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

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1998

                                       OR

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

                       (Commission File Number 333-40495)

                                ICG FUNDING, LLC
             (Exact name of registrant as specified in its charter)

               Delaware                              84-1434980
        (State or other jurisdiction    (I.R.S. Employer Identification No.)
          of 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)


     ICG Funding, LLC has no securities registered pursuant to Sections 12(b) or
12(g) of the Act.

     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    No X

     All of the issued and outstanding common securities of ICG Funding, LLC are
owned by ICG Communications, Inc.


<PAGE>
                                       2



                                TABLE OF CONTENTS




PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
     ITEM 1.  FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . .     3
              Balance Sheets as of December 31, 1997 and September 
               30, 1998 (unaudited). . . . . . . . . . . . . . . . . .     3
              Statements of Operations (unaudited) for the Period 
               from September 17, 1997 (inception) to September 30,
               1997 and for the Three Months and Nine Months Ended 
               September 30, 1998. . . . . . . . . . . . . . . . . . .     4
              Statement of Member's (Deficit) Equity (unaudited) for 
               the Nine Months Ended September 30, 1998. . . . . . . .     5
              Statement of Cash Flows (unaudited) for the Period 
               from September 17, 1997 (inception) to September 30, 
               1997 and for the Nine Months Ended September 30, 1998 .     6
              Notes to Financial Statements, December 31, 1997 and 
               September 30, 1998 (unaudited)  . . . . . . . . . . . .     7
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
             CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . .     9


PART II  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    14
     ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . .    14
     ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS . . . . . . . .    14
     ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . .    14
     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . .    14
     ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . .    14
     ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K . . . . . . . . . . . . .    14
             Exhibit . . . . . . . . . . . . . . . . . . . . . . . . .    14
             Reports on Form 8-K   . . . . . . . . . . . . . . . . . .    14
        

<PAGE>
                                       3


                                ICG FUNDING, LLC

                                 Balance Sheets
              December 31, 1997 and September 30, 1998 (unaudited)
<TABLE>
<CAPTION>

                                                                                        December 31,         September 30,
                                                                                            1997                  1998
                                                                                     --------------------  -------------------
                                                                                                  (in thousands)

<S>                                                                                      <C>                     <C>       
Assets

Current assets:
   Short-term investments available for sale                                             $   108,310                   -
   Dividends receivable                                                                            -                 862
   Restricted cash                                                                             8,693               8,693
                                                                                     --------------------  -------------------

       Total current assets                                                                  117,003               9,555
                                                                                     --------------------  -------------------

Investment in ICG Preferred Stock                                                                  -             115,784
Restricted cash                                                                               15,956              10,196
                                                                                     --------------------  -------------------

       Total assets                                                                       $  132,959             135,535
                                                                                     ====================  ===================

Liabilities and Member's (Deficit) Equity

Current liability - dividends payable                                                     $    1,116              1,116

Due to ICG                                                                                     4,699              4,699
                                                                                      -------------------  -------------------

       Total liabilities                                                                       5,815              5,815
                                                                                      -------------------  -------------------

Redeemable preferred securities ($133.4 million liquidation value at 
    December 31, 1997 and September 30, 1998)                                                127,655            127,944

Member's (deficit) equity:
    Additional paid-in capital (note 3)                                                            -              3,385
    Accumulated deficit                                                                         (511)            (1,609)
                                                                                      -------------------  -------------------
       Total member's (deficit) equity                                                          (511)             1,776
                                                                                      -------------------  -------------------

Commitments and contingencies

       Total liabilities and member's (deficit) equity                                     $  132,959            135,535
                                                                                      ===================  ===================
</TABLE>

                 See accompanying notes to financial statements.
<PAGE>
                                       4


                                ICG FUNDING, LLC

                      Statements of Operations (unaudited)
      Period from September 17, 1997 (inception) to September 30, 1997 and
              Three Months and Nine Months Ended September 30, 1998

<TABLE>
<CAPTION>

                                                  September 17, 1997        Three Months          Nine Months 
                                                    (inception) to              Ended                Ended
                                                    September 30,           September 30,         September 30,     
                                                         1997                   1998                  1998
                                               ------------------------- --------------------- ------------------
                                                                              (in thousands)

<S>                                            <C>                                 <C>                  <C>  
Interest income, net                           $               120                    285                1,653
Dividend income                                                  -                  1,711                4,233
                                               ------------------------- --------------------- ------------------

      Net income                               $               120                  1,996                5,886
                                               ------------------------- --------------------- ------------------

Preferred dividends on redeemable preferred
    securities, including accretion of
    offering costs                                            (129)                (2,328)              (6,984)
                                               ------------------------- --------------------- ------------------

      Net loss available to common member      $                (9)                  (332)              (1,098)
                                               ========================= ===================== ==================
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>
                                       5

                                ICG FUNDING, LLC

               Statement of Member's (Deficit) Equity (unaudited)
                      Nine Months Ended September 30, 1998

                                                                 
<TABLE>
<CAPTION>

                                                                                                                   Total     
                                                                        Additional                               member's
                                                                          paid-in          Accumulated           (deficit)
                                                                          capital             deficit              equity
                                                                      ----------------  -------------------  ------------------
                                                                                           (in thousands)

<S>                                                                   <C>                        <C>               <C>  
Balance at December 31, 1997                                          $             -              (511)             (511)
  Contribution of ICG Common Stock (note 3)                                    3,385                  -             3,385
  Net income                                                                       -              5,886             5,886
  Preferred dividends on redeemable preferred securities, including
    accretion of offering costs                                                    -             (6,984)           (6,984)
                                                                      ----------------  -------------------  ------------------

Balances at September 30, 1998                                           $     3,385             (1,609)            1,776
                                                                      ================  ===================  ==================
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>
                                       6



                                ICG FUNDING, LLC

                       Statement of Cash Flows (unaudited)
      Period from September 17, 1997 (inception) to September 30, 1997 and
                      Nine Months Ended September 30, 1998

<TABLE>
<CAPTION>

                                                                      September 17, 1997         Nine Months Ended
                                                                        (inception) to
                                                                         September 30,             September 30,
                                                                             1997                       1998
                                                                   --------------------------    -------------------
                                                                                    (in thousands)
<S>                                                                  <C>                                <C>  
Cash flows from operating activities:
    Net income                                                       $            120                      5,886
    Adjustment to reconcile net income to net cash provided by
       operating activities:
          Non-cash preferred dividends earned on
              ICG Preferred Stock                                                   -                     (4,233)
                                                                   --------------------------    -------------------

                 Net cash provided by operating
                   activities                                                     120                      1,653
                                                                   --------------------------    -------------------

Cash flows from investing activities:
    (Purchase) sale of short-term investments                                 (92,929)                   108,310
    Purchase of ICG Preferred Stock                                                 -                   (112,413)
    (Increase) decrease in restricted cash                                    (22,191)                     5,760
                                                                   --------------------------    -------------------

       Net cash (used in) provided by investing
         activities                                                          (115,120)                     1,657
                                                                   --------------------------    -------------------

Cash flows from financing activities:
    Net proceeds from issuance of redeemable preferred
      securities                                                              111,550                          -
    Advances from ICG                                                           3,450                          -
    Proceeds from sale of ICG Common Stock                                          -                      3,385
    Payment of preferred dividends on redeemable preferred
      securities                                                                    -                     (6,695)
                                                                   --------------------------    -------------------

       Net cash provided by (used in) financing
         activities                                                           115,000                     (3,310)
                                                                   --------------------------    -------------------

Cash and cash equivalents at December 31, 1997 and 
     September 30, 1998                                            $                -                          -
                                                                   ==========================    ===================
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>
                                       7

                                ICG FUNDING, LLC

                          Notes to Financial Statements
              December 31, 1997 and September 30, 1998 (unaudited)


(1)  Organization and Nature of Business

     ICG Funding, LLC, a Delaware limited liability company (the "Company"), was
     formed on September 17, 1997 as a special purpose limited liability company
     existing for the  exclusive  purposes of: (i) issuing  common and preferred
     interests  in the  Company;  (ii) using at least 85% of the net proceeds of
     such issuances and related  capital  contributions  (the "Net Proceeds") to
     purchase  shares of preferred  stock of ICG  Communications,  Inc.  ("ICG")
     ("ICG Preferred Stock") in a private  placement;  (iii) investing a portion
     of the remaining Net Proceeds in U.S.  Treasury  securities,  to be held in
     escrow  in an  amount  sufficient  to fund the cash  payments  of the first
     thirteen  quarterly  dividends on the Company's  preferred  interests  (the
     "Redeemable  Preferred  Securities");  and (iv)  purchasing  U.S.  Treasury
     securities  pending the purchase of shares of ICG Preferred  Stock.  Unless
     previously  dissolved,  the Company's term will continue until December 31,
     2050.

     ICG is the sole common  member of the Company.  The business and affairs of
     the  Company  are  conducted  by ICG  and  ICG  pays  all of the  Company's
     administrative expenses, which are insignificant.

(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/A for the period from  September
          17, 1997  (inception) to December 31, 1997 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 period  presented.  Such adjustments are of a normal recurring
          nature. Operating results for the nine months ended September 30, 1998
          are not necessarily indicative of the results that may be expected for
          the fiscal year ending December 31, 1998.

<PAGE>
                                       8

                                ICG FUNDING, LLC

                    Notes to Financial Statements, Continued


(2)  Significant Accounting Policies (continued)

     (b)  Net Loss Per Share

          The  Company's one issued and  outstanding  common  limited  liability
          company  security is owned directly by ICG.  Accordingly,  the Company
          does not present  net loss per share in its  financial  statements  as
          such disclosure is not considered to be meaningful.

(3)  Contribution  and Sale of ICG Common  Stock and  Purchase of ICG  Preferred
     Stock

     On February 13, 1998, ICG made a  contribution  of 126,750 shares of common
     stock of ICG,  $0.01  par  value  ("ICG  Common  Stock"),  to the  Company.
     Immediately  thereafter,   the  Company  sold  the  contributed  shares  to
     unrelated  third parties for proceeds of  approximately  $3.4 million.  The
     Company  recorded the  contribution  of the ICG Common Stock as  additional
     paid-in capital at the then fair market value and, consequently, no gain or
     loss was recorded by the Company on the subsequent sale of those shares.

     Also on February 13, 1998, the Company used the remaining proceeds from the
     private placement of the Redeemable  Preferred  Securities,  which were not
     restricted for the payment of cash dividends,  along with the proceeds from
     the sale of the  contributed  ICG Common  Stock to  purchase  approximately
     $112.4 million of ICG Communications,  Inc. Preferred Stock ("ICG Preferred
     Stock")  which pays  dividends  each  February  15,  May 15,  August 15 and
     November 15 in additional  shares of ICG Preferred  Stock through  November
     15, 2000.  Subsequent to November 15, 2000,  dividends on the ICG Preferred
     Stock are payable in cash or shares of ICG Common  Stock,  at the option of
     ICG. The ICG Preferred Stock is exchangeable, at the option of the Company,
     at any time prior to November  15, 2009 into shares of ICG Common  Stock at
     an exchange  rate based on the exchange  rate of the  Redeemable  Preferred
     Securities.  The ICG Preferred Stock is subject to mandatory  redemption on
     November 15, 2009.

<PAGE>
                                       9



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

     The following discussion includes certain forward-looking  statements which
are  affected  by  important  factors  including,  but not  limited  to,  market
conditions affecting the price of ICG Common Stock, redemption of the Redeemable
Preferred  Securities by ICG,  exchange into ICG Common Stock by the  Redeemable
Preferred  Securityholders,  the  declaration  and  payment of  preferred  stock
dividends to the Company by ICG and the ability of ICG to pay the administrative
expenses of the Company,  that could cause actual  results to differ  materially
from the forward-looking  statements.  The results for the three months and nine
months ended  September 30, 1998 have been derived from the Company's  unaudited
financial statements included elsewhere herein.

Company Overview and Description of Significant Transactions

     The Company was formed on September 17, 1997 as a special  purpose  limited
liability company existing for the exclusive purposes of: (i) issuing common and
preferred interests in the Company;  (ii) using at least 85% of the Net Proceeds
of such  issuances  and related  capital  contributions  to  purchase  shares of
preferred stock of ICG ("ICG  Preferred  Stock") in a private  placement;  (iii)
investing a portion of the remaining Net Proceeds in U.S.  Treasury  securities,
to be held in escrow in an amount  sufficient  to fund the cash  payments of the
first  thirteen  quarterly  dividends  on  the  Company's  Redeemable  Preferred
Securities; and (iv) purchasing U.S. Treasury securities pending the purchase of
shares of ICG Preferred Stock.

     On  September  24 and  October 3, 1997,  the  Company  completed  a private
placement of 6 3/4% Exchangeable  Limited Liability Company Preferred Securities
Mandatorily  Redeemable 2009 (the "Redeemable  Preferred  Securities") for gross
proceeds of $132.25  million.  Net proceeds  from the private  placement,  after
offering costs of approximately $4.7 million advanced by ICG, were approximately
$127.6 million.  Restricted cash at September 30, 1998 of $18.9 million consists
of the remaining  proceeds from the private  placement  which are designated for
the payment of cash dividends on the  Redeemable  Preferred  Securities  through
November 15, 2000.

     The  Redeemable  Preferred  Securities  consist of  2,645,000  exchangeable
preferred  securities of the Company that bear a cumulative dividend at the rate
of 6 3/4% per annum. The dividend is paid quarterly in arrears each February 15,
May 15, August 15 and November 15, and commenced November 15, 1997. The dividend
is payable in cash through November 15, 2000 and, thereafter,  in cash or shares
of common stock of ICG, $0.01 par value ("ICG Common  Stock"),  at the option of
the Company. The Redeemable Preferred Securities are exchangeable, at the option
of the holder,  at any time prior to November 15, 2009 into shares of ICG Common
Stock at a rate of 2.0812 shares of ICG Common Stock per preferred security,  or
$24.025 per share, subject to adjustment. The Company may, at its option, redeem
the Redeemable  Preferred  Securities at any time on or after November 18, 2000.
Prior to that time, the Company may redeem the Redeemable  Preferred  Securities
if the current  market  value of ICG Common Stock equals or exceeds the exchange
price,  for at least 20 days of any consecutive  30-day trading period,  by 170%
prior to November 16, 1998; by 160% from November 16, 1998 through  November 15,
1999;  and by 150% from  November  16,  1999  through  November  15,  2000.  The
Redeemable  Preferred Securities are subject to mandatory redemption on November
15, 2009.
<PAGE>
                                       10


     On February  13, 1998,  ICG made a  contribution  of 126,750  shares of ICG
Common  Stock to the  Company.  Immediately  thereafter,  the  Company  sold the
contributed shares to unrelated third parties for proceeds of approximately $3.4
million.  The  Company  recorded  the  contribution  of the ICG Common  Stock as
additional paid-in capital at the then fair market value and,  consequently,  no
gain or loss was recorded by the Company on the subsequent sale of those shares.

     Also, on February 13, 1998,  the Company used the  remaining  proceeds from
the private  placement of the Redeemable  Preferred  Securities,  which were not
restricted for the payment of cash  dividends,  along with the proceeds from the
sale of the  contributed  ICG  Common  Stock to  purchase  approximately  $112.4
million of ICG Preferred  Stock.  The ICG Preferred  Stock pays  dividends  each
February  15, May 15,  August 15 and  November  15 in  additional  shares of ICG
Preferred  Stock  through  November 15, 2000.  Subsequent  to November 15, 2000,
dividends on the ICG Preferred Stock are payable in cash or shares of ICG Common
Stock,  at the option of ICG. The ICG Preferred  Stock is  exchangeable,  at the
option of the Company, at any time prior to November 15, 2009 into shares of ICG
Common Stock at an exchange  rate based on the exchange  rate of the  Redeemable
Preferred Securities. The ICG Preferred Stock is subject to mandatory redemption
on November 15, 2009.

Results of Operations

     The following table presents the components of the Company's net income and
net loss  available  to common  member for the period  from  September  17, 1997
(inception)  to  September  30, 1997 and the three  months and nine months ended
September 30, 1998 (in thousands).
<TABLE>
<CAPTION>
                                              September 17, 1997           Three Months             Nine Months
                                                (inception) to            Ended September         Ended September      
                                              September 30, 1997              30, 1998               30, 1998
                                           ------------------------   ----------------------   --------------------
<S>                                          <C>                             <C>                        <C>  
Statement of Operations Data:
Interest income, net                         $         120                      285                      1,653
Dividend income                                          -                    1,711                      4,233  
                                           ------------------------   ----------------------   --------------------
  Net income                                           120                    1,996                      5,886  
                                           ------------------------   ----------------------   --------------------  
Preferred dividends on redeemable
  preferred securities, including  
  accretion of offering costs                         (129)                  (2,328)                    (6,984)
                                           ------------------------   ----------------------   --------------------  

  Net loss available to common member        $          (9)                    (332)                    (1,098)              
                                           ========================   ======================   ====================
Other Data:
Net cash provided by operating activities    $         120                      285                      1,653
Net cash (used in) provided by investing
  activities                                      (115,120)                   1,946                      1,657
Net cash provided by (used in) financing
  activities                                       115,000                   (2,231)                    (3,310)  

</TABLE>


<PAGE>
                                       11

     
Three Months and Nine Months Ended September 30, 1998

     Interest income, net. Interest income, net1of)$0.3 million and $1.7 million
for the three months and nine months  ended  September  30, 1998,  respectively,
consists of income  earned on invested  cash  proceeds  from the issuance of the
Redeemable  Preferred Securities in September and October 1997. Interest income,
net will continue to decrease in each future three-month period through November
15, 2000 due to the decrease in average balances held in short-term  investments
as  restricted  cash balances are used to pay cash  dividends on the  Redeemable
Preferred Securities.

     Dividend  income.  Dividend income of $1.7 million and $4.2 million for the
three months and nine months ended September 30, 1998, respectively, consists of
preferred  dividends  earned on the ICG  Preferred  Stock from February 13, 1998
through the end of the respective period.

     Net income.  The  Company's net income for the three months and nine months
ended September 30, 1998 consists of interest income,  net, and dividend income,
as noted above.

     Preferred dividends on redeemable preferred securities, including accretion
of offering  costs.  Preferred  dividends on  redeemable  preferred  securities,
including  accretion of offering costs was $2.3 million and $7.0 million for the
three  months and nine  months  ended  September  30,  1998,  respectively,  and
includes  approximately  $2.3  million and $6.7  million of  preferred  security
dividends  paid and  accrued  during  the three  months  and nine  months  ended
September 30, 1998,  respectively,  and the accretion of offering costs from the
private placement of the Redeemable  Preferred  Securities of approximately $0.1
million and $0.3 million for the three  months and nine months  ended  September
30, 1998, respectively.

     Net loss available to common member. Net loss available to common member of
$0.3  million  and $1.1  million  for the three  months  and nine  months  ended
September  30,  1998,  respectively,  is a  result  of  preferred  dividends  on
redeemable preferred securities, offset by net income, as noted above.

Period from September 17, 1997 (inception) to September 30, 1997

     Interest income,  net and net income.  Interest income, net of $0.1 million
for the period  from  September  17,  1997  (inception)  to  September  30, 1997
consists of income  earned on invested cash proceeds from the issuance of $115.0
million of Redeemable  Preferred Securities in September 1997. The Company's net
income for the period from September 17, 1997  (inception) to September 30, 1997
consists entirely of interest income.

     Preferred dividends on redeemable preferred securities, including accretion
of offering  costs.  Preferred  dividends on  redeemable  preferred  securities,
including  accretion  of  offering  costs was $0.1  million  for the period from
September 17, 1997  (inception) to September 30, 1997 and primarily  consists of
accrued preferred security dividends on the Redeemable  Preferred Securities for
the period from September 24, 1997 through  September 30, 1997 of  approximately
$0.1 million.
<PAGE>
                                       12


     Net loss  available to common  member.  Net loss available to common member
for the period from  September 17, 1997  (inception)  to September 30, 1997 is a
result of preferred  dividends on  redeemable  preferred  securities,  offset by
interest income, as noted above.

 Liquidity and Capital Resources

     The Company's  operations  consist  entirely of effecting the  transactions
required by the terms of the Redeemable Preferred Securities issued in September
and October 1997. To date, the Company's operations have been funded through the
proceeds from the issuance of the Redeemable  Preferred  Securities and the sale
of ICG Common Stock which was contributed to the Company by ICG. As of September
30, 1998, the Company has assets of  approximately  $135.5 million which consist
of the  Company's  investment  in ICG Preferred  Stock of  approximately  $115.8
million,  restricted cash invested in U.S. Treasury  securities of approximately
$18.9 million for the payment of cash dividends through November 15, 2000 on the
Redeemable  Preferred Securities and a receivable for preferred dividends earned
on the  ICG  Preferred  Stock  of  approximately  $0.8  million.  The  Company's
liabilities  at  September  30,  1998  include  approximately  $1.1  million  in
preferred  dividends  accrued  on  the  Redeemable   Preferred   Securities  and
approximately  $4.7  million  due to ICG for  advances  for the  offering  costs
associated with the issuance of the Redeemable Preferred Securities.

     The Company is dependent upon ICG to declare and pay preferred dividends on
the ICG  Preferred  Stock.  ICG is a Delaware  corporation  that  files  annual,
quarterly and current reports with the Securities and Exchange  Commission.  Its
Commission File Number is 1-11965.

 Net Cash Provided By Operating Activities

     Net cash provided by operating  activities was  approximately  $0.1 million
and $1.7 million for the period from September 17, 1997 (inception) to September
30,  1997 and the nine  months  ended  September  30,  1998,  respectively,  and
consists of interest income earned on restricted cash invested in U.S.  Treasury
securities.

 Net Cash (Used  In) Provided By Investing Activities

     The Company's  investing  activities used approximately  $115.1 million for
the period  from  September  17,  1997  (inception)  to  September  30, 1997 and
provided  approximately  $1.7  million for the nine months ended  September  30,
1998.  Net cash used in investing  activities  for the period from September 17,
1997 (inception) to September 30, 1997 consists of the purchase of U.S. Treasury
Securities of  approximately  $92.9 million and the  establishment of restricted
cash balances for cash dividends payable on the Redeemable  Preferred Securities
of approximately  $22.2 million.  Net cash provided by investing  activities for
the nine months  ended  September  30, 1998  consists of the purchase of the ICG
Preferred Stock for  approximately  $112.4 million,  offset by the proceeds from
the sale of U.S.  Treasury  securities of  approximately  $108.3 million and the
decrease in restricted cash of approximately $5.8 million.
<PAGE>
                                       13


 Net Cash Provided By (Used  In) Financing Activities

     Financing  activities provided  approximately $115.0 million for the period
from September 17, 1997 (inception) to September 30, 1997 and used approximately
$3.3 million for the nine months ended  September 30, 1998. Net cash provided by
financing  activities  for the period from  September  17, 1997  (inception ) to
September 30, 1997 includes the net proceeds from the issuance of the Redeemable
Preferred  Securities of  approximately  $111.6 million and advances from ICG of
approximately $3.5 million.  Net cash used in financing  activities for the nine
months ended  September 30, 1998 includes the payments of cash  dividends on the
Redeemable  Preferred  Securities of approximately  $6.7 million,  offset by the
proceeds from the sale of the contributed ICG Common Stock of $3.4 million.  The
Company  expects  cash used by financing  activities  in future years to include
only payments of cash dividends on the Redeemable Preferred Securities.

Cash Commitments

     The Redeemable  Preferred  Securities  require  payments of dividends to be
made in cash  and are  being  paid  currently  through  November  15,  2000.  At
September 30, 1998, the Company has cash dividend  obligations on the Redeemable
Preferred  Securities  of  approximately  $2.2  million  remaining  in 1998  and
approximately  $8.9 million in each of 1999 and 2000. The  Redeemable  Preferred
Securities have a liquidation  preference of $50 per security,  plus accrued and
unpaid  dividends,  and  are  mandatorily  redeemable  in  2009.  The  Company's
management  believes  it has  sufficient  resources  to meet these  future  cash
requirements.

Year 2000 Compliance

     As a wholly owned  subsidiary  of ICG, the Company's  Year 2000  compliance
plan is embedded  within ICG's Year 2000  compliance  plan for its  consolidated
operations.  It is not  practicable  for ICG to  address  the state of Year 2000
readiness,  compliance costs, risks or contingency plans of the Company,  or for
any other legal  entity on a  stand-alone  basis,  as ICG's plan was designed to
resolve Year 2000 compliance issues for all entities combined, which is the most
cost-effective  manner.  Moreover, as a result of the Company's and ICG's shared
management and  administrative  personnel and the Company's  dependence upon the
successful  operations  of ICG in  order  that  ICG's  Board of  Directors  will
continue to declare and pay dividends on the ICG Preferred Stock, evaluating the
Company's  plan  for  Year  2000  compliance  on  a  stand-alone  basis  is  not
meaningful.  ICG is a Delaware  corporation  that files  annual,  quarterly  and
current reports with the Securities and Exchange Commission. Its Commission File
Number is 1-11965.

<PAGE>
                                       14



                                     PART II


ITEM 1. LEGAL PROCEEDINGS

        None.

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

     Effective  July 20,  1998,  ICG,  Sole  Common  Member  and  Manager of the
Company,  caused the  Company to declare a cash  dividend in the amount of $0.47
per Redeemable  Preferred Security to holders of record at the close of business
on August 1, 1998, which was paid on August 15, 1998.

ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K

     (A)  Exhibit.

          (27) Financial Data Schedule.

               27.1:Financial  Data  Schedule of ICG  Funding,  LLC for the Nine
                    Months Ended September 30, 1998.

     (B)  Reports on Form 8-K.

          None.


<PAGE>

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

<PAGE>


                                     EXHIBIT


27.1:Financial  Data  Schedule of ICG  Funding,  LLC for the Nine  Months  Ended
     September 30, 1998.






<PAGE>


                                  EXHIBIT 27.1

                   Financial Data Schedule of ICG Funding, LLC
                            for the Nine Months Ended
                               September 30, 1998.


<PAGE>


                                    SIGNATURE

Pursuant to the  requirements of Section 13 or 15(d) 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 November 13, 1998.

                              ICG Funding, LLC


                              By: ICG Communications, Inc.
                                  Common Member and Manager


                              By: /s/ Harry R. Herbst
                                  --------------------------------------------
                                  Harry R. Herbst
                                  Executive Vice President and Chief
                                  Financial Officer (Principal Financial
                                  Officer)