<PAGE>
 
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           --------------------------
                                    FORM 10-K
                           --------------------------


 (Mark one)
    [X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the fiscal year ended December 31, 1998
       
                                          OR
       
    [_]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to


                          Commission File Number 1-7368


                     BELL ATLANTIC - WASHINGTON, D.C., INC.


 A New York Corporation           I.R.S. Employer Identification No. 53-0046277
 

                   1710 H Street, N.W., Washington, D.C. 20006


                         Telephone Number (202) 392-9900

                           --------------------------

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

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


THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION I(2).


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X  No
                                      ---   ---
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

                                TABLE OF CONTENTS

Item No.                                                                    Page
--------                                                                    ----

                               PART I          
                                                                           
  1.     Business                                                          
         (Abbreviated pursuant to General Instruction I(2).)...............   1
  2.     Properties .......................................................   6
  3.     Legal Proceedings ................................................   6
  4.     Submission of Matters to a Vote of Security Holders               
         (Omitted pursuant to General Instruction I(2).) ..................   6
                                                                           
                                                                           
                               PART II         
                                                                           
  5.     Market for Registrant's Common Equity and Related Stockholder     
         Matters ..........................................................   7
  6.     Selected Financial Data                                           
         (Omitted pursuant to General Instruction I(2).) ..................   7
  7.     Management's Discussion and Analysis of Results of Operations     
         (Abbreviated pursuant to General Instruction I(2).) ..............   8
 7A.     Quantitative and Qualitative Disclosures About Market Risk .......  18
  8.     Financial Statements and Supplementary Data ......................  18
  9.     Changes in and Disagreements with Accountants on Accounting and   
         Financial Disclosure .............................................  18
                                                                           
                                                                           
                               PART III         
                                                                           
(Omitted pursuant to General Instruction I(2).):                           
 10.     Directors and Executive Officers of the Registrant ...............  18
 11.     Executive Compensation ...........................................  18
 12.     Security Ownership of Certain Beneficial Owners and Management ...  18
 13.     Certain Relationships and Related Transactions ...................  18
                                                                           
                                                                           
                               PART IV         
                                                                           
14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K ..  18

     UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 29, 1999.
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

                                     PART I
Item 1. Business
                                     GENERAL

     Bell Atlantic - Washington, D.C., Inc. is incorporated under the laws of
the State of New York. Our principal offices are located at 1710 H Street, N.W.,
Washington D.C. 20006 (telephone number 202-392-9900). We are a wholly owned
subsidiary of Bell Atlantic Corporation (Bell Atlantic).

     We presently serve a territory consisting of a single Local Access and
Transport Area (LATA). A LATA is generally centered on a city or based on some
other identifiable common geography and, with certain limited exceptions, a LATA
marks the boundary within which we have been permitted by the "Modification of
Final Judgment" (MFJ) to provide telephone service.

     We currently provide two basic types of telecommunications services. First,
we transport telecommunications traffic between subscribers located within the
same LATA (intraLATA service), including both local and long distance services.
Local service includes the provision of local exchange (dial-tone), local
private line and public telephone services (including dial-tone service for pay
telephones owned by us and by other pay telephone providers). Among other local
services provided are Centrex (central office-based switched telephone service
enabling the subscriber to make both intercom and outside calls) and a variety
of special and custom calling services. Long distance service includes message
toll service (calling service beyond the local calling area) within LATA
boundaries. Second, we provide exchange access service, which links a
subscriber's telephone or other equipment to the transmission facilities of
interexchange carriers which, in turn, provide interLATA telecommunications
service to their customers.


                        PROPOSED BELL ATLANTIC-GTE MERGER

     Bell Atlantic and GTE Corporation (GTE) have announced a proposed merger of
equals under a definitive merger agreement dated as of July 27, 1998. Under the
terms of the agreement, GTE shareholders will receive 1.22 shares of Bell
Atlantic common stock for each share of GTE common stock that they own. Bell
Atlantic shareholders will continue to own their existing shares after the
merger. We will continue to be a wholly owned subsidiary of Bell Atlantic.

     The completion of the merger is subject to a number of conditions,
including certain regulatory approvals, receipt of opinions that the merger will
be tax-free, and the approval of the shareholders of both Bell Atlantic and GTE.

                                   OPERATIONS

     We are one of nine operating telephone subsidiaries owned by Bell Atlantic.
Bell Atlantic has organized certain telecommunications group functions into
business units operating across the telephone subsidiaries. The business units
focus on specific market segments. Each of the operating telephone subsidiaries,
including us, remains responsible within its respective service area for the
provision of telephone services, financial performance and regulatory matters.
We have one reportable segment, which comprises four strategic business units.

     The Consumer unit markets communications services to residential customers,
as well as operator services.

     The General Business unit markets communications and information services
to small and medium-sized businesses as well as pay telephone services.

     The Enterprise Business unit markets communications and information
technology and services to large businesses and to departments, agencies and
offices of the executive, judicial and legislative branches of the federal and
state governments. These services include voice switching/processing services
(e.g., dedicated private lines, custom Centrex, call management and voice
messaging), end-user networking (e.g., credit and debit card transactions, and
personal computer-based conferencing, including data and video), internetworking
(establishing links between the geographically disparate networks of two or more
companies or within the same company), network optimization (disaster avoidance,
911 service, intelligent vehicle highway systems), video services (distance
learning, telemedicine, videoconferencing) and interactive multimedia
applications services. 

                                       1
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

     The Network Services unit markets (i) switched and special access to the
telephone subsidiaries' local exchange networks, and (ii) billing and collection
services, including recording, rating, bill processing and bill rendering.

Telecommunications Act of 1996

     The Telecommunications Act of 1996 (the 1996 Act) became effective on
February 8, 1996, and replaced the MFJ, a consent decree that arose out of an
antitrust action brought by the United States Department of Justice against
AT&T. In general, the 1996 Act includes provisions that open local exchange
markets to competition and permit Bell Operating Companies, including ours, to
engage in manufacturing and to provide long distance service under certain
conditions.

     The 1996 Act permits us to offer in-region long distance services (that is,
services originating in the states where we operate as a local exchange
carrier), once we have demonstrated to the Federal Communications Commission
(FCC) that we have satisfied certain requirements. The requirements include a
14-point "competitive checklist" of steps which we must take to help competitors
offer local services through resale, through purchase of unbundled network
elements, or through their own networks. We must also demonstrate to the FCC
that our entry into the in-region long distance market would be in the public
interest.

     A U.S. Court of Appeals rejected a constitutional challenge to these
provisions, and the Supreme Court recently declined to review that decision.
During the period that the case was pending, we continued to work through the
regulatory process at both the state and federal levels in order to be in a
position to demonstrate compliance with the challenged provisions.

     The U.S. Supreme Court recently reversed a U.S. Court of Appeals decision
that had invalidated certain aspects of the FCC rules implementing provisions of
the 1996 Act. In particular, the Supreme Court reinstated the FCC's authority to
adopt rules governing the methodology to be used by state commissions in setting
prices for local interconnection and resale arrangements, and reinstated rules
that allow competitors to choose individual terms out of negotiated
interconnection agreements and that prohibit incumbent local telephone companies
from separating network elements that already are combined in the incumbent's
own network.

     The U.S. Supreme Court also decided that the FCC had applied the wrong
standard in determining what elements of their networks incumbent local
telephone companies are obligated to make available to competitors on an
unbundled basis. Among other things, the FCC failed to account for the fact that
some elements are available from other sources. As a result of the decision, the
FCC must conduct a new proceeding to apply the correct standard. Pending that
proceeding, we have informally agreed to continue offering the FCC's previously
specified list of unbundled elements. In addition, a challenge to the
substantive merits of the FCC's pricing rules remains pending in the U.S. Court
of Appeals.

FCC Regulation and Interstate Rates

     We are subject to the jurisdiction of the FCC with respect to interstate
services and certain related matters. In 1998, the FCC continued to implement
reforms to the interstate access charge system and to implement the "universal
service" and other requirements of the 1996 Act.

Access Charges

     Interstate access charges are the rates long distance carriers pay for use
and availability of our facilities for the origination and termination of
interstate service. The FCC required a phased restructuring of access charges,
which began in January 1998, so that our non-usage-sensitive costs will be
recovered from long distance carriers and end-users through flat rate charges,
and usage-sensitive costs will be recovered from long distance carriers through
usage-based rates. In addition, the FCC has required that different levels of
usage-based charges for originating and for terminating interstate traffic be
established.

                                       2
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

Price Caps

     Under the FCC price cap rules that apply to interstate access rates, each
year our price cap index is adjusted downward by a fixed percentage intended to
reflect increases in productivity (the productivity factor) and adjusted upward
by an allowance for inflation (the GDP-PI). The current productivity factor is
6.5 percent. These changes will be reflected in tariff changes that will be
filed to take effect on July 1, 1999.

     In October 1998, the FCC initiated a proceeding with respect to its price
cap rules to determine whether a change in the current productivity factor is
warranted, whether to continue its "market based" approach of allowing market
forces (supplemented by its price cap rules) to determine access charge levels,
and whether to afford additional pricing flexibility for access services. In
addition, Bell Atlantic has petitioned the FCC to remove our special access
services from price cap regulation on the grounds that customers of these
services have competitive alternatives available, and a challenge to the FCC
order establishing the 6.5 percent productivity factor is pending in the U.S.
Court of Appeals. We are unable to predict the results of these further
proceedings.

Universal Service

     The FCC has adopted rules implementing the "universal service" provision of
the 1996 Act. As of January 1, 1999, the rules require us to contribute
approximately 2% of our interstate retail revenues for high-cost and low-income
subsidies. We are also required to contribute a portion of our total retail
revenues for schools, libraries and not-for-profit health care. We will recover
these contributions through interstate charges to long distance carriers and
end-users.

     A new federal high-cost universal service support mechanism for non-rural
carriers and an increase in the funding level for schools and libraries are
expected to become effective in 1999. The FCC currently is considering, in
conjunction with a recommendation from a joint board of federal and state
regulators, a number of issues that could affect the size of the universal
service fund for high cost areas and the amount of universal service costs that
are assessed against us for recovery.

Reciprocal Compensation

     Competitive local exchange and other carriers have charged us with
"reciprocal compensation" payments to terminate calls on their networks,
including a large volume of one-way traffic from our customers to internet
service providers that are their customers. On February 26, 1999, the FCC
confirmed that such traffic is interstate and interexchange in nature and not
subject to the reciprocal compensation requirements of the 1996 Act. We are
evaluating the implications of the FCC's order.

State Regulation of Rates and Services

     The District of Columbia Public Service Commission (PSC) regulates our
intrastate rates and services and certain other matters.

     In 1996, the PSC approved a price cap plan for intra-Washington, D.C.
     services. Provisions of the plan include:
     .    a term of four years, through December 31, 1999;
     .    three service categories: basic, discretionary, and competitive;
     .    caps on certain basic residential rates for the term of the plan, with
          other basic rates to change with the GDP-PI minus 3%;
     .    discretionary service rate increases of up to 15% annually;
     .    elimination of price limits on competitive service rates; and
     .    elimination of the regulation of profits.

                                       3
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

Competition

     Legislative changes, including provisions of the 1996 Act discussed above
under "Telecommunications Act of 1996," regulatory changes and new technology
are continuing to expand the types of available communications services and
equipment and the number of competitors offering such services. We anticipate
that these industry changes, together with the rapid growth, enormous size and
global scope of these markets, will attract new entrants and encourage existing
competitors to broaden their offerings. Current and potential competitors in
telecommunication services include long distance companies, other local
telephone companies, cable companies, wireless service providers, foreign
telecommunications providers, electric utilities and other companies that offer
network services. Many of these companies have a strong market presence, brand
recognition and existing customer relationships, all of which contribute to
intensifying competition and may affect our future revenue growth.

Local Exchange Services

     State regulatory commissions have historically regulated the ability to
offer local exchange services. The PSC has approved applications from
competitors to provide and resell local exchange services.

     One of the purposes of the 1996 Act was to ensure, and accelerate, the
emergence of competition in local exchange markets. Toward this end, the 1996
Act requires most existing local exchange carriers (incumbent local exchange
carriers, or ILECs), including us, to permit potential competitors (competitive
local exchange carriers, or CLECs) to:

     .    purchase service from the ILEC for resale to CLEC customers
     .    purchase unbundled network elements from the ILEC, and/or
     .    interconnect the CLEC network with the ILEC's network.

     The 1996 Act provides for arbitration by the state public utility
commission if an ILEC and a CLEC are unable to reach agreement on the terms of
the arrangement sought by the CLEC.

     Our negotiations with various CLECs, and arbitrations before the PSC have
continued. As of January 31, 1999, we had entered into 73 agreements with CLECs,
of which 49 had been approved by our state commission.

     We expect that these agreements, and the 1996 Act, will continue to lead to
substantially increased competition in our local exchange market in 1999 and
subsequent years. We believe that this competition will be both on a facilities
basis and in the form of resale by CLECs of our service. Under the various
agreements and arbitrations discussed above, we are generally required to sell
our services to CLECs at discounts ranging from approximately 17% to 25% from
the prices we charge our retail customers.

Alternative Access

     A substantial portion of our revenues from business and government
customers is derived from a relatively small number of large, multiple-line
subscribers.

     We face competition from alternative communications systems, constructed by
large end-users, interexchange carriers and alternative access vendors, which
are capable of originating and/or terminating calls without the use of our
plant. The FCC's orders requiring us to offer virtual collocated interconnection
for special and switched access services have enhanced the ability of such
alternative access providers to compete with us.

     Other potential sources of competition include cable television systems,
shared tenant services and other non-carrier systems which are capable of
bypassing our local plant, either partially or completely, through substitution
of special access for switched access or through concentration of
telecommunications traffic on fewer of our lines.

                                       4
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

Wireless Services

     Wireless services also constitute potential sources of competition to our
wireline telecommunications services, especially as wireless carriers continue
to lower their prices to end users. Wireless portable telephone services employ
analog and digital technology that allows customers to make and receive
telephone calls from any location using small handsets, and can also be used for
data transmission.

Public Telephone Services

     We face increasing competition in the provision of pay telephone services
from other providers. In addition, the growth of wireless communications
decreases usage of public telephones.

Operator Services

     Alternative operator services providers have entered into competition with
our operator services product line.


                                    EMPLOYEES

     As of December 31, 1998, we had approximately 1,400 employees.

                                       5
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

Item 2. Properties

                                     GENERAL

     Our principal properties do not lend themselves to simple description by
character and location. Our investment in plant, property and equipment
consisted of the following at December 31:

                                                                1998        1997
                                                               -----       -----

     Central office equipment .............................      42%         41%
     Outside communications plant..........................      18          19
     Land and buildings ...................................      13          13
     Furniture, vehicles and other work equipment .........      25          25
     Other ................................................       2           2
                                                                ---         ---
                                                                100%        100%
                                                                ===         ===

     "Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Outside communications plant" consists
primarily of aerial cable, underground cable, conduit and wiring and telephone
poles. "Land and buildings" consists of land and land improvements, and
principally central office buildings. "Furniture, vehicles and other work
equipment" consists of public telephone instruments and telephone equipment,
furniture, office equipment, motor vehicles and other work equipment. "Other"
property consists primarily of plant under construction, capital leases and
leasehold improvements.

     Our customers are served by electronic switching systems that provide a
wide variety of services. Our network is in a transition from an analog to a
digital network, which provides the capabilities to furnish advanced data
transmission and information management services. At December 31, 1998,
approximately 77% of the access lines were served by digital capability.


                              CAPITAL EXPENDITURES

     We have been making and expect to continue to make significant capital
expenditures to meet the demand for communications services and to further
improve such services. Capital expenditures were approximately $212 million in
1998, $189 million in 1997 and $191 million in 1996. Capital expenditures
exclude additions under capital leases. Our total investment in plant, property
and equipment was approximately $1.8 billion at December 31, 1998, $1.7 billion
at December 31, 1997 and $1.5 billion at December 31, 1996, including the effect
of retirements, but before deducting accumulated depreciation.


Item 3. Legal Proceedings

        There are no proceedings reportable under Item 3.


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

        (Omitted pursuant to General Instruction I(2).)

                                       6
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


                                     PART II


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        Not applicable.


Item 6. Selected Financial Data

        (Omitted pursuant to General Instruction I(2).)

                                       7
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


Item 7. Management's Discussion and Analysis of Results of Operations
        (Abbreviated pursuant to General Instruction I(2).)

     This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements listed in the index set forth on page F-1.

     The communications services we provide are subject to regulation by the
District of Columbia Public Service Commission with respect to intrastate rates
and services and certain other matters. For a further discussion of the company
and our regulatory plan, see Item 1 - "Description of Business."


RESULTS OF OPERATIONS
---------------------

     We reported net income of $97,781,000 in 1998, compared to net income of
$45,305,000 in 1997.

     Our results for 1998 and 1997 were affected by the following special items.
The special charges in both years include our allocated share of charges from
Bell Atlantic Network Services, Inc. (NSI).

     The following table shows how special items are reflected in our statements
of income for each year:

Years ended December 31                                      1998          1997
--------------------------------------------------------------------------------
                                                          (Dollars in Thousands)
Operating Revenues
    Regulatory contingencies ........................    $    ---       $ 4,200
                                                         --------       -------

Employee Costs
    Merger direct incremental costs .................    $    ---       $   100
    Merger severance costs ..........................         ---         1,100

Depreciation and Amortization
    Write-down of assets ............................         ---        10,500

Other Operating Expenses
    Merger transition costs .........................         500           ---
    Other special items .............................         ---         3,200
    Allocated merger direct incremental,
        severance and transition costs...............       2,100         3,200
                                                         --------       -------
                                                         $  2,600       $18,100
                                                         --------       -------

     What follows is a further explanation of the nature and timing of these
special items.

Merger-Related Costs

     In connection with the Bell Atlantic-NYNEX merger, which was completed in
August 1997, we recorded pre-tax costs totaling $2,600,000 in 1998 and
$4,400,000 in 1997.

     In 1998, merger-related charges of $2,600,000 were for transition and
integration costs. In 1997, merger-related charges consisted of $1,000,000 for
direct incremental costs and $3,400,000 for employee severance costs. We also
incurred a small portion of transition and integration costs.

     Transition and integration costs consist of our proportionate share of
costs associated with integrating the operations of Bell Atlantic and NYNEX,
such as systems modifications costs and advertising and branding costs.
Transition and integration costs are expensed as incurred. Direct incremental
costs consist of expenses associated with compensation arrangements related to
completing the merger transaction. Employee severance costs, as recorded under
SFAS No. 112,

                                       8
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

"Employers' Accounting for Postemployment Benefits," represent our proportionate
share of benefit costs for the separation by the end of 1999 of management
employees who are entitled to benefits under pre-existing Bell Atlantic
separation pay plans. During 1997 and 1998, 4 and 26 management employees were
separated with severance benefits.

Other Charges and Special Items

     During 1997, we recorded other charges and special items totaling
approximately $17,900,000 in connection with consolidating operations and
combining organizations and for special items arising during the year. These
charges were comprised of the following significant items.

Write-down of Assets
     In the third quarter of 1997, we recorded pre-tax charges of approximately
$10,500,000 for the write-down of obsolete fixed assets. As part of the merger
integration planning, a review was conducted of the carrying values of
long-lived assets. This review included estimating remaining useful lives and
cash flows and identifying assets to be abandoned. As a result of these reviews,
we recorded a charge of approximately $10,500,000 for the write-off of assets.
These assets primarily included computers and other equipment used to transport
data for internal purposes. None of these assets are being held for disposal.

Regulatory Contingencies and Other Special Items
     In 1997, we also recorded reductions to operating revenues and charges to
operating expenses totaling approximately $7,400,000 (pre-tax), which consisted
of the following:

     .    Revenue reductions consisted of approximately $4,200,000 for federal
          regulatory matters. These matters relate to specific issues that are
          currently under investigation by federal regulatory commissions. We
          believe that it is probable that the ultimate resolution of these
          pending matters will result in refunds to our customers.

     .    Charges to operating expenses totaled approximately $3,200,000 for
          other post-merger initiatives.

     These and other items affecting the comparison of our results of operations
for the years ended December 31, 1998 and 1997 are discussed in the following
sections.

Segmental Results of Operations

     We have one reportable segment, which provides domestic wireline
telecommunications services. You may find additional information about segment
reporting in Note 16 to the financial statements.

                                       9
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


OPERATING REVENUE STATISTICS
----------------------------

                                                     1998      1997     % Change
--------------------------------------------------------------------------------

At Year-End
-----------
  Access Lines in Service (in thousands)*
    Residence ....................................    301        294       2.4%
    Business .....................................    627        615       2.0
    Public .......................................     10         10       ---
                                                      ---        ---
                                                      938        919       2.1
                                                      ===        ===

For the Year
------------
  Access Minutes of Use (in millions) ............  3,005      2,929       2.6
                                                    =====      =====

* 1997 reflects a restatement of access lines in service to include Primary Rate
ISDN (Integrated Services Digital Network) channels to conform with the 1998
presentation.


OPERATING REVENUES
------------------
(Dollars in Thousands)

For the Years Ended December 31                      1998       1997 
--------------------------------------------------------------------------------

Local services ...............................   $297,753   $298,450
Network access services ......................    146,348    135,570
Long distance services .......................      4,019      3,998
Ancillary services ...........................    192,701    170,467
Directory and information services ...........      2,717      2,737
                                                 --------   --------
Total ........................................   $643,538   $611,222
                                                 ========   ========

LOCAL SERVICES REVENUES

                                               (Decrease)
--------------------------------------------------------------------------------
   1998 - 1997                         $(697)             (.2)%
--------------------------------------------------------------------------------

     Local services revenues are earned by us from the provision of local
exchange, local private line, public telephone (pay phone) and value-added
services. Value-added services are a family of services which expand the
utilization of the network. These services include products such as Caller ID,
Call Waiting and Return Call.

     Local services revenues declined in 1998 due to price reductions on certain
local services and the elimination of business Touch-Tone service charges,
effective January 1, 1998. Lower business message volumes also contributed to
the decline in local services revenues.

     Revenue decreases were substantially offset by increased customer demand
and usage of our value-added services and higher revenues from private line and
switched data services. We also recognized higher revenues from public telephone
services in 1998 as a result of the implementation of new charges to carriers
resulting from pay phone deregulation in April 1997. Higher usage of our network
facilities, as generated by a 2.1% increase in access lines in service over the
same period in 1997, also offset reductions in local services revenues. Access
line growth primarily reflects higher demand for Centrex services and an
increase in additional residential lines.

                                       10
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

NETWORK ACCESS SERVICES REVENUES

                                               Increase
--------------------------------------------------------------------------------
   1998 - 1997                        $10,778             8.0%
--------------------------------------------------------------------------------

     Network access services revenues are earned from end-user subscribers and
long distance and other competing carriers who use our local exchange facilities
to provide usage services to their customers. Switched access revenues are
derived from fixed and usage-based charges paid by carriers for access to our
local network. Special access revenues originate from carriers and end-users
that buy dedicated local exchange capacity to support their private networks.
End-user access revenues are earned from our customers and resellers who
purchase retail dial-tone services.

     Our network access services revenue growth in 1998 was primarily as a
result of increased demand for special access services as a result of greater
utilization of our network by Internet service providers and other high-capacity
users. Higher customer demand was also reflected by growth in access minutes of
use of 2.6% over the same period in 1997. Volume growth reflects a continuing
expansion of the business market, particularly for high-capacity services.
Higher end-user revenues attributable to an increase in access lines in service
also contributed to revenue growth in 1998. Volume-related growth was partially
offset by net price reductions mandated by a federal price cap plan.

     The Federal Communications Commission (FCC) regulates the rates that we
charge long distance carriers and end-user subscribers for interstate access
services. We are required to file new access rates with the FCC each year, under
the rules of the Price Cap Plan. We implemented price decreases for interstate
access services of approximately $10,700,000 on an annual basis for the period
July 1997 through June 1998.

     In July 1998, we implemented price decreases of approximately $2,200,000 on
an annual basis. The rates include amounts necessary to recover our contribution
to the FCC's universal service fund. The FCC has created a multi-billion dollar
interstate fund to link schools and libraries to the Internet and to subsidize
low-income consumers and rural health care providers. Under the FCC's rules, all
providers of interstate telecommunications services must contribute to the fund.
Our contributions to the universal service fund are included in Other Operating
Expenses. In January 1999, our access services rates were increased by
approximately $1,300,000 on an annual basis. The rates included in our July 1998
and January 1999 filings will be in effect through June 1999.


LONG DISTANCE SERVICES REVENUES

                                               Increase
--------------------------------------------------------------------------------
   1998 - 1997                            $21              .5%
--------------------------------------------------------------------------------

     Long distance services revenues are earned primarily from calls made
outside a customer's local calling area, but within our service area (intraLATA
toll).

     The increase in long distance services revenues in 1998 was caused by
growth in toll message volumes from 1997.


ANCILLARY SERVICES REVENUES

                                               Increase
--------------------------------------------------------------------------------
   1998 - 1997                        $22,234            13.0%
--------------------------------------------------------------------------------

     Our ancillary services include such services as billing and collections for
long distance carriers and affiliates, facilities rentals to affiliates and
nonaffiliates, usage of separately priced (unbundled) components of our network,
voice messaging, customer premises equipment (CPE) and wiring and maintenance
services, and sales of materials and supplies to affiliates.

     Revenues from ancillary services grew in 1998 primarily as a result of
higher facilities rental revenues from affiliates. Rental revenues were higher
in 1998 due to the centralization of data processing services of certain
affiliates in a facility 

                                       11
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

we own. Higher revenues resulting from increased demand by long distance
carriers and affiliates for billing and collection services and increased demand
for voice messaging services also contributed to revenue growth in 1998.


DIRECTORY AND INFORMATION SERVICES REVENUES

                                               (Decrease)
--------------------------------------------------------------------------------
   1998 - 1997                          $(20)               (.7)%
--------------------------------------------------------------------------------

     Directory and information services revenues are earned primarily from fees
for nonpublication of telephone numbers and multiple white page listings, and
from a contract with an affiliate for usage of our directory listings.

     Directory and information services revenues decreased in 1998 due to
reduced demand for multiple white page listings. This decrease was substantially
offset by higher fees received from an affiliate for use of our directory
listings.


OPERATING EXPENSES
------------------
(Dollars in Thousands)

For the Years Ended December 31                                1998        1997
--------------------------------------------------------------------------------

Employee costs, including benefits and taxes ..........   $  83,178   $  95,897
Depreciation and amortization .........................     155,025     166,966
Other operating expenses ..............................     236,098     254,412
                                                          ---------   ---------
Total .................................................    $474,301    $517,275
                                                           ========    ========


EMPLOYEE COSTS

                                               (Decrease)
--------------------------------------------------------------------------------
   1998 - 1997                      $(12,719)               (13.3)%
--------------------------------------------------------------------------------

     Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by us. Similar costs incurred
by employees of NSI, who provide centralized services on a contract basis, are
allocated to us and are included in Other Operating Expenses.

     Employee costs decreased in 1998 primarily as a result of lower pension and
benefit costs. A number of factors contributed to the reduction in pension and
benefit costs, including favorable pension plan investment returns and lower
than expected retiree medical claims. Lower work force levels and the effect of
additional costs billed to affiliates associated with a centralized repair and
maintenance center also contributed to the decline in expense. Employee costs
were further decreased by the effect of severance and direct incremental
merger-related costs recorded in the third quarter of 1997, as described
earlier.

     These reductions were offset, in part, by annual salary and wage increases
for management and associate employees. In 1998, we executed a new contract with
the union representing associate employees. The new contract provides for wage
and pension increases and other benefit improvements as described below.

     The wages, pension and other benefits for our associate employees are
negotiated with a union. During 1998, we entered into a new 2-year contract with
the Communications Workers of America (CWA). This contract, which expires in
August 2000, provides for wage increases of up to 3.8 percent effective August
9, 1998, and up to 4 percent effective August 8, 1999. Over the course of this
two-year contract period, pensions will increase by 11 percent. The contract
also includes cash payments, working condition improvements, and continuation of
certain employment security provisions.

                                       12
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


DEPRECIATION AND AMORTIZATION

                                               (Decrease)
--------------------------------------------------------------------------------
   1998 - 1997                      $(11,941)               (7.2)%
--------------------------------------------------------------------------------

     Depreciation and amortization expense decreased in 1998 principally as a
result of lower rates of depreciation and amortization and the recording of a
write-down of obsolete fixed assets in the third quarter of 1997, as described
earlier. These decreases were partially offset by additional expense resulting
from growth in depreciable telephone plant.


OTHER OPERATING EXPENSES

                                               (Decrease)
--------------------------------------------------------------------------------
   1998 - 1997                      $(18,314)               (7.2)%
--------------------------------------------------------------------------------

     Other operating expenses consist of contract services including centralized
services expenses allocated from NSI, rent, network software costs, operating
taxes other than income, the provision for uncollectible accounts receivable,
and other costs.

     The decrease in other operating expenses was attributable to the effect of
additional costs billed to affiliates in 1998 associated with a centralized
repair and maintenance center and the effect of merger-related costs and other
special items recorded in the third quarter of 1997, as described earlier. Other
items contributing to the reduction in other operating expenses were lower costs
for materials and contract services. The decrease in contract services was due,
in part, to the disposition of Bell Atlantic's ownership interest in Bell
Communications Research Inc. (Bellcore) in November 1997.

     The decreases in other operating expenses were offset, in part, by our
contribution to the federal universal service fund, as described earlier, and
higher interconnection (reciprocal compensation) payments to competitive local
exchange and other carriers to terminate calls on their networks. For more
information on reciprocal compensation , see Item 1 -"Description of Business,
Operations - FCC Regulation and Interstate Rates - Reciprocal Compensation."


OTHER INCOME, NET

                                               Increase
--------------------------------------------------------------------------------
   1998 - 1997                                 $15,136
--------------------------------------------------------------------------------

     The change in other income, net, was primarily due to gains recognized on
the disposition of certain property in June 1998 and on the sale of our paging
licenses.


INTEREST EXPENSE

                                               (Decrease)
--------------------------------------------------------------------------------
   1998 - 1997                       $(1,816)               (9.6)%
--------------------------------------------------------------------------------

     Interest expense includes costs associated with borrowings and capital
leases, net of interest capitalized as a cost of acquiring or constructing plant
assets.

     Interest expense decreased principally due to the effect of refinancing
long-term debt with short-term debt at a more favorable interest rate.

     See Note 7 to the financial statements for additional information about our
debt.

                                       13
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

EFFECTIVE INCOME TAX RATES

     For the Years Ended December 31
--------------------------------------------------------------------------------
     1998                                             41.1%
--------------------------------------------------------------------------------
     1997                                             40.1%
--------------------------------------------------------------------------------

     The effective income tax rate is the provision for income taxes as a
percentage of income before provision for income taxes, extraordinary item and
cumulative effect of change in accounting principle. Our effective income tax
rate was higher in 1998 principally due to higher income tax credits recorded in
1997.

     A reconciliation of the statutory federal income tax rate to our effective
income tax rate for each period is provided in Note 12 to the financial
statements.


EXTRAORDINARY ITEM

       In 1998, we recorded an extraordinary charge associated with the early
extinguishment of long-term debt. This charge reduced net income by $983,000
(net of an income tax benefit of $692,000). You may find additional information
about this extraordinary charge in Note 7 to the financial statements.



FINANCIAL CONDITION
-------------------

     We use the net cash generated from operations and from external financing
to fund capital expenditures for network expansion and modernization, and pay
dividends. While current liabilities exceeded current assets at both December
31, 1998 and 1997, our sources of funds, primarily from operations and, to the
extent necessary, from readily available financing arrangements with an
affiliate, are sufficient to meet ongoing operating requirements. Management
expects that presently foreseeable capital requirements will continue to be
financed primarily through internally generated funds. Additional long-term debt
may be needed to fund additional development activities or to maintain our
capital structure to ensure financial flexibility.

     As of December 31, 1998, we had $25,542,000 available under our line of
credit with an affiliate, Bell Atlantic Network Funding Corporation (BANFC), and
$99,458,000 in borrowings outstanding. On February 1, 1999, our line of credit
with BANFC was increased by $125,000,000 to a total of $250,000,000. In 
addition, we have $100,000,000 remaining under a shelf registration statement
filed with the Securities and Exchange Commission for the issuance of unsecured
debt securities. Our debt securities continue to be accorded high ratings by
primary rating agencies. Subsequent to the announcement of the Bell Atlantic -
GTE merger, rating agencies have maintained current credit ratings, but have
placed our ratings under review for potential downgrade. In a subsequent and
unrelated event, Moody's Investor Services changed its methodology for rating
diversified U.S. Telecommunications Companies. As a result, our debt rating was
upgraded to reflect this new rating methodology. Duff & Phelps Credit Rating
Company also upgraded their rating on our debentures.

     Our debt ratio was 40.9% at December 31, 1998, compared to 45.0% at
December 31, 1997.

     On February 1, 1999, we declared and paid a dividend in the amount of
$19,600,000 to Bell Atlantic.

                                       14
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


OTHER MATTERS
-------------

Year "2000" Update

     Bell Atlantic has a comprehensive program to evaluate and address the
impact of the Year 2000 date transition on its subsidiaries' operations,
including our operations. This program includes steps to:

     .    inventory and assess for Year 2000 compliance our equipment, software
          and systems;
     .    determine whether to remediate, replace or retire noncompliant items,
          and establish a plan to accomplish these steps;
     .    remediate, replace or retire the items;
     .    test the items, where required; and
     .    provide management with reporting and issues management to support a
          seamless transition to the Year 2000.

State of Readiness

     For Bell Atlantic's operating telephone subsidiaries, centralized services
     entities and general corporate operations, the program focuses on the
     following project groups: Network Elements, Applications and Support
     Systems, and Information Technology Infrastructure. At this time, Bell
     Atlantic has virtually completed the inventory, assessment and detailed
     planning phases for these projects. Remediation/replacement/retirement and
     testing activities are well underway. Bell Atlantic plans to fix, replace
     or retire those items that were not Year 2000 compliant and that require
     action to avoid service impact. Bell Atlantic's goal for these operations
     is to have its network and other mission critical systems Year 2000
     compliant (including testing) by June 30, 1999. Bell Atlantic is on
     schedule to achieve this goal for substantially all of its network and
     other mission critical systems. What follows is a more detailed breakdown
     of Bell Atlantic's efforts to date.

 .    Network Elements

     Approximately 350 different types of network elements (such as central
     office switches) appear in over one hundred thousand instances. When
     combined in various ways and using network application systems, these
     elements are the building blocks of customer services and networked
     information transmission of all kinds. Bell Atlantic originally assessed
     approximately 70% of these element types, representing over 90% of all
     deployed network elements, as Year 2000 compliant. Late in 1998, through
     additional testing and verification, it determined that certain network
     elements, originally represented as having no Year 2000-related service
     impact, in fact were likely to cause service issues unless remediated. As a
     result, Bell Atlantic had an increase in the overall number of network
     elements requiring repair. Notwithstanding the additional work effort, as
     of February 1999, Bell Atlantic had repaired or replaced approximately 50%
     of the deployed network elements requiring remediation, and certification
     testing/evaluation is well underway. Bell Atlantic also has made
     substantial progress on the remaining network elements. Although Bell
     Atlantic is generally on track to achieve its June 30, 1999 goal for
     network elements, it is possible that the timeframe for compliance of a
     small number of network elements may extend into July or August, without
     any impact on customer service or its operations.

 .    Application and Support Systems

     Bell Atlantic has approximately 1,200 application and systems support: (i)
     the administration and maintenance of its network and customer service
     functions (network information systems); (ii) customer care and billing
     functions; and (iii) human resources, finance and general corporate
     functions. Bell Atlantic originally assessed approximately 48% of these
     application systems as either compliant or to be retired. As of February
     1999, Bell Atlantic successfully completed certification testing/evaluation
     of approximately 70% of all application systems. Bell Atlantic also has
     made substantial progress on the remaining application systems. Although
     Bell Atlantic is generally on track to achieve its June 30, 1999 goal for
     applications and support systems, it is possible that the timeframe for
     compliance of a small number of applications and support systems may extend
     into July or August, without any impact on customer service or its
     operations.

 .    Information Technology Infrastructure

     Approximately 40 mainframe, 1,000 mid-range, and 90,000 personal computers,
     and related network components and software products that comprise Bell
     Atlantic's information technology (IT) infrastructure. Of the approximately
     1,350 unique types of elements in the inventory for the IT infrastructure,
     Bell Atlantic originally assessed 

                                       15
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

     approximately 73% as compliant or to be retired. As of February 1999, Bell
     Atlantic has successfully completed certification testing/evaluation of
     approximately 90% of all element types. Bell Atlantic has made substantial
     progress on the remaining items and is on track to achieve its June 30,
     1999 goal.

     Bell Atlantic's Year 2000 program also includes a project to review and
remediate affected systems (including those with embedded technology) within its
buildings and other facilities, a project to assure Year 2000 compliance across
all of its internal business processes, and other specific projects directed
towards insuring it meets its Year 2000 objectives.

     Third Party Issues

     .    Vendors

          In general, Bell Atlantic's product vendors have made available either
          Year 2000-compliant versions of their offerings or new compliant
          products as replacements of discontinued offerings. In some cases, the
          compliance "status" of the product in question is based on vendor-
          provided information, which remains subject to Bell Atlantic testing
          and verification activities. In several instances, vendors have not
          met original delivery schedules, resulting in delayed testing and
          deployment. At this time, Bell Atlantic does not anticipate that such
          delays will have a material impact on its ability to achieve Year 2000
          compliance within its desired timeframes.

          Bell Atlantic is continuing Year 2000-related discussions with
          utilities and similar services providers. In general, information
          requests to such services providers have yielded less meaningful
          information than inquiries to its product vendors, and Bell Atlantic
          does not yet have sufficient information to determine whether key
          utilities and similar service providers will successfully complete the
          Year 2000 transition. However, Bell Atlantic is now beginning to
          engage in more productive discussions with large utilities servicing
          its facilities and it is hopeful that these discussions will provide
          additional assurance of Year 2000 compliance for those entities. At
          the present time, Bell Atlantic remains unable to determine the Year
          2000 readiness of most key utilities and similar service providers or
          the likelihood that those providers will successfully complete the
          Year 2000 transition. Bell Atlantic intends to monitor critical
          service provider activities, as appropriate, through the completion of
          their respective remediation projects.

     .    Customers

          Bell Atlantic's customers remain keenly interested in the progress of
          its Year 2000 efforts, and it anticipates increased demand for
          information, including detailed testing data and company-specific
          responses. Bell Atlantic is providing limited warranties of Year 2000
          compliance for certain new telecommunications services and other
          offerings, but it does not expect any resulting warranty costs to be
          material.

     .    Interconnecting Carriers

          Bell Atlantic's network operations interconnect with domestic and
          international networks of other carriers. If one of these
          interconnecting carriers should fail or suffer adverse impact from a
          Year 2000 problem, Bell Atlantic's customers could experience
          impairment of service.

Costs

     From the inception of Bell Atlantic's Year 2000 project through December
31, 1998, and based on the cost tracking methods it has historically applied to
this project, Bell Atlantic has incurred total pre-tax expenses of approximately
$122 million ($97 million of which was incurred in 1998), and it has made
capital expenditures of approximately $80 million (all of which was made in
1998).

                                       16
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


     For 1999, Bell Atlantic expects to incur total pre-tax expenses for its
Year 2000 project of approximately $100 million to $200 million and total
capital expenditures of $125 million to $175 million.

     Bell Atlantic has investments in various joint ventures and other
interests. At this time, Bell Atlantic does not anticipate that the impact of
any Year 2000 remediation costs that they incur will be material to its results
of operations.

Risks

     The failure to correct a material Year 2000 problem could cause an
interruption or failure of certain of Bell Atlantic's normal business functions
or operations, which could have a material adverse effect on its results of
operations, liquidity or financial condition; however, it considers such a
likelihood remote. Due to the uncertainty inherent in other Year 2000 issues
that are ultimately beyond Bell Atlantic's control, including, for example, the
final Year 2000 readiness of its suppliers, customers, interconnecting carriers,
and joint venture and investment interests, it is unable to determine at this
time the likelihood of a material impact on its results of operations, liquidity
or financial condition, due to such Year 2000 issues. However, Bell Atlantic is
taking appropriate prudent measures to mitigate that risk. Bell Atlantic
anticipates that, in the event of any material interruptions or failures of its
service resulting from actual or perceived Year 2000 problems within or beyond
our control, it could be subject to third party claims.

Contingency Plans

     As a public telecommunications carrier, Bell Atlantic has had considerable
experience successfully dealing with natural disasters and other events
requiring contingency planning and execution. As part of Bell Atlantic's efforts
to develop appropriate Year 2000 contingency plans, it is reviewing its existing
Emergency Preparedness and Disaster Recovery plans for any necessary
modifications.

     Bell Atlantic has developed, where appropriate, contingency plans for
addressing delays in remediation activities. For example, delay in the
installation of a new Year 2000 compliant system could require remediation of
the existing system. It is also developing a corporate Year 2000 contingency
plan to ensure that core business functions and key support processes are in
place for uninterrupted processing and service, in the event of external (e.g.
power, public transportation, water), internal or supply chain failures (i.e.
critical dependencies on another entity for information, data or services). Bell
Atlantic anticipates that an initial draft of its corporate contingency plan
will be ready by the end of the first quarter of 1999.

Recent Accounting Pronouncements

Costs of Computer Software

       In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides,
among other things, guidance for determining whether computer software is for
internal use and when the cost related to such software should be expensed as
incurred or capitalized and amortized. SOP 98-1 is required to be applied
prospectively and will be adopted effective January 1, 1999. Bell Atlantic
estimates that the implementation of SOP 98-1 will result in a net after-tax
benefit of $200 million to $250 million in 1999 results of operations due to the
prospective capitalization of costs which were previously expensed as incurred.
We anticipate that costs for maintenance and training, as well as the cost of
software that does not add functionality to the existing system will continue to
be expensed as incurred.

Costs of Start-Up Activities

       In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-up Activities." SOP No. 98-5, which will be adopted effective January 1,
1999, requires that costs of start-up activities including pre-operating,
pre-opening and other organizational costs be expensed as incurred. In addition,
at the time of adoption the unamortized balance of any previously deferred 
start-up costs must be expensed. The adoption of SOP 98-5 will have no material
effect on our results of operations or financial condition in 1999 because we
have not historically capitalized start-up activities.

Derivatives and Hedging Activities

       In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivatives be measured at fair value and recognized
as either assets or liabilities on our balance sheet. Changes in the fair values
of the derivative instruments will be recognized in either earnings or
comprehensive income, depending on the designated use and effectiveness of the
instruments. We must adopt SFAS No. 133 no later than January 1, 2000. The
adoption of SFAS No. 133 will have no material effect on our results of
operations or financial condition because we currently do not enter into the use
of derivative instruments and hedging activities.


                                       17
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

     We are exposed to interest rate risk in the normal course of our business.
The majority of our debt is fixed rate debt and we do not use derivatives such
as interest rate swap agreements. Our short-term borrowings from an affiliate
expose our earnings to changes in short-term interest rates since the interest
rate charged on such borrowings is typically fixed for less than one month.

     The following table summarizes the fair values of our long-term debt as of
December 31, 1998 and 1997. The table also provides a sensitivity analysis of
the estimated fair values of these financial instruments assuming
100-basis-point upward and downward parallel shifts in the yield curve. The
sensitivity analysis did not include the fair values of our short-term
borrowings from an affiliate since they are not significantly affected by
changes in market interest rates.

                                                        (Dollars in Thousands)
                                                             December 31, 
                                                    --------------------------
                                                      1998               1997 
                                                    --------------------------
Fair value of long-term debt                        $173,606          $247,919
Fair value assuming a +100-basis-point shift         164,889           237,038
Fair value assuming a -100-basis-point shift         180,115           258,729

     The primary reason for the decrease in 1998 was the maturity of a
$20,000,000 debenture and the redemption of a $60,000,000 debenture.



Item 8.  Financial Statements and Supplementary Data

         The information required by this Item is set forth on Pages F-1 through
         F-22.


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

         Not applicable.


                                    PART III


Item 10. Directors and Executive Officers of Registrant

         (Omitted pursuant to General Instruction I(2).)


Item 11. Executive Compensation

         (Omitted pursuant to General Instruction I(2).)


Item 12. Security Ownership of Certain Beneficial Owners and Management

         (Omitted pursuant to General Instruction I(2).)


Item 13. Certain Relationships and Related Transactions

         (Omitted pursuant to General Instruction I(2).)


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

    (a)  The following documents are filed as part of this report:

         (1)     Financial Statements

                        See Index to Financial Statements and Financial
                        Statement Schedule appearing on Page F-1.

         (2)     Financial Statement Schedules

                        See Index to Financial Statements and Financial
                        Statement Schedule appearing on Page F-1.

                                       18
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


                                     PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
         (Continued)

         (3)   Exhibits

                  Exhibits identified in parentheses below, on file with the
                  Securities and Exchange Commission (SEC), are incorporated
                  herein by reference as exhibits hereto.

         3a       Restated Certificate of Incorporation of the registrant,
                  as amended September 14, 1990. (Exhibit 3a to the
                  registrant's Annual Report on Form 10-K for the year
                  ended December 31, 1990, File No. 1-7368.)

                  3a(i)    Certificate of Amendment of the registrant's
                           Certificate of Incorporation, dated January 12,
                           1994 and filed January 13, 1994. (Exhibit 3a(i)
                           to the registrant's Annual Report on Form 10-K
                           for the year ended December 31, 1993, File No. 
                           1-7368.)

         3b       By-Laws of the registrant, as amended December 15, 1995.
                  (Exhibit 3b to the registrant's Annual Report on Form 10-K for
                  the year ended December 31, 1995, File No. 1-7368.)

                  3b(i)    Consent of Sole Stockholder of Bell Atlantic -
                           Washington, D.C., Inc., dated December 15, 1995.
                           (Exhibit 3b(i) to the registrant's Annual Report on
                           Form 10-K for the year ended December 31, 1995, File
                           No. 1-7368.)

         4        No instrument which defines the rights of holders of long-term
                  debt of the registrant is filed herewith pursuant to
                  Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this
                  regulation, the registrant hereby agrees to furnish a copy of
                  any such instrument to the SEC upon request.

         10a      Agreement among Bell Atlantic Network Services, Inc. and the
                  Bell Atlantic Corporation telephone subsidiaries, dated
                  November 7, 1983. (Exhibit 10b to Bell Atlantic Corporation
                  Annual Report on Form 10-K for the year ended December 31,
                  1993, File No. 1-8606.)

         23       Consent of Independent Accountants.

         27       Financial Data Schedule.

(b)      Reports on Form 8-K:

                  There were no Current Reports on Form 8-K filed during the
                  quarter ended December 31, 1998.

                                       19
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                        Bell Atlantic - Washington, D.C., Inc.


                                        By /s/ Edwin F. Hall
                                          -------------------------------------
                                               Edwin F. Hall
                                               Controller

March 29, 1999


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.


Signature                       Title                            Date
---------                       -----                            ----
                                                               
/s/ Marie C. Johns              President and                    March 29, 1999
-----------------------------   Chief Executive Officer        
    Marie C. Johns              and Director                   
                                (Principal Executive Officer)  
                                                               
                                                               
                                                               
/s/ Edwin F. Hall               Controller                       March 29, 1999
-----------------------------   (Principal Financial Officer)  
    Edwin F. Hall                                              
                                                               
                                                               
/s/ Barbara L. Connor           Director                         March 29, 1999
-----------------------------                                  
    Barbara L. Connor                                          
                                                               
                                                               
/s/ Phoebe B. Dixon             Director                         March 29, 1999
-----------------------------                                  
    Phoebe B. Dixon                                            
                                                               
                                                               
/s/ Diane B. Gongaware          Director                         March 29, 1999
-----------------------------                                  
    Diane B. Gongaware                                         
                                                               
                                                               
/s/ Benjamin W. Landrum         Director                         March 29, 1999
----------------------------                                   
    Benjamin W. Landrum                                        
                                                               
                                                               
/s/ Mark J. Mathis              Director                         March 29, 1999
-----------------------------                                  
    Mark J. Mathis                                             
                                                               
                                                               
/s/ John Walker                 Director                         March 29, 1999
-----------------------------   
    John Walker

                                       20
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

         Index to Financial Statements and Financial Statement Schedule


                                                                            Page
                                                                            ----

    Report of Independent Accountants ...................................    F-2

    Statements of Income
       For the years ended December 31, 1998, 1997 and 1996 .............    F-3

    Balance Sheets - December 31, 1998 and 1997 .........................    F-4

    Statements of Shareowner's Investment
       For the years ended December 31, 1998, 1997 and 1996..............    F-6

    Statements of Cash Flows
       For the years ended December 31, 1998, 1997 and 1996 .............    F-7

    Notes to Financial Statements .......................................    F-8

    Schedule II - Valuation and Qualifying Accounts
       For the years ended December 31, 1998, 1997 and 1996 .............   F-22



Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.

                                      F-1
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

                        REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and Shareowner of Bell Atlantic - Washington, D.C.,
Inc.



In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Bell
Atlantic - Washington, D.C., Inc. at December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule listed
in the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and the financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

As discussed in Note 1 to the financial statements, in 1996, the Company changed
its method of accounting for directory publishing revenues and expenses.




/s/ PricewaterhouseCoopers LLP





New York, New York
February 9, 1999

                                      F-2
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

                              STATEMENTS OF INCOME
                         For the Years Ended December 31
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                    1998       1997      1996
                                                  --------   --------  --------
<S>                                               <C>        <C>       <C>     
OPERATING REVENUES (including $136,840,                                
  $116,222 and $87,464 from affiliates) ......... $643,538   $611,222  $597,224
                                                  --------   --------  --------
                                                                       
OPERATING EXPENSES                                                     
  Employee costs, including benefits and taxes ..   83,178     95,897   111,112
  Depreciation and amortization .................  155,025    166,966   136,849
  Other (including $147,045, $154,295                                  
       and $164,515 to affiliates) ..............  236,098    254,412   249,823
                                                 ---------  ---------  --------
                                                   474,301    517,275   497,784
                                                 ---------  ---------  --------
                                                                       
OPERATING INCOME ................................  169,237     93,947    99,440
                                                                       
OTHER INCOME, NET (including $4, $3 and                                
  $0 from affiliate) ............................   15,698        562       375
                                                                       
INTEREST EXPENSE (including $2,667, $1,664                             
  and $2,032 to affiliate) ......................   17,116     18,932    18,825
                                                  --------   --------  --------
                                                                       
Income Before Provision for Income Taxes,                              
  Extraordinary Item and Cumulative Effect                             
  of Change in Accounting Principle .............  167,819     75,577    80,990
                                                                       
PROVISION FOR INCOME TAXES ......................   69,055     30,272    32,198
                                                  --------   --------  --------
                                                                       
Income Before Extraordinary Item and Cumulative                        
  Effect of Change in Accounting Principle ......   98,764     45,305    48,792
                                                                       
EXTRAORDINARY ITEM                                                     
  Early extinguishment of debt, net of tax ......     (983)       ---       ---
                                                                       
CUMULATIVE EFFECT OF CHANGE IN                                         
  ACCOUNTING PRINCIPLE                                                 
  Directory publishing, net of tax ..............      ---        ---       286
                                                  --------   --------  --------
                                                                       
NET INCOME ...................................... $ 97,781   $ 45,305  $ 49,078
                                                  ========   ========  ========
</TABLE>


                       See Notes to Financial Statements.

                                      F-3
<PAGE>
 
                    Bell Atlantic - Washington, D.C., Inc.

                                BALANCE SHEETS
                            (Dollars in Thousands)


                                    ASSETS
                                    ------

                                                             December 31       
                                                      --------------------------
                                                        1998             1997  
                                                      ----------     -----------
CURRENT ASSETS                                                     
Short-term investments ............................  $     6,690     $     7,134
Accounts receivable:                                               
     Trade and other, net of allowances for                        
          uncollectibles of $7,688 and $7,721......      157,946         132,936
     Affiliates ...................................       20,979          18,253
Material and supplies .............................        1,131           1,929
Prepaid expenses ..................................        3,045           3,962
Deferred income taxes .............................        3,484           3,872
Other .............................................          ---               2
                                                      ----------     -----------
                                                         193,275         168,088
                                                      ----------     -----------
                                                                   
PLANT, PROPERTY AND EQUIPMENT .....................    1,783,372       1,652,123
Less accumulated depreciation .....................      943,000         849,599
                                                      ----------     -----------
                                                         840,372         802,524
                                                      ----------     -----------
                                                                   
OTHER ASSETS ......................................        6,511          17,206
                                                      ----------     -----------
                                                                   
TOTAL ASSETS ......................................   $1,040,158     $   987,818
                                                      ==========     ===========



                       See Notes to Financial Statements.

                                      F-4
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.



                                 BALANCE SHEETS
                             (Dollars in Thousands)


                     LIABILITIES AND SHAREOWNER'S INVESTMENT
                     ---------------------------------------


                                                              December 31   
                                                       ------------------------
                                                          1998          1997
                                                       ----------   -----------
CURRENT LIABILITIES 
Debt maturing within one year:                
     Note payable to affiliate ....................... $   99,458   $     9,526
     Other ...........................................         14        20,512
Accounts payable and accrued liabilities:                         
     Affiliates ......................................    104,976       113,404
     Other ...........................................     80,007       102,722
Advance billings and customer deposits ...............     14,551         9,464
                                                       ----------   -----------
                                                          299,006       255,628
                                                       ----------   -----------
                                                                  
LONG-TERM DEBT .......................................    168,200       227,769
                                                       ----------   -----------
                                                                  
EMPLOYEE BENEFIT OBLIGATIONS .........................    118,139       134,434
                                                       ----------   -----------
                                                                  
DEFERRED CREDITS AND OTHER LIABILITIES                            
Deferred income taxes ................................     49,813        29,585
Unamortized investment tax credits ...................      3,336         3,626
Other ................................................     14,741        21,712
                                                       ----------   -----------
                                                           67,890        54,923
                                                       ----------   -----------
COMMITMENTS (Note 6)                                              
                                                                  
SHAREOWNER'S INVESTMENT                                           
Common stock - one share, owned by parent, at stated              
  value...............................................    191,968       191,968
Capital surplus ......................................     28,549        28,549
Reinvested earnings ..................................    166,452        94,547
Accumulated other comprehensive loss .................        (46)          ---
                                                       ----------   -----------
                                                          386,923       315,064
                                                       ----------   -----------
                                                                  
TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT ........ $1,040,158   $   987,818
                                                       ==========   ===========


                      See Notes to Financial Statements.

                                      F-5
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

                STATEMENTS OF CHANGES IN SHAREOWNER'S INVESTMENT
                             (Dollars in Thousands)


                                                 1998       1997        1996  
                                               ---------  ---------  ---------
COMMON STOCK                                                        
     Balance at beginning of year ............ $ 191,968  $ 191,968  $ 191,968
                                               ---------  ---------  ---------
     Balance at end of year ..................   191,968    191,968    191,968
                                               =========  =========  =========
                                                                    
CAPITAL SURPLUS                                                     
     Balance at beginning of year ............    28,549     28,549     28,549
                                               ---------  ---------  ---------
     Balance at end of year ..................    28,549     28,549     28,549
                                               =========  =========  =========
                                                                    
REINVESTED EARNINGS                                                 
     Balance at beginning of year ............    94,547     51,646      2,741
     Net income ..............................    97,781     45,305     49,078
     Dividends paid to Bell Atlantic .........   (26,000)       ---        ---
     Other ...................................       124     (2,404)      (173)
                                               ---------  ---------  ---------
     Balance at end of year ..................   166,452     94,547     51,646
                                               =========  ========= ==========
                                                                    
ACCUMULATED OTHER COMPREHENSIVE LOSS                                
     Balance at beginning of year ............       ---        ---        ---
     Minimum pension liability adjustment ....       (46)       ---        ---
                                               ---------  ---------  ---------
     Balance at end of year ..................       (46)       ---        ---
                                               =========  =========  =========
                                                                    
                                                                    
TOTAL SHAREOWNER'S INVESTMENT ................  $386,923   $315,064   $272,163
                                               =========  =========  =========
                                                                    
                                                                    
COMPREHENSIVE INCOME                                                
     Net income .............................. $  97,781  $  45,305  $  49,078
     Minimum pension liability adjustment ....       (46)       ---        ---
                                               ---------  ---------  ---------
                                               $  97,735  $  45,305  $  49,078
                                               =========  =========  =========


                       See Notes to Financial Statements.

                                      F-6
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


                            STATEMENTS OF CASH FLOWS
                         For the Years Ended December 31
                             (Dollars in Thousands)

<TABLE> 
<CAPTION> 
                                                                             1998                 1997                1996    
                                                                         -----------          ------------        ------------
<S>                                                                      <C>                  <C>                 <C>      
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...........................................................      $  97,781            $  45,305           $  49,078
Adjustments to reconcile net income to
     net cash provided by operating activities: 
          Depreciation and amortization ..............................        155,025              166,966             136,849
          Extraordinary item, net of tax .............................            983                  ---                 ---
          Cumulative effect of change in accounting
               principle, net of tax .................................            ---                  ---                (286)
          Deferred income taxes, net .................................         19,857                 (116)             14,293
          Investment tax credits .....................................           (290)                (543)               (726)
          Other items, net ...........................................         (1,155)                 (73)               (130)
          Changes in certain assets and liabilities:
               Accounts receivable ...................................        (27,736)              16,709                (287)
               Material and supplies .................................            798                 (222)                884
               Other assets ..........................................         (1,647)               6,443              14,217
               Accounts payable and accrued liabilities ..............        (19,932)               5,914              14,728
               Employee benefit obligations ..........................        (16,128)             (12,088)             (4,695)
               Other liabilities .....................................         (1,883)              (9,230)                434
                                                                            ---------             --------           ---------
Net cash provided by operating activities ............................        205,673              219,065             224,359
                                                                            ---------            ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments ..................................         (9,861)             (10,934)            (12,973)
Proceeds from sale of short-term investments .........................         10,305               12,773               4,000
Additions to plant, property and equipment ...........................       (211,512)            (188,799)           (190,771)
Other, net ...........................................................         17,816                9,564               4,666
                                                                            ---------             --------           ---------
Net cash used in investing activities ................................       (193,252)            (177,396)           (195,078)
                                                                            ---------             --------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Early extinguishment of debt .........................................        (60,000)                 ---                 ---
Principal repayments of borrowings and capital
     lease obligations ...............................................        (20,145)                (444)             (1,397)
Net change in note payable to affiliate ..............................         89,932              (38,684)            (26,241)
Dividends paid .......................................................        (26,000)                 ---                 ---
Net change in outstanding checks drawn on
     controlled disbursement accounts ................................          3,792               (2,541)             (1,643)
                                                                            ---------             --------           ---------
Net cash used in financing activities ................................        (12,421)             (41,669)            (29,281)
                                                                            ---------             --------           ---------

NET CHANGE IN CASH ...................................................            ---                  ---                 ---

CASH, BEGINNING OF YEAR ..............................................            ---                  ---                 ---
                                                                            ---------             --------           ---------

CASH, END OF YEAR ....................................................      $     ---             $    ---           $     ---
                                                                            =========             ========           =========
</TABLE>


                       See Notes to Financial Statements.

                                      F-7
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

                          NOTES TO FINANCIAL STATEMENTS

1.   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description of Business

     Bell Atlantic - Washington, D.C., Inc. is a wholly owned subsidiary of Bell
Atlantic Corporation (Bell Atlantic). We have one reportable segment which
provides domestic wireline telecommunications services. We presently serve a
territory consisting of a single Local Access and Transport Area (LATA) in
Washington, D.C. We currently provide two basic types of telecommunications
services. First, we transport telecommunications traffic between subscribers
located within the same LATA (intraLATA service), including both local and long
distance services. Local service includes voice and data transport, enhanced and
custom calling features, directory assistance, private lines and public
telephones. Long distance service includes message toll service within LATA
boundaries and intraLATA Wide Area Toll Service and 800 services. Second, we
provide exchange access service, which links a subscriber's telephone or other
equipment to the transmission facilities of interexchange carriers which, in
turn, provide telecommunications service between LATAs (interLATA service) to
their customers. Other services we provide include customer premises wiring and
maintenance and billing and collection services. Effective January 1, 1997, we
transferred certain assets and liabilities associated with our directory
publishing activities to a newly formed, wholly owned subsidiary (see Note 4).

     The telecommunications industry is undergoing substantial changes as a
result of the Telecommunications Act of 1996, other public policy changes and
technological advances. These changes are likely to bring increased competitive
pressures, but will also open new markets to Bell Atlantic, such as long
distance services within its geographic region, upon completion of certain
requirements of the Telecommunications Act of 1996.

     Basis of Presentation

     On August 14, 1997, Bell Atlantic and NYNEX Corporation (NYNEX) completed a
merger, which was accounted for as a pooling of interests. The financial
statements include certain reclassifications in presentation and certain
retroactive adjustments to conform accounting methodologies as a result of the
merger (see Note 2).

     We prepare our financial statements under generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amounts or certain disclosures. Actual results could differ
from those estimates.

     Revenue Recognition

     We recognize revenue when services are rendered based on usage of our local
exchange network and facilities.

     Maintenance and Repairs

     We charge the cost of maintenance and repairs, including the cost of
replacing minor items not constituting substantial betterments, to Operating
Expenses.

     Cash and Cash Equivalents

     We consider all highly liquid investments with a maturity of 90 days or
less when purchased to be cash equivalents, except cash equivalents held as
short-term investments. Cash equivalents are stated at cost, which approximates
market value.

     Short-term Investments

     Our short-term investments consist of cash equivalents held in trust to pay
for certain employee benefits. Short-term investments are stated at cost, which
approximates market value.

                                      F-8
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

     Material and Supplies

     We include in inventory new and reusable materials which are stated
principally at average original cost, except that specific costs are used in the
case of large individual items.

     Plant and Depreciation

     We state plant, property, and equipment at cost. Depreciation expense is
principally based on the composite group remaining life method and straight-line
composite rates. This method provides for the recognition of the cost of the
remaining net investment in telephone plant, less anticipated net salvage value,
over the remaining asset lives. This method requires the periodic revision of
depreciation rates. We used the following asset lives:

     Average Lives (in years)                                    
     ----------------------------------------------------------------------
     Buildings ..........................................              30
     Central office equipment ...........................            2 - 10
     Outside communications plant .......................           16 - 50
     Furniture, vehicles and other equipment ............            5 - 15

     When we replace or retire depreciable telephone plant, we deduct the
carrying amount of such plant from the respective accounts and charge
accumulated depreciation. Gains or losses on disposition are amortized with the
remaining net investment in telephone plant.

     Computer Software Costs

     We capitalize initial right-to-use fees for central office switching
equipment, including initial operating system and initial application software
costs. For noncentral office equipment, only the initial operating system
software is capitalized. Subsequent additions, modifications, or upgrades of
initial software programs, whether operating or application packages, are
expensed as incurred.

     Capitalization of Interest Costs

     We capitalize interest associated with the acquisition or construction of
plant assets. Capitalized interest is reported as a cost of plant and a
reduction in interest cost.

     Income Taxes

     Bell Atlantic and its domestic subsidiaries, including us, file a
consolidated federal income tax return.

     The consolidated amount of current and deferred tax expense is allocated by
applying the provisions of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" to each subsidiary as if it were a
separate taxpayer.

     We use the deferral method of accounting for investment tax credits earned
prior to the repeal of investment tax credits by the Tax Reform Act of 1986. We
also defer certain transitional credits earned after the repeal. We amortize
these credits over the estimated service lives of the related assets as a
reduction to the Provision for Income Taxes.

     Advertising Costs

     We expense advertising costs as they are incurred.

     Stock-Based Compensation

     We participate in stock-based employee compensation plans sponsored by Bell
Atlantic. Bell Atlantic accounts for stock-based employee compensation plans
under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations and follows the
disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." 

                                      F-9
<PAGE>
                    Bell Atlantic - Washington, D.C., Inc.
 
Change in Accounting Principle - Directory Publishing

       Effective January 1, 1996, we changed our method of accounting for
directory publishing revenues and expenses from the amortized method to the
point-of-publication method. Under the point-of-publication method, revenues and
expenses are recognized when the directories are published rather than over the
lives of the directories, as under the amortized method. We believe the
point-of-publication method is preferable because it is the method generally
followed by publishing companies. This accounting change resulted in a one-time,
noncash increase in net income of $286,000 (net of income tax of $210,000),
which is reported as a cumulative effect of a change in accounting principle at
January 1, 1996. On an annual basis, the financial impact of applying this
method in 1996 was not significant.

       Adoption of New Accounting Standards

       In 1998, we adopted SFAS No. 130, "Reporting Comprehensive Income" (see
Note 9), SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (see Note 16) and SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (see Note 11). Prior year amounts
have been provided or restated, as required. These standards require new
disclosures only and do not impact our results of operations or financial
position.

       Recent Accounting Pronouncements

       Costs of Computer Software

       In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides,
among other things, guidance for determining whether computer software is for
internal use and when the cost related to such software should be expensed as
incurred or capitalized and amortized. SOP 98-1 is required to be applied
prospectively and will be adopted effective January 1, 1999. Bell Atlantic
estimates that the implementation of SOP 98-1 will result in a net after-tax
benefit of $200 million to $250 million in 1999 results of operations due to the
prospective capitalization of costs which were previously expensed as incurred.
We anticipate that costs for maintenance and training, as well as the cost of
software that does not add functionality to the existing system will continue to
be expensed as incurred.

       Costs of Start-Up Activities

       In April 1998, the AICPA issued SOP No. 98-5, "Reporting on the Costs of
Start-up Activities." SOP No. 98-5, which will be adopted effective January 1,
1999, requires that costs of start-up activities including pre-operating,
pre-opening and other organizational costs be expensed as incurred. In addition,
at the time of adoption the unamortized balance of any previously deferred 
start-up costs must be expensed. The adoption of SOP 98-5 will have no material
effect on our results of operations or financial condition in 1999 because we
have not historically capitalized start-up activities.

       Derivatives and Hedging Activities

       In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivatives be measured at fair value and recognized
as either assets or liabilities on our balance sheet. Changes in the fair values
of the derivative instruments will be recognized in either earnings or
comprehensive income, depending on the designated use and effectiveness of the
instruments. We must adopt SFAS No. 133 no later than January 1, 2000. The
adoption of SFAS No. 133 will have no material effect on our results of
operations or financial condition because we currently do not enter into the use
of derivative instruments and hedging activities.

                                      F-10
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

2.   BELL ATLANTIC - NYNEX MERGER

     On August 14, 1997, Bell Atlantic and NYNEX completed a merger of equals
under a definitive merger agreement entered into on April 21, 1996 and amended
on July 2, 1996. Under the terms of the amended agreement, NYNEX became a wholly
owned subsidiary of Bell Atlantic. The merger qualified as a tax-free
reorganization and has been accounted for as a pooling of interests. Under this
method of accounting, the companies are treated as if they had always been
combined for accounting and financial reporting purposes.

     As a result of conforming the accounting methodologies of Bell Atlantic and
NYNEX, we recorded an after-tax charge of $1,045,000 to Accumulated Deficit as
if the merger had occurred as of the beginning of the earliest period presented.

Merger-Related Costs

     In the third quarter of 1997, we recorded merger-related pre-tax costs of
approximately $1,000,000 for direct incremental costs and $3,400,000 for
employee severance costs. These costs include approximately $3,200,000
representing our allocated share of merger-related costs from Bell Atlantic
Network Services, Inc. (NSI), an affiliate which provides centralized services
on a contract basis. Costs allocated from NSI are included in Other Operating
Expenses.

     Direct incremental costs consist of expenses associated with compensation
arrangements related to completing the merger transaction. Employee severance
costs, as recorded under SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," represent our proportionate share of benefit costs for the separation
by the end of 1999 of management employees who are entitled to benefits under
pre-existing Bell Atlantic separation pay plans. During 1997 and 1998, 4 and 26
management employees were separated with severance benefits. Accrued
postemployment benefit liabilities are included in our balance sheets as a
component of Employee Benefit Obligations.

Other Initiatives

     During 1997, we recorded other charges and special items totaling
approximately $17,900,000 in connection with consolidating operations and
combining organizations and for special items arising during the year. These
charges were comprised of the following significant items.

Write-down of Assets
     In the third quarter of 1997, we recorded pre-tax charges of approximately
$10,500,000 for the write-down of obsolete fixed assets. As part of the merger
integration planning, a review was conducted of the carrying values of
long-lived assets. This review included estimating remaining useful lives and
cash flows and identifying assets to be abandoned. As a result of these reviews,
we recorded a charge of approximately $10,500,000 for the write-off of assets.
These assets primarily included computers and other equipment used to transport
data for internal purposes. None of these assets are being held for disposal.

Regulatory Contingencies and Other Special Items
     In 1997, we also recorded reductions to operating revenues and charges to
operating expenses totaling approximately $7,400,000 (pre-tax), which consisted
of the following:

     .    Revenue reductions consisted of approximately $4,200,000 for federal
          regulatory matters. These matters relate to specific issues that are
          currently under investigation by federal regulatory commissions. We
          believe that it is probable that the ultimate resolution of these
          pending matters will result in refunds to our customers.

     .    Charges to operating expenses totaled approximately $3,200,000 for
          other post-merger initiatives.

                                      F-11
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


     The following table provides a reconciliation of the liabilities associated
with merger-related costs and other charges and special items at December 31,
1998 and 1997.

<TABLE>
<CAPTION>
                                                  Charged to                               1997                               1998
                                      Beginning   Expense or                              End of                             End of
(Dollars in Thousands)                  of Year      Revenue   Deductions   Adjustments    Year     Deductions  Adjustments   Year
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>        <C>           <C>           <C>       <C>        <C>           <C>    

Merger-Related
    Direct incremental costs .......     $  ---     $   159     $   (159)a  $    ---      $ ---     $  ---     $   ---       $  ---

    Severance obligation ...........      5,644       1,052         (658)a    (2,599)      3,439       (994)a      623        3,068

Other Initiatives
    Write-down of fixed assets .....        ---      10,433      (10,433)b       ---         ---        ---        ---          ---
    Regulatory contingencies
        and other special items ....        ---       7,489       (4,042)b       ---       3,447       (943)c      ---        2,504
                                    -----------------------------------------------------------------------------------------------
                                         $5,644     $19,133     $(15,292)   $ (2,599)     $6,886    $(1,937)   $   623       $5,572
                                    ===============================================================================================
</TABLE>

 .    Adjustments refer to deductions to the liability that reduced expense, or
     additions to the liability that increased expense resulting from changes in
     circumstances or experience in implementing the planned activities.

 .    Deductions refer to the utilization of the liability through payments,
     asset write-offs, or refunds to customers.
           a - primarily comprised of cash payments
           b - primarily comprised of asset write-offs
           c - primarily comprised of refunds to customers


3.   PROPOSED BELL ATLANTIC - GTE MERGER

     Bell Atlantic and GTE Corporation (GTE) have announced a proposed merger of
equals under a definitive merger agreement dated as of July 27, 1998. Under the
terms of the agreement, GTE shareholders will receive 1.22 shares of Bell
Atlantic common stock for each share of GTE common stock that they own. Bell
Atlantic shareholders will continue to own their existing shares after the
merger.

     It is expected that the merger will qualify as a pooling of interests. The
completion of the merger is subject to a number of conditions, including certain
regulatory approvals, receipt of opinions that the merger will be tax-free, and
the approval of the shareholders of both Bell Atlantic and GTE.


4.   TRANSFER OF DIRECTORY PUBLISHING ACTIVITIES

     On January 1, 1997, we transferred, at net book value without gain or loss,
certain assets and liabilities associated with our directory publishing
activities to a newly formed, wholly owned subsidiary. The stock of the
subsidiary was immediately distributed to Bell Atlantic. The transfer of such
assets and liabilities was completed as part of our and Bell Atlantic's response
to the requirements of the Telecommunications Act of 1996, which prohibits us
from engaging in electronic publishing or joint sales and marketing of
electronic products.

     We transferred net assets which totaled approximately $2,300,000, and
consisted of deferred directory production costs (included in prepaid expenses),
fixed assets, and related deferred tax liabilities.

     Revenues related to the directory publishing activities we transferred were
approximately $33,500,000 for the year ended December 31, 1996. Direct expenses
related to the directory publishing activities we transferred were approximately
$15,500,000 for the same period. We do not separately identify indirect expenses
attributable to the directory publishing activities, including expenses related
to billing and data management and processing services, legal, external affairs,
depreciation, interest expense and any corresponding tax expense.

                                      F-12
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc. 

5.   PLANT, PROPERTY AND EQUIPMENT

     The following table displays the details of plant, property and equipment,
which is stated at cost:

                                                            December 31
                                                      -----------------------
                                                         1998          1997     
                                                      ---------     ---------
                                                      (Dollars in Thousands)

     Land ..........................................  $  12,942     $  12,101
     Buildings .....................................    216,107       203,449
     Central office equipment ......................    757,243       680,071
     Outside communications plant ..................    317,784       308,331
     Furniture, vehicles and other work equipment...    452,690       420,603
     Other .........................................      7,741        13,705
     Construction-in-progress ......................     18,865        13,863
                                                      ---------     ---------
                                                      1,783,372     1,652,123
     Accumulated depreciation ......................   (943,000)     (849,599)
                                                      ---------     ---------
     Total .........................................  $ 840,372     $ 802,524
                                                      =========     =========


6.   LEASES

     We lease certain facilities and equipment for use in our operations under
both capital and operating leases. We did not incur any initial capital lease
obligations in 1998, compared to $827,000 in 1997 and $183,000 in 1996.

     Capital lease amounts included in plant, property and equipment are as 
follows:

                                                        December 31
                                                 --------------------------
                                                  1998                1997
                                                 ------              ------
                                                   (Dollars in Thousands)
                                        
     Capital Leases .........................    $3,628              $4,470
     Accumulated amortization................      (695)               (589)
                                                 ------              ------
     Total...................................    $2,933              $3,881
                                                 ======              ======

     Total rent expense amounted to $8,380,000 in 1998, $9,740,000 in 1997 and
$9,256,000 in 1996. Of these amounts, $7,101,000 in 1998, $7,995,000 in 1997 and
$7,566,000 in 1996 were lease payments to affiliated companies.

     This table displays the aggregate minimum rental commitments under
noncancelable leases for the periods shown at December 31:

     Years                                 Capital Leases     Operating Leases
     -----                                 --------------     ----------------
                                                (Dollars in Thousands)
     1999 ................................  $    273               $  373
     2000 ................................     4,046                  365
     2001 ................................       ---                  334
     2002 ................................       ---                    8
     2003 ................................       ---                  ---
     Thereafter ..........................       ---                  ---
                                              ------               ------
     Total minimum rental commitments ....     4,319               $1,080
                                                                   ======
                                         
     Less interest and executory costs ...       395
                                              ------
     Present value of minimum            
          lease payments .................     3,924
     Less current installments ...........       ---
                                              ------
     Long-term obligation at             
          December 31, 1998 ..............    $3,924
                                              ======

                                      F-13
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc. 

7.   DEBT

     Debt Maturing Within One Year

     Debt maturing within one year consists of the following at December 31:

                                                          1998        1997 
                                                        -------     -------
                                                       (Dollars in Thousands)
     Note payable to affiliate (BANFC) ................  $99,458    $  9,526
     Long-term debt maturing within one year ..........       14      20,512
                                                         -------     -------
     Total debt maturing within one year ..............  $99,472     $30,038
                                                         =======     =======
                                                     
     Weighted average interest rate for note payable 
          outstanding at year-end .....................     5.0%        5.8%
                                                         =======     =======

     We have a contractual agreement with an affiliated company, Bell Atlantic
Network Funding Corporation (BANFC), for the provision of short-term financing
and cash management services. BANFC issues commercial paper and obtains bank
loans to fund the working capital requirements of Bell Atlantic's network
services subsidiaries, including us, and invests funds in temporary investments
on their behalf. At December 31, 1998, we had $25,542,000 of an unused line of
credit with BANFC. On February 1, 1999, this line of credit was increased by
$125,000,000 to a total of $250,000,000.

     Long-Term Debt

     Long-term debt consists principally of debentures that we issued.
Interest rates and maturities of the amounts outstanding are as follows at
December 31:

<TABLE>
<CAPTION>
       Description                                                Interest Rate     Maturity         1998                1997    
       -----------------------------------------------------------------------------------------------------          -----------
                                                                                                          (Dollars in Thousands)
       <S>                                                         <C>                <C>       <C>                   <C>      
       Thirty-seven year debenture............................        4 3/8%          1998      $        ---          $  20,000
       Forty year debenture...................................        5 5/8           2006            25,000             25,000
       Forty year debenture...................................        7               2009            50,000             50,000
       Forty year debenture...................................        7 3/4           2013               ---             60,000
       Thirty year debenture..................................        7 3/4           2023            90,000             90,000
                                                                                                    --------           --------
                                                                                                     165,000            245,000
       Other long-term debt...................................     12.2 - 12.4        1999                14                 71
       Unamortized discount and premium, net .............................................              (724)            (1,133)
       Capital lease obligations - average rate 8.0% and 8.0% ............................             3,924              4,343
                                                                                                    --------           --------
       Total long-term debt, including current maturities ................................           168,214            248,281
       Less maturing within one year .....................................................                14             20,512
                                                                                                    --------           --------
       Total long-term debt ..............................................................          $168,200           $227,769
                                                                                                    ========           ========
</TABLE>

     Our long-term debt outstanding at December 31, 1998 includes $75,000,000
that is callable. The call prices range from 100.90% to 100.52% of face value,
depending upon the remaining term to maturity of the issue.

     In 1998, we recorded an extraordinary charge associated with the early
extinguishment of $60,000,000 of 7.75% debentures due in 2013. This charge
reduced net income by $983,000 (net of an income tax benefit of $692,000).

                                      F-14
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


8.   FINANCIAL INSTRUMENTS

     Concentrations of Credit Risk

     Financial instruments that subject us to concentrations of credit risk
consist primarily of short-term investments and trade receivables.
Concentrations of credit risk with respect to trade receivables other than those
from AT&T are limited due to the large number of customers. We generated
revenues from services provided to AT&T (primarily network access and billing
and collection) of $30,698,000 in 1998, $35,381,000 in 1997 and $37,002,000 in
1996.

     Fair Value of Financial Instruments

     The table below provides additional information about our material
financial instruments at December 31:

     Financial Instrument                     Valuation Method
     --------------------------------------------------------------------------
     Note payable to affiliate (BANFC)        Carrying amounts
     and short-term investments

     Debt (excluding capital leases)          Market quotes for similar terms 
                                              and maturities or future cash
                                              flows discounted at current rates

<TABLE>
<CAPTION>
                                      1998                       1997  
                            ------------------------   ----------------------- 
                             Carrying        Fair       Carrying       Fair
                              Amount         Value       Amount        Value
                            ------------------------   -----------------------  
                                           (Dollars in Thousands)      
     <S>                     <C>            <C>          <C>          <C>     
     Debt ...............    $263,748       $273,064     $253,464     $257,441
</TABLE>


9.   COMPREHENSIVE INCOME

     Effective January 1, 1998, we adopted SFAS No. 130, "Reporting
Comprehensive Income." The new rules establish standards for the reporting of
comprehensive income and its components in financial statements. Comprehensive
income consists of net income and other gains and losses affective shareowner's
investment that, under generally accepted accounting principles, are excluded
from net income. The adoption of SFAS No. 130 did not affect our statement of
income, but did affect the presentation of our balance sheet. We also have
included a statement of shareowner's investment as part of our basic financial
statements.

     The change in other comprehensive loss, net of an income tax benefit, is as
follows:


<TABLE>
<CAPTION>
                                                                                     Years ended December 31
                                                                         1998                1997                  1996   
                                                                      ----------          -----------           ----------
                                                                                    (Dollars in Thousands)
     <S>                                                              <C>                <C>                  <C>         
     Other comprehensive loss:
          Minimum pension liability adjustment (net of
            income tax benefit of $32)............................    $       (46)       $        ---         $        ---
                                                                      -----------        ------------         ------------
                                                                      $       (46)       $        ---         $        ---
                                                                      ===========        ============         ============
</TABLE> 
 
     Accumulated other comprehensive loss is comprised of the following:  
         
<TABLE> 
<CAPTION> 
                                                                               December 31
                                                                         1998               1997
                                                                      -----------        ------------
     <S>                                                              <C>                <C>                     
        Accumulated other comprehensive loss:
              Minimum pension liability adjustment ...............    $       (46)       $        ---
                                                                      -----------        ------------
                                                                      $       (46)       $        ---
                                                                      ===========        ============
</TABLE>

                                      F-15
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

10.  STOCK INCENTIVE PLANS

     We participate in stock-based compensation plans sponsored by Bell
Atlantic. Bell Atlantic applies APB Opinion No. 25 and related interpretations
in accounting for the plans and has adopted the disclosure-only provisions of
SFAS No. 123. If Bell Atlantic had elected to recognize compensation expense
based on the fair value at the grant dates for 1996 and subsequent awards
consistent with the provisions of SFAS No. 123, our net income would have been
changed to the pro forma amounts indicated below:

                                              1998        1997        1996   
                                           ----------  ----------  ----------
                                                (Dollars in Thousands)  
     Net income   - As reported .........    $97,781     $45,305     $49,078
                  - Pro forma ...........     96,649      44,467      48,172


     These results may not be representative of the effects on pro forma net
income for future years.

     The pro forma net income amounts were determined using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:

                                            1998         1997         1996   
                                         ----------   ----------   ----------

     Dividend yield .....................     4.59%        4.86%        4.90%
     Expected volatility ................    18.63%       14.87%       14.70%
     Risk-free interest rate ............     5.55%        6.35%        5.40%
     Expected lives (in years) ..........        5            5          4.5

     The weighted average value of options granted was $6.47 per option during
1998, $4.30 per option during 1997 and $3.62 per option during 1996.


11.  EMPLOYEE BENEFITS

     We participate in the Bell Atlantic benefit plans. Bell Atlantic maintains
noncontributory defined benefit pension plans for substantially all management
and associate employees, as well as postretirement healthcare and life insurance
plans for our retirees and their dependents. Bell Atlantic also sponsors savings
plans to provide opportunities for eligible employees to save for retirement on
a tax-deferred basis and to encourage employees to acquire and maintain an
equity interest in Bell Atlantic.

     In 1997, following the completion of the merger with NYNEX, the assets of
the Bell Atlantic and NYNEX pension and savings plans were commingled in a
master trust, and effective January 1, 1998, Bell Atlantic established common
pension and savings plan benefit provisions for all management employees.

       The Financial Accounting Standards Board issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," (SFAS No. 132) in
February 1998. This new standard does not change the measurement or recognition
of costs for pensions or other postretirement plans. It standardizes disclosures
and eliminates those that are no longer useful. The structure of Bell Atlantic's
benefit plans does not provide for the separate determination of certain
disclosures required by SFAS No. 132 for our company. The required information
is provided on a consolidated basis in Bell Atlantic's Annual Report on Form
10-K for the year ended December 31, 1998. What follows are our benefit costs
and obligations for 1998, 1997 and 1996. The disclosures in 1997 and 1996
reflect the historic benefit plans and actuarial assumptions in effect during
those years, as shown in the tables below.

                                      F-16
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

Pension and Other Postretirement Benefits

     Substantive commitments for future plan amendments are reflected in the
pension costs and benefit obligations. Pension and other postretirement benefits
for our associate employees are subject to collective bargaining agreements.
Modifications in associate benefits have been bargained from time to time, and
Bell Atlantic may also periodically amend the benefits in the management plans.
The following table provides our benefit costs for 1998, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                                          Years ended December 31,
                                                                                                            (Dollars in Thousands)
                                                                   Pension                                    Healthcare and Life
                                                    --------------------------------------- ---------------------------------------
                                                           1998         1997          1996         1998          1997         1996
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>          <C>             <C>          <C>           <C>          <C>   
Net periodic (income) benefit cost                     $(7,887)     $(4,015)        $1,539       $(921)        $1,415       $5,163
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE> 

Amounts recognized on the balance sheets consist of:

<TABLE>
<CAPTION>
                                                                                                                  At December 31,
                                                                                                           (Dollars in Thousands)
                                                                        Pension                              Healthcare and Life
                                                   --------------------------------------- ----------------------------------------
                                                                 1998                1997                1998                 1997
-----------------------------------------------------------------------------------------------------------------------------------
   <S>                                                      <C>                 <C>                 <C>                  <C>      
   Employee benefit obligations                             $(21,221)           $(29,340)           $(91,394)            $(98,523)
   Other assets                                                    84                 329                 ---                  ---
   Accumulated other comprehensive loss                            78                 ---                 ---                  ---
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     The changes in benefit obligations from year to year were caused by a
number of factors, including changes in actuarial assumptions (see Assumptions)
and plan amendments.

Assumptions

     The actuarial assumptions used are based on financial market interest
rates, past experience, and management's best estimate of future benefit changes
and economic conditions. Changes in these assumptions may impact future benefit
costs and obligations. The weighted-average assumptions used in determining
expense and benefit obligations are as follows:

<TABLE>
<CAPTION>
                                                                         Pension                     Healthcare and Life
                                                           ---------------------------------- -------------------------------------
                                                                1998          1997      1996      1998          1997          1996
-----------------------------------------------------------------------------------------------------------------------------------
  <S>                                                          <C>           <C>       <C>       <C>           <C>           <C>  
  Discount rate at end of year                                 7.00%         7.25%     7.75%     7.00%         7.25%         7.75%
  Long-term rate of return on plan assets for the year          8.90          8.90      8.25      8.90          8.90          8.25
  Rate of future increases in compensation at end of year       4.00          4.00      4.75      4.00          4.00          4.75
  Medical cost trend rate at end of year                                                          6.00          6.50          7.00
     Ultimate (year 2001 for 1998 and 1997,
     year 2008 for 1996)                                                                          5.00          5.00          5.00
  Dental cost trend rate at end of year                                                           3.50          3.50          4.00
     Ultimate (year 2002)                                                                         3.00          3.00           ---
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Savings Plans and Employee Stock Ownership Plans

     Substantially all of our employees are eligible to participate in savings
plans maintained by Bell Atlantic. Under these plans, a certain percentage of
eligible employee contributions are matched with shares of Bell Atlantic common
stock. We match employee contributions through two leveraged employee stock
ownership plans (ESOPs) maintained by Bell Atlantic. Bell Atlantic recognizes
leveraged ESOP cost based on the modified shares allocated method for these
leveraged ESOPs that held securities before December 15, 1989. We recognize our
proportionate share of total ESOP cost based on our matching obligation
attributable to our participating employees. We recorded total ESOP cost of
$964,000 in 1998, $1,615,000 in 1997 and $1,804,000 in 1996.

                                      F-17
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

12.  INCOME TAXES

     The components of income tax expense are presented in the following table:

                                          Years Ended December 31  
                                  ----------------------------------------
                                   1998            1997              1996   
                                  -------         -------          -------
                                           (Dollars in Thousands)

     Current:                                                    
          Federal .............   $37,941         $23,525          $14,552
          State and local .....    11,547           7,406            4,079
                                  -------         -------          -------
                                   49,488          30,931           18,631
                                  -------         -------          -------
     Deferred:                                                   
          Federal .............    15,089             (24)          10,701
          State and local .....     4,768             (92)           3,592
                                  -------         -------          -------
                                   19,857            (116)          14,293
                                  -------         -------          -------
                                   69,345          30,815           32,924
     Investment tax credits....      (290)           (543)            (726)
                                  -------         -------          -------
     Total income tax expense..   $69,055         $30,272          $32,198
                                  =======         =======          =======

     The following table shows the principle reasons for the difference between
the effective income tax rate and the statutory income tax rate.

                                                        Years Ended December 31
                                                        -----------------------
                                                        1998     1997     1996 
                                                        ----     ----     ----

     Statutory federal income tax rate ..............   35.0%    35.0%    35.0%
     Investment tax credits .........................    (.1)     (.5)     (.6)
     State income taxes, net of federal tax                             
       benefits .....................................    6.3      6.3      6.2
     Other, net .....................................    (.1)     (.7)     (.8)
                                                        ----     ----     ----
     Effective income tax rate ......................   41.1%    40.1%    39.8%
                                                        ====     ====     ====

     Deferred taxes arise because of differences in the book and tax bases of
certain assets and liabilities. Significant components of deferred tax
liabilities (assets) are shown in the following table:

                                                            December 31
                                                 -----------------------------
                                                    1998                1997    
                                                 ---------           ---------
                                                     (Dollars in Thousands)
     Deferred tax liabilities:
          Depreciation ......................     $130,600            $120,100
          Other .............................        3,500               2,500
                                                 ---------           ---------
                                                   134,100             122,600
                                                 ---------           ---------
     Deferred tax assets:
          Employee benefits .................      (73,600)            (83,000)
       Investment tax credits ...............       (1,400)             (1,400)
          Advance payments ..................       (1,400)               (700)
          Other .............................      (11,300)            (11,800)
                                                 ---------           ---------
                                                   (87,700)            (96,900)
                                                 ---------           ---------
     Net deferred tax liability .............    $  46,400           $  25,700
                                                 =========           =========

     Deferred tax assets include approximately $61,000,000 at December 31, 1998
and $64,000,000 at December 31, 1997 related to postretirement benefit costs
recognized under SFAS No. 106. This deferred tax asset will gradually be
realized over the estimated lives of current retirees and employees.

                                      F-18
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

13.  ADDITIONAL FINANCIAL INFORMATION

     The tables below provide additional financial information related to our
financial statements:

                                                         December 31          
                                                    ----------------------
                                                      1998          1997    
                                                    --------      --------
                                                    (Dollars in Thousands)      

       BALANCE SHEETS:                                          
       Accounts payable and accrued liabilities:                
            Accounts payable - affiliates .......   $104,529      $113,365
            Accounts payable - other ............     51,038        75,934
            Accrued taxes .......................     10,951         5,709
            Accrued vacation pay ................      6,531         7,028
            Accrued expenses ....................      6,338         7,727
            Interest payable - other ............      5,149         6,324
            Interest payable - affiliate ........        447            39
                                                    --------      --------
                                                    $184,983      $216,126
                                                    ========      ========

                                                      Years Ended December 31 
                                                     --------------------------
                                                      1998      1997      1996
                                                     ------    ------    ------
                                                       (Dollars in Thousands) 
       STATEMENTS OF CASH FLOWS:                                       
       Cash paid during the year for:                                  
            Income taxes, net of amounts refunded ..  $43,634  $26,131  $21,720
            Interest, net of amounts capitalized ...   17,703   18,626   18,821
                                                                       
       STATEMENTS OF INCOME:                                           
       Interest expense incurred,                                      
            net of amounts capitalized .............   17,116   18,932   18,825
       Capitalized interest ........................    1,041      909    1,318
       Advertising expense .........................    3,860    4,815    6,448

     Interest paid during the year includes $2,270,000 in 1998, $1,739,000 in
1997 and $2,296,000 in 1996 related to short-term financing services provided by
Bell Atlantic Network Funding Corporation (see Note 7).

     Advertising expense includes $3,744,000 in 1998, $4,815,000 in 1997 and
$4,662,000 in 1996, which was allocated to us by Bell Atlantic Network Services,
Inc. (NSI).

     At December 31, 1998 and 1997, $7,848,000 and $4,056,000 of bank
overdrafts were classified as accounts payable.


14.  TRANSACTIONS WITH AFFILIATES

     Our financial statements include transactions with Bell Atlantic Network
Services Inc., Bell Atlantic Network Funding Corporation (BANFC), Bell Atlantic,
and various other affiliates.

     We have contractual arrangements with NSI for the provision of various
centralized services. These services are divided into two broad categories. The
first category is comprised of network-related services which generally benefit
only Bell Atlantic's operating telephone subsidiaries, including us. These
services include administration, marketing, product advertising, sales,
information systems, network technology planning, labor relations, and staff
support for various network operations. The second category is comprised of
overhead and support services which generally benefit all subsidiaries of Bell
Atlantic. Such services include corporate governance and staff support in
finance, external affairs, legal and corporate secretary, media relations,
employee communications, corporate advertising, human resources, and treasury.
We receive technical and support services from Bell Communications Research,
Inc. (Bellcore), a company previously owned jointly by the regional holding
companies. In 1997, Bell Atlantic and the other Bellcore owners sold their
jointly owned 

                                      F-19
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

investment in Bellcore. We continue to contract with Bellcore for technical and
support services. The costs of these services are billed to us through NSI and
are included with network related services in 1998 in the table below.

     We recognize interest expense and income in connection with contractual
arrangements with BANFC to provide short-term financing, investing and cash
management services to us (see Note 7).

     Operating revenues include obligations from or to affiliates in connection
with an interstate revenue sharing arrangement with Bell Atlantic's operating
telephone subsidiaries. Other operating revenues and expenses include
miscellaneous items of income and expense resulting from transactions with other
affiliates, primarily rental of facilities and equipment. We also paid cash
dividends to our parent, Bell Atlantic.

     Transactions with affiliates are summarized as follows:

                                                     Years Ended December 31  
                                                --------------------------------
                                                  1998       1997        1996   
                                                ---------  ---------  ----------
                                                     (Dollars in Thousands)   
     Operating revenues:                                              
          Interstate revenue sharing from                             
            affiliates ........................ $   2,550  $   2,550  $    2,550
          Other revenue from affiliates .......   134,290    113,672      84,914
                                                ---------  ---------  ----------
                                                  136,840    116,222      87,464
                                                ---------  ---------  ----------
     Operating expenses:                                              
          NSI - network .......................    72,644     85,843      94,667
          NSI - other .........................    53,188     43,882      44,268
          Bellcore.............................       ---      5,612       4,984
          Other ...............................    21,213     18,958      20,596
                                                ---------  ---------  ----------
                                                  147,045    154,295     164,515
                                                ---------  ---------  ----------
                                                                      
     Interest income from BANFC ...............         4          3         ---
                                                                      
     Interest expense to BANFC ................     2,667      1,664       2,032
                                                                      
     Dividends paid to Bell Atlantic ..........    26,000        ---         ---

     Outstanding balances with affiliates are reported on the balance sheets at
December 31, 1998 and 1997 as Accounts Receivable - Affiliates, Note Payable to
Affiliate, and Accounts Payable and Accrued Liabilities - Affiliates.

     On February 1, 1999, we declared and paid a dividend in the amount of
$19,600,000 to Bell Atlantic.


15.  LITIGATION AND OTHER CONTINGENCIES

     Various legal actions and regulatory proceedings are pending to which we
are a party. We have established reserves for specific liabilities in connection
with regulatory and legal matters which we currently deem to be probable and
estimable. We do not expect that the ultimate resolution of regulatory and legal
matters in future periods will have a material effect on our financial
condition, but it could have a material effect on our results of operations.

                                      F-20
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.

16.  SEGMENT INFORMATION

     We have adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information." SFAS No. 131 establishes standards for the way
companies must determine and report information about operating segments in
their annual and interim reports.

     We have one reportable segment, which provides domestic wireline
telecommunications services. Specifically, we provide local telephone services
including voice and data transport, enhanced and custom calling features,
network access, directory assistance, private lines and public telephones. In
addition, we provide customer premises equipment distribution and billing and
collection services. We have four strategic business units (consumer,
enterprise, general and network services) supporting our operations that have
been aggregated into one reportable segment.


17.  QUARTERLY FINANCIAL INFORMATION (unaudited)

                                                     Income Before 
                              Operating  Operating   Extraordinary   Net
Quarter Ended                 Revenues     Income        Item       Income  
-------------                 ---------  ---------   -------------  ------
                                         (Dollars in Thousands)                
                                        
1998:                                                              
     March 31 ..............  $155,755   $  39,367    $  20,799    $  20,799
     June 30 ...............   165,695      49,332       34,647       34,647
     September 30 ..........   155,400      36,210       18,940       17,957
     December 31 ...........   166,688      44,328       24,378       24,378
                              --------   ---------    ---------    ---------
     Total .................  $643,538   $ 169,237    $  98,764    $  97,781
                              ========   =========    =========    =========
                                                                   
1997:                                                              
     March 31 ..............  $149,662   $  25,234    $  11,965    $  11,965
     June 30 ...............   159,397      31,461       16,584       16,584
     September 30* .........   150,316       5,883          850          850
     December 31 ...........   151,847      31,369       15,906       15,906
                              --------   ---------    ---------    ---------
     Total .................  $611,222   $  93,947    $  45,305    $  45,305
                              ========   =========    =========    =========

* Results of operations for the third quarter of 1997 include costs incurred
  in connection with consolidating operations and combining the organizations
  of Bell Atlantic and NYNEX and for other special items arising during the
  quarter, as well as charges associated with the completion of the merger
  (see Note 2).

                                      F-21
<PAGE>
 
                     Bell Atlantic - Washington, D.C., Inc.


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              For the Years Ended December 31, 1998, 1997 and 1996
                             (Dollars in Thousands)

                                            Additions      
                                         ------------------
                                                   Charged
                             Balance at  Charged   to Other             Balance
                             Beginning     to      Accounts Deductions  at End
Description                  of Period   Expenses  Note(a)   Note(b)   of Period
-----------                  ---------   --------  --------  -------   ---------


Allowance for Uncollectible                                            
  Accounts Receivable:                                                 
                                                                       
  Year 1998..............     $  7,721    $4,126    $7,712    $11,871  $  7,688
                                                                       
  Year 1997..............     $ 11,495    $3,844    $5,359    $12,977  $  7,721
                                                                       
  Year 1996 .............     $  9,193    $5,797    $9,839    $13,334   $11,495




-----------------------
(a)  (1) Allowance for Uncollectible Accounts Receivable includes amounts
     previously written off which were credited directly to this account when
     recovered, and (2) accruals charged to accounts payable for anticipated
     uncollectible charges on purchases of accounts receivable from others which
     we billed.

(b)  Amounts written off as uncollectible.

                                      F-22
<PAGE>
 
                                    EXHIBITS





                       FILED WITH ANNUAL REPORT FORM 10-K

                    UNDER THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998



                     Bell Atlantic - Washington, D.C., Inc.



                          COMMISSION FILE NUMBER 1-7368
<PAGE>
 
Form 10-K for 1998
File No. 1-7368
Page 1 of 1

                                  EXHIBIT INDEX



Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.


3a     Restated Certificate of Incorporation of the registrant, as amended
       September 14, 1990. (Exhibit 3a to the registrant's Annual Report on Form
       10-K for the year ended December 31, 1990, File No. 1-7368.)

       3a(i)  Certificate of Amendment of the registrant's Certificate of
              Incorporation, dated January 12, 1994 and filed January 13, 1994.
              (Exhibit 3a(i) to the registrant's Annual Report on Form 10-K for
              the year ended December 31, 1993, File No. 1-7368.)

3b     By-Laws of the registrant, as amended December 15, 1996. (Exhibit 3b to
       the registrant's Annual Report on Form 10-K for the year ended December
       31, 1995, File No. 1-7368.)

       3b(i)  Consent of the Sole Stockholder of Bell Atlantic - Washington,
              D.C., Inc., dated December 15, 1996. (Exhibit 3b(i) to the
              registrant's Annual Report on Form 10-K for the year ended
              December 31, 1995, File No. 1-7368.)

4      No instrument which defines the rights of holders of long-term debt of
       the registrant is filed herewith pursuant to Regulation S-K, Item
       601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby
       agrees to furnish a copy of any such instrument to the SEC upon request.

10a    Agreement among Bell Atlantic Network Services, Inc. and the Bell
       Atlantic Corporation telephone subsidiaries, dated November 7, 1983.
       (Exhibit 10b to Bell Atlantic Corporation Annual Report on Form 10-K for
       the year ended December 31, 1993, File No. 1-8606.)

23     Consent of Independent Accountants.

27     Financial Data Schedule.