostetter, Jr. was elected as a director effective immediately prior to the effective time of the going-private transaction. He serves as a member of the compensation committee. Mr. Hostetter has served as the chairman of Pilot House Associates, LLC since its formation in August 1997. Prior to joining Pilot House Associates, Mr. Hostetter was the chief executive officer of MediaOne, the domestic cable arm of MediaOne Group, formerly the nation’s third-largest broadband communications provider, serving more than 4.8 million subscribers in 19 states and employing 11,000 people. Mr. Hostetter co-founded Continental Cablevision in 1963 and served as its chief financial officer from 1963 until 1980 and as its chairman and chief executive officer from 1980 until its merger with MediaOne Group in November of 1996. Mr. Hostetter was the chairman of the board of the National Cable & Telecommunications Association from 1973 to 1974 and served on that association’s board from 1968 to 1998. He was a founding member and past chairman of the Cable-Satellite Public Affairs Network (C-SPAN) and Cable in the Classroom. President Gerald Ford appointed Mr. Hostetter a director of the Corporation for Public Broadcasting, and he is a former member of the Children’s Television Workshop. Mr. Hostetter is currently the Chair Emeritus of the board of trustees of Amherst College, a trustee of the Museum of Fine Arts in Boston and Chairman of the board of trustees of WGBH-TV. Mr. Hostetter earned a bachelor’s degree from Amherst College in 1958 and earned an MBA from Harvard Business School in 1961.

William E. Kennard was elected as a director effective immediately prior to the effective time of the going-private transaction. He serves as chairman of the compensation committee. Since May 2001, Mr. Kennard has served as a managing director of Carlyle. Before joining Carlyle, Mr. Kennard served as the Chairman of the Federal Communications Commission from November 1997 to January 2001. Mr. Kennard is also a member of the board of directors of The New York Times Company, Sprint Nextel Corporation and Hawaiian Telecommunications, Inc.

Geraldine B. Laybourne has served as a director of Insight since February 2004. She serves as a member of the audit and governance committees. In 1998, Ms. Laybourne founded Oxygen Media, LLC, an independent cable television network with programming tailored to the interests of women, and has served as its Chairman and Chief Executive Officer since its inception. She is most notably known for her work at Nickelodeon, a programming affiliate of MTV Networks, having served in a number of roles from 1980 to 1995, including as its President from 1989. From 1993 to 1995, she also served as the Vice Chairman of MTV Networks. From 1996 to 1998, she served as the President of Disney ABC Cable Networks. She currently serves on the boards of the National Cable & Telecommunications Association and the National Council for Families and Television, and on the Advisory Board of New York Women in Film & Television. Ms. Laybourne received a bachelor’s degree in Art History from Vassar College and serves on its board of trustees, and received an MS in Elementary Education from the University of Pennsylvania.

Each executive officer serves until a successor is elected by the board of directors or until the earlier of his or her resignation or removal.

Effective immediately prior to the effective time of the going-private transaction, the number of directors constituting our board of directors was increased from seven to nine. Each of the directors listed above was elected as a director effective immediately prior to the effectiveness of the resignations of

David C. Lee, Thomas L. Kempner and James S. Marcus and immediately prior to the effective time of the going-private transaction.

Sidney Knafel, Michael Willner and certain trusts for the benefit of Mr. Knafel’s children, through ownership of our Series A voting preferred stock, have the right to designate five directors, two of whom must be independent. Affiliates of The Carlyle Group, through ownership of our Series B voting preferred stock, have the right to designate four directors, one of whom must be independent. Messrs. Knafel, Willner, Jain and Hostetter and Ms. Laybourne are designees of the holders of Series A voting preferred stock, and the remaining four individuals are designees of the holders of Series B voting preferred stock.

The directors are divided into three classes consisting of three members each, and the terms for the directors are staggered. Each class has at least one Series A director and one Series B director. The respective terms of office expire at the annual election held in the year specified below. At each annual election, the directors chosen to succeed those whose terms then expire will be elected for that same class for a three-year term. Each of the directors will serve until his or her successor is duly elected or appointed and qualified or until his or her death, resignation or removal.

· Class I Directors—Term expires in 2006: Michael Willner, Dinni Jain and James Attwood.

· Class II Directors—Term expires in 2007: Sidney Knafel, William Kennard and Michael Connelly

· Class III Directors—Term expires in 2008: Geraldine Laybourne, Amos Hostetter and Stephen Gray

Our Board of Directors has determined that Michael Connelly and Stephen Gray meet the Securities and Exchange Commission definition of “audit committee financial expert.”

Code of Ethics

We have adopted a code of ethics for our directors, chief executive officer, chief financial officer and chief accounting officer, as well as other employees and the employees of our subsidiaries. A copy of the code was filed as an exhibit to our annual report on Form 10-K for the year ended December 31, 2003.

Item 11. Executive Compensation

The following table summarizes the compensation paid for services rendered in 2003, 2004 and 2005 to the Chief Executive Officer and the other four most highly compensated executive officers in 2005, as well as Christopher Slattery who became an executive officer in February 2006 (collectively, the “Named Executive Officers”).

Summary Compensation Table

		Annual Compensation				Long-Term Compensation Awards
Name and Principal Position	Year	Salary		Bonus		Restricted Stock Awards			Number of Securities Underlying Options		All Other Compensation (1)
Sidney R. Knafel	2005	$	250,000	—		—				—		$	14,614
Chairman of the Board	2004	$	250,000	—		—				281,250		$	13,568
	2003	$	250,000	—		$	655,520	(2)		—		$	13,282
Michael S. Willner	2005	$	691,200	$	349,300	—				—		$	17,460
Vice Chairman	2004	$	635,000	$	317,500	—				521,875		$	13,598
and Chief Executive	2003	$	577,900	$	290,000	$	1,638,800	(2)		—		$	11,896
Officer
Dinni Jain	2005	$	522,100	$	262,500	—				—		$	18,349
President	2004	$	500,000	$	250,000	—				237,500		$	12,572
and Chief Operating	2003	$	367,900	$	190,000	$	1,420,150	(2)(3)		—		$	11,728
Officer
John Abbot(4)	2005	$	391,600	$	196,900	—				—		$	14,583
Executive Vice President	2004	$	346,154	$	278,767	$	767,250			290,000		$	1,555
and Chief Financial
Officer
Christopher Slattery(5)	2005	$	279,000	$	141,900	—				—		$	2,259
Executive Vice President,	2004	$	80,100	$	25,000	$	135,450			25,000		$	1,992
Field Operations
Elliot Brecher	2005	$	329,300	$	115,800	—				—		$	13,884
Senior Vice President and	2004	$	318,360	$	110,000	—				81,250		$	11,803
General Counsel	2003	$	306,100	$	100,000	$	96,400	(2)		—		$	11,140

(1) Amounts for 2003, 2004 and 2005 include: (i) matching contributions made by us on behalf of the Named Executive Officers to our 401(k) plan (Sidney Knafel: $10,000, $10,500 and $10,500; Michael Willner: $10,000, $10,500 and $10,500; Dinni Jain: $10,000, $10,500 and $10,500; John Abbot: $10,500; and Elliot Brecher: $10,000, $10,500 and $10,500) and (ii) life insurance premiums and group term life insurance premiums paid by us on behalf of the Named Executive Officers (Sidney Knafel: $3,282, $3,068 and $4,114; Michael Willner: $1,896, $3,098 and $6,960; Dinni Jain: $1,728, $2,072 and $7,849; John Abbot: $1,555 and $4,083; Christopher Slattery: $1,992 and $2,259; and Elliot Brecher: $1,140, $1,303 and $3,384). One-half of the matching contributions to our 401(k) plan were made in the form of shares of Class A common stock. In connection with our going-private transaction on December 16, 2005, all 401(k) shares were converted into the right to receive the $11.75 per share merger consideration.

(2) Includes deferred stock awards the value of which is calculated by multiplying the closing market price of our Class A common stock on the date of grant (November 6, 2003: $9.64) by the number of shares awarded. In connection with our going-private transaction, on December 16, 2005, each of the deferred share award agreements was amended to provide for delivery of one share of our Series C non-voting preferred stock upon settlement for every share of Class A common stock that the holder otherwise would have been entitled to receive prior to giving effect to the amendment. The shares underlying the deferred stock awards are deliverable in settlement upon a change in control (as defined in the respective award agreements) or prior thereto upon the later to occur of December 16,

2010 or termination of the executive’s employment. The shares vest in five equal annual installments on November 6 of each year. The number and value of these awards as of December 31, 2005 (based upon the going-private merger price of our Class A common stock ($11.75)) was as follows: Sidney Knafel: 68,000 shares = $799,000; Michael Willner: 170,000 shares = $1,997,500; each of Dinni Jain and Elliot Brecher: 10,000 shares = $117,500.

(3) The restricted stock awards includes the deferred stock award he received on November 6, 2003 as described above in note (2) as well as a 125,000 restricted share award which is calculated by multiplying the closing market price of our Class A common stock on the date of grant (October 9, 2003: $10.59) by the number of shares reported. The restricted shares were to vest in five equal annual installments on November 15 of each year. On March 15, 2005, Mr. Jain surrendered for cancellation the remaining balance of 100,000 of such restricted shares and was granted a like number of shares of deferred stock. The deferred shares have a vesting schedule that mirrors the remaining vesting schedule of the surrendered restricted shares. In addition to the deferred stock award described in note (2) above, such 100,000 shares of deferred stock held by Mr. Jain as of December 31, 2005 had a value of $1,175,000 (based upon the going-private merger price of our Class A common stock ($11.75)).

(4) The 2004 bonus amount indicated above includes a $100,000 sign-on bonus. The restricted stock awards represents the 75,000 restricted share award he received upon joining our company, which is calculated by multiplying the closing price of our Class A common stock on the date of grant (January 2, 2004: $10.23) by the number of shares awarded. The restricted shares were to vest in five equal annual installments on March 1 of each year. On March 15, 2005, Mr. Abbot surrendered for cancellation the remaining balance of 60,000 restricted shares and was granted a like number of shares of deferred stock. The deferred shares have a vesting schedule that mirrors the remaining vesting schedule of the surrendered restricted shares. The deferred stock held by Mr. Abbot as of December 31, 2005 had a value of $705,000 (based upon the going-private merger price of our Class A common stock ($11.75)).

(5) Amounts for 2004 reflect the period from October 2004, when he joined our company. The restricted stock awards represents the 15,000 restricted share award he received upon joining our company, which is calculated by multiplying the closing price of our Class A common stock on the date of grant (October 26, 2004: $9.03) by the number of shares awarded. The restricted shares were to vest in three nearly equal installments: July 27, 2005, October 26, 2006 and October 26, 2007. On March 15, 2005, Mr. Slattery surrendered for cancellation all of the restricted shares and was granted a like number of shares of deferred stock. The deferred shares have a vesting schedule that mirrors the vesting schedule of the surrendered restricted shares. The deferred stock held by Mr. Slattery as of December 31, 2005 had a value of $176,250 (based upon the going-private merger price of our Class A common stock ($11.75)).

The following table sets forth information as of December 31, 2005 concerning stock options held by the Named Executive Officers in the Summary Compensation Table. In connection with our going-private transaction on December 16, 2005, each of our outstanding stock options (whether vested or unvested) were canceled in exchange for a gross cash payment equal to the excess, if any, of the $11.75 merger price and the exercise price for such option, multiplied by the number of shares covered by such option. The information in the table below represents such exchange. No options held by such individuals were exercised during 2005.

Name	Number of Shares Underlying Canceled Options		Value Realized
Sidney R. Knafel		281,250		$	739,690
Michael S. Willner		621,875		$	1,697,530
Dinni Jain		237,500		$	652,625
John Abbot		290,000		$	507,600
Christopher Slattery		25,000		$	68,000
Elliot Brecher		101,250		$	281,488

Compensation of Directors

Only our independent directors receive compensation for their services as directors, consisting of an annual retainer fee of $50,000, payable quarterly in cash. In addition, each of our current independent directors received a grant of 10,370 shares of our Series E non-voting common stock, subject to a five-year vesting schedule, with 20% of the shares vesting at the end of each completed year of service. Independent directors also are entitled to receive reimbursement of out-of-pocket expenses incurred in connection with their Board service.

Prior to the completion of our going-private transaction on December 16, 2005, those of our directors who were not also our employees (Thomas L. Kempner, Geraldine B. Laybourne, David Lee and James S. Marcus) were entitled to receive an annual retainer fee of $25,000 which, at the election of the director, could be in the form of cash or five-year stock options to purchase Class A common stock. Non-employee directors also were entitled to receive reimbursement of out-of-pocket expenses incurred for each Board or committee meeting attended. David Lee and Geraldine Laybourne also each received $100,000 in April 2005, in a lump-sum payment, as compensation for their services on the special committee formed for the purpose of reviewing, evaluating, negotiating and making a recommendation to our board of directors with respect to the going-private transaction.

Employment Agreements

Michael Willner. In connection with the completion of the going-private transaction on December 16, 2005, we entered into an employment agreement with Michael Willner, our chief executive officer. Under the terms of the employment agreement, Mr. Willner will serve as our president and chief executive officer for a three-year term, which will be automatically extended for additional one-year periods unless notice has been provided by either party that such extension will not take effect. He will receive a base salary of $698,500 during the term, subject to an annual review by our compensation committee in which it may, in its sole discretion, increase such base salary. Mr. Willner also will be entitled to an annual cash bonus opportunity for each of our fiscal years, subject to and based on the attainment by Mr. Willner and us of individual and financial performance targets to be determined by the compensation committee upon the recommendations of Mr. Willner and Sidney Knafel, our chairman of the board. For each fiscal year, Mr. Willner will have a minimum cash bonus opportunity of up to 50% of his base salary. In addition to the annual cash bonus, Mr. Willner will be entitled to participate in the management bonus pool established as provided in the securityholders agreement entered into in connection with the going-private transaction.

If Mr. Willner’s employment is terminated without Cause (as defined in the employment agreement) or Mr. Willner terminates his employment with Good Reason (as defined in the employment agreement), and in each case Mr. Willner executes a general release of all claims against us, we will pay Mr. Willner as liquidated damages:

· an amount equal to the product of Mr. Willner’s annual cash bonuses and a fraction, the numerator of which is equal to the number of days in such fiscal year that precede the date of termination and the denominator of which is equal to 365, plus

· continued payment of his base salary for the greater of the balance of the initial three year term or 12 months, plus

· payments during each fiscal year of the severance period equal to the annual cash bonuses for each such fiscal year as if Mr. Willner were employed and as if the performance targets were satisfied to the same extent as in the year prior to termination.

If Mr. Willner’s employment is terminated due to death or disability, we will pay Mr. Willner an amount equal to the product of his annual cash bonuses and a fraction, the numerator of which is equal to the number of days in such fiscal year that precede the date of termination and the denominator of which is equal to 365. The employment agreement also contains covenants relating to non-competition and non-solicitation of our employees, customers or suppliers from the date of the agreement through the severance period and protection of our confidential information.

Pursuant to the Principals’ Agreement dated July 28, 2005 entered into in connection with the going-private transaction, Sidney Knafel, Michael Willner and entities affiliated with The Carlyle Group have agreed to negotiate in good faith to reach agreement on mutually satisfactory employment agreements with Dinni Jain and John Abbot. To date, such agreements have not been entered into.

Compensation Committee Interlocks and Insider Participation

Prior to the completion of our going-private transaction on December 16, 2005, the members of the compensation committee were Thomas L. Kempner, Geraldine B. Laybourne, David Lee and James S. Marcus, none of whom were officers or employees of our company. On December 20, 2005, our compensation committee was reconstituted, and William Kennard (chairman), Stephen Gray and Amos Hostetter were appointed as the members of the compensation committee. None of the current compensation committee members is an officer or employee of our company.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information with respect to the beneficial ownership of our voting securities by:

· each person who is known by us to beneficially own more than 5% of our voting securities;

· each of our directors;

· each of our Named Executive Officers in the Summary Compensation Table; and

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

Unless otherwise indicated, the address of each person named in the table below is Insight Communications Company, Inc., 810 7th Avenue, New York, New York 10019, and each beneficial owner named in the table has sole voting and sole investment power with respect to all shares beneficially owned. The amounts and percentage of voting securities beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the

rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

	Series A Voting Preferred Stock			Series B Voting Preferred Stock			Percent of Vote as a
Beneficial Owner	Number	%		Number	%		Single Class(1)
Sidney R. Knafel	398,591		47.0	—		—		29.1
Michael S. Willner	110,652		13.0	—		—		8.1
Dinni Jain	—		—	—		—		—
John Abbot	—		—	—		—		—
Christopher Slattery	—		—	—		—		—
Elliot Brecher	—		—	—		—		—
James A. Attwood, Jr.(2)	—		—	517,836		100.0		37.9
Michael J. Connelly(2)	—		—	517,836		100.0		37.9
Stephen C. Gray	—		—	—		—		—
Amos B. Hostetter, Jr.	—		—	—		—		—
William E. Kennard(2)	—		—	517,836		100.0		37.9
Geraldine B. Laybourne	—		—	—		—		—
The Carlyle Group affiliates(2)	—		—	517,836		100.0		37.9
Andrew G. Knafel, Joshua Rubenstein and William L. Scherlis, as trustees under Trusts F/B/O children of Sidney R. Knafel	339,702		40.0	—		—		24.9
All directors and executive officers as a group (12 persons)	509,243		60.0	—		—		37.2

(1) Holders of Series A voting preferred stock and holders of Series B voting preferred stock are entitled to one vote per share. Holders of both series of preferred stock vote together as a single class on all matters presented for a vote, except as set forth in our amended and restated certificate of incorporation or as otherwise required by law.

(2) Each of Messrs. Attwood, Connelly and Kennard is a managing director of The Carlyle Group, and as such may be deemed to beneficially own the shares held by its affiliates. Carlyle’s address is 520 Madison Avenue, New York, NY 10022.

The following table sets forth information with respect to the beneficial ownership of our non-voting equity securities by:

· each of our directors;

· each of our Named Executive Officers in the Summary Compensation Table; and

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

The Series E and Series F non-voting common stock are subject to the vesting schedules and participation levels set forth in the respective award agreements.

	Series C Non-Voting Preferred Stock(1)		Series D Non-Voting Preferred Stock			Series E Non-Voting Common Stock		Series F Non-Voting Common Stock
Beneficial Owner	Number	%	Number	%		Number	%	Number		%
Sidney R. Knafel	3,903,132	29.2	—	—		281,250	7.7		22,500	24.8
Michael S. Willner	738,000	5.5	—	—		621,875	17.0		22,500	24.8
Dinni Jain	—	—	—	—		237,500	6.5		9,000	9.9
John Abbot	6,000	*	—	—		290,000	7.9		4,500	4.9
Christopher Slattery	—	—	—	—		25,000	*		2,700	3.0
Elliot Brecher	1,000	*	—	—		101,250	2.8		1,800	2.0
James A. Attwood, Jr.(2)	—	—	47,015,659	100.0	%	—	—		—	—
Michael J. Connelly(2)	—	—	47,015,659	100.0	%	—	—		—	—
Stephen C. Gray	—	—	—	—		10,370	*		—	—
Amos B. Hostetter, Jr.(3)	3,404,255	25.5	—	—		10,370	*		—	—
William E. Kennard (2)	—	—	47,015,659	100.0	%	—	—		—	—
Geraldine B. Laybourne	—	—	—	—		10,370	*		—	—
All directors and executive officers as a group (12 persons)	8,052,387	60.2	47,015,659	100.0	%	1,587,985	43.3		63,000	69.4

* Less than 1%.

(1) Does not include shares issuable under deferred stock units to the extent they may not be settled within 60 days.

(2) Represents shares held by affiliates of The Carlyle Group. Each of Messrs. Attwood, Connelly and Kennard is a managing director of Carlyle, and as such may be deemed to beneficially own the shares held by Carlyle’s affiliates.

(3) Represents shares held by PH Investments, LLC, an entity affiliated with Mr. Hostetter.

Insight Midwest Partnership Split-Up Provisions

We own 50% of the outstanding partnership interests in Insight Midwest, L.P. The other 50% of Insight Midwest is owned by an indirect subsidiary of Comcast Corporation, an entity over which we have no control. Our 50% interest in Insight Midwest constitutes substantially all of our operating assets. The Insight Midwest partnership agreement provides that at any time after December 31, 2005 either partner has the right to commence a split-up process with respect to Insight Midwest, subject to a limited right of postponement held by the non-initiating partner. To date, neither partner has commenced the split-up process.

Item 13. Certain Relationships and Related Transactions

Insight Communications Company, L.P. (our wholly-owned subsidiary) owns 50% of the outstanding partnership interests in Insight Midwest, L.P. The other 50% of Insight Midwest is owned by an indirect subsidiary of Comcast Cable Holdings, LLC, which is a subsidiary of Comcast Corporation. Sidney Knafel, Michael Willner and Dinni Jain, who are each executive officers and directors of our company, are members of and collectively constitute a majority of Insight Midwest’s advisory committee. Our 50% interest in Insight Midwest constitutes substantially all of our operating assets.

We purchase the majority of our programming through affiliates of Comcast Cable. Charges for such programming, including a 1½% administrative fee, were $157.6 million for the year ended December 31, 2005. As of December 31, 2005, $29.9 million of accrued programming costs were due to affiliates of

Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those available from independent parties.

On December 16, 2005, PH Investments, LLC, an entity affiliated with Amos B. Hostetter, Jr., one of our directors, made a cash contribution to Insight Acquisition Corp. in the amount of $39,999,996.25 in connection with our going-private merger. Insight Acquisition Corp. issued to PH Investments 3,404,255 shares of its Class C preferred stock. Such shares were then, in the merger, automatically converted into a corresponding number of shares of our Series C non-voting preferred stock, which number of shares is equal to an approximately 5.6% ownership interest in our company. PH Investments received an investment fee from us in the amount of $400,000 in respect of its cash contribution.

James A. Attwood, Jr., Michael J. Connelly and William E. Kennard are affiliates of The Carlyle Group. Certain affiliates of Carlyle formed Insight Acquisition Corp. and, in connection with the going-private merger, contributed $552,439,171.61 to Insight Acquisition Corp. Insight Acquisition Corp. issued to affiliates of Carlyle 517,836 shares of its Class B preferred stock and 47,015,659 shares of its Class D preferred stock. Such shares were then, in the merger, automatically converted into a corresponding number of shares of our Series B voting preferred stock and Series D non-voting preferred stock. Carlyle received an investment fee from us in the amount of $17,373,020 in respect of its cash contribution. On December 16, 2005, we entered into a consulting agreement with affiliates of Carlyle for the payment to such affiliates of $1.5 million per year in the aggregate. Prorated for the period in 2005 following completion of the merger, we paid the Carlyle affiliates $60,000 in respect of the consulting fee.

Item 14. Principal Accountant Fees and Services

Fees for professional services provided by our independent auditors in each of the last two fiscal years, in each of the following categories are as follows:

	2005		2004
	(in thousands)
Audit fees	$	727	$	769
Audit-related fees	156		—
Tax fees	364		118
All other fees	61		—
Total	$	1,308	$	887

Audit fees include fees associated with the annual audit, the reviews of our quarterly reports on Form 10-Q, assistance with and review of documents filed with the Securities and Exchange Commission, comfort letters and compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Audit-related fees consist of going-private transaction-related costs. Tax fees include tax compliance and tax consultations. All other fees primarily include support and advisory services related to the Company’s 401(k) plan.

The audit committee has adopted a policy that requires advance approval of all audit, audit-related, tax and other services performed by the independent auditor. The policy provides for pre-approval by the audit committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the audit committee must approve the permitted service before the independent auditor is engaged to perform it.

(b) Exhibits:

	Exhibit Number		Exhibit Description
2		Agreement and Plan of Merger, dated as of July 28, 2005, between Registrant and Insight Acquisition Corp.(1)
3(i)		Amended and Restated Certificate of Incorporation of Registrant(2)
3(ii)		By-laws of Registrant(2)
10.1*		1999 Equity Incentive Plan of Registrant(3)
10.1A*		Form of Deferred Stock Award Agreement
10.1B*		Form of Amendment to Deferred Stock Award Agreement, dated December 16, 2005
10.2*		2005 Stock Incentive Plan of Registrant(2)
10.2A*		Form of Subscription Agreement for E Shares(2)
10.2B*		Form of Subscription Agreement for F Shares(2)
10.3		Amended and Restated Credit Agreement, dated as of August 26, 2003, among Insight Midwest Holdings, LLC, several banks and financial institutions or entities, and The Bank of New York, as administrative agent (“Credit Agreement”)(4)
10.3A		Additional Term Loan Supplement to Credit Agreement, dated August 26, 2003(4)
10.3B		Amendment No. 1, dated as of July 14, 2005, and Form of Additional Term Loan Supplement to Credit Agreement(5)
10.4		Second Amended and Restated Operating Agreement of Insight Communications Midwest, LLC, dated as of January 5, 200(6)
10.5		Amended and Restated Management Agreement by and between Insight Communications of Indiana, LLC (now known as Insight Communications Midwest, LLC) and Insight Communications Company, L.P., dated as of October 1, 1999(7)
10.6		First Amendment to Amended and Restated Management Agreement dated as of January 5, 2001, by and between Insight Communications Midwest, LLC and Insight Communications Company, L.P.(6)
10.7		Amended and Restated Limited Partnership Agreement of Insight Kentucky Partners II, L.P., dated as of October 1, 1999(6)
10.8		First Amendment to Amended and Restated Limited Partnership Agreement of Insight Kentucky Partners II, L.P., dated as of January 5, 2001(6)
10.9		Management Agreement by and between Insight Kentucky Partners II, L.P. and Insight Communications Company, L.P., dated as of October 1, 1999(7)
10.10		Amended and Restated Operating Agreement of Insight Communications of Central Ohio, LLC, dated as of September 29, 2003(4)
10.11		Management Agreement by and between Insight Communications of Central Ohio, LLC and Insight Communications Company, L.P., dated as of September 29, 2003(4)
10.12		Amended and Restated Limited Partnership Agreement of Insight Midwest, L.P., dated January 5, 2001(8)

10.12A		First Amendment to Amended and Restated Limited Partnership Agreement of Insight Midwest, L.P., dated September 30, 2002(9)
10.13		Indenture relating to 9¾% senior notes of Insight Midwest, L.P. and Insight Capital, Inc., dated as of October 1, 1999(10)
10.13A		First Supplemental Indenture, dated as of January 14, 2004, relating to 9¾% senior notes(11)
10.14		Indenture relating to 10½% senior notes of Insight Midwest, L.P. and Insight Capital, Inc., dated as of November 6, 2000(6)
10.14A		First Supplemental Indenture, dated as of January 14, 2004, relating to 10½% senior notes(11)
10.15		Indenture relating to 12.25% senior discount notes of Registrant, dated as of February 6, 2001(6)
10.15A		First Supplemental Indenture, dated as of January 14, 2004, relating to 12.25% senior discount notes (11)
10.16		Promissory Note, dated March 28, 2002, made by Insight Midwest, L.P. to the Registrant(12)
10.17		Purchase Agreement, dated July 2, 2004, between Insight Midwest Holdings, LLC and Comcast Cable Holdings, LLC and certain of its affiliates(13)
10.18		Transition and Termination Agreement, dated as of July 22, 2004, between Comcast of Montana/Indiana/Kentucky/Utah and Insight Communications Company, L.P.(14)
10.19		Form of Exchange Agreement between Registrant and certain employees(12)
10.20		Purchase Agreement, dated as of August 26, 2003, among Coaxial Communications of Central Ohio, Inc., Insight Communications of Central Ohio, LLC, Insight Holdings of Ohio, LLC, Insight Communications Company, L.P., Insight Communications Company, Inc., Coaxial LLC, Coaxial DJM LLC, Coaxial DSM LLC, Barry Silverstein, Dennis J. McGillicuddy, and D. Stevens McVoy(4)
10.21*		Employment agreement with Michael S. Willner, dated December 16, 2005(2)
10.22		Securityholders Agreement, dated as of December 16, 2005, among The Carlyle Group, the Registrant, those individuals identified as Continuing Investor Securityholders, Continuing Investor Holding Company, LLC and PH Investments(2)
10.23		Consulting Agreement, dated as of December 16, 2005 between Registrant and affiliates of The Carlyle Group
14		Code of Ethics(11)
21		Subsidiaries of the Registrant(12)
31.1		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of Insight Communications Company, Inc.
31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of Insight Communications Company, Inc.
32		Section 1350 Certifications

* Management contract or compensatory plan or arrangement.

(1) Filed as an exhibit to Amendment No. 1 to the Schedule 13D filed by Messrs. Sidney R. Knafel, Michael S. Willner, etc. on July 29, 2005 and incorporated herein by reference.

(2) Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated December 16, 2005, and incorporated herein by reference.

(3) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 and incorporated herein by reference.

(4) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 and incorporated herein by reference.

(5) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 and incorporated herein by reference.

(6) Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference.

(7) Filed as an exhibit to the Registration Statement on Form S-4 of Insight Midwest, L.P. and Insight Capital, Inc. (Registration No. 333- 33540) and incorporated herein by reference.

(8) Filed as an exhibit to Registrant’s Current Report on Form 8-K, dated January 5, 2001, and incorporated herein by reference.

(9) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002 and incorporated herein by reference.

(10) Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference.

(11) Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference.

(12) Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference.

(13) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and incorporated herein by reference.

(14) Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 and incorporated herein by reference.

INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)

	December 31, 2005				December 31, 2004
Assets
Cash and cash equivalents		$	29,782			$	100,144
Investments		5,901				5,053
Trade accounts receivable, net of allowance for doubtful accounts of $1,079 and $1,050 as of December 31, 2005 and 2004		27,261				31,355
Launch funds receivable		974				2,749
Prepaid expenses and other assets		9,645				11,343
Total current assets		73,563				150,644
Fixed assets, net		1,130,705				1,154,251
Goodwill		72,430				72,430
Franchise costs		2,361,959				2,361,959
Deferred financing costs, net of accumulated amortization of $24,302 and $18,892 as December 31, 2005 and 2004		24,220				27,896
Other non-current assets		2,287				2,692
Total assets		$	3,665,164			$	3,769,872
Liabilities and stockholders’ equity
Accounts payable		$	42,333			$	31,886
Accrued expenses and other current liabilities		45,413				40,838
Accrued property taxes		12,921				13,049
Accrued programming costs (inclusive of $29,878 and $36,838 due to related parties as of December 31, 2005 and 2004)		43,705				51,329
Deferred revenue		4,978				8,996
Interest payable		20,459				20,643
Debt—current portion		83,500				83,500
Total current liabilities		253,309				250,241
Deferred revenue		1,499				2,904
Debt		2,676,418				2,724,063
Other non-current liabilities		2,382				1,331
Minority interest		251,011				245,523
Stockholders’ equity:
Common stock, $.01 par value:
Class A—300,000,000 shares authorized; 0 and 50,912,910 shares issued and outstanding as of December 31, 2005 and 2004		—				509
Class B—100,000,000 shares authorized; 0 and 8,489,454 shares issued and outstanding as of December 31, 2005 and 2004		—				85
Voting preferred stock, $.01 par value:
Series A—1,000,000 shares authorized; 848,945 and 0 shares issued and outstanding as of December 31, 2005 and 2004		8				—
Series B—1,000,000 shares authorized; 517,836 and 0 shares issued and outstanding as of December 31, 2005 and 2004		5				—
Non-voting preferred stock, $.01 par value:
Series C—15,000,000 shares authorized; 13,364,693 and 0 shares issued and outstanding as of December 31, 2005 and 2004		134				—
Series D—50,000,000 shares authorized; 47,015,659 and 0 shares issued and outstanding as of December 31, 2005 and 2004		470				—
Non-voting common stock, $.01 par value:
Series E—5,000,000 shares authorized; 0 and 0 shares issued and outstanding as of December 31, 2005 and 2004		—				—
Series F—100,000 shares authorized; 0 and 0 shares issued and outstanding as of December 31, 2005 and 2004		—				—
Voting common stock, $.01 par value:
Series G—10,000,000 shares authorized; 0 and 0 shares issued and outstanding as of December 31, 2005 and 2004		—				—
Additional paid-in-capital		829,337				813,853
Accumulated deficit		(345,199		)		(260,270		)
Deferred stock compensation		(4,210		)		(8,689		)
Accumulated other comprehensive income		—				322
Total stockholders’ equity		480,545				545,810
Total liabilities and stockholders’ equity		$	3,665,164			$	3,769,872

See accompanying notes

F-3

INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)

	Year Ended December 31,
	2005			2004			2003
Revenue	$	1,117,681		$	1,002,456		$	902,592
Operating costs and expenses:
Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $157,643, $150,956 and $142,387 of programming expense incurred through related parties during December 2005, 2004 and 2003)	380,277			342,636			327,505
Selling, general and administrative	269,446			227,774			187,983
Transaction-related costs	61,972			—			—
Stock-based compensation	17,368			4,438			1,729
Depreciation and amortization	247,039			239,123			230,031
Total operating costs and expenses	976,102			813,971			747,248
Operating income	141,579			188,485			155,344
Other income (expense):
Gain on cable system exchange	—			—			27,134
Interest expense	(226,956		)	(201,450		)	(206,031		)
Interest income	2,895			749			1,433
Other	3,541			(3,388		)	(31		)
Total other expense, net	(220,520		)	(204,089		)	(177,495		)
Loss before minority interest, investment activity, extinguishments of obligations, gain on contract settlement, income taxes and extraordinary item	(78,941		)	(15,604		)	(22,151		)
Minority interest expense	(5,488		)	(14,023		)	(7,936		)
Loss from early extinguishments of debt	—			—			(10,879		)
Loss on settlement of put obligation	—			—			(12,169		)
Gain on settlement of programming contract	—			—			37,742
Impairment write-down of investments	—			—			(1,500		)
Loss before income taxes and extraordinary item	(84,429		)	(29,627		)	(16,893		)
Benefit (provision) for income taxes	(500		)	201			2,702
Loss before extraordinary item	(84,929		)	(29,426		)	(14,191		)
Extraordinary item, net of tax	—			15,627			—
Loss before preferred interests	(84,929		)	(13,799		)	(14,191		)
Accrual of preferred interests	—			—			(10,353		)
Net loss	$	(84,929	)	$	(13,799	)	$	(24,544	)

See accompanying notes

F-4

INSIGHT COMMUNICATIONS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(dollars in thousands)

	Common Stock				Preferred Stock			Additional Paid-in Capital				Accumulated Deficit				Deferred Stock Compensation				Accumulated Other Comprehensive Income (Loss)				Total
Balance at December 31, 2002		$	600			$	—		$	829,873			$	(232,280	)		$	(5,882	)		$	(5,256	)	$	587,055
Net loss													(14,191		)									(14,191		)
Unrealized gain on investments																					1,564			1,564
Realized gain on investments																					(578		)	(578		)
Unrealized gain on interest rate swaps																					4,247			4,247
Total comprehensive loss																								(8,958		)
Issuance of stock to 401(k) plan		1							1,677															1,678
Issuance of restricted stock		2							4,821								(4,823		)					—
Issuance of stock through exercise of stock options and stock compensation									285								(31		)					254
Retirement of stock acquired through the purchase of Coaxial		(8		)					(8,336		)													(8,344		)
Contribution of Coaxial to Midwest Holdings									1,240															1,240
Retirement of put obligation									(7,100		)													(7,100		)
Accrual of preferred interests									(10,353		)													(10,353		)
Mark-to-market non-cash compensation									4,493								(4,493		)					—
Amortization of non-cash compensation																	1,647							1,647
Balance at December 31, 2003		595				—			816,600				(246,471		)		(13,582		)		(23		)	557,119
Net loss													(13,799		)									(13,799		)
Unrealized loss on investments																					(279		)	(279		)
Realized gain on investments																					(386		)	(386		)
Unrealized gain on interest rate swaps																					1,010			1,010
Total comprehensive loss																								(13,454		)
Issuance of stock to 401(k) plan		1							1,309															1,310
Issuance of restricted stock		1							766								(767		)					—
Issuance of stock through stock compensation and exercise of stock options									74								32							106
Acquisition of stock in satisfaction of employee loans		(3		)					(3,660		)													(3,663		)
Mark-to-market non-cash compensation									(1,236		)						4,398							3,162
Amortization of non-cash compensation																	1,230							1,230
Balance at December 31, 2004		594				—			813,853				(260,270		)		(8,689		)		322			545,810
Net loss													(84,929		)									(84,929		)
Realized gain on investments																					(448		)	(448		)
Unrealized gain on investments																					126			126
Total comprehensive loss																								(85,251		)
Issuance of stock to 401(k) plan		2							2,563															2,565
Issuance of deferred stock units									2,322								(2,322		)					—
Issuance of restricted stock		8							9,661								(9,669		)					—
Issuance of stock through stock compensation and exercise of stock options									63								(15		)					48
Cancellation of restricted stock		(2		)					(1,933		)						1,935							—
Mark-to-market non-cash compensation									2,455								984							3,439
Amortization of non-cash compensation																	3,883							3,883
Going-private transaction adjustments		(602		)		617			353								9,683							10,051
Balance at December 31, 2005		$	—			$	617		$	829,337			$	(345,199	)		$	(4,210	)		$	—		$	480,545

See accompanying notes

F-5

INSIGHT COMMUNICATIONS COMPANY, INC.

Consolidated Statements OF CASH FLOWS
(dollars in thousands)

	Year Ended December 31,
	2005			2004			2003
Operating activities:
Net loss	$	(84,929	)	$	(13,799	)	$	(14,191	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	247,039			239,123			230,031
Stock-based compensation	17,368			4,438			1,729
Non-cash consulting expense	45			60			60
Impairment of investments	—			—			1,500
Gain on sale of investments	(448		)	(386		)	(578		)
Loss (gain) on interest rate swaps	(2,078		)	(36		)	2,114
Loss on early extinguishments of debt	—			127			2,616
Settlement of put obligation	—			—			(7,100		)
Gain on settlement of programming contract	—			—			(34,819		)
Gain on cable systems exchange	—			—			(27,134		)
Minority interest	5,488			14,023			7,936
Provision for losses on trade accounts receivable	17,619			18,301			13,366
Contribution of stock to 401(k) Plan	2,565			1,309			1,678
Amortization of note discount	38,755			34,931			33,118
Deferred income taxes	—			(701		)	(2,952		)
Changes in operating assets and liabilities, net of acquisitions:
Trade accounts receivable	(13,525		)	(20,343		)	(16,954		)
Launch funds receivable	1,775			6,672			(4,224		)
Prepaid expenses and other assets	2,238			6,011			(1,219		)
Accounts payable	10,447			1,469			(16,803		)
Accrued expenses and other liabilities	(8,786		)	(1,285		)	29,614
Net cash provided by operating activities	233,573			289,914			197,788
Investing activities:
Purchase of fixed assets	(220,102		)	(174,096		)	(196,658		)
Sale of fixed assets	2,113			1,913			—
Purchase of intangible assets	—			(107		)	(889		)
Purchase of investments	(1,801		)	(1,856		)	(1,347		)
Sale of investments	1,079			602			999
Purchase of Coaxial interests	—			—			(10,321		)
Purchase of cable television systems, net	—			—			(26,475		)
Net cash used in investing activities	(218,711		)	(173,544		)	(234,691		)
Financing activities:
Distributions of preferred interests	—			—			(11,554		)
Net proceeds from borrowings under credit facility	—			—			118,000
Repayment of credit facilities	(83,500		)	(68,250		)	(25,000		)
Repayment of debt	—			(8,134		)	(195,869		)
Proceeds from issuance of notes	—			—			141,375
Debt issuance costs	(1,733		)	(14		)	(4,842		)
Proceeds from the cancellation and conversion of common stock	9			—			—
Proceeds from exercise of stock options	—			—			115
Net cash provided by (used in) financing activities	(85,224		)	(76,398		)	22,225
Net change in cash and cash equivalents	(70,362		)	39,972			(14,678		)
Cash and cash equivalents, beginning of year	100,144			60,172			74,850
Cash and cash equivalents, end of year	$	29,782		$	100,144		$	60,172

See accompanying notes

F-6

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Through our wholly owned subsidiary, Insight Communications Company, L.P. (“Insight LP”), we own a 50% interest in Insight Midwest, L.P. (“Insight Midwest”), which through its operating subsidiaries, Insight Communications Midwest, LLC (“Insight Communications Midwest”), Insight Kentucky Partners II, L.P. (“Insight Kentucky”) and Insight Communications of Central Ohio, LLC (“Insight Ohio”), owns and operates cable television systems in Indiana, Kentucky, Ohio, and Illinois which passed approximately 2.4 million homes and served approximately 1.3 million customers as of December 31, 2005.

Insight LP is the general partner of Insight Midwest. Through Insight LP, we manage all of Insight Midwest’s systems and, through July 31, 2004, managed certain systems owned by an affiliate of Comcast Cable Holdings, LLC (“Comcast Cable”) (formerly known as AT&T Broadband, LLC), the owner of the remaining 50% interest in Insight Midwest.

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries, Insight LP and Insight Cable Services, LLC.

On July 28, 2005, we entered into a definitive merger agreement (“the merger”) with Insight Acquisition Corp., an entity organized by affiliates of The Carlyle Group in order to effect the transactions contemplated by the merger agreement. Pursuant to the terms of the merger agreement, on December 16, 2005, Insight Acquisition Corp. merged with and into us, and we are the surviving entity. As of the effective time of the merger, our public shareholders (other than stockholders that are continuing as investors in the surviving corporation and stockholders who demanded appraisal rights) had no further ownership interest in us. Instead, the shares of common stock of such holders were converted into the right to receive $11.75 in cash per share. As a result of the merger, our common stock is no longer publicly traded.

2. Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include our accounts and those of our wholly owned subsidiaries, Insight LP and Insight Cable Services, LLC. Although Insight Midwest is equally owned by Insight LP and an indirect subsidiary of Comcast Cable, Insight LP, as the general partner of Insight Midwest, effectively controls all its operating and financial decisions. Accordingly, the results of Insight Midwest are included in our consolidated financial statements. The minority interest represents Comcast Cable’s 50% ownership interest in Insight Midwest. Intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

Revenue is earned from customer fees for cable television programming services including premium, digital and pay-per-view services and ancillary services, such as rental of converters, remote control devices, and installations. In addition, we earn revenues from providing high-speed Internet services, selling advertising, telephone services, commissions for products sold through home shopping networks, and management fees. Revenue is recorded in the month the related services are rendered. Fees received for activation of telephone services are amortized over the customer relationship period for the years ended December 31, 2004 and 2003. (See Note 14 “Related Party Transactions”).

F-7

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. The carrying amounts of our cash equivalents approximate their fair values.

Investments

All marketable equity investments are classified as available-for-sale under Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities. In accordance with SFAS No. 115, available-for-sale securities are carried at fair value, with unrealized gains and losses, net of income taxes, reported as a separate component of stockholders’ equity. Fair value is based on quoted market prices. All other equity investments for which a quoted market price is unavailable are carried at cost and periodically reviewed for impairment.

Fixed Assets

Fixed assets are stated at cost and include costs capitalized for labor and overhead incurred in connection with the construction of cable system infrastructures, including those providing high-speed Internet and the delivery of telephone services. In addition, we capitalize labor, material costs and overhead associated with installations related to new services on customer premises. Depreciation for buildings, cable system equipment, furniture, fixtures and office equipment is calculated using the straight-line method over estimated useful lives ranging from 2 to 30 years. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining term of the leases or the estimated life of the improvements.

The carrying value of fixed assets is reviewed if facts and circumstances suggest that they may be impaired. If this review indicates that the carrying value of the fixed assets will not be recovered from undiscounted future cash flows generated from such assets, an impairment loss would be recognized for the amount that the asset’s carrying value exceeds its fair value. We believe that no impairment of fixed assets existed as of December 31, 2005 or 2004.

Franchise Costs and Goodwill

On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. In accordance with SFAS No. 142, we discontinued the amortization of indefinite-lived intangible assets, including our franchise costs and goodwill. SFAS No. 142 requires goodwill and indefinite-lived intangible assets be tested for impairment annually, or more frequently as warranted by events or changes in circumstances. According to guidance prescribed in Emerging Issues Task Force (“EITF”) Issue No. 02-7, Unit of Accounting for Testing of Impairment of Indefinite-Lived Intangible Assets, single units of accounting

F-8

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

operated as a single asset and essentially inseparable from each other, should be combined as a single asset group for purposes of impairment testing. Management has identified three asset groups based on cable system management, geographic clustering and management’s belief that such grouping represents the best use of those assets.

Additionally, during September 2004, the SEC staff issued Topic D-108, Use of the Residual Method to Value Acquired Assets Other than Goodwill, which requires the direct method of separately valuing all intangible assets and does not permit goodwill to be included in franchise assets. In connection with adopting SFAS No. 142 and Topic D-108 and based on guidance from EITF Issue No. 02-7, we performed an impairment assessment using an independent third-party appraiser for the three asset groups identified. The Company determined that, as of December 31, 2005 and 2004, there had been no impairment to our franchise costs.

Deferred Financing Costs

Deferred financing costs relate to costs, primarily legal and bank facility fees, incurred in securing bank loans and other sources of financing. These costs are amortized over the life of the applicable debt. For the years ended December 31, 2005, 2004 and 2003, we recorded amortization expense of $5.4 million, $5.4 million and $4.8 million.

Stock-Based Compensation

Pursuant to SFAS No. 148, Accounting for Stock Based Compensation—Transition and Disclosure, we have elected to continue to account for employee stock-based compensation under Accounting Principals Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation, as amended.

Compensation expense for stock options is measured as the excess, if any, of the quoted market price of our stock at the date of grant over the amount an option holder must pay to acquire the stock. We record compensation expense for restricted stock awards based on the quoted market price at the date of grant over the vesting period. (See Note 11 “Stock Option Plan and Other Stock Based Compensation”).

Comprehensive Income (Loss)

We own certain investments that are classified as available-for-sale and reported at market value, with net unrealized gains and losses recorded as components of comprehensive income (loss). Additionally, we record the effective portion of certain derivatives’ net unrealized gains as components of comprehensive income (loss). Comprehensive income (loss) is presented in the accompanying consolidated statements of changes in stockholders’ equity. The cumulative amount of comprehensive income (loss) is presented in the accompanying consolidated balance sheets as accumulated other comprehensive income.

Income Taxes

Deferred income taxes are provided for using the liability method. Under this approach, differences between the financial statements and tax bases of assets and liabilities are determined annually, and deferred income tax assets and liabilities are recorded for those differences that have future tax consequences. Valuation allowances are established, if necessary, to reduce deferred tax assets to an

F-9

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

amount that will more likely than not be realized in future periods. Income tax expense is comprised of the current tax payable or refundable for the period plus or minus the net change in deferred tax assets and liabilities.

Marketing and Promotional Costs

Marketing and promotional costs are expensed as incurred. Marketing and promotional expenses, net of marketing support (recorded as a reduction to marketing expense), for the years ended December 31, 2005, 2004 and 2003 were $32.2 million, $21.6 million and $10.5 million.

Recent Accounting Pronouncements

On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”), which is a revision of SFAS No. 123, and supersedes APB Opinion No. 25. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the next fiscal year that begins after June 15, 2005. In addition, SFAS No. 123(R) will cause unrecognized expense related to previously issued options vesting after the date of initial adoption to be recognized as a charge to results of operations over the remaining vesting period. We are required to adopt SFAS No. 123(R) in our first quarter of 2006. The FASB has concluded that companies may adopt the new standard in one of two ways: the modified prospective transition method and the modified retrospective transition method. Under the modified retrospective transition method, prior periods may be retroactively adjusted either as of the beginning of the year of adoption or for all periods presented. The modified prospective transition method requires that compensation expense be recorded for all unvested stock options and share awards at the beginning of the fiscal period of adoption of SFAS No. 123R, while the retrospective method would record compensation expense for all unvested stock options and share awards beginning with the fiscal period retroactively adjusted. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.

In March 2005, FASB issued Interpretation No. 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations (an Interpretation of SFAS No. 143)”. This Interpretation provides clarification with respect to the timing of liability recognition for legal obligations associated with the retirement of long-lived assets when the timing and/or method of settlement of the obligation is conditional on a future event. This Interpretation requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it occurred if a reasonable estimate of fair value can be made. FIN 47 is effective for fiscal years ending after December 2005. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.

F-10

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Significant Accounting Policies (Continued)

corrections of errors made in fiscal years beginning in 2006. The Company does not anticipate that the adoption of this standard will have a material impact on its consolidated financial statements.

Reclassifications

Reclassifications have been made to the prior years’ financial statements to conform to those classifications used in 2005.

3. Insight Midwest

In September 1999, Insight Midwest was formed to serve as the holding company and a financing vehicle for our cable television system 50/50 joint venture with AT&T Broadband (now known as Comcast Cable). As of December 31, 2005, Insight Midwest was comprised of systems located in Indiana, Kentucky, Ohio and Illinois.

Indiana Systems

On October 31, 1998, Insight LP and AT&T Broadband contributed certain of their cable television systems located in Indiana and Northern Kentucky to form Insight Indiana in exchange for a 50% equity interest. On October 1, 1999, as part of a joint venture restructuring involving the Kentucky Systems (discussed below), Insight Indiana became a wholly owned subsidiary of Insight Midwest. Pursuant to the terms of their respective operating agreements, Insight Midwest and Insight Indiana will continue until October 1, 2011, unless extended or terminated sooner by Insight LP and Comcast Cable.

Kentucky Systems

On October 1, 1999, Insight LP acquired a combined 50% interest in InterMedia Capital Partners VI, LP (the “IPVI Partnership”) from related parties of Blackstone Cable Acquisition Company, LLC, InterMedia Capital Management VI, LLC and a subsidiary and related party of AT&T Broadband, for $341.5 million (inclusive of expenses). Insight Midwest assumed debt of $742.1 million (the total debt of the IPVI Partnership) in connection with this transaction. Concurrently with this acquisition, the Kentucky Systems were contributed to Insight Midwest. Pursuant to the terms of their respective operating agreements, Insight Midwest and Insight Kentucky will continue until October 1, 2011, unless extended or terminated sooner by Insight LP and Comcast Cable.

Illinois Systems

Effective January 1, 2001, Insight Midwest completed a series of transactions with Insight LP and AT&T Broadband for the acquisition of additional cable television systems, primarily located in the state of Illinois, valued at approximately $2.2 billion (the “AT&T transactions”), inclusive of systems valued at approximately $775.8 million, contributed by Insight LP.

In connection with the systems Insight LP purchased from AT&T Broadband that included approximately 105,000 customers, we recorded the purchased systems’ respective assets and liabilities, including debt incurred in connection with the purchase, at their respective fair values. The purchase price of $393.5 million was allocated to the cable television assets acquired in relation to their fair values as increases in fixed assets of $52.3 million and franchise costs of $341.2 million.

F-11

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Insight Midwest (Continued)

Concurrently with the completion of Insight LP’s purchase of systems from AT&T Broadband, Insight LP contributed such systems, along with all of its wholly owned systems serving approximately 175,000 customers, to Insight Midwest. The total value of such contributed systems was $1.2 billion. The assets and liabilities, including debt assumed, of such contributed systems continue to be recorded at their respective carrying values, as these systems remain within the consolidated group. We recorded a reduction in paid in capital of $113.8 million equal to 50% of the carrying value of such net assets contributed to Insight Midwest, representing the interest owned by AT&T Broadband (minority interest) through its investment in Insight Midwest.

Concurrently, AT&T Broadband contributed directly to Insight Midwest certain Illinois systems serving approximately 250,000 customers. The total value of such contributed systems was $983.3 million. We recorded an addition to paid in capital and a reduction to our minority interest liability equal to $328.8 million, representing the value of net assets contributed attributable to AT&T Broadband’s 50% interest in Insight Midwest. Insight Midwest recorded 100% of the assets and liabilities (including debt assumed of $306.2 million) of such systems contributed at their respective fair values. The fair value of $983.3 million was allocated to the cable television assets acquired in relation to their fair values as increases in fixed assets of $116.1 million and franchise costs of $867.2 million.

Both Insight LP and AT&T Broadband contributed their respective systems to Insight Midwest subject to an amount of indebtedness such that Insight Midwest remains equally owned by Insight LP and AT&T Broadband. The total debt assumed by Insight Midwest of $654.5 million was financed with the proceeds from the Midwest Holdings Credit Facility.

Ohio Systems

On August 21, 1998, Insight LP and Coaxial Communications of Central Ohio, Inc. (“Coaxial”) entered into a contribution agreement pursuant to which Coaxial contributed to Insight Ohio substantially all of the assets and liabilities of its cable television systems located in Columbus, Ohio.

On September 29, 2003, we retired all remaining Ohio obligations, comprised of Senior Notes and Senior Discount Notes, through our refinancing of the Insight Midwest Holdings Credit Facility. Insight Ohio is now a restricted subsidiary under the terms of our indentures. We recorded a loss of $10.9 million on the extinguishment of these obligations as a result of call premiums and the write-off of deferred financing costs.

4. Investments

Insight Interactive and Liberate Technologies

Effective November 17, 1999, Insight Cable Services entered into a Contribution Agreement with Source Media, Inc., providing for the creation of a joint venture, Insight Interactive LLC. Under the terms of the Contribution Agreement, Source Media contributed its Virtual Modem 2.5 software and the Interactive Channel products and services, including SourceGuide and LocalSource television content. We contributed $13.0 million in equity financing for 50% of the equity in the joint venture.

F-12

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

On March 3, 2000, pursuant to a merger of the joint venture with a subsidiary of Liberate Technologies (“Liberate”), Insight Interactive sold all of its VirtualModem assets in exchange for the issuance to each of Insight Cable Services and Source Media of 886,000 shares of Liberate common stock.

Insight Interactive continues to own and operate its programming assets, LocalSource and SourceGuide. In April 2005, Liberate sold its North American business to Double C Technologies, LLC, and in July 2005 sold its remaining business outside of North America to SeaChange International, Inc. On June 13, 2005, Liberate filed a complaint against Insight Interactive alleging Insight Interactive owes Liberate fees under a March 6, 2000 preferred content provider agreement. We believe that the claims are without merit and intend to defend the action vigorously.

In November 2003, we sold 295,000 shares of our Liberate stock. We received net proceeds of $988,000 and recorded a gain on the sale of $566,000, which has been included in other expense, net in our consolidated statements of operations. During January and February 2004, we sold a total of 150,000 shares of our Liberate stock. We received net proceeds of $595,000 and recorded a net gain on the sale of $381,000 that has been included in other expense, net in our consolidated statements of operations for the year ended December 31, 2004. In July and April 2005, we received special dividends of $0.15 and $2.10 per share on our 441,000 shares of Liberate stock. The total dividends received of $66,150 and $926,100 has been recorded as a decrease in our investment in Liberate. In November and December 2005, we sold the remaining shares of our Liberate investment. The cost basis of these shares was determined by using the specific identification method. We recorded a gain on these sales of $448,000, which has been included in other expense, net in our consolidated statements of operations. The carrying amount of our investment in Liberate was $0 and $953,000 as of December 31, 2005 and 2004.

AgileTV

AgileTV Corporation is a privately owned company that develops voice navigation services for television.

In November 2001, we purchased 3.0 million shares of AgileTV’s Series C redeemable, convertible preferred stock for $7.5 million, which is accounted for under the cost method. This preferred stock has a liquidation preference equal to $7.5 million. In connection with this investment, we received 3 million warrants to purchase AgileTV common stock with an exercise price of $2.50 per share and an additional 800,000 warrants with an exercise price of $1.25 per share.

Based on our on-going assessment of potential impairments in our investments in equity securities, as of December 31, 2003 we recorded impairment charges of $1.5 million related to our investment in AgileTV.

On May 11, 2005, we made an additional investment in AgileTV by purchasing shares of AgileTV’s Series B1 preferred stock and common stock for an aggregate purchase price of (i) approximately $900,000 in cash and (ii) approximately $300,000 in the form of conversion of an outstanding promissory note. We are accounting for our investment in AgileTV under the cost method. As of December 31, 2005 and December 31, 2004, our carrying value in this investment was $1.2 million and $300,000.

F-13

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

Oxygen Cable, LLC

Oxygen Cable, LLC (“Oxygen”) is an independent cable television network with programming tailored to the interests of women. On July 9, 2002 we entered into a carriage agreement with Oxygen, whereby we agreed to carry programming content from Oxygen. The term of the carriage agreement expires on December 31, 2006. For the years ended December 31, 2005, 2004 and 2003, we paid Oxygen approximately $440,000, $0 and $0 for programming content. In addition, Oxygen paid us marketing support fees, which we record as a reduction of marketing expense, of approximately $40,000, $440,000 and $95,000 for the years ended December 31, 2005, 2004 and 2003. As of December 31, 2005 and December 31, 2004, our carrying value in this investment was $4.7 million and $3.8 million.

Concurrently with the carriage agreement, we entered into an equity issuance agreement with Oxygen. The agreement calls for Oxygen to deliver to us shares having an aggregate fair market value as of December 31, 2005 of $3.8 million, and by December 1, 2006 deliver us additional shares having an aggregate fair market value as of the December 31, 2005 valuation of $2.0 million. We and Oxygen are in the process of determining the fair market value of Oxygen shares and as of the date of this filing no shares have been delivered.

5. Fixed Assets

	December 31,			December 31,
	2005			2004
	(in thousands)
Land, buildings and improvements	$	41,042		$	41,131
Cable system equipment	2,398,364			2,182,800
Furniture, fixtures and office equipment	21,352			20,073
	2,460,758			2,244,004
Less: accumulated depreciation and amortization	(1,330,053		)	(1,089,753		)
Total fixed assets, net	$	1,130,705		$	1,154,251

Depreciation expense for the years ended December 31, 2005, 2004 and 2003 was $241.5 million, $233.8 million and $225.2 million.

6. Debt

	December 31,				December 31,
	2005				2004
	(in thousands)
Insight Midwest Holdings Credit Facility		$	1,404,250			$	1,487,750
Insight Midwest 93¤4% Senior Notes		385,000				385,000
Insight Midwest 101¤2% Senior Notes		630,000				630,000
Insight Inc. 121¤4% Senior Discount Notes		350,000				350,000
		2,769,250				2,852,750
Net unamortized discount/premium on notes		(6,950		)		(45,706		)
Market value of interest rate swaps		(2,382		)		519
Total debt		$	2,759,918			$	2,807,563

F-14

INSIGHT COMMUNICATIONS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Debt (Continued)

Insight Midwest Holdings $1.975 Billion Credit Facility

Insight Midwest Holdings, LLC, a wholly owned subsidiary of Insight Midwest, holds all of the outstanding equity of each of our operating subsidiaries and serves as borrower under a $1.975 billion credit facility. On March 28, 2002, we loaned $100.0 million to Insight Midwest. The loan to Insight Midwest bears annual interest of 9%, compounded semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments. Insight Midwest Holdings is permitted under the credit facility to make distributions to Insight Midwest for the purpose of repaying our loan, including accrued interest, provided that there are no defaults existing under the credit facility. As of December 31, 2005 and December 31, 2004, the balance of the $100.0 million loan, including accrued interest, was $139.1 million and $127.4 million.

On July 21, 2005 we completed a refinancing of the existing $1.1 billion Term B loan facility under the credit facility. This refinancing reduced the applicable margins for LIBOR rate borrowings from LIBOR plus 275 basis points to LIBOR plus 200 basis points and the applicable margin will be reduced an additional 25 basis points if the Midwest Holdings leverage ratio drops below 2.75. The maximum total leverage ratio covenant was reset from 3.75 to 4.50 on July 1, 2005 with step downs to 4.25 on July 1, 2006 and 4.00 on July 1, 2007. The facility was also amended to provide certain flexibility to refinance senior notes at Insight Midwest.

Insight Midwest Senior Notes

On October 1, 1999 simultaneously with the closing of the purchase of Insight Kentucky, Insight Midwest completed a $200.0 million offering of 93¤4% senior notes due in October 2009. Interest payments on these Senior Notes, which commenced on April 1, 2000, are payable semi-annually on April 1 and October 1.

On November 6, 2000, Insight Midwest completed a $500.0 million offering of 101¤2% senior notes due in November 2010. Insight Midwest received proceeds of $487.5 million, net of an underwriting fee of $5.0 million and a bond discount of $7.5 million that is being amortized through November 2010. The proceeds of the offering were used to repay a portion of the outstanding debt under the then existing Insight Indiana credit facility and Insight Kentucky credit facility. Interest payments on these Senior Notes, which commenced on May 1, 2001, are payable semi-annually on May 1 and November 1.

The Insight Midwest 93¤4% Senior Notes became redeemable on or after October 1, 2004 and the 101¤2% Senior Notes are redeemable on or after November 1, 2005. In addition, Insight Midwest can redeem up to 35% of the Insight Midwest 93¤4% and 101¤2% Senior Notes prior to October 1, 2002 and November 1, 2005, with the net proceeds from certain sales of Insight Midwest’s equity. Each holder of the Insight Midwest Senior Notes may require Insight Midwest to redeem all or part of that holder’s notes upon certain changes of control. The Insight Midwest Senior Notes are general unsecured obligations and are subordinate to all other liabilities of Insight Midwest, the amounts of which were $1.6 billion and $1.7 billion as of December 31, 2005 and 2004. The Insight Midwest Senior Notes contain certain financial and other debt covenants.

In May 2000 and September 2001, Insight Midwest completed exchange offers pursuant to which the 93¤4% Senior Notes and 101¤2% Senior Notes were exchanged for identical notes registered under the Securities Act of 1933.

F-15

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

6. Debt (Continued)

In December 2002, Insight Midwest completed a $185.0 million add-on offering under the 93¤4% Senior Notes indenture. Insight Midwest received proceeds of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that was repaid to holders of the bonds in the first semi-annual interest payment due on April 1, 2003, and net of an underwriting fee of $3.1 million and a bond discount of $8.8 million that is being amortized through October 2009. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Midwest Holdings Credit Facility. Since this additional add-on offering occurred under the 93¤4% Senior Notes indenture, these additional debt securities and the 93¤4% Senior Notes are considered a single series of senior notes with identical terms. In June 2003, Insight Midwest completed an exchange offer pursuant to which the $185.0 million add-on offering under the 93¤4% Senior Notes were exchanged for identical notes registered under the Securities Act of 1933.

In December 2003, Insight Midwest completed a $130.0 million add-on offering under the 101¤2% Senior Notes indenture. Insight Midwest received proceeds of $140.9 million, including $1.5 million of interest accruing from November 1, 2003 through the date of issuance that was repaid to holders of the bonds in the first semi-annual interest payment due on May 1, 2004 and a bond premium of $11.4 million that is being amortized through November 2010 and net of an underwriting fee of $2.0 million. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Midwest Holdings Credit Facility. Since this additional add-on offering occurred under the 101¤2% Senior Notes indenture, these additional debt securities and the 101¤2% Senior Notes are considered a single series of senior notes with identical terms.

In July 2004, Insight Midwest completed an exchange offer pursuant to which the $130.0 million 101¤2% Senior Notes issued in December 2003 were exchanged for substantially identical notes registered under the Securities Act of 1933.

Insight Inc. 121¤4% Senior Discount Notes

In June 2004, we repurchased $10.0 million face amount of the 121¤4% Senior Discount Notes at the then accreted value of $8.1 million for $8.9 million, resulting in a loss of $843,000, which includes the write-off of unamortized deferred financing costs of $127,000.

No cash interest on the discount notes accrued prior to February 15, 2006. Thereafter, cash interest on the discount notes began to accrue and is payable on February 15 and August 15 of each year, commencing August 15, 2006. The initial accreted value of the discount notes increased until February 15, 2006 such that the accreted value equaled the revised outstanding principal amount of $350.0 million on February 15, 2006.

F-16

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

6. Debt (Continued)

Debt Principal Payments

As of December 31, 2005, the remaining principal payments required on our debt were as follows (in thousands):

2006	$	83,500
2007	83,500
2008	104,750
2009	1,517,500
2010	630,000
Thereafter	350,000
Total	$	2,769,250

7. Derivative Instruments

We enter into derivative instruments, typically interest-rate swap agreements, to modify the interest characteristics of our outstanding debt to either a floating or fixed rate basis. These agreements involve fixed rate interest payments in exchange for floating rate interest receipts, known as cash flow hedges, and floating rate interest payments in exchange for fixed rate interest receipts, known as fair value hedges, over the life of the agreement without an exchange of the underlying principal amount. The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expense related to the debt. The related amount payable or receivable is included in other non-current liabilities or assets.

Gains and losses related to cash flow hedges that are determined to be effective hedges are recorded as accumulated other comprehensive income or loss in the accompanying consolidated balance sheets. Gains and losses related to fair value hedges that are determined to be effective hedges are recorded in the consolidated statements of operations as an adjustment to the swap instrument and an equal and offsetting adjustment to the carrying value of the underlying debt. Gains and losses related to interest rate swaps that are determined not to be effective hedges and do not qualify for hedge accounting are recorded in our consolidated statements of operations as other income or expense.

Fair Value Hedges

In February 2003, we entered into two interest rate swap agreements whereby we swapped fixed rates under our 101¤2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 7.7%, on $185.0 million notional value of debt. Six-month LIBOR ranged between 1.26% and 1.34% for February and March 2003. In May 2003, we settled these swaps and received proceeds of $1.8 million and recorded a gain in this amount, which is included in other income (expense).

In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under our 101¤2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on $185.0 million notional value of debt. These agreements expired on November 1, 2005. We recorded a gain (loss) on these swaps of $2.1 million, $36,000 and ($2.1) million for the years ended December 31, 2005, 2004 and 2003, which is included in other income

F-17

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

7. Derivative Instruments (Continued)

(expense). As of December 31, 2005 and 2004, we recorded $0 and $364,000 of interest payable related to these agreements. The cost, if terminated, of these agreements was $0 and $2.1 million as of December 31, 2005 and 2004.

In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 10 1¤2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 5.9%, on $130.0 million notional value of debt. This agreement expires November 1, 2010. This swap has been determined to be perfectly effective in hedging against fluctuations in the fair value of the underlying debt. As such, changes in the fair value of the underlying debt equally offset changes in the value of the interest rate swap in our consolidated statements of operations. The fair value (cost if terminated) of this swap as of December 31, 2005 and 2004 was ($2.4) million and $519,000 and has been recorded in other non-current assets (liabilities) and as an adjustment to the carrying value of debt.

8. Supplemental Cash Flow Information

The following amounts were paid in cash during the years ended December 31:

	2005		2004		2003
	(in thousands)
Interest	$	188,216	$	167,602	$	169,704
Income taxes	$	266	$	271	$	448

9. Capital Stock

The following table represents the stock authorization levels for the various Classes and Series of stock authorized by us at December 31, 2005:

	Number of shares authorized		Number of shares issued as part of the merger
Voting preferred stock, $.01 par value:
Series A		1,000,000		848,945
Series B		1,000,000		517,836
Non-voting preferred stock, $.01 par value:
Series C		15,000,000		13,364,693
Series D		50,000,000		47,015,659
Non-voting common stock, $.01 par value:
Series E		5,000,000		—
Series F		100,000		—
Voting common stock, $.01 par value:
Series G		10,000,000		—

Common Stock

Pursuant to the merger, 46,835,659 shares of Insight’s former common stock have been cancelled and converted into the right to receive the $11.75 merger consideration. Additionally, a stockholder who holds

F-18

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

9. Capital Stock (Continued)

180,000 restricted shares has demanded appraisal rights on these shares and as of December 31, 2005 these shares have not been cancelled.

Liquidation and Distribution Rights

At the effective time of the merger, our certificate of incorporation was amended and restated in its entirety to provide for our capitalization, as the surviving corporation following the merger, and other terms applicable to the post-merger period. Among other provisions, our amended and restated certificate of incorporation provides that upon any liquidation of the corporation, the cash and other assets of the corporation available for distribution would be distributed to our stockholders as follows:

· First, the assets will be distributed 100% to holders of the Series A Voting Preferred Stock and the Series B Voting Preferred Stock on a pro rata basis until each share of the Series A Voting Preferred Stock and each share of the Series B Voting Preferred Stock shall have received an aggregate amount (including any amounts distributed on such shares prior to liquidation) equal to $0.01.

· Second, remaining assets will be distributed 100% to holders of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock on a pro rata basis until each share of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock shall have received an aggregate amount (including any amounts distributed on such shares prior to liquidation) equal to $11.75.

· Third, remaining assets will be distributed 100% to holders of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock and, as of and following such time as such distributions reach certain levels that cause participation levels for particular shares of the Series E Non-Voting Common Stock to be achieved, to holders of such shares of the Series E Non-Voting Common Stock for which participation levels have been achieved, in proportion to the number of such shares held by each holder, until the Series D Non-Voting Preferred Stock has received an internal rate of return on capital invested therein equal to 10% per annum, compounded annually.

· Fourth, 95% of the remaining assets will be distributed to holders of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock and, as of and following such time as such distributions reach certain levels that cause participation levels for particular shares of the Series E Non-Voting Common Stock to be achieved, to holders of such shares of the Series E Non-Voting Common Stock for which participation levels have been achieved, in proportion to the number of such shares held by each holder, and 5% to holders of the Series F Non-Voting Common Stock in proportion to the number of such shares held by each holder, until the Series D Non-Voting Preferred Stock has received an internal rate of return on capital invested therein equal to 15% per annum, compounded annually.

F-19

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

9. Capital Stock (Continued)

· Fifth, 90% of the remaining assets will be distributed to holders of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock and, as of and following such time as such distributions reach certain levels that cause participation levels for particular shares of the Series E Non-Voting Common Stock to be achieved, to holders of such shares of the Series E Non-Voting Common Stock for which participation levels have been achieved, in proportion to the number of such shares held by each holder, and 10% to holders of the Series F Non-Voting Common Stock, in proportion to the number of such shares held by each holder, until the Series D Non-Voting Preferred Stock has received an internal rate of return on capital invested therein equal to 20% per annum, compounded annually.

· Sixth, 85% of the remaining assets will be distributed to holders of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock and, as of and following such time as such distributions reach certain levels that cause participation levels for particular shares of the Series E Non-Voting Common Stock to be achieved, to holders of such shares of the Series E Non-Voting Common Stock for which participation levels have been achieved, in proportion to the number of such shares held by each holder, and 15% to holders of the Series F Non-Voting Common Stock, in proportion to the number of such shares held by each holder, until the Series D Non-Voting Preferred Stock has received an internal rate of return on capital invested therein equal to 25% per annum, compounded annually.

· Thereafter, 75% of the remaining assets will be distributed to holders of the Series C Non-Voting Preferred Stock and the Series D Non-Voting Preferred Stock and, as of and following such time as such distributions reach certain levels that cause participation levels for particular shares of the Series E Non-Voting Common Stock to be achieved, to holders of such shares of the Series E Non-Voting Common Stock for which participation levels have been achieved, in proportion to the number of such shares held by each holder, and 25% to holders of the Series F Non-Voting Common Stock in proportion to the number of such shares held by each holder.

Distributions other than upon liquidation will be made in accordance with the first three distribution priorities above, but no cash or other assets may be distributed in excess of the amount that would complete the distributions contemplated by such priorities without the consent of a majority in interest of the holders of the Series F Non-Voting Common Stock. If such consent is granted, additional distributions will continue to be made as specified in the third priority notwithstanding that they would increase the internal rate of return beyond 10%, provided that distributions made thereafter upon a liquidation will be adjusted to cause the aggregate distributions to conform to the complete order of priority set forth above.

10. Income Taxes

For the years ended December 31, 2005, 2004 and 2003, we recorded a deferred tax benefit of $0, $0.7, and $3.0 million. In addition, for the tax years ended December 31, 2005, 2004 and 2003, we recorded a current tax expense related to state and local taxes of approximately $500,000, $500,000 and $300,000. Deferred income taxes represent the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

F-20

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

10. Income Taxes (Continued)

Significant components of our deferred tax assets and liabilities consisted of the following:

	December 31,
	2005			2004
	(in thousands)
Deferred tax assets:
Net operating loss carry-forward	$	287,773		$	267,032
Unrealized loss on investments	7,134			8,069
Deferred interest expense	62,504			47,712
Interest rate hedges	—			—
Capital loss	8,497			7,613
Other	239			98
Gross deferred tax asset	366,147			330,524
Valuation allowance	(284,490		)	(251,188		)
Net deferred tax asset	81,657			79,336
Deferred tax liabilities:
Depreciation and amortization	4,825			5,730
Partnership investment	76,832			73,606
Gross deferred tax liability	81,657			79,336
Net deferred tax liability	$	—		$	—

We have provided a full valuation allowance on our deferred tax asset, consisting primarily of net operating loss carryforwards and unrealized losses on investments, due to the uncertainty regarding our realization of such assets in the future. The increase in the valuation allowance on the deferred tax asset for the year ended December 31, 2005 was $33.3 million.

The reconciliation of income tax expense computed at the U.S. federal statutory rate to income tax expense for the years ended December 31, 2005, 2004 and 2003 were as follows:

	Year ended December 31,
	2005			2004			2003
	(in thousands)
Benefit at federal statutory rate	$	(29,550	)	$	(4,900	)	$	(5,743	)
State and local taxes	500			500			(1,473		)
Expenses not deductible for U.S. tax purposes	33			36			85
Preferred interest accrual	—			—			(3,520		)
Disallowed interest expense	922			933			810
Disallowed compensation deduction	6,390			1,553			—
Capitalized privatization costs	18,331			—			—
Tax effect of interest rate swaps	—			(701		)	(2,952		)
Loss for which no benefit was received	3,874			2,378			10,091
Income tax (benefit) provision	$	500		$	(201	)	$	(2,702	)

F-21

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

10. Income Taxes (Continued)

As of December 31, 2005, we had a net operating loss carry-forward of $701.9 million for U.S. federal income tax purposes. Our net operating loss began accumulating effective July 26, 1999, the date of our initial public offering. The net operating loss will expire in the years 2019 through 2025.

11. Stock Option Plan and Other Stock Based Compensation

1999 Equity Incentive Plan

Our 1999 Equity Incentive Plan (the “Plan”) provided for the grant of incentive stock options, nonqualified stock options and restricted stock, as well as other awards such as performance units, performance shares, deferred stock, dividend equivalents and other stock-based awards. The Plan remains in effect under which only the deferred stock units remain outstanding.

2005 Stock Incentive Plan

On December 16, 2005, concurrently with the merger, our Board of Directors adopted the 2005 Stock Incentive Plan (the “2005 Plan”). Under the 2005 Plan the Board has the authority to grant awards of shares of its non-voting common stock to officers, employees and directors. A total of 3,666,887 shares of Series E Non-Voting Common Stock and 100,000 shares of Series F Non-Voting Common Stock are available for issuance under the 2005 Plan. Shares under the 2005 Plan require the execution of a subscription agreement.

On December 16, 2005, the Board authorized the issuance of 3,666,887 shares of Series E Non-Voting Common Stock and 45,000 shares of Series F Non-Voting Common Stock. These Series E and Series F shares were issued on January 20, 2006.

Stock Options

On November 7, 2003, we commenced an offer to exchange certain outstanding stock options granted under the Plan. The offer, available to all employees, provided the opportunity to tender to us all of their outstanding, unexercised options that have an exercise price greater than or equal to $17.00 per share to purchase our common stock in exchange for grants of replacement options. Those employees who held stock options with exercise prices between $17.00 and $23.99 received 3 new options for every 4 tendered. Those employees who held stock options with exercise prices $24.00 or greater received 1 option for every 2 tendered. The number of options eligible for exchange under this program was 2,852,932. Based on the election of eligible employees, we canceled 2,802,314 options on December 9, 2003 and granted 1,612,424 replacement options on June 14, 2004 with an exercise price of $9.12, the closing price on the date of grant.

As of the effective time of the merger, each option to purchase Insight common stock (whether vested or unvested) outstanding immediately prior to the effective time of the merger was canceled in exchange for the right to receive a cash payment equal to the product of (A) the excess, if any, of (i) $11.75, over (ii) the per share exercise price of the stock option, multiplied by (B) the number of shares of Insight common stock covered by the stock option.

We have excluded all disclosures of option activity, options outstanding, options exercisable and weighted average exercise prices as we believe that the presentation of this information would not be meaningful to the reader of the financial statements because as of the effective time of the merger our

F-22

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

11. Stock Option Plan and Other Stock Based Compensation (Continued)

common stock is not publicly traded, all of our options have been canceled and other equity interests have been converted into similar rights in the surviving corporation.

Pursuant to SFAS No. 123, we had, prior to the merger, elected to continue to account for employee stock-based compensation under APB Opinion No. 25, using an intrinsic value approach to measure compensation expense. Accordingly, no compensation expense has been recognized for options granted to employees under the Plan since all such options were granted at exercise prices equal to or greater than fair market value on the date of grant.

The following table summarizes relevant information as to our reported results under the intrinsic value method of accounting for stock awards, with supplemental information, as if the fair value recognition provisions of SFAS No. 123 had been applied to each of the years ended December 31, 2005, 2004 and 2003. These results take into effect the cancellation of all of our options in the going-private transaction. The following assumptions were used in determining the fair values: weighted average risk-free interest rate—4.05% (2005), 4.10% (2004) and 3.50% (2003); stock price volatility of 50% in all years; dividend yield of 0% in all years; and expected option life of seven years in all years (in thousands, except per share data):

	Year Ended December 31,
	2005			2004			2003
Net loss as reported	$	(84,929	)	$	(13,799	)	$	(24,544	)
Add: Stock-based compensation as reported, net of tax	17,368			4,497			1,707
Deduct: Stock-based compensation determined under fair value based method for all awards (SFAS No. 123), net of tax	(42,954		)	(9,887		)	(831		)
Adjusted net loss	$	(110,515	)	$	(19,189	)	$	(23,668	)

Other Stock Based Compensation

Restricted Stock

In 2005, 2004 and 2003, we issued to employees 828,141, 90,000 and 150,000 shares of common stock in the form of restricted stock. The restricted stock provided for vesting over a five-year period and were issued in the name of the employee on the date of grant and held by us until the shares vested. We recorded stock based compensation expense of $3.1 million, $471,000 and $39,000, which was being amortized on a straight-line basis over the vesting term.

At the effective time of the merger, pursuant to the merger agreement, we waived the transferability restrictions and/or the vesting conditions applicable to all restricted shares, and except for such shares that continued as shares of the surviving corporation, such shares became entitled to receive $11.75 in cash per share.

Deferred Stock Units

In 2005, 2004 and 2003, we issued to employees 215,500, 0 and 338,000 shares of deferred stock units. The deferred stock units vest over a five-year period and were issued in the name of the employee on the date of grant. We recorded stock based compensation expense of $786,000, $726,000 and $81,000, which was being amortized on a straight-line basis over the vesting term.

F-23

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

11. Stock Option Plan and Other Stock Based Compensation (Continued)

At the effective time of the merger, we adjusted each of the deferred stock unit agreements so that, upon delivery at the end of the deferral period, the holder of each deferred stock unit will be entitled to receive one share of Series C Non-Voting Preferred Stock of the surviving corporation for each share of Insight Class A common stock that the holder otherwise would have been entitled to receive prior to the adjustment. We also amended the agreements evidencing the deferred stock units to provide that the deferral period will end on the earlier of a change of control or prior thereto upon the later to occur of December 16, 2010 or the employee’s termination of employment. Any deferred stock units that remained unvested at the effective time of the merger will continue to vest according to the schedule set forth in the applicable agreement evidencing the grant of such deferred stock units.

Employee Loans

In October 1999 and April 2000, we made loans to certain of our employees that were used to satisfy their individual income tax withholding obligations resulting from their receipt of shares in connection with our initial public offering. Between December 8 and 31, 2004, we made an offer to each of the individuals with a loan obligation to (i) cancel such individual’s loan (including accrued interest) upon the surrender to us of such individual’s pledged shares and (ii) issue restricted shares of our Class A common stock as an incentive to surrender the pledged shares and, in the case of current employees, to encourage the employee’s long-term future performance, and in the case of former employees, to reward such former employees for their past service to us.

As of December 31, 2004, each of the individuals with a loan obligation accepted the offer and surrendered an aggregate of 395,210 shares of common stock in repayment of $3.7 million (based on the closing price of our Class A common stock on such date of $9.27 per share) of the aggregate $4.3 million of loans and accrued interest. The remaining balance of the loans were cancelled and recorded as compensation expense during the fourth quarter of 2004. On May 3, 2005, following shareholder approval of an amendment to our 1999 Equity Incentive Plan to increase the number of shares available thereunder for issuance, the employees and former employees were issued an aggregate of 825,641 shares of restricted stock referred to as “Loan Program Exchange Shares.” The issuance of these Loan Program Exchange Shares were recorded during the three months ended June 30, 2005.

Holders of Loan Program Exchange Shares contributed a portion of their Loan Program Exchange Shares to Insight Acquisition Corp. and in connection with the merger received a corresponding number of shares of Series C non-voting preferred stock. As of the effective time of the merger, vesting conditions on the Loan Program Exchange Shares were waived.

12. Financial Instruments

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. We maintain cash and cash equivalents with various financial institutions and our policy is designed to limit exposure to any one institution. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising our customer base.

F-24

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

12. Financial Instruments (Continued)

Fair Value

We used the following methods and assumptions in estimating our fair value disclosures for financial instruments:

Cash equivalents and accounts receivable: The carrying amount reported in the consolidated balance sheets for cash equivalents and accounts receivable approximates fair value.

Debt: The carrying amounts of our borrowings under our credit arrangements approximate fair value as they bear interest at floating rates. The fair value of our Senior Notes and Senior Discount Notes are based on quoted market prices and are listed in the following table:

	Fair Value at December 31, 2005			Fair Value at December 31, 2004
	(in thousands)
Insight Midwest 9¾% Senior Notes		$	394,600		$	404,300
Insight Midwest 10½% Senior Notes		$	659,100		$	689,900
Insight Inc. 12¼% Senior Discount Notes		$	365,300		$	338,600

Interest rate swap agreements: Interest rate swap agreements are recorded in our financial statements at fair value. The cost of such swap agreements was $2.4 million and $1.6 million as of December 31, 2005 and 2004.

13. Minority and Preferred Interests

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Financial instruments that fall within the scope of SFAS No. 150 that were previously classified as equity are now required to be classified as liabilities or, in some circumstances, assets.

As of July 1, 2003, we had $195.2 million of preferred interests recorded in our balance sheet as temporary equity. These preferred interests were fully accreted to their maturity value of $195.9 million as of August 15, 2003 and were subsequently converted to common interests in connection with our refinancing of the obligations of Insight Ohio. In connection with the adoption of SFAS No. 150, we recorded a $5.0 million accrual of preferred interests during the three months ended September 30, 2003, which have been included in interest expense in our third quarter 2003 consolidated statements of operations.

As of December 31, 2005 and 2004 we had $251.0 million and $245.5 million of minority interest recorded in our balance sheet as temporary equity related to Insight Midwest. On October 29, 2003, the FASB announced that it had deferred indefinitely the application of SFAS No. 150 as it applies to minority interests related to limited life entities consolidated in parent company financial statements. Although this application was deferred, the disclosure requirements of SFAS No. 150 still apply and, therefore, companies are required to disclose the estimated settlement value of these non-controlling interests.

The Insight Midwest partnership was formed in September 1999 to serve as the holding company and a financing vehicle for our cable television system 50/50 joint venture with an indirect subsidiary of AT&T

F-25

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

13. Minority and Preferred Interests (Continued)

Broadband (now known as Comcast Cable). The results of the partnership are included in our consolidated financial statements since we as general partner effectively control Insight Midwest’s operating and financial decisions. The partnership will continue until October 1, 2011 unless extended or terminated earlier in accordance with the provisions of the Insight Midwest partnership agreement.

Depending on the nature of a dissolution of the partnership, Insight Midwest will be required, in accordance with the partnership agreement, to either distribute to Comcast Cable some of its cable systems and liabilities equal to 50% of the net market value of the partnership or, in the event of a liquidation, an amount in cash equal to 50% of the net proceeds received. As of December 31, 2005, we estimated the settlement value of these minority interests to be between $930.3 million and $1.3 billion.

14. Related Party Transactions

Managed Systems

On March 17, 2000, we entered into a management agreement with Comcast of Montana/Indiana/Kentucky/Ohio (“Comcast”) (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, to provide management services to cable television systems owned by Comcast. Effective July 31, 2004, the management agreement was terminated by mutual agreement. We recognized management fees in connection with this agreement of $0, $1.4 million and $2.4 million for the years ended December 31, 2005, 2004 and 2003.

On February 28, 2003, Insight Midwest exchanged with Comcast of Montana/Indiana/Kentucky/Ohio the system we then owned in Griffin, Georgia, serving approximately 11,800 customers, plus $25.0 million, for the managed systems located in New Albany, Indiana and Shelbyville, Kentucky, together serving approximately 23,400 customers. Additionally, pursuant to the agreement, Insight Midwest paid approximately $1.5 million as a closing adjustment to Comcast of Montana/Indiana/Kentucky/Ohio to complete the rebuild and upgrade of the Griffin, Georgia system.

This system exchange was accounted for on that date as a sale of the Griffin, Georgia system and a purchase of the New Albany, Indiana and Shelbyville, Kentucky systems. In connection with this system exchange, we recorded a gain of approximately $27.1 million equal to the difference between the fair value and carrying value of the Griffin, Georgia system as of the closing date. Of the $64.5 million purchase price of the New Albany, Indiana and Shelbyville, Kentucky systems $31.9 million was allocated to such cable television systems’ assets acquired in relation to their fair values and $32.6 million was allocated to franchise costs.

Programming

We purchase the majority of our programming through affiliates of Comcast Cable. Charges for such programming, including a 1½% administrative fee, were $157.6 million, $151.0 million and $142.4 million for the years ended December 31, 2005, 2004 and 2003. As of December 31, 2005 and 2004, $29.9 million and $36.8 million of accrued programming costs were due to affiliates of Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those available from independent parties.

F-26

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

14. Related Party Transactions (Continued)

In 2001, in connection with the purchase and contribution of our systems primarily located in Illinois, we acquired, through affiliates of Comcast Cable, an above-market programming contract. The above-market portion of the contract was recorded as an adjustment to the purchase price of the Illinois systems of $36.5 million with a long-term programming liability recorded in other non-current liabilities. This contract was renegotiated, by affiliates of Comcast Cable and the programmer during the third quarter of 2003 and indirectly resulted in more favorable programming rates for us. As such, we recorded a reduction to programming expense of $3.1 million and recorded a gain on the extinguishment of the liability for $37.7 million, both of which have been recorded in our consolidated statements of operations during the three months ended September 30, 2003.

Telephone Agreements

Prior to December 31, 2004, to facilitate delivery of telephone services, we were party to a joint operating agreement with Comcast Cable that allowed Insight Midwest to deliver to its residential customers, in certain of its service areas, local telephone service provided by Comcast Cable. Under the terms of the agreement, Insight Midwest leased certain capacity on our local network to Comcast Cable. Revenue earned from leased network capacity used in the provision of telephone services was $0, $8.5 million and $6.2 million for the years ended December 31, 2005, 2004 and 2003. In addition, Insight Midwest received additional payments related to certain services and support, including installations, marketing and billing. Fee revenue earned in connection with installations was deferred and amortized over the expected term a telephone customer was expected to maintain their telephone service, then estimated to be three years. Marketing and billing support revenue was recognized in the period such services were performed.

On December 31, 2004, we acquired the telephone business conducted by Comcast Cable in the markets served under our joint operating agreement and terminated the joint operating agreement. Subsequent to December 31, 2004, we no longer earn revenue from the services described above, but rather we record the continued amortization of installation fee revenue and revenues earned directly from our customers for providing telephone and telephone related services. Comcast Cable paid us approximately $13 million in cash and transferred to us certain assets and liabilities related to the telephone business. We recorded an extraordinary gain of $15.6 million in connection with the acquisition and settled amounts with Comcast Cable under our pre-existing joint operating agreement for $2.6 million, representing the net current liabilities owed to Comcast Cable. The acquisition was accounted for under the purchase method of accounting.

Advertising Services

In October 1999, to facilitate the administration of our advertising services in our Kentucky Systems, we entered into an agreement with Comcast Cable, which provided for this affiliate to perform all of our Kentucky advertising sales and related administrative services. Effective September 26, 2004, this agreement was terminated by mutual agreement.

We earned advertising revenues through this affiliate of $0, $13.5 million and $18.5 million for the years ended December 31, 2005, 2004 and 2003. As of December 31, 2005 and December 31, 2004, we had $0 and $1.1 million as a receivable due from this affiliate included in other current assets. Through September 26, 2004 we paid this affiliate a fixed and variable fee for providing this service based on

F-27

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

14. Related Party Transactions (Continued)

advertising sales cash flow growth. As of December 31, 2005 and 2004, we had $0 and $38,500 recorded as payables to this affiliate related to such services.

15. 401(k) Plan

We sponsor a savings and investment 401(k) Plan for the benefit of our employees. All employees who have completed six months of employment and have attained age 18 are eligible to participate in the plan. We make matching contributions equal to 100% of the employee’s contribution excluding any such contributions in excess of 5% of the employee’s wages. Effective December 20, 2005, 100% of our matching contribution to the plan is in the form of cash. For the years ended December 31, 2005, 2004 and 2003, we matched contributions of $4.2 million, $3.6 million and $3.3 million.

16. Commitments and Contingencies

Programming Contracts

We enter into long-term contracts with third parties who provide us with programming for distribution over our cable television systems. These programming contracts are a significant part of our business and represent a substantial portion of our operating costs. Since future fees under such contracts are based on numerous variables, including number and type of customers, we have not recorded any liabilities with respect to such contracts.

Litigation

F-28

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

16. Commitments and Contingencies (Continued)

In April 2005, Acacia Media Technologies Corporation filed a lawsuit against us and others in the United States District Court for the Southern District of New York. The complaint alleges, among other things, infringement of certain United States patents that allegedly relate to systems and methods for transmitting and/or receiving digital audio and video content. The complaint seeks injunctive relief and damages in an unspecified amount. In the event that a court ultimately determines that we infringe on any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain products and services that we currently offer to subscribers. We believe that the claims are without merit and intend to defend the action vigorously. The final disposition of this claim is not expected to have a material adverse effect on our consolidated financial position but could possibly be material to our consolidated results of operations of any one period. Further, at this time the outcome of the litigation is impossible to predict, and no assurance can be given that any adverse outcome would not be material to our consolidated financial position.

We are subject to various legal proceedings that arise in the ordinary course of business. While it is impossible to determine with certainty the ultimate outcome of these matters, it is our opinion that the resolution of these matters will not have a material adverse affect on our consolidated financial condition.

Lease Agreements

We lease and sublease equipment and office space under various operating lease arrangements expiring through October 24, 2101. Future minimum rental payments required under such operating leases as of December 31, 2005 were (in thousands):

2006	$	4,637
2007	3,486
2008	3,050
2009	2,169
2010	783
Thereafter	740
Total	$	14,865

Rental expense on operating leases for the years ended December 31, 2005, 2004 and 2003 was $6.8 million, $5.6 million and $5.6 million.

F-29

INSIGHT COMMUNICATIONS COMPANY, INC.
Notes to Consolidated financial Statements (Continued)

17. Quarterly Selected Financial Data (Unaudited)

	Three months ended														Year ended
2005	March 31			June 30			September 30				December 31				December 31, 2005
	(dollars in thousands)
Revenue	$	269,327		$	279,311			$	278,986			$	290,057			$	1,117,681
Operating income (loss)	44,710			59,611				51,078				(13,820		)		141,579
Net loss	$	(8,342	)	$	(728	)		$	(7,375	)		$	(68,484	)		$	(84,929	)

	Three months ended														Year ended
2004	March 31			June 30			September 30				December 31				December 31, 2004
	(dollars in thousands)
Revenue	$	238,756		$	250,638			$	250,516			$	262,546			$	1,002,456
Operating income	41,394			46,095				44,714				56,282				188,485
Loss before extraordinary item	(6,817		)	(7,527		)		(5,447		)		(9,638		)		(29,426		)
Extraordinary Gain	—			—				—				15,627				15,627
Net income (loss)	$	(6,817	)	$	(7,527	)		$	(5,447	)		$	5,992			$	(13,799	)

F-30

Delaware	13-4053502
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
810 Seventh Avenue New York, New York 10019
(Address of principal executive offices)

	Insight Communications Company, Inc.
Date: March 16, 2006	By:	/s/ MICHAEL S. WILLNER
		Michael S. Willner, Vice Chairman
		and Chief Executive Officer

	Signatures		Title		Date
/s/ SIDNEY R. KNAFEL		Chairman of the Board		March 16, 2006
Sidney R. Knafel
/s/ MICHAEL S. WILLNER		Vice Chairman, Chief Executive		March 16, 2006
Michael S. Willner		Officer and Director (Principal Executive Officer)
/s/ DINNI JAIN		President, Chief Operating		March 16, 2006
Dinni Jain		Officer and Director
/s/ JOHN ABBOT		Executive Vice President and Chief Financial		March 16, 2006
John Abbot		Officer (Principal Financial Officer)
/s/ DANIEL MANNINO		Senior Vice President and Controller		March 16, 2006
Daniel Mannino		(Principal Accounting Officer)
/s/ JAMES A. ATTWOOD, JR.		Director
James A. Attwood, Jr.				March 16, 2006
/s/ MICHAEL J. CONNELLY		Director
Michael J. Connelly				March 16, 2006
/s/ STEPHEN C. GRAY		Director
Stephen C. Gray				March 16, 2006
/s/ AMOS B. HOSTETTER, JR.		Director
Amos B. Hostetter, Jr.				March 16, 2006
/s/ WILLIAM E. KENNARD		Director
William E. Kennard				March 16, 2006
/s/ GERALDINE B. LAYBOURNE		Director
Geraldine B. Laybourne				March 16, 2006

	INSIGHT COMMUNICATIONS COMPANY, INC.


	By:


	GRANTEE:
			[Name of Grantee]

INSIGHT COMMUNICATIONS COMPANY, INC.


By:
	Name:
	Title:


TC GROUP III, L.L.C.

By:TC Group, L.L.C.,
Its Managing Member


By:
	Name: William E. Kennard
	Title: Managing Director


TC GROUP IV, L.L.C.


By:TC Group, L.L.C.,
Its Managing Member


By:
		Name: William E. Kennard
		Title: Managing Director

As of
December 31, 2005

(dollars in thousands)

Total debt.

Stockholders’ equity.

Debt to equity ratio.

		Page
	PART I
Item 1.	Business	1
Item 1A	Risk Factors	27
Item 1B	Unresolved Staff Comments	32
Item 2.	Properties	32
Item 3.	Legal Proceedings	32
Item 4.	Submission of Matters to a Vote of Security Holders	33
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Selected Financial Data	36
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 8.	Financial Statements and Supplementary Data	50
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	51
Item 9A.	Controls and Procedures	51
Item 9B.	Other Information	52
	PART III
Item 10.	Directors and Executive Officers of the Registrant	53
Item 11.	Executive Compensation	56
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13.	Certain Relationships and Related Transactions	62
Item 14.	Principal Accountant Fees and Services	63
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	64
SIGNATURES

	Page
Report of Independent Registered Public Accounting Firm
—Internal Control over Financial Reporting	F-1
Report of Independent Registered Public Accounting Firm
—Financial Statements	F-2
Insight Communications Company, Inc.
Consolidated Balance Sheets as of
December 31, 2005 and 2004	F-3
Insight Communications Company, Inc.
Consolidated Statements of Operations
for the years ended December 31, 2005,
2004 and 2003	F-4
Insight Communications Company, Inc.
Consolidated Statements of Changes in
Stockholders’ Equity for the years ended
December 31, 2005, 2004 and 2003	F-5
Insight Communications Company, Inc.
Consolidated Statements of Cash Flows
for the years ended December 31, 2005,
2004 and 2003	F-6
Insight Communications Company, Inc.
Notes to Consolidated Financial
Statements	F-7

Carlyle Entity		Consulting Fee Percentage

TC Group III, LLC		51.70%

TC Group IV, LLC		48.30%

	/s/ MICHAEL S. WILLNER
	Michael S. Willner
	Vice Chairman and
	Chief Executive Officer
	March 16, 2006

	/s/ JOHN ABBOT
	John Abbot
	Executive Vice President and Chief
	Financial Officer
	March 16, 2006

	/s/ MICHAEL S. WILLNER
	Michael S. Willner
	Vice Chairman and Chief Executive Officer
	March 16, 2006
	/s/ JOHN ABBOT
	John Abbot
	Executive Vice President and Chief Financial Officer
	March 16, 2006