BELL ATLANTIC WASHINGTON DC INC, 10-K405, 1998-03-25

BELL ATLANTIC WASHINGTON DC INC
10-K405, 1998-03-25
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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

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

FORM 10-K

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

(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 1-7368

BELL ATLANTIC - WASHINGTON, D.C., INC.

A New York Corporation I.R.S. Employer Identification No. 53-0046277

1710 H Street, N.W., Washington, D.C. 20006

Telephone Number (202) 392-9900

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

Securities registered pursuant to Section 12(b) of the Act: See attached
Schedule A.

Securities registered pursuant to Section 12(g) of the Act: None.

THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF BELL ATLANTIC CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND
IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION I(2).

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
----- -----
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Bell Atlantic - Washington, D.C., Inc.

SCHEDULE A

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
- -------------------------------------------------- -------------------

Forty Year 7 3/4% Debentures, due November 1, 2013 New York Stock
Exchange
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Bell Atlantic - Washington, D.C., Inc.

TABLE OF CONTENTS

Item No. Page
- -------- ----

PART I

1. Business
(Abbreviated pursuant to General Instruction I(2).)............... 1
2. Properties........................................................ 6
3. Legal Proceedings................................................. 6
4. Submission of Matters to a Vote of Security Holders
(Omitted pursuant to General Instruction I(2).)................... 6

PART II

5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................... 7
6. Selected Financial Data
(Omitted pursuant to General Instruction I(2).)................... 7
7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction I(2).)............... 8
7A. Quantitative and Qualitative Disclosures About Market Risk........ 15
8. Financial Statements and Supplementary Data....................... 16
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 16

PART III

(Omitted pursuant to General Instruction I(2).):
10. Directors and Executive Officers of the Registrant................ 16
11. Executive Compensation............................................ 16
12. Security Ownership of Certain Beneficial Owners and Management.... 16
13. Certain Relationships and Related Transactions.................... 16

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.. 16

UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 20, 1998.

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Bell Atlantic - Washington, D.C., Inc.

PART I

Item 1. Business

GENERAL

Bell Atlantic - Washington, D.C., Inc. (the "Company") is incorporated under
the laws of the State of New York and has its principal offices at 1710 H
Street, N.W., Washington D.C. 20006 (telephone number 202-392-9900). The
Company is a wholly owned subsidiary of Bell Atlantic Corporation ("Bell
Atlantic").

The Company presently serves a territory consisting of a single Local Access
and Transport Area ("LATA"). A LATA is generally centered on a city or based on
some other identifiable common geography and, with certain limited exceptions, a
LATA marks the boundary within which the Company has been permitted by the
"Modification of Final Judgment" ("MFJ") to provide telephone service.

The Company currently provides two basic types of telecommunications services.
First, the Company transports telecommunications traffic between subscribers
located within the LATA ("intraLATA service"), including both local and long
distance services. Local service includes the provision of local exchange
("dial-tone"), local private line and public telephone services (including dial-
tone service for pay telephones owned by the Company and by other pay telephone
providers). Among other local services provided are Centrex (telephone
subsidiary central office-based switched telephone service enabling the
subscriber to make both intercom and outside calls) and a variety of special and
custom calling services. Long distance service includes message toll service
(calling service beyond the local calling area) within LATA boundaries. Second,
the Company provides exchange access service, which links a subscriber's
telephone or other equipment to the transmission facilities of interexchange
carriers which, in turn, provide telecommunications service between LATAs
("interLATA service") to their customers.

BELL ATLANTIC - NYNEX MERGER

On August 14, 1997, Bell Atlantic and NYNEX Corporation ("NYNEX") consummated
a merger whereby NYNEX became a subsidiary of Bell Atlantic and NYNEX
shareowners received 0.768 of a share of Bell Atlantic common stock for each
share of NYNEX common stock owned. Bell Atlantic owns nine subsidiaries which
provide domestic telecommunications services (collectively, the "telephone
subsidiaries").

In 1997, the Company recognized merger-related costs of approximately
$4,400,000, consisting of $1,000,000 of direct incremental costs and $3,400,000
for employee severance costs. A small portion of costs for transition and
integration were also incurred by the Company. These costs include
approximately $3,200,000 representing the Company's allocated share of merger-
related costs from Bell Atlantic Network Services, Inc., an affiliate which
provides centralized services on a contract basis.

TELECOMMUNICATIONS ACT OF 1996

The Telecommunications Act of 1996 (the "Act") became effective on February
8, 1996. Prior to the enactment of the Act, the operations of Bell Atlantic and
its subsidiaries were subject to the requirements of the MFJ, a consent decree
that arose out of an antitrust action brought by the United States Department of
Justice ("DOJ") against AT&T Corp. ("AT&T") and the Bell Operating Companies
("BOCs"), including the telephone subsidiaries. The Act provides that any
conduct or activity previously subject to the MFJ is now subject instead to the
restrictions and obligations imposed by the Act.

In general, the Act includes provisions that open local exchange markets to
competition and permit BOCs, or their affiliates, such as Bell Atlantic, to
engage in manufacturing and to provide services between LATAs. Under the Act,
the ability of Bell Atlantic to engage in businesses previously prohibited by
the MFJ is largely dependent on satisfying certain conditions contained in the
Act and regulations to be promulgated thereunder.

The Act takes a two-fold approach to the rules governing competition in the
interLATA market. First, Bell Atlantic is permitted to apply for state approval
to offer interLATA services originating in states outside of the geographic
region in which the telephone subsidiaries operate as local exchange carriers.

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Bell Atlantic - Washington, D.C., Inc.

Second, each of the telephone subsidiaries must demonstrate to the Federal
Communications Commission ("FCC") that it has satisfied certain requirements in
order for Bell Atlantic to be permitted to offer interLATA services for calls
originating within the geographic region in which the telephone subsidiary
operates as a local exchange carrier. Among the requirements with which a
telephone subsidiary must comply is a 14-point "competitive checklist," which
includes steps the telephone subsidiaries must take which will help competitors
offer local services through resale of the telephone subsidiaries' service,
purchase of unbundled network elements from the telephone subsidiaries, or
through the competitors' own networks. Bell Atlantic must also demonstrate to
the FCC that its entry into the interLATA market would be in the public
interest.

In December 1997, a U.S. District Court found that the line-of-business
restrictions in the Act, including the requirement that BOCs alone comply with a
competitive checklist before being allowed to provide long distance, are
unconstitutional because they apply only to the BOCs. Bell Atlantic was allowed
to join the case prior to the court's decision. The court has granted a stay of
its decision pending appeals by the DOJ and other parties.

The FCC is required to conduct a number of rulemakings to implement the Act.
See "FCC Regulation and Interstate Rates" and "Competition - Local Exchange
Services."

OPERATIONS

Bell Atlantic has organized certain telecommunications group functions into
business units operating across the telephone subsidiaries. The business units
focus on specific market segments. The telephone subsidiaries, including the
Company, remain responsible within their respective service areas for the
provision of telephone services, financial performance and regulatory matters.

The Consumer Services business unit markets communications services to
residential customers.

The Wholesale Services business unit markets (i) switched and special access
to the telephone subsidiaries' local exchange networks, and (ii) billing and
collection services, including recording, rating, bill processing and bill
rendering. The principal customers are interexchange carriers; AT&T is the
largest single customer. Other customers include business customers and
government agencies with their own special access network connections, wireless
companies and other local exchange carriers which resell network connections to
their own customers.

The General Business Services business unit markets communications and
information services to small and medium-sized businesses.

The Large Business Services business unit markets communications and
information services to large businesses. These services include voice
switching/processing services (e.g., dedicated private lines, custom Centrex,
call management and voice messaging), end-user networking (e.g., credit and
debit card transactions, and personal computer-based conferencing, including
data and video), internetworking (establishing links between the geographically
disparate networks of two or more companies or within the same company), network
integration (integrating multiple geographically disparate networks into one
system), network optimization (disaster avoidance, 911 service, intelligent
vehicle highway systems), video services (distance learning, telemedicine,
videoconferencing) and interactive multimedia applications services.

The Public and Operator Services business unit markets pay telephone and
operator services to meet consumer needs for accessing public networks and
locating and identifying network subscribers, and to provide calling assistance
and arrange billing alternatives (e.g., calling card, collect and third party
calls).

The Federal Systems business unit markets communications and information
technology and services to departments, agencies and offices of the executive,
judicial and legislative branches of the federal government.

The Network Group manages the technologies, services and systems platforms
required by the business units and the telephone subsidiaries to meet the needs
of their customers, including switching, feature development and on-premises
installation and maintenance services.

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Bell Atlantic - Washington, D.C., Inc.

The Information Services Group publishes directories for the Company.

In order to satisfy the requirements of the Act, the Company transferred
certain assets and liabilities associated with its directory publishing
activities to a newly formed, wholly owned subsidiary, effective January 1,
1997. The stock of the subsidiary was immediately distributed to Bell Atlantic.

FCC Regulation and Interstate Rates

The telephone subsidiaries, including the Company, are subject to the
jurisdiction of the FCC with respect to interstate services and certain related
matters. In 1997, the FCC adopted orders to reform the interstate access charge
system, to modify its price cap system and to implement the "universal service"
requirements of the Act.

Access Charges

Interstate access charges are the rates long distance carriers pay for use
and availability of the telephone subsidiaries' facilities for the origination
and termination of interstate service. The FCC's order adopted changes to the
access tariff structures in order to permit the telephone subsidiaries to
recover a greater portion of their interstate costs through rates that reflect
the manner in which those costs are incurred. The FCC required a phased
restructuring of access charges, beginning in January 1998, so that the
telephone subsidiaries' nonusage-sensitive costs will be recovered from long
distance carriers and end-users through flat rate charges, and usage-sensitive
costs will be recovered from long distance carriers through usage-based rates.
In addition, the FCC will require establishment of different levels of usage-
based charges for originating and for terminating interstate traffic.

A portion of the telephone subsidiaries' interstate costs are also recovered
through flat monthly charges to subscribers ("subscriber line charges"). Under
the FCC's order, subscriber line charges for primary residential and single line
businesses will remain unchanged initially, but such charges for additional
residential lines and multi-line businesses will rise.

The FCC has begun an investigation of the tariffs filed by the telephone
subsidiaries and other local exchange carriers to implement this new rate
structure.

Price Caps

The FCC also adopted modifications to its price cap rules which affect access
rate levels. Under those rules, each year the Company's price cap index is
adjusted downward by a fixed percentage intended to reflect increases in
productivity ("Productivity Factor") and adjusted upward by an allowance for
inflation (the GDP-PI). In the prior year, the Company's Productivity Factor
was 5.3%. The FCC created a single Productivity Factor of 6.5% for all price
cap companies, eliminated requirements to share a portion of future interstate
earnings and required that rates be set as if the higher Productivity Factor had
been in effect since July 1996. Any local exchange company that earns an
interstate rate of return below 10.25% in a calendar year will be permitted to
increase its interstate rates in the following year. The FCC also ordered
elimination of recovery for amortized costs associated with the implementation
of equal access to all long distance carriers and removal of certain general
overhead costs that it concluded were associated with other detariffed services.

The FCC is expected to adopt an order in 1998 to address the conditions under
which the FCC would relax or remove existing access rate structure requirements
and price cap restrictions as increased local market competition develops.

Universal Service

The FCC also adopted rules implementing the "universal service" provision of
the Act, which was designed to ensure that a basket of designated services is
widely available and affordable to all customers, including low-income customers
and customers in areas that are expensive to serve. The FCC's universal service
support in 1998 will approximate $1.5 billion for high-cost areas. The support
amount thereafter cannot yet be determined. The FCC, in conjunction with the
Federal-State Joint Board on Universal Service, will adopt a methodology for
determining high-cost areas for nonrural carriers, and the proper amount of
federal universal service support for high-cost areas. A new federal high-cost
universal service support mechanism will become effective in 1999.

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Bell Atlantic - Washington, D.C., Inc.

The FCC also adopted rules to implement the Act's requirements to provide
discounted telecommunications services to schools and libraries and to ensure
that not-for-profit rural health care providers have access to such services at
rates comparable to those charged their urban counterparts. All
telecommunications carriers must contribute funding for these universal service
programs. The federal universal service funding needs as of January 1, 1998
require each of the telephone subsidiaries to contribute approximately 2% of its
interstate retail revenues for high-cost and low income subsidies. Each of the
telephone subsidiaries will also be contributing a portion of its total retail
revenues for schools, libraries and not-for-profit health care. The telephone
subsidiaries will recover these contributions through interstate charges to long
distance carriers and end-users.

State Regulation of Rates and Services

The communications services of the Company are subject to regulation by the
District of Columbia Public Service Commission ("PSC") with respect to
intrastate rates and services and certain other matters.

In 1996, the PSC approved a price cap plan for intra-Washington, D.C.
services provided by the Company. Provisions of the plan include (1) a term of
four years, through December 31, 1999; (2) three service categories: basic,
discretionary, and competitive; (3) caps on certain basic residential rates for
the term of the plan, with other basic rates to change with the rate of
inflation (GDP-PI) minus 3%; (4) discretionary service rate increases of up to
15% annually; (5) elimination of price limits on competitive service rates; and
(6) elimination of the regulation of profits.

Competition

Legislative changes, including provisions of the Act discussed above under
"Telecommunications Act of 1996," regulatory changes and new technology are
continuing to expand the types of available communications services and
equipment and the number of competitors offering such services. The Company
anticipates that these industry changes, together with the rapid growth,
enormous size and global scope of these markets, will attract new entrants and
encourage existing competitors to broaden their offerings. Current and
potential competitors in telecommunication services include long distance
companies, other local telephone companies, cable companies, wireless service
providers, foreign telecommunications providers, electric utilities, Internet
service providers and other companies that offer network services. Many of these
companies have a strong market presence, brand recognition and existing customer
relationships, all of which contribute to intensifying competition and may
affect the Company's future revenue growth.

Local Exchange Services

The ability to offer local exchange services has historically been subject to
regulation by state regulatory commissions. Applications from competitors to
provide and resell local exchange services have been approved by the PSC.

One of the purposes of the Act was to ensure, and accelerate, the emergence
of competition in local exchange markets. Toward this end, the Act requires
most existing local exchange carriers (incumbent local exchange carriers, or
"ILECs"), including the Company, to permit potential competitors (competitive
local exchange carriers, or "CLECs") to (i) purchase service from the ILEC for
resale to CLEC customers, (ii) purchase unbundled network elements from the
ILEC, and/or (iii) interconnect its network with the ILEC's network. The Act
provides for arbitration by the state public utility commission if an ILEC and a
CLEC are unable to reach agreement on the terms of the arrangement sought by the
CLEC.

In 1997 a U.S. Court of Appeals found that the FCC unlawfully attempted to
preempt state authority in implementing key provisions of the Act and that
several provisions of the FCC's rules are inconsistent with the statutory
requirements. In particular, it affirmed that the states have exclusive
jurisdiction over the pricing of local interconnection and resale arrangements,
that the FCC cannot lawfully allow competitors to "pick and choose" isolated
terms out of negotiated interconnection agreements, that the FCC cannot require
incumbent local exchange carriers to provide competitors a pre-assembled network
platform at network element prices or to combine unbundled network elements for
competitors. The U.S. Supreme Court has agreed to hear appeals by the DOJ and
other parties of that decision.

Negotiations between the Company and various CLECs, and arbitrations before
the PSC, have continued. As of March 1, 1998, the Company had entered into 25
approved agreements with CLECs.

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Bell Atlantic - Washington, D.C., Inc.

Under the various agreements and arbitrations discussed above, the Company is
generally required to sell its services to CLECs at an interim discount of
approximately 25% from the prices the Company charges its retail customers.

Alternative Access

A substantial portion of the Company's revenues from business and government
customers is derived from a relatively small number of large, multiple-line
subscribers.

The Company faces competition from alternative communications systems,
constructed by large end users, interexchange carriers and alternative access
vendors, which are capable of originating and/or terminating calls without the
use of the Company's plant. The ability of such alternative access providers to
compete with the Company has been enhanced by the FCC's orders requiring the
Company to offer virtual collocated interconnection for special and switched
access services.

Other potential sources of competition include cable television systems,
shared tenant services and other non-carrier systems which are capable of
bypassing the Company's local plant, either partially or completely, through
substitution of special access for switched access or through concentration of
telecommunications traffic on fewer of the Company's lines.

Wireless Services

Wireless services also constitute potential sources of competition to the
Company. Wireless portable telephone services employ digital technology, allow
customers to make and receive telephone calls from any location using small
handsets, and can also be used for data transmission.

Public Telephone Services

The Company faces increasing competition in the provision of pay telephone
services from other providers. In addition, the growth of wireless
communications negatively impacts usage of public telephones.

Operator Services

Alternative operator services providers have entered into competition with
the Company's operator services product line.

EMPLOYEES

As of December 31, 1997, the Company had approximately 1,500 employees.

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Bell Atlantic - Washington, D.C., Inc.

Item 2. Properties

GENERAL

The principal properties of the Company do not lend themselves to simple
description by character and location. The Company's investment in plant,
property and equipment consisted of the following at December 31:

1997 1996
----- -----

Central office equipment.................. 41% 39%
Cable, wiring and conduit................. 18 19
Land and buildings........................ 13 14
Other equipment........................... 26 25
Other..................................... 2 3
---- ----
100% 100%
==== ====

"Central office equipment" consists of switching equipment, transmission
equipment and related facilities. "Cable, wiring and conduit" consists
primarily of aerial cable, underground cable, conduit and wiring. "Land and
buildings" consists of land owned in fee and improvements thereto, principally
central office buildings. "Other equipment" consists of public telephone
instruments and telephone equipment, poles, furniture, office equipment, and
vehicles and other work equipment. "Other" property consists primarily of plant
under construction, capital leases and leasehold improvements.

The Company's customers are served by electronic switching systems that
provide a wide variety of services. The Company's network is in a transition
from an analog to a digital network, which provides the capabilities to furnish
advanced data transmission and information management services. At December 31,
1997, approximately 77% of the access lines were served by digital capability.

CAPITAL EXPENDITURES

The Company has been making and expects to continue to make significant
capital expenditures to meet the demand for communications services and to
further improve such services. Capital expenditures were approximately $189
million in 1997, $191 million in 1996 and $205 million in 1995. Capital
expenditures exclude additions under capital leases. The total investment in
plant, property and equipment was approximately $1.7 billion at December 31,
1997, $1.5 billion at December 31, 1996 and $1.5 billion at December 31, 1995,
in each case after giving effect to retirements, but before deducting
accumulated depreciation at such date.

Item 3. Legal Proceedings

There are no proceedings reportable under Item 3.

Item 4. Submission of Matters to a Vote of Security Holders

(Omitted pursuant to General Instruction I(2).)

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Bell Atlantic - Washington, D.C., Inc.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Not applicable.

Item 6. Selected Financial Data

(Omitted pursuant to General Instruction I(2).)

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Bell Atlantic - Washington, D.C., Inc.

Item 7. Management's Discussion and Analysis of Results of Operations
(Abbreviated pursuant to General Instruction I(2).)

This discussion should be read in conjunction with the Financial Statements
and Notes to Financial Statements listed in the index set forth on page F-1.

The communications services of the Company are subject to regulation by the
District of Columbia Public Service Commission (PSC) with respect to intrastate
rates and certain other matters. For a further discussion of the Company and
its regulatory plan, see Item 1 - "Description of Business."

RESULTS OF OPERATIONS
- ---------------------

The Company reported net income of $45,305,000 in 1997, compared to net
income of $49,078,000 in 1996.

Bell Atlantic - NYNEX Merger

On August 14, 1997, Bell Atlantic Corporation (Bell Atlantic) and NYNEX
Corporation (NYNEX) completed a merger of equals under a definitive merger
agreement entered into on April 21, 1996 and amended on July 2, 1996. The
stockholders of each company approved the merger at special meetings held in
November 1996. Under the terms of the amended agreement, NYNEX became a wholly
owned subsidiary of Bell Atlantic. The merger has been accounted for as a
pooling of interests.

As a result of conforming the accounting methodologies of Bell Atlantic and
NYNEX, the Company has recorded an after-tax charge of $1,045,000 to Accumulated
Deficit as if the merger had occurred as of the beginning of the earliest period
presented (see Note 9 to the financial statements).

Merger-Related Costs

Results of operations for 1997 include merger-related pre-tax costs totaling
approximately $4,400,000, consisting of $1,000,000 for direct incremental costs
and $3,400,000 for employee severance costs. A small portion of costs for
transition and integration were also incurred by the Company. These costs
include approximately $3,200,000 representing the Company's allocated share of
merger-related costs from Bell Atlantic Network Services, Inc. (NSI), an
affiliate which provides centralized services on a contract basis. Costs
allocated from NSI are included in Other Operating Expenses.

Direct incremental costs consist of expenses associated with compensation
arrangements related to completing the merger transaction. Employee severance
costs represent the Company's proportionate share of benefit costs for the
separation by the end of 1999 of management employees who are entitled to
benefits under preexisting Bell Atlantic separation pay plans. Transition and
integration costs consist of the Company's proportionate share of costs
associated with integrating the operations of Bell Atlantic and NYNEX.

Other Charges and Special Items

In 1997, the Company recorded pre-tax charges of approximately $17,900,000 in
connection with consolidating operations and combining organizations and for
special items arising in the period. These charges include a small portion
representing the Company's allocated share of charges from NSI.

Transfer of Directory Publishing Activities

On January 1, 1997, the Company transferred, at net book value without gain
or loss, certain assets and liabilities associated with its directory publishing
activities to a newly formed, wholly owned subsidiary. The stock of the
subsidiary was immediately distributed to Bell Atlantic. The transfer of such
assets and liabilities was completed as part of Bell Atlantic's and the
Company's response to the requirements of the Telecommunications Act of 1996,
which prohibits the Company from engaging in electronic publishing or joint
sales and marketing of electronic products.

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Bell Atlantic - Washington, D.C., Inc.

Net assets transferred by the Company totaled approximately $2,300,000, and
consisted of deferred directory production costs (included in prepaid expenses),
fixed assets, and related deferred tax liabilities.

Revenues related to the Company's directory publishing activities transferred
were approximately $33,500,000 and $30,700,000 for the years ended December 31,
1996 and 1995, respectively. Direct expenses related to the directory
publishing activities transferred were approximately $15,500,000 and $13,500,000
for the years ended December 31, 1996 and 1995, respectively. The Company does
not separately identify indirect expenses attributable to the directory
publishing activities, including expenses related to billing and data management
and processing services, legal, external affairs, depreciation, interest expense
and any corresponding tax expense.

Effective January 1, 1997, revenues from directory publishing activities
transferred are no longer earned, and the related expenses are no longer
incurred, by the Company. Certain other revenues, primarily fees for non-
publication of telephone numbers and multiple white page listings continue to be
earned by the Company. Additionally, contracts between the Company and another
affiliate of Bell Atlantic for billing and collection services related to the
directory activities, use of directory listings, and rental charges have created
new revenue sources for the Company.

Cumulative Effect of Change in Accounting - Directory Publishing

The Company changed its method of accounting for directory publishing
revenues and expenses, effective January 1, 1996. The Company adopted the point-
of-publication method, which requires directory revenues and expenses to be
recognized upon publication rather than over the lives of the directories. The
Company recorded an after-tax increase in income of $286,000 in the first
quarter of 1996, representing the cumulative effect of this accounting change.

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

These and other items affecting the comparison of the Company's results of
operations between 1997 and 1996 are discussed in the following sections.

OPERATING REVENUE STATISTICS
- ----------------------------

1997 1996 % Change
- --------------------------------------------------------------------------------

At Year-End
- -----------
Access Lines in Service (in thousands)
Residence................................. 294 289 1.7%
Business.................................. 599 592 1.2
Public.................................... 10 10 --
----- -----
903 891 1.3
===== =====

For the Year
- ------------
Access Minutes of Use (in millions)........ 2,929 2,881 1.7
===== =====

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Bell Atlantic - Washington, D.C., Inc.

OPERATING REVENUES
- ------------------
(Dollars in Thousands)

For the Years Ended December 31 1997 1996 % Change
- --------------------------------------------------------------------------------

Local services.......................... $298,450 $300,548 (.7)%
Network access services................. 135,570 129,888 4.4
Long distance services.................. 3,998 3,862 3.5
Ancillary services...................... 170,467 127,239 34.0
Directory and information services...... 2,737 35,687 (92.3)
-------- --------
Total................................... $611,222 $597,224 2.3
======== ========

LOCAL SERVICES REVENUES

(Decrease)
- --------------------------------------------------------------------------------
1997 - 1996 $(2,098) (.7)%
- --------------------------------------------------------------------------------

Local services revenues are earned by the Company from the provision of local
exchange, local private line, public telephone (pay phone) and value-added
services. Value-added services are a family of services which expand the
utilization of the network. These services include products such as Caller ID,
Call Waiting and Return Call.

Local services revenues decreased in 1997 primarily due to rate reductions on
certain local services for business and residence customers and a reduction in
business Touch-Tone service charges in 1997. Effective in January 1997,
business Touch-Tone service charges were reduced by 50%, relative to 1996 rates,
resulting in an annual decrease of approximately $2,200,000. In January 1998,
the remaining business Touch-Tone service charge was eliminated.

The revenue decreases were partially offset by higher usage of the Company's
network facilities and increased business message volumes in 1997. This growth
was generated by an increase in access lines in service of 1.3% in 1997.

For a discussion of the Telecommunications Act of 1996 and its impact on the
local exchange market, see Item 1 - "Description of Business, Telecommunications
Act of 1996" and "Description of Business, Operations - Competition - Local
Exchange Services."

NETWORK ACCESS SERVICES REVENUES

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $ 5,682 4.4%
- --------------------------------------------------------------------------------

Network access services revenues are earned from carriers for their use of
the Company's local exchange facilities in providing usage services to their
customers, and from end-user subscribers. Switched access revenues are derived
from fixed and usage-based charges paid by carriers for access to the Company's
network. Special access revenues arise from access charges paid by carriers and
end-users who have private networks. End-user access revenues are earned from
the Company's customers who pay for access to the network.

Network access services revenues increased in 1997 principally due to higher
customer demand, particularly by the business market, for high capacity services
and price increases on end-user access services which became effective in July
1996. Volume growth, as reflected by growth in access minutes of use of 1.7% in
1997, also contributed to the increase in network access services revenues.
This revenue growth was negatively affected in 1997 by price reductions as
mandated by federal price cap plans.

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Bell Atlantic - Washington, D.C., Inc.

The Federal Communications Commission (FCC) regulates the rates that the
Company charges long distance carriers and end-user subscribers for interstate
access services. Bell Atlantic is required to file new access rates with the
FCC each year under the rules of its Interim Price Cap Plan. The Company
implemented required price increases for interstate access services totaling
approximately $900,000 on an annual basis for the period July 1996 through June
1997. Effective July 1, 1997, the Company implemented annual price decreases on
interstate access services of approximately $10,700,000. The rates included in
the 1997 filing will be in effect through June 1998. In addition, effective
January 1, 1998, the Company adjusted its annual rates by approximately
$4,000,000 to recover contributions that it will owe to the new universal
service fund. These revenues will be entirely offset by the contribution amount,
which will be recorded in Other Operating Expenses.

Revenues were also affected by reductions of approximately $4,200,000 in 1997
and $3,800,000 in 1996 for contingencies associated with regulatory matters.

For a further discussion of FCC rulemakings concerning access charges, price
caps and universal service, see Item 1 - "Description of Business, Operations -
FCC Regulation and Interstate Rates."

LONG DISTANCE SERVICES REVENUES

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $ 136 3.5%
- --------------------------------------------------------------------------------

Long distance services revenues are earned primarily from calls made outside
a customer's local calling area, but within the same service area of the Company
(intraLATA toll).

The growth in long distance services revenues in 1997 was principally due to
higher toll message volumes of 1.1% in 1997.

ANCILLARY SERVICES REVENUES

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $43,228 34.0%
- --------------------------------------------------------------------------------

The Company provides ancillary services which include billing and collection
services for long distance carriers and affiliates, customer premises equipment
(CPE) services, facilities rental services for affiliates and nonaffiliates,
sales of materials and supplies to affiliates and voice messaging.

Higher ancillary services revenues in 1997 resulted primarily from increases
in facilities rental revenues from affiliates. Data processing activities of
certain affiliates were consolidated in a facility owned by the Company,
resulting in the increase in rental revenues. Increased demand for CPE services
contracted with the federal government also contributed to the growth in
ancillary services revenues.

DIRECTORY AND INFORMATION SERVICES REVENUES

(Decrease)
- --------------------------------------------------------------------------------
1997 - 1996 $(32,950) (92.3)%
- --------------------------------------------------------------------------------

As described earlier, the Company transferred certain assets and liabilities
associated with its directory publishing activities to a newly formed, wholly
owned subsidiary, effective January 1, 1997. As a result, revenues associated
with directory publishing activities transferred are no longer earned by the
Company. The Company's directory and information services revenues in 1997 are
earned primarily from fees for nonpublication of telephone numbers, multiple
white page listings and usage of directory listings.

11
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

The decrease in directory and information services revenues in 1997 was
principally due to the effect of the transfer of directory publishing
activities.

OPERATING EXPENSES
- ------------------
(Dollars in Thousands)

For the Years Ended December 31 1997 1996 % Change
- --------------------------------------------------------------------------------

Employee costs, including benefits and taxes.. $ 95,897 $111,112 (13.7)%
Depreciation and amortization................. 166,966 136,849 22.0
Taxes other than income....................... 43,807 45,255 (3.2)
Other operating expenses...................... 210,605 204,568 3.0
-------- --------
Total......................................... $517,275 $497,784 3.9
======== ========

EMPLOYEE COSTS

(Decrease)
- --------------------------------------------------------------------------------
1997 - 1996 $(15,215) (13.7)%
- --------------------------------------------------------------------------------

Employee costs consist of salaries, wages and other employee compensation,
employee benefits and payroll taxes paid directly by the Company. Similar costs
incurred by employees of Bell Atlantic Network Services, Inc. (NSI), who provide
centralized services on a contract basis, are allocated to the Company and are
included in Other Operating Expenses.

The decrease in employee costs was primarily due to a reduction in benefit
costs caused by a number of factors, including changes in actuarial assumptions,
favorable returns on plan assets and lower than expected medical claims.
Employee costs were further reduced by the effect of additional benefit costs in
1996 associated with an amendment to a Bell Atlantic separation pay plan, lower
work force levels in 1997, and a decline in the level of employee costs incurred
for repair and maintenance activity in 1997. This decline was partially due to
the impact of the severe weather experienced in the first quarter of 1996 which
caused a higher level of costs to be expensed during that period.

These cost reductions were partially offset by annual salary and wage
increases and by merger-related costs recorded in the third quarter of 1997. As
described earlier, the Company recognized approximately $1,100,000 in benefit
costs for the separation by the end of 1999 of management employees who are
entitled to benefits under pre-existing Bell Atlantic separation pay plans. The
Company also recorded approximately $200,000 for direct incremental merger-
related costs associated with compensation arrangements. Merger-related costs
associated with employees of NSI were allocated to the Company and are included
in Other Operating Expenses.

DEPRECIATION AND AMORTIZATION

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $30,117 22.0%
- --------------------------------------------------------------------------------

Depreciation and amortization increased as a result of the recording of
approximately $10,400,000 for the write-down of obsolete fixed assets in the
third quarter of 1997. Charges associated with the write-down of obsolete fixed
assets of NSI were allocated to the Company and are included in Other Operating
Expenses. Higher depreciation expense was also caused by growth in depreciable
telephone plant and the effect of higher rates of depreciation and amortization.

12
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

TAXES OTHER THAN INCOME

(Decrease)
- --------------------------------------------------------------------------------
1997 - 1996 $(1,448) (3.2)%
- --------------------------------------------------------------------------------

Taxes other than income consist principally of taxes for gross receipts,
property, capital stock and business licenses.

The decrease in taxes other than income was principally due to lower gross
receipts tax resulting from a reduction in directory revenue. This decrease was
partially offset by higher sales & use tax resulting from additional purchases.

OTHER OPERATING EXPENSES

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $6,037 3.0%
- --------------------------------------------------------------------------------

Other operating expenses consist of contract services including centralized
services expenses allocated from NSI, rent, network software costs, the
provision for uncollectible accounts receivable, and other costs.

As a result of the transfer of directory publishing activities, certain
direct and allocated expenses related to the activities transferred are no
longer incurred by the Company.

The increase in other operating expenses was largely attributable to higher
costs for materials and contract services. Other operating expenses were further
increased by merger-related costs and other special items recorded in 1997.
These charges were comprised of the Company's allocated share of employee
severance costs, direct incremental and transition merger-related costs, charges
associated with the write-down of obsolete fixed assets incurred by NSI, and
other miscellaneous expense items.

These increases were partially offset by the effect of the transfer of
directory publishing activities and lower centralized services expenses
allocated from NSI. The decline in centralized services expenses was primarily
due to lower benefit costs.

OTHER INCOME, NET

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $187 49.9%
- --------------------------------------------------------------------------------

The change in other income, net, was attributable to additional interest
income primarily resulting from the purchase of short-term investments in
December 1996 to pre-fund a trust for the payment of certain employee benefits.

INTEREST EXPENSE

Increase
- --------------------------------------------------------------------------------
1997 - 1996 $107 .6%
- --------------------------------------------------------------------------------

Interest expense increased principally due to a reduction in capitalized
interest costs resulting from lower levels of telephone plant under construction
and the net effect of additional expense related to tax audits in 1996 and 1997.
These decreases were substantially offset by the effect of lower levels of
average short-term debt.

See Note 7 to the financial statements for additional information about the
Company's debt.

13
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

EFFECTIVE INCOME TAX RATES

For the Years Ended December 31
- --------------------------------------------------------------------------------
1997 40.1%
- --------------------------------------------------------------------------------
1996 39.8%
- --------------------------------------------------------------------------------

The effective income tax rate is the provision for income taxes as a
percentage of income before provision for income taxes and cumulative effect of
change in accounting principle. The Company's effective income tax rate was
higher in 1997 principally due to the effect of prior period adjustments
recorded in 1996.

A reconciliation of the statutory federal income tax rate to the effective
income tax rate for each period is provided in Note 12 to the financial
statements.

FINANCIAL CONDITION
- -------------------

The Company uses the net cash generated from operations and from external
financing to fund capital expenditures for network expansion and modernization.
While current liabilities exceeded current assets at both December 31, 1997 and
1996, the Company's sources of funds, primarily from operations and, to the
extent necessary, from readily available financing arrangements with an
affiliate, are sufficient to meet ongoing operating requirements. Management
expects that presently foreseeable capital requirements will continue to be
financed primarily through internally generated funds. Additional long-term debt
may be needed to fund additional development activities or to maintain the
Company's capital structure to ensure financial flexibility.

As of December 31, 1997, the Company had $115,474,000 of an unused line of
credit with an affiliate, Bell Atlantic Network Funding Corporation. In
addition, the Company has $60,000,000 remaining under a shelf registration
statement filed with the Securities and Exchange Commission for the issuance of
unsecured debt securities.

The Company's debt ratio was 45.0% at December 31, 1997, compared to 52.1%
at December 31, 1996.

OTHER MATTERS
- -------------

Year "2000" Systems Modifications

Bell Atlantic has initiated a comprehensive program to evaluate and address
the impact of the year 2000 on its operations. This program includes steps to
(a) identify each item or element that will require date code remediation, (b)
establish a plan for remediation or replacement, (c) implement the fix, (d) test
the remediated product and (e) provide management with assurance of a seamless
transition to the year 2000. The identification and planning phases are
substantially complete and remediation and testing are in process. Bell Atlantic
expects to complete the major portion of its internal date remediation activity
in 1998.

For the years 1998 through 1999, Bell Atlantic expects to incur total pre-tax
costs of approximately $200 million to $300 million associated with both
internal and external staffing resources for the necessary planning, remediation
and testing and other expenses to prepare its systems for the year 2000.
However, a portion of these costs will not be incremental, but rather will
represent the redeployment of existing information technology resources.
Estimated expenses include (a) anticipated license fees for replacement software
that will generally provide increased functionality as well as year 2000
compliance, and (b) direct remediation costs to provide priority to year 2000
compliance during the next two years. The cost of planning and initial
remediation incurred through 1997 has not been significant. Certain other
costs, which will be capitalized, represent ongoing investment in systems
upgrades, the timing of which is being accelerated in order to facilitate year
2000 compliance.

Bell Atlantic expects to complete this effort on a timely basis without
disruption to its customers or operations.

14
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to interest rate risk in the normal course of its
business. The majority of the Company's debt is fixed rate debt. Derivatives
such as interest rate swap agreements have not been employed by the Company.
The Company's short-term borrowings from an affiliate expose its earnings to
changes in short-term interest rates since the interest rate charged on such
borrowings is typically fixed for less than one month. As of December 31, 1997,
the fair value of the Company's long-term debt was approximately $248 million.
The aggregate hypothetical fair value of this long-term debt assuming a 100-
basis-point upward parallel shift in the yield curve is estimated to be $237
million. The aggregate hypothetical fair value of this long-term debt assuming
a 100-basis-point downward parallel shift in the yield curve is estimated to be
$259 million. The fair value of the Company's short-term borrowings from an
affiliate is not significantly affected by changes in market interest rates.

15
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Item 8. Financial Statements and Supplementary Data

The information required by this Item is set forth on Pages F-1 through
F-20.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

PART III

Item 10. Directors and Executive Officers of Registrant

(Omitted pursuant to General Instruction I(2).)

Item 11. Executive Compensation

(Omitted pursuant to General Instruction I(2).)

Item 12. Security Ownership of Certain Beneficial Owners and Management

(Omitted pursuant to General Instruction I(2).)

Item 13. Certain Relationships and Related Transactions

(Omitted pursuant to General Instruction I(2).)

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements

See Index to Financial Statements and Financial Statement
Schedule appearing on Page F-1.

(2) Financial Statement Schedules

See Index to Financial Statements and Financial Statement
Schedule appearing on Page F-1.

16
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)

(3) Exhibits

Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission (SEC), are incorporated
herein by reference as exhibits hereto.

3a Restated Certificate of Incorporation of the registrant, as
amended September 14, 1990. (Exhibit 3a to the registrant's
Annual Report on Form 10-K for the year ended December 31,
1990, File No. 1-7368.)

3a(i) Certificate of Amendment of the registrant's
Certificate of Incorporation, dated January 12, 1994
and filed January 13, 1994. (Exhibit 3a(i) to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1993, File No. 1-7368.)

3b By-Laws of the registrant, as amended December 15, 1995.
(Exhibit 3b to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, File No. 1-7368.)

3b(i) Consent of Sole Stockholder of Bell Atlantic -
Washington, D.C., Inc., dated December 15, 1995.
(Exhibit 3b(i) to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1995, File
No. 1-7368.)

4 No instrument which defines the rights of holders of long-
term debt of the registrant is filed herewith pursuant to
Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this
regulation, the registrant hereby agrees to furnish a copy of
any such instrument to the SEC upon request.

10a Agreement among Bell Atlantic Network Services, Inc. and the
Bell Atlantic Corporation telephone subsidiaries, dated
November 7, 1983. (Exhibit 10b to Bell Atlantic Corporation
Annual Report on Form 10-K for the year ended December 31,
1993, File No. 1-8606.)

23 Consent of Independent Accountants.

27.1 Financial Data Schedule - 1997.

27.2 Restated Financial Data Schedule - 1996.

27.3 Restated Financial Data Schedule - 1995.

(b) Reports on Form 8-K:

There were no Current Reports on Form 8-K filed during the
quarter ended December 31, 1997.

17
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

SIGNATURES

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.

Bell Atlantic - Washington, D.C., Inc.

By /s/ Edwin F. Hall
--------------------------------------
Edwin F. Hall
Controller and Treasurer

March 25, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ William M. Freeman President and March 25, 1998
- ------------------------------- Chief Executive Officer
William M. Freeman and Director
(Principal Executive Officer)

/s/ Edwin F. Hall Controller and Director March 25, 1998
- ------------------------------- (Principal Financial Officer)
Edwin F. Hall

/s/ Barbara L. Connor Director March 25, 1998
- -------------------------------
Barbara L. Connor

/s/ Glenn V. Evans Director March 25, 1998
- -------------------------------
Glenn V. Evans

/s/ Diane B. Gongaware Director March 25, 1998
- ------------------------------
Diane B. Gongaware

/s/ Marie C. Johns Director March 25, 1998
- ------------------------------
Marie C. Johns

/s/ Glen N. Jones Director March 25, 1998
- ------------------------------
Glen N. Jones

/s/ Aubrey L. Sarvis Director March 25, 1998
- ------------------------------
Aubrey L. Sarvis

18
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Index to Financial Statements and Financial Statement Schedule

Page
----

Report of Independent Accountants................................... F-2

Statements of Income and Reinvested Earnings (Accumulated Deficit)
For the years ended December 31, 1997, 1996 and 1995........... F-3

Balance Sheets - December 31, 1997 and 1996......................... F-4

Statements of Cash Flows
For the years ended December 31, 1997, 1996 and 1995........... F-6

Notes to Financial Statements....................................... F-7

Schedule II - Valuation and Qualifying Accounts
For the years ended December 31, 1997, 1996 and 1995........... F-20

Financial statement schedules other than that listed above have been omitted
because such schedules are not required or applicable.

F-1
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareowner of
Bell Atlantic - Washington, D.C., Inc.

We have audited the accompanying financial statements and financial statement
schedule of Bell Atlantic - Washington, D.C., Inc. as listed in the index on
page F-1 of this Form 10-K. The financial statements give retroactive effect to
the merger of Bell Atlantic Corporation (the Company's parent company) and NYNEX
Corporation on August 14, 1997, which has been accounted for as a pooling of
interests, as described in Note 2 to the financial statements. The financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bell Atlantic - Washington,
D.C., Inc. as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

As discussed in Note 3 to the financial statements, in 1996, the Company changed
its method of accounting for directory publishing revenues and expenses.

/s/ COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 9, 1998

F-2
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

STATEMENTS OF INCOME AND REINVESTED EARNINGS (ACCUMULATED DEFICIT)
For the Years Ended December 31
(Dollars in Thousands)

1997 1996 1995
-------- -------- --------
OPERATING REVENUES (including $116,222,
$96,436 and $65,735 from affiliates)..... $611,222 $597,224 $564,212
-------- -------- --------

OPERATING EXPENSES
Employee costs, including benefits
and taxes.............................. 95,897 111,112 138,505
Depreciation and amortization............ 166,966 136,849 113,952
Taxes other than income.................. 43,807 45,255 47,582
Other (including $154,295, $164,515
and $132,846 to affiliates)............ 210,605 204,568 192,548
-------- -------- --------
517,275 497,784 492,587
-------- -------- --------

OPERATING INCOME........................... 93,947 99,440 71,625

OTHER INCOME, NET (including $3, $0 and
$0 from affiliate)....................... 562 375 940

INTEREST EXPENSE (including $1,664, $2,032
and $2,766 to affiliate)................. 18,932 18,825 18,881
-------- -------- --------

Income Before Provision for Income Taxes
and Cumulative Effect of Change in
Accounting Principle..................... 75,577 80,990 53,684
PROVISION FOR INCOME TAXES................. 30,272 32,198 22,187
-------- -------- --------

Income Before Cumulative Effect of
Change in Accounting Principle........... 45,305 48,792 31,497

CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE
Directory Publishing, Net of Tax......... --- 286 ---
-------- -------- --------

NET INCOME................................. $ 45,305 $ 49,078 $ 31,497
======== ======== ========

REINVESTED EARNINGS (ACCUMULATED DEFICIT)
At beginning of year..................... $ 51,646 $ 2,741 $(28,375)
Add: net income.......................... 45,305 49,078 31,497
-------- -------- --------
96,951 51,819 3,122
Deduct: other changes.................... 2,404 173 381
-------- -------- --------
At end of year........................... $ 94,547 $ 51,646 $ 2,741
======== ======== ========

See Notes to Financial Statements.

F-3
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

BALANCE SHEETS
(Dollars in Thousands)

ASSETS
------

December 31
----------------------
1997 1996
---------- ----------
CURRENT ASSETS
Short-term investments.......................... $ 7,134 $ 8,973
Accounts receivable:
Trade and other, net of allowances for
uncollectibles of $7,721 and $11,495........ 132,936 149,777
Affiliates.................................... 18,253 18,122
Material and supplies........................... 1,929 1,707
Prepaid expenses................................ 3,962 10,968
Deferred income taxes........................... 3,872 1,458
Other........................................... 2 ---
---------- ----------
168,088 191,005
---------- ----------

PLANT, PROPERTY AND EQUIPMENT................... 1,652,123 1,521,071
Less accumulated depreciation................... 849,599 731,585
---------- ----------
802,524 789,486
---------- ----------

OTHER ASSETS.................................... 17,206 13,940
---------- ----------

TOTAL ASSETS.................................... $ 987,818 $ 994,431
========== ==========

See Notes to Financial Statements.

F-4
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

BALANCE SHEETS
(Dollars in Thousands)

LIABILITIES AND SHAREOWNER'S INVESTMENT
---------------------------------------

December 31
---------------------
1997 1996
-------- --------
CURRENT LIABILITIES
Debt maturing within one year:
Note payable to affiliate.......................... $ 9,526 $ 48,210
Other.............................................. 20,512 98
Accounts payable and accrued liabilities:
Affiliates......................................... 113,404 115,523
Other.............................................. 102,722 90,796
Advance billings and customer deposits............... 9,464 9,328
-------- --------
255,628 263,955
-------- --------

LONG-TERM DEBT....................................... 227,769 247,735
-------- --------

EMPLOYEE BENEFIT OBLIGATIONS......................... 134,434 146,522
-------- --------

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes................................ 29,585 28,921
Unamortized investment tax credits................... 3,626 4,169
Other................................................ 21,712 30,966
-------- --------
54,923 64,056
-------- --------
COMMITMENTS (Note 6)

SHAREOWNER'S INVESTMENT
Common stock - one share, owned by parent, at stated
value............................................... 191,968 191,968
Capital surplus...................................... 28,549 28,549
Reinvested earnings.................................. 94,547 51,646
-------- --------
315,064 272,163
-------- --------

TOTAL LIABILITIES AND SHAREOWNER'S INVESTMENT........ $987,818 $994,431
======== ========

See Notes to Financial Statements.

F-5
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

STATEMENTS OF CASH FLOWS
For the Years Ended December 31
(Dollars in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................... $ 45,305 $ 49,078 $ 31,497
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ............... 166,966 136,849 113,952
Cumulative effect of change in accounting
principle, net of tax ..................... -- (286) --
Deferred income taxes, net .................. (116) 14,293 (3,048)
Investment tax credits ...................... (543) (726) (890)
Other items, net ............................ (73) (130) 2,230
Changes in certain assets and liabilities:
Accounts receivable ....................... 16,709 (287) (1,079)
Material and supplies ..................... (222) 884 (172)
Other assets .............................. 6,443 14,217 21,632
Accounts payable and accrued liabilities... 5,914 14,728 (3,527)
Employee benefit obligations .............. (12,088) (4,695) (802)
Other liabilities ......................... (9,230) 434 (4,456)
--------- --------- ---------
Net cash provided by operating activities ....... 219,065 224,359 155,337
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments ............. (10,934) (12,973) (5,791)
Proceeds from sale of short-term investments .... 12,773 4,000 5,791
Additions to plant, property and equipment ...... (188,799) (190,771) (205,094)
Other, net ...................................... 9,564 4,666 7,493
--------- --------- ---------
Net cash used in investing activities ........... (177,396) (195,078) (197,601)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments of borrowings and capital
lease obligations ............................. (444) (1,397) (1,226)
Net change in note payable to affiliate ......... (38,684) (26,241) 66,989
Capital surplus distribution .................... -- -- (17,222)
Net change in outstanding checks drawn on
controlled disbursement accounts .............. (2,541) (1,643) (6,277)
--------- --------- ---------
Net cash (used in)/provided by
financing activities .......................... (41,669) (29,281) 42,264
--------- --------- ---------

NET CHANGE IN CASH .............................. -- -- --

CASH, BEGINNING OF YEAR ......................... -- -- --
--------- --------- ---------

CASH, END OF YEAR ............................... $ -- $ -- $ --
========= ========= =========
</TABLE>

See Notes to Financial Statements.

F-6
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Bell Atlantic - Washington, D.C., Inc. (the Company) is a wholly owned
subsidiary of Bell Atlantic Corporation (Bell Atlantic). The Company operates
in a single industry segment - communications and related services. The Company
provides two basic types of telecommunications services in a territory
consisting of a single Local Access and Transport Area (LATA) in Washington,
D.C. First, the Company transports telecommunications traffic between
subscribers located within the same LATA (intraLATA service), including both
local and long distance services. Local service includes the provision of local
exchange, local private line and public telephone services. Long distance
service includes message toll service and intraLATA Wide Area Toll Service and
800 services. Second, the Company provides exchange access service, which links
a subscriber's telephone equipment to the facilities of an interexchange carrier
which, in turn, provides telecommunications service between LATAs (interLATA
service) to their customers. Other services provided by the Company include
customer premises wiring and maintenance and billing and collection services.
Effective January 1, 1997, the Company transferred certain assets and
liabilities associated with its directory publishing activities to a newly
formed, wholly owned subsidiary (see Note 4).

The telecommunications industry is undergoing substantial changes as a
result of the Telecommunications Act of 1996, other public policy changes and
technological advances. These changes are likely to bring increased competitive
pressures, but will also open new markets to Bell Atlantic, such as long
distance services within its geographic region, upon completion of certain
requirements of the Telecommunications Act of 1996.

Basis of Presentation

On August 14, 1997, Bell Atlantic and NYNEX Corporation (NYNEX) completed a
merger, which was accounted for as a pooling of interests. The financial
statements include certain reclassifications in presentation and certain
retroactive adjustments to conform accounting methodologies as a result of the
merger (see Note 2).

The Company prepares its financial statements in accordance with generally
accepted accounting principles which require management to make estimates and
assumptions that affect the reported amounts or certain disclosures. Actual
results could differ from those estimates.

Revenue Recognition

The Company recognizes revenues when services are rendered based on usage of
its local exchange network and facilities.

Maintenance and Repairs

The Company charges the cost of maintenance and repairs, including the cost
of replacing minor items not constituting substantial betterments, to Operating
Expenses.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of 90
days or less when purchased to be cash equivalents, except cash equivalents held
as short-term investments. Cash equivalents are stated at cost, which
approximates market value.

Short-term Investments

Short-term investments consist of cash equivalents held in trust to pay for
certain employee benefits. Short-term investments are stated at cost, which
approximates market value.

F-7
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Material and Supplies

New and reusable materials are carried in inventory, principally at average
original cost, except that specific costs are used in the case of large
individual items.

Plant and Depreciation

The Company states plant, property, and equipment at cost. Depreciation
expense is principally based on the composite group remaining life method and
straight-line composite rates. This method provides for the recognition of the
cost of the remaining net investment in telephone plant, less anticipated net
salvage value, over the remaining asset lives. This method requires the periodic
revision of depreciation rates. The Company used the following asset lives:

Average Lives (in years)
------------------------------------------------------
Buildings............................ 19 - 40
Central office equipment............. 4 - 12
Cable, wiring and conduit............ 16 - 50
Other equipment...................... 5 - 30

When depreciable plant is replaced or retired, the carrying amount of such
plant is deducted from the respective accounts and charged to accumulated
depreciation. Gains or losses on disposition are amortized with the remaining
net investment in telephone plant.

Computer Software Costs

The Company capitalizes initial right-to-use fees for central office
switching equipment, including initial operating system and initial application
software costs. For noncentral office equipment, only the initial operating
system software is capitalized. Subsequent additions, modifications, or
upgrades of initial software programs, whether operating or application
packages, are expensed as incurred.

Capitalization of Interest Costs

The Company capitalizes interest associated with the acquisition or
construction of plant assets. Capitalized interest is reported as a cost of
plant and a reduction in interest cost.

Income Taxes

Bell Atlantic and its domestic subsidiaries, including the Company, file a
consolidated federal income tax return.

The consolidated amount of current and deferred tax expense is allocated by
applying the provisions of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" to each subsidiary as if it were a
separate taxpayer.

The Company uses the deferral method of accounting for investment tax
credits earned prior to repeal of investment tax credits by the Tax Reform Act
of 1986. The Company also defers certain transitional credits earned after the
repeal. These credits are being amortized as a reduction to the Provision for
Income Taxes over the estimated service lives of the related assets.

Advertising Costs

Advertising costs are expensed as incurred.

Stock-Based Compensation

The Company participates in stock-based compensation plans sponsored by Bell
Atlantic. Bell Atlantic accounts for stock-based employee compensation plans
under Accounting Principles Board (APB) Opinion No. 25, "Accounting for

F-8
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Stock Issued to Employees," and related interpretations. Effective January 1,
1996, Bell Atlantic adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" (see Note 10).

2. BELL ATLANTIC - NYNEX MERGER

On August 14, 1997, Bell Atlantic and NYNEX completed a merger of equals
under a definitive merger agreement entered into on April 21, 1996 and amended
on July 2, 1996. The stockholders of each company approved the merger at
special meetings held in November 1996. Under the terms of the amended
agreement, NYNEX became a wholly owned subsidiary of Bell Atlantic. The merger
has been accounted for as a pooling of interests.

Merger-Related Costs
Results of operations for 1997 include merger-related pre-tax costs of
approximately $1,000,000 for direct incremental costs and $3,400,000 for
employee severance costs. These costs include approximately $3,200,000
representing the Company's allocated share of merger-related costs from Bell
Atlantic Network Services, Inc. (NSI), an affiliate which provides centralized
services on a contract basis. Costs allocated from NSI are included in Other
Operating Expenses.

Direct incremental costs consist of expenses associated with compensation
arrangements related to completing the merger transaction. Employee severance
costs, as recorded under SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," represent the Company's proportionate share of benefit costs for the
separation by the end of 1999 of management employees who are entitled to
benefits under pre-existing Bell Atlantic separation pay plans.

3. CHANGE IN ACCOUNTING PRINCIPLE - DIRECTORY PUBLISHING

Effective January 1, 1996, the Company changed its method of accounting for
directory publishing revenues and expenses from the amortized method to the
point-of-publication method. Under the point-of-publication method, revenues
and expenses are recognized when the directories are published rather than over
the lives of the directories, as under the amortized method. The Company
believes the point-of-publication method is preferable because it is the method
generally followed by publishing companies.

This accounting change resulted in a one-time, noncash increase in net
income of $286,000 (net of income tax of $210,000), which is reported as a
cumulative effect of a change in accounting principle at January 1, 1996. On an
annual basis, the financial impact of applying this method in 1996 was not
significant, and it would not have been significant had it been applied in 1995.

4. TRANSFER OF DIRECTORY PUBLISHING ACTIVITIES

F-9
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

and 1995, respectively. The Company does not separately identify indirect
expenses attributable to the directory publishing activities, including expenses
related to billing and data management and processing services, legal, external
affairs, depreciation, interest expense and any corresponding tax expense.

5. PLANT, PROPERTY AND EQUIPMENT

Plant, property and equipment, which is stated at cost, is summarized as
follows at December 31:

1997 1996
---------- ----------
(Dollars in Thousands)

Land..................................... $ 12,101 $ 12,101
Buildings................................ 203,449 195,757
Central office equipment................. 680,071 599,389
Cable, wiring and conduit................ 304,144 296,277
Other equipment.......................... 424,790 380,775
Other.................................... 13,705 14,362
Construction-in-progress................. 13,863 22,410
---------- ----------
1,652,123 1,521,071
Accumulated depreciation................. (849,599) (731,585)
---------- ----------
Total.................................... $ 802,524 $ 789,486
========== ==========

6. LEASES

The Company leases certain facilities and equipment for use in its
operations under both capital and operating leases. Plant, property and
equipment included capital leases of $4,470,000 and $3,643,000, and related
accumulated amortization of $589,000 and $455,000 at December 31, 1997 and 1996,
respectively. The Company incurred $827,000 and $183,000 in initial capital
lease obligations in 1997 and 1996, respectively, and no initial capital lease
obligations in 1995.

Total rent expense amounted to $9,740,000 in 1997, $9,256,000 in 1996 and
$10,786,000 in 1995. Of these amounts, $7,995,000, $7,566,000 and $8,756,000 in
1997, 1996 and 1995, respectively, were lease payments to affiliated companies.

At December 31, 1997, the aggregate minimum rental commitments under
noncancelable leases for the periods shown are as follows:

Years Capital Leases Operating Leases
----- -------------- ----------------
(Dollars in Thousands)

1998..................................... $ 740 $1,218
1999..................................... 273 1,218
2000..................................... 4,046 717
2001..................................... --- 334
2002..................................... --- 8
Thereafter............................... --- ---
------ ------
Total minimum rental commitments......... 5,059 $3,495
====== ======

Less interest and executory costs........ 716
------
Present value of minimum
lease payments........................ 4,343
Less current installments................ 458
------
Long-term obligation at
December 31, 1997..................... $3,885
======

F-10
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

7. DEBT

Debt Maturing Within One Year

Debt maturing within one year consists of the following at December 31:

1997 1996
------- -------
(Dollars in Thousands)

Note payable to affiliate (BANFC).............. $ 9,526 $48,210
Long-term debt maturing within one year........ 20,512 98
------- -------
Total debt maturing within one year............ $30,038 $48,308
======= =======

Weighted average interest rate for note payable
outstanding at year-end...................... 5.8% 5.5%
======= =======

The Company has a contractual agreement with an affiliated company, Bell
Atlantic Network Funding Corporation (BANFC), for the provision of short-term
financing and cash management services. BANFC issues commercial paper and
obtains bank loans to fund the working capital requirements of Bell Atlantic's
network services subsidiaries, including the Company, and invests funds in
temporary investments on their behalf. At December 31, 1997, the Company had
$115,474,000 of an unused line of credit with BANFC.

Long-Term Debt

Long-term debt consists principally of debentures issued by the Company.
Interest rates and maturities of the amounts outstanding are as follows at
December 31:

1997 1996
-------- --------
(Dollars in Thousands)

Thirty-seven year 4 3/8%, due 1998............. $ 20,000 $ 20,000
Forty year 5 5/8%, due 2006.................... 25,000 25,000
Forty year 7%, due 2009........................ 50,000 50,000
Forty year 7 3/4%, due 2013.................... 60,000 60,000
Thirty year 7 3/4%, due 2023................... 90,000 90,000
-------- --------
245,000 245,000

Unamortized discount and premium, net.......... (1,133) (1,172)
Capital lease obligations - average
rate 7.8% and 8.0%........................ 4,343 3,837
Other long-term debt - 12.2% to 12.4%,
due 1998 to 1999.......................... 71 168
-------- --------
Total long-term debt, including
current maturities........................ 248,281 247,833
Less maturing within one year.................. 20,512 98
-------- --------
Total long-term debt........................... $227,769 $247,735
======== ========

Long-term debt outstanding at December 31, 1997 includes $155,000,000 that
is callable by the Company. The call prices range from 102.08% to 100.0% of face
value, depending upon the remaining term to maturity of the issue.

At December 31, 1997, the Company had $60,000,000 remaining under a shelf
registration statement filed with the Securities and Exchange Commission for the
issuance of unsecured debt securities.

F-11
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

8. FINANCIAL INSTRUMENTS

Concentrations of Credit Risk

Financial instruments that subject the Company to concentrations of credit
risk consist primarily of short-term investments and trade receivables.

Concentrations of credit risk with respect to trade receivables other than
those from AT&T are limited due to the large number of customers. For the years
ended December 31, 1997, 1996 and 1995, revenues generated from services
provided to AT&T (primarily network access and billing and collection) were
$35,381,000, $37,002,000 and $36,550,000, respectively.

Fair Value of Financial Instruments

The table below provides additional information about the Company's material
financial instruments at December 31, 1997:

Financial Instrument Valuation Method
----------------------------------------------------------------------------

Note payable to affiliate (BANFC) Carrying amounts
and short-term investments

Debt (excluding capital leases) Market quotes for similar terms
and maturities or future cash flows
discounted at current rates
<TABLE>
1997 1996
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------- ---------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Debt............................................. $253,464 $257,441 $292,206 $292,354
</TABLE>

9. SHAREOWNER'S INVESTMENT
<TABLE>
<CAPTION>
Common Capital Reinvested Earnings
(Dollars in Thousands) Stock Surplus (Accumulated Deficit)
--------------------------- --------- ------- ---------------------
<S> <C> <C> <C>
Balance at December 31, 1994, as reported........ $191,968 $ 45,771 $(27,330)
Adjustment for conforming accounting
methodologies.................................. (1,045)
-------- -------- --------
Balance at December 31, 1994, restated........... 191,968 45,771 (28,375)

Net income....................................... 31,497
Distribution of capital surplus to
Bell Atlantic.................................. (17,222)
Other............................................ (381)
-------- -------- --------
Balance at December 31, 1995..................... 191,968 28,549 2,741

Net income....................................... 49,078
Other............................................ (173)
-------- -------- --------
Balance at December 31, 1996..................... 191,968 28,549 51,646

Net income....................................... 45,305
Other............................................ (2,404)
-------- -------- --------
Balance at December 31, 1997..................... $191,968 $ 28,549 $ 94,547
======== ======== ========
</TABLE>

F-12
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

10. STOCK INCENTIVE PLANS

The Company participates in stock-based compensation plans sponsored by Bell
Atlantic. Bell Atlantic applies APB Opinion No. 25 and related interpretations
in accounting for the plans. Effective January 1, 1996, Bell Atlantic adopted
the disclosure-only provisions of SFAS No. 123. If Bell Atlantic had elected to
recognize compensation expense based on the fair value at the grant dates for
1995 and subsequent awards consistent with the provisions of SFAS No. 123, the
Company's pro forma net income for the years ended December 31, 1997, 1996 and
1995 would have been $44,467,000, $48,172,000 and $30,760,000, respectively,
compared to as reported net income of $45,305,000, $49,078,000 and $31,497,000
for the corresponding years. These results may not be representative of the
effects on pro forma net income for future years.

The pro forma net income amounts were determined using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:

1997 1996 1995
------ ------ ------

Dividend yield.................... 4.86% 4.90% 5.10%
Expected volatility............... 14.87% 14.70% 15.90%
Risk-free interest rate........... 6.35% 5.40% 7.60%
Expected lives (in years)......... 5 4.5 4.5

The weighted average value of options granted was $8.60 per option during
1997, $7.23 per option during 1996 and $7.46 per option during 1995.

11. EMPLOYEE BENEFITS

The Company participates in the Bell Atlantic benefit plans. In 1997,
following the completion of the merger, Bell Atlantic continued to maintain
separate benefit plans for employees of the former NYNEX companies. The assets
of the Bell Atlantic and NYNEX pension and savings plans have been commingled in
a master trust. The actuarial assumptions used are based on financial market
interest rates, past experience, and management's best estimate of future
benefit changes and economic conditions. Changes in these assumptions may impact
future benefit costs and obligations.

Effective January 1, 1998, Bell Atlantic established common pension and
savings plans benefit provisions for all management employees. As a result,
continuing NYNEX management employees will receive the same benefit levels as
previously given under Bell Atlantic management plans. Pension and other
postretirement benefits for associate employees are subject to collective
bargaining agreements, and no changes were bargained in 1997. Modifications in
associate benefits have been bargained from time to time, and Bell Atlantic may
also periodically amend the benefits in the management plans. Substantive
commitments for future amendments are reflected in the pension costs and benefit
obligations.

The structure of Bell Atlantic's benefit plans does not provide for the
determination of certain disclosures required by SFAS No. 87, "Employers'
Accounting for Pensions" and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The required information is
provided on a consolidated basis in Bell Atlantic's Annual Report on Form 10-K
for the year ended December 31, 1997, which shows combined results and weighted-
average assumptions. The Company's benefit costs and obligations for 1997, 1996
and 1995 were based on the historic benefit plans and actuarial assumptions as
shown in the tables below.

F-13
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Pension Plans

Bell Atlantic sponsors noncontributory defined benefit pension plans
covering substantially all of its management and associate employees. Benefits
for associate employees are determined by a flat dollar amount per year of
service according to job classification. Effective December 31, 1995, the plan
covering management employees was converted to a cash balance plan with benefits
determined by compensation credits related to age and service and interest
credits based on individual account balances. The management pension benefit for
prior years was based on a stated percentage of adjusted career average
earnings.

Under the cash balance plan, each management employee's opening account
balance was determined by converting the accrued pension benefit as of December
31, 1995 to a lump-sum amount based on the prior plan's provisions. The lump-
sum value was then multiplied by a transition factor based on age and service to
arrive at the opening balance.

Bell Atlantic's objective in funding the plans is to accumulate funds at a
relatively stable level over participants' working lives so that benefits are
fully funded at retirement. Plan assets consist principally of investments in
domestic and foreign corporate equity securities, U.S. and foreign government
and corporate debt securities, and real estate.

Pension (benefit) cost was $(4,015,000), $1,539,000 and $1,615,000 for the
years ended December 31, 1997, 1996 and 1995, respectively. The change in
pension cost from year to year was caused by a number of variables, including
changes in actuarial assumptions (see table below), favorable returns on plan
assets and plan amendments.

The significant assumptions used for the pension measurements were as
follows at December 31:

1997 1996 1995
----- ----- -----

Discount rate.................................... 7.25% 7.75% 7.25%
Rate of future increases in compensation levels
Management - through 2000....................... 3.00 4.75 4.75
Management - thereafter......................... 4.50 4.75 4.75
Associate....................................... 4.00 4.75 4.75

The expected long-term rate of return on plan assets was 8.90 % for 1997 and
8.25% for 1996 and 1995.

Postretirement Benefits Other Than Pensions

Bell Atlantic's postretirement health and life insurance benefit plans cover
substantially all of the Company's management and associate employees.
Postretirement health benefit costs are based on comprehensive medical and
dental plan provisions. Postretirement life insurance costs are based on annual
basic pay at retirement.

In 1996, Bell Atlantic restructured certain postretirement health and life
insurance obligations and assets to create a single plan. The remaining
postretirement benefits continue to be provided by separate plans. The
restructure did not affect plan benefits or postretirement benefit costs or
obligations.

Bell Atlantic funds the postretirement health and life insurance benefits of
current and future retirees. Plan assets consist principally of investments in
domestic and foreign corporate equity securities, and U.S. Government and
corporate debt securities.

Postretirement benefit cost was $1,415,000, $5,163,000 and $8,658,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. The change in
postretirement benefit cost from year to year was caused by a number of
variables, including changes in actuarial assumptions (see table below), changes
in plan provisions, favorable medical claims experience and favorable returns on
plan assets.

F-14
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Assumptions used in the actuarial computations for postretirement benefits
are as follows at December 31:
1997 1996 1995
------ ------ ------

Discount rate................................... 7.25% 7.75% 7.25%
Rate of future increases in compensation levels
Management - through 2000...................... 3.00 4.75 4.75
Management - thereafter........................ 4.50 4.75 4.75
Associate...................................... 4.00 4.75 4.75
Medical cost trend rate:
Year ending.................................... 6.50 7.00 10.00
Ultimate (year 2001 for 1997 and 1996,
2003 for 1995)............................... 5.00 5.00 5.00
Dental cost trend rate:
Year ending.................................... 3.50 4.00 4.00
Ultimate (year 2002)........................... 3.00 -- --

The expected long-term rate of return on plan assets was 8.90% for 1997 and
8.25% for 1996 and 1995.

Savings Plans and Employee Stock Ownership Plans

Substantially all of the Company's employees are eligible to participate in
savings plans established by Bell Atlantic to provide opportunities for eligible
employees to save for retirement on a tax-deferred basis and encourage employees
to acquire and maintain an equity interest in Bell Atlantic. Under these plans,
a certain percentage of eligible employee contributions are matched with shares
of Bell Atlantic common stock. The Company matches employee contributions
through two leveraged employee stock ownership plans (ESOPs) maintained by Bell
Atlantic. Bell Atlantic recognizes leveraged ESOP cost based on the modified
shares allocated method for the leveraged ESOP trusts that held securities
before December 15, 1989. The Company recognizes its proportionate share of
total ESOP cost based on the Company's matching obligation attributable to
participating Company employees. The Company recorded total ESOP cost of
$1,615,000, $1,804,000 and $2,304,000 in 1997, 1996 and 1995, respectively.

12. INCOME TAXES

The components of income tax expense are as follows:

Years Ended December 31
-----------------------------
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
Current:
Federal.................................. $23,525 $14,552 $19,847
State and local.......................... 7,406 4,079 6,278
------- ------- -------
Total.................................... 30,931 18,631 26,125
------- ------- -------

Deferred:
Federal.................................. (24) 10,701 (1,373)
State and local.......................... (92) 3,592 (1,675)
------- ------- -------
Total.................................... (116) 14,293 (3,048)
------- ------- -------
30,815 32,924 23,077

Investment tax credits..................... (543) (726) (890)
------- ------- -------
Total income tax expense................... $30,272 $32,198 $22,187
======= ======= =======

F-15
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

The provision for income taxes varies from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes. The difference is attributable to the following factors:

Years Ended December 31
--------------------------
1997 1996 1995
------ ------ ------

Statutory federal income tax rate................ 35.0% 35.0% 35.0%
Investment tax credits........................... (.5) (.6) (1.1)
State income taxes, net of federal tax benefits.. 6.3 6.2 5.7
Other, net....................................... (.7) (.8) 1.7
---- ---- ----
Effective income tax rate........................ 40.1% 39.8% 41.3%
==== ==== ====

Deferred taxes arise because of differences in the book and tax bases of
certain assets and liabilities. Significant components of deferred tax
liabilities (assets) were as follows at December 31:

1997 1996
-------- --------
(Dollars in Thousands)
Deferred tax liabilities:
Depreciation................................... $120,100 $121,400
Other.......................................... 2,500 4,200
-------- --------
122,600 125,600
-------- --------
Deferred tax assets:
Employee benefits.............................. (83,000) (86,700)
Investment tax credits......................... (1,400) (1,700)
Advance payments............................... (700) 100
Other.......................................... (11,800) (9,800)
-------- --------
(96,900) (98,100)
-------- --------
Net deferred tax liability....................... $ 25,700 $ 27,500
======== ========

Deferred tax assets include approximately $64,000,000 and $66,000,000 at
December 31, 1997 and 1996, respectively, related to postretirement benefit
costs recognized under SFAS No. 106. This deferred tax asset will gradually be
realized over the estimated lives of current retirees and employees.

13. ADDITIONAL FINANCIAL INFORMATION

December 31
--------------------
1997 1996
-------- --------
(Dollars in Thousands)
BALANCE SHEETS:
Accounts payable and accrued liabilities:
Accounts payable - affiliates............... $113,365 $115,409
Accounts payable - other.................... 75,934 64,236
Accrued expenses............................ 7,727 8,157
Accrued vacation pay........................ 7,028 7,247
Accrued taxes............................... 5,709 4,830
Interest payable - other.................... 6,324 6,326
Interest payable - affiliate................ 39 114
-------- --------
$216,126 $206,319
======== ========

F-16
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Years Ended December 31
-------------------------
1997 1996 1995
------- ------- -------
(Dollars in Thousands)
STATEMENTS OF CASH FLOWS:
Cash paid during the year for:
Income taxes, net of amounts refunded..... $26,131 $21,720 $17,522
Interest, net of amounts capitalized...... 18,626 18,821 14,893

STATEMENTS OF INCOME AND REINVESTED
EARNINGS (ACCUMULATED DEFICIT):
Interest expense incurred,
net of amounts capitalized................ 18,932 18,825 18,881
Capitalized interest........................ 909 1,318 2,954
Advertising expense......................... 4,815 6,448 4,792

Interest paid during the year includes $1,739,000 in 1997, $2,296,000 in
1996 and $2,101,000 in 1995 related to short-term financing services provided by
Bell Atlantic Network Funding Corporation (see Note 7).

Advertising expense includes $4,815,000, $4,662,000 and $3,440,000 in 1997,
1996 and 1995, respectively, allocated to the Company by Bell Atlantic Network
Services, Inc. (NSI).

At December 31, 1997 and 1996, $4,056,000 and $6,597,000, respectively, of
bank overdrafts were classified as accounts payable.

14. TRANSACTIONS WITH AFFILIATES

The financial statements include transactions with NSI, Bell Atlantic
Network Funding Corporation (BANFC), Bell Atlantic, and various other
affiliates.

The Company has contractual arrangements with NSI for the provision of
various centralized services. These services are divided into two broad
categories. The first category is comprised of network-related services which
generally benefit only Bell Atlantic's operating telephone subsidiaries. These
services include administration, marketing, product advertising, sales,
information systems, network technology planning, labor relations, and staff
support for various network operations. The second category is comprised of
overhead and support services which generally benefit all subsidiaries of Bell
Atlantic. Such services include corporate governance and staff support in
finance, external affairs, legal and corporate secretary, media relations,
employee communications, corporate advertising, human resources, and treasury.
The Company's allocated share of NSI costs also includes costs for technical and
support services billed by Bell Communications Research, Inc. (Bellcore),
another affiliated company which was owned jointly by the seven regional holding
companies. In 1997, Bell Atlantic and the other Bellcore owners sold their
jointly owned investment in Bellcore. The Company will continue to contract with
Bellcore for technical and support services.

The Company recognizes interest expense and income in connection with
contractual arrangements with BANFC to provide short-term financing, investing
and cash management services to the Company (see Note 7).

Operating revenues include obligations from or to affiliates in connection
with an interstate revenue sharing arrangement with Bell Atlantic's operating
telephone subsidiaries. Other operating revenues and expenses include
miscellaneous items of income and expense resulting from transactions with other
affiliates, primarily rental of facilities and equipment. The Company also paid
cash dividends and made distributions of capital surplus to its parent, Bell
Atlantic (see Note 9).

F-17
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

Transactions with affiliates are summarized as follows:

Years Ended December 31
------------------------------------
1997 1996 1995
---------- ---------- ----------
(Dollars in Thousands)
Operating revenues:
Interstate revenue sharing from/(to)
affiliates......................... $ 2,550 $ 2,550 $(10,489)
Other revenue from affiliates........ 113,672 93,886 76,224
-------- -------- --------
116,222 96,436 65,735
-------- -------- --------
Operating expenses:
NSI - network........................ 85,843 94,667 73,188
NSI - other.......................... 43,882 44,268 39,439
Bellcore............................. 5,612 4,984 4,766
Other................................ 18,958 20,596 15,453
-------- -------- --------
154,295 164,515 132,846
-------- -------- --------

Interest income from BANFC............. 3 --- ---

Interest expense to BANFC.............. 1,664 2,032 2,766

Dividends paid and distributions of
capital surplus to Bell Atlantic..... --- --- 17,222

Outstanding balances with affiliates are reported on the balance sheets at
December 31, 1997 and 1996 as Accounts Receivable - Affiliates, Note Payable to
Affiliate, and Accounts Payable and Accrued Liabilities - Affiliates.

15. LITIGATION AND OTHER CONTINGENCIES

Various legal actions and regulatory proceedings are pending to which the
Company is a party. The Company has established reserves for liabilities in
connection with regulatory and legal matters which it currently deems to be
probable and estimable. The Company does not expect that the ultimate
resolution of these matters in future periods will have a material effect on the
Company's financial position, but it could have a material effect on results of
operations.

F-18
<PAGE>
Bell Atlantic - Washington, D.C., Inc.

16. QUARTERLY FINANCIAL INFORMATION (unaudited)

Income Before
Cumulative
Effect of Change
Operating Operating in Accounting Net
Quarter Ended Revenues Income Principle Income
- ------------- --------- --------- ---------------- --------
(Dollars in Thousands)

1997:
March 31............ $149,662 $25,234 $11,965 $11,965
June 30............. 159,397 31,461 16,584 16,584
September 30*....... 150,316 5,883 850 850
December 31......... 151,847 31,369 15,906 15,906
-------- ------- ------- -------
Total............... $611,222 $93,947 $45,305 $45,305
======== ======= ======= =======

1996:
March 31............ $137,532 $19,254 $ 8,697 $ 8,983
June 30............. 176,984 44,123 24,049 24,049
September 30........ 140,320 19,665 9,066 9,066
December 31......... 142,388 16,398 6,980 6,980
-------- ------- ------- -------
Total $597,224 $99,440 $48,792 $49,078
======== ======= ======= =======

*Results of operations for the third quarter of 1997 include merger-related
costs (see Note 2).

F-19
<PAGE>

Bell Atlantic - Washington, D.C., Inc.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>

Additions
---------------------
Charged
Balance at Charged to Other Balance
Beginning to Accounts Deductions at End
Description of Period Expenses Note(a) Note(b) of Period
- ----------- ---------- -------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>

Allowance for Uncollectible
Accounts Receivable:

Year 1997.......... $11,495 $3,844 $5,359 $12,977 $ 7,721

Year 1996.......... $ 9,193 $5,797 $9,839 $13,334 $11,495

Year 1995.......... $ 6,475 $8,170 $6,314 $11,766 $ 9,193
</TABLE>

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

(a) (i) Amounts previously written off which were credited directly to this
account when recovered; and (ii) accruals charged to accounts payable for
anticipated uncollectible charges on purchases of accounts receivable from
others which were billed by the Company.

(b) Amounts written off as uncollectible.

F-20
<PAGE>

EXHIBITS

FILED WITH ANNUAL REPORT FORM 10-K

UNDER THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

Bell Atlantic - Washington, D.C., Inc.

COMMISSION FILE NUMBER 1-7368
<PAGE>

Form 10-K for 1997
File No. 1-7368
Page 1 of 1

EXHIBIT INDEX

Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission (SEC), are incorporated herein by reference as exhibits
hereto.

3a Restated Certificate of Incorporation of the registrant, as amended
September 14, 1990. (Exhibit 3a to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1990, File No.
1-7368.)

3a(i) Certificate of Amendment of the registrant's Certificate of
Incorporation, dated January 12, 1994 and filed January 13,
1994. (Exhibit 3a(i) to the registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, File No.
1-7368.)

3b By-Laws of the registrant, as amended December 15, 1996. (Exhibit
3b to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1995, File No. 1-7368.)

3b(i) Consent of the Sole Stockholder of Bell Atlantic -
Washington, D.C., Inc., dated December 15, 1996. (Exhibit
3b(i) to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1995, File No. 1-7368.)

4 No instrument which defines the rights of holders of long-term debt
of the registrant is filed herewith pursuant to Regulation S-K,
Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant
hereby agrees to furnish a copy of any such instrument to the SEC
upon request.

10a Agreement among Bell Atlantic Network Services, Inc. and the Bell
Atlantic Corporation telephone subsidiaries, dated November 7,
1983. (Exhibit 10b to Bell Atlantic Corporation Annual Report on
Form 10-K for the year ended December 31, 1993, File No. 1-8606.)

23 Consent of Independent Accountants.

27.1 Financial Data Schedule - 1997.

27.2 Restated Financial Data Schedule - 1996.

27.3 Restated Financial Data Schedule - 1995.

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Bell Atlantic - Washington, D.C., Inc. on Form S-3 (File No. 33-53234) of our
report dated February 9, 1998, on our audits of the financial statements and
financial statement schedule of the Company as of December 31, 1997 and December
31, 1996, and for each of the three years in the period ended December 31, 1997,
which report is included in this Annual Report on Form 10-K.

/s/ COOPERS & LYBRAND L.L.P

2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 25, 1998

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE BALANCE SHEET
AT DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,134
<SECURITIES> 0
<RECEIVABLES> 140,657
<ALLOWANCES> 7,721
<INVENTORY> 1,929
<CURRENT-ASSETS> 168,088
<PP&E> 1,652,123
<DEPRECIATION> 849,599
<TOTAL-ASSETS> 987,818
<CURRENT-LIABILITIES> 255,628
<BONDS> 227,769
0
0
<COMMON> 191,968
<OTHER-SE> 123,096
<TOTAL-LIABILITY-AND-EQUITY> 987,818
<SALES> 0
<TOTAL-REVENUES> 611,222
<CGS> 0
<TOTAL-COSTS> 517,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,932
<INCOME-PRETAX> 75,577
<INCOME-TAX> 30,272
<INCOME-CONTINUING> 45,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,305
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE BALANCE SHEET
AT DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,973
<SECURITIES> 0
<RECEIVABLES> 161,272
<ALLOWANCES> 11,495
<INVENTORY> 1,707
<CURRENT-ASSETS> 191,005<F1>
<PP&E> 1,521,071
<DEPRECIATION> 731,585
<TOTAL-ASSETS> 994,431<F1>
<CURRENT-LIABILITIES> 263,955<F1>
<BONDS> 247,735
0
0
<COMMON> 191,968
<OTHER-SE> 80,195<F1>
<TOTAL-LIABILITY-AND-EQUITY> 994,431
<SALES> 0
<TOTAL-REVENUES> 597,224<F1>
<CGS> 0
<TOTAL-COSTS> 497,784<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,825
<INCOME-PRETAX> 80,990
<INCOME-TAX> 32,198
<INCOME-CONTINUING> 48,792
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 286
<NET-INCOME> 49,078
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>RESTATED AS A RESULT OF THE MERGER OF BELL ATLANTIC CORPORATION AND NYNEX
CORPORATION COMPLETED ON AUGUST 14, 1997 AND ACCOUNTED FOR AS A POOLING OF
INTERESTS.
</FN>

</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE BALANCE SHEET
AT DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 154,670<F1>
<ALLOWANCES> 9,193
<INVENTORY> 2,591
<CURRENT-ASSETS> 193,700<F1>
<PP&E> 1,445,606
<DEPRECIATION> 703,316
<TOTAL-ASSETS> 950,027<F1>
<CURRENT-LIABILITIES> 274,010<F1>
<BONDS> 247,709
0
0
<COMMON> 191,968
<OTHER-SE> 31,290<F1>
<TOTAL-LIABILITY-AND-EQUITY> 950,027<F1>
<SALES> 0
<TOTAL-REVENUES> 564,212
<CGS> 0
<TOTAL-COSTS> 492,587<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,881
<INCOME-PRETAX> 53,684
<INCOME-TAX> 22,187
<INCOME-CONTINUING> 31,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,497
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>RESTATED AS A RESULT OF THE MERGER OF BELL ATLANTIC CORPORATION AND NYNEX
CORPORATION COMPLETED ON AUGUST 14, 1997 AND ACCOUNTED FOR AS A POOLING OF
INTERESTS.
</FN>

</TABLE>