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 September 30, 2000

                                       OR

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

                       (Commission File Number 333-51037)

                               ICG SERVICES, INC.
             (Exact name of registrant as specified in its charter)



               Delaware                                 84-1448147
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)


                            161 Inverness Drive West
                            Englewood, Colorado 80112
                        (888) 424-1144 or (303) 414-5000
  (Address of principal executive offices and registrant's telephone numbers,
                             including area codes)

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

     On November  17,  2000,  ICG  Services,  Inc. had 10 shares of common stock
outstanding.  ICG  Communications,  Inc. owns all of the issued and  outstanding
shares of common stock of ICG Services, Inc.



<PAGE>


                                TABLE OF CONTENTS




PART I ......................................................................  3
      ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS .............................  3
              Consolidated Balance Sheets as of December 31, 1999 and          3
                September 30, 2000 (unaudited)...............................
              Consolidated Statements of Operations for the Three and Nine
                Months Ended September 30, 1999 and 2000 (unaudited).........  5
              Consolidated Statement of Stockholder's Equity for the Nine
                Months Ended September 30, 2000 (unaudited)  ................  6
              Consolidated Statements of Cash Flows for the Nine Months Ended
                September 30, 1999 and 2000 (unaudited)......................  7
              Notes to Consolidated Financial Statements (unaudited) ........  9
      ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS ......................................... 16
      ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .... 26

PART II ..................................................................... 28
      ITEM 1. LEGAL PROCEEDINGS ............................................. 28
      ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ..................... 28
      ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS............ 28
      ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........... 28
      ITEM 5. OTHER INFORMATION ............................................. 28
      ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K  ............................. 28
              Exhibits ...................................................... 28
              Reports on Form 8-K ........................................... 28


                                       2
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets
                                   (unaudited)

                                                 December 31,    September
                                                                    30,
                                                     1999          2000
                                                 -------------  ------------
   Assets                                              (in thousands)
   ------

   Current assets:
     Cash and cash equivalents                   $    43,222       32,214
     Short-term investments available for sale        10,442            -
     Receivables (note 6):
       Trade, including amounts due from ICG          74,064      124,607
       Due from ICG                                  128,893            -
       Other                                             500            3
                                                 ------------   ------------
                                                     203,457      124,610
                                                 ------------   ------------

     Prepaid expenses, deposits and inventory          2,942        8,460
                                                 ------------   ------------

       Total current assets                          260,063      165,284
                                                 ------------   ------------

   Property and equipment                            916,953    1,437,178
     Less accumulated depreciation                   (64,273)    (144,526)
                                                 ------------   ------------
       Net property and equipment (note 4)           852,680    1,292,652
                                                 ------------   ------------

   Restricted cash                                     1,030        1,288
   Investment in partnership interests, common
     stock and restricted and exchangeable
     preferred stock                                  11,250        2,650
   Investments, accounted for under the equity
     method                                           41,152       26,101
   Deferred financing and lease administration
     costs, net of accumulated amortization of
     $3.9 million and $6.2 million at December
     31, 1999 and September 30, 2000,
     respectively                                     20,663       19,457
   Other assets                                          919          853
                                                 ------------   ------------

     Total Assets (notes 1 and 3)                $ 1,187,757    1,508,285
                                                 ============   ============
                                                                (Continued)


                                       3
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

              Consolidated Balance Sheets (unaudited), (Continued)

                                                    December 31,   September 30,
                                                        1999            2000
                                                   -------------   -------------
                                                            (in thousands)

Liabilities and Stockholder's Equity

Current liabilities:
  Accounts payable                                 $   113,372          109,607
  Pre-payment from ICG, (note 6)                             -          197,358
  Payable pursuant to IRU agreement                    135,322           53,826
  Accrued liabilities                                   38,718          115,714
  Deferred gain on sale                                  5,475                -
  Current portion of capital lease obligations           1,951           47,066
  Current portion of long-term debt (note 5)               750              750
                                                   -------------    ------------
    Total current liabilities                          295,588          524,321
                                                   -------------    ------------

Capital lease obligations, less current portion          5,784           88,424
Long-term debt, net of discount, less current
  portion (note 5)                                     767,167          821,344
Other long-term liabilities                              2,500            2,500
                                                   -------------    ------------
      Total liabilities                              $1,071,039       1,436,589
                                                   -------------    ------------

Stockholder's equity:
  Common stock, $.01 par value, 1,000 shares
   authorized; 10 shares issued and outstanding
   at December 31, 1999 and September 30, 2000                  -             -
  Additional paid-in capital                              129,402       129,402
  Accumulated deficit                                     (12,684)      (57,706)
                                                    --------------  ------------
    Total stockholder's equity                            116,718        71,696
                                                    --------------  ------------

Commitments and contingencies (note 7)

    Total Liabilities and Stockholder's Equity
      (note 1)                                       $  1,187,757     1,508,285
                                                    ==============  ============

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

                Consolidated Statements of Operations (unaudited)
             Three and Nine Months Ended September 30, 1999 and 2000

<TABLE>
<CAPTION>
                                       Three months ended        Nine months ended
                                          September 30,            September 30,
                                    --------------------------------------------------
                                        1999         2000        1999        2000
                                    ----------- ------------- ----------- ------------
                                                     (in thousands)
Revenue
  From services provided to ICG
<S>                                 <C>             <C>         <C>         <C>
    (note 6)                        $  32,333        63,057      66,724     159,466
  Other                                   511         4,490         764      17,275
                                    ----------- ------------- ----------- ------------
    Total revenue                      32,844        67,547      67,488     176,741
                                    ----------- ------------- ----------- ------------

Cost of services and expenses:
  Cost of services                      1,116        15,210       2,550      38,456
  Selling, general and
   administrative expenses:
    Amounts allocated from ICG
     (note 6)                             201         1,477         687       4,620
    Other                                 387           691         737       1,508
  Depreciation                         14,925        35,974      35,868      78,392
  Net loss on disposal of
   long-lived assets                        -           934           -         934
                                    ----------- ------------- ----------- ------------

      Total cost of services and
        expenses                        16,629        54,286      39,842     123,910
                                    ----------- ------------- ----------- ------------

         Operating  income             16,215        13,261      27,646      52,831

Other income (expense):
  Interest expense:
   Amounts due  to ICG (note 6)             -       (10,033)          -     (11,929)
   Other                              (18,492)      (27,368)    (51,629)    (79,998)
  Interest income:
   Amounts earned from ICG (note 6)     3,848             -      13,882       3,171
   Other                                1,367         3,107       6,615       5,672
  Other income (expense), net               1            (3)        440         282
                                    ----------- ------------- ----------- ------------
                                      (13,276)      (34,297)    (30,692)    (82,802)
                                    ----------- ------------- ----------- ------------

(Loss) income from continuing
  operations before share of net
  earnings (losses)                     2,939       (21,036)     (3,046)    (29,971)
Share of net losses of equity
  investees                            (3,441)       (5,398)     (4,706)    (15,051)
                                    ----------- ------------- ----------- ------------

Loss from continuing operations          (502)      (26,434)     (7,752)    (45,022)
                                    ----------- ------------- ----------- ------------

Extraordinary gain on sales of
  operations of NETCOM, net of              -             -     193,029           -
  income taxes of $6.4 million
                                    ----------- ------------- ----------- ------------
   Net income (loss)                $    (502)      (26,434)    185,277     (45,022)
                                    =========== ============= =========== ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

                 Consolidated Statement of Stockholder's Equity
                Nine Months Ended September 30, 2000 (unaudited)




                                                                      Total
                                Common stock  Additional              stock-
                                -------------  paid-in   Accumulated  holder's
                                Shares Amount  capital    deficit     equity
                                ------ ------ ---------- ---------- ----------
                                              (in thousands)

Balances at January 1, 2000        -   $      129,402     (12,684)   116,718
Net loss                           -       -        -     (45,022)   (45,022)
                                ------ ------ ---------- ---------- ----------
Balances at September 30, 2000     -   $      129,402     (57,706)    71,696
                                ====== ====== ========== ========== ==========

          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
            Nine Months Ended September 30, 1999 and 2000 (unaudited)

                                                        Nine months ended
                                                          September 30,
                                                     -------------------------
                                                        1999         2000
                                                     -----------  ------------
                                                          (in thousands)
Cash flows from operating activities:
    Net (loss) income                                $ 185,277       (45,022)
    Extraordinary gain on sales of discontinued
     operations                                       (193,029)            -
    Adjustments to reconcile net (loss) income
     to net cash provided by operating activities:
      Recognition of deferred gain                     (17,376)       (6,239)
      Share of net losses of equity investees            4,706        15,051
      Depreciation                                      35,868        78,392
      Net loss on disposal of long-lived assets              -           934
      Provision for uncollectible accounts                   -            64
      Interest expense deferred and included in
        long-term debt                                  44,866        49,439
      Amortization of deferred financing costs
        included in interest expense                     1,438         1,859
      Amortization of deferred lease administration
        costs included in selling, general and
        administrative expenses                            878           450
      Gain on sale of securities                             -          (634)
      Other noncash expenses                                 -           301
      Change in operating assets and liabilities:
         Receivables                                   (71,473)       76,113
         Prepaid expenses, deposits and inventory         (679)       (1,323)
         Accounts payable and accrued liabilities       (8,725)       74,788
                                                     -----------   -----------
           Net cash provided (used) by operating
            activities                                 (18,249)      244,173
                                                     -----------   -----------
Cash flows from investing activities:
    Acquisition of property and equipment             (379,713)     (286,936)
    Investment in equity investees                     (35,093)            -
    Investment in restricted preferred stock           (11,000)            -
    Proceeds from sales of operations of NETCOM,
     net of cash included in sale                      252,881             -
    Proceeds from sale of short-term investments
     available for sale                                 21,617        10,442
    Purchase of long-term investments                        -        (1,400)
    Proceeds from sale of marketable securities         30,000        10,634
    Increase in restricted cash                              -          (258)
                                                     -----------   -----------
      Net cash used by investing activities           (121,308)     (267,518)
                                                     -----------   -----------
Cash flows from financing activities:
    Proceeds from issuance of long-term debt            80,000        95,000
    Net pre-payment from ICG                                 -       197,358
    Deferred financing and lease administration
     costs                                              (6,264)       (1,266)
    Principal payments on long-term debt                  (188)      (90,262)
    Principal payments on capital lease obligations     (2,365)       (8,996)
    Payments on IRU agreement                                -      (179,497)
                                                     -----------   -----------
      Net cash provided by financing activities         71,183        12,337
                                                     -----------   -----------

      Net decrease in cash and cash equivalents        (68,374)      (11,008)
      Net cash used by discontinued operations          (5,107)            -
Cash and cash equivalents, beginning of period         114,380        43,222
                                                     -----------   -----------
Cash and cash equivalents, end of period             $  40,899        32,214
                                                     ===========   ===========
                                                                   (Continued)

                                       7
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows, (Continued)

                                                     Nine months ended
                                                       September 30,
                                                  -------------------------
                                                     1999         2000
                                                  -----------  ------------
                                                       (in thousands)

Supplemental disclosure of cash flows
 information of continuing operations:
  Cash paid for interest                          $   5,325       26,527
                                                  ===========  ============
  Cash paid for taxes                             $   1,140          246
                                                  ===========  ============

  Supplemental  disclosure  of noncash
    investing  and  financing  activities of
    continuing operations:
  Acquisition of corporate headquarters assets
    through the issuance of long-term debt and
    conversion of security deposit                $  33,077            -
                                                  ===========  ============

  Assets acquired pursuant to IRU agreement       $       -       96,903
  Assets acquired under capital leases                6,190      132,617
                                                  -----------  ------------
    Total                                         $   6,190      229,520
                                                  ===========  ============

          See accompanying notes to consolidated financial statements.


                                       8
<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
              December 31, 1999 and September 30, 2000 (unaudited)

(1)   Bankruptcy Proceedings

      During  the  quarter  ended  September  30,  2000  and  subsequent  to the
      quarter-end,  a series of  financial  and  operational  events  materially
      impacted ICG  Communications,  Inc.  and its  subsidiaries  ("ICG"),  and,
      consequently,  ICG Services,  Inc. (the  "Company").  These events reduced
      ICG's expected  revenue and cash flow generation for the remainder of 2000
      and 2001, which in turn  jeopardized the Company's  ability to comply with
      its existing  senior  secured credit  facility.  On November 14, 2000 (the
      "Petition Date"), ICG and most of its subsidiaries (including the Company)
      filed  voluntary  petitions for protection  under Chapter 11 of the United
      States  Bankruptcy  Code in the  Federal  District of Delaware in order to
      facilitate the  restructuring  of the Company's  long-term debt, trade and
      other   obligations.   ICG  and   its   bankruptcy   filing   subsidiaries
      (collectively    the    "Debtors")    are    currently     operating    as
      debtors-in-possession  under the supervision of the United States District
      Court for the District of Delaware. The bankruptcy petitions were filed in
      order to preserve cash and to give ICG and the Company the  opportunity to
      restructure their debt.

      Under the  Bankruptcy  Code,  the rights  and  treatment  of  pre-petition
      creditors and shareholders are expected to be substantially  altered. As a
      result of these  bankruptcy  proceedings,  substantially  all liabilities,
      litigation  and claims  against the Debtors in  existence  at the Petition
      Date are stayed  unless the stay is modified or lifted or payment has been
      otherwise  authorized  by the  Bankruptcy  Court.  At this time, it is not
      possible  to predict the outcome of the Chapter 11 cases in general or the
      effects of such cases on our business, or on the interest of creditors and
      shareholders.  As a result of the bankruptcy  filing, all of the Company's
      liabilities incurred prior to the Petition Date, including certain secured
      debt,  are  subject  to  compromise.  No  assurance  can be given that the
      Company will be successful in reorganizing  its affairs within the Chapter
      11 bankruptcy proceedings.

     Further,  due to the  bankruptcy  filing and  related  events,  there is no
     assurance  that the  carrying  amounts of assets  will be  realized or that
     liabilities  will be  liquidated or settled for the amounts  recorded.  The
     majority  of  the  Company's   revenue  is  generated   from   intercompany
     transactions with ICG and its subsidiaries. As a result of ICG's bankruptcy
     filings,  the Company's future revenues and intercompany  obligations could
     be materially adversely impacted. In addition, a plan of reorganization, or
     rejection  thereof,  could  change the amounts  reported  in the  financial
     statements.  As a result,  there is  substantial  doubt about the Company's
     ability to  continue  as a going  concern.  The  ability of the  Company to
     continue  as a  going  concern  is  dependent  upon,  but not  limited  to,
     formulation,  approval,  and  confirmation  of a  plan  of  reorganization,
     adequate sources of capital,  customer and employee retention,  the ability
     to provide  high  quality  services  and the  ability  to sustain  positive
     results of operations and cash flows sufficient to continue to operate.

(2)   Organization and Nature of Business

      ICG  Services,  Inc.,  a  Delaware  corporation  ("ICG  Services"  or "the
      Company"),  was  incorporated  on January 23,  1998 and is a wholly  owned
      subsidiary of ICG. On January 21, 1998, ICG completed a merger with NETCOM
      On-Line Communication Services,  Inc., a Delaware corporation and Internet
      service  provider  ("ISP")  located  in San Jose,  California  ("NETCOM"),
      accounted  for as a  pooling  of  interests.  Upon  the  formation  of ICG
      Services on January 23, 1998, ICG  contributed its investment in NETCOM to
      ICG  Services  and  NETCOM  became  a  wholly  owned  subsidiary  of,  and
      predecessor entity to, ICG Services. Accordingly, the financial statements
      of the Company prior to January 23, 1998 consist solely of the accounts of
      NETCOM and its  subsidiaries.  Effective  November 3, 1998,  the Company's
      board of directors adopted the formal plan to dispose of the operations of
      NETCOM. On February 17 and March 16, 1999, the Company completed the sales
      of the operations of NETCOM and, accordingly,  the Company's  consolidated
      financial  statements  prior to March 16, 1999 reflect the  operations and
      net assets of NETCOM as  discontinued.  In conjunction with the sales, the
      legal name of the NETCOM subsidiary


                                       9
<PAGE>


                       ICG SERVICES, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements, (Continued)

(2)   Organization and Nature of Business (continued)

      was changed to ICG NetAhead, Inc. ("NetAhead").  NetAhead has retained the
      domestic  Internet  backbone  assets  formerly owned by NETCOM which it is
      utilizing for the provision of newly developed  wholesale network services
      to ISPs and other telecommunications providers. The Company's consolidated
      financial  statements reflect the operations of NETCOM as discontinued for
      all periods  presented.  On January  23,  1998,  ICG  Equipment,  Inc.,  a
      Colorado  corporation  and wholly owned  subsidiary  of the Company  ("ICG
      Equipment"),  was formed for the principal purpose of providing  financing
      of  telecommunications  equipment and services to ICG Telecom Group, Inc.,
      an indirect  wholly owned  subsidiary of ICG, and its  subsidiaries  ("ICG
      Telecom").  Such financing is provided through ICG Equipment's purchase of
      telecommunications  equipment,  software,  network  capacity  and  related
      services from  original  equipment  manufacturers,  providers of intercity
      network facilities and ICG Telecom, and subsequent lease of such assets to
      ICG Telecom.

(3)   Significant Accounting Policies

      (a) Basis of Presentation

          These  financial  statements  should be read in  conjunction  with the
          Company's  Annual Report on Form 10-K for the year ended  December 31,
          1999, as certain information and note disclosures normally included in
          financial  statements  prepared in accordance with generally  accepted
          accounting  principles have been condensed or omitted  pursuant to the
          rules and  regulations  of the United States  Securities  and Exchange
          Commission.  The interim financial  statements reflect all adjustments
          which  are,  in  the  opinion  of  management,  necessary  for a  fair
          presentation  of financial  position,  results of operations  and cash
          flows as of and for the interim periods  presented.  Such  adjustments
          are of a  normal  recurring  nature.  Operating  results  for the nine
          months ended September 30, 2000 are not necessarily  indicative of the
          results that may be expected for the year ending December 31, 2000.

          Due to the event described in note 1, the Company is considering if an
          impairment  of  assets  has  occurred  under  Statement  of  Financial
          Accounting  Standards  "Accounting  for the  Impairment  of Long-Lived
          Assets and for Long-Lived  Assets to be Disposed of" ("SFAS 121").  As
          the Company is currently  undergoing a reorganization,  there is not a
          definitive  business  plan in  place  with  which to  determine  if an
          impairment has occurred or, if an impairment has occurred,  the amount
          of such  impairment.  As a result,  the  Company  has not  reduced the
          carrying  values  of  its  assets  in  the  accompanying  consolidated
          financial statements.

          All  significant  intercompany  accounts  and  transactions  have been
          eliminated in consolidation.

      (b) Recent Accounting Pronouncements

          In March 2000,  the  Financial  Accounting  Standards  Board  ("FASB")
          issued FASB Interpretation No. 44 "Accounting for Certain Transactions
          involving Stock  Compensation - and  interpretation of APB Opinion No.
          25" ("FIN 44"). This opinion  provides  guidance on the accounting for
          certain stock option  transactions and subsequent  amendments to stock
          option  transactions.  FIN 44 is effective  July 1, 2000,  but certain
          conclusions cover specific events that occur after either December 15,
          1998 or January  12,  2000.  To the extent  that FIN 44 covers  events
          occurring  during the period  from  December  15, 1998 and January 12,
          2000,   but  before  July  1,  2000,  the  effects  of  applying  this
          interpretation  are  to be  recognized  on a  prospective  basis.  The
          adoption  of FIN 44 did not have a  material  effect on the  Company's
          financial position or results of operation.

          In December 1999, the SEC released Staff  Accounting  Bulletin ("SAB")
          No. 101, "Revenue Recognition in Financial Statements", which provides
          guidance on the recognition, presentation and disclosure of revenue in
          financial  statements  filed  with  the  SEC.  Subsequently,  the  SEC
          released


                                       10
<PAGE>


(3)   Significant Accounting Policies (continued)

      (b) Recent Accounting Pronouncements (continued)

          SAB 101B,  which  delayed the  implementation  date of SAB 101 for the
          Company  until the quarter ended  December 31, 2000.  The Company does
          not believe that the  adoption of SAB 101 will have a material  impact
          on its financial position or results of operations.

          In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
          Instruments and Hedging Activities".  SFAS 133 establishes  accounting
          and  reporting  standards  for  derivative   instruments  and  hedging
          activities.  As amended by SFAS No. 137,  "Accounting  for  Derivative
          Instruments and Hedging  Activities-Deferral of Effective Date of FASB
          Statement  No.  133",  and  SFAS  No.  138   "Accounting  for  Certain
          Derivative Instruments and Certain Hedging Activities, an Amendment of
          FASB  Statement  No.133"  ("SFAS  138").  SFAS  133 and  SFAS  138 are
          effective for all quarters and fiscal years  beginning  after June 15,
          2000.  The Company  will adopt SFAS 133 and SFAS 138  effective at the
          beginning  of its fiscal year end 2001.  The Company  does not believe
          that the adoption of SFAS 133 and SFAS 138 will have a material effect
          on the Company's financial position or results of operations.

      (c) Reclassifications

          Certain  1999 amounts  have been  reclassified  to conform to the 2000
          presentation.

(4)   Property & Equipment

      Property and equipment,  including  assets held under capital  leases,  is
      comprised of the following:

                                              December 31,   September 30,
                                                  1999           2000
                                              ------------   -------------
                                                    (in thousands)

      Land                                       10,794         14,727
      Buildings and improvements                 36,203         36,203
      Furniture, fixtures and office equipment    6,326          7,283
      Internal-use software costs                   536            752
      Machinery and equipment                    13,451         18,095
      Fiber optic equipment                     241,167        336,026
      Switch equipment                          158,252        307,380
      Fiber optic network                       282,468        129,726
      Site improvements                             810            796
      Construction in progress                  166,946        586,190
                                              ------------   -------------
                                                916,953      1,437,178
      Less accumulated depreciation             (64,273)      (144,526)
                                              ------------   -------------
                                                852,680      1,292,652
                                              ============   =============

      Property and equipment includes  approximately $586.2 million of equipment
      which  has  not  been  placed  in  service  at  September  30,  2000,  and
      accordingly,  is not being depreciated.  Due to the bankruptcy proceedings
      discussed in note 1, there is substantial  uncertainty about the Company's
      ability to complete and place in service these assets.


                                       11
<PAGE>

(5)   Long-term Debt

      Long-term debt is summarized as follows:

                                                  December 31,    September 30,
                                                      1999             2000
                                                ---------------  ---------------
                                                         (in thousands)
      Senior Facility due on scheduled
         maturity dates, secured by
         substantially all of the assets of
         ICG Equipment and NetAhead at the
         weighted average interest rates
         ranging from 9.26% to 10.06% for
         the nine months ended September 30,
         2000 (a)                                $    79,625           84,362
      9 7/8% Senior discount notes, net of
         discount                                    293,925          315,931
      10% Senior discount notes, net of
         discount                                    361,290          388,724
      Mortgage loan payable with adjustable
         rate of interest (15.21% at September
         30, 2000) due in full on January 31,
         2013, secured by corporate headquarters      33,077           33,077
                                                ---------------  ---------------
                                                     767,917          822,094
      Less current portion                              (750)            (750)
                                                ---------------  ---------------
                                                 $   767,167          821,344
                                                ===============  ===============

      As a result of filing for  bankruptcy,  all due dates on the various  debt
      issuances have been  accelerated in accordance with the terms of the debt.
      However,  due  to  the  nature  of  the  bankruptcy  proceedings  and  the
      uncertainty   surrounding  any  potential  debt   settlements   under  the
      bankruptcy proceedings,  the Company has not at this time reclassified any
      amounts to current.

        (a) On September 18, 2000,  the Company  announced  that lower  expected
            financial  results  would  put the  Company  in  breach  of its $200
            million  Senior  Facility,  absent  obtaining  appropriate  covenant
            waivers.  On September 29, 2000,  the Company  announced that it had
            reached  agreement  with its senior  lenders  to receive  waivers on
            potential defaults under the Senior Facility.  The Company's lenders
            allowed a sixty day waiver, and as part of this agreement,  required
            payment of 50%, or $89.7 million,  of the outstanding balance of the
            Senior Facility as of September 30, 2000.

            On November 14, 2000,  the Company  announced that it had obtained a
            commitment     letter     which    will    provide    the    Company
            debtor-in-possession ("DIP") financing for a minimum of $200 million
            and the potential for an additional $150 million if certain criteria
            are met.  This DIP  financing  is subject to  customary  pre-closing
            conditions and is contingent upon Bankruptcy Court approval. The DIP
            financing  terms require that the Senior Facility be paid off at the
            time of the first draw under the DIP financing.


                                       12
<PAGE>

(6)   Related Party Transactions

      The following table illustrates related party transactions of ICG Services
      for the three  and nine  months  ended  September  30,  1999 and 2000 (all
      transactions  listed are between the Company  (including its subsidiaries)
      and ICG (including its subsidiaries)):

<TABLE>
<CAPTION>
                                             Three Months Ended     Nine Months Ended
                                                September 30,         September 30,
                                             --------------------  ---------------------
                                               1999       2000       1999       2000
                                             ----------  --------  ---------  ----------
                                                           (in thousands)

      Related Party Shared Services Activity:
         Net charges to (from) ICG, including
<S>                                          <C>         <C>        <C>          <C>
          pre-payments from ICG (a)          $ 145,454   174,526    377,216      377,100
         Charges from ICG included in             (201)     1,477      (687)       4,620
          expenses (b)

      Related Party Leasing Activity:
         Equipment purchased for ICG (c)         45,498    81,872    329,498     179,837
         Value of new  equipment on lease to
          ICG (d)                                18,440    40,793    164,440     134,676
         Operating lease revenue (d)             26,740    35,804     53,459     101,168
         Lease service fee revenue (e)            4,372     6,812      9,708      17,335
         Corporate headquarters lease
          revenue (f)                             1,221     1,258      3,557       3,737

      Related Party Interest Income (g)           3,848         -     13,882       3,171
      Related Party Interest Expense (g)              -   (10,033)         -     (11,929)

      Related Party Operational Activity:
         Installation & local access
          expenses (h)                            1,200         -      4,000           -
         DataChoice Revenue (i)                       -    19,183          -      37,226
</TABLE>

     (a)  The  Company  and  its   subsidiaries   have   entered   into  certain
          intercompany  and shared  services  agreements  with ICG,  whereby ICG
          allocates to the Company direct and certain indirect costs incurred by
          ICG or its  other  subsidiaries  (the  "Restricted  Subsidiaries")  on
          behalf of the Company.  Allocated expenses generally include a portion
          of salaries  and related  benefits of legal,  accounting  and finance,
          information systems support and other ICG employees,  certain overhead
          costs and  reimbursement  for  invoices  of the  Company  paid by ICG.
          Conversely,  any cash collected by ICG on behalf of the Company or its
          subsidiaries  or invoices  paid by the Company on behalf of ICG are in
          turn  reimbursed  to the  Company  by  ICG.  As the  Company  and  its
          subsidiaries  and ICG and its  Restricted  Subsidiaries  jointly enter
          into service  offerings and other  transactions,  joint costs incurred
          are  generally  allocated to each of the Company and ICG  according to
          the relative  capital invested and efforts expended by each party. All
          transactions between the Company, including its subsidiaries, and ICG,
          including its  subsidiaries,  contain fair and reasonable  terms.  All
          such transactions are settled in cash on a quarterly basis.

          During the second  quarter of fiscal  year 2000,  the shared  services
          agreement  between  the  Company  and ICG was  amended  to  allow  for
          pre-payments  to the Company in order to offset  payments  for capital
          expenditures,  line  costs,  and  general  expenses.  The  outstanding
          balance of $197.4 million is included in pre-payment  from ICG, in the
          Company's consolidated balance sheet as of September 30, 2000.

          In  addition,  as of  September  30,  2000,  the  Company  has a trade
          receivable  from ICG in the  approximate  amount of $117  million  for
          earned lese revenue and infrastructure charges.

          The majority of the Company's  revenue is generated from  intercompany
          transactions  with  ICG and its  subsidiaries.  As a  result  of ICG's
          bankruptcy  filings,  the Company's  future revenues and  intercompany
          obligations could be materially adversely impacted.

     (b)  Certain  of the  amounts  allocated  as  discussed  in (a)  above  are
          included in the  Company's  consolidated  statement of operations as a
          component  of selling,  general and  administrative  expenses  ("SG&A"
          expenses).

                                       13
<PAGE>

(6)  Related Party Transactions (continued)

     (c)  ICG Equipment purchased certain telecommunications equipment both from
          and for ICG Telecom.  The purchase  prices and lease  payments for all
          leases  are  subject  to  adjustment,  based  on  the  results  of  an
          independent  appraisal  which may be requested at the option of ICG or
          ICG Equipment on or before 90 days from the purchase date.

     (d)  ICG   Equipment   entered   into   separate    agreements   to   lease
          telecommunications  equipment  to ICG  under  operating  leases,  with
          annual lease payments  commencing one year from the date of the lease.
          ICG Equipment  recognizes revenue from the lease payments ratably over
          the lease terms. As noted in (c) above,  the purchase prices and lease
          payments  for all  leases  are  subject  to  adjustment,  based on the
          results of an  independent  appraisal  which may be  requested  at the
          option of ICG or ICG  Equipment on or before 90 days from the purchase
          date.

     (e)  Under  the  master  lease  agreement  between  ICG  Equipment  and ICG
          Telecom,  ICG is required to pay ICG Equipment a monthly lease service
          fee, at an annual rate of prime plus 4% (13.5% at September 30, 2000),
          based on the  average  monthly  balance  of  assets  purchased  by ICG
          Equipment  and  intended  for future  lease to ICG, but not yet placed
          into  service.  ICG  Equipment  places  assets  in  service  upon  the
          commencement  of the  respective  lease  term.  The  amount  of assets
          purchased by ICG  Equipment  and intended for future lease to ICG, but
          not yet placed into  service,  was  approximately  $155.0  million and
          $187.2  million at  September  30,  1999 and 2000,  respectively.  The
          Company begins  depreciation on property and equipment at the time the
          assets are placed in service.

     (f)  Effective  January 1, 1999,  the  Company  purchased  ICG's  Corporate
          Headquarters  and  subsequently  assumed the prior lessor's  operating
          lease of the Corporate  Headquarters assets to a Restricted Subsidiary
          of ICG.  The  Company  earned  leasing  revenue  from  the  Restricted
          Subsidiary  of ICG under the  operating  lease,  which is  included in
          revenue  and due  from  ICG in the  Company's  consolidated  financial
          statements.

     (g)  Net interest  income  (expense)  accrued by the Company on outstanding
          balances due from or to ICG and its Restricted  Subsidiaries  has been
          accrued on outstanding  balances of intercompany  transfers and direct
          and indirect  costs  between ICG  Services and ICG and its  Restricted
          Subsidiaries  as  discussed in (a) above at 12.5% and 10.15% per annum
          for  1999 and  2000,  respectively,  which  represents  the  Company's
          approximate  weighted  average cost of capital at the beginning of the
          respective fiscal year.

     (h)  In the normal  course of  business,  ICG Telecom  provides  the use of
          certain of its local access lines to NETCOM (prior to the  disposition
          of the  operations of NETCOM) and NetAhead and,  accordingly,  charges
          NETCOM and NetAhead for costs of any installation and recurring access
          to  its  network.   Theses   expenses   have  been   included  in  the
          extraordinary  gain on the sales of the operations of NETCOM for those
          charges  relating to NETCOM,  and in operating costs for those charges
          relating  to  NetAhead,  a portion of which were  applied  against the
          deferred  gain on the sale of certain of NETCOM's  domestic  operating
          assets  and  liabilities,  in  the  Company's  consolidated  financial
          statements.

     (i)  NetAhead earned revenue from a subsidiary of ICG,  DataChoice  Network
          Services,  L.L.C.  ("DataChoice"),  for DataChoice's use of NetAhead's
          data network assets.

(7)  Commitments and Contingencies

     As a  result  of  the  Company's  filing  for  bankruptcy  protection,  all
     commitments and  contingencies  could be substantially  modified during the
     Company's bankruptcy restructuring process.

     The Company has entered into various  equipment  purchase  agreements  with
     certain of its  vendors.  Under these  agreements,  if the Company does not
     meet a minimum purchase level in any given year, the vendor may discontinue
     certain  discounts,  allowances  and incentives  otherwise  provided to the
     Company.  These  agreements  may be terminated by either the Company or the
     vendor upon prior written notice.

     Due to the current  economic  uncertainty of the Company's  construction in
     progress assets, the Company may decide not to continue with these projects
     and incur additional termination costs.

     The Company has entered into certain commitments to purchase capital assets
     with  an  aggregate  purchase  price  of  approximately  $94.0  million  at
     September 30, 2000.

     NETCOM, now NetAhead,  is a party to certain litigation which has arisen in
     the ordinary course of business. In the opinion of management, the ultimate
     resolution of these matters will not have a material  adverse effect on the
     Company's financial condition, results of operations or cash flows.


                                       14
<PAGE>

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

      The following discussion includes certain  forward-looking  statements and
information  that is based on the beliefs of management  as well as  assumptions
made by management based on information currently available to the Company. When
used in  this  document,  the  words  "anticipate",  "believe",  "estimate"  and
"expect"  and  similar  expressions,  as  they  relate  to  the  Company  or its
management,   are  intended  to  identify  forward-looking   statements.   These
forward-looking  statements  are  intended  to  qualify  as  safe  harbors  from
liability as  established  by the Private  Securities  Litigation  Reform Act of
1995. Such  statements  reflect the current views of the Company with respect to
future events and are subject to certain risks,  uncertainties  and assumptions.
Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those described in this document. These forward-looking  statements are affected
by important factors, including, but not limited to the following:


o    The  uncertainty  of  the  Company's  future  as a  result  of  filing  for
     protection under bankruptcy law;
o    The  significant  amount of  indebtedness  incurred  by the Company and the
     Company's ability to successfully restructure this indebtedness;
o    The Company's  ability to successfully  maintain  commercial  relationships
     with its critical vendors and suppliers;
o    The Company's  ability to retain its major customers on profitable terms; o
     The availability and terms of the significant  additional  capital required
     to fund the Company's continued operations;
o    The extensive competition the Company will face;
o    The Company's ability to retain qualified  management and employees and the
     ability to manage growth;
o    The   Company's   ability  to  access   markets  and  obtain  any  required
     governmental authorizations, franchises and permits, in a timely manner, at
     reasonable costs and on satisfactory terms and conditions; and
o    Changes in, or the Company's  inability to comply with, existing government
     regulations.

     These  forward-looking  statements  speak  only  as of  the  date  of  this
Quarterly  Report.  The Company does not undertake  any  obligation to update or
revise  publicly  any  forward-looking  statements,  whether  as a result of new
information,  future events or otherwise. Although the Company believes that its
plans,   intentions   and   expectations   reflected  in  or  suggested  by  the
forward-looking  statements made in this Quarterly Report are reasonable,  there
is no assurance that such plans, intentions or expectations will be achieved.


     The results of operations for the three and nine months ended September 30,
1999 and 2000 represent the consolidated  operating results of the Company. (See
the unaudited consolidated financial statements of the Company for the three and
nine months ended September 30, 2000 included  elsewhere  herein.) The Company's
consolidated   financial   statements   reflect  the  operations  of  NETCOM  as
discontinued  for all periods  presented.  The terms  "fiscal" and "fiscal year"
refer to the Company's fiscal year ending December 31. All dollar amounts are in
U.S. dollars.

COMPANY OVERVIEW

General

     ICG Services,  Inc. ("ICG Services" or the "Company") was formed on January
23, 1998 and is a wholly owned subsidiary of ICG  Communications,  Inc. ("ICG").
The Company's  Leasing  Services and Network  Services  operations are currently
conducted  through its two operating  subsidiaries,  ICG  Equipment,  Inc. ("ICG
Equipment")  and  ICG  NetAhead,  Inc.  ("NetAhead")  (formerly  NETCOM  On-Line
Communication Services, Inc. ("NETCOM")).

     On January 21,  1998,  ICG  acquired  NETCOM,  a Delaware  corporation  and
provider of Internet  connectivity  and Web site hosting services located in San
Jose, California,  in a transaction accounted for as a pooling of interests.  As
consideration for the acquisition,  ICG issued approximately 10.2 million shares
of common  stock of ICG ("ICG Common  Stock"),  valued at  approximately  $284.9


                                       15
<PAGE>

million on the date of the  merger.  Upon the  formation  of ICG  Services,  ICG
contributed  its investment in NETCOM to ICG Services and NETCOM became a wholly
owned subsidiary of, and predecessor entity to, ICG Services.  Accordingly,  the
historical consolidated financial statements of the Company prior to January 23,
1998 consist solely of the accounts of NETCOM.

     In January 1998, the Company formed ICG Equipment,  a Colorado corporation,
for the principal purpose of providing financing of telecommunications equipment
and services to ICG Telecom Group,  Inc., an indirect wholly owned subsidiary of
ICG and provider of competitive  local exchange  services,  and its subsidiaries
("ICG Telecom").  Such financing is provided through ICG Equipment's purchase of
telecommunications  equipment,  software,  network capacity and related services
from original equipment manufacturers, providers of intercity network facilities
and ICG  Telecom,  and  subsequent  lease of such  assets  to ICG  Telecom.  The
equipment  and  services  provided to ICG  Telecom  are  utilized to upgrade and
expand ICG's network  infrastructure.  Management  believes that all leasing and
other  arrangements  between  ICG  Equipment  and ICG Telecom  contain  fair and
reasonable  terms and are  intended to be  conducted on the basis of fair market
value and on  comparable  terms that the Company  would be able to obtain from a
comparable   third  party.  ICG  Equipment   completed  its  first   significant
transaction on September 30, 1998 and, accordingly,  ICG Equipment's  operations
prior to that date are not  significant.  During the second half of 1998 through
September 30, 2000,  ICG Equipment  entered into a series of agreements  whereby
ICG Equipment  purchased  telecommunications  equipment and fiber optic capacity
from and for ICG Telecom and leased back the same  telecommunications  equipment
and fiber optic capacity to ICG Telecom under  operating  leases.  Additionally,
under master lease agreements between ICG Equipment and ICG Telecom, ICG Telecom
is  required  to pay ICG  Equipment  a monthly  lease  service  fee based on the
average  monthly  balance of assets  purchased by ICG Equipment and intended for
future lease to ICG Telecom,  but not yet placed into service.  At September 30,
2000,  ICG  Equipment had  approximately  $712.4  million of  telecommunications
equipment,  software,  network  capacity and related services under lease to ICG
Telecom and  approximately  $187.2  million of such assets  intended  for future
lease to ICG Telecom, but not yet placed into service.

Bankruptcy Proceedings

     During  the  quarter  ended  September  30,  2000  and  subsequent  to  the
quarter-end,  a series of financial and operational  events materially  impacted
ICG Communications,  Inc. and its subsidiaries ("ICG"), and,  consequently,  ICG
Services,  Inc.  (the  "Company").  Specifically,  these  events  reduced  ICG's
expected  revenue and cash flow  generation  for the remainder of 2000 and 2001,
which in turn  jeopardized  the  Company's  ability to comply with its  existing
senior secured credit facility.  On November 14, 2000 (the "Petition Date"), ICG
and most of its subsidiaries  (including the Company) filed voluntary  petitions
for  protection  under  Chapter 11 of the United States  Bankruptcy  Code in the
Federal  District of Delaware in order to facilitate  the  restructuring  of the
Company's long-term debt, trade and other obligations.  ICG and its subsidiaries
(collectively  the "Debtors") are currently  operating as  debtors-in-possession
under the  supervision  of the United States  District Court for the District of
Delaware.  The bankruptcy  petitions were filed in order to preserve cash and to
give ICG and the Company the opportunity to restructure their debt.

     Under the  Bankruptcy  Code,  the  rights  and  treatment  of  pre-petition
creditors and shareholders are expected to be substantially altered. As a result
of these bankruptcy proceedings,  substantially all liabilities,  litigation and
claims  against the Debtors in existence at the Petition  Date are stayed unless
the stay is modified or lifted or payment has been  otherwise  authorized by the
Bankruptcy Court. At this time, it is not possible to predict the outcome of the
Chapter 11 cases in general or the effects of such cases on our business,  or on
the  interest  of  creditors  and  shareholders.  As a result of the  bankruptcy
filing,  all of the Company's  liabilities  incurred prior to the Petition Date,
including  certain secured debt, are subject to compromise.  No assurance can be
given that the Company will be successful in reorganizing its affairs within the
Chapter 11 bankruptcy proceedings.

     Further,  due to the  bankruptcy  filing and  related  events,  there is no
assurance  that  the  carrying  amounts  of  assets  will  be  realized  or that
liabilities will be liquidated or settled for the amounts recorded. The majority
of the Company's  revenue is generated from  intercompany  transactions with ICG
and its  subsidiaries.  As a result of ICG's bankruptcy  filings,  the Company's
future  revenues and  intercompany  obligations  could be  materially  adversely
impacted.  In addition,  a plan of reorganization,  or rejection thereof,  could
change the amounts reported in the financial  statements.  As a result, there is
substantial  doubt about the Company's  ability to continue as a going  concern.
The ability of the Company to continue as a going concern is dependent upon, but
not  limited  to,  formulation,   approval,   and  confirmation  of  a  plan  of
reorganization,  adequate sources of capital,  customer and employee  retention,
the ability to provide high quality services and the ability to sustain positive
results of operations and cash flows sufficient to continue to operate.

                                       16
<PAGE>

Summary of Third Quarter and Subsequent Events

     Chronology of Events

     During the third quarter,  ICG  significantly  lowered expected revenue and
cash  flow  derived  from  terminating   local  ISP  traffic  based  on  several
significant regulatory and operational developments. Specifically, ICG announced
long-term  agreements with several ILECs that guaranteed future revenue,  albeit
at a lower rate.  Second, a decision from the Colorado Public Utility Commission
("PUC")  made in August 2000 denied  compensation  for  Internet-bound  traffic.
Finally,  as ICG increased the number of resold lines,  reciprocal  compensation
revenue  was  reduced,   as  these  resold  lines  do  not  generate  reciprocal
compensation revenue.

     In August 2000, ICG received letters from two, large Internet remote access
service ("IRAS") customers indicating that ICG's service and network performance
did not meet standards  contractually  agreed upon.  Absent quick  resolution of
these issues,  the customers  stated they either were considering or intended to
terminate contractual arrangements.

     On August 22, 2000, ICG's Chairman and Chief Executive  Officer,  J. Shelby
Bryan resigned each of these  positions and the Board of Directors  elected Carl
E. Vogel to the position of Chairman and Chief Executive  Officer.  Mr. Vogel is
of Liberty Media Group,  which invested $500 million in ICG through the purchase
of Series A Convertible  Preferred Stock in April 2000. Mr. Vogel is also Senior
Vice  President  of Liberty  Media Corp and Chief  Executive  Officer of Liberty
Satellite and Technology.

     The  combination  of lower  reciprocal  compensation  and the  reduction in
revenue  earned  from  IRAS   customers  for  the  third  and  fourth   quarters
substantially  reduced  expected revenue and EBITDA for the second-half of 2000.
Further,  reduced line commitments for the installation of IRAS products lowered
expected IRAS revenue and EBITDA for 2001. Therefore, on September 18, 2000, ICG
announced  that lower  expected  financial  results based on these events would,
absent obtaining  appropriate covenant waivers, put the Company in breach of its
$200 million senior secured  credit  facility.  Also at this time, ICG announced
that  it had a  revised  business  plan,  required  additional  funding  and was
exploring all strategic options involving ICG.

     On the  evening of  September  18,  2000,  Carl Vogel,  Chairman  and Chief
Executive  Officer  resigned  from his  position  as CEO and  from the  Board of
Directors.  In  addition,  Mr. Gary Howard  representing  Liberty  Media and Mr.
Thomas Hicks representing Hicks Muse resigned as directors.

     On September 19, 2000,  the Board of Directors  ratified the formation of a
Special Executive Committee to address the current events affecting the Company.
The Special  Executive  Committee is comprised of Mr. William Laggett,  Mr. John
Moorhead, Mr. Leontis Teryazos and Mr. Walter Threadgill.

     On September 26, 2000, the ICG Board of Directors  appointed Randall Curran
as Chief Executive Officer. In addition, the Company hired Wasserstein Perella &
Co., independent financial advisors, Zolfo Cooper, LLC, advisors that specialize
in  company  turnarounds  and  restructuring,  and  Gleacher  &  Co.,  financial
advisors.

     On September 29, 2000, the Company  announced that it had reached agreement
with its senior  lenders to receive  waivers  on  potential  defaults  under its
senior secured credit facility.  The Company's  lenders allowed a 60-day waiver,
and as part of this agreement, required payment of 50%, or $89.7 million, of the
outstanding balance of the facility as of September 30, 2000.

     During the third quarter and  subsequent  thereto,  ICG attempted to obtain
additional  funding while at the same time cutting all capital  expenditures and
minimizing  operating  expenditures  in order to  maximize  cash flow.  However,
consistent  with the  capital  markets  reluctance  to  provide  funding  to the
telecommunications industry, the capital markets previously open to ICG withdrew
interest.  In addition,  in response to events and announcements made during the
third  quarter,   the  value  of  ICG's  equity  and  public  debt  dramatically
deteriorated  in price  during the third  quarter.  In  combination,  sources of
available capital quickly diminished.

                                       17
<PAGE>

     On November 14, 2000, the Company filed for Chapter 11 protection.  Also on
that day, ICG  announced  that it had  obtained a  commitment  letter which will
provide ICG debtor-in-possession financing for a minimum of $200 million and the
potential  for an  additional  $150 million if certain  criteria  are met.  This
debtor-in-possession  financing is subject to customary  pre-closing  conditions
and is contingent upon Bankruptcy Court approval.  As of mid-November  2000, ICG
is continuing operations and developing a formal plan of reorganization.

Status of Operations and Reorganization Plan

     During the  pendancy of the Debtors  Chapter 11 cases,  ICG and the Company
expect to provide  on-going  service to their  customers  while  implementing  a
revised strategy intended to meet customer  commitments and maximize  short-term
cash flow.  Operations  are expected to focus on existing  markets where ICG has
capacity,  allowing ICG to add customers for nominal incremental cost and earn a
better return on existing assets.  In addition,  ICG intends to focus on product
sales that utilize  existing  infrastructure  to reduce capital  required in the
short-term.  In general, ICG will scale its geographic expansion and delivery of
new  products  to  better   match  its   technical   capabilities   and  capital
availability.  ICG's 22-city expansion plan originally  scheduled for completion
at year-end 2000 will be postponed.

     Due  to the  event  described  above,  the  Company  is  considering  if an
impairment  of assets  has  occurred  under  SFAS No.  121  "Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". As
the Company is currently undergoing a reorganization,  there is not a definitive
business plan in place with which to determine if an impairment has occurred or,
if an impairment has occurred,  the amount of such impairment.  As a result, the
Company has not reduced the  carrying  values of its assets in the  accompanying
consolidated financial statements.

Service Offerings

     On February 17, 1999, the Company sold certain of the operating  assets and
liabilities  of NETCOM to  MindSpring  Enterprises,  Inc.,  an Internet  service
provider ("ISP") located in Atlanta, Georgia and predecessor to EarthLink,  Inc.
("MindSpring"), for total proceeds of $245.0 million, and on March 16, 1999, the
Company sold all of the capital  stock of NETCOM's  international  operations in
Canada  and the  United  Kingdom  to other  unrelated  third  parties  for total
proceeds  of  approximately  $41.1  million.  In  conjunction  with  the sale to
MindSpring, the legal name of the NETCOM subsidiary was changed to ICG NetAhead,
Inc.  ("NetAhead").  NetAhead has retained the domestic Internet backbone assets
formerly owned by NETCOM.  NetAhead is utilizing the retained network  operating
assets to provide  wholesale  Internet access and enhanced  network  services to
MindSpring and other ISPs, ICG Telecom and other telecommunications providers.

     NetAhead  provides network capacity and enhanced data services to ISPs, ICG
Telecom and other telecommunications  providers. In December 1998, ICG announced
plans to offer  several new network  services  available to its business and ISP
customers  which utilize ICG's and,  consequently,  NetAhead's  nationwide  data
network and service  capabilities  to carry  out-of-region  traffic and enhanced
data services  provided.  Modemless  remote access service ("RAS") also known as
managed modem service,  allows NetAhead to provide modem access at ICG's and the
Company's  switch  locations,  thereby  eliminating  the need for ISPs to deploy
modems  physically  at each of their  POPs.  RAS  benefits  the ISPs by reducing
capital  expenditures and shifting network  management  responsibility  from the
ISPs to  NetAhead.  NetAhead  also  provides  transport  services to deliver all
Internet  protocol (IP) data packets  either  directly to the ISP, if the ISP is
not collocated at the telecommunications provider's local switch, or directly to
the Internet,  bypassing the ISP.  Additionally,  through its network operations
center,  NetAhead  monitors  the usage of each line and is  responsible  for the
administration of all network repair and maintenance.

                                       18
<PAGE>
RESULTS OF OPERATIONS

     The following  table  provides  certain  statement of  operations  data and
certain  other  financial  data for the Company for the periods  indicated.  The
table also presents revenue, cost of services and expenses, operating income and
EBITDA as a percentage of the Company's revenue.
<TABLE>
<CAPTION>
                                  Three months ended September 30, Nine months ended September 30,
                                    ------------------------------ ------------------------------
                                         1999            2000           1999            2000
                                    -------------- --------------- -------------- ---------------
                                       $       %       $      %       $      %       $       %
                                    --------- ----- -------- ----- -------- ----- --------  ----
                                                             (unaudited)
                                                           (in thousands)
 Statement of Operations Data:
<S>                                 <C>        <C> <C>         <C> <C>       <C> <C>        <C>
 Revenue                            32,844     100   67,547    100   67,488  100  176,741    100
 Cost of services and expenses:
  Cost of services                   1,116       3   15,210     23    2,550    4  38,456      22
  Selling, general and
   administrative expenses             588       2    2,168      3    1,424    2   6,128       4
  Depreciation                      14,925      46   35,974     53   35,868   53  78,392      45
   Net loss on disposal of
    long-lived assets                    -       -      934      1        -    -     934       -
                                    --------- ----- -------- -----  -------- ----- --------  ----
    Total cost of services and
     expenses                       16,629      51   54,286     80   39,842   59  123,910     71
      Operating income              16,215      49   13,261     20   27,646   41   52,831     29

 Other Data:
 Net cash provided (used)  by
  operating activities             (24,584)         176,315         (18,249)      244,173
 Net cash used by investing
  activities                      (104,793)        (164,417)       (121,308)     (267,518)
 Net cash provided (used) by
  financing activities              73,602         (166,374)         71,183        12,337
 EBITDA (1)                         31,140      95   50,169     75   63,514   94  132,157     75
 Capital expenditures of
  continuing operations (2)         88,914           192,563         385,903      516,456
</TABLE>

     (1)  EBITDA consists of earnings (loss) from continuing  operations  before
          interest expense, income taxes,  depreciation and amortization,  other
          expense,  net and  accretion  and  preferred  dividends  on  preferred
          securities of  subsidiaries,  or otherwise  defined as operating  loss
          plus  depreciation and amortization.  EBITDA (before  nonrecurring and
          noncash charges) represents EBITDA before certain nonrecurring charges
          such as the net loss  (gain) on  disposal  of  long-lived  assets  and
          other,   net  operating   costs  and  expenses,   including   deferred
          compensation.  EBITDA  and EBITDA  (before  nonrecurring  and  noncash
          charges) are provided  because they are measures  commonly used in the
          telecommunications  industry.  EBITDA and EBITDA (before  nonrecurring
          and noncash  charges) are presented to enhance an understanding of the
          Company's  operating  results and are not intended to  represent  cash
          flows or results of operations in accordance  with generally  accepted
          accounting  principles ("GAAP") for the periods indicated.  EBITDA and
          EBITDA (before  nonrecurring and noncash charges) are not measurements
          under GAAP and are not necessarily  comparable  with similarly  titled
          measures of other companies. Net cash flows from operating,  investing
          and financing activities of continuing  operations as determined using
          GAAP are also presented in Other Data.

     (2)  Capital  expenditures include assets acquired with cash, under capital
          leases, and pursuant to indefeasible right of use ("IRU) agreement.

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
                                     Three Months Ended September 30,
                                  ---------------------------------------
                                        1999                 2000
                                  ------------------  -------------------
                                     $         %         $          %
                                  --------  --------  --------   --------
                                         ($ values in thousands)
Revenue:
 From services provided to ICG     32,333     98       63,057      94
   Other                              511      2        4,490       6
                                  --------  --------  --------   --------
     Total Revenue                 32,844     100      67,547      100
                                  ========  ========  ========   ========


Cost of services                    1,116      3       15,210      23
                                  ========  ========  ========   ========
Selling, general and
 administrative:
   Amounts allocated from ICG         201      1        1,477       2

                                       19
<PAGE>

                                     Three Months Ended September 30,
                                  ---------------------------------------
                                        1999                 2000
                                  ------------------  -------------------
                                     $         %         $          %
                                  --------  --------  --------   --------
                                         ($ values in thousands)

   Other                              387      1          691       1
                                  --------  --------  --------   --------
      Total SG&A                      588      2        2,168       3
                                  ========  ========  ========   ========
Depreciation                       14,925     46       35,974      54
                                  ========  ========  ========   ========

Revenue

      A  significant  portion  of the  Company's  revenue  is  through  services
provided to ICG. Revenue earned from the services  provided to ICG can be broken
out as follows:

                                          Three Months Ended September 30,
                                       ---------------------------------------
                                             1999                 2000
                                       ------------------  -------------------
                                          $         %         $          %
                                       --------  --------  --------   --------
                                              ($ values in thousands)
Revenue from services provided to ICG:
   Operating lease revenue              26,740     83       35,804      57
   Lease service fee revenue             4,372     14        6,812      11
    Corporate headquarters lease
     revenue                             1,221      3        1,258       1
    NetAhead revenue with DataChoice
     (a subsidiary of ICG)                   -      -       19,163      31
    NetAhead revenue with ICG                -      -           20       -
                                       --------  --------  --------   --------
     Total revenue from ICG             32,333     100      63,057      100
                                       ========  ========  ========   ========

     Revenue  recorded on  operating  leases of property  and  equipment  to ICG
increased  from $26.7  million for the three months ended  September 30, 1999 to
$35.8 for the same period in 2000, a 34%  increase.  Leasing  revenue  increased
over the period as additional  assets were leased to ICG from September 30, 1999
through September 30, 2000.

     Lease service fee revenue  earned from ICG for the cost of carrying  assets
not yet placed into  service  increased  from $4.4  million for the three months
ended  September 30, 1999 to $6.8 million for the same period in 2000. The lease
service fee revenue  increased  primarily  due to the  increase in the amount of
assets not yet placed  into  service as well as the fact that the service fee is
earned at a rate of prime plus 4% (13.5% at  September  30,  2000) and the prime
rate increased from September 30, 1999 to September 30, 2000.

     The Company also received  rental income from ICG under the operating lease
for ICG's corporate headquarters, which the Company purchased and simultaneously
leased to ICG,  effective  January 1, 1999. For the three months ended September
30, 1999 and 2000, the Company  recorded  revenue on the operating lease for the
corporate headquarters of $1.2 million and $1.3 million, respectively.

     ICG Services also earned a significant  amount of revenue from a subsidiary
of ICG, DataChoice Network Services, L.L.C. ("DataChoice"), for DataChoice's use
of NetAhead's RAS assets.  During the three months ended September 30, 2000, the
Company earned $19.2 million in this manner.

     Additionally,  the  increase  in  revenue  during  the three  months  ended
September  30, 2000 over 1999 is also due to the  recognition  of  approximately
$4.4  million of revenue for the three  months  ended  September  30, 2000 which
prior to February 17, 2000 had been offset against the deferred gain on the sale
of NETCOM assets.

Cost of services

     Cost of services was $1.1 million for the three months ended  September 30,
1999 and $15.2 million for the same period in 2000.  Costs of services  includes
line costs and other direct costs of NetAhead associated with NetAhead's and ICG
Telecom's joint service  offering of IP telephony  services.  Additionally,  the


                                       20
<PAGE>

increase in cost of services  during the three months ended  September  30, 2000
over 1999 is due to the recognition of approximately  $15.2 million of operating
expenses for the three months ended  September  30, 2000 which prior to February
17, 2000 had been offset against the deferred gain on the sale of NETCOM assets.

Selling, general and administrative expenses

     Selling,  general and  administrative  ("SG&A") expenses were approximately
$0.6 million for the three months ended  September 30, 1999 and $2.2 million for
the same period in 2000. SG&A expenses include allocations of a portion of ICG's
general and  administrative  expenses  for  certain  direct and  indirect  costs
incurred by ICG on behalf of the Company. Such allocations were $0.2 million and
$1.5  million,  representing  34% and 68% of total SG&A  expenses  for the three
months ended September 30, 1999 and 2000, respectively.  Remaining SG&A expenses
include general corporate  administrative  expenses,  including professional and
cash  management  fees.  Additionally,  the increase in SG&A expenses during the
three months ended  September  30, 2000 over 1999 is due to the  recognition  of
$0.3 million of SG&A expenses  which prior to February 17, 2000 had been off set
against the deferred gain on the sale of NETCOM assets.

Depreciation

     Depreciation  increased  from  $14.9  million  for the three  months  ended
September  30, 1999 to $36.0  million for the same period in 2000.  Depreciation
and amortization  consists primarily of depreciation of ICG Equipment's property
and equipment purchased from and for ICG Telecom and leased to ICG Telecom under
long-term  operating  leases,  in  addition  to  depreciation  of  property  and
equipment of  NetAhead.  The increase in  depreciation  is primarily  due to the
continued expansion of ICG Equipment's  operations as well as a reduction in the
overall weighted-average useful life of depreciable assets in service.

Interest expense

     Interest  expense  increased  from $18.5 million for the three months ended
September 30, 1999 to $37.4 million for the same period in 2000 (which  includes
$10.0 million in interest expense paid to ICG). Included in interest expense for
the three months ended  September  30, 1999 and 2000 was $15.9 million and $19.7
million  of  noncash  interest,  respectively.  Interest  expense  is  primarily
attributable  to the 10% Senior Discount Notes due 2008 (the "10% Notes") issued
in February 1998, the 9 7/8% Senior Discount Notes due 2008 (the "9 7/8% Notes")
issued in April 1998 and the senior  secured  financing  facility  (the  "Senior
Facility") completed in August 1999.

Interest income

     Interest  income  decreased  from $5.2  million for the three  months ended
September 30, 1999 to $3.1 million for the same period in 2000. During the three
months  ended  September  30, 1999,  the Company  earned  interest  from ICG for
invoices  paid  by  the  Company  on  behalf  of ICG  and  its  other  operating
subsidiaries.  The Company also earned interest on invested cash balances during
both the three months ended September 30, 1999 and 2000.

Share of net losses of equity investees

     ICG  Services  purchased  a 20% equity  interest in ICG Ohio LINX in August
1998 and a 49% equity  interest in ChoiceCom in March 1999. The Company's  share
of net losses of equity  investees for the three months ended September 30, 1999
consists of the Company's  share of net losses of ICG Ohio LINX, Inc. ("ICG Ohio
LINX") and ICG ChoiceCom  L.P.  ("ChoiceCom")  of $0.7 million and $2.7 million,
respectively.  For the same period in 2000, the Company's share of net losses of
equity  investees are comprised of the Company's share of net losses of ICG Ohio
LINX and ChoiceCom of $1.0 million and $4.4 million, respectively.

Loss before extraordinary gain

     Loss before  extraordinary  gain  increased from a loss of $0.5 million for
the three months ended  September 30, 1999 to loss of $26.4 million for the same
period in 2000 due to the  increase in revenue,  offset by  increases in cost of
services, depreciation and interest expense, as noted above.

                                       21
<PAGE>


NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999

                                     Nine months ended September 30,
                                  ---------------------------------------
                                        1999                 2000
                                  ------------------  -------------------
                                     $         %         $          %
                                  --------  --------  --------   --------
                                         ($ values in thousands)
Revenue:
  From services provided to ICG    66,724     99      159,466      91

  Other                               764      1       17,275       9
                                  --------  --------  --------   --------
     Total Revenue                 67,488     100     176,741      100
                                  ========  ========  ========   ========

Cost of services                    2,550      4       38,456      22
                                  ========  ========  ========   ========
Selling, general and
 administrative:
   Amounts allocated from ICG         687      1        4,620       2
   Other                              737      1        1,508       1
                                  --------  --------  --------   --------
      Total SG&A                    1,424      2        6,128       3
                                  ========  ========  ========   ========
Depreciation                       35,868     53       78,392      45
                                  ========  ========  ========   ========

Revenue

      A  significant  portion  of the  Company's  revenue  is  through  services
provided to ICG. Revenue earned from the services  provided to ICG can be broken
out as follows:

                                          Nine months ended September 30,
                                       ---------------------------------------
                                             1999                 2000
                                       ------------------  -------------------
                                          $         %         $          %
                                       --------  --------  --------   --------
                                              ($ values in thousands)
Revenue from services provided to ICG:
   Operating lease revenue              53,459     80      101,168      64
   Lease service fee revenue             9,708     15       17,335      10
    Corporate headquarters lease
     revenue                             3,557      5        3,737       3
    NetAhead revenue with
     DataChoice (a subsidiary of ICG)        -      -       37,167      23
    NetAhead revenue with ICG                -      -           59       -
                                       --------  --------  --------   --------
     Total revenue from ICG             66,724     100     159,466      100
                                       ========  ========  ========   ========

     Revenue  recorded on  operating  leases of property  and  equipment  to ICG
increased  from $53.5  million for the nine months ended  September  30, 1999 to
$101.2 for the same period in 2000, an 89% increase.  Leasing revenue  increased
over the period as additional  assets were leased to ICG Telecom from  September
30, 1999 through September 30, 2000.

     Lease service fee revenue  earned from ICG for the cost of carrying  assets
not yet placed  into  service  increased  from $9.7  million for the nine months
ended September 30, 1999 to $17.3 million for the same period in 2000. The lease
service fee revenue  increased  primarily  due to the  increase in the amount of
assets not yet placed  into  service as well as the fact that the service fee is
earned at a rate of prime plus 4% (13.5% at  September  30,  2000) and the prime
rate increased from September 30, 1999 to September 30, 2000.

     The Company also received  rental income from ICG under the operating lease
for ICG's corporate headquarters, which the Company purchased and simultaneously
leased to ICG,  effective  January 1, 1999. For the nine months ended  September
30, 1999 and 2000, the Company  recorded  revenue on the operating lease for the
corporate headquarters of $3.6 million and $3.7 million, respectively.

                                       22
<PAGE>

     ICG Services also earned a significant  amount of revenue from a subsidiary
of ICG, DataChoice, for DataChoice's use of NetAhead RAS assets. During the nine
months ended  September  30,  2000,  the Company  earned  $37.2  million in this
manner.

     Additionally,  the  increase  in  revenue  during  the  nine  months  ended
September  30, 2000 over 1999 is also due to the  recognition  of  approximately
$17.0  million of revenue for the nine  months  ended  September  30, 2000 which
prior to February 17, 2000 had been offset against the deferred gain on the sale
of NETCOM assets.

Cost of services

     Cost of services was $2.6 million for the nine months ended  September  30,
1999 and $38.5  million for the same period in 2000.  Cost of services  includes
line costs and other direct costs of NetAhead associated with NetAhead's and ICG
Telecom's joint service  offering of IP telephony  services.  Additionally,  the
increase in cost of services  during the nine months  ended  September  30, 2000
over 1999 is due to the recognition of approximately  $38.4 million of operating
expenses  for the nine months ended  September  30, 2000 which prior to February
17, 2000 had been offset against the deferred gain on the sale of NETCOM assets.

Selling, general and administrative expenses

     Selling,  general and  administrative  ("SG&A") expenses were approximately
$1.4 million for the nine months ended  September  30, 1999 and $6.1 million for
the same period in 2000. SG&A expenses include allocations of a portion of ICG's
general and  administrative  expenses  for  certain  direct and  indirect  costs
incurred by ICG on behalf of the Company. Such allocations were $0.7 million and
$4.6  million,  representing  48% and 75% of total  SG&A  expenses  for the nine
months ended September 30, 1999 and 2000, respectively.  Remaining SG&A expenses
include general corporate  administrative  expenses,  including professional and
cash  management  fees.  Additionally,  the increase in SG&A expenses during the
nine months ended September 30, 2000 over 1999 is due to the recognition of $2.0
million of SG&A  expenses  which  prior to  February  17,  2000 had been  offset
against the deferred gain on the sale of NETCOM assets.

Depreciation

     Depreciation  increased  from  $35.9  million  for the  nine  months  ended
September  30, 1999 to $78.4  million for the same period in 2000.  Depreciation
consists  primarily of depreciation  of ICG  Equipment's  property and equipment
purchased  from and for ICG Telecom and leased to ICG  Telecom  under  long-term
operating  leases,  in addition to  depreciation  of property  and  equipment of
NetAhead.  The  increase  in  depreciation  is  primarily  due to the  continued
expansion of ICG  Equipment's  operations  as well as a reduction in the overall
weighted-average useful life of depreciable assets in service.

Interest expense

     Interest  expense  increased  from $51.6  million for the nine months ended
September 30, 1999 to $91.9 million for the same period in 2000 (which  includes
$11.9 million in interest expense paid to ICG). Included in interest expense for
the nine months ended  September  30, 1999 and 2000 was $46.3  million and $53.5
million  of  noncash  interest,  respectively.  Interest  expense  is  primarily
attributable  to the 10% Senior Discount Notes due 2008 (the "10% Notes") issued
in February 1998, the 9 7/8% Senior Discount Notes due 2008 (the "9 7/8% Notes")
issued in April 1998 and the senior  secured  financing  facility  (the  "Senior
Facility") completed in August 1999.

Interest income

     Interest  income  decreased  from $20.5  million for the nine months  ended
September  30, 1999 to $8.8  million for the same period in 2000 and  represents
net interest  income from ICG for invoices  paid by the Company on behalf of ICG
and its other operating  subsidiaries and repaid on a quarterly basis as well as
interest earned on invested cash balances.


                                       23
<PAGE>

Share of net losses of equity investees

     ICG  Services  purchased  a 20% equity  interest in ICG Ohio LINX in August
1998 and a 49% equity  interest in ChoiceCom in March 1999. The Company's  share
of net losses of equity  investees for the nine months ended  September 30, 1999
consists of the Company's share of net income of ICG Ohio LINX. of $1.6 million,
offset by the Company's  share of net losses of ChoiceCom of $6.3  million.  For
the same period in 2000, the Company's  share of net losses of equity  investees
are  comprised  of the  Company's  share  of net  losses  of ICG  Ohio  LINX and
ChoiceCom of $2.8 million and $12.3 million, respectively.

Loss before extraordinary gain

     Loss before  extraordinary  gain  increased  from $7.8 million for the nine
months ended September 30, 1999 to $45.0 million for the same period in 2000 due
to  the  increase  in  revenue,   offset  by  increases  in  cost  of  services,
depreciation and interest expense, as noted above.

Extraordinary gain on sales of operations of NETCOM

     The Company reported an  extraordinary  gain on the sales of the operations
of NETCOM during the nine months ended September 30, 1999 of $193.0 million, net
of  income  taxes  of  $6.4  million.  Offsetting  the  gain  on  the  sales  is
approximately  $16.6 million of net losses of operations of NETCOM from November
3, 1998 through the dates of the sales and  approximately  $35.5  million of the
proceeds was deferred and  recognized  over the one year term of the  MindSpring
Capacity Agreement.

LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 2000,  the Company had cash and short term  investments of
approximately  $32.2  million.  On November 14, 2000,  ICG announced that it had
obtained  a  commitment  letter  which  will  provide  ICG  debtor-in-possession
financing for a minimum of $200 million and the potential for an additional $150
million if certain  criteria  are met.  This  debtor-in-possession  financing is
subject to customary  pre-closing  conditions and is contingent  upon Bankruptcy
Court  approval.  The  debtor-in-possession  financing  terms  require  that the
Company's  Senior  Facility  be paid  off at the  time of the  first  borrowing.
Management   believes  that  current  cash,   short  term  investments  and  the
debtor-in-possession  financing,  along with  protection  under  bankruptcy law,
should  enable  ICG to fund  operations  through  the  bankruptcy  restructuring
process.

     At September  30, 2000,  the Company had  approximately  $957.6  million of
indebtedness outstanding.  As a result of filing for protection under bankruptcy
law, the Company is not  currently  paying any of the debt  service  obligations
that are  outstanding  as of November 14, 2000. In addition,  future  payment of
principal  and  interest on all of the  outstanding  indebtedness  is subject to
court  approval and may be  discharged  in whole or in part in  bankruptcy  with
proceeds from the court  approved plan of  reorganization  or liquidation of the
Company.  There can be no assurance  that any amounts owed to creditors  will be
paid or paid in full.

     In the event that plans or  assumptions  change or prove to be  inaccurate,
significant  unexpected expenses are incurred, or cash resources,  together with
borrowings  under  the  contemplated   financing   arrangements,   prove  to  be
insufficient to fund operations,  the Company may be required to seek additional
sources  of  capital  (or  seek   additional   capital   sooner  than  currently
anticipated).  There can be no guarantee,  however, that additional capital will
be available on reasonable terms, or at all.

Net Cash Provided (Used) By Operating Activities

     The Company's  operating  activities used $18.2 million and provided $244.2
million for the nine months ended September 30, 1999 and 2000, respectively. Net
cash used by operating  activities  during the nine months ended  September  30,
1999 is  primarily  due to net income,  which was more than offset by changes in
working capital items and noncash  expenses,  such as deferred  interest expense
and  depreciation.  Net cash  provided by operating  activities  during the nine
months ended  September 30, 2000 is primarily due to net losses,  which are more
than  offset  noncash   expenses,   such  as  deferred   interest   expense  and
depreciation.

                                       24
<PAGE>

Net Cash Used By Investing Activities

     The Company's  investing  activities used $121.3 million and $267.5 million
for the nine months ended  September 30, 1999 and 2000,  respectively.  Net cash
used by  investing  activities  for the nine  months  ended  September  30, 1999
includes  proceeds from the sales of the  operations of NETCOM of $252.9 million
and the sale of short-term  investments  and  marketable  and available for sale
securities of $51.6 million,  offset by the  acquisition of property,  equipment
and other assets of $379.7  million,  the purchase of the 49% equity interest in
ChoiceCom of $35.1  million and the purchase of  restricted  preferred  stock of
$11.0  million.  Net cash used by  investing  activities  during the nine months
ended  September  30,  2000 is  primarily  from  the  acquisition  of  property,
equipment and other assets of $286.9 million  partially  offset by proceeds from
the sale of short-term  investments and marketable  trading  securities of $21.1
million.  The Company  acquired  assets under capital leases and pursuant to IRU
agreement of $229.5 million during the nine months ended September 30, 2000.

Net Cash Provided By Financing Activities

     The Company's financing activities provided $71.2 million and $12.3 million
for the nine months ended  September  30, 1999 and 2000,  respectively.  For the
nine months ended September 30, 1999, the Company's financing activities consist
of the net proceeds from the issuance of long-term debt,  principal  payments on
long-term   debt  and  capital   leases  and   deferred   financing   and  lease
administration  costs.  Net cash provided by financing  activities  for the nine
months ended  September 30, 2000 is primarily  from the proceeds from the Senior
Facility and the  pre-payment  from ICG which are partially  offset by principal
payments on the IRU agreement, long-term debt and capital leases.

     On August 12,  1999,  ICG  Equipment  and  NetAhead  entered  into a $200.0
million senior secured financing facility (the "Senior Facility")  consisting of
a $75.0  million  term  loan,  a $100.0  million  term loan and a $25.0  million
revolving  line of credit.  As of  September  30,  2000,  the  Company had $84.4
million  outstanding  under the loans at weighted average interest rates ranging
from 9.26% to 10.06% for the nine months ended September 30, 2000.

     As of September 30, 2000,  the Company had an aggregate  accreted  value of
approximately  $704.7  million  outstanding  under  the 10% Notes and the 9 7/8%
Notes.

Other Cash Commitments and Capital Requirements

     The Company's  capital  expenditures  of continuing  operations,  including
assets  acquired with cash,  under capital  leases and pursuant to IRU agreement
were $385.9 million and $516.5  million for the nine months ended  September 30,
1999 and 2000,  respectively.  The Company is in the process of  evaluating  its
future capital expenditure  requirements in light of the bankruptcy  proceedings
and as part of the Company's restructuring plan.

     To facilitate  the expansion of its services and networks,  the Company has
entered into equipment purchase  agreements with various vendors under which the
Company has  committed to purchase a  substantial  amount of equipment and other
assets,  including a full range of switching systems, fiber optic cable, network
electronics,  software and  services.  If the Company  fails to meet the minimum
purchase level in any given year, the vendor may discontinue  certain discounts,
allowances and incentives otherwise provided to the Company.

     Under the debtor-in-possession  financing commitment, the Company's capital
expenditures will be significantly restricted.  Given this, there is substantial
doubt about the Company's ability to complete and place in service the Company's
$586.2 million construction in progress balance as of September 30, 2000.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's financial position and cash flows are subject to a variety of
risks in the normal course of business,  which include  market risks  associated
with  movements  in interest  rates and equity  prices.  The  Company  routinely
assesses  these risks and has  established  policies and  business  practices to
protect against the adverse effects of these and other potential exposures.  The
Company does not, in the normal  course of business,  use  derivative  financial
instruments for trading or speculative purposes.

                                       25
<PAGE>

Interest Rate Risk

     The Company's  exposure to market risk  associated with changes in interest
rates relates primarily to the Company's proposed debtor-in-possession financing
which, subject to changes, will incur interest at the LIBOR rate plus 4%.

                                       26
<PAGE>


                                     PART II


ITEM 1. LEGAL PROCEEDINGS

        On  November  14,  2000  the  Company  filed  voluntary   petitions  for
        protection under Chapter 11 of the United States  Bankruptcy Code in the
        Federal  District of  Delaware.  The Company is  currently  operating as
        debtors-in-possession under the supervision of the Bankruptcy Court. The
        bankruptcy  petition  was filed in order to  preserve  cash and give the
        Company the opportunity to restructure its debt.

        See  Notes 1 and 6 to the  Company's  unaudited  consolidated  financial
        statements for the quarterly  period ended  September 30, 2000 contained
        elsewhere in this Quarterly Report.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

        None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES AND USE OF PROCEEDS

        Due to the bankruptcy  proceedings  discussed in note 1 to the Company's
        unaudited  consolidated  financial  statements for the nine months ended
        September  30, 2000,  the Company is currently in default  under the 10%
        Notes, 9 7/8% Notes, and the Senior Secured Facility.

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

        None.

ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K

        (A) Exhibits.

            (10)  Material Contracts.

                  10:1:  Amendment and Waiver No. 4 to the Loan Documents, dated
                         as of September 29, 2000,  among ICG  Equipment,  Inc.,
                         ICG  NetAhead,  Inc.,  ICG  Services,  Inc., as Parent,
                         certain  Initial Lender  Parties party thereto,  Morgan
                         Stanley Senior Funding,  Inc., as Sole  Book-Runner and
                         Lead  Arranger,  Royal  Bank of Canada,  as  Collateral
                         Agent  and as  Administrative  Agent  for  such  Lender
                         Parties, Bank of America,  N.A., as Documentation Agent
                         and Barclays Bank Plc, as Co-Documentation Agent.

            (27)  Financial Data Schedule.

                  27.1:  Financial  Data Schedule of ICG Services,  Inc. for the
                         nine months ended September 30, 2000.

        (B) Reports on Form 8-K.

            (i)   Current Report on Form 8-K dated September 18, 2000, regarding
                  the announcement of a revised business plan.


                                       27
<PAGE>


                                INDEX TO EXHIBIT
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



<PAGE>


                                INDEX TO EXHIBITS

10.1 Amendment and Waiver No. 4 to the Loan Documents, dated as of September 29,
     2000, among ICG Equipment, Inc., ICG NetAhead, Inc., ICG Services, Inc., as
     Parent, certain Initial Lender Parties party thereto, Morgan Stanley Senior
     Funding, Inc., as Sole Book-Runner and Lead Arranger, Royal Bank of Canada,
     as Collateral  Agent and as  Administrative  Agent for such Lender Parties,
     Bank of America,  N.A.,  as  Documentation  Agent and Barclays Bank Plc, as
     Co-Documentation Agent.

27.1:Financial  Data  Schedule of ICG  Services,  Inc. for the nine months ended
     September 30, 2000.


<PAGE>


                                  EXHIBIT 10.1

Amendment  and Waiver No. 4 to the Loan  Documents,  dated as of  September  29,
2000,  among ICG  Equipment,  Inc., ICG NetAhead,  Inc., ICG Services,  Inc., as
Parent,  certain  Initial Lender  Parties party  thereto,  Morgan Stanley Senior
Funding,  Inc., as Sole Book-Runner and Lead Arranger,  Royal Bank of Canada, as
Collateral Agent and as  Administrative  Agent for such Lender Parties,  Bank of
America, N.A., as Documentation Agent and Barclays Bank Plc, as Co-Documentation
Agent.


<PAGE>


                                  EXHIBIT 27.1

Financial  Data  Schedule  of ICG  Services,  Inc.  for the  nine  months  ended
September 30, 2000.

<PAGE>


                                   SIGNATURES


      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, on December 11, 2000.



                                       ICG SERVICES, INC.



Date:  December 11, 2000               By: /s/ Randall C. Curran
                                           ------------------------------------
                                           Randall C. Curran
                                           Chief Executive Officer






Date:  December 11, 2000               By: /s/ John V. Colgan
                                           ------------------------------------
                                           John V. Colgan, Vice President of
                                           Finance and Controller
                                           (Principal Accounting Officer)