UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                   For the quarterly period ended June 30, 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 August 11,  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.






                                        1

<PAGE>

                                TABLE OF CONTENTS

PART I ....................................................................   3
      ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ...........................   3
              Consolidated Balance Sheets as of December 31, 1999 and June
                30, 2000 (unaudited).......................................   3
              Consolidated Statements of Operations for the Three Months
                and Six Months Ended June 30, 1999 and 2000 (unaudited)....   5
              Consolidated Statement of Stockholder's Equity for the Six
                Months Ended June 30, 2000 (unaudited)  ...................   6
              Consolidated Statements of Cash Flows for the Six Months
                Ended June 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 ...................................  15
      ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..  27

PART II ...................................................................  28
      ITEM 1. LEGAL PROCEEDINGS ...........................................  28
      ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ...................  28
      ITEM 3. DEFAULTS UPON SENIOR SECURITIES .............................  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

               December 31, 1999 and June 30, 2000 (unaudited)

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

   Current assets:
     Cash and cash equivalents                   $    43,222       186,690
     Short-term investments available for sale        10,442             -
     Receivables (note 5):
       Trade, net of allowance for doubtful
         accounts of $0.0 million and $0.6
         million at December 31, 1999 and June 30,
         2000, respectively, including amounts
         due from ICG                                 74,064         92,496
       Due from ICG                                  128,893              -
       Other                                             500         10,634
                                                 ------------   ------------
                                                     203,457        103,130
                                                 ------------   ------------

     Prepaid expenses, deposits and inventory          2,942          6,415
                                                 ------------   ------------

       Total current assets                          260,063        296,235
                                                 ------------   ------------

   Property and equipment                            916,953      1,252,268
     Less accumulated depreciation                   (64,273)      (110,017)
                                                 ------------   ------------
       Net property and equipment                    852,680      1,142,251
                                                 ------------   ------------

   Restricted cash                                     1,030          1,272
   Investment in partnership interests, common
     stock and restricted and exchangeable
     preferred stock                                  11,250          2,400
   Investments, accounted for under the equity
      method                                          41,152         31,499
   Deferred financing and lease administration
     costs, net of accumulated amortization of
     $3.9 million and $5.5 million at December
     31, 1999 and June 30, 2000, respectively         20,663         20,065
   Other assets                                          919            829
                                                 ------------   ------------
     Total assets                                $ 1,187,757      1,494,551
                                                 ============   ============
                                                                (Continued)


                                        3

<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

              Consolidated Balance Sheets (unaudited), Continued

                                                   December 31,     June 30,
                                                       1999           2000
                                                   --------------  ------------
Liabilities and Stockholder's Equity                     (in thousands)
------------------------------------

Current liabilities:
  Accounts payable                                   $   113,372      38,442
  Pre-payment from ICG, net(note 5)                            -     244,103
  Payable pursuant to IRU agreement                      135,322      84,516
  Accrued liabilities                                     38,718      14,439
  Deferred gain on sale (note 3)                           5,475           -
  Current portion of capital lease obligations             1,951      40,655
  Current portion of long-term debt (note 4)                 750         750
                                                   --------------  ------------
       Total current liabilities                         295,588     422,905
                                                   --------------  ------------

Capital lease obligations, less current portion            5,784      76,646
Long-term debt, net of discount, less current
  portion (note 4)                                       767,167     894,370
Other long-term liabilities                                2,500       2,500
                                                   -------------- ------------
       Total liabilities                               1,071,039   1,396,421
                                                   -------------- ------------

Stockholder's equity:
  Common stock, $.01 par value, 1,000 shares
   authorized; 10 shares issued and outstanding
   at December 31, 1999 and June 30, 2000                      -           -
  Additional paid-in capital                             129,402     129,402
  Accumulated deficit                                    (12,684)    (31,272)
                                                   --------------  ------------
       Total stockholder's equity                        116,718      98,130
                                                   --------------  ------------

Commitments and contingencies (note 6)

      Total liabilities and stockholder's equity   $   1,187,757   1,494,551
                                                   ==============  ============

         See accompanying notes to consolidated financial statements.

                                        4

<PAGE>

                       ICG SERVICES, INC. AND SUBSIDIARIES

              Consolidated Statements of Operations (unaudited)
           Three Months and Six Months Ended June 30, 1999 and 2000

<TABLE>
<CAPTION>

                                                            Three months ended        Six months ended
                                                                 June 30,                 June 30,
                                                         -------------------------  ------------------------
                                                           1999         2000        1999        2000
                                                         ----------- -------------  ------------ -----------
                                                                            (in thousands)
<S>                                                      <C>              <C>          <C>         <C>
Revenue
  From services provided to ICG (note 5)                 $   19,789       56,954        34,392      96,410
  Other                                                         252        8,413           252      12,783
                                                         ------------- ------------ ----------  ------------
    Total Revenue                                            20,041       65,367        34,644     109,193
                                                         ------------- ------------ ----------  ------------

Cost of services and expenses:
  Cost of services                                              848       13,800         1,434      23,246
  Selling, general and administrative expenses:                   -
    Amounts allocated from ICG (note 5)                         201          994           485       2,233
    Other                                                       246          873           351       1,726
  Depreciation                                               13,813       21,244        20,943      42,428
                                                         ------------- ------------ -----------  ------------
    Total cost of services and expenses                      15,108       36,911        23,213      69,633
                                                         ------------- ------------ -----------  ------------

    Operating  income                                         4,933       28,456        11,431      39,560

Other income (expense):
  Interest expense:
    Amounts due  to ICG (note 5)                                  -       (1,896)            -      (1,896)
    Other                                                   (17,499)     (27,751)      (33,137)    (52,630)
  Interest income:
    Amounts earned from ICG (note 5)                          4,101            -        10,034       3,171
    Other                                                     2,866        1,813         5,248       2,565
  Other income (expense), net                                     -          116           439         295
                                                         ------------- -------------- ----------- ------------
                                                            (10,532)     (27,718)      (17,416)    (48,495)
                                                         ------------- -------------- ----------- ------------

Income (loss) before share of  losses of equity
   investees and extraordinary gain                          (5,599)         738        (5,985)     (8,935)
Share of net losses of equity investees                          (3)      (4,445)       (1,265)     (9,653)
                                                         ------------- -------------- ----------- ------------
Loss before extraordinary gain                               (5,602)      (3,707)       (7,250)    (18,588)
                                                         ------------- -------------- ----------- ------------
Extraordinary gain on sales of operations of
   NETCOM, net of income taxes of $6.4 million
   (note 3)                                                       -            -       193,029           -
                                                         ------------- -------------- ----------- ------------
     Net income (loss)                                   $   (5,602)      (3,707)      185,779     (18,588)
                                                         ============= ============== =========== ============

</TABLE>

         See accompanying notes to consolidated financial statements.

                                        5


<PAGE>


                       ICG SERVICES, INC. AND SUBSIDIARIES

                Consolidated Statement of Stockholder's Equity
                  Six Months Ended June 30, 2000 (unaudited)

<TABLE>
<CAPTION>

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

<S>                                <C> <C>     <C>           <C>           <C>
Balances at January 1, 2000        -   $    -  129,402       (12,684)      116,718
Net loss                           -        -        -       (18,588)      (18,588)
                                ------ ------- ---------   ------------   ----------
Balances at June 30, 2000          -   $    -  129,402       (31,272)       98,130
                                ====== ======= ==========  ============   ==========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                        6


<PAGE>


                       ICG SERVICES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

             Six Months Ended June 30, 1999 and 2000 (unaudited)

<TABLE>
<CAPTION>

                                                                                        Six months ended June 30,
                                                                                        -------------------------
                                                                                          1999           2000
                                                                                        -----------  ------------
                                                                                               (in thousands)
<S>                                                                                     <C>             <C>
Cash flows from operating activities:
    Net (loss) income                                                                   $ 185,779       (18,588)
    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                                                        (10,498)       (6,239)
      Share of net losses of equity investees                                               1,265         9,653
      Depreciation                                                                         20,943        42,428
      Provision for uncollectible accounts                                                      -           577
      Interest expense deferred and included in long-term debt                             29,566        32,577
      Amortization of deferred financing costs included in
        interest expense                                                                      879         1,240
      Amortization of deferred lease administration
       costs included in selling, general and
       administrative expenses                                                                146           281
      Gain on sale of securities                                                             (439)         (634)
      Other noncash expenses                                                                    -           301
      Change in operating assets and liabilities:
        Receivables                                                                       (18,492)      105,294
        Prepaid expenses, deposits and inventory                                               46        (1,060)
        Accounts payable and accrued liabilities                                           (9,831)      (97,972)
                                                                                        -----------   -----------
          Net cash provided by operating activities                                         6,335        67,858
                                                                                        -----------   -----------
Cash flows from investing activities:

    Acquisition of property, equipment and other assets                                  (290,799)     (117,293)
    Payments for construction of corporate headquarters                                         -        (5,492)
    Investment in equity investee                                                         (35,093)            -
    Investment in restricted preferred stock                                              (10,000)            -
    Proceeds from sales of operations of NETCOM, net of cash
        included in sale                                                                  252,881             -
    Sale of short-term investments available for sale                                      36,057        10,442
    Purchase of long-term investments                                                           -        (1,150)
    Proceeds from sale of short-term investments available for sale                        30,439        10,634
    Increase in restricted cash                                                                 -          (242)
                                                                                        -----------   -----------
      Net cash used by investing activities                                               (16,515)     (103,101)
                                                                                        -----------   -----------
Cash flows from financing activities:

    Proceeds from issuance of long-term debt                                                    -        95,000
    Net pre-payment from ICG                                                                    -       235,953
    Deferred financing and lease administration costs                                        (997)         (922)
    Principal payments on long-term debt                                                        -          (374)
    Principal payments on capital lease obligations                                        (1,422)       (1,217)
    Payments on IRU agreement                                                                   -      (149,729)
                                                                                        -----------   -----------
      Net cash provided (used) by financing activities                                     (2,419)      178,711
                                                                                        -----------   -----------
      Net increase (decrease) in cash and cash equivalents                                (12,599)      143,468
      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                                                $  96,674       186,690
                                                                                        ===========   ===========
                                                                                                      (continued)
</TABLE>

                                        7


<PAGE>



                       ICG SERVICES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows, Continued



<TABLE>
<CAPTION>

                                                             Six months ended June 30,
                                                             -------------------------
                                                                 1999         2000
                                                             -----------  ------------
                                                                  (in thousands)
<S>                                                       <C>               <C>
Supplemental disclosure of cash flows information of
  continuing operations:
     Cash paid for interest                               $     2,692       17,202
                                                            ===========  ============
     Cash paid for taxes                                  $       931       16,470
                                                            ===========  ============

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             $         -       98,147
    Assets acquired under capital leases                        6,190      108,453
                                                            -----------  ------------
        Total                                             $     6,190      206,600
                                                            ===========  ============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                        8


<PAGE>


                       ICG SERVICES, INC. AND SUBSIDIARIES

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

(1)  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  Communications,  Inc.,  a  Delaware  corporation  (ICG
     Communications  and its subsidiaries  are herein referred to as "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 (see note
     3). 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  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.

     The  Company's  objective  is to acquire  and invest in  telecommunications
     equipment,  software,  network capacity and businesses that are integral to
     ICG's business strategy. The Company intends to capitalize on the growth in
     demand  for  telecommunications  equipment  and  services  provided  by the
     Company.

(2)   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 six months
          ended June 30, 2000 are not necessarily indicative of the results that
          may be expected for the year ending December 31, 2000.

          All  significant  intercompany  accounts  and  transactions  have been
          eliminated in consolidation.
                                        9


<PAGE>


                       ICG SERVICES, INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements (Continued)

(2)   Significant Accounting Policies (continued)

     (b)  Recent Accounting Pronouncements

     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 SAB 101B,
     which delayed the implementation  date of SAB 101 for the Company until the
     quarter  ended  December  31,2000.  The  Company has not yet  assessed  the
     impact,  if any,  that SAB 101  might  have on its  financial  position  or
     results of  operations.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
     Financial   Accounting   Standards  No.  133,  "Accounting  for  Derivative
     Instruments  and Hedging  Activities"  ("SFAS 133").  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 the Effective Date of FASB
     Statement No. 133",  SFAS 133 is effective  for all fiscal years  beginning
     after June 15,  2000.  The  Company  will adopt SFAS 133  effective  at the
     beginning  of its fiscal year end 2001.  The Company  does not believe that
     the  adoption  of SFAS 133 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.

(3)   Sale of Assets and Discontinued Operations

       To better  focus its  efforts on its core  operations,  the  Company  has
       disposed of certain assets which  management  believes did not complement
       its  overall  business  strategy.  The  Company  will  from  time to time
       evaluate  all of its  assets  as to its  core  needs  and,  based on such
       analysis,  may sell or otherwise  dispose of assets which management does
       not believe complement its overall business strategy.

       NETCOM

       On November 3, 1998 the Company's  board of directors  adopted the formal
       plan to dispose of the  operations  of NETCOM.  Once this formal plan was
       adopted, all historical revenue, operating costs depreciation,  interest,
       and other costs of NETCOM's operations were classified as discontinued in
       the Company's consolidated statements of operations.

                                       10

<PAGE>

                      ICG SERVICES, INC. AND SUBSIDIARIES

               Notes to Consolidated Financial Statements (Continued)


(3)   Sale of Assets and Discontinued Operations (continued)

      On February 17, 1999, the Company sold certain of the operating assets and
      liabilities  of NETCOM to MindSpring  Enterprises,  Inc.,  predecessor  to
      EarthLink,  Inc.  ("MindSpring")  for total  proceeds  of $245.0  million.
      Assets and liabilities sold to MindSpring  included those directly related
      to the domestic operations of NETCOM's Internet dial-up,  dedicated access
      and Web site hosting  services.  The carrying value of the assets retained
      by the Company was approximately  $21.7 million,  including  approximately
      $17.5 million of network equipment, on February 17, 1999. The Company also
      retained  approximately  $11.3 million of accrued  liabilities and capital
      lease obligations.  Additionally,  on March 16, 1999, the Company sold all
      of the  capital  stock of  NETCOM's  international  operations  (including
      NETCOM Canada and NETCOM U.K.) for total proceeds of  approximately  $41.1
      million.

      In conjunction  with the sale to MindSpring,  the Company  entered into an
      agreement  to lease to  MindSpring  for a one-year  period the capacity of
      certain network  operating assets formerly owned by NETCOM and retained by
      the Company (the "MindSpring  Capacity  Agreement").  Under the agreement,
      MindSpring  utilized the Company's  network  capacity to provide  Internet
      access to the dial-up  services  customers  formerly  owned by NETCOM.  In
      addition,  the  Company  received  for a one-year  period 50% of the gross
      revenue earned by MindSpring from the dedicated access customers  formerly
      owned by NETCOM.  As the Company  expected to  generate  operating  losses
      under  the  MindSpring  Capacity  Agreement,  and the  terms  of the  sale
      agreement were dependent upon and negotiated in conjunction with the terms
      of the sale of the  operating  assets  of  NETCOM,  the  Company  deferred
      approximately  $35.5 million of the proceeds from the sale agreement to be
      applied  on a  periodic  basis to losses  incurred  under  the  MindSpring
      Capacity  Agreement.  Accordingly,  the  Company  did  not  recognize  any
      revenue,  operating costs or selling,  general and administrative expenses
      from  services  provided to  MindSpring  for the twelve  month term of the
      agreement  which expired  February 17, 2000.  Any  incremental  revenue or
      costs  generated  by other  customers,  or by other  services  provided to
      MindSpring  was  recognized  in the  Company's  consolidated  statement of
      operations as incurred.

      As discussed  above, the terms of the MindSpring  Capacity  Agreement were
      negotiated in  conjunction  with and were  dependent upon the terms of the
      sale of the  operating  assets  of NETCOM to  MindSpring.  As such,  these
      transactions are collectively  referred to as "Sale of Operating Assets of
      NETCOM".

                                       11
<PAGE>

                      ICG SERVICES, INC. AND SUBSIDIARIES

               Notes to Consolidated Financial Statements (Continued)

(4)   Long-term Debt

      Long-term debt is summarized as follows:

                                               December 31,       June 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 9.56% to 9.87% for the
        six months ended June 30, 2000           $ 79,625          174,250
      9 7/8% Senior discount notes, net of
        discount                                  293,925          308,439
      10% Senior discount notes, net of
        discount                                  361,290          379,354
      Mortgage loan payable with adjustable
        rate of interest (15.21% at June
        30, 2000) due in full on January
        31, 2013, secured by corporate
        headquarters                               33,077           33,077
                                             ---------------  ---------------
                                                  767,917          895,120
      Less current portion                           (750)            (750)
                                              ---------------  ---------------
                                              $   767,167          894,370
                                              ===============  ===============

(5)   Related Party Transactions

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

<TABLE>
<CAPTION>

                                                                    Three Months Ended      Six Months Ended
                                                                           June 30,               June 30,
                                                                    --------------------  ---------------------
                                                                        1999       2000       1999       2000
                                                                    ----------  --------  ---------  ----------
                                                                                   (in thousands)
 <S>                                                                 <C>          <C>       <C>         <C>
      Related Party Shared Services Activity:

         Net charges to (from) ICG, including
            pre-payments from ICG (a)                                $ 111,600    75,008    234,000     202,794
         Charges from ICG included in expenses (b)                        (200)     (994)      (500)     (2,233)

      Related Party Leasing Activity:
         Equipment purchased for ICG (c)                               219,900    58,019    284,000      97,965
         Value of new  equipment on lease to ICG (d)                    96,500    37,836    146,000      93,864
         Operating lease revenue (d)                                    15,600    34,797     26,700      65,365
         Lease service fee revenue (e)                                   3,000     5,524      5,300      10,523
         Corporate headquarters lease revenue (f)                        1,100     1,258      2,300       2,479

      Related Party Interest Income (g)                                  4,101         -     10,034       3,171
      Related Party Interest Expense (g)                                     -    (1,896)         -      (1,896)


</TABLE>

<TABLE>
<CAPTION>

                                       12

<PAGE>
                       ICG SERVICES, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)


(5)   Related Party Transactions (continued)
                                                                Three Months Ended      Six Months Ended
                                                                       June 30,               June 30,
                                                                --------------------  ---------------------
                                                                    1999       2000       1999       2000
                                                                  ----------  --------  ---------  ----------
                                                                                 (in thousands)
<S>                                                                 <C>       <C>        <C>        <C>
      Related Party Operational Activity:
         Installation & local access expenses (h)                   (1,400)        -     (2,800)         -
         DataChoice Revenue (i)                                          -    15,375          -     18,043

</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 three  months  ended  June 30,  2000,  the shared  services
          agreement  between  the  Company  and ICG was  amended  to  allow  for
          pre-payments   to  the   Company  in  order  to  offset  the   capital
          expenditures  made or to be  made by the  Company  on  behalf  of ICG.
          During the three months ended June 30,  2000,  the Company  received a
          pre-payment  in the amount of $300 million to pre-pay the  anticipated
          receivable  from ICG through  August 31, 2000.  All amounts  remaining
          outstanding  under the  pre-payments are included in due to ICG in the
          Company's consolidated balance sheet as of June 30, 2000.

     (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).

     (c)  ICG Equipment purchased certain telecommunications equipment both from
          and for ICG 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 June 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  $149.1  million and
          $185.5  million at June 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.

                                    13
<PAGE>
                       ICG SERVICES, INC. AND SUBSIDIARIES

             Notes to Consolidated Financial Statements (Continued)

(5)  Related Party Transactions (continued)

     (g)  Net  interest  income(expense)  accrued by the Company on  outstanding
          balances  due from or to ICG and its  Restricted  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
          RAS assets.

(6)  Commitments and Contingencies

     During the six months  ended June 30,  2000,  the  Company  formalized  two
     agreements  with  Cisco  Systems,  Inc.  for  financing  of future  capital
     expenditures.  The Company  believes  that the  financing  agreements  will
     better enable the Company to fund its scheduled  network  expansion through
     the purchase of Cisco equipment.  The Cisco credit  facilities  provide the
     Company with $180.0 million of financing with a three-year  repayment term.
     As of June 30, 2000, $99.1 million was drawn under the facilities.


     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.  In  addition,  the  agreements  may be  terminated  by either the
     Company or the vendor upon prior written notice.

     The Company has entered into certain commitments to purchase capital assets
     with an aggregate  purchase price of  approximately  $272.3 million at June
     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 Company's ability to
obtain financing necessary to fund its planned expansion,  the Company's lack of
operating  history,  the successful  implementation of the Company's strategy of
offering   wholesale   network   services   to  ISPs,   ICG  Telecom  and  other
telecommunications  providers and its lack of credit support from ICG that could
cause actual results to differ  materially from the forward-looking  statements.
The results of  operations  for the three and six months ended June 30, 1999 and
2000  represent  the  consolidated  operating  results  of the  Company  and its
subsidiaries.  See the unaudited condensed  consolidated financial statements of
the Company for the three and six months ended June 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.

COMPANY OVERVIEW

     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
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 June 30, 1998 and, accordingly,  ICG Equipment's operations prior
to that date are not  significant.  During the second half of 1998  through June
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 June 30, 2000,  ICG
Equipment had  approximately  $632.4  million of  telecommunications  equipment,
software,  network  capacity and related services under lease to ICG Telecom and
approximately  $185.5  million of such assets  intended  for future lease to ICG
Telecom, but not yet placed into service.

                                       15

<PAGE>

     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.

      In August 1998, ICG Telecom began offering enhanced telephony services via
IP technology. ICG Telecom currently offers this service in certain major cities
in the United  States,  which cities  account for a large part of the commercial
long  distance  market.  ICG  Telecom  carries  the IP traffic  over  NetAhead's
nationwide  data  network  and  terminates  a large  portion of the  traffic via
NetAhead's  POPs.  NetAhead charges ICG Telecom for calls carried and terminated
on NetAhead's network.

      The  Company  has and will  continue  to enter  into  agreements  with ICG
Telecom to provide network  services at negotiated  rates.  Management  believes
that all such  arrangements  have and will 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.
The Company is not presently  able to determine the impact that the offerings of
its newly developed  network  services will have on revenue or EBITDA in 2000 or
future years. The nature, volume and consideration received for network services
from ISPs and other telecommunications  providers as well as that received under
its agreements  with ICG Telecom are ultimately  dependent upon demand from ISPs
and other  telecommunications  providers.  Thus,  while ICG Telecom and NetAhead
believe  the  Internet  services  market  sector  will  benefit  from  these new
services,  there is no assurance  that ICG Telecom and NetAhead  will be able to
successfully  deploy and market  their new services  efficiently,  or obtain and
retain new customers in a competitive marketplace.

      The Company may acquire  telecommunications  and related  businesses  that
complement ICG's business  strategy to offer a wide array of  telecommunications
and related services primarily to  communications-intensive  business customers.
Additionally,  the Company may acquire  businesses  from ICG which ICG currently
owns and operates.  Any further  acquisitions would be primarily through the use
of cash on hand and the proceeds from securities offerings,  including offerings
of ICG  Common  Stock.  However,  there is no  assurance  that  acquisitions  at
favorable  prices  to the  Company  will  occur or that the  Company  will  have
sufficient sources of funding to make such  acquisitions.  The Company's results
of  operations  and  financial  condition  will change as the  operations of ICG
Equipment  and  NetAhead   become  more   significant   and  as  it  consummates
acquisitions, if any.

                                       16

<PAGE>

Sale of Assets and Discontinued Operations

      The Company has disposed of certain assets which  management  believes did
not complement its overall business strategy. The Company will from time to time
evaluate all of its assets as to its core needs and, based on such analysis, may
sell or otherwise dispose of assets which management does not believe complement
its overall business  strategy.  Following is a discussion of the Company's sale
of assets of NETCOM.

NETCOM

      On November 3, 1998 the  Company's  board of directors  adopted the formal
plan to dispose of the operations of NETCOM.  Once this formal plan was adopted,
all historical revenue, operating costs, depreciation, interest, and other costs
of  NETCOM's  operations  were  classified  as  discontinued  in  the  Company's
consolidated statements of operations.

      On February 17, 1999, the Company sold certain of the operating assets and
liabilities of NETCOM to MindSpring Enterprises, Inc., predecessor to EarthLink,
Inc. ("MindSpring") for total proceeds of $245.0 million. Assets and liabilities
sold to MindSpring included those directly related to the domestic operations of
NETCOM's Internet dial-up,  dedicated access and Web site hosting services.  The
carrying  value of the assets  retained by the Company was  approximately  $21.7
million, including approximately $17.5 million of network equipment, on February
17,  1999.  The Company also  retained  approximately  $11.3  million of accrued
liabilities and capital lease obligations.  Additionally, on March 16, 1999, the
Company  sold all of the  capital  stock of  NETCOM's  international  operations
(including  NETCOM Canada and NETCOM U.K.) for total  proceeds of  approximately
$41.1 million.

      In conjunction  with the sale to MindSpring,  the Company  entered into an
agreement to lease to MindSpring  for a one-year  period the capacity of certain
network  operating  assets  formerly owned by NETCOM and retained by the Company
(the "MindSpring Capacity Agreement"). Under the agreement,  MindSpring utilized
the  Company's  network  capacity  to  provide  Internet  access to the  dial-up
services customers  formerly owned by NETCOM. In addition,  the Company received
for a one-year  period 50% of the gross revenue  earned by  MindSpring  from the
dedicated access customers  formerly owned by NETCOM. As the Company expected to
generate operating losses under the MindSpring Capacity Agreement, and the terms
of the sale agreement were dependent upon and negotiated in conjunction with the
terms of the sale of the  operating  assets  of  NETCOM,  the  Company  deferred
approximately  $35.5  million  of the  proceeds  from the sale  agreement  to be
applied on a periodic basis to losses  incurred  under the  MindSpring  Capacity
Agreement.  Accordingly,  the Company did not recognize  any revenue,  operating
costs or selling,  general and administrative expenses from services provided to
MindSpring for the twelve month term of the agreement which expired February 17,
2000. Any incremental revenue or costs generated by other customers, or by other
services  provided to MindSpring  was  recognized in the Company's  consolidated
statement of operations as incurred.

      As discussed  above, the terms of the MindSpring  Capacity  Agreement were
negotiated in conjunction  with and were dependent upon the terms of the sale of
the operating assets of NETCOM to MindSpring.  As such,  these  transactions are
collectively referred to as "Sale of Operating Assets of NETCOM".

                                     17
<PAGE>

Financial Impacts of Asset Sales and Discontinued Operations

     The following table  illustrates the financial impacts of the sale ofassets
of NETCOM for the three and six months ended June 30, 1999 and 2000:

<TABLE>
<CAPTION>
                                                 Three Months Ended      Six Months Ended
                                                      June 30,               June 30,
                                                 --------------------   -------------------
                                                    1999       2000        1999      2000
                                                 ---------  ---------   ---------  --------
                                                            (in thousands)
<S>                                             <C>        <C>       <C>          <C>
Sale of Operating Assets of NETCOM:

  Extraordinary  gain recorded on the sale
     of NETCOM operations (1)                      $   -         -       193,029          -
  Taxes on sale of NETCOM operations                   -         -        (6,400)         -

  Losses  from   discontinued   operations
    offset against gain (including  losses
    from  November 3, 1998 - February  17,
    1999) (1)                                          -         -       (16,600)         -
  Recognition of Deferred Gain                     3,800         -        10,500      6,239
Summary Results of Operations  (February
  17, 2000 - June 30, 2000):
    Revenue                                            -      8,300            -     12,600
    Operating Costs                                    -    (13,800)           -    (23,200)
    SG&A                                               -       (700)           -     (1,700)
</TABLE>

(1)   Offsetting  the gain  recorded on the Sale of  Operating  Assets of NETCOM
      during the six months ended June 30, 1999 is  approximately  $16.6 million
      of net losses from operations of NETCOM from November 3, 1998 (the date on
      which the Company's board of directors  adopted the formal plan to dispose
      of the operations of NETCOM) through the dates of the sales.  Also, as the
      operations  sold were acquired by ICG in a transaction  accounted for as a
      pooling of interests, the gain on the sales of the operations of NETCOM is
      classified  as  an  extraordinary  item  in  the  Company's   consolidated
      statement of operations.


                                       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  (loss)
income and EBITDA as a percentage of the Company's revenue.
<TABLE>
<CAPTION>
                                      Three months ended June 30,    Six months ended June 30,
                                     ------------------------------ -----------------------------
                                         1999            2000           1999           2000
                                     -------------- --------------- -------------  --------------
                                       $       %       $      %      $      %       $       %
                                    --------- ----- -------- ----- ------- ----- --------- -----
                                                                     (unaudited)

 <S>                                <C>        <C>  <C>       <C>  <C>      <C>  <C>        <C>
 Statement of Operations Data:

 Revenue                            20,041     100  65,367    100  34,644   100  109,193    100
 Cost of services and expenses:
  Cost of services                     848       4  13,800     21   1,434     4   23,246     21
  Selling, general and
    administrative expenses            447       2   1,867      3     836     3    3,959      4
  Depreciation                      13,813      69  21,244     32  20,943    60   42,428     39
                                    --------- ----- -------- ----- ------- ----- --------- -----
    Total cost of services and
        expenses                    15,108      75  36,911     56  23,213    67   69,633     64
      Operating income               4,933      25  28,456     44  11,431    33   39,560     36

 Other Data:
 Net cash provided by operating
   activities                        2,715         110,817          6,335         67,858
 Net cash used by investing
   activities                     (147,136)        (56,080)       (16,515)      (103,101)
 Net cash provided (used) by
   financing activities                153         120,592         (2,419)       178,711
 EBITDA (1)                         18,746      94  49,700     76  32,374    93   81,988     75
 Capital expenditures of
   continuing operations (2)       229,175         210,167        296,989        323,893
</TABLE>

(1)  EBITDA  consists  of  earnings  (loss) from  continuing  operations  before
     interest, income taxes,  depreciation,  other expense, net and share of net
     losses of equity investees, or otherwise defined as operating income (loss)
     plus depreciation. EBITDA is provided because it is a measure commonly used
     in the  telecommunications  industry.  EBITDA is  presented  to  enhance an
     understanding  of the  Company's  operating  results and is not intended to
     represent cash flows or results of operations in accordance  with generally
     accepted accounting  principles ("GAAP") for the periods indicated.  EBITDA
     is not a  measurement  under GAAP and is 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  includes  assets  acquired with cash,  under capital
     leases and assets acquired pursuant to an indefeasible right of use ("IRU")
     agreement.  Capital  expenditures of discontinued  operations  includes the
     capital expenditures of NETCOM.

                                       19

<PAGE>

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999


                                             Three Months Ended June 30,
                                         ---------------------------------------
                                               1999                 2000
                                         ------------------  -------------------
                                            $         %         $          %
                                         --------  --------  --------   --------
                                             ($ values in thousands)
Revenue:
   From services provided to ICG          19,789     99       56,954      87
   Other                                     252      1        8,413      13
                                         --------  --------  --------   --------
     Total Revenue                        20,041    100       65,367     100
                                         ========  ========  ========   ========

Cost of services                             848      4       13,800      21
                                         ========  ========  ========   ========
Selling, general and administrative:
   Amounts allocated from ICG                201      1          994       2
   Other                                     246      1          873       1
                                         --------  --------  --------   --------
      Total SG&A                             447      2        1,867       3
                                         ========  ========  ========   ========
Depreciation and amortization             13,813     69       21,244      32
                                         =========  ========  ========  ========

Revenue

     A significant portion of the Company's revenue is through services provided
to ICG.  Revenue  earned from the services  provided to ICG be can broken out as
follows:
                                                   Three Months Ended June 30,
                                        ---------------------------------------
                                               1999                 2000
                                        ------------------  -------------------
                                           $         %         $          %
                                        --------  --------  --------   --------
                                                  ($ values in thousands)
Revenue from services provided to ICG:

   Operating lease revenue                15,644     79     34,797       61
   Lease service fee revenue               3,045     15      5,524       10
   Corporate headquarters lease revenue    1,100      6      1,258        2
   NetAhead revenue with DataChoice
      (a subsidiary of ICG)                    -      -     15,355       27
   NetAhead revenue with ICG                   -      -         20        -
                                         --------  --------  --------   --------
     Total revenue from ICG               19,789    100     56,954      100

     Revenue  recorded on  operating  leases of property  and  equipment  to ICG
increased  from $15.6  million for the three months ended June 30, 1999 to $34.8
for the same period in 2000, a 123% increase. Leasing revenue increased over the
period as  additional  assets  were  leased to ICG  Telecom  from June 30,  1999
through June 30, 2000.

     Lease service fee revenue  earned from ICG for the cost of carrying  assets
not yet placed into  service  increased  from $3.0  million for the three months
ended  June 30,  1999 to $5.5  million  for the same  period in 2000.  The lease
service fee revenue  increased  primarily because the service fee is earned at a
rate of prime plus 4% (13.5% at June 30, 2000) and the prime rate increased from
June 30, 1999 to June 30,  2000 as well as the  increase in the amount of assets
not yet placed into service.

     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 June 30,
1999 and 2000,  the  Company  recorded  revenue on the  operating  lease for the
corporate headquarters of $1.1 million and $1.3 million, respectively.

                                       20
<PAGE>

      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 June 30,  2000,  the
Company earned $15.4 million in this manner.

      Additionally,  the increase in revenue  during the three months ended June
30, 2000 over 1999 is also due to the recognition of approximately  $8.3 million
of revenue for the three  months ended June 30, 2000 which prior to February 17,
2000 had been offset against the deferred gain on the sale of NETCOM assets (see
further discussion in "Sale of Assets and Discontinued Operations" above).

Cost of services

      Cost of services was $0.8 million for the three months ended June 30, 1999
and $13.8 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
increase in cost of services  during the three  months  ended June 30, 2000 over
1999 is due to the  recognition  of  approximately  $13.8  million of  operating
expenses  for the three  months  ended June 30, 2000 which prior to February 17,
2000 had been offset against the deferred gain on the sale of NETCOM assets (see
further discussion in "Sale of Assets and Discontinued Operations" above).

Selling, general and administrative expenses

      Selling,  general and administrative  ("SG&A") expenses were approximately
$0.4  million for the three  months ended June 30, 1999 and $1.9 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
$1.0  million,  representing  45% and 53% of total SG&A  expenses  for the three
months  ended June 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 June 30, 2000 over 1999 is due to the  recognition  of $0.7
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 (see further  discussion
in "Sale of Assets and Discontinued Operations" above).

Depreciation

      Depreciation  increased from $13.8 million for the three months ended June
30, 1999 to $21.2  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. The Company's depreciation expense
will  continue  to  increase  as  NetAhead  purchases  additional  property  and
equipment,  ICG  Equipment  places in service  equipment  that has already  been
purchased  and  purchases  additional  property and equipment for lease to ICG's
other operating subsidiaries.

Interest expense

      Interest  expense  increased from $17.5 million for the three months ended
June 30, 1999 to $29.6 million for the same period in 2000 (which  includes $1.9
million in interest  expense paid to ICG).  Included in interest expense for the
three months ended June 30, 1999 and 2000 was $15.4 million and $17.1 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.  The  Company's  interest  expense  will  continue to
increase as the principal amounts of the indebtedness  outstanding under the 10%
Notes and the 9 7/8% Notes  increase due to the  accretion of noncash  interest.
The 10% Notes and the 9 7/8%  Notes do not begin to pay  interest  in cash until
2003.


                                       21
<PAGE>

Interest income

      Interest  income  decreased  from $7.0  million for the three months ended
June 30,  1999 to $1.8  million  for the same  period in 2000.  During the three
months ended June 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 June 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  June 30,  1999
consists of the Company's  share of net income of ICG Ohio LINX, Inc. ("ICG Ohio
LINX") of $2.8  million,  offset  by the  Company's  share of net  losses of ICG
ChoiceCom L.P.  ("ChoiceCom") of $2.8 million.  For the same period in 2000, the
Company's share of net losses are comprised of the Company's share of net losses
of ICG Ohio LINX, Inc. ("ICG Ohio LINX") of $1.0 million and the Company's share
of net losses of ICG ChoiceCom L.P. ("ChoiceCom") of $3.4 million.

Loss before extraordinary gain

     Losses before  extraordinary gain decreased from a loss of $5.6 million for
the three months ended June 30, 1999 to loss of $3.7 million for the same period
in 2000 due to the  increase  in revenue,  and  increases  in cost of  services,
depreciation and interest expense, as noted above.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999

                                        Six Months Ended June 30,
                                  ---------------------------------------
                                        1999                 2000
                                  ------------------  -------------------
                                     $         %         $          %
                                  --------  --------  --------   --------
                                         ($ values in thousands)
Revenue:
   From services provided to ICG   34,392     99       96,410      88
   Other                              252      1       12,783      12
                                  --------  --------  --------   --------
     Total Revenue                 34,644    100      109,193     100
                                  ========  ========  ========   ========

Cost of services                    1,434      4       23,246      21
                                  ========  ========  ========   ========

Selling, general and administrative:
   Amounts allocated from ICG         485      2        2,233       2
   Other                              351      1        1,726       2
                                  --------  --------  --------   --------
      Total SG&A                      836      3        3,959       4
                                  ========  ========  ========   ========
Depreciation and amortization      20,943     60       42,428      39
                                  ========  ========  ========   ========



                                     22
<PAGE>

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:
                                             Six Months Ended June 30,
                                       ---------------------------------------
                                             1999                 2000
                                       ------------------  -------------------
                                          $         %         $          %
                                       --------  --------  --------   --------
                                              ($ values in thousands)
Revenue from services provided to ICG:

   Operating lease revenue              26,749     78       65,365      68
   Lease service fee revenue             5,320     15       10,523      10
   Corporate headquarters lease revenue  2,323      7        2,479       3
   NetAhead revenue with DataChoice
      (a subsidiary of ICG)                  -      -       18,004      19
   NetAhead revenue with ICG                 -      -           39       -
                                       --------  --------  --------   --------
     Total revenue from ICG             34,392    100       96,410     100

     Revenue  recorded on  operating  leases of property  and  equipment  to ICG
increased from $26.7 million for the six months ended June 30, 1999 to $65.4 for
the same period in 2000, a 145%  increase.  Leasing  revenue  increased over the
period as  additional  assets  were  leased to ICG  Telecom  from June 30,  1999
through June 30, 2000.

     Lease service fee revenue  earned from ICG for the cost of carrying  assets
not yet placed into service increased from $5.3 million for the six months ended
June 30, 1999 to $10.5  million for the same period in 2000.  The lease  service
fee revenue  increased  primarily because the service fee is earned at a rate of
prime plus 4% (13.5% at June 30,  2000) and the prime rate  increased  from June
30,  1999 to June 30,  2000 as well as the  increase in the amount of assets not
yet placed into service.

      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 six months ended June 30, 1999
and 2000, the Company  recorded revenue on the operating lease for the corporate
headquarters of $2.3 million and $2.5 million, respectively.

      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 six
months ended June 30, 2000, the Company earned $18.0 million in this manner.

      Additionally, the increase in revenue during the six months ended June 30,
2000 over 1999 is also due to the recognition of approximately  $12.6 million of
revenue for the six months  ended June 30, 2000 which prior to February 17, 2000
had been offset  against  the  deferred  gain on the sale of NETCOM  assets (see
further discussion in "Sale of Assets and Discontinued Operations" above).

Cost of services

      Cost of services  was $1.4  million for the six months ended June 30, 1999
and $23.2  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 six months ended June 30, 2000 over 1999
is due to the recognition of approximately  $23.2 million of operating  expenses
for the six months ended June 30, 2000 which prior to February 17, 2000 had been
offset  against the  deferred  gain on the sale of NETCOM  assets  (see  further
discussion in "Sale of Assets and Discontinued Operations" above).



                                       23
<PAGE>

Selling, general and administrative expenses

      Selling,  general and administrative  ("SG&A") expenses were approximately
$0.8  million for the six months  ended June 30,  1999 and $4.0  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 $0.5 million and
$2.2 million, representing 58% and 56% of total SG&A expenses for the six months
ended June 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 six
months ended June 30, 2000 over 1999 is due to the  recognition  of $1.7 million
of SG&A  expenses  which prior to February 17, 2000 had been offset  against the
deferred gain on the sale of NETCOM  assets (see further  discussion in "Sale of
Assets and Discontinued Operations" above).

Depreciation

      Depreciation  increased  from $20.9  million for the six months ended June
30, 1999 to $42.4  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. The Company's depreciation expense
will  continue  to  increase  as  NetAhead  purchases  additional  property  and
equipment,  ICG  Equipment  places in service  equipment  that has already  been
purchased  and  purchases  additional  property and equipment for lease to ICG's
other operating subsidiaries.

Interest expense

      Interest  expense  increased  from $33.1  million for the six months ended
June 30, 1999 to $54.5 million for the same period in 2000. Included in interest
expense for the six months  ended June 30,  1999 and 2000 was $30.4  million and
$33.8 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.  The  Company's  interest  expense  will
continue to increase as the principal  amounts of the  indebtedness  outstanding
under  the 10% Notes  and the 9 7/8%  Notes  increase  due to the  accretion  of
noncash  interest.  The 10%  Notes  and the 9 7/8%  Notes  do not  begin  to pay
interest in cash until 2003.

Interest income

      Interest income decreased from $15.3 million for the six months ended June
30, 1999 to $5.7 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.

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 six  months  ended  June 30,  1999
consists of the Company's  share of net income of ICG Ohio LINX, Inc. ("ICG Ohio
LINX") of $2.3  million,  offset  by the  Company's  share of net  losses of ICG
ChoiceCom L.P.  ("ChoiceCom") of $3.6 million.  For the same period in 2000, the
Company's share of net losses are comprised of the Company's share of net losses
of ICG Ohio LINX, Inc. ("ICG Ohio LINX") of $1.8 million and the Company's share
of net losses of ICG ChoiceCom L.P. ("ChoiceCom") of $7.8 million.


                                       24
<PAGE>

Loss before extraordinary gain

     Losses before  extraordinary  gain  increased from $7.3 million for the six
months  ended June 30, 1999 to $18.6  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 six months ended June 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.  (See "Sale of Assets and Discontinued  Operations" above for further
discussion.)

LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  growth to date has been funded  through a  combination  of
 equity, debt and lease financing and non-core asset sales. The Company has also
 incurred losses from continuing  operations since inception and, as of June 30,
 2000, had a working capital deficit of $126.7 million. As of June 30, 2000, the
 Company had  approximately  $186.7 million of cash and  short-term  investments
 available for sale, $103.1 million of accounts receivable including amounts due
 from ICG and  approximately  $25.0 million of credit available under the Senior
 Facility.

     Management   believes  that  resources  are  currently  abailable  to  fund
operations and achieve  targeted growth through early 2001.  Subsequent to early
2001,  management expects that additional  financing,  including bank financing,
vendor  financing,  and/or the issuance of high yield debt, will be available to
fund  operations and achieve the Company's  targeted  future  growth.  While the
Company believes that it could obtain requisite additional financing,  there can
be no assurance that such  financing  would be available on a timely basis or on
acceptable terms.

Net Cash Provided By Operating Activities

     The Company's operating  activities provided $6.3 million and $67.9 million
for the six months ended June 30, 1999 and 2000, respectively. Net cash provided
by operating  activities  during the six months ended June 30, 1999 is primarily
due to net  losses,  which are 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 six months ended June 30,
2000 is primarily due to net losses, which are more than offset by a significant
decrease in amounts due from ICG as well as noncash  expenses,  such as deferred
interest expense and depreciation.

Net Cash Used By Investing Activities

      The Company's  investing  activities used $16.5 million and $103.1 million
for the six months ended June 30, 1999 and 2000, respectively.  Net cash used by
investing  activities  for the six months ended June 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 $66.5
million,  offset by the  acquisition of property,  equipment and other assets of
$290.8  million,  the purchase of the 49% equity  interest in ChoiceCom of $35.1
million and the purchase of restricted  preferred  stock of $10.0  million.  Net
cash used by investing  activities  during the six months ended June 30, 2000 is
primarily from the acquisition of property, equipment and other assets of $117.3
million  partially offset by the sale of short-term and marketable and available
for sale  securities of $21.1 million.  The Company will continue to use cash in
2000 and subsequent periods for the purchase of telecommunications  equipment by
ICG Equipment for lease to ICG Telecom,  the expansion of NetAhead's  operations
and,  potentially,  for acquisitions.  The Company acquired assets under capital
leases and  pursuant to IRU  agreement of $206.6  million  during the six months
ended June 30, 2000.

                                       25

<PAGE>

Net Cash Provided (Used) By Financing Activities

      The Company's  financing  activities used $2.4 million and provided $178.7
million for the six months ended June 30, 1999 and 2000,  respectively.  For the
six months ended June 30, 1999, the Company's  financing  activities  consist of
principal  payments on long-term debt and capital  leases.  Net cash provided by
financing  activities  for the six months ended June 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 June 30, 2000,  the Company had $174.3 million
outstanding  under the loans at weighted  average  interest  rates  ranging from
9.56% to 9.87% for the six months ended June 30, 2000.  Quarterly  repayments on
the debt commence at various dates  beginning  September 30, 1999 with remaining
outstanding  balances maturing on June 30, 2005 for the $100.0 million term loan
and the $25.0  million  line of credit and March 31, 2006 for the $75.0  million
term loan.

     As of June  30,  2000,  the  Company  had an  aggregate  accreted  value of
approximately  $687.8  million  outstanding  under  the 10% Notes and the 9 7/8%
Notes.  The 10% Notes require payments of interest to be made in cash commencing
August 15, 2003 and mature February 15, 2008. The 9 7/8% Notes require  payments
of  interest  to be made in cash  commencing  November 1, 2003 and mature May 1,
2008.  As of June 30,  2000,  the  Company had $117.3  million of capital  lease
obligations and $35.6 million of other indebtedness outstanding. With respect to
fixed rate senior  indebtedness  outstanding  on June 30, 2000,  the Company has
cash interest  payment  obligations of  approximately  $44.5 million in 2003 and
$89.0 million in 2004, 2005 and each year thereafter through 2007.

     During the six months  ended June 30,  2000,  the  Company  formalized  two
agreements  with Cisco Systems,  Inc. The Company  believes that these financing
agreements  will  better  enable  the  Company  to fund  its  scheduled  network
expansion  through the purchase of Cisco equipment.  The Cisco credit facilities
provide for $180.0 million of financing with a three-year repayment term.

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 $297.0  million and $323.9  million for the six months  ended June 30, 1999
and 2000,  respectively.  The  Company  anticipates  that the  expansion  of the
Company's  businesses as currently planned will require capital  expenditures of
approximately  $500.0 million for the remainder of 2000. In the event that ICG's
and the  Company's  efforts to acquire new customers and deploy new services are
more  successful  than  planned,  the Company may be required to expand  capital
resources earlier than expected to accommodate  customer demands.  To facilitate
the  expansion  of its  services  and  networks,  the Company  has entered  into
equipment purchase  agreements with various vendors under which the Company will
purchase  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.  Actual capital  expenditures  will depend on numerous  factors,
including  certain factors beyond the Company's  control.  These factors include
economic conditions,  competition,  regulatory developments and the availability
of equity, debt and lease financing.

      Changes in the Company's  business plan may require  additional sources of
cash which may be obtained through public and private debt or equity financings,
capital leases and other financing  arrangements.  To date, the Company has been
able to secure sufficient amounts of financing to meet its capital and operating
needs. There can be no assurance that additional  financing will be available to
the Company or, if available, that it can be obtained on terms acceptable to the
Company.  The failure to obtain sufficient  amounts of financing could result in
the  delay  or  abandonment  of some  or all of the  Company's  development  and
expansion  plans,  which could have a material  adverse  effect on the Company's
business.



                                       26
<PAGE>

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.

Interest Rate Risk

      The Company's  exposure to market risk associated with changes in interest
rates relates  primarily to the Company's  investments in marketable  securities
and its senior indebtedness.

      The Company invests  primarily in high grade short-term  investments which
consist of money market instruments,  commercial paper, certificates of deposit,
and  government  and  agency  obligations,  all of which  are  considered  to be
available  for sale  and  generally  have  maturities  of one year or less.  The
Company's short-term investment  objectives are safety,  liquidity and yield, in
that order. As of June 30, 2000, the Company had approximately $186.7 million in
cash,  cash  equivalents  and  short-term  investments  available  for sale at a
weighted  average fixed interest rate of 6.58% for the six months ended June 30,
2000. A hypothetical 10% fluctuation in market rates of interest would not cause
a material  change in the fair value of the  Company's  investment in marketable
securities at June 30, 2000 and, accordingly,  would not cause a material impact
on the Company's financial position, results of operations or cash flows.

      At June 30, 2000, the Company's indebtedness included $687.8 million under
the 10% Notes and 9 7/8% Notes. These instruments  contain fixed annual interest
rates and, accordingly, any change in market interest rates would have no impact
on the Company's financial position, results of operations or cash flows. Future
increases in interest rates could increase the cost of any new borrowings by the
Company.  The Company does not hedge against  future  changes in market rates of
interest.

      On  August  12,  1999,  the  Company  entered  into the  Senior  Facility,
consisting of two term loans and a revolving  line of credit.  All components of
the Senior Facility bear variable annual rates of interest,  based on changes in
LIBOR,  the  Royal  Bank of  Canada  prime  rate  and the  federal  funds  rate.
Consequently,  additional  borrowings under the Senior Facility and increases in
LIBOR,  the Royal  Bank of Canada  prime  rate and the  federal  funds rate will
increase the  Company's  indebtedness  and may increase the  Company's  interest
expense in future periods. Additionally, under the terms of the Senior Facility,
the Company is required to hedge the interest rate risk on $100.0 million of the
Senior  Facility if LIBOR exceeds 9.0% for 15  consecutive  days. As of June 30,
2000, the Company had $174.3 million  outstanding  under the Senior Facility.  A
hypothetical  change in annual  interest  rate of 1% per annum would result in a
change in  interest  expense of  approximately  $0.4  million for the six months
ended June 30, 2000.

Market Price Risk

     The fair value of the  Company's  Senior  Discount  Notes  outstanding  was
$475.3  million as of June 30,  2000  compared to the  carrying  value of $687.8
million.  The fair value of the Senior  Discount Notes was calculated  using the
quoted bid price per bond as of June 30,2000.  A hypothetical 10% fluctuation in
market rates of interest would not cause a material  change in the fair value of
the Company's Senior Discount Notes at June 30, 2000.

                                    27

<PAGE>




                                     PART II

ITEM 1. LEGAL PROCEEDINGS

        See Note 6 to the Company's unaudited  consolidated financial statements
        for the quarterly period ended June 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

        None.

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.

                None.

           (27)  Financial Data Schedule.

                 27.1: Financial Data Schedule of ICG Services,  Inc. for the
                        Six Months Ended June 30, 2000.

      (B)   Reports on Form 8-K.

            None.
                                       28


<PAGE>






                                INDEX TO EXHIBIT

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


<PAGE>


                                INDEX TO EXHIBIT

27.1: Financial  Data Schedule of ICG Services,  Inc. for the Six Months Ended
            June 30, 2000.

<PAGE>


                                  EXHIBIT 27.1

 Financial Data Schedule of ICG Services, Inc. for the Six Months Ended June
                                    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 August 14, 2000.

                                           ICG SERVICES, INC.

Date:  August 14, 2000                  By: /s/ Harry R. Herbst
                                            ------------------------------------
                                           Harry R. Herbst, Executive Vice
                                           President and
                                           Chief Financial Officer (Principal
                                           Financial Officer)






Date:  August 14, 2000                  By: /s/ John V. Colgan
                                            ------------------------------------
                                           John V. Colgan, Vice President of
                                           Finance and
                                           Controller (Principal Accounting
                                           Officer)