<PAGE>
 
                                                                   EXHIBIT 10.17

                                                         Contract No. 97TX-10080
                                                         January 8, 1998

                               LICENSE AGREEMENT
                                executed by the
                            UNITED STATES OF AMERICA
                              DEPARTMENT OF ENERGY
                           acting by and through the
                        BONNEVILLE POWER ADMINISTRATION
                                      and
                            ELECTRIC LIGHTWAVE, INC.


                               Index to Sections
--------------------------------------------------------------------------------
Section                                                     Page
  1.   Definitions........................................   2
  2.   Term...............................................   6
  3.   Exhibits...........................................   7
  4.   Amendments.........................................   7
  5.   Milestone Schedule.................................   7
  6.   Ownership..........................................   7
  7.   License............................................   8
  8.   Performance Criteria...............................   8
  9.   ELI Capital Spending...............................  11
  10.  BPA Terminal Equipment.............................  11
  11.  Business Plan......................................  11
  12.  Market Price Assessment............................  12
  13.  Payment............................................  13
  14.  Maintenance, Repair, and Restoration of the Cable..  14
  15.  Regenerator Building(s)............................  17
  16.  Rights and Obligations Concerning the Cable........  18
  17.  Relocation of the Cable............................  22
  18.  Representations and Warranties.....................  22
  19.  Audit Procedures...................................  25
  20.  Insurance..........................................  26
  21.  Default............................................  28
  22.  Termination........................................  30
  23.  Indemnification; Waiver of Damages.................  31
  23.  Dispute Resolution.................................  32
  25.  General............................................  34

       Exhibit A  (Route)
       Exhibit B  (Payment Specifications)
       Exhibit C  (Revenue Sharing Route)
       Exhibit D  (Fiber Specifications)
       Exhibit E  (Acceptance Testing Standards)
       Exhibit F  (Terminal Equipment Standards)
<PAGE>
 
       This LICENSE AGREEMENT (Agreement), was executed January 8, 1998, by the
UNITED STATES OF AMERICA (Government), Department of Energy, acting by and
through the BONNEVILLE POWER ADMINISTRATION (BPA), and Electric Lightwave,
Incorporated (ELI), a corporation organized and existing under the laws of the
State of Delaware.  Both BPA and ELI may be referred to herein individually as
"Party" and collectively as "Parties."

                             W I T N E S S E T H :

       WHEREAS BPA owns the Cable and Cable accessories; and

       WHEREAS BPA currently needs only 8 of the 72 fibers in the Cable for its
own operational use, which will give BPA fiber-optic cable capacity in excess of
that which is needed to operate its transmission communications along the Cable
Route; and

       WHEREAS BPA desires to grant a license for a period of time to ELI
respecting the Commercial Fiber along the Cable Route under the terms and
conditions contained herein;

       NOW, THEREFORE, in consideration of the premises and of the mutual
obligations and agreements herein contained, the Parties hereby agree as
follows:

1.     DEFINITIONS
       The following terms, when used in this Agreement, shall have the meanings
set forth in this section:

(a)       "BPA Capital Cost" means the direct and indirect costs BPA incurs
          ,using prudent electric utility practices, to develop and construct
          the Cable.  Direct costs include, but are not limited to, environment,
          surveying and mapping, design, land, material, construction, and
          labor.  Such direct costs incurred up to 12 months after the Service
          Ready Date shall be included in BPA Capital Cost.  Indirect costs
          (overheads) shall be included as part of BPA Capital Cost and applied
          at a fixed rate of 45 percent to all direct costs.  Interest costs,
          implicit or otherwise, will be excluded.  BPA shall use its best
          efforts to manage the cost of development and construction of the
          Cable to, or below, $*    .


*  Confidential information has been omitted pursuant to a request for 
   confidential treatment. Such material has been filed separately with the 
   Securities and Exchange Commission.

                                       2


<PAGE>
 
(b)       "BPA Facilities" means all BPA-owned and/or leased structures,
          buildings, land, access roads, and equipment along the Cable Route.

(c)       "BPA Fiber" means 8 dark optical fibers within the Cable designated
          for BPA's exclusive use and control.

(d)       "BPA Terminal Equipment" means that equipment set forth in Exhibit F.

(e)       "Cable" means a BPA-owned cable, containing 72 optical fibers, single-
          mode, nondispersion shifted, to be installed along the Cable Route.

(f)       "Cable Accessories" means the equipment necessary for the attachment
          of the Cable to the BPA Facilities, including splice boxes.

(g)       "Cable Route" means the Cable path described in Exhibit A.

(h)       "Cable Specifications" means the drawings and specifications regarding
          the Cable hardware and materials incorporated into the construction
          project.

(i)       "Commercial Fiber" means the 64 dark optical fibers within the Cable
          licensed to ELI under this License Agreement.

(j)       "Dark Fiber Lease Value" means the sum of all dark fiber lease
          payments received by ELI for Commercial Fiber.

(k)       "Diverse Fibers" means 4 dark optical fibers within the Cable and
          constituting a portion of the Commercial Fiber reserved for diverse
          switching paths for a SONET ring in order to achieve optimum network
          robustness and reliability.

(l)       "ELI Transport Service(s)" means Transport Service(s) used by ELI in
          the delivery of End-User Service(s).

                                       3
<PAGE>
 
(m)       "ELI Transport Service Value(s)" means the sum of the values for all
          the ELI Transport Service(s) within the Commercial Fiber as described
          in Exhibit B.

(n)       "End-User" means the customer(s) of ELI.

(o)       "End-User Service(s)" means services provided to the End-User, other
          than Transport Service(s) and Other Transport Service(s).

(p)       "End-User Transport Service Value(s)" means the sum of all payments
          received by ELI from End-User(s) for Transport Service sales.

(q)       "Fiber Specifications" means the performance attributes of the fiber
          within the Cable as described in Exhibit D.

(r)       "Gross Revenue Value(s) (GRV)" means the annual sum of ELI's Transport
          Service Value(s) plus End-User Transport Service Value(s) plus Dark
          Fiber Lease Value(s) plus Other Transport Service Value(s) provided
          over the Revenue Sharing Route.

(s)       "Interest Rate" means .05 percent per day (18.25 percent per annum) to
          be compounded daily on the unpaid balance.

(t)       "License" means the License granted to ELI in section
          7(a).t"Originating and Terminating Markets" means the areas in and
          around the cities along the Route, including Portland, Vancouver, The
          Dalles, Madras, Redmond, and Bend.

(u)       "Other Transport Service(s)" means services sold over the Commercial
          Fiber at the Optical Carrier level (e.g., OC1, OC3, OC12, OC48).

(v)       "Other Transport Service Value(s)" means the sum of all payments
          received by ELI for Other Transport Services.

(w)       "Performance Criteria" means those minimum Annual Gross Revenues
          described in Section 8 and calculated in Exhibit B, page 2 of 2.

                                       4
<PAGE>
 
(x)       "Regenerator Building(s)" means the building(s) along the Cable Route,
          owned and operated by ELI, that house the terminal and regenerator
          equipment including any optronics or electronics required by ELI to
          make use of the ELI Fibers.  For the purpose of this Agreement, the
          Regenerator Building(s) include conduit and fiber-optic cable from the
          Regenerator Building(s) up to the nearest fiber-optic splice box on
          the Cable Route or the nearest substation fence, at BPA's discretion.

(y)       "Revenue Sharing Route" means the cable path described in Exhibit C.

(z)       "Route" means the Cable path as described in Exhibit A.

(aa)      "Service Ready" means the time when the Commercial Fiber is fully
          installed and meets ELI's Acceptance Testing Standards, which
          acceptance will be provided by ELI to BPA in writing.  ELI's
          Acceptance Testing Standards are set forth in Exhibit E.

(bb)      "Transport Services" means individual DS0, DS1, and DS3 circuits used
          or sold as bulk transport by ELI for long-haul traffic on the
          Commercial Fiber as described below:

(1)            "Digital Signal Zero (DS0)" means:  one (1) 64-Kilobits-per-
               second (Kbps) or 56-Kbps digital, pulse-coded modulated voice
               channel;

(2)            "Digital Signal One (DS1)" means:  (A) in the U.S. Digital
               hierarchy, digital signal level 1 indicates a 1.544 megabytes per
               second (Mbps) data signal; and (B) also referred to as a T1 in
               the U.S. time-division multiplexing hierarchy, digital signal
               level 1 (DS1) indicates the first level of multiplexing.  It is
               defined as 24 DS0 (64 Kbps) circuits multiplexed into a 1.544
               Mbps data signal; and

(3)            "Digital Signal Level Three (DS3)" means:  (A) In the U.S.
               Digital hierarchy, digital signal level 3 indicates a 44.736 Mbps
               data signal, often delivered to customers via optical fiber
               systems, also referred to as T3; (B) in the U.S. time-division
               multiplexing hierarchy, digital signal level 3 (DS3) indicates
               the third level of multiplexing.  It is defined as 28 DS1 (1.544
               Mbps) signals, with added overhead bits, multiplexed onto a
               44.736 Mpbs data signal; and (C) high capacity access service
               that provides capacity equivalent to 28 DS1 circuits, 7 DS2

                                       5
<PAGE>
 
               channels, or 672 voice grade special access circuits; also used
               generically to describe digital data transmission services
               operating over fiber-optic lines at transmission speed of 44.6
               Mbps.

2.   TERM

(a)       This Agreement shall be effective at 2400 hours on the date of
          execution by both Parties (Effective Date) and shall continue in
          effect for a period of 20 years after Service Ready Date, unless
          sooner terminated or extended in accordance with the terms of this
          Agreement.

(b)       The term of this Agreement shall be extended only by written mutual
          agreement of  the Parties.  The Agreement may be extended for one
          separate 10-year renewal period.  Either Party shall notify the other
          Party at least 90 days prior to the expiration date of this Agreement
          if the notifying Party seeks to renew the Agreement.  The Parties
          shall have 45 calendar days from the notifying Party's notice in which
          to reach written agreement on renewal.  The terms and conditions of
          this Agreement applicable to the initial 20-year period may be
          modified or renegotiated before each renewal period(s) upon written
          mutual agreement of the Parties.

3.   EXHIBITS

     Exhibit A (Cable Route); Exhibit B (Payment Specifications); Exhibit C
     (Revenue Sharing Route); Exhibit D (Fiber Specifications); Exhibit E
     (Acceptance Testing Standards); and Exhibit F (Terminal Equipment
     Standards) are incorporated into and made a part of this Agreement.

4.   AMENDMENTS
     This Agreement may be amended upon the written agreement of both Parties.

5.   MILESTONE SCHEDULE

     Service Ready Date of the Cable is currently scheduled for December 31,
     1998.  On or before June 1, 1998, BPA and ELI agree to complete an
     evaluation of the milestones required to complete 

                                       6
<PAGE>
 
     construction and Service Ready Date of the Cable. The evaluation shall be
     used by the Parties to determine whether milestones will be revised to
     reflect an earlier, or later, Service Ready Date.

6.   OWNERSHIP

(a)       Each Party shall own its own electronic and optronic devices necessary
          to transmit signals over the fibers each Party controls as specified
          in this Agreement.

(b)       Except as otherwise provided in section 6(c) below, BPA shall own all
          structures, improvements, and components obtained for or installed on
          BPA Facilities along the Cable Route in accordance with this
          Agreement.

(c)       Title and ownership of the Cable Accessories, Regenerator Building(s),
          and related equipment within the Regenerator Building(s) furnished by
          ELI shall be and remain the property of ELI, except that BPA shall
          gain title to and ownership of such equipment that cannot be removed
          without damage to BPA Facilities at termination of this Agreement.

7.   LICENSE

     (a)  EXCLUSIVITY

          BPA hereby grants to ELI an exclusive License to use the Commercial
          Fiber and to manage the Diverse Fibers. During the term of this
          Agreement, Tthis right shall remain exclusive with respect to 4
          optical fibers of the Commercial Fiber, and exclusive with respect to
          the remaining 60 optical fibers of the Commercial Fiber as long as ELI
          meets or exceeds the Performance Criteria described in section 8.

     (b)  ACCESS TO THE CABLE ROUTE

          ELI shall have escorted access to the Cable Route for the purposes of
          performing its rights and obligations under this Agreement.  BPA shall
          have the right to use the Cable Route, BPA Fiber, or any portion
          thereof, together with the right to enter upon the Cable Route, or any
          portion thereof, at all times, for any and all purposes.  BPA shall
          retain the right to 

                                       7
<PAGE>
 
          use the BPA Fiber for its own internal electric system network and
          utility business purposes.

     (c)  NO PROPERTY INTEREST

          This Agreement shall not confer upon ELI any ownership or possessory
          interest in the Cable Route or other property owned by BPA except as
          provided herein, and ELI agrees that it shall never make any claim of
          such interest based upon this Agreement.

8.   PERFORMANCE CRITERIA

     (a)  MINIMUM ANNUAL GROSS REVENUE PERFORMANCE REQUIREMENTS

          ELI shall maintain sales at a minimum annual GRV equal to or greater
          than 50 percent of the annual revenues described in ELI's revenue
          forecast (Table A). The Annual GRV shall equal the sum of the monthly
          GRVs over a given 12-month period. Unless otherwise agreed to by the
          Parties, the first 12-month period (Year 1) shall commence 30 calendar
          days following the Service Ready Date.

          In the event that the Annual GRV is below the minimum described
          herein, BPA may invoke its rights under subsection (b)(1) below
          regarding the exclusivity of the Commercial Fiber.

     (b)  BPA RIGHTS
          (1)  BPA shall have the right to make a performance audit within 60
               days of the conclusion of each annual period.  If BPA determines
               that ELI has failed to meet the annual Performance Criteria, BPA
               shall give written notice of such failure to ELI.  ELI shall have
               10 working days after receipt of written notice from BPA in which
               to review the results of BPA's audit and provide any new
               information or data that might alter BPA's audit conclusions.  If
               at the end of such 10-day period, BPA determines that the
               Performance Criteria have not been met, BPA, at its discretion,
               may determine the License to be nonexclusive and BPA shall have
               the right to use any unused portion 60 optical fibers of the
               Commercial Fiber for any purpose.  Nothing 

                                       8
<PAGE>
 
               contained in this paragraph shall prevent either Party from
               seeking a resolution of any dispute hereunder pursuant to the
               provisions of Section 23 of this Agreement.

          (2)  In the event ELI's License becomes nonexclusive, ELI shall
               cooperate with BPA to allow co-location of other users of the
               Commercial Fiber in ELI's Regenerator Buildings, based on
               available space.  The Parties shall agree to the amount of
               reasonable compensation to be charged to the co-locating users.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------- 
                                           TABLE A ($000)
----------------------------------------------------------------------------------------------------- 
         YEAR*                           REVENUE FORECAST*         PERFORMANCE CRITERIA*
-----------------------------------------------------------------------------------------------------
<S>                                      <C>                       <C> 
-----------------------------------------------------------------------------------------------------
</TABLE>


          (c)  ELI RIGHTS

               In the event ELI's License is determined to be nonexclusive under
               the provisions of this Section 8, this Agreement shall not
               terminate, but shall continue in force and effect. ELI shall have
               the right, subject to the terms of Agreement, including, without
               limitation, the payments described in Section 12, to continue its
               use of the Commercial Fibers then being used by ELI to provide
               End-User Services, Other Transport Services, and Transport
               Services. In addition, to the extent BPA has unused dark fiber
               capacity along the Cable Route, ELI shall have the right to lease

*  Confidential information has been omitted pursuant to a request for 
   confidential treatment. Such material has been filed separately with the 
   Securities and Exchange Commission.

                                       9
<PAGE>
 
               such additional dark fiber capacity on the same terms offered by
               BPA to other carriers.

9.   ELI CAPITAL SPENDING

     ELI shall make capital investments to provision the Commercial Fiber with
     electronics, optronics, buildings, other infrastructure, and fiber
     connectivity with Local Exchange Carrier networks and Inter-Exchange
     Carrier networks, at a sufficient level to meet the Revenue Forecast listed
     in Table A of section 8.

10.  BPA TERMINAL EQUIPMENT

     ELI shall purchase and provide for the installation and testing of BPA
     SONET Terminal Equipment at 14 sites along the Cable Route.  Upon BPA's
     acceptance of the Terminal Equipment, title shall transfer to BPA, no later
     than 180 days following the Service Ready Date.

     The Terminal Equipment to be provided to BPA is identified in Exhibit F.
     BPA will notify ELI of the 14 sites upon which to install and test the
     Terminal Equipment.  The amount to be paid by ELI for the Terminal
     Equipment shall not exceed $*. ELI shall have the option of purchasing the
     Terminal Equipment using BPA's existing contract number 95AM50206 "SONET
     Microwave Radio and Fiber Optic Project."

11.  BUSINESS PLAN

     ELI shall develop a Business Plan that describes ELI's proposal for
     marketing, managing, and utilizing the Cable.  The Business Plan shall
     include, but not be limited to, ELI's marketing strategy for
     telecommunications service(s) along the Cable Route; customer service;
     sales strategy for all Transport Services; accounting, billing and
     collections standards; strategy for maintaining ELI fibers; and plan for
     maintaining compliance with all regulatory requirements or relevant State
     regulatory authorities and the Federal Communications Commission.  Unless
     otherwise agreed to by the Parties, ELI shall complete the Business Plan 6
     months from the date of execution of this Agreement.  Prior to finalization
     of the Business Plan, BPA shall have the right to review ELI's Business
     Plan for consistency with this Agreement; however, BPA shall not be
     involved in ELI's 


*  Confidential information has been omitted pursuant to a request for 
   confidential treatment. Such material has been filed separately with the 
   Securities and Exchange Commission.

                                       10
<PAGE>
 
     decisions regarding the marketing, pricing, managing, and use of the
     Commercial Fiber. ELI shall use its best efforts, consistent with
     reasonable commercial practices, to maximize the GRV generated pursuant to
     the License.

12.  MARKET PRICE ASSESSMENT

     (a)  BPA shall procure, under separate agreement, the services of a market
          assessment consultant(s) to assess market prices of bulk transport
          services and provide reports to BPA.
       
     (b)  BPA and ELI agree to equally share in the costs of procuring the
          services described above.
       
     (c)  The market assessment consultant(s) shall be responsible for acquiring
          quotes, calculating an average, and delivering market assessment
          reports to BPA at some planned interval, using the methodology agreed
          to by BPA and ELI.  BPA and ELI shall, within 120 calendar days from
          execution of this Agreement, make their best effort to agree to the
          methodology.
       
     (d)  BPA agrees to allow ELI to participate in the development of the
          methodology for assessing market price(s) to be used under this
          Agreement.
       
     (e)  ELI agrees to use the current data provided to BPA by the market
          assessment consultant as a basis for setting ELI Transport Service
          Value(s) for each ELI Transport Service, depending on when the ELI
          Transport Service is placed in service by ELI.  The ELI Transport
          Service Value for any specific ELI Transport Service will remain in
          effect for a period of 36 months, after which the ELI Transport
          Service must be re-valued based on the current market assessment data.
       
     (f)  The agreed-to methodology may be changed by mutual agreement of BPA
          and ELI.
13.  PAYMENT

                                       11
<PAGE>
 
(a)       ELI agrees to pay BPA monthly, according to the Payment Specifications
          described in Exhibit B.  In addition to ELI's monthly payment to BPA,
          ELI shall include a monthly report of all transactions.  The report
          will allow BPA to account for the GRV generated each month.  Both
          Parties shall agree on a reporting format to be used prior to ELI's
          first payment to BPA.
(b)       For the purposes of determining the monthly payment required under
          this Agreement, any Transport Services along the Revenue Sharing Route
          will be included in the accounting to determine GRV.
   
(c)       Unless otherwise agreed to by the Parties, accounting of the GRV shall
          begin 30 calendar days following the Service Ready Date.  Payment
          shall be received by BPA from ELI by the last day of each month for
          GRV calculated on the previous calendar months' transactions (the Due
          Date).  Payments shall be sent to the address identified in (f) below.
   
(d)       Payments to BPA for revenue generated by ELI from use of the
          Commercial Fiber (or portion thereof) before the Service Ready Date
          shall be based on the GRV of such services and calculated using the 20
          percent and the 10 percent Payment Factors, as described in Exhibit B.
          All payments, including payments based on Early Service Revenues,
          shall be credited toward ELI's accumulative monthly payments to BPA to
          determine Payment Factor.

(e)       Early Service Revenues:    Revenues generated by ELI, using the
          Commercial Fibers, before Service Ready (as described in section 8),
          shall be accumulated as a credit against the Performance Criteria in
          Year 1.

(f)       ELI shall pay by wire or ACH transfer, using procedures established by
          BPA's Financial Services Group.  ELI may pay its bill by mail,
          provided that BPA receives full payment by the Due Date.

          ELI shall include the following information in the description field
          of each transfer: BPA contract number, Revenue PL6, and End Item Code.

                                       12
<PAGE>
 
          If ELI is paying by mail, payments shall be mailed to:
          BPA Accounting Operation - CRO
          P.O. Box 6040
          Portland, OR  97228-6040

          ELI shall include the following information in the documentation sent
          with each check: BPA Contract Number, Revenue PL6, and End Item Code.

(g)       Payments not received by the Due Date shall bear interest at the
          Interest Rate from the Due Date until the date payment is received by
          BPA.

(h)       BPA may purchase from ELI any commercial telecommunications service
          ELI generally offers business customers.  The price charged by ELI for
          any such service shall be the lowest price then charged by ELI to
          similarly situated commercial customers for a similar service or group
          of services, taking into account similar terms and volumes.

14.  MAINTENANCE, REPAIR, AND RESTORATION OF THE CABLE

     (a)  MAINTENANCE OF THE CABLE

          (1)  During the term of this Agreement, BPA shall be responsible for
               the physical routine maintenance of the Cable and the Cable
               Accessories.  BPA shall maintain the Cable and the Cable Route at
               all times in good working order and in a safe condition, in
               conformity with the Cable Specifications and all applicable laws
               and regulations.
          (2)  BPA shall pay all costs associated with the routine maintenance
               of the Cable.
          (3)  ELI shall be responsible for maintenance of its property,
               including the Regenerator Building(s) along the Cable Route.

(b)  DETAILED RESTORATION PLAN

     (1)       Restoration activities will be integral to ensuring successful
               implementation of this Agreement. Timely restoration is dependent
               upon the timely coordination and implementation between BPA and
               ELI.

                                       13
<PAGE>
 
     (2)       The Parties agree to jointly, by December 31, 1998, develop a
               Detailed Restoration Plan, which shall upon its completion become
               part of this Agreement.

     (3)       The following provisions described in sections (c) and (d) below
               shall form the principles and basis for the development of a
               Detailed Restoration Plan.

                                       14
<PAGE>
 
(c)       RESTORATION PRIORITIES AND GENERAL REQUIREMENTS

          (1)  BPA's obligation to maintain and repair the Cable and any
               activities incidental thereto shall be subordinate to, and shall
               not conflict with, BPA's rightful use and operation of its
               transmission facilities.  In the event both BPA's transmission
               facilities and the Cable require maintenance or repair, the
               restoration of the Cable shall be at all times subordinate to the
               restoration of BPA's transmission facilities, unless otherwise
               agreed to in writing by BPA in advance.  The restoration of BPA's
               telecommunications system shall take priority over restoration
               activities related to the Commercial Fiber.  In the event that
               ELI's License becomes nonexclusive pursuant to section 8, the
               Commercial Fiber used by ELI shall take priority over restoration
               activities related to any fibers used by any other users of the
               Commercial Fiber.

          (2)  A BPA representative must be on-site during all repair and
               restoration work to perform functions such as safety watch,
               protection of BPA's transmission facilities, and the obtaining of
               line clearances.

          (3)  The Party performing the repair and restoration shall use prudent
               business methods to acquire the most cost-effective restoration
               procedures and materials available given the Cable
               Specifications, Fiber Specifications, and current industry
               standards.

          (4)  Any and all BPA, ELI representatives, or other users of the
               Commercial Fiber that construct, install, repair, replace, or
               otherwise handle the Cable, Cable Accessories, Commercial Fiber,
               BPA Fiber, or any related materials and equipment shall be
               properly trained and equipped to perform work that meets all
               current telecommunication industry standards.  BPA shall require
               all employees or agents of ELI or any other users of the
               Commercial Fiber who work near BPA's transmission facilities to
               demonstrate that they have been properly trained and equipped to
               perform the work.  The Parties shall agree in advance what
               constitutes proper training and reasonable costs.  The costs of
               agreed-upon training of ELI employees, agents of ELI, or other
               users of the Commercial Fiber shall be borne by ELI.

                                       15
<PAGE>
 
          (5)  A BPA representative shall have the authority to stop any work
               activities or equipment functions for reasons that he or she
               determines in good faith to involve potential health hazards,
               safety concerns, and potential disruption to BPA's operating
               system.  BPA will make reasonable efforts to coordinate with ELI
               in case of such events.

(d)  RESTORATION OF THE CABLE

     (1)       Except as provided in section 13(c)(1), BPA shall immediately,
               upon notification from ELI of interruption in service, failure,
               disrepair, impairment, or other need for repair or restoration of
               the Commercial Fiber, begin to mobilize BPA crews and make its
               best effort to achieve such necessary repair or restoration,
               including making its best effort to have maintenance personnel at
               the affected site within 4 hours after receipt of such notice,
               PROVIDED, HOWEVER, that in the event any of ELI's rights are
               interrupted pursuant to section 23(a), repairs and restoration
               shall be made as expeditiously as possible.  ELI recognizes that
               the 4-hour response time represents optimal conditions, and may
               be impossible to achieve when responding to certain remote
               locations.  Actual response times will be influenced by factors
               such as the terrain, weather conditions present at the time the
               request is made, and the actual mileage from BPA's dispatch
               station to the fault site.

     (2)       For purposes of this section, best efforts means activities and
               performance consistent with prudent utility practice, existing
               contract provisions for BPA's hourly employees ("Collective
               Agreement between BPA and Columbia Power Trades Council"), and
               response times that do not jeopardize the health and safety of
               BPA employees or agents or ELI employees or agents.

     (3)       The Detailed Restoration Plan shall set forth the roles and
               responsibilities of the respective Parties, and shall address
               issues regarding logistical considerations, response interval
               factors, communication between the Parties, sequential activity
               requirements, and other related items that would impact response
               time and restoration intervals.  The aforementioned issues will
               be taken into consideration in the determination of whether BPA
               has used its best efforts in such restoration or repair
               activities.  The Detailed Restoration Plan will also set forth
               financial 

                                       16
<PAGE>
 
               penalties, if any, to be paid to ELI by BPA for failure to use
               its best efforts on any repair or restoration, including the
               mobilization effort as set forth above.

15.  REGENERATOR BUILDING(S)

     (a)  ELI shall have sole responsibility for the expense and acquisition of
          any electric power and/or property necessary for its equipment along
          the Cable Route.  If space is available at BPA substations, such space
          shall be provided to ELI at BPA's "bare land" lease rate under a
          separate agreement.
       
     (b)  ELI shall provide and own, except as provided in section 6, Cable
          Accessories, splice boxes, and other components necessary for the
          operation of the Commercial Fiber.
       
     (c)  ELI shall have sole responsibility for the physical maintenance and
          environmental compliance associated with the Regenerator Building(s)
          and the grounds underneath and around the Regenerator Building(s).

16.  RIGHTS AND OBLIGATIONS CONCERNING THE CABLE

     (a)  GENERAL 

          In the event that ELI requires services from BPA (other than Transport
          Service(s)) along the Cable Route, BPA and ELI shall agree in writing
          on how those transactions shall be valued.

          ELI shall not use Commercial Fiber for commercial activities not
          accounted for in this Agreement.

          ELI agrees to utilize the Commercial Fiber for all ELI capacity needs,
          existing or arising along the Cable Route and Revenue Sharing Route,
          except for diversity needs, and subject to ELI's existing contractual
          obligations.  ELI shall use its best efforts to transition as quickly
          as possible from existing contractual obligations in satisfying the
          requirements of the preceding sentence.

                                       17
<PAGE>
 
     (b)  PERMITS

          BPA shall acquire all necessary regulatory or governmental permits and
          approvals required for construction of the Cable, and ELI shall, at
          its cost, cooperate and provide BPA with such information as BPA may
          reasonably request from ELI in connection with such permits and
          approvals.  ELI shall acquire all necessary regulatory or governmental
          permits and approvals necessary for ELI's use of the Commercial Fiber
          for telecommunications services, including Transport Service(s) and
          Dark Fiber Leases, and any permits and/or approvals that may be
          required for the Regenerator Building(s).  ELI shall not rely upon BPA
          to acquire from any other Federal agency any necessary regulatory or
          governmental permits and approvals required by ELI.

          When feasible, BPA shall, at its cost, cooperate and provide ELI with
          such information as ELI may reasonably request from BPA in connection
          with acquiring permits, easements, or additional rights-of-way for the
          Regenerator Building(s); provided that ELI indemnifies and holds
          harmless BPA from any future liability resulting from such actions.

     (c)  TAXES, MECHANIC'S LIENS, AND ENCUMBRANCES

          ELI shall pay its own income taxes, as well as all franchise fees and
          other fees and taxes resulting from ELI's License or use of the
          Commercial Fiber. ELI shall keep the Cable Route free and clear from
          all liens and encumbrances resulting from ELI's use of the Commercial
          Fiber. If ELI does not pay the foregoing taxes and fees when such
          become due, and such nonpayment results in the imposition of a lien
          on, or encumbrance of, the Cable Route, then BPA shall have the right,
          but not the obligation, to pay all amounts due and discharge such lien
          or encumbrance, upon 30 calendar days' prior written notice to ELI. In
          the event BPA causes such liens or encumbrances to be discharged, ELI
          shall reimburse BPA upon demand together with interest thereon at the
          Interest Rate, accruing from the date that BPA makes payment
          discharging such liens or encumbrances until the date BPA receives
          full reimbursement from ELI. ELI shall have the absolute right to
          dispute or challenge any tax or fee assessed on its use of the
          Commercial Fiber.

                                       18
<PAGE>
 
     (d)  ACCESS ROADS

          ELI may use BPA's access roads to access the Regenerator Building(s),
          provided that heavy vehicles or other equipment being used on the
          access road will not at any time impair the use of the access road by
          BPA.  Access to the roads shall be limited to the times and frequency
          required for maintenance and operation of the Regenerator Building(s)
          and equipment, and any repair and restoration of the Cable pursuant to
          section 13.  ELI shall, at ELI's expense, repair any damage to the
          access roads caused as a result of ELI use of the access roads.  ELI
          shall acquire access easements to the Regenerator Building(s) where
          BPA access roads are not available.

     (e)  ENVIRONMENTAL COMPLIANCE ACTIVITIES

          (1)  BPA shall be responsible for compliance with the National
               Environmental Policy Act (NEPA) and shall acquire all necessary
               permits associated with the project operations, maintenance, and
               construction of the Cable. ELI shall, at its expense, cooperate
               and provide BPA with such information as it may reasonably
               request in connection with such compliance and permits. The
               project activities will be limited to construction and operation
               of cable, hardware, Regenerator Building(s), access roads, and
               distribution lines if needed for Regenerator Building(s). If any
               mitigation measures are required along the Cable Route as part of
               the NEPA compliance activities, these measures will be performed
               by BPA at the sole cost of BPA. Contacts with the local
               landowners will be performed by BPA-appointed representatives.
               Any landowner compensation required as part of the NEPA and
               project activities will be made by BPA. All of the compliance and
               permitting activities undertaken by BPA pursuant to this
               paragraph (e) shall be at the cost and expense of BPA.

          (2)  BPA and ELI agree neither they nor anyone acting on their behalf
               will bring, keep, or use Hazardous Materials at or on the Cable
               Route (including regenerators) except for those necessary for use
               in their respective businesses, in which case they are to be
               handled, stored, used, and disposed of in compliance with
               applicable laws, regulations, and ordinances.

                                       19
<PAGE>
 
          (3)  BPA agrees to indemnify and hold ELI harmless from any and all
               claims, damages, fines, judgments, penalties, costs, liabilities,
               or losses arising from or due to the presence of Hazardous
               Materials at or on the Cable Route (including regenerators) if
               BPA or its agent, contractor, employees, or invitees is
               responsible for the introduction of the Hazardous Materials. This
               indemnity shall specifically include, without limitation, any and
               all costs due to Hazardous Materials that flow, diffuse, migrate,
               or percolate into, onto or under the property, or from the
               property to neighboring property or groundwater after the
               Agreement commences; however, it shall not include the cost of
               repairing ELI's equipment.

          (4)  ELI agrees to indemnify and hold BPA harmless from any and all
               claims, damages, fines, judgments, penalties, costs, liabilities,
               or losses arising from or due to the presence of Hazardous
               Materials at or on the Cable Route (including regenerators) if
               ELI or its agent, contractor, employee, or invitees is
               responsible for the introduction of the Hazardous Materials. This
               indemnity shall specifically include, without limitation, any and
               all costs due to Hazardous Materials that flow, diffuse, migrate,
               or percolate into, onto or under the property, or from the
               property to neighboring property or groundwater after the
               Agreement commences; however, it shall not include the cost of
               repairing BPA's equipment.

          (5)  'Hazardous Materials', as used herein, shall mean all materials
               that have been determined to be hazardous to health or the
               environment by virtue of being:  (A) a hazardous waste as defined
               by the Resource Conservation and Recovery Act; (B) a hazardous
               substance as defined in the Comprehensive Environment,
               Compensation, and Liability Act; (C) a substance regulated by the
               Toxic Substances Control Act; and (D) substances regulated by the
               Federal Insecticide, Fungicide, and Rodenticide Act in accordance
               with the applicability provisions of such Act.  Reference to
               specific statutes include amendments as they are made from time-
               to-time, as well as the regulations promulgated thereunder.

17.  RELOCATION OF THE CABLE

     In the event the Cable requires relocation or replacement during the term
     of this Agreement, the cost of such relocation or replacement shall be
     allocated as follows:

                                       20
<PAGE>
 
     (a)  If requested by ELI, ELI shall pay all such costs;
       
     (b)  If requested by BPA due to requirements necessary to provide
          economical and reliable electric power, BPA shall pay all such costs;
       
     (c)  If the Cable must be relocated due to the order of any court,
          governmental agency, or in conjunction with the operational needs of
          BPA, BPA shall, in consultation with ELI, designate a new route for
          the Cable.  The costs associated with such required relocation that
          are not paid by a third party shall be paid by BPA.  ELI shall be
          responsible for any relocation costs associated with ELI's Regenerator
          Building(s), ELI-owned cable, and

          ELI-owned terminal equipment.

18.  REPRESENTATIONS AND WARRANTIES

     (a)  ELI
          ELI represents and warrants to BPA as follows:

          (1)  ELI is a corporation duly organized and validly existing and in
               good standing under the laws of the State of Delaware.  ELI is
               duly qualified to do business and is in good standing in the
               States of Oregon and Washington.  ELI covenants that it will
               maintain any necessary Federal, State, or local compliance needed
               to continue to do business in the States of Oregon, Washington,
               and California.  ELI has full power and authority to execute,
               deliver, and perform its obligations under this Agreement.  The
               execution of this Agreement by ELI has been duly and validly
               authorized by all necessary action on the part of ELI.  This
               Agreement is a legal, valid, and binding obligation of ELI,
               enforceable against ELI in accordance with its terms, subject,
               however, to limitations imposed by bankruptcy laws of the United
               States, insolvency, reorganization, arrangement, moratorium, or
               other laws relating to or affecting the enforceability of
               creditor's rights generally.  The execution and delivery of this
               Agreement by ELI and the performance of the terms, covenants, and
               conditions contained herein will not violate the articles of the
               corporation, or bylaws of ELI, or any applicable law or
               regulation or any 

                                       21
<PAGE>
 
               order of court or arbitrator, and will not conflict with and will
               not constitute a material breach of, or default under, the
               provisions of any contract by which ELI is bound. Except for
               approvals and authorizations required to perform services on the
               cable (such as franchise and building permit applications and
               approvals), or as otherwise stated herein, no approval,
               authorization, or other action by any governmental authority or
               filing with any such authority which has not been obtained or
               accomplished is required in connection with the execution,
               delivery, and performance by ELI of this Agreement.

          (2)  Any assignment of the License of this Agreement to parties not
               owned by Citizens Utilities shall be with the written consent of
               BPA.  Such consent shall not be unreasonably withheld.

          (3)  There are no known actions, suits, or proceedings pending or
               overtly threatened against ELI before any court or administrative
               agency that would materially impair ELI's performance of its
               obligations under this Agreement.

          (4)  ELI has made no other representations or warranties outside of
               this Agreement, and BPA acknowledges and agrees that it is not
               relying on any other representations or warranties.

     (b)  BPA
          BPA represents and warrants to ELI as follows:

          (1)  BPA is duly authorized to execute this Agreement.  This Agreement
               constitutes a legal and valid obligation of BPA, enforceable in
               accordance with its terms to the full extent provided by law.
               The enforceability of this Agreement is qualified as to:

               Limitations imposed by bankruptcy laws of the United States,
               insolvency, reorganization, arrangement, moratorium, or other
               laws relating to or affecting the enforcement of creditor's
               rights generally.

          (2)  Upon execution of this Agreement, BPA warrants that there are no
               known conflicts with this Agreement and that this Agreement does
               not constitute a material breach of or a default under any
               constitutional provision, law, or 

                                       22
<PAGE>
 
               administrative regulation; or violate any judgment, decree, or
               other instrument, or any other contract related to the Cable
               Route to which BPA is a Party or to which BPA or any of its
               property or assets is subject.

          (3)  BPA has made no other representations or warranties outside of
               this Agreement, and ELI acknowledges and agrees that it is not
               relying on any other representations or warranties.

     (c)  NO BPA WARRANTY CONCERNING CABLE ROUTE

          BPA makes no representation or warranty whatsoever concerning the
          physical characteristics of the Cable Route. ELI acknowledges that
          neither BPA nor any of BPA's officers, employees, representatives,
          contractors, or subcontractors or agents have made any such
          representation, nor is BPA or ELI entering into this Agreement in
          reliance upon any such representation or warranty.

19.  AUDIT PROCEDURES

     (a)  RECORDS

          The Parties shall maintain true and correct sets of records in
          connection with the performance of this Agreement. ELI shall retain
          records of all transactions with supporting documentation related
          thereto for a period of not less than 3 years after the term of a
          specific transaction has expired and receipt of final payment by ELI
          to BPA. The records in connection with each financial transaction
          shall include an accounting of gross revenues, revenue shares, and
          billing and collection. BPA shall retain all documents relative to BPA
          Capital Cost for a period of at least 3 years after BPA incurs the
          Capital Cost.

     (b)  AUDIT RIGHTS

          Either Party shall have the right to perform an audit of each other's
          books, records, and documents used in or relating to the costs to
          construct, repair, and maintain the site and improvements under this
          Agreement.  Such audit may be performed within 36 months after the
          date that either Party renders a bill or refund voucher.  Each Party
          shall be responsible for all expenses incurred by such Party in the
          performance of an audit pursuant to this 

                                       23
<PAGE>
 
          section. In the event that the Parties agree that the Auditing Party's
          audit is determined to be correct, the Non-Auditing Party shall
          reimburse the Auditing Party the agreed upon amount. In the event that
          the Non-Auditing Party disagrees with the results of the other Party's
          audit, and resolution is not reached between the Parties, the Parties
          agree to resolve the dispute pursuant to section 23 of this Agreement.

     (c)  TECHNICAL AUDITS

          BPA reserves the right to conduct technical audits, including physical
          inspection of the number, type, and use of circuits, including
          Transport Service(s) sold, used, and administered by ELI using the
          Commercial Fiber.

20.  INSURANCE

     (a)  GENERAL

          At all times during the term of this Agreement and the License term,
          ELI, at its own cost and expense, shall provide the insurance
          specified by this section.

     (b)  EVIDENCE REQUIRED

          On the Effective Date of this Agreement, ELI shall provide BPA with a
          certificate of insurance (Certificate of Insurance) executed by an
          authorized representative of the insurer(s) evidencing that ELI
          insurance complies with this section.  A copy of all required
          endorsements shall be attached to and form a part of the Certificate
          of Insurance.

     (c)  NOTICE OF CANCELLATION, REDUCTION, OR MATERIAL CHANGE IN COVERAGE

          Policies shall be endorsed to provide BPA with 30 calendar days' prior
          written notice of any cancellation, reduction, or material change in
          coverage.  If insurance coverage is due to be canceled, reduced, or
          materially changed, ELI shall, within 30 calendar days before the
          effective date of such cancellation, reduction, or material change,
          obtain the coverage required under this section 19 and provide to BPA
          documentation evidencing such coverage.  ELI shall be responsible for
          the costs of any damage, liability, or injury occurring during any
          period of cancellation, reduction, or material change in insurance
          coverage to the extent such costs are not otherwise covered by
          insurance; provided that 

                                       24
<PAGE>
 
          ELI shall not be responsible for the costs of any damage, liability,
          or injury occurring during any such period if such damage, liability,
          or injury was caused by BPA's gross negligence or willful misconduct.

     (d)  QUALIFYING INSURERS

          Policies shall be issued by companies which hold a current
          policyholders alphabetic and financial size category rating of not
          less than A:X according to Best's Insurance Reports.

     (e)  INSURANCE REQUIRED

          (1)  LIABILITY

               Commercial general liability insurance for bodily injury
               (including death) and property damage shall provide limits of not
               less than $10 million per occurrence.

               (A)    Coverage included shall be:

                      (i)    premises and operations;                          

                      (ii)   broad form property damage;                       

                      (iii)  products and completed operations;                

                      (iv)   blanket contractual liability;                    

                      (v)    personal injury liability;                        

                      (vi)   cross-liability and severability of interests; and

                      (vii)  independent contractors liability.                 

               (B)    Coverage shall be endorsed to include the following:

                      (i)    inclusion of BPA, its officers, representatives,
                             agents, and employees as an additional insured as
                             respects services or operations in connection with
                             this Agreement; and

                      (ii)   stipulation that the insurance is primary insurance
                             and that no insurance or self-insurance of BPA will
                             be called upon to contribute to a loss.

          (2)  BUSINESS AUTOMOBILE LIABILITY INSURANCE

               Business Automobile Liability Insurance for bodily injury
               (including death) and property damage shall provide total limits
               of not less than $2 million combined single limit per occurrence
               to all owned, non-owned, and hired vehicles.

                                       25
<PAGE>
 
          (3)  WORKERS' COMPENSATION/EMPLOYER'S LIABILITY INSURANCE

               Statutory Workers' Compensation and Employer's Liability
               Insurance for not less than $1 million per occurrence shall apply
               to employer's liability coverage for all employees engaged in
               services or operations under this Agreement. The policy shall
               include broad form all-States/ other States coverage.

     (f)  SPECIAL PROVISIONS

          (1)  The foregoing requirements as to the types and limits of
               insurance coverage to be maintained by ELI, and any approval of
               said insurance by BPA or ELI, are not intended to and shall not
               in any manner limit or qualify the liabilities and obligations
               otherwise assumed by ELI pursuant to this Agreement, including,
               but not limited to, the provisions concerning indemnification.

          (2)  BPA acknowledges that some insurance requirements contained in
               this section 19 may be fulfilled by a funded self-insurance
               program of ELI or its parent company, Citizens Utilities.
               However, this shall not in any way limit liabilities assumed by
               ELI under this Agreement.  Any self-insurance program must be
               first approved in writing by BPA.

21.  DEFAULT

     (a)  EVENTS OF DEFAULT

          If either Party is in material breach or default (Defaulting Party),
          under this Agreement, the other Party (Non-Defaulting Party) may
          notify in writing the Defaulting Party that it is in material breach
          or default, such notice to be effective upon its receipt by the
          Defaulting Party. Material breach or default under this Agreement
          shall include, but is not limited to the following:

          (1)  failure to make any payment when due hereunder; with the
               exception of payments that become payable during periods of Force
               Majeure as provided in section 24(a)(2).

                                       26
<PAGE>
 
          (2)  failure to perform any obligations required to be observed or
               performed hereunder;

          (3)  any representation or warranty made by one Party to the other
               herein proving incorrect in any material respect as of the date
               of the making thereof;

          (4)  ELI files a voluntary petition in bankruptcy, or a petition in
               bankruptcy is filed against ELI and not dismissed within 60 days,
               or ELI is adjudicated as bankrupt or insolvent, or files any
               petition or answer seeking or acquiescing in any reorganization,
               arrangement, composition, readjustment, liquidation, dissolution,
               or similar relief under any present or future Federal, State, or
               other statute, law, or regulation relating to bankruptcy,
               insolvency, or other relief for debtors, or seeks or consents to
               or acquiesces in the appointment of any trustee, receiver,
               custodian, liquidator, or similar official of ELI, or makes any
               general assignment for the benefit of creditors;

          (5)  material interference by a Party to the other Party's operations;
               or

          (6)  failure to make restitution for any damage to a Party's real
               property or equipment caused as a result of the negligent or
               willful acts or omissions of the other Party when such damage
               causes material interference to a Party's operations.

(b)  REMEDIES

     (1)       DEFAULTING PARTY'S RIGHT TO CURE

               The Defaulting Party shall have the right to cure any material
               breach or default under this Agreement within 30 calendar days
               after the receipt by the Defaulting Party of notification of such
               material breach or default. In the case of any material breach or
               default which may not reasonably be cured within 30 calendar
               days, other than in the case of a breach of section 20(a)(1), the
               Defaulting Party shall have the right to provide the Non-
               Defaulting Party with a plan for the appropriate actions to cure
               such material breach or default, which plan shall be subject to
               the approval of the Non-Defaulting Party, which approval shall
               not be unreasonably withheld. Within 30 calendar days of
               submission of the plan, the Defaulting Party must commence
               diligently pursuing appropriate action under the plan to cure the
               material breach or default, and unless otherwise agreed to by the

                                       27
<PAGE>
 
               Parties, such material breach or default shall be cured within 90
               calendar days of submission of the plan, failing which the Non-
               Defaulting Party may forthwith and without further notice
               terminate this Agreement.

          (2)  RIGHTS AND REMEDIES UPON TERMINATION

               Any Party terminating this Agreement under section 21 shall have
               the additional right to cure any material breach or default of
               the Defaulting Party to preserve the Non-Defaulting Party's
               rights that may be prejudiced as a result of such material breach
               or default and exercise and pursue all other rights and remedies
               available to it under applicable law.

          (3)  RIGHTS AND REMEDIES CUMULATIVE

               Except as otherwise provided in this Agreement, any right or
               remedy afforded to either ELI or BPA under any provision of this
               Agreement is in addition to, and not in lieu of, all rights or
               remedies afforded either ELI or BPA under any other provision of
               this Agreement, by law or otherwise.

22.  TERMINATION

     (a)  Termination of this Agreement may occur in the following instances:

          (1)      By the Non-Defaulting Party, after the time period for
                   the Defaulting Party to cure a material breach or
                   default has expired;
          
          (2)      By either Party, if the Party claiming Force Majeure has
                   not satisfactorily performed any obligations delayed due
                   to the Force Majeure within 1 year of the notice of the
                   Force Majeure event; or
          
          (3)      Pursuant to Partial Invalidity terms, section 24(d) of
                   this Agreement.

     (b)  Subject to section 20(b), the Terminating Party shall give the other
          Party 30 calendar days advance written notice of Termination, which
          Termination shall become effective 30 calendar days after the receipt
          of such notice by the other Party.

                                       28
<PAGE>
 
23.  INDEMNIFICATION; WAIVER OF DAMAGES

     (a)  INDEMNIFICATION BY ELI

          (1)  To the extent allowed by law, ELI shall release and indemnify,
               defend, and hold harmless BPA and each of its directors,
               officers, agents, representatives, subcontractors, and employees
               (the "BPA Indemnitees") from and against any and all claims:  (A)
               for injury to or death of a person, including an employee of BPA
               or an ELI Indemnity; or (B) for loss of or damage to property
               resulting directly or indirectly from ELI's performance or
               nonperformance of this Agreement; or

               (C) for any Claims against BPA by customers of ELI or others
               doing business with ELI, except in the cases of clauses (A) and
               (B) only, to the extent that such Claim is the result of the
               gross negligence or willful misconduct of a BPA Indemnity.

          (2)  If gross negligence or willful misconduct of a BPA Indemnity has
               contributed to a Claim, ELI shall not be obligated to indemnify
               the BPA Indemnitees for the proportionate share of such Claims
               caused by such negligence or willful misconduct.  BPA shall have
               the right, at its own cost, to retain counsel, and to monitor, or
               participate in the defense of any Claim that is covered by ELI's
               indemnity hereunder.

(b)  INDEMNIFICATION BY BPA

     (1)       To the extent allowed under the Federal Tort Claims Act, BPA
               shall release and indemnify, defend, and hold harmless ELI and
               each of its directors, officers, agents, representatives,
               subcontractors, and employees (the "ELI Indemnitees") from and
               against any and all claims for injury to or death of a person,
               including an employee of BPA or an ELI Indemnity, or for loss of
               or damage to property resulting directly or indirectly from BPA's
               performance or nonperformance of this Agreement, except to the
               extent that such claim is the result of the gross negligence or
               willful misconduct of a ELI Indemnity.  In no event shall BPA be

                                       29
<PAGE>
 
               required to indemnify ELI Indemnities against claims against ELI
               by customers of ELI or others doing business with ELI.

      (2)      If gross negligence or willful misconduct of an ELI Indemnity has
               contributed to a claim, BPA shall not be obligated to indemnify
               the ELI Indemnitees for the proportionate share of such claims
               caused by such negligence or willful misconduct.  ELI shall have
               the right, at its own cost, to retain counsel, to monitor, or to
               participate in the defense of any claim that is covered by BPA's
               indemnity hereunder.

     (c)  WAIVER OF CERTAIN DAMAGES

          Each Party hereby waives any right to consequential, incidental,
          special or indirect damages, or damages for lost profits or exemplary
          damages with respect to any claim arising out of or related to this
          Agreement. The Parties acknowledge that the foregoing waiver shall not
          prejudice the right of indemnity respecting any claim under this
          section 22.

24.  DISPUTE RESOLUTION

     (a)  Pending resolution of a disputed matter, the Parties shall continue
          performance of their respective obligations hereunder, provided that
          neither Party shall be required to take any action pending such
          resolution which it has been advised by Counsel, or which it
          reasonably believes, is unlawful or not permitted pursuant to
          applicable regulations or permit requirements.  Any controversy
          between the Parties rising out of this Agreement or breach thereof, or
          out of performance under this Agreement, is subject to the mediation
          process described below.  If not resolved by mediation, then the
          matter must be submitted to the American Arbitration Association
          ("AAA") for arbitration before a sole arbitrator.

     (b)  A meeting will be held promptly between the Parties to attempt in good
          faith to negotiate a resolution of the dispute.  The meeting will be
          attended by individuals with decision-making authority regarding the
          dispute.  If within 30 calendar days after such meeting the Parties
          have not succeeded in resolving the dispute, within 30 calendar days
          thereafter, upon the written notice from either Party to the other
          Party, they shall submit the dispute 

                                       30
<PAGE>
 
          to a mutually acceptable third-party mediator who is acquainted with
          dispute resolution methods. The mediation shall be non-binding. If the
          dispute is not resolved by mediation, either Party may initiate an
          arbitration with the AAA, upon the written notice from either Party to
          the other Party. The dispute shall be resolved by arbitration under
          the rules and administration of the AAA (except that service of
          process, pleadings, motions and orders on BPA shall be as prescribed
          by the Federal Rules of Civil Procedures), and judgment upon the award
          rendered by the arbitrator(s) may be entered in any court having
          jurisdiction thereof. Neither Party is entitled to seek or recover
          punitive damages in considering or fixing any award under these
          proceedings.

(c)       The costs of mediation and arbitration, including any mediator's fees,
          AAA administration fee, the arbitrator's fee, and costs for the use of
          facilities during the hearings, shall be borne equally by the Parties.
          Reasonable attorneys' fees may be awarded to the prevailing Party
          (provided such a Party can clearly be determined from the proceedings)
          at the discretion of the arbitrator.  Each Party's other costs and
          expenses will be borne by the Party incurring them.

25.  GENERAL

     (a)  FORCE MAJEURE

          (1)  As used in this Agreement, the term "Force Majeure" means acts of
               God (including but not limited to, earthquakes, fires, floods,
               windstorms, landslides, and ice storms); strikes, lockouts, or
               other labor disputes; acts of public enemy; wars, riots, and
               insurrection; epidemics; civil disturbances; explosions; train
               derailments; breakdown or failure of machinery or facilities
               (excluding the Cable and Cable Accessories); accidents to
               machinery or equipment (excluding the Cable and Cable
               Accessories), and delay in delivery of equipment to the extent
               such occurrences are beyond the reasonable control of the
               Parties; electrical disturbance originating in or transmitted
               through such Party's electrical system or equipment or any
               electrical system with which such Party's system or equipment is
               interconnected; and any other event, cause, or condition beyond
               the Party's 

                                       31
<PAGE>
 
               reasonable control, which, by the exercise of
               reasonable diligence, prevents the operation of the Cable and
               prevents the Party claiming Force Majeure from performing its
               obligations under this Agreement.

     (2)       If either Party is unable to carry out its obligations under this
               Agreement as a result of an event, cause, or condition of Force
               Majeure, the Party claiming Force Majeure shall give notice and
               full particulars of such Force Majeure in writing to the other
               Party within 5 calendar days after the occurrence of the Force
               Majeure event, cause, or condition.  Any obligations that such
               Party claims it is unable to perform due to an event, cause, or
               condition of Force Majeure shall be suspended during the
               continuance of such event of Force Majeure.  The Party claiming
               Force Majeure shall use reasonable efforts to remedy and minimize
               the effects of such event of Force Majeure with all reasonable
               dispatch.  For purposes of this Agreement, the Parties are
               obligated  to make payments during periods of Force Majeure;
               PROVIDED, HOWEVER, ELI shall not be obligated to make payments
               during periods of Force Majeure when ELI is unable to provide
               service under the terms of the agreement with ELI's customers.
               Interest shall not accrue on payments that become payable to
               either Party during the period of any Force Majeure.

     (3)       Neither Party shall be liable under this Agreement for, or
               considered to be in material breach or default under, this
               Agreement on account of any delay in or failure of performance
               due to Force Majeure unless specifically stated in this
               Agreement.  In the event that ELI continues to receive revenue
               from End-Users under this Agreement during a Force Majeure event,
               ELI will not be excused from performing its payment under this
               Agreement.

(b)  NOTICES

     All notices and other communications under this Agreement shall be properly
     given only if made in writing; and

     (1)       mailed by certified mail, return receipt requested, postage
               prepaid; or

     (2)       delivered by facsimile transmission followed by certified mail to
               the Party's at the address or 

                                       32
<PAGE>
 
               facsimile number set forth in this section 24(b) or such other
               address or facsimile number as such Party may designate by notice
               to the other Party. Such notices and other communications shall
               be effective on the date of receipt. If any such notice or
               communication is not received or cannot be delivered due to a
               change in the address of the receiving Party of which notice was
               not previously given to the sending Party or due to a refusal to
               accept by the receiving Party, such notice or other communication
               shall be effective on the date delivery is attempted.

               If to BPA:       The Bonneville Power Administration
                                P.O. Box 3621
                                Portland, OR  97208-3621
                                Attn:  To be identified under separate letter
 

               with a copy to:  The Bonneville Power Administration
                                P.O. Box 3621
                                Portland, OR  97208-3621
                                Attn:  To be identified under separate letter

               If to ELI:       Electric Lightwave, Inc.
                                8100 NE. Parkway Drive, Suite 150
                                Vancouver, WA
                                Attn:  Legal Affairs
                                Phone:  (360) 892-1000
                                FAX:    (360) 253-4425

     (c)  ASSIGNMENT

          ELI shall not sell, assign, lease, sublease, sub-license or otherwise
          allow use of ELI's License under this Agreement to any person or
          entity without BPA's written approval; which approval shall not be
          unreasonably withheld. Notwithstanding the foregoing, ELI may assign
          in writing its rights and responsibilities under this Agreement to a
          corporate parent, subsidiary, or commonly owned affiliate, upon
          written notification to BPA, and a guarantee by its parent company,
          Citizens Utilities, to perform the obligation of ELI under this
          Agreement. Any permitted assignment or other transfer of rights
          hereunder shall be in writing and shall specify that the assignee or
          other transferee is bound by the terms and conditions of this
          Agreement to the same extent as if it were the original named party
          instead of ELI hereunder. In the event that ELI sells, assigns,
          leases, subleases, or  

                                       33
<PAGE>
 
          otherwise allows use of ELI's License under this Agreement, ELI or its
          assigned entity shall designate a single point-of-contact to BPA for
          all activities relating to this Agreement. A sale, transfer, or
          distribution (by way of a dividend or otherwise) in one or a series of
          transactions of 50 percent or more of the capital stock of the entity
          that holds the License shall be deemed to be an assignment of the
          License.

     (d)  PARTIAL INVALIDITY

          If any provision of this Agreement is determined by a proper court to
          be invalid, illegal, or unenforceable, such invalidity, illegality, or
          unenforceability shall not affect the performance of other provisions
          of this Agreement, and this Agreement shall remain in full force and
          effect without such invalid, illegal, or unenforceable provision;
          provided that if any such invalid, illegal, or unenforceable provision
          results in frustration of this Agreement, such that ELI cannot perform
          under section 13, BPA shall have the right to terminate in accordance
          with section 21.

     (e)  GOVERNING LAW

          This Agreement shall be governed by and construed in accordance with
          Federal law.

     (f)  TERMS GENERALLY

          The defined terms in this Agreement shall apply equally to both the
          singular and the plural forms of the terms defined.  Whenever the
          context may require, any pronoun shall include the corresponding
          masculine, feminine, and neuter forms.  The term "person" includes
          individuals, corporations, partnerships, trusts, other legal entities,
          organizations and associations, and any Government or governmental
          agency or authority.  The words "include," "includes," and
          "including," shall be deemed to be followed by the phrase "without
          limitation."  The words "approval," "consent," and "notice," shall be
          deemed to be preceded by the word "written."

     (g)  RELATIONSHIP OF THE PARTIES

          Nothing in this Agreement is intended or shall be deemed to constitute
          a partnership, agency, or joint venture relationship between or among
          the Parties hereto. The performance by the Parties of all duties and
          obligations hereunder shall be as independent

                                       34
<PAGE>
 
          contractors and not as agents of the other Party, and no persons
          employed or utilized by a performing Party shall be considered
          employees or agents of the other.

     (h)  WAIVERS

          No waiver of any provision or breach of this Agreement shall be
          effective unless such waiver is in writing and signed by the waiving
          Party and any such waiver shall not be deemed a waiver of any other
          provision of this Agreement or any other breach of this Agreement.

     (i)  CONFIDENTIALITY

          If and to the extent any information or documents furnished by one
          Party to the other under this Agreement is confidential or proprietary
          to the furnishing Party, the receiving Party shall treat such
          information or documents as confidential and proprietary and shall
          take reasonable steps to protect against the unauthorized use or
          disclosure of such information or documents; PROVIDED, HOWEVER, that
          such information and documents are conspicuously marked or otherwise
          clearly identified as confidential or proprietary when furnished; and
          PROVIDED, FURTHER, that this section 24(g) shall not apply to
          information or documents in the public domain or to information or
          documents required to be disclosed by any law, rule, regulation,
          order, or other requirement of any governmental authority having
          jurisdiction. If a Freedom of Information Act, or Congressional,
          request is received by BPA for such written information or documents,
          BPA must promptly notify ELI of such request and will, further, notify
          ELI if BPA is required to disclose such written information or
          documents.

     (j)  NO THIRD-PARTY BENEFICIARIES

          This Agreement creates rights and obligations only between the Parties
          hereto.  The Parties hereto expressly do not intend to create any
          obligations or promise of performance to any other third person or
          entity, nor have the Parties conferred any rights or remedy upon any
          third person or entity other than the Parties hereto, their respective
          successor or assigns to enforce this Agreement.

     (k)  MISCELLANEOUS

                                       35
<PAGE>
 
          Neither Party shall make public announcement of this Agreement or the
          transactions contemplated by this Agreement without the prior consent
          of the other Party, unless such public announcement is necessary to
          comply with applicable law.  This Agreement shall benefit and bind ELI
          and BPA  and their respective permitted successors and assigns.  Time
          is of the essence of this Agreement.  This Agreement may be executed
          in counterparts, each of which shall be an original, but all of which
          shall constitute one and the same Agreement.  This Agreement may not
          be amended or modified except by a written instrument signed by ELI
          and BPA.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in two
counterparts.
                                    UNITED STATES OF AMERICA
                                    Department of Energy
                                    BPA Power Administration



                                         /s/ Kevin A. Ward for
                                    Name ___________________________
                                         Charles E. Meyer
                                         Vice President, Transmission
                                         Marketing & Sales


                                         January 8, 1998
                                    Date ___________________________
ACCEPTED:

ELECTRIC LIGHTWAVE, INC.

      /s/ David Sharkey
By    __________________________

      David B. Sharkey
Name  __________________________
(Print/Type)

      President
Title __________________________

      January 8, 1998
Date  __________________________

                                       36
<PAGE>
 
                                              Exhibit A, Page 1 of 1
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date

<TABLE>
<CAPTION>
                               ROUTE DESCRIPTION
---------------------------------------------------------------------------------------------------
STATION OR (TOWER        LINE DISTANCE            LINE                     COMMENTS
SERIAL NO.)              (MILES)                  NAME     
-------------------------------------------------------------------------------------------------------------
<S>                      <C>                           <C>                         <C>
Ross
------------------------------------------------------------------------------------------------------------- 
                           14.7                   North Bon. - Ross No. 1          From Ross to structure            
                                                                                   AFX 113A                          
------------------------------------------------------------------------------------------------------------- 
(AFX 113A)                                                                         Line Transition                   
------------------------------------------------------------------------------------------------------------- 
                            6.7                   North Bon.- Troutdale            From Structure                    
                                                  No. 2                            AFX 113A to Troutdale             
------------------------------------------------------------------------------------------------------------- 
Troutdale                                                                                                            
------------------------------------------------------------------------------------------------------------- 
                           53.4                   Big Eddy-Troutdale No. 1                                           
------------------------------------------------------------------------------------------------------------- 
Parkdale                                                                                                             
------------------------------------------------------------------------------------------------------------- 
                           24.0                   Big Eddy - Troutdale No. 1
------------------------------------------------------------------------------------------------------------- 
Big Eddy                                                                                                             
------------------------------------------------------------------------------------------------------------- 
                           29.4                   Big Eddy - Redmond  No. 1                                          
------------------------------------------------------------------------------------------------------------- 
Maupin                                                                                                               
------------------------------------------------------------------------------------------------------------- 
                           68.0                   Big Eddy - Redmond No. 1                                      
------------------------------------------------------------------------------------------------------------- 
Redmond                                                                                                              
------------------------------------------------------------------------------------------------------------- 
                           15.1                   Redmond - Pilot Butte No. 1
------------------------------------------------------------------------------------------------------------- 
Pilot Butte                                                                                                          
------------------------------------------------------------------------------------------------------------- 
                           29.6                   Pilot Butte - LaPine No. 1                                    
------------------------------------------------------------------------------------------------------------- 
LaPine                                                                                                               
------------------------------------------------------------------------------------------------------------- 
                           45.5                   LaPine - Fort Rock No. 1                                      
------------------------------------------------------------------------------------------------------------- 
(ALC 308)                                                                          From LaPine to str. 46/3          
                                                                                   (Serial No. ALC 308)              
------------------------------------------------------------------------------------------------------------- 
                            0.1                                                    Line Transition                   
------------------------------------------------------------------------------------------------------------- 
(CG 406)                                                                           Starting point on Grizzly         
                                                                                   - Captain Jack (86/5)             
------------------------------------------------------------------------------------------------------------- 
                            1.5                   Grizzly - Captain Jack No. 1
------------------------------------------------------------------------------------------------------------- 
Fort Rock                                                                          BPA Compensation Station          
------------------------------------------------------------------------------------------------------------- 
                           28.5                   Grizzly - Captain Jack No. 1 
------------------------------------------------------------------------------------------------------------- 
Sycan                                                                                                                
------------------------------------------------------------------------------------------------------------- 
                           60.0                   Grizzly - Captain Jack No. 1
------------------------------------------------------------------------------------------------------------- 
Captain Jack                                                                                                         
------------------------------------------------------------------------------------------------------------- 
                            7.4                   Captain Jack - Malin  No. 1
------------------------------------------------------------------------------------------------------------- 
Malin                    
------------------------------------------------------------------------------------------------------------- 
Total Miles =             383.9
------------------------------------------------------------------------------------------------------------
</TABLE>

                                       1
<PAGE>
 
                                              Exhibit B, Page 1 of 2
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


                             PAYMENT SPECIFICATIONS


ELI's MONTHLY PAYMENT to BPA will equal GRV multiplied by the Payment Factor.

The PAYMENT FACTOR equals * (*) until ELI's accumulative monthly
payments to BPA exceed BPA Capital Costs, after which the Payment Factor will
equal * (*) for the remainder of the contract.

The GRV will be determined using the following formula:

GRV = ELITSV + EUTSV + DFLV + OSV

Where:
GRV = GROSS REVENUE VALUE
ELITSV = ELI TRANSPORT SERVICE VALUE(S)
EUTSV = END-USER TRANSPORT SERVICE VALUE(S)
DFLV = DARK FIBER LEASE VALUE(S)
OSV = OTHER SERVICE VALUE(S)



*  Confidential information has been omitted pursuant to a request for 
confidential treatment.  Such material has been filed separately with the 
Securities and Exchange Commission.

                                       1
<PAGE>
 
                                                          Exhibit B, Page 2 of 2
                                                         Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                                 Effective on the Effective Date


ELECTRIC LIGHTWAVE, INC.
PORTLAND - SACRAMENTO - SAN FRANCISCO - LOS ANGELES
($000)

<TABLE> 
<CAPTION> 
  Calendar Years                   1998*  1999*  2000*  2001*  2002*  2003*  2004*  2005*  2006*  2007*  2008*  2009*  2010*  2011*
<S>                                <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>

Revenue Forecast:
-----------------

Revenue Growth yrs 6-10*
Revenue Growth yrs 11-20*

Portland to Sacramento*
Portland to San Francisco*
Portland to Los Angeles*
Sacramento to Los Angeles*
San Francisco to Los Angeles*
Sacramento to San Francisco*

Dark Fiber Lease*

     Total ELI Revenue*

Revenue Split:
BPA Revenue split percentage
  Until capital is repaid*
  After capital is repaid*
BPA Annual Revenues*

BPA Cumulative Revenues*
     BPA Revenues*

Capital Investment:
-------------------
Number of Miles*
BPA Miles*
BPA Outside Plant($000)*
     BPA

Cash Flow:
----------
Capital Expenditures*

Revenue*
BPA Cash Flow*
</TABLE> 

----------
* Confidential information has been omitted pursuant to a request for 
  confidential treatment.  Such material has been filed separately with the 
  Securities and Exchange Commission.
<PAGE>
 
                                                        Exhibit C, Page 1 of 1
                                                       Contract No. 97TX-10080
                                            ELI Telecommunications Corporation
                                               Effective on the Effective Date


                                   EXHIBIT C
                             REVENUE SHARING ROUTE

     The revenue sharing route originates in the Portland, Oregon area and 
terminates in Los Angeles, California, passing though Sacramento and San 
Francisco, California.

<PAGE>
 
                                              Exhibit D, Page 1 of 4
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date



                        COMMERCIAL FIBER SPECIFICATIONS
                            CORNING/(R)/ SMF-28 CPC6
                           SINGLE-MODE OPTICAL FIBER


GENERAL

Corning/(R)/ SMF-28 single-mode fiber is considered the "standard" optical fiber
for telephony, cable television, submarine, and private network applications in
the transmission of data, voice, and/or video services.  Corning SMF-28 fiber is
manufactured to the most demanding specifications in the industry.

SMF-28 fiber is optimized for use in the 1310 nm wavelength region.  The
information-carrying capacity of the fiber is at its highest in this
transmission window; it is also where dispersion is the lowest.  SMF-28 fiber
can also be effectively used in the 1550 nm wavelength region.

Corning's enhanced, dual layer acrylate CPC6 coating provides excellent fiber
protection and is easy to work with.  CPC6 can be mechanically stripped and has
an outside diameter of 245 um.  CPC6 is optimized for use in many single and
multi-fiber cable designs including loose tube, ribbon, slotted core, and tight
buffer cables.

SMF-28 fiber is manufactured using the Outside Vapor Deposition (OVD) process,
which produces a totally synthetic, ultra-pure fiber.  As a result, Corning SMF-
28 has consistent geometric properties, high strength, and low attenuation.
Corning SMF-28 fiber can be counted on to deliver excellent performance and high
reliability, reel after reel.

FEATURES AND BENEFITS

 .  Versatility in 1310 nm and 1550 nm applications.

 .  Outstanding geometrical properties for low splice loss and high splice
   yields.

 .  OVD manufacturing reliability and product consistency.

 .  Optimized for use in ribbon, loose tube, and other common cable designs.

                                       1
<PAGE>
 
                                              Exhibit D, Page 2 of 4
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


OPTICAL SPECIFICATIONS

ATTENUATION

<TABLE>
<CAPTION>
    UNCABLED FIBER ATTENUATION CELLS      POINT DISCONTINUITY
---------------------------------------
<S>                   <C>                 <C>
                      Attenuation Cells   No point of discontinuity greater than 0.10 dB at either 1310 nm or 1550
                           (dB/km)        nm.
---------------------------------------
  Wavelength (nm)         Standard
--------------------------------------- 
       1310  less than or equal to 0.40   ATTENUATION AT THE WATER PEAK
---------------------------------------
       1550  less than or equal to 0.30   The attenuation at 1383 plus/minus 3 nm shall not exceed 2.1 dB/km.
---------------------------------------
</TABLE>
*Lower attenuation available in limited quantities.

<TABLE>
<CAPTION>
      ATTENUATION VS. WAVELENGTH
--------------------------------------- 
<S>               <C>    <C>                <C>
     Range        Ref.L  Max Increase       The attenuation in a given wavelength range 
      (nm)        (nm)     A(dB/km)         does not exceed the attenuation of the reference
   1285-1330      1310       0.05           wavelength (L) by more than the value A.
---------------------------------------
   1525-1575      1550       0.05      
--------------------------------------- 
</TABLE>

<TABLE>
<CAPTION>
                ATTENUATION WITH BENDING
--------------------------------------------------------------------
Mandrel   Number of Turns  Wavelength       Induced                     The induced attenuation due to fiber   
Diameter                     (nm)         Attenuation                   wrapped around a mandrel of a specified   
(mm)                                         (dB)                       diameter.
<S>            <C>           <C>    <C>                         <C> 
     32        1             1550   less than or equal to       0.50
--------------------------------------------------------------------
     75        100           1310   less than or equal to       0.05
--------------------------------------------------------------------
     75        100           1550   less than or equal to       0.10
--------------------------------------------------------------------
</TABLE>

<TABLE>
<S>                                     <C> 
 .    CABLE CUTOFF WAVELENGTH (Lccf)     .       MODE-FIELD DIAMETER
     Lccf less than 1260 nm                     9.30 plus/minus 0.50 micro m at 1310 nm
                                                10.50 plus/minus 1.00 micro m at 1550 nm
 .    DISPERSION
     Zero Dispersion Wavelength (L\o\):  1301.5 nm less than or equal to Lo less than or equal to 1321.5 nm

     Zero Dispersion Slope (S\o\):  less than or equal to 0.092 ps/(nm/2/ . km)

     Fiber Polarization Mode Dispersion Coefficient (PMD):  less than or equal to 0.5 psec/ divided by km
</TABLE> 

<TABLE>
<CAPTION>
                                                     DISPERSION CALCULATION
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C> 
                      S\o\ [     L\o\ to the 4th power]
Dispersion = D (L): ~ ---- [ L - ---------------------] ps/(nm.km), for 1200 nm less than or equal to L
                        4  [       L to the 3rd power ] less than or equal to 1600 nm   L = Operating Wavelength  
</TABLE>
ENVIRONMENTAL SPECIFICATIONS

                                       2
<PAGE>
 
                                              Exhibit D, Page 3 of 4
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


<TABLE>
<CAPTION>
                                      INDUCED                                                 
  ENVIRONMENTAL TEST CONDITION      ATTENUATION                                 
                                      (DB/KM)               
------------------------------------------------------------------------------------          Operating Temperature Range 
<S>                           <C>                         <C>                                 -60C to +85C                
                                   1310 nm                    1550 nm
------------------------------------------------------------------------------------ 
Temperature Dependence        less than or equal to 0.05  less than or equal to 0.05 
-60 to +85C
------------------------------------------------------------------------------------  
Temperature-Humidity Cycling  less than or equal to 0.05  less than or equal to 0.05              
-10C to +85C, up to 98% RH
------------------------------------------------------------------------------------  
Water Immersion, 23C          less than or equal to 0.05  less than or equal to 0.05              
Heat Aging, 85C               less than or equal to 0.05  less than or equal to 0.05              
------------------------------------------------------------------------------------ 
</TABLE>

DIMENSIONAL SPECIFICATIONS

STANDARD LENGTH (KM/REEL):  2.2 - 25.0
*Longer spliced lengths available at a premium.

<TABLE>
<CAPTION>
GLASS GEOMETRY                                                        COATING GEOMETRY
<S>                                                 <C>
Fiber Curl:  greater than or equal to 2.0 m radius of curvature       Coating Diameter:  245 plus/minus 10 micro m
Cladding Diameter:  125.0 plus/minus 1.0 micro m                      Coating-Cladding Concentricity:  less than 12 micro m
Core-Clad Concentricity:  less than or equal to 0.8 micro m
Cadding Non-Circularity:  less than 1.0%
</TABLE>

              [     Min. Cladding Diameter ]  x 100
Defined as:     1 - ----------------------  
              [     Max. Cladding Diameter ]

MECHANICAL SPECIFICATIONS

PROOF TEST:
The entire length of fiber is subjected to a tensile proof stress greater than 
or equal to 100 kpsi (0.7 GN/m/2/)*

*Higher proof test available at a premium.

                                       3
<PAGE>
 
                                              Exhibit D, Page 4 of 4
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date




PERFORMANCE CHARACTERIZATIONS
Characterized parameters are typical values.

<TABLE>
<CAPTION>
CORE DIAMETER:                                    REFRACTIVE INDEX DIFFERENCE:
<S>                                               <C>
8.3 micro m                                       0.36%
 
NUMERICAL APERTURE:                               EFFECTIVE GROUP INDEX OF REFRACTION (Neff):
0.13                                              1.4675 at 1310 nm
NA was measured at the one percent power          1.4681 at 1550 nm
 angle of a one-dimensional far-field scan
 at 1310 nm.
 
ZERO DISPERSION WAVELENGTH (Lo):                FATIGUE RESISTANCE PARAMETER (nd):
1312 nm                                           greater than or equal to 20
 
ZERO DISPERSION SLOPE (So):                   COATING STRIP FORCE:
0.090 ps/(nm/2/.km)                               Dry:  0.7 lbs. (3.2 N)
                                                  Wet:  14 days room temperature:  0.7 lbs. (3.2 N)
</TABLE>
COATINGS

SMF-28 optical fiber also is available with CSB4 500 micro m coating.

                                       4
<PAGE>
 
                                              Exhibit E, Page 1 of 3
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


                                   EXHIBIT E
                     ELI FIBER ACCEPTANCE TESTING STANDARDS

Bonneville shall meet or exceed these specifications.  In the event that
Bonneville's performance requirements for its communication system requires
Bonneville to exceed the standards and requirements specified in this Exhibit D,
Bonneville shall apply the higher standard.

ELI Network Span and Final Acceptance Requirements:

1.0 Design Criteria:
--------------------

The number of cable splices at the time of original construction must be
designed to an average of 4 km between splices.  Due to cable cuts, and cable
relocation, additional splices are allowed.  The number of splices must be
closely monitored to insure attenuation and reflection tolerances are
maintained.

Construction:
-------------

Cable must be constructed in accordance with sound commercial practices.  The
National Electrical Code shall be followed in every case except where local
regulations are more stringent, in which case local regulations shall govern.

2.0 Typical Fiber Cable Information:
------------------------------------

Single mode fiber specifications may vary, depending on the fiber manufacturer.
Typical concatenated levels of 0.35 dB per km @ 1310nm and 0.25 per km @ 1550nm
are expected.

3.0 Span Requirements:
----------------------

Span documentation must be performed using the two following methods: OTDR
(optical time domain reflectometer) and insertion loss (stabilized light source
and power meter) measurement in each direction at 1550nm wavelength.

 . Maximum total span loss must not exceed 35.0 dB at 1550nm.
          ----------                                        

 .  Maximum dB/Km loss must not exceed 0.35 dB/Km at 1550nm.
           -----                                           

 .  In no case shall a fiber show a point discontinuity greater than 0.1dB.
   Discontinuities (know as steps, splices, or attenuation non-uniformities)
   shall be measured with an optical time domain reflectometer (OTDR) to
   determine the loss of the localized attenuation. The lease squares fit method
   of measurement must be used to determine the magnitude of the loss of a point
   discontinuity.

 .  Typical span scenario 30.0 dB=120 Km X .25 dB/Km.
           ----                                     

                                       1
<PAGE>
 
                                              Exhibit E, Page 2 of 3
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


 .  Maximum fiber loss scenario 35.0 dB= 100 Km X ..35 dB/Km. (depends on
           ----------                                                   
   regeneration huts)

 .  Maximum span dispersion = 2250 ps/mn/Km.
           ---------------                 

 .  Performance levels must be maintained as accepted during the entire duration
   of the agreement.

 .  Test data including OTDR hard copies or electronic data must be submitted to
   Common System Engineering before Final Acceptance. ELI, at its discretion,
   may choose to physically monitor any or all testing associated with Final
   Acceptance of the ELI Fibers.

In the event the measured span measured values exceeds the calculated values,
Bonneville will perform corrective maintenance as required to restore the ELI
Fibers to the calculated values.

4.0 Splice Loss:
    ------------

the splice loss will average 0.10dB.  All splicing will be performed by
proprietor pursuant to fibers leased agreement.  Further, no individual splice
will exceed 0.50dB.  Splices shall be measured using bi-directional methods to
average absolute splice loss.  All fiber splicing must be fusion type.
                               ---------------------------------------

5.0 Compliance:
    -----------

Customer, at its discretion, may choose to physically monitor any or all testing
associated with acceptance of Fibers.  Test data including OTDR hard copies or
electronic data must be submitted to the customer for review.  Customer has the
option to vainer any specifications and/or requirements listed in the technical
specification criteria.  (limited to ELI receiving a hard copy of their fiber
only.)

6.0 Waivers:
    --------

the proprietor must provide Fibers with attenuation of not greater than 0.35
loss per. km @ 1550nm and will not be required to perform corrective maintenance
under .25dB to reduce span attenuation.

7.0 Key optical performance Characteristics Required For Single-Mode Optical
----------------------------------------------------------------------------
Cables:
-------

7.1 Attenuation Single Mode Non-Shifted:
----------------------------------------

 .  The attenuation must not exceed 0.30 dB/Km when measured at a wavelength of
   1.55 microns (1550nm) using the two point measurement.

 .  The attenuation must not exceed 0.40 dB/Km when measured at a wavelength of
   1.30 microns (1310nm) using the two point measurement.

                                       2
<PAGE>
 
                                              Exhibit E, Page 3 of 3
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


7.2 Attenuation Single Mode Dispersion Shifted:
-----------------------------------------------

 .  The attenuation must not exceed 0.25 dB/Km when measured at a wavelength of
   1.55 microns (1550nm) using the two joint measurement.

7.3 Attenuation Versus Wavelength Single-Mode and Dispersion Shifted:
---------------------------------------------------------------------

 .  The attenuation for the wavelength region form 1525 nm to 1575 nm must not
   exceed the attenuation at 1550 nm by more than 0.05 dB/Km.

7.4 Chromatic Dispersion Non-Dispersion Shifted (ps/nm-km):
-----------------------------------------------------------

 .  For conventional single mode fibers, the zero dispersion wavelength must be
   1301.5 to 1321.5nm. The maximum dispersion slope (SoMAX) must be no greater
   than 0.092 ps/(km-nm /2 /). The nominal zero dispersion wavelength must be
   near 1310nm zero dispersion range. The dispersion between 1530 and 1570 nm
   must be less than or equal to 18 ps/(nm km).

7.5 Cutoff Wavelength:
----------------------

 .  The cutoff wavelength of cabled fiber must be less than 1260 nm.

7.6 Core Diameter:
------------------

 .  The core diameter must be typically 8.3 + or - 0.13.
                                          

7.7 Temperature:
----------------

 .  Operating Temperature Range  -60 C to +85 C

Bonneville will insure that the Cable and related appurtenances meet all of the
above optical performance characteristics operating systems power level.

                                       3
<PAGE>
 
                                              Exhibit F, Page 1 of 2
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


                                   EXHIBIT F

                        TERMINAL EQUIPMENT REQUIREMENTS



GENERAL
ELI agrees to purchase, in exchange for four (4) fibers between Portland and the
CA-OR border, Lucent Technologies SONET terminal equipment and turnkey
installation of a collapsed ring system for 14 sites.  Procurement of this SONET
system shall be in accordance with the specifications of the BPA/Harris-
Farinon/Lucent 10-year indefinite quantity contract no. 95AM50206.

EQUIPMENT
The equipment shall be Lucent Technologies DDM-2000 OC-3 as specified below.

DESCRIPTION                            QTY
Shelf Assembly                         26 ea.
Heat Baffle                            26 ea.
Timing Generator                       52 ea.
OC-12 OLIU (1310 nm)                   32 ea.
OC-12 OLIU (1550 nm)*                  20 ea.
SYSCTRL                                26 ea.
OHCTRL                                 26 ea.
MXRVO BBG2                             52 ea.
DS1 Card BBFIB                         52 ea.
Retainer Card 177B                    156 ea.
OC-3 Software                          26 ea.
Fiber Jumpers/Cables                   26 lot

9' x 23" Equipment Rack                14 ea. (actual rack heights to be 
                                              determined later)

Fuse and Alarm Panel                   14 ea.
DS1 Jackfield Assy.                    14 ea.
Service Chan/Orderwire                 14 ea.
DVA Remote Alarm                       14 ea.
Fiber Termination Panel                14 ea.

DDM-2000 Manuals                       14 set
DDM-2000 Schematics                    14 set
Factory setup & test                    1 job

                                       1
<PAGE>
 
                                              Exhibit F, Page 2 of 2
                                              Contract No. 97TX-10080
                                              Eli Telecommunications Corporation
                                              Effective on the Effective Date


In addition, the following spares are required:
<TABLE>
<CAPTION>
 
DESCRIPTION                QTY
<S>                       <C>    <C>
OC-12 OLIU (1310 nm)      3 ea.
OC-12 OLIU (1550 nm)*     3 ea.
SYSCTRL                   2 ea.  (with software loaded)
OHCTRL                    2 ea.  (with software loaded)
OC-3 Software             1 ea.  (set of diskettes)
Fiber Jumpers/Cables      4 lot
Service Chan/Orderwire    1 ea.  (ROSS-FRAN used Premisys IMACS 600 shelves & Harris-Farinon DVSII's)
DDM-2000 Manuals          2 set
</TABLE>
DDM-2000 Schematics  2 set

* As of December 15, 1997 the 1550 nm OC-12 OLIU for the OC-3 DDM-2000 shelf is
in development.  BPA anticipates Lucent Technologies will have this module
commercially available by July 1998.

                                       2