UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal period ended December 31, 2018

Commission File Numbers: 333-72440

                                                       333-82124-02

Mediacom Broadband LLC

Mediacom Broadband Corporation*

(Exact names of Registrants as specified in their charters)

1 Mediacom Way

Mediacom Park, New York 10918

(Address of principal executive offices)

(845) 443-2600

(Registrants’ telephone number)

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

None

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

None

Indicate by check mark if the Registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the Registrants are not required to file pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ☒    No  ☐

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

Note: As voluntary filers, not subject to the filing requirements, the Registrants have filed all reports under Section 13 or 15(d) of the Exchange Act during the preceding 12 months.

Indicate by check mark whether the Registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrants were required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Not Applicable.

Indicate by check mark whether the Registrants are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting companies, or emerging growth companies. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the Registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

State the aggregate market value of the common equity held by non-affiliates of the Registrants: Not Applicable

Indicate the number of shares outstanding of the Registrants’ common stock: Not Applicable

MEDIACOM BROADBAND LLC

2018 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

This Annual Report on Form 10-K is for the year ended December 31, 2018. Any statement contained in a prior periodic report shall be deemed to be modified or superseded for purposes of this Annual Report to the extent that a statement herein modifies or supersedes such statement. The Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information by referring you directly to those documents. Information incorporated by reference is considered to be part of this Annual Report.

Mediacom Broadband LLC is a Delaware limited liability company and a wholly-owned subsidiary of Mediacom Communications Corporation, a Delaware corporation. Mediacom Broadband Corporation is a Delaware corporation and a wholly-owned subsidiary of Mediacom Broadband LLC. Mediacom Broadband Corporation was formed for the sole purpose of acting as co-issuer with Mediacom Broadband LLC of debt securities and does not conduct operations of its own.

References in this Annual Report to “we,” “us,” or “our” are to Mediacom Broadband LLC and its direct and indirect subsidiaries (including Mediacom Broadband Corporation), unless the context specifies or requires otherwise. References in this Annual Report to “Mediacom” or “MCC” are to Mediacom Communications Corporation.

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Cautionary Statement Regarding Forward-Looking Statements

You should carefully review the information contained in this Annual Report and in other reports or documents that we file from time to time with the SEC.

In this Annual Report, we state our beliefs of future events and of our future financial performance. In some cases, you can identify those so-called “forward-looking statements” by words such as “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will,” or the negative of those and other comparable words. These forward-looking statements are not guarantees of future performance or results, and are subject to risks and uncertainties that could cause actual results to differ materially from historical results or those we anticipate as a result of various factors, many of which are beyond our control. Factors that may cause such differences to occur include, but are not limited to:

Statements included in this Annual Report are based upon information known to us as of the date hereof, and we assume no obligation to update or alter our forward-looking statements made in this Annual Report, whether as a result of new information, future events or otherwise, except as required by applicable federal securities laws.

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PART I

Mediacom Communications Corporation

We are a wholly-owned subsidiary of Mediacom Communications Corporation (“Mediacom” or “MCC”). MCC is the fifth largest cable operator in the U.S., serving almost 1.4 million residential and business customers, primarily in smaller markets in the Midwest and Southeast. MCC offers a wide array of information, communications and entertainment services to households and businesses, including video, high-speed data (“HSD”), phone, and home security and automation. Through Mediacom Business, MCC provides scalable broadband communications solutions to commercial and public sector customers of all sizes, and sells advertising and production services under the OnMedia brand.

MCC’s cable systems are owned and operated through our operating subsidiaries and those of Mediacom LLC, another wholly-owned subsidiary of MCC. As of December 31, 2018, MCC’s cable systems passed an estimated 2.9 million homes and served approximately 776,000 video customers, 1,264,000 HSD customers and 614,000 phone customers, aggregating 2,654,000 primary service units (“PSUs”).

MCC is a privately-owned company. An entity wholly-owned by Rocco B. Commisso and related parties is the sole shareholder of MCC, a C corporation. Mr. Commisso is MCC’s founder, Chairman and Chief Executive Officer. MCC manages us pursuant to management agreements with our operating subsidiaries. See Note 9 in our Notes to Consolidated Financial Statements.

Mediacom Broadband LLC

We are a holding company and do not have any operations or hold any assets other than our investments in our operating subsidiaries. As of December 31, 2018, our cable systems passed an estimated 1.5 million homes and served approximately 428,000 video customers, 699,000 HSD customers and 339,000 phone customers, aggregating 1,466,000 PSUs. As of the same date, our cable systems had 753,000 residential and business customer relationships.

Our phone number is (845) 443-2600 and our principal executive offices are located at 1 Mediacom Way, Mediacom Park, New York, 10918. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the SEC under sections 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge on MCC’s website (www.mediacomcc.com) as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The information posted on MCC’s website is not incorporated into our SEC filings.

2018 Developments

2018 Financing Activity

On March 2, 2018, we called for the redemption of the entire $300.0 million principal amount outstanding of our 6³⁄₈% senior notes due April 2023 (the “6³⁄₈% Notes”). On March 30, 2018, we received $158.0 million of cash contributions from our parent, MCC, which, in turn, received such contributions from Mediacom LLC on the same date. On April 2, 2018, such cash contributions, along with $151.6 million of borrowings under our revolving credit commitments, were used to fund the redemption of the 6³⁄₈% Notes.

See “Liquidity and Capital Resources — Capital Structure — 2018 Financing Activity.”

Tower Asset Sale

On November 15, 2017, MCC entered into an asset purchase agreement (the “APA”) to sell substantially all of our and Mediacom LLC’s tower assets (the “tower assets”) to CTI Towers (“CTI”), subject to closing conditions and requirements per the APA. CTI leases space on towers to wireless carriers and such tower assets were non-strategic to MCC’s cable operations. On December 21, 2017, March 15, 2018 and September 25, 2018, we and Mediacom LLC contributed certain tower assets to MCC which were sold to CTI. These transactions substantially completed the tower asset sale pursuant to the terms and conditions of the APA. MCC received equity in CTI, representing a minority position, in exchange for the tower assets.

See Note 13 in our Notes to Consolidated Financial Statements.

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Description of Our Business

The following table provides an overview of selected operating data for our cable systems as of December 31:

Services

We offer video, HSD and phone services individually and in bundled packages to residential and small- to medium-sized business (“SMB”) customers, and provide fiber-based network and transport services to medium- and large-sized businesses, governments and educational institutions. We also sell advertising to local, regional and national advertisers on television and digital platforms, and offer home security and automation services to residential customers.

Our customers are typically billed on a monthly basis, with subscription rates, installation fees and other one-time charges that vary depending on the services, equipment and features taken. We generally offer discounted packages for new customers, and for those who take multiple services. Our bundled packages are intended to meet the disparate demands of our customer base with discounts provided as an additional incentive. Residential customers are generally not subject to minimum-term contracts, while substantially all of our business services customers are under contracts that typically have 3 to 5 year terms.

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Our Service Areas

Approximately 78% of our homes passed are in between the 65^th and 130^th television markets in the United States, or designated market areas (“DMAs”). Our largest markets are:

Residential Services

We market our residential services individually and in bundled packages, with discounts generally available for the subscription to bundled packages or other combinations of services. As of December 31, 2018, approximately 58% of our residential customers took a bundle of two or more of our services.

Video

We offer residential video customers a variety of service levels, ranging from a limited basic tier to a full service tier with access to hundreds of channels. Video customers may also take premium networks that provide commercial-free original programming, movies, live and taped sporting events and concerts, and other special events. Residential video customers are charged a monthly fee that varies depending on the level of service and equipment taken, with additional revenues generated from one-time installation expenses, video-on-demand (“VOD”) fees and other ancillary purchases. Most of our video programming is available in a high-definition (“HD”) format for no additional charge. We also enable video customers to watch certain programming on personal devices connected to the Internet, whether in or outside their home, and manage their content through our mobile apps and online portal.

Our video service requires the use of a digital set-top box (“set-top”), which provides an interactive on-screen program guide and access to our VOD library. For an additional monthly fee, our digital video recorder (“DVR”) service allows customers to record and store content to view at their convenience, along with the ability to pause and rewind live programming. Approximately 40% of our video customers take our Internet Protocol (“IP”) set-top that offers a cloud-based, graphically-rich TiVo guide with integrated access and search functionality to several over-the-top (“OTT”) video services, including Netflix, Hulu, and YouTube. We also offer a lower-cost, IP set-top that provides customers with the same high-quality video experience without the ability to record and store content. In 2018, we introduced a voice-controlled remote which allows customers to quickly search for content, tune to channels and control their DVR.

HSD

We offer high-speed Internet services with a minimum downstream speed of up to 60 megabits per second (“Mbps”) and a maximum downstream speed of up to 1 gigabit per second (“Gbps”). Our residential HSD customers are charged a monthly fee that varies depending on the speeds and usage allowance associated with their level of HSD service and equipment taken. Our residential HSD service requires a modem, which most of our customers lease from us for a monthly fee and typically includes a built-in wireless, or Wi-Fi, gateway. Our WiFi360 service provides additional wireless access points that improve wireless signal quality through the home. We have also deployed community Wi-Fi access points in high-traffic commercial and public areas in certain of our markets, providing our HSD customers with connectivity outside of their home.

Phone

Our residential phone service includes unlimited nationwide calling and certain features such as Caller ID, call waiting, call forwarding, and three-way calling. Residential phone customers are charged a monthly fee, with voicemail services, directory assistance, international calling plans and other services available for an additional charge. Residential phone service requires equipment that is included in the modem leased by customers who also purchase HSD service. Due to our low delivery costs for phone service and given the high degree of wireless substitution for wireline phone service, we typically bundle our phone service on a discounted basis with our HSD and/or video services.

Business Services

Mediacom Business is our commercial division providing innovative data, voice and video solutions to commercial- and public-sector customers of all sizes. We provide SMB customers with HSD, phone, and video services similar to those offered to our residential customers. For medium- and large-sized businesses and institutions, we furnish custom fiber solutions with transmission speeds up to 10 Gbps, cloud-based managed voice solutions, and IP-enabled trunk-based voice services along with private point-to-point, multi-point wide area, and local area network solutions. Mediacom Business also provides direct and wholesale high-capacity fiber transport and dedicated Internet access up to 100 Gbps to national and regional carriers to support wireless backhaul, Ethernet and regional transport. Fixed wireless and small-cell solutions are offered as well. We continue to extend our network to new commercial buildings to grow our business services revenues.

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Advertising

We sell targeted, data-driven television and digital advertising solutions and production services to local, regional and national customers under our OnMedia brand. Television advertising is linear video inserted on local commercial time allocated by cable networks, generally two minutes per hour. OnMedia’s sales team markets these availabilities to local businesses directly and to national and regional businesses directly and through agency relationships. OnMedia represents other multichannel video programming distributors (“MVPDs”) in the same DMA as a single-source buying contact in certain markets, and conversely, is represented by other MVPDs in some markets. Digital advertising offers include pre-roll, mid-roll, and post-roll ads for online videos, display ad placement, and search engine optimization and marketing. Digital advertising represents the fastest-growing product of OnMedia, reflective of the broader advertising industry budget shift to digital.

Marketing and Sales

We employ a wide range of sales channels to reach current and potential customers, including outbound telemarketing, direct mail, in-bound customer care centers, retail locations, field technician sales, and our e-commerce site. Customers are directed to our in-bound call centers or website through various forms of advertising, including television advertising on our own cable systems. Mediacom Business has a dedicated sales force and outbound telemarketing, and we have several relationships with third-party agents who sell our services. We market our flagship bundles under the “Xtream” brand, which typically includes video with multi-room DVR service, HSD with minimum speeds of up to 100 Mbps and wireless gateway, and phone service. We believe the simplified pricing and value proposition of our Xtream bundles has positively influenced the market’s perception of our products and services, and has driven higher levels of sales activity.

Customer Care

Our field operations team focuses on providing a quality experience during installation and service calls, with the goal of resolving any technical issues on the first attempt. We offer 30-minute arrival windows and evening and weekend availability for installation and service calls to provide more convenient scheduling for our customers. Field activity is scheduled and routed seamlessly with remote dispatching and workflow management, and GPS systems that facilitate on-time arrival for customer appointments. Our technicians are equipped with diagnostic and monitoring tools that determine the quality of service at the customer’s home in real-time.

Our customer care group has multiple contact centers with dedicated customer service, sales, and technical support representatives available at all times, and our virtual contact center allows us to manage resources efficiently and effectively function as a single, unified call center. Our website and mobile applications allow customers to manage their billing account, utilize self-help tools and schedule appointments. Our Total Care Text Messaging platform allows us to communicate with our customers through text messaging, informing them about outage notifications, billing status and payment confirmation, Wi-Fi password management, appointment scheduling and data usage information. Molli, a digital assistant that interacts with our customers through text messages, website usage and social media, provides initial support for our customers and manages connections to live customer representatives, allowing our customers access to a full support experience without the use of a phone call.

Technology

Our services are delivered through a fiber-rich, technologically-advanced, route-diverse network that consists of a national backbone; large-scale, centralized platforms; regional networks and headends; neighborhood nodes; and last-mile connectivity to customer homes or businesses. We utilize an IP ring architecture that minimizes service outages through its redundant design, and our network operations center supports and continuously monitors our network. We believe our network infrastructure provides several advantages over most of our competitors, including significantly more bandwidth capacity, greater reliability and higher quality of service.

Our national backbone is connected to leading carriers, with a presence in several major carrier hotels, and allows us to introduce new services across all our markets and realize greater economic efficiencies and scale. Our national backbone connects centralized platforms that control video content delivery, HSD and phone services, provisioning, customer care and email, and provides access to several aggregation and exchange points in our regional networks to ensure network redundancy and enhanced quality of service.

The last-mile connectivity is delivered through our hybrid fiber and coaxial (“HFC”) network, transporting content via laser-fed fiber-optic cable by regional networks and headends to local nodes, and by coaxial cable from these nodes to our customers. We have installed back-up power supplies that are intended to allow our services to continue to be available in the event of a commercial power outage. For certain business customers that have high-capacity requirements, we extend fiber-optic cable from the node site directly to the customer’s premise.

HSD customers continue to rapidly increase the amounts of bandwidth they consume, largely driven by increased usage of OTT video, and we expect their bandwidth usage to grow. To provide additional network capacity to facilitate meaningful bandwidth consumption increases, we have deployed multiple tools to recapture bandwidth and optimize our network, including the conversion of substantially

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all of our video delivery network to “all-digital” technology, freeing up spectrum that was previously used to deliver analog video signals that require more capacity. We have also transitioned substantially all of our HSD delivery to DOCSIS 3.1, allowing us to use our bandwidth in a more efficient manner. These bandwidth reclamation and optimization efforts and capital investments have enabled progressive increases in the speeds of our HSD service packages, culminating in the current availability of 1 Gbps downstream speeds to substantially all of our markets.

Our future plans revolve around the cable industry’s recently announced development of a 10 gigabit network, which has been named 10G. The 10G platform will enable symmetrical residential internet speeds of up to 10 Gbps and will be a substantial enhancement of our existing DOCSIS platform, greatly improving latency, reliability and security. In the future, we expect to make the necessary investments in our network to begin testing 10G, which would position us to meet the future anticipated needs of a fully connected community.

Community Relations

We are dedicated to fostering strong relations with the communities we serve and believe our local involvement strengthens the awareness and favorable perception of our brand. We support local charities and community causes in our markets with scholarships, events and campaigns to raise funds and supplies for persons in need, and in-kind donations that include production services and free airtime on cable networks. As of December 31, 2018, we provided free video service to over 1,600 schools and free HSD service to nearly 200 schools, and also provided free video service to over 1,600 government buildings, libraries and not-for-profit hospitals, of which over 170 also receive free HSD service.

Franchises

As of December 31, 2018, we served 478 communities under non-exclusive franchises granted to us by local or state governmental authorities. Many of the provisions of local franchises are subject to federal regulation under the Communications Act of 1934, as amended (the “Cable Act”). Many of the local franchises impose a fee not exceeding 5% of the gross revenues of specified video services, which we typically pass through directly to the customer.

We believe that we have satisfactory relationships with our franchising communities, and have never had a franchise revoked, or had a community refuse to consent to a franchise transfer to us. For more information around our franchises, see “Legislation and Regulation – State and Local Regulation – Franchise Matters.”

Sources of Supply

Programming

Our video programming is generally obtained pursuant to fixed-term contracts, typically based on a monthly fee per video customer, subject to contractual escalations. Most of our contracts are entered into directly, but we also secure certain content through a cooperative if more favorable pricing or terms are available. We also have various retransmission consent agreements that permit us to retransmit the signals of local broadcast television stations. Local broadcast stations must elect, on a three-year cycle, either “must-carry” rights or “retransmission consent,” which is generally conditioned upon our payment of cash fees and/or our carriage of one or more of their affiliated stations or programming networks.    

Programming expenses have historically been our largest single expense item and, on a per-video customer basis, have continually increased at a higher rate than our ability to offset such increases with rate increases to our customers, particularly due to sports programming and retransmission consent. The primary reason behind our programming cost increases is significant media industry consolidation, which has resulted in many popular cable networks being owned by a relatively small number of large media conglomerates and in independent broadcast groups that own, control or represent a significant number of local broadcast stations across the country and, in some cases, multiple stations in the same market.

Many of these large media conglomerates and independent broadcast groups require us to purchase their content in bundles and dictate how we offer them to our customers, which has materially diminished our ability to selectively negotiate for the carriage or tier placement of individual networks or broadcast stations, and to lower our programming costs. We have been unable to fully offset these programming cost increases over the past several years through customer rate increases and do not expect this dynamic to change in the foreseeable future. Our inability to fully recover programming cost increases is expected to continue to adversely impact our video service margins and related cash flows.

HSD Service

We deliver HSD service through route-diverse fiber networks that are owned by us or leased from third parties and through backbone networks that are operated by third parties. We pay fees for leased circuits based on the amount of capacity and for Internet connectivity based on the amount of HSD traffic over the provider’s network.

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Phone Service

Our phone service is delivered through a Voice over Internet Protocol (“VoIP”) platform over a route-diverse infrastructure. We source certain services from outside parties to support our phone service, the most significant of which are long-distance services from a number of Tier 1 carriers, E911 database management, and leased circuits from incumbent local exchange carriers (“ILECs”).

Set-Tops, Programming Guides, Cable Modems and Network Equipment

We purchase set-tops from a limited number of suppliers and lease these devices to customers on a monthly basis. We provide our customers with set-top program guides. We mainly purchase cable modems and routers, switches and other network equipment.

Competition

We face competition for residential and business customers from a wide range of communication, entertainment and information services. We have historically faced, and continue to face, intense competition from existing providers. Rapid technological advances and changes in consumer behavior and demands have led to an increasing number of companies that offer new products and services that compete with all of our residential products. Our business services generally compete with existing providers who may have a stronger foothold and customer penetration in our markets, and we continue to face a number of challengers for advertising sales.

Many of our current and potential future competitors have strong brand name recognition, a nationwide platform and significant financial resources, which may allow them to react to technological developments or changes in consumer behavior quicker than us. Recent consolidation has resulted in competitors becoming larger and offering additional services. AT&T’s acquisition of DirecTV in 2015 enhanced their ability to offer bundled wireline and wireless services, and facilitated their recent launch of “DirecTV Now,” a vMVPD that competes with our video service. AT&T’s acquisition of Time Warner Inc. in 2018 will allow them to integrate a variety of video content on to their distribution platforms, and they have announced plans to launch a new SVOD service that includes films and television shows from the HBO, Turner and WarnerMedia properties.

Video

Direct Broadcast Satellite (“DBS”) Providers

We face our most significant competition for video customers from DBS providers, principally DirecTV, which is owned by AT&T, and DISH Network, which offer satellite-delivered video packages similar to ours, including certain features we may not provide including ad-skipping functionality and exclusive content such as DirecTV’s agreement with the National Football League. DBS providers also have certain other advantages over us, including a national brand and marketing platform, and the ability to avoid certain franchise fees, property taxes and other expenses that we typically incur. We believe aggressive promotional pricing and advanced customer equipment offered by these DBS providers have contributed to our historical video customer losses. Additionally, DirecTV and Dish have both launched virtual multichannel video provider services, allowing them to further compete with our video services.

Phone Companies

Certain phone companies have built fiber-based networks that allow them to offer a video service that is substantially similar to ours. As of December 31, 2018, approximately 5% of our homes passed faced wireline video competition from AT&T U-Verse based on internal estimates. The video service offered by phone companies is typically bundled with Internet, phone and, in some cases, wireless services. In markets where phone companies do not offer wireline video service, they have typically bundled their Internet and/or phone services with a DBS video service.

Other Overbuilders

We compete with other operators which we refer to as “overbuilders,” that offer video service to markets representing approximately 24% (excluding the phone companies noted above) of our homes passed. The level of competition provided by overbuilders varies, depending on the quality of their network and services offered, but they generally market bundled packages similar to ours. Some overbuilders, including municipally-owned entities, may be granted franchises on more favorable terms than ours, which may include exemptions from certain operating cost and/or regulatory requirements, to which we are subject. We believe there has been limited expansion of overbuilders in our markets in the past several years.

OTT Video

Our video service faces increasing competition from an increasing variety of OTT video providers that include:

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OTT services have become increasingly accessible as technological advances have facilitated the ability of consumers to watch such video products on their television and a variety of devices, and we have integrated many such services into our set-top to facilitate their usage. Additionally, because OTT video is very popular with younger demographics, there may be an increasing substitution of traditional video if newly formed households were more likely to choose one or several OTT video services as their only video provider. Our HSD customers who rely on OTT service for their only video service are likely to choose a higher tier of service, given their greater requirements for speed and data consumption.

Other

We also face competition for our video service from over-the-air broadcast television, of which the extent of such competition for our video service is dependent on the quality and quantity of broadcast signals available through an “off-air” antenna.

HSD

Phone Companies

Our HSD service faces its most significant competition from local phone companies, including CenturyLink, AT&T and Windstream, that generally offer digital subscriber line (“DSL”) based Internet services, which is limited by technical constraints to maximum speeds considerably slower than ours. These phone companies generally market their service at a lower price than our HSD service, but in certain markets where they have upgraded portions of their network to allow for faster speeds, their higher-speed tiers are typically available at similar or higher prices than ours.

Some phone companies have upgraded portions of their network to a fiber-to-the-node (“FTTN”) system that allows for Internet speeds comparable to our minimum speed of up to 60 Mbps, or fiber-to-the-home (“FTTH”) systems, which capable of providing Internet speeds as fast as our highest speeds. AT&T and CenturyLink have upgraded their networks to FTTN delivery systems in several of our markets, and AT&T has committed to deploying FTTH service to 12.5 million nation-wide locations within four years of their 2016 acquisition of DirecTV. We do not compete with FTTH services in a meaningful number of our markets. We generally believe our markets have been a lower priority for these phone companies, given the higher costs associated with building out such fiber networks in lower density markets such as ours, as compared to larger metropolitan markets. However, we may face greater competition for HSD customers if these companies were to continue, or accelerate, the deployment of fiber in markets which we compete.

Wireless Providers

We also face competition from wireless providers such as AT&T, Verizon Wireless, T-Mobile, Sprint and US Cellular that offer third and fourth generation, or “3G” and “4G,” wireless Internet service. While certain households or individuals may fully substitute their wireline Internet service for a wireless one, we do not believe that wireless Internet service offers a full replacement to our HSD service given higher data usage costs, slower speeds and lower reliability. Some of these drawbacks have been mitigated with the introduction of unlimited bandwidth consumption packages, but we believe our HSD offerings are compellingly priced and more widely available throughout our markets. However, the level of competition provided by wireless Internet services may increase in the future with the deployment of fifth generation, or “5G” technology. Verizon Wireless has launched 5G services in four select cities and has committed to reaching 30 million households by 2023. AT&T has launched 5G services in twelve select locations and plans to launch in an additional seven cities by the end of 2019. Given the lower density of our overall service areas, we do not believe 5G will have a near-term impact on our business.

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Other

Our HSD service also faces limited competition from other providers, including most of the overbuilders that compete with our video service, and certain municipalities and commercial entities that have built fiber networks and offer Internet service that competes with ours. Some local governments in our footprint may consider or pursue the subsidized build out of additional fiber and/or Wi-Fi networks. Our HSD service also faces competition from certain commercial venues, such as retail shopping areas, restaurants and airports that offer Wi-Fi Internet service, sometimes free of charge. If any of these providers were to significantly expand services in our markets, we would face additional competitive pressures.

Phone

Our phone service faces its most significant competition from the phone companies noted above that offer wireline phone service that is substantially similar to ours and, increasingly, from the wireless providers noted above. As households continue to utilize cell phones as their only phone service, the number of customers taking a wireline phone service has meaningfully declined, a trend we believe will continue.

Our phone service also competes with providers of IP-based phone services such as Vonage, Skype and magicJack, and from other forms of communication such as text and video messaging.

Business Services

We mainly compete for SMB customers with local phone companies, many of which have had a historical advantage of incumbency and monopoly for phone and internet services. However, in recent years, we have aggressively marketed our business services and expanded our high-capacity network into additional commercial areas, which has led to significant customer and revenue increases associated with business services, which we expect to continue as the market for true broadband services grows.

Our wireless backhaul and enterprise-level services also face competition from these local phone companies as well as other carriers, including metro and regional fiber-based carriers. However, many of these same competitors lease network access and bandwidth from Mediacom Business on a wholesale basis given our network availability in rural and underserved areas.

Advertising

We compete for the sale of advertising against a wide variety of traditional media outlets, including local broadcast stations, national broadcast networks, national and regional programming networks, local radio broadcast stations, local and regional newspapers, and magazines. Increasingly, non-traditional competitors in the digital media market are competing for the advertising budget shared with the traditional media outlets. This is a function of the industry trend to digital-inclusive multi-media ad campaigns. Competition will likely continue to increase as digital and other new formats for advertising seek to attract the same advertisers.

Other Competition

We also face competition for all of our services with all other sources of leisure, news, information and entertainment, including movies, sporting or other live events, radio broadcasts, home video services, console games, print media and the Internet. There can be no assurance that these or other existing, proposed, or as yet undeveloped technologies will not become dominant in the future and render our products and services less profitable or even obsolete.

Employees

As of December 31, 2018, we had 2,325 employees. None of our employees are organized under, or covered by, a collective bargaining agreement. We consider our relations with our employees to be satisfactory.

Legislation and Regulation

General

Federal, state and local laws regulate the development and operation of cable systems and, to varying degrees, the services we offer. Significant legal requirements imposed on us because of our status as a cable operator, or by virtue of the services we offer, are described below. Changes in these legal requirements, whether through legislation, administrative action or judicial decisions can impact our business.

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While some legal requirements affect our business overall, many of our operations are regulated to a varying degree under different provisions of federal law, principally Title I (information services), Title II (telecommunications services) and Title VI (cable services) of the Communications Act of 1934, as amended (“Communications Act”).

In September 2018, Truth-In-Billing, Remedies, and User Empowerment over Fees (“TRUE Fees”) Act of 2018 was introduced and would require cable, Internet and phone providers to include all charges (to the extent uniform across the United States) in advertised prices, restrict increases in service fees and equipment costs to consumers under contract to amounts equal to “objectively quantifiable increase in the cost to the provider” by reference to some external index, permit the consumer to cancel its service contract without any early termination fee or other penalty. Equipment rates could not be increased unless equipment hardware or software is upgraded to substantially increase functionality. Providers could not require binding arbitration for dispute resolution.

Privacy and Data Security

How we collect, use, disclose and retain personally identifiable information and other sensitive information about our customers and what we do in the event of a data security breach is governed by federal and state laws. Efforts to regulate privacy at the federal level continue, including Congressional hearings and introduced legislation. Many states in which we operate have also enacted customer privacy statutes, including obligations to notify customers when certain customer information is accessed or believed to have been accessed without authorization. These state provisions are in some cases more restrictive than those in federal law. In 2018, California, a state where we operate, enacted the California Consumer Privacy Act which, when it takes effect, impacts a wide-range of personal data of California residents, restricts the collection, use and disclosure of that data, gives consumers the right, with certain exceptions, to have their personal information deleted by a business, imposes data security requirements on business that collect the data and provides consumers a private right of action with the ability to recover statutory damages.

In addition to these general requirements, the Cable Act imposes a number of restrictions on the manner in which cable operators can collect, disclose and retain data about individual customers and requires cable operators to take actions to prevent unauthorized access to such information. The statute also requires that the cable operator periodically provide all customers with written information about its policies, including the types of information collected; the use of such information; the nature, frequency and purpose of any disclosures; the period of retention; the times and places where a customer may have access to such information; the limitations placed on the cable operator by the Cable Act; and a customer’s enforcement rights. In the event that a cable operator is found to have violated the customer privacy provisions of the Cable Act, it could be required to pay damages, attorneys’ fees and other costs. Certain of these Cable Act requirements have been modified by more recent federal laws. Other federal laws currently impact the circumstances and the manner in which we disclose certain customer information and future federal legislation may further impact our obligations.

In January 2019, the US General Accounting Office issued a study on Internet privacy and concluded that comprehensive Internet privacy legislation that establishes specific standards and includes traditional notice-and-comment rulemaking and broader Federal Trade Commission (“FTC”) civil penalty authority could enhance the federal government’s ability to protect consumer privacy.

The Federal Communications Commission’s (“FCC”) 2017 decision reclassifying broadband Internet access service as an “information service,” (see “HSD Service, Federal Regulation and Network Neutrality”) restored the FTC’s ability, pursuant to its general authority to enforce against unfair or deceptive acts and practices, to protect the privacy of Internet service customers, including our use and disclosure of certain customer information.

In addition to any privacy laws that may apply to our provision of VoIP services, we must comply with additional privacy provisions contained in the FCC’s Customer Proprietary Network Information (“CPNI”) regulations related to certain telephone customer records. In addition to employee training programs and other operating and disciplinary procedures, the CPNI rules require establishment of customer authentication and password protections, limit the means that we may use for such authentication, and provide customer approval prior to certain types of uses or disclosures of CPNI.

Preemption of State Restriction of Municipal-Based Broadband Systems

In a limited number of our markets, our products and services face competition from municipally owned electric utilities that have constructed telecommunications systems. Certain of the states in which we operate have adopted laws that impose conditions upon the conduct of a telecommunications business by local municipalities. For example, some states may require voter approval and prohibit cross-subsidization of the telecommunications business by electric, gas and water utility customers.

Broadband Infrastructure Support

Universal Service Fund

In recent years, the FCC has adopted a series of reforms to the Universal Service Fund (“USF”) support mechanism to help to make broadband available to areas that do not have or would not have broadband service. In addition, the FCC has expanded the types of services that must contribute to the USF. VoIP providers must contribute to the USF, and it is possible that in the future the FCC subject Internet access services, including our HSD Service to Universal Service funding requirements.

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Any increased costs resulting from having to contribute to USF, however, would increase our cost of service to consumers and that could adversely affect our business. We cannot predict how these various changes either may add costs or burdens to our existing VoIP and broadband services or how they may potentially benefit those who provide competing services.

Other Potential Governmental Support

In 2018, President Trump signed an executive order designed to make it easier for companies to install high-speed broadband networks in rural areas. He has further introduced a plan suggesting that funding for broadband deployment may also be part of a trillion dollar plus infrastructure package that his administration may propose. In addition, numerous pieces of legislation have been introduced in Congress, and the FCC has undertaken, to facilitate and/or fund more rapid and widespread high-speed broadband deployment. In 2018, the FCC committed $1.98 billion over ten years ($198 million annually) to support the deployment and provision of voice and fixed broadband services in unserved high-cost areas. In February 2019, the Secretaries of Agriculture and Commerce issued the American Broadband Initiative Milestones Report as required by the Agricultural Improvement Act of 2018 to President Trump. The report makes specific recommendations to accelerate the deployment and adoption of high-speed broadband connectivity. In the report, the United States Department of Agriculture announced that it is preparing to deploy a new congressional appropriation of $600 million of an innovative broadband pilot program to spur further private investment with priority given to improving broadband infrastructure in underserved rural areas. We cannot predict the impact of these efforts and actions could have on our business, but to the extent that it permits competitors to build out into our service areas that could adversely affect our business.

Cable System Operations and Video Services

Federal Regulation

Title VI of the Communications Act, referred to as the Cable Act, establishes the principal federal regulatory framework for our operation of cable systems and for the provision of our video services. The Cable Act allocates primary responsibility for enforcing the federal policies among the FCC and state and local governmental authorities.

The Communications Act and FCC regulations include content and non-content rules that impact our cable operations. These include, for example, rules (i) pursuant to which cable systems may retransmit over the air broadcast stations, as detailed more below; (ii) network nonduplication and syndicated exclusivity rules that allow broadcasters, under some circumstances, to require a cable system to block subscriber access to certain programming; (iii) political programming requirements, that impose obligations on cable operators to maintain records regarding advertising on the cable system by candidates and with respect to certain controversial issues of public importance, and, during weeks leading up to elections, offer political candidates the lowest unit charge paid by a commercial advertiser for the same class of advertising; (iv) customer service standards, that regulate certain aspects of our interactions with our subscribers (e.g., telephone availability and officer hours), (v) commercial limits during children’s programming; (vi) emergency alert system requirements to ensure delivery to our subscribers of certain emergency information; (vii) multiple dwelling unit (“MDU”) inside wiring and exclusive contract restrictions (see, Multiple Dwelling Unit Buildings, below); (viii) equal employment opportunity requirements; (ix) obligation to allow subscribers to use compatible retail navigation devices and related security issues (e.g., CableCards) (x) accessibility, both in terms of video description and closed captioning; (xi) requirements for cable systems to make available public, educational and governmental (“PEG”) channels, as well as leased access channels (which leased access rules are under review by the FCC in an pending rulemaking) and (xii) pole attachment rate rules (see, Pole Attachment Regulation, below).

Broadcast Signal Carriage

Must Carry and Retransmission Consent

FCC regulations require local commercial television broadcast stations to elect once every three years whether to require a cable system to carry the primary signal of their stations, subject to certain exceptions, commonly called must-carry, or to negotiate the terms by which the cable operator may carry the station on its cable systems, commonly called retransmission consent. The most recent elections took effect through December 31, 2020. Through January 1, 2020, Congress bars broadcasters from entering into exclusive retransmission consent agreements. Congress also requires all parties to negotiate retransmission consent agreements in good faith.

Federal law prohibits stations not under common ownership from engaging in joint negotiations with multichannel video programming distributors (“MVPDs”) and restricts broadcasters from generally limiting carriage of stations that are significantly viewed or otherwise entitled to carriage. In 2015, the FCC initiated a rulemaking, which still remains pending, to review the “totality of the circumstances” test applied, in part, to determine whether parties have attempted to negotiate retransmission consent in good faith and whether certain other actions should evidence bad faith. We cannot predict whether the FCC will modify its rules or the impact of any such modifications. If the FCC fails to modify its rules, such action could be seen as an endorsement of current broadcaster negotiating tactics that often introduce challenges to the negotiation of retransmission consent agreements, especially in light of the increasing consolidation of broadcast station ownership.

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There have long existed a variety of restrictions on media ownership to ensure advancement of diverse viewpoints, localism and competition. Congress, however, requires the FCC to review its media ownership rules periodically to ensure the continued need for them. In recent years, the FCC has modified or repealed several of its ownership restrictions, which has allowed for greater consolidation among broadcast stations. In July 2018, the D.C. Circuit Court of Appeals rejected a challenge to the FCC’s reinstatement of the UHF Discount, which allows broadcasters to count their UHF stations at half their reach, pending the outcome of the FCC’s 2017 rulemaking to review the national audience reach cap and the UHF discount. This rulemaking, along with the FCC’s 2018 quadrennial review of other media ownership rules, remain pending. The outcomes of these proceedings could pave the way for greater broadcast station ownership consolidation, which could increase the leverage of such group owners when negotiating retransmission consent agreements.    

We carry both must-carry broadcast stations and broadcast stations that have granted retransmission consent. A significant number of local broadcast stations carried by our cable systems have elected to negotiate for retransmission consent, and we have entered into retransmission consent agreements with substantially all of them. Retransmission consent agreements representing substantially all of our video customers receiving local broadcast stations will expire and require renegotiation prior to January 1, 2022.

Broadcast ATSC 3.0 (Next Gen TV) Transmission Standard

In 2017, the FCC authorized a new television broadcast transmission standard (referred to as ATSC 3.0 or Next Gen TV) that would, among other things, increase the amount of data that could be broadcast in a signal allowing transmission in higher definition formats such as 4K or UltraHD, add additional multicast channels and/or convert the transmission of exiting multicast channels to high definition. The Next Gen TV transmission standard would also allow reception of the broadcast signal on certain mobile devices, such as smart phones, that have a built-in ATSC 3.0 receiver. Stations considering transitioning to ATSC 3.0 are in most cases required to partner with another station to facilitate simulcasting of the station’s signal in ATSC 1.0 and 3.0 formats (one station would transmit the signals of both in ATSC 1.0 format while the other would do the same but in ATSC 3.0 format). While the simulcast signals must be available to most areas of the stations’ DMA, it might not be available to all locations in the DMA. The FCC is developing rules to permit waivers pursuant to which stations could convert to ATSC 3.0 transmission without offering a simulcast. To the extent a Next Gen TV station’s signal may not reach areas of the DMA served by our systems or a station licensee were to obtain a waiver from the simulcast requirements, this could impact our ability to offer subscribers all of the programming we currently offer. In addition, while the FCC will consider requests for ATSC 3.0 market trials and product development, it is not yet accepting applications for Next Gen TV licenses; other than a small number of reported market trials. Therefore, we do not know how quickly broadcasters will either begin transitioning or converting to the new standard or how long a transition period would continue and when stations we retransmit would convert to transmitting in the ATSC 3.0 format and we cannot predict the impact any of this would have on our operations.

Multiple Dwelling Units

The FCC’s cable inside wiring rules provide a specific procedure for the disposition of residential home wiring and internal building wiring that belongs to an incumbent cable operator that is forced by the building owner to terminate its cable services in a building with multiple dwelling units. The FCC regulations also prohibits exclusive service contracts for services to multiple dwelling units or other residential developments, however, bulk rate agreements and exclusive marketing agreements, while the permissibility of which is under review by the FCC, currently remain permissible. In 2017, the FCC issued a Notice of Inquiry to facilitate greater consumer choice and enhance broadband deployment in multiple tenant environments that could impact the provision of service to commercial customers in those environments. Our potential loss of such rights and the inability to secure such express rights in the future may adversely affect our business to customers residing in multiple dwelling unit buildings and certain other residential developments.

Copyright

Our cable systems typically include in their channel line-ups local and distant television and radio broadcast signals, which are protected by the copyright laws. We generally do not obtain a license to use this programming directly from the owners of the copyrights associated with this programming, but instead comply with an alternative federal compulsory copyright licensing process. In exchange for filing certain reports and contributing a percentage of our revenues to a federal copyright royalty pool, we obtain blanket permission to retransmit the copyrighted material carried on these broadcast signals. The nature and amount of future copyright payments for broadcast signal carriage cannot be predicted at this time.

As part of periodic Congressionally mandated reports, the Copyright Office has repeatedly recommended phasing out the distant signal compulsory license. We cannot predict whether Congress will eliminate the cable compulsory license, or what scheme would replace it, if any; however, any loss of the current compulsory license could increase our costs.

Pole Attachment Regulation

The Cable Act requires certain public utilities, including all local telephone companies and electric utilities, except those owned by municipalities and co-operatives, to provide cable operators and telecommunications carriers with nondiscriminatory access to poles, ducts, conduits and rights-of-way at just and reasonable rates. This right of access is beneficial to us. Federal law also requires the

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FCC to regulate the rates, terms and conditions imposed by such public utilities for cable systems’ use of utility pole and conduit space unless state authorities have demonstrated to the FCC that they adequately regulate pole attachment rates, as is the case in certain states in which we operate. In the absence of state regulation, the FCC will regulate pole attachment rates, terms and conditions only in response to a formal complaint. The FCC established a rate formula that governs the maximum rate certain utilities may charge for attachments to their poles and conduit by companies providing telecommunications services, including cable operators, for which, in almost all circumstances, the cable and telecommunications rates now approximate each other.

State and Local Regulation

Franchise Matters

Our cable systems use local streets and rights-of-way. Consequently, we must comply with state and local regulation, which is typically imposed through the franchising process. We have non-exclusive franchises granted by municipal, state or other local government entities for virtually every community where we operate that authorize us to construct, operate and maintain our cable systems. Our franchises generally are granted for fixed terms and in many cases are terminable if we fail to comply with material provisions. The terms and conditions of our franchises can vary materially from jurisdiction to jurisdiction. Each franchise granted by a municipal or local governmental entity generally contains provisions governing:

Although franchising matters were traditionally regulated at the local level through a franchise agreement and/or a local ordinance, many states now allow or require cable service providers to bypass the local process and obtain franchise agreements or equivalent authorizations directly from state government. Many of the states where we operate, including Illinois, Iowa, Missouri and Wisconsin, make state-issued franchises available, which typically contain less restrictive provisions than those issued by municipal or other local government entities. State-issued franchises in many states generally allow local telephone companies or others to deliver services in competition with our cable service without obtaining equivalent local franchises. In states where available, we are generally able to obtain state-issued franchises upon expiration of our existing franchises. Our business may be adversely affected to the extent that our competitors are able to operate under franchises that are more favorable than our existing local franchises. While most franchising matters are dealt with at the state and/or local level, the Cable Act provides oversight and guidelines to govern our relationship with local franchising authorities whether they are at the state, county or municipal level.

HSD Service

Federal Regulation and Network Neutrality

In 2017, the FCC issued a Declaratory Ruling reversing its 2015 action that had classified the provision of broadband Internet access service as a regulated telecommunications service under Title II of the Communications Act (so-called “net neutrality” rules) and restoring its classification as a Title I information service. As an information service, broadband Internet access services are not subject to the utility-style regulations under Title II. Broadband access service providers are required to comply with the FCC’s refined transparency rule, including disclosures of network management practices (for example, blocking, throttling and traffic prioritization), performance and commercial terms of service, and the Federal Trade Commission will again have enforcement jurisdiction over certain business practices. A suit by at least twenty-two state Attorneys General seeks to overturn the FCC’s action. Some members of Congress have also undertaken efforts to reinstate net neutrality requirements. We cannot predict the outcome or what the impact of such litigation, legislation or executive orders may be.

We provide HSD services to business customers. In 2017, the FCC adopted a Report and Order that found the market for packet-based services to businesses at speeds exceeding 45 Mbps as widespread therefore negating the need for any price regulation.

Digital Millennium Copyright Act

The owners of copyrights have been active in seeking to prevent use of the Internet to violate their rights, and we regularly receive notices of claimed infringements by our HSD customers. In many cases, their claims of infringement are based on the acts of customers of an Internet service provider — for example, a customer’s use of an Internet service or the resources it provides to post, download or disseminate copyrighted music, movies, software or other content without the consent of the copyright owner or to seek to profit from the use of the goodwill associated with another person’s trademark. In some cases, copyright and trademark owners have sought to recover damages from the Internet service provider, as well as or instead of the customer. The law relating to the

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potential liability of Internet service providers in these circumstances is unsettled. In 1996, Congress adopted the Digital Millennium Copyright Act, which is intended to grant ISPs protection against certain claims of infringement resulting from the actions of customers, provided that the ISP complies with certain requirements.

State and Local Regulation and Competition

Our HSD service provided over our cable systems generally have not been subject to regulation by state or local jurisdictions. Five states have enacted state laws through legislation or executive orders in some fashion governing net neutrality, including California where we have systems. More than thirty states considered similar legislation during 2018 and we do not know whether other states may undertake similar legislative efforts to enact statutes to regulate the provision of broadband service, primarily with respect to so-called net neutrality issues, and several governors have signed executive orders to the same effect. We cannot predict the outcome or what the impact of such legislation or executive orders may be.

Voice-over-Internet Protocol Phone Service

Federal Law

The 1996 amendments to the Cable Act created a more favorable regulatory environment for cable operators to enter the phone business. Most major cable operators now offer (“VoIP”) phone service as a competitive alternative to traditional circuit-switched telephone service. Various states, including states where we operate, considered or attempted differing regulatory treatment, ranging from minimal or no regulation to heavily-regulated common carrier status. As part of the proceeding to determine any appropriate regulatory obligations for VoIP phone service, the FCC decided that alternative voice technologies, like certain types of VoIP phone service, 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 phone service as a business operation.

Federal Regulatory Obligations

The FCC has applied some traditional landline telephone provider regulations to VoIP services. In addition to certain USF obligations as discussed in Broadband Infrastructure Support – Universal Service Fund, above, the FCC also has extended other regulations and reporting requirements to VoIP providers, including E-911, CPNI, local number portability, disability access, Form 477 (subscriber information) reporting obligations, international service revenue reporting and outage reporting.

State and Local Regulation

Although our entities that provide VoIP phone service services are certificated as competitive local exchange carriers in most of the states where they operate, they generally provide few, if any, services in that capacity. Rather, we provide VoIP services that are not generally subject to regulation by state or local jurisdictions. The FCC has preempted some state commission regulation of VoIP services, but has stated that its preemption does not extend to state consumer protection requirements. Some states continue to attempt to impose obligations on VoIP service providers, including state universal service fund payment obligations.

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Risks Related to our Operations

We face intense competition that could adversely affect our business, financial condition and results of operations.

We face significant competition for our products and services from a growing number of competitors that offer a wide range of communication, entertainment and information services. Many of our competitors have, compared to us, greater financial resources, more favorable brand recognition, fewer regulatory burdens, national footprints and scale, and long-standing relationships with regulatory authorities and customers. Technological advances and changes in consumer behavior and demands have led to an increasing number of companies that offer new products and services that compete with ours, including OTT video, and wireless Internet and phone services.

We face significant competition for video service from DBS providers, OTT video providers, phone companies and other overbuilders. Many of the OTT video competitors have strong brand name recognition, a nationwide platform and significant financial resources. Phone companies that offer video service substantially similar to our own represent approximately 5% of our homes passed, and other overbuilders (excluding phone companies) offer such a video service to about 24% of our homes passed.

Our HSD service faces its most meaningful competition from phone companies, wireless providers and other providers of internet access, including other overbuilders, municipalities and certain commercial entities that have built, or are considering building, fiber and/or Wi-Fi networks. The phone companies we compete with, including CenturyLink, AT&T and Windstream, primarily offer DSL Internet service that is typically limited to speeds considerably slower than ours. These phone companies have upgraded limited portions of their networks to FTTN or FTTH delivery systems that allow for speeds comparable to our HSD service.

Other services that we provide that may also face significant competition include our phone, business services, including cell tower backhaul and enterprise level services, and our advertising sales group.

Although we have generally eliminated or reduced tactical discounts for video customers that do not take bundled services, in order to attract new customers and maintain our existing customer base, we continue to make certain promotional offers that include short-term discounted service or equipment rates for bundled services, which may result in lower revenues and greater marketing expenses. Customers who take these discounted bundled services may not remain customers following the end of the promotional period. If our ability to attract new customers or retain existing customers is impeded due to increased levels of competition, our business, financial condition and results of operations may be adversely affected. For additional information regarding our competitors, see “Business Description – Competition.”

Continued increases in video programming expenses may drive the pricing of our video services to levels that customers deem unaffordable, which could have an adverse effect on our business, financial condition and results of operations.

Video programming expenses have historically been, and we expect will continue to be, our largest single expense item and, on a per-video customer basis, has increased at a substantially higher pace than the inflation rate or increase in U.S. wages. The higher rates is primarily caused by national and regional sports and other popular cable networks and retransmission consent fees imposed by local broadcast stations.

We believe these expenses will continue to grow at a significant rate because of the demands of the small number of large media conglomerates and independent television broadcast groups that own, control or otherwise represent a significant number of local broadcast stations across the country and, in some cases, own or control multiple stations in the same market. Consolidation among these independent broadcast station groups continues at a significant pace, and as a result, they have become much larger based on the number of stations that they own in our markets. This strengthened position allows them to negotiate for even higher retransmission consent fees. Additionally, many of these large media conglomerates and independent broadcast groups require us to purchase their content in bundles and dictate how we offer them to our customers, which has materially diminished our ability to selectively negotiate for the carriage or tier placement of individual networks or broadcast stations and to lower our programming costs.

If we are unable to successfully negotiate new agreements with these programmers before our current agreements expire, the programmers could require us to cease carrying their signals, possibly for an indefinite period, which may result in a loss of video customers and advertising revenue. On certain occasions in the past, negotiations have led to disputes with programmers that have resulted in temporary periods where we were not carrying a particular broadcast network or programming service or services, which increases the risk of customer dissatisfaction and the loss of customers. Because of the leverage these large programming companies have over us, we also may be obligated to carry additional programming that we would otherwise not offer, which may increase our programming expenses and lower our capacity to introduce other new products or services. We may also selectively choose not to renew our agreements with certain content providers if we believe it is uneconomical to do so, which could result in a loss of video customers and advertising revenues. In addition, if our HSD customers are unable to access desirable content online because content providers block or limit access by our customers if we do not carry their video programming, we may have difficulty retaining certain HSD customers.

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While we attempt to offset such growth in programming expenses by customer rate increases, including the direct pass-through of increases in retransmission consent and regional sports network fees, our video gross margins will likely continue to decline given the outsized increases to our programming costs we expect in the future. Such increases in our programming costs have forced us to push the pricing of our video services to levels that our customers may deem unaffordable or undesirable. As such, our customers may choose to no longer purchase our video services and instead rely on over-the-air viewing or use an OTT video service, which could have an adverse effect on our business, financial condition and results of operations.

Weak economic conditions could adversely impact our business, financial condition and results of operations.

Most of our revenues are sourced from consumers whose spending behavior is impacted by prevailing economic conditions. Weak job and business creation, occupied housing levels, personal income growth and consumer confidence can adversely impact demand for our services, and may cause increased cancellations by our customers or lead to unfavorable changes in the mix of products taken. The expanded availability of free or lower cost services that may compete with ours, including OTT video and wireless Internet available in certain commercial or public locations, may further pressure our customer retention. Weak economic conditions also can decrease advertising demand and negatively impact our advertising revenues.

Our ability to gain new customers depends, in part, on growth in occupied housing in our service areas, which is influenced by both local and national economic conditions. If the number of occupied homes in our service areas were to decline or not grow at all, our ability to attract and retain new video customers may be negatively impacted, and could adversely impact our business, financial condition and results of operations.

An acceleration in bandwidth consumption by HSD customers greater than current expectations could require unplanned network investments and meaningfully increase our capital expenditures.

The level of bandwidth consumption by our HSD customers has grown at sizeable rates for the past several years as usage of many Internet-based services, particularly OTT video, has rapidly increased. If bandwidth consumption were to grow at accelerated rates compared to recent experiences, we may need to meaningfully increase our capital expenditures to expand the bandwidth capacity of our systems beyond current expectations to ensure the quality of service provided to our HSD customers. Our ability to develop, implement and refine business models that respond to changing consumer bandwidth usage and demands efficiently could be restricted by regulatory and legislative efforts to impose so-called “net neutrality” requirements on Internet providers. See “Business — Legislation and Regulation — HSD Service — Federal Regulation and Network Neutrality.”

We face risks as we attempt to continue to grow our business services customer base and associated revenues.

Business services customers, and associated revenues, have made increasing contributions to our results of operations in the last several years, and we may encounter challenges as we attempt to further expand the delivery of HSD and phone to small- and medium-sized businesses, and data networking and fiber connectivity to medium- and large-sized businesses and wireless carriers’ cellular towers. We expect to continue to commit significant investments on technology, equipment and personnel focused on our business services, including the extension of our network to numerous locations that contain multiple potential business customers. If we are unable to sufficiently build the necessary infrastructure and internal support functions to scale and expand our customer base, the potential growth of business services would be limited. In many cases, business service customers have service level agreements that require us to provide higher standards of service and reliability. If we are unable to meet these service level requirements, or more broadly, the expectations of SMB and enterprise customers, or we fail to properly scale and support these activities, our business, financial condition and results of operations may be adversely affected.

If we are unable to keep pace with rapid technological developments and respond effectively to changes in consumer behavior and demand, our business, financial condition and results of operations may be adversely affected.

We operate in a rapidly changing environment and our success depends, in part, on our ability to maintain or improve our competitive position by acquiring, developing, adopting and exploiting new and existing technologies to add introduce new products and services, or enhance existing ones. Continued development of newer technologies and services and rapidly evolving consumer preferences will likely continue to drive expansion of the products and services offered by our existing competitors and increase the number of competitors that we face. Next-generation technology has allowed for linear OTT video services that can serve as a full replacement for our video service is allowing for wireless Internet providers to offer a service based on “5G” technology that may adequately serve as a replacement for our HSD service. If our competitors were to introduce new or products and services that we do not currently offer, or enhanced versions of existing products and services that consumers find more compelling than ours, we may be required to deploy greater levels of marketing expenditures and capital investments to maintain our competitive position. We may also recognize lower revenues if such new products and services require us to offer certain of our existing services at a lower or no cost to our customers. Such changes could cause our business, financial condition and results of operation may be adversely affected.

To keep pace with future developments, we must choose third-party suppliers whose technologies or equipment are more effective, cost-efficient and attractive to customers than those offered by our competitors. We rely on third-party providers to make available to us new, cost-effective set-tops and programming guides that allow us to offer our video customers an enhanced user experience. If our vendors were unable to provide set-tops and programming guides that our customers prefer in a timely manner, compared to those offered by our competitors, we may experience greater video customer losses, and our business, financial condition and results of operation may be adversely affected.

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We depend on network and information systems and other technologies to operate our businesses. A disruption or failure in such networks, systems or technologies resulting from “cyber-attacks,” natural disasters or other events outside our control have an adverse effect on our business, financial condition and results of operations.

Because of the importance of network and information systems and other technologies to our business, disruptions or failures caused by “cyber-attacks” such as computer hacking, computer viruses, denial of service attacks, worms or other disruptive software could have a devastating impact on our business. Both unsuccessful and successful “cyber-attacks” on companies have continued to increase in frequency, scope and potential harm in recent years. Because the techniques used in such attacks have become more sophisticated and change frequently, we may be unable to anticipate these techniques or implement adequate preventative measures. These “cyber-attacks” could result in misappropriation, misuse, leakage, falsification and accidental release or loss of information maintained in our information technology system and networks, including customer, personnel and vendor data, and we could also be subject to employee error or malfeasance, or other disruptions. Such events could damage our reputation and credibility, which could adversely affect our business, financial condition, and results of operations.

As a result of the increasing awareness concerning the importance of safeguarding personal information and the potential misuse of such information, businesses such as ours that handle a large amount of personal customer data are subject to legislation that has been adopted or is being considered regarding the protection, privacy and security of personal information and information-related risks. We may also provide certain customer and employee information to third parties in connection with our business. While we obtain assurance such data will be protected by these third-parties, they are potentially vulnerable to the same threats noted above. If such risks were to materialize, we may be subject to significant costs and expenses, or damage to our reputation and credibility, which could adversely affect our business, financial condition, and results of operations.

Our network and information systems are also vulnerable to damage resulting from power outages, natural disasters, terrorist attacks and other material events that are outside our control. Any such event may degrade or disrupt our service, lead to excessive volume at our call centers, and damage our plant, equipment, data and reputation. While we generally implement redundant systems to allow our network to continue to function in an outage, these measures may be ineffective in certain events. We are unable to predict the impact of such events, and any resulting customer or revenue losses, or increases in costs and expenses or capital expenditures, could have an adverse effect on our business, financial condition, and results of operations.

We may be unable to secure necessary hardware, software, telecommunications components and their operational support, and the related product development, which may impair our ability to provision and service our customers and to compete effectively.

Third-party firms supply most of the components used in delivering our products and services, including set-tops and VOD equipment; interactive programming guides; cable modems; routers and other switching equipment; provisioning and other software; network connections for our phone services; fiber-optic cable and construction services for expansion and upgrades of our network; and our customer billing platform. Some of these companies may have negotiating leverage over us because they are the sole supplier of certain products and services, or because there may be a long lead time and/or significant expense required to transition to another provider. We also rely on these third-party firms to develop next-generation technology so that we may stay competitive with the latest products and services, and such reliance may result in less product innovation or higher costs than we would experience with multiple suppliers. In many cases, these hardware, software and operational support vendors and service providers have, either through contract or as a result of intellectual property rights, a position of some exclusivity, and our operations depend on a successful relationship with these companies.

Any delays or disruptions in the relationship as a result of contractual disagreements, operational or financial failures on the part of the suppliers, or other adverse events affecting these suppliers could negatively affect our ability to effectively provision and service our customers. We may face significant lapses in service and costs to upgrade our networks to allow them to operate with alternate equipment if such events were to occur, which would negatively affect our business, financial condition and results of operations.

One of our significant third-party suppliers is Windstream Holdings Inc. or its affiliates (“Windstream”). Key components we use in important segments of our network include fiber and conduit that we use under leases, “indefeasible right of use” and other arrangements we currently have or originally entered into with Windstream, including certain fiber and conduit that Windstream transferred to, and then leased back from Uniti Group Inc. (“Uniti”) in 2015. As a result of recent adverse rulings in litigation arising out of its transaction with Uniti, Windstream recently filed a petition for reorganization under Chapter 11 of the US Bankruptcy Code in the Southern District of New York (Case No. 19-22312). It is possible that our right to continue to use such fiber and conduit, or our costs for such usage, could be negatively impacted as a result of the Chapter 11 proceeding or the challenges to the transaction between Windstream and Uniti, in which case our business, results of operations and financial condition could be adversely affected unless we were able to secure replacements or work arounds on a timely basis and at comparable costs.

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Our business depends on certain intellectual property rights and on not infringing on the intellectual property rights of others.

We rely on our copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other parties, to use our technologies, conduct our operations and sell our products and services. Third-party firms have in the past, and may in the future, assert claims or initiate litigation related to patent, copyright, trademark, and other intellectual property rights to technologies and related standards that are relevant to us. These assertions have increased over time as a result of our growth and the general increase in the pace of patent claims assertions, particularly in the United States. Recently, the number of intellectual property infringement claims has been increasing in the communications and entertainment fields, and from time to time, we have been party to litigation alleging that certain of our services or technologies infringe upon the intellectual property rights of others. Because of the large number of patents in the networking field, the secrecy of some pending patents and the rapid rate of issuance of new patents, it is not economically practical or, in some cases, possible to determine in advance whether a product or any of its components infringes or will infringe on the patent rights of others. Asserted claims and/or initiated litigation can include claims against us or our manufacturers, suppliers, or customers, alleging infringement of their proprietary rights with respect to our existing or future products and/or services or components of those products and/or services. Regardless of the merit of these claims, they can be time-consuming to defend; result in costly litigation and diversion of technical and management personnel; and require us to develop a non-infringing technology or enter into license agreements. There can be no assurance that licenses will be available on acceptable terms and conditions, if at all, or that any indemnification by our suppliers will be adequate to cover our costs if a claim were brought directly against us or our customers. Furthermore, because of the potential for high monetary awards that are not predictable, it is not unusual to find even arguably unmeritorious claims settled for significant amounts.

If any infringement or other intellectual property claim made against us by any third-party is successful, if we are required to indemnify a customer with respect to a claim against the customer, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, results of operations, and financial condition could be adversely affected.

The loss of key personnel could have a material adverse effect on our business.

Our success is substantially dependent upon the retention of, and the continued performance by, MCC’s key personnel, including Rocco B. Commisso, MCC’s Chairman and Chief Executive Officer. If any of MCC’s key personnel cease to participate in our business and operations, it could have an adverse effect on our business, financial condition and results of operations.

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Risks Related to our Financial Condition

We have a significant amount of debt, and the associated interest and principal payments could limit our operational flexibility and have an adverse effect on our business, financial condition, liquidity, and results of operations.

As of December 31, 2018, our total debt was $1.224 billion. Given our substantial debt, we are highly leveraged and will continue to be so. Our debt obligations require us to use a meaningful portion of our cash flows from operations to pay interest and principal payments on such debt, resulting in less cash available to finance our operations, capital expenditures and other activities.

Our significant amount of debt and associated debt service requirements could have adverse consequences, such as:

If we are unable to obtain financing on acceptable terms, or at all, to refinance our debt as it comes due, we would need to take other actions, including selling assets or seeking strategic investments from third parties, potentially on unfavorable terms, and deferring capital expenditures or other discretionary uses of cash. Such potential asset sales or third-party investments could adversely affect our results of operations, liquidity and financial condition, and any significant reduction in capital expenditures could affect our ability to compete effectively. If such measures were to become necessary, there can be no assurance that we would be able to sell assets or raise strategic investment capital sufficient enough to meet our scheduled debt maturities as they come due.

The financial markets are subject to volatility and disruptions, which may adversely affect our access to, or the cost of, new capital or our ability to refinance our scheduled debt maturities and other obligations as they come due.

Volatility and disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our businesses. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

Our access to funds under our revolving credit commitments is dependent on the ability of the financial institutions that are parties to those facilities to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our revolving credit commitments are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

We are a holding company, and if our operating subsidiaries are unable to make funds available to us, we may not be able to fund our indebtedness and other obligations.

We are a holding company, and do not have any operations or hold any assets other than our investments in, and our advances to, our operating subsidiaries. Our operating subsidiaries conduct all of our consolidated operations and own substantially all of our consolidated assets. Our operating subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to make funds available to us.

The only source of cash that we have to fund our senior notes (including, without limitation, the payment of interest on, and the repayment of, principal) is the cash that our operating subsidiaries generate from operations or borrow under their bank credit facility (the “credit facility”). The ability of our operating subsidiaries to make funds available to us will depend upon their results and applicable laws and contractual restrictions, including the covenants set forth in the credit agreement governing the credit facility (the “credit agreement”). If our operating subsidiaries were unable to make funds available to us, then we may not be able to make payments of principal or interest due under our senior notes. If such an event occurred, we may be required to adopt one or more alternatives, such as refinancing our senior notes or the outstanding debt of our operating subsidiaries at or before maturity, or raising additional capital through debt or equity issuance, or both. If we were not able to successfully accomplish those tasks, then we may have to take other actions, including selling assets or seeking strategic investments from third parties, potentially on unfavorable terms, and deferring capital expenditures or other discretionary uses of cash.

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There can be no assurance that any of the foregoing actions would be successful. Any inability to meet our debt service obligations or refinance our indebtedness would materially adversely affect our business, financial condition and results of operations.

A default under our credit agreement or indenture could result in an acceleration of our indebtedness and other material adverse effects.

As of December 31, 2018, the principal financial covenants of the credit agreement required our operating subsidiaries to maintain a total leverage ratio (as defined in the credit agreement) of no more than 5.0 to 1.0 and an interest coverage ratio (as defined in the credit agreement) of no less than 2.0 to 1.0. The credit agreement also contains various other covenants that, among other things, impose certain limitations on mergers and acquisitions, consolidations and sales of certain assets, liens, restricted payments and certain transactions with affiliates. See Note 6 in our Notes to Consolidated Financial Statements.

As of December 31, 2018, the principal financial covenant of the indenture governing our senior notes (the “indenture”) was a limitation on the incurrence of additional indebtedness based upon a maximum debt to operating cash flow ratio (as defined in the indenture) of 8.5 to 1.0. The indenture also contain various other covenants, though they are generally less restrictive than those found in our credit facility. See Note 6 in our Notes to Consolidated Financial Statements.

The breach of any of the covenants under the credit agreement or indenture could cause a default, which may result in the associated indebtedness becoming immediately due and payable. If this were to occur, we would be unable to adequately finance our operations. The membership interests of our operating subsidiaries are pledged as collateral under our credit facility. A default under our credit agreement could result in a foreclosure by the lenders on the membership interests pledged under that facility. Because we are dependent upon our operating subsidiaries for all of our cash flows, a foreclosure would have a material adverse effect on our business, financial condition, liquidity, and results of operations.

In the event of a liquidation or reorganization of any of our subsidiaries, the creditors of any of such subsidiaries, including trade creditors, would be entitled to a claim on the assets of such subsidiaries prior to any claims of the stockholders of any such subsidiaries, and those creditors are likely to be paid in full before any distribution is made to such stockholders. To the extent that we, or any of our direct or indirect subsidiaries, are a creditor of another of our subsidiaries, the claims of such creditor could be subordinated to any security interest in the assets of such subsidiary and/or any indebtedness of such subsidiary senior to that held by such creditor.

A lowering or cessation of the ratings assigned to our debt securities by ratings agencies may increase our future borrowing costs and reduce our access to capital.

Our future access to the debt markets and the terms and conditions we receive are influenced by our debt ratings. MCC’s corporate credit ratings currently are Ba1 by Moody’s, with a stable outlook, and BB by Standard and Poor’s (“S&P”), with a positive outlook. Our senior unsecured ratings currently are Ba2 by Moody’s, with a stable outlook, and B+ by S&P, with a positive outlook. There can be no assurance that Moody’s or S&P will maintain their ratings on MCC and us. A negative change to these credit ratings could result in higher interest rates on future debt issuance than we currently experience, or adversely impact our ability to raise additional funds.

Impairment of our goodwill and other intangible assets could cause significant losses.

As of December 31, 2018, we had approximately $1.4 billion of unamortized intangible assets, including franchise rights of $1.2 billion and goodwill of $0.2 billion on our consolidated balance sheets. These intangible assets represented approximately 59% of our total assets.

Accounting Standards Codification (“ASC”) No. 350 — Intangibles — Goodwill and Other (“ASC 350”) requires that goodwill and other intangible assets deemed to have indefinite useful lives, such as cable franchise rights, cease to be amortized. ASC 350 also requires that goodwill and certain intangible assets be tested at least annually for impairment. If we find that the carrying value of goodwill or cable franchise rights exceeds its fair value, we will reduce the carrying value of the goodwill or intangible asset to the fair value, and will recognize an impairment loss in our results of operations. See “Management’s Discussion and Analysis – Critical Accounting Policies – Valuation and Impairment Testing of Indefinite-lived Intangibles” and Note 2 in our Notes to Consolidated Financial Statements.

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Risks Related to Legislative and Regulatory Matters

Changes in government regulation could adversely impact our business.

The cable industry is subject to extensive legislation and regulation at the federal and local levels and, in some instances, at the state level. Additionally, our HSD and phone services are also subject to regulation, and additional regulation is under consideration. Aspects of such regulation are currently the subject of judicial and administrative proceedings, legislative and administrative proposals, and lobbying efforts by us and our competitors. Legislation is periodically under consideration that could entirely rewrite our principal regulatory statute, and the FCC and/or Congress may attempt to change the classification of, or change the way that, our services are regulated and/or change the framework under which broadcast signals are carried, remove the copyright compulsory license and change the rights and obligations of our competitors. We expect that court actions and regulatory proceedings will continue to refine our rights and obligations under applicable federal, state and local laws. The results of current or future judicial and administrative proceedings and legislative activities cannot be predicted. Modifications to existing requirements or imposition of new requirements or limitations could have an adverse impact on our business including those described below. See “Business — Legislation and Regulation.”

Recent FCC action to declassify our HSD service from Title II regulation under the Communications Act could be overturned by the courts or legislation.

A reclassification of our HSD service as a telecommunications service under Title II of the Communications Act could significantly impact how we provide and charge for our HSD service and operate our network by imposing requirements and limitations on us. See “Business — Legislation and Regulation — HSD Service — Federal Regulation and Network Neutrality.”

Government financing of broadband providers in our service areas could adversely impact our business.

In 2018, the FCC committed $1.98 billion over ten years ($198 million annually) to support the deployment and provision of voice and fixed broadband services in unserved high-cost areas which could be used to build or upgrade systems owned by those who compete with us. In 2019, the USDA announced plans to deploy an additional $600 million appropriation to spur additional private investment in improving broadband infrastructure in underserved rural areas. Major government infrastructure spending packages and/or other pieces of legislation currently under consideration in Congress or others that may be introduced may provide funding and subsidies to those who either compete with us or seek to compete with us and therefore may put us at a competitive disadvantage. Moreover, if the FCC chooses to broaden the imposition of USF fees on services we provide, the cost of our services could increase and harm our ability to compete. See “Business — Legislation and Regulation — General —Broadband Infrastructure Support — Universal Service Fund,” “Business — Legislation and Regulation — General — Governmental Broadband Infrastructure Support – Governmental Support” and “Business — Legislation and Regulation — Voice-over-Internet-Protocol Phone Service — Federal Regulatory Obligations.”

Adoption of an ATSC 3.0 transmission standard by stations whose broadcast signals we retransmit may increase our costs or cause loss of our ability to receive some signals.

In the event of a simulcast, a change in transmission location could impair our ability or increase our cost to obtain a station’s broadcast signal. If there is no ATSC 1.0 simulcast, unless we are permitted to downconvert a signal from ATSC 3.0 to ATSC 1.0, we will either lose the affiliated network content or we would have to modify the configuration and possibly some components of our system to permit retransmissions in ATSC 3.0 format, which could increase our costs and require additional capital investment. See “Business – Legislation and Regulation – Must Carry and Retransmission Consent.”

Loss of our ability to provide bulk rate services to multiple dwelling unit buildings could decrease the number of such units purchasing our services.

Any loss of the ability to provide services on a bulk rate basis to multiple dwelling unit buildings could result in a decrease in the number of such customers and the total amount of replacement revenue from full-rate individually billed customers may not offset such loss as it is unlikely that all residents of such units would take our services on an individual basis. See “Business — Legislation and Regulation —Multiple Dwelling Units.”

Denials of franchise renewals or continued absence of franchise parity can adversely impact our business.

Where state-issued franchises are not available, local franchising authorities may demand concessions, or other commitments, as a condition to renewal, and these concessions or other commitments could be costly. Although the Cable Act affords certain protections, there is no assurance that we will not be compelled to meet such demands in order to obtain renewals.

Our cable systems are operated under non-exclusive franchises. We believe that, as of December 31, 2018, various other entities are currently offering video service, through wireline distribution networks, to about 29% of our estimated homes passed. Because of the FCC’s actions to speed issuance of local competitive franchises and because many states in which we operate cable systems have adopted, and other states may adopt, legislation to allow others, including local telephone companies, to deliver services in competition with our cable service without obtaining equivalent local franchises, we may face not only increasing competition but we may be at a competitive disadvantage due to lack of regulatory parity. Any of these factors could adversely affect our business. See “Business — Legislation and Regulation — Cable System Operations and Video Services — State and Local Regulation — Franchise Matters.”

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Our phone service may become subject to additional regulation.

The regulatory treatment of phone services that we and other providers offer remains uncertain. The FCC, Congress, the courts and the states continue to look at issues surrounding the provision of VoIP. Any changes to existing law as it applies to VoIP or any determination that results in greater or different regulatory obligations than competing services would result in increased costs, lower revenues or an impeded ability to effectively compete or otherwise adversely affect our ability to successfully conduct our phone business. See “Business — Legislation and Regulation — Voice-over-Internet-Protocol Phone Service — Federal Law.”

Changes in compulsory copyright regulations could significantly increase our license fees.

If Congress either eliminates the current cable compulsory license or enacts revisions to the Copyright Act, the elimination could impose increased costs and transactional burdens or the revisions could impose oversight and conditions that could adversely affect our business. Any future decision by Congress to eliminate the cable compulsory license, which would require us to obtain copyright licensing of all broadcast material at the source, would impose significant administrative burdens and additional costs that could adversely affect our business. See “Business — Legislation and Regulation — Cable System Operations and Video Services — Federal Regulation — Copyright.”

Increased consolidation of broadcast television station ownership may increase leverage of those owners when negotiating retransmission consent rates and to impose additional carriage obligations on us.

If the FCC permits through changes in regulations or by approving case-by-case acquisitions of additional broadcast television stations by existing group owners, such owners could control an increasing number of broadcast television stations in DMAs in which our systems operate. This could give them increased leverage to extract higher retransmission consent fees and other consideration, including carriage of additional non-broadcast television programming, all of which could increase our costs that could adversely affect our business.

Risks Related to MCC’s Chairman and Chief Executive Officer’s Controlling Position

MCC’s Chairman and Chief Executive Officer has the ability to control all major corporate decisions, and a sale of his ownership interest could result in a change of control that would have unpredictable effects.

An entity wholly-owned by Rocco B. Commisso and related parties is the sole shareholder of MCC. Mr. Commisso is MCC’s founder, Chairman and Chief Executive Officer. Our debt arrangements provide that a default may result upon certain change of control events, including if Mr. Commisso were to sell a significant stake in us or MCC to a third party. Our debt agreements provide, however, that a change of control will not be deemed to have occurred so long as MCC continues to be our manager and/or Mr. Commisso continues to be MCC’s, or our, Chairman or Chief Executive Officer.

A change in control could result in a default under our debt arrangements, which require us to offer to repurchase our senior notes at 101% of their principal amount and trigger a variety of federal, state and local regulatory consent requirements. Any of the foregoing results could adversely affect our results of operations and financial condition.

None.

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Our principal physical assets consist of fiber-optic networks, including signal receiving, encoding and decoding devices, headend facilities and distribution systems and equipment at, or near, customers’ homes and businesses. The signal receiving apparatus typically includes a tower, antenna, ancillary electronic equipment and earth stations for reception of satellite signals. Headend facilities are located near the receiving devices. Our distribution system consists primarily of coaxial and fiber-optic cables and related electronic equipment. Customer premise equipment consists of set-top devices, cable modems and related equipment. Our distribution systems and related equipment generally are attached to utility poles under pole rental agreements with local public utilities, although in some areas the distribution cable is buried in underground ducts or trenches. The physical components of the cable systems require maintenance and periodic upgrading to improve performance and capacity. In addition, we maintain a network operations center with equipment necessary to monitor and manage the status of our network.

We own and lease the real property housing our regional call centers, business offices and warehouses throughout our operating regions. Our headend facilities, signal reception sites and microwave facilities are located on owned and leased parcels of land, and we generally own the towers on which certain of our equipment is located. We own most of our service vehicles. We believe that our properties, both owned and leased, are in good condition and are suitable and adequate for our operations.

We are involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, cash flows or business.

Not applicable.

PART II

There is no public trading market for our equity, all of which is held by MCC.

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In the table below, we provide selected historical consolidated statement of operations data, cash flow data and other data for the years ended December 31, 2014 through 2018 and balance sheet data and operating data as of December 31, 2014 through 2018, which are derived from our consolidated financial statements (except other data and operating data). Dollars are in thousands, except operating data. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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The following represents a reconciliation of Adjusted OIBDA to operating income, which is the most directly comparable GAAP measure (dollars in thousands):

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Reference is made to the “Risk Factors” in Item 1A for a discussion of important factors that could cause actual results to differ from expectations and any of our forward-looking statements contained herein. The following discussion should be read in conjunction with our audited consolidated financial statements as of, and for the years ended, December 31, 2018, 2017 and 2016.

Overview

We are a wholly-owned subsidiary of Mediacom Communications Corporation (“MCC”), the nation’s fifth largest cable company based on the number of customers who purchase one or more video services, or video customers. As of December 31, 2018, we served approximately 428,000 video customers, 699,000 high-speed data (“HSD”) customers and 339,000 phone customers, aggregating 1,466,000 primary service units (“PSUs”). As of the same date, we had 753,000 residential and business customer relationships.

We offer video, HSD and phone services individually and in bundled packages to residential and small- to medium-sized business (“SMB”) customers over our hybrid fiber and coaxial cable (“HFC”) network, and provide fiber-based network and transport services to medium- and large-sized businesses, governments and educational institutions. We also sell advertising to local, regional and national advertisers on video and digital platforms. We also offer home security and automation services to residential customers. Our services are typically offered on a subscription basis, and installation fees, monthly rates and related charges vary according to the services, equipment and features customers choose. We offer discounted packages for new customers and those who take multiple services, and primarily market bundled packages under the Xtream brand that include video with digital video recorder (“DVR”) service and set-tops with the TiVo guide, HSD with a wireless gateway, and phone service. We believe the simplified pricing and value proposition of our Xtream bundles has driven higher levels of sales activity.

Over the past several years, revenues from residential services have increased mainly due to residential HSD customer growth. We expect to continue to grow such revenues through HSD customer growth and increased revenue per customer relationship as more customers take faster HSD tiers and advanced video services, including DVR. Our business services revenues have grown at a faster rate than our residential revenues as we have rapidly grown our business customer relationships. Through significant capital investments, we continue to extend our network to new commercial locations that contain multiple businesses representing potential customers, in an effort to sustain or accelerate our rate of growth in business services revenues.

Our residential video service principally competes with direct broadcast satellite (“DBS”) providers that offer video programming substantially similar to ours and a variety of over-the-top (“OTT”) video services. Over the past several years, we have experienced meaningful video customer losses, largely to DBS competitors. The introduction of more OTT video services and offerings have increasingly represented additional competition for our video service. We have placed a greater emphasis on higher quality residential customer relationships, and we have generally eliminated or reduced tactical discounts for video customers that do not purchase two or more services. To appeal to such higher-quality consumers, we have deployed a next-generation Internet Protocol (“IP”) set-top that offers a cloud-based, graphically-rich TiVo guide with access and integrated search functionality to certain OTT video services, including as Netflix, Hulu, and YouTube, along with a multi-room DVR service and the ability to download certain content to personal devices. We also offer a lower-cost IP set-top that offers the TiVo guide and OTT video services, but without the required equipment for DVR service. Our voice-controlled remote allows our customers to use voice commands to change channels, search for shows and discover content through recommendations. If we are unsuccessful with this strategy and cannot offset video customer losses through higher average unit pricing and greater penetration of our advanced video services, we may experience future declines in annual video revenues.

Our residential HSD service competes primarily with digital subscriber line (“DSL”) services offered by local phone companies and wireless services offered by cellular phone companies. We have continued to grow our HSD customer base at a meaningful rate over the last several years. We believe our HSD service offers greater capacity and reliability than DSL and wireless offerings in our service areas, and our minimum downstream speed of up to 60 megabits per second (“Mbps”) is faster than the highest speed offered by substantially all our competitors. As consumers’ bandwidth consumption has dramatically risen in recent years, we have dedicated increasing levels of capital expenditures to allow for faster speeds and greater consumption. Through recent capital investment initiatives, we completed the transition of our network to DOCSIS 3.1 technology and offer 1 Gbps downstream HSD service throughout substantially all of our footprint. We offer modems that function as a phone adapter and wireless gateway, ensuring performance of multiple personal devices used at the same time. Our WiFi360 service provides additional access points and extends the range of the wireless network in the customer’s home. We expect to continue to grow HSD revenues as we grow our customer base and our HSD customers choose higher speed tiers.

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Our residential phone service mainly competes with substantially comparable phone services offered by local phone companies and cellular phone services offered by national wireless providers. We believe we will continue to grow residential phone customers, but may experience modest declines in phone revenues due to unit pricing pressure.

Our business services primarily compete for SMB customers with local phone companies, many of which have had a historical advantage given long-term relationships with such customers, a nation-wide footprint that allows them to more effectively serve multiple locations, and existing networks built in certain commercial areas that we do not currently serve. Our cell tower backhaul and enterprise-level services also face competition from these local phone companies as well as other carriers, including metro and regional fiber-based carriers. In recent years, we have aggressively marketed our business services and have expanded our network into additional commercial areas through certain capital investment initiatives. We believe these tactics have allowed us to gain market share, resulting in growth in our business services revenues over the past several years, which we believe will continue.

We sell advertising and production services to local, regional and national customers under our OnMedia brand. These revenues are determined, in part, by the number of video customers served and are impacted by overall advertising competition in our markets, including local broadcast stations, national cable and broadcast networks, radio, newspapers, magazines, outdoor display and Internet companies. Competition has, and likely will, continue to elevate as new formats of advertising are introduced into our markets. In recent years, we have generally experienced lower advertising revenues due to digital marketing taking a greater share of advertising spend in our markets and an overall reduction of our video customer base. These secular declines have been periodically offset by increased levels of political advertising during national elections and other significant political events.

Video programming has been our single largest expense and, on a per-video customer basis, continually increased at a higher rate than our ability to offset such increases with rate increases to our customers, particularly due to sports programming and retransmission consent. Media industry consolidation has resulted in the formation of large media conglomerates and large independent broadcast groups, who own or control a family of popular cable networks and a significant number of local broadcast stations across the country and, in some cases, own, control or otherwise represent multiple stations in the same market. Many of those powerful owners of programming require us to purchase their networks and stations in bundles and effectively dictate how we offer them to our customers, which has materially diminished our ability to selectively negotiate for the carriage or tier placement of individual networks or stations and to slow the rate of growth of our programming costs and the video rates our customers ultimately pay. Our inability to fully recover the programming cost increases has adversely impacted, and continues to adversely impact, our video service margins and related cash flows.

2018 Developments

2018 Financing Activity

On March 2, 2018, we called for the redemption of the entire $300.0 million principal amount outstanding of our 6³⁄₈% senior notes due April 2023 (the “6³⁄₈% Notes”). On March 30, 2018, we received $158.0 million of cash contributions from our parent, MCC, which, in turn, received such contributions from Mediacom LLC on the same date. On April 2, 2018, such cash contributions, along with $151.6 million of borrowings under our revolving credit commitments, were used to fund the redemption of the 6³⁄₈% Notes.

See “Liquidity and Capital Resources — Capital Structure — 2018 Financing Activity” and Note 6 in our Notes to Consolidated Financial Statements.

Tower Asset Sale

On March 15, 2018 and September 25, 2018, we contributed certain tower assets to MCC which, in turn, sold such tower assets to CTI.

See Note 13 in our Notes to Consolidated Financial Statements.

Hurricane Michael

On October 10, 2018, Hurricane Michael made landfall in the Panhandle region of Florida. Hurricane Michael caused property damage to our cable plant, as well as to our customers’ homes and businesses, in Georgia. As of December 31, 2018, the damage caused by Hurricane Michael required an additional $7.9 million of capital expenditures in order to repair our network and services.

See Note 14 in our Notes to Consolidated Financial Statements.

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Revenues

Changes in Accounting Standards

As of January 1, 2018, we have adopted certain accounting standards and related guidance (collectively, “revenue recognition”) that affects both the timing of revenue recognition (the “timing change”) and the allocation of revenues among video, HSD and phone within our multi-product offerings, in which we offer product bundles at a discount (the “allocation change”). We adopted this accounting standard using a modified retrospective transition, and accordingly, the impact was reflected in our financial results only for the full year ended December 31, 2018 and reported results for prior periods were not restated. The adoption of the new standard did not have a material impact on our results of operations for this period.

Video

Video revenues primarily represent monthly subscription fees charged to residential customers, which vary according to the level of service and the type and amount of equipment taken. Video revenues also include the sale of VOD content and pay-per-view events, installation, reconnection and wire maintenance fees, franchise and late payment fees, and other ancillary revenue.

HSD

HSD revenues primarily represent monthly subscription fees charged to residential customers, which vary according to the level of service and type of equipment taken.

Phone

Phone revenues primarily represent monthly subscription and equipment fees charged to residential customers for our phone service.

Business Services

Business services revenues primarily represent monthly fees charged to SMBs for video, HSD and phone services, which vary according to the level of service taken, and fees charged to large businesses, including revenues from cell tower backhaul and enterprise class services.

Advertising

Advertising revenues primarily represent revenues received from selling advertising time we receive under programming license agreements to local, regional and national advertisers for the placement of commercials on channels offered on our video services.

Costs and Expenses

Service Costs

Service costs consist of the costs related to providing and maintaining services to our customers. Significant service costs comprise: video programming; HSD service, including bandwidth connectivity; phone service, including leased circuits and long distance; our enterprise networks business, including leased access; technical personnel who maintain the cable network, perform customer installation activities and provide customer support; network operations center; utilities, including pole rental; and field operations, including outside contractors, vehicle fuel and maintenance and leased fiber for regional connectivity.

Video programming costs, which are generally paid on a per-video customer basis, have historically represented our single largest expense. In recent years, we have experienced substantial increases in the per-unit cost of programming, which we believe will continue to grow due to the increasing contractual rates and retransmission consent fees demanded by large programmers and independent broadcasters. Our HSD costs fluctuate depending on customers’ bandwidth consumption and customer growth. Phone service costs are mainly determined by network configuration, customers’ long distance usage and net termination payments to other carriers. Our other service costs generally rise as a result of customer growth and inflationary cost increases for personnel, outside vendors and other expenses. Personnel and related support costs may increase as the percentage of expenses that we capitalize declines due to lower levels of new service installations. We anticipate that service costs, with the exception of programming expenses, will remain fairly consistent as a percentage of our revenues.

Selling, General and Administrative Expenses

Significant selling, general and administrative expenses comprise: call center, customer service, marketing, business services, support and administrative personnel; franchise fees and other taxes; bad debt; billing; marketing; advertising; and general office administration. These expenses generally rise due to customer growth and inflationary cost increases for personnel, outside vendors and other expenses. We anticipate that selling, general and administrative expenses will remain fairly consistent as a percentage of our revenues.

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Service costs and selling, general and administrative expenses exclude depreciation and amortization, which we present separately.

Management Fee Expense

Management fee expense reflects compensation paid to MCC for the performance of services it provides our operating subsidiaries in accordance with management agreements between MCC and our operating subsidiaries.

Capital Expenditures

Capital expenditures are categorized in accordance with the National Cable and Telecommunications Association (“NCTA”) disclosure guidelines, which are intended to provide more consistency in the reporting of capital expenditures among peer companies in the cable industry. These disclosure guidelines are not required under GAAP, nor do they impact our accounting for capital expenditures under GAAP. Our capital expenditures comprise:

Use of Non-GAAP Financial Measures

“Adjusted OIBDA” is not a financial measure calculated in accordance with generally accepted accounting principles (“GAAP”) in the United States. We define Adjusted OIBDA as operating income before depreciation and amortization and deferred compensation. Adjusted OIBDA has inherent limitations as discussed below.

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Adjusted OIBDA is one of the primary measures used by management to evaluate our performance and to forecast future results. We believe Adjusted OIBDA is useful for investors because it enables them to assess our performance in a manner similar to the methods used by management, and provides a measure that can be used to analyze our value and evaluate our performance compared to other companies in the cable industry. A limitation of Adjusted OIBDA, however, is that it excludes depreciation and amortization, which represents the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our business, and it excludes deferred compensation. Management uses a separate process to budget, measure and evaluate capital expenditures. Adjusted OIBDA may not be comparable to similarly titled measures used by other companies, which may have different depreciation and amortization policies. Adjusted OIBDA is a key component to our covenant calculations.

Adjusted OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

The table below sets forth our consolidated statements of operations and Adjusted OIBDA for the years ended December 31, 2018, 2017 and 2016 (dollars in thousands and percentage changes that are not meaningful are marked NM):

The table below represents a reconciliation of Adjusted OIBDA to operating income, which we believe is the most directly comparable GAAP measure (dollars in thousands):

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Revenues

The tables below set forth revenue and selected customer and average monthly revenue statistics as of, and for the years ended, December 31, 2018, 2017 and 2016 (dollars in thousands, except per unit data):

Revenues increased 3.9% for the year ended December 31, 2018, primarily due to greater HSD and, to a lesser extent, business services, advertising and phone revenues, offset in part by a decline in video revenues. Revenues were substantially unaffected for the year ended December 31, 2018 by the timing change to revenue recognition as noted in “Revenues – Changes in Accounting Standards.”

Revenues increased 2.5% for the year ended December 31, 2017, primarily due to greater HSD and, to a much lesser extent, business services and phone revenues, offset in part by declines in video and advertising revenues.

We lost 2,000 customer relationships during the year ended December 31, 2018, compared to a gain of 1,000 and 22,000 customer relationships during the years ended December 31, 2017 and 2016, respectively. Our net changes in customer relationships continue to reflect an ongoing reduction in customers that only take our video service, mostly offset by greater numbers of customers in our bundled packages. Average total monthly revenue per customer relationship was $121.65 and $116.97 for the years ended December 31, 2018 and 2017, respectively, representing increases of 4.0% and 0.9% over the prior years.

Video

Video revenues decreased 3.9% for the year ended December 31, 2018, primarily due to the timing and allocation changes to revenue recognition noted in “Revenues – Changes in Accounting Standards,” and, to a lesser extent, a smaller residential video customer base compared to the prior year, offset in part by rate adjustments associated with the pass-through of higher programming costs for retransmission consent fees, and more customers taking our advanced video services. Excluding the impact of the timing and allocation changes, video revenues would have decreased 1.3%.

Video revenues declined 2.4% for the year ended December 31, 2017, mainly due to a smaller residential video customer base compared to the prior year, offset in part by more customers taking advanced video services and rate adjustments associated with the pass-through of higher programming costs for retransmission consent fees.

We lost 27,000, 8,000 and 17,000 video customers during the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we served 428,000 video customers, or 28.2% of our estimated homes passed, and 42.6% of our residential video customers took our DVR service, which represents the largest component of advanced video service revenues.

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HSD

HSD revenues grew 11.2% for the year ended December 31, 2018, mainly as a result of more customers paying higher rates for faster speed tiers, a larger residential HSD customer base compared to the prior year, and the timing and allocation changes to revenue recognition. Excluding the impact of the timing and allocation changes, HSD revenues would have grown 8.8%.

HSD revenues grew 10.3% for the year ended December 31, 2017, largely as a result of rate adjustments, more customers paying higher rates for faster speed tiers and a larger residential HSD customer base compared to the prior year.

We gained 31,000, 25,000 and 38,000 HSD customers during the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we served 699,000 HSD customers, or 46.1% of our estimated homes passed.

Phone

Phone revenues increased 3.9% for the year ended December 31, 2018, primarily due to the timing and allocation changes to revenue recognition and a larger residential phone customer base compared to the prior year, offset in part by by greater levels of discounting within the bundled packaging of our services. Excluding the impact of the timing and allocation changes, phone revenues would have decreased 0.8%.

Phone revenues increased 2.3% for the year ended December 31, 2017, mainly due to a larger residential phone customer base compared to the prior year, mostly offset by greater levels of discounting within the bundled packaging of our services.

We gained 27,000, 48,000 and 25,000 phone customers during the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we served 339,000 phone customers, or 22.4% of our estimated homes passed.

Business Services

Business services revenues rose 8.6% and 8.1% for the year ended December 31, 2018 and 2017, respectively, principally due to a larger SMB customer bases compared to the respective prior years. Business services revenues were minimally affected by the timing change to revenue recognition for the year ended December 31, 2018 and, excluding the impact of the timing change, business services revenues would have grown 8.4%.

Advertising

Advertising revenues increased 5.9% for the year ended December 31, 2018, substantially due to greater political advertising revenue associated with an election year, offset in part by declines in local automotive advertising and a smaller video customer base compared to the prior year.

Advertising revenues fell 19.8% for the year ended December 31, 2017, predominantly due to an unfavorable comparison to the prior year, which benefitted from advertising revenues associated with the national election in 2016.

Costs and Expenses

Service Costs

Service costs increased 3.8% and 4.9% for the years ended December 31, 2018 and 2017, respectively, primarily due to greater video programming and, to a lesser extent, employee costs. Programming costs grew 4.1% and 6.6% for the years ended December 31, 2018 and 2017, respectively, principally due to higher fees associated with the renewal of programming contracts and contractual increases under existing agreements, offset in part by smaller video customer bases compared to the respective prior years. Employee costs were 4.7% and 6.0% higher for the years ended December 31, 2018 and 2017, respectively, largely due to increased technical, maintenance and other operating employee staff and compensation levels.

Service costs as a percentage of revenues were 41.5%, 41.5% and 40.6% for the years ended December 31, 2018, 2017 and 2016, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 1.5% for the year ended December 31, 2018, primarily due to greater employee, marketing and billing expenses, offset in part by lower bad debt expense and taxes and fees. Employee expenses increased 2.3%, mainly due to greater administrative, marketing and advertising staffing levels, and to a lesser extent, the introduction of a new deferred compensation, offset by lower customer service employee staffing and compensation levels. Marketing costs were 3.1% higher, principally due to greater spending on digital and television advertising and on marketing our business services, offset in part by lower spending on radio and print advertising. Billing expenses grew 5.6%, substantially due to greater fees associated with customers’ bank and credit card payments. Bad debt expense decreased 6.5%, largely as a result of lower write-offs associated with certain accounts. Taxes and fees declined 2.4%, mainly due to lower franchise fees.

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Selling, general and administrative expenses increased 0.5% for the year ended December 31, 2017, primarily due to greater marketing and, to a lesser extent, office expenses, mostly offset by lower employee costs and taxes and fees. Marketing costs grew 7.7%, principally due to expenses related to the marketing of our business services and, to a lesser extent, our Xtream bundles. Office expenses rose 12.8%, mainly due to higher equipment maintenance, software and utilities costs. Employee costs declined 2.6%, chiefly due to lower customer service staffing levels. Taxes and fees decreased 5.0%, mainly due to lower franchise fees, offset in part by higher property taxes.

Selling, general and administrative expenses as a percentage of revenues were 18.0% 18.4%, and 18.7% for the years ended December 31, 2018, 2017 and 2016, respectively.

Management Fee Expense

Management fee expense grew 10.8% and 4.2% for the years ended December 31, 2018 and 2017, respectively, reflecting higher fees charged by MCC.

Management fee expense as a percentage of revenues were 2.2%, 2.0% and 2.0% for the years ended December 31, 2018, 2017 and 2016, respectively.

Depreciation and Amortization

Depreciation and amortization was 11.4% lower for the year ended December 31, 2018, mainly due a favorable comparison to the prior year, which contained a write-off of certain network equipment that was replaced under certain capital investment initiatives and, to a lesser extent, older investments and network assets becoming fully depreciated, offset in part by greater depreciation of investments in customer premise equipment, HSD bandwidth expansion and business customer support equipment software.

Depreciation and amortization was 17.1% higher for the year ended December 31, 2017, largely as a result of the write-off of certain network equipment that was replaced under certain capital investment initiatives and, to a much lesser extent, greater depreciation of investments in customer premise equipment, HSD bandwidth expansion and business support equipment and software.

Operating Income

Operating income grew 17.1% for the year ended December 31, 2018, primarily due to the increase in revenues and, to a lesser extent, lower depreciation and amortization, offset by higher service costs and, to a much lesser extent, selling, general and administrative expenses and management fees.

Operating income declined 8.6% for the year ended December 31, 2017, principally due to higher depreciation and amortization and service costs, offset in part by the increase in revenues.

Interest Expense, Net

Interest expense, net, fell 18.5% and 11.0% for the years ended December 31, 2018 and 2017, respectively, due to lower average outstanding indebtedness and lower average borrowing costs as a result of favorable financing transactions.

(Loss) Gain on Derivatives, Net

As a result of changes to the mark-to-market valuation of our interest rate exchange agreements, we recorded a net loss on derivatives of $2.2 million and net gains on derivatives of $2.8 million and $1.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. See Notes 4 and 6 in our Notes to Consolidated Financial Statements.

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt totaled $12.2 million for the year ended December 31, 2018, which represented the $9.6 million redemption price paid above par and the write-off of $2.6 million of unamortized financing costs associated with certain previously existing senior notes. Loss on early extinguishment of debt totaled $2.6 million and $1.2 million for the years ended December 31, 2017 and 2016, respectively, which represented the write-off of unamortized financing costs associated with certain previously existing term loans under our bank credit facility that were fully repaid.

Other Expense, Net

Other expense, net, was $0.7 million for the year ended December 31, 2018, representing $1.4 million of revolving credit commitment fees, offset in part by $0.7 million of other income due to a reversal of accruals associated with tower retirements, $1.3 million for the year ended December 31, 2017, representing $1.0 million of revolving credit commitment fees and $0.3 million of other fees, and $1.7 million for the year ended December 31, 2016, representing $1.5 million of revolving credit commitment fees and $0.2 million of other fees.

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Net Income

As a result of the factors described above, we recognized net income of $197.7 million, $159.3 million, and $171.9 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Adjusted OIBDA

Adjusted OIBDA increased 5.1% for the year ended December 31, 2018, substantially due to the increase in revenues, offset in part by higher service costs and, to a lesser extent, selling, general and administrative expenses and management fees.

Adjusted OIBDA increased 0.9% for the year ended December 31, 2017, principally due to the increase in revenues, mostly offset by higher service costs and, to a lesser extent, an unfavorable comparison to the prior year, which benefited from advertising revenues associated with the national election in 2016.

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Liquidity and Capital Resources

Our net cash flows provided by operating activities are primarily used to fund investments to enhance the capacity and reliability of our network and further expand our products and services, and make scheduled and voluntary repayments of our indebtedness and periodic distributions to MCC. As of December 31, 2018, our near-term liquidity requirements included term loan principal repayments of $20.5 million over the next twelve months. As of the same date, our sources of liquidity included $30.0 million of cash and $365.4 million of unused and available commitments under our $375.0 million revolving credit facility, after giving effect to no outstanding loans and $9.6 million of letters of credit issued to various parties as collateral.

We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements, including fixed charges, through existing cash, internally generated cash flows from operating activities, cash available to us under our revolving credit commitments and our ability to obtain future financing. If we are unable to obtain sufficient future financing on acceptable terms, or at all, we may need to take other actions to conserve or raise capital that we would not take otherwise. However, we have accessed the debt markets for significant amounts of capital in the past, and expect to continue to be able to access these markets in the future as necessary.

Net Cash Flows Provided by Operating Activities

Net cash flows provided by operating activities were $368.7 million for the year ended December 31, 2018, primarily due to Adjusted OIBDA of $423.4 million, offset in part by interest expense of $57.1 million and the $1.1 million net change in our operating assets and liabilities. The net change in our operating assets and liabilities was primarily due to decreases in accounts payable, accrued expenses and other current liabilities of $5.0 million, and in accounts payable to affiliates of $2.1 million, and an increase accounts receivable, net of $1.1 million, offset in part by a decrease in prepaid expenses of $7.2 million.

Net cash flows provided by operating activities were $325.3 million for the year ended December 31, 2017, primarily due to Adjusted OIBDA of $402.8 million, offset in part by interest expense of $70.1 million and the $10.0 million net change in our operating assets and liabilities. The net change in our operating assets and liabilities was primarily due to increases in prepaid expenses of $7.5 million and in accounts receivable, net, of $4.3 million, and decreases in accounts payable, accrued expenses, and other current liabilities of $5.5 million and other non-current liabilities of $1.5 million, offset in part by increases in accounts payable to affiliates of $7.3 million and in deferred revenue of $1.5 million.

Net Cash Flows Used in Investing Activities

Capital expenditures continue to be our primary use of capital resources and generally comprise substantially all of our net cash flows used in investing activities.

Net cash flows used in investing activities were $173.7 million for the year ended December 31, 2018, substantially comprising $178.1 million of capital expenditures, offset in part by a net change in accrued property, plant, and equipment of $3.4 million and proceeds from sale of assets of $1.0 million.

Net cash flows used in investing activities were $179.2 million for the year ended December 31, 2017, substantially comprising $181.5 million of capital expenditures, offset in part by a net change in accrued property, plant, and equipment of $1.8 million.

Capital Expenditures

The table below sets forth our capital expenditures (dollars in thousands):

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Capital expenditures for the year ended December 31, 2018 decreased $3.4 million, largely reflecting lower spending in customer premise equipment, primarily on our advanced video set-tops, and line extensions, mainly following the completion of opportunistic network expansions, offset in part by greater spending in support capital, primarily for business support functions, and in upgrade and rebuild, chiefly for the replacement of certain network assets. We incurred approximately $7.9 million of additional capital expenditures related to the repair and recovery of areas impact by Hurricane Michael. See Note 14 in our Notes to Consolidated Financial Statements.

Capital expenditures for the year ended December 31, 2017 increased $1.8 million, largely reflecting greater spending in customer premise equipment, primarily for our advanced video set-tops, and, to a lesser extent, in upgrade and rebuild, mainly for the replacement of certain network assets, mostly offset by lower spending in scalable infrastructure, principally on next-generation HSD network equipment associated with the deployment of DOCSIS 3.1 technology.

Net Cash Flows Used in Financing Activities

Net cash flows used in financing activities were $177.6 million for the year ended December 31, 2018, substantially as a result of the $300.0 million redemption of the 6³⁄₈% Notes, $52.6 million of net repayments under the credit facility, $18.0 million of dividend payments on preferred members’ interest, $10.5 million of capital distributions to our parent, MCC, and $9.6 million for the redemption price paid above par associated with the 6³⁄₈% Notes, offset in part by $208.0 million of capital contributions from our parent, MCC, and $5.1 million of other financing activities.

Net cash flows used in financing activities were $147.7 million for the year ended December 31, 2017, comprising $121.1 million of capital distributions to our parent, MCC, $51.0 million of net repayments under the credit facility, $18.0 million of dividend payments on preferred members’ interest, $13.3 million of financing costs and $4.3 million of other financing activities, offset in part by $60.0 million of capital contributions from our parent, MCC.

Capital Structure

As of December 31, 2018, our total indebtedness was $1.224 billion, of which approximately 16% was at fixed interest rates or had interest rate exchange agreements that fixed the variable portion of debt. During the year ended December 31, 2018, we paid cash interest of $59.2 million, net of capitalized interest.

2018 Financing Activity

On March 2, 2018, we called for the redemption of the entire $300.0 million principal amount outstanding of our 6³⁄₈% senior notes due April 2023 (the “6³⁄₈% Notes”). On March 30, 2018, we received $158.0 million of cash contributions from our parent, MCC, which, in turn, received such contributions from Mediacom LLC on the same date. On April 2, 2018, such cash contributions, along with $151.6 million of borrowings under our revolving credit commitments, were used to fund the redemption of the 6³⁄₈% Notes.

See Note 6 in our Notes to Consolidated Financial Statements.

Bank Credit Facility

As of December 31, 2018, we maintained a $1,399.0 million credit facility, comprising $1,024.4 million of term loans with maturities ranging from November 2022 to January 2025, and $375.0 million of revolving credit commitments, which are scheduled to expire in November 2022. As of the same date, we had $365.4 million of unused lines under our revolving credit commitments, all of which were available to be borrowed and used for general corporate purposes, after taking into account no outstanding loans and $9.6 million of letters of credit issued thereunder to various parties as collateral.

The credit facility is collateralized by our ownership interests in our operating subsidiaries, and is guaranteed by us on a limited recourse basis to the extent of such ownership interests. The credit agreement governing the credit facility (the “credit agreement”) requires us to maintain a total leverage ratio (as defined in the credit agreement) of no more than 5.0 to 1.0 and an interest coverage ratio (as defined in the credit agreement) of no less than 2.0 to 1.0. For all periods through December 31, 2018, our operating subsidiaries were in compliance with all covenants under the credit agreement including, as of the same date, a total leverage ratio of 2.2 to 1.0 and an interest coverage ratio of 6.1 to 1.0. We do not believe that our operating subsidiaries will have any difficulty complying with any of the covenants under the credit agreement in the near future.

Interest Rate Swaps

We periodically enter into interest rate exchange agreements (which we refer to as “interest rate swaps”) with various banks to fix the variable rate on a portion of our borrowings under the credit facility to reduce the potential volatility in our interest expense that may result from changes in market interest rates. As of December 31, 2018, we had no current or forward-starting interest rate swaps.

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Senior Notes

As of December 31, 2018, we had $200.0 million of outstanding senior notes, all of which comprised our 5¹⁄₂% senior notes due April 2021 (the “5¹⁄₂% Notes”). See Note 6 in our Notes to Consolidated Financial Statements.

Our senior notes are unsecured obligations, and the indenture governing the 5¹⁄₂% Notes (the “indenture”) limits the incurrence of additional indebtedness based upon a maximum debt to operating cash flow ratio (as defined in the indenture) of 8.5 to 1.0. For all periods through December 31, 2018, we were in compliance with covenants under the indenture including, as of the same date, a debt to operating cash flow ratio of 2.7 to 1.0. We do not believe that we will have any difficulty complying with any of the covenants under the indenture in the near future.

Debt Ratings

MCC’s corporate credit ratings currently are Ba1 by Moody’s, with a stable outlook, and BB by Standard and Poor’s (“S&P”), with a positive outlook, and our unsecured ratings currently are Ba2 by Moody’s, with a stable outlook, and B+ by S&P, with a positive outlook.

There can be no assurance that Moody’s or S&P will maintain their ratings on MCC and us. A negative change to these credit ratings could result in higher interest rates on future debt issuance than we currently experience, or adversely impact our ability to raise additional funds. There are no covenants, events of default, borrowing conditions or other terms in the credit agreement or indenture that are based on changes in our credit rating assigned by any rating agency.

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments, and the effects they are expected to have on our liquidity and cash flow, for the five years subsequent to December 31, 2018 and thereafter (dollars in thousands)*:

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Critical Accounting Policies

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Periodically, we evaluate our estimates, including those related to doubtful accounts, long-lived assets, capitalized costs and accruals. We base our estimates on historical experience and on various other assumptions that we believe are reasonable. Actual results may differ from these estimates under different assumptions or conditions. We believe that the application of the critical accounting policies discussed below requires significant judgments and estimates on the part of management. For a summary of our accounting policies, see Note 2 in our Notes to Consolidated Financial Statements.

Property, Plant and Equipment

We capitalize the costs of new construction and replacement of our cable transmission and distribution facilities and new service installation in accordance with Accounting Standards Codification (“ASC”) No. 922 — Entertainment — Cable Television. Costs associated with subsequent installations of additional services not previously installed at a customer’s dwelling are capitalized to the extent such costs are incremental and directly attributable to the installation of such additional services. Capitalized costs include all direct labor and materials as well as certain indirect costs. Capitalized costs are recorded as additions to property, plant and equipment and depreciated over the average life of the related assets. We use standard costing models, developed from actual historical costs and relevant operational data, to determine our capitalized amounts. These models include labor rates, overhead rates and standard time inputs to perform various installation and construction activities. The development of these standards involves significant judgment by management, especially in the development of standards for our newer, advanced products and services in which historical data is limited. Changes to the estimates or assumptions used in establishing these standards could be material. We perform periodic evaluations of the estimates used to determine the amount of costs that are capitalized. Any changes to these estimates, which may be significant, are applied in the period in which the evaluations were completed.

Valuation and Impairment Testing of Indefinite-lived Intangibles

As of December 31, 2018, we had approximately $1.4 billion of unamortized intangible assets, including franchise rights of $1.2 billion and goodwill of $0.2 billion, on our consolidated balance sheets. Franchise rights are our largest asset and, together with goodwill, represent approximately 59% of our total assets as of the same date.

Our cable systems operate under non-exclusive cable franchises, or franchise rights, granted by state and local governmental authorities for varying lengths of time. We acquired these cable franchises through acquisitions of cable systems and were accounted for using the purchase method of accounting. As of December 31, 2018, we held 478 franchises in areas located throughout the United States. The value of a franchise is derived from the economic benefits we receive from the right to solicit new customers and to market new products and services, such as digital video, HSD and phone, in a specific market territory. We concluded that our franchise rights have an indefinite useful life since, among other things, there are no legal, regulatory, contractual, competitive, economic or other factors limiting the period over which these franchise rights contribute to our revenues and cash flows. Goodwill is the excess of the acquisition cost of an acquired entity over the fair value of the identifiable net assets acquired. In accordance with ASC No. 350 — Intangibles — Goodwill and Other (“ASC 350”), we do not amortize franchise rights and goodwill. Instead, such assets are tested annually for impairment or more frequently if impairment indicators arise.

We follow the provisions of ASC 350 to test our goodwill and franchise rights for impairment. We assess the fair values of our reporting unit using the Excess Earnings Method of the Income Approach as our discounted cash flow (“DCF”) methodology, under which the fair value of cable franchise rights are determined in a direct manner. We employ the Multi-Period Excess Earnings Method to calculate the fair values of our cable franchise rights, using unobservable inputs (Level 3). This assessment involves significant judgment, including certain assumptions and estimates that determine future cash flow expectations and other future benefits, which are consistent with the expectations of buyers and sellers of cable systems in determining fair value. These assumptions and estimates include discount rates, estimated growth rates, terminal growth rates, revenues per customer, market penetration as a percentage of homes passed and operating margin. We also consider market transactions, market valuations, research analyst estimates and other valuations using multiples of operating income before depreciation and amortization to confirm the reasonableness of fair values determined by the DCF methodology. We also employ the Greenfield model to corroborate the fair values of our cable franchise rights determined under the In-use Excess Earnings DCF methodology. Significant impairment in value resulting in impairment charges may result if the estimates and assumptions used in the fair value determination change in the future. Such impairments, if recognized, could potentially be material.

Based on the guidance outlined in ASC 350, we have determined that the unit of accounting, or reporting unit, for testing goodwill and franchise rights is Mediacom Broadband. Comprising cable system clusters across several states, Mediacom Broadband is at the financial reporting level that is managed and reviewed by the corporate office (i.e., chief operating decision maker) including our determination as to how we allocate capital resources and utilize the assets. The reporting unit level also reflects the level at which the purchase method of accounting for our acquisitions was originally recorded.

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In accordance with ASC 350, we are required to determine goodwill impairment using a two-step process. The first step compares the fair value of a reporting unit with our carrying amount, including goodwill. If the fair value of the reporting unit exceeds our carrying amount, goodwill of the reporting unit is considered not impaired and the second step is unnecessary. If the carrying amount of a reporting unit exceeds our fair value, the second step is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill, calculated using the residual method, with the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied fair value, the excess is recognized as an impairment loss.

The impairment test for our franchise rights and other intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, the excess is recognized as an impairment loss.

Since our adoption of ASC 350 in 2002, we have not recorded any impairments as a result of our impairment testing. We monitor the reporting unit for impairment throughout each of the reporting periods. We completed our most recent impairment test as of October 1, 2018, which reflected no impairment of our franchise rights, goodwill or other intangible assets. For the years ended, December 31, 2018 and 2017, respectively, no impairments were recorded.

For illustrative purposes, if there were a hypothetical decline of 20% in the fair values determined for cable franchise rights, goodwill and other finite-lived intangible assets at our reporting unit, no impairment loss would result as of our impairment testing date of October 1, 2018.

We could record impairments in the future if there are changes in the long-term fundamentals of our business, in general market conditions or in the regulatory landscape that could prevent us from recovering the carrying value of our long-lived intangible assets. The economic conditions affecting the U.S. economy, and how that may impact the fundamentals of our business, may have a negative impact on the fair values of the assets in our reporting unit.

We have evaluated whether there are any adverse qualitative factors surrounding our Mediacom Broadband reporting unit indicating that a goodwill impairment may exist. We do not believe that it is “more likely than not” that a goodwill impairment exists as of December 31, 2018. As such, we have not performed Step 2 of the goodwill impairment test.

Recent Accounting Pronouncements

See Note 2 in our Notes to the Consolidated Financial Statements.

Inflation and Changing Prices

Our costs and expenses are subject to inflation and price fluctuations. Such changes in costs and expenses can generally be passed through to customers. Programming costs have historically increased at rates in excess of inflation and are expected to continue to do so. We believe that under the FCC’s existing cable rate regulations we may increase rates for cable services to more than cover any increases in programming. However, competitive conditions and other factors in the marketplace may limit our ability to increase our rates.

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We periodically enter into interest rate exchange agreements (which we refer to as “interest rate swaps”) with counterparty banks to fix the variable interest rate on a portion of our borrowings under our credit facility. As of December 31, 2018, we had no current or forward-starting interest rate swaps that fixed the variable portion of our borrowings and, as of the same date, approximately 84% of our total debt was exposed to variable rates.

Our debt arrangements do not contain credit rating triggers that could affect our liquidity.

The table below provides the scheduled maturity and estimated fair value of our debt as of December 31, 2018 (dollars in thousands):

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MEDIACOM BROADBAND LLC AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents

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Report of Independent Registered Public Accounting Firm

To the Management of Mediacom Broadband LLC:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mediacom Broadband LLC and its subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in member’s equity and cash flows for each of the three years in the period ended December 31, 2018, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

March 8, 2019

We have served as the Company’s auditor since 2002.

43

MEDIACOM BROADBAND LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

The accompanying notes are an integral part of these statements.

44

MEDIACOM BROADBAND LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

The accompanying notes are an integral part of these statements.

45

MEDIACOM BROADBAND LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER’S EQUITY

(Dollars in thousands)

The accompanying notes are an integral part of these statements.

46

MEDIACOM BROADBAND LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)