Good morning. I am Jerry Kent, President and CEO of Charter Communications. I cofounded Charter as an entrepreneurial company in 1993, and we have grown to be the fourth-largest cable company in the country. With the closing of a pending acquisition, Charter will be serving approximately 7 million customers in 40 states. Thank you for inviting me to testify this morning on how Charter Communications is responding to the intense competition we face in the multichannel video marketplace.

The cable industry is facing increasing competition in the video marketplace from direct broadcast satellites and from terrestrial competitors such as local utilities, phone companies and cable overbuilders. More than 20% of the homes in Charter service areas have chosen to subscribe to a competing DBS provider. Terrestrial competitors include Knology, which competes with us in several markets in the southeast; Wide Open West, which has obtained franchises in Fort Worth, Texas and in several communities in our hometown of St. Louis; and several local utilities and phone companies in communities including Wisconsin Rapids, Wisconsin; Newnan, Georgia; and St. Cloud, Minnesota.

In order to compete effectively, Charter has chosen to capitalize on what we perceive to be our greatest competitive advantage: our advanced local delivery system. We have the ability to transmit voice, video and data services with the speed, capacity and interactive capability that our customers demand. That belief in our broadband pipe was the main driver in my founding of Charter Communications. In 1998, Paul Allen bought controlling interest in Charter to help realize his vision of a Wired World, in which cable’s broadband capabilities will facilitate the convergence of television with computers and the Internet.

Based upon our potential, my management team in 1999 completed what was then the third largest IPO in U.S. history.

Today we are delivering on that Wired World vision by upgrading our plant and equipment to state-of-the-art technology that is second to none. Our strategy is to invest in and deploy a plethora of services through that broadband pipe that will give us the ability to compete effectively in the open marketplace.

We are well into a three year $3.5 billion program to upgrade and rebuild our systems to the highest broadband standards in the industry. Today, nearly 70% of our customers are served by systems that are newly upgraded and capable of providing digital video, high speed Internet access and other exciting interactive services. And by the end of next year, almost 90 percent of our customers will be served by systems of 750 MHz or greater.

This massive rebuilding project is not occurring in a vacuum. Charter is engaged in a fierce competitive battle with DBS providers, telephone companies, utilities, and cable overbuilders. The billions of dollars we are investing to upgrade our plant from a one-way analog video delivery service into a two-way interactive digital platform is in large part fueled by the competition we face in the marketplace. We are deploying advanced services to set us apart from the competition in the eyes of the consumer.

In response to this competition, we made converting our systems to digital our top priority in 2000. Our digital conversion has been occurring at a rapid rate and our customers are responding with great enthusiasm. Charter started the year 2000 with just 155,000 digital customers. By the end of the year, we had over one million digital subscribers accounting for almost 15 % of our customer base—a 550% rate of growth. On average, we added 17,500 new digital customers per week, a 560% rate of growth. In the first quarter of 2001, we added well over 20,000 new digital customers per week and we expect to end the year with over 30% of our customers subscribing to digital services.

Of course, rebuilt plant is more than just increased programming choices and better picture quality. Using our new capacity, we are able to offer our customers exciting new interactive services including high speed Internet access, Internet access over the television set and video on demand. And we have begun trials on Internet Protocol (IP) telephony in order to offer our customers a choice in local phone service.

In 2000, we nearly tripled customers to our high speed Internet service, called Charter Pipeline, ending the year with 250,000 data customers. We added over 3,500 new data customers per week last year. In the first quarter of this year, we have added 6,000 new data customers per week. Charter Pipeline cable modem service competes directly with the telephone industry’s fast growing DSL service, and our prices are very competitive. In fact, it was the deployment of cable modem service that sparked competition from DSL providers. We also provide significant discounts for a bundled video and data product to attract and retain customers.

We also recently launched Video on Demand in two of our markets. With this new service, customers have access to a library of more than 400 movie titles and can enjoy full VCR functionality while viewing their selection. Customer response has been extraordinarily positive. We have seen Video on Demand take rates double that of traditional pay-per-view and we will roll out Video on Demand in 10 more markets this year. By the end of 2001, we are projecting 2.2 million Charter homes will have access to Video on Demand technology.

But in a competitive environment, it all comes down to taking care of your customer. They vote with their pocketbook every day in this competitive environment. That is why we are continuing to enhance our customer service program.

For example, in Wisconsin, we have invested more than half a billion dollars to upgrade our plant and swiftly deploy advanced cable services. To service our newly upgraded systems, we opened our first state-of-the-art regional customer contact center in Fond du Lac. The center does not replace our local offices, but adds a level of specialized customer support for advanced digital products, available 24 hours a day, seven days a week. This center will serve as a template for six additional regional centers that we are building this year at a total cost of over $60 million, culminating in twelve regional call centers at a cost of over $100 million in the next two years.

Charter is also undertaking telephony initiatives focusing on the testing of IP calling technologies and developing back-office support. We are working with Cisco, Telecordia and Motorola on a trial in Wisconsin and another home-user trial with Nortel and Antec in the St. Louis market. We expect to compete in local telephone service when our IP technology is ready. We anticipate this to be 2003.

Charter is working on several other advanced technology initiatives including video streaming, which will be available to our customers in the third quarter; home networking, and web cams for video conferencing that will benefit our residential customers.

Charter fully recognizes that we are in a new era of competition for the various services we offer to our customers. By investing in broadband technologies and deploying new services through innovation, Charter is well positioned to compete effectively in this vibrant new marketplace. The American consumers are the real winners with an increasing array of digital, data and interactive services available from a growing number of competitive providers.

Thank you again, Mr. Chairman, for inviting me to appear before you today. I would be happy to answer any questions you might have.