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 JUNE 30, 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 June 30, 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



--------------------------------------------------------------------------------
(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
August 4, 1998 were:

                         Common Stock Class A 8,546,063
                         Common Stock Class B 41,165,000




<PAGE>


















                            ELECTRIC LIGHTWAVE, INC.

                          Index to Financial Statements


<TABLE>
<CAPTION>


                                                                                                     Page No.
<S>                                                                                                  <C>

Part I.  Financial Information

    Item 1.  Financial Statements

       Balance Sheets at June 30, 1998 (unaudited) and December 31, 1997                                  2

       Statements of Operations for the Three Months Ended June 30, 1998 and 1997 (unaudited)             3

       Statements of Operations for the Six Months Ended June 30, 1998 and 1997 (unaudited)               4

       Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 (unaudited)               5

       Notes to Financial Statements                                                                      6

    Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations        9

Part II.  Other Information                                                                              14

Signature                                                                                                16






</TABLE>









                                       1

<PAGE>

<TABLE>
<CAPTION>


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                            ELECTRIC LIGHTWAVE, INC.
                                 BALANCE SHEETS
                                 (In thousands)

                                                                                  June 30, 1998    December 31, 1997
                                                                                   (Unaudited)

ASSETS

Current assets:
<S>                                                                          <C>                 <C>         
     Cash                                                                    $        12,638     $     26,531
     Trade receivables, net                                                           10,207           12,569
     Other receivables                                                                   652            7,688
     Other current assets                                                                893              844
                                                                                 --------------    -------------
       Total current assets                                                           24,390           47,632
                                                                                 --------------    -------------

Property, plant and equipment                                                        396,080          328,664
Less accumulated depreciation and amortization                                       (31,887)         (25,791)
                                                                                 --------------    -------------

     Property, plant and equipment, net                                              364,193          302,873
                                                                                 --------------    -------------

Other assets                                                                           6,420            9,457
                                                                                 --------------    -------------

        Total assets                                                         $       395,003     $    359,962
                                                                                 ==============    =============



LIABILITIES AND EQUITY

Current liabilities:
      Accounts payable and accrued liabilities                               $        28,101     $      50,237
      Taxes other than income taxes                                                    5,078             3,136
      Due to Citizens Utilities Company                                                4,863               944
      Current portion of capital lease obligation                                      6,460               452
      Other current liabilities                                                        5,301             2,650
                                                                                 --------------     -------------
       Total current liabilities                                                      49,803            57,419
                                                                                 --------------     -------------

Deferred credits and other                                                             1,740             1,800
Deferred income taxes payable                                                         10,870            16,918
Capital lease obligation                                                              12,656            10,511
Long-term debt                                                                       134,000            60,000
                                                                                 --------------     -------------
            Total liabilities                                                        209,069           146,648
                                                                                 --------------     -------------

Shareholders' Equity:
      Common stock issued, $.01 par value
           Class A                                                                        85                85
           Class B                                                                       412               412
      Additional paid-in-capital                                                     318,881           316,731
      Deficit                                                                       (133,444)         (103,914)
                                                                                 --------------     -------------
       Total shareholders' equity                                                    185,934           213,314
                                                                                 --------------     -------------

         Total liabilities and shareholders' equity                          $       395,003     $     359,962
                                                                                 ==============     =============


</TABLE>



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

                                       2
<PAGE>


PART I.  FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.
                            STATEMENTS OF OPERATIONS
                FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                    (In thousands, except per-share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                               1998                1997
                                                                                            ------------        -----------
<S>                                                                                      <C>                 <C>

Revenues                                                                                 $    21,443         $    14,246
                                                                                            ------------        -----------

Operating expenses:
     Network access                                                                            9,860               7,016
     Sales and marketing                                                                       5,735               3,761
     Depreciation and amortization                                                             3,780               2,786
     Other operating expenses                                                                 18,381              10,426
                                                                                            ------------        -----------
         Total operating expenses                                                             37,756              23,989
                                                                                            ------------        -----------

     Loss from operations                                                                    (16,313)             (9,743)

Interest expense (net of capitalized interest of $2,050 for 1998 and $481 for 1997)            1,690                 211
Interest income                                                                                 (223)                  -
                                                                                            ------------        -----------

     Net loss before income taxes                                                            (17,780)             (9,954)

Income tax benefit                                                                            (3,022)                  -
                                                                                            ------------        -----------

     Net loss                                                                            $   (14,758)        $    (9,954)
                                                                                            ============        ===========

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

Weighted average shares outstanding                                                           49,694              41,685



</TABLE>












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

                                       3

<PAGE>


PART I.  FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                    (In thousands, except per-share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

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


<S>                                                                                      <C>                 <C>         
Revenues                                                                                 $    41,500         $     24,765
                                                                                            ------------        -----------

Operating expenses:
     Network access                                                                           19,072               11,946
     Sales and marketing                                                                      10,675                6,667
     Depreciation and amortization                                                             7,664                5,603
     Other operating expenses                                                                 34,062               20,363
                                                                                            ------------        -----------
         Total operating expenses                                                             71,473               44,579
                                                                                            ------------        -----------

     Loss from operations                                                                    (29,973)             (19,814)

Interest expense (net of capitalized interest of $3,838 for 1998 and $826 for 1997)            2,601                  302
Interest income                                                                                 (390)                   -
                                                                                            ------------        -----------

     Net loss  before  income  taxes and  cumulative  effect  of  change in  accounting      (32,184)             (20,116)
principle

Income tax benefit                                                                            (5,471)                   -
                                                                                            ------------        -----------

     Net loss before cumulative effect of change in accounting principle                     (26,713)             (20,116)

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

     Net loss                                                                            $   (29,530)        $    (20,116)
                                                                                            ============        ===========

Net loss before cumulative  effect of change in accounting  principle per common
share:
         Basic                                                                           $      (.54)        $       (.48)
         Diluted                                                                         $      (.54)        $       (.48)

Net loss per common share:
         Basic                                                                           $      (.59)        $       (.48)
         Diluted                                                                         $      (.59)        $       (.48)

Weighted average shares outstanding                                                           49,690               41,685

</TABLE>










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

                                       4

<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                         1998               1997


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

<S>                                                                            <C>                 <C>            
Net cash used for operating activities                                         $      (13,022)     $       (4,845)
                                                                                  ---------------     ---------------

Cash flows used for investing activities:
     Capital expenditures                                                             (74,971)            (36,902)
                                                                                  ---------------     ---------------

Cash flows from financing activities:
     Debt borrowings                                                                   74,000                   -
     Citizens fundings                                                                      -              42,392
     Other, net                                                                           100                (147)
                                                                                  ---------------     ---------------
         Net cash provided by financing activities                                     74,100              42,245
                                                                                  ---------------     ---------------

Net increase (decrease) in cash                                                       (13,893)                498

Cash at January 1,                                                                     26,531                 611
                                                                                  ---------------     ---------------
Cash at June 30,                                                               $       12,638      $        1,109
                                                                                  ===============     ===============




Supplemental cash flow information:
     Cash paid for interest, net of capitalized portion                        $        1,836      $            -
     Non-cash increase in capital lease asset and obligation                            8,337                   -
     Other non-cash transactions with Citizens:
         Deferred income taxes                                                              -               3,118
         Capitalized interest                                                  $            -      $          826





</TABLE>














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

                                      5


<PAGE>


PART I. 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 three months ended and six months ended
                  June 30, 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 three  months ended and
                  six months ended June 30, 1997 .

(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 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  adopted 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 statement of
      operations  for the six  months  ended  June 30,  1998,  net of income tax
      benefit of $577,000.

                                       6

<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.
                          NOTES TO FINANCIAL STATEMENTS

(3)   Commitments and Contingencies

      Effective  March 20, 1998, the Company  amended two previous  fifteen year
      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
      one 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.

      In May 1998, the Company  entered into a 20 year operating lease agreement
      with a third  party in order to develop a  long-haul  route from Oregon to
      southern  California.  Rental  payments are based on a  percentage  of the
      Company's  leased traffic and the route is expected to become  operational
      in the second quarter of 1999.

      In June 1998, the Company  entered into a private line services  agreement
      with a third party which  allows the Company to utilize the third  party's
      national fiber optic network for a period of nine years. The Company has a
      total minimum  commitment of $122 million over the term of the  agreement,
      including $6.3 million over the twelve months subsequent to June 30, 1998.
      A  portion  of the  network  was  operational  as of June 30,  1998,  with
      construction  on the remainder of the network  scheduled for completion in
      the second quarter of 1999.

      The current portion of capital lease  obligation at June 30, 1998 includes
      $6.1 million of an accrued obligation to reflect construction  activity on
      capital leases for long-haul routes under development.

(4)   Related Party Transactions

      A summary of the activity in the amount due to Citizens for the six months
      ended June 30, 1998 is as follows:

             ($ in thousands)
             Balance beginning of period                          $    944
             Guarantee fees                                          3,522
             Administrative services and other items                 4,897
             Payment to Citizens                                    (4,500)
                                                                   ----------
             Balance end of period                                $  4,863
                                                                   ==========


(5)   Employee Stock Purchase Plan

      In May 1998,  the  Company's  stockholders  approved  the  Employee  Stock
      Purchase Plan (ESPP).  Under the ESPP,  eligible  employees of the Company
      may subscribe to purchase  shares of Class A Common Stock at the lesser of
      85% of the mean  between  the high and low  market  prices on the first or
      last day of the purchase  period.  An employee may elect to have up to 20%
      of  annual  base  pay  withheld  in  equal  installments   throughout  the
      designated  payroll-deduction period for the purchase of shares. The value
      of an employee's  subscription  may not exceed $25,000 in any one calendar
      year.  An employee may not  participate  in the ESPP if the employee  owns
      stock possessing 5% or more of the total combined voting power or value of
      all classes of capital  stock of the Company.  As of June 30, 1998,  there
      were 175,460  shares of Class A Common Stock  reserved for issuance  under
      the ESPP,  which will be adjusted for any future stock  dividends or stock
      splits.  The ESPP will terminate when all 175,460 shares of Class A Common
      Stock reserved have been subscribed for, unless terminated  earlier by the
      Board of Directors.  The ESPP is  administered by a committee of the Board
      of Directors.  As of June 30, 1998, the number of employees  participating
      in the ESPP was 362 and the total  number of shares  subscribed  for under
      the ESPP was 51,208. No stock-based  compensation  expense was recorded in
      the  financial  statements  pursuant  to the ESPP in  accordance  with APB
      opinion No. 25.

                                       7

<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.
                          NOTES TO FINANCIAL STATEMENTS

(6)   Income Taxes

      The income tax benefit of $3,022,000  and $6,048,000 for the three and six
      months  ended  June  30,  1998,  respectively,  primarily  represents  the
      recognition of operating  losses. A full valuation  allowance  against the
      benefit of the Company's  losses was necessary in the three and six months
      ended June 30, 1997 due to 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,  November 24,
      1997.  For the post IPO period,  which  includes  the three and six months
      ended June 30, 1998, the tax benefit of the Company's operating losses are
      being  recognized  to the extent of net deferred  income tax  liabilities,
      since  Citizens  has agreed to  reimburse  the Company  when losses can be
      utilized by the  Company on a stand  alone  basis.  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.


                                       8

<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.


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

     This quarterly report on Form 10-Q contains 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.
     Forward-looking  statements are statements (including oral representations)
     about future  performance or results,  including any  statements  using the
     words   "believe",   "expect",   "anticipate"   or   similar   words.   All
     forward-looking  statements  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 Regional Bell  Operating
     Companies  (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 Company has no obligation to update or
     revise  forward-looking  statements  to reflect  the  occurrence  of future
     events or circumstances.

     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 is a facilities-based  integrated communications provider (ICP)
     providing a broad  range of  communications  services  in six major  market
     clusters in the western United States including: Portland, Oregon; Seattle,
     Washington; Salt Lake City, Utah; Sacramento, California; Boise, Idaho; and
     Phoenix,  Arizona and their respective  surrounding areas. The Company also
     provides data services in Los Angeles and San  Francisco,  California;  and
     Las Vegas,  Nevada.  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 six  months  ended June 30,  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 million  revolving  bank credit  facility.
     Citizens has guaranteed all of the Company's  obligations under this credit
     facility.  The Company  drew $74  million on its line of credit  during the
     first  six  months  of  1998,  and as of June 30,  1998, $134  million  was
     outstanding under this facility.

     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 $396 million at June 30, 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.

     In June 1998,  the Company  entered into a private line services  agreement
     with a third  party which  allows the Company to utilize the third  party's
     national  fiber optic  network  for a period of nine years.  The Company is
     obligated  for a  minimum  commitment  of  $122  million  in a  take-or-pay
     arrangement,  including  $6.3 million over the twelve months  subsequent to
     June 30, 1998.

                                       9

<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.

     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. The Company expects
     that  additional  debt or equity  financing  may be required to  consummate
     significant  acquisitions.  The Company  believes  that it would be able to
     attract  such  financing  at  reasonable  terms;  however,  there can be no
     assurance  that  the  Company  will be able to  obtain  such  financing  at
     reasonable  terms,  which  would  have a  material  adverse  effect  on its
     business, results of operations, and financial condition.

     U.S. West union  employees have  authorized a strike  effective  August 15,
     1998.  The Company  relies upon U.S. West, the RBOC operating in a majority
     of the Company's markets,  for provisioning new off-net  customers.  A U.S.
     West strike, depending on its duration, may have an adverse impact upon the
     Company's  ability to generate new revenue through the  provisioning of new
     off-net customers.

     (b)  Results of Operations

                                    REVENUES

     Revenues  for the three and six months ended June 30, 1998  increased  $7.2
     million,  or 51%, and $16.7 million, or 68%,  respectively,  over the three
     and six months  ended June 30, 1997 due to the  continued  expansion of the
     Company's  network and customer  base.  In 1998,  the Company  added Boise,
     Idaho as a new market  cluster and began offering data services in a number
     of other cities, including Los Angeles and San Francisco,  California. From
     June 30, 1997 to June 30, 1998,  the Company added 339 customers and 34,077
     access line equivalents (34% and 167% increases, respectively).

<TABLE>
<CAPTION>

                                               For the three months                                For the six months
                                                  ended June 30,                                     ended June 30,
                                     -----------------------------------------        ----------------------------------------------
                                                 ($ in thousands)                                   ($ in thousands)
  
                                                                       %
                                                                   Increase/                                              %
                                       1998           1997        (Decrease)              1998           1997          Increase
                                     ----------     ----------    ------------         -----------     ----------     --------------
<S>                               <C>            <C>                   <C>         <C>              <C>                   <C>
       Dedicated services         $      8,371   $      8,036          4%          $       17,478   $     14,116          24%
       Local dial tone services          7,769          1,997        289%                  13,793          3,243         325%
       Long distance services            1,899          1,942        (2)%                   3,721          3,443           8%
       Enhanced services                 3,404          2,271         50%                   6,508          3,963          64%
                                     ----------     ----------                        ------------     ----------
            Total                 $     21,443   $     14,246         51%          $       41,500   $     24,765          68%
                                     ==========     ==========                        ============     ==========
</TABLE>

     Dedicated Services
     Dedicated  services  revenues  for the three  months  ended  June 30,  1998
     increased  $.3  million,  or 4%, over the three months ended June 30, 1997.
     Revenues  increased  $1.2 million over 1997 due to an expansion of sales in
     existing  markets and a $.5 million  increase from the  Company's  entrance
     into new  markets  in 1998.  This  increase  was  offset  by a $.9  million
     decrease in revenue from a significant  customer  primarily  related to the
     expiration of a short-term contract in the first quarter 1998.

     Dedicated  services  revenues  for the  six  months  ended  June  30,  1998
     increased  $3.4  million,  or 24%,  over the six months ended June 30, 1997
     primarily  due to an  expansion  of sales in  existing  markets  and a $1.0
     million increase from the Company's entrance into new markets in 1998.

     Local Dial Tone Services
     Local dial tone services  revenues for the three months ended June 30, 1998
     increased $5.8 million,  or 289%, over the three months ended June 30, 1997
     primarily due to local access revenue of $2.8 million,  net of $2.3 million
     reserved  for due to a dispute by a carrier.  No local  access  revenue was
     recognized in the three months ended June 30, 1997. Access line equivalents
     increased  34,077,  or 167%,  from  June 30,  1997 to June  30,  1998  also
     contributing to the increase in local dial tone services. In addition,  the
     successful  sales and  marketing of the ISDN product  also  generated  $1.6
     million of  increased  revenue in the three months ended June 30, 1998 over
     the three months ended June 30, 1997.

                                       10


<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.

     Local dial tone  services  revenues  for the six months ended June 30, 1998
     increased  $10.6 million,  or 325%, over the six months ended June 30, 1997
     primarily due to local access revenue of $5.3 million,  net of $2.4 million
     reserved for due to a dispute by a carrier.  Local  access  revenue for the
     six months ended June 30, 1998 includes $1.1 million of revenue  related to
     the reversal of an allowance  previously  provided for access fees that had
     been disputed by a carrier.  No local access  revenue was recognized in the
     six months ended June 30, 1997.  Access line equivalents  increased 34,077,
     or 167%,  from  June 30,  1997 to June 30,  1998 also  contributing  to the
     increase in local dial tone services. In addition, the successful sales and
     marketing of the ISDN product  generated $2.9 million of increased  revenue
     in the six months  ended June 30,  1998 over the six months  ended June 30,
     1997.

     Long Distance Services
     Long  distance  services  revenues for the three months ended June 30, 1998
     decreased  by  $43,000,  or 2%, from the three  months  ended June 30, 1997
     primarily  due to  lower  wholesale  long  distance  and  prepaid  services
     revenues  offset  in part  by a $.3  million  increase  in  Advantage  Long
     Distance,  the  Company's  retail  long  distance  service.  Long  distance
     services  revenues  for the six months  ended June 30, 1998  increased  $.3
     million,  or 8%, primarily due to a $1.0 million increase in Advantage Long
     Distance  offset in part by  decreases  of $.4  million  and $.3 million in
     wholesale long distance and prepaid services, respectively. The increase in
     Advantage  Long  Distance is  attributable  to an overall  expansion of the
     Company's sales force and the Company's product bundling strategy.

     Enhanced Services
     Enhanced services revenues for the three and six months ended June 30, 1998
     increased  $1.1 million,  or 50%, and $2.5 million,  or 64%,  respectively,
     over the  three  and six  months  ended  June  30,  1997  primarily  due to
     increased  sales  of the  frame  relay  and  Internet  products  in new and
     existing  markets as a result of strong customer demand for these services.
     For the three and six months  ended June 30, 1998 frame relay and  Internet
     product  revenues  of $.3  million  and  $.5  million,  respectively,  were
     recognized in markets entered into  subsequent to June 30, 1997,  including
     Los Angeles and San Francisco, California.


                               OPERATING EXPENSES

     Operating expenses increased $13.8 million,  or 57%, and $26.9 million,  or
     60%, respectively, over the three and six months ended June 30, 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.

<TABLE>
<CAPTION>

                                                 For the three months                               For the six months
                                                    ended June 30,                                    ended June 30,
                                        ----------------------------------------       ---------------------------------------------
                                                    ($ in thousands)                                 ($ in thousands)
 
                                                                         %                                                     %
                                          1998          1997         Increase             1998             1997          Increase
                                        ---------     ----------    ------------       ------------     ------------    ------------
<S>                                  <C>           <C>                  <C>         <C>             <C>                     <C>
       Network access                $     9,860   $      7,016         41%         $      19,072   $       11,946          60%
       Sales and marketing                 5,735          3,761         52%                10,675            6,667          60%
       Depreciation & amortization         3,780          2,786         36%                 7,664            5,603          37%
       Other operating expenses           18,381         10,426         76%                34,062           20,363          67%
                                        ---------     ----------                       -----------     ------------
                                     $    37,756   $     23,989         57%         $      71,473   $       44,579          60%
                                        =========     ==========                       ===========     ============
</TABLE>

     Network Access
     Network  access  expenses  for the three and six months ended June 30, 1998
     increased  $2.8 million,  or 41%, and $7.1 million,  or 60%, over the three
     and six months  ended June 30,  1997,  respectively,  primarily  due to the
     Company's  revenue  growth,  including  expansion  of its  frame  relay and
     internet  products,  and its customer base.  Network  access  expenses were
     lower,  as a  percentage  of  revenues,  in the three months and six months
     ended June 30, 1998 than in the  respective  periods in 1997 as a result of
     increased  efficiencies from network  development,  allowing the Company to
     carry more of its traffic on its own network.

                                       11

<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.

     Sales and Marketing
     Sales and  marketing  expenses  for the three and six months ended June 30,
     1998   increased  $2.0  million,   or  52%,  and  $4.0  million,   or  60%,
     respectively,  over the three and six months ended June 30, 1997  primarily
     due to the Company's  continued focus on expanding sales in its established
     markets,  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;  Las Vegas,  Nevada; and Spokane,  Washington.  The
     Company  increased  its sales force by 55 employees,  a 95% increase,  from
     June  30,  1997 to  June  30,  1998.  In  addition,  the  Company  expanded
     advertising,  direct marketing, and public relations efforts in key markets
     to increase name recognition and product  information in the second quarter
     of 1998.

     Depreciation and Amortization
     Depreciation  and  amortization  expense for the three and six months ended
     June 30, 1998  increased  $1.0 million,  or 36%, and $2.1 million,  or 37%,
     respectively,  over the three and six months ended June 30, 1997, primarily
     due to higher plant in service balances for newly completed  communications
     network facilities and electronics.

     Other Operating Expenses
     Other  operating  expenses for the three and six months ended June 30, 1998
     increased $8.0 million,  or 76%, and $13.7 million,  or 67%,  respectively,
     over the  three  and six  months  ended  June  30,  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. Employee head count increased 356, or 73%, over June 30, 1997
     which also caused increased facilities rental costs of $.6 million and $1.1
     million over the three and six months ended June 30, 1997, respectively, as
     facility demands  increased because of the new employees and the opening of
     five  new  sales   offices,   including  Los  Angeles  and  San  Francisco,
     California. In addition,  maintenance costs have risen $.5 million and $1.4
     million over the three and six months  ended June 30,  1997,  respectively,
     due to the expansion of the Company's network.

<TABLE>
<CAPTION>


                                     EBITDA

                                                 For the three months                              For the six months
                                                    ended June 30,                                    ended June 30,
                                        ----------------------------------------       ---------------------------------------------
                                                    ($ in thousands)                                ($ in thousands)

                                                                         %                                                 %
                                          1998           1997       (Decrease)             1998           1997        (Decrease)
                                        ----------     ---------    ------------        -----------     ----------    --------------

<S>                                  <C>           <C>                 <C>          <C>              <C>                  <C>  
       EBITDA                        $   (12,533)  $    (6,957)        (80)%        $     (22,309)   $   (14,211)         (57)%

     EBITDA  consists  of  earnings  (loss)  before   interest,   income  taxes,
     depreciation,  amortization, and one-time and certain non-recurring charges
     such as the cumulative effect of a change in accounting  principle.  EBITDA
     is a measure  commonly used in the  telecommunications  industry to measure
     operating  performance,  asset value,  and financial  leverage,  and is not
     intended to present,  or replace,  cash flow or operating income as defined
     by generally accepted accounting principles for the periods presented.  See
     the Financial  Statements and accompanying Notes included elsewhere in this
     report.

     EBITDA for the three and six  months  ended June 30,  1998  decreased  $5.6
     million, or 80%, and $8.1 million, or 57%, respectively, over the three and
     six months ended June 30, 1997,  primarily  due to employee  expenses  that
     have  grown  faster  than  revenues  as  the  Company  builds  an  internal
     infrastructure  that is able to generate and accommodate revenue growth and
     market expansion.

</TABLE>
                                       12
<PAGE>


PART I. FINANCIAL INFORMATION (Continued)

                            ELECTRIC LIGHTWAVE, INC.

                       INTEREST EXPENSE / INTEREST INCOME
<TABLE>
<CAPTION>

                                              For the three months                                For the six months
                                                 ended June 30,                                     ended June 30,
                                     ----------------------------------------        ---------------------------------------------
                                                 ($ in thousands)                                  ($ in thousands)

                                                                      %                                                  %
                                       1998           1997        Increase              1998            1997         Increase
                                     ----------     ---------    ------------         ----------      ----------    --------------

<S>                               <C>            <C>                <C>           <C>             <C>                  <C> 
       Interest expense, net      $      1,690   $       211        701%          $       2,601   $         302        761%
       Interest income                     223             -        n/a                     390               -        n/a

     Interest expense for the three and six months ended June 30, 1998 increased
     $1.5 million,  or 701%, and $2.3 million, or 761%,  respectively,  over the
     three and six months  ended June 30,  1997,  primarily  due to interest and
     guarantee fees associated with the Company's  borrowings against its credit
     facility and  construction  agency  agreement.  Interest  expense is net of
     capitalized interest of $2.1 million and $3.8 million for the three and six
     months ended June 30, 1998,  respectively,  and $.5 million and $.8 million
     for the three and six months ended June 30, 1997, respectively.

     Interest  income for the three and six months ended June 30, 1998 increased
     $.2 million, and $.4 million,  respectively,  over the three and six months
     ended June 30, 1997 primarily due to interest  earned on cash maintained in
     a money market fund.

</TABLE>
<TABLE>
<CAPTION>


                               INCOME TAX BENEFIT

                                                 For the three months                              For the six months
                                                    ended June 30,                                    ended June 30,
                                        ----------------------------------------       ---------------------------------------------
                                                    ($ in thousands)                                ($ in thousands)

                                                                         %                                                 %
                                                                     Increase/                                         Increase/
                                          1998          1997        (Decrease)             1998           1997        (Decrease)
                                        ---------     ----------    ------------        -----------     ----------    --------------

<S>                                  <C>          <C>                               <C>              <C>                     
       Income tax benefit            $     3,022  $           -        n/a          $        5,471   $          -         n/a

     Income tax  benefit  increased  $3.0  million  for the three and six months
     ended June 30, 1998 and $6.0 million  (including $.6 million netted against
     cumulative effect of change in accounting  principle),  respectively,  over
     the  three  and six  months  ended  June  30,  1997,  primarily  due to the
     recognition of net operating losses.
</TABLE>

                                       13
<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  these  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 2.  Changes in Securities and Use of Proceeds

On November 21, 1997,  the  Company's  Registration  Statement on Form S-1, file
number  333-35227,  registering  $207,000,000  aggregate amount of the Company's
Class A Common  Stock,  par value $.01 per  share,  became  effective  under the
Securities Act of 1933. The Company used the $6,531,000  remaining proceeds from
this  issuance  in the  first  quarter  of 1998 to fund  operating  and  capital
expenditures. All of the offering proceeds from this issuance have been applied.

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

The Company held its 1998 Annual Meeting of the  Stockholders on May 21, 1998 to
elect directors and consider  proposals (i) to approve the 1997 Equity Incentive
Plan and (ii) to approve the Employee  Stock  Purchase Plan, as discussed in the
Company's proxy statement filed on April 28, 1998.

The  following  persons  were  elected  directors  to hold office until the next
annual meeting and until their successors have been elected and qualified:
<TABLE>
<CAPTION>

                                                                      Votes
                                                     ----------------------------------------
                                                          For (*)               Abstained
                                                     -------------------     ----------------

<S>                                                     <C>                       <C>  
Daryl A. Ferguson                                       416,740,465               6,735
Stanley Harfenist                                       416,741,065               6,135
David B. Sharkey                                        416,741,065               6,135
Robert A. Stanger                                       416,740,965               6,235
Leonard Tow                                             416,741,065               6,135
Maggie Wilderotter                                      416,741,065               6,135
</TABLE>


The  stockholders  approved  the  1997  Equity  Incentive  Plan  by  a  vote  of
413,257,018 (*) votes For to 1,421,510 votes Against;  7,830 votes Abstained and
there were 2,060,842 Broker Non-Votes.

The  stockholders  also approved the Employee  Stock  Purchase Plan by a vote of
414,681,109  (*) votes For to 181,430 votes Against;  7,230 votes  Abstained and
there were 1,877,431 Broker Non-Votes.

     * Includes  votes from the 41,165,000  shares of Class B common stock.  All
     Class B Common  Stock is owned by Citizens and each share is entitled to 10
     votes on each matter to be voted upon by holders of the Common Stock.


                                       14

<PAGE>


PART II. OTHER INFORMATION (continued)

                            ELECTRIC LIGHTWAVE, INC.

Item 6.  Exhibits and Reports on Form 8-K

a) The exhibits below are filed as part of this report:
<TABLE>
<CAPTION>


Exhibit No.      Description

<S>              <C>                              
3.2              Amended By-laws of the Company.
10.19*           Initial Optical Fiber Design and Installation  Agreement between the Company and FOCAS, Inc. dated as of May
                 7, 1998.
10.20*           Post-Completion Agreement between the Company and FOCAS, Inc. dated as of May 7, 1998.
10.21*           Private Line Services  Agreement between the Company and Qwest  Communications  Corporation dated as of June
                 1, 1998.
10.22            Electric Lightwave, Inc. Employee Stock Purchase Plan.
27.1             Financial  Data  Schedule for the six months ended June 30, 1998.
27.2             Amended  Financial Data Schedules for the three months ended March 31, 1998 and 1997, the six months ended
                 June 30, 1997,  the nine months ended  September 30, 1997,  and the twelve months ended December 31, 1997.

Exhibit 10.22 is a management contract or compensatory plan or arrangement,  and
is  incorporated  by reference to the Company's  Proxy Statement on Schedule 14A
filed on April 28, 1998.

* 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 May 5, 1998,  under Item 5, "Other  Events" first quarter 1998 financial information.
</TABLE>

                                       15

<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





August 13, 1998




                                       16