<PAGE>
 
                            ELECTRIC LIGHTWAVE, INC.

                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
<PAGE>
 
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
                  For the quarterly period ended March 31, 1998

|_| 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 0-23393


                               ELECTRIC LIGHTWAVE, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                                      93-1035711
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)



      4400 NE 77th Avenue
     Vancouver, Washington                                98662
(Address of principal executive offices                (Zip Code)



Registrant's telephone number, including area code     (360)892-1000


              8100 NE Parkway  Drive,  Suite 150,  Vancouver,  WA 98662  (Former
name, former address and former fiscal year, if changed since last report.)


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  twelve 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 ninety days.

                                    Yes X No


The number of shares outstanding of the registrant's class of common stock as of
April 22, 1998 were:

                         Common Stock Class A 8,520,711
                         Common Stock Class B 41,165,000
<PAGE>
 
                            ELECTRIC LIGHTWAVE, INC.

                          Index to Financial Statements



<TABLE>
<CAPTION>

<S>                                                                                                  <C>

                                                                                                     Page No.


  Part I. Financial Information                                        
   
      Balance Sheets at March 31, 1998 and December 31, 1997                                                2

      Statements of Operations for the Three Months Ended March 31, 1998 and 1997                           3

      Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997                           4

      Notes to Financial Statements                                                                         5

      Management's Discussion and Analysis of Financial Condition and
       Results of Operations                                                                                7
 
   Part II. Other Information                                                                              12
   
   Signature                                                                                               13        





 

                                     1
</TABLE>
<PAGE>
 
                          PART 1. FINANCIAL INFORMATION
                            ELECTRIC LIGHTWAVE, INC.
                                 BALANCE SHEETS
                                 (In thousands)
 
<TABLE>
<CAPTION>
                                                                                March 31, 1998   December 31, 1997
                                                                                --------------   -----------------
<S>                                                                            <C>              <C>  
ASSETS
 
Current assets:
     Cash                                                                    $          21,849   $      26,531
     Trade receivables, net                                                             12,393          12,569
     Other receivables                                                                   7,573           7,688
     Other current assets                                                                1,619             844
                                                                                 --------------    -------------
       Total current assets                                                             43,434          47,632
                                                                                 --------------    -------------

Property, plant and equipment                                                          352,062         328,664
Less accumulated depreciation and amortization                                        ( 28,247)        (25,791)
                                                                                 --------------    -------------
     Property, plant and equipment, net                                                323,815         302,873
                                                                                 --------------    -------------
Other assets                                                                             6,125           9,457
                                                                                 --------------    -------------

        Total assets                                                         $         373,374  $      359,962
                                                                                 ==============    =============



LIABILITIES AND EQUITY

Current liabilities:
      Accounts payable and accrued liabilities                                $         30,610   $       50,237
      Taxes other than income taxes                                                      3,783            3,136
      Due to Citizens Utilities Company                                                  7,281              944
      Other current liabilities                                                          3,743            3,102
                                                                                 --------------     -------------
       Total current liabilities                                                        45,417           57,419
                                                                                 --------------     -------------

Deferred credits and other                                                               1,720            1,800
Deferred income taxes payable                                                           13,892           16,918
Capital lease obligation                                                                12,732           10,511
Long-term debt                                                                         100,000           60,000
                                                                                 --------------     -------------
            Total liabilities                                                          173,761          146,648
                                                                                 --------------     -------------

Shareholders' Equity:
      Common stock issued, $.01 par value
           Class A                                                                          85               85
           Class B                                                                         412              412
      Additional paid-in-capital                                                       317,802          316,731
      Deficit                                                                         (118,686)        (103,914)
                                                                                 --------------     -------------
       Total shareholders' equity                                                      199,613          213,314
                                                                                 --------------     -------------

         Total liabilities and shareholders' equity                           $        373,374   $      359,962
                                                                                 ==============     =============
</TABLE> 



The accompanying Notes are an integral part of these Financial Statements.

                                       2
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.
                             STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                    (In thousands, except per-share amounts)
 
<TABLE> 
<CAPTION> 
                                                                                               1998                1997
                                                                                            ------------        -----------
<S>                                                                                      <C>                 <C> 
Revenues                                                                                 $       20,057      $      10,519
                                                                                            ------------        -----------

Operating expenses:
     Network access                                                                               9,212              4,930
     Sales and marketing                                                                          4,940              2,906
     Depreciation and amortization                                                                3,884              2,817
     Other operating expenses                                                                    15,681              9,937
                                                                                            ------------        -----------
         Total operating expenses                                                                33,717             20,590
                                                                                            ------------        -----------

     Loss from operations                                                                      (13,660)           (10,071)

Interest expense (net of capitalized interest of $1,788 for 1998 and $345 for 1997)                 911                 91
Interest income                                                                                     167                  -
                                                                                            ------------        -----------

     Net loss  before  income  taxes and  cumulative  effect  of  change in  accounting                   
        principle                                                                              (14,404)           (10,162)

Income tax benefit                                                                              (2,449)                  -
                                                                                            ------------        -----------
 
     Net loss before cumulative effect of change in accounting principle                       (11,955)           (10,162)

Cumulative effect of change in accounting principle (net of $577 income tax benefit)              2,817                  -
                                                                                            ------------        -----------

     Net loss                                                                            $     (14,772)      $    (10,162)
                                                                                            ============        ===========

Net loss before cumulative effect of change in accounting principle per common share:
         Basic                                                                           $        (.24)      $       (.24)
         Diluted                                                                         $        (.24)      $       (.24)

Net loss per common share:
         Basic                                                                           $        (.30)      $       (.24)
         Diluted                                                                         $        (.30)      $       (.24)

Weighted average shares outstanding                                                              49,685             41,685
</TABLE> 





The accompanying Notes are an integral part of these Financial Statements.

                                       3
<PAGE>
 
                   PART 1. FINANCIAL INFORMATION(Continued)
                           ELECTRIC LIGHTWAVE, INC.
                           STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
                                (In thousands)



<TABLE> 
<CAPTION> 
                                                                                       1998                1997
                                                                                  ---------------     ---------------
<S>                                                                            <C>                 <C> 
Net cash used for operating activities                                         $         (6,541)   $         (5,562)
                                                                                  ---------------     ---------------

Cash flows used for investing activities:
     Capital expenditures                                                               (38,028)            (20,354)
                                                                                  ---------------     ---------------

Cash flows from financing activities:
     Debt borrowings                                                                      40,000                   -
     Citizens fundings                                                                         -              26,518
     Principle payments on capital lease obligation                                        (113)                   -
                                                                                  ---------------     ---------------
         Net cash provided by financing activities                                        39,887              26,518
                                                                                  ---------------     ---------------

Net increase (decrease)in cash                                                           (4,682)                 602

Cash at January 1,                                                                        26,531                 611
                                                                                 ---------------     ---------------
Cash at March 31,                                                              $          21,849   $           1,213
                                                                                  ===============     ===============




Supplemental cash flow information:
     Cash paid for interest                                                    $           1,153   $               -
     Other non-cash transactions with Citizens:
         Deferred income taxes                                                 $               -   $           1,559
         Capitalized interest                                                  $             630   $             345
     Other non-cash transaction from modification of capital lease:
         Increase in capital lease asset                                       $           2,174   $               -
         Increase in capital lease obligation                                  $           2,174   $               -
</TABLE> 




The accompanying Notes are an integral part of these Financial Statements.

                                       4
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.
                          NOTES TO FINANCIAL STATEMENTS

(1)   Summary of Significant Accounting Policies

          (a)  BASIS  OF  PRESENTATION  AND  USE OF  ESTIMATES  These  unaudited
               financial  statements of Electric  Lightwave,  Inc.(the  Company)
               have  been  prepared  in  accordance   with  generally   accepted
               accounting  principles (GAAP).  The financial  statements include
               all  adjustments  and  recurring  accruals  necessary  to present
               fairly the results for the interim periods shown. The preparation
               of  financial   statements  in  conformity   with  GAAP  requires
               management  to make  estimates and  assumptions  which affect the
               reported  amounts of assets and  liabilities  and  disclosure  of
               contingent  assets and  liabilities  at the date of the financial
               statements  and the  reported  amounts of revenues  and  expenses
               during the reporting  periods.  Certain  information and footnote
               disclosures  have  been  condensed  pursuant  to  Securities  and
               Exchange  Commission  rules and  regulations.  The results of the
               interim periods are not necessarily indicative of the results for
               the full year. Certain  reclassifications  of balances previously
               reported have been made to conform to current presentation.


          (b)  COMPREHENSIVE  INCOME  In  June  1997  the  Financial  Accounting
               Standards   Board  issued   Statement  of  Financial   Accounting
               Standards 130 (SFAS 130) "Reporting  Comprehensive  Income". This
               statement  requires  that changes in the amounts of items such as
               foreign   currency   translation  and   gains/losses  on  certain
               securities  are to be  displayed  in a  financial  statement,  as
               prominently  as other  financial  statements.  This  statement is
               effective for financial  statements  issued for periods beginning
               after December 15, 1997 and requires  reclassification of earlier
               financial  statements  for  comparative  purposes.   The  Company
               adopted SFAS 130 on January 1, 1998. The Company currently has no
               items  of "other   comprehensive   income"  as  defined  in  the
               Statement.


          (c)  NET LOSS PER SHARE The  Company  follows the  provisions  of SFAS
               128, "Earnings Per Share" which  requires  presentation  of both
               basic and  diluted  earnings  per share  (EPS) on the face of the
               income  statement.  Basic  EPS is  computed  using  the  weighted
               average  number of common shares  outstanding  during the period.
               Diluted EPS reflects the  potential  dilution that could occur if
               securities  or  other   contracts  to  issue  common  stock  were
               exercised or converted  into common stock at the beginning of the
               period.  Certain  common  stock  equivalents  arising  from stock
               options  outstanding  during  the  first  quarter  1998 have been
               omitted from  diluted EPS as the effect  would be  anti-dilutive.
               
               Weighted  average shares  outstanding  have been adjusted for the
               effects of  application  of  Securities  and Exchange  Commission
               Staff  Accounting  Bulletin (SAB) No. 98. Pursuant to SAB No. 98,
               all stock issued for nominal  consideration  should be treated as
               outstanding  for all periods  presented even though the effect is
               to reduce the net loss per share.  The  application of SAB No. 98
               had the effect of  increasing  outstanding  shares by 520,000 for
               the first quarter 1997.




                                       5
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.
                          NOTES TO FINANCIAL STATEMENTS


(2)   Change in Accounting Principle
 
On April 3, 1998,  the  Accounting  Standards  Executive  Committee of the AICPA
released  Statement  of  Position  98-5 (SOP 98-5),  "Reporting  on the Costs of
Start-Up  Activities".  The SOP, which is effective for periods  beginning after
December  15,  1998,  requires  that  at the  beginning  of the  fiscal  year of
adoption,  the unamortized portion of deferred start-up costs be written off and
reported  as  a  change  in  accounting  principle.  Future  costs  of  start-up
activities  should then be expensed as  incurred.  

The Company elected to early adopt SOP 98-5,  effective January 1, 1998. Certain
third party direct costs incurred in connection  with  negotiating  and securing
initial  rights-of-way and developing  network design for new market clusters or
locations had been  capitalized by the Company in previous years, and were being
amortized  over five  years.  The net book value of these  deferred  amounts was
$3,394,000  which  has been  reported  as a  cumulative  effect  of a change  in
accounting principle in the statements of operations for the first quarter 1998,
net of income tax benefit of $577,000.



(3)   Commitments and Contingencies

Effective March 20, 1998, the Company amended two previous lease  agreements for
long-haul  routes  interconnecting  Portland,  Oregon and Seattle  and  Spokane,
Washington.  The previous  capital lease agreement  which became  operational in
February  1997  provided  for  rental  payments  based  on a  percentage  of the
Company's monthly leased traffic over such route with a minimum required monthly
payment of $105,000.  The previous  operating lease provided for rental payments
based  on a  percentage  of the  Company's  leased  traffic  and  was to  become
operational  in the second  quarter of 1998.  Under the amended  lease,  a third
route from Seattle to Spokane,  Washington  was added and both  previous  leases
were combined into a capital lease with a 20 year term.  The amended lease calls
for rental  payments based on a percentage of the Company's  leased traffic over
such routes with a minimum required  monthly payment of $105,000.  The effect of
the amended  lease was to increase the book value of the capital lease asset and
obligation by $2,174,000.

Effective May 7, 1998, the Company entered into an operating lease with a  third
party for a long-haul route.  The agreement  has a 20 year term and provides for
rental payments based on a percentage of the Company's quarterly leased  traffic
over the route.  The route is  expected  to  become  operational  in  the  first
quarter of 1999.

(4)   Related Party Transactions

A summary of the  activity in the amount due to Citizens  for the quarter  ended
March 31, 1998 is as follows:

             ($ in thousands)
             Balance beginning of period                          $      944
             Guarantee fees                                            1,747
             Administrative services and other items                   4,590
                                                                     ---------
             Balance end of period                                $    7,281
                                                                     =========


                                       6
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                           ELECTRIC LIGHTWAVE, INC.
                          NOTES TO FINANCIAL STATEMENTS

(5)   Income Taxes

     Income taxes for the first  quarter 1998  decreased  $3,026,000 as compared
     with the prior year period primarily due to the recognition of a portion of
     the operating loss benefit which is not offset with a valuation  allowance.
     The  effective  income tax rate for the first quarter is 17% compared to 0%
     for the prior year period.  The change in the effective  income tax rate is
     due to the  full  valuation  allowance  reducing  the  tax  benefit  of the
     operating  loss for the prior year period  compared to a partial  valuation
     allowance  for the current  year period  based on the  estimated  effective
     annual income tax benefit rate. A full valuation allowance was necessary in
     the prior period due to the  uncertainty  of realizing the benefit of those
     operating  losses in the future as well as Citizens policy not to reimburse
     the Company for the tax benefits that were  contributed to the consolidated
     tax return of Citizens for any operating  losses prior to the IPO date. For
     the post IPO period, which includes the first quarter 1998, the tax benefit
     of the  Company's  operating  losses can be recognized to the extent of net
     deferred income tax  liabilities.  The existence of net deferred income tax
     liabilities  gives assurance that the income tax benefit related to the net
     operating  losses  will  be  realized  through  future  turnaround  of  the
     temporary  differences  that have  given  rise to the  deferred  income tax
     liabilities.


     Item 2. Management's  Discussion and Analysis of Financial Condition and 
             Results of Operations

     This quarterly report on Form 10-Q may contain  forward-looking  statements
     that are  subject  to risks and  uncertainties  which  could  cause  actual
     results  to differ  materially  from  those  expressed  or  implied  in the
     statements. All forward-looking statements (including oral representations)
     are only  predictions or statements of current plans,  which are constantly
     under review by the Company. All forward-looking statements may differ from
     actual future  results due to, but not limited to, changes in the local and
     overall economy,  the nature and pace of technological  changes, the number
     and  effectiveness  of  competitors  in the Company's  markets,  success in
     overall strategy,  changes in legal and regulatory  policy,  relations with
     RBOCs  and  their  ability  to  provide  delivery  of  services   including
     interoffice  trunking,  implementation  of  back  office  service  delivery
     systems,  the Company's ability to identify future markets and successfully
     expand  existing  ones and the mix of products and services  offered in the
     Company's target markets.  Readers should consider these important  factors
     in evaluating any statement  contained herein and/or made by the Company or
     on its behalf. The following information is unaudited and should be read in
     conjunction  with the financial  statements  and related notes to financial
     statements included in this report. The Company has no obligation to update
     or revise  forward-looking  statements to reflect the  occurrence of future
     events or  circumstances.  

     The  Company is a  facilities-based  integrated  communications  provider  
     (ICP) providing a broad range of communications services in five major 
     market clusters in the western United States including:  Portland, Oregon; 
     Seattle,  Washington; Salt Lake City, Utah; Sacramento,  California; and
     Phoenix, Arizona (hub cities) and their respective  surrounding  areas. The
     Company provides  state-of-the-art voice and data communications services
     to retail customers, primarily large- and medium-sized  communications-
     intensive  businesses, and wholesale customers. The Company was  
     incorporated  in 1990 and is a  subsidiary  of  Citizens  Utilities Company
     (Citizens).

     (a) Liquidity and Capital Resources

     For the three months  ended March 31, 1998 the Company  used the  remaining
     proceeds  from its  initial  public  offering  and  proceeds  from a credit
     facility  to fund  operating  and capital  expenditures.  

     The  Company  has a  five-year $400,000,000 revolving bank credit facility.
     Citizens  has  guaranteed  all of the  Company's  obligations  under this 
     credit facility.  The Company drew  $40,000,000  on its line of credit 
     during the first quarter 1998, and as of March 31, 1998,  $100,000,000 was
     outstanding under this facility.


                                       7
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.

     The capital  expenditures of the Company  associated with the installation,
     development and expansion of its existing and new  communications  networks
     are substantial,  and a significant portion of these expenditures generally
     are  incurred  before  any  revenues  are  realized.  The  Company's  gross
     property,  plant and  equipment has grown to $352 million at March 31, 1998
     from $329 million at December 31, 1997. These  expenditures,  together with
     associated  initial operating  expenses,  have resulted in operating losses
     and  negative  operating  cash  flow  and will  continue  to do so until an
     adequate  customer  base and revenue  stream for these  networks  have been
     established.  The Company  expects to incur net losses for the  foreseeable
     future as it continues to install,  develop and expand its new and existing
     communications networks. There can be no assurance that an adequate revenue
     base will be  established  or that the  Company  will  achieve  or  sustain
     profitability  or  generate  sufficient  positive  cash  flow to  fund  its
     operating  and  capital  requirements  and/or  service  debt.  

     The  Company  continues  to  evaluate   potential   acquisitions  that  are
     consistent with its long-range  business plans of generating revenue growth
     through the expansion of its network and customer base. If any acquisitions
     are  consummated,  the  Company  expects  that  additional  debt or  equity
     financing would be required.  The Company believes that it can attract such
     financing at reasonable terms.


                                       8
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.

     (b)  Results of Operations

                                    REVENUES

     Revenues increased $9.5 million, or 91%, over the first quarter 1997 due to
     the build  out of the five  market  clusters  in which  the  Company  has a
     presence.   The  Company   added  365  customers  and  26,600  access  line
     equivalents (42% and 181% increases over first quarter 1997, respectively).


                                          For the three months
                                             ended March 31
                            --------------------------------------------
                                            ($ in thousands)
                                                    
                                                                    %
                                  1998            1997           Increase
                             ---------     -------------         --------

Dedicated services        $      9,107  $          6,081           50%
Local dial tone services         6,024             1,245          384%
Long distance services           1,822             1,501           21%
Enhanced services                3,104             1,692           83%
                             ----------    --------------
     Total                $     20,057  $         10,519           91%
                             ==========    ==============

     Dedicated services revenues increased $3.0 million,  or 50%, over the first
     quarter  of  1997  primarily  due to a 42%  increase  in  customers  and an
     increase in route miles of 69% over the first quarter 1997. 

     Local dial tone services revenues increased $4.8 million, or 384%, over the
     first  quarter of 1997  primarily  due to a 181%  increase  in access  line
     equivalents.  The  successful  sales  and  marketing  of the  ISDN  product
     generated $1.3 million of increased  revenue in the first quarter 1998 over
     the first quarter 1997.  Carrier and local access  revenue  increased  $3.2
     million  over the first  quarter of 1997,  which  included  $1.1 million of
     revenue  related to the  reversal of an allowance  previously  provided for
     access fees that had been  disputed by a carrier.  

     Long distance  services  revenues  increased $.3 million,  or 21%, over the
     first quarter of 1997 primarily due to a $.6 million  increase in Advantage
     Long Distance,  the Company's retail long distance service. The increase is
     attributable  to an overall  expansion of the Company's sales force and the
     Company's success in its product bundling strategy.  The increase in retail
     long  distance was  partially  offset by decreases in prepaid  services and
     wholesale long distance. 

     Enhanced services revenues  increased $1.4 million,  or 83%, over the first
     quarter of 1997  primarily  due to  increased  sales of the frame relay and
     Internet products.


                                       9
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.


                               OPERATING EXPENSES

     Operating expenses  increased $13.1 million,  or 64% over the first quarter
     1997 due to the Company's rapid network and customer growth as reflected in
     revenues,  offset in part by  economies  of scale from  infrastructure  and
     network development.

                                         For the three months
                                            ended March 31
                            --------------------------------------------
                                           ($ in thousands)
                                                    
                                                                   %
                                 1998            1997           Increase
                             ----------    --------------     -----------
Network access            $      9,212  $          4,930           87%
Sales and marketing              4,940             2,906           70%
Depreciation & amortization      3,884             2,817           38%
Other operating expenses        15,681             9,937           58%
                             ----------    --------------
                          $     33,717  $         20,590           64%
                             ==========    ==============

     Network  access  expenses  increased  $4.3 million,  or 87%, over the first
     quarter of 1997 primarily due to the Company's expansion of its frame relay
     and internet products, and its customer base.

     Sales and marketing expenses increased $2.0 million, or 70%, over the first
     quarter of 1997 primarily due to the Company's continued focus on expanding
     direct  retail sales in the markets it had entered as of the first  quarter
     1997, as well as additional  sales and marketing  activities to support its
     entry into new markets such as Boise, Idaho; Los Angeles and San Francisco,
     California; and Spokane, Washington.

     Depreciation and amortization  expense increased $1.1 million, or 38%, over
     the first quarter of 1997 primarily due to higher plant in service balances
     for newly completed communications network facilities and electronics.

     Other  operating  expenses  increased $5.7 million,  or 58%, over the first
     quarter of 1997 primarily due to increases in salaries and related expenses
     to support the expanded delivery of services, new product development,  and
     an expanded customer service organization.



                                     10
<PAGE>
 
                    PART 1. FINANCIAL INFORMATION(Continued)
                            ELECTRIC LIGHTWAVE, INC.


                       INTEREST EXPENSE / INTEREST INCOME


                                         For the three months
                                            ended March 31
                            --------------------------------------------
                                           ($ in thousands)
                                                    
                                                                   %
                                1998            1997           Increase
                            -----------    -------------     -----------

Interest expense          $         911  $             91         901%
Interest income                     167                 -          N/A


     Interest  expense  (net of  capitalized  interest  of $1.8  million and $.3
     million for 1998 and 1997,  respectively)  increased $.8 million,  or 901%,
     over the first quarter of 1997 primarily due to interest and guarantee fees
     associated  with the Company's  borrowings  against its credit facility and
     construction agency agreement.

     Interest  income  increased  $.2  million  over the first  quarter  of 1997
     primarily due to interest  earned on cash and  investments  maintained in a
     money market fund.


                               INCOME TAX BENEFIT


                                          For the three months
                                             ended March 31
                           --------------------------------------------
                                            ($ in thousands)
                                                    
                                                                   %
                                 1998             1997          Increase
                             ----------    --------------     -----------

Income tax benefit        $       2,449  $              -          N/A


     Income tax benefit  increased  $3.0 million,  including $.6 million  netted
     against cumulative effect of change in accounting principle, over the first
     quarter of 1997 primarily due to net operating loss carryforwards. 



                                       11
<PAGE>
 
                           PART II. OTHER INFORMATION

                            ELECTRIC LIGHTWAVE, INC.


Item 1.  Legal Proceedings

         The Company is party to various legal proceedings arising in the normal
         course  of  business.   The  outcome  of  individual   matters  is  not
         predictable.  However, management believes that the ultimate resolution
         of all such matters, after considering its level of insurance coverage,
         will not have a  material  adverse  effect on the  Company's  financial
         position, results of operations, or its cash flows.

Item 6.  Exhibits and Reports on Form 8-K

         a) The exhibits below are filed as part of this report:

            Exhibit No.   Description

               10.14.1    Amendment  number  one  to  the  Pre-construction  IR4
                          Agreement between  the Company and FTV Communications,
                          LLC dated November 14, 1997.
               10.16*     License  Agreement  between the Company and the United
                          States of America  Department  of Energy acting by and
                          through  the  Bonneville  Power  Administration  dated
                          March 20, 1998.
               10.17*     License  Agreement  between the Company and the United
                          States of America  Department  of Energy acting by and
                          through  the  Bonneville  Power  Administration  dated
                          January 8, 1998.
               10.18*     Optical Fiber  Installation  and IRU Agreement between
                          the Company and Pacific Gas and Electric Company dated
                          December 31, 1997.
               10.18.1*   First Amendment to Optical Fiber  Installation and IRU
                          Agreement  between  the  Company  and  Pacific Gas and
                          Electric Company dated March 9, 1998.
               27.1       Financial   Data   Schedule   for   periods   ended 
                          March 31, 1998 and March 31, 1997.

---------------
*  Material has been omitted pursuant to a request for confidential treatment.
               
         b) Reports on Form 8-K
            The Company filed on Form 8-K dated February 19, 1998, under Item 7,
            "Exhibits" the executed copies of certain  agreements,  the forms of
            which  had been  filed as  exhibits  to the  registration  statement
            relating to the Company's initial public offering.  The Company also
            filed on Form 8-K dated March 23, 1998, under Item 5, "Other Events"
            quarterly financial information for 1997.

























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<PAGE>
 
                            ELECTRIC LIGHTWAVE, INC.




                                    SIGNATURE



Pursuant  to the  requirements  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.


                            ELECTRIC LIGHTWAVE, INC.
                                  (Registrant)

                              By: /s/ Kerry D. Rea
                                  Kerry D. Rea
                          Vice President and Controller



May 15, 1998