ELECTRIC LIGHTWAVE, INC. FORM 10-Q



                Quarterly Report Pursuant To Section 13 or 15(d)
                     of The Securities Exchange Act of 1934


                  For The Quarterly Period Ended March 31, 2001
<PAGE>
<TABLE>



<CAPTION>
<S>             <C>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2001

                                              OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to


                                 Commission file number 0-23393


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

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


                                      3 High Ridge Park
                                        P. O. Box 3801
                                      Stamford, CT 06905
                      (Address, zip code of principal executive offices)

              Registrant's telephone number, including area code (203) 614-5600

Indicate by check mark whether the registrant  (1) has filed all reports  required to be filed
by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the  preceding  twelve
months (or for such shorter  period that the  registrant  was required to file such  reports),
and (2) has been subject to such filing requirements for the past ninety days.

                                        Yes   |X|          No   |_|

The number of shares  outstanding  of the  registrant's  class of common stock as of April 30,
2001 were:

                               Common Stock Class A  9,703,482
                               Common Stock Class B 41,165,000
</TABLE>



<PAGE>



INDEX
<TABLE>
<CAPTION>
                                                                                              Page No.
                                                                                              --------

PART I. FINANCIAL INFORMATION


    ITEM 1. FINANCIAL STATEMENTS

<S>                                                                                                <C>
               Balance Sheets at March 31, 2001 and December 31, 2000 (unaudited)                  2

               Statements of Operations for the Three Months Ended                                 3
                  March 31, 2001 and 2000 (unaudited)

               Condensed Statements of Cash Flows for the Three Months Ended                       4
                  March 31, 2001 and 2000 (unaudited)

               Statements of Shareholders' Equity (Deficiency) for the Three Months Ended          5
                  March 31, 2001 and the Year Ended December 31, 2000 (unaudited)

               Notes to Financial Statements                                                       6

    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION                           10
            AND RESULTS OF OPERATIONS

    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            16

PART II.    OTHER INFORMATION                                                                     17

SIGNATURE                                                                                         18

</TABLE>


                                           1


<PAGE>
                                PART I. FINANCIAL INFORMATION
                                -----------------------------
<TABLE>
<CAPTION>

ITEM 1.    FINANCIAL STATEMENTS

BALANCE SHEETS
(In thousands, except share data)
---------------------------------
(Unaudited)
                                                                March 31,      December 31,
Assets                                                            2001            2000
                                                              -------------   -------------
Current assets:
<S>                                                                <C>            <C>
    Cash                                                       $     9,959     $    10,318
    Trade receivables, net                                          28,657          35,491
    Other receivables                                                6,212           6,001
    Other current assets                                             4,311           5,080
                                                              -------------   -------------
       Total current assets                                         49,139          56,890

Property, plant and equipment, net                                 834,395         846,716
Goodwill, net                                                       41,904          42,601
Other assets                                                         2,961           3,567
                                                              -------------   -------------

       Total assets                                            $   928,399     $   949,774
                                                              =============   =============

Liabilities and Shareholders' Deficiency

Current liabilities:
    Accounts payable and accrued liabilities                   $    48,914     $    60,851
    Current portion of capital lease obligations                    26,699          28,798
    Due to Citizens Communications Company                           9,430           7,684
    Other accrued taxes                                             18,332          16,377
    Interest payable                                                19,139          13,244
    Other current liabilities                                        5,885           5,718
                                                              -------------   -------------
       Total current liabilities                                   128,399         132,672

Deferred revenue                                                    16,216          14,847
Deferred income taxes payable                                        3,221           3,058
Other long-term liabilities                                          2,780           3,295
Capital lease obligations                                          102,891         103,404
Long-term debt                                                     783,000         763,000
                                                              -------------   -------------
       Total liabilities                                         1,036,507       1,020,276
                                                              -------------   -------------

Shareholders' deficiency:
    Common stock issued, $.01 par value
       Class A, authorized 110,000,000 shares, 9,703,482 shares
           and 9,658,437 shares issued and outstanding at
           March 31, 2001 and December 31, 2000, respectively           97              96
       Class B, authorized 60,000,000 shares, 41,165,000 shares
           issued and outstanding at March 31, 2001 and
           December 31, 2000                                           412             412
    Additional paid-in-capital                                     373,017         372,930
    Accumulated Deficiency                                        (481,634)       (443,940)
                                                              -------------   -------------
       Total shareholders' deficiency                             (108,108)        (70,502)
                                                              -------------   -------------

       Total liabilities and shareholders' deficiency          $   928,399     $   949,774
                                                              =============   =============
</TABLE>

                             See accompanying notes

                                       2
<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
----------------------------------------
(Unaudited)

                                                    For the three months ended March 31,
                                                    ------------------------------------
                                                           2001            2000
                                                       -------------   -------------

<S>                                                        <C>             <C>
Revenue                                                   $  62,562       $  56,778
                                                       -------------   -------------
Operating expenses:
    Network access                                           16,731          20,696
    Operations                                               12,336          11,575
    Selling, general and administrative                      30,202          31,172
    Depreciation and amortization                            18,894          12,755
                                                       -------------   -------------
       Total operating expenses                              78,163          76,198
                                                       -------------   -------------

    Loss from operations                                    (15,601)        (19,420)

Interest expense, net                                        22,050          15,196
Loss (gain) on disposal of assets                               (11)            567
Interest income and other                                      (109)           (279)
                                                       -------------   -------------
    Net loss before income taxes                            (37,531)        (34,904)

Income tax expense                                              163             235
                                                       -------------   -------------
    Net loss                                              $ (37,694)      $ (35,139)
                                                       =============   =============
Net loss per common share:
    Basic                                                 $   (0.74)      $   (0.70)
    Diluted                                               $   (0.74)      $   (0.70)

Weighted average shares outstanding                          50,844          50,183
</TABLE>





                             See accompanying notes
                                       3
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
--------------
(Unaudited)
<TABLE>
<CAPTION>
                                                            For the three months ended March 31,
                                                            ------------------------------------
                                                                  2001            2000
                                                              -------------   -------------
<S>                                                                <C>           <C>
Net cash provided by (used for) operating activities              $  2,599       $ (11,514)
                                                              -------------   -------------
Cash flows used for investing activities:
    Capital expenditures                                           (20,334)        (25,371)
                                                              -------------   -------------
Cash flows from financing activities:
    Revolving bank credit facility proceeds                              -          40,000
    Long term funding from Citizens                                 20,000               -
    Payments of capital lease obligation                            (2,611)              -
    Other                                                              (13)          1,497
                                                              -------------   -------------
       Net cash provided by financing activities                    17,376          41,497
                                                              -------------   -------------
Net increase (decrease) in cash                                       (359)          4,612

Cash at January 1,                                                  10,318          21,378
                                                              -------------   -------------
Cash at March 31,                                                 $  9,959       $  25,990
                                                              =============   =============
Supplemental cash flow information:
    Cash paid for interest, net of capitalized portion            $ 16,156       $   8,184
    Non-cash increase in capital lease asset                      $      -       $  23,412

</TABLE>


                             See accompanying notes
                                       4
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(In thousands, except share data)
---------------------------------
(Unaudited)

                                        Class A Common Stock,    Class B Common Stock,
                                        --------------------     ---------------------  Additional
                                         $.01 per share          $.01 per share         Paid-in-    Accumulated   Shareholders'
                                        Shares        Amount    Shares        Amount    Capital     Deficiency  Equity(Deficiency)
                                         -----------------------------------------------------------------------------------------
<S>              <C>                     <C>         <C>         <C>          <C>     <C>          <C>          <C>
Balance, January 1, 2000                 8,966,276   $    90     41,165,000   $  412    $ 326,477    $ (307,478)  $   19,501

   Stock issued in connection with
     employee incentive plans, net         692,161         6              -        -        6,228             -        6,234
   Amortization of restricted stock              -         -              -        -        1,422             -        1,422
   Stock units payable to non-
     employee director                           -         -              -        -           56             -           56
   Acquisition by Citizens of
     minority interest                           -         -              -        -       38,747             -       38,747
   Net loss                                      -         -              -        -            -      (136,462)    (136,462)
                                       --------------------------------------------------------------------------------------
Balance, December 31, 2000               9,658,437   $    96     41,165,000   $  412    $ 372,930    $ (443,940)  $  (70,502)

   Stock issued in connection with
     employee incentive plans, net          45,045         1              -        -         (107)            -         (106)
   Amortization of restricted stock              -         -              -        -          183             -          183
   Stock units payable to non-
     employee director                           -         -              -        -           11             -           11
   Net loss                                      -         -              -        -            -       (37,694)     (37,694)
                                       --------------------------------------------------------------------------------------
Balance, March 31, 2001                  9,703,482   $    97     41,165,000   $  412    $ 373,017    $ (481,634)  $ (108,108)
                                       ======================================================================================
</TABLE>






                             See accompanying notes
                                       5
<PAGE>




                                NOTES TO FINANCIAL STATEMENTS
                                -----------------------------

1.   SUMMARY OF  SIGNIFICANT ACCOUNTING POLICIES

     a.  BASIS OF PRESENTATION AND USE OF ESTIMATES

     Electric Lightwave,  Inc. is referred to as "we", "us" or "our" in this re-
     port. We have prepared these unaudited  financial  statements in accordance
     with generally accepted accounting  principles (GAAP) for interim financial
     information  and with the  instructions  to Form  10-Q  and  Article  10 of
     Regulation  S-X.   Accordingly,   we  have  condensed  or  omitted  certain
     information  and  footnote  disclosures.  In our opinion,  these  financial
     statements  include all  adjustments  and recurring  accruals  necessary to
     present fairly the results for the interim periods shown.

     Preparing financial  statements in conformity with GAAP requires us to make
     estimates and assumptions which affect the amounts of assets,  liabilities,
     revenue and expenses we have  reported  and our  disclosure  of  contingent
     assets and liabilities at the date of the financial statements. The results
     of the interim  periods are not  necessarily  indicative of the results for
     the  full  year.  We  have  made  certain   reclassifications  of  balances
     previously   reported  to  conform  to  the  current  financial   statement
     presentation.  You should read these  financial  statements in  conjunction
     with the audited financial statements and the related notes included in our
     Annual Report on Form 10-K for the year ended December 31, 2000.

     b.  CAPITALIZED INTEREST

     Property,  plant and equipment  includes interest costs capitalized  during
     the   installation  and  expansion  of  our   telecommunications   network.
     Approximately $958,000 and $2,033,000 of interest costs were capitalized in
     the three months ended March 31, 2001 and 2000, respectively.

     c.  REVENUE  RECOGNITION

     We recognize  revenues from  communications  services when the services are
     provided.   Long-term  prepaid  network  services  revenue  agreements  are
     deferred  and  recognized  on a  straight-line  basis over the terms of the
     related  agreements.  Installation fees and related costs (up to the amount
     of  installation  revenue)  are deferred  and  recognized  over the average
     contract life.  Installation  related costs in excess of installation  fees
     are expensed when incurred.

     d.  NET LOSS PER SHARE

     We follow the  provisions  of SFAS No.  128,  "Earnings  Per  Share"  which
     requires presentation of both basic and diluted earnings per share (EPS) on
     the face of the statements of operations.  Basic EPS excludes  dilution and
     is computed using the weighted average number of common shares  outstanding
     during the period.  The diluted EPS  calculation  assumes that all dilutive
     stock  options  or  contracts  to issue  common  stock  were  exercised  or
     converted  into  common  stock  at the  beginning  of the  period.  We have
     excluded certain common stock  equivalents from our diluted EPS calculation
     during the  quarters  ended March 31, 2001 and 2000 as their  effect  would
     have reduced our net loss per share.


                                       6
<PAGE>
2.  PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are as follows:
<TABLE>
<CAPTION>

    ($ In thousands)                                    March 31, 2001  December 31, 2000
                                                         -------------   -----------------
<S>                                                          <C>              <C>
    Property, plant and equipment                          $ 983,041        $ 978,327
    Accumulated depreciation and amortization               (148,646)        (131,611)
                                                         -------------   --------------
      Property, plant and equipment, net                   $ 834,395        $ 846,716
                                                         =============   ==============
</TABLE>

    Depreciation  expense was  $18,056,000  and $12,598,000 for the three months
    ended March 31, 2001 and 2000, respectively.

3.  COMMITMENTS AND CONTINGENCIES

    We have entered into various  capital  and operating  leases for fiber optic
    cable to interconnect our local networks with  long-haul fiber optic routes.
    The terms of the various agreements range from  20 to 25 years, with varying
    optional renewal periods.

    In addition to the long-haul  agreements  above, we  have  also entered into
    certain  operating and  capital leases  to develop our local networks.   The
    terms of the various  agreements  range from  15 to 30 years,  with  varying
    optional renewal periods.   One  of  these  contracts  provides  us with  an
    exclusive  right  to use the  facilities  as long as  certain  minimum usage
    is  satisfied. We continued to meet those requirements as of March 31, 2001.

    We are involved in various claims and legal actions arising in the  ordinary
    course  of business.  In the opinion of management, the ultimate disposition
    of these matters will not have a  material adverse effect on  our results of
    operations, financial position or liquidity.

4.  RELATED PARTY TRANSACTIONS

    On December 1, 1997, we entered  into an Administrative  Services  Agreement
    (Agreement) under which  Citizens Communications Company (Citizens) provides
    us with certain administrative  services including,  but not limited to, fi-
    nancial management services,   information services, legal and contract ser-
    vices, planning and human  resources services. Under the terms of the Agree-
    ment, Citizens  bills us  for direct  costs and an  allocation  of  indirect
    costs,  plus an administrative  charge.  The current practice  of allocating
    indirect  costs is based  on  four  factors:  our  plant  assets,  operating
    expenses,  number of customers and payroll  expenses.   We believe that this
    allocation  method and the resultant amounts are reasonable  as contemplated
    by the Agreement.  In addition,  we reimburse third party costs  incurred by
    Citizens on our behalf.  We believe that the amounts charged by  Citizens do
    not exceed  comparable  amounts  that  would be charged  by an  unaffiliated
    third party.  Also, we believe that  the accompanying  financial  statements
    include all of our costs of doing business.

    Citizens owns all of our Class B Common Stock and  2,287,644  shares of  our
    Class A Common Stock, in total representing an 85% economic interest in us.

    We have entered into a  revolving  credit  facility  with  Citizens for $450
    million  with an interest  rate of 15% and a  final  maturity of October 30,
    2005  (Citizens  Credit  Facility).   Funds  of  $260  million  for  general
    corporate  purposes  are  available  to be drawn until  June 30,  2002.  The
    remaining  balance  may be drawn to pay  interest  due  under  the  Citizens
    Credit Facility until maturity. As of March 31, 2001, there  was $58 million
    outstanding under the Citizens Credit Facility.



                                       7
<PAGE>
    This table summarizes the activity in the liability account Due  to Citizens
    Communications Company for the three months ended March 31,

($ In thousands)                                 2001            2000
                                             -------------   --------------
Balance beginning of period                       $ 7,684         $ 14,650
Guarantee fees                                      7,292            6,356
Interest expense on Credit Facility                 1,695                -
Administrative services:
    Services provided by Citizens                   2,223            1,154
    ELI expenses paid by Citizens                   1,692            2,313
Payments to Citizens                              (11,156)         (19,325)
                                             -------------   --------------
Balance end of period                             $ 9,430         $  5,148
                                             =============   ==============

5.   INCOME TAXES

     Citizens includes us in their consolidated  federal income tax return which
     uses a calendar year reporting period. We record income taxes as if we were
     a  stand-alone  company.  We recorded  income tax  expense of $163,000  and
     $235,000 for the three months ended March 31, 2001 and 2000,  respectively.
     This  expense  represents  the  deferred  tax  effect  of the  increase  in
     temporary  differences  between our GAAP  financial  statements and our tax
     return that may not be fully offset with the use of tax loss  carryforwards
     when the temporary differences reverse in future periods.

     The income taxes payable by Citizens'  consolidated group have been reduced
     as a  consequence  of our losses for tax  purposes in past years.  We would
     have been able to carry-forward  our tax losses to future periods to offset
     taxable income in these future  periods had we been a stand-alone  company.
     In  accordance  with our tax  sharing  agreement,  Citizens  has  agreed to
     reimburse us for the taxes we would be required to pay in the future, if we
     have  taxable  income,  to the extent that these loss  carryforwards  would
     otherwise remain available on a stand-alone basis.




                                       8
<PAGE>


6.   SEGMENT DISCLOSURES

     We  operate  in a single  industry  segment,  communications  services.  We
     provide services  utilizing our centrally  planned,  monitored and operated
     telecommunications   network.   Operations   are  managed   and   financial
     performance  is  evaluated  based on the  delivery of multiple  services to
     customers over our single fiber-optic  network. As a result, there are many
     shared  expenses  generated by the various  revenue  streams and geographic
     locations. Management believes that any allocation of the expenses incurred
     on a single  network to  multiple  revenue  streams  would be  impractical,
     arbitrary and inconsistent with the way the business is currently evaluated
     by management.  As a result, we do not presently have systems or procedures
     in place to derive  all the  operating  costs and  expenses  relating  to a
     particular product group or service area.

     PRODUCTS AND SERVICES

     We group our products and services into Network  Services,  Local Telephone
     Services,  Long Distance Services and Data Services.  The revenue generated
     by these products and services for the three months ended March 31 were:

     ($ In thousands)                               2001            2000
                                                -------------   --------------
     Network services                            $ 25,768         $ 16,004
     Local telephone services                      21,797           24,274
     Long distance services                         3,084            4,596
     Data services                                 11,913           11,904
                                                -------------   --------------
       Total                                     $ 62,562         $ 56,778
                                                =============   ==============

     We do not currently provide products or services outside the United States.

     MAJOR CUSTOMER

     Qwest Communications (Qwest) accounted for 12% and 21% of our total revenue
     for the three months ended March 31, 2001 and 2000,  respectively.  Most of
     the Qwest revenue was generated from reciprocal compensation agreements. No
     other customer accounted for 10% or more of our total revenue for the three
     months ended March 31, 2001 or 2000.

7.   DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS
     No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities."
     This  statement   establishes   accounting  and  reporting   standards  for
     derivative instruments and hedging activities and, as amended, is effective
     for all fiscal  quarters of fiscal years beginning after June 15, 2000. The
     statement  requires  balance sheet  recognition of derivatives as assets or
     liabilities  measured  at fair  value.  Accounting  for  gains  and  losses
     resulting from changes in the values of derivatives is dependent on the use
     of the  derivative  and  whether it  qualifies  for hedge  accounting.  The
     adoption of SFAS 133 could increase the volatility of reported earnings and
     other  comprehensive  income  in the  future.  In  general,  the  amount of
     volatility  will vary with the level of  derivative  activities  during any
     period.  We adopted  SFAS 133 on January 1, 2001.  As of March 31,  2001 we
     have not identified any derivative instruments subject to the provisions of
     SFAS 133. Therefore, SFAS 133 did not have any impact on our first quarter
     2001 financial statements.

                                       9
<PAGE>
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS
           ---------------------------------------------------------------------

     We  caution  you  that  this   quarterly   report  on  Form  10-Q  contains
     forward-looking  statements  within the meaning of the Securities  Exchange
     Act of 1934.  Forward-looking  statements  (including oral representations)
     are only predictions or statements of our current plans, which we review on
     a continual basis. These statements are based on our beliefs,  expectations
     and assumptions and on information  currently available to us. We undertake
     no obligation  to update or revise  forward-looking  statements.  The words
     "may", "should",  "expect",  "anticipate",  "intend",  "plan",  "continue",
     "believe",  "estimate"  or  similar  expressions  used in this  report  are
     intended to identify forward-looking statements.

     The  forward-looking  statements  in this  quarterly  report  on Form  10-Q
     involve  certain  risks,  uncertainties  and  assumptions.   They  are  not
     guarantees of future performance.  Factors that may cause actual results to
     differ  materially from those  expressed or implied in any  forward-looking
     statements  include,   but  are  not  limited  to,  any  of  the  following
     possibilities:

     o  if there are changes in the nature and pace of technological advances in
        our industry;
     o  if competitive pressure in the telecommunications industry increases  in
        any of our markets because of the entrance of new competitors, the  com-
        bination of  existing competitors and/or the more effective provision of
        products  and services  from our competitors,  including Incumbent Local
        Exchange  Carriers  (ILECs),  or other  public utilities;
     o  if our business strategy or its execution,  including financial  perfor-
        mance goals, is not as successful as we anticipate;
     o  if state or federal  regulatory  changes  are  implemented  that  assist
        our  competitors, impair  our  competitive  position, threaten our costs
        or impact our rate structures, including the ability to bill and collect
        reciprocal  compensation  for calls terminated to Internet Service
        Providers (ISPs);
     o  if we do not receive the services and support which we require from  the
        regional ILECs or cannot maintain our current relationships with  ILECs;
     o  if we are  not  able  to  effectively  manage  rapid  growth,  including
        integrating  any businesses acquired;
     o  if we are not able to correctly  identify  future  markets, successfully
        expand existing ones, or successfully expand through acquisitions;
     o  if the mix of products and  services  we are able to offer in our target
        markets is not appropriate to the demands of our customers;
     o  if we are not able to obtain additional financing;
     o  if our stock price is volatile; or
     o  the  effects  of more general  factors  including, but  not  limited to,
        changes  in  economic  conditions,  changes  in industry conditions  and
        changes in accounting policies and  practices adopted voluntarily  or as
        required by generally accepted accounting principles.

You should  consider  these  important  factors in evaluating any statement con-
tained in this report and/or made by us or on our behalf.

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

The following information has not been audited. You should read this information
in  conjunction  with the condensed  financial  statements  and related notes to
financial  statements  included  in this  report.  In  addition,  please see our
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  audited  financial  statements  and related  notes  included in our
Annual  Report on Form  10-K for the year  ended  December  31,  2000.  Electric
Lightwave, Inc. is referred to as "we", "us", or "our" in this report.


                                       10
<PAGE>

OVERVIEW

     We have  built an  extensive  fiber-optic  network  in the  western  United
     States,  which includes  expansive local networks in seven major cities and
     their surrounding areas, connected by our long-haul routes. In addition, we
     provide data services in certain strategic  markets across the nation.  Our
     product offerings include:

     o  Network services - includes dedicated service  between  two  points  for
        a  customer's exclusive  use.  We offer this in both local and long-haul
        applications and  collocation facilities to meet us directly in our hub.
     o  Local  telephone  services - consists  of the  delivery  of  local  dial
        tone and related services, and related carrier and local access revenue,
        as well as Integrated  Services Digital Network  Primary Rate  Interface
        (ISDN PRI).  ISDN PRI provides  customers with a high-speed  access con-
        nection to the public switched  telephone network for voice,  video  and
        data applications.
     o  Long  distance services - includes retail  and wholesale  long  distance
        phone services.
     o  Data services - includes a wide range of products to deliver large quan-
        tities of data from one location to another through Asynchronous  Trans-
        fer  Mode  (ATM),  Frame  Relay  and   Internet  Protocol  (IP)   packet
        technologies.  These technologies  group data (voice, video,  images and
        character-based data) into small  packets of  information  and  transmit
        the packets over a network.

     Refer  to  Note 4 in  Part  I,  Item 1,  for a  discussion  concerning  our
     relationship  with  Citizens,  which owns  approximately  85% of our common
     stock.

a.   LIQUIDITY AND CAPITAL RESOURCES

     We have entered into a revolving  credit  facility  with  Citizens for $450
     million  with an interest  rate of 15% and a final  maturity of October 30,
     2005  (Citizens  Credit  Facility).  Funds  of  $260  million  for  general
     corporate  purposes  are  available  to be drawn until June 30,  2002.  The
     remaining  balance  may be drawn to pay  interest  due under  the  Citizens
     Credit Facility until maturity.

     We drew $20 million from the Citizens Credit Facility to fund operating and
     capital expenditures for the three months ended March 31, 2001. As of March
     31,  2001,  we have drawn $58 million from the  Citizens  Credit  Facility.
     Additionally,  we have  outstanding  $325  million  five-year  6.05% senior
     unsecured  notes that mature on May 14, 2004 and a $400  million  revolving
     bank credit facility (Bank Credit  Facility).  No principal  payment on the
     Bank Credit  Facility is due until its  expiration  date in November  2002.
     Citizens  has  guaranteed  both the Bank  Credit  Facility  and our  senior
     unsecured  notes  for fees of 3.25% and  4.0%,  respectively,  based on the
     respective outstanding balances.

     We anticipate that our existing cash balances and cash to be generated from
     operations will not be adequate to fund operating  leases,  working capital
     deficiencies,  capital  expenditures,  capital lease  obligations  and debt
     service  through  2001.  The Citizens  Credit  Facility  provides the funds
     necessary to support cash requirements  through June 30, 2002. Citizens has
     committed to continue to finance our cash requirements, at market terms and
     conditions,  until  the  earlier  of  completion  of a  public  or  private
     financing  or June 30,  2002,  which would  provide the funds  necessary to
     support our cash requirements.  Absent the Citizens  commitment,  we do not
     believe  there is currently a market to further  finance or  refinance  our
     existing indebtedness.

     In order to continue the growth of our customer base and revenue stream, we
     must continue to invest in the  installation,  development and expansion of
     our existing  telecommunications  network.  A significant  portion of these
     expenditures  is  incurred  before any  revenue is  realized.  Our  capital
     expenditures  were  approximately  $20.3 million in the first quarter 2001.
     These expenditures,  combined with our operating expenses, have resulted in
     operating  losses and negative cash flows. We expect to continue  incurring
     operating losses and negative cash flows until we can establish an adequate


                                       11
<PAGE>
     customer base necessary to generate a revenue stream  sufficient to support
     our operations,  capital  requirements and debt service.  We cannot be sure
     that we will  achieve or  sustain  profitability  or that we will  generate
     sufficient  positive cash flow to fund our operating,  capital  expenditure
     and debt service requirements.

OTHER MATTERS

RECIPROCAL COMPENSATION

     We  have   various   interconnection   agreements   with   Qwest,   Verizon
     Communications  (Verizon) and Pacific Bell Telephone Company (PacBell), the
     ILECs in the states in which we operate. These agreements govern reciprocal
     compensation  relating to the transport and  termination of traffic between
     the ILECs' networks and our network. We recognize  reciprocal  compensation
     revenues as earned,  based on the terms of the interconnection  agreements.
     We  recognized  reciprocal  compensation  revenues of $7.7 million and $9.6
     million for the three months  ended March 31, 2001 and 2000,  respectively.
     Net trade accounts receivable relating to reciprocal  compensation  totaled
     $5.1  million and $7.7  million at March 31, 2001 and  December  31,  2000,
     respectively.  These agreements are scheduled to expire between June 30 and
     December  31,  2001.  We  cannot  provide  assurance  that  renewal  of the
     interconnection agreements will be in the same form, or at rates comparable
     to the current interconnection agreement.

     On February 25, 1999, the Federal Communications  Commission (FCC) issued a
     Declaratory Ruling and Notice of Proposed Rulemaking that categorized calls
     terminated to ISPs as "largely"  interstate in nature, which could have had
     the effect of precluding these calls from reciprocal  compensation charges.
     However,   the  ruling   stated  that  ILECs  are  bound  by  the  existing
     interconnection  agreements and the state decisions that have defined them.
     The FCC gave the states  authority  to interpret  existing  interconnection
     agreements.

     On March 24, 2000, the DC Circuit Court changed  certain  provisions of the
     FCC's 1999 Declaratory Ruling. The DC Circuit Court is requiring the FCC to
     again  review  the  definitions  of  traffic  that  require   inter-carrier
     compensation.   The  FCC  has  been  asked  to   specifically   review  the
     compensation mechanisms for ISP-bound traffic.

     On  April  19,  2001,  the FCC  announced  that it had  adopted  new  rules
     concerning  intercarrier  compensation  for  ISP-bound  traffic.  While the
     written  order is not yet  available,  the FCC set  transitional  rates for
     reciprocal  compensation that exceeds a 3:1 ratio. The rate for above ratio
     traffic  is .15  cents  per  minute  for the  first  six  months  after the
     effective date of the commission  order,  .10 cents per minute for the next
     18 months and .07 cents per minute after that.  Below ratio traffic remains
     at the state established rate level. Based on our preliminary  analysis, we
     do not  anticipate  the FCC's  action to cause any material  deviations  in
     anticipated reciprocal compensation revenue for 2001.


                                       12
<PAGE>
b.   RESULTS OF OPERATIONS

REVENUE

     Revenue increased $5.8 million, or 10%, for the first quarter 2001 over the
     first quarter 2000.
                                    For the three months ended March 31,
                                 --------------------------------------------
($ In thousands)                    2001            2000          % Change
                                 ------------   -------------   -------------
Network services                   $ 25,768       $ 16,004            61%
Local telephone services             21,797         24,274           (10%)
Long distance services                3,084          4,596           (33%)
Data services                        11,913         11,904             0%
                                 ------------   -------------
     Total                         $ 62,562       $ 56,778            10%
                                 ============   =============


Network Services

     Network  services  revenue  increased  $9.8 million,  or 61%, for the first
     quarter 2001 over the first quarter 2000.  The increase is due to continued
     growth in our network and sales of additional  circuits to new and existing
     customers.

Local Telephone Services

     Local telephone  services revenue  decreased $2.5 million,  or 10%, for the
     first  quarter 2001 compared to the first  quarter  2000.  Local  telephone
     services  include  ISDN  PRI,  dial  tone,   Carrier  Access  Billings  and
     reciprocal compensation.

     o    ISDN PRI revenue increased $0.2 million,  or 3%, for the first quarter
          2001 over the first quarter  2000.  Dial tone revenue  increased  $0.2
          million,  or 3%,  for the first  quarter  2001 over the first  quarter
          2000.  Increases  in  revenue  for both  ISDN PRI and dial tone is the
          result of an  increase  in the  average  access  line  equivalents  of
          14,280, or 8%, for the first quarter 2001 over the first quarter 2000.

     o    Carrier Access Billings  revenue  decreased $0.9 million,  or 41%, for
          the first  quarter  2001  compared  to the  first  quarter  2000.  The
          decrease  is the  result  of lower  average  rates per  minute  due to
          competitive pressures in the markets in which we operate, offset by an
          increase in average monthly minutes processed of 12.7 million, or 49%,
          for the first quarter 2001 over the first quarter 2000.


     o    Reciprocal  compensation  revenue decreased $1.9 million,  or 20%, for
          the first  quarter  2001  compared  to the  first  quarter  2000.  The
          decrease is due to a decrease in average monthly minutes  processed of
          31.1 million,  or 3%, for the first quarter 2001 compared to the first
          quarter 2000,  and lower  average rates per minute due to  competitive
          pressures  in the markets in which we operate.  See "Part I., Item 2.,
          Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of  Operations  -  Liquidity  and  Capital  Resources  - Other
          Matters  -  Reciprocal   Compensation"   for  further   discussion  of
          reciprocal compensation.

Long Distance Services

     Long distance  services  revenue  decreased  $1.5 million,  or 33%, for the
     first  quarter  2001  compared to the first  quarter  2000.  Long  distance
     services include retail and wholesale long distance.

     o    Retail long distance revenue  decreased $0.3 million,  or 11%, for the
          first quarter 2001 compared to the first quarter 2000. The decrease is
          due to a decrease in average monthly minutes processed of 0.3 million,
          or 3%, for the three  months  ended March 31,  2001 and lower  average
          rates per minute.

                                       13
<PAGE>
     o    Wholesale long distance  revenue  decreased $1.1 million,  or 49%, for
          the first  quarter  2001  compared  to the  first  quarter  2000.  The
          decrease is due to a decrease in average monthly minutes  processed of
          5.8  million,  or 30%,  for the three  months ended March 31, 2001 and
          lower average rates per minute.

 Data Services

     Data services  revenue  increased  marginally  over the first quarter 2000.
     Data services include Internet, RSVP, Frame Relay and other services.

     o    Revenue from our Internet services product increased $0.6 million,  or
          18%, for the first quarter 2001 over the first quarter 2000.

     o    Revenue from our RSVP products  increased  $0.7 million,  or 106%, for
          the first quarter 2001 over the first quarter 2000.

     o    Revenue from our Frame Relay product  increased $0.3 million,  or 14%,
          for the first quarter 2001 over the first quarter 2000.

     o    These increases were offset by a decrease of $1.6 million, or 33%, for
          the first  quarter 2001  compared to the first  quarter  2000,  as the
          result  of  the  expiration  on  February  28,  2001  of  an  18-month
          take-or-pay  contract with a significant  customer.  This  take-or-pay
          contract has not been renewed.

OPERATING EXPENSES

     Operating  expenses  increased  $2.0 million,  or 3%, for the first quarter
     2001 over the first quarter 2000.
<TABLE>
<CAPTION>

                                                   For the three months ended March 31,
                                                --------------------------------------------
($ In thousands)                                   2001            2000          % Change
                                                ------------   -------------   -------------
<S>                                                <C>             <C>                 <C>
Network access                                     $ 16,731        $ 20,696            (19%)
Operations                                           12,336          11,575              7%
Selling, general and administrative                  30,202          31,172             (3%)
Depreciation and amortization                        18,894          12,755             48%
                                                ------------   -------------
     Total                                         $ 78,163        $ 76,198              3%
                                                ============   =============
</TABLE>
Network Access

     Network  access  expenses  include  circuit  and  usage-based  charges  for
     carrying and terminating traffic on another carrier's network.

     Network access expenses for the three months ended March 31, 2001 decreased
     $4.0 million,  or 19%, compared to the same period in 2000. The decrease is
     a result of the  completion  of our inland and coastal  long-haul  network,
     which has allowed us to focus on  providing  on-net  services  resulting in
     reduced variable costs. In addition, we have made efforts to reduce off-net
     long distance costs, which have resulted in a $2.0 million savings compared
     to the 2000  period.  These  savings are  partially  offset by increases in
     costs directly related to increased revenue growth and network expansion.

Operations

     Operations expenses consist of costs related to providing  facilities based
     network and enhanced  communications  services  other than  network  access
     costs.  The primary  components  of these  expenses  are  right-of-way  and
     telecommunications  equipment  leases as well as operations and engineering
     personnel costs.


                                       14
<PAGE>


     Operations  expenses  increased $0.8 million,  or 7%, for the first quarter
     2001 over the first  quarter  2000,  primarily due to increases in payroll,
     maintenance,  operating rents and related  expenses to support the expanded
     delivery of services.

Selling, General and Administrative

     Selling,  general  and  administrative  expenses  include  all  direct  and
     indirect sales channel expenses and commissions, as well as all general and
     administrative expenses.

     Selling, general and administrative expenses decreased $1.0 million, or 3%,
     for the first  quarter 2001 over the first  quarter  2000.  The decrease is
     primarily due to a reduction in personnel, partially offset by increases in
     franchise fees and property taxes.

Depreciation and Amortization

     Depreciation   and   amortization    expenses   include   depreciation   of
     telecommunications  network assets  including  fiber-optic  cable,  network
     electronics, network switching and network data equipment.

     Depreciation and amortization  expense increased $6.1 million,  or 48%, for
     the first quarter 2001 over the first quarter 2000.  This was primarily due
     to higher plant in service balances for newly completed  telecommunications
     network facilities and electronics.

INTEREST EXPENSE, NET
<TABLE>
<CAPTION>

                                                   For the three months ended March 31,
                                                --------------------------------------------
($ In thousands)                                   2001            2000          % Change
                                                ------------   -------------   -------------
<S>                                                <C>             <C>                  <C>
     Gross interest expense                        $ 23,008        $ 17,229             34%
     Capitalized interest                              (958)         (2,033)           (53%)
                                                ------------   -------------
Interest expense, net                              $ 22,050        $ 15,196             45%
                                                ============   =============
</TABLE>

     Gross  interest  expense  increased  $5.8  million,  or 34%,  for the first
     quarter 2001 over the first quarter 2000, primarily due to higher levels of
     outstanding  long-term debt and higher average  interest rates. As of March
     31, 2001, we had long-term  debt  outstanding  of $783 million  compared to
     $625  million  at March 31,  2000.  The  higher  balance  led to  increased
     interest and guarantee fees.

     Capitalized  interest decreased $1.1 million, or 53%, for the first quarter
     2001 over the first  quarter  2000.  The  decrease is due to a reduction in
     average  Construction  Work In Process of $59.6  million,  or 70%,  for the
     first quarter 2001 compared to the first quarter 2000,  partially offset by
     higher interest rates.

INCOME TAX EXPENSE

                                    For the three months ended March 31,
                                 --------------------------------------------
($ In thousands)                    2001            2000          % Change
                                 ------------   -------------   -------------
Income tax expense                $   163        $    235            (31%)


     Income tax expense  decreased  $0.1 million,  or 31%, for the first quarter
     2001 over the first quarter 2000. In both 2001 and 2000, the benefit of our
     tax loss carryforwards is not able to fully offset the deferred tax expense
     associated with current year temporary differences.


                                       15
<PAGE>


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

DISCLOSURE OF PRIMARY MARKET RISK AND HOW IT IS MANAGED

     We are  exposed  to  market  risk  in the  normal  course  of our  business
     operations  due to ongoing  funding  activities.  Market risk refers to the
     potential  change in fair value of a  financial  instrument  as a result of
     fluctuations in interest rates and equity and commodity prices. Our primary
     market risk exposure is interest rate risk, which relates  primarily to our
     long-term  debt and  capital  lease  obligations.   We do not hold or issue
     derivative instruments or other financial instruments for trading purposes.
     Financial  instruments that are held for other than trading purposes do not
     impose a  material  market  risk.  As a  result,  we do not  undertake  any
     specific actions to cover our exposure to interest rate risk and we are not
     party to any interest rate risk management agreements.

     We are exposed to interest rate risk since debt financing is needed to fund
     the operating losses and capital expenditures  associated with establishing
     and expanding our  telecommunications  network.  The interest rates that we
     will be able to obtain on debt financing  will depend on market  conditions
     at that time,  and may differ from the rates we have secured on our current
     debt.  Citizens has committed to continue to finance our cash requirements,
     at market terms and conditions, until the earlier of completion of a public
     or private financing or June 30, 2002.

     We have no material  future earnings or cash flow exposures from changes in
     interest  rates on our long-term debt and capital lease  obligations,  as a
     majority  of our  obligations  are  fixed and most of our  obligations  are
     guaranteed by Citizens. A hypothetical 10% adverse change in interest rates
     would increase the amount that we pay on our variable obligations and could
     result in fluctuations in the fair value of our fixed rate obligations.

     Based  upon our  overall  interest  rate  exposure  at March  31,  2001,  a
     near-term  change  in  interest  rates  would  not  materially  affect  our
     consolidated financial position, results of operations or cash flows.

SENSITIVITY ANALYSIS

     At March 31, 2001,  the fair value of our long-term  debt and capital lease
     obligations was estimated to be $854 million, based on our overall weighted
     average rate of 6.8% and our overall  weighted  maturity of 4 years.  There
     has been no material change in the weighted average maturity  applicable to
     our  obligations  since December 31, 2000.  However,  the overall  weighted
     average  interest  rate has  declined  by  approximately  62 basis  points,
     consistent  with the  general  decline of interest  rates  during the first
     quarter  2001.  A  hypothetical  increase  of 68 basis  points  (10% of our
     overall weighted average borrowing rate) would result in an approximate $12
     million decrease in the fair value of our fixed rate obligations.

DISCLOSURE OF LIMITATIONS OF SENSITIVITY ANALYSIS

     Certain  shortcomings  are inherent in the method of analysis  presented in
     the computation of fair value of financial  instruments.  Actual values may
     differ from those presented should market  conditions vary from assumptions
     used in the calculation of the fair value. This analysis  incorporates only
     those exposures that exist as of March 31, 2001. It does not consider those
     exposures or positions  that could arise after that date. As a result,  our
     ultimate exposure with respect to our interest rate risk will depend on the
     exposures that arise during the period, the ratio of variable to fixed debt
     outstanding and the fluctuation of interest rates.



                                       16
<PAGE>



                                  PART II: OTHER INFORMATION
                                  --------------------------
ITEM 1.   LEGAL PROCEEDINGS

          We are party to routine  litigation  arising  in the normal  course of
          business.  We do not  expect  these  matters,  individually  or in the
          aggregate,  to  have  a  material  adverse  effect  on  our  financial
          position,  results of operations  or cash flows.  We are also party to
          various proceedings before state Public Utilities  Commissions.  These
          proceedings  typically  relate to  authority to operate in a state and
          regulatory  arbitration  proceedings  concerning  our  interconnection
          agreements.  See  "Part  I.,  Item  2.,  Management's  Discussion  and
          Analysis of Financial  Condition and Results of Operations - Liquidity
          and Capital Resources - Other Matters - Reciprocal Compensation".

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

ITEM 5.   OTHER INFORMATION

          We received a letter from The Nasdaq Stock Market,  Inc.,  dated April
          2, 2001, informing us that our Class A Common Stock failed to maintain
          a minimum  bid price of $5.00  over the prior 30  consecutive  trading
          days which does not meet the  minimum  listing  criteria of Nasdaq for
          shares listed on the National Market System.  If the bid price for our
          Class A Common  Stock is not at least  $5.00 for 10  consecutive  days
          prior to July 2, 2001, subject to the filing of an application and its
          approval,  our listing  will be  transferred  to the Nasdaq  Small Cap
          Market.  In addition,  we have the opportunity to appeal any change in
          status to a Nasdaq Listing  Qualifications Panel. We intend to explore
          our  options,  including  an appeal and a transfer to the Nasdaq Small
          Cap Market,  unless the price of our Class A Common Stock has achieved
          the minimum  level.  At the close of business on May 8, 2001,  the bid
          price for a share of our Class A Common Stock was $2.70.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

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

              None.

          b)  Reports on Form 8-K

              On March 8, 2001,  we filed a current  report on Form 8-K,  under
              Item 5, "Other  Events",  to make available a press release dated
              March 8, 2001,  regarding  our  fourth  quarter  and fiscal  2000
              financial results.



                                       17
<PAGE>


SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



ELECTRIC LIGHTWAVE, INC.

(Registrant)

By:  /s/ Robert J. Larson
     ----------------------------
     Robert J. Larson
     Vice  President and Chief Accounting Officer


May 9, 2001

                                       18